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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 2, 1998
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Berger Holdings, Ltd.
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(Exact Name of Registrant as Specified in Charter)
Pennsylvania 000-12362 23-2160077
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
805 Pennsylvania Boulevard, Feasterville, PA 19053
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:(215) 355-1200
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Item 2. Acquisition of Assets.
The Registrant acquired that portion of the assets (the "Assets") of
Benjamin Obdyke Incorporated, a Pennsylvania corporation ("Obdyke") relating
to the Business (as defined below), pursuant to a certain Asset Purchase
Agreement (the "Agreement"), dated as of December 3, 1997, by and among the
Registrant, Obdyke and the shareholders of Obdyke. Obdyke engages in the
manufacture and sale of commercial and residential roof drainage products,
including gutters, downspouts, associated fittings, hardware, accessories,
snowguards, roof edgings and soffit products (the "Business") and the roof
ventilation product business and the manufacture and distribution of certain
building products (other than roof drainage products). The Assets, which
include primarily inventory and equipment utilized in the Business, are being
moved to the Registrant's main facility.
As consideration for the Common Stock, the Registrant paid to Obdyke
$10,000,000 on the date of the Agreement and issued to Obdyke 125,000 shares
of the common stock of the Registrant, $0.01 par value (the "Common Shares").
The Registrant also agreed to make quarterly payments to Obdyke for a period
of eighteen months aggregating $879,000. The Registrant also issued to Obdyke
warrants to purchase 50,000 Common Shares at $4.4175 per share, exercisable
until December 31, 1999.
The funds used by the Registrant in regard to the transactions
contemplated by the Agreement were primarily obtained from:
(i) the sale to Tandem Capital, a Tennessee corporation
("Tandem"), on December 31, 1997, of (A) $2,000,000 original principal amount
of the Registrant's 12.25% Subordinated Debentures due January 2, 2003;
(b) warrants to purchase 240,000 Common Shares at $4.25 per share, exercisable
until January 2, 2003; and (c) 25,000 shares of the Series A Convertible
Preferred Stock of the Registrant, $0.01 par value, for an aggregate
consideration of $4,500,000;
(ii) the sale to Argosy Investment Partners, L.P., a
Pennsylvania limited partnership ("Argosy"), on January 2, 1998, of (A)
$500,000 original principal amount of the Registrant's 12.25% Subordinated
Debentures due January 2, 2003; (b) warrants to purchase 60,000 Common Shares
at $4.25 per share, exercisable until January 2, 2003; and (c) 15,000 shares
of the Series A Convertible Preferred Stock of the Registrant, $0.01 par
value, for an aggregate consideration of $2,000,000; and
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(iii) a credit facility with Summit Bank, N.A. ("Summit").
That portion of the funds obtained from the above-described
transactions which is not used in regard to the transactions contemplated by
the Agreement will be used by the Registrant for general corporate purposes.
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Item 7. Financial Statements and Exhibits.
In accordance with Rule 3-05(b)(i) and Article 11 under Regulation
S-X, as referenced by Items 7(a) and 7(b) of Form 8-K, the Registrant is
required to furnish (i) the below-listed financial statements of Obdyke and
(ii) certain pro forma information with regard to the Registrant in filing
this Form 8- K. Such financial statements and pro forma information will be
filed as part of an amendment to this Form 8-K as soon as practicable
following the date of filing hereof, but, in accordance with Item 7(a)(4) of
Form 8-K, not later than 60 days after the date that the initial report on
Form 8-K must be filed.
(i) The Balance Sheet of the Business at December 31, 1997 and
December 31, 1996; and
(ii) The Statement of Income and Statement of Cash Flow of the
Business for the years ended December 31, 1997, December 31,
1996 and December 31, 1995.
The Registrant has furnished the exhibits enumerated on the included
Exhibit Index. In accordance with Item 601(b)(2) of Regulation S-K, the
schedules to the documents filed herewith as exhibits are not filed. Such
agreements contain, where applicable, lists of such schedules, a copy of any
of which the Registrant agrees to furnish supplementally to the Securities and
Exchange Commission upon request.
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Signatures
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.
BERGER HOLDINGS, LTD.
Dated: January 16, 1998 By: JOSEPH F. WEIDERMAN
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Joseph F. Weiderman
President
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Exhibit Index
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The following exhibits are filed as part of this Current Report on Form 8-K:
Exhibit
No. Item
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2.1 Asset Purchase Agreement, dated as of December 3,
1997, by and among the Registrant, Obdyke and the
shareholders of Obdyke.
2.2 Preferred Stock Purchase Agreement, dated as of
December 17, 1997, by and among the Registrant,
Tandem and Argosy.
2.3 Debenture Purchase Agreement, dated as of
December 17, 1997, by and among the Registrant,
Tandem and Argosy.
2.4 Amended and Restated Loan and Security Agreement,
dated as of January 2, 1998, by and among Berger
Financial Corp., a Delaware corporation, Berger
Bros Company, a Pennsylvania corporation and
Summit.
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ASSET PURCHASE AGREEMENT
BY AND AMONG
BERGER HOLDINGS, LTD. ("BUYER"),
BENJAMIN OBDYKE INCORPORATED ("SELLER")
AND
SHAREHOLDERS OF SELLER
Dated as of December 3, 1997
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TABLE OF CONTENTS
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Page
ARTICLE I
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ASSETS AND LIABILITIES............................................................................................1
1.1 Assets to be Purchased.................................................................1
1.2 Excluded Assets........................................................................2
1.3 No Assumption of Liabilities...........................................................2
ARTICLE II
PURCHASE PRICE; ADJUSTMENTS TO PURCHASE PRICE...................................................2
2.1 Purchase Price.........................................................................2
2.2 Adjustments to Purchase Price..........................................................3
2.3 Adjustments and Allocations............................................................3
2.4 Adjustment to the Purchase Price.......................................................4
2.5 Allocation of Purchase Price...........................................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE SHAREHOLDERS..................................................................4
3.1 Corporate Status; Authority............................................................4
3.2 Due Authorization; Validity of Agreement...............................................5
3.3 Title to Assets; No Affiliates.........................................................5
3.4 Condition of Assets....................................................................5
3.5 Conflicts; Consents of Third Parties...................................................5
3.6 Financial Information..................................................................6
3.7 Intangible Property....................................................................6
3.8 Employee Benefits......................................................................6
3.9 Labor..................................................................................6
3.10 Litigation.............................................................................7
3.11 Compliance with Laws...................................................................8
3.12 Insurance..............................................................................8
3.13 Related Party Transactions.............................................................8
3.14 Actions since January 1, 1997..........................................................8
3.15 Taxes.................................................................................10
3.16 Material Contracts....................................................................10
3.17 Environmental Matters.................................................................11
3.18 No Misrepresentation..................................................................11
3.19 Financial Advisors....................................................................12
3.20 Securities Representations............................................................12
3.21 Solvency..............................................................................13
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ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF BUYER........................................................13
4.1 Organization and Good Standing........................................................13
4.2 Authorization of Agreement............................................................13
4.3 Conflicts; Consents of Third Parties..................................................14
ARTICLE V
CLOSING; DELIVERIES AT CLOSING.................................................................14
ARTICLE VI
CONDUCT OF THE BUSINESS OF COMPANY PENDING CLOSING.............................................15
ARTICLE VII
COVENANTS......................................................................................17
7.1 Preservation of Records...............................................................17
7.2 Put Option............................................................................17
7.3 Noncompetition Agreement..............................................................18
7.4 Financial Statements..................................................................19
7.5 Employees of Seller...................................................................19
7.6 Delivery of Assets....................................................................19
7.7 Crane Gutter Product..................................................................19
7.8 Sales of Shares, etc..................................................................20
7.9 Satisfaction of Conditions............................................................20
7.10 Access................................................................................20
7.11 Removal of Obdyke Name; Sale of Certain Products......................................20
7.12 Unfilled Orders.......................................................................20
7.13 Schedules.............................................................................20
ARTICLE VIII
CONDITIONS TO CLOSING..........................................................................21
8.1 Conditions to Each Party's Obligations................................................21
8.2 Conditions to Obligations of Buyer....................................................21
8.3 Conditions to Obligations of Shareholders and Seller..................................22
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION...................................................22
9.1 Statements as Representations.........................................................22
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9.2 Survival of Representations and Warranties............................................22
9.3 General Indemnity.....................................................................23
9.4 Interest on Indemnification Obligations...............................................24
09.5 Indemnification Procedure.............................................................24
9.6 Remedies Cumulative...................................................................25
9.7 Limitations of Shareholders' Liability................................................25
ARTICLE X
MISCELLANEOUS..................................................................................26
10.1 Certain Definitions...................................................................26
10.2 Confidentiality; Non-Disparagement....................................................30
10.3 Expenses..............................................................................31
10.4 Termination...........................................................................31
10.5 Further Assurances....................................................................31
10.6 Arbitration...........................................................................31
10.7 Entire Agreement; Amendments and Waivers..............................................32
10.8 Governing Law.........................................................................32
10.9 Table of Contents and Headings........................................................32
10.10 Notices...............................................................................32
10.11 Agent of Seller and Shareholders......................................................34
10.12 Binding Nature of Agreement; Assignment...............................................34
10.13 Severability..........................................................................34
10.14 Counterparts..........................................................................34
</TABLE>
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SCHEDULES AND EXHIBITS
Exhibit A - Subordinated Note
Exhibit B - Warrant
Schedule 1.1(a) - Assets
Schedule 1.1(c) - Records
Schedule 1.1(d) - Intellectual Property
Schedule 2.5 - Allocation of Purchase Price
Schedule 3.6 - Financial Information
Schedule 3.7 - Intangible Property
Schedule 3.8(a) - Employee Benefit Plans
Schedule 3.8(b) - Material Obligations Regarding Employee Benefit Plans
Schedule 3.9(b) - Employees of Seller
Schedule 3.9(c) - Obligations to Employees
Schedule 3.10 - Litigation
Schedule 3.11 - Permits
Schedule 3.12 - Insurance Policies
Schedule 3.13 - Related Party Transactions
Schedule 3.14 - Actions Since November 1, 1997
Schedule 3.16 - Material Contracts
Schedule 3.17 - Environmental Matters
Schedule 4.3 - Consents
Schedule 7.4 - Certain Financial Statements
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of December 3, 1997
(the "Agreement"), by and among Berger Holdings, Ltd., a Pennsylvania
corporation ("Buyer"), Benjamin Obdyke Incorporated, a Delaware corporation
("Seller") and the shareholders of Seller listed on the signature page hereto
(each, a "Shareholder" and, collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, Seller is currently engaged in the manufacture and
sale of commercial and residential roof drainage products, including gutters,
downspouts, associated fittings, hardware, accessories, snowguards, roof
edgings and soffit products (the "Business") and the roll vent business and
the manufacture and distribution of certain building products (other than roof
drainage products) (the "Excluded Business") with manufacturing and sales
facilities located in the Commonwealth of Pennsylvania;
WHEREAS, the Shareholders own all of the issued and
outstanding capital stock of Seller;
WHEREAS, Buyer desires to purchase, and Seller desires to
sell, the Assets (as defined below) that relate to the Business on the terms
set forth below.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the parties hereby
agree as follows:
ARTICLE I
ASSETS AND LIABILITIES
1.1 Assets to be Purchased. On the Closing Date (as
hereinafter defined) and subject to the terms and conditions contained in this
Agreement, Seller shall sell, transfer, assign and deliver to Buyer, and Buyer
shall purchase, assume and accept from Seller, free and clear of all liens and
encumbrances, all right, title and interest in and to all of the assets owned
by Seller used or useable in the Business (the "Assets"), but not the assets
of Seller related to the Excluded Business. The Assets include without
limitation the following:
(a) the Equipment listed on Schedule 1.1(a) hereto;
(b) All Seller's inventory related to the Business
as of the Closing Date that is in good condition, excluding broken or damaged
goods (collectively, the
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"Inventory"), and the supplies of Seller related to the Business, including
without limitation packaging and all related supplies (the "Supplies");
(c) the records relating to the Business listed on
Schedule 1.1(c) hereto; and
(d) All trademarks, service marks, trade names, logos
and other intellectual property of Seller relating to the Business, including
without limitation all know-how and trade secrets related to the Business, and
those items set forth on Schedule 1.1(d) hereto.
1.2 Excluded Assets. The Assets do not include assets
utilized solely in the Excluded Business, cash, accounts receivable, prepaid
rents, deposits and those items listed on Schedule 1.2 hereto.
1.3 No Assumption of Liabilities. Buyer shall not assume and
shall in no event be liable for any debts, liabilities or obligations of
Seller (hereinafter be referred to as the "Seller Liabilities"), whether fixed
or contingent, known or unknown, liquidated or unliquidated, secured or
unsecured, or otherwise and regardless of when they arose or arise, including,
but not limited to, all liabilities attributable to any Employee Benefit Plans
of Seller or otherwise arising out of any employment relationships between
Seller (or any Affiliates of Seller) and any employees of Seller (or any
Affiliated Seller) and any environmental liabilities or obligations.
ARTICLE II
PURCHASE PRICE; ADJUSTMENTS TO PURCHASE PRICE
2.1 Purchase Price. The aggregate consideration (the
"Purchase Price") paid or payable (i) to Seller by Buyer in exchange for the
sale, transfer, assignment and delivery of the Assets, subject to adjustments
pursuant to Section 2.2, and in consideration of its agreement pursuant to
Section 7.3 hereof, and (ii) the Shareholders in consideration of their
agreements pursuant to Section 7.3 hereof, shall consist of the following:
(a) On the Closing Date, cash (the "Cash"), to be
delivered by wire transfer to an account designated by Seller or check drawn
to the order of Seller, in the aggregate amount of Ten Million Dollars
($10,000,000);
(b) On the Closing Date, the non-negotiable,
subordinated note of Buyer, in the original principal amount of One Million
Five Hundred Thousand Dollars ($1,500,000), in the form attached hereto as
Exhibit A, subject to modifications to the subordination provisions thereof
based upon the requests of Persons agreeing to provide debt financing to the
Company contemporaneously with Closing, which modifications are reasonably
acceptable to Seller (the "Subordinated Note");
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(c) On the Closing Date, one hundred twenty-five
thousand (125,000) shares (the "Shares") of the common stock of Buyer, $0.01
par value (the "Common Stock"); and
(d) On the Closing Date, a warrant, in the form
attached hereto as Exhibit B (the "Warrant") to purchase 50,000 shares of the
Common Stock. The Warrant shall be exercisable at any time from the Closing
Date until December 31, 1999, and the exercise price per share of Common Stock
shall be One Hundred Twenty Percent (120%) of the average of the Closing Price
(as defined below) for the ten consecutive Trading Days ending with the
Trading Day immediately prior to the Closing Date.
2.2 Adjustments to Purchase Price. The Purchase Price shall
be increased or decreased, on a dollar-for-dollar basis, in accordance with
Section 2.4 hereof, for each dollar that the Adjusted Inventory Value as of
the close of business on the Closing Date exceeds or is less than the
$3,000,000. "Adjusted Inventory Value" shall mean the sum of the Valuation
Amounts of each item of Inventory. The "Valuation Amount" of each item of
Inventory (other than Obsolete Inventory) shall be 100% of the Base Value of
such item of Inventory. The "Base Value" of any item of Inventory shall be
Seller's average vendor invoice cost for such item of Inventory, calculated on
a "first in - first out" basis (the "Seller Item Cost"); provided, however,
that if, for any item of Inventory, the Seller Item Cost is more than One
Hundred Ten Percent (110%) of Buyer's average vendor invoice cost calculated
on a "first in - first out" basis (the "Buyer Item Cost"), the Chief Operating
Officers of Buyer and Seller shall attempt to agree on a Base Value for such
item and, if they cannot so agree prior to Closing, the Base Value shall be
the mean of the Seller Item Cost and the Buyer Item Cost; provided, further,
that no adjustments shall be made pursuant to the immediately preceding
proviso unless the sum of such adjustments is at least Twenty Thousand Dollars
($20,000), in which event all such adjustments shall be made (e.g., if the sum
of such adjustments is Twenty Thousand and One Dollars ($20,001), the total
adjustments shall be Twenty Thousand and One Dollars ($20,001)). The Valuation
Amount of each item of Obsolete Inventory shall equal 100% of the Base Value
of such item of Obsolete Inventory until the aggregate Valuation Amounts of
all items of Obsolete Inventory equals $300,000. The Valuation Amount of any
additional Obsolete Inventory shall be 80% of its Base Value.
2.3 Adjustments and Allocations.
(a) Adjusted Inventory Value. The Base Value of each
item of Inventory shall be determined as follows:
(i) On or prior to December 31, 1997, Buyer
shall submit to Seller a list of the Inventory based upon the results of a
physical inventory to be accomplished by Buyer on or about December 30, 1997
(the "Physical Inventory"), and Seller shall assign to each item so listed its
Seller Item Cost.
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(ii) As soon as practicable after receiving the
list and assigned costs referred to in Section 2.3(a)(i), Buyer shall assign
to each item of Inventory its Buyer Item Cost.
(iii) Based on the foregoing, Buyer and Seller
shall reach agreement prior to Closing on the Adjusted Inventory Value in
accordance with Section 2.2.
(b) In the event that agreement is not reached on the
Adjusted Inventory Value prior to Closing, Seller's reasonable estimate made
in accordance with Sections 2.2 and 2.3 hereof shall be utilized for purposes
of Closing, and Buyer shall notify Seller in writing within two weeks after
the Closing Date of such dispute, its calculation of the applicable amounts,
and the basis therefor. Subsequent to such notice, the parties shall submit
such dispute for resolution to KPMG Peat Marwick LLP (the "Independent
Accountants"). The parties shall share equally in the fees and expenses of
such resolution. Should the Independent Accountants be unwilling or unable to
resolve such dispute within sixty (60) days of notice thereof by Buyer, either
party may submit the dispute to arbitration in accordance with Section 10.6
hereof.
2.4 Adjustment to the Purchase Price. Any increase to the
Purchase Price pursuant to Section 2.2 hereof shall be accomplished by an
increase in the original principal amount of the Subordinated Note. Any
decrease to the Purchase Price pursuant to Section 2.2 hereof shall be
accomplished by a decrease in the original principal amount of the
Subordinated Note and then, if necessary, by reducing the number of Shares
(valuing each Share at the greater of (i) the Closing Price on the Trading Day
immediately prior to the Closing Date and (ii) Four Dollars ($4.00)) and then,
if necessary, by decreasing the cash to be delivered at Closing.
2.5 Allocation of Purchase Price. The Purchase Price shall
be allocated for all applicable tax and accounting purposes, including without
limitation filings required under Section 1060 of the Internal Revenue Code of
1986, as amended, and all regulations thereunder, as set forth on Schedule 2.5
hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE SHAREHOLDERS
Seller and each of the Shareholders, jointly and severally,
hereby represent and warrant to Buyer, subject to any exceptions listed on
Schedule 3 hereto, which exceptions specifically reference the applicable
sections of this Article III, as follows:
3.1 Corporate Status; Authority. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now
conducted. Seller is not qualified to do business as a foreign corporation in
any other state. Seller and the Shareholders have the full power and authority
to execute and
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deliver this Agreement and any and all other documents or instruments to be
executed and/or delivered by Seller or any Shareholder in connection herewith
(collectively, the "Seller Purchase Documents") and to perform their
obligations hereunder and thereunder.
3.2 Due Authorization; Validity of Agreement. The execution,
delivery and performance of this Agreement and the Seller Purchase Documents
by Seller and the Shareholders have been duly authorized and approved by all
necessary corporate action on the part of Seller. This Agreement has been duly
executed and delivered by Seller and the Shareholders and, assuming the due
execution and delivery of this Agreement by Buyer, constitutes the valid and
binding obligation of Seller and the Shareholders, enforceable against them in
accordance with its terms, except as such enforceability may be limited by the
effect of bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by general principles of equity. Assuming due execution and
delivery by Buyer, the Seller Purchase Documents will constitute the valid and
binding obligations of Seller and Shareholders, enforceable against them in
accordance with their respective terms.
3.3 Title to Assets; No Affiliates. Seller has good and
marketable title to all the Assets, which at the time of Closing will be free
and clear of all Liens. None of the Assets is held by Seller on consignment.
As of Closing, no Affiliate of Seller will be engaged in the Business or own
assets related to the Business.
3.4 Condition of Assets. The Inventory is in good condition.
The Equipment is in good operating order, normal wear and tear excepted. The
Supplies are in good and useable condition.
3.5 Conflicts; Consents of Third Parties.
(a) Neither the execution and delivery by Seller or
any Shareholder of this Agreement and any of the Seller Purchase Documents,
the consummation by Seller or any Shareholder of the transactions contemplated
hereby and thereby, nor compliance by Seller or any Shareholder with any of
the provisions hereof or thereof will (i) conflict with, violate, result in
the breach or termination of, constitute a default under, or give rise to any
right of acceleration under, any Contract to which Seller or any Shareholder
is a party or by which Seller or any Shareholder or any of their properties or
assets is bound; (ii) violate any Law or Order of any Governmental Body by
which Seller is bound; or (iii) result in the creation of any Lien upon the
properties or assets of Seller.
(b) No waiver, Order or Permit, or declaration or
filing with or notification to, any Person or Governmental Body is required on
the part of Seller in connection with the execution and delivery of this
Agreement or the Seller Purchase Documents, the compliance by Seller or any
Shareholder with any of the provisions hereof or thereof, or the consummation
of the transactions contemplated hereby or thereby.
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3.6 Financial Information. The Shareholder has delivered to
Buyer the financial information attached hereto as Schedule 3.6. The
information set forth on Schedule 3.6 has been prepared from Seller's business
records and presents fairly the information reflected therein.
3.7 Intangible Property. Schedule 3.7 hereto contains a
complete and correct list of each patent, trademark, trade name, service mark
and copyright or other intellectual property (collectively, the "Intellectual
Property") owned or used by Seller in the operation of the Business, as well
as all registrations thereof and pending applications therefor, and each
license or other agreement relating thereto. Except as set forth on Schedule
3.7 hereto, there is no item of Intellectual Property used in the conduct of
the Business. No process used by Seller in the Business or any product
manufactured or sold by Seller as part of the Business infringes upon any
patent, patent application, trademark or trade name, or misappropriates any
trade secret, of any other party.
3.8 Employee Benefits. Seller has made available to Buyer
true and complete copies of the Employee Benefit Plans of Seller, including
all amendments thereto, and has set forth on Schedule 3.8(a) a complete list
of all material employee benefit plans within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
maintained by Seller or to which Seller currently contributes which provide
any benefits to current employees of Seller (collectively, "Employee Benefit
Plans"). Seller does not have any current obligation to contribute to any
"multiemployer plan," within the meaning of Section 3(37) of ERISA, with
respect to its employees. No provision of this Agreement shall create any
third-party beneficiary rights in any employee and former employee (including
any beneficiary or dependent thereof) of Seller in respect of continued
employment (or resumed employment), and no provision hereof shall create any
such third-party beneficiary rights in any such Person in respect of any
benefits that may be provided, directly or indirectly, under any employee
benefit plan or arrangement, including the currently existing Employee Benefit
Plans.
3.9 Labor.
(a) (i) Seller has paid in full to, or accrued on
behalf of, all Seller Personnel all wages, salaries, commissions, bonuses and
other direct compensation for all services performed by them to the Closing
Date and has paid all amounts required to be reimbursed to Seller Personnel;
(ii) Seller is in material compliance with all applicable, federal, state,
local and foreign laws and regulations respecting employment and employment
practices, labor relations, terms and conditions of employment and wages and
hours; (iii) there is no unfair labor practice complaint or charge against
Seller threatened or pending before the National Labor Relations Board or any
comparable state, local or foreign agency or other Governmental Entity; (iv)
there is no labor strike, dispute, slowdown or stoppage actually pending or,
to the Knowledge of Seller, threatened against or involving Seller; (v) no
representation question exists respecting the employees of Seller; (vi) no
grievance which will have a Material Adverse Effect is pending and no claim
therefor has been asserted; (vii) the only collective bargaining agreement to
which Seller is a party is with Warehouse Employees' Union Local No. 169,
which
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expires December 31, 1998; (viii) no action has been taken, corporate or
otherwise, that could result in a termination of employment of a substantial
number of Seller Personnel (beyond normal turnover) on or prior to the Closing
Date; (ix) Seller has not taken any action which has resulted or is expected
to result in a "plant closing" or a "mass layoff" within the meaning of the
Worker Adjustment and Retraining Notification ("WARN") Act, or any state or
local WARN Act, with respect to Seller Personnel since the effective date of
such Act; (x) Seller shall be responsible for all notifications required by
federal, state and local WARN Acts as a result of this transaction; (xi) since
January 1, 1997 neither Seller, any Affiliate of Seller nor any Shareholder
has received notice by charge, complaint, citation, claim or grievance that it
has violated or is alleged to have violated federal, state or local laws or
regulations or common law concerning the health and safety of Seller
Personnel, unlawful discrimination in employment, unlawful employment
practices, wages and hours, terms or conditions of employment or any other
employment-related law, regulation or common law, with respect to any Seller
Personnel or any applicant for a position as Seller Personnel; and (xii) no
claim is pending which alleges Seller, any Affiliate of Seller or a
Shareholder has violated federal, state or local laws or regulations or common
law concerning the health and safety of Seller Personnel, unlawful
discrimination in employment, unlawful employment practices, wages and hours,
terms or conditions of employment or any other employment-related law,
regulation or common law, with respect to any Seller Personnel or any
applicant for a position as Seller Personnel.
(b) Schedule 3.9(b) hereto contains a list of certain
employees of Seller, including the following information: (i) name; (ii)
social security number; (iii) the location of employment; (iv) first date of
present service; (v) job title or description; (vi) rate of compensation
(including any bonus, incentive, profit-sharing or other contingent payment);
and (vii) date and amount of last change in compensation rate; provided, that
information relating to items (vi) and (vii) need be given only with respect
to non-union employees.
(c) Except as set forth on Schedule 3.9(c), Seller
has no obligation, whether legal or otherwise, to pay to any of its current or
former employees, directors, officers or advisors, any salary, fringe benefit
or premium, or to offer any Person employment after the Closing Date. To the
Knowledge of Seller, Seller has no obligations or liabilities arising from the
termination or cancellation of any employment agreements in effect on or prior
to the Closing Date. Except as required by law, Seller is not a party to any
employment or consulting agreement, whether written or oral, which cannot be
terminated upon notice of thirty (30) days or less without penalty or premium.
(d) To the Knowledge of Seller, no present or former
employee of Seller is presently engaged or has threatened to engage in
competition with the Business.
3.10 Litigation. Except as set forth on Schedule 3.10, there
is no suit, action, charge, proceeding, investigation, claim or order pending
or, to the Knowledge of Seller or any Shareholder, threatened, against Seller
(or, to the knowledge of Seller or any Shareholder, pending or threatened
against any of the officers, directors or key employees of Seller with respect
to their business activities on behalf of Seller), or to which Seller is
otherwise a party,
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before any court, or before any Governmental Body, including, without
limitation, any employment discrimination charge before a federal, state of
local governmental administrative agency; nor, to the Knowledge of Seller or
any Shareholder, is there any reasonable basis for any such action,
proceeding, or investigation. Seller is not subject to any Order of any
Governmental Body and Seller is not engaged in any legal action to recover
monies due it or for damages sustained by it or otherwise.
3.11 Compliance with Laws. Seller possesses all material
Permits of and from all Governmental Bodies necessary to own or lease its
respective properties and assets and to conduct the Business, which Permits
are listed on Schedule 3.11 hereto. No proceeding has been threatened or
commenced that seeks to, or could reasonably be anticipated to, cause the
suspension, modification, revocation or withdrawal of any such Permit. Seller
is currently, and at all times has been, in material compliance with all Laws
applicable to it relating to the Business; provided, that with respect to the
compliance of the Equipment with the provisions of OSHA and the rules and
regulations promulgated thereunder, this representation and warranty is made
to the Knowledge of Seller. Neither Seller nor any Shareholder has received
any written or oral communication alleging that Seller or the operations
thereof may be in violation of any Law or any Permit, or may have any
liability under any Law, relating to the Business, except for any such
violation or liability that would not result in a Material Adverse Effect.
3.12 Insurance. Schedule 3.12 sets forth a complete and
accurate list of all policies of insurance of any kind or nature covering
Seller or any of its employees, properties or assets, including, without
limitation, policies of life, disability, fire, theft, workers compensation,
employee fidelity and other casualty and liability insurance. All such
policies are in full force and effect and Seller is not in material default of
any provision thereof. Seller has not received notice from any issuer of any
of such policies of such issuer's intention to cancel or refusal to renew any
policy issued by it.
3.13 Related Party Transactions. Except as set forth in
Schedule 3.13, none of Seller, or any of its officers, employees or Affiliates
(i) owns any direct or indirect interest of any kind in, or controls or is a
director, officer, employee or partner of, or consultant to, or lender to or
borrower from or has the right to participate in the profits of, any Person
which is (A) a competitor, supplier, customer, landlord, tenant, creditor or
debtor of Seller, (B) engaged in a business related to the Business or (C) a
participant in any transaction related to the Business to which Seller is a
party or (ii) is a party to any Contract or transaction with Seller. Since
January 1, 1996, Seller has not transferred any equipment or other assets to
any employee of Seller or any of Seller's Affiliates, and has not assisted any
such employee in establishing a business that might compete in any manner with
the Business.
3.14 Actions since January 1, 1997. Except as shown on
Schedule 3.14, or as contemplated by this Agreement, since January 1, 1997,
there has not been, with respect to Seller, any:
(a) change which has had a Material Adverse Effect;
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(b) termination or amendment of, or a failure in any
material respect to perform obligations or the occurrence of any default
under, any contract, lease, agreement or license that has had or could have a
Material Adverse Effect;
(c) failure to maintain in full force and effect
substantially the same level and types of insurance coverage, or destruction,
damage to, or loss of any asset of Seller (whether or not covered by
insurance) that has had or could have a Material Adverse Effect;
(d) change in accounting or business principles,
methods or practices (including, without limitation, changes in (i) inventory,
equipment or supply cost systems or (ii) practices or time periods for billing
customers);
(e) except as otherwise contemplated by this
Agreement, sale, assignment, or transfer of any tangible or intangible asset,
including any rights to Intellectual Property, except in the ordinary course
of business and consistent with past practice;
(f) waiver or release of any material right or claim
related to the Business, except for cancellations, waivers and releases in the
ordinary course of business and consistent with past practice which do not
exceed Ten Thousand Dollars ($10,000) individually or Twenty-Five Thousand
Dollars ($25,000) in the aggregate;
(g) disposition of or lapse of any patent, trademark,
trade name or copyright or any application for the foregoing or any license,
permit or authorization to use any of the foregoing;
(h) revaluation of any assets of Seller;
(i) amendment or termination of the contract,
agreement or license relating to Intellectual Property, or amendment or
termination of any other material contract, agreement, license, permit or
governmental approval to which Seller is a party;
(j) subjecting to Liens any asset of Seller related
to the Business;
(k) return of previously ordered equipment or
supplies to the manufacturer or suppliers thereof, except in the ordinary
course of business and consistent with past practice;
(l) material delay in the purchase of inventory
compared to past ordinary course of business practice and as needed for normal
business use;
(m) transfer, sale or other disposition of any Asset
from Seller without full consideration being paid, including, without
limitation, by dividend or other distribution; or
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(n) agreement or understanding to take any of the
actions described above in this Section 3.14.
3.15 Taxes.
(a) "Taxes" shall mean any tax (whether income,
excise, customs, sales or use, value added, ad valorem, real or personal
property, license, transfer, employment, social security or any other kind of
tax or contribution no matter how denominated), or any assessment, levy,
impost, withholding, or other governmental charge in the nature of a tax, and
shall include all additions to tax, interest, penalties and fines with respect
thereto; and "Returns" shall mean all reports, estimates, information
statements and returns of any nature, including amended versions of any of the
foregoing, relating to or required to be filed in connection with any Taxes
pursuant to the statutes or regulations of any federal, state, local or
foreign government taxing authority.
(b) The Seller has filed all Returns that are
required to be filed on or before the date hereof. All such returns are true,
correct and complete in all material respects. All Taxes shown to be due on
such Returns (filed on or before the date hereof) have been paid, and all
Taxes which are required to be withheld or collected by the Seller have been
duly withheld and collected and, to the extent required, have been paid to the
appropriate governmental authority or properly deposited as required by
applicable law.
(c) Seller has not been audited by any taxing
authority in the last five years and has not been notified of, and to the
Knowledge of Seller and the Shareholders, there has not been, any attempt or
threat to audit Seller with respect to any Taxes relating to the Business.
(d) Seller is not obligated to file any Returns in
any country other than the United States.
3.16 Material Contracts. Schedule 3.16 sets forth all
Contracts (excluding Contracts that involve total payments to or from Seller
(or that impose liabilities on Seller or any other party to the Contract) in
excess of Ten Thousand Dollars ($10,000) as to any one Contract or Twenty Five
Thousand Dollars ($25,000) in the aggregate as to all such Contracts) relating
to the Business to which Seller is a party or by which it is bound, including,
without limitation: (i) Contracts with any Shareholder (or any Affiliates of
any Shareholder) or any current or former officer or director of Seller; (ii)
Contracts with any labor union or association representing any employee of
Seller; (iii) Contracts pursuant to which any Person is required to purchase
or sell a stated portion of its requirements or output from or to another
Person; (iv) Contracts for the sale or lease (as lessor or lessee) of any real
or personal property whether or not in the ordinary course of business or for
the grant to any Person of any preferential rights to purchase any of its
assets; (v) partnership or joint venture agreements; (vi) Contracts containing
covenants of Seller or any of its Affiliates not to compete in any line of
business or with any Person in any geographical area or covenants of any other
Person not to compete with Seller in any line of
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business or in any geographical area; (vii) Contracts relating to the
acquisition by Seller of any operating business or the capital stock of any
other Person; or (viii) Contracts relating to the borrowing of money. There
have been made available to Buyer true and complete copies of each of the
Contracts. Except as set forth on Schedule 3.16, each of the Contracts and
other agreements is in full force and effect and is the legal, valid and
binding obligation of each party thereto, enforceable against such party in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or
in equity). Except as set forth on Schedule 3.16, Seller is not in material
default under any Contract, nor, to the Knowledge of any Shareholder, is any
other party to any Contract in default thereunder in any material respect.
3.17 Environmental Matters.
(a) To the Knowledge of Seller, all permits and
licenses regarding the Assets held on the date hereof by Seller pursuant to
Environmental Laws are identified in Schedule 3.17, Part I. To the Knowledge
of Seller, all Materials of Environmental Concern have been properly disposed
of in accordance with the Environmental Laws.
(b) Except as set forth in Schedule 3.17, Part II,
there is no Environmental Claim pending against Seller or any Operating
Facility or, to the Knowledge of the Seller, threatened against Seller or any
Operating Facility, or threatened or pending against any Person whose
liability for any Environmental Claim Seller has or may have retained or
assumed either contractually or by operation of law.
(c) Except as set forth on Schedule 3.17, Part III,
there are no past or present actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the release or threatened
release, emission, discharge, disposal or presence of any Materials of
Environmental Concern, that, to the Knowledge of Seller, forms the basis of
any Environmental Claim against Seller, any Operating Facility or any Person
whose liability for any Environmental Claim Seller has or may have retained or
assumed either contractually or by operation of law.
(d) Except as set forth on Schedule 3.17, Part IV, no
asbestos containing materials or polychlorinated biphenyls are contained in or
form a part of any of the Assets.
3.18 No Misrepresentation. Except as any representation or
warranty contained in this agreement may be limited to the Knowledge of Seller
or any Shareholder, no representation or warranty of Seller or any Shareholder
contained in this Agreement or in any exhibit or schedule hereto or in any
certificate or other agreement or instrument furnished by Seller or any
Shareholder to Buyer pursuant to the terms hereof contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements contained herein
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or therein not misleading. There are no material facts relating to Seller, the
Business or the Assets that have not been reflected in this Agreement,
including the exhibits and schedules hereto.
3.19 Financial Advisors. No Person has acted, directly or
indirectly, as a broker, finder or financial advisor for Seller or any
Shareholder in connection with the transactions contemplated by this Agreement
and no Person is entitled to any fee or commission or like payment in respect
thereof.
3.20 Securities Representations.
(a) Seller is domiciled in and each Shareholder is a
resident of the Commonwealth of Pennsylvania, and Seller and each Shareholder
is an "accredited investor" as that term is in Rule 501 of Regulation D under
the Securities Act.
(b) Seller and each Shareholder has read the
Securities Reports. Buyer has made available to Seller and each Shareholder
all documents that Seller or any Shareholder has requested relating to the
Buyer, the Shares and the Warrants, and any Common Stock issuable upon
exercise of the Warrants (collectively the "Securities"), and has provided
answers to Seller and all of the Shareholders' questions concerning the Buyer
and the Securities. In addition, Seller and each Shareholder has had an
opportunity to discuss the Buyer and the Securities with representatives of
Buyer and to ask questions of them. Without limiting the foregoing, Seller and
each Shareholder understands and acknowledges that neither Buyer nor anyone
acting on its behalf has made any representations or warranties other than
those contained herein respecting Buyer or the future conduct of Buyer's
business or of Seller's business, and neither Seller nor any Shareholder has
relied upon any representations or warranties other than those contained
herein in the belief that they were made on behalf of Buyer.
(c) Seller and each Shareholder recognizes that
receipt of the Shares involves certain risks, including without limitation
those set forth in the Registration Statement on the Form S-3 that is one of
the Securities Reports and has sufficient knowledge to understand all such
risks.
(d) Seller and each Shareholder is acquiring the
Securities to be issued to it without a view to any distribution or resale
thereof, other than a resale that, in the opinion of Seller's counsel, which
opinion is satisfactory to Buyer, may be made without violating the
registration provisions of the Securities Act or applicable Pennsylvania
securities laws. The Securities are "restricted securities" within the meaning
of Rule 144 under the Securities Act and have not been registered under the
Securities Act and therefore must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from
registration is available.
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(e) Seller and each Shareholder understands that
there shall be endorsed on the certificate evidencing each share of Common
Stock issued pursuant to this Agreement or the Warrant delivered
contemporaneously herewith a legend substantially similar to the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE '1933 ACT'), OR THE SECURITIES LAWS
OF ANY OTHER JURISDICTION AND ARE 'RESTRICTED
SECURITIES' AS DEFINED BY RULE 144 UNDER THE 1933
ACT. THE SHARES MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR DISTRIBUTED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT REGISTERING THE
SHARES UNDER THE 1933 ACT, OR IN LIEU THEREOF, AN
OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY
TO THE ISSUER OF THE SHARES, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACTS."
3.21 Solvency. Seller is, and shall subsequent to Closing
be, solvent, and shall have sufficient working capital to pays its debts and
obligations as they become due.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller that:
4.1 Organization and Good Standing. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania.
4.2 Authorization of Agreement. Buyer has full corporate
power and authority to execute and deliver this Agreement and any and all
other documents or instruments to be executed and/or delivered by Buyer in
connection herewith (collectively, the "Buyer Purchase Documents"), and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by Buyer of this Agreement and the Buyer Purchase
Documents have been duly authorized by all necessary corporate action on
behalf of Buyer. This Agreement and each of the Buyer Purchase Documents has
been duly executed and delivered by Buyer and (assuming the due authorization,
execution and delivery by the other parties hereto and thereto) this Agreement
and each the Buyer Purchase Document when so executed and delivered constitute
the legal, valid and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles
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of commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).
4.3 Conflicts; Consents of Third Parties.
(a) Except as set forth on Schedule 4.3 hereto, none
of the execution and delivery by Buyer of this Agreement and of the Buyer
Purchase Documents, the consummation by Buyer of the transactions contemplated
hereby and thereby or compliance by Buyer with any of the provisions hereof or
thereof will (i) conflict with, or result in the breach of, any provision of
the certificate of incorporation or by-laws of Buyer, (ii) conflict with,
violate, result in the breach or termination of, constitute a default under,
or give rise to any right of acceleration under, any Contract to which Buyer
is a party or by which Buyer or its properties or assets is bound or (iii)
violate any Law or Order of any Governmental Body by which Buyer is bound.
(b) Except as set forth on Schedule 4.3, no waiver,
Order or Permit of, or declaration or filing with, or notification to, any
Person or Governmental Body is required on the part of Buyer in connection
with the execution and delivery of this Agreement or the Buyer Purchase
Documents or the compliance by Buyer with any of the provisions hereof or
thereof, or the consummation of the transactions contemplated hereby or
thereby.
4.4 Financial Advisors. No Person has acted, directly or
indirectly, as a broker, finder or financial advisor for Buyer in connection
with the transactions contemplated by this Agreement and no person is entitled
to any fee or commission or like payment in respect thereof.
4.5 No Misrepresentation. No representation or warranty of
Buyer contained in this Agreement or in any schedule hereto or in any
certificate or other agreement or instrument furnished by Buyer to any
Shareholder pursuant to the terms hereof contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading. The Securities Reports,
as of their respective dates of filing, do not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained therein not misleading.
ARTICLE V
CLOSING; DELIVERIES AT CLOSING
5.1 Closing.
(a) Closing Date. The Closing of the transaction
provided for in this Agreement (herein sometimes called the "Closing") shall
take place at 10:00 a.m. on January 2, 1998, or such other place and time as
shall be agreed to between the parties hereto; provided, however, that if, on
January 2, 1998 any of the conditions to Closing specified in Article VIII
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hereof has not been satisfied or waived, either party shall have the right to
delay the time of Closing until such condition is satisfied or waived, subject
to the parties' right to terminate this Agreement pursuant to Section 10.4.
The date and time of Closing is sometimes herein called the "Closing Date."
(b) Deliveries by Seller and Shareholders at Closing.
At Closing, Seller or Shareholders will deliver or cause to be delivered to
Buyer the following: (i) all agreements, understandings, assignments,
contracts, items and documents referred to in Section 8.2(f); (ii) copies of
the minutes of the Board of Directors and shareholders of Seller authorizing
the execution and performance of this Agreement and all ancillary agreements,
certified by Seller's Secretary; (iii) a bill of sale and general assignment
and other applicable transfer instruments transferring to Buyers good title to
all of the personal property included in the Assets; (iv) a certificate, dated
the Closing Date, executed by each of Shareholders and the President and
Secretary of Seller, to the effect that the conditions set forth in Sections
8.2(a) and 8.2(b) hereof have been satisfied; and (v) all such further
documents, instruments and agreements which may be reasonably requested by
Buyer or its counsel in order to more effectively transfer title to the Assets
to Buyer, or to effectuate and carry out any provision of this Agreement.
(c) Deliveries by Buyer at Closing. At the Closing,
Buyer will deliver or cause to be delivered to Seller and Shareholders the
following: (i) the Cash; (ii) the Subordinated Note; (iii) the Shares; (iv)
the Warrant; (v) a certificate of the Secretary of Buyer, dated the Closing
Date, certifying that all necessary action has been taken to authorize the
consummation by Buyer of the transactions contemplated by this Agreement and
the Buyer Purchase Documents; (vi) a certificate, dated the Closing Date,
executed by an authorized officer of Buyer, to the effect that the conditions
set forth in Sections 8.3(a) and 8.3(b) hereof have been satisfied; and (vii)
all such further documents, instruments and agreements which may be reasonably
requested by Seller, Shareholders or their counsel in order to effectuate and
carry out the provisions of this Agreement.
ARTICLE VI
CONDUCT OF THE BUSINESS OF COMPANY PENDING CLOSING
6.1 Conduct of the Business Pending Closing.
Between the date hereof and the Closing hereunder Seller
will, and Shareholders will cause Seller to:
(a) Not take or suffer or permit any action which
would render untrue any of the representations or warranties of Shareholders
and Seller herein contained, and not omit to take any action, the omission of
which would render untrue any such representation or warranty;
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(b) Conduct the Business in a good and diligent
manner in the ordinary and usual course;
(c) Not enter into any Contract relating to the
Business with any party, other than Contracts for the sale of merchandise and
Contracts for the purchase of materials and supplies in the ordinary and usual
course of business, and not amend, modify or terminate any Contracts without
the prior written consent of Buyer;
(d) Except as otherwise agreed to by the parties, use
its best efforts to preserve Seller's organization intact as it relates to the
Business, except as may be required to comply with the terms hereof, to keep
available the services of its employees and sales representatives, and to
preserve its relationships with customers, suppliers and others with whom it
deals;
(e) Not reveal, orally or in writing, to any party,
other than Buyer and Buyer's authorized agents, or in the ordinary course of
the Business to any actual or potential customer, any of the business
procedures and practices followed by Seller in the conduct of the Business, or
any technology used in the processing, evaluation or manufacture of any of the
products of the Business;
(f) Maintain in full force and effect all of the
insurance policies listed on Schedule 3.12 and make no change in any insurance
coverage without the prior written consent of Buyer;
(g) Keep the premises occupied by Seller and all of
Seller's equipment and other tangible personal property in good order and
repair and perform all necessary repairs and maintenance in accordance with
past practices, normal wear and tear excepted;
(h) Continue to maintain all of Seller's usual
business books and records in accordance with its past practices and not
change its method of accounting;
(i) Not issue any capital stock or any option,
warrant or right relating thereto;
(j) Not waive any right or cancel any claim relating
to the Business other than in the ordinary course of business;
(k) Maintain Seller's corporate existence and not
merge or consolidate with any other entity, except for the acquisition from an
Affiliate of assets related to the Business;
(l) Except as may be required to comply with the
terms hereof, comply with all provisions of all Contracts and all applicable
laws, rules and regulations (except for any non-compliance that would not have
a Material Adverse Effect); and
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(m) Not negotiate with any other person the sale or
other transfer of the Assets, or the capital stock of Seller, or any similar
transaction.
ARTICLE VII
COVENANTS
7.1 Preservation of Records. Seller and Buyer agree that
each of them shall preserve and keep the records held by them relating to the
Business for a period of three (3) years from the date hereof and shall make
such records and personnel available to the other as may be reasonably
required by such party in connection with, among other things, any insurance
claims by, Legal Proceedings against or governmental investigations of Seller
or Buyer or any of their respective Affiliates or in order to enable Seller or
Buyer to comply with their respective obligations under this Agreement and
each other agreement, document or instrument contemplated hereby. In the event
either Seller or Buyer wishes to destroy such records after that time, such
party shall first give ninety (90) days prior written notice to the other and
such other party shall have the right at its option and expense, upon prior
written notice given to such party within that ninety (90) day period, to take
possession of the records within one hundred and eighty (180) days after the
date of such notice.
7.2 Put Option.
(a) Seller and the Shareholders, as applicable
(collectively, the "Holder") shall have the option (the "Put Option") to
require Buyer to repurchase from the Holder the Shares then held by the Holder
at the price of $4.00 per Share, by exercising the Put Option in accordance
with the terms of this Section 7.2. Buyer may assign its obligations under
this Section 7.2 to any party, in whole or in part, but shall remain liable to
Seller and the Shareholders for any such assigned obligations.
(b) The Put Option may be exercised, by written
notice in accordance with Section 7.2(d) hereof, one time, but not from time
to time, in part or in full, on any of the ten Business Days (as defined
below) beginning with the day that is the date of the second anniversary of
the Closing Date, or, if such day is not a Business Day, the next subsequent
Business Day; provided, however, that should Buyer default on the Subordinated
Note, and should such default not be cured in accordance with the terms of the
Subordinated Note, after written notice by Seller to Buyer identifying the
default, the Put Option shall be immediately exercisable for a period of 30
days beginning on the Business Day after the last Business Day on which Buyer
had the right to cure such default. In such event, the Put Option shall
terminate at the end of such 30 day period.
(c) Notwithstanding the foregoing, the Put Option
shall be permanently terminated with regard to any Shares as to which a Sale
Notice is provided in accordance with Section 7.2(f), except to the extent
that Buyer fails to make any payment owed in connection therewith pursuant to
Section 7.2(f).
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(d) Any notice regarding the exercise by the Holder
of the Put Option under this Section 7.2 shall set forth the number of Shares
with respect to which the Holder is exercising such Put Option. Payment with
respect to the Put Option shall be made by federal wire transfer, payable in
same day funds, pursuant to written instructions furnished by the Holder to
Buyer in a timely manner, or by any other means as agreed to by the Holder and
Buyer. Such payment shall occur no later than ten Business Days after exercise
of the Put Option in accordance with the foregoing.
(e) Should Buyer or, if applicable, its assignee,
default in the payment of any amount due with respect to Section 8.2(g), the
Subordinated Note or the Put Option (i) the amount of such default shall
accrue interest from the date first owed until the date paid at a floating
interest rate that is five percentage points higher than the Prime Rate and
(ii) if the Buyer should remain in default of the Subordinated Note or the Put
Option, as the case may be, 180 days after receiving written notice of such
default, Seller and the Shareholders shall be released from the Noncompetition
Agreement set forth in Section 7.3 hereof.
(f) Any other provision of this Section 7.2
notwithstanding, Buyer may, at its option, at any time (and from time to time)
that the Shares are saleable by any Holder without violation of any securities
laws, instruct the Holder to sell, by written notice from Buyer to the Holder
(a "Sale Notice"), within two Business Days of the receipt of the applicable
Sale Notice, such number of Shares as are specified in the applicable Sale
Notice (and through, the broker, if any, specified in such Sale Notice), to
another party designated by Buyer in such Sale Notice or into the open market.
Should any Holder sell pursuant to the preceding sentence, Buyer will pay to
the Holder any amount by which the number of shares of Common Stock sold,
times $4.00, exceeds the aggregate pre-tax net proceeds of such sale to the
Holder. If the Holder fails to sell any Shares that are the subject of a Sale
Notice in accordance with the foregoing, the Put Option applicable to such
Shares shall automatically terminate.
7.3 Noncompetition Agreement.
(a) Duration and Extent of Noncompetition Agreement.
For a period of fifteen (15) years from the date hereof, neither Seller nor
any Shareholder, nor any Affiliate of any of the foregoing, shall directly or
indirectly engage in (as owner, employee, agent, consultant, director,
officer, independent contractor or otherwise), or directly or indirectly be
financially interested in, any business that is engaged in the manufacture,
sale or distribution anywhere in the world of any of the following products
from any material: commercial or residential roof drainage products, systems
and accessories, including all styles of gutters, downspouts, associated
fittings, hardware, accessories, snowguards and roof edgings; siding products;
and soffit products (but not to include products that are part of Seller's
current ventilation products). Nothing in the foregoing sentence shall be
deemed, however, to prevent Seller (i) from owning securities of Buyer, or of
any other publicly-owned corporation engaged in any such business, provided
that the total amount of securities of each class owned by Shareholder in such
other publicly-owned corporation does not exceed five percent (5%) of the
outstanding securities of such class or (ii) from exercising any rights to
distribution of the
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CranePlastics WaterFall (TM) Gutter Guards System retained by Seller in
accordance with Section 7.7 hereof.
(b) Remedies for Breach. Seller and Shareholders
acknowledge that the restrictions contained in Section 7.3(a) are reasonable
and necessary in order to protect Buyer's legitimate interests and that any
violation thereof would result in irreparable injury to Buyer. Seller and
Shareholders therefore acknowledge and agree that, in the event of any
violation thereof, Buyer shall be authorized and entitled to obtain, from any
court of competent jurisdiction, preliminary and permanent injunctive relief
as well as an equitable accounting of all profits or benefits arising out of
such violation, which rights and remedies shall be cumulative and in addition
to any other rights or remedies to which Buyer may be entitled. In the event
that Section 7.3(a) above is held to be in any respect an unreasonable
restriction upon the Seller or any Shareholder, then the court so holding may
reduce the territory to which it pertains and/or the period of time in which
it operates, or effect any other change to the extent necessary to render such
subparagraph enforceable by said court.
(c) Extension of Noncompetition Agreement. In the
event of any breach or violation of the restriction contained in Section
7.3(a) above, the period therein specified shall abate during the time of any
violation thereof and that portion remaining at the time of commencement of
any violation shall not begin to run until such violation has been fully and
finally cured.
7.4 Financial Statements. Seller shall provide the financial
statements of the Business set forth on Schedule 7.4 hereto. Except as
otherwise indicated on Schedule 7.4, all such financial statements shall be
provided prior to Closing. All such financial statements shall be prepared by
Seller's independent accountants. The costs of the financial statements to be
prepared in accordance with this Section 7.4 shall be shared equally by Buyer
and Seller. Buyer shall be responsible for all costs of any pro forma
financial statements to be prepared in connection herewith.
7.5 Employees of Seller. Buyer shall have no obligation, at
any time, to hire any employee of Seller. Seller shall be responsible for
negotiating with any affected unions or labor organizations, including
Warehouse Employees' Union Local No. 169, about the effects of this
transaction on Seller's employees. Buyer has no such obligation and shall not
be responsible for any failure of Seller to negotiate.
7.6 Delivery of Assets. Subsequent to Closing, Buyer shall
have up to six weeks to take delivery of the Assets. The parties hereby agree
that Seller's employees (at Seller's cost) shall (i) disconnect all Equipment
from any air hoses or electrical systems and (ii) move all Inventory to a
loading dock on Seller's premises to which Buyer has convenient access.
7.7 Crane Gutter Product. The parties hereby acknowledge
that Seller holds distribution rights from CranePlastics to distribute Crane's
WaterFall (TM) Gutter Guards System. The parties hereby agree that, subsequent
to Closing, Buyer may seek to obtain such
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distribution rights from CranePlastics and Seller may seek to retain such
rights, but Buyer shall not have any liability to Seller if Buyer obtains such
rights and Seller's rights are terminated.
7.8 Sales of Shares, etc. Seller and Shareholders hereby
agree:
(a) not to sell, or otherwise transfer, more than
5,000 shares of Common Stock during any Trading Day without giving the Company
two (2) Business Days' written notice thereof; and
(b) not to solicit proxies from any of the Company's
shareholders for any purpose or to act as a member of a group, as contemplated
by Rule 13d-1 under the Exchange Act, with any other holders of Common Stock.
7.9 Satisfaction of Conditions. Each of the parties hereto
shall use their reasonable commercial efforts to cause the conditions of the
Closing to be satisfied as promptly as practicable.
7.10 Access. Immediately after the date of this Agreement,
and continuing subsequent to Closing, Buyer and Seller shall provide
reasonable access, which access shall not result in any unreasonable burden or
expense to Buyer or Seller, as the case may be, at reasonable times and upon
reasonable notice to representatives of each other, subject to Section
10.2(b), for purposes of confirming the accuracy of the information set forth
herein and for other purposes reasonably related to effectuating the
transactions contemplated hereby, including without limitation obtaining
information required by Buyer in order to comply with the Exchange Act and the
Securities Act.
7.11 Removal of Obdyke Name; Sale of Certain Products. Buyer
shall have 120 days after Closing to alter any of the Equipment that imprints
or otherwise places the name "Benjamin Obdyke Incorporated," the related
initials or any shorter version thereof, on any product produced by such
Equipment, so that it shall no longer do so. Any item of Inventory, or any
product of the Equipment referred to in the first sentence of this paragraph
produced prior to the end of such 120 day period, may be sold by Buyer,
without altering such item to remove such name or mark.
7.12 Unfilled Orders. Seller shall assign to Buyer at
Closing all orders with respect to the Business that have not been filled
prior to the Closing Date.
7.13 Schedules. On or before December 11, 1997, Seller and
Shareholders shall provide to Buyer any Schedules required hereby that are not
attached at the date of this Agreement. Buyer may terminate this Agreement by
written notice to Seller on or before December 19, 1997 if any such Schedule
is unsatisfactory to it.
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ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated hereby
shall be subject to the fulfillment, at or prior to the Closing Date, of the
condition that no preliminary or permanent injunction or other order, decree
or ruling issued by any court of competent jurisdiction nor any statute, rule,
regulation or order entered, promulgated or enacted by any Governmental Entity
shall be in effect which would prevent the consummation of the transactions
contemplated hereby, and no action, suit, claim or proceeding brought by a
governmental authority before any domestic court, governmental agency,
commission or administrative or regulatory authority shall have been commenced
and be pending which seeks to restrain, prevent or materially delay or
restructure the transactions contemplated hereby or which otherwise questions
the validity or legality of any such transactions;
8.2 Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated hereby shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) each of Shareholders and Seller shall have
performed or complied in all material respects with all obligations and
agreements required to be performed or complied with by them hereunder at or
prior to the Closing Date;
(b) each of the representations and warranties of
Shareholders and of Seller contained in this Agreement is now, and at all
times after the date of this Agreement to and including the time of Closing
shall be, true and correct in all material respects;
(c) all consents, approvals and waivers required by
Seller from third parties, if any, required to consummate the transactions
contemplated hereby shall have been obtained;
(d) no litigation, governmental action or other
proceedings involving Seller which might have a Material Adverse Effect on the
Business shall be threatened in good faith or commenced against Seller with
respect to any matter;
(e) no Material Adverse Effect shall have occurred
with respect to the Business or the Assets subsequent to the date of this
Agreement;
(f) all documents required to be delivered to Buyer
by Seller and Shareholders at or prior to Closing shall have been delivered or
shall be tendered at the time and place of Closing;
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(g) (i) Buyer shall have obtained financing
acceptable to Buyer in its sole discretion in the amount of Ten Million
Dollars ($10,000,000) and (ii) Buyer shall have obtained the consent of Summit
Bank, N.A. to the transactions contemplated by this Agreement; provided,
however, that should Buyer fail to close hereunder based on its inability to
obtain financing or the consent of Summit Bank, N.A., it shall pay to Seller
the amount of Five Hundred Thousand Dollars ($500,000) as liquidated damages.
In such case, Buyer shall have no other liability to Seller or any Shareholder
in connection with this Agreement. Any reasonable costs incurred by Seller in
collecting such amount (including reasonable attorney's fees and expenses)
shall be paid by Buyer.
8.3 Conditions to Obligations of Shareholders and Seller.
The obligations of Shareholders and Seller to consummate the transactions
contemplated hereby shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions:
(a) Buyer shall have performed or complied in all
material respects with all obligations and agreements required to be performed
or complied with by it hereunder at or prior to the Closing Date;
(b) each of the representations and warranties of
Buyer contained in this Agreement is now, and at all times after the date of
this Agreement to and including the time of Closing shall be, true and correct
in all material respects;
(c) all Cash, Securities and documents required to be
delivered to Seller and Shareholders by Buyer shall have been delivered or
shall be tendered at the time and place of Closing; and
(d) the absence of any material adverse change to
Buyer subsequent to the date of this Agreement.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
9.1 Statements as Representations. All representations
contained in this Agreement shall be deemed a representation and warranty as
such terms are used in this Article IX.
9.2 Survival of Representations and Warranties. The
representations and warranties of Seller, Shareholders and Buyer contained
herein shall survive until the day that is eighteen (18) months after the
Closing Date, except that the representations and warranties of Seller and
Shareholders set forth in Sections 3.3, 3.8, 3.9, 3.15 and 3.17 shall survive
until the expiration of the applicable statute of limitations. All covenants,
obligations and agreements of Buyer, Shareholders and Seller contained herein
shall survive the Closing Date.
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9.3 General Indemnity.
(a) Seller and Shareholders shall jointly and
severally indemnify and hold harmless Buyer and its Affiliates (the "Buyer
Group"), from, against and in respect of any and all damages, claims,
liabilities or expenses, including, without limitation, interest, penalties
and reasonable attorneys' fees (collectively, "Damages"), resulting from,
incurred in connection with or arising out of or otherwise in respect of (i)
the breach of any representation or warranty of Seller or Shareholders for
such period of survival as provided in Section 9.2; provided, that Seller
shall not be liable with regard to claims for breaches of representations and
warranties in Article 3 hereof (not including Sections 3.3 and 3.4) unless the
aggregate amount of such claims exceeds Twenty-Five Thousand Dollars ($25,000)
(but if the aggregate amount of such claims exceeds Twenty-Five Thousand
Dollars ($25,000), Seller shall be liable for such entire amount), (ii) the
nonfulfillment of any unwaived covenant or agreement on the part of Seller or
Shareholders set forth in this Agreement or in any agreement or certificate
executed and delivered by Seller or Shareholders pursuant to this Agreement,
(iii) all liabilities for Taxes arising from the transfer of the Assets from
Seller to Buyer and all liabilities for Taxes of Seller, Shareholders or any
of their respective Affiliates for any period prior to or subsequent to the
Closing Date, including Bulk Sales Tax, if any; (iv) any and all liabilities,
obligations, or responsibilities of Seller, Shareholders or any of their
respective Affiliates with respect to any Seller Personnel, or any spouse,
dependent or family member of any Seller Personnel, resulting from, relating
to or arising out of any action or failure to act which occurred on, prior to
or subsequent to the Closing Date, including, without limitation, obligations,
liabilities and responsibilities with respect to any (1) discrimination or
civil rights claims, wrongful discharge claims, unfair labor practice charges
or other charges, claims, complaints or grievances relating to labor
relations, employment, employment contracts or contracts for the provision of
services, with Seller, any Shareholder or any Affiliate of Seller; (2) claims
or actions under federal, state or local WARN Acts for improper notification
of a plant closing or mass layoff (3) accidents, events or other occurrences
compensable under any applicable workers' compensation or similar state or
federal law, except to the limited extent that such obligations, liabilities
or responsibilities are required by applicable law to be assumed by Buyer; and
(4) pension plan, severance plan or policy, termination or indemnity payment,
salary continuation agreement or practice, special bonuses or any similar
costs or obligations; (v) all liabilities of Seller, whether incurred on,
prior to, or subsequent to the Closing Date, including without limitation any
liabilities with respect to any Environmental Claim or Environmental Laws and
claims of infringement of Intellectual Property rights of others with respect
to actions or failures to act prior to the Closing; (vi) all litigation
resulting from, incurred in connection with or arising out of or otherwise in
respect of the conduct of the Business on or prior to the Closing; (vii) any
and all fees and expenses and other transaction costs, including, without
limitation, attorneys' fees, financial advisors' fees or accountants' fees
incurred by any Shareholder, Seller or any of their respective Affiliates, in
each case in connection with this Agreement or the transactions contemplated
by this Agreement, and (viii) any and all actions, suits, claims, proceedings,
investigations, audits, examinations, demands, assessments, fines, judgments,
settlements, interest, penalties, costs, remedial actions and other expenses
(collectively, "Actions") pertaining to or arising out of any of the foregoing
in this Section 9.3(a). The indemnities set
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forth in clauses (iii) through (vii) if the preceding sentence shall be
referred to as the "Specific Indemnities." Seller and Shareholders hereby
acknowledge that the Specific Indemnities are in addition to, and in no way in
limitation of, any other obligations of indemnity set forth herein.
(b) Buyer shall indemnify and hold harmless Seller
and Shareholders from, against and in respect of any and all Damages resulting
from, incurred in connection with or arising out of or otherwise in respect of
(i) the breach of any representation or warranty of Buyer for such period of
survival as provided in Section 9.2, (ii) the nonfulfillment of any unwaived
covenant or agreement on the part of Buyer set forth in this Agreement or in
any agreement or certificate executed and delivered by Buyer pursuant to this
Agreement, (iii) any and all fees and expenses, including, without limitation,
attorneys' fees, financial advisors' fees, accountants' fees and brokers' or
finders' fees incurred by Buyer in connection with this Agreement or the
transactions contemplated by this Agreement, (iv) the conduct of the Business
by Buyer subsequent to the Closing Date and (v) any and all Actions pertaining
to or arising out of any of the foregoing in this Section 9.3(b).
9.4 Interest on Indemnification Obligations. In the case of
any payments in respect of the indemnification obligations set forth in
Section 9.3, interest shall accrue on the amount of such payment from the date
payment is made by the Person seeking indemnification until the same is
reimbursed at a rate per annum equal to the Prime Rate plus five percent.
9.5 Indemnification Procedure. All claims for
indemnification by a Person entitled to be indemnified hereunder (an
"Indemnitee") by another Person (an "Indemnitor"), shall be asserted and
resolved as follows:
(a) In the event that any claim or demand for which
an Indemnitee may claim indemnity is asserted against or sought to be
collected from an Indemnitee by a third party, the Indemnitee shall notify the
Indemnitor within fifteen (15) days following the receipt by the Indemnitee of
such claim or demand, specifying the nature of such claim or demand and the
amount or the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim and demand)
(the "Claim Notice"); provided, however, that the failure so to notify the
Indemnitor will not relieve the Indemnitor from any liability it may have to
the Indemnitee under this Article IX unless, and only to the extent that, such
failure so to notify results in the loss of substantive rights or defenses.
(b) An Indemnitor shall have thirty (30) days from
the date on which the Claim Notice is duly given (the "Notice Period") to
notify an Indemnitee (i) whether or not it disputes the liability of the
Indemnitor to the Indemnitee hereunder with respect to such claim or demand
and (ii) whether or not the Indemnitor desires, at its sole cost and expense,
to defend the Indemnitee against such claim or demand; provided, however, that
the Indemnitor shall not be entitled to assume the defense of any proceeding
pursuant to Section 9.5(b)(ii) unless it has accepted and assumed in writing
the obligation to indemnify the Indemnitee with respect to Damages arising
from or relating to such claim or demand. If an Indemnitor does not notify an
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Indemnitee within the Notice Period that it disputes its liability to the
Indemnitee, the Indemnitor shall be liable for the amount of any Damages
related thereto.
(c) In the event an Indemnitor notifies an Indemnitee
within the Notice Period that it desires to defend the Indemnitee against such
claim or demand from the Indemnitee, then except as hereinafter provided the
Indemnitor shall defend, at its sole cost and expense, the Indemnitee by
appropriate proceedings, shall use its best efforts to settle or prosecute
such proceedings to a final conclusion in such a manner as to avoid any risk
of the Indemnitee becoming subject to any injunctive or other equitable order
for relief or to liability for any other matter, and shall control the conduct
of such defense; provided, however, that the Indemnitor shall not, without the
prior written consent of the Indemnitee, consent to the entry of any judgment
against the Indemnitee or enter into any settlement or compromise which does
not include, as an unconditional term thereof, the giving by the claimant or
plaintiff to the Indemnitee of a release, in form and substance reasonably
satisfactory to the Indemnitee, from all liability in respect of such claim or
litigation. If the defendants in any such claim or demand include both the
Indemnitor and the Indemnitee, and the Indemnitee, following consultation with
and notice to the Indemnitor, shall have received the opinion of outside
counsel, reasonably acceptable to the Indemnitor, stating that there may be
legal defenses or rights available to the Indemnitee which are different from,
in actual or potential conflict with, or additional to those available to the
Indemnitor, the Indemnitee shall have the right to select one law firm to act
at the Indemnitor's expense as separate counsel, on behalf of the Indemnitee.
In addition, if the Indemnitee desires to participate in, but not control, any
other defense or settlement, it may do so at its sole cost and expense. So
long as the Indemnitor is defending in good faith any such claim or demand,
the Indemnitee shall not settle such claim or demand without the consent of
the Indemnitor, which consent shall not be unreasonably withheld or delayed.
(d) In the event an Indemnitee should have a claim
against an Indemnitor hereunder which does not involve a claim or demand being
asserted against or sought to be collected from the Indemnitee by a third
party, the Indemnitee shall promptly send a Claim Notice with respect to such
claim to the Indemnitor; provided, however, that the failure so to notify the
Indemnitor will not relieve the Indemnitor from any liability it may have to
the Indemnitee under this Article IX unless, and only to the extent that, such
failure so to notify results in the loss of substantive rights or defenses. If
the Indemnitor does not notify the Indemnitee within the Notice Period that it
disputes such claim, the Indemnitor shall be liable for the amount of any
Damages related thereto.
9.6 Remedies Cumulative. The remedies provided in this
Article IX are not exclusive and shall not preclude assertion by any party
hereto of any other rights or the seeking of any other remedies against any
party hereto.
9.7 Limitations of Shareholders' Liability.
(a) The liability of the Shareholders pursuant to
this Article IX shall be limited to the aggregate amount of all payments or
distributions received after October 31,
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1997 by the Shareholders or any Affiliate of any Shareholder from Seller or
any Affiliate of Seller in any form and in any capacity, except that
distributions to a Shareholder or any Affiliate thereof from Seller or any
Affiliate thereof on account of income taxes payable by Shareholders on
Seller's Subchapter-S income shall not be counted as a payment or distribution
for the purposes of this Section 9.7.
(b) Buyer shall not seek to assert any liability
against any Shareholder unless at least thirty (30) days have elapsed since a
previous demand by Buyer against Seller with regard to such liability, and
such amount has not been paid to Buyer. Should Buyer obtain final judgments
against any Shareholder with regard to any liability, it shall not seek to
enforce such judgment against any Shareholder unless at least ten (10) days
have elapsed since Buyer has given Seller notice of such judgment and such
judgment has not been satisfied.
ARTICLE X
MISCELLANEOUS
10.1 Certain Definitions.
For purposes of this Agreement, the following terms shall
have the meanings specified in this Section 10.1:
"Adjusted Inventory Value" shall have the meaning set forth in
Section 2.2 hereof.
"Affiliate" means, with respect to any Person, any other
Person controlling, controlled by or under common control with such Person.
Each Shareholder shall be deemed to be an Affiliate of Seller.
"Agent" shall have the meaning set forth in Section 11.11
hereof.
"Assets" shall have the meaning set forth in Section 1.1
hereof.
"Business" shall have the meaning set forth in the Recitals
hereto.
"Business Day" means any day of the year on which federally
chartered banking institutions in Philadelphia, Pennsylvania, are open to the
public for conducting business and are not required or authorized to close.
"Buyer" shall have the meaning set forth in the Preamble
hereto.
"Buyer Item Cost" shall have the meaning set forth in
Section 2.2 hereof.
"Cash" shall have the meaning set forth in Section 2.1 hereof.
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"Closing Price" means, as of any date, (i) the closing sale
price of the Common Stock on Nasdaq; (ii) the closing sale price of the Common
Stock on the principal securities exchange on which the Common Stock is then
listed or admitted to trading, if the Common Stock is not included for
quotation on Nasdaq at any time of determination; or (iii) the average of the
mean between the last bid and asked prices per share of Common Stock, as
reported by the National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service, if the Common Stock is traded in the
over-the-counter market, and not on a securities exchange or on Nasdaq at any
time of determination, or, if not so reported, the average of the closing bid
and asked prices for the Common Stock as furnished to the Company by any
member of the National Association of Securities Dealers, Inc., selected by
the Company for that purpose.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Common Stock" shall have the meaning given in Section 2.1
hereof.
"Confidential Information" means all documents and other
information provided by any party to this Agreement to any other party,
whether written or oral, unless otherwise agreed in writing, provided that
such information shall not include information which: (a) is or becomes public
knowledge other than through the unauthorized disclosure of the party who has
received such information; (b) was known to the receiving party, before
receipt from the disclosing party; (c) is received legally without restriction
on disclosure from a third party who has the right to make such disclosure; or
(d) is required to be disclosed in order to comply with a judicial order or
decree or with any law or regulation of any governmental authority.
"Contract" means any oral or written contract, agreement,
indenture, note, bond, loan, instrument, lease, commitment, employment
agreement, covenant not to compete or other arrangement or agreement.
"Employee Benefit Plans" shall have the meaning set forth in
Section 3.8 hereof.
"Environmental Claim" shall mean any notice by a Person
alleging actual or potential liability (including, without limitation,
liability for any investigatory cost, cleanup cost, governmental response
cost, natural resources damage, property damage, diminution in property value,
personal injury, fine or penalty) arising out of, based on or resulting from
the presence, use, handling, emission, transport, disposal, discharge or
release or threatened release of any Material of Environmental Concern at any
location, whether or not owned by Seller.
"Environmental Laws" shall mean all applicable federal,
state, local and foreign laws, ordinances, rules, regulations or common law
relating to pollution or protection of human health or safety or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including, without limitation,
those relating to the emission, discharge, release or threatened release,
presence of, manufacture, processing,
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distribution, use, treatment, storage, disposal, transport, recycling,
reporting or handling of Materials of Environmental Concern.
"Equipment" shall mean that portion of the Assets that is
indicated on Schedule 1.1(a) hereto to be equipment used in the operation of
the Business.
"ERISA" shall have the meaning set forth in Section 3.8
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Business" shall have the meaning set forth in the
Recitals hereto.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency, instrumentality or authority thereof,
or any court or arbitrator (public or private).
"Indemnitee" shall have the meaning set forth in Section 9.5
hereof.
"Indemnitor" shall have the meaning set forth in Section 9.5
hereof.
"Intellectual Property" shall have the meaning set forth in
Section 3.7 hereof.
"Inventory" shall have the meaning set forth in Section 1.1
hereof.
"Knowledge of Seller" shall mean knowledge which any
Shareholder had as of the date of this Agreement.
"Law" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule, regulation or other
requirement, including, without limitation, any Environmental Laws.
"Legal Proceeding" means any judicial, administrative or
arbitral actions, suits, charges, proceedings (public or private), claims or
governmental proceedings.
"Lien" means any lien, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever.
"Material Adverse Effect" shall mean any material event,
change or effect related to the condition (financial or otherwise),
properties, assets, liabilities, prospects, businesses, operations or results
of operations of the Business.
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"Materials of Environmental Concern" shall mean hazardous
chemicals, pollutants, contaminants, wastes and other toxic or hazardous
substances or any other materials or substances that are defined in or
regulated under any Environmental Laws.
"Nasdaq" means, as of any date, whichever of the Nasdaq
SmallCap Market or the Nasdaq National Market, both operated by the Nasdaq
Stock Market, Inc., on which the Common Shares are listed at such date.
"Obsolete Inventory" shall mean that portion of the
Inventory for which the date of receipt is greater than 12 months prior to the
Closing Date.
"Operating Facility" shall mean any operating facility which
is owned by Seller or in the management of which Seller actively participates.
"Order" means any order, injunction, judgment, decree,
ruling, writ, assessment or arbitration award.
"OSHA" means the Occupational Safety and Health Act of 1970,
as amended, and any other Federal, state or local statute, law, ordinance,
code, rule or regulation or judicial or administrative order or decree
regulating, relating to or imposing liability or standards of conduct
concerning employee safety and/or health, as now or at any time hereafter in
effect.
"Patents" means any and all United States or foreign patents
owned by Seller or the Shareholder, other than the Excluded Intellectual
Property.
"Permits" means any approvals, authorizations, consents,
licenses, permits or certificates, including without limitation any Permits
required to handle any Material of Environmental Concern or otherwise required
under any Environmental Law.
"Person" means any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
"Physical Inventory" shall have the meaning set forth in
Section 2.3 hereof.
"Prime Rate" means the prime rate quoted by the Wall Street
Journal (Eastern Edition) from time to time.
"Purchase Price" shall have the meaning set forth in Section
2.1 hereof.
"Returns" shall have the meaning set forth in Section 3.15
hereof.
"Sale Notice" shall have the meaning set forth in Section 7.2
hereof.
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"Securities Act" means the Securities Act of 1933, as amended.
"Securities Reports" means, collectively, the Annual Report
on Form 10-K of Buyer for the year ended December 31, 1996, the Quarterly
Reports on Form 10-Q of Buyer for the periods ending March 31, June 30 and
September 30, 1997, the Proxy Statement of Buyer dated May 20, 1997 and the
Registration Statement of Buyer on Form S-3, as filed with the United States
Securities and Exchange Commission on November 7, 1996.
"Seller" shall have the meaning set forth in the Preamble
hereto.
"Seller Item Cost" shall have the meaning set forth in
Section 2.2 hereof.
"Seller Liabilities" shall have the meaning set forth in
Section 1.3 hereof.
"Seller Personnel" shall mean any present or former
employee, director, officer, agent, independent contractor, advisor, leased
worker, consultant, broker or representative of Seller.
"Shares" shall have the meaning set forth in Section 2.1
hereof.
"Shareholders" shall have the meaning set forth in the
Preamble hereto.
"Subordinated Note" shall have the meaning set forth in
Section 2.1 hereof.
"Subsidiary" of a Person means any other Person of which a
majority of the outstanding voting securities or other voting equity interests
are owned, directly or indirectly, by such Person.
"Taxes" shall have the meaning set forth in Section 3.15
hereof.
"Trading Day" means any Business Day on which Nasdaq (or the
principal market for the Shares as of the day of determination) is open for
trading.
"Warrant" shall have them meaning set forth in Section 2.1
hereof.
10.2 Confidentiality; Non-Disparagement.
(a) The parties will keep the existence of this
Agreement in confidence; will not discuss the transactions described herein
with any person except their respective equity owners, principals,
accountants, attorneys, lenders and advisors; and will not otherwise reveal
the contents of this Agreement except to the extent necessary to fulfill the
conditions of Closing and to the extent the parties, acting in good faith,
otherwise mutually agree.
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(b) For a period of five (5) years after the date of
this Agreement, the parties shall use reasonable care to maintain the
confidentiality of any Confidential Information received under this Agreement,
except insofar as written approval of the other party to release such
information, signed by an authorized representative thereof, is obtained.
(c) Neither Seller nor any Shareholder will make any
written or oral, public or private statements that comment adversely,
criticize or otherwise disparage Buyer, or any of its directors, officers,
partners, employees, services or products or the honesty, integrity, ability
or financial condition of Buyer or any of its directors, officers, partners,
or employees. Buyer agrees that it and its directors, officers and employees
will not make any written or oral, public or private statements that comment
adversely, criticize or otherwise disparage Seller, any Shareholder or their
respective honesty, integrity, ability or financial condition.
10.3 Expenses. The parties shall each bear their own
expenses incurred in connection with the negotiation and execution of this
Agreement and each other agreement, document and instrument contemplated by
this Agreement and the consummation of the transactions contemplated hereby
and thereby.
10.4 Termination. This Agreement may be terminated by
written agreement of the parties hereto or by either Buyer or Seller if
Closing has not occurred by January 30, 1998 (provided that no breach by the
terminating party was responsible for the Closing not occurring by such date),
and, in such event, this Agreement shall have no further force or effect and
there shall be no liability to the parties hereto except that the parties
shall continue to be liable for any breach of this Agreement and Sections
7.2(e), 8.2(g), 10.2(a), 10.2(b), 10.3, 10.6 and 10.8 shall survive such
termination or termination pursuant to Section 7.13.
10.5 Further Assurances. Each of the Shareholders and Buyer
agrees to execute and deliver (and, if applicable, file) such other documents
or agreements and to take such other action as may be reasonably necessary or
desirable, without payment of further consideration, for the implementation of
this Agreement and the consummation and effectuation of the transactions
contemplated hereby.
10.6 Arbitration.
(a) The parties hereto waive their rights to seek
remedies in court, including any right to a jury trial, and agree that in the
event of any dispute arising between the parties, such dispute shall be
settled by arbitration to be conducted in Philadelphia, Pennsylvania in
accordance with the rules of the American Arbitration Association ("AAA")
applying the laws of Pennsylvania. Disputes will not be resolved in any other
forum or venue. The parties hereto understand that any party's right to appeal
or to seek modification of rulings in an arbitration is severely limited. Any
award rendered by the arbitrators shall be final and binding and judgment may
be entered upon it in any court of competent jurisdiction in Pennsylvania or
any other applicable jurisdiction. The fees payable to the AAA shall be shared
equally by Buyer
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<PAGE>
and Seller. Notwithstanding the foregoing, the parties agree that they shall
retain the right to institute court actions for injunctive and other
non-monetary equitable relief.
(b) Each of the parties hereto hereby consents to
process being served by any party to this Agreement in any suit, action or
proceeding by the mailing of a copy thereof in accordance with the provisions
of Section 10.10.
10.7 Entire Agreement; Amendments and Waivers. This
Agreement (including the schedules and exhibits hereto), the Seller Purchase
Documents and the Buyer Purchase Documents represent the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof and can be amended, supplemented or changed, and any provision hereof
or thereof can be waived, only by written instrument making specific reference
to this Agreement or specific Seller Purchase Document or Buyer Purchase
Document signed by the party against whom enforcement of any such amendment,
supplement, modification or waiver is sought. No action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representation, warranty, covenant or agreement
contained herein. The waiver by any party hereto of a breach of any provision
of this Agreement or specific Seller Purchase Document or Buyer Purchase
Document shall not operate or be construed as a further or continuing waiver
of such breach or as a waiver of any other or subsequent breach. No failure on
the part of any party 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 such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
10.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without giving effect to principles of conflicts of law.
10.9 Table of Contents and Headings. The table of contents
and section headings of this Agreement are for reference purposes only and are
to be given no effect in the construction or interpretation of this Agreement.
10.10 Notices. All notices and other communications under
this Agreement shall be in writing and shall be deemed given when delivered
personally, sent by nationally recognized overnight courier or mailed by
certified mail, return receipt requested, to the parties (and shall also be
transmitted by facsimile to the Persons receiving copies thereof) at the
following addresses (or to such other address as a party may have specified by
notice given to the other party pursuant to this provision):
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If to Buyer:
805 Pennsylvania Boulevard
Feasterville, PA 19053
Attention: Joseph F. Weiderman, President
Telephone No: (215) 355-1200 (ext. 120)
Telecopy No: (215) 355-7738
with a copy to:
Wolf, Block, Schorr and Solis-Cohen LLP
Twelfth Floor Packard Building
111 South 15th Street
Philadelphia, Pennsylvania 19102-2678
Attention: Jason M. Shargel, Esquire
Telephone No: (215) 977-2216
Telecopy No: (215) 977-2334
If to Seller or any Shareholder:
Benjamin Obdyke Incorporated
John Fitch Industrial Park
Warminster, PA 18974
Attention: David Campbell
Telephone No: (215) 672-7200
Telecopy No: (215) 672-5204
33
<PAGE>
with a copy to:
Morgan, Lewis and Bockius
2000 One Logan Square
Philadelphia, PA 19103-6993
Attention: Stephen M. Goodman, Esquire
Telephone No: (215) 963-5086
Telecopy No: (215) 963-5299
10.11 Agent of Seller and Shareholders. David Campbell (the
"Agent") shall be the agent and attorney-in-fact for Seller and each of the
Shareholders, and any notice delivered pursuant to this Agreement shall be
deemed to be given to all such parties when such notice is given to the Agent.
The Agent shall be entitled to act for and bind and receive all payments on
behalf of all such parties for all purposes of this Agreement, and to enter
into amendments and supplements to this Agreement as he shall deem desirable,
and all such parties hereby appoint the Agent as their agent and
attorney-in-fact for all such purposes. All other parties to this Agreement
shall be entitled to rely upon such appointment for all such purposes. If the
Agent becomes unavailable or refuses to continue to serve in such capacity,
Richard Campbell shall succeed him upon written notice thereof to Buyer and he
shall thereafter have the same rights and powers.
10.12 Binding Nature of Agreement; Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns.
No party may assign or transfer its rights or obligations under this Agreement
without the prior written consent of the other parties hereto; provided,
however, that Buyer may transfer its rights and obligations under this
Agreement, upon written notice to Seller and Shareholders of such assignment,
to any Affiliate of Buyer, subject to Buyer's agreement to remain liable at
all times for any of its obligations under this Agreement prior to such
assignment.
10.13 Severability. If any provision of this Agreement is
invalid or unenforceable, the balance of this Agreement shall remain in
effect.
10.14 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by
all of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first written above.
BERGER HOLDINGS, LTD.
By: /s/ Theodore A. Schwartz
-------------------------------
Name: Theodore A. Schwartz
Title: C.E.O.
BENJAMIN OBDYKE INCORPORATED
By: /s/ Richard Campbell
-------------------------------
Name: Richard Campbell
Title: Chief Executive Officer
SHAREHOLDERS:
/s/ David Campbell
-----------------------------------
DAVID CAMPBELL
/s/ Richard Campbell
-----------------------------------
RICHARD CAMPBELL
35
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[INTENTIONALLY LEFT BLANK]
36
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Exhibit A
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF OR EXEMPTIONS UNDER
SUCH ACT AND LAWS AND, IN THE CASE OF ANY TRANSFER PURSUANT TO SUCH
EXEMPTIONS, UNTIL THE COMPANY SHALL HAVE RECEIVED THE WRITTEN
OPINION OF COUNSEL OF RECOGNIZED STANDING REASONABLY ACCEPTABLE
TO COUNSEL TO THE COMPANY TO THE EFFECT THAT SUCH TRANSFER IS
EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE
SECURITIES LAWS.
THIS SUBORDINATED NOTE IS SUBJECT TO RESTRICTIONS ON TRANSFER
CONTAINED IN SECTION 6 HEREOF AND SUBORDINATION PROVISIONS
CONTAINED IN SECTION 8 HEREOF.
THIS SUBORDINATED NOTE IS SUBJECT TO A SETOFF PROVISION
CONTAINED IN SECTION 5 HEREOF.
9.50% SUBORDINATED NOTE DUE JANUARY 2, 2000
No. 1 Philadelphia, Pennsylvania
January 2, 1998
BERGER HOLDINGS, LTD., a Pennsylvania corporation (the
"Company"), for value received, hereby promises to pay to BENJAMIN OBDYKE
INCORPORATED, a Pennsylvania corporation ("Obdyke"), the principal amount of
EIGHT HUNDRED SEVENTY-NINE THOUSAND DOLLARS AND NO CENTS ($879,000.00) in six
(6) equal, successive quarterly installments of One Hundred Forty-Six Thousand
Dollars and Fifty Cents ($146,000.50) each, to be due on October 2, 1998,
January 2, 1999, April 2, 1999, July 2, 1999, October 2, 1999 and January 2,
2000 (the "Maturity Date"). Unless the Default Rate (as hereinafter defined)
is in effect, the Company also promises to pay interest in arrears (computed
on the basis of a 365-day year) on the unpaid principal amount hereof, from
the date hereof, at the rate of Nine and One-Half percent (9.50%) per annum,
which interest shall be payable quarterly beginning on October 2, 1998 on the
date of each payment of principal. Payments of principal and interest on this
9.50% subordinated note (this "Note") shall be made in such coin or currency
of the United States of America as at the time of payment shall be legal
tender for the payment of public and private debts. If the date on which any
such payment is required to be made pursuant to the provisions of this Note
occurs on a day other than a Business Day (as hereinafter defined), such
payment shall be due and payable on the next succeeding Business Day.
<PAGE>
Section 1. DEFINED TERMS
As used herein the following terms shall have the following
meanings:
"Acquisition" shall mean the acquisition by the Company of
certain of the assets of Obdyke pursuant to the Purchase Agreement.
"Assignment Form" shall mean the Assignment Form, in the
form of Exhibit A hereto, which the registered holder must complete and
surrender in order to transfer this Note, pursuant to Section 7.1.
"Bank" shall mean Summit Bank, N.A. and other financial
institutions who are from time to time parties to the Credit Agreement.
"Business Day" shall mean a day other than Saturday, Sunday
or other day on which commercial banks in Philadelphia, Pennsylvania are
authorized, or required by law to close.
"Capital Stock" shall mean, with respect to any Person, any
and all shares, interests, participations or other equivalents (however
designated, whether voting or nonvoting) designated as such Person's capital
stock, whether now outstanding or issued after the date of this Note.
"Cash Equivalents" shall mean (a) any evidence of
indebtedness, maturing not more than ninety (90) days after the date of
issuance, issued by the United States of America or an instrumentality or
agency thereof and guaranteed fully as to principal, premium, if any, and
interest by the United States of America, or (b) commercial paper, maturing
not more than ninety (90) days from the date of issue, which is issued by a
corporation (other than an affiliate of the Company) organized under the laws
of any state of the United States or of the District of Columbia and rated A-I
by Standard & Poor's Corporation or P-I by Moody's Investors Service, Inc.
"Change in Control" shall mean shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended, as in effect on the date hereof; provided,
that, without limitation, a Change in Control shall also be deemed to have
occurred if and when a material portion (over fifty percent (50%) in value of
all assets or revenues) of the Company's assets, operations or businesses
shall have been sold to an unaffiliated party or parties.
"Credit Agreement" shall mean, taken together as a whole,
(i) the Subordination Agreement [Tandem Capital], dated as of January 2, 1998,
between the Company, Sirrom Capital Corporation (d/b/a Tandem Capital), a
Tennessee corporation, and the Bank and (ii) the Subordination Agreement
[Argosy Investment Partners, L.P.], dated as of January 2, 1998,
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<PAGE>
between the Company, Argosy Investment Partners, L.P., a Pennsylvania limited
partnership, and the Bank, as either such agreement may be amended (including
any restatement thereof), supplemented, replaced or otherwise modified from
time to time.
"Default Rate" shall mean an annual rate of interest equal
to the greater of (a) twelve percent (12%) or (b) the prime lending rate as
published from time to time in The Wall Street Journal or any successor
publication thereto plus five percent (5%).
"Event of Default" shall have the meaning set forth in
Section 2.
"Executive Office" shall mean the Company's principal
executive office, 805 Pennsylvania Boulevard, Feasterville, Pennsylvania
19053, which address is subject to change upon notification to the Holders in
accordance with Section 9.
"Holder" shall mean the Person in whose name this Note is
registered on the Register maintained by the Company pursuant to Section 4.
"Partnership Interests" shall mean, with respect to any
Person, any and all units, shares, interests, participations or other
equivalents (however designated, whether voting or nonvoting) representing the
right to participate or share in such Person's profits or losses, whether now
outstanding or issued after the date of this Note.
"Permissible Transferee" shall have the meaning assigned to it
in Section 6.3.
"Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
"Purchase Agreement" shall mean the Asset Purchase Agreement
dated as of December 3, 1997, among the Company, Obdyke and the Shareholders.
"Register" shall have the meaning set forth in Section 4.
"Related Agreements" shall have the meaning set forth in the
Purchase Agreement.
"Shareholders" shall mean all of the shareholders of Obdyke.
"Senior Creditors" shall mean the Bank and the holders of any
other Senior Obligations.
"Senior Notes" shall mean the promissory notes of the
Company evidencing indebtedness to (a) the Bank that are outstanding from time
to time under the Credit Agreement and (b) the holders of any other Senior
Obligations that are outstanding from time to time.
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<PAGE>
"Senior Obligations" shall mean the following obligations of
the Company, whether outstanding on the closing date of the Acquisition or
thereafter incurred: (a) all monetary obligations of the Company incurred
pursuant to the Credit Agreement, including the principal amount of, and
accrued interest (including, without limitation, any interest which accrues
after the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Company, whether or not
allowed as an enforceable claim against the debtor pursuant to applicable
bankruptcy, insolvency or reorganization laws), the Senior Notes and all
indebtedness, liabilities and obligations of the Company in respect thereof,
and all other indebtedness, obligations and liabilities (including fees and
expenses) of the Company to the Bank now existing or hereafter incurred or
created under or with respect to the Senior Notes or the Credit Agreement
(including, without limitation, (i) any interest which accrues after the
commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Company, whether or not
allowed as an enforceable claim against the Company pursuant to applicable
bankruptcy, insolvency or reorganization laws or (ii) any advances by the
Senior Creditors which exceed the aggregate face amount of the Senior Notes or
any other instrument evidencing any of the Senior Obligations, or which
advances are made without regard to, or exceed amounts otherwise available
pursuant to, the Credit Agreement or any other agreement between the Company
and any of the Senior Creditors, or which are made after the occurrence of a
default or event of default under the Credit Agreement or any other agreement
between the Company and any of the Senior Creditors), (b) any refinancings of,
or increases to, any of the indebtedness described in clause (a) above, which
is secured by assets or property of the Company or any subsidiary thereof, (c)
all obligations due to the purchase of the Company's 12.25% Subordinated
Debentures due 2003 in the aggregate initial principal amount of $2,500,000
and (d) any other indebtedness of the Company which is secured by assets or
properties of the Company or any subsidiary thereof, including the principal
amount of, and accrued interest (including, without limitation, any interest
which accrues after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Company,
whether or not allowed as enforceable claim against the debtor pursuant to
applicable bankruptcy, insolvency reorganization laws) on such other
indebtedness and all other indebtedness, obligations and liabilities
(including fees and expenses) of the Company under or in respect of such
indebtedness, or any employee, officer, director, manager or member of the
Company.
"Transfer" shall mean any direct or indirect sale,
assignment, transfer, pledge, encumbrance or hypothecation of an interest in
this Note or the grant of a security interest in this Note.
"Voting Stock" shall mean, with respect to any Person,
Capital Stock of any class or kind ordinarily having the power to vote for the
election of directors, managers or other voting members of the governing body
of such Person.
Section 2. EVENTS OF DEFAULT
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<PAGE>
Upon the occurrence of any of the following events (each,
individually, an "Event of Default" and collectively, "Events of Default"):
(a) The Company shall (i) fail to pay any
installment of the principal of this Note when due in accordance with the
terms hereof or (ii) fail to pay any installment of interest on this Note when
due in accordance with the terms hereof or any other amount payable hereunder
and such failure continues for a period of ten (10) days after written notice
thereof from Holder to the Company;
(b) The Company shall default on its obligations to
make payments pursuant to the "Put Option" provisions of the Purchase
Agreement and such default shall continue for a period of 180 days after
written notice thereof from Holder to the Company; or
(c) (i) the Company shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to the Company, or seeking to adjudicate it as bankrupt
or insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian or
other similar official for it or for all or any substantial part of its
assets, or the Company shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Company any case,
proceeding or other action of a nature referred to in clause (i) above which
(A) results in the entry of an order for relief or any such adjudication or
appointment, or (B) remains undismissed, undischarged or unbounded for a
period of ninety (90) consecutive days; or (iii) there shall be commenced
against the Company any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of the Company's assets, which results in the entry of
any order for any such relief which shall not have been vacated, discharged,
or stayed on bond pending appeal within ninety (90) consecutive days from the
entry thereof, or (iv) the Company shall take any corporate action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clauses (i), (ii) or (iii) above; or (v) the
Company shall generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due; or
then, and in any such event, but subject to the provisions of Section 8, (1)
upon the occurrence of any Event of Default described in subclause (i) or (ii)
of clause (c) of this Section 2, the unpaid principal amount of and accrued
interest on and all other amounts owing under this Note shall automatically,
without any further action of any Person, mature and become due and payable,
and (2) upon the occurrence and during the continuation of any other Event of
Default, the Holder may at any time (unless all Events of Default shall
theretofore have been remedied in full) at its option, by written notice or
notices to the Company, declare this Note to be due and payable, whereupon
(subject to Section 8) the unpaid principal amount of and accrued interest on
and all other amounts owing under this Note shall forthwith mature and become
due and
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<PAGE>
payable, all without, presentment, demand, protest or other notice, all of
which are hereby expressly waived except as expressly provided above in this
Section 2.
Subject to the provisions of Section 8 hereof, (A) during
any period in which the Company refuses to make any scheduled principal
payment on account of the indebtedness evidenced by this Note despite the fact
that it would otherwise be permitted to do so pursuant to Section 8 hereof,
interest will accrue on the entire unpaid principal balance of this Note at
the Default Rate and (B) interest will accrue at the Default Rate on the
principal amount of this Note, if any, that remains unpaid after the Maturity
Date.
Section 3. REMEDIES ON DEFAULT; NO WAIVER; ETC.
Subject to the provisions of Section 8, in case any one or
more Events of Default shall occur and be continuing, the Holder may proceed
to protect and enforce its rights by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein, or for an injunction against a violation of any of the terms
hereof, or in aid of the exercise of any power granted hereby or by law or
otherwise. No course of dealing and no failure to exercise or delay in
exercising any right, power or remedy by or an the part of any Holder shall
operate as a waiver thereof or otherwise prejudice any Holder's rights, powers
or remedies nor shall, any single or partial exercise of any such right, power
or remedy preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. No right, power or remedy conferred by this
Note upon any Holder shall be exclusive of' any other right, power or remedy
referred to herein or now or hereafter available by law, in equity or
otherwise.
Section 4. NOTES REGISTER
The Company may deem and treat the Person in whose name this
Note is registered as the owner hereof, notwithstanding any notations of
ownership or writing hereon made by anyone other than the Company for all
purposes and shall not be affected by any notice to the contrary, until
presentation of this Note for registration of transfer as provided in Section
6. The Company shall maintain, at its Executive Office, a register for this
Note (the "Register"), in which the Company shall record the name and address
of the Person in whose name this Note has been issued, as well, as the name
and address of each transferee and assignee and each prior owner of this Note.
Section 5. SETOFF
The Company is hereby irrevocably authorized at any time and
from time to time to set-off, appropriate and apply any and all amounts
payable by the Company under this Note (whether or not then due and payable)
on account of any indemnity claims or deemed indemnity claims that the Company
may from, time to time, have against the Holder or the Shareholders pursuant
to Section 9 of the Purchase Agreement; provided, that the Company shall place
any amounts it sets off pursuant to this Section 5 in an interest-bearing
escrow account maintained by
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<PAGE>
Bank, or another institution mutually agreeable to the parties hereto, upon
terms customary to the escrow accounts maintained by Bank or such other
institution, as the case may be, until any dispute regarding such set-off is
resolved. The rights of the Company under this Section 5 are in addition to
all other rights and remedies which the Company may have under the Purchase
Agreement or the Related Agreements.
Section 6. TRANSFER AND REPLACEMENT
Section 6.1. Transfer. Subject to the restrictions on
Transfer contained in Section 6.3, this Note and all rights hereunder are
transferable, on the Register, upon the delivery at the Executive Office of
(a) this Note, and (b) a duly completed Assignment Form by the registered
holder hereof in person or by a duly authorized attorney. After all of such
items shall be delivered, a new note identical to the terms of this Note
(other than the name of the transferee) shall be made and delivered by the
Company, of the same tenor as this Note, but registered in the name of the
transferee. The Company may condition the issuance of any new note in
connection with a transfer by any Person on the payment of a sum to cover any
stamp tax or other governmental charge imposed in respect to such transfer.
Section 6.2. Replacement. Upon receipt by the Company at its
Executive Office of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of indemnity or security satisfactory to the Company, and, if
mutilated, upon surrender of this Note at such office, the Company will make
and deliver a new note identical to the terms of this Note of like tenor in
replacement of this Note. This Note shall be promptly canceled by the Company
upon the surrender hereof in connection with any exchange, transfer or
replacement.
Section 6.3. Restrictions on Transfer. The Holder shall not,
directly or indirectly, Transfer this Note or any of this Note unless:
(a) such Transfer is of the whole, and not merely a
part, of the Holder's direct or beneficial interest in this Note and is for cash
consideration only;
(b) such Transfer is made pursuant to an effective
registration statement under the Securities Act of 1933, as amended, and any
applicable securities law of any state or pursuant to an exemption from
registration under said Act and laws (in which case the Holder shall deliver
to the Company an opinion of counsel of recognized standing in securities law
(including in-house or special counsel), which opinion of counsel shall be
reasonably satisfactory to the Company and obtained at the Holder's expense,
to the effect that the proposed Transfer is exempt from registration under
applicable federal and state securities laws);
(c) such Transfer does not otherwise violate any law,
statute, rule, regulation, order or decree of the United States of America or
any state thereof or any governmental authority of any of the foregoing;
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<PAGE>
(d) such Transfer has been approved in writing by the
Company; and
(e) the transferee expressly acknowledges in writing
to the Company that the transferee and the transferee's rights to receive
payment hereunder are subject to the provisions set forth in Section 8
(including, but not limited to, Section 8.13) and, to certain setoff rights as
provided in Section 5.
Notwithstanding any provision to the contrary set forth in this Note, but
subject to compliance with clauses (a), (b), (c), and (e) of this Section 6.3,
the Holder may transfer this Note to (i) either of the Shareholders, (ii) a
spouse or any lineal ancestor or descendant of either of the Shareholders,
(iii) the trustee or trustees of a trust or trusts at any time established for
the primary benefit of either of the Shareholders or their respective spouses
or any of their respective lineal ancestors or descendants, or (iv) any
corporation or other similar Person, one hundred percent (100%) of the Voting
Stock or Partnership Interests of which are owned by the Shareholders;
provided, that (A) any such trusts shall have no terms inconsistent with the
restrictions imposed on the Holder under this Note and (B) as a condition of
transfer, any Permissible Transferee (as hereinafter defined) shall execute
and deliver to the Company an acknowledgment in form and substance
satisfactory to the Company pursuant to which the Permissible Transferee
agrees to be bound by all other provisions of this Note. Any Person to whom
this Note is transferred pursuant to the immediately preceding sentence is
herein referred to as "Permissible Transferee."
Any Person to whom this Note is transferred in accordance with this Section
6.3 (including, but not limited to, a Permissible Transferee) shall take and
hold this Note, and this Note shall be, subject to the rights, obligations and
restrictions set forth herein with respect to the original Holder of this
Note, as if such transferee were such original Holder.
Section 6.4. Transfer Otherwise Void. Any purported Transfer
of the Holder's interest in this Note made other than in accordance with this
Section 6 shall be void and the Company shall not be required to recognize any
equitable or other claims to such interest on the part of any purported
transferee.
Section 6.5. Restrictive Legend. This Note and each note
issued upon Transfer or in exchange or replacement for this Note pursuant to
Sections 6.1 or 6.2 shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
THE REQUIREMENTS OF OR EXEMPTIONS UNDER SUCH ACT AND LAWS
AND, IN THE CASE OF ANY TRANSFER PURSUANT TO SUCH
EXEMPTIONS, UNTIL
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THE COMPANY SHALL HAVE RECEIVED THE WRITTEN OPINION OF
COUNSEL OF RECOGNIZED STANDING REASONABLY ACCEPTABLE TO
COUNSEL TO THE COMPANY TO THE EFFECT THAT SUCH TRANSFER IS
EXEMPT FROM REGISTRATION UNDER APPLICABLE FEDERAL AND STATE
SECURITIES LAWS.
THIS SUBORDINATED NOTE IS SUBJECT TO RESTRICTIONS ON
TRANSFER CONTAINED IN SECTION 6 HEREOF AND SUBORDINATION
PROVISIONS CONTAINED IN SECTION 8 HEREOF.
THIS SUBORDINATED NOTE IS SUBJECT TO A SETOFF PROVISION
CONTAINED IN SECTION 5 HEREOF.
Section 7. PREPAYMENT; REDEMPTION; RESTRICTIONS ON
DISTRIBUTION; FINANCIAL STATEMENTS.
Section 7.1. Prepayment. Subject to the provisions of
Section 8, the Company, upon not less than thirty (30) days prior written
notice to the Holder, may prepay all or any part of the unpaid principal
amount of this Note, together with accrued interest, at any time after the
date hereof without premium, penalty or other charge.
Section 7.2. Redemption. Upon the occurrence of any Change
in Control as a result of which the Senior Obligations then outstanding under
the Credit Agreement are prepaid in full in cash or Cash Equivalents, this
Note shall be subject to redemption in whole (but not in part) at the option
of the Holder. Any such redemption shall be made concurrently with such Change
in Control (but only after the repayment of the Senior Obligations then
outstanding) and be accompanied by the payment of all accrued and unpaid
interest on this Note through the date of such redemption and without premium,
penalty or other charge. The Company shall give the Holder of this Note no
less than thirty (30) days' prior written notice of such Change in Control and
the right of redemption provided for herein may be exercised by the Holder by
giving written notice thereof to the Company no less than fifteen (15) days
prior to such Change in Control.
Section 7.3. Restrictions on Distributions. Any restrictions
set forth in the Credit Agreement from time to time (or in any new or
replacement Credit Agreement or other documents that may evidence or secure
the Senior Obligations) regarding the Company's ability to (a) declare, pay or
make any distribution of any nature whatsoever on any class of Partnership
Interests of the Company or on any options or other rights with respect to any
class of Partnership Interests of the Company or (b) apply any of its funds,
property or assets to the purchase, redemption, sinking fund or other
retirement of, or agree to purchase or redeem, any units of any class of
Partnership Interests of the Company, or options or other rights with respect
to any class of Partnership Interests of the Company, are hereby incorporated
by reference into
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<PAGE>
this Note and made a part hereof as if such restrictions were set forth in
this Section 8.3 in their entirety.
Section 8. SUBORDINATION
Section 8.1. Express Subordination. The Company covenants
and agrees, and the Holder, by its acceptance of this Note, likewise covenants
and agrees, that this Note shall be issued subject to the provisions of this
Section 8 and the Holder, whether a Holder pursuant to original issue or upon
Transfer or exchange hereof, accepts and agrees that this Note and the
obligations hereunder shall, to the extent and in the manner set forth in this
Section 8, be subordinated in right of payment and enforcement to the prior
payment in full, in cash or Cash Equivalents, of all amounts payable under the
Senior Obligations.
Section 8.2. No Payment on this Note in Certain
Circumstances; No Enforcement.
(a) No direct or indirect payment by or on behalf of
the Company upon or in respect of this Note shall be made if, at the time of
such payment, there exists a default in the payment of all or any portion of
the Senior Obligations, and such default shall not have been cured or waived
in writing or the benefits of this sentence shall not have been waived in
writing by or on behalf (and at the direction) of the holders of such Senior
Obligations.
(b) During the continuance of any other event of
default with respect to the Senior Obligations pursuant to which the maturity
thereof may be accelerated and upon receipt by the Company of written notice
of such event of default from the Bank (a copy of which the Company agrees to
give promptly to the Holder (and in no event later than five (5) days
following the date of the Company's receipt of such notice)) no direct or
indirect payment may be made by or on behalf of the Company upon or in respect
of this Note until (i) repayment of the Senior Obligations in full in cash or
Cash Equivalents or (ii) such event of default has been cured or waived in
writing. The failure of the Senior Creditors to give notice of any event of
default shall not constitute a waiver by the Senior Creditors of the right to
give such notice at a later date provided that such event of default has not
at such time been cured nor shall it constitute a waiver of the right to give
such notice by reason of the existence of a similar event of default which
exists at the time such notice is given.
(c) in the event that, notwithstanding the foregoing,
any payment shall be received by the Holder when such payment is prohibited by
Section 8.2(a) or 8.2(b) of this Note, the Holder shall promptly notify the
Bank of such prohibited payment or, in the absence of such notice, the Bank
shall notify the Company (which agrees to promptly notify the Holder) or shall
directly notify the Holder, and upon receipt of any such notice described
above, such payment shall be held in trust for the benefit of, and shall be
paid over or delivered to, the Bank under the Credit Agreement, with the
balance to be paid to any other Senior Creditors (pro rata on the basis of the
respective amounts of Senior Obligations held by such Senior Creditors) or
their representatives, as their respective interests may appear.
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<PAGE>
(d) Anything to the contrary set forth in this Note
notwithstanding, until payment in full of the Senior Obligations in cash or
Cash Equivalents, (i) Holder shall not, under any circumstances, (A) cause or
permit the acceleration, for any reason, of the maturity of any amount due or
to become due under this Note, (B) assert, collect, sue upon or enforce, or
attempt to assert, collect, sue upon or enforce, all or any part of the
indebtedness evidenced by this Note or (C) take any enforcement actions
against the Company with respect to the indebtedness evidenced by this Note
and (D) this Note shall be unsecured and, in furtherance thereof, the Holder
shall not ask for or demand, directly or indirectly, any security or
collateral or accept any grant of a security interest in or transfer of any of
the Company's property or assets whether now owned or hereafter acquired. Any
grant of a security interest or transfer of property or assets by the Company
to, or in favor of, the Holder in violation of this Section 8.2(d) shall be
void and, with respect to any such property or assets so transferred, such
property and assets shall be (1) segregated from other property held by the
Holder, (2) received and held in trust for tho benefit of, and shall be paid
over or delivered to, the Senior Creditors (pro rata on the basis of the
respective amounts of the Senior Obligations held by such Senior Creditors) or
their representatives, as their respective interests appear, (3) paid or
delivered to the Senior Creditors in the same form as so received (with any
necessary endorsements therefor) by the Holder and (4) applied (in the case of
cash) to, or held as collateral in the case of noncash property, Cash
Equivalents or other securities) for, the payment or prepayment of the Senior
Obligations, as the Senior Creditors may determine in their sole discretion.
Section 8.3. Payment Upon Dissolution, Etc.
(a) Upon any payment or distribution of assets or
securities of the Company of any kind or character, whether in cash, property
or securities, upon any dissolution or winding up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary
or in bankruptcy, insolvency, receivership or other proceedings, all amounts
due or to become due upon all Senior Obligations shall first be paid in full,
in cash or Cash Equivalents, before the Holder shall be entitled to receive
any payment by the Company on account of this Note or any payment by the
Company to acquire this Note for cash, property or securities, or any
distribution with respect to this Note of any cash, property or securities;
provided, that in such event Holder shall be entitled to receive payments
hereunder prior to any payment, distribution of assets or securities of the
Company of any kind or character to the general or limited partners of the
Company on account of their respective Partnership interests in the Company.
Before any payment may be made by, or an behalf of, the Company on this Note
upon any such dissolution, winding up, liquidation or reorganization, any
payment or distribution of assets or securities of the Company of any kind or
character, whether in cash, property or securities, to which the Holder would
be entitled, but for the provisions of this Section 9, shall be made by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person making such payment or distribution, or by the Holder
if received by the Holder, directly to the Bank under the Credit Agreement,
with the balance to be paid to any other Senior Creditors (pro rata on the
basis of the respective amounts of Senior Obligations held by such Senior
Creditors) or their representatives, as their respective interests appear, to
the extent necessary to pay all such Senior Obligations in full, in cash or
Cash
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<PAGE>
Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the Senior Creditors.
(b) To the extent any payment in respect of the
Senior Obligations (whether by or on behalf of the Company, as proceeds of
security or enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to any receiver
trustee in bankruptcy, liquidating trustee, agent or other similar Persons
under any bankruptcy, insolvency, receivership, fraudulent conveyance or
similar law, then if such payment is recovered by, or paid over to, such
receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
Person, the Senior Obligations or, part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay any Senior Obligation
is declared to be fraudulent, invalid, or otherwise set aside under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligations so declared fraudulent, invalid or otherwise set aside
(and all other amounts that would come due with respect thereto had such
obligation not been affected) shall be deemed to be reinstated and outstanding
as Senior Obligations for all purposes hereof as if such declaration,
invalidity or setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, any payment or
distribution of assets of securities of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Holder at a
time when such payment or distribution is prohibited by Section 8.3(a) or
8.3(b) of this Note and before all obligations in respect of the Senior
Obligations are paid in full, in cash or Cash Equivalents, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered to, the Bank and any other Senior Creditors (pro
rata on the basis of the respective amounts of Senior Obligations held by such
Senior Creditors) or their representatives, as their respective interests
appear, for application to the payment of Senior Obligations remaining unpaid
until all such Senior Obligations have been paid in full, in cash or Cash
Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the Senior Creditors.
(d) For purposes of this Section 8.3 the words "cash,
property or securities" shall not be deemed to include (so long as the effect
of this clause is not to cause this Note to be treated it any case or
proceeding or similar event described in this Section 8.3 as part of the same
class of claims as the Senior Obligations or any class of claims pari passu
with, or senior to, the Senior Obligations for any payment or distribution)
securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment that are subordinated, at least to the extent
this Note is subordinated, to the payment of all Senior Obligations then
outstanding; provided that (i) if a new corporation results from such
reorganization or readjustment such corporation assumes the Senior Obligations
and (ii) the rights of the Senior Creditors are not, without their consent,
altered by such reorganization or readjustment.
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<PAGE>
Section 8.4. Subrogation.
(a) Upon the payment in full of all Senior
Obligations in cash or Cash Equivalents, the Holder shall be subrogated to the
rights of the Senior Creditors to receive payments or distributions of cash,
property or securities of the company made on such Senior Obligations until
the principal amount of and interest on this Note shall be paid in full; and,
for the purposes of which subrogation, no payments or distributions to the
Senior Creditors of any cash, property or securities to which the Holder would
be entitled except for the provisions of this Section 8, and no payment
pursuant to the provisions of this Section 8 to the Senior Creditors by the
Holder shall, between the Company, its creditors other than the senior
Creditors, and the Holder, be deemed to be a payment by the Company to or on
account of the Senior Obligations. It is understood that the provisions of
this Section 8 are intended solely for the purpose of defining the relative
rights of the Holder, on the one hand, and the Senior Creditors, on the other
hand.
(b) It any payment or distribution to which the
Holder would otherwise have been entitled but for the provisions of this
Section 8 shall have been applied, pursuant to the provisions of this Section
8, to the payment of all amounts payable under the Senior Obligations, then,
and in such came, the Holder shall be entitled to receive from the Senior
Creditors any payments or distributions received by the Senior Creditors in
excess of the amount required to make payment in full, in cash or Cash
Equivalents, of such Senior Obligations.
Section 8.5. Obligations of Company Unconditional. Nothing
contained in this Section 8 or elsewhere in this Note is intended to or shall
impair, as between the Company and the Holder, the obligation of the Company,
which is absolute and unconditional, to pay to the Holder the principal amount
of and interest on this Note as and when the same shall become due and payable
in accordance with the terms of this Note, or is intended to or shall affect
the relative rights of the Holder and creditors of the Company other than the
Senior creditors.
Section 8.6. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets or securities
referred to in this Section 8, the Holder shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding up, liquidation or reorganization proceedings
are pending, or upon a certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person making such payment or
distribution, delivered to the Holder for the purpose of ascertaining the
Persons entitled to participate in such distribution, the Senior Creditors and
other holders of indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 8.
Section 8.7. Subordination Right Not Impaired by Acts or
Omissions of the company or the Senior Creditors. No right of any present or
future Senior Creditors to enforce subordination as provided in this Section 8
will at any time in any way be prejudiced or impaired
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<PAGE>
by any act or failure to act on the part of the Company or by any act or
failure to act, in good faith, by any of the Senior Creditors, or by any
noncompliance by the Company with the terms of this Note regardless of any
knowledge thereof that any such Senior Creditor may have or otherwise he
charged with. The Holder acknowledges that the provisions of this Section 8
are expressly intended to be for the benefit of, and shall be enforceable
directly and only by, the Senior Creditors.
Section 8.8. Holder Authorizes Bank to Effectuate
Subordination of the Note. By accepting this Note, the Holder authorizer and
expressly directs the Bank on Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Section 8 and appoints the Bank as Holder's attorney-in-fact for such
purposes, including, in the event of any dissolution, winding up, liquidation
or reorganization of the Company (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
property and assets of the Company, the filing of a claim for the unpaid
balance of this Note in the form required in those proceedings. The Bank shall
not be liable to Holder for any exercise of the power of attorney granted to
Bank hereunder, unless the conduct or actions of Bank in connection with such
exercise shall constitute gross negligence or willful misconduct.
Section 8.9. Subordination Not to Prevent Events of Default.
The failure to make a payment on account of the principal amount of or
interest on this Note by reason of any provision of this Section 8 will not be
construed as preventing the occurrence of any Event of Default.
Section 8.10. No Waiver of Subordination Provisions. Without
in any way limiting the generality of Section 8.7, the Senior Creditors may,
at any time and from time to time, without the consent of or notice to the
Holder, without incurring responsibility no the Holder and without impairing
or releasing the subordination provided in this Section 8 or the obligations
hereunder of the Holder to the Senior Creditors, do any one or more of the
following; (a) change the manner, place or terms of payment or extend the time
of payment of, increase the amount of or interest rates with respect to, or
otherwise renew or alter, the Senior Obligations or any instrument evidencing
the same or any agreement under which Senior Obligations are outstanding or
secured, (b) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Obligations; (c) release any
Person liable in any manner for the collection of Senior Obligations; and (d)
exercise or refrain from exercising any rights against the Company and any
other Person.
Section 8.11. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Section 8 or elsewhere in this Note shall prevent
the Company, except under the conditions described in Sections 7.1, 8.2 or
8.3, from making payments of principal and interest on this Note. The Company
shall give prompt written notice to the Holder of any dissolution, winding up,
liquidation or reorganization of the Company.
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<PAGE>
Section 8.12. Consent of Senior Creditors. The provisions of
this Section 8 (including the definitions contained therein and references to
this Section 8 contained in this Note) shall not be amended in a manner that
would adversely affect the rights of the Senior Creditors, and no such
amendment shall become effective unless the Senior Creditors shall have
consented to such amendment in writing.
Section 8.13. Senior Creditor Subordination Agreements. The
Holder, by acceptance of this Note, agrees that the Holder will, upon the
request of any Senior Creditor, execute and deliver to such Senior Creditor,
from time to time, a subordination agreement, in the usual and customary form
of such Senior Creditor, evidencing, modifying or supplementing the
subordination provisions set forth in this Section 8. To the extent that the
provisions of any such subordination agreement are inconsistent with the
provisions of this Section 8, the provisions of such subordination agreement
shall govern and control.
Section 9. NOTICES, ETC.
All notices, waivers and other communications provided for
hereunder shall be in writing, and shall be deemed to be given (a) when
delivered, if delivered by hand (with written confirmation of receipt) or by
telecopier (as evidenced by receipt of the correct answer back), (b) one day
after sending, if sent by nationally recognized overnight delivery specifying
next day delivery (with written Confirmation of receipt), or (c) three (3)
days after deposited in the mails, if sent by certified mail, with return
receipt requested. All such notices, waivers and other communications shall be
addressed, if to the Company, 805 Pennsylvania Boulevard, Feasterville,
Pennsylvania 19053, and if to the Holder, at its address specified on the
Register, or, in each case, to such other addresses as shall be specified by
like notice.
Section 10. COSTS AND EXPENSES.
Company will reimburse Obdyke, upon demand, for all costs
and expenses incurred in connection with the collection and/or enforcement of
this Note or with respect to any litigation or controversy arising from this
Note or such guaranty (including, without limitation, attorneys' fees) whether
or not suit is actually instituted.
Section 11. GOVERNING LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA (WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS).
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<PAGE>
Section 12. MISCELLANEOUS
The provisions of this Note shall inure to the benefit of
and shall be binding upon the Company and the Holder, and their respective
heirs, legal representatives, successors and assigns.
Dated as of __________, 199__ BERGER HOLDINGS, LTD.
By: ________________________________
Name: Theodore A. Schwartz
Title: Chief Executive Officer
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<PAGE>
EXHIBIT A
ASSIGNMENT FORM
To Be Executed by the Registered Holder Desiring
to Transfer the Within 9.50% Subordinated Note
FOR VALUE RECEIVED, the undersigned registered holder hereby
sells, assigns and transfers unto ______________ the ____ Subordinated Note
and does hereby irrevocably constitute and appoint _____________________,
attorney to transfer the said ___ Subordinated Note on the books of the
Company (as defined in said ____ Subordinated Note), with full power of
substitution.
Name of Registered Holder
------------------------------------
Signature___________________________
Title_______________________________
Address_____________________________
Dated: 19
in the presence of
- -------------------------------
NOTICE:
The signature to the foregoing Assignment Form must
correspond to the name as written upon the face of the within at Subordinated
Note in every particular, without alteration or enlargement or any change
whatsoever.
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<PAGE>
Exhibit B
NEITHER THIS WARRANT NOR ANY EXERCISE SHARE (AS DEFINED
BELOW) MAY BE OFFERED FOR SALE OR SOLD, OR OTHERWISE TRANSFERRED OR SOLD IN
ANY TRANSACTION WHICH WOULD CONSTITUTE A SALE THEREOF WITHIN THE MEANING OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), UNLESS (I) SUCH
SECURITY HAS BEEN REGISTERED FOR SALE UNDER THE SECURITIES ACT AND REGISTERED
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS RELATING TO THE OFFER AND
SALE OF SECURITIES, OR (II) EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF ALL
SUCH STATE SECURITIES LAWS ARE AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED
AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY (AS DEFINED BELOW) AS TO
ITS ISSUER, FORM AND CONTENTS, THAT THE PROPOSED SALE OR OTHER DISPOSITION OF
SUCH SECURITIES MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT
AND WOULD NOT RESULT IN ANY VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS
RELATING TO THE REGISTRATION OR QUALIFICATION OF SECURITIES FOR SALE.
WARRANT TO PURCHASE
UP TO 50,000
COMMON SHARES OF
BERGER HOLDINGS, LTD.
Void after 5:30 p.m. Eastern Time on the Termination Date
(as hereinafter defined)
This is to certify that, FOR VALUE RECEIVED, BENJAMIN OBDYKE
INCORPORATED, a Pennsylvania corporation, or its registered assigns
(hereinafter referred to collectively as the "Holder"), is entitled to
purchase, subject to the terms and conditions hereof, from the Company, Fifty
Thousand (50,000) shares of the common stock, par value $0.0l, of Berger
Holdings, Ltd. (the "Company") (the "Common Shares") at any time during the
period commencing on the date hereof and ending at 5:30 p.m. on December 31,
1999 (the "Termination Date") at an exercise price of Four Dollars Forty-One
and Three-Quarter Cents ($4.4175) per Common Share. This document shall
constitute the Warrant Certificate referred to below. The number of Common
Shares purchasable upon exercise of this Warrant and the exercise price per
share shall be subject to adjustment from time to time upon the occurrence of
certain events as set forth below.
The Common Shares or any other shares or other units of
stock or other securities or property, or any combination thereof receivable
upon exercise of this Warrant, as adjusted from time to time, are sometimes
referred to hereinafter as "Exercise Shares." The exercise price per share as
from time to time in effect is referred to hereinafter as the "Exercise
Price."
<PAGE>
1. Exercise of Warrant; Issuance of Exercise Shares.
(a) Exercise of Warrant. This Warrant may be
exercised in whole or in part at any time or from time to time until and
including the Termination Date upon surrender on any business day to the
Company at its principal office, together with: (i) a completed and executed
Notice of Warrant Exercise in the form set forth in Appendix A hereto and made
a part hereof and (ii) payment of the full Exercise Price for the amount of
Exercise Shares set forth in the Notice of Warrant Exercise, in lawful money
of the United States of America in cash or by certified check or cashier's
check, made payable to the order of the Company.
In the event that this Warrant shall be duly
exercised in part prior to the Termination Date, the Company shall issue a new
Warrant or Warrants of like tenor evidencing the rights of the Holder thereof
to purchase the balance of the Exercise Shares purchasable under the Warrant
so surrendered that shall not have been purchased.
No adjustments shall be made for any cash dividends
on Exercise Shares issuable upon exercise of the Warrant. The Company shall
cancel Warrant Certificates surrendered upon exercise thereof.
(b) Issuance of Exercise Shares; Delivery of Warrant
Certificate. The Company shall, within ten (10) business days, or as soon
thereafter as is practicable, of the exercise of this Warrant, issue in the
name of and cause to be delivered to the Holder (or such other person or
persons, if any, as the Holder shall have designated in the Notice of Warrant
Exercise) one or more Warrant Certificates representing the Exercise Shares to
which the Holder (or such other person or persons) shall be entitled upon such
exercise under the terms hereof. Such Warrant Certificate or Certificates
shall be deemed to have been issued and the Holder (or such other person or
persons so designated) shall be deemed to have become the record holder of the
Exercise Shares as of the date of the due exercise of this Warrant.
(c) Exercise Shares Fully Paid and Non-Assessable.
The Company agrees and covenants that all Exercise Shares issuable upon the
due exercise of the Warrant represented by this Warrant Certificate will, upon
issuance in accordance with the terms hereof, be duly authorized, validly
issued, fully paid and non-assessable.
(d) Reservation of Exercise Shares. At the time of
or before taking any action which would cause an adjustment pursuant to
Section 7 hereof increasing the number of shares of capital stock constituting
the Exercise Shares, the Company will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Company have
remaining, after such adjustment, a number of shares of such capital stock
unissued and unreserved for other purposes sufficient to permit the exercise
of all the then outstanding Warrants of like tenor immediately after such
adjustment; the Company will also from time to time take action to increase
the authorized amount of its capital stock constituting the Exercise Shares if
at any time the number of shares of capital stock authorized but remaining
unissued and unreserved for other purposes shall be insufficient to permit the
exercise of the Warrants then outstanding. The Company will at all
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<PAGE>
times reserve and keep available, out of the aggregate of its authorized but
unissued shares of capital stock, for the purpose of enabling it to satisfy
any obligation to issue Exercise Shares upon exercise of Warrants, through the
Termination Date, the number of Exercise Shares deliverable upon the full
exercise of this Warrant and all other Warrants of like tenor then
outstanding.
(e) Fractional Shares. The Company shall not be
required to issue fractional shares of capital stock upon the exercise of this
Warrant or to deliver Warrant Certificates that evidence fractional shares of
capital stock. In the event that any fraction of an Exercise Share would,
except for the provisions of this Subsection 1(e), be issuable upon the
exercise of this Warrant, the Company may, at its option, issue such
fractional share or pay to the Holder exercising the Warrant an amount in cash
equal to such fraction multiplied by the then Current Market Value (as defined
below) of such Exercise Share. For purposes of this Subsection 1(e), the
Current Market Value shall be determined as follows:
(i) the closing per share sale price of the
Exercise Shares, as of any date, on whichever of the Nasdaq SmallCap Market or
the Nasdaq National Market (collectively, "Nasdaq"), both operated by the
Nasdaq Stock Market, Inc., on which the Exercise Shares are listed at such
date.;
(ii) the closing per share sale price of
the Exercise Shares on the principal securities exchange on which the Exercise
Shares are then listed or admitted to trading, if the Exercise Shares are not
included for quotation on Nasdaq at any time of determination; or
(iii) the average of the mean between the
last per share bid and asked prices, as reported by the National Quotation
Bureau, Inc., or an equivalent generally accepted reporting service, if the
Exercise Shares are traded in the over-the-counter market, and not on a
securities exchange or on Nasdaq at any time of determination, or, if not so
reported, the average of the closing bid and asked prices for the Exercise
Shares as furnished to the Company by any member of the National Association
of Securities Dealers, Inc., selected by the Company for that purpose.
2. Conversion Right. In lieu of exercising this Warrant
pursuant to Section 1 above, the Holder shall have the right to require the
Company to convert all, but not less than all, of this Warrant into Common
Shares (the "Conversion Right"), upon delivery to the Company at 805
Pennsylvania Boulevard, Feasterville, PA 19053 or such other address as the
Company shall designate in a written notice to the Holder hereof, of written
notice of the exercise of the Conversion Right, executed on behalf of the
Holder, together with this Warrant. Upon exercise of the Conversion Right, the
Company shall deliver to the Holder (without payment by the Holder of any
Exercise Price) that number of Common Shares which is equal to the number
value "Z" obtained under the following formula:
Z = (A x B) - C
-----------
A
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<PAGE>
A = the Current Market Value (as such term is
defined in Section 1(e)) as at such time
B = that number of Exercise Shares issuable upon
exercise of this Warrant immediately prior
to the exercise of the Conversion Right
(taking into account all applicable
adjustments pursuant to Section 6))
C = the aggregate Exercise Price for the Exercise
Shares issuable upon exercise of this
Warrant immediately prior to the exercise
of the Conversion Right
Any references in any Warrants to the "exercise" of this Warrant, and the use
of the term exercise herein, shall be deemed to include (without limitation)
any exercise of the Conversion Right. If, after one year from the date of this
Warrant, the Company's counsel is unwilling or unable to opine that the Common
Shares issuable to the initial Holder upon exercise of the Conversion Right
(and not subsequently transferred) are saleable in accordance with Rule 144
under the Securities Act, the Company shall as promptly as practicable file
and use its best efforts to cause to become effective a registration statement
registering the resale of such Common Shares under the Securities Act.
3. Payment of Taxes. The Company shall not be responsible to
pay any documentary stamp taxes, if any, attributable to the initial issuance
of Exercise Shares upon the exercise of this Warrant; and, in addition, the
Company shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant or any
certificates for Exercise Shares in a name other than that of the Holder of a
Warrant surrendered upon the exercise of a Warrant, and the Company shall not
be required to issue or deliver such certificates unless or until the person
or persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
4. Mutilated or Missing Warrant Certificates. In case any
Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Company
may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and in
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate or Warrant Certificates of like tenor and in the same
aggregate denomination, but only (i) in the case of loss, theft or
destruction, upon receipt of evidence satisfactory to the Company of such
loss, theft or destruction of such Warrant and indemnity or bond, if
requested, also satisfactory to them and (ii) in the case of mutilation, upon
surrender of the mutilated Warrant Certificate. Applicants for such substitute
Warrant Certificate shall also comply with such other reasonable regulations
and pay such other reasonable charges as the Company or its counsel may
prescribe.
5. Rights of Holder. The Holder shall not, by virtue of any
provision contained in this Warrant Certificate or otherwise, be entitled to
any right, either in law or equity, of a
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shareholder of the Company, including without limitation, the right to receive
dividends or to vote, consent or receive notice as a shareholder in respect of
the meetings of shareholders or the election of directors of the Company or
any other matter.
6. Registration of Transfers and Exchanges. The Warrant
shall be transferable, subject to the provisions of Section 8 hereof, upon the
books of the Company, if any, to be maintained by it for that purpose, only
upon surrender of the Warrant Certificate to the Company at its principal
office, or such other location as the Company may from time to time designate,
accompanied (if so required by the Company at its discretion) by a written
instrument or instruments of transfer in form satisfactory to the Company and
duly executed by the Holder thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney and upon payment of
any necessary transfer tax or other governmental charge imposed upon such
transfer. In all cases of transfer by an attorney, the original letter of
attorney, duly approved, or an official copy thereof, duly certified, shall be
deposited and remain with the Company. In case of transfer by executors,
administrators, guardians or other legal representatives, duly authenticated
evidence of such person's authority shall be produced, and may be required to
be deposited and remain with the Company in its discretion. Upon any such
registration of such transfer, a new Warrant shall be issued to the transferee
named in such instrument of transfer, and the surrendered Warrant shall be
canceled by the Company.
Any Warrant Certificate may be exchanged, at the
option of the Holders thereof and without charge, when surrendered to the
Company at its principal office, or at the office of its transfer agent, if
any, for another Warrant Certificate or Certificates of like tenor and
representing in the aggregate the right to purchase from the Company a like
number and kind of Exercise Shares as the Warrant Certificate so surrendered
for exchange or transfer, and the Warrant Certificate so surrendered shall be
canceled by the Company or transfer agent, as the case may be.
7. Adjustment of Exercise Shares and Exercise Price. The
Exercise Price and the number and kind of Exercise Shares purchasable upon the
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events as hereinafter provided. The Exercise Price
in effect at any time and the number and kind of securities purchasable upon
exercise of each Warrant shall be subject to adjustment as follows:
(a) In the event that the Company shall (i) pay a
dividend or make a distribution on its Common Shares in Common Shares, (ii)
subdivide or reclassify its outstanding Common Shares into a greater number of
shares or (iii) combine or reclassify its outstanding Common Shares into a
smaller number of shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification, as the case may be, shall be
proportionally adjusted so that the Holder of this Warrant shall be entitled,
should this Warrant be exercised after such date, to receive the aggregate
number and kind of shares that, if this Warrant had been exercised by such
Holder immediately prior to such date, such holder would have owned upon such
exercise and been entitled to receive upon such dividend, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur.
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(b) Whenever the Exercise Price payable upon exercise
of each Warrant is adjusted pursuant to Subsection 7(a) above, the number of
Exercise Shares purchasable upon exercise of this Warrant shall simultaneously
be adjusted by multiplying the number of Exercise Shares initially issuable
upon exercise of this Warrant by the Exercise Price in effect on the date
hereof and dividing the product so obtained by the Exercise Price, as
adjusted.
(c) No adjustment of the Exercise Price shall be
required unless such adjustment would require an increase or decrease of at
least one cent ($.01) in such price; provided, however, that any adjustments
which by reason of this Subsection 7(c) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment required
to be made hereunder. All calculations under this Section 7 shall be made to
the nearest one-half (1/2) of a cent or to the nearest one-hundredth (1/100)
of a share, as the case may be.
(d) If the Company at any time merges or consolidates
with or into any other corporation or enters into a similar transaction (other
than a merger in which the Company is the surviving corporation and in
connection with which there is no reclassification or other change in Common
Shares or other securities of the Company or any issuance of stock, securities
or property to the holders of its outstanding Common Shares), then the Company
shall notify the Holder of any such event and, effective upon the record or
other date of determination of persons affected by such merger, consolidation
or similar transaction, the Exercise Shares shall include the kind and amount
of securities, cash and property that would have been held by the Holder if on
such determination date the Holder had been the holder of record of the
securities, cash and properties issuable upon exercise of the Warrant on such
determination date (or the right thereto prior to the effective date thereof).
In the event of any merger, consolidation or similar transaction referred to
above in this Subsection 7(d), the Company shall, and shall cause any
successor corporation as a condition precedent to such transaction to, execute
and deliver to each Holder a new Warrant (i) providing that the owner of such
Warrant, upon exercise thereof, shall have the right to purchase the Exercise
Shares adjusted as described above, and (ii) containing provisions for
subsequent adjustments in a manner and on terms as nearly equivalent as may be
practicable to the adjustments provided for in this Subsection 7(d).
(e) Whenever an adjustment is required as herein
provided, the Company shall promptly cause a notice setting forth the adjusted
Exercise Price and adjusted number of Exercise Shares issuable upon the
exercise of each Warrant or the number of warrants to be issued to be mailed
to the Holders, at their last addresses appearing in the Warrant Register, and
shall cause a certified copy thereof to be mailed to its transfer agent, if
any. The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants
employed by the Company) to make any computation required by this Section 6,
and a certificate signed by such firm shall be conclusive evidence of the
correctness of such adjustment.
(f) In the event that, at any time, as a result of an
adjustment made pursuant to the provisions, the Holder of this Warrant
thereafter shall become entitled to receive any Exercise Shares of the
Company, other than Common Shares, thereafter the number of such other
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<PAGE>
shares so receivable upon exercise of this warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Shares contained in
Subsections 7(a)-(e), inclusive.
(g) Irrespective of any adjustments in the Exercise
Price or the number or kind of Exercise Shares purchasable upon exercise of
this Warrant, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in the
similar Warrants initially issuable pursuant to this Agreement.
(h) Whenever the Exercise Price shall be adjusted as
required by the provisions of this Section, the Company shall forthwith file
in the custody of its Secretary or an Assistant Secretary at its principal
office and with its share transfer agent, if any, an officer's certificate
showing the adjusted Exercise Price and other adjustments determined as herein
provided, setting forth in reasonable detail the facts requiring such
adjustment, including a statement of the number of additional Common Shares,
if any, and such other facts as shall be necessary to show the reason for and
the manner of computing such adjustment. Each such officer's certificate shall
be made available at all reasonable times for inspection by the Holder.
8. Restrictions on Transferability; Restrictive Legend.
Neither this Warrant nor the Exercise Shares shall be transferable except in
accordance with the provisions of this Section.
(a) Restrictions on Transfer; Indemnification.
Neither this Warrant nor any Exercise Share may be offered for sale or sold,
or otherwise transferred or sold in any transaction which would constitute a
sale thereof within the meaning of the Securities Act, unless (i) such
security has been registered for sale under the Securities Act and registered
or qualified under applicable state securities laws relating to the offer and
sale of securities, or (ii) exemptions from the registration requirements of
the Securities Act and the registration or qualification requirements of all
such state securities laws are available and the Company shall have received
an opinion of counsel, satisfactory to the Company as to its issuer, form and
contents, that the proposed sale or other disposition of such securities may
be effected without registration under the Securities Act and would not result
in any violation of any applicable state securities laws relating to the
registration or qualification of securities for sale.
The Holder agrees to indemnify and hold harmless the
Company against any loss, damage, claim or liability arising from the
disposition of this Warrant or any Exercise Share held by such holder or any
interest therein in violation of the provisions of this Section 8.
(b) Restrictive Legends. Unless and until otherwise
permitted by this Section 8, this Warrant Certificate, each Warrant
Certificate issued to the Holder or to any transferee or assignee of this
Warrant and each certificate representing Exercise Shares issued upon exercise
of this Warrant or to any transferee of the person to whom the Exercise Shares
were issued, shall bear a legend setting forth the requirements of Subsection
8(a), together with such other legend or legends as may otherwise be deemed
necessary or appropriate by counsel to the Company.
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<PAGE>
(c) Notice of Proposed Transfers. Prior to any
transfer, offer to transfer or attempted transfer of this Warrant or any
Exercise Share, the holder of such security shall give written notice to the
Company of such holder's intention to effect such transfer. Each such notice
shall (x) describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall contain an undertaking by the person giving such
notice to furnish such other information as may be required to enable counsel
to render the opinions referred to below, and (y) designate the counsel for
the person giving such notice, such counsel to be satisfactory to the Company.
The person giving such notice shall submit a copy thereof to the counsel
designated in such notice and the Company shall submit a copy thereof to its
counsel, and the following provisions shall apply:
(i) If, in the opinion of each such counsel,
the proposed transfer of this Warrant or Exercise Shares, as appropriate, may
be effected without registration of such security under the Securities Act,
the Company shall, as promptly as practicable, so notify the holder of such
security and such holder shall thereupon be entitled to transfer such security
in accordance with the terms of the notice delivered by such holder to the
Company. Each certificate evidencing the securities thus to be transferred
(and each certificate evidencing any untransferred balance of the securities
evidenced by such certificate) shall bear the restrictive legends referred to
in Subsection 8(b), unless in the opinion of each such counsel such legend is
not required in order to insure compliance with the Securities Act.
(ii) If, in the opinion of either of such
counsel, the proposed transfer of securities may not be effected without
registration under the Securities Act, the Company shall, as promptly as
practicable, so notify the holder thereof. However, the Company shall have no
obligation to register such securities under the Securities Act, except as
otherwise provided herein.
The holder of the securities giving the notice under
this Subsection 8(c) shall not be entitled to transfer any of the securities
until receipt of notice from the Company under Subsection 8(c)(i) or the
registration of such securities under the Securities Act has become effective.
(d) Removal of Legends. The Company shall, at the
request of any registered holder of a warrant or Exercise Share, exchange the
certificate representing such security for a certificate representing the same
security not bearing the restrictive legend required by Subsection 8(c) if, in
the opinion of counsel to the Company, such restrictive legend is no longer
necessary.
(e) Accredited Investors. This Warrant may not be
offered for sale or sold, or otherwise transferred or sold in any transaction,
to any person other than an Accredited Investor, as defined in Rule 501 of
Regulation D under the Securities Act.
9. Supplements and Amendments. The Company may from time to
time supplement or amend this Warrant Certificate without the approval of any
holders of Warrants in order to cure any ambiguity or to correct or supplement
any provision contained herein which may
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<PAGE>
be defective or inconsistent with any other provision, or to make any other
provisions in regard to matters or questions herein arising hereunder which
the Company may deem necessary or desirable and which shall not materially
adversely affect the interests of the Holder.
10. Successors and Assigns. This Warrant shall inure to the
benefit of and be binding on the respective successors, assigns and legal
representatives of the Holder and the Company.
11. Severability. If, for any reason, any provision,
paragraph or term of this Warrant Certificate is held to be invalid or
unenforceable, all other valid provisions herein shall remain in full force
and effect and all terms, provisions and paragraphs of this Warrant shall be
deemed to be severable.
12. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the Commonwealth of Pennsylvania and for all
purposes shall be governed by and construed in accordance with the laws of
said Commonwealth.
13. Headings. Section and Subsection headings are included
herein for convenience of reference only and shall not affect the construction
of this Warrant Certificate nor constitute a part of this Warrant Certificate
for any other purpose.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused these presents to
be duly executed as of the ___ day of ____________, 19__.
BERGER HOLDINGS, LTD.
By:
-------------------------------
Name: Theodore A. Schwartz
Title: Chief Executive Officer
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<PAGE>
APPENDIX A
NOTICE OF WARRANT EXERCISE
To: Berger Holdings, Ltd.
The undersigned, the holder of the within Warrant, hereby
irrevocably exercises its purchase rights under the Warrant to purchase
________________ Common Shares, $0.01 par value, of Berger Holdings, Ltd., and
herewith makes payment of $__________________________ Dollars and ________
Cents ($_____________) in lawful money of the United States, all at the
Exercise Price and on the terms and conditions specified in the within
Warrant. If such number of shares shall not be all of the shares purchasable
under the within Warrant, please issue a new Warrant Certificate for the
balance of the remaining shares purchasable under the within Warrant and
deliver such new certificates to the undersigned at the address stated below.
The undersigned directs that a certificate representing the
Common Shares or other securities issuable upon the exercise of the within
Warrant pursuant to this Notice be issued in the name of and at the address
specified below and delivered thereto as follows:
______________________________ Dated:________________________
(Signature of Owner)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
Shares to be issued to:
______________________________ ______________________________
(Name) (Taxpayer Identification No.)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
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<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto:
______________________________(the "Assignee")
Name
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
(Please type or print in block letters)
the right to purchase Common Shares represented by this Warrant to the extent
which such right is exercisable and does hereby irrevocably constitute and
appoint the Assignee as the attorney of the undersigned, to transfer the same
on the books of the Company with full power of substitution in the premises.
Dated:________________,19____
____________________________________________________________
Signature
Print Name:___________________________________________________
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<PAGE>
DEBENTURE PURCHASE AGREEMENT
Between
SIRROM CAPITAL CORPORATION,
d/b/a TANDEM CAPITAL
ARGOSY INVESTMENT PARTNERS, L.P.,
AS PURCHASERS
And
BERGER HOLDINGS, LTD.
December 17, 1997
<PAGE>
Table of Contents
ARTICLE I - SALE AND PURCHASE OF DEBENTURES; ISSUANCE OF WARRANTS............1
Section 1.1 Debentures....................................................1
Section 1.2 Warrants; Registration Rights Agreement.......................1
Section 1.3 Commitment; Closing Date......................................2
Section 1.4 Closing Fee...................................................2
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................2
Section 2.1 Corporate Status..............................................2
Section 2.2 Capitalization................................................3
Section 2.3 Authorization; Absence of Conflicts...........................4
Section 2.4 Validity and Binding Effect...................................4
Section 2.5 Financial Statements..........................................4
Section 2.6 SEC Reports...................................................5
Section 2.7 Absence of Changes............................................5
Section 2.8 No Defaults...................................................6
Section 2.9 Compliance With Law...........................................6
Section 2.10 Litigation...................................................6
Section 2.11 Taxes........................................................6
Section 2.12 Certain Transactions.........................................6
Section 2.13 Title to Property............................................7
Section 2.14 Intellectual Property........................................7
Section 2.15 Debt.........................................................8
Section 2.16 Material Contracts...........................................8
Section 2.17 Environmental Matters........................................8
Section 2.18 Accounting Matters...........................................9
Section 2.19 Distributions to Company.....................................9
Section 2.20 Prior Sales.................................................10
Section 2.21 Regulatory Compliance.......................................10
Section 2.22 Margin Regulations..........................................10
Section 2.23 Limited Offering............................................10
Section 2.24 Registration Rights.........................................10
Section 2.25 Insurance...................................................11
Section 2.26 Governmental Consents.......................................11
Section 2.27 Employees...................................................11
Section 2.28 ERISA.......................................................11
Section 2.29 Fees/Commissions............................................12
Section 2.30 Small Business Concern......................................12
Section 2.31 Proposed Acquisition........................................12
Section 2.32 Disclosure..................................................12
Section 2.33 Survival....................................................12
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER..................13
Section 3.1 Corporate Status Residence...................................13
Section 3.2 Authorization................................................13
Section 3.3 Validity and Binding Effect..................................13
<PAGE>
Section 3.4 Accredited Investor; Investment Intent.......................13
Section 3.5 Survival.....................................................14
ARTICLE IV - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER...........14
Section 4.1 Representations and Warranties...............................14
Section 4.2 Officer's Certificate........................................14
Section 4.3 Satisfactory Proceedings; Secretary's Certificate............14
Section 4.4 Legal Opinion................................................14
Section 4.5 Authorization Agreement......................................15
Section 4.6 The Company's Existence and Authority........................15
Section 4.7 Delivery of Operative Documents..............................15
Section 4.8 Acquisition Transaction......................................15
Section 4.9 Warrant Valuation Letter.....................................15
Section 4.10 Preferred Stock.............................................15
Section 4.11 Senior Credit Agreement; Intercreditor Agreement............16
Section 4.12 SBA Forms...................................................16
Section 4.13 Required Consents...........................................16
Section 4.14 Expenses....................................................16
Section 4.15 Waiver of Conditions........................................16
ARTICLE V - COVENANTS OF COMPANY............................................17
Section 5.1 Use of Proceeds; Certain Prohibited Activities...............17
Section 5.2 Payment of Debentures........................................17
Section 5.3 Optional Redemptions of Debentures; Procedures...............17
Section 5.4 Corporate Existence, Etc.....................................18
Section 5.5 Maintenance, Etc.............................................18
Section 5.6 Nature of Business...........................................18
Section 5.7 Insurance....................................................18
Section 5.8 Taxes, Claims for Labor and Materials........................18
Section 5.9 Compliance with Laws, Agreements, etc........................19
Section 5.10 ERISA Matters...............................................19
Section 5.11 Books and Records; Rights of Inspection.....................19
Section 5.12 Reports.....................................................20
Section 5.13 Limitations on Debt and Obligations.........................21
Section 5.14 Guaranties..................................................22
Section 5.15 Limitation on Liens.........................................22
Section 5.16 Restricted Payments.........................................23
Section 5.17 Investments.................................................23
Section 5.18 Mergers, Consolidations and Sales of Assets.................24
Section 5.19 Transactions with Affiliates................................25
Section 5.20 Notice......................................................25
Section 5.21 Annual Plan.................................................26
Section 5.22 Board of Directors; Observer Rights.........................26
Section 5.23 Key Executives..............................................27
Section 5.24 Further Assurances..........................................27
ARTICLE VI - SUBORDINATION OF DEBENTURES....................................27
Section 6.1 Subordination................................................27
Section 6.2 Liquidation, etc............................................27
<PAGE>
Section 6.3 Senior Indebtedness Default..................................28
Section 6.4 Subrogation..................................................28
Section 6.5 Company's Obligations Not Impaired...........................29
ARTICLE VII - RESTRICTIONS ON TRANSFER......................................29
Section 7.1 Legends; Restrictions on Transfer............................29
Section 7.2 Notice of Intention to Transfer; Opinions of Counsel.........29
ARTICLE VIII - EVENTS OF DEFAULT; REMEDIES..................................30
Section 8.1 Events of Default............................................30
Section 8.2 Acceleration of Maturities...................................31
ARTICLE IX - AMENDMENTS, WAIVERS AND CONSENTS...............................32
Section 9.1 Consent Required.............................................32
Section 9.2 Solicitation of Debenture Holders............................32
Section 9.3 Effect of Amendment or Waiver................................32
ARTICLE X - INTERPRETATION OF AGREEMENT; DEFINITIONS........................32
Section 10.1 Definitions.................................................32
Section 10.2 Accounting Principles.......................................35
ARTICLE XI - MISCELLANEOUS..................................................35
Section 11.1 Expenses, Stamp Tax Indemnity...............................35
Section 11.2 Powers and Rights Not Waived; Remedies Cumulative...........36
Section 11.3 Notices.....................................................36
Section 11.4 Successors and Assigns......................................37
Section 11.5 Survival of Covenants and Representations...................38
Section 11.6 Severability................................................38
Section 11.7 Governing Law...............................................38
Section 11.8 Captions; Counterparts......................................38
Section 11.9 Entire Agreement............................................38
<PAGE>
DEBENTURE PURCHASE AGREEMENT
This DEBENTURE PURCHASE AGREEMENT (the "Agreement") entered into the
17th day of December, 1997, is by and between SIRROM CAPITAL CORPORATION d/b/a
TANDEM CAPITAL, a Tennessee corporation, ("Tandem"), and ARGOSY INVESTMENT
PARTNERS, L.P., a Pennsylvania limited partnership ("Argosy"), (each of Tandem
and Argosy being referred to as, individually, a "Purchaser" and collectively,
the "Purchasers"), and BERGER HOLDINGS, LTD., a Pennsylvania corporation (the
"Company").
WITNESSETH:
WHEREAS, the Company desires to obtain additional capital for use in
connection with its business through the issue and sale of certain
obligations, and the Purchasers, severally, are willing to purchase such
obligations from the Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in mutual consideration of the premises and the
respective representations, warranties, covenants and agreements contained
herein, the parties agree as follows:
ARTICLE I - SALE AND PURCHASE OF DEBENTURES; ISSUANCE OF WARRANTS
Section 1.1 Debentures.
(a) The Company has authorized the issue and sale of Two Million Five
Hundred Thousand and no/100ths Dollars ($2,500,000.00) aggregate principal
amount of its 12.25% Subordinated Debentures due on the fifth anniversary of
the date of issue (the "Debentures"), to be dated the date of issue and to
bear interest from such date at the rate of 12.25% per annum, subject to
increase upon the failure to occur of certain events described therein.
Interest is payable quarterly by automatic debit on the first day of each
February, May, August and November in each year (commencing February 1, 1998)
and at maturity, to mature on the fifth anniversary of the date of issuance,
to bear such other terms and to be substantially in the form attached hereto
as Exhibit A-1. Interest on the Debentures shall be computed on the basis of a
360-day year of twelve 30-day months. The Debentures may be redeemed or repaid
at the option of the Company, subject to the restrictions in Section 5.3 of
this Agreement. The term "Debentures" as used herein shall include each
Debenture delivered pursuant to this Agreement. The terms which are
capitalized herein shall have the meanings set forth in Section 10 hereof
unless the context shall otherwise require.
Section 1.2 Warrants; Registration Rights Agreement.
(a) Simultaneously with the purchase and sale of the Debentures, the
Company shall grant, issue, and deliver to Tandem its Stock Purchase Warrant
for the purchase of 240,000 shares of Common Stock of the Company and to
Argosy its Stock Purchase Warrant for the purchase of 60,000 shares of Common
Stock of the Company, in each case with an exercise price of $4.25 per share,
dated the Closing Date (as defined in Section 1.3 below) and substantially in
the form attached
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<PAGE>
hereto as Exhibit A-2 (the "Warrants") and an accompanying Registration Rights
Agreement, dated the Closing Date, by and among the Company, Tandem, and
Argosy, and substantially in the form attached hereto as Exhibit A-3 (the
"Registration Rights Agreement").
Section 1.3 Commitment; Closing Date.
Subject to the terms and conditions hereof and on the basis of the
representations and warranties hereinafter set forth, (i) the Company agrees
to issue and sell to Tandem, and Tandem agrees to purchase from the Company,
Debentures in the aggregate principal amount of $2,000,000, and (ii) the
Company agrees to issue and sell to Argosy, and Argosy agrees to purchase from
the Company, Debentures in the aggregate principal amount of $500,000, in each
case at a price of 100% of the principal amount thereof.
Delivery of the Debentures will be made at the offices of Sherrard &
Roe, PLC, 424 Church Street, Suite 2000, Nashville, Tennessee 37219, against
payment therefor by federal funds wire transfer in immediately available funds
and to the accounts and in the amounts in accordance with the Company's wire
instructions set forth on Exhibit B hereto, at 10:00 A.M., Nashville time, on
January 2, 1998, or such other date, but no later than January 30, 1998, as
the Company shall determine, upon two (2) business days prior notice to
Purchasers (the "Closing Date"). The Debentures delivered to Purchasers on the
Closing Date will be delivered to Purchasers in the form of a single Debenture
as to each Purchaser for the full amount of such purchase (unless different
denominations are specified by Purchaser), registered in the respective
Purchaser's name or in the name of such nominee as each Purchaser may specify
and, with appropriate insertions, in the form attached hereto as Exhibit A-1,
all as each Purchaser may specify at least 24 hours prior to the date fixed
for delivery.
Section 1.4 Closing Fee.
The Company agrees to pay on or before the Closing Date a closing fee
(a) to Tandem, in an amount equal to $45,000, and (b) to Argosy, in an amount
equal to $11,250; provided that if no closing occurs hereunder, no such fee
shall be payable by the Company.
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
Section 2.1 Corporate Status.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania and has
the corporate power to own and operate its properties, to carry on its
business as now conducted and to enter into and to perform its obligations
under this Agreement, the Debentures, the Warrants, the Registration Rights
Agreement, and any other document executed and delivered by the Company in
connection herewith or therewith (collectively, the "Operative Documents").
The Company is qualified to do business and is in good standing in each state
or other jurisdiction in which such qualification is necessary under
applicable provisions of law, except where the failure to so qualify would not
have a Materially Adverse Effect
2
<PAGE>
on the financial condition or results of operations of the Company. The states
or other jurisdictions in which the Company is so qualified are set forth on
Schedule 2.1(a) hereto.
(b) Schedule 2.1(b) sets forth a complete list of each corporation,
partnership, joint venture, limited liability company or other business
organization in which the Company owns, directly or indirectly, any capital
stock or other equity interest (the "Subsidiary" or, collectively, the
"Subsidiaries"), or with respect to which the Company or any Subsidiary, alone
or in combination with others, is in a control position, which list shows the
jurisdiction of incorporation or other organization and the percentage of
stock or other equity interest of each Subsidiary owned by the Company. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of incorporation or other organization as indicated
on Schedule 2.1(b), each has all requisite power and authority and holds all
material licenses, permits and other required authorizations from government
authorities necessary to own its properties and assets and to conduct its
business as it is now being conducted, and is qualified to do business as a
foreign corporation (or business organization) and is in good standing in
every jurisdiction in which such qualification is necessary under applicable
provisions of law, except where the failure to so qualify would not have a
Materially Adverse Effect on the financial condition or results of operations
of the Company. All of the outstanding shares of capital stock, or other
equity interest, of each Subsidiary owned, directly or indirectly, by the
Company have been validly issued, are fully paid and nonassessable, and are
owned by the Company free and clear of all liens, charges, security interests
or encumbrances.
(c) Schedule 2.1(c) sets forth a complete list of "affiliates" (as
that term is defined in Title 13, United States Code of Federal Regulations,
Section 121.103) (the "SBA Affiliates"), with a brief statement describing the
basis of each affiliation.
Section 2.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
20,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), of which 5,198,992 shares are issued and outstanding, and (ii)
5,000,000 shares of preferred stock, with rights and preferences to be fixed
by the Board of Directors in accordance with the corporate laws of the
Commonwealth of Pennsylvania and the Company's Articles of Incorporation, as
amended, none of which is issued and outstanding. All shares of Common Stock
outstanding have been validly issued and are fully paid and nonassessable.
Except as listed on Schedule 2.2(a), there are no statutory or contractual
pre-emptive rights, rights of first refusal, antidilution rights or any
similar rights held by any party with respect to the issuance of the
Debentures or the Warrants.
(b) The Company has not granted, or agreed to grant or issue, any
options, warrants or rights to purchase or acquire from the Company any shares
of capital stock of the Company, there are no securities outstanding or
committed to be issued by the Company or any Subsidiary which are convertible
into or exchangeable for any shares of capital stock or other securities of
the Company, and there are no contracts, commitments, agreements,
understandings, arrangements or restrictions as to which the Company is a
party, or by which it is bound, relating to any shares of capital stock or
other securities of the Company, whether or not outstanding except for (i) the
Warrants to be issued pursuant to this Agreement, (ii) such options, warrants
and other rights to acquire capital stock of the Company, together with
relevant exercise prices and dates, set forth on Schedule 2.2(b), (iii) the
40,000 shares of Series A Convertible Preferred Stock (the "Preferred Stock")
to be issued pursuant
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to the Preferred Stock Purchase Agreement between the Company, Tandem, and
Argosy, dated as of the date hereof (the "Preferred Stock Purchase
Agreement"), and (iv) the conversion privileges of the holders of the
Preferred Stock to be issued pursuant to the Preferred Stock Purchase
Agreement. Except as set forth on Schedule 2.2(b), all such shares have been
duly reserved for issuance, have been duly and validly authorized and upon
issuance in accordance with the terms of the respective instruments, will be
validly issued, fully paid and nonassessable.
Section 2.3 Authorization; Absence of Conflicts.
The Company has full legal right, power and authority to enter into
and perform its obligations under this Agreement and any of the other
Operative Documents without the consent or approval of any other person, firm,
governmental agency or other legal entity, except as set forth on Schedule
2.3, each of which will be obtained prior to Closing. The execution and
delivery of this Agreement, the issuance of the Debentures and Warrants
hereunder, the execution and delivery of each other document in connection
herewith or therewith to which the Company is a party, and the performance by
the Company of its obligations hereunder and/or thereunder are within the
corporate powers of the Company and have been duly authorized by all necessary
corporate action properly taken, have received all necessary governmental
approvals, if any were required, and do not and will not contravene or
conflict with (a) the Articles of Incorporation or Bylaws of the Company, as
amended, (b) any material agreement to which the Company or any of its
Subsidiaries is a party or by which any of them or their properties is bound,
or constitute a default thereunder, or result in the creation or imposition of
any lien, charge, security interest, or encumbrance of any nature upon any of
the property or assets of the Company or any of its Subsidiaries pursuant to
the terms of any such agreement or instrument, or (c) violate any provision of
law or any applicable judgment, ordinance, regulation or order of any court or
governmental agency. The officer(s) executing this Agreement, the Debentures,
the Operative Documents, and any other document executed and delivered by
Purchaser in connection herewith or therewith, is duly authorized to act on
behalf of the Company.
Section 2.4 Validity and Binding Effect.
Each of the Operative Documents is the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by the effect of
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or by general principles of equity.
Section 2.5 Financial Statements.
The consolidated financial statements of the Company and its
Subsidiaries for the fiscal years ended December 31, 1994, December 31, 1995,
and December 31, 1996, and the unaudited consolidated financial statements as
of and for the nine (9) months ended September 30, 1997, and the related
notes, copies of which the Company previously has delivered to Purchasers,
fairly present the financial position, results of operations, cash flows and
changes in stockholders' equity of the Company and its consolidated
Subsidiaries, at the respective dates of and for the periods to which they
apply in such financial statements and have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods indicated, subject, in the case of interim financial
statements, to year-end adjustments (the effect of which will not,
individually or in the
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aggregate, have a Materially Adverse Effect). No financial statements of any
other person(s) are required by GAAP to be included in the consolidated
financial statements of the Company.
Section 2.6 SEC Reports.
The Company's Common Stock is listed on the NASDAQ Small Cap Market
and has been duly registered with the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Since January 1, 1994, the Company has
timely filed all reports, registrations, proxy or information statements and
all other documents, together with any amendments required to be made thereto,
required to be filed with the SEC under the Securities Act and the Exchange
Act (collectively, the "SEC Reports"). The Company previously has furnished to
Purchasers true copies of all the SEC Reports, together with all exhibits
thereto that a Purchaser has requested, and the Company's annual report to
stockholders for the year ended December 31, 1996, which annual report meets
the requirements of Rule 14a-3 or 14e-3 under the Exchange Act (the "Annual
Report"). The financial statements contained in the SEC Reports fairly
presented (or will fairly present, as the case may be) the financial position
of the Company as of the dates mentioned and the results of operations,
changes in stockholders' equity and changes in financial position or cash
flows for the periods then ended in conformity with GAAP applied on a
consistent basis throughout the periods involved. As of their respective
dates, the SEC Reports complied (or will comply, as the case may be) in all
material respects with all rules and regulations promulgated by the SEC and
did not (or will not, as the case may be) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 2.7 Absence of Changes.
Except as set forth on Schedule 2.7, since September 30, 1997, (i)
neither the Company nor any of its Subsidiaries has incurred any liabilities
or obligations, direct or contingent, or entered into any transactions, not in
the ordinary course of business, that are material to the Company or any of
its Subsidiaries, (ii) neither the Company nor any of its Subsidiaries has
purchased any of its outstanding capital stock or declared, or paid any
dividend or other distribution or payment in respect of its capital stock,
(iii) there has not been any change in the authorized or issued capital stock,
long-term debt or short-term debt of the Company, and (iv) there has not been
any Materially Adverse Effect in or affecting the business, operations,
properties, prospects, assets, or condition (financial or otherwise) of the
Company or any Subsidiary, and no event has occurred or circumstance exists
that may result in such a Materially Adverse Effect.
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Section 2.8 No Defaults.
Except as set forth on Schedule 2.8 and except where a default or
event of default does not and would not constitute a Materially Adverse
Effect, to the Company's knowledge, no default or event of default by the
Company or any Subsidiary exists under this Agreement or under any instrument
or agreement to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or its respective properties may be bound or, to the
knowledge of the Company, affected, and no event has occurred and is
continuing that with notice or the passage of time or both would constitute a
default or event of default thereunder.
Section 2.9 Compliance With Law.
The Company and its Subsidiaries are in compliance with all federal,
state and local laws, regulations, decrees and orders applicable to them
(including but not limited to occupational and health standards and controls,
antitrust, monopoly, restraint of trade or unfair competition) to the extent
that noncompliance, in the aggregate, cannot reasonably be expected to cause a
Materially Adverse Effect.
Section 2.10 Litigation.
Except as set forth on Schedule 2.10, there is no litigation,
arbitration, claim, proceeding or investigation pending or threatened in
writing in which the Company or any Subsidiary is a party or to which any of
its respective properties or assets is the subject which, if determined
adversely to the Company or such Subsidiary, would individually or in the
aggregate have a Materially Adverse Effect.
Section 2.11 Taxes.
Except as set forth on Schedule 2.11, the Company and its
Subsidiaries have filed or caused to be filed all federal, state and local
income, excise and franchise tax returns required to be filed (except for
returns that have been appropriately extended), and have paid, or provided for
the payment of, all taxes shown to be due and payable on said returns and all
other taxes, impositions, assessments, fees or other charges imposed on it by
any governmental authority, agency or instrumentality, prior to any
delinquency with respect thereto (other than taxes, impositions, assessments,
fees and charges currently being contested in good faith by appropriate
proceedings, for which appropriate amounts have been reserved), and the
Company does not know of any proposed assessment for additional taxes or any
basis therefor. No tax liens have been filed against the Company, or its
Subsidiaries or any of their properties. The Company's federal income tax
liability has been finally determined by the Internal Revenue Service and
satisfied for all taxable years up to and including the taxable year ended
December 31, 1992, or closed by applicable statutes of limitation.
Section 2.12 Certain Transactions.
Except as set forth on Schedule 2.12(i) and except as to indebtedness
incurred in the ordinary course of business and approved by the Board of
Directors of the Company, neither the Company nor any Subsidiary is indebted,
directly or indirectly, to any of its officers or directors, or to their
respective
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spouses or children, in excess of an aggregate amount of $60,000, and none of
the officers or directors or any members of their immediate families are
indebted to the Company or any Subsidiary in excess of an aggregate amount of
$60,000 or have any direct or indirect ownership interest in any firm or
corporation with which the Company or any Subsidiary is affiliated or with
which the Company has a business relationship, or any firm or corporation
which competes with the Company or any Subsidiary, except that officers and/or
directors of the Company may own no more than 4.9% of the outstanding stock of
any publicly traded company which competes directly with the Company. Except
as set forth on Schedule 2.12(ii), no officer or director of the Company or
any Subsidiary or any member of their immediate families is, directly or
indirectly, interested in any material contract with the Company or any
Subsidiary. Except as set forth on Schedule 2.12(iii), neither the Company nor
any Subsidiary is a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
Section 2.13 Title to Property.
The Company and each Subsidiary has good and marketable title to all
real and personal property owned by it, free and clear of all liens, security
interests, pledges, encumbrances, equities claims and restrictions of every
kind and nature whatsoever, except as disclosed on Schedule 2.13 and except
for such liens, security interests, pledges, encumbrances, equities, claims
and restrictions which are not in the aggregate material to the business,
operations or financial condition of the Company and its Subsidiaries taken as
a whole. Any real property and buildings held under lease by the Company or
any Subsidiary are held under valid existing and enforceable leases, and no
default has occurred or is continuing thereunder might result in any
Materially Adverse Effect, and the Company and each Subsidiary enjoys peaceful
and undisturbed possession under all such leases, except as disclosed on
Schedule 2.13 or which are not material and do not interfere with the use to
be made of such buildings or property by the Company.
Section 2.14 Intellectual Property.
Except as set forth in Schedule 2.14, the Company is the lawful owner
or has a valid right to use the Proprietary Information in its business free
and clear of any claim, right, trademark, patent or copyright protection of
any third party. The Company has good and marketable title to or has a valid
right to use all patents, trademarks, trade names, service marks, copyrights
or other intangible property rights, and registrations or applications for
registration thereof, owned by the Company or any Subsidiary or used or
required by the Company or any Subsidiary in the operation of its business as
presently being conducted, which are listed on Schedule 2.14(b)(i), except as
set forth on Schedule 2.14(b)(ii). The Company has no knowledge of any
infringements or conflict with asserted rights of others with respect to
copyrights, patents, trademarks, service marks, trade names, trade secrets or
other intangible property rights or know-how which would individually or in
the aggregate have a Materially Adverse Effect. To the Company's knowledge, no
products or processes of the Company infringe or conflict with any rights of
patent or copyright, or any discovery, invention, product or process, that is
the subject of a patent or copyright application or registration known to the
Company. The Company follows such procedures as the Company deems necessary or
appropriate to provide reasonable protection of the Company's trade secrets
and proprietary rights in intellectual property of all kinds. To the knowledge
of the Company, no person employed by or affiliated with the
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Company has employed or proposes to employ any trade secret or any information
or documentation proprietary to any former employer, and to the knowledge of
the Company, no person employed by or affiliated with the Company has violated
any confidential relationship that such person may have had with any third
person, in connection with the development, manufacture or sale of any product
or proposed product or the development or sale of any service or proposed
service of the Company.
Section 2.15 Debt.
Schedule 2.15(i) sets forth (i) a complete and correct list of all
loans, credit agreements, indentures, purchase agreements, promissory notes
and other evidences of indebtedness, Guaranties, capital leases and other
instruments, agreements and arrangements presently in effect providing for or
relating to extensions of credit (including agreements and arrangements for
the issuance of letters of credit or for acceptance financing) in respect of
which the Company, any Subsidiary or any of their properties is in any manner
directly or contingently obligated; (ii) a correct statement of the maximum
principal or face amounts of the credit in question that are outstanding and
that can be outstanding; and (iii) a correct statement of all liens, pledges
or security interests of any nature given or agreed to be given as security
therefor or in connection therewith. Consummation of the transactions hereby
contemplated and the performance of the obligations of the Company under the
Operative Documents will not result in any breach of, or constitute a default
under, or require the consent of any person under, any loan, credit agreement,
indenture, purchase agreement, promissory note or other evidences of
indebtedness, Guaranty, capital lease or other instrument, agreement or
arrangement set forth on Schedule 2.15(i), except as set forth on Schedule
2.15(ii).
Section 2.16 Material Contracts.
Schedule 2.16(i) sets forth a complete and correct list of (a) all
contracts, agreements and other documents outside of the ordinary course of
business pursuant to which the Company or any Subsidiary either (i) receives
revenues or (ii) makes payment to any third Person(s), in excess of $100,000
per fiscal year, and (b) contracts or other agreements required to be filed by
the Company with the SEC as an exhibit pursuant to Item 601(b)(10) of
Regulation S-K under the Securities Act (each instrument identified in
Schedule 2.16 individually being an "Applicable Contract" and collectively the
"Applicable Contracts"). Each Applicable Contract is in full force and effect
as of the date hereof and the Company knows of no reason why such Applicable
Contracts would not remain in full force and effect pursuant to the terms
thereof. Consummation of the transactions hereby contemplated and the
performance of the obligations of the Company under the Operative Documents
will not result in any breach of, or constitute a default under, or require
the consent of any person under, any Applicable Contract set forth on Schedule
2.16(i), except as set forth on Schedule 2.16(ii).
Section 2.17 Environmental Matters.
The Company and each of its Subsidiaries have duly complied in all
material respects with, and its business, operations, assets, equipment,
property, leaseholds or other facilities of each are in compliance in all
material respects with, the provisions of all federal, state and local
environmental, health, and safety laws, codes and ordinances, and all rules
and regulations promulgated thereunder. Except where not reasonably likely to
result in a Materially Adverse Effect, the Company and each of its
Subsidiaries have been issued and will maintain all required federal, state
and local permits, licenses, certificates and approvals relating to (i) air
emissions; (ii) discharges to surface water or
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groundwater; (iii) noise emissions; (iv) solid or liquid waste disposal; (v)
the use, generation, storage, transportation or disposal of toxic or hazardous
substances or wastes (which shall include any and all such materials listed in
any federal, state or local law, code or ordinance and all rules and
regulations promulgated thereunder as hazardous or potentially hazardous); or
(vi) other environmental, health or safety matters. Neither the Company nor
any Subsidiary has received notice of, or knows of, or suspects facts which
might constitute any material violations of any federal, state or local
environmental, health or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder with respect to its businesses, operations,
assets, equipment, property, leaseholds, or other facilities. Except in
accordance with a valid governmental permit, license, certificate or approval,
there has been no emission, spill, release or discharge into or upon (a) the
air; (b) soils, or any improvements located thereon; (c) surface water or
groundwater; or (d) the sewer, septic system or waste treatment, storage or
disposal system servicing the premises, of any toxic or hazardous substances
or wastes at or from the premises owned or occupied by the Company or its
Subsidiaries. To the Company's knowledge, there has been no complaint, order,
directive, claim, citation or notice by any governmental authority or any
person or entity with respect to (I) air emissions; (II) spills, releases or
discharges to soils or improvements located thereon, surface water,
groundwater or the sewer, septic system or waste treatment, storage or
disposal systems servicing the premises; (III) noise emissions; (IV) solid or
liquid waste disposal; (V) the use, generation, storage, transportation or
disposal of toxic or hazardous substances or waste; or (VI) other
environmental, health or safety matters affecting the Company or any of its
Subsidiaries or their respective businesses, operations, assets, equipment,
property, leaseholds or other facilities. Neither the Company nor any
Subsidiary has any material indebtedness, obligation or liability (absolute or
contingent, matured or not matured), with respect to the storage, treatment,
cleanup or disposal of any solid wastes, hazardous wastes or other toxic or
hazardous substances (including without limitation any such indebtedness,
obligation, or liability with respect to any current regulation, law or
statute regarding such storage, treatment, cleanup or disposal).
Section 2.18 Accounting Matters.
The books of account, minute books, stock record books and other
records of the Company and its Subsidiaries are complete and correct in all
material respects, have been maintained in accordance with sound business
practices and accurately and fairly reflect the transactions and dispositions
of the assets of the Company. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain accountability for the assets of the Company and each of
its Subsidiaries; (iii) access to the assets of the Company and each of its
Subsidiaries is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets of the
Company and each of its Subsidiaries are compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
Section 2.19 Distributions to Company.
No Subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distributions on such Subsidiary's capital
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stock, from repaying to the Company any loans or advances to such Subsidiary
or from transferring any of such Subsidiary's property or assets to the
Company or any other Subsidiary of the Company.
Section 2.20 Prior Sales.
All offers and sales by the Company of its capital stock since
January 1, 1994, were at all relevant times (i) exempt from the registration
requirements of the Securities Act or were duly registered under the
Securities Act, and (ii) were duly registered or were the subject of an
available exemption from the registration requirements of all applicable state
securities or Blue Sky laws.
Section 2.21 Regulatory Compliance.
The conduct of the business and the ownership of the assets of the
Company and its Subsidiaries does not require any license, permit, approval,
waiver or other authorization of any federal, state or local governmental or
regulatory body of which the failure to obtain would cause a Materially
Adverse Effect, and except as set forth on Schedule 2.21, such business is not
subject to the material regulation of any federal, state or local government
or regulatory body by reason of the nature of the business being conducted (as
distinct from regulation common to commercial enterprises in general). All
licenses, permits and authorizations of which the failure to obtain would
cause a Materially Adverse Effect are in full force and effect.
Section 2.22 Margin Regulations.
The Company is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock. No proceeds received
pursuant to this Agreement will be used to purchase or carry any equity
security of a class which is registered pursuant to Section 12 of the Exchange
Act.
Section 2.23 Limited Offering.
Subject in part to the truth and accuracy of Purchaser's
representations set forth in this Agreement, the offer, sale and issuance of
the Debentures and the Warrants are exempt from the registration requirements
of the Securities Act, and neither the Company nor any authorized agent acting
on its behalf has taken or will take any action hereafter that would cause the
loss of such exemption.
Section 2.24 Registration Rights.
Except as described in Schedule 2.24, the Company is not under any
obligation to register under the Securities Act or the Trust Indenture Act of
1939, as amended, any of its presently outstanding securities or any of its
securities that may subsequently be issued.
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Section 2.25 Insurance.
The Company has maintained, and has caused each Subsidiary to
maintain the insurance policies set forth on Schedule 2.25.
Section 2.26 Governmental Consents.
No consent, approval, qualification, order or authorization of, or
filing with, any local, state, or federal governmental authority is required
on the part of the Company in connection with the Company's valid execution,
delivery, or performance of this Agreement or the offer, sale or issuance of
the Debentures by the Company.
Section 2.27 Employees.
Schedule 2.27 sets forth the number of full-time employees and
full-time equivalent employees of the Company and each Subsidiary as of the
most recent payroll date, which date is set forth therein. To the best of the
Company's knowledge, there is no strike, labor dispute or union organization
activities pending or threatened between it and its employees. Except as set
forth on Schedule 2.27, none of the Company's employees belongs to any union
or collective bargaining unit. To the best of its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. To the best of the Company's
knowledge, no employee of the Company is or will be in violation of any
judgment, decree, or order, or any term of any employment contract, patent
disclosure agreement, or other contract or agreement relating to the
relationship of any such employee with the Company, or any other party,
because of the nature of the business conducted or presently proposed to be
conducted by the Company or to the use by the employee of his or her best
efforts with respect to such business. Except as disclosed in Schedule 2.27,
the Company is not a party to or bound by any employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement, or other employee compensation agreement. The Company is
not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment of any of the
foregoing. Except as described in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, and as described on Schedule 2.27, subject
to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the
will of the Company.
Section 2.28 ERISA.
The Company is in compliance in all material respects with all
applicable provisions of Title IV of the Employee Retirement Income Security
Act of 1974, Pub. L. No. 93-406, September 2, 1974, 88 Stat. 829, 29 U.S.C.A.
ss. 1001 et seq. (1975), as amended from time to time ("ERISA"). Except as
disclosed in Schedule 2.28, neither a reportable event nor a prohibited
transaction (as defined in ERISA) has occurred and is continuing with respect
to any "pension plan" (as such term is defined in ERISA, a "Plan"); no notice
of intent to terminate a Plan has been filed nor has any Plan been terminated;
no circumstances exist which constitute grounds entitling the Pension Benefit
Guaranty Corporation (together with any entity succeeding to or all of its
functions, the "PBGC") to
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institute proceedings to terminate, or appoint a trustee to administer, a
Plan, nor has the PBGC instituted any such proceedings; neither the Company
nor any commonly controlled entity (as defined in ERISA) has completely or
partially withdrawn from a multiemployer plan (as defined in ERISA); the
Company and each commonly controlled entity has met its minimum funding
requirements under ERISA with respect to all of its Plans and the present fair
market value of all Plan property exceeds the present value of all vested
benefits under each Plan, as determined on the most recent valuation date of
the Plan and in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of the Company or any
commonly controlled entity to the PBGC or the Plan under Title IV or ERISA;
and neither the Company nor any commonly controlled entity has incurred any
liability to the PBGC under ERISA.
Section 2.29 Fees/Commissions.
The Company has not agreed to pay any finder's fee, commission,
origination fee or other fee or charge to any person or entity with respect to
or as a result of the consummation of the transactions contemplated hereunder,
except for the processing fee due to Purchaser pursuant to Section 1.3 hereof.
Section 2.30 Small Business Concern.
The Company, together with its SBA Affiliates, if any, is and will be
on the Closing Date a "small business concern" within the meaning of Section
107.50 of Title 13 of the United States Code of Federal Regulations and which
meets the size standards under 13 C.F.R. ss. 121.301(c). The information to be
set forth in the Small Business Administration Form 480, Form 652 and Part A
of Form 1031 regarding the Company is accurate and complete. Neither the
Company nor any of its Subsidiaries presently engage in any activities for
which a small business investment company is prohibited from providing funds
under 13 C.F.R. ss. 107.720.
Section 2.31 Proposed Acquisition.
The Company has entered into the Asset Purchase Agreement, dated as
of December 3, 1997, among the Company, Benjamin Obdyke Incorporated (the
"Seller") and the shareholders of Seller (the "Acquisition Agreement"), in the
form of Schedule 2.31 hereto (the "Obdyke Acquisition").
Section 2.32 Disclosure.
No representation or warranty given as of the date hereof by the
Company contained in this Agreement or any Schedule attached hereto or any
statement in any document, certificate or other instrument furnished or to be
furnished to the Purchaser pursuant hereto, taken as a whole, contains or will
(as of the time so furnished) contain any untrue statement of a material fact,
or omits or will (as of the time so furnished) omit to state any material fact
which is necessary in order to make the statements contained herein or therein
not misleading.
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Section 2.33 Survival.
The representations and warranties of the Company contained in this
Agreement shall survive the termination of this Agreement in accordance with
Section 12.5 hereof.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Each Purchaser, severally and not jointly, hereby represents to the
Company as follows:
Section 3.1 Corporate Status; Residence.
Purchaser is a corporation or partnership duly organized and validly
existing under the laws of its respective jurisdiction and has the corporate
power to own and operate its properties, to carry on its business as now
conducted and to enter into and to perform its obligations under this
Agreement and any other document executed or delivered by Purchaser in
connection herewith. Purchaser is resident in the State set forth under its
name in Section 11.3 below.
Section 3.2 Authorization.
Purchaser has full legal right, power and authority to enter into and
perform its obligations under this Agreement and any other document executed
and delivered by Purchaser in connection herewith, without the consent or
approval of any other person, firm, governmental agency or other legal entity.
The execution and delivery of this Agreement and any other document executed
and delivered by Purchaser in connection herewith, and the performance by
Purchaser of its obligations hereunder and/or thereunder are within the
corporate powers of Purchaser, have received all necessary governmental
approvals, if any were required, and do not and will not contravene or
conflict with (a) the Charter or Bylaws of Purchaser, (b) any material
agreement to which Purchaser is a party or by which it or any of its
properties is bound, or constitute a default thereunder, or result in the
creation or imposition of any lien, charge, security interest or encumbrance
of any nature upon any of the property or assets of Purchaser pursuant to the
terms of any such agreement or instrument, or (c) violate any provision of law
or any applicable judgment, ordinance, regulation or order of any court or
governmental agency. The officer(s) executing this Agreement and any other
document executed and delivered by Purchaser in connection herewith, is duly
authorized to act on behalf of Purchaser.
Section 3.3 Validity and Binding Effect.
This Agreement and any other document executed and delivered by
Purchaser in connection herewith are the legal, valid and binding obligations
of the Purchaser, enforceable against it in accordance with their respective
terms.
Section 3.4 Accredited Investor; Investment Intent.
Purchaser is and at the Closing Date will be an "accredited investor"
under Rule 501(a) under the Securities Act. Tandem is, and at the Closing Date
will be, an investment company registered under the Investment Company Act of
1940, as amended and has, and at the Closing Date will have, a net worth in
excess of One Million Dollars ($1,000,000). Argosy is, and at the Closing Date
will be, a Small Business Investment Company, as the term is defined in
Section 103 of the Small Business Investment Act of 1958, 15 U.S.C.A. Section
662, and has, and at the Closing Date will
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have, a total capital of at least One Million Dollars ($1,000,000). Purchaser
is acquiring the Debentures for its own account, for investment, and not with
a view to the distribution or resale thereof, in whole or in part, in
violation of the Securities Act or any applicable state securities law, and
Purchaser has no present intention of selling, negotiating or otherwise
disposing of the Debentures, it being understood that Tandem intends to
transfer and assign the Debentures and all of Tandem's rights and obligations
under this Agreement and the Operative Documents to one or more Wholly-owned
subsidiaries of Tandem, which Wholly-owned subsidiaries are also "accredited
investors" under Rule 501(a).
Section 3.5 Survival.
The representations and warranties of the Purchaser contained in this
Agreement shall survive the termination of this Agreement in accordance with
Section 12.5 hereof.
ARTICLE IV - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
The obligation of Purchasers to purchase and pay for the Debentures
on the Closing Date shall be subject to the fulfillment on or before the
Closing Date of each of the following conditions:
Section 4.1 Representations and Warranties.
The representations and warranties of the Company contained in this
Agreement and in any Schedule hereto or any document or instrument delivered
to Purchasers or their representatives hereunder, shall have been true and
correct when made and shall be true and correct as of the Closing Date as if
made on such date, except to the extent such representations and warranties
expressly relate to a specific date. The Company shall have duly performed all
of the covenants and agreements to be performed by it hereunder on or prior to
the Closing Date.
Section 4.2 Officer's Certificate.
The Company shall have delivered to each Purchaser a certificate,
dated the Closing Date, signed by the President of the Company substantially
in the form attached hereto as Exhibit C.
Section 4.3 Satisfactory Proceedings; Secretary's Certificate.
All proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents necessary to the
consummation thereof, shall be satisfactory in form and substance to Purchaser
and Purchaser's counsel, and the Company shall have delivered to each
Purchaser a certificate, dated the Closing Date, signed by the Secretary of
the Company substantially in the form attached hereto as Exhibit D.
Section 4.4 Legal Opinion.
Each Purchaser shall have received the opinion of Wolf, Block, Schorr
and Solis-Cohen LLP, counsel for the Company, dated the Closing Date,
addressed to Purchasers, in form and substance satisfactory to Purchasers'
counsel, and covering the matters set forth in Exhibit E hereto.
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Section 4.5 Authorization Agreement.
The Company shall have delivered to each Purchaser an Authorization
Agreement for Pre-Authorized Payments (Debit), dated the Closing Date,
executed by a duly authorized officer(s) of the Company, in the form attached
hereto as Exhibit F.
Section 4.6 The Company's Existence and Authority.
The Company shall have delivered to Purchasers the following
certificates of public officials, in each case as of a date within ten (10)
days of the Closing Date:
(a) the Articles of Incorporation of the Company and each of
the Subsidiaries, certified by the Secretary of State or other appropriate
official in the jurisdiction each such entity is incorporated; and
(b) a certificate as to the legal existence and subsistence
of the Company and each of the Subsidiaries issued by the Secretary of State
or other appropriate official in the jurisdiction each such entity is
incorporated.
Section 4.7 Delivery of Operative Documents.
The Company shall have delivered to Purchasers the following
documents, executed by the Company and dated the Closing Date:
(a) the Debentures;
(b) the Warrants; and
(c) the Registration Rights Agreement.
Section 4.8 Acquisition Transaction.
The closing of the purchase by the Company of the Assets (as defined
in the Acquisition Agreement) from Seller pursuant to the terms of the
Acquisition Agreement shall have occurred simultaneously with the Closing
hereunder.
Section 4.9 Warrant Valuation Letter.
The Company shall have delivered to Purchasers a Warrant Valuation
letter in the form attached as Exhibit G acceptable to Purchasers.
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Section 4.10 Preferred Stock.
The Company shall have sold to Purchasers, and Purchasers shall have
purchased, an aggregate of 40,000 shares of the Preferred Stock of the Company
pursuant to the terms of the Preferred Stock Purchase Agreement.
Section 4.11 Senior Loan Agreement; Intercreditor Agreement.
The closing of the initial funding pursuant to the Loan and Security
Agreement dated August 21, 1997, among Summit Bank and certain of the
Company's Subsidiaries, as amended or restated as contemplated in that certain
commitment letter dated December 2, 1997, from Summit Bank to the Company and
its Subsidiaries (the "Senior Loan Agreement") shall have occurred
simultaneously with the Closing hereunder; and the Company shall have executed
and delivered to the Purchasers a subordination agreement among the Company,
its Subsidiaries, Purchasers, and Summit Bank, in each case to provide that,
absent the existence any event of default or any event which, with the passage
of time or the giving of notice, or both, would constitute an event of default
under the Senior Loan Agreement, such agreements shall allow regularly
scheduled payments of interest on the Debentures and dividends on the
Preferred Stock; provided, however, that the subordination agreement shall
contain such other terms and provisions as shall be reasonably acceptable to
Purchasers.
Section 4.12 SBA Forms.
The Company shall have delivered to Argosy Form 480, Form 652 and
Form 1031, in each case duly executed (if required), and completed with
respect to information required about, the Company.
Section 4.13 Required Consents.
Any consents or approvals required to be obtained from any third
party, including any holder of indebtedness or any outstanding security of the
Company, and any amendments of agreements which shall be necessary to permit
the consummation of the transactions contemplated hereby on the Closing Date,
including the consents set forth on Schedule 2.3, shall have been obtained and
all such consents or amendments shall be satisfactory in form and substance to
Purchasers and Purchasers' counsel.
Section 4.14 Expenses.
The Company shall have reimbursed the Purchasers for all fees and
expenses as provided in Section 11.1 herein.
Section 4.15 Waiver of Conditions.
If on the Closing Date the Company fails to tender to Purchasers the
Debentures to be issued to Purchasers on such date or if the conditions
specified in this Article IV have not been fulfilled, Purchasers may thereupon
elect to be relieved of all further obligations under this Agreement. Without
limiting the foregoing, if the conditions specified in this Article IV have
not been fulfilled, Purchasers may waive compliance by the Company with any
such condition to such extent as
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Purchasers, in Purchasers' sole discretion, may determine; provided, however,
the failure to fulfill any of the conditions specified in Sections 4.8, 4.10
and 4.11 may not be waived. Nothing in this Section 4.15 shall operate to
relieve the Company of any of its obligations hereunder or to waive any of
Purchasers' rights against the Company.
ARTICLE V - COVENANTS OF COMPANY
From and after the Closing Date and continuing so long as any amount
remains unpaid on any of the Debentures:
Section 5.1 Use of Proceeds; Certain Prohibited Activities.
(a) The Company shall use the proceeds of the Debentures only for the
purposes set forth on Schedule 5.1 attached hereto. No later than ninety (90)
days after the sale of the Debentures, the Company shall furnish Purchasers a
certificate, executed by the President of the Company, itemizing the use of
proceeds from the Debentures.
(b) Neither the Company nor any of its SBA Affiliates will engage in
any activities or use directly or indirectly the proceeds of the Debentures
for any purpose for which a small business investment company is prohibited
from providing funds under 13 C.F.R. Section 107.720.
(c) The Company will not, without obtaining the prior written
approval of Argosy, change within one (1) year of the Closing, the Company's
business activity to a business activity to which a small business investment
company is prohibited from providing funds under C.F.R. ss.107.720. The
Company agrees that any such changes in its business activity without such
prior written consent of Argosy will constitute a material breach of the
obligations of the Company under this Agreement (an "Activity Event of
Default"). If an Activity Event of Default occurs, Argosy has the right to
demand, in writing, immediate repayment of the Debentures held by it, together
with accrued but unpaid interest, and the Company will immediately make such
payment within three (3) days of receipt of a demand. The payment remedy is in
addition to any and all other rights and remedies against the Company and
others to which Argosy may be entitled.
Section 5.2 Payment of Debentures.
The Company shall perform and observe all of its obligations to the
holder(s) of the Debentures set forth herein and in the Debentures.
Section 5.3 Optional Redemptions of Debentures; Procedures.
The Debentures may be redeemed, repaid or repurchased by the Company
or any Subsidiary or Affiliate, at the option of the Company, in whole at any
time or in part from time to time, provided that in the case of a redemption
of part of the Debentures, such redemption shall be effected pro rata among
all holders of Debentures. In case the Company repurchases or otherwise
acquires any Debentures, such Debentures shall immediately thereafter be
canceled, and no Debentures shall be issued in substitution therefor. Without
limiting the foregoing, upon the purchase or other acquisition of any
Debentures by the Company or any Subsidiary or Affiliate, such
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Debentures shall no longer be outstanding for purposes of any Section of this
Agreement relating to the taking by the holders of the Debentures of any
actions with respect hereto, including, without limitation, Sections 9.3
[Acceleration of Maturities].
Section 5.4 Corporate Existence, Etc.
The Company will preserve and keep in force and effect, and will
cause each Subsidiary to preserve and keep in force and effect, its corporate
existence and good standing in the state of incorporation thereof, its
qualification and good standing as a foreign corporation in each jurisdiction
where such qualification is required by applicable law except where the
failure to so qualify would not have a Materially Adverse Effect and all
licenses and permits necessary to the proper conduct of its business.
Section 5.5 Maintenance, Etc.
The Company will, in all material respects, maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties and assets which are used in the conduct of its business (whether
owned in fee or pursuant to a leasehold interest) in good repair and working
order and from time to time will make all necessary repairs, replacements,
renewals and additions so that at all times the efficiency thereof shall be
maintained.
Section 5.6 Nature of Business.
Neither the Company nor any Subsidiary will engage in any business
if, as a result, the general nature of the business, taken on a consolidated
basis, which would then be engaged in by the Company and its Subsidiaries
would be substantially changed from the general nature of the business engaged
in by the Company and its Subsidiaries on the date of this Agreement,
including the business engaged in by Seller.
Section 5.7 Insurance.
The Company will maintain, and will cause each Subsidiary to
maintain, insurance coverage by financially sound and reputable insurers with
respect to their respective properties and business in such forms and amounts
and against such risks, casualties and contingencies as are reasonable.
Section 5.8 Taxes, Claims for Labor and Materials.
The Company will promptly pay and discharge, and will cause each
Subsidiary promptly to pay and discharge, (i) all lawful taxes, assessments
and governmental charges or levies imposed upon the property or business of
the Company or such Subsidiary, respectively, (ii) all trade accounts payable
in accordance with usual and customary business terms, and (iii) all claims
for work, labor or materials, which if unpaid might become a lien or charge
upon any property of the Company or such Subsidiary; provided the Company or
such Subsidiary shall not be required to pay any such tax, assessment, charge,
levy, account payable or claim if (a) the validity, applicability or amount
thereof is being contested in good faith by appropriate actions or proceedings
which will prevent the forfeiture or sale of any property of the Company or
such Subsidiary or any material interference
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with the use thereof by the Company or such Subsidiary, and (b) the Company or
such Subsidiary shall set aside on its books, reserves deemed by it to be
adequate with respect thereto.
Section 5.9 Compliance with Laws, Agreements, etc.
Except where failure to do so does not and would not have a
Materially Adverse Effect, the Company and each Subsidiary shall maintain its
business operations and property owned or used in connection therewith in
compliance with (i) all applicable federal, state and local laws, regulations
and ordinances, and such laws, regulations and ordinances of foreign
jurisdictions, governing such business operations and the use and ownership of
such property, and (ii) all agreements, licenses, franchises, indentures and
mortgages to which the Company and each Subsidiary is a party or by which the
Company and each Subsidiary or any of their respective properties are bound.
Without limiting the foregoing, the Company and each Subsidiary shall pay all
of its indebtedness promptly and substantially in accordance with the terms
thereof.
Section 5.10 ERISA Matters.
If the Company or any Subsidiary has in effect, or hereafter
institutes, a pension plan that is subject to the requirements of Title IV of
ERISA (a "Plan"), then the following covenants shall be applicable during such
period as any such Plan shall be in effect: (i) throughout the existence of
the Plan, the Company's and/or such Subsidiary's contributions under the Plan
will meet the minimum funding standards required by ERISA and the Company
and/or such Subsidiary will not institute a distress termination of the Plan;
and (ii) the Company and/or such Subsidiary will send to each Purchaser a copy
of any notice of a reportable event (as defined in ERISA) required by ERISA to
be filed with the Labor Department or the PBGC, at the time that such notice
is so filed.
Section 5.11 Books and Records; Rights of Inspection.
The Company will keep, and will cause each Subsidiary to keep, proper
books of record and account in which full and correct entries will be made of
all dealings or transactions of or in relation to the business and affairs of
the Company or such Subsidiary, in accordance with GAAP consistently
maintained. The Company shall permit a representative of Purchaser (and, if
Purchaser is a Small Business Investment Company, a representative of the
United States Small Business Administration (the "SBA Representative")) to
visit any of its properties and inspect its corporate books and financial
records, and will discuss its accounts, affairs and finances with a
representative of Purchaser (or the SBA Representative, if applicable), during
reasonable business hours, at all such times as Purchaser may reasonably
request. The Company will, upon reasonable request, cooperate fully with
Argosy, Argosy's representations and counsel in the preparation of any
document or other material which may be required by the United States Small
Business Administration or any other governmental agency as a predicate to or
result of the transaction herein contemplated. The Company will furnish to any
Purchaser that is a small business investment company information requested by
the United States Small Business Administration concerning the economic impact
of such Purchaser's investment including but not limited to information
concerning taxes paid and number of employees.
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Section 5.12 Reports.
The Company will furnish to each Purchaser the following:
(a) Monthly Statements. Within thirty (30) days of the end
of each month, beginning the month of January 1998, monthly internal financial
reports which at a minimum shall consist of the key item report in the form
currently prepared by the Company and attached hereto as Schedule 5.12(a), as
well as any additional financial reports for such period (i) distributed to
directors of the Company or (ii) routinely prepared with respect to the
Company and the Subsidiaries subsequent to the date hereof;
(b) Quarterly Statements. As soon as available and in any
event within forty-five (45) days after the end of each quarterly fiscal
period (except the last) of each fiscal year, copies of:
(i) consolidated balance sheets of the Company and
Subsidiaries as of the close of the three-month period then
ended, setting forth in comparative form the consolidated
figures at the end of the preceding fiscal year,
(ii) consolidated statements of income and retained
earnings of the Company and Subsidiaries for the three-month
period then ended, setting forth in comparative form the
consolidated figures for the corresponding period of the
preceding fiscal year, and
(iii) consolidated statements of cash flows of the
Company and Subsidiaries for the portion of the fiscal year
ending with such three-month period, setting forth in
comparative form the consolidated figures for the
corresponding period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct by an
authorized financial officer of the Company;
(c) Annual Statements. As soon as available and in any event
within ninety (90) days after the close of each fiscal year of the Company,
copies of:
(i) consolidated balance sheets of the Company and
Subsidiaries as of the close of such fiscal year, and
(ii) consolidated statements of income and retained
earnings and cash flows of the Company and Subsidiaries for
such fiscal year,
in each case setting forth in comparative form the consolidated figures for
the preceding fiscal year, all in reasonable detail and accompanied by an
unqualified report thereon of Goldenberg Rosenthal Friedlander, LLP, or if
such firm is no longer auditors to the Company, a firm of independent public
accountants of recognized national standing;
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(d) Audit Reports. Promptly upon receipt thereof, one copy
of each interim or special audit made by independent accountants of the books
of the Company or any Subsidiary;
(e) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally and of each periodic
or current report, and any registration statement or prospectus filed by the
Company or any Subsidiary with any securities exchange or the SEC or any
successor agency, and copies of any orders in any proceedings to which the
Company or any of its Subsidiaries is a party, issued by any governmental
agency, federal or state, having jurisdiction over the Company or any of its
Subsidiaries. The Company specifically covenants to timely file each such item
required to be filed with the SEC and each state requiring securities laws
filings;
(f) Press Releases. Promptly upon its release, a copy of
each press release issued by the Company; and
(g) Requested Information. With reasonable promptness, such
financial data and other information relating to the business of the Company
as a Purchaser may from time to time reasonably request.
Section 5.13 Limitations on Debt and Obligations.
For so long as any amounts under the Debentures shall remain
outstanding, neither the Company nor any Subsidiary shall incur additional
Indebtedness, except (i) Indebtedness existing on the Closing Date, after
giving effect to the Obdyke Acquisition and the borrowings under the Senior
Loan Agreement and as otherwise contemplated, as set forth on Schedule 5.13
hereto, as the same Indebtedness may be extended or renewed (but not increased
by more than $1,000,000); (ii) the Indebtedness incurred pursuant to the
Debentures; (iii) accounts payable and other trade payables incurred in the
ordinary course of business; (iv) Indebtedness incurred after the date hereof
which by its terms is expressly stated to be subordinate or junior to the all
other debt of the Company and any Subsidiary, including the Debentures; (v)
Indebtedness senior to or pari passu with the Debentures, with the prior
written consent of Purchasers; (vi) purchase money indebtedness incurred by
the Company in the purchase of office equipment and other property used by the
Company in the ordinary course of business, such purchase money indebtedness
not to exceed an aggregate amount of principal and interest thereon of
$1,000,000 at any time outstanding; (vii) obligations of the Company pursuant
to capitalized leases; (viii) Indebtedness that refinances secured
Indebtedness under clause (i) above, provided that the collateral for such new
Indebtedness is the collateral from the refinanced secured Indebtedness and
the aggregate principal amount of such Indebtedness does not exceed the
principal amount outstanding under the refinanced Indebtedness; and (ix) other
than the Obdyke Acquisition, Indebtedness incurred in connection with the
acquisition of a business (including the assets of a business), provided such
Indebtedness is secured solely by the assets of the business so acquired.
Notwithstanding the foregoing, the aggregate principal amount of any
Indebtedness secured by the accounts receivable and/or inventory of Borrower
and its Subsidiaries (whether such Indebtedness is permitted under clause (i)
or in clause (viii)), may be increased based upon the amount of the accounts
receivable and/or inventory eligible as collateral, so long as the borrowing
base formula does not exceed 85% of "Eligible Accounts," after deducting
therefrom all
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payments, adjustments and credits applicable thereto, or 50% of "Eligible
Inventory," as the case may be (with such terms bearing the meanings given
them in the Senior Loan Agreement).
Section 5.14 Guaranties.
Without the prior written consent of Purchaser, the Company will not,
and will not permit any Subsidiary to, become or be liable in respect of any
Guaranty except Guaranties reflected on Schedule 5.14 and Guaranties by the
Company which are limited in maximum financial exposure to the amounts set
forth in, and are incurred in compliance with, the provisions of Section 5.13
of this Agreement.
Section 5.15 Limitation on Liens.
Without the prior written consent of Purchaser, the Company will not,
and will not permit any Subsidiary to, create or incur, or suffer to be
incurred or to exist, any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (collectively, "Liens") on its or their property or
assets, whether now owned or hereafter acquired, or upon any income or profits
therefrom, or transfer any property for the purpose of subjecting the same to
the payment of obligations in priority to the payment of its or their general
creditors, or acquire or agree to acquire, or permit any Subsidiary to
acquire, any property or assets upon conditional sales agreement or other
title retention devices, except those Liens which exist or are contemplated as
of the date hereof as set forth on Schedules 2.15 and 5.13, and except:
(a) Liens for taxes, assessments and governmental charges or
levies which the Company is contesting in good faith by proper proceedings and
as to which appropriate reserves are being maintained in accordance with GAAP
on the books of the Company;
(b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's liens and other similar liens arising in
the ordinary course of business and securing obligations (other than
indebtedness for borrowed money) that (A) are not overdue for a period of more
than 60 days or (B) are being contested in good faith by proper proceedings
and as to which appropriate reserves are being maintained in accordance with
GAAP on the books of the Company;
(c) pledges or deposits to secure obligations under worker's
compensation laws or other similar legislation or to secure public or
statutory obligations;
(d) Liens securing the performance of, or payment in respect
of, bids, tenders, government contracts (other than for the repayment of
borrowed money), surety and appeal bonds and other obligations of a similar
nature incurred in the ordinary course of business;
(e) Liens created in connection with purchase money
financing permitted pursuant to Section 5.15 hereof; and
(f) other encumbrances consisting of zoning restrictions,
easements, restrictions on the use of real property or minor irregularities in
the title thereto, which do not arise in connection
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with the borrowing of, or any obligation for the payment of, money and which,
in the aggregate, do not materially detract from the value of the premises or
the business, properties or assets of the Company or any Subsidiary.
Section 5.16 Restricted Payments.
For so long as the Debentures are outstanding, the Company will not,
without the prior written consent of Purchaser and except as hereinafter
provided:
(a) declare or pay any dividends, either in cash or
property, on any shares of its capital stock of any class except (i) dividends
or other distributions payable solely in shares of capital stock of Company
and (ii) cash dividends payable on the Preferred Stock, provided that no Event
of Default exists hereunder;
(b) directly or indirectly, or through any Subsidiary,
purchase, redeem or retire any shares of its capital stock of any class or any
warrants, rights or options to purchase or acquire any shares of its capital
stock, other than the purchase of up to 125,000 shares of Common Stock (as
adjusted for stock splits or stock dividends after the date hereof) pursuant
to the "Put Options" contained in the Acquisition Agreement; or
(c) make any other payment or distribution, either directly
or indirectly or through any Subsidiary, in respect of its capital stock.
Section 5.17 Investments.
The Company will not, and will not permit any Subsidiary to, make any
Investments outside the ordinary course of business for the Company or any
Subsidiary, without the prior written consent of Purchaser, except:
(a) Investments in direct obligations of the United States
of America, or any agency or instrumentality of the United States of America,
the payment or guaranty of which constitutes a full faith and credit
obligation of the United States of America, in either case maturing in twelve
months or less from the date of acquisition thereof;
(b) Investments in certificates of deposit maturing within
one year from the date of origin, issued by a bank or trust company organized
under the laws of the United States or any state thereof, having capital,
surplus and undivided profits aggregating at least $100,000,000 and whose
long-term certificates of deposit are, at the time of acquisition thereof by
Company or a Subsidiary, rated AA or better by Standard & Poor's Corporation
or Aa or better by Moody's Investors Service, Inc.;
(c) Investments in commercial paper maturing in 270 days or
less from the date of issuance which, at the time of acquisition by the
Company or any Subsidiary, is accorded the highest rating by Standard & Poor's
Corporation, Moody's Investors Service, Inc. or another nationally recognized
credit rating agency of similar standing;
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(d) loans or advances in the usual and ordinary course of
business to officers, directors and employees for expenses (including moving
expenses related to a transfer) incidental to carrying on the business of the
Company or any Subsidiary;
(e) receivables arising from the sale of goods and services
in the ordinary course of business of the Company and its Subsidiaries; and
(f) purchases by the Company or any Subsidiary of assets,
property or stock otherwise than in the ordinary course of business of the
Company and its Subsidiaries, in an amount not to exceed $100,000 individually
or $300,000 in the aggregate; and
(g) any Investment permitted under Section 5.18 hereof.
Section 5.18 Mergers, Consolidations and Sales of Assets.
(a) Without the prior written consent of Purchaser, the
Company will not, and will not permit any Subsidiary to (1) consolidate with
or be a party to a merger or share exchange with any other corporation or (2)
sell, lease or otherwise dispose of all or any substantial part (as defined in
paragraph (c) of this Section 5.18) of the assets of Company and its
Subsidiaries; provided, however, that:
(i) any Subsidiary may merge or consolidate with or
into the Company or any Wholly-owned Subsidiary so long as
in any merger or consolidation involving the Company, the
Company shall be the surviving or continuing corporation;
and
(ii) any Subsidiary may sell, lease or otherwise
dispose of all or any substantial part of its assets to the
Company or any other Wholly-owned Subsidiary.
(iii) Without the prior written consent of
Purchaser, the Company will not permit any Subsidiary to
issue or sell any shares of stock of any class (including as
"stock" for the purposes of this Section 5.18, any warrants,
rights or options to purchase or otherwise acquire stock or
other Securities exchangeable for or convertible into stock)
of such Subsidiary to any Person other than the Company or a
Wholly-owned Subsidiary, except for the purpose of
qualifying directors or except in satisfaction of the
validly pre-existing preemptive rights of minority
shareholders in connection with the simultaneous issuance of
stock to the Company and/or a Subsidiary whereby the Company
and/or such Subsidiary maintain their same proportionate
interest in such Subsidiary.
(b) Without the prior written consent of Purchaser, the
Company will not sell, transfer or otherwise dispose of any shares of stock in
any Subsidiary (except to qualify directors) or any indebtedness of any
Subsidiary, and will not permit any Subsidiary to sell, transfer or otherwise
dispose of (except to the Company or a Wholly-owned Subsidiary) any shares of
stock or any indebtedness of any other Subsidiary, unless all of the following
conditions are met:
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(i) simultaneously with such sale, transfer or
disposition, all shares of stock and all indebtedness of
such Subsidiary at the time owned by the Company and by
every other Subsidiary shall be sold, transferred or
disposed of as an entirety;
(ii) the Board of Directors of the Company shall
have determined, as evidenced by a resolution thereof, that
the retention of such stock and indebtedness is no longer in
the best interests of the Company;
(iii) such stock and Indebtedness is sold,
transferred or otherwise disposed of to a Person, for a cash
consideration and on terms reasonably deemed by the Board of
Directors to be adequate and satisfactory;
(iv) the Subsidiary being disposed of shall not
have any continuing investment in the Company or any other
Subsidiary not being simultaneously disposed of; and
(v) such sale or other disposition does not involve
a substantial part (as hereinafter defined) of the assets of
the Company and its Subsidiaries taken as a whole.
(c) As used in this Section 5.18, a sale, lease or other
disposition of assets shall be deemed to be a "substantial part" of the assets
of the Company and its Subsidiaries only if the book value of such assets,
when added to the book value of all other assets sold, leased or otherwise
disposed of by the Company and its Subsidiaries (other than in the ordinary
course of business) during the same twelve month period ending on the date of
such sale, lease or other disposition, exceeds 15% of the consolidated net
tangible assets of the Company and its Subsidiaries determined as of the end
of the immediately preceding fiscal year.
Section 5.19 Transactions with Affiliates.
Without the prior written consent of Purchaser, the Company will not,
and will not permit any Subsidiary to, enter into or be a party to any
transaction or arrangement with any officer, director or Affiliate (including,
without limitation, the purchase from, sale to or exchange of property with,
or the rendering of any service by or for, any Affiliate), except pursuant to
the reasonable requirements of the Company's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than could be obtained in an arm's-length transaction with a Person
other than an Affiliate, in each case as determined in good faith by a
majority of the disinterested directors of the Company.
Section 5.20 Notice.
The Company shall promptly upon the discovery thereof give written
notice to Purchaser of (i) the occurrence of any default or Event of Default
or event which, with the passage of time, would constitute an Event of
Default, under this Agreement; (ii) the occurrence of any default or event of
default under any other agreement providing for Indebtedness of the Company or
any Subsidiary or under a capitalized lease obligation for at least $100,000,
and which default would cause the
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obligations under such agreement to be accelerated; (iii) any actions, suits
or proceedings instituted by any Person against the Company or a Subsidiary or
materially affecting any of the assets of the Company or any Subsidiary
involving claims in excess of $100,000 (unless covered by insurance and not
subject to a reservation of rights); or (iv) any investigation initiated by,
or any dispute between and any governmental regulatory body, on the one hand,
and the Company or any Subsidiary, on the other hand, which dispute might
interfere with the normal operations of the Company or any Subsidiary;
provided, however, that Purchaser shall not be required by this Agreement to
disclose any such information provided in (iii) or (iv) above to any third
party other than Purchaser's counsel and except to the extent compelled by law
or otherwise authorized by the Company.
Section 5.21 Annual Plan.
The Board of Directors shall adopt and the Company will furnish to
Purchaser, in such manner and form as approved by the Board of Directors of
the Company, no later than the first day of each fiscal year, commencing on
and after January 1, 1999, a financial plan for the Company and its
Subsidiaries , which shall include at least a projection of income and
expenses (including capital expenditures) and a projected cash flows statement
for each month in such fiscal year, and a projected balance sheet as of the
end of each month in such fiscal year (the "Annual Plan"). The Company shall
promptly furnish to Purchaser each amendment or revision to the Annual Plan.
Section 5.22 Board of Directors; Observer Rights.
(a) At any time or from time to time after the Closing Date upon the
request of Purchasers, the Board of Directors of the Company shall promptly
(i) cause the size of the Board of Directors of the Company to be increased by
one (1) director (unless a vacancy on the Board of Directors shall already
exist) and (ii) fill the vacancy created thereby (or such existing vacancy) by
electing or appointing as director a person designated by Purchasers to serve
in such capacity as a member of the Board of Directors of the Company until
the next annual meeting of the shareholders of the Company. Thereafter, for so
long as the initial Purchasers or any Affiliate own at least 25% of the
initial aggregate principal amount of the Debentures, the Company agrees to
include a nominee of Purchasers in management's slate of nominees to be
elected to the Board of Directors and to recommend to the shareholders of the
Company the election of such nominee. Any designee or nominee of Purchasers
hereunder shall be reimbursed for all reasonable expenses incurred as a
director and shall be entitled to receive such compensation as may be received
by other non-employee directors of the Company, provided, however, that such
directors shall not be entitled to receive in any calendar year options to
purchase more than 5,000 shares of Common Stock (subject to adjustments for
stock splits, stock dividends or recapitalizations after the date hereof), on
the same terms and conditions as stock options granted to all other
non-employee directors.
(b) Purchasers shall not be entitled to exercise the right set forth
in Section 5.22(a) above so long as any of their shares of the Preferred Stock
remains outstanding.
(c) Notwithstanding anything to the contrary in Section 5.21(b)
above, if an Event of Default hereunder exists, the Company shall invite one
representative of Tandem to attend, at the Company's expense, all meetings of
the Company's Board of Directors and all committees of the
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Company's Board of Directors in a nonvoting capacity and, in this respect,
shall give such representative copies of all notices and meeting agenda in
advance of such meetings and shall permit such representative to review all
documents and other materials provided to directors at such meetings. The
Company shall also provide Purchaser, in advance, with copies of all actions
proposed to be taken by the Board of Directors in lieu of meeting.
Section 5.23 Key Executives.
The officers and key employees of the Company whose names and current
positions are set forth on Schedule 5.23 hereto shall continue to be employed
by the Company in such position and with the current duties and
responsibilities for at least that position, unless (i) such employment ceases
because of death or (ii) the Company replaces such officer or key employee
within ninety (90) days with another executive who shall be reasonably
acceptable to Purchasers.
Section 5.24 Further Assurances.
The Company will take all actions reasonably requested by Purchasers
to effect the transactions contemplated by this Agreement and the other
Operative Documents.
ARTICLE VI - SUBORDINATION OF DEBENTURES
Section 6.1 Subordination.
(a) Notwithstanding anything to the contrary in this Agreement or in
the Debentures, the indebtedness evidenced by the Debentures, including
principal and interest, shall be subordinate and junior to the prior payment
of the indebtedness of the Company for borrowed money (except such
indebtedness of the Company other than the Debentures which is expressly
stated to be subordinate or junior in any respect to other indebtedness of the
Company) outstanding as of the date of this Agreement and set forth on
Schedule 6.1 hereto (including any obligations of the Company under any
guaranty or suretyship agreement relating to indebtedness for borrowed money
by Subsidiaries of the Company), constituting borrowed money from financial
institutions approved by the Board of Directors of the Company and designated
as being senior to the Debentures (but only to the extent so designated),
together with all obligations issued in renewal, deferral, extension,
refunding, amendment or modification of any such indebtedness including,
without limitation, any and all indebtedness now or hereafter owing by the
Company to Summit Bank, N.A., and its successors and assigns (collectively,
the "Senior Indebtedness").
Section 6.2 Liquidation, etc.
(a) Upon any distribution of assets of the Company in connection with
any dissolution, winding up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency, or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise), the holders of all
Senior Indebtedness shall first be entitled to receive payment in full of the
principal thereof, premium, if any, and interest due thereon, and all costs
and expenses (including attorneys' fees) related thereto, before the holders
of the Debentures shall be entitled to receive any payment on
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account of the principal of or interest on or any other amount owing with
respect to the Debentures (other than payment in shares of capital stock of
the Company as reorganized or readjusted, or securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment,
which stock and securities are subordinated to the payment of all Senior
Indebtedness and securities received in lieu thereof which may at the time be
outstanding). Under the circumstances provided herein, the holders of the
Senior Indebtedness shall have the right to receive and collect any
distributions made with respect to the Debentures until such time as the
Senior Indebtedness is paid in full, and shall have the further right to take
such actions as may be deemed necessary or required to so receive and collect
such distributions including making or filing any proofs of claim relating
thereto.
(b) Without in any way modifying the provisions of this Article VI or
affecting the subordination effected hereby if such notice is not given, the
Company shall give prompt written notice to the Purchaser of any dissolution,
winding up, liquidation or reorganization of maker (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit
of creditors or otherwise).
Section 6.3 Senior Indebtedness Default.
The Company shall not declare or pay any dividends or make any
distributions to the holders of capital stock of the Company, or purchase or
acquire for value, any of the Debentures if any default has occurred and is
continuing with respect to the payment of principal of, premium if any or
interest on any Senior Indebtedness.
Section 6.4 Subrogation.
Upon the prior payment in full of all Senior Indebtedness, the
Purchasers shall be subrogated to the rights of the holders of the Senior
Indebtedness to receive payments or distributions of assets of the Company
applicable to the Senior Indebtedness until all amounts owing on the
Debentures shall be paid in full, and for the purpose of such subrogation, no
payments or distributions to the Purchasers otherwise payable or distributable
to the holders of Senior Indebtedness shall, as between the Company, its
creditors, other than the holders of Senior Indebtedness, and Purchasers,
shall be deemed to be payment by the Company to or on account of the
Debentures, it being understood that the provisions of this Article VI are and
are intended solely for the purpose of defining the relative rights of
Purchasers, on the one hand, and the holders of the Senior Indebtedness, on
the other hand.
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Section 6.5 Company's Obligations Not Impaired.
(a) Nothing contained in this Article VI or in the Debentures is
intended to or shall impair, as between the Company and Purchasers, the
obligation of the Company, which is absolute and unconditional, to pay the
Purchasers the principal of and interest on the Debentures as and when the
same shall become due and payable in accordance with the terms of the
Debentures, or is intended to or shall affect the relative rights of the
Purchasers other than with respect to the holders of the Senior Indebtedness,
nor, except as expressly provided in this Article VI, shall anything herein or
therein prevent the Purchasers from exercising all remedies otherwise
permitted by applicable law upon the occurrence of an Event of Default under
this Agreement or under the Debentures.
(b) If any payment or distribution shall be received in respect of
the Debentures in contravention of the terms of this Article VI, such payment
or distribution shall be held in trust for the holders of the Senior
Indebtedness, and shall be immediately delivered to such holders in the same
form as received.
ARTICLE VII - RESTRICTIONS ON TRANSFER
Section 7.1 Legends; Restrictions on Transfer.
The Debentures have not been registered under the Securities Act or
any state securities laws. Each Debenture issued pursuant to this Agreement
(except as permitted by this Article VII) shall bear a legend in substantially
the following form:
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (i) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS, OR (ii) IN THE OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE
SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH TRANSFER.
The provisions of this Article VII shall be binding upon all
subsequent holders of the Debentures unless in the opinion of counsel to any
such holder, specified in Section 7.2 below, the Debentures are no longer
subject to the restrictions described herein.
Section 7.2 Notice of Intention to Transfer; Opinions of Counsel.
The Debentures shall not be transferable except upon the conditions
specified in this Article VII. Each holder of any Debenture, by acceptance
thereof, agrees, prior to any transfer or such Debenture, to give written
notice to the Company of such holder's intention to effect such transfer and
briefly describe the manner of the proposed transfer. Such notice of intended
transfer shall be accompanied by, if applicable, an opinion of counsel to such
holder reasonably satisfactory to the Company, to the effect that registration
under the Securities Act of such Debenture in connection
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with such proposed transfer is not required. If in the opinion of such
counsel, the proposed transfer of such Debenture may be effected without
registration of such Debenture, under the Securities Act, such holder shall be
entitled to transfer such Debenture in accordance with the terms of the notice
delivered by such holder to the Company. The Company will promptly upon such
transfer deliver new Debentures not bearing a legend of the character set
forth in Section 7.1, unless in the opinion of such counsel subsequent
disposition by such holder of the Debentures to be so transferred may require
registration under the Securities Act. If the proposed transfer of such
Debenture may not be effected without registration of such Debenture under the
Securities Act, the holder thereof shall not be entitled to transfer such
Debenture, in the absence of an effective registration statement.
ARTICLE VIII - EVENTS OF DEFAULT; REMEDIES
Section 8.1 Events of Default.
The occurrence of any one of the following shall constitute an "Event
of Default" under this Agreement:
(a) Default shall occur in the payment of interest on any Debenture
when the same shall have become due, which default shall continue for five (5)
days; or
(b) Default shall occur in the making of any payment of the principal
of any Debenture or the premium, if any, by the Company thereon at the
expressed or any accelerated maturity date or at any date fixed by the Company
for prepayment, which default shall continue for five (5) days; or
(c) Default shall be made in the payment of the principal of or
interest on any Indebtedness (other than the Debentures) of the Company or any
Subsidiary and such default shall continue beyond the period of grace, if any,
allowed with respect thereto; or
(d) Default or the happening of any event shall occur under any
contract, agreement, lease, indenture or other instrument under which any
Indebtedness (other than the Debentures) of the Company or any Subsidiary may
be issued and such default or event shall (i) result in liability of more than
$100,000 and (ii) continue for a period of time sufficient to permit the
acceleration of the maturity of any such Indebtedness of the Company or any
Subsidiary outstanding thereunder; or
(e) Default shall occur in the observance or performance of any
covenant or agreement contained in Section 5.2, Sections 5.12 through 5.18, or
Sections 5.22 and 5.23 hereof, and such default shall continue after five (5)
days of notice thereof to the Company; or
(f) Default shall occur in the observance or performance of any other
provision of this Agreement which is not remedied within thirty (30) days
after the earlier of (i) the date on which the Company first obtains knowledge
of such Default and (ii) the date on which written notice thereof is given to
the Company by the holder of any Debenture; or
(g) Any representation or warranty made by the Company herein, or
made by the Company in any statement or certificate furnished by the Company
in connection with the
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consummation of the issuance and delivery of the Debentures or furnished by
the Company pursuant hereto, is untrue in any material respect as of the date
of the issuance or making thereof; or
(h) Final judgment or judgments for the payment of money aggregating
in excess of $100,000, is or are outstanding against the Company or any
Subsidiary or against any property or assets of either and any one of such
judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of thirty (30) days from the date of its entry; or
(i) The Company or any Subsidiary becomes insolvent or bankrupt, is
generally not paying its debts as they become due or makes an assignment for
the benefit of creditors, or the Company or any Subsidiary applies for or
consents to the appointment of a custodian, trustee, liquidator, or receiver
for the Company or such Subsidiary or for the major part of the property of
either; or
(j) A custodian, trustee, liquidator, or receiver is appointed for
the Company or any Subsidiary or for the major part of the property of either
and is not discharged within sixty (60) days after such appointment; or
(k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar
law or laws for the relief of debtors, are instituted by or against the
Company or any Subsidiary and, if instituted against the company or any
Subsidiary, are consented to or are not dismissed within sixty (60) days after
such institution.
Section 8.2 Acceleration of Maturities.
When any Event of Default described in paragraph (a), (b) or (c) of
Section 8.1 has happened and is continuing, any holder of any Debenture may,
and when any Event of Default described in paragraphs (d) through (i),
inclusive, of said Section 8.1 has happened and is continuing the holder or
holders of 50% or more of the principal amount of Debentures at the time
outstanding may, by notice to the Company, declare the entire principal and
all interest accrued on all Debentures to be, and all Debentures shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived.
When any Event of Default described in paragraph (j) or (k) of Section 8.1 has
occurred, then all outstanding Debentures shall immediately become due and
payable without presentment, demand or notice of any kind, all of which are
hereby expressly waived. Upon the Debentures becoming due and payable as a
result of any Event of Default as aforesaid, the Company will forthwith pay to
the holders of the Debentures the entire principal and interest accrued on the
Debentures. No course of dealing on the part of any Debentureholder nor any
delay or failure on the part of any Debentureholder to exercise any right
shall operate as a waiver of such right or otherwise prejudice such holder's
rights, powers and remedies. The Company further agrees, to the extent
permitted by law, to pay to the holder or holders of the Debentures all costs
and expenses, including reasonable attorneys' fees, incurred by them in the
collection of any Debentures upon any default hereunder or thereon.
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ARTICLE IX - AMENDMENTS, WAIVERS AND CONSENTS
Section 9.1 Consent Required.
Any term, covenant, agreement or condition of this Agreement may,
with the consent of the Company, be amended or compliance therewith may be
waived (either generally or in a particular instance and either retroactively
or prospectively), if the Company shall have obtained the consent in writing
of the holders of at least 50% in aggregate principal amount of outstanding
Debentures; provided that without the written consent of the holders of all of
the Debentures then outstanding, no such waiver, modification, alteration or
amendment shall be effective (a) which will change the time of payment of the
principal of or the interest on any Debenture or reduce the principal amount
thereof or change the rate of interest thereon, (b) which will change any of
the provisions hereof with respect to optional prepayments or (c) which will
change the percentage of holders of the Debentures required to consent to any
such amendment, modification or waiver of any of the provisions of this
Article IX [Amendments, etc.] or Article VIII [Defaults; Remedies]; and
further provided that the holders of at least 50% in the aggregate principal
amount of outstanding Debentures may exercise the rights of Purchasers under
Section 5.22(a), subject to the provisions of Section 5.22(b).
Section 9.2 Solicitation of Debenture Holders.
The Company will not, directly or indirectly, pay or cause to be paid
by remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any holder of the Debentures as consideration for or as an
inducement to the entering into by any holder of the Debentures of any waiver
or amendment of any of the terms and provisions of this Agreement unless such
remuneration is concurrently paid, on the same terms, ratably to the holders
of all of the Debentures then outstanding.
Section 9.3 Effect of Amendment or Waiver.
Any such amendment or waiver shall apply equally to all of the
holders of the Debentures and shall be binding upon them, upon each future
holder of any Debenture and upon the Company, whether or not such Debenture
shall have been marked to indicate such amendment or waiver. No such amendment
or waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
ARTICLE X - INTERPRETATION OF AGREEMENT; DEFINITIONS
Section 10.1 Definitions.
Unless the context otherwise requires, the terms hereinafter set
forth when used herein shall have the following meanings and the following
definitions shall be equally applicable to both the singular and plural forms
of any of the terms herein defined:
"Affiliate" shall mean any Person (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Company, (b) which beneficially owns or holds 5% or
more of any class of the Voting Stock of the Company or (c)
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5% or more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially owned
or held by the Company or a Subsidiary.
"Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which banks in Tennessee are authorized to close.
The term "control" (including the terms "controlling," "controlled
by" and "under common control") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of Voting Stock, by
contract, or otherwise.
"Default" shall mean any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default as defined in Section 9.1.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended and any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"Event of Default" shall have the meaning set forth in Section 9.1
hereof.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent
or otherwise, by such Person: (a) to purchase such Indebtedness or obligation
or any property or assets constituting security therefor, (b) to advance or
supply funds (i) for the purchase or payment of such Indebtedness or
obligation, (ii) to maintain working capital or other balance sheet condition
or (iii) otherwise to advance or make available funds for the purchase or
payment of such Indebtedness or obligation, or (c) to lease property or to
purchase Securities or other property or services primarily for the purpose of
assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation, or (d)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof. For the purposes of all computations
made under this Agreement, a Guaranty in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the principal
amount of such Indebtedness for borrowed money which has been guaranteed, and
a Guaranty in respect of any other obligation or liability or any dividend
shall be deemed to be Indebtedness equal to the maximum aggregate amount of
such obligation, liability or dividend.
"Hazardous Substance" shall mean any hazardous or toxic material,
substance or waste, pollutant or contaminant which is regulated under any
statute, law, ordinance, rule or regulation of any local, state, regional or
Federal authority having jurisdiction over the property of the Company and its
Subsidiaries or its use, including but not limited to any material, substance
or waste which is: (a) defined as a hazardous substance under Section 311 of
the Federal Water Pollution Control Act (33 U.S.C. ss. 1317.1) as amended; (b)
regulated as a hazardous waste under Section 1004 or Section
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3001 of the Federal Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.) as amended; (c)
defined as a hazardous substance under Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.) as amended; or (d) defined or regulated as a hazardous substance or
hazardous waste under any rules or regulations promulgated under any of the
foregoing statutes.
"Indebtedness" of any Person shall mean and include all obligations
of such Person which in accordance with GAAP shall be classified upon a
balance sheet of such Person as liabilities of such Person, and in any event
shall include all (a) obligations of such Person for borrowed money or which
have been incurred in connection with the acquisition of property or assets,
(b) obligations secured by any lien or other charge upon property or assets
owned by such Person, even though such Person has not assumed or become liable
for the payment of such obligations, (c) obligations created or arising under
any conditional sale or other title retention agreement with respect to
property acquired by such Person, notwithstanding the fact that the rights and
remedies of the seller, lender or lessor under such agreement in the Event of
Default are limited to repossession or sale or property, (d) capitalized
rentals, and (e) Guaranties of obligations of others of the character referred
to in this definition.
"Investments" shall mean all investments, in cash or by delivery of
property made, directly or indirectly in any Person, whether by acquisition of
shares of capital stock, indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise; provided, however that
"Investments" shall not mean or include routine investments in property to be
used or consumed in the ordinary course of business.
The term "knowledge of the Company" shall mean, with respect to a
particular fact or other matter if a director or executive officer of the
Company or any Subsidiary is actually, or has been, aware of such fact or
other matter, after reasonable inquiry under the circumstances.
"Materially Adverse Effect" shall mean a materially adverse effect
upon the business, assets, liabilities, financial condition, results of
operations or business prospects, in each case of the Company and its
Subsidiaries taken as a whole, or upon the ability of the Company to perform
its obligations under this Agreement, the Debentures or the other Operative
Documents.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Operative Documents" shall mean (i) this Debenture Purchase
Agreement; (ii) the Debenture, (iii) the Warrants; and (iv) the Registration
Rights Agreement.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political
subdivision thereof.
"Plan" means a "pension plan", as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
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"Proprietary Information" includes without limitation (i) any
computer software and related documentation, inventions, technical and
nontechnical data related thereto, and (ii) other documentation, inventions
and data related to patterns, plans, methods, techniques, drawings, finances,
customer lists, suppliers, products, special pricing and cost information,
designs, processes, procedures, formulas, research data owned or used by the
Company or any Subsidiary or marketing studies conducted by the Company, all
of which the Company considers to be commercially important and competitively
sensitive and which generally has not been disclosed to third parties other
than customers in the ordinary course of business.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
The term "subsidiary" shall mean, as to any particular parent
corporation, any corporation of which more than 50% (by number of votes) of
the Voting Stock shall be owned by such parent corporation and/or one or more
corporations which are themselves subsidiaries of such parent corporation. The
term "Subsidiary" shall mean a subsidiary of the Company.
"Voting Stock" shall mean Securities of any class or classes the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean
a Subsidiary of which all of the issued and outstanding shares of stock
(except shares required as directors' qualifying shares) shall be owned by the
Company and/or one or more of its Wholly-owned Subsidiaries.
Section 10.2 Accounting Principles.
Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with the
requirements of this Agreement.
ARTICLE XI - MISCELLANEOUS
Section 11.1 Expenses, Stamp Tax Indemnity.
Whether or not the transactions herein contemplated shall be
consummated, the Company agrees to pay directly all of Purchasers'
out-of-pocket expenses not to exceed $60,000 in the aggregate in connection
with (a) the entering into of this Agreement and the Preferred Stock Purchase
Agreement and the consummation of the transactions contemplated hereby and
thereby, including but not limited to the reasonable fees, expenses and
disbursements of Purchasers' counsel, and (b) so long as a Purchaser holds any
of the Debentures, all such expenses relating to any amendment, waiver or
consent pursuant to the provisions hereof (whether or not the same are
35
<PAGE>
actually executed and delivered), including, without limitation, any
amendments, waivers or consents resulting from any work-out, restructuring or
similar proceedings relating to the performance by the Company of its
obligations under this Agreement and the Debentures. The Company also agrees
that it will pay and save Purchaser harmless against any and all liability
with respect to stamp and other taxes, if any, which may be payable in
connection with the execution and delivery of this Agreement or the
Debentures, whether or not any Debentures are then outstanding. The Company
agrees to protect and indemnify each Purchaser against any liability for any
and all brokerage fees and commissions payable or claimed to be payable to any
Person retained by the Company in connection with the transactions
contemplated by this Agreement.
Section 11.2 Powers and Rights Not Waived; Remedies Cumulative.
No delay or failure on the part of the holder of any Debenture in the
exercise of any power or right shall operate as a waiver thereof; nor shall
any single or partial exercise of the same preclude any other of further
exercise thereof, or the exercise of any other power or right, and the rights
and remedies of the holder of any Debenture are cumulative to and are not
exclusive of any rights or remedies any such holder would otherwise have, and
no waiver or consent, given or extended pursuant to Article VIII hereof, shall
extend to or affect any obligation or right not expressly waived or consented
to.
Section 11.3 Notices.
All communications provided for hereunder shall be in writing and
shall be delivered personally, or mailed by registered mail, or by prepaid
overnight air courier, or by facsimile communication, in each case addressed:
If to Tandem: Tandem Capital, Inc.
500 Church Street, Suite 200
Nashville, Tennessee 37219
Fax: (615) 726-1208
Attention: Craig Macnab
with a copy to: Sherrard & Roe, PLC
424 Church Street, Suite 2000
Nashville, Tennessee 37219
Fax: (615) 742-4539
Attention: Donald I.N. McKenzie, Esq.
If to Argosy: Argosy Investment Partners, L.P.
950 West Valley Road, Suite 2902
Wayne, Pennsylvania 19087
Fax: (610) 964-9524
Attention: John Paul Kirwin, III, Principal
36
<PAGE>
with a copy to: McCausland, Keen & Buckman
Radnor Court
259 Radnor-Chester Road, Suite 160
Radnor, Pennsylvania 19087-5240
Fax: (610) 341-1099
Attention: Robert H. Young, Jr.
If to the Company: Berger Holdings, Ltd.
805 Pennsylvania Blvd.
Feasterville, Pennsylvania 19053
Fax: (215) 355-7738
Attention: President
with a copy to: Wolf, Block, Schorr, and Solis-Cohen LLP
12th Floor, Packard Building
111 South 15th Street
Philadelphia, Pennsylvania 19102
Fax: (215) 977-2334
Attention: Jason M. Shargel, Esq.
or such other address as a Purchaser or the subsequent holder of any Debenture
initially issued to a Purchaser may designate to the Company in writing, or
such other address as the Company may in writing designate to Purchasers or to
a subsequent holder of the Debenture initially issued to Purchasers, provided,
however, that a notice sent by overnight air courier shall only be effective
if delivered at a street address designated for such purpose by such person
and a notice sent by facsimile communication shall only be effective if made
by confirmed transmission at a telephone number designated for such purpose by
such person or, in either case, as a Purchaser or a subsequent holder of any
Debentures initially issued to a Purchaser may designate to the Company in
writing or at a telephone number herein set forth in the case of the Company.
Section 11.4 Successors and Assigns.
Purchaser's interest in this Agreement, the Debentures and the other
Operative Documents may be endorsed, assigned and/or transferred by such
Purchaser, and any such holder and/or assignee of the same shall succeed to
and be possessed of the rights and powers of Lender under all of the same to
the extent transferred and assigned. The Company shall not assign any of its
rights nor delegate any of its duties under this Agreement or any of the other
Operative Documents by operation of law or otherwise without the prior express
written consent of Purchaser, and in the event the Company obtains such
consent, this Agreement and the other Operative Documents shall be binding
upon such assignee.
37
<PAGE>
Section 11.5 Survival of Covenants and Representations.
All representations and warranties made by the Company herein and in
any certificates delivered pursuant hereto, whether or not in connection with
the Closing Date, shall survive the closing and the delivery of this Agreement
and the Closing Date, and shall be extinguished and eliminated on the day that
is eighteen (18) months after the Closing Date, except that the
representations and warranties of the Company set forth in Sections 2.11,
2.17, 2.27 and 2.28 shall survive until the expiration of the applicable
statutes of limitation. All covenants made by the Company herein shall survive
the closing and delivery of this Agreement and the Operative Documents in
accordance with their respective terms so long as any amounts are outstanding
under the Debentures.
Section 11.6 Severability.
Should any part of this Agreement for any reason be declared invalid
or unenforceable, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid or unenforceable portion thereof
eliminated and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Agreement without
including therein any such part, parts or portion which may for any reason, be
hereafter declared invalid or unenforceable.
Section 11.7 Governing Law.
This Agreement and the Debentures issued and sold hereunder shall be
governed by and construed in accordance with Tennessee law, without regard to
its conflict of law rules.
Section 11.8 Captions; Counterparts.
The descriptive headings of the various Sections or parts of this
Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.9 Entire Agreement.
This Agreement constitutes the entire agreement of the parties with
regard to the sale of the Debentures.
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Debenture
Purchase Agreement to be executed and delivered by their duly authorized
officers as of the date first written above.
COMPANY:
BERGER HOLDINGS, LTD.
By: /s/ Theodore A. Schwartz
----------------------------------------
Name: Theodore A. Schwartz
---------------------------------
Title: C.E.O.
---------------------------------
PURCHASERS:
SIRROM CAPITAL CORPORATION
d/b/a TANDEM CAPITAL
By: /s/ Craig Macnab
---------------------------------------------
Craig Macnab, Vice President
ARGOSY INVESTMENT PARTNERS, L.P.
By: Argosy Associates, L.P., its general partner
By: Argosy Associates, Inc., its general partner
Name: John Paul Kirwin III
--------------------
Title: Vice President
--------------------
<PAGE>
List of Schedules -- Debenture Purchase Agreement
Schedule 2.1(a) -- States in Which Company is Qualified
Schedule 2.1(b) -- Subsidiaries
Schedule 2.1(c) -- SBA Affiliates
Schedule 2.2(a) -- Preemptive Rights, Right of First Refusal, Antidilution
Rights
Schedule 2.2(b) -- Options, Warrants and Other Rights
Schedule 2.3 -- Consents
Schedule 2.7 -- Absence of Changes
Schedule 2.8 -- Defaults
Schedule 2.10 -- Litigation
Schedule 2.11 -- Taxes
Schedule 2.12(i) -- Indebtedness
Schedule 2.12(ii) -- Interested Officers or Directors
Schedule 2.12(iii) -- Guaranties and Indemnities
Schedule 2.13 -- Title
Schedule 2.14 -- Proprietary Information
Schedule 2.14(b)(i) -- Intellectual Property
Schedule 2.14(b)(ii) -- Intellectual Property
Schedule 2.15 -- Debt
Schedule 2.16(i) -- Material Contracts
Schedule 2.16(ii) -- Material Contracts
Schedule 2.21 -- Regulatory Compliance
Schedule 2.24 -- Registration Rights
Schedule 2.25 -- Insurance
Schedule 2.27 -- Employees
Schedule 2.28 -- ERISA
Schedule 2.31 -- Acquisition Agreement
Schedule 5.1 -- Use of Proceeds
Schedule 5.12(a) -- Key Item Report
Schedule 5.13 -- Debt to be Incurred Contemporaneously with Closing or Shortly
Thereafter
Schedule 5.14 -- Guaranties
Schedule 5.23 -- Key Executives
Schedule 6.1 -- Senior Indebtedness
<PAGE>
EXHIBIT A-1
FORM OF DEBENTURE
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS, OR (ii) IN
THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY REGISTRATION UNDER
THE SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN
CONNECTION WITH SUCH TRANSFER.
Berger Holdings, Ltd.
12.25% Subordinated Debenture Due January __, 2003
No. R-1 January _, 1998
$[2,000,000]
For value received, Berger Holdings, Ltd., a Pennsylvania corporation
(the "Company"), hereby promises to pay to [Sirrom Capital Corporation at
Tandem Capital, Inc., 500 Church Street, Suite 200, Nashville, Tennessee
37219, or registered assigns,] on the __ day of January, 2003, the principal
amount of [Two Million Dollars ($2,000,000)] and to pay interest (computed on
the basis of a 360-day year of twelve 30-day months) on the principal amount
from time to time remaining unpaid hereon at the rate of (a) 12.25% per annum
from the date hereof until [the third anniversary of the date of issuance,]
and (b) 20% per annum from January __, 2001, until maturity, payable quarterly
on the first day of each February, May, August, and November in each year,
commencing February 1, 1998, and at maturity. The Company agrees to pay
interest (computed on the same basis) on overdue principal and premium, if
any, and (to the extent legally enforceable) on any overdue installment of
interest, at the stated rate plus 3% per annum (or, in each case, at the
highest rate permitted by applicable law, whichever is less) until paid.
Both the principal hereof and interest hereon are payable to the
order of the holder hereof at its address registered on the books of the
Company or by federal funds wire transfer to a bank account designated in
writing by the holder to the Company in coin or currency of the United States
of America which at the time of payment shall be legal tender for the payment
of public and private debts. If any amount of principal, premium, if any, or
interest on or in respect of this Debenture becomes due and payable on any
date which is not a Business Day, such amount shall be payable on the next
preceding Business Day. "Business Day" means any day other than a Saturday,
Sunday, statutory holiday or other day on which banks in Tennessee are
required by law to close or are customarily closed.
This Debenture is one of the 12.25% Subordinated Debentures due
January _, 2003 of the Company in the aggregate principal amount of
$2,500,000, issued under and pursuant to the terms and provisions of the
Debenture Purchase Agreement, dated as of December __, 1997 (the
1
<PAGE>
"Debenture Agreement"), entered into by the Company with the original
purchasers referred to therein, and this Debenture and the holder hereof are
entitled, equally and ratably with the holders of all other Debentures
outstanding under the Debenture Agreement, to all the benefits provided for
thereby or referred to therein, and to which Debenture Agreement reference is
hereby made for all such terms and provisions.
This Debenture is subordinated to certain other indebtedness of the
Company to the extent and with the effect set forth in the Debenture
Agreement.
If an Event of Default, as defined in the Debenture Agreement, occurs
and is continuing, the principal of this Debenture and the other Debentures
outstanding under the Debenture Agreement may be declared due and payable in
the manner and with the effect provided in the Debenture Agreement.
This Debenture is registered on the books of the Company and is
transferable only by surrender thereof at the principal office of the Company
at 805 Pennsylvania Blvd., Feasterville, Pennsylvania 19053, or such other
address as the Company shall have advised the holders of the Debenture in
writing, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of this Debenture or its attorney duly
authorized in writing and in accordance with the provisions of Section 7.2 of
the Debenture Agreement. Payment of or on account of principal, premium, if
any, and interest on this Debenture shall be made only to or upon the order in
writing of the registered holder.
If the indebtedness represented by this Debenture or any part thereof
is placed in the hands of attorneys for collection after an Event of Default,
or the enforcement of any rights under the Debenture Agreement, the Company
agrees to pay the principal, premium if any, and interest due and payable
hereon, and an amount equal to all costs of collecting this Debenture,
including reasonable attorneys' fees and expenses.
This Debenture and said Debenture Agreement are governed by and
construed in accordance with the laws of Tennessee.
[Corporate Seal] BERGER HOLDINGS, LTD.
ATTEST:
By:
______________________________ __________________________________
Secretary Joseph F. Weiderman, President
2
<PAGE>
EXHIBIT A-2
FORM OF WARRANT
See attached
<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER THE ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY,
REGISTRATION UNDER THE ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
Warrant No. S-1
STOCK PURCHASE WARRANT
This Warrant is issued this __ day of January, 1998, by BERGER
HOLDINGS, LTD., a Pennsylvania corporation (the "Company"), to SIRROM CAPITAL
CORPORATION d/b/a Tandem Capital, a Tennessee corporation ("Tandem" which,
together with any subsequent assignee or transferee hereof is hereinafter
referred to collectively as "Holder" or "Holders").
AGREEMENT:
1. Issuance of Warrant; Term. For and in consideration of SIRROM
CAPITAL CORPORATION d/b/a Tandem Capital, purchasing from the Company its
12.25% Subordinated Debenture due January __, 2003, in the initial principal
amount of [Two Million Dollars] (the "Debenture") pursuant to the terms of a
Debenture Purchase Agreement, dated December __, 1997 among the Company, Tandem
and Argosy Investment Partners, L.P. ("Argosy") (the "Debenture Purchase
Agreement"), and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company hereby grants to
Holder the right to purchase [Two Hundred Forty Thousand (240,000)] shares of
the Company's common stock, par value $.01 per share (the "Common Stock"). The
shares of Common Stock issuable upon exercise of this Warrant are hereinafter
referred to as the "Shares." The number of such shares and the Exercise Price
(as defined below) are subject to adjustment as provided herein. The term
"Warrant" as used herein includes this Warrant and any warrants delivered in
exchange therefor as provided herein. This Warrant shall be exercisable at any
time and from time to time during the term commencing on the date hereof and
ending at 5:00 p.m. Eastern time on January __, 2003.
2. Exercise Price. The exercise price (the "Exercise Price") per
share for which all or any of the Shares may be purchased pursuant to the
terms of this Warrant shall be Four Dollars and Twenty-Five Cents ($4.25), as
adjusted from time to time pursuant to Section 7 hereof.
3. Exercise.
(a) Manner of Exercise. This Warrant may be exercised by the Holder
hereof (but only on the conditions hereinafter set forth) as to all or any
increment or increments of one hundred (100) Shares (or the balance of the
Shares if less than 100), upon delivery to the Company at the following
address: 805 Pennsylvania Blvd., Feasterville, Pennsylvania 19053 or such
other
<PAGE>
address as the Company shall designate in a written notice to the Holder
hereof, of the Notice of Exercise in the form of Annex A hereto, duly
completed and executed on behalf of the Holder, together with this Warrant and
payment to the Company of the aggregate Exercise Price of the Shares so
purchased. The Exercise Price shall be payable, at the option of the Holder,
(i) by certified or bank check, (ii) by the surrender by the Holder for
cancellation of Debentures or any portion thereof having an outstanding
principal balance at least equal to the aggregate Exercise Price, or (iii) by
a combination of (i) and (ii) above. Upon exercise of this Warrant as
aforesaid, the Company shall as promptly as practicable, and in any event
within ten (10) days thereafter, execute and deliver to the Holder of this
Warrant a certificate or certificates for the total number of whole Shares for
which this Warrant is being exercised in such names and denominations as are
requested by such Holder. If this Warrant shall be exercised with respect to
less than all of the Shares, the Holder shall be entitled to receive a new
Warrant covering the number of Shares in respect of which this Warrant shall
not have been exercised, which new Warrant shall in all other respects be
identical to this Warrant. The Company covenants and agrees that it will pay
when due any and all state and federal issue taxes which may be payable in
respect of the issuance of this Warrant or the issuance of any Shares upon
exercise of this Warrant.
(b) Conversion Rights. In lieu of exercising this Warrant pursuant
to Section 3(a) above, the Holder shall have the right to require the Company
to convert this Warrant, in whole or in part and at any time or times into
Shares (the "Conversion Right"), upon delivery to the Company at its address
in Section 3(a) or such other address as the Company shall designate in a
written notice to the Holder hereof, of the Notice of Exercise, with the
election to convert duly completed and executed on behalf of the Holder,
together with this Warrant. Upon exercise of the Conversion Right, the Company
shall deliver to the Holder (without payment by the Holder of any Exercise
Price) that number of Shares which is equal to the quotient obtained by
dividing (x) the net value of the number of Shares into which this Warrant is
being converted at the time the Conversion Right is exercised (determined by
subtracting the aggregate Exercise Price for the Shares into which this
Warrant is being converted immediately prior to the exercise of the Conversion
Right from a number equal to the product of (i) the Fair Market Value (as such
term is defined in Section 7(e)) per share as at such time, multiplied by (ii)
that number of Shares purchasable upon exercise of this Warrant (or portion
hereof that is being converted at the time the Conversion Right is exercised)
immediately prior to the exercise of the Conversion Right (taking into account
all applicable adjustments pursuant to Section 7)), by (y) the Fair Market
Value per share. Any references in any Warrants to the "exercise" of this
Warrant, and the use of the term exercise herein, shall be deemed to include
(without limitation) any exercise of the Conversion Right.
4. Covenants and Conditions. The above provisions are subject to the
following:
(a) Securities Laws Compliance. Neither this Warrant nor the
Shares have been registered under the Securities Act of 1933, as amended
("Securities Act") or any state securities laws ("Blue Sky Laws"). This
Warrant has been acquired for investment purposes and not with a view to
distribution or resale in violation of the registration provisions of the
Securities Act; [except for the transfer of the Warrant to one or more
wholly-owned subsidiaries of Sirrom Capital Corporation, which subsidiary(s)
shall be an "accredited investor," as defined in Rule 501(a) under the
Securities Act], this Warrant may not be sold or otherwise transferred without
(i) an effective registration statement for such Warrant under the Securities
Act and such applicable Blue Sky Laws, or (ii) an opinion of counsel, which
opinion and counsel shall be reasonably
<PAGE>
satisfactory to the Company and its counsel, that registration is not required
under the Securities Act or under any applicable Blue Sky Laws (the Company
hereby acknowledges that [Sherrard & Roe, PLC] is acceptable counsel).
Transfer of the Shares issued upon the exercise of this Warrant shall be
restricted in the same manner and to the same extent as the Warrant and the
certificates representing such Shares shall bear substantially the following
legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT AND
SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE
WITH REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY, REGISTRATION UNDER SUCH ACT AND SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect
the compliance of the issuance of this Warrant and any Shares of Common Stock
issued upon exercise hereof with applicable federal and state securities laws.
(b) Covenants of the Company. The Company covenants and agrees
that all shares of Common Stock which may be issued upon exercise of this
Warrant will, upon issuance and payment therefor, be legally and validly
issued and outstanding, fully paid and nonassessable, free from all taxes,
liens, charges with respect to the issuance thereof. The Company further
covenants that it shall at all times during the term of this Warrant reserve
and keep available for issuance upon the exercise of this Warrant such number
of authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of this Warrant and, from time to time, will take
all steps necessary to amend its Articles of Incorporation to provide
sufficient reserves of shares of its Common Stock for issuance upon exercise
of the Warrant.
5. Transfer of Warrant.
(a) Warrant Register. The Company will maintain a warrant register
containing the names and address of the Holder or Holders. Any Holder of this
Warrant or any portion thereof may change its address as shown on the warrant
register by written notice to the Company requesting such change. Any notice
or written communication required or permitted to be given to the Holder may
be delivered or given by registered or certified mail to such Holder as shown
on the warrant register and at the address shown on the warrant register.
Until this Warrant is transferred on the warrant register of the Company, the
Company may treat the Holder as shown on the warrant register as the absolute
owner of this Warrant for all purposes, notwithstanding any notice to the
contrary.
(b) Transferability. Subject to compliance with the provisions of
Section 4(a) hereof, this Warrant may be transferred, in whole or in part, to
any person, by presentation of the
<PAGE>
Warrant to the Company together with the Notice of Assignment in the form of
Annex B hereto, duly endorsed for transfer. Upon such presentation for
transfer, the Company shall promptly execute and deliver a new Warrant or
Warrants in the form hereof in the name of the assignee(s) and in the
denominations specified in such instructions in the Assignment Form. The
Company shall pay all expenses incurred by it in connection with the
preparation, issuance and delivery of new Warrants under this Section 5.
6. Warrant Holder Not Shareholder; Rights Offering. Except as
otherwise provided herein, this Warrant does not confer upon the Holder, as
such, any right whatsoever as a shareholder of the Company. Notwithstanding
the foregoing, if the Company should offer to all of the Company's
shareholders the right to purchase any securities of the Company, then all
Shares of Common Stock that are subject to this Warrant shall be deemed to be
outstanding and owned by the Holder and the Holder shall be entitled to
participate in such rights offering.
7. Adjustment of Exercise Price and Number of Shares Issuable. The
Exercise Price and the number of shares purchasable hereunder are subject to
adjustment from time to time as follows:
(a) Stock Splits, Recapitalization, Etc. If all or any portion of
this Warrant shall be exercised subsequent to any stock split, stock dividend,
recapitalization, combination of shares of the Company, or other similar event
occurring after the date hereof, then the Holder exercising this Warrant shall
receive, for the aggregate price paid upon such exercise, the aggregate number
and class of shares which such Holder would have received if this Warrant had
been exercised immediately prior to the record date for such stock split,
stock dividend, recapitalization, combination of shares, or other similar
event.
(b) Merger, Etc. If the Company at any time merges or consolidates
with or into any other corporation or enters into a similar transaction (other
than a merger in which the Company is the surviving corporation and in
connection with which there is no reclassification or other change in the
Common Stock or other securities of the Company or any issuance of stock,
securities or property to the holders of its outstanding shares of Common
Stock), then the Company shall notify the Holder of any such event and,
effective upon the record or other date of determination of persons affected
by such merger, consolidation or similar transaction, the securities which the
Holder would be entitled to receive on the exercise hereof shall include the
kind and amount of securities, cash and property that would have been held by
the Holder if on such determination date the Holder had been the holder of
record of the securities, cash and properties issuable upon exercise of the
Warrant on such determination date (or the right thereto prior to the
effective date thereof). In the event of any merger, consolidation or similar
transaction referred to. above in this Section 7(b), the Company shall, and
shall cause any successor corporation as a condition precedent to such
transaction to, execute and deliver to each Holder a new Warrant (i) providing
that the owner of such Warrant, upon exercise thereof, shall have the right to
purchase the securities as adjusted as described above, and (ii) containing
provisions for subsequent adjustments in a manner and on terms as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 7(b).
(C) Adjustment on Certain Dilutive Issues.
<PAGE>
(i) Definitions. For purposes of this Section 7(c), the
following definitions apply:
(1) "Options" shall mean rights, options, or
warrants to subscribe for, purchase or otherwise acquire
either Common Stock or Convertible Securities (as defined
below), except for (A) currently exercisable options and
warrants to purchase an aggregate of 1,539,248 shares of
Common Stock outstanding on January __,1998 (the "Outstanding
Options"); (B) options to purchase an aggregate of 1,270,000
shares of Common Stock granted or provided for but not
exercisable as of January _, 1998 (the "Agreed Options"),
(C) rights or options to acquire up to an aggregate of
250,000 shares of Common Stock which may be granted to
employees, directors or consultants to the Corporation at an
exercise price of no less than the Fair Market Value (as
defined in Section 5(h) below) on the date of grant (the
"Future Options") and (D) warrants to purchase an aggregate
of 350,000 shares of Common Stock granted and reserved for
issuance on January _, 1998 (the "Current Warrants").
(2) "Convertible Securities" shall mean any
evidences of indebtedness, shares of stock (other than
Common Stock and the Company's Series A Convertible
Preferred Stock (the "Series A Preferred") or other
securities convertible into or exchangeable for Common
Stock.
(3) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or deemed to be issued
pursuant to Section 7(c)(iii)) by the Corporation after
January _, 1998, other than shares of Common Stock issued or
issuable upon (i) upon conversion of shares of Series A
Preferred Stock or as a dividend or distribution on Series A
Preferred Stock, (ii) upon the exercise of the Outstanding
Options; (iii) upon the exercise of the Agreed Options, (iv)
upon the exercise of any ISOs, or (y) upon the exercise of
the Current Warrants.
(ii) Adjustment of Exercise Price. In the event that the
consideration per share (determined pursuant to Section 7(c)(v) hereof) for an
Additional Share of Common Stock issued or deemed to be issued by the Company
is less than the Exercise Price in effect on the date of, and immediately
prior to, the issue of such Additional Share of Common Stock, then the
Exercise Price and the number of shares shall be adjusted as provided herein.
(iii) Issue of Options and Convertible Securities. In the
event the Company at any time or from time to time after the Warrant Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities then entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to
any provisions contained therein for a subsequent adjustment of such number)
of Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of
such Convertible Securities, shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issue or, in case such a record date shall
have been fixed, as of the close of business on such record date, provided
that Additional Shares of Common
<PAGE>
Stock shall not be deemed to have been issued unless the consideration per
share (determined pursuant to Section 7(c)(v) hereof) of such Additional
Shares of Common Stock would be less than the Exercise Price in effect on the
date of and immediately prior to such issue, or such record date, as the case
may be, and provided that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(1) no further adjustments in the Exercise Price
shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible
Securities;
(2) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise,
for any increase or decrease in the consideration payable to
the Company, or decrease or increase in the number of shares
of Common Stock issuable upon the exercise, conversion or
exchange thereof, the Exercise Price computed upon the
original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments
based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights
of conversion or exchange under such Convertible Securities,
provided, however, that no such adjustment of the Exercise
Price shall affect Common Stock previously issued upon
exercise or conversion of this Warrant;
(3) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities that shall not have been exercised, the Exercise
Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(a) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of
Common Stock issued were the shares of Common Stock, if any,
actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities and
the consideration received therefor was the consideration
actually received by the Company for the issue of all such
Options, whether or not exercised, plus the consideration
actually received by the Company upon such exercise, or for
the issue of all such Convertible Securities that were
actually converted or exchanged, plus the additional
consideration, if any, actually received by the Company upon
such conversion or exchange, and
(b) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued at the
time of issue of such Options, and the consideration
received by the Company for the Additional Shares of Common
Stock deemed to have been then issued was the consideration
actually received by the Company for the issue of all such
Options, whether or not exercised, plus the consideration
deemed to have been received by the Company (determined
pursuant to Section
<PAGE>
7(c)(v)) upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;
(4) no readjustment pursuant to Section
7(c)(iii)(2) or (3) above shall have the effect of
increasing the Exercise Price to an amount which exceeds the
lower of (a) the Exercise Price prior to the initial
adjustment to which the readjustment applies, or (b) the
Exercise Price that would have resulted from any issuance of
Additional Shares of Common Stock between the date of the
initial adjustment date and such readjustment date; and
(5) in the event of any change in the number of
shares of Common Stock issuable upon the exercise,
conversion or exchange of any Option or Convertible
Security, including, but not limited to, a change resulting
from the antidilution provisions thereof, the Exercise Price
then in effect shall forthwith be readjusted to such
Exercise Price as would have been obtained had the
adjustment which was initially made upon the issuance of
such unexercised Option or unconverted Convertible Security,
been made upon the basis of such subsequent change, but no
further adjustment shall be made for the actual issuance of
Common Stock upon the exercise or conversion of any such
Option or Convertible Security.
(iv) Adjustment of Exercise Price Upon Issuance of
Additional Shares of Common Stock. In the event the Company at any time after
the Warrant Issue Date shall issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Section 7(c)(iii)), without consideration or for a consideration per share
less than the Exercise Price in effect on the date of and immediately prior to
such issue, then and in such event, the Exercise Price shall be reduced to a
price (calculated to the nearest cent) determined by multiplying the then
current Exercise Price by a fraction the numerator of which shall be the sum
of
(A) the number of shares of Common Stock
outstanding immediately prior to such issue, plus
(B) the number of shares of Common Stock which the
aggregate consideration received by the Company for the
total number of Additional Shares of Common Stock so issued
would purchase at the Exercise Price in effect immediately
prior to such issuance
and the denominator of which shall be the sum of
(x) the number of shares of Common Stock
outstanding immediately prior to such issue, plus
(y) the number of such Additional Shares of Common
Stock so issued.
For the purpose of the above calculation, the number of shares of Common Stock
outstanding shall be calculated on a fully diluted basis, as if all shares of
Series A Preferred and all other Convertible Securities had been fully converted
into shares of Common Stock immediately prior to such issuance, and any
outstanding warrants, options or other rights for the purchase of shares of
stock or
<PAGE>
Convertible Securities had been fully exercised immediately prior to such
issuance, and the resulting securities fully converted into shares of Common
Stock, if so convertible as of such date. This calculation shall not include,
however, any Additional Shares of Common Stock issuable with respect to this
Warrant or to shares of Series A Preferred, Convertible Securities or
outstanding options, warrants or other rights for the purchase of shares or
Convertible Securities, solely as a result of adjustment of the Exercise Price
resulting from the issuance of Additional Shares of Common Stock causing such
adjustment.
The provisions of this Section 7(c)(iv) do not apply if the
provisions of any of Section 7(a) or (b) apply.
(v) Determination of Consideration. The consideration received by
the Company for the issue of any Additional Shares of Common Stock shall be
computed as follows:
(1) Cash, Property, and Other Consideration. Such
consideration shall:
(a) insofar as it consists of cash, be computed as
the aggregate amount of cash received by the Company
excluding amounts paid or payable for accrued interest or
accrued dividends;
(b) insofar as it consists of property, services,
or other consideration other than cash, be computed at the
fair value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and
(c) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other
assets of the Company for consideration which covers both,
be the proportion of the consideration so received, computed
as provided in clauses (a) and (b) above, as is determined
in good faith by the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share received by the Company for
Additional Shares of Common Stock deemed to have been issued
pursuant to Options and Convertible Securities, shall be
deemed to be the sum of the consideration paid for such
Option or Convertible Security, if any, plus the lowest
consideration per share then payable upon the exercise of
Options, as set forth in the instruments relating to such
Options, or Convertible Securities, without regard to any
provision contained therein designed to protect against
dilution. If Options or Convertible Securities are issued
together with other securities or instruments of the
Company, the Board of Directors shall determine in good
faith the amount of consideration paid for such Option or
Convertible Securities.
(d) Certificate as to Adjustments. In each case of any
adjustment or readjustment pursuant to Section 7(a)-(c) of the Exercise Price
or the number of shares issuable pursuant to this Warrant, the Company shall
forthwith notify the Holder or Holders of this Warrant
<PAGE>
of each such adjustment, setting forth in reasonable detail the event
requiring the adjustment and the method by which such adjustment was
calculated.
(e) No Fractional Shares; Fair Market Value. If any
adjustment pursuant to Section 7(a) - (c) would create a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares subject to this
Warrant shall be the next higher number of shares, rounding all fractions
upward. "Fair Market Value" per share of Common Stock shall mean (i) in the
case of a security listed or admitted to trading on any securities exchange,
the last reported sale price, regular way (as determined in accordance with
the practices of such exchange), on such day, or if no sale takes place on
such day, the average of the closing bid and asked prices on such day (and in
the case of a security traded on more than one national securities exchange,
at such price or such average, upon the exchange on which the volume of
trading during the last calendar year was the greatest), (ii) in the case of a
security not then listed or admitted to trading on any securities exchange,
the last reported sale price on such day, or if no sale takes place on such
day, the average of the closing bid and asked prices on such day, as reported
by a reputable quotation service designated by the Company, (iii) in the case
of a security not then listed or admitted to trading on any securities
exchange and as to which no such reported sale price or bid and asked prices
are available, the average of the reported high bid and low asked prices on
such day, as reported by a reputable quotation service, or the Wall Street
Journal, or if there are no bids and asked prices on such day, the average of
the high bid and low asked prices, as so reported, on the most recent day (not
more than 30 days prior to the date in question) for which prices have been so
reported, and (iv) in the case of a security determined by the Company's Board
of Directors as not having an active quoted market or in the case of other
property, such fair market value as shall be determined by the Board of
Directors.
8. Certain Notices. In case at any time the Company shall
propose to:
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in
stock or make any special dividend or other distribution to the holders of its
Common Stock;
(c) offer for subscription to the holders of any of its
Common Stock any additional shares of stock in any class or series or other
rights;
(d) reorganize, or reclassify the capital stock of the
Company, or consolidate, merge or otherwise combine with, or sell of all or
substantially all of its assets to, another corporation;
(e) voluntarily dissolve, liquidate or wind up of the
affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or
securities convertible into its capital stock;
then, in any one or more of said cases, the Company shall give to the Holder
of the Warrant, by certified or registered mail, (i) at least twenty (20)
days' prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution or
<PAGE>
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, and (ii) in the case of such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least twenty (20) days' prior written notice of the date when
the same shall take place. Any notice required by clause (i) shall also
specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled
thereto, and any notice required by clause (ii) shall specify the date on
which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
9. Registration Rights. The shares of Common Stock issuable upon
exercise of this Warrant shall be "Registrable Securities" under that certain
Registration Rights Agreement, dated as of the Warrant Issue date, among the
Company, Tandem and Argosy, and the Holder of this Warrant shall be entitled
to the benefits of the Registration Rights Agreement in accordance with its
terms.
10. Governing Law and Amendments. The corporate law of Pennsylvania
shall govern all issues concerning the relative rights of the Company and the
holders of its Common Stock. [In all other matters, this Warrant shall be
construed and enforced under the laws of the State of Tennessee. No amendment
or modification hereof shall be effective except in a writing executed by each
of the Company and the Holder.
11. Equity Participation. This Warrant is issued in connection
with the Debenture Purchase Agreement. It is intended that this Warrant
constitute an equity participation under and pursuant to T.C.A. Section
47-24-101, et. seg. and that equity participation be permitted under said
statutes and not constitute interest on the Debenture. If under any
circumstances whatsoever, fulfillment of any obligation of this Warrant, the
Debenture Purchase Agreement, or any other agreement or document executed in
connection with the Debenture Purchase Agreement, shall violate the lawful limit
of any applicable usury statute or any other applicable law with regard to
obligations of like character and amount, then the obligation to be fulfilled
shall be reduced to such lawful limit, such that in no event shall there occur,
under this Warrant, the Debenture Purchase Agreement, or any other document or
instrument executed in connection with the Debenture Purchase Agreement, any
violation of such lawful limit, but such obligation shall be fulfilled to the
lawful limit. If any sum is collected in excess of the lawful limit, such excess
shall be applied to reduce the principal amount of the Debenture.
<PAGE>
IN WITNESS WHEREOF, Berger Holdings, Ltd. has caused this Warrant to
be executed by its duly authorized officer as of the date first above written.
BERGER HOLDINGS, LTD.
By: _____________________________________
Name: ________________________________
Title: _______________________________
HOLDER:
SIRROM CAPITAL CORPORATION
d/b/a Tandem Capital
By: ____________________________________
Craig Macnab, Vice President
<PAGE>
ANNEX A
NOTICE OF EXERCISE
To: BERGER HOLDINGS, LTD.
(1) The undersigned hereby:
[Initial and complete one]
(a)____ elects to purchase ___ shares of Common Stock of BERGER
HOLDINGS, LTD., pursuant to the provisions of Section 3(a)
of the attached Warrant, and tenders herewith payment of
the purchase price in full for such shares in the amount
of $____________; or
(b)____ elects to exercise this Warrant for the purchase of ____ shares
of Common Stock, pursuant to the conversion right set
forth in Section 3(c) of the attached Warrant.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock to be issued upon
conversion thereof are being acquired solely for the account of the
undersigned, and for investment, and that the undersigned will not
offer, sell or otherwise dispose of any such shares of Common Stock
except under circumstances that will not result in a violation of
the Securities Act of 1933, as amended, or any applicable state
securities laws.
(3) Please issue a certificate(s) representing said shares of Common
Stock in the name of the undersigned or in such other name as is
specified below:
___________________________________
(Name)
___________________________________
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other
name as is specified below:
___________________________________
(Name)
________________________________ ___________________________________
(Date) (Signature)
<PAGE>
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
and does hereby irrevocably constitute and appoint Attorney _________________ to
make such transfer on the books of BERGER HOLDINGS, LTD.,
maintained for the purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the
Assignee acknowledges that this Warrant and the shares of stock to be issued
upon exercise hereof or conversion thereof are being acquired for investment
and that the Assignee will not offer, sell or otherwise dispose of this
Warrant or any shares of stock to be issued upon exercise hereof or conversion
thereof except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Securities Act"), or any state
securities laws. Further, the Assignee has acknowledged that upon exercise of
this Warrant, the Assignee shall, if requested by the Company, confirm in
writing, in a form satisfactory to the Company, that the shares of stock so
purchased are being acquired for investment and not with a view toward
distribution or resale in violation of the registration provisions of the
Securities Act or any state securities laws.
Dated: ___________________________
__________________________________
Signature of Holder
<PAGE>
EXHIBIT C
OFFICER'S CERTIFICATE
The undersigned, Joseph F. Weiderman, the duly elected and authorized
President of Berger Holdings, Ltd., a Pennsylvania corporation (the
"Company"), does hereby certify pursuant to Section 4.2 of that certain
Debenture Purchase Agreement (the "Debenture Agreement"), dated December ___,
1997 among the Company and Sirrom Capital Corporation d/b/a Tandem Capital and
Argosy Investment Partners, L.P., as follows:
1. The representations and warranties of the Company contained in the
Debenture Agreement were true and correct when made and are true and correct
on the date hereof as if made on and as of the date hereof, except as such
representations and warranties expressly relate to a specific date.
2. The Company has performed and complied with all covenants and
agreements and conditions contained in the Debenture Agreement required to be
performed or complied with by it prior to or at the time of delivery hereof.
3. Since December __, 1997, no change has occurred in the condition,
financial or otherwise, or prospects of the Company or any Subsidiary which,
either individually or in the aggregate, would have a Materially Adverse
Effect (as defined in the Debenture Agreement).
4. On the date hereof, the Company consummated the acquisition
of _____ ___, a _________ corporation pursuant to the terms of that certain
[Acquisition Agreement] dated December ___, 1997 between the Company and
____________.
Capitalized terms used herein which are defined in the Debenture
Agreement will have the same meaning as provided therein.
IN WITNESS WHEREOF, the undersigned has executed this Officer's
Certificate this ___ day of _______________, 199__.
_________________________________
Joseph F. Weiderman, President
<PAGE>
EXHIBIT D
FORM OF SECRETARY'S CERTIFICATE
The undersigned, ______________, the duly elected and authorized
Secretary of Berger Holdings, Ltd., a Pennsylvania corporation (the "Company"),
does hereby certify pursuant to Section 4.3 of that certain Debenture Purchase
Agreement (the "Debenture Agreement"), dated December -, 1997, by and among the
Company and Sirrom Capital Corporation d/b/a Tandem Capital and Argosy
Investment Partners, L.P., as follows:
1. There has not been any amendment or other document affecting the
Articles of Incorporation of the Company filed with the Secretary of State of
Pennsylvania since [date of certified Articles delivered at Closing], or any
action contemplating any such amendment, other than the Statement with Respect
to Shares.
2. No proceedings looking toward the liquidation or dissolution of
the Company or threatening the existence of the Company are pending or
contemplated by the Company.
3. Attached hereto as Exhibit D-1 is a true, complete and correct
copy of the Bylaws of the Company, as amended and/or restated, as such Bylaws
are in full force and effect on the date hereof.
4. Attached hereto as Exhibit D-2 is a true, complete and correct
copy of the resolutions duly adopted by the Board of Directors of the Company
[at a meeting held on _______________] OR [by written consent dated _________],
authorizing the issue and sale of the Debentures and the grant of the
Warrants, the execution and delivery of the Debenture Agreement and the
Warrants, and the consummation of the transactions contemplated thereby, and
such resolutions are in full force and effect on the date hereof and have not
been rescinded or modified in any respect.
5. The following persons are the duly elected, qualified and acting
officers of the Company authorized to execute and deliver on behalf of the
Company, the Debenture Agreement and the other documents and instruments to be
executed by the Company in connection with the transactions contemplated by
the Debenture Agreement, and the signature of each person set forth opposite
his/her name is his/her genuine signature:
Name Office Signature
---- ------ ---------
Joseph F. Weiderman President ________________________
_______________________________ Secretary ________________________
<PAGE>
PREFERRED STOCK PURCHASE AGREEMENT
Between
SIRROM CAPITAL CORPORATION
(d/b/a Tandem Capital),
ARGOSY INVESTMENT PARTNERS, L.P.,
And
BERGER HOLDINGS, LTD.
December 17, 1997
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I - SALE AND PURCHASE OF STOCK............................................................................1
Section 1.1 Description of Preferred Stock.....................................................................1
Section 1.2 Commitment; Closing Date...........................................................................1
Section 1.3 Commitment Fee.....................................................................................2
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................................2
Section 2.1 Corporate Status...................................................................................2
Section 2.2 Capitalization.....................................................................................3
Section 2.3 Authorization; Absence of Conflicts................................................................3
Section 2.4 Validity and Binding Effect........................................................................4
Section 2.5 Financial Statements...............................................................................4
Section 2.6 SEC Reports........................................................................................4
Section 2.7 Absence of Changes.................................................................................5
Section 2.8 No Defaults........................................................................................5
Section 2.9 Compliance With Law................................................................................5
Section 2.10 Litigation........................................................................................5
Section 2.11 Taxes.............................................................................................6
Section 2.12 Certain Transactions..............................................................................6
Section 2.13 Title to Property.................................................................................6
Section 2.14 Intellectual Property.............................................................................7
Section 2.15 Debt..............................................................................................7
Section 2.16 Material Contracts................................................................................7
Section 2.17 Environmental Matters.............................................................................8
Section 2.18 Accounting Matters................................................................................8
Section 2.19 Distributions to Company..........................................................................9
Section 2.20 Prior Sales.......................................................................................9
Section 2.21 Regulatory Compliance.............................................................................9
Section 2.22 Margin Regulations................................................................................9
Section 2.23 Limited Offering..................................................................................9
Section 2.24 Registration Rights..............................................................................10
Section 2.25 Insurance........................................................................................10
Section 2.26 Governmental Consents............................................................................10
Section 2.27 Employees........................................................................................10
Section 2.28 ERISA............................................................................................10
Section 2.29 Fees/Commissions.................................................................................11
Section 2.30 Small Business Concern...........................................................................11
Section 2.31 Proposed Acquisition.............................................................................11
Section 2.32 Disclosure.......................................................................................11
Section 2.33 Survival.........................................................................................11
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASERS.......................................................12
Section 3.1 Corporate Status; Residence.......................................................................12
Section 3.2 Authorization.....................................................................................12
Section 3.3 Validity and Binding Effect.......................................................................12
Section 3.4 Accredited Investor Status; Purchase for Investment...............................................12
Section 3.5 Legends on Certificates...........................................................................13
Section 3.6 Survival..........................................................................................13
ARTICLE IV - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASERS...............................................13
Section 4.1 Representations and Warranties....................................................................13
Section 4.2 Officer's Certificate.............................................................................13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 4.3 Satisfactory Proceedings; Secretary's Certificate.................................................14
Section 4.4 Legal Opinion.....................................................................................14
Section 4.5 Authorization Agreement...........................................................................14
Section 4.6 Statement With Respect To Shares..................................................................14
Section 4.7 Registration Rights Agreement.....................................................................14
Section 4.8 The Company's Existence and Authority.............................................................14
Section 4.9 Acquisition Transaction...........................................................................14
Section 4.10 Debentures.......................................................................................15
Section 4.11 Senior Loan Agreement; Intercreditor Agreement...................................................15
Section 4.12 SBA Forms........................................................................................15
Section 4.13 Required Consents................................................................................15
Section 4.14 Expenses.........................................................................................15
Section 4.15 Waiver of Conditions.............................................................................15
ARTICLE V - COVENANTS OF COMPANY.................................................................................16
Section 5.1 Use of Proceeds...................................................................................16
Section 5.2 Dividends; Repurchase of Preferred Stock..........................................................16
Section 5.3 Corporate Existence, Etc..........................................................................16
Section 5.4 Maintenance, Etc..................................................................................16
Section 5.5 Nature of Business................................................................................17
Section 5.6 Insurance.........................................................................................17
Section 5.7 Taxes, Claims for Labor and Materials.............................................................17
Section 5.8 Compliance with Laws, Agreements, etc.............................................................17
Section 5.9 ERISA Matters.....................................................................................17
Section 5.10 Books and Records; Rights of Inspection..........................................................18
Section 5.11 Reports..........................................................................................18
Section 5.12 Annual Plan......................................................................................19
Section 5.13 Board of Directors; Observer Rights..............................................................20
Section 5.14 Further Assurances...............................................................................20
ARTICLE VI - AMENDMENTS, WAIVERS AND CONSENTS....................................................................20
Section 6.1 Consent Required..................................................................................20
Section 6.2 Effect of Amendment or Waiver.....................................................................20
ARTICLE VII -- INTERPRETATION OF AGREEMENT; DEFINITIONS..........................................................20
Section 7.1 Definitions.......................................................................................20
Section 7.2 Accounting Principles.............................................................................22
ARTICLE VIII -- MISCELLANEOUS...................................................................................23
Section 8.1 Expenses; Stamp Tax Indemnity.....................................................................23
Section 8.2 Powers and Rights Not Waived; Remedies Cumulative.................................................23
Section 8.3 Notices...........................................................................................23
Section 8.4 Successors and Assigns............................................................................24
Section 8.5 Survival of Covenants and Representations.........................................................25
Section 8.6 Severability......................................................................................25
Section 8.7 Governing Law.....................................................................................25
Section 8.8 Captions; Counterparts............................................................................25
Section 8.9 Entire Agreement..................................................................................25
Section 8.10 Specific Performances............................................................................25
Section 8.11 Attorneys' Fees..................................................................................26
</TABLE>
<PAGE>
PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") entered
into the 17th day of December, 1997, is by and among BERGER HOLDINGS, LTD., a
Pennsylvania corporation (the "Company"); and SIRROM CAPITAL CORPORATION,
d/b/a TANDEM CAPITAL, a Tennessee corporation ("Tandem"), and ARGOSY
INVESTMENT PARTNERS, L.P., a Pennsylvania limited partnership ("Argosy") (each
of Tandem and Argosy being referred to as, individually, a "Purchaser," and
collectively, the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company desires to obtain additional capital for use in
connection with its business through the issue and sale of shares of Preferred
Stock (as defined herein) of the Company, and the Purchasers, severally, are
willing to purchase such shares of Preferred Stock from the Company, on the
terms and conditions set forth herein.
NOW, THEREFORE, in mutual consideration of the premises and the
respective representations, warranties, covenants and agreements contained
herein, the parties agree as follows:
ARTICLE I - SALE AND PURCHASE OF STOCK
Section 1.1 Description of Preferred Stock.
The Company has authorized the issue and sale of 40,000 shares of its
Series A Convertible Preferred Stock (the "Preferred Stock") having the rights
and preferences set forth in the Company's proposed Statement With Respect To
Shares in the form attached hereto as Exhibit A (the "Statement With Respect
To Shares"), for a purchase price of $100.00 per share, or an aggregate
purchase price of $4,000,000.00. The Statement With Respect To Shares shall be
filed with the Secretary of State of Pennsylvania on or before the Closing
Date (as defined below). The terms which are capitalized herein shall have the
meanings set forth in Section 7 hereof unless the context shall otherwise
require.
Section 1.2 Commitment; Closing Date.
Subject to the terms and conditions hereof and on the basis of the
representations and warranties hereinafter set forth, (i) the Company agrees
to issue and sell to Tandem, and Tandem agrees to purchase from the Company,
25,000 shares of Preferred Stock for a purchase price of $2,500,000, and (ii)
the Company agrees to issue and sell to Argosy, and Argosy agrees to purchase
from the Company, 15,000 shares of Preferred Stock for a purchase price of
$1,500,000.
Delivery of certificates representing the Preferred Stock will be
made at the offices of Sherrard & Roe, PLC, 424 Church Street, Suite 2000,
Nashville, Tennessee 37219, against payment therefor by federal funds wire
transfer in immediately available funds and to the accounts and in the amounts
in accordance with the Company's wire instructions set forth on Exhibit B
hereto, on January 2, 1998, or such other date as the Company shall determine,
1
<PAGE>
upon two (2) business days prior notice to Purchasers, but no later than
January 30, 1998 (the "Closing Date"). The stock certificates to be delivered
to the Purchasers on the Closing Date will be registered in the respective
Purchaser's name or in the name of such nominee as a Purchaser may specify at
least 24 hours prior to the date fixed for delivery.
Section 1.3 Commitment Fee.
The Company agrees to pay, on or before the Closing Date, a commitment fee (a)
to Tandem in the amount of $25,000, and (b) to Argosy, in the amount of
$15,000; provided that if no closing occurs hereunder, no such fee shall be
payable by the Company.
ARTICLE II -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers as
follows:
Section 2.1 Corporate Status.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania and has
the corporate power to own and operate its properties, to carry on its
business as now conducted and to enter into and to perform its obligations
under this Agreement, the Registration Rights Agreement, to be dated as of the
Closing Date, by and between the Company and Purchasers (the "Registration
Rights Agreement"), and any other document executed and delivered by the
Company in connection herewith or therewith (collectively, the "Operative
Documents"). The Company is qualified to do business and is in good standing
in each state or other jurisdiction in which such qualification is necessary
under applicable provisions of law, except where the failure to so qualify
would not have a Materially Adverse Effect on the financial condition or
results of operations of the Company. The states or other jurisdictions in
which the Company is so qualified are set forth on Schedule 2.1(a) hereto.
(b) Schedule 2.1(b) sets forth a complete list of each corporation,
partnership, joint venture, limited liability company or other business
organization in which the Company owns, directly or indirectly, any capital
stock or other equity interest (the "Subsidiary" or, collectively, the
"Subsidiaries"), or with respect to which the Company or any Subsidiary, alone
or in combination with others, is in a control position, which list shows the
jurisdiction of incorporation or other organization and the percentage of
stock or other equity interest of each Subsidiary owned by the Company. Each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of incorporation or other organization as indicated
on Schedule 2.1(b), each has all requisite power and authority and holds all
material licenses, permits and other required authorizations from government
authorities necessary to own its properties and assets and to conduct its
business as it is now being conducted, and is qualified to do business as a
foreign corporation (or business organization) and is in good standing in
every jurisdiction in which such qualification is necessary under applicable
provisions of law, except where the failure to so qualify would not have a
Materially Adverse Effect on the financial condition or results of operations
of the Company. All of the outstanding shares of capital stock, or other
equity interest, of each Subsidiary owned, directly or indirectly, by the
Company have been validly issued, are fully paid and nonassessable, and are
owned by the Company free and clear of all liens, charges, security interests
or encumbrances.
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(c) Schedule 2.1(c) sets forth a complete list of "affiliates" (as
that term is defined in Title 13, United States Code of Federal Regulations,
Section 121.103) (the "SBA Affiliates"), with a brief statement describing the
basis of each affiliation.
Section 2.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
20,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), of which 5,198,992 shares are issued and outstanding, and (ii)
5,000,000 shares of preferred stock, with rights and preferences fixed by the
Board of Directors in accordance with the corporate laws of the Commonwealth
of Pennsylvania and the Company's Articles of Incorporation, as amended], none
of which is issued and outstanding. All shares of Common Stock outstanding
have been validly issued and are fully paid and nonassessable. As of the
Closing Date, 40,000 shares of such preferred stock shall have been designated
as "Series A Convertible Preferred Stock" with the rights, preferences and
limitations set forth in the Statement With Respect To Shares. Except as
listed on Schedule 2.2(a), there are no statutory or contractual pre-emptive
rights, rights of first refusal, antidilution rights or any similar rights
held by any party with respect to the issuance of the Preferred Stock.
(b) The Company has not granted, or agreed to grant or issue, any
options, warrants or rights to purchase or acquire from the Company any shares
of capital stock of the Company, there are no securities outstanding or
committed to be issued by the Company or any Subsidiary which are convertible
into or exchangeable for any shares of capital stock or other securities of
the Company, and there are no contracts, commitments, agreements,
understandings, arrangements or restrictions as to which the Company is a
party, or by which it is bound, relating to any shares of capital stock or
other securities of the Company, whether or not outstanding except for (i) the
shares of Preferred Stock to be issued pursuant to this Agreement, (ii) the
conversion privileges of the holders of the Preferred Stock to be issued
pursuant to this Agreement, with respect to which an aggregate of at least
941,177 shares of Common Stock have been reserved for issuance upon such
conversion, (iii) the Stock Purchase Warrants (the "Tandem and Argosy
Warrants") to be issued pursuant to the Debenture Purchase Agreement between
the Company and Purchasers, dated of even date herewith (the "Debenture
Purchase Agreement"), and iv) such options, warrants and other rights to
acquire capital stock of the Company, together with relevant exercise prices
and dates, set forth on Schedule 2.2(b). Except as set forth on Schedule
2.2(b), all such shares have been duly reserved for issuance, have been duly
and validly authorized and upon issuance in accordance with the terms of the
respective instruments, will be validly issued, fully paid and nonassessable.
(c) The Preferred Stock that is being purchased by the Purchasers,
when issued, sold, and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and validly
issued, fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws. The Common Stock issuable upon
conversion of the Preferred Stock being purchased under this Agreement has
been duly and validly reserved for issuance and, upon issuance in accordance
with the terms of the Statement With Respect To Shares, will be duly and
validly issued, fully paid, and nonassessable and will be free of restrictions
on transfer other than restrictions on transfer under applicable state and
federal securities laws.
Section 2.3 Authorization; Absence of Conflicts.
The Company has full legal right, power and authority to enter into
and perform its obligations under this Agreement and any of the other
Operative Documents without the consent or approval of any other person, firm,
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governmental agency or other legal entity except as set forth on Schedule 2.3,
each of which will be obtained prior to Closing. The execution and delivery of
this Agreement, the issuance of the shares of Preferred Stock hereunder, the
execution and delivery of each other document in connection herewith or
therewith to which the Company is a party, and the performance by the Company
of its obligations hereunder and/or thereunder are within the corporate powers
of the Company and have been duly authorized by all necessary corporate action
properly taken, have received all necessary governmental approvals, if any
were required, and do not and will not contravene or conflict with (a) the
Articles of Incorporation or Bylaws, as amended, of the Company , (b) any
material agreement to which the Company or any of its Subsidiaries is a party
or by which any of them or their properties is bound, or constitute a default
thereunder, or result in the creation or imposition of any lien, charge,
security interest, or encumbrance of any nature upon any of the property or
assets of the Company or any of its Subsidiaries pursuant to the terms of any
such agreement or instrument, or (c) violate any provision of law or any
applicable judgment, ordinance, regulation or order of any court or
governmental agency. The officer(s) executing this Agreement, the Operative
Documents and any other document executed and delivered by Purchasers in
connection herewith or therewith, is duly authorized to act on behalf of the
Company.
Section 2.4 Validity and Binding Effect.
Each of the Operative Documents is the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by the effect of
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or by general principles of equity.
Section 2.5 Financial Statements.
The consolidated financial statements of the Company and its
Subsidiaries for the fiscal years ended December 31, 1994, December 31, 1995,
and December 31, 1996, and the unaudited consolidated financial statements as
of and for the nine (9) months ended September 30, 1997, and the related
notes, copies of which the Company previously has delivered to Purchasers,
fairly present the financial position, results of operations, cash flows and
changes in stockholders' equity of the Company and its consolidated
Subsidiaries, at the respective dates of and for the periods to which they
apply in such financial statements and have been prepared in accordance with
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods indicated, subject, in the case of interim financial
statements, to normal recurring year-end adjustments (the effect of which will
not, individually or in the aggregate, have a Materially Adverse Effect). No
financial statements of any other person(s) are required by GAAP to be
included in the consolidated financial statements of the Company.
Section 2.6 SEC Reports.
The Company's Common Stock is listed on the NASDAQ Small Cap Market
and has been duly registered with the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Since January 1, 1994, the Company has
timely filed all reports, registrations, proxy or information statements and
all other documents, together with any amendments required to be made thereto,
required to be filed with the SEC under the Securities Act and the Exchange
Act (collectively, the "SEC Reports"). The Company previously has furnished to
Purchasers true copies of all the SEC Reports, together with all exhibits
thereto that a Purchaser has requested, and the Company's annual report to
stockholders for the year ended December 31, 1996, which annual report meets
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the requirements of Rule 14a-3 or 14e-3 under the Exchange Act (the "Annual
Report"). The financial statements contained in the SEC Reports fairly
presented (or will fairly present, as the case may be) the financial position
of the Company as of the dates mentioned and the results of operations,
changes in stockholders' equity and changes in financial position or cash
flows for the periods then ended in conformity with GAAP applied on a
consistent basis throughout the periods involved. As of their respective
dates, the SEC Reports complied (or will comply, as the case may be) in all
material respects with all rules and regulations promulgated by the SEC and
did not (or will not, as the case may be) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 2.7 Absence of Changes.
Except as set forth on Schedule 2.7, since September 30, 1997, (i)
neither the Company nor any of its Subsidiaries has incurred any liabilities
or obligations, direct or contingent, or entered into any transactions, not in
the ordinary course of business, that are material to the Company or any of
its Subsidiaries, (ii) neither the Company nor any of its Subsidiaries has
purchased any of its outstanding capital stock or declared, or paid any
dividend or other distribution or payment in respect of its capital stock,
(iii) there has not been any change in the authorized or issued capital stock,
long-term debt or short-term debt of the Company, and (iv) there has not been
any Materially Adverse Effect in or affecting the business, operations,
properties, prospects, assets, or condition (financial or otherwise) of the
Company or any Subsidiary, and no event has occurred or circumstance exists
that may result in such a Materially Adverse Effect.
Section 2.8 No Defaults.
Except as set forth on Schedule 2.8 and except where a default or
event of default does not and would not constitute a Materially Adverse
Effect, to the Company's knowledge, no default or event of default by the
Company or any Subsidiary exists under this Agreement or under any instrument
or agreement to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or its respective properties may be bound or, to the
knowledge of the Company, affected, and no event has occurred and is
continuing that with notice or the passage of time or both would constitute a
default or event of default thereunder.
Section 2.9 Compliance With Law.
The Company and its Subsidiaries are in compliance with all federal,
state and local laws, regulations, decrees and orders applicable to them
(including but not limited to occupational and health standards and controls,
antitrust, monopoly, restraint of trade or unfair competition) to the extent
that noncompliance, in the aggregate, cannot reasonably be expected to cause a
Materially Adverse Effect.
Section 2.10 Litigation.
Except as set forth on Schedule 2.10, there is no litigation,
arbitration, claim, proceeding or investigation pending or threatened in
writing in which the Company or any Subsidiary is a party or to which any of
its respective properties or assets is the subject which, if determined
adversely to the Company or such Subsidiary, would individually or in the
aggregate have a Materially Adverse Effect.
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Section 2.11 Taxes.
Except as set forth on Schedule 2.11, the Company and its
Subsidiaries have filed or caused to be filed all federal, state and local
income, excise and franchise tax returns required to be filed (except for
returns that have been appropriately extended), and have paid, or provided for
the payment of, all taxes shown to be due and payable on said returns and all
other taxes, impositions, assessments, fees or other charges imposed on it by
any governmental authority, agency or instrumentality, prior to any
delinquency with respect thereto (other than taxes, impositions, assessments,
fees and charges currently being contested in good faith by appropriate
proceedings, for which appropriate amounts have been reserved), and the
Company does not know of any proposed assessment for additional taxes or any
basis therefor. No tax liens have been filed against the Company, or its
Subsidiaries or any of their properties. The Company's federal income tax
liability has been finally determined by the Internal Revenue Service and
satisfied for all taxable years up to and including the taxable year ended
December 31, 1992, or closed by applicable statutes of limitation.
Section 2.12 Certain Transactions.
Except as set forth on Schedule 2.12(i) and except as to indebtedness
incurred in the ordinary course of business and approved by the Board of
Directors of the Company, neither the Company nor any Subsidiary is indebted,
directly or indirectly, to any of its officers or directors, or to their
respective spouses or children, in excess of an aggregate amount of $60,000,
and none of the officers or directors or any members of their immediate
families are indebted to the Company or any Subsidiary in excess of an
aggregate amount of $60,000 or have any direct or indirect ownership interest
in any firm or corporation with which the Company or any Subsidiary is
affiliated or with which the Company has a business relationship, or any firm
or corporation which competes with the Company or any Subsidiary, except that
officers and/or directors of the Company may own no more than 4.9% of the
outstanding stock of any publicly traded company which competes directly with
the Company. Except as set forth on Schedule 2.12(ii), no officer or director
of the Company or any Subsidiary or any member of their immediate families is,
directly or indirectly, interested in any material contract with the Company
or any Subsidiary. Except as set forth on Schedule 2.12(iii), neither the
Company nor any Subsidiary is a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation.
Section 2.13 Title to Property.
The Company and each Subsidiary has good and marketable title to all
real and personal property owned by it, free and clear of all liens, security
interests, pledges, encumbrances, equities claims and restrictions of every
kind and nature whatsoever, except as disclosed on Schedule 2.13 and except
for such liens, security interests, pledges, encumbrances, equities claims and
restrictions which are not in the aggregate material to the business,
operations or financial condition of the Company and its Subsidiaries taken as
a whole. Any real property and buildings held under lease by the Company or
any Subsidiary are held under valid existing and enforceable leases, and no
default has occurred or is continuing thereunder might result in any
Materially Adverse Effect, and the Company and each Subsidiary enjoys peaceful
and undisturbed possession under all such leases, except as disclosed on
Schedule 2.13 or which are not material and do not interfere with the use to
be made of such buildings or property by the Company or any Subsidiary.
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Section 2.14 Intellectual Property.
Except as set forth in Schedule 2.14, the Company is the lawful owner
or has a valid right to use the Proprietary Information in its business free
and clear of any claim, right, trademark, patent or copyright protection of
any third party. The Company has good and marketable title to or has a valid
right to use all patents, trademarks, trade names, service marks, copyrights
or other intangible property rights, and registrations or applications for
registration thereof, owned by the Company or any Subsidiary or used or
required by the Company or any Subsidiary in the operation of its business as
presently being conducted, which are listed on Schedule 2.14(b)(i), except as
set forth on Schedule 2.14(b)(ii). The Company has no knowledge of any
infringements or conflict with asserted rights of others with respect to
copyrights, patents, trademarks, service marks, trade names, trade secrets or
other intangible property rights or know-how which would individually or in
the aggregate have a Materially Adverse Effect. To the Company's knowledge, no
products or processes of the Company infringe or conflict with any rights of
patent or copyright, or any discovery, invention, product or process, that is
the subject of a patent or copyright application or registration known to the
Company. The Company follows such procedures as the Company deems necessary or
appropriate to provide reasonable protection of the Company's trade secrets
and proprietary rights in intellectual property of all kinds. To the knowledge
of the Company, no person employed by or affiliated with the Company has
employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, and to the knowledge of the
Company, no person employed by or affiliated with the Company has violated any
confidential relationship that such person may have had with any third person,
in connection with the development, manufacture or sale of any product or
proposed product or the development or sale of any service or proposed service
of the Company.
Section 2.15 Debt.
Schedule 2.15(i) sets forth (i) a complete and correct list of all
loans, credit agreements, indentures, purchase agreements, promissory notes
and other evidences of indebtedness, Guaranties, capital leases and other
instruments, agreements and arrangements presently in effect providing for or
relating to extensions of credit (including agreements and arrangements for
the issuance of letters of credit or for acceptance financing) in respect of
which the Company, any Subsidiary or any of their properties is in any manner
directly or contingently obligated; (ii) a correct statement of the maximum
principal or face amounts of the credit in question that are outstanding and
that can be outstanding; and (iii) a correct statement of all liens, pledges
or security interests of any nature given or agreed to be given as security
therefor or in connection therewith. Consummation of the transactions hereby
contemplated and the performance of the obligations of the Company under the
Operative Documents will not result in any breach of, or constitute a default
under, or require the consent of any person under, any loan, credit agreement,
indenture, purchase agreement, promissory note or other evidences of
indebtedness, Guaranty, capital lease or other instrument, agreement or
arrangement set forth on Schedule 2.15(i), except as set forth on Schedule
2.15(ii).
Section 2.16 Material Contracts.
Schedule 2.16(i) sets forth a complete and correct list of (a) all
contracts, agreements and other documents outside the ordinary course of
business pursuant to which the Company or any Subsidiary either (i) receives
revenues or (ii) makes payment to any third Person(s), in excess of $100,000
per fiscal year, and (b) all contracts or other agreements required to be
filed by the Company with the SEC as an exhibit pursuant to Item 601(b)(10) of
Regulation S-K under the Securities Act (each instrument identified in
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Schedule 2.16 individually being an "Applicable Contract" and collectively the
"Applicable Contracts"). Each Applicable Contract is in full force and effect
as of the date hereof and the Company knows of no reason why such Applicable
Contracts would not remain in full force and effect pursuant to the terms
thereof. Consummation of the transactions hereby contemplated and the
performance of the obligations of the Company under the Operative Documents
will not result in any breach of, or constitute a default under, or require
the consent of any person under, any Applicable Contract set forth on Schedule
2.16, except as set forth on Schedule 2.16(ii).
Section 2.17 Environmental Matters.
The Company and each of its Subsidiaries have duly complied in all
material respects with, and its business, operations, assets, equipment,
property, leaseholds or other facilities of each are in compliance in all
material respects with, the provisions of all federal, state and local
environmental, health, and safety laws, codes and ordinances, and all rules
and regulations promulgated thereunder. Except where not likely to result in a
Materially Adverse Effect, the Company and each of its Subsidiaries have been
issued and will maintain all required federal, state and local permits,
licenses, certificates and approvals relating to (i) air emissions; (ii)
discharges to surface water or groundwater; (iii) noise emissions; (iv) solid
or liquid waste disposal; (v) the use, generation, storage, transportation or
disposal of toxic or hazardous substances or wastes (which shall include any
and all such materials listed in any federal, state or local law, code or
ordinance and all rules and regulations promulgated thereunder as hazardous or
potentially hazardous); or (vi) other environmental, health or safety matters.
Neither the Company nor any Subsidiary has received notice of, or knows of, or
suspects facts which might constitute any material violations of any federal,
state or local environmental, health or safety laws, codes or ordinances, and
any rules or regulations promulgated thereunder with respect to its
businesses, operations, assets, equipment, property, leaseholds, or other
facilities. Except in accordance with a valid governmental permit, license,
certificate or approval, there has been no emission, spill, release or
discharge into or upon (a) the air; (b) soils, or any improvements located
thereon; (c) surface water or groundwater; or (d) the sewer, septic system or
waste treatment, storage or disposal system servicing the premises, of any
toxic or hazardous substances or wastes at or from the premises owned or
occupied by the Company or its Subsidiaries. To the Company's knowledge, there
has been no complaint, order, directive, claim, citation or notice by any
governmental authority or any person or entity with respect to (I) air
emissions; (II) spills, releases or discharges to soils or improvements
located thereon, surface water, groundwater or the sewer, septic system or
waste treatment, storage or disposal systems servicing the premises; (III)
noise emissions; (IV) solid or liquid waste disposal; (V) the use, generation,
storage, transportation or disposal of toxic or hazardous substances or waste;
or (VI) other environmental, health or safety matters affecting the Company or
any of its Subsidiaries or their respective businesses, operations, assets,
equipment, property, leaseholds or other facilities. Neither the Company nor
any Subsidiary has any material indebtedness, obligation or liability
(absolute or contingent, matured or not matured), with respect to the storage,
treatment, cleanup or disposal of any solid wastes, hazardous wastes or other
toxic or hazardous substances (including without limitation any such
indebtedness, obligation, or liability with respect to any current regulation,
law or statute regarding such storage, treatment, cleanup or disposal).
Section 2.18 Accounting Matters.
The books of account, minute books, stock record books and other
records of the Company and its Subsidiaries are complete and correct in all
material respects, have been maintained in accordance with sound business
practices and accurately and fairly reflect the transactions and dispositions
of the assets of the Company. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
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management's general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain accountability for the assets of the Company and each of
its Subsidiaries; (iii) access to the assets of the Company and each of its
Subsidiaries is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets of the
Company and each of its Subsidiaries are compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
Section 2.19 Distributions to Company.
No Subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distributions on such Subsidiary's capital stock, from repaying to the Company
any loans or advances to such Subsidiary or from transferring any of such
Subsidiary's property or assets to the Company or any other Subsidiary of the
Company. The Company is not prohibited from paying cash dividends to the
holders of the Preferred Stock except as set forth in Schedule 2.19.
Section 2.20 Prior Sales.
All offers and sales by the Company of its capital stock since
January 1, 1994, were at all relevant times (i) exempt from the registration
requirements of the Securities Act or were duly registered under the
Securities Act, and (ii) were duly registered or were the subject of an
available exemption from the registration requirements of all applicable state
securities or Blue Sky laws.
Section 2.21 Regulatory Compliance.
The conduct of the business and the ownership of the assets of the
Company and its Subsidiaries does not require any license, permit, approval,
waiver or other authorization of any federal, state or local governmental or
regulatory body of which the failure to obtain would cause a Materially
Adverse Effect, and except as set forth on Schedule 2.21, such business is not
subject to the regulation of any federal, state or local government or
regulatory body by reason of the nature of the business being conducted (as
distinct from regulation common to commercial enterprises in general). All
licenses, permits and authorizations of which the failure to obtain would
cause a Materially Adverse Effect are in full force and effect.
Section 2.22 Margin Regulations.
The Company is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock. No proceeds received
pursuant to this Agreement will be used to purchase or carry any equity
security of a class which is registered pursuant to Section 12 of the Exchange
Act.
Section 2.23 Limited Offering.
Subject in part to the truth and accuracy of each Purchaser's
representations set forth in this Agreement, the offer, sale and issuance of
the Preferred Stock are exempt from the registration requirements of the
Securities Act, and neither the Company nor any authorized agent acting on its
behalf has taken or will take any action hereafter that would cause the loss
of such exemption.
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Section 2.24 Registration Rights.
Except as described in Schedule 2.24, the Company is not under any
obligation to register under the Securities Act, as amended, any of its
presently outstanding securities or any of its securities that may
subsequently be issued.
Section 2.25 Insurance.
The Company has maintained, and has caused each Subsidiary to
maintain, the insurance policies set forth on Schedule 2.25.
Section 2.26 Governmental Consents.
No consent, approval, qualification, order or authorization of, or
filing with, any local, state, or federal governmental authority is required
on the part of the Company in connection with the Company's valid execution,
delivery, or performance of this Agreement or the offer, sale or issuance of
the Preferred Stock by the Company.
Section 2.27 Employees.
Schedule 2.27 sets forth the number of full-time employees and
full-time equivalent employees of the Company and each Subsidiary as of the
most recent payroll date, which date is set forth therein. To the best of the
Company's knowledge, there is no strike, labor dispute or union organization
activities pending or threatened between it and its employees. Except as set
forth on Schedule 2.27, none of the Company's employees belongs to any union
or collective bargaining unit. To the best of its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
opportunity and other laws related to employment. To the best of the Company's
knowledge, no employee of the Company is or will be in violation of any
judgment, decree, or order, or any term of any employment contract, patent
disclosure agreement, or other contract or agreement relating to the
relationship of any such employee with the Company, or any other party,
because of the nature of the business conducted or presently proposed to be
conducted by the Company or to the use by the employee of his or her best
efforts with respect to such business. Except as disclosed in Schedule 2.27,
the Company is not a party to or bound by any employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement, or other employee compensation agreement. The Company is
not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does
the Company have a present intention to terminate the employment of any of the
foregoing. Except as described in the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, and as described in Schedule 2.27, subject
to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the
will of the Company.
Section 2.28 ERISA.
The Company is in compliance in all material respects with all
applicable provisions of Title IV of the Employee Retirement Income Security Act
of 1974, Pub. L. No. 93-406, September 2, 1974, 88 Stat. 829, 29 U.S.C.A. ss.
1001 et seq. (1975), as amended from time to time ("ERISA"). Except as disclosed
in Schedule 2.28, neither a reportable event nor a prohibited transaction (as
defined in ERISA) has occurred and is continuing with respect to any "pension
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plan" (as such term is defined in ERISA, a "Plan"); no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the Pension Benefit
Guaranty Corporation (together with any entity succeeding to or all of its
functions, the "PBGC") to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings;
neither the Company nor any commonly controlled entity (as defined in ERISA) has
completely or partially withdrawn from a multiemployer plan (as defined in
ERISA); the Company and each commonly controlled entity has met its minimum
funding requirements under ERISA with respect to all of its Plans and the
present fair market value of all Plan property exceeds the present value of all
vested benefits under each Plan, as determined on the most recent valuation date
of the Plan and in accordance with the provisions of ERISA and the regulations
thereunder for calculating the potential liability of the Company or any
commonly controlled entity to the PBGC or the Plan under Title IV or ERISA; and
neither the Company nor any commonly controlled entity has incurred any
liability to the PBGC under ERISA.
Section 2.29 Fees/Commissions.
The Company has not agreed to pay any finder's fee, commission,
origination fee or other fee or charge to any person or entity with respect to
or as a result of the consummation of the transactions contemplated hereunder,
except for the processing fee due to Purchaser pursuant to Section 1.3 hereof.
Section 2.30 Small Business Concern.
The Company, together with its SBA Affiliates, if any, is and will be
on the Closing Date a "small business concern" within the meaning of Section
107.50 of Title 13 of the United States Code of Federal Regulations and which
meets the size standards under 13 C.F.R. ss. 121.301(c). The information to be
set forth in the Small Business Administration Form 480, Form 652 and Part A
of Form 1031 regarding the Company is accurate and complete. Neither the
Company nor any of its Subsidiaries presently engage in any activities for
which a small business investment company is prohibited from providing funds
under 13 C.F.R. ss. 107.720.
Section 2.31 Proposed Acquisition.
The Company has entered into the Asset Purchase Agreement, dated as
of December 3, 1997, among the Company, Benjamin Obdyke Incorporated (the
"Seller") and the shareholders of Seller (the "Acquisition Agreement"), in the
form of Schedule 2.31 hereto (the "Obdyke Acquisition").
Section 2.32 Disclosure.
No representation or warranty given as of the date hereof by the
Company contained in this Agreement or any Schedule attached hereto or any
statement in any document, certificate or other instrument furnished or to be
furnished to the Purchaser pursuant hereto, taken as a whole, contains or will
(as of the time so furnished) contain any untrue statement of a material fact,
or omits or will (as of the time so furnished) omit to state any material fact
which is necessary in order to make the statements contained herein or therein
not misleading.
Section 2.33 Survival.
The representations and warranties of the Company contained in this
Agreement shall survive in accordance with Section 8.5 hereof until this
Agreement terminates.
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ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each Purchaser, severally and not jointly, hereby represents to the
Company, as follows:
Section 3.1 Corporate Status; Residence.
Purchaser is a corporation or partnership duly organized and validly
existing under the laws of its respective jurisdiction and has the requisite
power and authority to own and operate its properties, to carry on its
business as now conducted and to enter into and to perform its obligations
under this Agreement and any other document executed or delivered by Purchaser
in connection herewith. Purchaser is resident in the State set forth under its
name in Section 8.3 below.
Section 3.2 Authorization.
Purchaser has full legal right, power and authority to enter into and
perform its obligations under this Agreement, the Registration Rights
Agreement, and any other document executed and delivered by Purchaser in
connection herewith, without the consent or approval of any other person,
firm, governmental agency or other legal entity. The execution and delivery of
this Agreement and any other document executed and delivered by Purchaser in
connection herewith, and the performance by Purchaser of its obligations
hereunder and/or thereunder are within the corporate or organizational powers
of Purchaser, and do not and will not contravene or conflict with (a) the
organizational documents of Purchaser, (b) any material agreement to which
Purchaser is a party or by which it or any of its properties is bound, or
constitute a default thereunder, or result in the creation or imposition of
any lien, charge, security interest or encumbrance of any nature upon any of
the property or assets of Purchaser pursuant to the terms of any such
agreement or instrument, or (c) violate any provision of law or any applicable
judgment, ordinance, regulation or order of any court or governmental agency.
The person(s) executing this Agreement and any other document executed and
delivered by Purchaser in connection herewith, is duly authorized to act on
behalf of Purchaser.
Section 3.3 Validity and Binding Effect.
This Agreement and any other document executed and delivered by
Purchaser in connection herewith are the legal, valid and binding obligations
of the Purchaser, enforceable against it in accordance with their respective
terms.
Section 3.4 Accredited Investor Status; Purchase for Investment.
Purchaser is and at the Closing Date will be an "accredited investor"
under Rule 501(a) under the Securities Act. Tandem is, and at the Closing Date
will be, an investment company registered under the Investment Company Act of
1940, as amended and has, and at the Closing Date will have, a net worth in
excess of One Million Dollars ($1,000,000). Argosy is, and at the Closing Date
will be, a Small Business Investment Company, as the term is defined in
Section 103 of the Small Business Investment Act of 1958, 15 U.S.C.A. ss.662,
and has, and at the Closing Date will have, a total capital of at least One
Million Dollars ($1,000,000). Purchaser is acquiring the Preferred Stock for
its own account, for investment, and not with a view to the distribution or
resale thereof, in whole or in part, in violation of the Securities Act or any
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applicable state securities law, and Purchaser has no present intention of
selling, negotiating or otherwise disposing of the Preferred Stock, it being
understood that Tandem intends to transfer and assign, without consideration,
the Preferred Stock and all of Tandem's rights and obligations under this
Agreement and the Operative Documents to one or more Wholly-owned Subsidiaries
of Tandem, which Wholly-owned Subsidiaries are also "accredited investors"
under Rule 501(a).
Section 3.5 Legends on Certificates.
Purchaser understands that the certificates representing the
Preferred Stock (or the Common Stock issued upon conversion of the Preferred
Stock) shall bear the following or similar legend and that appropriate stock
transfer instructions will be entered in the stock records of the Company:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY APPLICABLE STATE SECURITIES LAW. THE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR RESALE IN CONNECTION
WITH THE DISTRIBUTION THEREOF. NO DISPOSITION OF THE SHARES MAY BE
MADE IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR (2) AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH DISPOSITION WITHOUT REGISTRATION IS IN COMPLIANCE
WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAW.
Section 3.6 Survival.
The representations and warranties of Purchaser contained in this
Agreement shall survive the termination of this Agreement in accordance with
Section 8.5 hereof.
ARTICLE IV - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASERS
The obligation of Purchasers to purchase and pay for the Preferred
Stock on the Closing Date shall be subject to the fulfillment on or before the
Closing Date of each of the following conditions:
Section 4.1 Representations and Warranties.
The representations and warranties of the Company contained in this
Agreement and in any Schedule hereto or any document or instrument delivered
to Purchasers or their representatives hereunder, shall have been true and
correct when made and shall be true and correct as of the Closing Date as if
made on such date, except to the extent such representations and warranties
expressly relate to a specific date. The Company shall have duly performed all
of the covenants and agreements to be performed by it hereunder on or prior to
the Closing Date.
Section 4.2 Officer's Certificate.
The Company shall have delivered to each Purchaser a certificate,
dated the Closing Date, signed by the President of the Company substantially
in the form attached hereto as Exhibit C.
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Section 4.3 Satisfactory Proceedings; Secretary's Certificate.
All proceedings taken in connection with the transactions
contemplated by this Agreement, and all documents necessary to the
consummation thereof, shall be satisfactory in form and substance to
Purchasers and Purchasers' counsel, and the Company shall have delivered to
each Purchaser a certificate, dated the Closing Date, signed by the Secretary
of the Company substantially in the form attached hereto as Exhibit D.
Section 4.4 Legal Opinion.
Each Purchaser shall have received the opinion of Wolf, Block, Schorr
and Solis-Cohen LLP, counsel for the Company, dated the Closing Date,
addressed to Purchasers, in form and substance satisfactory to Purchasers'
counsel, and covering the matters set forth in Exhibit E hereto.
Section 4.5 Authorization Agreement.
The Company shall have delivered to each Purchaser an Authorization
Agreement for Pre-Authorized Payments (Debit), dated the Closing Date,
executed by a duly authorized officer of the Company, in the form attached
hereto as Exhibit F.
Section 4.6 Statement With Respect To Shares.
The Statement With Respect To Shares shall have been accepted by the
Office of the Secretary of State of Pennsylvania as filed.
Section 4.7 Registration Rights Agreement.
The Company shall have executed and delivered to Purchasers the
Registration Rights Agreement.
Section 4.8 The Company's Existence and Authority.
The Company shall have delivered to Purchasers the following
certificates of public officials, in each case as of a date within ten (10)
days of the Closing Date:
(a) the Articles of Incorporation of the Company and each of the
Subsidiaries, certified by the Secretary of State or other appropriate
official in the jurisdiction each such entity is incorporated; and
(b) a certificate as to the legal existence and subsistence of the
Company and each of the Subsidiaries issued by the Secretary of State or other
appropriate official in the jurisdiction each such entity is incorporated.
Section 4.9 Acquisition Transaction.
The closing of the purchase by the Company of the Assets (as defined
in the Acquisition Agreement) from Seller pursuant to the terms of the
Acquisition Agreement shall have occurred simultaneously with the Closing
hereunder.
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Section 4.10 Debentures.
The Company shall have sold to Purchasers, and Purchasers shall have
purchased, the Company's 12.25% Subordinated Debentures in the original
principal amount of $2,500,000, and the Company shall have issued to the
Purchasers the Tandem and Argosy Warrants, pursuant to the terms of the
Debenture Purchase Agreement.
Section 4.11 Senior Loan Agreement; Intercreditor Agreement.
The closing of the initial funding pursuant to the Loan and Security
Agreement dated August 21, 1997, among Summit Bank and certain of the
Company's Subsidiaries, as amended or restated as contemplated in that certain
commitment letter dated December 2, 1997, from Summit Bank to the Company and
its Subsidiaries (the "Senior Loan Agreement") shall have occurred
simultaneously with the Closing hereunder; and the Company shall have executed
and delivered to the Purchasers a subordination agreement among the Company,
its Subsidiaries, Purchasers, and Summit Bank, in each case to provide that,
absent the existence of any event of default or any event which, with the
passage of time or the giving of notice, or both, would constitute an event of
default under the Senior Loan Agreement, such agreements shall allow regularly
scheduled payments of interest on the Debentures and dividends on the
Preferred Stock; provided, however, that the subordination agreement shall
contain such other terms and provisions as shall be reasonably acceptable to
Purchasers.
Section 4.12 SBA Forms.
The Company shall have delivered to Argosy Form 480, Form 652 and
Form 1031, in each case duly executed (if required) by, and completed with
respect to information required about, the Company.
Section 4.13 Required Consents.
Any consents or approvals required to be obtained from any third
party, including any holder of indebtedness or any outstanding security of the
Company, and any amendments of agreements which shall be necessary to permit
the consummation of the transactions contemplated hereby on the Closing Date,
shall have been obtained and all such consents or amendments shall be
satisfactory in form and substance to Purchasers and Purchasers' counsel.
Section 4.14 Expenses.
The Company shall have reimbursed the Purchasers for all fees and
expenses as provided in Section 8.1 herein.
Section 4.15 Waiver of Conditions.
If on the Closing Date the Company fails to tender to Purchasers the
Preferred Stock to be issued to Purchasers on such date or if the conditions
specified in this Article IV have not been fulfilled, Purchasers may thereupon
elect to be relieved of all further obligations under this Agreement. Without
limiting the foregoing, if the conditions specified in this Article IV have
not been fulfilled, Purchasers may waive compliance by the Company with any
such condition to such extent as Purchasers, in Purchasers' sole discretion,
may determine; provided, however, the failure to fulfill any of the conditions
specified in Sections 4.9, 4.10 and 4.11 may not be waived. Nothing in this
Section 4.15 shall operate to relieve the Company of any of its obligations
hereunder or to waive any of Purchasers' rights against the Company.
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ARTICLE V - COVENANTS OF COMPANY
From and after the Closing Date and continuing so long as a Purchaser
holds any shares of the Preferred Stock:
Section 5.1 Use of Proceeds.
(a) The Company shall use the proceeds of the sale of the Preferred
Stock only for the purposes set forth on Schedule 5.1 attached hereto. No
later than ninety (90) days after the sale of the Preferred Stock, the Company
shall furnish to each Purchaser a certificate, executed by the President of
the Company, itemizing the use of proceeds from the Preferred Stock.
(b) Neither the Company nor any of its SBA Affiliates will engage in
any activities or use directly or indirectly the proceeds of the Preferred
Stock for any purpose for which a small business investment company is
prohibited from providing funds under 13 C.F.R. ss. 107.720.
(c) The Company will not, without obtaining the prior written
approval of Argosy, change within one (1) year of the Closing, the Company's
business activity to a business activity to which a small business investment
company is prohibited from providing funds under 13 C.F.R. ss. 107.720.
Section 5.2 Dividends; Repurchase of Preferred Stock.
The Company shall declare and pay the Preferred Dividends (as that
term is defined in the Statement with Respect to Shares) no later than the
respective dates set forth in the Statement With Respect to Shares, provided
the Company may lawfully declare and pay a dividend on such dates and further
provided that the payments of such dividends shall not be prohibited under the
Senior Loan Agreement.
Section 5.3 Corporate Existence, Etc.
The Company will preserve and keep in force and effect, and will
cause each Subsidiary to preserve and keep in force and effect, its corporate
existence and good standing in the state of incorporation thereof, its
qualification and good standing as a foreign corporation in each jurisdiction
where such qualification is required by applicable law except where the
failure to so qualify would not have a Materially Adverse Effect and all
licenses and permits necessary to the proper conduct of its business.
Section 5.4 Maintenance, Etc.
The Company will, in all material respects, maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties and assets which are used in the conduct of its business (whether
owned in fee or pursuant to a leasehold interest) in good repair and working
order and from time to time will make all necessary repairs, replacements,
renewals and additions so that at all times the efficiency thereof shall be
maintained.
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Section 5.5 Nature of Business.
Neither the Company nor any Subsidiary will engage in any business
if, as a result, the general nature of the business, taken on a consolidated
basis, which would then be engaged in by the Company and its Subsidiaries
would be substantially changed from the general nature of the business engaged
in by the Company and its Subsidiaries on the date of this Agreement,
including the business engaged in by Seller.
Section 5.6 Insurance.
The Company will maintain, and will cause each Subsidiary to maintain,
insurance coverage by financially sound and reputable insurers with respect to
their respective properties and business in such forms and amounts and against
such risks, casualties and contingencies as are reasonable.
Section 5.7 Taxes, Claims for Labor and Materials.
The Company will promptly pay and discharge, and will cause each
Subsidiary promptly to pay and discharge, (i) all lawful taxes, assessments
and governmental charges or levies imposed upon the property or business of
the Company or such Subsidiary, respectively, (ii) all trade accounts payable
in accordance with usual and customary business terms, and (iii) all claims
for work, labor or materials, which if unpaid might become a lien or charge
upon any property of the Company or such Subsidiary; provided the Company or
such Subsidiary shall not be required to pay any such tax, assessment, charge,
levy, account payable or claim if (a) the validity, applicability or amount
thereof is being contested in good faith by appropriate actions or proceedings
which will prevent the forfeiture or sale of any property of the Company or
such Subsidiary or any material interference with the use thereof by the
Company or such Subsidiary, and (b) the Company or such Subsidiary shall set
aside on its books, reserves deemed by it to be adequate with respect thereto.
Section 5.8 Compliance with Laws, Agreements, etc.
Except where failure to do so does not and would not have a
Materially Adverse Effect, the Company shall maintain its business operations
and property owned or used in connection therewith in compliance with (i) all
applicable federal, state and local laws, regulations and ordinances, and such
laws, regulations and ordinances of foreign jurisdictions, governing such
business operations and the use and ownership of such property, and (ii) all
agreements, licenses, franchises, indentures and mortgages to which the
Company is a party or by which the Company or any of its properties is bound.
Without limiting the foregoing, the Company shall pay all of its indebtedness
promptly and substantially in accordance with the terms thereof.
Section 5.9 ERISA Matters.
If the Company has in effect, or hereafter institutes, a pension plan
that is subject to the requirements of Title IV of ERISA (a "Plan"), then the
following covenants shall be applicable during such period as any such Plan
shall be in effect: (i) throughout the existence of the Plan, the Company's
contributions under the Plan will meet the minimum funding standards required
by ERISA and the Company will not institute a distress termination of the
Plan; and (ii) the Company will send to Purchaser a copy of any notice of a
reportable event (as defined in ERISA) required by ERISA to be filed with the
Labor Department or the PBGC, at the time that such notice is so filed.
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Section 5.10 Books and Records; Rights of Inspection.
The Company will keep, and will cause each Subsidiary to keep, proper
books of record and account in which full and correct entries will be made of
all dealings or transactions of or in relation to the business and affairs of
the Company or such Subsidiary, in accordance with GAAP consistently
maintained. The Company shall permit a representative of Purchaser (and, if
Purchaser is a Small Business Investment Company, a representative of the
United States Small Business Administration (the "SBA Representative")) to
visit any of its properties and inspect its corporate books and financial
records, and will discuss its accounts, affairs and finances with a
representative of Purchaser (or the SBA Representative, if applicable), during
reasonable business hours, at all such times as Purchaser may reasonably
request. The Company will, upon reasonable request, cooperate fully with
Argosy, Argosy's representatives and counsel in the preparation of any
document or other material which may be required by the United States Small
Business Administration or any other governmental agency as a predicate to or
result of the transaction herein contemplated. The Company will furnish to any
Purchaser that is a small business investment company information requested by
the United States Small Business Administration concerning the economic impact
of such Purchaser's investment including but not limited to information
concerning taxes paid and number of employees.
Section 5.11 Reports.
The Company will furnish to Purchaser the following (provided that
this obligation shall be deemed satisfied if the Company delivers the
following to each Purchaser in connection with the Debenture Purchase
Agreement):
(a) Monthly Statements. Within thirty (30) days of the end
of each month, beginning the month of January 1998, monthly internal financial
reports which at a minimum shall consist of the key item report in the form
currently prepared by the Company, and attached hereto as Schedule 5.12(a), as
well as any additional financial reports for such period (i) distributed to
directors of the Company or (ii) routinely prepared with respect to the
Company and the Subsidiaries subsequent to the date hereof;
(b) Quarterly Statements. As soon as available and in any
event within forty-five (45) days after the end of each quarterly fiscal
period (except the last) of each fiscal year, copies of:
(i) consolidated balance sheets of the
Company and Subsidiaries as of the close of the three-month
period then ended, setting forth in comparative form the
consolidated figures at the end of the preceding fiscal
year,
(ii) consolidated statements of income and
retained earnings of the Company and Subsidiaries for the
three-month period then ended, setting forth in comparative
form the consolidated figures for the corresponding period
of the preceding fiscal year, and
(iii) consolidated statements of cash
flows of the Company and Subsidiaries for the portion of the
fiscal year ending with such three-month period, setting
forth in comparative form the consolidated figures for the
corresponding period of the preceding fiscal year,
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all in reasonable detail and certified as complete and correct by an authorized
financial officer of the Company;
(c) Annual Statements. As soon as available and in any event
within ninety (90) days after the close of each fiscal year of the Company,
copies of:
(i) consolidated balance sheets of the
Company and Subsidiaries as of the close of such fiscal year,
and
(ii) consolidated statements of income and
retained earnings and cash flows of the Company and
Subsidiaries for such fiscal year,
in each case setting forth in comparative form the consolidated figures for
the preceding fiscal year, all in reasonable detail and accompanied by an
unqualified report thereon of Goldenberg Rosenthal Friendlander, LLP, or if
such firm is no longer auditor to the Company, a firm of independent public
accountants of recognized national standing;
(d) Audit Reports. Promptly upon receipt thereof, one copy
of each interim or special audit made by independent accountants of the books
of the Company or any Subsidiary;
(e) SEC and Other Reports. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally and of each periodic
or current report, and any registration statement or prospectus filed by the
Company or any Subsidiary with any securities exchange or the SEC or any
successor agency, and copies of any orders in any proceedings to which the
Company or any of its Subsidiaries is a party, issued by any governmental
agency, federal or state, having jurisdiction over the Company or any of its
Subsidiaries. The Company specifically covenants to timely file each such item
required to be filed with the SEC and each state requiring securities laws
filings;
(f) Press Releases. Promptly upon its release, a copy of each
press release issued by the Company; and
(g) Requested Information. With reasonable promptness, such
financial data and other information relating to the business of the Company
as Purchaser may from time to time reasonably request.
Section 5.12 Annual Plan.
The Board of Directors shall adopt and the Company will furnish to
Purchasers, in such manner and form as approved by the Board of Directors of
the Company, no later than the first day of each fiscal year, commencing on
and after January 1, 1999, a financial plan for the Company, which shall
include at least a projection of income and expenses (including capital
expenditures) and a projected cash flows statement for each month in such
fiscal year, and a projected balance sheet as of the end of each month in such
fiscal year (the "Annual Plan"). The Company shall promptly furnish to
Purchasers each amendment or revision to the Annual Plan.
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Section 5.13 Board of Directors; Observer Rights.
For so long as any shares of the Preferred Stock shall remain
outstanding, and regardless of whether a nominee of an initial Purchaser is a
director, upon request of either Tandem or Argosy, the Company shall invite a
representative of such Purchaser to attend, at the Company's expense, all
meetings of the Company's Board of Directors and all committees of the
Company's Board of Directors in a nonvoting capacity and, in this respect,
shall give such representative copies of all notices and meeting agenda in
advance of such meetings and shall permit such representative to review all
documents and other materials provided to directors at such meetings. The
Company shall also provide such Purchaser, in advance, with copies of all
actions proposed to be taken by the Board of Directors in lieu of meeting.
Notwithstanding anything herein to the contrary, if an initial Purchaser has
rights to attend Board meetings pursuant to the Debenture Purchase Agreement,
this provision shall not apply to such initial Purchaser.
Section 5.14 Further Assurances.
The Company will take all actions reasonably requested by Purchasers
to effect the transactions contemplated by this Agreement and the other
Operative Documents.
ARTICLE VI - AMENDMENTS, WAIVERS AND CONSENTS
Section 6.1 Consent Required.
Any term, covenant, agreement or condition of this Agreement may,
with the consent of the Company, be amended or compliance therewith may be
waived (either generally or in a particular instance and either retroactively
or prospectively), if the Company shall have obtained the consent in writing
of the holders of at least 75% of the outstanding Preferred Stock.
Section 6.2 Effect of Amendment or Waiver.
Any such amendment or waiver shall apply equally to all of the
holders of the Preferred Stock and shall be binding upon them, upon each
future holder of any Preferred Stock and upon the Company. No such amendment
or waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
ARTICLE VII -- INTERPRETATION OF AGREEMENT; DEFINITIONS
Section 7.1 Definitions.
Unless the context otherwise requires, the terms hereinafter set
forth when used herein shall have the following meanings and the following
definitions shall be equally applicable to both the singular and plural forms
of any of the terms herein defined:
"Affiliate" shall mean any Person (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the Company, (b) which beneficially owns or holds 5% or
more of any class of the Voting Stock of the Company or (c) 5% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 5% or
more of the equity interest) of which is beneficially owned or held by the
Company or a Subsidiary.
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"Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which banks in Tennessee are authorized to close.
The term "control" (including the terms "controlling," "controlled
by" and "under common control") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of Voting Stock, by
contract, or otherwise.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended and any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA shall be construed to also refer to any
successor sections.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent
or otherwise, by such Person: (a) to purchase such Indebtedness or obligation
or any property or assets constituting security therefor, (b) to advance or
supply funds (i) for the purchase or payment of such Indebtedness or
obligation, (ii) to maintain working capital or other balance sheet condition
or (iii) otherwise to advance or make available funds for the purchase or
payment of such Indebtedness or obligation, or (c) to lease property or to
purchase Securities or other property or services primarily for the purpose of
assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation, or (d)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof. For the purposes of all computations
made under this Agreement, a Guaranty in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the principal
amount of such Indebtedness for borrowed money which has been guaranteed, and
a Guaranty in respect of any other obligation or liability or any dividend
shall be deemed to be Indebtedness equal to the maximum aggregate amount of
such obligation, liability or dividend.
"Hazardous Substance" shall mean any hazardous or toxic material,
substance or waste, pollutant or contaminant which is regulated under any
statute, law, ordinance, rule or regulation of any local, state, regional or
Federal authority having jurisdiction over the property of the Company and its
Subsidiaries or its use, including but not limited to any material, substance
or waste which is: (a) defined as a hazardous substance under Section 311 of
the Federal Water Pollution Control Act (33 U.S.C. ss. 1317.1) as amended; (b)
regulated as a hazardous waste under Section 1004 or Section 3001 of the
Federal Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et seq.) as amended; (c) defined as a
hazardous substance under Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.) as
amended; or (d) defined or regulated as a hazardous substance or hazardous
waste under any rules or regulations promulgated under any of the foregoing
statutes.
The term "knowledge of the Company" shall mean, with respect to a
particular fact or other matter if a director or executive officer of the
Company or any Subsidiary is actually, or has been, aware of such fact or
other matter, after reasonable inquiry under the circumstances.
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"Materially Adverse Effect" shall mean a materially adverse effect
upon the business, assets, liabilities, financial condition, results of
operations or business prospects, in each case of the Company and its
Subsidiaries taken as a whole, or upon the ability of the Company to perform
its obligations under this Agreement, the Debentures or the other Operative
Documents.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political
subdivision thereof.
"Plan" means a "pension plan", as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Proprietary Information" includes without limitation (i) any
computer software and related documentation, inventions, technical and
nontechnical data related thereto, and (ii) other documentation, inventions
and data related to patterns, plans, methods, techniques, drawings, finances,
customer lists, suppliers, products, special pricing and cost information,
designs, processes, procedures, formulas, research data owned or used by the
Company or any Subsidiary or marketing studies conducted by the Company, all
of which the Company considers to be commercially important and competitively
sensitive and which generally has not been disclosed to third parties other
than customers in the ordinary course of business.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
The term "subsidiary" shall mean, as to any particular parent
corporation, any corporation of which more than 50% (by number of votes) of
the Voting Stock shall be owned by such parent corporation and/or one or more
corporations which are themselves Subsidiaries of such parent corporation. The
term "Subsidiary" shall mean a subsidiary of the Company.
"Voting Stock" shall mean Securities of any class or classes the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean
a Subsidiary of which all of the issued and outstanding shares of stock
(except shares required as directors' qualifying shares) shall be owned by the
Company and/or one or more of its Wholly-owned Subsidiaries.
Section 7.2 Accounting Principles.
Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, the same shall be done in accordance with GAAP, to the extent
applicable, except where such principles are inconsistent with the
requirements of this Agreement.
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ARTICLE VIII -- MISCELLANEOUS
Section 8.1 Expenses; Stamp Tax Indemnity.
Whether or not the transactions herein contemplated shall be
consummated, the Company agrees to pay directly all of Purchasers'
out-of-pocket expenses not to exceed $60,000 in the aggregate, in connection
with (a) the entering into of this Agreement and the Debenture Purchase
Agreement and the consummation of the transactions contemplated hereby and
thereby, including but not limited to the reasonable fees, expenses and
disbursements of Purchasers' counsel, and (b) so long as Purchaser holds any
of the Preferred Stock, all such expenses relating to any amendments, waivers
or consents pursuant to the provisions hereof (whether or not the same are
actually executed and delivered), including, without limitation, any
amendments, waivers or consents resulting from any work-out, restructuring or
similar proceedings relating to the performance by the Company of its
obligations under this Agreement. The Company also agrees that it will pay and
save Purchasers harmless against any and all liability with respect to stamp
and other taxes, if any, which may be payable in connection with the execution
and delivery of this Agreement or the issuance of the Preferred Stock, whether
or not any shares of Preferred Stock are then outstanding. The Company agrees
to protect and indemnify Purchasers against any liability for any and all
brokerage fees and commissions payable or claimed to be payable to any Person
retained by the Company in connection with the transactions contemplated by
this Agreement.
Section 8.2 Powers and Rights Not Waived; Remedies Cumulative.
No delay or failure on the part of the holder of any Preferred Stock
in the exercise of any power or right shall operate as a waiver thereof; nor
shall any single or partial exercise of the same preclude any other of further
exercise thereof, or the exercise of any other power or right, and the rights
and remedies of the holder of any Preferred Stock are cumulative to and are
not exclusive of any rights or remedies any such holder would otherwise have,
and no waiver or consent, given or extended pursuant to Article XI hereof,
shall extend to or affect any obligation or right not expressly waived or
consented to.
Section 8.3 Notices.
All communications provided for hereunder shall be in writing and
shall be delivered personally, or mailed by registered mail, or by prepaid
overnight air courier, or by facsimile communication, in each case addressed:
If to Tandem: Tandem Capital, Inc.
500 Church Street, Suite 200
Nashville, Tennessee 37219
Fax: (615) 726-1208
Attention: Craig Macnab
with a copy to: Sherrard & Roe, PLC
424 Church Street, Suite 2000
Nashville, Tennessee 37219
Fax: (615) 742-4539
Attention: Donald I.N. McKenzie, Esq.
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If to Argosy: Argosy Investment Partners, L.P.
950 West Valley Road, Suite 2902
Wayne, Pennsylvania 19087
Fax: (610) 964-9524
Attention: John P. Kirwin, III, Principal
with a copy to: McCausland, Keen & Buckman
Radnor Court
259 Radnor-Chester Road, Suite 160
Radnor, Pennsylvania 19087-5240
Fax: (610) 341-1099
Attention: Robert H. Young, Jr.
If to the Company: Berger Holdings, Ltd.
805 Pennsylvania Blvd.
Feasterville, Pennsylvania 19053
Fax: (215) 355-7738
Attention: President
with a copy to: Wolf, Block, Schorr, and Solis-Cohen, LLP
12th Floor, Packard Building
111 South 15th Street
Philadelphia, Pennsylvania 19102
Fax: (215) 977-2334
Attention: Jason M. Shargel, Esq.
or such other address as the respective Purchaser or the subsequent holder of
any Preferred Stock initially issued to either Purchaser may designate to the
Company in writing, or such other address as the Company may in writing
designate to Purchasers or to a subsequent holder of the Preferred Stock
initially issued to Purchasers, provided, however, that a notice sent by
overnight air courier shall only be effective if delivered at a street address
designated for such purpose by such person and a notice sent by facsimile
communication shall only be effective if made by confirmed transmission at a
telephone number designated for such purpose by such person or, in either
case, as a Purchaser or a subsequent holder of any Preferred Stock initially
issued to Purchasers may designate to the Company in writing or at a telephone
number herein set forth in the case of the Company.
Section 8.4 Successors and Assigns.
A Purchaser's interest in this Agreement and the other Operative
Documents may be endorsed, assigned and/or transferred in whole or in part by
such Purchaser, and any such holder and/or assignee of the same shall succeed
to and be possessed of the rights and powers of a Purchaser under all of the
same to the extent transferred and assigned. The Company shall not assign any
of its rights nor delegate any of its duties under this Agreement or any of
the other Operative Documents by operation of law or otherwise without the
prior express written consent of Purchasers, and in the event the Company
obtains such consent, this Agreement and the other Operative Documents shall
be binding upon such assignee.
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Section 8.5 Survival of Covenants and Representations.
All representations and warranties made by the Company herein and in
any certificates delivered pursuant hereto, whether or not in connection with
the Closing Date, shall survive the closing and the delivery of this Agreement
and the Closing Date, and shall be extinguished and eliminated on the day that
is eighteen (18) months after the Closing Date, except that the
representations and warranties of the Company set forth in Section 2.11, 2.17,
2.27 and 2.28 shall survive until the expiration of the applicable statutes of
limitation. All covenants made by the Company herein shall survive the closing
and delivery of this Agreement and the Operative Documents in accordance with
their respective terms for as long as the Purchasers collectively hold no less
than 15,000 shares of Preferred Stock, as adjusted for stock splits, stock
dividends, and other events, as more fully described in the Statement With
Respect To Shares.
Section 8.6 Severability.
Should any part of this Agreement for any reason be declared invalid
or unenforceable, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid or unenforceable portion thereof
eliminated and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Agreement without
including therein any such part, parts or portion which may for any reason, be
hereafter declared invalid or unenforceable.
Section 8.7 Governing Law.
The corporate law of Pennsylvania shall govern all issues concerning
the relative rights of the Company and its stockholders. All other questions
concerning the construction, validity and interpretation of this Agreement and
the exhibits and schedules hereto shall be governed by the internal law, and
not the law of conflicts, of Tennessee.
Section 8.8 Captions; Counterparts.
The descriptive headings of the various Sections or parts of this
Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof. This Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.9 Entire Agreement.
This Agreement together with the Statement With Respect To Shares
constitutes the entire agreement of the parties with regard to the sale of the
Preferred Stock.
Section 8.10 Specific Performances.
Should the Company violate any of Sections 5.11, 5.12, and 5.13 of
this Agreement, then, in addition to all legal and equitable remedies
available to the Purchasers, the provisions thereof shall be enforceable by
specific performance and injunctive relief. The parties agree and stipulate
that the right of Purchasers to obtain specific performance, injunctive
relief, or both, are specifically bargained for due to the mutual recognition
that the amount of actual damages arising from violation of the covenants in
Sections 5.11, 5.12, and 5.13 will be difficult or impossible to ascertain
both now and in the future and that such violation will cause irreparable harm
to Purchasers.
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Section 8.11 Attorneys' Fees.
If legal action is commenced to enforce any provision of this
Agreement, the prevailing party in such action shall be entitled to recover
its attorneys' fees through all appellate levels in addition to any other
relief that may be granted.
IN WITNESS WHEREOF, the parties hereto have caused this Preferred
Stock Purchase Agreement to be executed and delivered by their duly authorized
officers as of the date first written above.
COMPANY:
BERGER HOLDINGS, LTD.
By: /s/ Theodore A. Schwartz
---------------------------------------
Name: Theodore A. Schwartz
---------------------------------
Title: C.E.O.
---------------------------------
PURCHASERS:
SIRROM CAPITAL CORPORATION
d/b/a TANDEM CAPITAL
By: /s/ Craig Macnab
---------------------------------------
Craig Macnab, Vice President
ARGOSY INVESTMENT PARTNERS, L.P.
By: Argosy Associates, L.P., its general partner
By: Argosy Associates, Inc., its general partner
Name: /s/ John Paul Kirwin, III
--------------------------------------
Title: Vice President
--------------------------------------
<PAGE>
EXHIBIT A
STATEMENT WITH RESPECT TO SHARES
List of Schedules -- Preferred Share Purchase Agreement
Schedule 2.1(a) -- States in Which Company is Qualified
Schedule 2.1(b) -- Subsidiaries
Schedule 2.1(c) -- SBA Affiliates
Schedule 2.2(a) -- Preemptive Rights, Right of First Refusal, Antidilution
Rights
Schedule 2.2(b) -- Options, Warrants and Other Rights
Schedule 2.2(c) -- Shares not Reserved
Schedule 2.3 -- Consents
Schedule 2.7 -- Absence of Changes
Schedule 2.8 -- Defaults
Schedule 2.10 -- Litigation
Schedule 2.11 -- Taxes
Schedule 2.12(i) -- Indebtedness
Schedule 2.12(ii) -- Interested Officers or Directors
Schedule 2.12(iii) -- Guaranties and Indemnities
Schedule 2.13 -- Title
Schedule 2.14 -- Proprietary Information
Schedule 2.14(b)(i) -- Intellectual Property
Schedule 2.14(b)(ii) -- Intellectual Property
Schedule 2.15 -- Debt
Schedule 2.16(i) -- Material Contracts
Schedule 2.16(ii) -- Material Contracts
Schedule 2.19 -- Distribution to Holders of Preferred Stock
Schedule 2.21 -- Regulatory Compliance
Schedule 2.24 -- Registration Rights
Schedule 2.25 -- Insurance
Schedule 2.27 -- Employees
Schedule 2.28 -- ERISA
Schedule 2.31 -- Acquisition Agreement
Schedule 5.1 -- Use of Proceeds
Schedule 5.12(a) -- Key Item Report
Schedule 5.13 -- Debt to be Incurred Contemporaneously with Closing or Shortly
Thereafter
Schedule 5.14 -- Guaranties
Schedule 5.23 -- Key Executives
Schedule 6.1 -- Senior Indebtedness
<PAGE>
STATEMENT WITH RESPECT TO SHARES
OF
BERGER HOLDINGS, LTD.
RESOLVED, that pursuant to the powers expressly delegated to the Board of
Directors by Article 6 of the Articles of Incorporation of the Corporation, as
amended, the Corporation hereby establishes and designates one series of
preferred stock and fixes and determines as set forth herein the relative rights
and preferences thereof as follows:
Section 1. Designation. There shall be established a series of preferred
stock, which shall consist of 40,000 shares of the authorized preferred stock
and shall be designated Series A Convertible Preferred Stock (herein referred to
as the "Preferred Stock").
Section 2. Dividends.
(a) The holders of Preferred Stock shall be entitled to receive
dividends (the "Preferred Dividend") payable in cash at the rate of $10.00 per
share per annum or such rate as modified under Section 2(b) herein (the
"Dividend Rate") on a cumulative basis from the actual date of original issue of
each share of Preferred Stock (the "Original Issue Date"), whether or not
declared, out of funds legally available therefor, payable quarterly in arrears
on the first day of each February, May, August, and November in each year (each
a "Dividend Payment Date"). Payments shall commence on the first such date to
occur after the Original Issue Date. Each such Preferred Dividend shall be
payable to the holders of record of the Preferred Stock at the close of business
on the preceding December 31, March 31, June 30, and September 30, respectively.
Each dividend shall be declared by the Board of Directors no more than fifteen
(15) days prior to its respective record date. Payments shall equal $2.50 per
share on each Dividend Payment Date or such lesser amount as shall result from
any proration in respect of any partial quarterly period. The amount of
Preferred Dividends payable upon the occurrence of any event described in
Sections 3, 5 or 7 hereof shall be computed by multiplying the applicable
Dividend Rate by a fraction, the numerator of which shall be the number of days
since the preceding Dividend Payment Date to the date of payment of such partial
Preferred Dividend and the denominator of which shall be 360.
(b) Beginning on the fifth anniversary of the Original Issue
Date, the Dividend Rate shall be adjusted by increasing the Dividend Rate to
$20.00 per share per annum, with the quarterly Preferred Dividend being
increased to $5.00 per share.
(c) So long as any of the shares of Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of or options, warrants or rights to subscribe for or purchase shares of Common
Stock) shall be declared or paid or set apart for payment by the Corporation or
other distribution of cash or other property declared or made directly or
indirectly by the Corporation or any affiliate or any person acting on behalf of
the Corporation or any of its affiliates with respect to any shares of Common
Stock or other capital stock over which the Preferred Stock has preference or
priority in the payments of dividends or in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation ("Junior Stock"), nor
shall any shares of Junior Stock be redeemed, purchased or otherwise acquired
(other than a (i) purchase or other acquisition of Common Stock made for
purposes of any employee incentive or benefit plan of the Corporation or any
subsidiary or (ii) the purchase of up to 125,000 shares of Common Stock (as
adjusted for stock splits or stock dividends) pursuant to the "Put Option"
contained in the Asset Purchase Agreement dated as of
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December 3, 1997, by and among the Corporation and the parties thereto) for any
consideration (or any moneys be paid to or made available for a sinking-fund
for the redemption of any shares of any such stock) directly or indirectly by
the Corporation or any affiliate or any person acting on behalf of the
Corporation or any of its affiliates (except by conversion into or exchange for
Junior Stock), nor shall any other cash or other property otherwise be paid or
distributed to or for the benefit of any holder of shares of Junior Stock in
respect thereof, directly or indirectly, by the Corporation or any affiliate or
any person acting on behalf of the Corporation or any of its affiliates unless
in each case (x) the full Preferred Dividends (including all accumulated,
accrued and unpaid dividends) on all outstanding shares of Preferred Stock
shall have been paid or such dividends have been declared and set apart for
payment for the current dividend periods with respect to the Preferred Stock
and (y) sufficient funds shall have been paid or set apart for the payment of
the full Preferred Dividend for the current dividend period with respect to the
Preferred Stock.
(d) If and whenever a quarterly Preferred Dividend is not
paid on a Dividend Payment Date (whether or not declared), then the amount of
such Preferred Dividend remaining in arrears and unpaid from time to time shall
bear interest from such Dividend Payment Date until the date it is paid in full
at an annual rate equal to ten percent (10%). Interest payable in respect of
Preferred Dividends which are in arrears shall be computed on the basis of
twelve (12) 30 - day months and a 360-day year. No payment shall be applied to
the Preferred Dividend due on a Dividend Payment Date unless and until all
arrears, including interest thereon, with respect to accumulated, accrued but
unpaid Preferred Dividends shall have been paid.
Section 3. Liquidation, Dissolution, or Winding Up.
(a) In the event of any liquidation, dissolution, or winding
up of the Corporation, whether voluntary or involuntary, the holders of the
Preferred Stock shall be entitled to be paid first out of the assets of the
Corporation available for distribution to holders of the Corporation's capital
stock of all classes and before any sums shall be paid or any assets
distributed among the holders of shares of any other class or series of capital
stock of the Corporation, including Common Stock, an amount per share equal to
One Hundred Dollars ($100.00) plus an amount equal to all the accrued but
unpaid Preferred Dividends (whether or not declared), and the amount equal to
all interest, if any, on any Preferred Dividends in arrears, in each case to
the date of final distribution to such holders (the "Preference Amount"). Until
the holders of the Preferred Stock have been paid the Preference Amount in
full, no payment will be made to any holder of Junior Stock upon the
liquidation, dissolution or winding up of the Corporation. If the assets of the
Corporation shall be insufficient to permit the payment in full to the holders
of the Preferred Stock of the Preference Amounts, then the entire assets of the
Corporation available for such distribution shall be distributed ratably among
the holders of the Preferred Stock in proportion to the Preference Amount each
such holder is otherwise entitled to receive. After payment of the Preference
Amount shall have been made in full to the holders of the Preferred Stock or
funds necessary for such payment shall have been set aside by the Corporation
in trust for the account of holders of the Preferred Stock so as to be
available for such payment, holders of the Preferred Stock shall not be
entitled to participate in the distribution of any remaining assets of the
Corporation.
(b) Any consolidation, merger or a statutory share exchange
(other than a (i) merger with a wholly-owned subsidiary of the Corporation,
(ii) or a mere reincorporation transaction, or (iii) a merger pursuant to which
the Corporation is the surviving entity and the capitalization of the
Corporation remains unchanged) in which the outstanding shares of capital stock
of the Corporation are exchanged for securities or other consideration of or
from another corporation, or a sale of all or substantially all the assets or
stock of the Corporation, shall be deemed to be a liquidation, dissolution,
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<PAGE>
or winding up of the affairs of the Corporation within the meaning of this
Section 3, and shall entitle the holders of the Preferred Stock to receive on
the effective date of such event the Preference Amount, in cash, securities or
other property; provided, however, that any such event shall not be so regarded
as a liquidation, dissolution, or winding up of the affairs of the Corporation
with respect to the Preferred Stock if the holders of seventy-five percent (75%)
of the outstanding shares of the Preferred Stock approve such event or elect not
to have any such event deemed to be a liquidation, dissolution, or winding up of
the affairs of the Corporation by giving written notice thereof to the
Corporation at least ten (10) days prior to the effective date of such event.
(c) Whenever the distribution provided for in this Section 3
shall be paid in property other than cash, the value of such distribution shall
be the fair value thereof determined in good faith by the Board of Directors of
the Corporation.
Section 4. Voting Rights.
(a) Except as otherwise required by law, or as specifically
provided herein, the holders of Preferred Stock shall have full voting rights
and powers, and the holders of shares of Preferred Stock and Common Stock shall
vote together as a single class on all matters submitted to a vote of the
stockholders of the Corporation; provided, however, that solely with respect to
the right to elect and remove directors, the holders of Preferred Stock shall
not be entitled to vote pursuant to this Section 4(a), but the provisions of
Section 4(b) and (c) shall govern the rights of the holders of Preferred Stock
with respect to the election or removal of directions. In any vote pursuant to
the preceding sentence, each holder of Preferred Stock shall be entitled to that
number of votes equal to the number of shares of Common Stock which would be
issuable upon conversion of such shares of Preferred Stock, as provided in
Section 5(a) hereof (the "As Converted Number of Shares") of such holder (with
fractional shares rounded up or down to the nearest whole number) at the record
date for the determination of stockholders entitled to vote on such matters or,
if no such record date is established, at the date such vote is taken or any
written consent of stockholders is solicited. The holders of the Preferred Stock
shall be entitled to notice of any stockholders' meeting in accordance with the
Bylaws of the Corporation.
(b) The holders of the Preferred Stock, voting separately as one
class, shall have the exclusive and special right at all times to elect two (2)
directors (the "Preferred Directors") to the Board of Directors of the
Corporation provided, however, that so long as any shares of Preferred Stock are
outstanding, the Board of Directors shall not consist of more than nine (9)
members. The Preferred Directors shall be elected by the vote of the holders of
seventy-five percent (75%), and removed by the vote of the holders of
seventy-five percent (75%), of the shares of Preferred Stock then outstanding.
The right of holders of the Preferred Stock contained in this Section 4(b) may
be exercised either at a special meeting of the holders of Preferred Stock or at
any annual or special meeting of the stockholders of the Corporation, or by
written consent of such holders in lieu of a meeting. Upon the written request
of the holders of record of at least a majority of the Preferred Stock then
outstanding, the Secretary of the Corporation shall call a special meeting of
the holders of Preferred Stock for the purpose of (i) removing any Preferred
Director elected pursuant to this Section 4(b) and/or (ii) electing director(s)
to fill a vacancy of the directorship authorized to be filled by the holders of
Preferred Stock pursuant to this Section 4(b). Such meeting shall be held at the
earliest practicable date.
At any meeting held for the purpose of electing or removing a Preferred
Director, the presence, in person or by proxy, of the holders of record of
seventy-five percent (75%) of the Preferred Stock then outstanding shall be
required to constitute a quorum of the Preferred Stock for such election.
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<PAGE>
A vacancy in the directorship to be elected by the holders of Preferred Stock
pursuant to this Section 4(b) may be filled only by vote or written consent in
lieu of a meeting of the holders of seventy-five percent (75%) of the shares of
Preferred Stock then outstanding and may not be filled by the remaining
directors.
(c) If and whenever four (4) quarterly dividends (whether or not
consecutive) payable on the Preferred Stock shall be in arrears (which shall,
with respect to any such quarterly dividend, mean that any such dividend has
not been paid in full), whether or not earned or declared, the number of
directors then constituting the Board of Directors shall be increased to a
number which allows for holders of the Preferred Stock to elect a majority of
the entire Board of Directors at a special meeting of stockholders called as
hereinafter provided. Whenever all arrears in dividends on the Preferred Stock
(together with interest on dividends in arrears pursuant to Section 2(d) above)
shall have been paid and dividends thereon for the current quarterly dividend
period shall have been paid or declared and set apart for payment, then the
right of the holders of the Preferred Stock to elect such additional directors
shall cease (but subject always to the same provision of the vesting of such
special voting rights in the case of any similar future arrearages in four (4)
quarterly dividends), and the terms of office of all persons elected as
additional directors by the holders of the Preferred Stock pursuant to this
Section 4(c) shall forthwith terminate and the number of the Board of Directors
shall be reduced accordingly. At any time after such additional voting power
shall have been so vested in the holders of the Preferred Stock, the Secretary
of the Corporation may, and upon the written request of any holder of Preferred
Stock (addressed to the Secretary at the principal office of the Corporation)
shall, call a special meeting of the holders of the Preferred Stock for the
election of the additional directors to be elected by them as herein provided,
such call to be made by notice similar to that provided in the Bylaws of the
Corporation for a special meeting of the stockholders or as required by law. If
any such special meeting required to be called as above provided shall not be
called by the Secretary within twenty (20) days after receipt of any such
request, then any holder of Preferred Stock may call such meeting, upon the
notice above provided, and for that purpose shall have access to the stock
books of the Corporation. The additional Preferred Directors elected at any
special meeting shall hold office until the next annual meeting of the
stockholders or special meeting held in lieu thereof if such office shall not
have previously terminated as above provided. If any vacancy shall occur among
the additional Preferred Directors, a successor shall be elected by the Board
of Directors, upon the nomination of the then remaining Preferred Directors or
the successor of such remaining directors, to serve until the next annual
meeting of the stockholders or special meeting held in place thereof if such
office shall not have previously terminated as above provided.
Section 5. Conversion Rights. The holders of the Preferred Stock shall
have the following conversion rights:
(a) Right to Convert. Each share of Preferred Stock shall be
convertible at any time, and from time to time, at the option of the holder
thereof, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing One Hundred Dollars ($100.00) (the
"Numerator") by the Conversion Price (as defined below) in effect at the time
of conversion. The conversion price at which shares of Common Stock shall be
deliverable upon conversion of Preferred Stock without the payment of
additional consideration by the holder thereof (the "Conversion Price")
initially shall be Four and 25/100 Dollars ($4.25). Such initial Conversion
Price, and the rate at which shares of Preferred Stock may be converted into
shares of Common Stock, shall be subject to adjustment as provided below. The
conversion rights of the holders of Preferred Stock shall terminate (i) in the
event of a liquidation of the Corporation, at the close of business on the
first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of
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<PAGE>
Preferred Stock; and (ii) in the event shares of Preferred Stock are called for
redemption pursuant to Section 7 hereof, at the close of business on the
Redemption Date (as defined in Section 7(a) below), unless the Corporation shall
default in making payment in full of the Redemption Price.
(b) Adjustment to Conversion Price Upon Occurrence of
Extraordinary Common Stock Event. Upon the happening of an Extraordinary Common
Stock Event (as hereinafter defined), the Conversion Price for the Preferred
Stock, simultaneously with the happening of such Extraordinary Common Stock
Event, shall be adjusted by multiplying the then-effective Conversion Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such Extraordinary Common Stock Event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained thereafter shall be the Conversion Price for the Preferred Stock. The
Conversion Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive Extraordinary Common Stock Event(s).
"Extraordinary Common Stock Event" shall mean (i) the issuance of additional
shares of Common Stock as a dividend or other distribution on outstanding Common
Stock, (ii) a stock split or subdivision of outstanding shares of Common Stock
into a greater number of shares of Common Stock, or (iii) a reverse stock split
or combination of outstanding shares of Common Stock into a smaller number of
shares of Common Stock.
(c) Recapitalization or Reclassification. If the Common Stock
issuable upon the conversion of the Preferred Stock shall be changed into the
same or a different number of shares of any class or classes of stock of the
Corporation, whether by recapitalization, reclassification, or otherwise (other
than a subdivision or combination of shares or stock dividend provided for in
Section 5(b) hereof, or a reorganization, merger, share exchange, consolidation,
or sale of assets provided for in Section 5(d) hereof), then and in each such
event the holder of each share of Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such recapitalization,
reclassification, or other change by holders of the number of shares of Common
Stock into which such share of Preferred Stock might have been converted
immediately prior to such recapitalization, reclassification, or change, all
subject to further adjustment as provided herein.
(d) Capital Reorganization, Merger, Share Exchange,
Consolidation, or Sale of Assets. If at any time or from time to time there
shall be a capital reorganization of the Common Stock, including a merger, share
exchange, consolidation, or sale of all or substantially all of assets of the
Corporation (other than a subdivision or combination of shares or stock dividend
provided for in Section 5(b) hereof or a recapitalization or reclassification
provided for in Section 5(c) hereof), then, as a part of such reorganization,
provision shall be made so that the holders of the Preferred Stock thereafter
shall be entitled to receive, upon conversion of each share of the Preferred
Stock, the number of shares of stock or other securities or property to which a
holder of the number of shares of Common Stock into which such shares of
Preferred Stock might have been converted immediately prior to such capital
reorganization would have been entitled to receive. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5 with respect to the rights of the holders of the Preferred Stock
after the reorganization to the end that the provisions of this Section 5
(including adjustment of the Conversion Price then in effect and the number of
shares acquired upon conversion of the Preferred Stock) shall be applicable
after that event in as nearly equivalent a manner as may be practicable.
Notwithstanding the foregoing, in the case of a consolidation, merger, share
exchange, or sale of all or substantially all the assets of the Corporation, the
provisions of Section 3(b) shall apply to the Preferred Stock, and this Section
5(d) shall not apply, unless, as provided in Section 3(b) the holders of seventy
five percent (75%) of the outstanding shares of Preferred Stock elect that
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<PAGE>
such event shall not be deemed to be a liquidation, dissolution, or winding up
of the affairs of the Corporation.
(e) Certain Dilutive Issues.
(i) Special Definitions. For purposes of this Section 5(e),
the following definitions apply:
(1) "Options" shall mean rights, options, or
warrants to subscribe for, purchase or otherwise acquire either Common
Stock or Convertible Securities (as defined below), except for (A)
currently exercisable options and warrants to purchase an aggregate of
1,539,248 shares of Common Stock outstanding on the Original Issue Date
(the "Outstanding Options"); (B) options to purchase an aggregate of
1,270,000 shares of Common Stock granted or provided for but not
exercisable as of the Original Issue Date (the "Agreed Options"), (C)
rights or options to acquire up to an aggregate of 250,000 shares of
Common Stock which may be granted to employees, directors or
consultants to the Corporation at an exercise price of no less than the
Fair Market Value (as defined in Section 5(h) below) on the date of
grant (the "Future Options") and (D) warrants to purchase an aggregate
of 350,000 shares of Common Stock granted and reserved for issuance on
the Original Issue Date (the "Current Warrants").
(2) "Convertible Securities" shall mean any
evidences of indebtedness, shares of stock (other than Common Stock and
Preferred Stock) or other securities convertible into or exchangeable
for Common Stock.
(3) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or deemed to be issued pursuant to
Section 5(e)(iii)) by the Corporation after the Original Issue Date,
other than shares of Common Stock issued or issuable upon (i) upon
conversion of shares of Preferred Stock or as a dividend or
distribution on Preferred Stock, (ii) upon the exercise of the
Outstanding Options; (iii) upon the exercise of the Agreed Options,
(iv) upon the exercise of any Future Options, or (v) upon the exercise
of the Current Warrants.
(ii) No Adjustment of Conversion Price. Any provision herein
to the contrary notwithstanding, no adjustment in the number of shares
of Common Stock into which shares of Preferred Stock is convertible
shall be made, by adjustment in the Conversion Price, unless the
consideration per share (determined pursuant to Section 5(e)(v) hereof)
for an Additional Share of Common Stock issued or deemed to be issued
by the Corporation is less than the Conversion Price in effect on the
date of, and immediately prior to, the issue of such Additional Shares
of Common Stock.
(iii) Issue of Options and Convertible Securities. In the
event the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities
or shall fix a record date for the determination of holders of any
class of securities then entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth
in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common
Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue or, in case such a
record date shall have been
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<PAGE>
fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been
issued unless the consideration per share (determined pursuant to
Section 5(e)(v) hereof) of such Additional Shares of Common Stock would
be less than the Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may
be, and provided that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(1) no further adjustments in the Conversion Price
shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion
or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any
increase or decrease in the consideration payable to the Corporation,
or decrease or increase in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange thereof, the
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities, provided, however, that no
such adjustment of the Conversion Price shall affect Common Stock
previously issued upon conversion of shares of Preferred Stock;
(3) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities that
shall not have been exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(a) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock
issued were the shares of Common Stock, if any, actually issued upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor was the
consideration actually received by the Corporation for the issue of all
such Options, whether or not exercised, plus the consideration actually
received by the Corporation upon such exercise, or for the issue of all
such Convertible Securities that were actually converted or exchanged,
plus the additional consideration, if any, actually received by the
Corporation upon such conversion or exchange,and
(b) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such
Options, and the consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been then issued was
the consideration actually received by the Corporation for the issue of
all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Corporation (determined pursuant to
Section 5(e)(v)) upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;
(4) no readjustment pursuant to Section 5(e)(iii)(2)
or (3) above shall have the effect of increasing the Conversion Price
to an amount which exceeds the lower of (a) the Conversion Price prior
to the initial adjustment to which the readjustment applies, or (b)
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<PAGE>
the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the date of the initial
adjustment date and such readjustment date; and
(5) in the event of any change in the number of
shares of Common Stock issuable upon the exercise, conversion or
exchange of any Option or Convertible Security, including, but not
limited to, a change resulting from the antidilution provisions
thereof, the Conversion Price then in effect shall forthwith be
readjusted to such Conversion Price as would have been obtained had the
adjustment which was initially made upon the issuance of such
unexercised Option or unconverted Convertible Security, been made upon
the basis of such subsequent change, but no further adjustment shall be
made for the actual issuance of Common Stock upon the exercise or
conversion of any such Option or Convertible Security.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation at any
time after the Original Issue Date shall issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be
issued pursuant to Section 5(e)(iii)), without consideration or for a
consideration per share less than the Conversion Price in effect on the
date of and immediately prior to such issue, then and in such event,
the Conversion Price shall be reduced to a price (calculated to the
nearest cent) determined by multiplying the then current Conversion
Price by a fraction the numerator of which shall be the sum of
(A) the number of shares of Common Stock outstanding
immediately prior to such issue, plus
(B) the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total
number of Additional Shares of Common Stock so issued would purchase at
the Conversion Price in effect immediately prior to such issuance
and the denominator of which shall be the sum of
(x) the number of shares of Common Stock outstanding
immediately prior to such issue, plus
(y) the number of such Additional Shares of Common
Stock so issued.
For the purpose of the above calculation, the number of shares of Common Stock
outstanding shall be calculated on a fully diluted basis, as if all shares of
Preferred Stock and all other Convertible Securities had been fully converted
into shares of Common Stock immediately prior to such issuance, and any
outstanding warrants, options or other rights for the purchase of shares of
stock or Convertible Securities had been fully exercised immediately prior to
such issuance, and the resulting securities fully converted into shares of
Common Stock, if so convertible as of such date. This calculation shall not
include, however, any Additional Shares of Common Stock issuable with respect to
shares of Preferred Stock, Convertible Securities or outstanding options,
warrants or other rights for the purchase of shares or Convertible Securities,
solely as a result of adjustment of the Conversion Price resulting from the
issuance of Additional Shares of Common Stock causing such adjustment.
The provisions of this Section 5(e)(iv) do not apply if the provisions
of any of Section 5(b), (c) or (d) apply.
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(v) Determination of Consideration. The consideration received
by the Corporation for the issue of any Additional Shares of Common Stock shall
be computed as follows:
(1) Cash, Property, and Other Consideration. Such
consideration shall:
(a) insofar as it consists of cash, be
computed as the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or accrued
dividends;
(b) insofar as it consists of property,
services, or other consideration other than cash, be computed at the
fair value thereof at the time of such issue, as determined in good
faith by the Board of Directors; and
(c) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the
proportion of the consideration so received, computed as provided in
clauses (a) and (b) above, as is determined in good faith by the Board
of Directors.
(2) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional
Shares of Common Stock deemed to have been issued pursuant to Options
and Convertible Securities, shall be deemed to be the sum of the
consideration paid for such Option or Convertible Security, if any,
plus the lowest consideration per share then payable upon the exercise
of Options, as set forth in the instruments relating to such Options or
Convertible Securities, without regard to any provision contained
therein designed to protect against dilution. If Options or Convertible
Securities are issued together with other securities or instruments of
the Corporation, the Board of Directors shall determine in good faith
the amount of consideration paid for such Option or Convertible
Securities.
(f) Certificate as to Adjustments. In each case of an
adjustment or readjustment of the Conversion Price of the Preferred Stock, the
Corporation will furnish each holder of the Preferred Stock with a certificate
prepared by the Chief Financial Officer of the Corporation showing such
adjustment or readjustment and stating in detail the facts upon which such
adjustment or readjustment is based.
(g) Exercise of Conversion Privilege. To exercise its conversion
privilege, a holder of Preferred Stock shall surrender the certificate(s)
representing the shares being converted to the Corporation at its principal
office, accompanied by written notice to the Corporation at that office that
such stockholder elects to convert such shares (a "Conversion Notice"). The
Conversion Notice also shall state the name(s) and address(es) in which the
certificate(s) for shares of Common Stock issuable upon such conversion shall
be issued. The certificate(s) for shares of Preferred Stock surrendered for
conversion shall be accompanied by proper assignment thereof to the Corporation
or in blank. The date when the Conversion Notice is received by the Corporation
together with the certificate(s) representing the shares of Preferred Stock
being converted shall be the "Conversion Date." As promptly as practicable
after the Conversion Date, the Corporation shall issue and deliver to the
holder of the shares of Preferred Stock being converted, or on its written
order, such certificate(s) as it may request of the number of whole shares of
Common Stock issuable upon the conversion of such shares of Preferred Stock in
accordance with the provisions of this Section 5 and cash, as provided in
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<PAGE>
Section 5(h), in respect of any fraction of a share of Common Stock issuable
upon such conversion. Such conversion shall be deemed to have been effected
immediately prior to the close of business on the Conversion Date, and at such
time the rights of the holder as a holder of the converted shares of Preferred
Stock shall cease and the person(s) in whose name(s) any certificate(s) for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder(s) of record of the shares of Common Stock represented
thereby.
(h) Cash in Lieu of Fractional Shares. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Preferred Stock. Instead of any fractional shares of
Common Stock that otherwise would be issuable upon conversion of a series of
Preferred Stock, the Corporation shall pay to the holder of the shares of
Preferred Stock that were converted a cash adjustment in respect of such
fractional shares in an amount equal to the same fraction of the Fair Market
Value price per share of the Common Stock at the close of business on the
Conversion Date. "Fair Market Value" shall mean (i) in the case of a security
listed or admitted to trading on any securities exchange, the last reported sale
price, regular way (as determined in accordance with the practices of such
exchange), on such day, or if no sale takes place on such day, the average of
the closing bid and asked prices on such day (and in the case of a security
traded on more than one national securities exchange, at such price or such
average, upon the exchange on which the volume of trading during the last
calendar year was the greatest), (ii) in the case of a security not then listed
or admitted to trading on any securities exchange, the last reported sale price
on such day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, as reported by a reputable quotation service
designated by the Corporation, (iii) in the case of a security not then listed
or admitted to trading on any securities exchange and as to which no such
reported sale price or bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a reputable
quotation service, or the Wall Street Journal, or if there are no bids and asked
prices on such day, the average of the high bid and low asked prices, as so
reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported, and (iv) in the case of a
security determined by the Corporation's Board of Directors as not having an
active quoted market or in the case of other property, such fair market value as
shall be determined by the Board of Directors. The determination as to whether
any fractional shares are issuable shall be based upon the total number of
shares of Preferred Stock being converted at any one time by any holder thereof,
not upon each share of Preferred Stock being converted.
(i) Reservation of Common Stock. The Corporation at all times
shall reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Preferred Stock, such number of its shares of Common Stock as from time
to time shall be sufficient to effect the conversion of all outstanding shares
of the Preferred Stock.
Section 6. Restrictions and Limitations; Voting as a Class. So long as
any shares of Preferred Stock remain outstanding, in addition to any other vote
or consent of stockholders required by law or the Articles of Incorporation, the
Corporation will not take any of the following actions without the affirmative
vote or consent (with each share of Preferred Stock being entitled to one vote)
of the holders of at least seventy-five percent (75%) of the outstanding shares
of the Preferred Stock, given in writing or by resolution adopted at a meeting
called for such purpose:
(a) amend the Articles of Incorporation or Bylaws of the
Corporation if such amendment would:
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(i) reduce the Dividend Rate on the Preferred Stock
provided for herein, make such dividends noncumulative, defer the date
from which dividends will accrue, cancel accrued and unpaid dividends,
or change the relative seniority rights of the holders of the Preferred
Stock as to the payment of dividends in relation to the holders of any
other capital stock of the Corporation;
(ii) reduce the amount payable to the holders of the
Preferred Stock upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, or change the relative
seniority of the liquidation preferences of the holders of the
Preferred Stock;
(iii) reduce the Redemption Price specified in
Section 7 hereof with respect to the Preferred Stock,
(iv) cancel or modify the conversion rights of the
Preferred Stock provided for in Section 5 hereof, or
(v) adversely affect any of the rights, preferences
or privileges provided for herein for the benefit of any shares of
Preferred Stock; provided that no issuance of equity securities which
shall have been approved under Section 6(d) hereof (or which does not
require approval under such Section 6(d)) shall be deemed to have such
an adverse effect.
(b) redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose) any share or shares of
Preferred Stock otherwise than by redemption of Preferred Stock in accordance
with Section 7 hereof or by conversion in accordance with Section 5
hereof,
(c) redeem, purchase or otherwise acquire (or pay into or
set aside for a sinking fund for such purpose) any share or shares of Junior
Stock, except for (i) a purchase or other acquisition of Common Stock made for
purposes of any employee incentive or benefit plan of the Corporation or any
subsidiary, or (ii) the purchase of up to 125,000 shares of Common Stock (as
adjusted for stock splits or stock dividends) pursuant to the "Put Option"
contained in the Asset Purchase Agreement dated as of December 3, 1997, by and
among the Corporation and the parties thereto.
(d) authorize or issue, or obligate itself to issue, any
other equity security (i) senior to or on a parity with the Preferred Stock as
to dividend rights or redemption rights or liquidation preferences or (ii)
which entitles the holders thereof to voting rights equal to at least twenty
percent (20%) of the outstanding voting power of all capital stock of the
Corporation or to elect directors which constitute twenty percent (20%) or more
of the Board of Directors;
(e) effect any sale, lease, assignment, transfer, or other
conveyance of all or substantially all of the assets of the Corporation or any
of its subsidiaries, or any consolidation or merger involving the Corporation
or any of its subsidiaries, except (i) merger with wholly-owned subsidiary of
the Corporation, (ii) a mere reincorporation transaction, or (iii) a merger
pursuant to which the Corporation is the surviving entity and the
capitalization of the Corporation remains unchanged, or (iv) upon an election
by the holders of Preferred Stock pursuant to Section 3(b) hereof,
(f) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Preferred Stock (which
shall not prohibit the increase or decrease by the Corporation of the total
number of authorized shares of preferred stock); or
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<PAGE>
(g) effect any change in the rights or limitations of the Common
Stock, or any recapitalization of the Corporation.
Section 7. Redemption.
(a) Redemption at the Option of the Corporation. Shares of
Preferred Stock shall not be redeemable by the Corporation at any time prior to
the second anniversary of the Original Issue Date. On and after the second (2nd)
anniversary of the Original Issue Date, at the option of the Corporation, the
Corporation may fix a date (the "Redemption Date") on which it shall redeem all
(but not less than all) of the then outstanding shares of Preferred Stock by
paying in cash, out of funds legally available therefor, to the holders thereof
and in respect of each such share of Preferred Stock, the Redemption Price (as
defined below), (i) at any time prior to the fifth anniversary of the Original
Issue Date but only in the event that the average bid price of the Common Stock
of the Corporation exceeds Nine Dollars ($9.00) per share (without giving effect
to any stock splits, stock dividends or recapitalizations after the Original
Issue Date), with respect to each of the twenty (20) consecutive Trading Days
(as defined below) immediately preceding the date of the Redemption Notice (as
defined in Section 7(b) below), or (ii) at any time after the fifth anniversary
of the Original Issue Date. A holder of Preferred Stock may elect, by written
notice delivered to the Corporation not less than ten (10) days prior to the
Redemption Date, to waive its right to have redeemed all (but not less than all)
of the shares of Preferred Stock held by such holder which are eligible to be
redeemed on such Redemption Date, provided that on such Redemption Date each
such share of Preferred Stock which is not redeemed shall be converted
automatically into shares of Common Stock at the Conversion Price then in effect
on such Redemption Date. The term "Trading Day" shall mean any day other than
Saturday or Sunday on which national securities exchanges are open for trading
and trades in Corporation Common Stock occur. The term "Redemption Price" shall
mean an amount per share equal to (A) for any redemption pursuant to clause (i)
above, the Preference Amount (determined as provided in Section 3(a) hereof);
and (B) for any redemption pursuant to clause (ii) above, One Hundred Five
Dollars ($105.00) plus an amount equal to all the accrued but unpaid Preferred
Dividends (whether or not declared, and the amount equal to all interest, if
any, on any Preferred Dividends in arrears, in each case to the Redemption Date.
(b) Procedures for Redemption of Preferred Stock. At least
thirty (30) days but not more than forty-five (45) days prior to the Redemption
Date the Corporation shall mail a written notice, first class postage prepaid,
to each holder of record at the close of business on the business day preceding
the day on which notice is given, of the Preferred Stock to be redeemed, at the
address last shown on the records of the Corporation for such holder, notifying
such holder of the redemption to be effected, specifying (i) that all shares of
Preferred Stock shall be redeemed from such holder, (ii) the Redemption Date,
(iii) the Redemption Price, (iv) the place at which payment may be obtained, (v)
advising such holder of its right to elect to waive its right to have all (but
not less than all) such shares redeemed and that, if such election is made, such
shares of Preferred Stock which are not redeemed shall be converted
automatically into shares of Common Stock at the Conversion Price then in effect
(setting forth such Conversion Price), and (vi) calling upon such holder to
surrender to the Corporation, in the manner and at the place designated, its
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). On or after the Redemption Date, each holder of Preferred
Stock to be redeemed shall surrender to the Corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. From and after each Redemption Date, unless there
shall have been a default in payment of the Redemption Price, any
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<PAGE>
shares of Preferred Stock redeemed on such Redemption Date shall not be entitled
to any further rights as Preferred Stock and shall not be deemed outstanding for
any purpose. If the funds of the Corporation legally available for redemption of
shares of Preferred Stock on any Redemption Date are insufficient to redeem the
total number of shares of Preferred Stock to be redeemed on such date, those
funds which are legally available will be used to redeem the maximum possible
number of such shares ratably among the holders of such shares to be redeemed
based upon the number of shares of Preferred Stock held by each such holder. The
shares of Preferred Stock not redeemed shall remain outstanding and entitled to
all the rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
shares of Preferred Stock such funds will be used immediately to redeem the
balance of the shares which the Corporation has become obliged to redeem on any
Redemption Date, but which it has not redeemed, it being understood that any
such redemption shall not constitute a waiver by a holder of Preferred Stock of
any rights derived from the failure to redeem on the Redemption Date.
Section 8. No Reissuance of Convertible Preferred Stock; Status of
Stock. No share of Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion, or otherwise shall be reissued, and all such
shares shall be restored to the status of authorized but unissued shares of
preferred stock, without designation as to rights, limitations or preferences.
Section 9. No Dilution or Impairment. The Corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, share exchange, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Preferred Stock set forth
herein, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Preferred Stock
against dilution or other impairment.
Section 10. Notices of Record Date. In the event of any:
(a) taking by the Corporation of a record of the holders of any
class of 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) capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger, consolidation, or share exchange of the Corporation, or any transfer
of all or substantially all the assets of the Corporation to any other
corporation, or any other entity or person; or
(c) voluntary or involuntary dissolution, liquidation, or
winding up the Corporation;
then and in each such event the Corporation shall mail or cause to be mailed to
each holder of Preferred Stock a notice specifying (i) the record date for such
dividend, distribution, or right and a description of such dividend,
distribution, or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger, share
exchange, dissolution, liquidation, or winding up is expected to become
effective, and (iii) the time, if any, that is to be fixed as to when 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 such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, share exchange,
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dissolution, liquidation, or winding up. Such notice shall be mailed at least
ten (10) days prior to the date specified in such notice on which such action is
to be taken.
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EXHIBIT C
OFFICER'S CERTIFICATE
The undersigned, Joseph F. Weiderman, the duly elected and authorized
President of Berger Holdings, Ltd., a Pennsylvania corporation (the "Company"),
does hereby certify pursuant to Section 4.2 of that certain Preferred Stock
Purchase Agreement (the "Preferred Stock Agreement"), dated December _, 1997
among the Company and Sirrom Capital Corporation d/b/a Tandem Capital and Argosy
Investment Partners, L.P., as follows:
1. The representations and warranties of the Company contained in the
Preferred Stock Agreement were true and correct when made and are true and
correct on the date hereof as if made on and as of the date hereof, except as
such representations and warranties expressly relate to a specific date.
2. The Company has performed and complied with all covenants and
agreements and conditions contained in the Preferred Stock Agreement required to
be performed or complied with by it prior to or at the time of delivery hereof.
3. Since December___, 1997, no change has occurred in the condition,
financial or otherwise, or prospects of the Company or any Subsidiary which,
either individually or in the aggregate, would have a Materially Adverse Effect
(as defined in the Preferred Stock Agreement).
4. On the date hereof, the Company consummated the acquisition of
__________________, a ________________ corporation pursuant to the terms of that
certain [Acquisition Agreement] dated December ___________ , 1997 between the
Company and ______________________ .
Capitalized terms used herein which are defined in the Preferred Stock
Agreement will have the same meaning as provided therein.
IN WITNESS WHEREOF, the undersigned has executed this Officer's
Certificate this day of ____________, 199_.
----------------------------------
Joseph F. Weiderman, President
<PAGE>
EXHIBIT D
FORM OF SECRETARY'S CERTIFICATE
The undersigned, _____________________ , the duly elected and
authorized Secretary of Berger Holdings, Ltd., a Pennsylvania corporation (the
"Company"), does hereby certify pursuant to Section 4.3 of that certain
Preferred Stock Purchase Agreement (the "Preferred Stock Agreement"), dated
December__, 1997, by and among the Company and Sirrom Capital Corporation d/b/a
Tandem Capital and Argosy Investment Partners, L.P., as follows:
1. There has not been any amendment or other document affecting the
Articles of Incorporation of the Company filed with the Secretary of State of
Pennsylvania since [date of certified Articles delivered at Closing], or any
action contemplating any such amendment, other than the Statement with Respect
to Shares.
2. No proceedings looking toward the liquidation or dissolution of the
Company or threatening the existence of the Company are pending or contemplated
by the Company.
3. Attached hereto as Exhibit D-1 is a true, complete and correct copy of
the Bylaws of the Company, as amended and/or restated, as such Bylaws are in
full force and effect on the date hereof.
4. Attached hereto as Exhibit D-2 is a true, complete and correct copy
of the resolutions duly adopted by the Board of Directors of the Company [at a
meeting held on _________________ ] OR [by written consent dated _____________],
authorizing the issue and sale of the Preferred Stock and the execution and
delivery of the Preferred Stock Agreement and the consummation of the
transactions contemplated thereby, and establishing the rights, limitations, and
preferences of the Preferred Stock. Such resolutions are in full force and
effect on the date hereof and have not been rescinded or modified in any
respect.
5. Attached hereto as Exhibit D-3 is a true and correct specimen copy of
the certificate representing shares of Preferred Stock of the Company.
6. The following persons are the duly elected, qualified and acting
officers of the Company authorized to execute and deliver on behalf of the
Company, the Preferred Stock Agreement and the other documents and instruments
to be executed by the Company in connection with the transactions contemplated
by the Preferred Stock Agreement, and the signature of each person set forth
opposite his/her name is his/her genuine signature:
Name Office Signature
- ---- ------ ---------
Joseph F. Weiderman President
--------------------------------
Secretary
- -------------------------------- --------------------------------
<PAGE>
Capitalized terms used herein which are defined in the Preferred Stock
Agreement shall have the same meaning as provided therein.
IN WITNESS WHEREOF, the undersigned has executed this Secretary's
Certificate this _________ day of ___________, 1997.
--------------------------------
Secretary
The undersigned President of the Company, does hereby certify that
________, who executed the foregoing Certificate, is the duly elected,
qualified and acting Secretary of the Company and that the signature on such
certificate is his/her genuine signature.
---------------------------------
Joseph F. Weiderman, President
<PAGE>
EXHIBIT F (Pfd. Stock Pur. Agr.)
Authorization Agreement for Pre-Authorized Payments (Debit)
Company Name: Berger Holdings, Ltd.
The undersigned hereby authorizes [Sirrom Capital Corporation ("SCC"), or any
of its wholly-owned subsidiaries that may become the holder of the Series A
Convertible Preferred Stock] and the financial institution named below to
electronically charge the Company's account specified below for payments of
dividends payable with respect to the Company's Series A Convertible Preferred
Stock to holders of record on the record dates and with respect to the dividend
payment dates set forth on Exhibit A attached hereto.
- ----------------------------- -------------------------------------------
Bank Name Branch Location (where account was opened)
- ----------------------------- -------------------------------------------
City State Zip Code
- ----------------------------- -------------------------------------------
Bank Transit/ABA Number Account Number
-------------------------------------------
Account Name
This authority is to remain in full force and effect until [SCC (or its
assignee)] and Bank have received written notification from the undersigned of
its termination in such time and in such manner as to afford [SCC (or its
assignee)] and Bank a reasonable opportunity to act on it. Following
termination of the authority granted hereby, the Company shall make all
payments due [SCC (or its assignee)] at such time and in such manner as set
forth in the Statement With Respect To Shares.
- -------------------------------- -------------------------------------------
Authorizing Party (Please Print) Company Tax ID Number
- -------------------------------- -------------------------------------------
Signature Date Signature Date
<PAGE>
Exhibit A
Number of Shares Held:
25,000
Record Date Payment Date Per Share Amount Total Dividend Payment
- ----------- ------------ ---------------- ----------------------
03-31-98 05-01-98 $2.50 $ 62,500
06-30-98 08-01-98 2.50 62,500
09-30-98 11-01-98 2.50 62,500
12-31-98 02-01-99 2.50 62,500
03-31-99 05-01-99 2.50 62,500
06-30-99 08-01-99 2.50 62,500
09-30-99 11-01-99 2.50 62,500
12-31-99 02-01-00 2.50 62,500
03-31-00 05-01-00 2.50 62,500
06-30-00 08-01-00 2.50 62,500
09-30-00 11-01-00 2.50 62,500
12-31-00 02-01-01 2.50 62,500
03-31-01 05-01-01 2.50 62,500
06-30-01 08-01-01 2.50 62,500
09-30-01 11-01-01 2.50 62,500
12-31-01 02-01-02 2.50 62,500
03-31-02 05-01-02 2.50 62,500
06-30-02 08-01-02 2.50 62,500
09-30-02 11-01-02 2.50 62,500
12-31-02 02-01-03 2.50 62,500
03-31-03 05-01-03 5.00 125,000
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
by and among
BERGER FINANCIAL CORP.,
a Delaware corporation,
BERGER BROS COMPANY,
a Pennsylvania corporation
and
SUMMIT BANK,
a New Jersey bank
dated January 2, 1998
<PAGE>
TABLE OF CONTENTS
(continued)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
SECTION 1. DEFINITIONS.....................................................................................6
1.1 "Account Debtor"................................................................................6
1.2 "Accounts", "Chattel Paper", "Contracts", "Documents", "Equipment",
"Fixtures", "General Intangibles", "Goods", "Instruments", "Inventory",
"Investment Property" and "Proceeds"............................................................6
1.3 "Affiliate".....................................................................................6
1.4 "Assets"........................................................................................6
1.5 "Borrowing Base"................................................................................6
1.6 "Borrowing Base Certificate"....................................................................7
1.7 "Business Day"..................................................................................7
1.8 "Closing".......................................................................................7
1.9 "Collateral"....................................................................................7
1.10 "Collateral Documents"..........................................................................7
1.11 "Controlled Group"..............................................................................7
1.12 "Eligible Account"..............................................................................7
1.13 "Eligible Inventory"............................................................................9
1.14 "Employee Benefit Plan"........................................................................10
1.15 "Environmental Laws"...........................................................................10
1.16 "ERISA"........................................................................................10
1.17 "Event of Default".............................................................................10
1.18 "Expiration Date"..............................................................................10
1.19 "Financial Statements".........................................................................10
1.20 "GAAP".........................................................................................11
1.21 "Indebtedness".................................................................................11
1.22 "Internal Revenue Code"........................................................................11
1.23 "IRS"..........................................................................................11
1.24 "Laws".........................................................................................11
1.25 "Liabilities"..................................................................................12
1.26 "Loans"........................................................................................12
1.27 "Material Adverse Effect"......................................................................12
1.28 "Mortgaged Property"...........................................................................12
1.29 "Notes"........................................................................................12
1.30 "Obligations"..................................................................................12
1.31 "Obligors".....................................................................................13
1.32 "PBGC".........................................................................................13
1.33 "Permitted Liens"..............................................................................13
1.34 "Person".......................................................................................14
1.35 "Potential Default"............................................................................14
1.36 "Base Rate"....................................................................................14
1.37 "Questionnaires"...............................................................................14
</TABLE>
(i)
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
1.38 "Rate".........................................................................................14
1.39 "Records"......................................................................................14
1.40 "Subordinated Indebtedness"....................................................................14
1.41 "Surety".......................................................................................14
1.42 "Surety Agreement".............................................................................14
1.43 "Tangible Net Worth"...........................................................................14
SECTION 2. THE LOANS......................................................................................15
2.1 Confirmation of Existing Indebtedness..........................................................15
2.2 Disbursement and Use of the Loan Proceeds......................................................15
2.3 The Revolving Credit...........................................................................15
2.4 Permitted Overadvances.........................................................................15
2.5 The Revolving Credit Note......................................................................16
2.6 Revolving Credit Term and Termination..........................................................16
2.7 The Term Loan..................................................................................16
2.8 The Term Loan Note.............................................................................17
2.9 Interest Rates, Default Rate and Payment of Interest...........................................17
2.10 Collections, Disbursements and Availability....................................................18
2.11 Fees...........................................................................................18
2.12 Termination Premium............................................................................19
2.13 Payments to Bank; Credit to Obligations........................................................20
2.14 Late Charges...................................................................................20
SECTION 3. CONDITIONS PRECEDENT...........................................................................20
3.1 Documents Required for Closing.................................................................20
3.2 Documents Required for Subsequent Disbursements Under the Revolving Credit.....................23
3.3 Certain Events.................................................................................23
3.4 Legal Matters..................................................................................23
SECTION 4. COLLATERAL SECURITY............................................................................23
4.1 Composition of the Collateral..................................................................23
4.2 Rights in Property Held by the Bank............................................................24
4.3 Rights in Property Held by the Borrower........................................................24
4.4 Assignment of Life Insurance Policy............................................................25
4.5 Mortgage.......................................................................................25
4.6 Priority of Liens..............................................................................25
4.7 Further Assurances.............................................................................25
4.8 Landlords' Waivers.............................................................................26
</TABLE>
(ii)
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
4.9 Searches.......................................................................................26
SECTION 5. REPRESENTATIONS AND WARRANTIES.................................................................26
5.1 Inducement to Bank.............................................................................26
5.2 Survival.......................................................................................30
SECTION 6. BORROWER'S COVENANTS...........................................................................30
6.1 Affirmative Covenants..........................................................................30
6.2 Negative Covenants.............................................................................34
6.3 Financial Covenants............................................................................37
6.4 Special Covenants..............................................................................37
SECTION 7. DEFAULT........................................................................................38
7.1 Events of Default..............................................................................38
7.2 Remedies.......................................................................................40
SECTION 8. MISCELLANEOUS..................................................................................41
8.1 Construction...................................................................................41
8.2 Further Assurances.............................................................................41
8.3 Enforcement and Waiver by Bank.................................................................41
8.4 Expenses of Bank...............................................................................42
8.5 Notices........................................................................................42
8.6 Waiver and Release by Borrower.................................................................43
8.7 Indemnification................................................................................43
8.8 Warrant of Attorney............................................................................44
8.9 Waiver of Jury Trial...........................................................................45
8.10 Jurisdiction...................................................................................45
8.11 Applicable Law.................................................................................45
8.12 Binding Effect, Assignment and Entire Agreement................................................45
8.13 Severability...................................................................................45
8.14 Counterparts...................................................................................45
8.15 Headings.......................................................................................45
8.16 Modification...................................................................................45
8.17 Third Parties..................................................................................46
8.18 Seal...........................................................................................46
</TABLE>
(iii)
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement ("Agreement") is
made this 2nd day of January, 1998 by and among Berger Financial Corp. ("BFC"),
a Delaware corporation with its chief executive office at 805 Pennsylvania
Boulevard, Feasterville, Pennsylvania 19053, Berger Bros Company ("BBC"), a
Pennsylvania corporation with its chief executive office at 805 Pennsylvania
Boulevard, Feasterville, Pennsylvania, and Summit Bank ("Bank"), a New Jersey
bank with an office at 4900 Route 70, Pennsauken, New Jersey 08109-4792. BFC
and BBC are sometimes hereinafter severally and collectively referred to, and
jointly and severally obligated as, "Borrower".
BACKGROUND
A. Pursuant to the terms and subject to the conditions set forth in
that certain Loan and Security Agreement dated August 21, 1997 among Borrower
and Bank (the "Existing Loan Agreement") and all related instruments, agreements
and documents (collectively, along with the Existing Loan Agreement, the
"Existing Financing Agreements"), Borrower is currently indebted to Bank for
repayment of (i) various loans, advances and extensions of credit made by Bank
from time to time to or for the benefit of Borrower under a Three Million Five
Hundred Thousand ($3,500,000.00) Dollar revolving credit facility (the "Existing
Revolving Credit"), which indebtedness is evidenced by that certain Revolving
Credit Note dated August 21, 1997 in the principal sum of Three Million Five
Hundred Thousand ($3,500,000.00) Dollars executed and delivered by Borrower to
Bank (the "Revolving Credit Note"), and (ii) a term loan in the principal sum of
One Million Three Hundred Thousand ($1,300,000.00) Dollars (the "Existing Term
Loan"), which indebtedness is evidenced by that certain Term Loan Note dated
August 21, 1997 in the principal sum of One Million Three Hundred Thousand
($1,300,000.00) Dollars executed and delivered by Borrower to Bank (the "Term
Loan Note").
B. As part of the collateral security for the existing and future
debts, liabilities and obligations of Borrower to Bank including, without
limitation, the indebtedness evidenced by the Revolving Credit Note and the Term
Loan Note, pursuant to the terms and subject to the conditions of the Existing
Loan Agreement and the other Existing Financing Agreements, Bank holds
continuing liens on and security interests in and to all of Borrower's existing
and future accounts, chattel paper, contracts, documents, equipment, fixtures,
general intangibles, goods, instruments, inventory, investment property and the
cash and noncash proceeds thereof, subject only to Permitted Liens (as defined
in the Existing Loan Agreement). As additional collateral security for the
debts, liabilities and obligations of Borrower to Bank, pursuant to the terms
and subject to the conditions of that certain Second Open-End Mortgage and
Security Agreement dated August 21, 1997 between BBC, as mortgagor, and Bank, as
mortgagee, and a certain Second Assignment of Leases and Rents between BBC, as
assignor, and Bank, as assignee, Bank holds liens on and security interests in
and to the real property, with improvements, known and designated as 805
Pennsylvania Boulevard, Feasterville, Pennsylvania (the "Premises"), and the
existing and future leases of all or any part of the Premises, all as more fully
described in such Second Open-End Mortgage and Security Agreement (the "Second
Mortgage"), which Second Mortgage was recorded in the office for the recording
of mortgages in and for Bucks County, Pennsylvania in Mortgage Book 1454, at
Page 1986, et seq.
C. To induce Bank to enter into and continue in financing arrangements
to or for the benefit of Borrower, pursuant to a certain Surety Agreement dated
August 21, 1997 executed and delivered by Berger Holdings, Ltd. ("BHL"), a
Pennsylvania corporation and the holder of all issued and outstanding shares of
stock of Borrower, BHL guaranteed, as a surety, the existing and future debts,
1
<PAGE>
liabilities and obligations of Borrower to Bank including, without limitation,
the indebtedness evidenced by the Revolving Credit Note and the Term Loan Note
and, to secure its liabilities as a surety for such debts, liabilities and
obligations of Borrower to Bank, pursuant to a certain Security Agreement dated
August 21, 1997 between BHL, as debtor, and Bank, as secured party, BHL granted
to Bank continuing liens on and security interests in and to all of BHL's
existing and future accounts, chattel paper, contracts, documents, equipment,
fixtures, general intangibles, goods, instruments, inventory, investment
property and the cash and noncash proceeds thereof, all as more fully described
in such Security Agreement (the "Surety Security Agreement").
D. Concurrently herewith, pursuant to the terms and subject to the
conditions of a certain Asset Purchase Agreement dated as of December 3, 1997 by
and among BHL and Benjamin Obdyke Incorporated ("Seller"), a Delaware
corporation, and the shareholders of Seller (the "Asset Purchase Agreement"),
BHL has agreed to purchase certain assets from Seller (the "Acquired Assets"),
all as more fully described in such Asset Purchase Agreement. Immediately
following the acquisition by BHL of the Acquired Assets of Seller, BHL is
contributing such assets to BBC for use by BBC in the ordinary course of its
business. To finance, in part, the acquisition by BHL of Acquired Assets, and
the corresponding acquisition by BBC of such assets from BHL, and to fund the
working capital needs of Borrower, BHL and Borrower have requested that Bank
amend the Existing Financing Agreements to provide for, inter alia, an increase
in the Revolving Credit and the Term Loan (as increased, the "Credit Facility"),
and Bank is willing to do so under the terms and subject to the conditions set
forth in this Agreement, which Agreement amends and restates the Existing Loan
Agreement and amends and modifies the Existing Financing Agreements.
E. To provide additional financing for the acquisition by BHL and
Borrower of the Acquired Assets and for working capital: (i) pursuant to the
terms and subject to the conditions of the Asset Purchase Agreement, Seller is
providing unsecured, subordinate purchase money financing in the sum of Eight
Hundred Eighty Thousand Eight Hundred Fifteen ($880,815.00) Dollars of which
subordinated indebtedness is evidenced by a certain nine and one-half percent (9
1/2%) Subordinated Note due January 2, 2000 of even date herewith in the
principal sum of Eight Hundred Eighty Thousand Eight Hundred Fifteen
($880,815.00) Dollars executed and delivered by BHL to Seller (the "Seller
Subordinated Note"); (ii) pursuant to a certain Debentures Purchase Agreement
dated as of December 17, 1997 among BHL, as issuer, and Sirrom Capital
Corporation, doing business as Tandem Capital ("Tandem"), a Tennessee
corporation, and Argosy Investment Partners, L.P. ("Argosy"; and, together with
Tandem, the "Subordinated Creditor"), a Pennsylvania limited partnership, BHL is
issuing to Subordinated Creditor subordinated debentures in the aggregate sum of
Two Million Five Hundred Thousand ($2,500,000.00) Dollars (collectively, the
"Debentures"), all as more fully described in such Debentures Purchase Agreement
and related instruments, agreements and documents (collectively, the "Debentures
Purchase Documents"); and (iii) BHL is also issuing to Subordinated Creditor
forty thousand (40,000) shares of preferred stock of BHL having a liquidation
preference of Four Million ($4,000,000.00) Dollars (collectively, the "Preferred
Shares") and certain warrants, all as more fully described in that certain
2
<PAGE>
Preferred Stock Purchase Agreement dated as of December 17, 1997 among BHL and
Subordinated Creditor and related instruments, agreements and documents
(collectively, along with such Preferred Stock Purchase Agreement, the
"Preferred Stock Documents").
NOW, THEREFORE, with the foregoing Background deemed incorporated
hereinafter by this reference and hereby made a part hereof, the parties hereto,
intending to be legally bound hereby, further covenant and agree as follows:
SECTION 1. DEFINITIONS.
As used herein:
1.1 "Account Debtor" means a Person obligated to Borrower for an
Account.
1.2 "Accounts", "Chattel Paper", "Contracts", "Documents", "Equipment",
"Fixtures", "General Intangibles", "Goods", "Instruments", "Inventory",
"Investment Property" and "Proceeds" shall have the same respective meanings as
are ascribed to such terms in the Uniform Commercial Code as enacted in the
Commonwealth of Pennsylvania.
1.3 "Affiliate" means, as to any Person, each other Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person in question.
1.4 "Assets" means, at any time, all assets of every kind of Borrower
and Surety as would be shown on a consolidating and consolidated financial
statement of Borrower and Surety prepared in accordance with GAAP.
1.5 "Borrowing Base" means, at any time, an amount shown on the most
current Borrowing Base Certificate executed and delivered by Borrower to Bank
equal to the lesser of:
1.5.1 Seven Million ($7,000,000.00) Dollars ("Maximum Line
Amount"); and
1.5.2 An amount up to the sum of (a) eighty-five (85%) percent
of the net outstanding amount of Eligible Accounts, after deducting therefrom
all payments, adjustments and credits applicable thereto, and (b) the lesser of
(i) fifty (50%) percent of the value (determined on the basis of the lower of
cost or market value) of Eligible Inventory and (ii) Three Million
($3,000,000.00) Dollars. The foregoing percentage advance rates are subject to
periodic examination and analysis by Bank and, as a result thereof, and in
Bank's discretion exercised reasonably and in good faith, are subject to change.
1.6 "Borrowing Base Certificate" means a full and complete certificate
in the form of Exhibit 1.6 attached hereto, incorporated herein by this
3
<PAGE>
reference and hereby made a part hereof, certified by the President or Chief
Financial Officer or Cash Manager of BBC to be true and correct.
1.7 "Business Day" means any day other than a Saturday, Sunday or legal
holiday on which Bank is not open for business in Pennsauken, New Jersey.
1.8 "Closing" means the date of this Agreement.
1.9 "Collateral" means the property so designated in Section 4 of this
Agreement.
1.10 "Collateral Documents" means all of the instruments, agreements
and documents evidencing and/or securing the Loans including, without
limitation, the documents specified in Sections 3 and 4 of this Agreement.
1.11 "Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414 of the Internal
Revenue Code or Section 4001 of ERISA.
1.12 "Eligible Account" means an Account of BBC that conforms and
continues to conform to the following specifications and such additional
specifications as Bank may establish in the exercise of its reasonable
discretion:
1.12.1 The Account is based upon an enforceable order or
Contract, written or oral, for Goods produced or shipped or services performed,
and the same were produced or shipped or actually performed in accordance with
such order or contract;
1.12.2 The title of BBC in and to the Account is absolute and
is lawfully in BBC and subject to no prior assignment, claim, lien, security
interest or other encumbrance, except Permitted Liens, and BBC has the right of
assignment thereof and the power to grant to Bank a security interest therein;
1.12.3 The amount shown on the Records of BBC, and on any
invoice or statement delivered to Bank in respect of the Account, that is owing
to BBC and no partial payment has been made thereon, except for partial payments
reflected on the current Borrowing Base Certificate furnished to Bank;
1.12.4 The Account Debtor has not returned or refused to
retain any of the Goods, the sale of which has given rise to the Account;
1.12.5 The Account is due and payable by its terms not more
than sixty (60) days from the date of the invoice evidencing the Account and is
outstanding not more than ninety (90) days from the date of the invoice
evidencing the Account;
4
<PAGE>
1.12.6 No Account arises out of a Contract with, or order
from, an Account Debtor that, by its terms, forbids or makes void or
unenforceable the grant by Borrower to Bank of a security interest in the
Account arising with respect thereto;
1.12.7 Borrower has not received any note, trade acceptance,
draft or other Instrument with respect to or in payment for or on account of the
Account, nor any Chattel Paper with respect thereto;
1.12.8 The Account is a valid and enforceable Account,
representing an undisputed indebtedness of an Account Debtor to BBC, and is net
of any claim (including freight claims) or any reduction, counterclaim, set-off,
recoupment, chargeback or any claim for credits, allowances or adjustments by
the Account Debtor because of returned, inferior or damaged Goods or
unsatisfactory services, or for any other reason except for discounts
customarily allowed by BBC in the ordinary course of its business for prompt
payment. Any credits applicable to Accounts outstanding ninety (90) days or more
shall be added to ineligible Accounts;
1.12.9 The Account is not a contra account;
1.12.10 Borrower has not received any notice of the death of
the Account Debtor or a general partner thereof; or of the dissolution,
termination of existence, insolvency, business failure or cessation, appointment
of a receiver for all or any material part of the property of, assignment for
the benefit of creditors by, or the filing of a petition in bankruptcy or the
commencement of any proceeding under any bankruptcy or insolvency laws, now or
hereafter enacted, by or against the Account Debtor. Upon the receipt by BBC of
any such notice with respect to or in connection with an Account Debtor liable
to BBC for a sum in excess of Five Thousand ($5,000.00) Dollars, Borrower give
Bank prompt written advice thereof;
1.12.11 The Account Debtor has its executive offices,
principal place of business and offices from which its order to Borrower was
placed in the continental United States or in Canada (other than in Quebec
Province), provided, however, if the Account arises from a sale to an Account
Debtor which does not meet the specifications set forth in this Subparagraph
1.12.11, but is otherwise eligible under this Paragraph 1.12, the Account shall
be deemed an Eligible Account if the Account is supported by foreign credit
insurance acceptable to Bank in all respects and/or a letter of credit
benefitting BBC (and assigned by BBC to Bank) or Bank in form and substance, and
issued (and advised) by a banking institution acceptable to Bank in its sole and
absolute discretion;
1.12.12 The Account does not arise out of a sale to, or the
performance of services for, the government of the United States, unless BBC has
complied in all respects with the Federal Assignment of Claims Act and other
applicable Law;
1.12.13 The Account Debtor's obligations to BBC exceeding
ninety (90) days old, together with any other Account obligation of the Account
5
<PAGE>
Debtor to BBC which otherwise do not meet the criteria to be an Eligible
Account, are not greater than fifty (50%) percent of the total obligations of
the Account Debtor to BBC;
1.12.14 The amount of any finance charges of the Account
Debtor's obligations shall not be deemed part of any Eligible Account; such sums
owing are not eligible or qualified to be part of the Borrowing Base.
1.12.15 The Account arose in the ordinary course of BBC's
business from the bona fide, absolute sale of goods by BBC (and not on a
consignment, approval or sale-or-return basis or subject to any other repurchase
or return agreement), or for services performed by BBC, and such goods have been
shipped to the appropriate Account Debtor, or the services have been actually
performed for the appropriate Account Debtor;
1.12.16 The aggregate of the Account Debtor's obligations to
BBC do not exceed twenty (20%) percent of the aggregate amount of Eligible
Accounts; and
1.12.17 The Account Debtor is not a subsidiary or an
Affiliate of BBC, BFC or Surety.
In the event of any dispute as to whether an Account is or has ceased to be a
Eligible Account, the decision (made in the exercise of reasonable judgment and
in good faith) of Bank shall control.
1.13 "Eligible Inventory" means Inventory of BBC that conforms and
continues to conform to the following specifications:
1.13.1 The Inventory is raw materials Inventory consisting of
steel, aluminum, copper coils and polyvinylchloride, or finished goods Inventory
of BBC and is not work-in-process Inventory, supplies, obsolete Inventory (i.e.,
Inventory that is older than twelve (12) months for finished goods and eighteen
(18) months for raw materials) or the labor, overhead and packaging costs
included in finished goods purchased for resale, regrind, tolling charges and
packaging materials.
1.13.2 The title of BBC in and to the Inventory is absolute
and lawfully in BBC and subject to no prior assignment, claim, lien or security
interest, and Borrower has the right of assignment thereof and the power to
grant to Bank a lien on and security interest therein;
1.13.3 The Inventory is intended for sale or use by BBC in the
ordinary course of BBC's business;
1.13.4 The Inventory is located at premises owned by Borrower
or at a location for which Bank has received an executed landlord's waiver in
form and substance satisfactory to Bank; and
6
<PAGE>
1.13.5 The Inventory is otherwise acceptable to Bank in its
discretion (exercised reasonably and in good faith).
1.14 "Employee Benefit Plan" means a "pension plan", as such term is
defined in Section 3(2) of ERISA or a "welfare plan", as such term is defined in
Section 3(1) of ERISA, for which Borrower or any member of the Controlled Group
may have liability.
1.15 "Environmental Laws" means all Laws relating to or pertaining to
the environment, human health or safety or environmental public welfare,
including, without limitation, the Pennsylvania Hazardous Sites Cleanup Act (a.
State. Ann. Tit. 35 ss.6070.101 et seq., as amended); the Pennsylvania Solid
Waste Management Act (Pa. Stat. Ann. Tit. 35 ss.6018.101 et seq., as amended);
the Pennsylvania Clean Streams Laws (Pa. Stat. Ann. Tit. 35 691.1 et seq., as
amended); the Pennsylvania Storage Tank and Spill Prevention Act (Pa. Stat. Ann.
Tit. 35 ss.6020.1 et seq.); the Hazardous and Solid Waste Amendments of 1984
Pub. L98- 616 (42 U.S.C. ss.699 et seq., as amended); the Resource Conservation
and Recovery Act (42 U.S.C. ss.6901 et seq., as amended), the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss.9601 et
seq., as amended), and any other applicable Laws including those relating to the
use of recyclable materials.
1.16 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time;.
1.17 "Event of Default" mean an event specified in Section 7 hereof.
1.18 "Expiration Date" has the meaning set forth at Paragraph 2.6.1.
1.19 "Financial Statements" means the annual audited consolidating and
consolidated balance sheet and cash flow and profit and loss statements for
Borrower and Surety as of December 31, 1995 and 1996 and the internally prepared
consolidating and consolidated balance sheet and cash flow and profit and loss
statements for Borrower and Surety as of June 30, 1997.
1.20 "GAAP" means generally accepted accounting principles as of the
date of this Agreement applied in a manner consistent with the Financial
Statements and/or the most recent accountant-prepared financial statements
furnished and acceptable to Bank pursuant to Section 6 of this Agreement.
1.21 "Indebtedness" means, as to Borrower, all items of indebtedness,
obligation or liability, due or to become due, liquidated or unliquidated,
direct or contingent, joint or several, of any nature whatsoever and out of
whatever transaction arising including, without limitation:
7
<PAGE>
1.21.1 All indebtedness guaranteed, directly or indirectly, in
any manner, or endorsed (other than for collection or deposit in the ordinary
course of business) or discounted with recourse;
1.21.2 All indebtedness in effect guaranteed, directly or
indirectly, through agreements, contingent or otherwise to (a) purchase such
indebtedness, (b) purchase, sell or lease (as lessee or lessor) property,
products, materials or supplies, or to purchase or sell services, primarily for
the purpose of enabling any debtor to make payment of such indebtedness or to
assure the holder of the indebtedness against loss, or (c) supply funds to or in
any other manner invest in any debtor;
1.21.3 All indebtedness secured by (or for which the holder of
such indebtedness has an existing right, contingent or otherwise, to be secured
by) any mortgage, deed of trust, pledge, lien, security interest or other charge
or encumbrance upon property owned or acquired subject to such mortgage, deed of
trust, pledge, lien, security interest, charge or encumbrance, whether or not
the liabilities secured thereby have been assumed; provided, however, that if
such liabilities have not been assumed, Indebtedness shall be limited to the
value of Assets secured; and
1.21.4 All indebtedness incurred as the lessee of goods or
services under leases that, in accordance with GAAP, should be reflected on the
lessee's balance sheet.
1.22 "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended.
1.23 "IRS" means the U.S. Internal Revenue Service.
1.24 "Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs or decrees of any government or political subdivision or
agency thereof or any court or similar entity established by any thereof.
1.25 "Liabilities" means, at any time, all liabilities of every kind of
Borrower and Surety as would be shown on a consolidating and consolidated
financial statement of Borrower and Surety prepared in accordance with GAAP.
1.26 "Loans" means, collectively, all loans, advances and extensions of
credit made by Bank to or for the benefit of Borrower under the Revolving Credit
and the Term Loan.
1.27 "Material Adverse Effect" means, at any time, a material adverse
effect on the business, properties, financial condition or results of operations
of Borrower or Surety or the ability of Borrower to perform under this
Agreement, or the Collateral Documents, or the ability of Surety to perform
under its Surety Agreement or any instrument, agreement or documents securing
the same.
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1.28 "Mortgaged Property" means the real property, with improvements,
known and designated as 805 Pennsylvania Boulevard, Feasterville, Pennsylvania
19053, as more fully described in the Collateral Documents.
1.29 "Notes" means, collectively, the Revolving Credit Note (as defined
in Paragraph 2.3 hereof) and the Term Loan Note (as defined in Paragraph 2.6
hereof) and "Note" means each such Instrument, individually.
1.30 "Obligations" mean the obligations of the Borrower:
1.30.1 To pay the principal of and the interest on the Notes
in accordance with the terms hereof and thereof, and to satisfy all of
Borrower's other existing and future debts, liabilities and obligations to Bank
including, without limitation, the existing and future debts, liabilities and
obligations of Borrower to Bank in connection with certain lease financing
arrangements and any Indebtedness of Borrower to others which Bank may acquire
by assignment or otherwise, whether matured or unmatured, direct or contingent,
joint or several, including, without limitation, any extensions, modifications,
renewals thereof and substitutions therefor;
1.30.2 To repay to Bank all amounts advanced by Bank hereunder
or otherwise to or for the benefit of Borrower and/or Surety including, without
limitation, advances for principal and/or interest payments to prior secured
parties, mortgagees, beneficiaries or other lienors, or for taxes, levies,
insurance, rent, repairs to or maintenance, storage or other preservation of all
or any part of the Collateral and collateral security described in the Surety
Security Agreement; and
1.30.3 To pay all of the Bank's fees, expenses and costs
including, without limitation, the reasonable fees and expenses of Bank's
counsel, in connection with the preparation, negotiation, administration,
amendment, modification or enforcement of this Agreement and the Collateral
Documents, the collection or attempted collection of the Notes and Bank's rights
hereunder and under the documents required hereunder, or any proceedings
(including, without limitation, bankruptcy or other insolvency proceedings)
brought or threatened to enforce payment of any of the Obligations.
1.31 "Obligors" means, severally and collectively, Borrower and Surety.
1.32 "PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
1.33 "Permitted Liens" means:
1.33.1 Liens for taxes, assessments or similar charges
incurred in the ordinary course of business which are not yet due and payable;
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1.33.2 Pledges or deposits made in the ordinary course of
business to secure payment of workers' compensation, or participation in any
fund in connection with compensation, unemployment insurance, old-age pensions
or other social security programs, as well as any underlying lien, if any, being
replaced by such pledge or deposit;
1.33.3 Liens of mechanics, materialmen, warehousemen,
carriers, or other like lienors, securing obligations incurred in the ordinary
course of business that are not yet due and payable;
1.33.4 Good faith pledges or deposits made in the ordinary
course of business to secure performance of bids, tenders, Contracts (other than
for the repayment of borrowed money) or leases, not in excess of ten (10%)
percent of the aggregate amount due thereunder, or to secure statutory
obligations, or surety, appeal, indemnity, performance or other similar bonds
required in the ordinary course of business, as well as any underlying lien, if
any, being replaced by such pledge, deposit or bond;
1.33.5 Liens in favor of Bank;
1.33.6 Purchase money liens permitted pursuant to Paragraph
6.2.5 of this Agreement;
1.33.7 Title exceptions set forth in the Title Insurance
Commitment dated August 21, 1997, No. 97-1016, issued by Stewart Title Guaranty
Company to Bank; and
1.33.8 Existing liens scheduled on the Questionnaire and
incorporated herein by this reference and hereby made a part hereof.
1.34 "Person" means any individual, corporation, partnership,
association, joint-stock company, limited liability company, trust,
unincorporated organization, joint venture, court or government or political
subdivision or agency thereof.
1.35 "Potential Default" means the occurrence of any event which, with
the passage of time or the giving of notice, or both, could constitute an Event
of Default.
1.36 "Base Rate" means that rate of interest (which is not necessarily
the lowest rate of interest charged by Bank to any particular class or category
of customers of Bank) periodically announced by Bank and designated as Bank's
"Base Rate", as such rate may change from time to time, without notice to
Borrower or any other obligor of the Obligations.
1.37 "Questionnaires" means the Collateral Questionnaires on Bank's
form completed, executed and delivered by BFC, BBC and Surety.
1.38 "Rate" means any of the rates of interest specified in Paragraph
2.9 of this Agreement.
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1.39 "Records" means, severally and collectively, Borrower's respective
correspondence, memoranda, tapes, discs, papers, books and other documents, or
transcribed information of any type, whether expressed in ordinary or machine
language, and whether on or off the premises of Borrower.
1.40 "Subordinated Indebtedness" means all Indebtedness incurred at any
time by Borrower or the Surety, the repayment of which is subordinated to the
Obligations in form and manner reasonably satisfactory to Bank and its counsel.
All existing Subordinated Indebtedness is so specified in Exhibit 1.40 attached
hereto, incorporated herein by this reference and hereby made a part hereof.
1.41 "Surety" means BHL.
1.42 "Surety Agreement" means the Amended and Restated Surety Agreement
of even date herewith executed and delivered by, Surety to Bank, pursuant to
which Surety guaranties, as a surety, the prompt payment and satisfaction of the
Obligations.
1.43 "Tangible Net Worth" means at any time, the amount by which all
Assets, excluding intangible Assets (as defined under GAAP), intercompany
receivables, officer loans and intercompany loans, exceed all Liabilities, as
would be shown on a consolidating and consolidated balance sheet of Borrower and
Surety prepared as of such date in accordance with GAAP.
SECTION 2. THE LOANS.
2.1 Confirmation of Existing Indebtedness. Borrower and, by its
acknowledgment and consent of the terms, covenants and conditions set forth in
this Agreement, Surety hereby unconditionally acknowledge and confirm that: (i)
the unpaid principal Indebtedness of Borrower to Bank evidenced by the Revolving
Credit Note is, as of the date hereof, One Million Four Hundred Thirty-Seven
Thousand Six Hundred Eight and 47/100 ($1,437,608.47) Dollars; (ii) the unpaid
principal Indebtedness of Borrower to Bank evidenced by the Term Loan Note is,
as of the date hereof One Million Two Hundred Thirty-Four Thousand Nine Hundred
Ninety-Nine ($1,234,999.00) Dollars; (iii) interest on the foregoing
Indebtedness of Borrower to Bank has been paid through December 31, 1997; and
(iv) the foregoing Indebtedness, together with continually accruing interest and
related costs, fees and expenses (collectively, the "Existing Indebtedness"), is
owing without claim, counterclaim, right of recoupment, defense or set-off of
any kind or of any nature whatsoever.
2.2 Disbursement and Use of the Loan Proceeds.
2.2.1 At Closing, subject to satisfaction of all conditions
precedent set forth herein, except as set forth herein, Bank will credit the
proceeds of the initial advance under the Revolving Credit and the Term Loan to
Borrower's deposit account(s) with Bank.
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2.2.2 Borrower shall use the proceeds of the Loans (i) to
finance, in part, the acquisition of the Acquired Assets (ii) for capital
expenditures permitted hereunder and (iii) for working capital purposes in the
ordinary course of BBC's business.
2.3 The Revolving Credit. So long as there has occurred no Event of
Default or any Potential Default, the Revolving Credit shall include all sums
advanced by Bank pursuant to the Existing Financing Agreements under the
Existing Revolving Credit and hereunder to or for the benefit of Borrower from
Closing through the Expiration Date up to the Maximum Line Amount, depending
upon the requests of Borrower, the availability of Eligible Accounts and the
existence of Eligible Inventory. It is the intention of the parties that the
outstanding principal amount of the Revolving Credit shall at no time, except as
expressly set forth in Paragraph 2.4 of this Agreement with respect to Permitted
Overadvances, exceed the Borrowing Base or the Maximum Line Amount, and if, at
any time, an excess shall for any reasons exist, Borrower agrees to repay to
Bank, on demand, such amounts as may be necessary to eliminate such excess.
Subject to the foregoing, absent the existence of an Event of Default or a
Potential Default, until the Expiration Date, Borrower may borrow under the
Revolving Credit, repay without penalty or premium (except as provided in
Paragraph 2.12 hereof) and reborrow under the Revolving Credit, up to the
Maximum Line Amount.
2.4 Permitted Overadvances. So long as there has occurred no Event of
Default or any Potential Default which is continuing, for a period of two
hundred forty (240) days following Closing, the Revolving Credit may include
loans, advances and extensions of credit in excess of the Borrowing Base
(collectively, the "Permitted Overadvances") as follows: for the first ninety
(90) days following Closing, the Permitted Overadvances may be in amounts up to
One Million Five Hundred Thousand ($1,500,000.00) Dollars; on the ninety-first
(91st) day following Closing, and on each thirtieth (30th) day thereafter, the
maximum amount of Permitted Overadvances shall reduce by Two Hundred Fifty
Thousand ($250,000.00) Dollars so that on the two hundred fortieth (240th) day
following Closing, there shall be no Permitted Overadvance then outstanding;
thereafter, no Permitted Overadvances shall be permitted, considered or made
without the express written consent of Bank.
2.5 The Revolving Credit Note. Contemporaneously herewith, Borrower
shall execute and deliver to Bank its promissory note in the principal sum of
Seven Million ($7,000,000.00) Dollars (the "Revolving Credit Note") to evidence
the Obligations with respect to the loans and advances made or to be made by
Bank to or for the benefit of Borrower under the Existing Revolving Credit and
the Revolving Credit, all as more fully described in the Revolving Credit Note,
the terms, covenants and conditions of which are hereby deemed incorporated
herein by this reference and made a part hereof. The Revolving Credit Note
replaces and supersedes (but does not extinguish any unpaid Obligations
evidenced by or constitute a novation of) the Existing Revolving Credit Note.
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2.6 Revolving Credit Term and Termination.
2.6.1 The term of the Revolving Credit shall be from the date
of this Agreement through the date that is three (3) years after the date
hereof, unless sooner terminated according to its terms. The date of termination
of the Revolving Credit is the "Expiration Date".
2.6.2 If at any time the Revolving Credit shall terminate,
Bank shall have the option to terminate and accelerate the Term Loan.
2.7 The Term Loan.
2.7.1 At Closing, Bank shall, under the terms and subject to
the conditions of this Agreement and all related instruments, agreements and
documents, make the Term Loan to Borrower.
2.7.2 Borrower may prepay, in whole or in part, at any time or
from time to time, without penalty or premium the principal of the Term Loan
(except as expressly provided herein); provided, however, that any partial
prepayment of such Loan shall be accompanied by a payment of all then accrued
and unpaid interest thereon, and any partial prepayments of such Loan shall be
applied to installments thereunder in the inverse order of their maturity (last
installment(s) credited first).
2.8 The Term Loan Note. Contemporaneously herewith, Borrower shall
execute and deliver to Bank its term promissory note in the principal sum of One
Million Nine Hundred Sixty Thousand ($1,960,000.00) Dollars (the "Term Loan
Note") to evidence Borrower's Obligations to repay Bank, with interest at the
applicable Rate, the principal sum of the Term Loan in thirty-five (35) equal
and consecutive monthly installments of principal in the amount of Thirty-Two
Thousand Six Hundred Sixty-Six and 67/100 ($32,666.67) Dollars each, plus
interest as set forth herein and in the Term Loan Note, payable monthly, in
arrears, commencing on February 1, 1998 and continuing on the first day of each
month thereafter during the term of this Agreement, followed by a final,
consecutive thirty-sixth (36th) installment of all principal, interest and other
sums owing in connection with the Term Loan, which final installment shall be
due and payable on the Expiration Date, unless the Term Loan is sooner
accelerated in accordance with the provisions of this Agreement, all as more
fully described in the Term Loan Note, the terms, covenants and conditions of
which are hereby deemed incorporated herein by this reference and made a part
hereof. The Term Loan Note replaces and supersedes (but does not extinguish any
unpaid Obligations evidenced by or constitute a novation of) the Existing Term
Loan Note
2.9 Interest Rates, Default Rate and Payment of Interest. Interest
shall accrue at the following rates (each, a "Rate") and be paid as follows:
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2.9.1 Interest on the outstanding principal balance of the
Revolving Credit shall accrue and be payable at a per annum rate equal to the
Base Rate in effect from time to time plus one-half (1/2%) percent (the
"Variable Revolving Credit Rate").
2.9.2 Interest on the outstanding principal balance of the
Term Loan shall accrue and be payable at a per annum rate equal to the Base Rate
in effect from time to time plus one (1%) percent (the "Variable Term Loan
Rate").
2.9.3 After the occurrence and during the continuance of an
Event of Default, interest on the outstanding principal balance of the Loans
shall accrue and be payable, on demand, at a per annum rate (the "Default Rate")
equal to three (3%) percent in excess of any then-applicable Rate. Bank shall
endeavor to give notice to Borrower of the imposition of the Default Rate, but
failure to give such notice shall not impair the right of Bank to impose the
Default Rate.
2.9.4 Each time the Base Rate shall change, the Variable
Revolving Credit Rate and the Variable Term Loan Rate (or the corresponding
Default Rates if applicable) shall change contemporaneously with such change in
the Base Rate. Interest on all Loans shall be calculated on the basis of a year
of three hundred sixty (360) days for the actual number of days elapsed and
payable in accordance with the Notes.
2.9.5 If, at any time, any of the Rates shall be finally
determined by any Court of competent jurisdiction, governmental agency or
tribunal to exceed the maximum rate of interest permitted by any applicable
Laws, then, for such time as such Rate(s) would be deemed excessive, application
thereof shall be suspended and there shall be charged in lieu thereof the
maximum rate of interest permissible under such laws.
2.10 Collections, Disbursements and Availability.
2.10.1 Borrower shall maintain a lockbox ("Lockbox") with Bank
and a depository account ("Cash Collateral Account") with Bank subject to the
provisions of this Paragraph. All collections of Accounts shall be paid directly
from Account Debtors into the Lockbox from which funds shall be transferred to
the Cash Collateral Account, and from which funds shall be applied by Bank,
daily, as such funds are available funds to reduce the outstanding Obligations
under the Revolving Credit (for availability purposes) with future loans,
advances and extensions of credit to be made by Bank under the conditions set
forth in this Section 2. In the event that collections of Accounts and Proceeds
of other Collateral are received by Borrower, such collections and receipts
shall be held in express trust for the benefit of Bank and remitted, in the form
received (with appropriate endorsement which Borrower hereby agrees to make), to
Bank for deposit in the Cash Collateral Account within one (1) Business Day of
receipt by Borrower. Borrower shall have no right of access to or withdrawal
from the Lockbox or the Cash Collateral Account and no interest shall accrue on
sums in such accounts.
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2.10.2 Cash advances made by Bank under the Revolving Credit
shall be made available to Borrower by crediting such proceeds to the operating
account of Borrower with Bank. Advances will be made available to Borrower on
any Business Day after a telephonic request by Borrower to Bank (made before
1:00 P.M. Philadelphia time) on such Business Day. If requested by Bank,
Borrower will confirm such request, in writing, within one (1) Business Day of
any such telephonic request. Bank may rely upon any and all telephonic and
written requests purported to be made by Borrower through any of its authorized
officers.
2.10.3 Borrower shall execute all instruments, agreements and
documents reasonably necessary to grant to Bank the right to receive all
collections of Borrower's Accounts and Proceeds of other Collateral which are
received through the lock box procedures and/or the Cash Collateral Account,
including, without limitation, Bank's lockbox and cash management services
agreements (collectively, the "Lock Box Agreement"). As part of the Obligations,
Borrower shall pay, as and when billed, all of Bank's normal and customary
charges for use of Bank's lock box facilities.
2.11 Fees.
2.11.1 For the purpose of determining availability under the
Revolving Credit, Bank agrees to give Borrower immediate credit for uncollected
items of deposit in consideration of which Borrower agrees to pay to Bank, on
demand, a fee (the "Uncollected Funds Fee") equal to two (2) days' interest on
the amount of such credit at the then applicable Variable Revolving Credit Rate.
2.11.2 Commencing August 1, 1998, and continuing on the first
day of August in each year thereafter, Borrower shall pay to Bank an annual
facility fee of Eight Thousand ($8,000.00) Dollars (the "Facility Fee") and an
annual collateral management fee of Six Thousand ($6,000.00) Dollars (the
"Collateral Management Fee"). In addition to the foregoing fees, in
consideration of the modification and extension of the Existing Credit Facility,
concurrently herewith, and as one of the conditions precedent to Closing
hereunder, Borrower shall pay to Bank a one-time modification and extension fee
in the amount of Thirty-Five Thousand ($35,000.00) Dollars (the "Modification
and Extension Fee") The foregoing fees shall be deemed earned when payable and
shall not be subject to refund or abatement in any amount, but are payable in
the last year of the term of this Agreement on a prorated amount. These fees are
part of the Obligations and secured by the Collateral.
2.11.3 In the event the outstanding principal Obligations
under the Revolving Credit are less than Five Hundred Thousand ($500,000.00)
Dollars for sixty (60) consecutive days, from and after such sixtieth (60th)
day, and until such time as the outstanding principal Obligations under the
Revolving Credit exceed Five Hundred Thousand ($500,000.00) Dollars for a period
of sixty (60) consecutive days, Borrower shall pay to Bank a fee equal to
one-quarter of one (0.25%) percent per annum of the difference between the
Maximum Line Amount and the average daily outstanding balance of the Revolving
Credit (the "Unused Line Fee"), which fee shall be calculated and payable
monthly, in arrears, as billed by Bank.
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2.12 Termination Premium. Borrower shall, simultaneously with the
termination of the Revolving Credit, pay to Bank a termination premium (the
"Termination Premium") as follows:
2.12.1 If termination occurs during the period commencing on
the date hereof and ending on the first anniversary of the Closing, the
Termination Premium payable to Bank shall be the greater of two (2%) percent of
the Credit Facility (if Bank has increased the Credit Facility) or One Hundred
Seventy-Nine Thousand Two Hundred ($179,200.00) Dollars;
2.12.2 If termination occurs during the period commencing one
year and one day after the Closing and ending on the second anniversary of the
Closing, the Termination Premium payable to Bank shall be the greater of one
(1%) percent of the Credit Facility (if Bank has increased the Credit Facility)
or Eighty-Nine Thousand Six Hundred ($89,600.00) Dollars; and
2.12.3 If termination occurs at any time after the second
anniversary of this Agreement, no Termination Premium shall be payable.
For the purposes of this Agreement, a "termination" of the Revolving Credit
shall be deemed to have occurred at such time as Borrower refinances the
Obligations with a third Person or Persons, sells or otherwise disposes of all
or substantially all of its Assets (in a single transaction or in a series of
related transactions or otherwise outside the ordinary course of Borrower's
business), raises capital through an equity offering, the proceeds of which are
used to pay the Obligations, and terminates any right to loans, advances and
extensions of credit hereunder, or suffers to occur or permits to exist an Event
of Default and an acceleration of the Obligations.
2.13 Payments to Bank; Credit to Obligations.
2.13.1 All payments of interest on and principal of the Loans,
all fees and all other sums payable to Bank hereunder shall be paid directly to
Bank in immediately available funds, in such currency of the United States of
America as is, at the time of payment, legal tender for the payment of public
and private debts. To the extent Bank sends Borrower statements of all amounts
due hereunder for interest, principal and fees, in the absence of manifest
error, such statements shall be considered correct and presumptively binding on
Borrower unless Borrower notifies Bank to the contrary within thirty (30) days
of Borrower's receipt of any statement which Borrower deems to be incorrect.
2.13.2 Bank will (and Borrower hereby authorizes Bank to)
charge any deposit account of Borrower maintained at Bank for all or any part of
any amount due hereunder including, without limitation, principal, interest,
late charges and fees and expenses reimbursable to Bank in accordance with the
terms of this Agreement and the Collateral Documents.
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2.14 Late Charges. If any payment of principal and/or interest or fees
hereunder is not received in full by Bank within ten (10) days after the due
date thereof, there shall be added to the Obligations a late charge equal to
five (5%) percent of the amount past due, but not less than Fifty ($50.00)
Dollars. The late charge shall be immediately due and payable. Payments are
deemed made the banking day on which they are received by Bank, but any payments
received after 3:00 p.m. will be deemed made the next banking day.
SECTION 3. CONDITIONS PRECEDENT.
The making of the Loans is subject to the following conditions
precedent (all documents to be in form and substance satisfactory to Bank and
its counsel):
3.1 Documents Required for Closing. Borrower shall have duly executed
and/or delivered (or caused to be duly executed and/or delivered) to Bank the
following:
3.1.1 The Revolving Credit Note, the Term Loan Note, the
Surety Agreement, the Collateral Documents and each other instrument, agreement
and document to be executed and/or delivered pursuant to this Agreement and/or
the instruments, agreements and documents referred to in this Agreement,
including, without limitation, the Questionnaire;
3.1.2 A confirmation that the Surety Security Agreement
remains in full force and effect and that all collateral security described
therein secures and shall continue to secure the Obligations;
3.1.3 The financing statements required by Paragraph 4.7
hereof;
3.1.4 A Borrowing Base Certificate dated as of the date of
Closing;
3.1.5 Payment of the Modification and Extension Fee and all
costs paid or incurred by Bank in connection with the preparation, negotiation
and administration of this Agreement, the Notes and the Collateral Documents
including, without limitation, search fees, title insurance fees, audit,
appraisal and reasonable fees and expenses of counsel representing Bank;
3.1.6 The landlord's waivers and other deliveries required by
Paragraph 4.8 hereof;
3.1.7 The searches required by Paragraph 4.9 hereof;
3.1.8 A certified (as of the date of Closing) copies of the
resolutions of the boards of directors of BFC and BBC authorizing, the
execution, delivery and performance of this Agreement, the Revolving Credit
Note, the Term Loan Note, the Collateral Documents, and each other document to
be executed and/or delivered pursuant hereto and any other instrument, agreement
or document referred to herein;
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3.1.9 Certified copies of the articles of incorporation,
certificate of incorporation, and by-laws of BFC and BBC, in each case with all
amendments thereto;
3.1.10 Certificates (dated the date of Closing) of each of the
corporate secretary's of BFC and BBC as to the incumbency and specimen
signatures of the officers of Borrower executing, this Agreement, the Revolving
Credit Note, the Term Loan Note, the Collateral Documents and each other
document to be executed and/or delivered pursuant hereto or thereto;
3.1.11 Certificates, as of the most recent dates practicable,
of the Secretary of State of the state of incorporation and of each other state
or jurisdiction in which BFC and BBC is qualified as a foreign entity, and the
department of revenue or taxation of each of the foregoing states or
jurisdictions, as to the subsistence and/or good standing, as applicable;
3.1.12 A certificate of the corporate secretary of Surety as
to the incumbency and specimen signatures of each officer executing the Surety
Agreement for Surety, and each other instrument, agreement, and document
required to be executed and/or delivered in connection therewith; and certified
copies of the articles or certificate of incorporation of Surety, with all
amendments thereto;
3.1.13 A certificate, dated the date of the Closing, signed by
the President of BFC and BBC to the effect that:
(a) The representations and warranties set forth in
Section 5 of this Agreement are true and correct as of the date of the Closing;
and
(b) No Event of Default hereunder, and no event
which, with the giving of notice or the passage of time, or both, would
constitute an Event of Default, has occurred as of Closing;
3.1.14 Copies of all documents evidencing the terms and
conditions of any Indebtedness specified as Subordinated Indebtedness on Exhibit
1.40 to this Agreement and subordination agreements from the holders of
Subordinated Indebtedness;
3.1.15 No Material Adverse Effect shall have occurred since
the date of the most recent Financial Statements submitted to Bank or field
examination conducted by Bank;
3.1.16 The written opinion of Borrower's and Surety's counsel,
dated the date of Closing and addressed to Bank;
3.1.17 Proof satisfactory to Bank that Borrower has obtained
all required property, liability and casualty insurance with respect to all of
its real and personal property (including the Acquired Assets). Bank shall be
named as lender loss payee, mortgagee and additional insured, as its interest
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may appear, on all such policies of insurance and its interests shall be insured
notwithstanding acts or negligence on the part of Borrower;
3.1.18 All instruments, agreements and documents required to
be delivered by Borrower pursuant to Bank's commitment letter dated December 2,
1997 (the "Commitment Letter");
3.1.19 Copies of the Asset Purchase Agreement and all
instruments, agreements and documents relative to the acquisition by Surety and
Borrower of the Acquired Assets;
3.1.20 Copies of the Debentures Purchase Documents and the
Preferred Stock Documents;
3.1.21 Evidence of the acquisition by Surety and BBC of the
Acquired Assets pursuant to the Asset Purchase Agreement and all related
instruments, agreements and documents and, without limiting the generality of
the foregoing, evidence of the consummation of the transactions described in
such documents in accordance with all applicable Law;
3.1.22 Evidence of the consummation of the transactions
described in the Debentures Purchase Documents and the Preferred Stock Documents
in accordance with their respective terms and all applicable Law, together with
copies of any opinions issued by counsel to the parties to the Asset Purchase
Agreement, the Debentures Purchase Documents and the Preferred Stock Documents
and the express, written consent of the issuers of such opinions to Bank's
reliance thereon as if the same were addressed to Bank; and
3.1.23 Such other instruments, agreements and documents as may
be required by Bank and/or its counsel.
3.2 Documents Required for Subsequent Disbursements Under the Revolving
Credit. Borrowing Base Certificates shall be delivered with each request for an
advance under the Revolving Credit, but not less than weekly (irrespective of
whether a request for an advance on any such date is then outstanding). Bank
reserves the right to require Borrower to furnish at any time and from time to
time schedules of the invoices relating to the Accounts giving rise to
availability under the Revolving Credit and copies of the invoices relating to
the Accounts giving rise to availability under the Revolving Credit and credit
memos relating to Accounts.
3.3 Certain Events. At the Closing and upon Borrower's request for an
advance under the Revolving Credit:
3.3.1 No Event of Default or Potential Default shall have
occurred, and no event shall have occurred;
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3.3.2 No Material Adverse Effect shall have occurred since the
date of this Agreement;
3.3.3 All of the Collateral Documents shall have remained and
be in full force and effect; and
3.3.4 Satisfaction of all conditions to closing set forth in
the Commitment Letter.
3.4 Legal Matters. At the time of Closing, and at each request for an
advance under the Revolving Credit, all legal matters incidental thereto shall
be reasonably satisfactory to Bank and its counsel.
SECTION 4. COLLATERAL SECURITY.
4.1 Composition of the Collateral. The property in which a lien or
security interest is granted and/or reaffirmed pursuant to the provisions of
Paragraphs 4.2 and 4.3 of this Agreement, together with the Proceeds thereof, is
herein collectively called the "Collateral". The Collateral, together with all
of Borrower's other property of any kind held by Bank, shall stand as one
general, continuing collateral security for all Obligations and may be retained
by Bank until all Obligations have been paid and satisfied in full.
4.2 Rights in Property Held by the Bank. As security for the prompt
payment and satisfaction of all Obligations, Borrower hereby grants Bank (and
hereby reaffirms its prior grant to Bank pursuant to the Existing Loan Agreement
of) a first lien on and a security interest in and to, all amounts that may be
owing from time to time by Bank to Borrower in any capacity including, without
limitation, any balance or share belonging to Borrower of any deposit or other
account with Bank, which lien and security interest shall be independent of any
right of set-off which Bank has or may have, and all property of Borrower which
at any time Bank shall have in its possession, or which is in transit to Bank.
4.3 Rights in Property Held by the Borrower. As security for the prompt
payment and satisfaction of all Obligations, Borrower hereby grants Bank (and
hereby reaffirms its prior grant to Bank pursuant to the Existing Loan Agreement
of) a continuing lien on and security interest in and to, all of the following,
wherever located, whether now owned or hereafter acquired, together with all
replacements, additions and substitutions therefor and the Proceeds thereof:
4.3.1 Accounts;
4.3.2 Chattel Paper;
4.3.3 Contracts;
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4.3.4 Documents;
4.3.5 Equipment (including, without limitation, rolling
stock);
4.3.6 Fixtures;
4.3.7 General Intangibles (including, without limitation, all
chooses in action, tax refunds and obligations or other refunds now or hereafter
owing to Borrower, customer lists, rights and franchises, sales and consignment
Contracts, patent(s) and patent application(s), copyright(s) and copyright
application(s), trademarks, logos, and tradenames);
4.3.8 Instruments including, without limitation, any and all
Instruments evidencing intercompany Indebtedness among BBC, BFC, Surety and/or
their Affiliates and security interests securing such Indebtedness
4.3.9 Inventory;
4.3.10 Investment Property;
4.3.11 Leaseholds;
4.3.12 Rights as sellers of Goods and rights to returned or
repossessed Goods; and
4.3.13 The Records.
4.4 Assignment of Life Insurance Policy. Contemporaneously herewith,
Borrower shall deliver to Bank (or confirm that Bank holds) an assignment of a
life insurance policy on the life of Joseph F. Weiderman for an amount not less
than Five Hundred Thousand ($500,000.00) Dollars (the "Assignment of Life
Insurance") together with evidence of premiums prepaid. The foregoing assignment
of life insurance policy shall be acknowledged in writing by the issuer of such
policy.
4.5 Mortgage. Contemporaneously herewith, pursuant to a Modification of
Open-End Mortgage and Security Agreement and Absolute Assignment of Leases and
Rents, Borrower shall confirm that the liens of Bank in and to the Mortgaged
Property and all existing and future leases, rents, issues and profits arising
out of and/or relating to the Mortgaged Property secure and shall continue to
secure the Obligations. The aforementioned mortgage lien shall continue to be
insured as a second mortgage lien, subject only to a prior lien securing
Indebtedness of not more than One Million Six Hundred Fifty Thousand
($1,650,000.00) Dollars.
4.6 Priority of Liens. The foregoing liens shall be first and prior
liens except for Permitted Liens.
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4.7 Further Assurances.
4.7.1 At Closing and thereafter as Bank reasonably deems
necessary, Borrower shall:
(a) Join with the Bank in executing financing
statements (including amendments thereto and continuation statements thereof) as
Bank may specify, which Bank may file or record in any jurisdiction where
Collateral is maintained and in any other jurisdiction that Bank deems
appropriate;
(b) Pay or reimburse Bank for all costs and taxes of
filing or recording the same in such public offices as Bank may designate; and
(c) Take such other and further steps as Bank may
direct including, without limitation, noting of Bank's liens on the Collateral
and on any certificates of title evidencing Borrower's ownership of Collateral,
delivering to Bank all notes, documents of title, bills of lading, chattel
paper, instruments and any other similar Collateral, all to perfect the Bank's
interest in and to the Collateral, and to otherwise effectuate the intentions
and objects of this Agreement and all related instruments, agreements and
documents.
4.7.2 In addition to the foregoing, and not in limitation
thereof:
(a) A carbon, photographic, or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof; and
(b) To the extent lawful, Borrower hereby appoints
Bank as its attorney-in-fact (without requiring Bank to act as such) to do any
of the following: execute any financing statement or mortgage on properties
owned in fee simple by Borrower in the name of Borrower; and/or perform all
other acts that Bank deems appropriate to secure, perfect and continue its
security interest in, and to protect and preserve, the Collateral.
4.8 Landlords' Waivers. Borrower will cause the landlord of each
premises leased by Borrower to execute and deliver to Bank instruments, in form
and substance satisfactory to the Bank and its counsel, by which each such
landlord waives its rights, if any, to any and all of the Collateral. In the
event Borrower is unable to obtain any such instruments of waiver, Bank reserves
the right to establish appropriate reserves against sums otherwise available
under the Revolving Credit in respect of amounts for which any such landlords
may be able to realize from the Collateral.
4.9 Searches. Borrower shall, prior to or at Closing, and thereafter,
at its expense, obtain and deliver to Bank (or if obtained by Bank, pay Bank
for) Uniform Commercial Code, judgment and federal and state tax lien searches
against Borrower and Seller (with respect to the Acquired Assets), showing that
Bank's security interests in and liens on the Collateral (including the Acquired
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Assets), shall be, upon perfection, security interests in and liens thereon with
the priority rights agreed to in this Agreement, and not subject to any liens,
claims and encumbrances, except for Permitted Liens. Borrower shall also deliver
Good Standing and Corporate Tax Lien Search Certificates showing no liens on the
Collateral and showing Borrower to be in good standing (or its equivalent under
applicable Law) in each jurisdiction in which the nature of its business or
Collateral makes such qualification necessary or desirable.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
5.1 Inducement to Bank. To induce Bank to enter into this Agreement,
Borrower represents and warrants to Bank that:
5.1.1 The representations and warranties of Borrower to Bank
set forth on the Questionnaires are true and correct as of the date hereof and
are incorporated herein by this reference as if set forth at length herein;
5.1.2 BFC is a corporation duly organized, validly existing
and in good standing under the Laws of the State of Delaware and BBC is a
corporation duly organized, validly existing and in good standing under the Laws
of the Commonwealth of Pennsylvania and Borrower is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which the nature
of its business or Collateral makes such qualification necessary or desirable
except where the failure to so qualify would not result in a Material Adverse
Effect; Borrower has the lawful power and capacity to own its property and to
engage in the business it conducts;
5.1.3 Borrower is not in default with respect to any of its
existing Indebtedness, and the making and performance of this Agreement, the
Notes and the Collateral Documents will not (immediately, with the passage of
time, or with the giving of notice and the passage of time):
(a) Violate the articles of incorporation,
certificates of incorporation or by-laws of Borrower or, in any material
respect, violate any Laws or result in a default under any material Contract,
agreement or instrument to, which Borrower is a party or by which Borrower or
its properties or assets are or may be bound; or
(b) Result in the creation or imposition of any
security interest in, or lien or encumbrance upon, any of the Assets, except
such as are in favor of Bank;
5.1.4 Borrower has the power, authority and capacity to enter
into and perform this Agreement, the Notes and the Collateral Documents, and to
incur the Obligations herein and therein provided for, and Borrower has taken
all proper and necessary corporate action to authorize the execution, delivery
and performance of this Agreement, the Notes and the Collateral Documents;
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5.1.5 This Agreement and the Collateral Documents are, and the
Notes when delivered will be, valid, binding and enforceable against Borrower in
accordance with their respective terms;
5.1.6 Except as disclosed in Exhibit 5.1.6, attached hereto,
incorporated herein by this reference and hereby made a part hereof, there are
no judgments or judicial or administrative orders or proceedings pending, or to
the knowledge of Borrower threatened, against or affecting Borrower or the
property of Borrower in any court or before any governmental authority or
arbitration board or tribunal. Except as disclosed on Exhibit 5.1.6, Borrower is
not in default under any order of any court, governmental authority, arbitration
board or tribunal or administrative agency. Exhibit 5.1.6 further discloses, all
judgments, or judicial or administrative orders or proceedings pending or
threatened against or affecting Borrower or the Collateral as of the date
hereof;
5.1.7 Borrower has good and marketable title in fee simple (or
its equivalent under applicable law) to all of the properties and Assets it
purports to own including, without limitation, all property reflected in its
financial statements (including the Financial Statements), free from liens,
claims and encumbrances of any third party, except for Permitted Liens;
5.1.8 The Financial Statements are correct and complete in all
material respects and fully and fairly present the financial condition of
Borrower as of the date thereof and the results of the operations of Borrower
for the periods covered thereby. The Financial Statements submitted by Borrower
to Bank, the Collateral Documents and all related instruments, agreements and
documents, or any written statement furnished by Borrower and/or the Surety to
Bank in connection with the negotiation of the Loans and/or this Agreement or
any related instrument, agreement or document, do not contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact known to
Borrower, which Borrower has not disclosed in writing to Bank, which materially
affects adversely or, so far as Borrower can now foresee, may materially affect
adversely the Collateral, business, prospects, profits or the condition
(financial or otherwise) of Borrower or the ability of Borrower to perform under
this Agreement, the Collateral Documents or the Notes;
5.1.9 Borrower has no material Indebtedness of any nature
including, without limitation, liabilities for taxes and any interest or
penalties relating thereto, except to the extent reflected (in a footnote or
otherwise) and reserved against in the Financial Statements or as disclosed in
or permitted by this Agreement. Borrower does not know, and has no reasonable
ground to know, of any basis for the assertion against it (individually or
jointly) of any material Indebtedness of any nature not fully reflected and
reserved against in the Financial Statements or as proposed in or permitted by
this Agreement;
5.1.10 Borrower has filed or caused to be filed all federal,
state and local tax returns and other reports it is required by Laws to file
prior to the date hereof, has paid or caused to be paid all taxes, assessments
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and other governmental charges that are due and payable prior to the date
hereof, and has made adequate provision for the payment of such taxes,
assessments or other charges accruing but not yet payable. Borrower has no
knowledge of any deficiency or additional assessment against it in connection
with any taxes, assessments or charges not provided for on its Records;
5.1.11 Borrower has complied in all material respects with all
applicable Laws (including, without limitation, all Laws relating to or
pertaining to the environment, human health or safety or public welfare
including, without limitation, the American with Disabilities Act and all
material agreements to which Borrower or Surety is subject) with respect to (a)
restrictions, specifications or other requirements pertaining to products that
it manufactures and sells or to the services it performs, (b) the conduct of its
business operations, and (c) the use, maintenance and operation of the real and
personal property owned or leased by it;
5.1.12 No representation or warranty by Borrower contained
herein, or in any certificate or other document furnished by Borrower pursuant
hereto, contains any untrue statements of material fact or omits to state a
material fact necessary to make any such representation or warranty not
misleading in light of the circumstances under which it was made;
5.1.13 No consent, approval or authorization of, or filing,
registration or qualification with, any Person is required to be obtained by
Borrower in connection with the execution and delivery of this Agreement, the
Notes and the Collateral Documents or the undertaking or performance of any
Obligation hereunder or thereunder;
5.1.14 Except as described on Exhibit 5.1.14 attached hereto,
incorporated herein by this reference and hereby made a part hereof, Borrower
has no material leases, contracts or commitments of any kind (such as employment
agreements, collective bargaining agreements, powers of attorney, distribution
arrangements, patent license agreements, contracts for future purchase or
delivery of Goods or rendering of services, bonds, pension and retirement plans,
or accrued vacation pay, insurance and welfare agreements), that would
materially and adversely affect the condition (financial or otherwise) of
Borrower. All parties (including Borrower) to all such material leases,
contracts and other commitments to which Borrower is a party have, to the best
of Borrower's knowledge, materially complied with the provisions of such leases,
contracts and other commitments and no party is, to the best of Borrower's
knowledge, in default thereunder and no event has occurred which, with the
giving of notice or the passage of time, or both, could constitute a default
thereunder;
5.1.15 Borrower has not committed Bank to the payment of any
brokerage fee or commission in connection with this transaction and, if any such
claim is made against Bank by any broker, finder or agent or any other Person,
Borrower will indemnify, defend (at its expense, engage counsel reasonably
acceptable to Bank) and hold Bank harmless against any such claim, at its own
cost and expense, including Bank's reasonable counsel fees. Borrower further
agrees that until any such claim or demand is adjudicated in Bank's favor, the
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amount claimed and/or demanded shall be deemed part of the Obligations secured
by the Collateral;
5.1.16 Each Employee Benefit Plan is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code. No steps have been taken to terminate any Employee
Benefit Plan, and no contribution failure has occurred with respect to any
Employee Benefit Plan sufficient to give rise to a lien under Section 302(f) of
ERISA. No condition exists or event or transaction has occurred with respect to
any Employee Benefit Plan which might result in the incurrence by Borrower or
any member of the Controlled Group of any material liability, fine or penalty.
Neither Borrower nor any member of the Controlled Group has contingent liability
with respect to any post-retirement benefit under any Employee Benefit Plan,
other than liability for continuation coverage described in Part 6 of Title I of
ERISA. Neither Borrower nor any member of the Controlled Group currently or in
the past has been a party to a "multiemployer plan" within the meaning of
Section 4001(1)(3) of ERISA;
5.1.17 Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of the Loans has been or will be used,
directly or indirectly, to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock;
5.1.18 Borrower has obtained all licenses, permits, franchises
or other governmental authorizations necessary to the ownership of its property
and assets and to the conduct of its business, except where the failure to
obtain would not result in a Material Adverse Effect, all of which are in good
standing and free from any claim of invalidity, defect or ineffectiveness;
5.1.19 Borrower has filed all reports required to be filed
with any federal or state Securities and Exchange Commission or similar agency
and is in full compliance with applicable rules and regulations thereof;
5.1.20 The transactions described in the Asset Purchase
Agreement and related instruments, agreements and documents, the Debentures
Purchase Documents and the Preferred Stock Documents have been consummated in
accordance with their respective terms and all applicable Law, and the Acquired
Assets have been transferred to and are held by BBC, subject to no liens, claims
or encumbrances except in favor of Bank; and
5.1.21 Within the past three (3) years, neither the business,
properties or assets of Borrower have been materially and adversely affected in
any way by any casualty, strike, lockout, combination of workers, order of the
United States of America, or any state or local government, or any political
subdivision or agency thereof, directed against Borrower.
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5.2 Survival. By completing a closing hereunder, Bank does not thereby
waive any breach of warranty or misrepresentation made by Borrower hereunder, or
under any other document or agreement delivered to Bank at Closing or otherwise
referred to herein, and all of Bank's claims and rights resulting from any
breach or misrepresentation by Borrower are expressly reserved by Bank. All of
the foregoing representations and warranties set forth in this Section 5 shall
survive until all Obligations are paid and satisfied in full.
SECTION 6. BORROWER'S COVENANTS.
6.1 Affirmative Covenants. Borrower covenants and agree with Bank that,
so long as any of the Obligations remain unsatisfied and outstanding, Borrower
will comply with the following covenants:
6.1.1 Borrower will use the proceeds of the Loans for the
purposes set forth in this Agreement only, and will furnish Bank with such
evidence as Bank may reasonably require with respect to such use;
6.1.2 Borrower will furnish (or cause to be furnished to) Bank
with such data and information (financial or otherwise) as Bank may request, all
in form and substance satisfactory to Bank in its sole and absolute discretion,
including, without limitation:
(a) Within ninety (90) days after the end of each
fiscal year of Borrower annual, audited consolidating and consolidated financial
statements of Borrower and Surety prepared in accordance with GAAP certified by
an independent certified public accountant acceptable to Bank ("Borrower's
Accountant"). The accountant firm of Goldenberg, Rosenthal and Friedlander is
presently acceptable to Bank;
(b) Within thirty (30) days after the end of each
month, internally prepared monthly consolidating and consolidated financial
statements of Borrower and Surety, prepared in accordance with GAAP, certified
by the President or Chief Financial Officer of BFC, BBC and Surety to be true
and correct, and otherwise acceptable to Bank;
(c) Within ten (10) days after the end of each month,
agings of Accounts receivable and Accounts payable, and inventory reports all of
which shall be certified to be true and correct by the President or Chief
Financial Officer of BFC and BBC;
(d) On or before November 30 of each year, a
projected consolidating and consolidated balance sheet and profit and loss
statement of Borrower and Surety for the subsequent fiscal year;
(e) Within ten (10) days after their submission to
the applicable taxing authority, copies of Borrower's and Surety's income tax
returns;
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(f) Within ten (10) days after their submission to
the Securities Exchange Commission, copies of Surety's Form 10K, Form 10Q and
any other forms, documents or reports required to be filed or submitted by
Surety under applicable securities Laws.
6.1.3 Borrower will maintain its Inventory, Equipment, real
estate and other properties in good condition and repair (normal wear and tear
excepted), and will pay and discharge, or cause to be paid and discharged, when
due, the cost of repairs to or maintenance of the same, and will pay, or cause
to be paid, all rental or mortgage payments due on such real estate;
6.1.4 Borrower will maintain, or cause to be maintained,
public liability insurance, hazard, casualty and extended coverage insurance on
all assets owned by Borrower, all in such amounts as is consistent with industry
practices and with such insurers as may be reasonably satisfactory to Bank,
together with loss payable and mortgagee endorsements in favor of Bank providing
for not less than thirty (30) days written notice to Bank of any alteration or
cancellation of such coverage, and insuring Bank notwithstanding an act or
neglect to act on the part of Borrower or Surety. Borrower will furnish to Bank
such evidence of insurance as Bank may reasonably require. Borrower hereby
assigns to Bank any returned or unearned premiums that may be due it upon
cancellation of any such policies for any reason whatsoever, and directs the
insurers to pay Bank any amounts so due. Bank is hereby appointed Borrower's
attorney-in-fact (without requiring Bank to act as such) to endorse any check
which may be payable to Borrower and to collect such returned or unearned
premiums or the proceeds of any such insurance. Any amount so collected may be
applied by Bank toward satisfaction of any of the Obligations in such order as
Bank may elect;
6.1.5 Borrower will pay or cause to be paid when due, all
taxes, assessments and charges or levies imposed upon Borrower or on any of its
properties or which it is required to withhold and pay over;
6.1.6 Borrower will, when requested to do so, make available
for inspection by duly authorized representatives of Bank any of the Records,
and furnish Bank any information regarding its business affairs and financial
condition. Bank may at any time and from time to time, on reasonable notice to
Borrower, and, absent the existence of an Event of Default, during normal
business hours, and at Borrower' expense conduct field examinations and/or
audits of the Collateral and/or the Records; provided, however, absent the
existence of an Event of Default, the reimbursement obligation of Borrower to
Bank in connection with such field examination shall be deemed to be satisfied
by the payment of the Collateral Management Fee;
6.1.7 Borrower will take all necessary steps to preserve its
corporate existence and franchises, and Borrower will comply with all present
and future Laws applicable to it in the operation of Borrower's business
including, without limitation, all Environmental Laws and the Americans with
Disabilities Act, and will comply with all material agreements to which Borrower
is subject;
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6.1.8 Borrower will collect its Accounts and sell its
Inventory, and provide services, only in the ordinary course of its business;
6.1.9 Borrower will give prompt notice to Bank of (a) any
litigation to which Borrower is a party (whether or not the claim is considered
to be covered by insurance) in which the amount in controversy exceeds
Twenty-Five Thousand ($25,000.00) Dollars, and (b) the institution of any other
suit or any administrative proceeding involving Borrower that might materially
and adversely affect Borrower's operations, financial condition, prospects,
property or business;
6.1.10 Borrower will pay when due all Indebtedness due third
Persons (including, but not limited to, rent and other consideration payable for
occupancy of any of its leased locations), except when the amount thereof is
being contested in good faith, by appropriate proceedings and with adequate
reserves therefor being set aside on the Records. If any default is made by
Borrower in the payment of any principal (or an installment thereof), of, or
interest on, any such Indebtedness (including rent, as aforesaid), Bank shall
have the right, in its discretion and without obligation, to pay such interest
or principal for the account of such Borrower and shall be immediately
reimbursed therefor on demand by Borrower;
6.1.11 Borrower will give written notice to Bank promptly upon
becoming aware of the occurrence of any Event of Default or of any Potential
Default, or of the failure of Borrower to observe any of its undertakings
hereunder, which notice shall specify the nature of such event or Event of
Default and the period of existence of the same;
6.1.12 Borrower and Surety will maintain their operating and
deposit accounts with Bank;
6.1.13 Borrower will notify Bank in writing ten (10) days in
advance of any change in the location of any of its places of business or
locations of Collateral or of the establishment of any new, or the
discontinuance of any existing, place(s) of business or locations of Collateral;
6.1.14 Borrower will, to the extent applicable: (a) make all
contributions to, and payments from, the Employee Benefit Plans when they are
required to be made in accordance with the Employee Benefit Plans and, when
applicable, Section 302 of ERISA; (b) furnish Bank, promptly after the filing of
the same, with copies of all reports or other statements filed with the United
States Department of Labor, the PBGC or the IRS with respect to all such Plans,
or which Borrower, or any member of a Controlled Group, may receive from the
United States Department of Labor, the IRS or the PBGC, with respect to all such
Employee Benefit Plans, and (c) promptly advise Bank of the occurrence of any
"reportable event" as defined in Section 4043 of ERISA or "prohibited
transaction" as defined in Section 406 of ERISA, with respect to any such
Employee Benefit Plan(s) and the action it proposes to take with respect
thereto.
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6.1.15 Borrower will, on demand, make available to Bank
shipping and delivery receipts evidencing the shipment of the Goods that gave
rise to an Account and completion certificates or other proof of the
satisfactory performance of services that gave rise to an Account, and deliver
to Bank copies of the invoices for each Account and copies of any written
Contract(s) or order(s) from which an Account arose;
6.1.16 Borrower will promptly notify Bank if any Account
arises out of Contracts with the United States or any department, agency or
instrumentality thereof, and will execute any instruments and take any steps
required by the Bank so that all monies due and to become due under such
Contracts shall be assigned to Bank and notice thereof given to the government
under the Federal Assignment of Claims Act;
6.1.17 Borrower will, when requested by Bank from time to
time, give Bank specific assignments and schedules of Accounts after they come
into existence, the form and content of such assignments and schedules to be
reasonably satisfactory to Bank and its counsel;
6.1.18 Borrower hereby irrevocably authorizes and directs all
accountants and auditors employed by Borrower at any time during the term of
this Agreement and until all Obligations have been paid and satisfied to exhibit
and deliver to Bank copies of any of Borrower's financial statements, trial
balances or other Records in their possession, and to disclose to Bank any
information they may have concerning Borrower's financial status and business
operations, as requested by Bank. Subject to the provisions of Paragraph 6.1.6
of this Agreement, limiting the reimbursement obligations of Borrower and the
access by Bank, Bank may, by its agents, employees or representatives, without
hindrance or delay, and without the same being a trespass, enter upon, examine
and inspect all premises where Borrower transacts business or maintains Records
and may examine, inspect, audit and make extracts from Borrower's Records at
Borrower's sole cost. Borrower irrevocably authorizes any Person in possession
of any of Borrower's Records to furnish the same to Bank, releasing such Person
of all liability;
6.1.19 Borrower will, if requested by Bank, mark its Records
concerning Inventory and Accounts in a manner reasonably satisfactory to Bank to
evidence Bank's lien on and security interest therein;
6.1.20 Borrower will, upon receipt of any Instrument or
Chattel Paper delivered on account of any Account or otherwise, immediately
notify Bank and, if requested by Bank, endorse and/or assign and deliver the
same to Bank; and
6.1.21 Borrower shall continue to maintain the conditions and
status of the warranties and representations set forth in Section 5 of this
Agreement, except for those warranties and representatives which speak as of a
particular date, as if each such warranty and representation were set forth at
length herein in the form of a continuing covenant which requires compliance.
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6.2 Negative Covenants. Borrower hereby covenants and agrees that, so
long as any of the Obligations remain unsatisfied and outstanding, without the
prior written consent of the Bank:
6.2.1 Borrower will not change its name, enter into any
merger, consolidation or reorganization or reclassify its capital stock;
6.2.2 Borrower will not sell, transfer, assign, lease or
otherwise dispose of all or (except in the ordinary course of business) any
material part of its Assets;
6.2.3 Borrower will not mortgage, pledge, grant or permit to
exist a security interest in or lien on any of its Assets of any kind, real or
personal, tangible or intangible, now owned or hereafter acquired, except for
Permitted Liens;
6.2.4 Borrower will not hereafter become liable, directly or
indirectly, as surety, endorser or otherwise for any Indebtedness or obligation
of any other Person, except for endorsement of commercial paper for deposit or
collection in the ordinary course of business;
6.2.5 Borrower will not incur, create, assume or permit to
exist any Indebtedness except (a) the Loans, (b) existing Indebtedness as set
forth in the Financial Statements (except for Indebtedness to be repaid with
proceeds of the Loans), (c) trade Indebtedness incurred in the ordinary course
of business, (d) Indebtedness secured by Permitted Liens and (e) Indebtedness
secured by purchase money liens, provided (i) Borrower may not incur such
indebtedness in excess of Four Hundred Thousand ($400,000.00) Dollars per year,
and (ii) the lien to secure any such purchase money indebtedness shall be
limited to the Asset(s) acquired with the proceeds of such purchase money
Indebtedness and the amount of any such lien shall be equal to the lesser of the
cost or fair value of the Asset(s) so acquired. If any Assets are purchased and
then made an integral part of a unit of property on which Bank has a lien so
that removal of the purchase money lien Asset(s) will materially and adversely
affect the value of the property to which it is attached, Borrower agrees that
it will not acquire such Asset(s) on purchase money lien arrangements;
6.2.6 Borrower will not declare or pay any dividends, or make
any payments or distributions on account of its capital stock except so long as
no Event of Default has occurred and is continuing, and so long as the
declaration, payment or distribution on account of its capital stock would not
result in the existence of any Event of Default: Borrower may declare, pay and
distribute cash dividends in an amount up to twenty-five (25%) percent of the
after tax income of Borrower for its preceding fiscal year, as determined with
reference to the annual, audited financial statements of Borrower furnished to
Bank pursuant to this Agreement; and Surety may declare, pay and distribute cash
dividends pursuant to the Preferred Stock Documents;
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6.2.7 Borrower will not pay management fees to any Affiliate
in an amount in excess of Twenty-Five Thousand ($25,000.00) Dollars per year (on
a non-cumulative basis);
6.2.8 Borrower will not form any subsidiary, and Borrower will
not make any investments in or make any loans or advances in the nature of any
investments to any Person;
6.2.9 Borrower will not make or have outstanding any loans or
advances in the nature of loans to any Person, including, without limitation,
any officer, shareholder, director, employee or Affiliate of Borrower; provided,
however, (i) BFC may use proceeds of the Loans to make loans to BBC, provided
that any and all Instruments, agreements and documents which evidence and/or
secure such loans are simultaneously assigned and delivered to Bank as
Collateral hereunder, (ii) cash loans to officers of Borrower up to the
aggregate sum of Two Hundred Fifty Thousand ($250,000.00) Dollars, and (iii)
loans to officers of Borrower for stock subscribed (provided such proceeds of
loans are actually paid or applied in consideration of subscribed stock);
6.2.10 Borrower will not purchase or otherwise invest in or
hold securities, non-operating real estate or other non-operating assets, except
(a) direct obligations of the United States of America, (b) the present
investment in any such assets, (c) operating assets that hereafter become
non-operating assets, and (d) any single investments not in excess of One
Hundred Thousand ($100,000.00) Dollars or investments (each limited as
aforesaid) of not more than Three Hundred Thousand ($300,000.00) Dollars in the
aggregate;
6.2.11 Borrower will not issue, redeem, purchase or retire any
of its capital stock or grant or issue any warrant, right or option pertaining
thereto or other security convertible into any of the foregoing;
6.2.12 Borrower will not prepay any Subordinated Indebtedness,
Indebtedness for borrowed money, or Indebtedness secured by any of Borrower's
Assets (except the Obligations), or enter into or modify any agreement as a
result of which the terms of payment of any of the foregoing Indebtedness are
waived or modified;
6.2.13 Borrower will not enter into sale-leaseback
transactions;
6.2.14 Borrower will not acquire any stock in, or all or
substantially all of the assets of, any Person;
6.2.15 Borrower will not furnish Bank any certificate or other
document that will contain any untrue statement of material fact or that will
omit to state a material fact necessary to make it not misleading in light of
the circumstances under which it was furnished;
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6.2.16 Borrower will not directly or indirectly apply any part
of the proceeds of the Loans to the purchasing or carrying of any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, or any regulations, interpretations or rulings thereunder; and
6.2.17 Borrower shall not use Bank's name or the name of any
of Bank's Affiliates in connection with any of Borrower's businesses or
activities except in connection with routine credit references and as may be
required in its dealings with any governmental agency. Nothing herein contained
is intended to permit or authorize Borrower to make any contract on behalf of
Bank, nor shall this Agreement be construed as creating a partnership, joint
venture or making Bank an investor in Borrower;
The foregoing limits and restrictions applicable to Borrower shall also be
deemed applicable to Borrower and Surety as if consolidated. By way of example,
cash loans to officers of Borrower and/or Surety are limited to the aggregate
sum of Two Hundred Fifty Thousand ($250,000.00) Dollars outstanding and are not
permitted in excess of such sum without the prior, written consent of Bank.
6.3 Financial Covenants. Borrower covenants and agrees with Bank that,
so long as any of the Obligations remain unsatisfied and outstanding, it will
comply (and cause Surety to comply) with the following financial covenants (all
calculations to be made in accordance with GAAP on a consolidated basis):
6.3.1 Borrower and Surety shall at all times maintain a ratio
of Senior Liabilities (defined to be all Liabilities minus the long-term portion
of Subordinated Indebtedness) to Tangible Capital Funds (defined to be Tangible
Net Worth plus the long-term portion of Subordinated Indebtedness) of not more
than 2.00 to 1.00;
6.3.2 Borrower and Surety shall, as of the last day of
Borrower's fiscal year, achieve net income from operations (excluding
extraordinary items and net loss carry-forwards) of not less than One Million
($1,000,000.00) Dollars for such fiscal year; and
6.3.3 Borrower and Surety shall, as of the last day of
Borrower's fiscal year, have a debt service coverage ratio of not less than 1.10
to 1.00. For purposes of this covenant, "debt service coverage ratio" shall mean
the ratio of earnings before interest, taxes, depreciation and amortization
minus dividends paid to the sum of principal of all Indebtedness (other than
inter-company Indebtedness) paid within the twelve (12) month period prior to
date of determination, plus interest, taxes and unfinanced capital expenditures
(defined in accordance with GAAP).
6.4 Special Covenants.
6.4.1 Bank shall have the right at any time and from time to
time, after the occurrence and during the continuance of an Event of Default, to
notify any and all Account Debtors obligated on any Account to make payments
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thereon directly to Bank and to take control of the cash and noncash proceeds of
any such Account. The cost of all such collection and enforcement, including
reasonable attorneys' fees and out-of-pocket expenses, shall be deemed part of
the Obligations secured by the Collateral, irrespective of whether the same are
incurred by Bank or Borrower.
6.4.2 Each of the officers of Bank is hereby irrevocably made,
constituted and appointed the true and lawful attorney for Borrower (without
requiring any of them to act as such) with full power of substitution to do the
following: (a) endorse the name of Borrower upon any and all checks, drafts,
money orders and other instruments for the payment of monies that are payable to
Borrower and constitute collections on Accounts; (b) after the occurrence and
during the continuance of an Event of Default, to sign and endorse the name of
Borrower upon any invoices and Documents including, without limitation, freight
or express bills, bills of lading and storage or warehouse receipts relating to
the Collateral; (c) to give written notices and request verifications and
execute assignments with respect to Accounts, Contracts and rights in General
Intangibles; (d) after the occurrence and during the continuance of an Event of
Default, to give written notice to such officers and officials of the United
States Post Office to effect such change or changes of address so that all mail
may be delivered directly to Bank (all mail not related to the Obligations or
the Collateral shall be returned to Borrower); (e) execute in the name of
Borrower any schedules, assignments, instruments, documents and statements that
Borrower is obligated to give Bank hereunder; and (f) do such other and further
acts and deeds in the name of Borrower that Bank may reasonably deem necessary
or desirable to perfect Bank's security interest or lien in the Collateral
enforce any Account or other Collateral.
SECTION 7. DEFAULT.
7.1 Events of Default. Each of the following events shall constitute an
Event of Default and Bank shall thereupon have the option (which is not intended
to diminish, alter or limit Bank's rights described in this Agreement, the
Collateral Documents or any related instruments, agreements and documents) to
declare Borrower in default under this Agreement, the Collateral Documents, the
Notes, and all other agreements with Bank, and declare all existing and future
liabilities, indebtedness and Obligations accelerated and immediately due and
payable, including, without limitation, interest, principal, expenses, advances
to protect Bank's position and reasonable counsel fees to enforce this
Agreement, the Collateral Documents, and all related instruments, agreements and
documents, and all of Bank's rights hereunder and thereunder, all without
demand, notice, presentment or protest, or further action of any kind, except as
specified herein:
7.1.1 Borrower shall fail to pay, when due, any installment of
principal, interest, or fee or other charge payable hereunder or under any of
the Notes or the Collateral Documents to Bank;
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7.1.2 Borrower shall fail to observe or perform any other
obligation or covenant to be observed or performed by Borrower hereunder or
under any of the Collateral Documents, or under any other existing or future
agreement between Borrower and Bank (other than those covered by 7.1.1 above)
for twenty (20) days after the earlier of written notice thereof has been given
to Borrower by Bank or any officer of Borrower knows of the existence of such
failure, provided that, in the event such failure is incapable of remedy or
consists of an Event of Default with respect to any of the financial covenants,
or was willfully caused or permitted by Borrower, no notice or cure period shall
be available to Borrower;
7.1.3 Borrower shall either (a) fail to pay when due, or
within applicable grace periods, any material Indebtedness due any third Person,
or (b) suffer to exist any other default or event of default of a material
nature under any agreement binding Borrower;
7.1.4 If any financial statement, representation, warranty,
statement or certificate made or furnished to Bank in connection with this
Agreement, or as inducement to Bank to enter into this Agreement, or in any
separate statement, or document, instrument or agreement to be delivered
hereunder to Bank, shall be materially false, incorrect, or incomplete when
made;
7.1.5 Any Obligor shall admit an inability to pay its debts as
they mature, or shall make a general assignment for the benefit of any of its or
its creditors;
7.1.6 Proceedings in bankruptcy, or for reorganization of any
Obligor or for the readjustment of any of its debts, under the United States
Bankruptcy Code, as amended, or any part thereof, or under any other Laws,
whether state or federal, for the relief of debtors, now or hereafter existing,
shall be commenced by any Obligor, or shall be commenced against any Obligor and
shall not be dismissed within sixty (60) days of its commencement;
7.1.7 A receiver or trustee shall be appointed for any Obligor
or for any substantial part of the Assets of any Obligor, or any proceedings
shall be instituted for the dissolution or the full or partial liquidation of
any Obligor, and if such appointment or proceedings are involuntary, such
receiver or trustee shall not be discharged within thirty (30) days of
appointment, or such proceedings shall not be discharged within thirty (30) days
of its commencement, or any Obligor shall discontinue its business(es) or
materially change the nature of its business;
7.1.8 Borrower shall suffer final judgment(s) for the payment
of money in excess of Twenty-Five Thousand ($25,000.00) Dollars severally or One
Hundred Thousand ($100,000.00) Dollars in the aggregate and the same or any one
of the same shall not be discharged or stayed within a period of thirty (30)
days from the date of entry thereof;
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7.1.9 A judgment or attaching creditor of Borrower shall
obtain possession of any of the Collateral having a value in excess of Ten
Thousand ($10,000.00) Dollars by any means including, without limitation, levy,
distraint, replevin or self-help or shall attach a bank account of Borrower
maintained with Bank;
7.1.10 The occurrence of one or more of the following: (a) the
institution of any steps by Borrower, any member of its Controlled Group, the
PBGC or any other Person to terminate an Employee Benefit Plan if, as a result
of such termination, such Borrower or any such member could be required to make
a contribution to an Employee Benefit Plan, or could reasonably expect to incur
a liability or obligation to such Employee Benefit Plan; or (b) a contribution
failure occurs with respect to an Employee Benefit Plan sufficient to give rise
to a lien under Section 302(f) of ERISA;
7.1.11 The occurrence of a Material Adverse Effect;
7.1.12 The occurrence of an Event of Default under the Surety
Agreement or any default, violation or event of default (howsoever defined)
under any instrument, agreement or document securing liabilities and obligations
under the Surety Agreement, including the Surety Security Agreement;
7.1.13 There shall have occurred any change in the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of Borrower or Surety, whether through the ownership of
voting securities, by contract or otherwise, without the prior written consent
of Bank;
7.1.14 The validity or enforceability of this Agreement, the
Notes or the Collateral Documents shall be contested by any Obligor or Borrower
shall deny that it has any or further liability or obligation hereunder or
thereunder or Surety shall deny that it has any or further liability or
obligation under its Surety Agreement;
7.1.15 The occurrence of any material default, violation or
event of default (howsoever defined) by Borrower, Surety or any holder of
Subordinated Indebtedness under any subordination agreement relative to (or
Instrument evidencing) Subordinated Indebtedness; or
7.1.16 The indictment or threatened indictment of any Obligor
under any criminal statute, or commence or threatened commencement of criminal
or civil proceedings against any Obligor, pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
any material portion of the property of such Obligor.
7.2 Remedies. After any acceleration of the Obligations, Bank shall
have in addition to the rights and remedies given it by this Agreement and the
Collateral Documents, all those allowed by all applicable Laws including,
without limitation, the Uniform Commercial Code as enacted in any jurisdiction
in which any Collateral may be located. Without limiting the generality of the
foregoing, Bank may immediately, without demand of performance and without other
notice (except as specifically required by this Agreement or the Collateral
Documents) or demand whatsoever to Borrower, all of which are hereby expressly
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waived, and without advertisement, sell at public or private sale or otherwise
realize upon, in Pennsauken, New Jersey, or elsewhere, the whole or, from time
to time, any part of the Collateral, or any interest which Borrower may have
therein. After deducting from the proceeds of sale or other disposition of the
Collateral all expenses (including all reasonable expenses for legal services),
Bank shall apply such proceeds toward the satisfaction of the Obligations. Any
remainder of the proceeds after satisfaction in full of the Obligations shall be
distributed as required by applicable Laws. Notice of any sale or other
disposition shall be given to Borrower at least ten (10) days before the time of
any intended public sale or of the time after which any intended private sale or
other disposition of the Collateral is to be made, which Borrower hereby agrees
shall be reasonable notice of such sale or other disposition. Borrower agrees to
assemble, or to cause to be assembled at its expense, the Collateral at such
place or places as Bank shall designate. At any such sale or other disposition,
Bank may, to the extent permissible under applicable Laws, purchase the whole or
any part of the Collateral, free from any right of redemption on the part of
Borrower, which right is hereby waived and released. Without limiting the
generality of any of the rights and remedies conferred upon Bank under this
paragraph, Bank may, to the full extent permitted by applicable Laws:
7.2.1 Enter upon the premises of Borrower, exclude therefrom
Borrower, and take immediate possession of the Collateral, either personally or
by means of a receiver appointed by a court of competent jurisdiction, using all
necessary force to do so;
7.2.2 At Bank's option, use, operate, manage and control the
Collateral in any lawful manner;
7.2.3 Collect and receive all rents, income, revenue,
earnings, issues and profits therefrom;
7.2.4 Give written notice to officers and/or officials of the
United States Post Office to effect such change or changes of Borrower's
address(es) so that all mail may be delivered directly to Bank (all mail not
related to the Obligations or the Collateral shall be returned to Borrower);
7.2.5 Maintain, repair, renovate, alter, remove, abandon or
relinquish rights in and to the Collateral as Bank may determine in its
discretion;
7.2.6 Cease the making of Loans under the Revolving Credit;
7.2.7 Exercise rights of set-off against accounts maintained
by Borrower and Surety with Bank; and
7.2.8 Increase the Rate to the Default Rate, which increase
shall be retroactive to the date of the first occurrence of an event giving rise
to an Event of Default.
SECTION 8. MISCELLANEOUS.
8.1 Construction. The provisions of this Agreement shall be in addition
to those of any guaranty, pledge or security agreement, note or other evidence
of liability held by Bank, all of which shall be construed as integrated and
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complementary of each other. Nothing herein contained shall prevent Bank from
enforcing any or all other Note, guaranty, pledge or security agreements in
accordance with its respective terms.
8.2 Further Assurances. From time to time, Borrower will execute and
deliver to Bank such additional documents, and will provide such additional
information as Bank may reasonably require, to carry out the terms of this
Agreement and the Collateral Documents, and be informed of Borrower' s status
and affairs.
8.3 Enforcement and Waiver by Bank. Bank shall have the right at all
times to enforce the provisions of this Agreement and the Collateral Documents
in strict accordance with the terms hereof and thereof, notwithstanding any
conduct or custom on the part of Bank in refraining from so doing at any time or
times. The failure of Bank at any time or times to enforce its rights under such
provisions, strictly in accordance with the same, shall not be construed as
having created a custom in any way or manner contrary to specific provisions of
this Agreement or as having in any way or manner modified or waived the same.
All rights and remedies of Bank are cumulative and concurrent and the exercise
of one right or remedy shall not be deemed a waiver or release of any other
right or remedy.
8.4 Expenses of Bank. Borrower will pay all expenses, including the
reasonable fees and expenses of legal counsel for Bank, incurred in connection
with the preparation, negotiation, administration, amendment, modification or
enforcement of this Agreement and the Collateral Documents, the collection or
attempted collection of the Notes and Bank's rights hereunder and under the
documents required hereunder, or any proceedings (including, without limitation,
bankruptcy or other insolvency proceedings) brought or threatened to enforce
payment of any of the Obligations.
8.5 Notices. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed delivered if delivered in
person, or by commercial courier against receipt or if sent by certified mail,
postage prepaid, return receipt requested, or telegraph, as follows, unless such
address is changed by written notice hereunder:
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(a) If to the Borrower:
Berger Financial Corp.
Berger Bros Company
805 Pennsylvania Boulevard
Feasterville, PA 19053
Attention: Joseph F. Weiderman, President
With copies to:
Wolf, Block, Schorr and Solis-Cohen LLP
15th and Chestnut Streets
Packard Building, 12th Floor
Philadelphia, PA 19102
Attention: Jason M. Shargel, Esquire
(B) If to the Bank:
Summit Bank
4900 Route 70
Pennsauken, NJ 08109-4792
Attention: Phyllis Briley-Geiser, Vice President
With copies to:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
Attention: Richard S. Roisman, Esquire
8.6 Waiver and Release by Borrower. To the maximum extent permitted by
applicable Laws, Borrower hereby:
8.6.1 Waives: (a) protest of all commercial paper at any time
held by Bank on which Borrower is in any way liable; and (b) except as otherwise
set forth herein or in the Collateral Documents, notice and opportunity to be
heard, after acceleration in the manner provided in Paragraph 7.1 before
exercise by Bank of the remedies of self-help, set-off, or of other summary
procedures permitted by any applicable Laws or by any agreement with Borrower
and, except where required hereby or by any applicable Laws, notice of any other
action taken by Bank; and
8.6.2 Releases Bank and its officers, attorneys, agents and
employees from all claims for loss or damage caused by any act or omission on
the part of any of them.
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8.7 Indemnification.
8.7.1 Borrower hereby indemnifies and agrees to protect,
defend and hold harmless Bank, Bank's Affiliates and any member, officer,
director, official, agent, employee or attorney of Bank or Bank's Affiliates and
their respective heirs, administrators, executors, successors and assigns
(collectively, the "Indemnified Parties"), from and against any and all losses,
damages, expenses or liabilities of any kind or nature and from any suits,
claims or demands, including reasonable attorneys' fees incurred in
investigating or defending such claim, suffered by any of them and caused by,
relating to, arising out of, resulting from, or in any way connected with this
Agreement, the Notes or the Collateral Documents or the transactions
contemplated therein (unless determined by a final judgment of a court of
competent jurisdiction to have been caused by the gross negligence or willful
misconduct of the Indemnified Parties) including, without limitation: (i)
losses, damages (including consequential damages), expenses or liabilities
sustained by Bank or Bank's Affiliates in connection with any environmental
inspection, monitoring, sampling or cleanup of the Mortgaged Property required
or mandated by any applicable Environmental Law; (ii) any untrue statement of a
material fact contained in information submitted to Bank by Borrower or the
omission of any material fact necessary to be stated therein in order to make
such statement not misleading or incomplete; (iii) the failure of Borrower to
perform any obligations herein required to be performed by Borrower; and (iv)
the ownership, construction, occupancy, operation, use or maintenance of the
Mortgaged Property.
8.7.2 In case any action shall be brought against Bank or any
other Indemnified Party in respect to which indemnity may be sought against
Borrower, Bank or such other Indemnified Party shall promptly notify Borrower
and Borrower shall assume the defense thereof, including the employment of
counsel selected by Borrower and satisfactory to Bank, the payment of all costs
and expenses and the right to negotiate and consent to settlement. The failure
of Bank to so notify Borrower shall not relieve Borrower of any liability it may
have under the foregoing indemnification provisions or from any liability which
it may otherwise have to Bank or any of the other Indemnified Parties. Bank
shall have the right, at its sole option, to employ separate counsel in any such
action and to participate in the defense thereof, all at Borrower's joint and
several cost and expense. Borrower shall not be liable for any settlement of
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any such action effected without its consent (unless Borrower fails to defend
such claim), but if settled with Borrower's consent, or if there be a final
judgment for the claimant in any such action, Borrower agrees to indemnify and
save harmless Bank from and against any loss or liability by reason of such
settlement or judgment.
8.7.3 The provisions of this Paragraph 8.7 shall survive the
repayment or other satisfaction of the Obligations.
8.8 Warrant of Attorney. BORROWER HEREBY IRREVOCABLY AUTHORIZES AND
EMPOWERS ANY ATTORNEY OR ANY CLERK OF ANY COURT OF RECORD UPON OR AFTER THE
OCCURRENCE AND DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT TO APPEAR FOR AND
CONFESS JUDGMENT AGAINST BORROWER, (A) FOR SUCH SUMS AS ARE DUE AND/OR MAY
BECOME DUE ON THE BORROWER'S OBLIGATIONS, AND/OR (B) IN ANY ACTION OF REPLEVIN
INSTITUTED BY BANK TO OBTAIN POSSESSION OF ANY COLLATERAL OR OTHER COLLATERAL
SECURITY FOR THE OBLIGATIONS OF BORROWER TO BANK, IN EITHER CASE WITH OR WITHOUT
DECLARATION, WITH COSTS OF SUIT, WITHOUT STAY OF EXECUTION AND WITH FIVE (5%)
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PERCENT OF THE PRINCIPAL AMOUNT THEREOF, BUT NOT LESS THAN FIVE THOUSAND
($5,000.00) DOLLARS, ADDED FOR LIEN PRIORITY PURPOSES WITH ACTUAL ATTORNEY'S
FEES GOVERNED BY PARAGRAPH 8.4 HEREOF. BORROWER UNCONDITIONALLY AND IRREVOCABLY:
(A) WAIVES THE RIGHT OF INQUISITION ON ANY REAL ESTATE LEVIED ON, VOLUNTARILY
CONDEMNS THE SAME, AUTHORIZES THE PROTHONOTARY OR CLERK TO ENTER UPON THE WRIT
OF EXECUTION SAID VOLUNTARY CONDEMNATION AND AGREES THAT SAID REAL ESTATE MAY BE
SOLD ON A WRIT OF EXECUTION; (B) WAIVES AND RELEASES ALL RELIEF FROM ALL
REDEMPTION, APPRAISEMENT, STAY, EXEMPTION OR APPEAL LAWS OF ANY STATE NOW IN
FORCE OR HEREAFTER ENACTED; AND (C) RELEASES ALL ERRORS IN SUCH PROCEEDINGS. IF
A COPY OF THIS AGREEMENT, VERIFIED BY AFFIDAVIT BY OR ON BEHALF OF BANK SHALL
HAVE BEEN FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL
OF THIS AGREEMENT AS A WARRANT OF ATTORNEY. THE AUTHORITY AND POWER TO APPEAR
FOR AND ENTER JUDGMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY THE INITIAL
EXERCISE THEREOF, AND THE SAME MAY BE EXERCISED, FROM TIME TO TIME, AS OFTEN AS
BANK SHALL DEEM NECESSARY AND DESIRABLE, AND THIS AGREEMENT SHALL BE A
SUFFICIENT WARRANT THEREFORE. BANK MAY ENTER ONE OR MORE JUDGMENTS IN THE SAME
OR DIFFERENT COUNTIES FOR ALL OR PART OF THE BORROWER'S OBLIGATIONS, WITHOUT
REGARD TO WHETHER JUDGMENT HAS BEEN ENTERED ON MORE THAN ONE OCCASION FOR THE
SAME BORROWER'S OBLIGATIONS. IN THE EVENT ANY JUDGMENT ENTERED AGAINST BORROWER
HEREUNDER IS STRICKEN OR OPENED UPON APPLICATION BY OR ON BORROWER'S BEHALF FOR
ANY REASON WHATSOEVER, BANK IS HEREBY AUTHORIZED AND EMPOWERED TO AGAIN APPEAR
FOR AND CONFESS JUDGMENT AGAINST BORROWER; SUBJECT, HOWEVER, TO THE LIMITATION
THAT SUCH SUBSEQUENT ENTRY OR ENTRIES OF JUDGMENT BY BANK MAY ONLY BE DONE TO
CURE ANY ERRORS IN PRIOR PROCEEDINGS, ONLY AND TO THE EXTENT THAT SUCH ERRORS
ARE SUBJECT TO CURE IN THE LATER PROCEEDINGS.
8.9 Waiver of Jury Trial. IN ANY LITIGATION ARISING OUT OF OR RELATING
TO THE LOANS OR ANY OF THE OTHER OBLIGATIONS IN WHICH BORROWER AND BANK ARE
ADVERSE PARTIES, BORROWER AND BANK HEREBY WAIVE TRIAL BY JURY.
8.10 Jurisdiction. In any litigation arising out of or relating to the
Loans or any of the other Obligations, Borrower hereby consents to the personal
jurisdiction of the State and/or Federal courts of the Commonwealth of
Pennsylvania.
8.11 Applicable Law. The substantive Laws of the Commonwealth of
Pennsylvania shall govern the construction of this Agreement and the rights and
remedies of the parties hereto.
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8.12 Binding Effect, Assignment and Entire Agreement.
8.12.1 This Agreement shall inure to the benefit of, and shall
be binding upon, the respective heirs, personal representatives, successors and
permitted assigns of the parties hereto.
8.12.2 Borrower has no right to assign any of its rights or
Obligations hereunder without the prior written consent of Bank.
8.12.3 This Agreement, and the documents executed and
delivered pursuant hereto and thereto, constitute the entire agreement between
the parties, and may be amended only by a writing signed on behalf of each
party.
8.13 Severability. If any provision of this Agreement shall be held
invalid under any applicable Laws, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provision, and, to this end, the provisions hereof are severable.
8.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
8.15 Headings. The headings of any paragraph of this Agreement are for
convenience only and shall not be used to interpret any provision of this
Agreement.
8.16 Modification. No modification hereof or of any agreement referred
to herein shall be binding or enforceable unless in writing and signed on behalf
of the party against whom enforcement is sought.
8.17 Third Parties. No rights are intended to be created hereunder, or
under the Collateral Documents or related agreements and documents for the
benefit of any third party donee, creditor or incidental beneficiary of
Borrower. Nothing contained in this Agreement shall be construed as a delegation
to Bank of Borrower's duties of performance, including, without limitation,
Borrower's duties under any Account or Contract in which Bank has a security
interest.
8.18 Seal. This Agreement is intended to take effect as an instrument
under seal. IN WITNESS WHEREOF, the parties hereto have caused this Loan and
Security Agreement to be executed and delivered by their duly authorized
officers as of the day and year first above written.
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ATTEST: BERGER FINANCIAL CORP.,
a Delaware corporation
By: /s/ Theodore A. Schwartz By: /s/ Joseph F. Weiderman
--------------------------- ---------------------------
Name: Theodore A. Schwartz Joseph F. Weiderman,
Title: C.E.O. President
[Corporate Seal]
ATTEST: BERGER BROS COMPANY,
a Pennsylvania corporation
By: /s/ Theodore A. Schwartz By: /s/ Joseph F. Weiderman
--------------------------- ---------------------------
Name: Theodore A. Schwartz Joseph F. Weiderman,
Title: C.E.O. President
[Corporate Seal]
SUMMIT BANK
By: /s/ Phyllis Briley-Geiser
-------------------------
Phyllis Briley-Geiser,
Vice President
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LIST OF EXHIBITS
Exhibit 1.6 -- Form of Borrowing Base Certificate
Exhibit 1.40 -- Subordinated Indebtedness
Exhibit 5.1.6 -- Judgments, Judicial or Administrative
Orders or Proceedings Pending
Exhibit 5.1.14 -- Material Leases, Contracts, Commitments, Etc.
45
