UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 30, 1999
PENN ENGINEERING & MANUFACTURING CORP.
--------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-5356 23-0951065
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
P.O. Box 1000, Danboro, Pennsylvania 18916
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 766-8853
N/A
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On September 30, 1999, the Company acquired all of the issued and
outstanding capital stock of R.C. Dudek & Company, Inc., a California
corporation, in consideration for the payment of $34,000,000 in cash. The stock
was acquired from Victor E. Carlson, Sara E. Carlson, John S. Perell, Elizabeth
C. Perell, Martha Gail Anderson and Harriet Dudek, now known as Harriet Serven,
Trustee Under the Will of Richard C. Dudek, Deceased.
Also on September 30, 1999, the Company acquired certain real property,
including offices and warehouse facilities, located on approximately 2.15 acres
of land at 800 Del Norte Boulevard, Oxnard, California, for a purchase price
$2,200,000 in cash. The real property was acquired from Victor E. Carlson, Sara
E. Carlson, John S. Perell, Elizabeth C. Perell and Harriet Dudek, now known as
Harriet Serven, Trustee Under the Will of Richard C. Dudek, Deceased.
The business and the real property acquired were used by the persons from
whom acquired in conducting a distribution business, including the distribution
of fasteners and other products manufactured by the Company. The Company intends
to continue such use and to expand the number and type of products distributed.
Financing for the acquisitions referenced above was provided by First Union
National Bank (the "Bank"), pursuant to a loan agreement dated September 28,
1999 (the "Loan Agreement"). Under the Loan Agreement, the Bank agreed to
provide the Company with a working capital line of credit of up to $10 million
and an acquisition line of credit of up to $30 million. The Loan Agreement also
provides that the Bank has agreed to make a term loan to the Company in the
amount of the outstanding balance of the acquisition line of credit on September
27, 2000.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
The historical financial statements of the acquired business required by
Rule 3-05 of Regulation S-X are not yet available. Pursuant to Item 7(a)(4) of
Form 8-K, such historical financial information will be filed as soon as
practicable, but in no event later than December 14, 1999.
(b) Pro forma financial information.
The pro forma financial information required by Article 11 of Regulation
S-X is not yet available. Pursuant to Item 7(b)(2) of Form 8-K, such pro forma
financial information will be filed as soon as practicable, but in no event
later than December 14, 1999.
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(c) Exhibits:
Exhibit No. Exhibit Description
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2.1 Stock Purchase Agreement among Penn
Engineering & Manufacturing Corp. and
Harriet Dudek, now known as Harriet Serven,
Trustee of Trust B under Will of Richard C.
Dudek, Deceased, Victor E. Carlson, Sara E.
Carlson, John S. Perell, Elizabeth C. Perell
and Martha Gail Anderson dated September 16,
1999. (Schedules omitted; the Company agrees
to furnish supplementally a copy of any
omitted schedule to the Commission upon
request.)
2.2 Agreement of Sale for 800 Del Norte
Boulevard, Oxnard, California, dated as of
September 30, 1999 between Victor E. Carlson,
Sara E. Carlson, John S. Perell, Elizabeth
C. Perell, Harriet Dudek, now known as
Harriet Serven, Trustee Under Will of
Richard C. Dudek, Deceased, as Seller, and
Penn Engineering & Manufacturing Corp., as
Buyer. (Schedules omitted; the Company
agrees to furnish supplementally a copy of
any omitted schedule to the Commission upon
request.)
10.4 Loan Agreement dated as of September 28, 1999
between Penn Engineering & Manufacturing Corp.
and First Union National Bank.
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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.
PENN ENGINEERING &
MANUFACTURING CORP.
Date: October 15, 1999 By:/s/ Mark W. Simon
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Mark W. Simon, Vice President
and Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Exhibit Description
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2.1 Stock Purchase Agreement among Penn Engineering & Manufac-
turing Corp. and Harriet Dudek, now known as Harriet Serven,
Trustee of Trust B under Will of Richard C. Dudek, Deceased,
Victor E. Carlson, Sara E. Carlson, John S. Perell, Elizabeth C.
Perell and Martha Gail Anderson dated September 16, 1999.
2.2 Agreement of Sale for 800 Del Norte Boulevard, Oxnard, Califor
nia, dated as of September 30, 1999 between Victor E. Carlson,
Sara E. Carlson, John S. Perell, Elizabeth C. Perell, Harriet Dudek,
now known as Harriet Serven, Trustee Under Will of Richard C.
Dudek, Deceased, as Seller, and Penn Engineering & Manufactur-
ing Corp., as Buyer
10.4 Loan Agreement dated as of September 28, 1999 between Penn
Engineering & Manufacturing Corp. and First Union National
Bank.
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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
AMONG
PENN ENGINEERING & MANUFACTURING CORP.
AND
HARRIET DUDEK, NOW KNOWN AS HARRIET SERVEN,
TRUSTEE OF TRUST B under
WILL OF RICHARD C. DUDEK, Deceased
VICTOR E. CARLSON
SARA E. CARLSON
JOHN S. PERELL
ELIZABETH C. PERELL
AND
MARTHA GAIL ANDERSON
September 16, 1999
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TABLE FOR CONTENTS
<TABLE>
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Page
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<S> <C> <C>
1. Definitions......................................................................1
2. Purchase and Sale of Company Shares..............................................6
(a) Basic Transaction.......................................................6
(b) Purchase Price..........................................................6
(c) Post-Closing Adjustment.................................................6
(d) Escrow..................................................................7
(e) The Closing.............................................................7
(f) Deliveries at the Closing...............................................7
(g) FOGA Business...........................................................7
(h) Manufacturer's Representative Business..................................8
3. Representations and Warranties Concerning the Transaction........................8
(a) Representations and Warranties of the Sellers...........................8
(b) Representations and Warranties of the Buyer.............................9
4. Representations and Warranties Concerning the Company and Its Subsidiaries......10
(a) Organization, Qualification, and Corporate Power.......................10
(b) Capitalization.........................................................11
(c) Noncontravention.......................................................11
(d) Brokers' Fees..........................................................11
(e) Title to Assets........................................................11
(f) Subsidiaries...........................................................11
(g) Financial Statements...................................................11
(h) Events Subsequent to Most Recent Fiscal Year End.......................12
(i) Undisclosed Liabilities................................................14
(j) Legal Compliance.......................................................14
(k) Taxes..................................................................14
(l) Real Property..........................................................16
(m) Intellectual Property..................................................16
(n) Tangible Assets........................................................18
(o) Inventory..............................................................18
(p) Contracts..............................................................18
(q) Notes and Accounts Receivable..........................................19
(r) Powers of Attorney.....................................................19
(s) Insurance..............................................................20
(t) Litigation.............................................................20
</TABLE>
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<S> <C> <C>
(u) Product Warranty.......................................................20
(v) Product Liability......................................................21
(w) Employees..............................................................21
(x) Employee Benefits......................................................21
(y) Guaranties.............................................................22
(z) Environment, Health, and Safety Matters................................22
(aa) Certain Business Relationships With the Company and Its Subsidiaries...23
(bb) Disclosure.............................................................24
5. Pre-Closing Covenants...........................................................24
(a) General................................................................24
(b) Notices and Consents...................................................24
(c) Operation of Business..................................................24
(d) Preservation of Business...............................................25
(e) Full Access............................................................25
(f) Notice of Developments.................................................25
(g) Exclusivity............................................................25
(h) Existing Agreements....................................................25
(i) Company's Qualified Plan...............................................25
6. Post-Closing Covenants..........................................................26
(a) General................................................................26
(b) Litigation Support.....................................................26
(c) Transition.............................................................26
(d) Confidentiality........................................................27
(e) Covenant Not to Compete................................................27
7. Conditions to Obligation to Close...............................................27
(a) Conditions to Obligation of the Buyer..................................27
(b) Conditions to Obligation of the Sellers................................29
8. Remedies for Breaches of This Agreement.........................................30
(a) Survival of Representations and Warranties.............................30
(b) Indemnification Provisions for Benefit of the Buyer....................30
(c) Indemnification Provisions for Benefit of the Sellers..................31
(d) Matters Involving Third Parties........................................32
(e) Determination of Adverse Consequences..................................32
(f) Exclusive Remedy.......................................................33
9. Tax Matters.....................................................................33
(a) Tax Periods Ending on or Before the Closing Date.......................33
(b) Tax Periods Beginning Before and Ending After the Closing Date.........33
(c) Refunds and Tax Benefits...............................................34
</TABLE>
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<TABLE>
<S> <C> <C>
(d) Cooperation on Tax Matters.............................................34
(e) Tax Sharing Agreements.................................................35
(f) Certain Taxes..........................................................35
(g) Allocation and 338(h)(10) Election.....................................35
10. Termination.....................................................................36
(a) Termination of Agreement...............................................36
(b) Effect of Termination..................................................36
11. Miscellaneous...................................................................36
(a) Nature of Certain Obligations..........................................36
(b) Press Releases and Public Announcements................................37
(c) No Third-Party Beneficiaries...........................................37
(d) Entire Agreement.......................................................37
(e) Succession and Assignment..............................................37
(f) Counterparts...........................................................37
(g) Headings...............................................................37
(h) Notices................................................................38
(i) Governing Law..........................................................39
(j) Amendments and Waivers.................................................39
(k) Severability...........................................................39
(l) Expenses...............................................................39
(m) Construction...........................................................39
(n) Incorporation of Exhibits, Annexes, and Schedules......................40
(o) Arbitration............................................................40
</TABLE>
Exhibit A -- Form of Escrow Agreement
Exhibit B -- Historical Financial Statements
Exhibit C -- Form of Real Property Agreement
Exhibit D -- Form of Opinion of Counsel to the Sellers
Exhibit E -- Form of Opinion of Counsel to the Buyer
Exhibit F -- Allocation of Sales Price
Annex I -- Exceptions to the Sellers' Representations and Warranties
Concerning the Transaction
Annex II -- Exceptions to the Buyer's Representations and Warranties
Concerning the Transaction
Disclosure Schedule--Exceptions to Representations and Warranties
Concerning the Company and Its Subsidiaries
Schedule 2(h) -- Manufacturer's Representative Employees
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STOCK PURCHASE AGREEMENT
Agreement entered into on September 16, 1999, by and among Penn
Engineering & Manufacturing Corp., a Delaware corporation (the "Buyer"), and
Harriet Dudek, now known as Harriet Serven, Trustee of Trust B under Will of
Richard C. Dudek, Deceased, Victor E. Carlson, Sara E. Carlson, John S. Perell,
Elizabeth C. Perell and Martha Gail Anderson (collectively the "Sellers" and
referred to individually as a "Seller"). The Buyer and the Sellers are referred
to collectively herein as the "Parties".
The Sellers in the aggregate own all of the outstanding capital stock of R.
C. Dudek & Company, Inc. a California corporation (the "Company").
This Agreement contemplates a transaction in which the Buyer will purchase
from the Sellers, and the Sellers will sell to the Buyer, all of the outstanding
capital stock of the Company in return for cash.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
ss.1504(a).
"Applicable Rate" means the prime rate of interest publicly announced
from time to time by First Union National Bank.
"Basis" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in ss.2(c) below.
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"Closing Date" has the meaning set forth in ss.2(c) below.
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of
ERISA and Code ss.4980B.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Share" means any share of the Common Stock, par value $0.10 per
share, of the Company.
"Confidential Information" means any information concerning the
businesses and affairs of the Company and its Subsidiaries that is not already
generally available to the public.
"Controlled Groups" has the meaning set forth in Code ss.1563.
"Disclosure Schedule" has the meaning set forth in ss.4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement, (b) Employee Pension Benefit Plan, (c)
Employee Welfare Benefit Plan, (d) material fringe benefit or other retirement,
bonus, or incentive plan or program or other plan or arrangement providing
additional compensation or benefits.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Environmental, Health, and Safety Requirements" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity which is treated as a single
employer with Seller for purposes of Code ss.414.
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"Escrow" has the meaning set forth in ss.2(d) below.
"Escrow Agreement" has the meaning set forth in ss.2(b) below.
"Fiduciary" has the meaning set forth in ERISA ss.3(21).
"Financial Statements" has the meaning set forth in ss.4(g) below.
"FOGA Business" shall mean the business, including without limitation,
the assets and liabilities, of the FOGA Division of the Company which extrudes
aluminum for point of purchase displays and trade show exhibits.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Indemnified Party" has the meaning set forth in ss.8(d) below.
"Indemnifying Party" has the meaning set forth in ss.8(d) below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related
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documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Manufacturer's Representative Business" shall mean the Company's
business acting as a manufacturer's representative on a commissionable basis for
manufacturers of fasteners and other products.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition, operations or results of operations of the
Company.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in ss.4(g)
below.
"Most Recent Fiscal Month End" has the meaning set forth in ss.4(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in ss.4(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"1998 Balance Sheet" means the Company's balance sheet for the Dudek
Division as of September 30, 1998 which is included in the Financial Statements.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA ss.406 and
Code ss.4975.
"Pro-Rata" has the meaning set forth in ss.2(b).
"Purchase Price" has the meaning set forth in ss.2(b) below.
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"Real Property Agreement" means the agreement of sale by and among the
Buyer and certain of the Sellers providing for the purchase by Buyer of the real
property leased and operated by the Company and located in the City of Oxnard,
Ventura County, California, the form of which is attached hereto as Exhibit C.
"Reportable Event" has the meaning set forth in ERISA ss.4043.
"Requisite Sellers" means Sellers holding a majority in interest of the
Company Shares as set forth in ss.4(b) of the Disclosure Schedule.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable; (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" or "Taxes" means any federal, state, local and foreign income,
payroll, withholding, excise, sales, use, personal property, use and occupancy,
business and occupation, mercantile, real estate, gross receipts, license,
employment, severance, stamp, premium, windfall profits, social security (or
similar unemployment), disability, transfer, registration, value added,
alternative, or add-on minimum, estimated, or capital stock and franchise and
other tax of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not.
"Tax Return" or "Tax Returns" means all returns, reports, forms,
declarations, claims for refunds or other information required to be filed or
supplied to any Person in connection with Taxes (including without limitation
information returns and declarations of estimated Tax) (Any reference to "filed"
or "file" with respect to Taxes shall also be deemed to include "supplied" or
"supply").
"Third Party Claim" has the meaning set forth in ss.8(d) below.
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2. Purchase and Sale of Company Shares.
(a) Basic Transaction. On and subject to the terms and conditions of
this Agreement, the Buyer agrees to purchase from each of the Sellers, and each
of the Sellers agrees to sell to the Buyer, all of his or her Company Shares for
the consideration specified below in this ss.2.
(b) Purchase Price. The Buyer agrees to pay to the Sellers at the
Closing $34,000,000 (the "Purchase Price") by delivery of (i) cash of $3,400,000
payable by wire transfer or other immediately available funds to the escrow
agent designated in the escrow agreement (the "Escrow Agreement") in the form of
Exhibit A attached hereto and (ii) cash for the balance of the Purchase Price
payable to Sellers by wire transfer or delivery of other immediately available
funds. The Purchase Price shall be allocated among the Sellers in proportion to
their respective holdings of Company Shares as set forth in ss.4(b) of the
Disclosure Schedule ("Pro-Rata").
(c) Post-Closing Adjustment. Immediately after the consummation of the
Closing hereunder Buyer shall, at Buyer's expense, engage Ernst & Young LLP to
determine the consolidated net working capital (current assets minus current
liabilities) of the R.C. Dudek Division (excluding the FOGA Division) of the
Company ("Net Working Capital") as of the close of business on the Closing Date
(the "Closing Statement"), which shall be prepared in accordance with generally
accepted accounting principles. Ernst & Young LLP shall be required to deliver
the Closing Statement to Buyer not later than 60 days after the Closing Date.
Promptly after Buyer's receipt thereof, Buyer shall deliver a copy of the
Closing Statement to Victor E. Carlson who is authorized to act as agent for
Sellers with respect to adjustments of the Purchase Price hereunder (the
"Sellers' Agent"). Upon receipt of the Closing Statement, Sellers' Agent shall
give written notice to Buyer within 15 days if Sellers' Agent disputes the
Closing Statement and the parties shall negotiate in good faith to resolve such
dispute. If Buyer and Sellers' Agent are unable to resolve such dispute within
fifteen (15) days after Buyer is notified thereof, the matter shall be referred
to an independent public accountant satisfactory to the Buyer and Sellers' Agent
which shall be directed to determine the Net Working Capital of the R.C. Dudek
Division (excluding the FOGA Division) of the Company as of the Closing Date and
the determination of such accountant shall be binding on the parties hereto.
Buyer and Sellers shall each pay one-half of the cost of the services of such
independent accountant. If and to the extent that the Net Working Capital of the
R.C. Dudek Division (excluding the FOGA Division) of the Company reflected on
the Closing Statement ("Net Working Capital at Closing") shall be less than
$13,322,400 ("Minimum Required Working Capital"): (i) the Purchase Price shall
be retroactively and immediately reduced by an amount equal to the amount
("Working Capital Deficit") by which the Net Working Capital at Closing is less
than the Minimum Required Working Capital, and (ii) an amount equal to the Net
Working Capital Deficit shall become immediately due and payable to Buyer from
Sellers, such amount being payable first from the Escrow and if in excess of the
Escrow, then by the Sellers Pro-Rata. The Closing Statement shall be prepared
using the asset and liability accounts used in the preparation of the 1998
Balance Sheet, and valuing inventory on the last-in, first-out (LIFO) method
used in the preparation of the 1998 Balance Sheet, but not reflecting any
disclosures or statements made in the Disclosure
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Schedule. The Closing Statement shall not include any assets or liabilities of
the FOGA Business or any interdivisional accounts receivable.
(d) Escrow. In order to secure Buyer with respect to: (i) any reduction
in the Net Working Capital of the R.C. Dudek Division of the Company between
September 30, 1998 and the Closing Date and (ii) the accuracy of the
representations, warranties, and the prompt performance and payment of the
covenants, agreements and indemnifications, of Sellers provided for in this
Agreement and all other documents and instruments executed by Sellers in
connection herewith, on the Closing Date Sellers and Buyer shall enter into an
escrow agreement (the "Escrow Agreement") substantially in the form of Exhibit A
hereto with U.S. Trust Company (provided that if the fees of U.S. Trust Company
are not reasonable and competitive with other similar institutions, the parties
will mutually agree on another escrow agent) as escrow agent (with such changes
therein relative to the rights and duties of the escrow agent as may be required
by said escrow agent.) Buyer shall deposit $3,400,000 (the "Escrow") pursuant to
the Escrow Agreement. Upon the later of (i) 120 days after the Closing Date,
(ii) the final determination of the Purchase Price, and (iii) the final
determination of any indemnification claims made by Buyer against Sellers
pursuant to Section 8 hereof on or before 120 days after the Closing Date, Buyer
shall be entitled to receive from the Escrow an amount equal to the sum of (A)
any reduction in the Purchase Price as finally determined, and (b) the amount of
any indemnification to which Buyer is entitled under Section 8 hereof as
determined by agreement between Buyer and Sellers or, in the absence of
agreement, by the final judgment of any court of competent jurisdiction, and the
remaining balance of such Escrow, if any, shall be distributed to Sellers.
One-third of the Escrow shall be distributed each six months after the Closing,
subject to retention at all times of funds reasonably required in Buyer's good
faith judgment to cover any pending and bona fide claims of Buyer for
indemnification. Interest earned on the Escrow shall be distributed to the
Sellers monthly Pro-Rata and the Sellers shall be responsible for reporting all
taxable interest and dividends distributed from the Escrow. Buyer shall pay the
fees and costs of the escrow agent.
(e) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of the Company
commencing at 9:00 a.m. local time on September 30, 1999 or such other date as
the Buyer and the Requisite Sellers may mutually determine (the "Closing Date").
(f) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in ss.7(a) below, (ii) the Buyer will deliver to the Sellers the
various certificates, instruments, and documents referred to in ss.7(b) below,
(iii) each of the Sellers will deliver to the Buyer stock certificates
representing all of his or her Company Shares, endorsed in blank or accompanied
by duly executed assignment documents, and (iv) the Buyer will deliver to the
Escrow and to each of the Sellers the consideration specified in ss.2(b) above.
(g) FOGA Business. Sellers do not intend to sell or transfer to Buyer,
and Buyer does not intend to purchase or assume from Sellers, any assets ("FOGA
Assets") or liabilities
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("FOGA Liabilities") of the Company's FOGA Business. Sellers agree that prior to
the Closing, Sellers will cause the Company either to sell the FOGA Assets and
transfer the FOGA Liabilities to a third-party, or to another entity controlled
by Sellers, such that on the Closing Date the Company will own no FOGA Assets
and all FOGA Liabilities (which term shall include all liabilities related to
the FOGA business, whether known or unknown, whether now existing or hereafter
incurred or arising, matured or unmatured, direct or indirect, absolute or
contingent, joint or several) will have been assumed by such third-party or
other entity. Sellers agree to indemnify Buyer and hold Buyer harmless from and
against any and all FOGA Liabilities including attorneys fees and costs related
thereto incurred by the Company or by the Buyer after the Closing in connection
with FOGA Liabilities. Any proceeds of sale received by the Company from the
sale of the FOGA Assets shall belong to Sellers and may be distributed by the
Company to Sellers prior to the Closing. Sellers agree to continue existing
product liability coverage for the FOGA Business at Sellers' expense for a
period of five (5) years after the Closing Date. Sellers will cause all FOGA
Assets to be removed from the Company's premises prior to the Closing.
(h) Manufacturer's Representative Business. Prior to the Closing the
parties shall cause the manufacturer's representative agreement between the
Company and the Buyer to be terminated. Buyer agrees that in the event that (i)
Sellers are able to locate or organize a new manufacturer's representative
organization meeting Buyer's criteria (or which agrees in writing to meet such
criteria within four months after the Closing Date) and (ii) Buyer enters into a
manufacturer's representative agreement satisfactory in form and substance to
Buyer with such new organization, any amount payable by such new organization
for the goodwill, customer lists and other intangible assets of the Company's
existing manufacturer's representative business for fasteners and related
products shall belong to the Sellers and neither the Company nor the Buyer shall
have any interest therein, provided that the Buyer shall have no obligation to
approve any new manufacturer's representative organization recommended by
Sellers unless it meets all of Buyer's specified criteria (or agrees to do so
within four months after the Closing and makes substantial progress acting in
good faith to meet such criteria within such period) and is reasonably
satisfactory in all other respects to Buyer and enters into a manufacturer's
representative agreement with Buyer satisfactory in form and substance to Buyer.
Sellers shall have the right to request those employees of the Company listed on
Schedule 2(h) attached hereto to become employees of such new manufacturer's
representative organization, but shall not at any time solicit or permit such
new organization to employ any other employees of the Company. Any new
manufacturer's representative agreement shall be cancellable by the Buyer on
thirty (30) days notice.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers. Each of the Sellers
represents and warrants to the Buyer that the statements contained in this
ss.3(a) are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
ss.3(a)) with respect to himself or itself, except as set forth in Annex I
attached hereto.
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(i) Authorization of Transaction. The Seller has full power and
authority to execute and deliver this Agreement and to perform his or her
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms and
conditions. The Seller need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this Agreement.
(ii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a party or by which he
or she is bound or to which any of his or her assets is subject.
(iii) Brokers' Fees. The Seller has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(iv) Company Shares. The Seller holds of record and owns
beneficially the number of Company Shares set forth next to his or her name in
ss.4(b) of the Disclosure Schedule, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. The Seller is not a party
to any option, warrant, purchase right, or other contract or commitment that
could require the Seller to sell, transfer, or otherwise dispose of any capital
stock of the Company (other than this Agreement). The Seller is not a party to
any voting trust, proxy, or other agreement or understanding with respect to the
voting of any capital stock of the Company.
(b) Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Sellers that the statements contained in this ss.3(b) are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this ss.3(b)),
except as set forth in Annex II attached hereto.
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions. The Buyer need not give any notice
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to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject.
(iv) Brokers' Fees. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any Seller could become
liable or obligated.
(v) Investment. The Buyer is acquiring the Company Shares for
investment purposes only and is not acquiring the Company Shares with a view to
or for sale in connection with any distribution thereof within the meaning of
the Securities Act.
4. Representations and Warranties Concerning the Company and Its
Subsidiaries. The Sellers represent and warrant to the Buyer that the statements
contained in this ss.4 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and
as though the Closing Date were substituted for the date of this Agreement
throughout this ss.4), except as set forth in the disclosure schedule delivered
by the Sellers to the Buyer on the date hereof and initialed by the Parties (the
"Disclosure Schedule"). Although the Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this ss.4, disclosures made with respect to one paragraph of the Disclosure
Schedule shall be deemed to be made with respect to all of the paragraphs of the
Disclosure Schedule, to the extent relevant thereto. The representations and
warranties contained in this ss.4 do not apply to (i) the FOGA Business as to
which Sellers have agreed to indemnify Buyer pursuant to ss.2(g) or (ii) the
Manufacturer's Representative Business.
(a) Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
the Company. The Company has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. ss.4(a) of the Disclosure Schedule lists the directors and officers
of the Company.
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(b) Capitalization. The entire authorized capital stock of the Company
consists of 750,000 Company Shares, of which 866 Company Shares are issued and
outstanding and no Company Shares are held in treasury. All of the issued and
outstanding Company Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by the respective Sellers as set
forth in ss.4(b) of the Disclosure Schedule. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Company to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Company.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject or any provision
of the charter or bylaws of the Company or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which the Company is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). The Company is not required to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except where the failure to give
notice, to file, or to obtain any authorization, consent, or approval would not
have a material adverse effect on the business, financial condition, operations,
or results of operations of the Company and its Subsidiaries or on the ability
of the Parties to consummate the transactions contemplated by this Agreement.
(d) Brokers' Fees. The Company has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(e) Title to Assets. The Company has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet.
(f) Subsidiaries. The Company has no Subsidiaries.
(g) Financial Statements. Attached hereto as Exhibit B are the following
financial statements (collectively the "Financial Statements"): (i) reviewed
balance sheets and statements of income, changes in stockholders' equity, and
cash flow as of and for the fiscal years ended
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September 30, 1997 and September 30, 1998 (the "Most Recent Fiscal Year End")
for the R.C. Dudek Division of the Company; and (ii) unaudited management
prepared balance sheets and statements of income, changes in stockholders'
equity, and cash flow (the "Most Recent Financial Statements") as of and for the
9 months ended June 30, 1999 (the "Most Recent Fiscal Month End") for the R.C.
Dudek Division of the Company. The Financial Statements (including the notes
thereto) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby and present fairly the financial
condition of the Company as of such dates and the results of operations of the
Company for such periods; provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items. The parties acknowledge that the Financial Statements
include information with respect to and results of operations of the
Manufacturer's Representative Business.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, or results of operations of the
Company. Without limiting the generality of the foregoing, since that date:
(i) the Company has not sold, leased, transferred, or assigned any
material assets, tangible or intangible, outside the Ordinary Course of
Business, except for the sale of the FOGA Business;
(ii) the Company has not entered into any material agreement,
contract, lease, or license outside the Ordinary Course of Business except with
respect to the sale of the FOGA Business;
(iii) no party (including the Company) has accelerated, terminated,
made material modifications to, or canceled any material agreement, contract,
lease, or license to which the Company is a party or by which it is bound except
in the Ordinary Course of Business and except in connection with the sale of the
FOGA Business and the termination of the Manufacturer's Representative Business;
(iv) the Company has not imposed any Security Interest upon any of
its assets, tangible or intangible;
(v) the Company has not made any material capital expenditures
outside the Ordinary Course of Business;
(vi) the Company has not made any material capital investment in, or
any material loan to, any other Person outside the Ordinary Course of Business;
(vii) the Company has not created, incurred, assumed, or guaranteed
more than $100,000 in aggregate indebtedness for borrowed money and capitalized
lease obligations;
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(viii) the Company has not granted any license or sublicense of any
material rights under or with respect to any Intellectual Property;
(ix) there has been no change made or authorized in the charter or
bylaws of any of the Company.
(x) the Company has not issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
(xi) the Company has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash or
in kind) or redeemed, purchased, or otherwise acquired any of its capital stock
except for distributions to Sellers which do not reduce the Net Working Capital
of the R.C. Dudek Division of the Company on the Closing Date to the less than
the Minimum Required Working Capital;
(xii) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xiii) the Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees outside
the Ordinary Course of Business;
(xiv) the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xv) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xvi) the Company has not adopted, amended, modified, or terminated
in any material respect any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any other
Employee Benefit Plan) except for changes in commitments in the Ordinary Course
of Business;
(xvii) the Company has not made any other material change in
employment terms for any of its directors, officers, and employees outside the
Ordinary Course of Business; and
(xviii) the Company has not committed to any of the foregoing.
(i) Undisclosed Liabilities. The Company has no material liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued
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or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for taxes), except for (i) liabilities set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto) and
(ii) liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business.
(j) Legal Compliance. The Company has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against the Company alleging any failure so to comply, except
where the failure to comply would not have a material adverse effect on the
business, financial condition, operations, results of operations of the Company.
(k) Taxes. Except as otherwise set forth in ss.4(k) of the Disclosure
Schedule:
The Company has duly and timely filed all Tax Returns that it was
required to file on or prior to the date hereof. All such Tax Returns were true,
complete and correct. All Taxes owed or required to be remitted by the Company
(whether or not shown on any Tax Return) have been paid or remitted, or are
being contested and adequately reserved in accordance with GAAP on the financial
statements of the Company. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. The most recent financial
statements delivered to Buyer by the Company hereunder reflect an adequate
reserve in accordance with GAAP for all Taxes of the Company for all taxable
periods and portions thereof through the date of such financial statements. The
Company maintained reserves in accordance with GAAP for all Taxes for the period
from the date of the most recent financial statements through the Closing Date.
The Company has satisfied all federal, state, local and foreign
withholding tax requirements including but not limited to income, social
security and employment tax.
None of the assets of the Company (i) is property that is required to be
treated as owned by another person pursuant to the "safe harbor lease"
provisions of former Section 168(f)(8) of the Code, (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code or (iii) directly or
indirectly secures any debt the interest of which is tax-exempt under Section
103(a) of the Code.
There are no Liens for Taxes on any of the assets of the Company.
The Company is not a party to any tax allocation, tax sharing or tax
benefit transfer agreement. The Company (A) has not been a member of an
affiliated, combined or unitary group filing a consolidated, combined or unitary
Tax Return (other than a group the common parent of which was the Company) and
(B) has no liability for the Taxes of any Person under Treas. Reg. ss.1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
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To the Knowledge of any of the Sellers and the directors and officers of
the Company, no written claim has ever been made by a taxing authority in a
jurisdiction where the Company does not file Tax Returns that the Company is or
may be subject to taxation by that jurisdiction.
There is no dispute or claim concerning any Tax liability of the Company
either (A) claimed or raised by any taxing authority in writing or (B) as to
which any of the Sellers has knowledge based upon personal contact with any
agent of such taxing authority. No taxing authority is now asserting or, to the
knowledge of the Sellers, threatening to assert, any deficiency or assessment
for additional Taxes of the Company or has notified the Company of its intent to
examine or audit the Company. The Company has not (A) waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency or (B) received any written notice of
deficiency of assessment from any taxing authority with respect to liability for
Taxes that has not been fully paid or finally settled.
The Sellers have delivered to the Buyer correct and complete copies of all
federal income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by the Company since December 31, 1993.
The Company has not filed a consent under Code section 341(f) concerning
collapsible corporations.
For all tax periods from and after 1987, up to and including the Effective
Time of Closing (collectively, the "S Corporation Tax Period"), the Company has
elected (with the consent of all of its shareholders), in compliance with all
applicable legal requirements, and has qualified to be taxed under Subchapter S
of the Code and corresponding provisions under any applicable state and local
laws, and such elections are in effect for the Company. No action has been taken
by the Company or any shareholder of the Company that may result in the
revocation of any such elections and, with respect to the S Corporation Tax
Period, the Company has no liability, absolute or contingent, for the payment of
any income Taxes under the Code or under the laws of such states or localities
which afford tax treatment similar to that under Subchapter S of the Code. With
respect to each subsidiary, directly or indirectly, owned by the Company, the
Company has made an election under section 1361(b)(3) of the Code and
corresponding provisions under any applicable state and local laws to treat such
subsidiary as a qualified subchapter S corporation ("QSSS"), such subsidiary has
been a QSSS since the effective date of such election and will continue to have
such status up to and including the Effective Time, and Section 4(k) of the
Disclosure Schedule sets forth, for each subsidiary, the effective date of its
QSSS election.
The Sellers represent and warrant that each is qualified to make a Code
section 338(h)(10) election under Treasury Regulations section 1.338(h)(10)-1
with respect to the sale of the Shares to Buyer, and agree to join Buyer in
making an election under section 338(h)(10) of the Code and one or more similar
elections under any applicable state income tax law (individually, a "Section
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338(h)(10) Election" and collectively, the "Section 338(h)(10) Elections"), with
respect to Buyer's purchase of the Shares.
(l) Real Property.
(i) The Company does not own any real property.
(ii) ss.4(l)(ii) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to the Company. The Sellers have
delivered to the Buyer correct and complete copies of the leases and subleases
listed in ss.4(l)(ii) of the Disclosure Schedule (as amended to date). With
respect to each material lease and sublease listed in ss.4(l)(ii) of the
Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material respects;
(B) no party to the lease or sublease is in material breach or
default, and no event has occurred which, with notice or lapse of time, would
constitute a material breach or default or permit termination, modification, or
acceleration thereunder;
(C) no party to the lease or sublease has repudiated any
material provision thereof;
(D) there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(E) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold; and
(F) all facilities leased or subleased thereunder have received
all approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof, and have been operated and
maintained in accordance with applicable laws, rules, and regulations in all
respects other than where the absence of the foregoing would not cause a
Material Adverse Effect.
(m) Intellectual Property.
(i) To the Knowledge of any of the Sellers and the directors and
officers of the Company, the Company has not interfered with, infringed upon,
misappropriated, or violated any material Intellectual Property rights of third
parties in any material respect, and none of the Sellers and the directors and
officers of the Company has ever received any written charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any written claim that the Company
must license or refrain from using any
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Intellectual Property rights of any third party). To the Knowledge of any of the
Sellers and the directors and officers of the Company, no third party has
interfered with, infringed upon, misappropriated, or violated any material
Intellectual Property rights of any of the Company in any material respect.
(ii) ss.4(m)(ii) of the Disclosure Schedule identifies each patent
or registration which has been issued to the Company with respect to any of its
Intellectual Property, identifies each pending patent application or application
for registration which the Company has made with respect to any of its
Intellectual Property, and identifies each material license, agreement, or other
permission which the Company has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). The Sellers have
delivered to the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date). ss.4(m)(ii) of the Disclosure Schedule also identifies each material
trade name or unregistered trademark used by the Company in connection with any
of its businesses. With respect to each item of Intellectual Property required
to be identified in ss.4(m)(ii) of the Disclosure Schedule except where there
would not be a Material Adverse Effect:
(A) the Company possesses all right, title, and interest in and
to the item, free and clear of any Security Interest, license, or other
restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation, charge,
written complaint, claim, or written demand is pending or, to the Knowledge of
any of the Sellers and the directors and officers of the Company, is threatened
which challenges the legality, validity, enforceability, use, or ownership of
the item; and
(D) the Company has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other conflict with
respect to the item.
(iii) ss.4(m)(iii) of the Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and that the
Company uses pursuant to license, sublicense, agreement, or permission. The
Sellers have delivered to the Buyer correct and complete copies of all such
material licenses, sublicenses, agreements, and permissions (as amended to
date). With respect to each item of Intellectual Property required to be
identified in ss.4(m)(iii) of the Disclosure Schedule except where there would
not be a Material Adverse Effect:
(A) the license, sublicense, agreement, or permission covering
the item is legal, valid, binding, enforceable, and in full force and effect;
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(B) no party to the license, sublicense, agreement, or
permission is in material breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(C) no party to the license, sublicense, agreement, or
permission has repudiated any material provision thereof; and
(D) the Company has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(n) Tangible Assets. The buildings, machinery, equipment, and other
tangible assets that the Company owns and leases are free from material defects
(patent and latent, to the Knowledge of any of the Sellers and the directors and
officers of the Company), have been maintained in accordance with normal
industry practice, and are in good operating condition and repair (subject to
normal wear and tear).
(o) Inventory. The inventory of the Company consists of raw
materials and supplies, manufactured and processed parts, work in process, and
finished goods, all of which is merchantable in the Ordinary Course of Business
(including, without limitation, normal marketing programs, discounts, rebates,
commissions, incentives and the like) and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving (on hand for more
than one year without being written down to nominal value), obsolete, damaged,
or defective, subject only to the reserve for inventory writedown set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of the Company.
(p) Contracts. ss.4(p) of the Disclosure Schedule lists the
following contracts and other agreements to which the Company is a party:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
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(v) any material agreement concerning confidentiality or
noncompetition;
(vi) any material agreement with any of the Sellers and their
Affiliates (other than the Company);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, or results of operations of the Company and its
Subsidiaries; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
The Sellers have delivered to the Buyer a correct and complete copy of
each written agreement listed in ss.4(p) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the material terms and conditions
of each oral agreement referred to in ss.4(p) of the Disclosure Schedule. With
respect to each such agreement except where there would not be a Material
Adverse Effect: (A) the agreement is legal, valid, binding, enforceable, and in
full force and effect; (B) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (C) no party has repudiated any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable
of the Company are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of the Company.
(r) Powers of Attorney. To the Knowledge of any of the Sellers and
the directors and officers of the Company, there are no material outstanding
powers of attorney executed on behalf of the Company.
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(s) Insurance. ss.4(s) of the Disclosure Schedule sets forth the
following information with respect to each material insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) with respect to which the Company is
a party, a named insured, or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage is
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
material loss-sharing arrangements.
With respect to each such insurance policy, except where there would not
be a Material Adverse Effect: (A) the policy is legal, valid, binding,
enforceable, and in full force and effect; (B) neither the Company nor any other
party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (C) no
party to the policy has repudiated in writing any provision thereof. ss.4(s) of
the Disclosure Schedule describes any material self-insurance arrangements
affecting any of the Company and its Subsidiaries.
(t) Litigation. ss.4(t) of the Disclosure Schedule sets forth each
instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of any of the Sellers and the directors and officers of the Company,
is threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator.
(u) Product Warranty. Substantially all of the products manufactured,
sold, leased, and delivered by the Company have conformed in all material
respects with all applicable contractual commitments and all express and implied
warranties, and the Company has no material liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due) for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the
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Closing Date in accordance with the past custom and practice of the Company.
Substantially all of the products manufactured, sold, leased, and delivered by
the Company are subject to standard terms and conditions of sale or lease.
ss.4(u) of the Disclosure Schedule includes copies of the standard terms and
conditions of sale or lease for the Company (containing applicable guaranty,
warranty, and indemnity provisions).
(v) Product Liability. The Company has no material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by the Company. The parties agree that
Sellers shall have no responsibility to Buyer under Sections 3(u) or 3(v) with
respect to product liability claims or product warranty claims involving
allegedly defective products sold by Buyer to the Company to the extent such
claims are covered by Buyer's standard warranty or by Buyer's product liability
insurance policy.
(w) Employees. To the Knowledge of any of the Sellers and the directors
and officers of the Company, except for those of the Company's officers and
directors Buyer does not intend to maintain an employment relationship with
following the Closing as confirmed in writing by Buyer to the Company, no
executive, key employee, or significant group of employees plans to terminate
employment with the Company during the next 12 months. The Company is not a
party to or bound by any collective bargaining agreement, nor has it experienced
any strike or material grievance, claim of unfair labor practices, or other
collective bargaining dispute within the past three years. The Company has not
committed any material unfair labor practice. None of the Sellers and the
directors and officers of the Company has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Company.
(x) Employee Benefits.
(i) ss.4(x) of the Disclosure Schedule lists each Employee Benefit
Plan that the Company maintains or to which the Company contributes or has any
obligation to contribute. The Company does not have, and has never had, any
ERISA Affiliates
(A) At no time has the Company ever sponsored or otherwise
contributed to or had any obligation to contribute to any Multiemployer Plan or
defined benefit plan (as such term is defined in ERISA ss.3(35)) or otherwise
has incurred any withdrawal liability as defined in ERISA ss.4201 or liability
to the PBGC (whether known or unknown, asserted or unasserted), nor has the
Company ever sponsored or otherwise contributed to or has any obligation to
contribute to any plan providing benefits to current or future retired or
terminated employees, their spouses, or their dependents, except for required
continuation coverage under Part 6 of Title I of ERISA and Code ss.4908B.
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(B) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code and other
applicable laws.
(C) All required reports and descriptions (including Form 5500
Annual Reports, summary annual reports, PBGC-l's, and summary plan descriptions)
have been timely filed and distributed appropriately with respect to each such
Employee Benefit Plan. The requirements of COBRA have been met in all material
respects with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(D) All contributions (including all employer contributions,
employee salary reduction contributions and insurance premiums and other
payments) which are due have been paid to each such Employee Benefit Plan and
all contributions for any period ending on or before the Closing Date which are
not yet due have been paid to each such Employee Benefit Plan or accrued in
accordance with the past custom and practice of the Company.
(E) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan intended to be a "qualified plan" under Code ss.401(a) meets the
requirements, both in form and operation of Code ss.401(a), has received a
favorable determination letter from the Internal Revenue Service that it is a
"qualified plan," and such determination letter is currently in effect, and
Seller is not aware of any facts or circumstances that could result in the
revocation of such determination letter.
(F) The Sellers have delivered to the Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most recent
Form 5500 Annual Report, and all related trust agreements, insurance contracts,
and other funding agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that the Company
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute, there have been no
Prohibited Transactions with respect to any such Employee Benefit Plan. No
Fiduciary has any liability for material breach of fiduciary duty or any other
material failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge of any of the Sellers and
the directors and officers of the Company, threatened.
(y) Guaranties. The Company is not a guarantor or otherwise responsible
for any liability or obligation (including indebtedness) of any other Person.
(z) Environment, Health, and Safety Matters.
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(i) The Company, has complied and is in compliance, in each case in
all material respects, with all Environmental, Health, and Safety Requirements.
(ii) Without limiting the generality of the foregoing, the Company
has obtained, has complied, and is in compliance with, in each case in all
material respects, all material permits, licenses and other authorizations that
are required pursuant to Environmental, Health, and Safety Requirements for the
occupation of its facilities and the operation of its business; a list of all
such material permits, licenses and other authorizations is set forth on the
attached "Environmental and Safety Permits Schedule."
(iii) The Company has not received any written notice, report or
other information regarding any actual or alleged material violation of
Environmental, Health, and Safety Requirements, or any material liabilities or
potential material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any material investigatory, remedial or
corrective obligations, relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.
(iv) Except as set forth on the attached "Environmental and Safety
Matters Schedule", none of the following exists at any property or facility
owned or operated by the Company: (1) underground storage tanks, (2)
asbestos-containing material in any friable and damaged form or condition, (3)
materials or equipment containing polychlorinated biphenyls, or (4) landfills,
surface impoundments, or disposal areas.
(v) The Company has not treated, stored, disposed of, arranged for
or permitted the disposal of, transported, handled, or released any substance,
including without limitation any hazardous substance, or owned or operated any
property or facility (and no such property or facility is contaminated by any
such substance) in a manner that has given or would give rise to material
liabilities, including any material liability for response costs, corrective
action costs, personal injury, property damage, natural resources damages or
attorney fees, pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA") or the Solid Waste
Disposal Act, as amended ("SWDA") or any other Environmental, Health, and Safety
Requirements.
(vi) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any material obligations
for site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
(aa) Certain Business Relationships With the Company and Its
Subsidiaries. None of the Sellers and their Affiliates has been involved in any
material business arrangement or relationship with the Company within the past
12 months, and none of the Sellers and their Affiliates owns any material asset,
tangible or intangible, which is used in the business of any of the Company,
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except that certain of the Sellers own the real property in Oxnard, California
which is leased by the Company and is being sold to the Buyer pursuant to the
Real Property Agreement.
(bb) Disclosure. The representations and warranties contained in this
ss.4 do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this ss.4 not misleading. Other than as set forth in this Agreement
and the Disclosure Schedule and any other exhibits and schedules hereto, neither
the Company nor any Seller is making any representations or warranties and Buyer
is placing no reliance on any representations or warranties which are not set
forth in this Agreement, the Disclosure Schedule and any other exhibits and
schedules hereto.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or her reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in ss.7 below).
(b) Notices and Consents. The Sellers will cause the Company to give any
notices to third parties, and will cause the Company to use its reasonable best
efforts to obtain any third party consents, that the Buyer reasonably may
request in connection with the matters referred to in ss.4(c) above. Each of the
Parties will (and the Sellers will cause the Company to) give any notices to,
make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in ss.3(a)(ii), ss.3(b)(ii), and
ss.4(c) above. Without limiting the generality of the foregoing, each of the
Parties will file (and the Sellers will cause the Company to file) any
Notification and Report Forms and related material that he or she may be
required to file with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice under the Hart-Scott-Rodino Act, and
will make (and the Sellers will cause the Company to make) any further filings
pursuant thereto that may be necessary, proper, or advisable in connection
therewith. Buyer will assist Sellers and the Company in the preparation of
filings under the Hart-Scott-Rodino Act, but Sellers shall be responsible for
the filings being complete and accurate as required by the Hart-Scott-Rodino
Act.
(c) Operation of Business. The Sellers will not cause or permit the
Company to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Sellers will not cause or permit the Company to
(i) declare, set aside, or pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase, or otherwise acquire any of
its capital stock, (ii) otherwise engage in any practice, take any action, or
enter into any transaction of the sort described in ss.4(h) above, except as set
forth in the Disclosure Schedule, provided that any dividends or distributions
referenced in the Disclosure Schedule shall not reduce the Net Working Capital
of the Company on the Closing Date below the Net Working Capital on the 1998
Balance Sheet.
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(d) Preservation of Business. The Sellers will cause the Company to keep
its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(e) Full Access. Each of the Sellers will permit, and the Sellers will
cause the Company to permit, representatives of the Buyer to have full access at
all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company, to all premises, properties, personnel,
books, records (including tax records), contracts, and documents of or
pertaining to the Company. The Buyer will treat and hold as such any
Confidential Information it receives from any of the Sellers and the Company in
the course of the reviews contemplated by this ss.5(e), will not use any of the
Confidential Information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, will return to the Sellers
and the Company all tangible embodiments (and all copies) of the Confidential
Information which are in its possession.
(f) Notice of Developments. The Sellers will give prompt written notice
to the Buyer of any material adverse development causing a breach of any of the
representations and warranties in ss.4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or her own representations and warranties in ss.3 above. No
disclosure by any Party pursuant to this ss.5(f), however, shall be deemed to
amend or supplement Annex I, Annex II, or the Disclosure Schedule or to prevent
or cure any misrepresentation, breach of warranty, or breach of covenant.
(g) Exclusivity. None of the Sellers will (and the Sellers will not
cause or permit the Company to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of the Company (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing. None of the Sellers will vote their
Company Shares in favor of any such acquisition structured as a merger,
consolidation, or share exchange.
(h) Existing Agreements. The Buyer will not terminate or otherwise alter
in any material respect any of the terms or conditions of its existing
agreements with the Company, except for termination of the manufacturer's
representative agreement between the Company and the Buyer.
(i) Company's Qualified Plan. Sellers shall cause the Company to adopt
such resolutions as may be necessary to terminate the R.C. Dudek & Company, Inc.
Retirement Plan ("Qualified Plan") as of a date no later than the day prior to
the Closing Date ("Termination Date"). Such resolutions shall further provide
that the Qualified Plan be amended to cease all future contributions and benefit
accruals under the Qualified Plan as of the Termination Date and vest all
participants thereunder as of the Termination Date. In addition, such
resolutions shall provide that
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the termination of the Qualified Plan shall be subject to the condition
subsequent that the Internal Revenue Service determines that the termination of
the Qualified Plan will not adversely affect its qualified status under Code
ss.401(a) and that the Company shall make such submission as may be necessary to
obtain such determination. The resolutions shall also direct the liquidation and
termination of the trust established under the Qualified Plan upon receipt of a
favorable determination with respect to the termination of the Qualified Plan.
Sellers shall also cause the Company to adopt amendments to the Qualified Plan
to the extent necessary to implement the resolutions, such amendments to be
effective subject to the condition subsequent of the determination by the
Internal Revenue Service that such amendment(s) will not adversely affect the
qualified status of the Qualified Plan under Code ss.401(a) of the Code.
6. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement, each of the Parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request, all at the
sole cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under ss.8 below). The Sellers acknowledge
and agree that from and after the Closing the Buyer will be entitled to
possession of all documents, books, records (including tax records), agreements,
and financial data of any sort relating to the Company.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of the Company and its Subsidiaries, each of
the other Parties will cooperate with him or it and his or her counsel in the
contest or defense, make available their personnel, and provide such testimony
and access to their books and records as shall be necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under ss.8 below).
(c) Transition. None of the Sellers will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Company from maintaining
the same business relationships with the Company after the Closing as it
maintained with the Company prior to the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as such all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in his or
her possession, except nothing herein shall restrict any Seller who becomes an
employee
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of the Company after the Closing from using Confidential Information in the
course of his employment by the Company. In the event that any of the Sellers is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, that Seller will
notify the Buyer promptly of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the provisions of
this ss.6(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Sellers is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that Seller may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing Seller shall use his or her reasonable
best efforts to obtain (at Buyer's sole cost and expense), at the reasonable
request of the Buyer, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information required to be
disclosed as the Buyer shall designate.
(e) Covenant Not to Compete. For a period of five years from and after
the Closing Date, none of the Sellers will engage directly or indirectly in any
business that the Company conducts as of the Closing Date in any geographic area
in which the Company conducts that business as of the Closing Date; provided,
however, that no owner of less than 1% of the outstanding stock of any
publicly-traded corporation shall be deemed to engage solely by reason thereof
in any of its businesses. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this ss.6(e) is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3(a) and ss.4
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Sellers shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
(iii) the Company shall have procured all of the material third
party consents specified in ss.5(b) above;
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(iv) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of the Buyer to own the
Company Shares and to control the Company or (D) affect materially and adversely
the right of the Company to own its assets and to operate its businesses (and no
such injunction, judgment, order, decree, ruling, or charge shall be in effect);
(v) the Sellers shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in ss.7(a)(i)-(iv) is
satisfied in all respects;
(vi) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated
and the Parties, and the Company, shall have received all other material
authorizations, consents, and approvals of governments and governmental agencies
referred to in ss.3(a)(ii), ss.3(b)(ii), and ss.4(c) above;
(vii) closing of the transactions contemplated by the Real Property
Agreement shall occur concurrently with the Closing hereunder and Buyer shall
acquire the real property which is the subject thereof pursuant to the terms and
conditions of the Real Property Agreement;
(viii) the Buyer shall have received from counsel to the Sellers an
opinion in form and substance as set forth in Exhibit D attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
(ix) the Buyer shall have received the resignations, effective as of
the Closing, of each director and officer of the Company.
(x) the Buyer shall have entered into employment agreements or
otherwise reached satisfactory understandings with key employees of the Company;
(xi) the Sellers and the Buyer shall have executed mutual releases
of all claims prior to the Closing Date reasonably satisfactory to Sellers and
Buyer; and
(xii) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Buyer.
The Buyer may waive any condition specified in this ss.7(a) if it
executes a writing so stating at or prior to the Closing.
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(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3(b) above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing including
without limitation payment of the Purchase Price as provided herein;
(iii) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers a certificate to
the effect that each of the conditions specified above in ss.7(b)(i)-(iii) is
satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated
and the Parties, the Company, and its Subsidiaries shall have received all other
material authorizations, consents, and approvals of governments and governmental
agencies referred to in ss.3(a)(ii), ss.3(b)(ii), and ss.4(c) above;
(vi) closing of the transactions contemplated by the Real Property
Agreement shall occur concurrently with the closing hereunder and the Sellers of
the real property which is the subject thereof shall receive the consideration
provided for therein;
(vii) the Sellers shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit E attached hereto,
addressed to the Sellers, and dated as of the Closing Date;
(viii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Requisite Sellers;
(ix) the Sellers and the Buyer shall have executed mutual releases
of all claims prior to the Closing Date reasonably satisfactory to Sellers and
Buyer; and
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(x) Buyer and its affiliates shall have waived all claims they may
have against Sellers under Sections 500 et. seq of the California Corporations
Code regarding all preclosing distributions disclosed on the Disclosure
Schedule.
The Requisite Sellers may waive any condition specified in this
ss.7(b) if they execute a writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Sellers contained in ss.4 above (other
than ss.4(k) above) shall survive the Closing hereunder (even if the Buyer knew
or had reason to know of any misrepresentation or breach of warranty at the time
of Closing) and continue in full force and effect for a period of two years
thereafter; provided, however, that the representations and warranties contained
in ss.4(z) above shall survive the Closing hereunder (even if the Buyer knew or
had reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect for a period of five years
thereafter. All of the other representations and warranties of the Parties
contained in this Agreement (including the representations and warranties of the
Parties contained in ss.3 above and the representations and warranties of the
Sellers contained in ss.4(k) above) shall survive the Closing (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations). Upon termination
of any representations and warranties of Sellers as expressly provided above,
Buyer shall have no right to make a claim for indemnification for breach of such
representations and warranties, except with respect to claims made in writing
prior to such termination.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) In the event any of the Sellers breaches any of their
representations, warranties, and covenants contained herein (other than the
covenants in ss.2(a) above and the representations and warranties in ss.3(a)
above), and, if there is an applicable survival period pursuant to ss.8(a)
above, provided that the Buyer makes a written claim for indemnification against
any of the Sellers pursuant to ss.11(h) below within such survival period, then
each of the Sellers agrees to indemnify the Buyer from and against the entirety
of any Adverse Consequences the Buyer may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences the Buyer may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach; provided,
however, that (A) the Sellers shall not have any obligation to indemnify the
Buyer from and against any Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach of any representation or
warranty of the Sellers contained in ss.4 above until the Buyer has suffered
Adverse Consequences by reason of all such breaches in excess of $340,000 (after
which point the Sellers will be obligated to indemnify the Buyer from and
against all such Adverse Consequences whether greater or less than such amount)
and (B) there will be a $7,500,000 aggregate ceiling on
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<PAGE>
the obligation of the Sellers to indemnify the Buyer from and against Adverse
Consequences resulting from, arising out of, relating to, in the nature of, or
caused by breaches of the representations and warranties of the Sellers
contained in ss.4 above.
(ii) In the event any of the Sellers breaches any of his or her
covenants in ss.2(a) above or any of his or her representations and warranties
in ss.3(a) above, and, if there is an applicable survival period pursuant to
ss.8(a) above, provided that the Buyer makes a written claim for indemnification
against the Seller pursuant to ss.11(h) below within such survival period, then
the Seller agrees to indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences the Buyer may
suffer after the end of any applicable survival period) resulting from, arising
out of, relating to, in the nature of, or caused by the breach.
(iii) Each of the Sellers agrees to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any Liability
of the Company (x) for any Taxes of the Company with respect to any Tax year or
portion thereof ending on or before the Closing Date (or for any Tax year
beginning before and ending after the Closing Date to the extent allocable
(determined in a manner consistent with ss.9(b)) to the portion of such period
beginning before and ending on the Closing Date), to the extent such Income
Taxes are not reflected in the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Closing Statement, and (y) for the
unpaid taxes of any Person (other than the Company) under Reg. ss.1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(c) Indemnification Provisions for Benefit of the Sellers. In the event
the Buyer breaches any of its representations, warranties, and covenants
contained herein, and, if there is an applicable survival period pursuant to
ss.8(a) above, provided that any of the Sellers makes a written claim for
indemnification against the Buyer pursuant to ss.11(h) below within such
survival period, then the Buyer agrees to indemnify each of the Sellers from and
against the entirety of any Adverse Consequences the Sellers may suffer through
and after the date of the claim for indemnification (including any Adverse
Consequences the Sellers may suffer after the end of any applicable survival
period) resulting from, arising out of, relating to, in the nature of, or caused
by the breach. In addition, the Buyer agrees to indemnify each of the Sellers
from and against the entirety of any Adverse Consequences the Sellers may suffer
resulting from, arising out of or relating to, in the nature of, or caused by
Buyer's ownership and operation of the business of the Company after Closing,
other than with respect to (i) matters for which Sellers are required to
indemnify Buyers pursuant to Section 8(b) and (ii) matters related to the
representation of Buyer as a manufacturer's representative.
(d) Matters Involving Third Parties.
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(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other Party (the "Indemnifying
Party") under this ss.8, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to assume the
defense of the Third Party Claim with counsel of his or her choice reasonably
satisfactory to the Indemnified Party at any time within 15 days after the
Indemnified Party has given notice of the Third Party Claim; provided, however,
that the Indemnifying Party must conduct the defense of the Third Party Claim
actively and diligently thereafter in order to preserve its rights in this
regard; and provided further that the Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in (but not control) the
defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has assumed and is
conducting the defense of the Third Party Claim in accordance with ss.8(d)(ii)
above, (A) the Indemnifying Party will not consent to the entry of any judgment
or enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (not to be withheld or delayed
unreasonably) unless the judgment or proposed settlement involves only the
payment of money damages by one or more of the Indemnifying Parties and does not
impose an injunction or other equitable relief upon the Indemnified Party and
(B) the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld or delayed
unreasonably).
(iv) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third Party Claim in accordance with ss.8(d)(ii)
above, however, (A) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner he or she reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith) and (B) the Indemnifying Parties
will remain responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim to the fullest extent provided in this ss.8.
(e) Determination of Adverse Consequences. The Parties shall make
appropriate adjustments for tax consequences and insurance coverage and take
into account the time cost of money (using the Applicable Rate as the discount
rate) in determining Adverse Consequences for purposes of this ss.8. All
indemnification payments under this ss.8 shall be deemed adjustments to the
Purchase Price.
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(f) Exclusive Remedy. The Buyer and the Seller acknowledge and agree
that the foregoing indemnification provisions in this ss.8 shall be the
exclusive remedy of the Buyer and the Seller with respect to the Company, and
the transactions contemplated by this Agreement. Without limiting the generality
of the foregoing, the Buyer and the Seller hereby waive any statutory,
equitable, or common law rights or remedies relating to any environmental
matters, including without limitation any such matters arising under any
Environmental, Health, and Safety Requirements and including without limitation
any arising under the Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"). Each of the Sellers hereby agrees that he or she will
not make any claim for indemnification against the Company by reason of the fact
that he or she was a director, officer, employee, or agent of any such entity or
was serving at the request of any such entity as a partner, trustee, director,
officer, employee, or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in settlement, losses,
expenses, or otherwise and whether such claim is pursuant to any statute,
charter document, bylaw, agreement, or otherwise) with respect to any action,
suit, proceeding, complaint, claim, or demand brought by the Buyer against such
Seller (whether such action, suit, proceeding, complaint, claim, or demand is
pursuant to this Agreement, applicable law, or otherwise).
9. Tax Matters.
The following provisions shall govern the allocation of responsibility as
between Buyer and Sellers for certain tax matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. Sellers shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. Sellers shall permit Buyer to review and comment
on each such Tax Return described in the preceding sentence prior to filing and
shall make such revisions to such Tax Returns as are reasonably requested by
Buyer. Sellers shall be responsible for the payment of Taxes of the Company with
respect to such periods except to the extent such Taxes are reflected in the
reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the Closing Statement.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed
(subject to review and approval by Seller's Agent which approval shall not be
unreasonably withheld or delayed) any Tax Returns of the Company for Tax periods
which begin before the Closing Date and end after the Closing Date. Seller shall
pay to Buyer within fifteen (15) days after the date on which Taxes are paid
with respect to such periods an amount equal to the portion of such Taxes which
relates to the portion of such Taxable period ending on the Closing Date to the
extent such Taxes are not reflected in the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Closing Statement. For
purposes of this Section, in the case of any Taxes that are imposed on a
periodic basis and are payable for a Taxable period that includes (but does not
end on) the Closing Date, the portion of such Tax which relates
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<PAGE>
to the portion of such Taxable period ending on the Closing Date shall (x) in
the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Taxable period
multiplied by a fraction the numerator of which is the number of days in the
Taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire Taxable period, and (y) in the case of any Tax
based upon or related to income or receipts be deemed equal to the amount which
would be payable if the relevant Taxable period ended on the Closing Date. Any
credits relating to a Taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant Taxable period
ended on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice
of the Company.
(c) Refunds and Tax Benefits. Any Tax refunds that are received by Buyer
or the Company, and any amounts credited against Tax to which Buyer or the
Company become entitled, that relate to Tax periods or portions thereof ending
on or before the Closing Date that were not reflected on the Closing Statement
or the 1998 Balance Sheet shall be for the account of Seller, and Buyer shall
pay over to Seller any such refund or the amount of any such credit within
fifteen (15) days after receipt or entitlement thereto. In addition, to the
extent that a claim for refund or a proceeding results in a payment or credit
against Tax by a taxing authority to the Buyer or the Company of any Tax accrued
on the Closing Statement, the Buyer shall pay such amount to Seller within
fifteen (15) days after receipt or entitlement thereto provided that such
payment or credit against Tax was not reflected on the 1998 Balance Sheet or on
the Closing Statement.
(d) Cooperation on Tax Matters.
(i) Buyer, the Company and Sellers shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. The Company and Sellers agree (A) to retain all books and records
with respect to Tax matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or Sellers, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Company or
Sellers, as the case may be, shall allow the other party to take possession of
such books and records.
(ii) Buyer and Seller further agree, upon request, to use their best
efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
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<PAGE>
(iii) Buyer and Seller further agree, upon request, to provide the
other party with all information that either party may be required to report
pursuant to ss.6043 of the Code and all Treasury Department Regulations
promulgated thereunder.
(iv) If the Company becomes obligated to pay any state Taxes (other
than California Taxes) with respect to any period ending on or prior to the
Closing Date, Buyer will cooperate with Sellers by amending the Company's
California Tax Returns as may be appropriate in order to obtain any refund or
credit to which the Company is entitled in order to mitigate the amount of any
Tax for which Sellers are liable to indemnify Buyer hereunder, provided that
such amendment does not have an adverse effect on the Company or the Buyer for
periods ending after the Closing Date.
(e) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder.
(f) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, shall be paid by Sellers
when due, and Sellers will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
(g) Allocation and 338(h)(10) Election. Buyer shall prepare Internal
Revenue Service Form 8023 (and any required attachments) and any similar state
forms (and any required attachments) that may be required to make the Section
338(h)(10) Elections (collectively, the "Forms") and shall submit for Forms to
the Sellers not later than 10 days prior to the Closing for review by Sellers.
After review and approval by Sellers, Sellers and Buyer shall sign the forms
which shall be delivered to Buyer at Closing. The Sellers agree to provide the
necessary information to Buyer in connection with the preparation of the Forms.
The Sellers and the Buyer agree upon an allocation of the modified aggregate
deemed sales price (as such term is defined in Treasury regulations under
section 338) among the Company's assets (the "Allocation") in accordance with
the attached Exhibit F. The parties acknowledge that Exhibit F has been prepared
based on the Company's June 30, 1999 balance sheet and that such allocation will
be appropriately revised based upon the balance sheet as of the Closing Date.
The Buyer shall file the Forms in accordance with applicable Tax laws. The
Sellers and the Buyer shall take or cause to be taken any other actions that are
necessary for making or perfecting the Section 338(h)(10) Elections. The Buyer
shall provide the Sellers with a copy of the Forms as filed. With respect to
each Section 338(h)(10) Election, the Sellers shall treat the Section 338(h)(10)
Election as valid and shall not take any action inconsistent with such
treatment, except to the extent otherwise provided under applicable Tax law. Any
Taxes payable by the Company as a result of such election shall be accrued as a
liability on the Closing Statement.
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<PAGE>
10. Termination.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Requisite Sellers may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving written
notice to the Requisite Sellers at any time prior to the Closing (A) in the
event any of the Sellers has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Buyer has
notified the Requisite Sellers of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before October 31, 1999, by reason of the
failure of any condition precedent under ss.7(a) hereof (unless the failure
results primarily from the Buyer itself breaching any representation, warranty,
or covenant contained in this Agreement); and
(iii) the Requisite Sellers may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in the event
the Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, any of the Sellers has
notified the Buyer of the breach, and the breach has continued without cure for
a period of 30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before October 31, 1999, by reason of the failure of any
condition precedent under ss.7(b) hereof (unless the failure results primarily
from any of the Sellers themselves breaching any representation, warranty, or
covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss.10(a) above, all rights and obligations of the Parties hereunder
shall terminate without any liability of any Party to any other Party (except
for any liability of any Party then in breach); provided, however, that the
confidentiality provisions contained in ss.5(e) above shall survive termination.
11. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Sellers in ss.2(a) above
concerning the sale of his or her Company Shares to the Buyer and the
representations and warranties of each of the Sellers in ss.3(a) above
concerning the transaction are several obligations. This means that the
particular Seller making the representation, warranty, or covenant will be
solely responsible to the extent provided in ss.8 above for any Adverse
Consequences the Buyer may suffer as a result of any breach thereof.
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<PAGE>
(ii) The remainder of the representations, warranties, and
covenants in this Agreement are joint and several obligations. This means that
each Seller will be responsible to the extent provided in ss.8 above for the
entirety of any Adverse Consequences the Buyer may suffer as a result of any
breach thereof.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
Buyer and the Requisite Sellers; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the Real Property
Agreement and the other documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or her rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Requisite Sellers; provided, however, that the
Buyer may (i) assign any or all of its rights and interests hereunder to one or
more of its Affiliates and (ii) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
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If to the Sellers:
Victor E. Carlson
R. C. Dudek & Company, Inc.
800 Del Norte Blvd.
Oxnard, CA 93030
With a copy to:
Weinstock, Manion, Reisman,
Shore and Neumann, a Law Corporation
1875 Century Park East
Suite 1500
Los Angeles, California 90067
Attention: Louis A. Reisman, Esquire
If to the Buyer:
Penn Engineering & Manufacturing Corp.
5190 Old Easton Road
Danboro, PA 18916-1000
Attention: Kenneth A. Swanstrom, Chairman
With a copy to:
Duane, Morris & Heckscher LLP
4200 One Liberty Place
Philadelphia, PA 19103-7396
Attention: Stephen D. Teaford, Esquire
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
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<PAGE>
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Requisite Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties and the Company, will bear his or her
or its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. Sellers
and Buyer shall each pay one-half of the Hart-Scott-Rodino filing fee and the
fees and expenses of Duane, Morris & Heckscher LLP incurred in connection with
such filing. The Sellers agree that the Company has not borne and will not bear
any of the Sellers' costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby, except that the Company shall be permitted to pay up to
$200,000 for the Sellers' and the Company's costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby,
including Seller's portion of the Hart-Scott-Rodino filing fee and legal and
accounting fees and expenses) but only to the extent that the Net Working
Capital of the R.C. Dudek Division of the Company on the Closing Date after
payment of such items is not less than the Net Working Capital of the Company as
shown on the 1998 Balance Sheet.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(n) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Arbitration. Except for disputes concerning the preparation of the
Closing Statement and any reduction of the Purchase Price under Section 2(c)
which shall be resolved in accordance with such Section 2(c), any other dispute
arising under the indemnification provisions or any other provisions of this
Agreement or the Escrow Agreement shall be resolved by binding arbitration
conducted in Wilmington, Delaware in accordance with the procedures of the
American Arbitration Association and judgment may be entered in any court of
competent jurisdiction based upon the decision reached in such arbitration. Each
of the Parties agrees that notices given to the Parties in connection with any
arbitration proceeding shall be properly given if sent in accordance with
ss.11(h) hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
PENN ENGINEERING &
MANUFACTURING CORP.
By: /s/ Kenneth A. Swanstrom
-------------------------------
Name: Kenneth A. Swanstrom
Title:
/s/ Harriet Dudek Serven
-----------------------------------
HARRIET DUDEK, NOW KNOWN AS HARRIET
SERVEN, Trustee of Trust B under
Will of Richard C. Dudek, Deceased
/s/ Victor E. Carlson
-----------------------------------
VICTOR E. CARLSON
/s/ Sara E. Carlson
-----------------------------------
SARA E. CARLSON
/s/ John S. Perell
-----------------------------------
JOHN S. PERELL
/s/ Elizabeth C. Perell
-----------------------------------
ELIZABETH C. PERELL
/s/ Martha Gail Anderson
-----------------------------------
MARTHA GAIL ANDERSON
40
AGREEMENT OF SALE
For
800 DEL NORTE BOULEVARD
OXNARD, CALIFORNIA
Between
VICTOR E. CARLSON
SARA E. CARLSON
JOHN S. PERELL
ELIZABETH C. PERELL
HARRIET DUDEK, NOW KNOWN AS HARRIET SERVEN,
TRUSTEE UNDER WILL OF
RICHARD C. DUDEK, DECEASED
as Seller
and
PENN ENGINEERING AND MANUFACTURING CORP.
as Buyer
<PAGE>
AGREEMENT OF SALE
This AGREEMENT OF SALE (this "Agreement") is dated as of the 30th day of
September, 1999 (The "Delivery Date") by and among Victor E. Carlson, Sara E.
Carlson, John S. Perell, Elizabeth C. Perell and Harriet Dudek, now known as
Harriet Serven, Trustee under the Will of Richard C. Dudek, Deceased, each an
adult individual, (collectively, the "Seller"), and Penn Engineering and
Manufacturing Corp., a Delaware corporation, (the "Buyer").
1. PURCHASE AND SALE; PROPERTY
a. Purchase and Sale.
Seller shall sell and convey to Buyer, and Buyer shall purchase and accept
from Seller, the Property (hereafter defined) for the Purchase Price (hereafter
defined) on and subject to the terms and conditions of this Agreement.
b. Property.
The Property consists of all of the following:
i. All that certain tract or parcel of land containing approximately
2.15 acres having an address of 800 Del Norte Boulevard, Oxnard,
California, as more particularly described by metes and bounds on Exhibit
(I)(B)(1) (the "Land");
ii. All improvements erected on, over and beneath the Land including,
without limitation, the one story building located on the Land containing
approximately 30,600 square feet (the "Building");
iii. All easements, rights-of-way or use, privileges, licenses,
hereditaments, appurtenances, interests and other rights belonging to or
inuring to the benefit of the Land and all right, title and interest of
Seller, if any, in and to any land lying in the bed of any highway, street,
road or avenue, opened or proposed, in front or abutting or adjoining the
Land (the items mentioned in subsections (1), (2) and (3) being sometimes
referred to as the "Real Property");
iv. All tangible personal property owned by Seller and located in or
on, attached or appurtenant to, or used in connection with the ownership,
financing, operation and maintenance of the Real Property, including,
without limitation, all furniture, furnishings, carpeting, draperies,
fixtures and equipment, all building systems (including the heating, air
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conditioning, ventilating, electrical, plumbing, sprinkling, security, and
telecommunication systems), ranges, refrigerators, building supplies,
maintenance equipment (including spare parts, tools, lawnmowers and
snowblowers), signs and landscaping; and
v. All intangible personal property owned by Seller and used in
connection with the ownership, financing, operation, and maintenance of the
Real Property including, without limitation, all right, title and interest
of the Seller in and to:
(1) all contract rights, escrow accounts, deposits, instruments,
documents of title, general intangibles, and business records
pertaining to the Real Property (except for documents of a proprietary
nature);
(2) the contracts affecting the Real Property set forth in
Exhibit (I)(B)(5)(c) (the "Service Contracts"); and
(3) the licenses and permits applicable to the Property as set
forth in Exhibit (I)(B)(5)(c) (the "Permits") (the items mentioned in
subsections 4 and 5 being sometimes collectively referred to as the
"Personal Property").
2. PURCHASE PRICE
a. Purchase Price.
The total purchase price for the Property (the "Purchase Price") shall be
Two Million Two Hundred Thousand ($2,200,000.00) DOLLARS which shall be paid by
Buyer to Seller on the Closing Date in cash, by wire transfer of immediately
available funds to a single account designated by Seller's written notice to
Buyer and Escrow Agent (hereafter defined) not less than two (2) business days
prior to the Closing Date, or by bank certified, treasurer's or cashier's check
or plain check of the Escrow Agent subject to adjustments as provided in this
Agreement.
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b. Allocation of the Purchase Price.
i. The Purchase Price shall be allocated as follows:
Land $ 682,000.00
Buildings, Improvements and
Personal Property
(Section 1250 and 1245 Property
as defined in the Internal Revenue Code) $1,518,000.00
Total $2,200,000.00
ii. To the extent that the Purchase Price is at variance from the
Total stated above, each of the categories comprising the allocation of the
Purchase Price shall be adjusted proportionately.
iii. Buyer and Seller acknowledge that in arriving at the above
allocation, they took into account the respective fair market values of the
properties and that such allocation shall be used for all purposes
including, but not limited to federal income tax, realty transfer tax, and
financial reporting services.
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3. CLOSING; CONDITIONS PRECEDENT TO CLOSING
a. Closing.
Closing (the "Closing") under this Agreement shall take place on the date
(the "Closing Date") on which closing is effectuated under that certain Stock
Purchase Agreement dated as of the date of this Agreement among Seller, Buyer
and Martha Gail Anderson (the "Stock Purchase Agreement"). Closing procedures
shall be handled through the escrow offices of Chicago Title Insurance Company
("Escrow Agent").
b. Condition of Title.
1. Buyer shall obtain a Preliminary title Report from Chicago Title
Insurance Company ("Title Company") for its review and approval. If Buyer is not
satisfied with the exceptions shown on the Preliminary Title Report or if Buyer
is not able to arrange for the Title Company to satisfy Buyer's title insurance
requirements, then Buyer may deliver written notice to Seller prior to the date
which is thirty (30) days after the Delivery Date that Buyer disapproves a title
matter and elects to terminate the Agreement.
2. Notwithstanding the Foregoing, title to the Real Property at the Closing
shall be good and marketable and free and clear of all liens, security
interests, leases, title-retention agreements and other encumbrances (excepting
only those encumbrances, if any, which Buyer has agreed to accept as Permitted
Exceptions under this Agreement).
3. The following items are agreed to be "Permitted Exceptions":
a. The printed exclusions from coverage appearing in the standard form
of ALTA Owner's Title Policy (Form B, amended 10-17-70) (provided that this
exception is for insurability purposes only) and provided that there shall
be deleted therefrom any exception for possible unfiled mechanics' liens or
claims for labor or material furnished at or prior to Closing upon Seller's
certification or, in the event that Seller is unable to certify to the
Title Company that no building, construction, alterations, additions or
repairs have been made to the Property within the four (4) month period
preceding the Closing Date, then the exception for mechanics' liens shall
be insured over by affirmative coverage, Seller to pay any special premiums
for mechanics' lien coverage charged because of Seller's failure to make
such certification;
b. Subsurface public utility easements for local distribution, such as
for gas, water and sewer lines or electric, telephone or CATV cable, the
location of which is
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ascertainable and fixed, provided that the exercise of the rights thereunder
does not and will not interfere with the use of any present or potential future
improvements on the Property;
c. Surface public utility easements for local distribution along one
or more of the property lines and extending not more than ten (10) feet
therefrom, the location of which is ascertainable and fixed, providing that
the exercise of the rights thereunder does not and will not interfere with
the use of any present or potential future improvements on the Property or
the use of that part of the Property outside of the easements and not
occupied by improvements; and
d. Current real property taxes not yet due and payable.
C. Inspection Contingency.
1. Within thirty (30) days after the Delivery Date, Buyer shall have
received a favorable report or reports of the physical inspection of the
Property (collectively the "Inspection Reports") by the engineer, inspector,
architect, surveyor, environmental testing company, or other inspection company
selected and paid for by Buyer.
2. If Buyer is dissatisfied for any reason with the condition of the
Property as disclosed in the Inspection Reports described in (1) above on the
Preliminary Title Report, Buyer shall have the right to terminate this Agreement
by delivering written notice of termination to Seller and Escrow Agent prior to
the expiration of such 30 day period, in which case this Agreement shall be
terminated.
D. Other Conditions.
Buyer's obligation to close under this Agreement is also subject to the
following conditions (any one or more of which may be waived in writing in whole
or in part by Buyer at Buyer's option):
1. Seller shall have performed, observed and complied with all
covenants, agreements and conditions required by this Agreement to be
performed, observed and complied with on its part prior to or at Closing.
2. All instruments and documents required on the part of Seller to be
delivered under this Agreement shall have been delivered to Buyer and shall
be in form reasonably satisfactory to Buyer and Buyer's counsel.
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3. All representations and warranties by Seller set forth in this
Agreement shall be true and correct at and as of Closing in all respects as
though such representations and warranties were made at and as of the
Closing.
4. No representation, statement or warranty by Seller contained in
this Agreement or in any Exhibit attached to this Agreement contains or
will contain any untrue statement or omits or will omit a material fact
necessary to make the statement of fact therein recited not misleading.
5. Closing of the transactions contemplated by the Stock Purchase
Agreement shall occur concurrently with the Closing hereunder pursuant to
the terms and conditions of the Stock Purchase Agreement.
E. Failure of Condition.
In the event that all of the conditions set forth in this Article III above
are not satisfied on or before the Closing Date, then, upon termination of this
Agreement as provided above, this Agreement shall become null and void and
neither party shall have any further liabilities or obligations under this
Agreement.
IV. REPRESENTATIONS AND WARRANTIES
A. Capacity/Organization.
1. Seller warrants and represents that each individual Seller is at least
eighteen (18) years of age.
2. Buyer warrants and represents that Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority to enter into and consummate
the transaction contemplated by this Agreement.
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B. Authorization.
1. Seller warrants and represents that all actions of Seller and other
authorizations necessary or appropriate for the execution and delivery of and
compliance with this Agreement have been taken or obtained and, upon their
execution, this Agreement and the other documents and instruments contemplated
by this Agreement, shall constitute the valid and legally binding obligations of
Seller, enforceable against Seller in accordance with their respective terms.
2. Buyer warrants and represents that the persons executing this Agreement
on behalf of Buyer are authorized to bind the Buyer. All actions of Buyer and
other authorizations necessary or appropriate for the execution and delivery of
and compliance with this Agreement have been taken or obtained and, upon their
execution, this Agreement and the other documents and instruments contemplated
by this Agreement, shall constitute the valid and legally binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
C. Required Consents.
1. Seller warrants and represents that no consent, approval or other
authorization of or by any court, administrative agency or other governmental or
quasi-governmental authority is required in connection with Seller's execution
and delivery of or compliance with this Agreement or any other document or
instrument relating to this Agreement, executed, or to be executed by Seller.
2. Buyer warrants and represents that no consent, approval, or other
authorization of or by any court, administrative agency or other governmental or
quasi-governmental authority is required in connection with Buyer's execution
and delivery of or compliance with this Agreement or any other document or
instrument relating to this Agreement executed, or to be executed, by Buyer.
D. No Conflict.
1. Seller warrants and represents that the execution and delivery of this
Agreement, the consummation of the purchase and sale contemplated by this
Agreement, and Seller's compliance with the terms and conditions of this
Agreement will not conflict with, or result in a breach of any mortgage, lease,
agreement, or other instrument, or any applicable law, judgment, order, writ,
injunction, decree, rule or regulation of any court, administrative agency or
other governmental authority to which Seller is a party or by which Seller or
Seller's properties is bound.
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2. Buyer warrants and represents that the execution and delivery of this
Agreement, the consummation of the purchase and sale contemplated by this
Agreement, and Buyer's compliance with the terms and conditions of this
Agreement will not conflict with, or result in a breach of (i) the terms,
conditions or provisions of the Articles of Incorporation or ByLaws of Buyer or
(ii) any mortgage, lease, agreement, or other instrument, or any applicable law,
judgment, order, writ, injunction, decree, rule or regulation of any court,
administrative agency or other governmental authority to which Buyer is a party
or by which Buyer or Buyer's properties is bound.
E. Zoning and Regulatory Compliance.
Seller warrants and represents that Seller has received no notice from any
governmental authority of any violation of any federal, state or local law,
regulation or ordinance regarding any portion of the Property which remains
uncured. Seller shall cure, prior to Closing, or as soon thereafter as
reasonably practicable, any violation of which Seller receives written notice
from any governmental agency prior to the Closing or which results from any
inspection of the Property which occurs prior to Closing.
F. Service Contracts.
Seller warrants and represents that:
1. The Schedule of Service Contracts attached as Exhibit (I)(B)(5)(b) is
true, correct and complete;
2. Seller has delivered to Buyer true, correct and complete copies of all
Service Contracts affecting the Property;
3. There are no management, service, equipment, supply, maintenance or
concession contracts or agreements with respect to or affecting the Property
except as set forth in the Schedule of Service Contracts;
4. Neither Seller nor any person on behalf of Seller has received or given
any notice of cancellation or termination of any Service Contract; and
5. Seller is not in default under the terms of any Service Contract nor has
any event occurred which, but for the giving of notice or passage of time would
constitute an Event of Default under any of the Service Contracts.
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G. Insurance.
Seller warrants and represents that:
1. No notice has been received by Seller from any insurance company
providing insurance coverage for the Property that policies insuring the
Property will not be renewed or will be renewed at a higher premium than is
presently payable for such policy.
2. No notice has been received by Seller from, or issued by, any insurance
company which has issued a policy with respect to the Property or from any board
of fire underwriters (or any other body exercising similar functions) claiming
any defects or deficiencies or requesting the performance of any repairs,
alterations or other work.
3. The Property is not located within a "flood plain area" as defined by
the Federal Insurance Administration pursuant to the Federal Flood Disaster
Protection Act of 1973, as amended.
4. No notice has been received to the effect that any portion of the
Property has been subjected to damage by fire or other casualty which damage is
unrepaired as of the Delivery Date and, to the best of Seller's knowledge, no
portion of the Property has any unrepaired fire damage.
H. Litigation.
Seller warrants and represents that there is no action, suit or proceeding
pending or, to the knowledge of Seller, threatened against or affecting the
Property or related to or arising from the ownership, management or operation of
the Property in any court or before or by any federal, state or local
departments, commission, board, bureau or agency or other governmental
instrumentality. There are no outstanding decrees, orders, awards or specific
administrative determinations relating to the Property or Seller's ownership,
management or operation of the Property.
I. Public Improvements.
Seller warrants and represents to Buyer that:
1. Except for the assessments listed on Exhibit (IV)(J)(1), no assessment
for public improvements has been made with respect to the Property which remains
unpaid including, but not limited to, assessments for construction of sewer or
water lines or mains, streets, sidewalks and curbing. No notice or order by any
governmental agency or authority has been served upon Seller which (i) requires
the performance of any work or the making of any repairs or
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alterations on the Property or in the streets bounding thereon or (ii) orders
the installation, repair or alteration of any public improvements on or about
the Property or the streets bounding thereon which may or might create a lien on
the Property.
2. Provided that Closing occurs under this Agreement, Buyer will be
responsible for and shall comply with the requirements of all notices of
assessment for public improvements issued after the Delivery Date and Seller
will be responsible for and shall comply with the requirements of all notices of
assessment for public improvements issued on or before the Delivery Date.
3. The Building located on the Property is connected to public water and
sewer lines in sufficient capacity to service the Building for its present use.
4. There are no outstanding charges or fees in connection with the use,
installation, connection or tap-in to any utilities, public or private, serving
the Property.
5. All public improvements required to be constructed in connection with
the approval of the development plan of the Property have been installed and
dedication to the applicable governmental authority has been completed.
J. Condemnation.
Seller warrants and represents that Seller has not received any notice of
any condemnation proceedings or other proceeding in the nature of eminent domain
with respect to the Property and, to the best of Seller's knowledge, no such
proceedings are threatened.
K. Condition of Property.
Seller warrants and represents that, to the best of Seller's knowledge the
Property has not been used at any time during or prior to Seller's ownership
thereof, for the disposal of any industrial refuse or waste or for the
processing, manufacture, storage, handling, treatment or disposal of any
hazardous or toxic substance or material. No asbestos containing materials have
been installed or used on the Property at any time during or, to the best of
Seller's knowledge, prior to Seller's ownership of the Property. To the best of
Seller's knowledge, no machinery, equipment or fixtures containing
polychlorinated biphenyls (PCBs) have been located on the Property at any time
during, or, prior to, Seller's ownership of the Property. To the best of
Seller's knowledge, no storage tanks for gasoline or any other substance have
been located on the Property at any time during or, prior to, Seller's ownership
of the Property. To the best of Seller's knowledge, no toxic or hazardous
substances or materials have been located on the Property during, or prior to,
Seller's ownership of the Property, which substances or materials, if found on
the Property, would subject the owner or occupant of the Property to damages,
penalties,
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liabilities or an obligation to remove such substances or materials under any
applicable federal, state or local law, regulation or ordinance, and no notice
from any governmental body has ever been served upon Seller, its agents or
employees or, any prior owner of the Property, claiming any violation of any
federal, state or local law, regulation or ordinance concerning the
environmental state, condition, or quality of the Property, or requiring or
calling attention to the need for any work, repair, construction alteration,
demolition, renovation or installation on or in connection with the Property in
order to comply with any law, regulation or ordinance concerning the
environmental state, condition or quality of the Property.
L. Brokers.
1. Seller and Buyer each warrant and represent to the other that such party
has made no agreement and has had no dealings, negotiations or communications
with any brokers, finders or other intermediaries, nor has such party taken any
action which may cause anyone to become entitled to a commission as a result of
the purchase and sale contemplated by this Agreement. Seller shall pay any
commission due to the Broker pursuant to a separate agreement with the Broker.
2. Buyer and Seller each will indemnify, defend and hold the other harmless
from any and all claims, actual or threatened, for compensation by reason of
such party's breach of its representation, warranty or obligation contained in
this section. This provision shall survive Closing and any termination of this
Agreement.
M. Reliance; "As-Is" Sale.
Except for the specific representations of Seller contained in this
Agreement and in the Stock Purchase Agreement, Buyer agrees that (a) neither
Seller nor anyone purporting to act for Seller has made any representations or
warranties, express or implied, concerning zoning regulations or other
governmental requirements, site or physical conditions, the conditions of or any
matters relating to the improvements on the Property, soil or geologic
conditions, hazardous materials, matters affecting use or occupancy, the
condition or use of the Property or compliance of the Property with any or all
past, present or future Federal, State or local ordinances, rules, regulations
or laws, building code or fire or zoning ordinances, prospects for future
development, economic feasibility, leasing, financing or refinancing, title
matters, marketability or any other matter concerning the Property; (b) Buyer
shall rely solely on Buyer's examination, investigation and audit; and (c) Buyer
is purchasing the Property in its "as is" and "where is" condition, with all
faults. Buyer acknowledges that it has or will complete all physical and
financial examinations relating to the acquisition of the Property and will
acquire the same solely on the basis of such examinations, together with the
specific representations of the Seller contained herein and in the Stock
Purchase Agreement.
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V. RIGHTS AND DUTIES PENDING CLOSING
Between the Delivery Date and the Closing Date:
A. Operation and Management.
1. Seller shall continue to operate and manage the Property in the
ordinary course of business and in the same manner as operated and managed
to date, with no obligation to make any extraordinary capital improvements.
2. Seller shall perform such necessary repairs and replacements of the
Property so that on the Closing Date the Property shall be in substantially
the same condition, reasonable wear and tear excepted, as on the Delivery
Date, with no obligation to make any extraordinary capital improvements.
3. Seller shall not remove any Personal Property from the Property.
4. Seller shall maintain all existing fire and extended coverage
insurance on the Property.
B. Service Contracts.
Seller may not, without the prior written approval of Buyer:
1. renew or extend any Service Contract expiring prior to Closing;
2. modify the terms of any Service Contract affecting the Property;
3. accede to any termination of any Service Contract not permitted
under the terms of the Service Contract; or
4. enter into any contract or commitment with respect to the Property
that will survive Closing or otherwise affect the use, development or
operation of the Property after the Closing.
C. No Transfer.
Seller shall not, without the prior written approval of Buyer, sell,
assign, transfer, alienate, lien or encumber Seller's interest in the Property.
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D. Satisfaction of Conditions.
Buyer shall promptly, diligently and in good faith take all action
reasonably necessary to bring about the satisfaction of the Conditions Precedent
to Closing described in Article III of this Agreement.
E. Entry for Inspections.
1. Seller shall permit Buyer and Buyer's authorized representatives to
inspect all areas of the Property (including occupied spaces) for the purpose of
conducting the inspections described in Section (III)(C). In addition, Seller
shall permit any of Buyer's prospective lenders and appraisers and other
professionals engaged by such lenders to inspect all areas of the Property.
2. Seller shall permit Buyer's accountants to examine (during regular
business hours) Seller's business and financial records pertaining to the
ownership, operation, leasing and management of the Property. Seller shall
provide Buyer with all available information pertaining to expenditures made on
repairs, maintenance, upkeep and operation of the Property, including all taxes
and utility payments for the three (3) years immediately preceding Closing and
dates of construction, installation and major repairs to the Property.
3. Buyer shall notify Seller, in writing, of its intention or of the
intention of its agents or representatives, to enter the Property at least 24
hours prior to such intended entry, and Buyer shall obtain Seller's prior
written consent to any tests to be conducted. Buyer shall bear the cost of all
inspections and tests. At Seller's option, Seller or its representatives may be
present for any inspection or test. In conducting any inspections,
investigations or tests of the Property, Buyer and its agents and
representatives has and/or shall: (i) not contact any tenant without Seller's
prior written consent or disturb the tenants or interfere with their use of the
Property pursuant to their respective leases; (ii) not interfere with the
operation and maintenance of the Property; (iii) not damage any part of the
Property or any personal property; (iv) promptly pay when due the costs of all
tests, investigations and examinations done with regard to the Property; (v) not
permit any liens to attach to the Property by reason of the exercise of its
rights hereunder. Buyer shall indemnify, protect, defend and hold the Property
and Seller harmless from and against any and all liens, claims, causes of
action, damages, liabilities and expenses (including reasonable attorneys' fees)
arising of out Buyer's inspections or tests of the Property. Buyer's obligations
pursuant to this Section shall survive Closing. Notwithstanding any provision of
this Agreement, no termination hereof shall terminate Buyer's obligations
pursuant to this paragraph.
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F. Notices.
Seller shall give Buyer prompt written notice of:
1. any notice received by Seller of a proposed taking of any part of
the Property by eminent domain;
2. any notice received by Seller of a proposed increase in real estate
tax assessments or market valuation of any part of the Property;
3. any notice received by Seller from any governmental agency or
authority or insurance company or underwriting agency pertaining to
noncompliance with any law, regulation or insurance requirement;
4. any notice of the commencement of any legal or equitable claim or
proceeding with respect to the Property;
5. any notice received in regard to the Service Contracts; and
6. any notice of violation, suspension or non-renewal of any of the
Licenses or Permits.
VI. RISK OF LOSS; CONDEMNATION
A. Loss by Fire or Other Casualty.
1. If prior to the Closing, the Property, or any part thereof, shall
be damaged by fire or other casualty, Seller shall notify Buyer promptly
thereof.
2. If the fire or other casualty damages the Property so that the cost
of repair shall reasonably be estimated to exceed $100,000.00, Buyer shall
have the option to
a. consummate this transaction without any abatement of the
Purchase Price whatsoever, in which event
(1) at the Closing, all of the insurance proceeds payable as
a result of such damage shall belong (and, to the extent received
by Seller, shall be paid) to Buyer, or if such proceeds have not
then been received by Seller, such proceeds and all of Seller's
rights thereto shall be assigned by Seller to Buyer;
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(2) Seller shall reimburse Buyer at Closing for the amount
of the deductible under Seller's policies of insurance; and
(3) the Seller shall not settle or compromise any claim for
such insurance proceeds without the Buyer's prior written
consent; or
b. cancel this Agreement, in which event Seller shall cause the
Deposit to be returned to Buyer, and thereupon, neither party shall have
any further liability or obligation under this Agreement.
3. If the fire or other casualty damages the Property so that the estimated
cost of repair and restoration is $100,000.00 or less, Buyer shall not have the
option to cancel this Agreement but shall complete the Closing as provided under
option (2)(a) above. If the loss is uninsured, or the insurance company denies
coverage, Buyer shall receive a credit against the cash portion of the Purchase
Price for the cost of restoration and repair but Buyer shall assign to Seller
all rights against any surety or any other person which the Buyer may have with
respect to such claim.
4. If Buyer accepts title as provided in Subsection (2)(a) or (3) above,
Seller, in accordance with the direction of Buyer, shall make any temporary
repairs or restorations required to preserve or protect the Property, and Buyer
shall reimburse the Seller for the cost thereof at Closing.
B. Condemnation or Eminent Domain.
If, prior to the Closing, all or any portion of the Property shall be taken
by condemnation or eminent domain, this Agreement may be canceled by Buyer, by
notice to Seller, within ten (10) days of the Seller's notice to Buyer of the
taking. If Buyer elects not to terminate, Seller shall be relieved of the duty
to convey title to the portion so taken or condemned, and at the Closing, the
proceeds of any award or payment in respect of any such taking shall belong (and
to the extent received by Seller, shall be paid) to Buyer or, if such proceeds
have not then been received by Seller, such proceeds and all of Seller's rights
thereto, shall be assigned by Seller to Buyer. Any moneys received by Seller
after the Closing in connection with any such taking shall be promptly paid over
to Buyer. In no event shall Seller settle or compromise any claim for such an
award without Buyer's prior written consent. If Buyer shall accept title subject
to any such taking, Seller, in accordance with the directions of Buyer, shall
make any temporary repairs required to preserve or protect the Property, and
Buyer shall reimburse Seller for the cost thereof at the Closing
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VII. CLOSING DOCUMENTS; EXPENSES AND PRORATIONS
A. Seller's Obligations.
At Closing, Seller shall deliver, or cause to be delivered, to Buyer all of
the following:
1. A grant deed for the Real Property, duly executed and acknowledged
by Seller and in form satisfactory to counsel for Buyer;
2. A Bill of Sale conveying the Personal Property with warranty of
title free and clear of all liens, security interests and encumbrances
other than Permitted Exceptions;
3. Assignment of Contracts, Licenses and Permits;
4. An affidavit, in accordance with the Foreign Investments in Real
Property Tax Act, stating the Seller is not a foreign person within the
meaning of such Act and that Seller is not subject to the withholding
requirements set forth in such Act;
5. Such affidavits or letters of indemnity as the Title Company may
require in order to issue, without extra charge, policies of title
insurance free of any exceptions for unfiled mechanic's or materialmen's
liens;
6. A certificate in form and substance satisfactory to Buyer stating
that Seller's representations and warranties contained in this Agreement
are true and correct as of the Closing Date and any conditions precedent to
Closing required to be performed by Seller have been satisfied;
7. Certified or original counterparts of all Licenses and Permits;
copies of all certificates issued by the local board of fire underwriters;
copies of all plans and specifications for the Building and other
improvements or Property; copies of all manuals, warranties and guaranties
applicable to the Property; all keys to the Property; the access codes to
all security systems on the Property and all books, records,
correspondence, maintenance records and advertising brochures, if any, as
may be reasonably required for the continued operation of the Property; and
8. Such other documents as may be required to be delivered by Seller
by the provisions of this Agreement or as may be reasonably required to
consummate Closing.
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B. Buyer's Obligations.
At Closing, Buyer shall deliver, or cause to be delivered, to Seller all of
the following:
1. the Purchase Price as required by the provisions of Article II of this
Agreement;
2. A certificate in form and substance satisfactory to Seller stating that
Buyer's representations and warranties contained in this Agreement are true and
correct as of the Closing Date and that the conditions precedent to Closing
required to be performed by Buyer have been satisfied; and
3. Such other documents as may be required by the provisions of this
Agreement or as may be reasonably required to consummate Closing.
C. Apportionments.
The following items shall be apportioned between Seller and Buyer as of the
Closing Date.
1. Real estate taxes assessed against the Property on a per diem basis,
without discount or penalty and on the basis of the fiscal year of the authority
levying same;
2. Water and sewer charges based upon final meter readings obtained by
Seller not earlier than two (2) business days prior to Closing;
3. Electricity, gas and other utility charges based upon final meter
readings obtained by Seller not earlier than two (2) business days prior to
Closing;
4. Payments under those Service Contracts assumed by Buyer at the Closing
as follows:
a. Amounts prepaid by Seller for the current billing period in which
Closing occurs shall be apportioned on a per diem basis.
b. Amounts due as of the Closing Date under Service Contracts shall be
paid by Seller at the Closing.
5. All fees prepaid to state or local governmental authorities for Permits
and Licenses with respect to the Property shall be apportioned as of the
Closing.
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D. Expenses.
1. All realty transfer taxes imposed by any governmental authority upon the
conveyance of the Property shall be divided equally between Seller and Buyer.
2. Buyer shall pay for all title insurance premiums and all recording fees
for the deed and other documents to be recorded at the Closing (except documents
required to be produced by Seller to remove matters affecting title).
3. Each party shall bear its own counsel fees.
4. Buyer shall pay costs and expenses in connection with obtaining any
financing for the purchase of the Property.
5. Seller shall obtain and pay for a survey of the Property, and the deed
to be delivered under this Agreement shall describe the Property in accordance
with the survey, if any of the following circumstances has occurred:
a. a physical change in the metes and bounds of the Real Property by
subdivision, highway or road changes or improvements on or abounding the
Property;
b. a change in ownership to a portion of the Property which would
render the existing legal description incomplete, incorrect or inadequate
to describe properly the Property to be conveyed under this Agreement; or
c. if the Title Company requires production of a survey in order to
insure Buyer's title.
In any other case, Buyer shall obtain and pay for any survey desired by
Buyer.
VIII. INDEMNIFICATION
A. Indemnification by Seller.
Provided Closing is completed hereunder, Seller shall indemnify and hold
harmless the Buyer against and in respect to any and all claims, losses,
obligations, liabilities, damages, costs and expenses (including reasonable
attorneys' fees and court costs) which Buyer may incur or suffer arising out of,
in connection with or based upon any breach of any of Seller's representations,
warranties or covenants under this Agreement.
18
<PAGE>
B. Indemnification by Buyer.
Provided Closing is held hereunder, Buyer shall indemnify, defend and hold
harmless Seller against and in respect of any and all claims, losses,
obligations, liabilities and damages which Seller may incur or suffer from or
after the date of Closing arising out of, in connection with or based upon (a)
the breach of Buyer's representations, warranties or covenants or (b) Buyer's or
Buyer's representatives' access to the Property.
C. Indemnification Procedure.
The party claiming to be entitled to be indemnified under this Article (the
"Indemnitee") shall give written notice to the party by whom the Indemnitee
seeks to be indemnified pursuant to this Article VIII (the "Indemnitor")
promptly after the assertion of any claim or demand and the Indemnitor shall
have the right to elect, but shall not be obligated, to defend, pay or settle
any such claim or demand by notice in writing given to the Indemnitee within
five (5) business days after the Indemnitee's notification to the Indemnitor of
the same. If the Indemnitor shall elect to defend, pay or settle any such claim
or demand thereafter, Indemnitee shall not admit liability for nor settle any
such claim or demand or incur any costs in connection therewith without the
prior written consent of the Indemnitor, which consent shall not be unreasonably
withheld or delayed. Any amount that may become due from an Indemnitor to an
Indemnitee shall be paid by the Indemnitor immediately upon demand.
D. Survival.
This Article VIII shall survive Closing for a period of two (2) years.
IX. DEFAULT; REMEDIES
A. Buyer's Default.
If Buyer breaches any of the terms of this Agreement applicable to Buyer,
then, Seller may pursue any remedies available at law or in equity.
B. Seller's Default.
If Seller breaches any of the terms of this Agreement applicable to it,
then Buyer shall have the right to (i) specifically enforce this Agreement
against Seller, (ii) complete Closing and maintain a claim against Seller for
breach of this Agreement or (iii) terminate this Agreement, in which latter
event, the Deposit and all other monies paid by Buyer on account of the Purchase
Price shall be reimbursed to Buyer and, upon such reimbursement, Buyer and
Seller shall each be
19
<PAGE>
released from all liability or obligation under this Agreement, and this
Agreement shall become null and void. If such violation, breach or default is
willful or intentional, Buyer shall have the right to recover all out-of-pocket
costs and expenses Buyer shall have incurred in connection with this
transaction.
X. MISCELLANEOUS
A. Assignability.
This Agreement and the rights and obligations hereunder shall not be
assignable by either party without the written consent of the other except in
the case of an assignment by Buyer to a corporation or partnership controlled by
Buyer or the stockholders of Buyer.
B. Governing Law; Heirs, Successors and Assigns.
This Agreement shall be governed by the laws of the State of California.
This Agreement shall bind and inure to the benefit of the parties hereto and
their respective heirs, successors and assigns.
C. Time of Essence.
All times, wherever specified herein, are of the essence of this Agreement.
D. Headings.
The headings preceding the text of the Sections and Subsections of this
Agreement are inserted solely for convenience of reference and shall not
constitute a part of this Agreement, nor shall they affect the meaning,
construction or effect of this Agreement.
E. Exhibits.
All exhibits which are referred to in this Agreement and which are attached
hereto or bound separately and initialed by the parties are expressly
incorporated into and constitute a part of this Agreement.
F. Survival.
Except as otherwise provided in this Agreement, the provisions of this
Agreement shall survive Closing.
20
<PAGE>
G. Entire Agreement; Amendments.
This Agreement sets forth all of the promises, covenants, agreements,
conditions and undertakings between the parties with respect to the subject
matter of this Agreement and supersedes all prior and contemporaneous agreements
and understandings, inducements or conditions, express or implied, oral or
written, except as specifically set forth in this Agreement. This Agreement may
not be changed orally but only by an agreement in writing, duly executed by or
on behalf of the party against whom enforcement of any waiver, change,
modification, consent or discharge is sought.
H. Recording.
This Agreement shall not be recorded in the office for the recording of
deeds or in any other office or place of public record except with the prior
written consent of Seller. If Buyer shall record this Agreement or cause or
permit the same to be recorded other than as expressly permitted above, Seller
may, at Seller's option elect to treat such act as a breach of this Agreement
and, in addition to Seller's other rights and remedies hereunder, Seller shall
have the right to institute appropriate legal proceedings to have the same
removed from record at Buyer's expense.
I. Tender.
Formal tender of an executed deed and Purchase Price is hereby waived but
nothing herein shall be deemed a waiver, concurrently with Closing hereunder, of
the obligation of Seller to execute, acknowledge and deliver a deed for the
Property or the concurrent obligation of Buyer to pay the balance of the
Purchase Price.
J. Severability.
If any provision of this Agreement is found by a court of competent
jurisdiction to be illegal, invalid, or unenforceable, the remainder of this
Agreement will not be affected and in lieu of each provision which is found to
be illegal, invalid or unenforceable, there will be added as a part of this
Agreement a provision as similar to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
K. Construction.
This Agreement has been prepared by Buyer and its professional advisors and
reviewed by Seller and its professional advisors. Seller, Buyer and their
separate advisors believe that this Agreement is the product of all of their
efforts, that it expresses their agreement and that
21
<PAGE>
it should not be interpreted in favor of either Seller or Buyer or against
either Seller or Buyer merely because of their efforts in preparing it.
L. Attorneys' Fees.
If Seller and Buyer litigate any provision of this Agreement or the subject
matter of this Agreement, the unsuccessful litigant will pay to the successful
litigant all costs and expenses, including reasonable attorneys' fees and court
costs, incurred by the successful litigant at trial and on any appeal. If,
without fault, either Seller or Buyer is made a party to any litigation
instituted by or against the other, the other will indemnify the faultless one
against all loss, liability and expense, including reasonable attorneys' fees
and court costs, incurred by it in connection with such litigation.
M. Waiver of Jury Trial.
Seller and Buyer waive trial by jury in any action, proceeding or
counterclaim brought by either of them against the other on all matters arising
out of this Agreement or the use and occupancy of the Property.
N. Notices.
Any notice, request, demand, consent, approval or other communication
required or permitted under this Agreement will be written and will be deemed to
have been given (a) when personally delivered; or (b) on the next following day
after it is delivered to any nationally recognized express delivery service; or
(c) on the second day after it is deposited in any depository regularly
maintained by the United States postal service, postage prepaid, certified or
registered mail, return receipt requested, addressed to:
Seller:
Victor E. Carlson
R. C. Dudek & Co., Inc.
800 Del Norte Boulevard
Oxnard, CA 93030
With a copy at the same time to:
Weinstock, Marion, Reisman, Shore & Neumann, a law corporation
1875 Century Park East, 15th Floor
Los Angeles, California 90007-2516
Attention: Louis A. Reisman, Esquire
22
<PAGE>
Buyer:
Penn Engineering & Manufacturing Corp.
Danboro, PA 18916-1000
Attention: Kenneth A. Swanstrom, Chairman
With a copy at the same time to:
Duane, Morris & Heckscher LLP
4200 One Liberty Place
Philadelphia, PA 19103-7396
Attention: Stephen D. Teaford, Esquire
Legal counsel for the respective parties may send to the other party any
notices, requests, demands or other communications required or permitted to be
given by such party.
Either Seller or Buyer may change its address or addresses for purposes of
this Section by giving ten (10) days' prior notice according to this Section.
O. Offer.
This Agreement, executed by the Buyer, shall constitute an offer of the
Buyer which the Seller must accept or reject by 5:00 pm EDT on the third
business day from the date of Buyer's execution hereto (as indicated under the
Buyer's signature line) or the offer shall be deemed revoked by Buyer upon the
expiration of such time period and any payment delivered on account of the
Deposit shall be refunded by Escrow Agent to Buyer.
P. Execution in Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be an original, but all of which shall constitute one and the same
instrument.
Q. Locative Adverbs.
Whenever in this Agreement locative adverbs such as "herein," "hereby,"
"hereof," "hereto" and "hereunder" are used, the same shall be made in reference
to this Agreement in its entirety and not to any specific section, subsection,
subpart, paragraph or subparagraph. The terms "include," "including" and similar
terms shall be construed as if followed by the phrase "without being limited
to."
R. Time Periods.
23
<PAGE>
Whenever, under the terms of this Agreement, the time for performance of a
covenant or condition falls upon a Saturday, Sunday or holiday, such time for
performance shall be extended to the next business day. Except as otherwise
provided herein, all references herein to "days" shall mean calendar days.
S. 1031 Exchange
Buyer acknowledges that Seller may desire to sell the Property pursuant to
a like-kind exchange qualifying under Section 1031 of the Internal Revenue Code.
Buyer agrees to cooperate with Seller in order to enable Seller to consummate
the transfer of the Property as part of a like-kind exchange qualifying pursuant
to Section 1031. At Seller's request, Buyer shall execute or consent to such
additional documents and transactions as may be requested by Seller, including,
but not limited to, any assignments of documents or interest in the contemplated
transactions, provided that (a) there shall be no delay in the consummation of
the transactions contemplated in this Agreement; and (b) Buyer need not incur
any additional costs or assume any additional liabilities or obligations as a
result of the exchange or attempted exchange.
24
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have hereunto executed this Agreement as of the date first above written.
Witness/Attest SELLER:
/s/ Louis A. Reisman /s/ Victor E. Carlson
- --------------------------------- ----------------------------------------
Victor E. Carlson
Date: September 30, 1999
-------------------
/s/ Louis A. Reisman /s/ Sara E. Carlson
- --------------------------------- ----------------------------------------
Sara E. Carlson
Date: September 30, 1999
-------------------
/s/ Louis A. Reisman /s/ John S. Perell
- --------------------------------- ----------------------------------------
John S. Perell
Date: September 30, 1999
-------------------
/s/ Louis A. Reisman /s/ Elizabeth C. Perell
- --------------------------------- ----------------------------------------
Elizabeth C. Perell
Date: September 30, 1999
-------------------
/s/ Louis A. Reisman /s/ Harriet Serven
- --------------------------------- ----------------------------------------
Harriet Dudek, now known as Harriet
Serven, Trustee under the
Will of Richard C. Dudek, Deceased
Date: September 30. 1999
-----------------------------------
BUYER:
PENN ENGINEERING AND
MANUFACTURING CORP.,
a Delaware corporation
/s/ Mark W. Simon By: /s/ Martin Bidart
- --------------------------------- -------------------------------------
Name: Mark W. Simon Name: Martin Bidart
Title: Corporate Secretary Title: President/C.O.O.
Date: September 30, 1999
-------------------
25
<PAGE>
EXHIBIT (I)(B)(1)
Legal Description of the Land
<PAGE>
EXHIBIT (I)(B)(5)(c)
Service Contracts
None
<PAGE>
EXHIBIT (I)(B)(5)(6)
Permits
None
<PAGE>
EXHIBIT (IV)(J)(1)
Assessments
None
LOAN AGREEMENT
Dated: September 28, 1999
Between
PENN ENGINEERING & MANUFACTURING CORP.
and
FIRST UNION NATIONAL BANK
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS.......................................................1
1.1. General Provisions...........................................1
1.2. Defined Terms................................................1
SECTION 2. AMOUNT AND TERMS OF LOANS........................................13
2.1. Working Capital Line of Credit..............................13
2.2. Working Capital Line of Credit Note.........................14
2.3. Acquisition Line of Credit..................................14
2.4. Acquisition Line of Credit Note.............................15
2.5. Term Loan Facility..........................................15
2.6. Term Loan Note..............................................15
2.7. Interest Rate Elections.....................................16
2.8. Loan Account................................................18
2.9. Maximum Legal Rate..........................................18
2.10. Payments...................................................18
2.11. Application of Payments....................................18
2.12. Late Charges...............................................19
2.13. Mandatory Payments.........................................19
2.14. Voluntary Prepayments......................................19
2.15. Yield Protection; Capital Adequacy.........................20
SECTION 3. REPRESENTATIONS AND WARRANTIES...................................20
3.1. Organization and Qualification..............................20
3.2. Power and Authority.........................................21
3.3. Enforceability..............................................21
3.4. Conflict with Other Instruments.............................21
3.5. Litigation..................................................21
3.6. Title to Assets.............................................21
3.7. Licenses; Intellectual Property.............................21
3.8. Default.....................................................22
ii
<PAGE>
3.9. Taxes.......................................................22
3.10. Financial Condition........................................22
3.11. ERISA......................................................22
3.12. Use of Proceeds............................................23
3.13. Regulation U...............................................23
3.14. No Notices; No Violations..................................23
3.15. Labor......................................................23
3.16. Group Health Plans.........................................23
3.17. Year 2000 Matters..........................................24
3.18. No Omissions...............................................24
SECTION 4. CONDITIONS OF BORROWING..........................................24
4.1. Initial Advance.............................................24
4.2. Subsequent Advances.........................................26
4.3. Conditions to Term Loan.....................................27
4.4. Satisfaction of Conditions..................................27
SECTION 5. AFFIRMATIVE COVENANTS............................................28
5.1. Financial Statements; Reports...............................28
5.2. Liabilities.................................................28
5.3. ERISA.......................................................28
5.4. Notices.....................................................29
5.5. Environmental Matters; Compliance with Laws.................29
5.6. Corporate Existence; Properties.............................30
5.7. Insurance...................................................30
5.8. Books and Records...........................................31
5.9. Location of Business........................................31
5.10. Funded Debt to EBITDA Ratio................................31
5.11. Funds Flow Coverage Ratio..................................31
5.12. Group Health Plans.........................................31
5.13. Deposit Accounts...........................................31
iii
<PAGE>
SECTION 6. NEGATIVE COVENANTS...............................................31
6.1. Debt........................................................32
6.2. Liens.......................................................32
6.3. Investments, Loans and Advances.............................33
6.4. Mergers, Consolidations.....................................33
6.5. Disposition of Assets.......................................33
6.6. Guaranty Obligations........................................33
6.7. Sales and Lease-Backs.......................................33
6.8. Continuance of Business.....................................34
6.9. Voluntary Prepayments.......................................34
6.10. Transactions with Affiliates...............................34
6.11. Handling of Hazardous Substances...........................34
6.12. Use of Proceeds............................................34
6.13. Management Changes.........................................35
SECTION 7. EVENTS OF DEFAULT, REMEDIES......................................35
7.1. Events of Default...........................................35
7.2. Acceleration................................................37
7.3. Right of Setoff.............................................37
7.4. No Marshalling, Etc., Required..............................38
7.5. Remedies Cumulative.........................................38
SECTION 8. MISCELLANEOUS....................................................38
8.1. No Waiver; Cumulative Remedies..............................38
8.2. Notices.....................................................38
8.3. Reimbursement of Lender.....................................39
8.4. Payment of Expenses and Taxes...............................39
8.5. Survival of Representations and Warranties..................39
8.6. Participations..............................................39
8.7. Successors..................................................40
8.8. Construction................................................40
8.9. Severability................................................40
8.10. Indemnity...................................................40
8.11. Waiver of Trial by Jury; Jurisdiction.......................40
iv
<PAGE>
8.12. Actions Against Lender; Release.............................41
8.13. Performance by Lender.......................................41
8.14. Counterparts................................................41
8.15. Further Actions.............................................42
8.16. Entire Agreement............................................42
8.17. Arbitration.................................................42
v
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT made and entered into September 28, 1999, between PENN
ENGINEERING & MANUFACTURING CORP., a Delaware corporation, and FIRST UNION
NATIONAL BANK, a national banking association.
SECTION 1. DEFINITIONS.
1.1. General Provisions. Unless expressly provided otherwise in this
Agreement or in the Loan Documents, or unless the context requires otherwise:
(a) all accounting terms used in this Agreement and in the Loan
Documents shall have the meanings given to them in accordance with GAAP;
(b) all terms used herein and in the Loan Documents that are defined
in the Pennsylvania Uniform Commercial Code, as amended from time to time,
shall have the meanings set forth therein;
(c) all capitalized terms defined in this Agreement shall have the
defined meanings when used in the Loan Documents and in any other documents
made or delivered pursuant to this Agreement;
(d) the singular shall include the plural, the plural shall include
the singular, and the use of any gender shall include all genders;
(e) all references to any particular party defined herein shall be
deemed to refer to each and every person defined herein as such party
individually, and to all of them, collectively, jointly and severally, as
though each were named wherever the applicable defined term is used;
(f) all references to "Sections," "Subsections," "Paragraphs" and
"Subparagraphs" shall refer to provisions of this Agreement;
(g) all references to time herein shall mean Eastern Standard Time or
Eastern Daylight Time, as then in effect; and
(h) all references to sections, subsections, paragraphs or other
provisions of statutes or regulations shall be deemed to include successor,
amended, renumbered and replacement provisions.
1.2. Defined Terms. As used herein, the following terms shall have the
meanings indicated, unless the context otherwise requires:
"Accumulated Funding Deficiency" shall mean any accumulated funding
deficiency as defined in ERISA ss.302(a).
1
<PAGE>
"Acquisition" shall mean any purchase or acquisition by the Borrower
of any properties, assets, common stock, or business completed after the
Closing Date.
"Acquisition Line of Credit" shall mean the revolving line of credit
facility in the maximum amount of Thirty Million Dollars ($30,000,000)
described in Section 2.3.
"Acquisition Line of Credit Commitment" shall mean, as at any
applicable time, the Borrower's maximum credit availability under the
Acquisition Line of Credit, as established in Section 2.3(a) whether or not
then fully extended.
"Acquisition Line of Credit Note" shall mean the promissory note
described in Section 2.4 and any future amendments, restatements,
modifications or supplements thereof or thereto.
"Acquisition Line of Credit Termination Date" shall mean September 27,
2000 unless extended in writing by the Lender.
"Additional Costs" shall have the meaning ascribed to it in Section
2.15(a).
"Adjusted LIBOR Rate" shall mean, for and with respect to any LIBOR
Loan and LIBOR Period applicable thereto, (i) the LIBOR Rate, plus (ii)
fifty (50) basis points.
"Adjusted LIBOR Market Index Rate" shall mean, for and with respect to
any LMIR Loan, (i) the LIBOR Market Index Rate (as in effect from time to
time), plus (ii) fifty (50) basis points.
"Adjusted Prime Rate" shall mean, as appropriate, (i) for and with
respect to any Prime Rate Loan made under the Working Capital Line of
Credit, the Prime Rate minus fifty (50) basis points, and (ii) for and with
respect to any Prime Rate Loan made under the Acquisition Line of Credit,
the Prime Rate minus twenty-five (25) basis points.
"Advance" and "Advances" shall mean, individually or collectively, as
appropriate any and/or all advances under (i) the Working Capital Line of
Credit , (ii) the Acquisition Line of Credit, and/or (iii) the Term Loan.
"Affiliate" shall mean, as to any Person:
(a) if such Person is an individual, any (i) relative of such
Person or of a general partner of such Person, (ii) partnership in
which such Person is a general partner, (iii) general partner of such
Person, or (iv) corporation of which such Person is a director,
officer, or person in control;
(b) if such Person is a corporation, any (i) director of such
Person, (ii) officer of such Person, (iii) person in control of such
Person, (iv) partnership in which such Person is a general partner,
(v) general partner of or joint venturer with such Person, or (vi)
relative of a general partner, director, officer, or person in control
of such Person; or
2
<PAGE>
(c) if such Person is a partnership, any (i) general partner in
such Person, (ii) relative of a general partner in such Person, (iii)
partnership in which such Person is a general partner, (iv) general
partner of such Person, or (v) person in control of such Person.
As used in this definition, "control" shall mean possession, directly
or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise), provided that,
in any event, any Person which owns or holds directly or indirectly
twenty percent (20%) or more of the voting securities or twenty
percent (20%) or more of the partnership or other equity interests of
any other Person (other than as a limited partner of such other
Person) will be deemed to control such corporation or other Person.
"Agreement" shall mean this Loan Agreement and any future amendments,
restatements, modifications or supplements hereof or hereto.
"Amortization Period" shall mean, for and with respect to the Term
Loan, the amortization period selected by the Borrower pursuant to Section
4.3, which may be from a minimum of one (1) year to a maximum of seven (7)
years from the date on which the Term Loan is made.
"Authorized Officer" shall mean, collectively, the President, Chief
Financial Officer, or any other officer of the Borrower designated as an
Authorized Officer in writing to the Lender by the President of the
Borrower.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, Title
11 of the United States Code, as amended, or any successor law thereto, and
any rules promulgated in connection therewith.
"Borrower" shall mean Penn Engineering & Manufacturing Corp., a
Delaware corporation.
"Borrowing Notice" shall mean a written request by the Borrower to the
Lender for an Advance pursuant hereto, which Borrowing Notice shall be in
the form of Exhibit "A" attached hereto (as such form of Borrowing Notice
may be modified and amended from time to time by the Lender).
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday or any day that
shall be in the City of Philadelphia, Pennsylvania, a legal holiday or a
day on which banking institutions are authorized by law or other
governmental agencies to close, and (ii) with respect to all determinations
and notices in connection with, and payments of principal and interest on,
LIBOR Loans, any day that is a Business Day described in clause (i) above
that is also a day for trading by and between banks in Dollars ($) deposits
in the London interbank market.
"Capital Expenditures" shall mean, with respect to any Person for any
applicable period, the sum, without duplication, of the aggregate amount of
all expenditures of such Person during such period which, pursuant to and
3
<PAGE>
in accordance with GAAP, would be classified as capital expenditures
including, without limitation, Capital Lease Obligations.
"Capital Lease Obligations" shall mean, collectively, the obligations
of any Person to pay rent or other amounts under any lease of or other
arrangement conveying the right to use real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person pursuant
to and accordance with GAAP, and the amount of such obligations shall be
the capitalized amount thereof determined in accordance with GAAP.
"Closing Date" shall mean the date hereof.
"COBRA Continuation Coverage" shall mean those provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, found
in Code ss.4980B(f), which impose certain continuation coverage
requirements upon group health plans in order for such plans to retain
certain tax advantages.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor law thereto, and any regulations promulgated thereunder.
"Commitment Letter" shall mean the letter dated August 26, 1999 from
the Lender to the Borrower and any amendments, restatements, modifications
or supplements thereof or thereto.
"Compliance Certificate" shall mean a certificate in the form of
Exhibit "B" attached hereto and made a part hereof executed by an
Authorized Officer certifying as to the matters therein described.
"Consolidated Debt" shall mean the aggregate sum of all Debt of the
Borrower and its Subsidiaries, if any, on a consolidated basis and after
eliminating all intercompany items.
"Contamination" shall mean the presence of any Hazardous Substance
which may require Remedial Actions under applicable law.
"Controlled Group Member" shall mean:
(a) any corporation included with the Borrower in a controlled
group of corporations within the meaning of Code ss.414(b);
(b) any trade or business (whether or not incorporated) which is
under common control with the Borrower within the meaning of Code
ss.414(c); and
(c) any member of an affiliated service group of which the
Borrower is a member within the meaning of Code ss.414(m).
"Debt" shall mean, with respect to any Person at any applicable time
(without duplication), (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds, debentures,
notes or similar instruments, (iii) all obligations of such Person under
conditional sale or other title retention agreements relating to property
4
<PAGE>
purchased by such Person to the extent of the value of such property (other
than customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (iv) all
obligations, other than intercompany items, of such Person issued or
assumed as the deferred purchase price of property or services purchased by
such Person which would appear as liabilities on a balance sheet of such
Person, (v) all Debt of others secured by (or for which the holder of such
Debt has an existing right, contingent or otherwise, to be secured by) any
Lien on, or payable out of the proceeds of production from, property owned
or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (vi) all Guaranty Obligations of such Person, (vii) the
principal portion of all Capital Lease Obligations, (viii) all obligations
of such Person in respect of interest rate protection agreements, foreign
currency exchange agreements, or other interest or exchange rate or
commodity price hedging agreements, (ix) the maximum amount of all
performance and standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without duplication,
all drafts drawn thereunder (to the extent unreimbursed), (x) all preferred
stock issued by such Person and required by the terms thereof to be
redeemed, or for which mandatory sinking fund payments are due, by a fixed
date, and (xi) any other item of indebtedness or liability that would be
reflected on the liabilities side of a balance sheet of such Person in
accordance with GAAP. The Debt of any Person shall also include the Debt of
any partnership or unincorporated joint venture in which such Person is
legally obligated or has a reasonable expectation of being liable with
respect thereto.
"Default" shall mean any event specified in Section 7.1, whether or
not any requirement for notice or lapse of time or any other condition has
been satisfied.
"Default Rate" shall mean a rate per annum equal to (i) two percent
(2%) in excess of (ii) the Prime Rate (as in effect from time to time).
"EBITDA" shall mean, for any applicable period and for the Borrower,
the earnings of the Borrower before interest expense, taxes, depreciation
and amortization expense (determined without regard to extraordinary or
similar items of gain), all as determined on a consolidated basis after
eliminating all intercompany items in accordance with GAAP consistently
applied.
"Employee Pension Plan" shall mean any employee pension benefit plan
as defined in ERISA ss.3(2) and which is (i) maintained by the Borrower or
any Controlled Group Member, and (ii) qualified under Code ss.401.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any regulations issued thereunder by the United
States Department of Labor or the PBGC.
"Event of Default" shall mean any event specified in Section 7.1,
provided that any requirement for notice or lapse of time or any other
condition has been satisfied.
"Funded Debt" shall mean, as at any applicable time and for the
Borrowers (without duplication), the sum of (i) all Debt of the Borrowers
and their Subsidiaries for borrowed money, (ii) all purchase money Debt of
the Borrowers and their Subsidiaries, (iii) the principal portion of all
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obligations of the Borrowers and their Subsidiaries in respect of Capital
Lease Obligations, (iv) commercial letters of credit and the maximum amount
of all performance and standby letters of credit issued or bankers'
acceptance facilities created for the account of any Borrower or any of its
Subsidiaries, including, without duplication, all unreimbursed draws
thereunder, (v) all Guaranty Obligations of the Borrowers and their
Subsidiaries with respect to Funded Debt of another Person, (vi) all Funded
Debt of another Person secured by a Lien on any property of the Borrowers
and their Subsidiaries whether or not such Funded Debt has been assumed by
any Borrower or any of its Subsidiaries, (vii) all Funded Debt of any
partnership or unincorporated joint venture to the extent any Borrower or
any of its Subsidiaries is legally obligated or has a reasonable
expectation of being liable with respect thereto, net of any assets of such
partnership or joint venture, and (viii) the principal balance outstanding
under any synthetic lease, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing product where such transaction
is considered borrowed money indebtedness for tax purposes but is
classified as an operating lease in accordance with GAAP.
"Funds Flow Coverage Ratio" shall mean, for the Borrower and with
respect to any applicable period of the Borrower, the ratio of (i) (A) net
income after taxes of the Borrower (excluding, however, extraordinary or
similar items of gain to the extent included in the calculation of net
income), plus (B) the aggregate amount of depreciation and amortization
expense taken by the Borrower pursuant to and in accordance with GAAP, plus
(C) interest expense on all Debt of the Borrower (including payments in the
nature of interest under Capital Lease Obligations), minus (D) dividends
and distributions paid to the Borrower's shareholders for the previous four
consecutive fiscal quarters, to (ii) (A) the current maturities portion of
all long-term Debt of the Borrower (including payments in the nature of
principal under Capital Lease Obligations), plus (B) the amount referred to
in paragraph (C) of clause (i) of this definition.
"GAAP" shall mean, at any particular time, generally accepted
accounting principles as in effect at such time, provided, however, that,
if employment of more than one principle shall be permissible at such time
in respect of a particular accounting matter, "GAAP" shall refer to the
principle which is then employed by the Borrower with the agreement of its
independent certified public accountants.
"Guaranty Obligations" shall mean, as at any applicable time and for
any Person, without duplication, any obligations (other than endorsements
in the ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Debt of any other
Person in any manner, whether direct or indirect, and including without
limitation any obligation, whether or not contingent, (i) to purchase any
such Debt or other obligation or any property constituting security
therefor, (ii) to advance or provide funds or other support for the payment
or purchase of such Debt or obligation or to maintain working capital,
solvency or other balance sheet condition of such other Person (including,
without limitation, maintenance agreements, comfort letters, take or pay
arrangements, put agreements or similar agreements or arrangements) for the
benefit of the holder of Debt of such other Person, (iii) to lease or
purchase property, securities or services primarily for the purpose of
assuring the owner of such Debt, or (iv) to otherwise assure or hold
harmless the owner of such Debt or obligation against loss in respect
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thereof. The amount of any Guaranty Obligation hereunder shall (subject to
any limitations set forth therein) be deemed to be an amount equal to the
outstanding principal amount (or maximum principal amount, if larger) of
the Debt in respect of which such Guaranty Obligation is made.
"Hazardous Substances" shall mean any chemical, solid, liquid, gas, or
other substance having the characteristics identified in, listed under, or
designated pursuant to:
(a) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. ss.9601(14), as a
"hazardous substance;"
(b) the Clean Water Act, 33 U.S.C. ss.1321(b)(2)(A), as a
"hazardous substance;"
(c) the Clean Water Act, 33 U.S.C. ss.ss.1317(a) and 1362(13), as
a "toxic pollutant;"
(d) Table 1 of Committee Print Numbered 95-30 of the Committee on
Public Works and Transportation of the United States House of
Representatives, as a "toxic pollutant;"
(e) the Clean Air Act, 42 U.S.C. ss.7412(a)(1), as a "hazardous
air pollutant;"
(f) the Toxic Substances Control Act, 15 U.S.C. ss.2606(f), as an
"imminently hazardous chemical substance or mixture;"
(g) the Resource, Conservation and Recovery Act, 42
U.S.C. ss.ss.6903(5) and 6921, as a "hazardous waste;" or
(h) any other laws, regulations or governmental publications, as
presenting an imminent and substantial danger to the public health or
welfare or to the environment, or as otherwise requiring special
handling, collection, storage, treatment, disposal, or transportation.
The term "Hazardous Substances" shall also include: (w) petroleum, crude
oil, gasoline, natural gas, liquefied natural gas, synthetic fuel, and all
other petroleum, oil, or gas based products; (x) nuclear, radioactive, or
atomic substances, mixtures, wastes, compounds, materials, elements,
products or matters; (y) asbestos, asbestos-containing materials,
polychlorinated biphenyls, and (z) any other substance, mixture, waste,
compound, material, element, product or matter that presents an imminent
and substantial danger to the public health or welfare or to the
environment upon its Release.
"Investment" in any Person shall mean, collectively, (i) the
acquisition (whether for cash, property, services, assumption of
Indebtedness, securities or otherwise) of assets, shares of capital stock,
bonds, notes, debentures, partnership, joint ventures or other ownership
interests or other securities of such other Person, (ii) any deposit with,
or advance, loan or other extension of credit to, such Person (other than
deposits made in connection with the purchase of equipment or other assets
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in the ordinary course of business), or (iii) any other capital
contribution to or investment in such Person, including, without
limitation, any Guaranty Obligation (including any support for a letter of
credit issued on behalf of such Person) incurred for the benefit of such
Person.
"Lender" shall mean First Union National Bank, a national banking
association.
"LIBOR" shall mean, for each LIBOR Loan and LIBOR Period applicable
thereto, the rate per annum (rounded upwards, if necessary, to the nearest
1/16th of 1%) determined by the Lender according to the following formula:
R = X
---
1-Y
where R = LIBOR
X = London Interbank Offered Rate for such LIBOR Loan for the
applicable LIBOR Period
Y = The average of the daily rates (expressed as a decimal fraction)
of maximum reserve requirements which are, at any time,
applicable during such LIBOR Period (including, without
limitation, basic, special, supplemental, marginal and emergency
reserves) under any regulations of the Board of Governors of the
Federal Reserve System or other banking authority, domestic or
foreign, as now and from time to time hereafter in effect,
prescribed for eurocurrency funding (currently referred to as
Eurocurrency Liabilities in Regulation D of such Board) to which
the Lender (including any branch, Affiliate, or other fronting
office making or holding a LIBOR Loan) is subject, as now and
from time to time hereafter in effect
"LIBOR Loan" shall mean any Loan or portion thereof which bears
interest at the Adjusted LIBOR Rate pursuant hereto.
"LIBOR Period" shall mean, with respect to any Loan or portion thereof
bearing interest at the Adjusted LIBOR Rate pursuant hereto, the period
commencing on the date on which the Loan or portion thereof begins to bear
interest at the Adjusted LIBOR Rate in accordance herewith and ending one
(1) month, two (2) months, three (3) months, six (6) months, or nine (9)
months thereafter, as appropriate, as selected by the Borrower pursuant to
Section 2.7, subject to the following:
(a) if the last day of the LIBOR Period selected by the Borrower
pursuant to Section 2.7 does not fall on a Business Day:
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(1) the LIBOR Period shall be automatically extended until
the next succeeding Business Day unless such Business Day falls
in another calendar month, in which case such LIBOR Period shall
end on the next preceding Business Day;
(2) interest shall, to the extent applicable, continue to
accrue at the Adjusted LIBOR Rate; and
(3) the next LIBOR Period elected, or deemed to have been
elected, by the Borrower with respect to the LIBOR Loan to which
the LIBOR Period relates, if any, shall commence on the Business
Day described in clause (a)(1) above; and
(b) any LIBOR Period that begins on the last Business Day of the
calendar month (or on a date for which there is no numerically
corresponding day in the calendar month in which such LIBOR Period
ends) shall end on the last Business Day of a calendar month and the
next LIBOR Period with respect to the LIBOR Loan to which the LIBOR
Period relates, if any, shall commence on such Business Day.
"LIBOR Market Index Rate" shall mean, for any day, the rate (rounded
to the next higher 1/100 of 1%) or one (1) month U.S. Dollar deposits as
reported on Telerate page 3750 as of 11:00 a.m. London time, for any such
day, provided, if such day is not a London business day, the immediately
preceding London business day (or if not so reported, then as determined by
the Lender from another recognized source or interbank quotation).
"LMIR Loan" and "LMIR Loans" shall mean, individually or collectively,
as appropriate, any Advance and/or all Advances which bear interest at the
Adjusted LIBOR Market Index Rate pursuant hereto.
"Lien" shall mean, collectively, any mortgage, pledge, hypothecation,
assignment, deposit arrangement, security interest, encumbrance, lien
(statutory or otherwise), preference, priority or charge of any kind,
including, without limitation, any agreement to give any of the foregoing,
any conditional sale or other title retention agreement, and any lease in
the nature thereof.
"Loan" and "Loans" shall mean, individually or collectively, as
appropriate, (i) any or all Advances under the Working Capital Line of
Credit, (ii) any or all Advances under the Acquisition Line of Credit
and/or (iii) any or all Advances under the Term Loan.
"Loan Account" shall mean, collectively, the account or accounts of
the Borrower on the books of Lender in which are recorded the Loans and the
payments of principal and interest made by the Borrower to Lender thereon.
"Loan Documents" shall mean this Agreement, the Notes and all other
documents executed and delivered to the Lender by or on behalf of the
Borrower in connection therewith and any modifications, amendments,
restatements, substitutions and replacements of or for any of the
foregoing.
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"London Interbank Offered Rate" shall mean, for and with respect to
any LIBOR Loan and any LIBOR Period applicable thereto, the rate (rounded
upwards, if necessary, to the nearest 1/16th of 1%) equal to the composite
London Interbank Offered Rate for dollar ($) deposits approximately equal
in principal amount to the amount of such LIBOR Loan and for a maturity
comparable to such LIBOR Period appearing on the Telerate Screen Page 3750
at approximately 11:00 A.M., London time, on the date that is two (2) LIBOR
Business Days prior to the commencement of such LIBOR Period; provided,
however, that if such rate shall for any reason not be available on the
Telerate Screen Page 3750 at such time, the London Interbank Offered Rate
shall be the arithmetic average of the rates at which Dollar ($) deposits
approximately equal in principal amount to the amount of such LIBOR Loan
and for a maturity comparable to such LIBOR Period are offered to the
principal London office of any bank designated by the Lender in immediately
available funds in the London interbank market at approximately 11:00 A.M.,
London time, two (2) LIBOR Business Days prior to the commencement of such
Interest Period. As used herein, the term "Telerate Screen Page 3750" shall
mean the display designated as the page for LIBOR on the Dow Jones Telerate
Service (or such other page as may replace the LIBOR page on that service
for the purpose of displaying London interbank offered rates of major
banks).
"Material Adverse Effect" shall mean, collectively and with respect to
any event, occurrence, or condition of any kind or nature, a material
adverse effect on (i) the assets, liabilities, operations, profits,
financial condition or business of the Borrower, (ii) the ability of the
Borrower to perform its obligations under this Agreement or any of the Loan
Documents, or (iii) the validity or enforceability of this Agreement, any
of the other Loan Documents, or any of the rights and remedies of the
Lender hereunder or thereunder.
"Minimum LIBOR Loan Amount" shall mean Five Hundred Thousand Dollars
($500,000).
"Notes" shall mean, collectively, (i) the Working Capital Line of
Credit Note, (ii) the Acquisition Line of Credit Note and (iii) the Term
Loan Note.
"Obligations" shall mean, collectively, all liabilities, duties and
obligations of the Borrower to the Lender with respect to any covenants,
representations or warranties herein or in the Loan Documents, with respect
to the principal of and interest on the Loans, and all other present and
future fixed and/or contingent obligations of the Borrower to the Lender
hereunder and under the Loan Documents, including, without limitation,
obligations with respect to interest accruing (or which would accrue but
for ss.502 of the Bankruptcy Code) after the date of any filing by Borrower
of any petition in bankruptcy or the commencement of any bankruptcy,
insolvency or similar proceedings with respect to Borrower.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" shall mean those liens and encumbrances
listed on Schedule 3.6.
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"Permitted Indebtedness" shall mean any and all Debt permitted under
Section 6.1.
"Person" shall mean an individual, a corporation, a partnership, a
joint venture, a trust or unincorporated organization, a joint stock
company or other similar organization, a government or any political
subdivision thereof, or any other legal entity.
"Prevailing Rate" shall mean, with respect to any Loan or portion
thereof, the rate per annum at which the Loan or portion thereof bears
interest pursuant to Section 2.7.
"Prime Rate" shall mean the floating annual rate of interest that is
designated from time to time by the Lender as the "Prime Rate" and is used
by the Lender as a reference base with respect to different interest rates
charged to borrowers generally. Such rate of interest shall change
simultaneously and automatically upon the Lender's designation of any
change in such reference rate, and the Lender's determination and
designation from time to time of the reference rate shall not in any way
preclude the Lender from making loans to other borrowers at rates which are
higher or lower than or different from the referenced rate.
"Prime Rate Loan" and "Prime Rate Loans" shall mean, individually or
collectively, as appropriate, any Advance and/or all Advances which bear
interest at the Adjusted Prime Rate pursuant hereto.
"Regulatory Change" shall mean (a) any change on or after the date of
this Agreement in United States federal, state, or any foreign, laws or
regulations (including Regulation D of the Board of Governors of the
Federal Reserve System) applying to the class of banks including the Lender
(or any Affiliate thereof), or (b) the adoption or making on or after such
date of any interpretations, directives or requests applying to a class of
banks including the Lender (or any Affiliate thereof) of or under any
United States federal or state, or any foreign, laws or regulations
(whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration
thereof.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, or dumping.
"Remedial Actions" shall mean:
(a) clean-up or removal of Hazardous Substances;
(b) such actions as may be necessary to monitor, assess, or
evaluate the Release or threatened Release of Hazardous Substances;
(c) proper disposal or removal of Hazardous Substances;
(d) the taking of such other actions as may be necessary to
prevent, minimize, or mitigate the damages caused by a Release or
threatened Release of Hazardous Substances to the public health or
welfare or to the environment; and
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(e) the providing of emergency assistance after a Release.
Remedial Actions include, but are not limited to, such actions at the
location of a Release as: storage; confinement; perimeter protection using
dikes, trenches, or ditches; clay cover; neutralization; clean-up of
Hazardous Substances or contaminated materials; recycling or reuse;
diversion; destruction; segregation of reactive wastes; dredging or
excavations; repair or replacement of leaking containers; collection of
leachate and runoff; onsite treatment or incineration; providing
alternative water supplies; and any monitoring reasonably required to
assure that such actions protect the public health and welfare and the
environment.
"Reportable Event" shall mean with respect to any Employee Pension
Plan subject to Title IV of ERISA, an event described in ERISA ss.4043(b).
"Solvent" shall mean, as at any applicable time and for any Person,
that at such time (i) such Person is able to pay its debts and other
liabilities, contingent obligations and other commitments as they mature in
the normal course of business, (ii) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature in their
ordinary course, (iii) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person's assets would constitute unreasonably small capital
after giving due consideration to the prevailing practice in the industry
in which such Person is engaged or is to engage, (iv) the fair value of the
assets of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person, and
(v) the present fair saleable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured. In computing
the amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Subordinated Indebtedness" shall mean, collectively, all Debt of the
Borrower and its Subsidiaries, if any, for money borrowed, whether now
existing or hereafter incurred, and which is subordinated in right of
payment of principal and interest to the Obligations, either absolutely or
upon the occurrence of and during the continuance of a Default or an Event
of Default, pursuant to and in accordance with the terms, conditions, and
restrictions of a subordination agreement with the Lender which is
satisfactory, in form and substance, to the Lender.
"Subsidiary" shall mean any corporation more than fifty percent (50%)
of the outstanding shares of capital stock of which (except for directors'
qualifying shares, if required by law) are at the time owned by the
Borrower and/or one or more Subsidiaries.
"Term Loan" shall mean the term loan made by the Lender to the
Borrower under and pursuant to the Term Loan Facility.
"Term Loan Facility" shall mean the term loan facility described in
Section 2.5.
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"Term Loan Note" shall mean the promissory note described in Section
2.6, and any future amendments, restatements, modifications or supplements
thereof or thereto.
"Working Capital Line of Credit" shall mean the revolving line of
credit facility in the maximum amount of Ten Million Dollars ($10,000,000)
described in Section 2.1.
"Working Capital Line of Credit Commitment" shall mean, as at any
applicable time, the Borrower's maximum credit availability under the
Working Capital Line of Credit, as established in Section 2.1(a) whether or
not then fully extended.
"Working Capital Line of Credit Note" shall mean the promissory note
described in Section 2.2 and any future amendments, restatements,
modifications or supplements thereof or thereto.
"Working Capital Line of Credit Termination Date" shall mean September
27, 2000 unless extended in writing by the Lender.
SECTION 2. AMOUNT AND TERMS OF LOANS.
2.1. Working Capital Line of Credit.
(a) Subject to, and in accordance with, the terms and conditions of
this Agreement, the Lender agrees to extend credit to the Borrower by
making Advances to it under the Working Capital Line of Credit, from time
to time during the period commencing on the Closing Date and ending on the
Business Day preceding the Working Capital Line of Credit Termination Date,
in an aggregate outstanding amount that shall not exceed, at any one time,
Ten Million Dollars ($10,000,000).
(b) During the period referred to in Section 2.1(a), the Borrower may
use the Lender's commitment under the Working Capital Line of Credit by
borrowing, repaying and reborrowing. The Borrower shall notify the Lender
verbally or in writing of each proposed borrowing under the Working Capital
Line of Credit not later than 2:00 p.m., Philadelphia, Pennsylvania, time
on the day of such proposed borrowing pursuant to a Borrowing Notice. The
Borrower authorizes and directs the Lender to disburse the proceeds of each
such borrowing by direct deposit to Borrower's demand deposit account
maintained with the Lender.
(c) The Working Capital Line of Credit shall be used solely for the
Borrower's working capital requirements. The initial Advance under the
Working Capital Line of Credit shall be used to repay the outstanding
balance of the borrower's existing line of credit facility with the Lender
(which line of credit facility is hereby terminated and canceled.)
(d) The Working Capital Line of Credit Termination Date may be
extended or renewed by the Lender, in its sole discretion, on a day-to-day
basis or otherwise, based on a letter to such effect from the Lender to the
Borrower or by a written agreement between the parties hereto; provided,
however, the Lender shall have no duty or obligation, express or implied,
to extend the Working Capital Line of Credit Termination Date or consider
any request for such an extension.
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2.2. Working Capital Line of Credit Note. On the Closing Date, the Borrower
shall execute and deliver to the Lender its promissory note, which shall
evidence the Borrower's obligations to repay the principal of, interest on, and
other amounts due in connection with the Working Capital Line of Credit, and
which shall:
(a) be dated the Closing Date and be payable to the Lender's order in
the principal amount of Ten Million Dollars ($10,000,000);
(b) bear interest on the unpaid principal amount of any funds advanced
and outstanding thereunder at the Prevailing Rate;
(c) be payable as to interest monthly, with respect to the LMIR Loans
and Prime Rate Loans evidenced thereby, commencing on November 1, 1999, and
continuing on the same day of each month thereafter until payment in full
of the unpaid principal amount of, and all accrued but unpaid interest
thereon;
(d) be payable as to interest, with respect to LIBOR Loans evidenced
thereby, at the expiration of the LIBOR Period applicable thereto, unless
the LIBOR Period exceeds three (3) months in which case interest shall be
payable at each three (3) month interval of the LIBOR Period and at the
expiration of LIBOR Period; and
(e) be payable in full as to the entire unpaid principal balance, all
accrued interest and other sums due thereunder on the Working Capital Line
of Credit Termination Date.
2.3. Acquisition Line of Credit.
(a) Subject to, and in accordance with, the terms and conditions of
this Agreement, the Lender agrees to extend credit to the Borrower by
making Advances to it under the Acquisition Line of Credit, from time to
time during the period commencing on the Closing Date and ending on the
Business Day preceding the Acquisition Line of Credit Termination Date, in
an aggregate outstanding amount that shall not exceed, at any one time,
Thirty Million Dollars ($30,000,000).
(b) During the period referred to in Section 2.3(a), the Borrower may
use the Lender's commitment under the Acquisition Line of Credit by
borrowing, repaying and reborrowing. The Borrower shall notify the Lender
in writing of each proposed borrowing under the Acquisition Line of Credit
not later than 10:00 a.m., Philadelphia, Pennsylvania, time on the day of
such proposed borrowing pursuant to a Borrowing Notice. The Borrower
authorizes and directs the Lender to disburse the proceeds of each such
borrowing by direct deposit to the demand deposit account of the Borrower
with the Lender.
(c) The Borrower shall be permitted to use Advances under the
Acquisition Line of Credit solely to finance all or any portion of a
transaction, pursuant to which the Borrower shall purchase all or a portion
of the assets, properties, equity securities, and/or business of a Person
engaged in a business similar to or related to the industry of the business
conducted by the Borrower as of the Closing Date, the completion of which
has been approved by Borrower's Board of Directors.
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<PAGE>
(d) The Acquisition Line of Credit Termination Date may be extended or
renewed by the Lender, in its sole discretion, on a day-to-day basis or
otherwise, based on a letter to such effect from the Lender to the Borrower
or by a written agreement between the parties hereto; provided, however,
the Lender shall have no duty or obligation, express or implied, to extend
the Acquisition Line of Credit Termination Date or consider any request for
such an extension.
2.4. Acquisition Line of Credit Note. On the Closing Date, the Borrower
shall execute and deliver to the Lender a promissory note, which shall evidence
the Borrower's obligation to repay the principal of, interest on, and other
amounts due in connection with the Acquisition Line of Credit, and which shall:
(a) be dated the Closing Date and be payable to the Lender's order in
the principal amount of Thirty Million Dollars ($30,000,000);
(b) bear interest on the unpaid principal amount of any funds advanced
and outstanding under the Acquisition Line of Credit from the dates of such
advances at an annual rate equal to the Prevailing Rate;
(c) be payable as to interest monthly, with respect to the LMIR Loans
and Prime Rate Loans evidenced thereby, commencing on November 1, 1999, and
continuing on the same day of each month thereafter until payment in full
of the unpaid principal amount of, and all accrued but unpaid interest
thereon;
(d) be payable as to interest, with respect to LIBOR Loans evidenced
thereby, at the expiration of the LIBOR Period applicable thereto, unless
the LIBOR Period exceeds three (3) months in which case interest shall be
payable at each three (3) month interval of the LIBOR Period and at the
expiration of LIBOR Period; and
(e) be payable in full as to the entire unpaid principal balance, all
accrued interest and other sums due thereunder on the Acquisition Line of
Credit Termination Date.
2.5. Term Loan Facility.
(a) Subject to the terms and conditions of this Agreement, the Lender
agrees to make a term loan to the Borrower, on the Acquisition Line of
Credit Termination Date, in the maximum amount equal to the outstanding
balance of the Acquisition Line of Credit on the Acquisition Line of Credit
Termination Date.
(b) The Borrower shall be permitted to use the Term Loan solely to
repay the Acquisition Line of Credit.
(c) The Term Loan shall be subject to those conditions more fully
described in Section 4.3.
2.6. Term Loan Note. As more fully set forth in Section 4.3, concurrently
with the making of the Term Loan, the Borrower shall execute and deliver to the
Lender its promissory note, which shall evidence the Borrower's obligation to
repay the principal of, interest on, and other amounts due in connection with
the Term Loan, and which shall:
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<PAGE>
(a) be dated the date on which the Term Loan is made and be payable to
the Lender's order in the principal amount of the Term Loan;
(b) bear interest on the unpaid principal amount thereof at an annual
rate equal to the Prevailing Rate;
(c) be payable as to interest monthly, with respect to LMIR Loans and
Prime Rate Loans evidenced thereby, commencing on the first day of the
first month of the Amortization Period applicable thereto, and continuing
on the same day of each month thereafter until payment in full of the
unpaid principal amount of, and all accrued but unpaid interest thereon;
(d) be payable as to interest, with respect to LIBOR Loans evidenced
thereby, at the expiration of the LIBOR Period applicable thereto, unless
the LIBOR Period exceeds three (3) months in which case interest shall be
payable at each three (3) month interval of the LIBOR Period and at the
expiration of LIBOR Period;
(e) be payable as to principal in equal, consecutive monthly
installments during the Amortization Period with respect thereto commencing
on the first day of the first month of the Amortization Period and
continuing on the same day of each month thereafter, each such installment
to be equal to (i) the original principal amount of the Term Loan, divided
by (ii) the number of months comprising the Amortization Period;
(f) have a maturity date occurring on the last day of the Amortization
Period applicable thereto, at which time the entire outstanding principal
amount thereof, and all accrued interest thereon, shall be paid in full;
and
(g) be in the form of Exhibit "C" attached hereto.
2.7. Interest Rate Elections.
(a) The Borrower, subject to any prior continuing interest rate
elections made pursuant to Sections 2.7(b) and 2.7(c), at any time and from
time to time, may notify the Lender that it is electing to have interest
accrue at the Prime Rate on a specific portion (up to and including 100%)
of the aggregate unpaid amount of any Advance(s). All Advances for which an
interest rate option is not specifically designated by the Borrower under
this Section 2.7, pursuant to the terms hereof, or not requested in
conformity with the terms hereof, shall be Prime Rate Loans.
(b) Subject to the notice provisions set forth in this Section 2.7(b),
at any time and from time to time, the Borrower may notify (which notice
shall be irrevocable) the Lender it is electing to have interest accrue for
a LIBOR Period specified in writing by the Borrower at the Adjusted LIBOR
Rate on a specific portion (up to and including 100%) of the aggregate
unpaid amount of any Advance (including any Advance to be made by the
Lender to the Borrower on the date of election) equal to the amount
specified by the Borrower. The Borrower shall notify the Lender not later
than 10:00 A.M. two (2) Business Days before the date on which the Borrower
desires any Advance to bear interest at the Adjusted LIBOR Rate.
Notwithstanding anything contained herein to the contrary, (i) any LIBOR
Loan shall be in minimum denominations equal to the Minimum LIBOR Loan
Amount and in multiples thereof if in excess thereof, and (ii) the Borrower
shall not be permitted to request a LIBOR Loan (including a conversion
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thereto) that, if made, would result in more than four (4) LIBOR Loans
outstanding at any time (it being understood that LIBOR Loans having
different LIBOR Periods, regardless of whether they commence on the same
date, shall be considered separate LIBOR Loans).
(c) The Borrower, subject to any prior continuing interest rate
elections made pursuant to Sections 2.7(a) or 2.7(b), at any time and from
time to time, may notify the Lender that it is electing to have interest
accrue at the LIBOR Market Index Rate on a specific portion (up to and
including 100%) of the aggregate unpaid amount of any Advance.
(d) Following an interest rate election made by the Borrower with
respect to any Advance pursuant to Sections 2.7(a), 2.7(b) or 2.7(c), but
subject to all other conditions of this Agreement, the Borrower may, in
accordance with the provisions of Sections 2.7(a), 2.7(b) and 2.7(c), from
time to time, elect to convert or continue the type of interest rate borne
by such Advance. In the event that the Borrower fails to provide the Lender
with any notice of conversion or continuance, as described above, such
Advance shall immediately and automatically become a Prime Rate Loan and
shall commence bearing interest at the Adjusted Prime Rate. Notwithstanding
anything contained herein to the contrary, the Borrower shall not convert,
or permit the conversion of, any LIBOR Loan to a Prime Rate Loan or LMIR
Loan until the expiration of the LIBOR Period then in effect with respect
thereto.
(e) Any LIBOR Period for LIBOR Loans under the Acquisition Line of
Credit and Working Capital Line of Credit shall end prior to the
Acquisition Line of Credit Termination Date or the Working Capital Line of
Credit Termination Date, as appropriate, and the Borrower's election of
LIBOR Periods hereunder shall not violate the provisions of this Section
2.7(e). Any LIBOR Period for LIBOR Loans under the Term Loan shall end
prior to the expiration of the Amortization Period and the Borrower's
election of LIBOR Periods hereunder shall not violate the provisions of
this Section 2.7(e).
(f) In the event that the Lender shall determine (which determination
shall be conclusive and binding upon the Borrower) that, by reason of
circumstances affecting the interbank eurodollar market or otherwise,
adequate and reasonable means do not exist for ascertaining LIBOR and/or
LIBOR Market Index Rate, the Borrower's right to elect to have interest
accrue on any Advance at the Adjusted LIBOR Rate or Adjusted LIBOR Market
Index Rate shall be suspended until such time that the Lender determines
that adequate and reasonable means exist for ascertaining LIBOR or LIBOR
Market Index Rate.
(g) Notwithstanding anything contained herein to the contrary, if any
applicable law, treaty, regulation or directive, or any change in or in the
application or interpretation of such law, treaty, regulation or directive,
or any other event shall make it unlawful for the Lender to make or
maintain LIBOR Loans and/or LMIR Loans:
(1) The obligation of the Lender to make or maintain LIBOR Loans
and/or LMIR Loans shall be canceled automatically and immediately; and
(2) Such LIBOR Loans and/or LMIR Loans shall convert
automatically and immediately to Prime Rate Loans.
(h) The Borrower shall not prepay, in whole or in part, any LIBOR
Loans prior to the expiration of the appropriate LIBOR Period applicable
thereto. The Borrower shall indemnify the Lender and hold the Lender
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harmless from and against any loss or expense that the Lender may sustain
or incur as a result of (i) any prepayment of a LIBOR Loan, (ii) the
conversion of a LIBOR Loan to a Prime Rate Loan or LMIR Loan prior to the
expiration of the LIBOR Period applicable thereto, (iii) a Loan being
converted from a LIBOR Loan to a Prime Rate Loan or LMIR Loan by reason of
the circumstances described in Section 2.7(g), or (iv) a LIBOR Loan not
being made after notice thereof is provided to the Lender pursuant hereto.
Such agreement to indemnify shall include, without limitation, any interest
payable by the Lender to lenders of funds obtained by the Lender in order
to make or maintain LIBOR Loans pursuant hereto.
(i) Following the occurrence of a Default or an Event of Default, the
Borrower may not elect to have any Advance made or maintained as, or
converted into, a LIBOR Loan after the expiration of any LIBOR Period then
in effect for that Advance.
2.8. Loan Account. The Lender shall record in one or more Loan Accounts,
the Loans, all advances to and all payments made by Borrower on account of the
Loans, and all other appropriate debits and credits. Each month the Lender shall
render to Borrower a statement setting forth the debit balance of the Loan
Account as of the close of the preceding month, together with a statement of the
amount of interest and other charges due the Lender as of that time. Each
statement shall be considered correct and accepted by the Borrower and
conclusively binding upon the Borrower unless the Borrower notifies the Lender
to the contrary in writing within sixty (60) days from the receipt of the
statement.
2.9. Maximum Legal Rate. Borrower shall not be obligated to pay and Lender
shall not collect interest on any Obligation at a rate in excess of the maximum
permitted by law or the maximum that will not subject Lender to any civil or
criminal penalties. If, because of the acceleration of maturity, the payment of
interest in advance or any other reason, Borrower is required, under the
provisions of any Loan Document or otherwise, to pay interest at a rate in
excess of such maximum rate, the rate of interest under such provisions shall
immediately and automatically be reduced to such maximum rate, and any payment
made in excess of such maximum rate, together with interest thereon at the rate
provided herein from the date of such payment, shall be immediately and
automatically applied to the reduction of the unpaid principal balance of the
Obligations as of the date on which such excess payment was made. If the amount
to be so applied to reduction of the unpaid principal balance exceeds the unpaid
principal balance, the amount of such excess shall be refunded by Lender to
Borrower.
2.10. Payments. All payments (including prepayments) by the Borrower
hereunder shall be made at the Lender's address set forth in Section 8.2, or
such other place or places as the Lender may direct, prior to 2:00 p.m. on the
date of payment, in lawful money of the United States of America, and in
immediately available funds, and, when due or upon instruction from the
Borrower, may be made by debit to any of the Borrower's general accounts with
the Lender.
2.11. Application of Payments. All payments shall be applied first to the
payment in full of any costs incurred in the collection of any Obligation,
including (without limitation) reasonable attorneys' fees, then to the payment
in full of any late charges, then to the payment in full of accrued, unpaid
interest and finally to the reduction of the unpaid principal balance.
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2.12. Late Charges. If the Borrower shall fail to pay any installment of
interest or principal due under the Loans or any other sum due to the Lender
under any of the Loan Documents on the date it is due, the Borrower shall pay to
the order of the Lender, immediately, without notice or demand, a late charge
equal to five percent (5%) of the amount overdue to defray part of the
additional expense incurred by the Lender in connection with the delinquency and
collection of the overdue amount. The provision for such late charge shall not
be construed to permit the Borrower to make any payment after its due date,
obligate the Lender to accept any overdue installment, or affect the Lender's
rights and remedies upon the occurrence of a Default or an Event of Default.
2.13. Mandatory Payments.
(a) If (i) the unpaid principal balance of the Working Capital Line of
Credit Note exceeds (ii) the Working Capital Line of Credit Commitment at
any time, the Borrower shall immediately pay to the Lender, for application
to the Working Capital Line of Credit Note, an amount equal to such excess.
If the Lender shall determine, in its reasonable discretion, that the
unpaid principal balance of the Working Capital Line of Credit Note exceeds
the Working Capital Line of Credit Commitment, then the Lender shall have
the right to set-off any funds of the Borrower on deposit with the Lender
to the extent necessary to eliminate such excess.
(b) If (i) the unpaid principal balance of the Acquisition Line of
Credit Note exceeds (ii) the Acquisition Line of Credit Commitment at any
time, the Borrower shall immediately pay to the Lender, for application to
the Acquisition Line of Credit Note, an amount equal to such excess. If the
Lender shall determine, in its reasonable discretion, that the unpaid
principal balance of the Acquisition Line of Credit Note exceeds the
Acquisition Line of Credit Commitment, then the Lender shall have the right
to set-off any funds of the Borrower on deposit with the Lender to the
extent necessary to eliminate such excess.
2.14. Voluntary Prepayments.
(a) Except as otherwise provided herein, the Borrower at any time and
from time to time may voluntarily prepay Prime Rate Loans or LMIR Loans, or
any of them, in whole or in part, upon notification to the Lender of such
prepayment not later than 10:00 a.m. on the date of prepayment, in integral
multiples of Twenty-Five Thousand Dollars ($25,000). Any partial
prepayments of principal shall be applied against scheduled payments of
principal in the inverse order of maturity and shall not postpone or reduce
any regularly scheduled payment of principal or interest thereon.
(b) The Borrower shall not prepay, in whole or in part, any LIBOR
Loans prior to the expiration of the appropriate LIBOR Period applicable
thereto. The Borrower shall indemnify the Lender and hold the Lender
harmless from and against any loss or expense that the Lender may sustain
or incur as a result of (i) any prepayment of a LIBOR Loan, or (ii) a Loan
being converted from a LIBOR Loan to a Prime Rate Loan or LMIR Loan by
reason of the circumstances described in Section 2.7(f) or Section 2.7(g).
Such agreement to indemnify shall include, without limitation, any interest
payable by the Lender to lenders of funds obtained by the Lender in order
to make or maintain LIBOR Loans pursuant hereto.
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2.15. Yield Protection; Capital Adequacy.
(a) The Borrower shall pay to the Lender from time to time such
amounts as the Lender may determine to be necessary to compensate it for
any costs incurred by the Lender or any reduction in any amount receivable
by the Lender hereunder (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to the Lender under this Agreement or the Notes (other than taxes
imposed on the overall net income of the Lender by the jurisdiction in
which the Lender has its principal office); or (ii) imposes or modifies any
reserve, special deposit or similar requirements relating to any extensions
of credit, or other assets of, or any deposits with or other liabilities
of, the Lender (but excluding any such requirement to the extent reflected
in an applicable reserve requirement); or (iii) imposes any other condition
affecting this Agreement (or any of such extensions of credit or
liabilities). The Lender will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Lender to
compensation pursuant to this Section 2.15 as promptly as practicable after
it obtains knowledge thereof and determines to request such compensation.
The Lender will furnish the Borrower with a statement setting forth the
basis and amount of each such request.
(b) If after the date hereof, the Lender shall have determined that
the adoption of any applicable law, rule, regulation or treaty regarding
capital adequacy, or any Regulatory Change, has or would have the effect of
reducing the rate of return on the Lender's capital as a consequence of its
obligations hereunder to a level below that which the Lender could have
achieved but for such adoption, change or compliance (taking into
consideration the Lender's policies with respect to capital adequacy) by an
amount the Lender deems material, the Borrower shall pay to the Lender such
additional amount or amounts as will compensate the Lender for such
reduction.
(c) In determining the amounts due under this Section 2.15, the Lender
may use any reasonable averaging and attribution methods. Determination by
the Lender for purposes of this Section 2.15 of the effect of any
Regulatory Change on its costs of making or maintaining Loans hereunder or
on amounts receivable by it hereunder and of the additional amounts
required to compensate the Lender shall be conclusive, absent manifest
error.
(d) Lender agrees to use reasonable efforts to minimize any amounts
which become due and payable by the Borrower to the Lender by reason of the
provisions of this Section 2.15, although the Lender shall have no
liability to the Borrower in connection therewith.
SECTION 3. REPRESENTATIONS AND WARRANTIES.
To induce Lender to enter into this Agreement and to make the Loans, the
Borrower represents and warrants to Lender that:
3.1. Organization and Qualification. The Borrower and each Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction in which
the conduct of its business or the ownership of its assets requires such
qualification.
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3.2. Power and Authority. The Borrower has the corporate power to execute,
deliver and perform under, the Loan Documents, to borrow under this Agreement,
and has taken all necessary corporate action to authorize the borrowings
hereunder on the terms and conditions of this Agreement and the execution and
delivery of, and performance under, the Loan Documents. No consent of any other
party (including stockholders of the Borrower) and no consent, license, approval
or authorization of, or registration or declaration with, any governmental
authority, bureau or agency is required in connection with the execution,
delivery, performance, validity or enforceability of the Loan Documents.
3.3. Enforceability. The Loan Documents, when executed and delivered to
Lender pursuant to the provisions of this Agreement, will constitute valid
obligations of the Borrower legally binding upon it and enforceable in
accordance with their respective terms, except as enforceability of the
foregoing may be limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights.
3.4. Conflict with Other Instruments. The execution and delivery of, and
performance under, the Loan Documents will not violate or contravene any
provision of any existing law or regulation or decree of any court, governmental
authority, bureau or agency having jurisdiction in the premises or of the
Articles or Certificate of Incorporation or Charter or of the By-Laws of the
Borrower or of any mortgage, indenture, security agreement, contract,
undertaking or other agreement to which the Borrower is a party or which
purports to be binding upon it or any of its properties or assets, and will not
result in the creation or imposition of any lien, charge, encumbrance on, or
security interest in, any of its properties or assets pursuant to the provisions
of any such mortgage, indenture, security agreement, contract, undertaking or
other agreement.
3.5. Litigation. Except as set forth on Schedule 3.5, no actions, suits or
proceedings before any court or governmental department or agency (whether or
not purportedly on behalf of the Borrower or any Subsidiary) are pending or, to
the knowledge of the Borrower, threatened (a) with respect to any of the
transactions contemplated by this Agreement or (b) against or affecting the
Borrower or any Subsidiary or any of its properties that, if adversely
determined, could reasonably be expected to have a Material Adverse Effect.
3.6. Title to Assets. The Borrower has good and marketable title in fee to,
or valid, enforceable leases of, all property owned, leased, or otherwise used
by the Borrower, and good and marketable title to all of its other assets now
carried on its books, or used by it, including those reflected in the most
recent consolidated balance sheet of the Borrower delivered to the Lender or
acquired since the date of such balance sheet (except personal property disposed
of since said date in the ordinary course of business), free of any Liens,
except those indicated in Schedule 3.6.
3.7. Licenses; Intellectual Property. The Borrower owns or has a valid
right to use the patents, patent rights, permits, licenses, trade secrets,
trademarks, trademark rights, trade names or trade name rights or franchises,
copyrights, inventions, and intellectual property rights being used to conduct
its business as now operated and as now contemplated to be operated; and the
conduct of the business of Borrower as now operated and as now proposed to be
operated does not and will not conflict with valid patents, patent rights,
permits, licenses, trade secrets, trademarks, trademark rights, trade names or
trade name rights or franchises, copyrights, inventions, and intellectual
property rights of others. No claim is pending or threatened to the effect that
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any such intellectual property owned or licensed by the Borrower or which the
Borrower otherwise has the right to use, is invalid or unenforceable by the
Borrower, as the case may be. Except as set forth on Schedule 3.7, the Borrower
has no obligation to compensate any Person other than Subsidiaries of the
Borrower for the use of any such patents or rights, and no Person has been
granted any license or other rights to use in any manner any of the patents or
rights of the Borrower or any Subsidiary, whether requiring the payment of
royalties or not.
3.8. Default. The Borrower is not in default under any material existing
agreement, and no Default or Event of Default hereunder has occurred and is
continuing.
3.9. Taxes. The Borrower has filed or caused to be filed all tax returns
(including, without limitation, those relating to federal and state income
taxes) required to be filed and has paid all taxes shown to be due and payable
on said returns or on any assessments made against it (other than those being
contested in good faith by appropriate proceedings for which adequate reserves
have been provided on its books). No tax Liens have been filed against the
assets of the Borrower or any Subsidiary, and no claims are being asserted with
respect to such taxes which could have a Material Adverse Effect.
3.10. Financial Condition.
(a) All consolidated and consolidating balance sheets, profit and loss
statements, and other financial statements of the Borrower, dated as of
June 30, 1999 all of which have heretofore been delivered to the Lender,
and all financial statements and data of the Borrower which will hereafter
be furnished to the Lender, are or will be (when furnished) true and
correct and do or will (when furnished) present fairly, accurately and
completely the consolidated financial position of the Borrower and the
results of its operations as of the dates and for the periods for which the
same are furnished. All such financial statements have been prepared in
accordance with GAAP applied on a consistent basis. Neither the Borrower
nor any Subsidiary possesses any "loss contingency" (as that term is
defined in Financial Accounting Standards Board, Statement of Financial
Accounting Standards No. 5 - "FASB 5") which is not accrued, reflected, or
reserved against in its balance sheet or disclosed in the footnotes to such
balance sheet. There has been no material adverse change in the business,
properties, operations or condition (financial or otherwise) of the
Borrower or any Subsidiary since the date of the financial statements which
were most recently furnished by the Borrower to Lender. No event has
occurred that could reasonably be expected to interfere substantially with
the normal business operations of the Borrower.
(b) The Borrower is Solvent and will (after taking into account the
completion of the transactions described herein and contemplated hereby) be
Solvent.
3.11. ERISA.
(a) Except as specifically disclosed to the Lender in writing prior to
the date of this Agreement:
(1) there is no Accumulated Funding Deficiency with respect to
any Employee Pension Plan;
(2) no Reportable Event has occurred with respect to any Employee
Pension Plan;
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(3) to the best of Borrower's knowledge, no violations of the
Code have occurred that could potentially cause the loss of the tax
qualified status of any Employee Pension Plan;
(4) neither the Borrower nor any Controlled Group Member
contributes to or has ever contributed to or otherwise incurred
Withdrawal Liability with respect to any Multiemployer Plan; and
(b) No liability (whether or not such liability is being litigated)
has been asserted against the Borrower or any Controlled Group Member in
connection with any Employee Pension Plan by the PBGC, by a trustee
appointed pursuant to ERISA ss.4042(b) or (c), and no Lien has been
attached and no person has threatened to attach a Lien on any of the
Borrower's or its Controlled Group Members' property as a result of failure
to comply with ERISA or as a result of the termination of any Employee
Pension Plan.
(c) Each Employee Pension Plan, as most recently amended, including
amendments to any trust agreement, group annuity or insurance contract, or
other governing instrument, is the subject of a favorable determination
letter by the Internal Revenue Service with respect to its qualifications
under Code ss.401(a) and such Employee Pension Plan's related trusts are
exempt from taxation under Code ss.501(a). The Borrower has furnished
Lender with a copy of the most recent actuarial report for each Employee
Pension Plan which is a defined benefit pension plan and each such report
is accurate in all material respects.
3.12. Use of Proceeds. The proceeds of the Working Capital Line of Credit
shall be used solely for the purposes set forth in Section 2.1(c). The proceeds
of the Acquisition Line of Credit shall be used solely for the purposes set
forth in Section 2.3(c). The proceeds of the Term Loan shall be used solely for
the purposes set forth in Section 2.5(b).
3.13. Regulation U. Neither the Borrower nor any Subsidiary is 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 will be
used to purchase or carry any margin stock or to reduce or retire any
indebtedness incurred for such purpose or to extend credit to others for such
purpose.
3.14. No Notices; No Violations. Neither the Borrower nor any Subsidiary
has received any notice from any federal, state or local authority or any
insurance or inspection body to the effect that any of its properties,
facilities, equipment or business procedures or practices fail to comply, in any
material respect, with any applicable law, ordinance, regulation, building or
zoning law, judicial or administrative determination, or any other requirements
of any such authority or body, and the Borrower and all Subsidiaries, and all
such properties, facilities, equipment, procedures and practices, are in
material compliance with all such laws, ordinances, determinations, regulations
and requirements (including, without limitation, all environmental laws, rules
and regulations).
3.15. Labor. Neither the Borrower nor any Subsidiary is involved in any
strike, lock-out, boycott or any other material labor trouble, similar or
dissimilar, nor is it involved in negotiations with any labor union.
3.16. Group Health Plans. The Borrower and each Subsidiary (a) provide
COBRA Continuation Coverage under group health plans for separating employees in
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accordance with the provisions of Code ss.4980B(f), (b) are in compliance with
the provisions of ss.1862(b)(1) of the Social Security Act, and (c) are in
compliance with the provisions of the Health Insurance Portability and
Accountability Act of 1996.
3.17. Year 2000 Matters. The advent of the year 2000 shall not materially
and adversely affect the Borrower's operations or the performance of its
information technology. Without limiting the generality of the foregoing, (i)
the hardware and software utilized by the Borrower are designed, in all material
respects, to be used prior to, during, and after the calendar 2000 A.D. and such
hardware and software will operate during each such time period without error
relating to date data, specifically including any error relating to, or the
conduct of, date data which represents or references different centuries or more
than one century, (ii) the hardware and software utilized by the Borrower will
not, in any material respect, abnormally end or provide invalid or incorrect
results as a result of date data, and (iii) the hardware and software utilized
by the Borrower have been designed to ensure year 2000 A.D. compatibility in all
material respects, including date data, century recognition, leap year,
calculations which accommodate same century and multi-century formulae in date
values, and date data interface values that reflect the century.
3.18. No Omissions. Neither this Agreement, any Schedule or any other Loan
Document contains or will contain any untrue statement of material fact or omits
or will omit to state a material fact required to be stated in order to make
such statement, document or other instrument not misleading.
SECTION 4. CONDITIONS OF BORROWING.
4.1. Initial Advance. As a condition precedent to the Lender's obligation
to make the initial Advance under the Notes, the following conditions shall all
be satisfied:
(a) Loan Documents. The Borrower shall have delivered or caused to be
delivered to the Lender duly executed copies of each of the Loan Documents.
(b) Borrower's Authorizations.
(1) The Borrower shall have delivered to Lender:
(A) a copy, certified by the Secretary of the Borrower, of
the resolutions of the Board of Directors of the Borrower
authorizing and approving the execution and delivery of and
performance under this Agreement and the other Loan Documents;
(B) the Borrower's articles or certificate of incorporation,
certified by the Secretary of State of the state of the
Borrower's incorporation as of a recent date;
(C) a good standing or subsistence certificate with respect
to the Borrower certified by the Secretary of State of the state
of the Borrower's incorporation as of a date within ten (10) days
of the Closing Date; and
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(D) a copy of the Borrower's By-Laws, as currently in
effect, certified by the Borrower's Secretary or Assistant
Secretary.
(2) The President and Secretary of the Borrower shall have duly
executed and delivered to the Lender certificates of incumbency, in
form and substance satisfactory to the Lender.
(c) Legal Opinions. Counsel for the Borrower shall have delivered to
the Lender a favorable opinion, dated the Closing Date, addressed to the
Lender, and satisfactory in form and substance to Lender.
(d) Representations. The representations and warranties contained in
Section 3 hereof shall be true and correct on and as of the date of the
making of the Loans and the date of any Advance with the same effect as if
made on and as of such date, and no Event of Default or Default shall be in
existence on the date of the making of such Advance or shall occur as a
result thereof.
(e) No Material Adverse Effect. No Material Adverse Effect to the
business, properties, operations, or financial condition of the Borrower
shall have occurred since June 30, 1999.
(f) No Litigation. No suit, action, investigation, inquiry or other
proceeding by or before any arbitrator or any governmental authority shall
be pending and no preliminary or permanent injunction or order by a state
or federal court shall have been entered (i) in connection with this
Agreement, the other Loan Documents, or any of the transactions
contemplated hereby or thereby, or (ii) which, in the reasonable judgment
of the Lender, could reasonably be expected to have a Material Adverse
Effect.
(g) Compliance with Commitment Letter. The Borrower shall have
otherwise complied with all of the terms and conditions set forth in the
Commitment Letter.
(h) No Violation. The completion of the transactions contemplated
hereby and by the Loan Documents shall not contravene, violate or conflict
with, nor involve the Lender in violation of, any law, rule, or regulation
applicable to it.
(i) Closing Date Compliance Certificate. The Borrower shall have
delivered to the Lender a duly executed Compliance Certificate dated as of
the Closing Date.
(j) Lien Searches. The Lender shall have received such secured
transaction, judgment and lien searches as it deems appropriate, all of
which shall be satisfactory to the Lender.
(k) Borrowing Notice. The Borrower shall have provided the Lender with
a Borrowing Notice describing:
(i) The amount of the requested Advance;
(ii) The initial rate at which the Advance will bear interest
pursuant to Section 2.7; and
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(iii) Whether the Advance will be under the Acquisition Line of
Credit or Working Capital Line of Credit.
(l) Legal Matters. All legal matters incident to the transactions
contemplated by this Agreement shall be reasonably satisfactory to Stevens
& Lee, counsel for the Lender.
4.2. Subsequent Advances. As a condition precedent to the Lender's
obligation to make to make any Advance after the Closing Date, the following
conditions shall all be satisfied on the date of such Advance:
(a) Material Adverse Change. No material adverse change shall have
occurred in the financial condition, assets, or results of operations of
the Borrower from the date of the latest quarterly financial statements
provided to the Lender under Section 5.1(b).
(b) No Default. No Default or Event of Default shall exist on the date
of such Advance or shall occur as a result of the making of such Advance.
(c) Representations. Without limiting the generality of Section
4.2(b), the representations and warranties contained in Section 3 shall be
true and correct on and as of the date of the making of such Advance with
the same effect as if made on and as of such date.
(d) No litigation. No litigation, investigation, or proceeding before
or by any arbitrator or governmental authority shall be pending and no
preliminary or permanent injunction or order by a state or federal court
shall have been entered (i) in connection with this Agreement, the other
Loan Documents, or any of the transactions contemplated hereby or thereby,
or (ii) which, in the reasonable judgment of the Lender, could reasonably
be expected to have a Material Adverse Effect.
(e) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be reasonably satisfactory, in form and substance, to the Lender.
(f) Borrowing Notice. The Borrower shall have provided the Lender with
a Borrowing Notice describing:
(i) The amount of the requested Advance;
(ii) The initial rate at which the Advance will bear interest
pursuant to Section 2.7; and
(iii) Whether the Advance will be under the Acquisition Line of
Credit or Working Capital Line of Credit; and
(iv) If the Advance is made under the Acquisition Line of Credit
and will exceed Fifteen Million Dollars ($15,000,000) for any single
Acquisition transaction (taking into account all Advances made, or to
be made, in connection with such Acquisition, but specifically
excluding the pending Acquisitions of RC Dudek and Company, Inc. and
Rivnet) containing (i) a pro-forma balance sheet of the Borrower
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taking into account the completion of the Acquisition relating thereto
and evidencing that no Default or Event of Default will occur as a
result of the Borrower's completion of the Acquisition and that the
Borrower will be in full and complete compliance with the financial
covenants set forth in Sections 5.10 and 5.11 immediately after the
Acquisition, (ii) a pro-forma income statement of the Borrower
restating the Borrower's income statement for the immediately
preceding four (4) fiscal quarters prior to the completion of the
Acquisition taking into account the projected effect of the
Acquisition on the Borrower's income and cash flows for such four (4)
quarter period, (iii) a description of the Acquisition transaction
relating thereto, and (iv) copies of any and all agreements,
documents, and instruments relating and/or pertaining to such
Acquisition, all of which the Lender shall have a reasonable
opportunity to review and which shall be satisfactory to the Lender.
4.3. Conditions to Term Loan. As a condition precedent to the Lender's
obligation to make the Term Loan, the following conditions shall all be
satisfied:
(a) Representations. The representations and warranties contained in
Section 3 shall be true and correct on and as of the date of the making of
the Term Loan with the same effect as if made on and as of such date, and
no Default or Event of Default shall be in existence on the date of the
making of the Term Loan or shall occur as a result thereof.
(b) Borrowing Notice. The Borrower shall have provided the Lender with
a Borrowing Notice describing the following:
(i) The amount of the Term Loan;
(ii) The initial rate at which the Term Loan will bear interest
pursuant to Section 2.7; and
(iii) The Amortization Period selected by the Borrower for the
Term Loan.
(c) Payment of Fees. The Borrower shall have paid to the Lender a
non-refundable facility fee in the following amount:
Fee Amortization Period
--- -------------------
$30,000 Up to 3 Year Amortization Period
$37,500 4 to 5 Year Amortization Period
$45,000 6 to 7 Year Amortization Period
4.4. Satisfaction of Conditions. The Lender's reasonable determination with
respect to whether an Advance or other Loan is required to be made pursuant to
the provisions hereof and whether any condition herein described has been
satisfied shall be binding upon the Borrower.
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SECTION 5. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that from and after the Closing Date and
so long as any of the Obligations remain outstanding and unpaid, in whole or in
part, the Borrower will observe the following covenants, unless the Lender shall
otherwise consent in writing:
5.1. Financial Statements; Reports. The Borrower will furnish to Lender:
(a) Annual Reports: as soon as available, but in any event not later
than one hundred twenty (120) days after the close of each fiscal year of
the Borrower, the annual audit report of the Borrower containing
consolidated and consolidating balance sheets of the Borrower and any
Subsidiaries, as at the end of such fiscal year, and related consolidated
and consolidating statements of income, shareholders' equity and cash flows
of the Borrower and any Subsidiaries, for such fiscal year, setting forth
in each case in comparative form the corresponding figures for the
preceding fiscal year, all in reasonable detail, prepared in accordance
with GAAP applied on a consistent basis and certified without exception or
qualification by independent public accountants selected by the Borrower
and satisfactory to the Lender, together with a copy of the management
letter prepared by such accountants in connection with such audit;
(b) Compliance Certificates: concurrently with the delivery of the
quarterly reports on Form 10-Q required to be furnished by the Borrower to
the Lender pursuant to the provisions of paragraph (B) of Section 5.1(c), a
Compliance Certificate executed by the Borrower's Chief Financial Officer;
(c) Securities Filings: promptly upon sending, making available, or
filing the same, such reports and financial statements as the Borrower or
any Subsidiary shall send or make available to the shareholders of the
Borrower or file with the Securities and Exchange Commission or any state
securities agencies including, without limitation, (A) annual reports filed
on Form 10-K, and (B) quarterly reports filed on Form 10-Q (and all related
exhibits and schedules thereto); and
(d) Other Information: from time to time, such additional financial
and other information as Lender may reasonably request.
5.2. Liabilities. The Borrower and any Subsidiaries will pay and discharge,
at or before their maturity, all their respective obligations and liabilities
(including, without limitation, tax liabilities and all employee wages as
provided in the Fair Labor Standards Act, 29 U.S.C. ss.ss.206-207 and any
successor statute), except those which may be contested in good faith, and
maintain adequate reserves for any of the same in accordance with GAAP;
provided, however, no Event of Default shall be deemed to have occurred by
reason of the Borrower's failure to comply with the covenant set forth in this
Section 5.2 unless such failure results in an Event of Default under Section
7.1(d).
5.3. ERISA.
(a) The Borrower will furnish to Lender (i) within thirty (30) days
after it has reason to know that any Reportable Event has occurred with
respect to any Employee Pension Plan or that the PBGC has instituted or
will institute proceedings under Title IV of ERISA to terminate any
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Employee Pension Plan or to appoint a trustee to administer any Employee
Pension Plan, a statement setting forth the details as to such Reportable
Event, termination or appointment proceedings and the action which it (or
the Employee Pension Plan sponsor other than the Borrower) proposes to take
with respect thereto, together with a copy of any notice of such Reportable
Event given to PBGC if a copy of such notice is available to the Borrower
or any of its Controlled Group Members; and (ii) promptly after receipt
thereof, a copy of any notice the Borrower or any of its Controlled Group
Members or the sponsor of any Employee Pension Plan received from PBGC or
the Internal Revenue Service which sets forth or proposes any action or
determination with respect to such Employee Pension Plan.
(b) The Borrower will notify Lender of (i) any excise taxes which have
been assessed or which the Borrower or any of its Controlled Group Members
have reason to believe may be assessed against the Borrower or any of its
Controlled Group Members by the Internal Revenue Service with respect to
any Employee Pension Plan or (ii) any revocation of qualification under
Code ss.401 which has occurred or which the Borrower or any of its
Controlled Group Members have reason to believe may occur with respect to
any Employee Pension Plan.
5.4. Notices. The Borrower will promptly give notice in writing to Lender
of the occurrence of any of the following:
(a) any Event of Default or Default under this Agreement, or any event
of default or similar occurrence under any material instrument or other
material agreement of the Borrower or any Subsidiary entitling any Person
to accelerate the maturity of any material obligation of the Borrower or
any Subsidiary or to exercise any other remedy against the Borrower or such
Subsidiary;
(b) any strike, lock-out, boycott or any other material labor trouble;
(c) the commencement of any litigation, proceeding or dispute
affecting the Borrower or any Subsidiary, or any dispute between the
Borrower or any Subsidiary, and any Person, if such litigation, proceeding
or dispute might interfere with the normal business operations of the
Borrower or any Subsidiary, or, if resolved other than in the favor of the
Borrower or any Subsidiary, such litigation, proceeding or dispute would
have a material adverse effect on the Borrower's or such Subsidiary's
financial condition;
(d) any material and adverse change in the financial position,
operations, business or prospects of the Borrower; or
(e) any changes in the personnel holding executive management
positions with the Borrower at the time of closing, including but not
limited to, the Borrower's president, vice-president, and chief financial
officer.
5.5. Environmental Matters; Compliance with Laws.
(a) The Borrower, and each of its Subsidiaries, shall:
(1) immediately notify the Lender (and any other person that
Borrower or any Subsidiary is required to notify pursuant to any
applicable laws) once it is aware of a material Release or threatened
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material Release of Hazardous Substances on, from, or near any of the
properties owned or used by the Borrower which might cause
Contamination;
(2) immediately notify the Lender once an environmental
investigation or clean-up proceeding is instituted by any Person in
connection with such properties;
(3) fully comply with and assist any such environmental
investigation and clean-up proceeding;
(4) promptly execute and complete any Remedial Actions necessary
to ensure that such properties are in material compliance with all
applicable laws and free from Contamination, and to ensure that no
environmental liens or encumbrances are levied against or exist with
respect to such properties; and
(5) comply, and cause all properties, assets, and operations
owned or used by the Borrower and its Subsidiaries to comply, in all
material respects, with all applicable federal, state, local and other
environmental, zoning, occupational safety, health, employment,
discrimination, labor and other laws and regulations.
(b) The Borrower shall defend, indemnify the Lender and hold the
Lender harmless from and against all loss, liability, damage, cost, and
expense, including without limitation, reasonable attorneys' fees, fines,
or other civil and criminal penalties or payments, for failure of the
assets or property owned or used by the Borrower or its Subsidiaries to
comply in all respects with all environmental and other laws, caused, in
whole or in part, regardless of fault, by the Borrower, by any Subsidiary,
or by any past, present or future owner, occupier, tenant, subtenant,
licensee, guest or other person. The provisions of this Section 5.5(b)
shall survive payoff, release, foreclosure, or other disposition of this
Agreement. The Borrower shall remain liable hereunder regardless of any
other provisions hereof which may limit the Borrower's liability.
5.6. Corporate Existence; Properties. The Borrower will notify the Lender
at least thirty (30) days before any change of name of the Borrower and will
maintain:
(a) its corporate existence and its qualification to do business and
good standing in each jurisdiction in which qualification is necessary for
the proper conduct of its businesses;
(b) all material licenses, permits and other authorizations necessary
for the ownership and operation of its properties and businesses; and
(c) its assets and properties in good repair, working order and
condition and to make all necessary or appropriate repairs, renewals,
replacements and substitutions, so that the value and efficiency of all
such assets and properties shall at all times be properly preserved and
maintained.
5.7. Insurance. The Borrower and each Subsidiary shall carry at all times,
in coverage, form and amount satisfactory to the Lender, hazard insurance (with
fire, extended and vandalism and malicious mischief coverage and coverage
against such other hazards as are customarily insured against by companies in
the same or similar business), commercial general liability insurance, worker's
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compensation insurance, comprehensive automobile liability insurance, and such
other insurance as is customarily carried by similarly situated companies, and
pay all premiums on the policies for such insurance when and as they become due
and do all other things necessary to maintain such policies in full force and
effect. The Borrower shall from time to time, upon request by the Lender,
promptly furnish or cause to be furnished to the Lender evidence, in form and
substance satisfactory to the Lender, of the maintenance of all insurance
required to be maintained by this Section 5.7 including, but not limited to,
such originals or copies, as the Lender may request, of policies, certificates
of insurance, riders and endorsements relating to such insurance and proof of
premium payments.
5.8. Books and Records. The Borrower will maintain, and will cause each
Subsidiary to maintain, accurate and complete, in all material respects, records
and books of account with respect to all its operations in accordance with GAAP,
and will permit, and will cause each Subsidiary to permit, officers or
representatives of the Lender to examine and make excerpts from such books and
records and to visit and inspect its properties, both real and personal, at all
reasonable times and, provided no Event of Default has occurred, upon reasonable
advance notice by the Lender to the Borrower.
5.9. Location of Business. The Borrower will notify the Lender in writing
at least five (5) days prior to any change in the location of any place of
business of Borrower and each Subsidiary, if any, whether the establishment of a
new place of business or the discontinuance of a present place of business.
5.10. Funded Debt to EBITDA Ratio. Borrower shall maintain a ratio of
Funded Debt to EBITDA of not more than 1.75 to 1.00 measured at the close of
each fiscal quarter..
5.11. Funds Flow Coverage Ratio. The Borrower shall maintain a Funds Flow
Coverage Ratio of not less than 1.50 to 1.00 measured at the close of each
fiscal quarter for the rolling four (4) quarter period ending as at the close of
the fiscal quarter as of which the Funds Flow Coverage is being measured.
5.12. Group Health Plans. The Borrower will comply, and cause each
Subsidiary to comply, in all material respects with the group health plan COBRA
Continuation Coverage requirements of Code ss.4980B(f), with all provisions of
ss.1862(b)(1) of the Social Security Act and the provisions of the Health
Insurance Portability and Accountability Act of 1996. The Borrower will furnish
to Lender, as soon as possible and in any event within thirty (30) days after
the Borrower knows or has reason to know, notice that the Borrower or any
Subsidiary is not in compliance with any provision of Code ss.4980B(f),
ss.1862(b)(1) of the Social Security Act, or the Health Insurance Portability
and Accountability Act of 1996.
5.13. Deposit Accounts. The Borrower and all Subsidiaries shall maintain
one or more of their deposit accounts with the Lender.
SECTION 6. NEGATIVE COVENANTS.
The Borrower covenants and agrees that from and after the Closing Date and
so long as any of the Obligations remain outstanding and unpaid, in whole or in
part, the Borrower will observe the following covenants unless the Lender shall
otherwise consent in writing:
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6.1. Debt. The Borrower will not, nor will it permit any Subsidiary to,
create, incur, assume or suffer or permit to exist any Debt, including
indebtedness for borrowed money or any indebtedness constituting the deferred
portion of the purchase price of any property, except:
(a) any Obligations, whether evidenced by the Notes or any other
instruments;
(b) Debt to suppliers and other trade creditors incurred in the
ordinary course of business by the Borrower and its Subsidiaries, if any;
(c) Subordinated Indebtedness;
(d) so long as no Default or Event of Default has occurred or would be
caused thereby, Debt constituting the deferred purchase price of equipment
purchased or acquired as permitted by Section 6.2(b) in an aggregate amount
which does not exceed Two Hundred Thousand Dollars ($200,000) during any
fiscal year;
(e) Debt described on Schedule 6.1(e); and
(f) any other Debt permitted under the Loan Documents.
6.2. Liens. The Borrower will not, nor will it permit any Subsidiary to,
create, assume, or suffer to exist, any Lien of any kind upon any of its assets,
whether now owned or hereafter acquired, except:
(a) purchase money Liens on equipment hereafter acquired securing Debt
permitted by Section 6.1(d), provided that such Liens attach only to the
equipment so acquired and do not encumber any other property of the
Borrower or any Subsidiary;
(b) Liens for taxes not yet payable or being contested in good faith
by appropriate proceedings and for which adequate reserves have been
provided on the books of the Borrower or a Subsidiary;
(c) mechanics', materialmen's, warehousemen's, carriers' or other like
Liens arising in the ordinary course of business of the Borrower or any
Subsidiary, if any, arising with respect to obligations which are not
overdue for a period longer than thirty (30) days or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided on the books of the Borrower or a Subsidiary;
(d) deposits or pledges to secure the performance of bids, tenders,
contracts, leases, public or statutory obligations, surety or appeal bonds
or other deposits or pledges for purposes of a like general nature or given
in the ordinary course of business by the Borrower or any Subsidiary; and
(e) 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 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 Borrower or any Subsidiary.
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6.3. Investments, Loans and Advances. The Borrower will not, nor will it
permit any Subsidiary to, make or suffer to exist any Investment (by way of
transfer of property, contribution to capital, purchase of stock, securities,
partnership or other ownership interests or evidence of indebtedness,
acquisition of the business or assets or otherwise) in, or make or suffer to
exist any advances or loans to, any Person, except that:
(a) the Borrower and its Subsidiaries, if any, may extend trade credit
under usual and customary arm's length terms in the ordinary course of
business;
(b) the Borrower and its Subsidiaries, if any, may purchase and own
marketable direct obligations of the United States of America or any agency
thereof, marketable obligations directly and fully guaranteed by the United
States of America and certificates of deposit issued by the Lender or by
any other bank with a shareholders' equity of at least $50,000,000
organized under the laws of the United States of America or any state
thereof, provided that such obligations and certificates of deposit have a
maturity of one year or less from the date of purchase;
(c) Acquisitions financed with the Acquisition Line of Credit; and
(d) the Borrower and its Subsidiaries may make investments in
marketable securities satisfying the investment criteria of Borrower's
investment policy (as in effect from time to time, which shall be
reasonably satisfactory to the Lender).
6.4. Mergers, Consolidations. The Borrower will not, nor will it permit any
Subsidiary to, enter into any transaction of merger or consolidation; provided,
however, so long as no Default or Event of Default has occurred or would be
caused thereby, so long as advance written notice thereof is furnished by the
Borrower to the Lender, (i) mergers and consolidations among Subsidiaries of the
Borrower may be completed, and (ii) any Subsidiary of the Borrower may be merged
with and into the Borrower if the Borrower is the surviving corporation in
connection with such merger.
6.5. Disposition of Assets. The Borrower will not, nor will it permit any
Subsidiary to, liquidate or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, pledge, or otherwise transfer or dispose
of all or any substantial part of its properties, assets or business except that
(a) the Borrower and any Subsidiaries may sell used equipment no longer used or
useful in connection with their respective businesses having a value not in
excess of One Million Dollars ($1,000,000), in the aggregate, in any fiscal
year, and (b) the Borrower may sell inventory in the ordinary course of its
business.
6.6. Guaranty Obligations. The Borrower will not, nor will it permit any
Subsidiary to, become or remain liable, directly or indirectly, in connection
with Guaranty Obligations, except that the Borrower and any Subsidiary may
endorse negotiable instruments for collection in the ordinary course of their
respective businesses.
6.7. Sales and Lease-Backs. The Borrower will not, nor will it permit any
Subsidiary to, enter into any arrangement, directly or indirectly, with any
Person, whereby the Borrower or any Subsidiary shall sell or transfer any
property, real or personal, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which the Borrower or
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such Subsidiary intends to use for substantially the same purpose or purposes as
the property being sold or transferred.
6.8. Continuance of Business. The Borrower will not, nor will it permit any
Subsidiary to, engage in any line of business other than those which are the
same as or similar to those in which the Borrower or any such Subsidiary is
actively engaged on the Closing Date including those businesses acquired with
Advances under the Acquisition Line of Credit.
6.9. Voluntary Prepayments. The Borrower will not, nor will it permit any
Subsidiary to, prepay, purchase, redeem or otherwise acquire for value prior to
the stated maturity thereof all or any part of any Debt of the Borrower or any
Subsidiary, if any, for borrowed money (other than the Obligations as provided
herein).
6.10. Transactions with Affiliates. Except as expressly permitted by this
Agreement, the Borrower will not, nor will it permit any Subsidiary to, directly
or indirectly:
(a) make any Investment in, or loan or advance to, an Affiliate;
provided, however, so long as no Default or Event of Default has occurred
or would be caused thereby, the Borrower and its Subsidiaries may make
intercompany advances to one another in the ordinary course of their
respective businesses as heretofore conducted and for proper corporate
purposes;
(b) transfer, sell, lease, assign or otherwise dispose of any assets
to an Affiliate;
(c) merge into or consolidate with or purchase or acquire assets from
an Affiliate; or
(d) enter into any other transaction directly or indirectly with or
for the benefit of any Affiliate (including, without limitation, any
guarantees or assumptions of obligations of an Affiliate);
provided that Borrower and any Subsidiary may enter into any transaction
with an Affiliate for the leasing of property, the rendering or receipt of
services or the purchase or sale of assets in the ordinary course of
business for a consideration which is substantially as advantageous to
Borrower or such Subsidiary as the consideration which it would obtain in a
comparable arm's length transaction with a Person not an Affiliate.
6.11. Handling of Hazardous Substances. The Borrower will not permit, nor
will it permit any Subsidiary to, use in its business or operations, or produce
as a result or as a by-product of its business or operations, or store or hold
at any site or location at which it conducts its business or operations, or at
any other property, Hazardous Substance unless the Borrower or any Subsidiary
complies, in all material respects, with all requirements of any applicable law,
regulation, decision or edict relating to the special handling, collection,
storage, treatment, disposal, or transportation of such Hazardous Substance. The
Borrower will not, nor will it permit any Subsidiary to, permit the Release or
threatened Release of any Hazardous Substance on, from, or near their respective
properties which might cause Contamination.
6.12. Use of Proceeds. The Borrower will not, nor will it permit any
Subsidiary to, directly or indirectly, apply any part of the proceeds of the
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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.
6.13. Management Changes. The Borrower acknowledges that the Lender is
relying upon the abilities of the Borrower's senior executive management as a
material inducement for the Lender to enter into this Agreement and agree to
make the Loans. Therefore, the Borrower shall maintain, at all times, senior
executive management which is reasonably satisfactory to the Lender. Lender
acknowledges that the present senior executive management of the Borrower is
satisfactory to it.
SECTION 7. EVENTS OF DEFAULT, REMEDIES.
7.1. Events of Default. The following shall constitute Events of Default:
(a) Non-Payment. (i) Failure by the Borrower to pay the principal of
or accrued interest on the Notes or any other instrument evidencing any
Obligation when due, or (ii) the failure of the Borrower or any Subsidiary
to pay any other amount payable to Lender, whether under this Agreement or
otherwise, within three (3) days after such amount becomes due.
(b) Falsity of Representations and Warranties. Any representation or
warranty made by the Borrower in this Agreement or in any other Loan
Document or in any certificate, financial or other statement furnished at
any time under or in connection with this Agreement or any other Loan
Document shall appear to be false or misleading in any material respect.
(c) Failure to Perform Certain Covenants. Failure by the Borrower to
observe or perform any other covenants, conditions or provisions contained
in this Agreement or in any other Loan Document, provided that, except with
respect to a violation of the covenants contained in Sections 5.10 and
5.11, or Section 6, such failure shall continue for a period of fifteen
(15) days after the earlier of (i) written notice thereof from Lender to
the Borrower, or (ii) the date on which an officer of the Borrower knew, or
should have known, of such failure.
(d) Default Under Other Obligations. The Borrower or any Subsidiary:
(1) defaults in any payment of principal of or interest on any
material obligations for borrowed money (other than under the Notes)
or for the deferred purchase price of property beyond any period of
grace provided with respect thereto; or
(2) defaults in the performance of any other agreement, term or
condition contained in any such material obligation or in any
agreement relating thereto, if the effect of such default is to cause,
or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to then cause, such obligation to
become due prior to its stated maturity. As used in this Section
7.1(d), "material obligation" shall mean any obligation of the
Borrower or any Subsidiary, under which the aggregate liability of the
Borrower or such Subsidiary (whether fixed or contingent) exceeds Two
Hundred Thousand Dollars ($200,000).
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(e) Voluntary Bankruptcy, Etc. The commencement by the Borrower or any
Subsidiary of a voluntary case under the Bankruptcy Code, as now
constituted or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency, reorganization, rehabilitation or other similar
law, or the consent by it to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Borrower or any Subsidiary or for any substantial
part of its property, or the making by it of any assignment for the benefit
of creditors, or the failure of the Borrower or any Subsidiary generally to
pay its debts as such debts become due, or the taking of corporate action
by the Borrower or any Subsidiary in furtherance of any of the foregoing.
(f) Involuntary Bankruptcy, Etc. The entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of the
Borrower or any Subsidiary in an involuntary case under the Bankruptcy
Code, as now or hereafter constituted, or any other applicable federal or
state bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of the Borrower or any Subsidiary or for any substantial
part of its property, or ordering the winding-up or liquidation of its
affairs and the continuance of any such decree or order unstayed and in
effect for a period of sixty (60) days.
(g) ERISA.
(1) (A)(1) Any Employee Pension Plan is terminated within the
meaning of Title IV of ERISA, or (2) a trustee is appointed by the
appropriate United States District Court to administer any Employee
Pension Plan, or (3) the PBGC institutes proceedings to terminate any
Employee Pension Plan, or (4) any Reportable Event occurs which the
Lender determines in good faith indicates a substantial likelihood
that an event described in (1), (2), or (3) above will occur, and (B)
with respect to events described in (1)-(4) above, only, the benefit
commitments (within the meaning of ERISA ss.4001(a)(16)), exceed the
market value of the assets in the fund under the Employee Pension Plan
by, five percent (5%) or more of the Borrower's or its Controlled
Group Members' tangible net worth;
(2) there occurs any Accumulated Funding Deficiency with respect
to any Employee Pension Plan and the Borrower or any of its Controlled
Group Members fails to correct such Accumulated Funding Deficiency
prior to the end of the taxable period within the meaning of Code
ss.4971(c)(3); or
(3) any Employee Pension Plan loses its tax-qualified status.
(h) COBRA Continuation Coverage. (i) Failure by the Borrower or any
Subsidiary to provide COBRA Continuation Coverage under group health plans
for separating employees in accordance with Code ss.4980B(f) at the time
continuation coverage is to be made available; (ii) failure by the Borrower
or any Subsidiary to comply with all provisions of ss.1862(b)(1) of the
Social Security Act; or (iii) failure by the Borrower or any Subsidiary to
comply with all provisions of the Health Insurance Portability and
Accountability Act of 1996.
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(i) Material Adverse Change. The Lender in good faith believes the
prospect of timely repayment of the Obligations to be materially impaired
by reason of a material adverse change in the Borrower's operations,
financial condition, earnings or physical assets.
(j) Default Under Other Documents. An "Event of Default" or similar
event shall have occurred and be continuing under any Loan Document.
(k) Unenforceability. (i) Any material provision of any of the Loan
Documents shall at any time for any reason cease to be a valid and binding
obligation of the Borrower, or shall be declared to be null and void or
(ii) the validity or enforceability thereof shall be contested by the
Borrower or any governmental agency or authority, or the Borrower shall
deny that it has any further liability or obligation under any Loan
Document to which it is a party.
(l) Judgments. One or more judgments are entered against Borrower in
the aggregate amount of Five Hundred Thousand Dollars ($500,000) or more,
and the Borrower shall not obtain the satisfaction, release, stay or
dismissal thereof within thirty (30) days thereof.
7.2. Acceleration.
(a) Upon the occurrence of an Event of Default specified in Sections
7.1(a) through 7.1(d), and 7.1(g) through 7.1(l), the Lender may, by
written notice to Borrower, terminate immediately and irrevocably the
Acquisition Line of Credit, the Acquisition Line of Credit Commitment, the
Working Capital Line of Credit, the Working Capital Line of Credit
Commitment, the Term Loan and any other obligation of the Lender to make
any advances to or for the account of the Borrower or any of its
Affiliates, and declare the Notes, and all other instruments evidencing the
Obligations to be due and payable, whereupon the principal amount of the
Notes and all outstanding Obligations, together with accrued interest
thereon and all other amounts payable thereunder, shall become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, anything contained herein
or in the documents evidencing the same to the contrary notwithstanding.
(b) Upon the occurrence of an Event of Default specified in Sections
7.1(e) or 7.1(f), the Acquisition Line of Credit, the Acquisition Line of
Credit Commitment, the Working Capital Line of Credit, the Working Capital
Line of Credit Commitment, the Term Loan, and any other obligation of the
Lender to make any advances to or for the account of the Borrower or any of
its Affiliates, shall automatically and immediately terminate and the
unpaid principal balances of, all accrued, unpaid interest on, and all
other sums payable with regard to, the Notes and all instruments evidencing
the Obligations shall automatically and immediately become due and payable,
in all cases without any action on the part of the Lender.
7.3. Right of Setoff. Upon the occurrence of a Default or an Event of
Default, the Lender shall have the right, in addition to all other rights and
remedies available to it, to set off against the unpaid balance of the
Obligations, any debt owing to the Borrower by the Lender and any funds in any
deposit account maintained by the Borrower with the Lender.
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7.4. No Marshalling, Etc., Required. If an Event of Default shall have
occurred and be continuing, the Lender shall not be required to marshal any
present or future security for, or guarantees of, the Obligations or to resort
to any such security or guarantee in any particular order and the Borrower
waives, to the fullest extent that it lawfully can, (a) any right it might have
to require the Lender to pursue any particular remedy before proceeding against
it, and (b) any right to the benefit of, or to direct the application of the
proceeds of any collateral until the Obligations have been paid in full.
7.5. Remedies Cumulative. Lender may exercise any of its rights and
remedies set forth in this Loan Agreement and the other Loan Documents. The
remedies of Lender shall be cumulative and concurrent, and may be pursued
singly, successively, or together, at its sole discretion, and may be exercised
as often as the occasion therefore shall occur; and the failure to exercise any
such right or remedy shall in no event be construed as a waiver or release
thereof.
SECTION 8. MISCELLANEOUS.
8.1. No Waiver; Cumulative Remedies. No failure or delay on the part of the
Lender in exercising any right, power or privilege hereunder or under the other
Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder or thereunder
preclude or require any other or further exercise thereof or the exercise of any
other right, power or privilege. The Lender shall not be deemed, by any act of
omission or commission, to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by the Lender, and then only to the
extent specifically set forth in writing. A waiver with respect to one event
shall not be construed as continuing or as a bar to or a waiver of any right or
remedy with respect to a subsequent event. The rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies provided by
law.
8.2. Notices. All notices and other communications shall have been duly
given and shall be effective (i) when delivered, (ii) when transmitted via
telecopy (or other facsimile device) to the numbers set forth below, (iii) the
Business Day following the day on which the same has been delivered prepaid to a
reputable national overnight air courier service, or (iv) the third Business Day
following the day on which the same is sent by certified or registered mail,
post prepaid, in each case to the respective parties at the address or telecopy
number set forth below, or at such other address or telecopy number as such
party may hereafter specify by written notice to the other party hereof:
The Borrower: Penn Engineering & Manufacturing Corp.
P.O. Box 1000
Danboro, PA 18916
Attention: Mr. Richard F. Davies, Treasurer
with a copy to: Duane Morris & Heckscher LLP
One Liberty Place
Philadelphia, Pa 19103-7396
Attention: Stephen D. Teaford, Esquire
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Lender: First Union National Bank
PA5416
2240 Butler Pike
Plymouth Meeting, PA 19462
Attention: Ms. Stasia H. Whiteman,
Vice President
with a copy to: Stevens & Lee
One Glenhardie Corporate Center
1275 Drummers Lane
P.O. Box 236
Wayne, PA 19087-0236
Attention: Steven M. Tyminski, Esquire
8.3. Reimbursement of Lender. The Borrower hereby agrees to reimburse the
Lender for its out-of-pocket expenses, including counsel fees, incurred by the
Lender in connection with the development, preparation, execution and
enforcement of this Agreement and all the Loan Documents, including all counsel
fees in connection with any bankruptcy or insolvency proceeding involving the
Borrower, this Agreement or any of the other Loan Documents. Such expenses and
counsel fees shall be paid simultaneously with the execution of this Agreement
and all such expenses hereafter incurred shall be paid within ten (10) days
after notice by the Lender.
8.4. Payment of Expenses and Taxes. In addition to payment of the expenses
and counsel fees provided for in Section 8.3, the Borrower agrees to pay, and to
save the Lender harmless from any delay in paying, stamp and other similar
taxes, if any, including, without limitation, all levies, impositions, duties,
charges or withholdings, together with any penalties, fines or interest thereon
or other additions thereto, which may be payable or determined to be payable in
connection with the execution and delivery of this Agreement and the Loan
Documents or any modification of any thereof or any waiver or consent under or
in respect of any thereof.
8.5. Survival of Representations and Warranties. All representations,
warranties, covenants and agreements made in this Agreement and all other Loan
Documents shall survive the execution and delivery of the Loan Documents and the
making of the Loans hereunder. All such representations and warranties shall be
deemed to be made again at the date of each request for a borrowing under the
Loans. The provisions of Sections 5.5, 8.3, 8.4, 8.10, 8.11 and 8.12 hereof
shall survive payment of the Obligations.
8.6. Participations. The Lender reserves the absolute right to assign all
or any of its interest in any or all of the Loans and the Loan Documents or to
participate with other lenders in the Loans, the Loan Documents on such terms
and at such times as the Lender may determine from time to time, with prior
notice to and the consent of the Borrower (which consent shall not be
unreasonably withheld, conditioned or delayed); provided, however, no such
notice to or consent of the Borrower shall be required if a Default or Event of
Default has occurred. The Borrower hereby grants to each such assignee and
participant the right to set off deposit accounts maintained by the Borrower or
any of its Subsidiaries with such assignee or participant or any other
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obligations such assignee or participant may owe to Borrower or any of its
Subsidiaries, to the extent of all Obligations. The Lender may disclose all
financial, business and other information about the Borrower or any of its
Subsidiaries which the Lender may possess at any time to all prospective and
actual assignees and participants.
8.7. Successors. This Agreement shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower may not assign or transfer its rights
hereunder without the prior written consent of the Lender.
8.8. Construction. This Agreement, all Loan Documents, and the rights and
obligations of the parties hereunder and thereunder, shall be governed by and
construed and interpreted in accordance with, the domestic internal laws of the
Commonwealth of Pennsylvania without regard to its rules pertaining to conflict
of laws. The Section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8.9. Severability. Any provision contained in this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.10. Indemnity. The Borrower hereby agrees, whether or not any of the
transactions contemplated in the Loan Documents shall be consummated, to pay,
assume liability for, and indemnify, protect, defend, save and keep harmless the
Lender from and against, any and all liabilities, obligations, losses, damages,
settlements, claims, actions, suits, penalties, costs and expenses (including,
but not limited to, legal and investigative fees and expenses) of whatsoever
kind and nature, including, but not limited to claims based upon negligence,
strict or absolute liability, liability in tort, latent and other defects
(whether or not discoverable), and any claim for patent, trademark or copyright
infringement which may from time to time be imposed on, incurred by or asserted
against the Lender (whether or not any such claim is also indemnified or insured
against by any other person) in any way relating to or resulting from this
Agreement, any Loan Document, or any of the transactions contemplated herein or
therein. The provisions of this Section 8.10 shall survive the payoff, release,
foreclosure or other disposition, as applicable, of this Agreement and the
Obligations.
8.11. Waiver of Trial by Jury; Jurisdiction.
(a) Each party to this Agreement agrees that any suit, action, or
proceeding, whether claim or counterclaim, brought or instituted by either
party hereto or any successor or assign of any party on or with respect to
this Agreement or any other Loan Document or which in any way relates,
directly or indirectly, to the Loans or any event, transaction, or
occurrence arising out of or in any way connection with the Loans, or the
dealings of the parties with respect thereto, shall be tried only by a
court and not by a jury. EACH PARTY HEREBY EXPRESSLY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY SUCH SUIT, ACTION, OR PROCEEDING. THE BORROWER
ACKNOWLEDGES AND AGREES THAT THIS SECTION 8.11 IS A SPECIFIC AND MATERIAL
ASPECT OF THIS AGREEMENT BETWEEN THE PARTIES AND THAT THE LENDER WOULD NOT
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EXTEND THE LOANS TO THE BORROWER IF THIS WAIVER OF JURY TRIAL SECTION WERE
NOT A PART OF THIS AGREEMENT.
(b) For the purpose of any suit, action or proceeding arising out of
or relating to this Agreement, the Notes or the Loans , the Borrower hereby
irrevocably consents and submits to the jurisdiction and venue of any of
the Courts of the Commonwealth of Pennsylvania including, without
limitation, the Court of Common Pleas of Philadelphia County and the
Federal District Court for the Eastern District of Pennsylvania, and
appoints and constitutes the Secretary of State of the Commonwealth of
Pennsylvania as its agent to accept and acknowledge on its behalf all
service of process in connection with any such matter, copies of which
process shall be mailed or delivered to the Borrower. The Borrower
irrevocably waives any objection which it may now or hereinafter have to
the laying of the venue of any suit, action or proceeding brought in such
court and any claim that such suit, action or proceeding brought in such a
court has been brought in an inconvenient forum and agrees that service of
process in accordance with the foregoing sentence shall be deemed in every
respect effective and valid personal service of process upon the Borrower.
The provisions of this Section 8.11(b) shall not limit or otherwise affect
the right of the Lender to institute and conduct action in any other
appropriate manner, jurisdiction or court.
8.12. Actions Against Lender; Release.
(a) Any action brought by the Borrower or any Subsidiary against the
Lender which is based, directly or indirectly, or on this Agreement or any
other Loan Document or any matter in or related to this Agreement or any
other Loan Document, including but not limited to the making of the Loans
or the administration or collection thereof, shall be brought only in the
courts of the Commonwealth of Pennsylvania.
(b) Upon full payment and satisfaction of the Loans and the interest
thereon, as provided in Section 2 hereof, the parties shall thereupon
automatically each be fully, finally, and forever released and discharged
from any further claim, liability or obligation in connection with the
Loans except as expressly set forth herein, except to the extent an payment
received by the Lender is determined to be a preference or similar voidable
transfer.
8.13. Performance by Lender. If the Borrower shall fail to observe or
perform any of the terms, agreements or covenants contained in this Agreement,
or in any other Loan Document, the Lender may, in its discretion, but without
any obligation or duty to do so, and without waiving any Default, or Event of
Default, and with prior written notice to the Borrower, perform any of such
terms, agreements or covenants, in part or in whole, and any money advanced or
expended by the Lender in or toward the fulfillment of such terms, agreements or
covenants, shall be due on demand and become a part of and be added to the
indebtedness due under the Notes and secured as herein provided with interest
thereon at the rate specified in such Note from the date of the respective
advance or expenditure. Lender's rights contained in this Section 8.13 shall be
in addition to all of Lender's rights under Section 5.5(b) and otherwise, and
Lender may, at its sole election, exercise any one or more, or all, of such
rights alternatively or concurrently.
8.14. Counterparts. This Agreement may be executed in any number of
counterparts with then same effect as if the signatures thereto and hereto were
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upon the same instrument, but all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
8.15. Further Actions. The Borrower shall execute and deliver such
documents and instruments, and take such other actions, as the Lender deems
necessary to consummate the transactions described in this Agreement.
8.16. Entire Agreement. This Agreement and the Loan Documents represent the
entire agreement between the Lender and the Borrower with respect to the
financing transactions to which they relate, and cannot be changed or amended
except by an agreement in writing signed by the party against whom enforcement
of the change or amendment is sought.
8.17. Arbitration.
(a) Notwithstanding anything contained herein or in any other Loan
Document to the contrary, upon demand of any party hereto, whether made
before or after institution of any judicial proceeding, any dispute, claim
or controversy arising out of, connected with or relating to this Agreement
and other Loan Documents ("Disputes") between or among parties to this
Agreement shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of
that party to demand arbitration hereunder. Disputes may include, without
limitation, tort claims, counterclaims, disputes as to whether a matter is
subject to arbitration, claims brought as class actions, claims arising
from Loan Documents executed in the future, or claims arising out of or
connection with the transaction reflected by this Agreement.
(b) Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules")
of the American Arbitration Association (the "AAA") and Title 9 of the U.S.
Code. All arbitration hearings shall be conducted in the City of
Philadelphia. The expedited procedures set forth in Rule 51 et seq. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000.
All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction.
The panel from which all arbitrators are selected shall be comprised of
licensed attorneys. The single arbitrator selected for expedited procedure
shall be a retired judge from the highest court of general jurisdiction,
state or federal, of the state where the hearing will be conducted or if
such person is not available to serve, the single arbitrator may be a
licensed attorney. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to swap agreements.
(c) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that
any party hereto may employ or exercise freely, independently or in
connection with an arbitration proceeding or after an arbitration action is
brought. Lender and Companies shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any
real or personal property or other security by exercising a power of sale
granted under the Loan Documents or under applicable law or by judicial
foreclosure and sale, including a proceeding to confirm the sale; (ii) all
rights of self-help including peaceful occupation of real property and
collection of rents, set-off, and peaceful possession of personal property;
(iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver and
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filing an involuntary bankruptcy proceeding; and (iv) when applicable, a
judgment by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
(d) The parties hereto agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby
waive any right or claim to punitive or exemplary damages they have now or
which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially.
IN WITNESS WHEREOF the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
PENN ENGINEERING & MANUFACTURING CORP.
By /s/ Richard F. Davies
------------------------------
Name: Richard F. Davies
Title: Treasurer
("Borrower")
FIRST UNION NATIONAL BANK
By /s/ Stasia H. Whiteman
------------------------------
Name: Stasia H. Whiteman
Title: Vice President
("Lender")
SCHEDULES
3.5 Litigation
3.6 Title to Assets; Liens
3.7 Licenses; Intellectual Property
6.1(d) Permitted Debt
Exhibits
"A" Form of Borrowing Notice
"B" Form of Compliance Certificate
"C" Form of Term Note
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EXHIBIT "A"
FORM OF BORROWING NOTICE
First Union National Bank
2240 Butler Pike
Plymouth Meeting. PA 19462
Attention: Ms. Stasia H. Whiteman, Vice President
Ladies and Gentlemen:
The undersigned, Penn Engineering & Manufacturing Corp. ("Borrower"),
refers to the Loan Agreement dated September 28, 1999 (as it may be amended,
modified, extended or restated from time to time, the "Loan Agreement"), between
Borrower and Lender. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Loan Agreement. The
undersigned hereby gives you notice that it requests an Advance in accordance
with the provisions of Section 2.7 of the Loan Agreement, and in that connection
therewith sets forth below the terms on which such Advance is requested to be
made:
REQUEST FOR [Insert Advance Type] ADVANCE
(A) Date of Borrowing
(which is a Business Day) ______________________________
(B) Principal Amount of
Advance ______________________________
(C) Interest rate basis ______________________________
(D) Interest Period and the last
day thereof if a LIBOR Loan ______________________________
Upon acceptance of any or all of the Advances made by the Lender in
response to this request, the Borrower shall be deemed to have represented and
warranted that the conditions to lending specified in Sections 4.2 and 4.3 of
the Loan Agreement have all been satisfied.
Very truly yours,
PENN ENGINEERING & MANUFACTURING CORP.
By_______________________________________
Name:_________________________________
Title:________________________________
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EXHIBIT "B"
Form of Compliance Certificate
In accordance with the provisions of Section 5.1(b) of the Loan Agreement
(the "Loan Agreement") dated September 28, 1999, by and between Penn Engineering
& Manufacturing Corp. (the "Borrower") and First Union National Bank (the
"Lender"), the undersigned, being the Chief Financial Officer of the Borrower,
does hereby certify to the Lender, on behalf of the Borrower, as follows:
(i) The representations and warranties made by the Borrower in Section
3 of the Loan Agreement are true and complete in all material respects as
on and as of the date hereof as if made on and as of this date;
(ii) The Borrower has, as of the date hereof, performed all covenants
and agreements required to be performed by it under the Loan Agreement and
related Loan Documents; and
(iii) No Default or Event of Default has occurred, [except and to the
extent specifically set forth on Exhibit "A" attached hereto and made a
part hereof].
(iv) The Borrower is in compliance with the financial covenants set
forth in Sections 5.10 and 5.11 of the Loan Agreement, as provided below:
[Calculation of Financial Covenants to be provided].
Any capitalized terms which are used in this Certificate and which are not
defined herein, but which are defined in the Loan Agreement, shall have the
meanings given to those terms in the Loan Agreement.
IN WITNESS WHEREOF, I have executed this Certificate the ____ day of
___________________.
PENN ENGINEERING & MANUFACTURING CORP.
By (SEAL)
-------------------------------------
Name:
Title: Chief Financial Officer of the Borrower
45
