SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)
February 26, 1998 (February 11, 1998)
MASON-DIXON BANCSHARES, INC.
(Exact name of Registrant as specified in Charter)
Maryland 0-20516 52-1764929
(State or other Jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
45 W. Main Street, Westminster, MD 21157
(Address of Principal Executive Offices/Zip Code)
Registrant's telephone number, including area code: (410) 857-3401
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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INFORMATION TO BE INCLUDED IN THE REPORT
Item 2. Acquisition or Disposition of Assets.
Effective at the close of business on February 11, 1998, Mason-Dixon
Bancshares, Inc. ("Mason-Dixon") acquired substantially all of the assets of,
and assumed certain liabilities of, Rose Shanis & Co., Inc., a Maryland
corporation, Rose Shanis Sons, Inc., a Maryland corporation, Rose Shanis & Co.,
a Maryland general partnership, and Stephen Corp., a Maryland corporation
(collectively, "Rose Shanis Companies"). A copy of the Asset Purchase Agreement,
dated November 26, 1997, as amended on February 11, 1998, and Exhibits thereto,
is filed herewith as Exhibits 2.1 and 2.2.
Prior to the acquisition, Rose Shanis & Co., Inc., Rose Shanis Sons,
Inc., and Rose Shanis & Co. were engaged in the consumer finance business. The
assets of Rose Shanis & Co., Inc., Rose Shanis Sons, Inc., and Rose Shanis & Co.
were acquired by Bay Finance, LLC, a Maryland limited liability company and
subsidiary of Mason-Dixon formed for the purpose of effectuating the
acquisition, which then changed its name to Rose Shanis Loans, LLC. Stephen
Corp. was engaged in the sale of insurance products that were directly related
to extensions of credit by the other Rose Shanis Companies. The assets of
Stephen Corp. were acquired by Bay Insurance, LLC, a Maryland limited liability
company and subsidiary of Mason-Dixon formed for the purpose of that
acquisition.
The consideration paid for the assets was $16,250,000 cash plus the
assumption by Bay Finance, LLC of approximately $31,800,000 in scheduled
liabilities. The amount of consideration was based on historical earnings of the
Rose Shanis Companies. The purchase price is subject to adjustment based on the
results of the 1997 year-end audit of the financial statements of the Rose
Shanis Companies. The cash amount was paid from internally generated funds.
One of the assumed liabilities of the Rose Shanis Companies was bank
debt of $29,000,000 assumed by Bay Finance, LLC and guaranteed by Mason-Dixon.
In connection with the assumption of that loan, Mason-Dixon and Bay Finance, LLC
entered into a new loan agreement with NationsBank, N.A., Corestates Bank, N.A.,
and Harris Trust and Savings Bank, the proceeds of which were used to pay the
assumed loan in full. The new loan is a revolving credit facility for up to
$38,000,000, secured by substantially all assets of Bay Finance, LLC, guaranteed
by Mason-Dixon and matures on June 11, 1998. Proceeds of the financing in excess
of the amount of the assumed loan will be used for working capital for Bay
Finance, LLC.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. Financial
statements of the businesses acquired will be filed within 60
days after the required filing of this report.
(b) Pro Forma Financial Information. Required pro forma financial
information will be filed within 60 days after the required
filing of this report.
(c) Exhibits.
2.1 Asset Purchase Agreement, dated November 26,
1997.
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2.2 Amendment to Asset Purchase Agreement, dated
February 11, 1998.
2.3 Assumption Agreement, dated February 11,
1998.
2.4 Shareholders' Equity Escrow Agreement, dated
February 11, 1998.
2.5 Indemnity and Escrow Agreement, dated
February 11, 1998.
2.6 Guaranty of Payment Agreement, dated
February 11, 1998.
2.7 Loan Agreement, dated February 11, 1998.
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.
MASON-DIXON BANCSHARES, INC.
Date: February 26, 1998 By: /s/ Thomas K. Ferguson
-----------------------
Thomas K. Ferguson
President and Chief Executive Officer
F5151.600
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
2.1 Asset Purchase Agreement, dated November 26, 1997 7
2.2 Amendment to Asset Purchase Agreement, dated 100
February 11, 1998
2.3 Assumption Agreement, dated February 11, 1998 110
2.4 Shareholders' Equity Escrow Agreement, dated 121
February 11, 1998
2.5 Indemnity and Escrow Agreement, dated February 11, 1998 130
2.6 Guaranty of Payment Agreement, dated February 11, 1998 153
2.7 Loan Agreement, dated February 11, 1998 172
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, including all attached Exhibits
and Schedules which are part of this Asset Purchase Agreement (the "Agreement"),
is made this 26th day of November, 1997 by and among Rose Shanis & Co., Inc.,
Rose Shanis Sons, Inc., Rose Shanis & Co. and Stephen Corp. (collectively "Rose
Shanis"), Norman J. Glick, Susan M. Glick, Personal Representative of the Estate
of Stephen J. Glick, Susan M. Glick and Gail Glick, Trustees of the Marital
Trust under the Last Will and Testament of Stephen J. Glick, Susan M. Glick and
Gail Glick, Trustees of the Bypass Trust under the Last Will and Testament of
Stephen J. Glick, Mitzi S. Glick and Eugene Schreiber, Trustees u/a Norman J.
Glick dated May 14, 1997, FBO Robert S. Glick, and Mitzi S. Glick and Eugene
Schreiber, Trustees u/a Norman J. Glick dated May 14, 1997, FBO Bonnie G. Dubin,
and Norman J. Glick and Susan M. Glick, Trustees of the Norman J. Glick Trust
Share of the Bernice Shanis Trust, the Stephen J. Glick Trust Share of the
Bernice Shanis Trust, the Norman J. Glick Trust Share of the Ely Shanis Trust,
and the Stephen J. Glick Trust Share of the Ely Shanis Trust, (Norman J. Glick
and Susan M. Glick, Personal Representative of the Estate of Stephen J. Glick,
Mitzi S. Glick and Eugene Schreiber, Trustees u/a Norman J. Glick dated May 14,
1997, FBO Robert S. Glick, Mitzi S. Glick and Eugene Schreiber, Trustees u/a
Norman J. Glick dated May 14, 1997, FBO Bonnie G. Dubin, Norman J. Glick and
Susan M. Glick, Trustees of the Norman J. Glick Trust Share of the Bernice
Shanis Trust, the Stephen J. Glick Trust Share of the Bernice Shanis Trust, the
Norman J. Glick Trust Share of the Ely Shanis Trust, and the Stephen J. Glick
Trust Share of the Ely Shanis Trust, Susan M. Glick and Gail Glick, Trustees of
the Marital Trust under the Last Will and Testament of Stephen J. Glick, and
Susan M. Glick and Gail Glick, Trustees of the Bypass Trust under the Last Will
and Testament of Stephen J. Glick, are sometimes collectively called the
"Owners" and the foregoing trusts are sometimes collectively called the
"Trusts"), and Mason-Dixon Bancshares, Inc.("Mason-Dixon").
RECITALS
Rose Shanis is engaged in the consumer finance and insurance
business (the "Business"). Rose Shanis Sons, Inc., is a Maryland corporation
owned by Norman J. Glick, Susan M. Glick, Personal Representative of the Estate
of Stephen J. Glick, Mitzi S. Glick and Eugene Schreiber, Trustees u/a Norman J.
Glick dated May 14, 1997, FBO Robert S. Glick, and Mitzi S. Glick and Eugene
Schreiber, Trustees u/a Norman J. Glick dated May 14, 1997, FBO Bonnie G. Dubin.
Rose Shanis & Co., Inc., is a Maryland corporation owned by Norman J. Glick and
Susan M. Glick, Personal Representative of the Estate of Stephen J. Glick.
Stephen Corp. is a Maryland corporation owned by Norman J. Glick and Susan M.
Glick, Personal Representative of the Estate of Stephen J. Glick. Rose Shanis &
Co. is a Maryland general partnership whose partners are Norman J. Glick and
Susan M. Glick, Trustees of the Norman J. Glick Trust Share of the Bernice
Shanis Trust, the Stephen J. Glick Trust Share of the Bernice Shanis Trust, the
Norman J. Glick Trust Share of the Ely Shanis Trust, and the Stephen J. Glick
Trust Share of the Ely Shanis Trust, Norman J. Glick and Susan M. Glick,
Personal Representative of the Estate of Stephen J. Glick. Mason-Dixon is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended, and the owner of all the issued and outstanding stock of Carroll County
Bank and Trust Company and Bank of Maryland ("Banks"), Maryland commercial
banks. Mason-Dixon shall form a consumer finance subsidiary (the "Consumer
Finance Subsidiary") and an insurance agent subsidiary (the "Insurance Agent
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Subsidiary") (collectively the "Subsidiaries"). Rose Shanis and the Owners
desire to sell and Mason-Dixon desires to acquire, through the Subsidiaries,
substantially all of the assets of Rose Shanis on the terms and conditions
hereinafter set forth. The individuals named above as trustees under the Trusts
and the Personal Representative sign this Agreement solely in their fiduciary
capacities and shall have no personal liability hereunder.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Purchase of Assets.
1.1. On the terms and subject to the conditions set
forth in this Agreement, Rose Shanis hereby agrees to sell, transfer and assign
to Mason-Dixon and Mason-Dixon hereby agrees to purchase from Rose Shanis all of
its assets (the "Assets"), excluding the assets described in Section 1.2. All
actions contemplated by this Agreement to consummate this purchase and sale and
the assumption of liabilities described in Section 2 are called the
"Transactions." The Assets include all the assets set forth on Rose Shanis'
internally prepared balance sheet dated September 30, 1997 ("Rose Shanis'
Balance Sheet") attached as Exhibit 1.1, as increased or decreased by assets
disposed of or acquired in the ordinary course of business since the date of the
Rose Shanis' Balance Sheet until Closing, including, but not limited to, the
following:
1.1.1. cash and cash equivalents, including
all bank accounts and funds contained therein or represented thereby,
certificates of deposit, money market accounts, securities, and investments;
1.1.2. all assets of and related to the
making and servicing of consumer loans and credit sales, including the consumer
loans and credit sales listed on Schedule 1.1.2 ("Loans"), and including
collateral, investments, receivables, residuals, contract rights, associated
income streams, dealer reserve agreements and accounts, and other assets and
rights that represent the Business (the "Consumer Loan Assets");
1.1.3. all assets of and related to the
selling and servicing of insurance and other products in connection with the
Consumer Loan Assets, including the assets listed on Schedule 1.1.3, including
collected premiums, investments, receivables, residuals, contract rights,
associated income streams, and other assets and rights that represent the
Business;
1.1.4. the complete list of the customers of
the Business ("Customer List"), and all rights to service such customers;
1.1.5. all equipment, furniture, and
fixtures (the "Equipment"), including all Equipment listed in Schedule 1.1.5,
and all office supplies;
1.1.6. leases of its office premises at the
locations listed in Schedule 1.1.6 (the "Facilities");
1.1.7. all other contracts and contract
rights, including all contracts and leases of personal property described in
Schedule 10.8;
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1.1.8. all books, records, data and
information bases pertaining to the Business, and its assets and liabilities,
including all tapes, computer diskettes, or other storage media, whether
electronic or otherwise, but excluding corporate minute books, tax returns, and
files concerning lawsuits against Rose Shanis;
1.1.9. all patents, copyrights, trademarks
and trade names (including the name "Rose Shanis" and all variations thereof and
all goodwill associated therewith) ("Intellectual Property"), including the
Intellectual Property described in Schedule 1.1.9;
1.1.10. all computer systems, software and
programs owned by Rose Shanis (the "Computer Systems"), including the Computer
Systems described on Schedule 1.1.10;
1.1.11. all choses in action and rights and
claims against third parties ("Claims"), including the claims listed and
described in Schedule 1.1.11;
1.2. Excluded from the Assets to be sold (the
"Excluded Assets") shall be the assets listed on Schedule 1.2.
1.3. All of the Assets shall be transferred to the
Subsidiary designated by Mason-Dixon at Closing free and clear of all liens,
security interests, claims, taxes and encumbrances of any nature, except for any
transfer or sales tax as a result of the Transactions.
2. Assumption of Liabilities.
2.1. On the basis of the representations, warranties,
covenants and agreements and subject to the satisfaction of the conditions set
forth in this Agreement, one of the Subsidiaries shall assume and agree to pay,
perform, fulfill and discharge in accordance with its terms each of the
liabilities of Rose Shanis listed on Schedule 2.1, and those liabilities
incurred in the ordinary course of business from September 30, 1997, to the date
of Closing (the "Assumed Liabilities").
2.2. Rose Shanis and the Owners will make reasonable
efforts to obtain the consent of the appropriate parties so that the
Subsidiaries will be permitted to assume the Assumed Liabilities (except the
credit facility identified as Item B on Schedule 2.1) on terms no less favorable
than currently exist. Rose Shanis and the Owners will take such action as is
necessary to obtain the consent of the Glick and Kahn Family Noteholders listed
on Schedule 2.1 to amend their notes as described in Section 7.1.16.
3. Closing.
Closing ("Closing") shall take place at the offices
of Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC, 233 East Redwood
Street in Baltimore, Maryland at 11:00 o'clock a.m. on January 23, 1998,
("Closing Date") effective as of the close of business on that date, or at such
other time and date as the parties may mutually agree.
4. Purchase Price.
4.1. The Purchase Price for the Assets net of the
Assumed Liabilities shall be Sixteen Million Two Hundred and Fifty Thousand
Dollars ($16,250,000) plus or minus
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the Adjustment Amount as determined in Section 5.2 (the "Purchase Price"). The
final Purchase Price shall be the Purchase Price less any amounts payable to
Mason-Dixon under the Indemnity and Escrow Agreement.
4.2. Allocation of Purchase Price. The Purchase Price
shall be allocated by both Rose Shanis and Mason-Dixon among the Assets based on
the 1997 Financial Statements (as defined in Section 5.2.2). The next $1,000 of
the Purchase Price shall be allocated to the Customer List and then the excess
of Purchase Price over net Assets acquired shall be allocated to goodwill.
5. Payment of the Purchase Price.
5.1. Payment. The Purchase Price shall be payable as
follows:
5.1.1. $6,750,000 in cash payable at Closing
by delivery of a certified or bank cashier's check to Rose Shanis or wire
transfer to an account designated by Rose Shanis; and
5.1.2. $7,500,000 in cash, payable by
delivery of a certified or bank cashier's check to Escrow Agent (as defined in
the Indemnity and Escrow Agreement referred to in Section 7.1.11) or wire
transfer to an account designated by Escrow Agent at Closing (the "Indemnity
Escrow"); and
5.1.3. $2,000,000 in cash, payable by
delivery of a certified or bank cashier's check to Escrow Agent (as defined in
the Escrow Agreement referred to in Section 7.1.17 ) or wire transfer to an
account designated by Escrow Agent at Closing (the "Shareholders' Equity
Escrow").
5.2. Adjustment Amount.
5.2.1. The Adjustment Amount (which may be a
positive or negative number) will be computed based on the consolidated
stockholders' equity and partners' capital of Rose Shanis as of December 31,
1997 determined in accordance with generally accepted accounting principles
consistently applied and in a manner consistent with the past practices and
policies of Rose Shanis. To the extent liabilities for the following matters are
accrued as liabilities on the 1997 Financial Statements (as defined below), so
as to reduce stockholders' equity and partners' capital, stockholders' equity
and partners' capital shall be increased by the amount of the accruals and the
aggregate of these amounts shall be called "Stockholders' Equity": any liability
arising from Bay Country Consumer Finance, L.L.C. v. Rose Shanis & Co., Inc.
(Circuit Court for Baltimore City Case No. 96305016/CE219424); any liability
arising from Ratliff v. Rose Shanis Sons, Inc., (Circuit Court for Anne Arundel
County) ; any liability arising from Dixon v. Rose Shanis Sons, Inc. (Circuit
Court for Cecil County) ; the obligation to pay the "pay to stay" retention
bonuses under the bonus program described in Item 4 of Schedule 10.14.7; the
obligation to pay the fees of BT Alex. Brown Incorporated referred to in Section
20; any obligation to pay for the Grabush, Newman & Co., P.A. audit described in
Section 5.2.2; and the obligation to pay William R. Kahn the "special bonus"
described in Section 4.3 of his employment agreement with Rose Shanis & Co.,
Inc., dated June 1, 1993. To the extent Stockholders' Equity is less than
$11,712,000, the Purchase Price will be reduced by the same amount, but shall
not be reduced below $14,250,000. To the extent
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Stockholders' Equity exceeds $11,900,000, the Purchase Price shall be increased
by the same amount, but shall not be increased to more than $17,250,000.
5.2.2. Rose Shanis will prepare and Rose
Shanis and Mason-Dixon will cause Grabush, Newman & Co., P.A. ("Grabush"), Rose
Shanis' certified public accountants, to audit consolidated financial statements
("1997 Financial Statements") of Rose Shanis as of December 31, 1997, including
a computation of consolidated stockholders' equity and partners' capital as of
December 31, 1997. Rose Shanis and Mason-Dixon shall jointly engage the services
of Grabush and Mason-Dixon shall pay Grabush up to $50,000 for the audit and the
Owners shall pay the remainder, if any. The 1997 Financial Statements shall be
prepared in accordance with generally accepted accounting principles
consistently applied and in a manner consistent with the past practices and
policies of Rose Shanis, shall be prepared and audited in accordance with
Regulation S-X as promulgated by the Securities Exchange Commission and shall be
accompanied by an unqualified opinion of Grabush. Rose Shanis will deliver the
1997 Financial Statements to Mason-Dixon within 60 days after the Closing Date.
The 1997 Financial Statements will be used to compute the Adjustment Amount.
5.2.3. On the 10th business day following
the determination of the Adjustment Amount, if the Purchase Price as adjusted is
greater than $16,250,000, Mason-Dixon shall notify the Escrow Agent to release
the Shareholder's Equity Escrow to Rose Shanis and shall pay the remainder of
the Purchase Price (not exceeding $1,000,000) to Rose Shanis, and if the
Purchase Price as adjusted is less than $16,250,000, the difference shall be
paid to Mason-Dixon from the Shareholders' Equity Escrow. Any payment by
Mason-Dixon shall be made in immediately available funds and shall be allocated
to goodwill.
5.2.4. If Rose Shanis fails to perform its
obligations under Section 5.2.2 in any respect, including, but not limited to,
failure to deliver to Mason-Dixon an unqualified opinion of Grabush, Mason-Dixon
shall give Rose Shanis notice of such failure and Rose Shanis shall have a
reasonable period of time, not exceeding 60 days after such notice is given, to
cure such failure and to comply with the requirements of this Agreement. If Rose
Shanis fails to cure such failure within such time period, the entire
Shareholders' Equity Escrow shall be paid to Mason-Dixon as the Adjustment
Amount, i.e., the Purchase Price shall be $14,250,000.
6. Organization of the Subsidiaries. Before Closing, and
subject to approval of the Maryland Commissioner of Financial Regulation and the
Federal Reserve Board, Mason-Dixon will cause the formation of the Subsidiaries
and their adoption of this Agreement. Before Closing, Mason-Dixon will invest in
each Subsidiary a sufficient amount of cash to permit the Subsidiary to
consummate the Closing.
7. Required Documents.
7.1. Rose Shanis. At Closing, Rose Shanis shall
deliver to Mason- Dixon the following items:
7.1.1. Bill of Sale. A Bill of Sale of the
assets in the form of Exhibit 7.1.1, duly executed by Rose Shanis.
7.1.2. Contracts, etc. An assignment of all
contracts, leases and similar rights, substantially in the form of Exhibit
7.1.2, together with any consents or waivers
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of consent that are required including, but not limited to, the consent of
Parnell & Associates and John Parnell & Assoc., Inc. to the assignment of the
License and Support Agreements identified on Schedule 10.8., and such additional
assignments as are required to evidence the transfer of the Consumer Loan
Assets.
7.1.3. Opinion of Counsel. The opinion of
Adelberg, Rudow, Dorf, Hendler & Sameth, LLC, counsel to Rose Shanis, in
substantially the form of Exhibit 7.1.3.
7.1.4. Opinion of Counsel. The opinion of
Freishtat & Sandler, counsel to the Estate of Stephen J. Glick, in substantially
the form of Exhibit 7.1.4.
7.1.5. Opinion of Counsel. The opinion of
Freishtat & Sandler, counsel to the Stephen J. Glick Marital and Bypass Trusts,
in substantially the form of Exhibit 7.1.5.
7.1.6. Opinion of Counsel. The opinion of
Blades & Rosenfeld, P.A., counsel to the Trust FBO Robert S. Glick and the Trust
FBO Bonnie G. Dubin, and the opinion of Adelberg, Rudow, Dorf, Hendler & Sameth,
LLC, counsel to Norman J. Glick and Susan M. Glick, Trustees of the Norman J.
Glick Trust Share of the Bernice Shanis Trust, the Stephen J. Glick Trust Share
of the Bernice Shanis Trust, the Norman J. Glick Trust Share of the Ely Shanis
Trust, and the Stephen J. Glick Trust Share of the Ely Shanis Trust, in
substantially the form of Exhibit 7.1.6.
7.1.7. Corporate Proceedings. Copies of the
articles of incorporation and bylaws as amended through the Closing Date and
minutes of the proceedings of the stockholders and Boards of Directors of each
corporate Rose Shanis entity, certified as of the date of Closing by their
Presidents, approving the Transactions.
7.1.8. Partnership Documents. A copy of the
Partnership Agreement of Rose Shanis & Co., as amended through the Closing Date.
7.1.9. Corporate Documents. A Certificate of
Good Standing of each corporate Rose Shanis entity as of a recent date from the
State Department of Assessments and Taxation of Maryland ("SDAT").
7.1.10. Articles of Transfer. Articles of
Transfer that conform with the requirements of the Maryland General Corporation
Law and are substantially in the form of Exhibit 7.1.10 executed by the
Presidents of each corporate Rose Shanis entity.
7.1.11. Indemnity and Escrow Agreement. An
Indemnity and Escrow Agreement in the form of Exhibit 7.1.11 executed by Rose
Shanis and each of the Owners.
7.1.12. Kahn Agreement. An agreement in the
form of Exhibit 7.1.12 signed by William R. Kahn ("Kahn") .
7.1.13. Rose Shanis Facilities' Leases.
Leases satisfactory to Mason-Dixon for the Facilities located at 313 North
Howard Street and 1103 Light Street, Baltimore.
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7.1.14. Norman J. Glick Employment
Agreement. An employment agreement in a form satisfactory to Mason-Dixon
executed by Norman J. Glick.
7.1.15. Letters of Administration. Letters
of Administration appointing Susan M. Glick Personal Representative for the
Estate of Stephen J. Glick dated within 30 days of Closing.
7.1.16. Glick and Kahn Family Notes and Note
Amendments. Amendments to each Glick and Kahn Family note identified on Schedule
2.1 which permit the assuming Subsidiary to prepay the note at any time and from
time to time without penalty and which provide a maturity date of no earlier
than June 30, 1998, a note evidencing each such loan which permits prepayment at
any time and from time to time in form satisfactory to Mason-Dixon, provides a
maturity date of no earlier than June 30, 1998, and bears interest at the rate
set forth in Schedule 2.1 and a statement signed by each noteholder confirming
the amount of principal and interest due at Closing.
7.1.17. Shareholders' Equity Escrow
Agreement. A Shareholders' Equity Escrow Agreement in the form of Exhibit 7.1.17
executed by Rose Shanis.
7.1.18. Other Documents. Such other
documents relating to Rose Shanis as Mason-Dixon reasonably may request.
7.2. Mason-Dixon and the Subsidiaries. At Closing,
Mason-Dixon and the Subsidiaries shall deliver to Rose Shanis the following
items:
7.2.1. Opinion of Counsel. The opinion of
Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC, counsel to Mason-Dixon
and the Subsidiaries, in substantially the form attached as Exhibit 7.2.1.
7.2.2. Proceedings. Copies of the minutes of
the proceedings of the Board of Directors of Mason-Dixon and the Member of the
Subsidiaries, certified as of the date of Closing by the Secretary or Assistant
Secretary of Mason-Dixon and the Secretary or Assistant Secretaries or other
authorized parties of the Subsidiaries, approving the Transactions.
7.2.3. Documents. A good standing
certificate for each of Mason- Dixon and the Subsidiaries as of a recent date
from SDAT.
7.2.4. Assumption Agreement. An Assumption
Agreement with respect to the Assumed Liabilities in the form of Exhibit 7.2.4
duly executed by the appropriate Subsidiary.
8. Conditions of Closing for Mason-Dixon and the Subsidiaries.
8.1. The obligations of Mason-Dixon and the
Subsidiaries to close under this Agreement are contingent upon the following:
8.1.1. All of the representations and
warranties of Rose Shanis and the Owners contained in this Agreement shall be
true and correct in all material respects when made and on the Closing Date as
if made on and as of such date (except to the extent they relate to a particular
date, in which case they shall remain true and correct as of such date.)
<PAGE>
8.1.2. Neither Rose Shanis nor the Owners
shall have breached or materially failed to comply with any of its or their
covenants and agreements contained herein in any material respect.
8.1.3. Rose Shanis shall have delivered at
Closing all of the documents required to be delivered by it pursuant to Section
7.1, satisfactory in form and substance to counsel to Mason-Dixon.
8.1.4. There shall not have been any
lawsuit, claim, action or other proceeding instituted or threatened by any
person or entity affecting the Owners or Rose Shanis or relating to the Assets
or Business or in which it was sought to restrain or prohibit, or otherwise
challenge the legality of or affect, the Transactions.
8.1.5. All corporate and partnership
proceedings required to be taken by Rose Shanis in connection with the
Transactions have been taken.
8.1.6. No event since December 31, 1996
(including the discovery of any previously unknown fact or circumstance by Rose
Shanis or the Owners) shall have occurred which has or could have a material
adverse effect on Rose Shanis, the Assets, or the Business, other than the
events disclosed on Schedule 10.5.1. Loan charge-offs required or requested by
Mason-Dixon which are not also required by Section 3.17 of the Loan Agreement
identified in Item B of Schedule 2.1 shall not be included among such events.
8.1.7. Mason-Dixon and Banks shall have
received all necessary approvals from the Maryland Commissioner of Financial
Regulation, the Board of Governors of the Federal Reserve, and from any other
governmental or regulatory body, to the Transactions to be consummated and any
waiting periods shall have expired.
8.1.8. The Subsidiaries shall have received
all necessary licenses from the Maryland Commissioner of Financial Regulation,
the Maryland Insurance Commissioner, and any other governmental or regulatory
body, to conduct the Business and consummate the Transactions.
8.1.9. The Subsidiaries shall have entered
into Facilities' leases which shall contain terms substantially similar to the
terms of the Facilities' leases currently in effect, where such leases are
currently in effect, and where leases are not currently in effect, such terms
shall be satisfactory to Mason-Dixon.
8.1.10. The Consumer Finance Subsidiary
shall have entered into a credit facility with NationsBank, N.A., or other
lender or financing source replacing the credit facility identified in Item B of
Schedule 2.1, on terms substantially similar to the terms described on Schedule
8.1.10.
8.1.11. The employment of such Rose Shanis
employees as shall be employed by the Subsidiaries shall have been terminated by
Rose Shanis.
8.1.12. Mason-Dixon shall have received a
"Year 2000" certification from Parnell & Associates substantially in the form
attached as Schedule 8.1.12.
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9. Conditions of Closing for Rose Shanis.
9.1. The obligations of Rose Shanis to close under
this Agreement are contingent upon the following:
9.1.1. All of the representations and
warranties of Mason-Dixon contained in this Agreement shall be true and correct
in all material respects when made and on the Closing Date as if made on and as
of such date (except to the extent they relate to a particular date, in which
case they shall remain true and correct as of such date.)
9.1.2. Mason-Dixon shall not have breached
or failed to comply with any of its covenants and agreements contained herein in
any material respect.
9.1.3. Mason-Dixon shall have delivered at
Closing all payments required at Closing pursuant to Sections 4 and 5 and
documents required to be delivered by it pursuant to Section 7.2.
9.1.4. There shall not have been any
lawsuit, claim, action or other proceeding instituted or threatened by any
person or entity affecting Mason-Dixon or the Subsidiaries in any manner in
which it was sought to restrain or prohibit, or otherwise challenge the legality
of or affect, the Transactions.
9.1.5. All corporate and other proceedings
required to be taken by Mason-Dixon and the Subsidiaries in connection with the
Transactions have been taken.
9.1.6. Rose Shanis shall have been released
from liability for the bank indebtedness specified in Item B of Schedule 2.1.
9.1.7. Rose Shanis shall have been released
from liability under the Facilities' leases currently in effect.
10. Warranties and Representations of Rose Shanis.
Rose Shanis represents and warrants to Mason-Dixon
and the Subsidiaries that:
10.1. Organization.
10.1.1. Each corporate Rose Shanis entity is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its Business
as is now being conducted.
10.1.2. Rose Shanis & Co. is a general
partnership which exists pursuant to a general partnership agreement dated
January 31, 1942, among Ely Shanis, Bernice Shanis, David Glick and Rose S.
Glick which has not been amended. Rose Shanis & Co. has all requisite power and
authority to own, lease and operate its Business as is now being conducted. All
partners of Rose Shanis & Co. have approved this Agreement as evidenced by their
signatures hereto. The partners of Rose Shanis & Co. are the Norman J. Glick
Trust Share of the Ely Shanis Trust and the Stephen J. Glick Trust Share of the
Ely Shanis Trust, the Norman J. Glick
<PAGE>
Trust Share of the Bernice Shanis Trust and the Stephen J. Glick Trust Share of
the Bernice Shanis Trust, Norman J. Glick and Susan M. Glick, Personal
Representative of the Estate of Stephen J. Glick (the "Partners"). The Partners
own their partnership interests in Rose Shanis & Co. free and clear of all
liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature.
10.1.3. Rose Shanis is not required to
qualify as a foreign corporation in any jurisdiction.
10.1.4. Rose Shanis has made available to
Mason-Dixon accurate and complete copies of its Articles of Incorporation and
Bylaws as currently in effect and its Partnership Agreement as currently in
effect and has made available to Mason-Dixon the minute books and stock records
of Rose Shanis.
10.1.5. Rose Shanis does not own an equity
interest in any corporation, partnership or other entity.
10.2. Authorization. Rose Shanis has full corporate
and partnership power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the sale of its Business and
the other Transactions. The execution and delivery of this Agreement by Rose
Shanis and the performance by Rose Shanis of its obligations hereunder have been
duly and validly authorized by all necessary corporate or partnership action on
the part of Rose Shanis. Norman J. Glick in his individual capacity and the
other Owners in their representative capacities have full power and capacity to
execute and deliver this Agreement and perform their respective obligations
hereunder and to consummate the Transactions. This Agreement has been duly
executed and delivered by the Owners and Rose Shanis and constitutes the legal,
valid and binding agreement of each, enforceable against each in accordance with
its terms, subject to applicable bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies.
10.3. Absence of Restrictions and Conflicts. The
execution, delivery and performance of this Agreement, and the fulfillment of
and compliance with the terms and conditions of this Agreement do not and will
not, with the passing of time or the giving of notice or both, violate or
conflict with, constitute a breach of or default under, result in the loss of
any material benefit under, or permit the acceleration of any obligation under,
(i) any term or provision of the Articles of Incorporation, Bylaws or
Partnership Agreement of Rose Shanis, (ii) any of Rose Shanis' Contracts
described in Section 10.8 except as noted in Schedule 10.8, (iii) any judgment,
decree or order of any court or governmental authority or agency to which Rose
Shanis is a party or by which Rose Shanis or any of its properties is bound, or
(iv) any statute, law, regulation or rule applicable to Rose Shanis, so as to
have a material adverse effect on the assets, liabilities, results of
operations, financial condition, business or prospects of Rose Shanis. Except
for compliance with the applicable requirements of filing and recording of
Articles of Transfer as required by the Maryland General Corporation Law, no
consent, approval, order or authorization of, or registration, declaration or
filing with, any governmental agency or public or regulatory unit, agency, body
or authority with respect to Rose Shanis is required in connection with the
execution, delivery or performance of this Agreement by Rose Shanis or the
consummation of the Transactions by Rose Shanis, the failure of which to obtain
would have a material adverse effect upon the assets, liabilities, results of
operations, financial condition, business or prospects of Rose Shanis.
<PAGE>
10.4. Capitalization. The authorized capital stock of
the corporate Rose Shanis entities, the number of shares of capital stock of the
corporate Rose Shanis entities issued and outstanding as of the date hereof and
the identities of the stockholders are set forth in Schedule 10.4. All of such
issued and outstanding shares of capital stock of Rose Shanis are duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights; and no such shares have been issued in violation of any federal or state
securities law. Except as set forth in this Section 10.4, there are no shares of
capital stock of Rose Shanis outstanding, and there are no subscriptions,
options, convertible securities, calls, rights, warrants or other agreements,
claims or commitments of any nature whatsoever obligating Rose Shanis to issue,
transfer, deliver or sell, or cause to be issued, transferred, delivered or
sold, additional shares of capital stock or other securities of Rose Shanis or
obligating Rose Shanis to grant, extend or enter into any such agreement or
commitment. No prior offer, issue, redemption, call, purchase, sale, transfer,
negotiation or other transaction of any nature with respect to the capital stock
or equity interests of Rose Shanis has given or may give rise to any valid claim
or action by any person which is enforceable against either Rose Shanis or the
Owners. The persons named on Schedule 10.4 are the owners of all of the issued
and outstanding shares of Rose Shanis' capital stock free and clear of all
liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature.
10.5. Absence of Certain Changes.
10.5.1. Except as otherwise described in
Schedule 10.5.1, since December 31, 1996, there has not been (i) any material
adverse change in the assets, liabilities, business, financial condition,
results of operations or prospects of Rose Shanis, (ii) any damage, destruction,
loss or casualty to property or assets of Rose Shanis, whether or not covered by
insurance, which property or assets are material to the operations or business
of Rose Shanis, (iii) any amount declared, set aside or paid in a dividend or
any other distribution in cash, stock or property in respect to any shares of
Rose Shanis' capital stock or any partnership interest in Rose Shanis, (iv) any
redemption or other acquisition by Rose Shanis of any of its capital stock or
any split, combination or reclassification of shares of capital stock declared
or made by Rose Shanis, or (v) any agreement to do any of the foregoing. From
September 30, 1997, through the date hereof, Rose Shanis has made no dividends
or distributions to or on behalf of the Owners.
10.5.2. Except as otherwise described in
Schedule 10.5.2., since December 31, 1996, there have not been (i) any
extraordinary losses suffered, (ii) any material assets mortgaged, pledged or
made subject to any lien, charge or other encumbrance, (iii) any liability or
obligation (absolute, accrued or contingent) incurred or any material bad debt,
contingency or other reserve increase suffered, except, in each such case, in
the ordinary course of business and consistent with past practice, (iv) any
claims, liabilities or obligations (absolute, accrued or contingent) paid,
discharged or satisfied, other than the payment, discharge or satisfaction, in
the ordinary course of business and consistent with past practice, of claims,
liabilities and obligations reflected or reserved against in Rose Shanis'
Balance Sheet or incurred in the ordinary course of business and consistent with
past practice, (v) any guaranteed checks, notes or accounts receivable which
have been or should be written off as uncollectible, except write-offs in the
ordinary course of business and consistent with past practice, (vi) any write
down of the value of any asset or investment on the books or records of Rose
Shanis, except for depreciation and amortization taken in the ordinary course of
business and consistent with past practice, (vii) any cancellation of any debts
or waiver of any claims or rights, or sale, transfer or other disposition of any
properties or assets (real, personal or mixed, tangible or intangible), except,
in each such case, in transactions in the ordinary course of business and
consistent with
<PAGE>
past practice, (viii) any transactions entered into other than in the ordinary
course of business, (ix) any agreements to do any of the foregoing, or (x) to
the best knowledge of Rose Shanis, any other events, developments or conditions
of any character that have had or are reasonably likely to have a material
adverse effect on the assets, liabilities, results of operations, financial
condition, business or prospects of Rose Shanis. In this Agreement, Rose Shanis
will be deemed to have "knowledge" of a particular fact or other matter if
Norman J. Glick, William R. Kahn, Bonnie Klapaska, Scott Frankle or Joshua
Johnson has, or at any time had, actual knowledge of such fact or other matter.
10.6. Legal Proceedings. Other than as described in
Schedule 10.6, there are no suits, actions, claims, or proceedings pending, or,
to the best knowledge of Rose Shanis, threatened against, relating to or
involving Rose Shanis, and there are no investigations pending or threatened to
the best knowledge of Rose Shanis, before any court, arbitrator or
administrative or governmental body, which, if finally determined adversely, are
reasonably likely, individually or in the aggregate, to have an adverse effect
on the assets, liabilities, results of operations, financial condition, business
or prospects of Rose Shanis. All pending suits, actions, claims, proceedings or
investigations relating to or involving Rose Shanis before any court, arbitrator
or administrative or governmental body are adequately provided for in Rose
Shanis' Balance Sheet. Rose Shanis is not subject to any judgment, decree,
injunction, rule or order of any court, and, to the best knowledge of Rose
Shanis, Rose Shanis is not subject to any governmental restriction, which is
reasonably likely (i) to have a material adverse effect on the assets,
liabilities, results of operations, financial condition, business or prospects
of Rose Shanis or (ii) to cause a limitation on Mason-Dixon's and the
Subsidiaries' ability to operate the business of Rose Shanis after Closing.
10.7. Compliance with Law. Except as otherwise
described in Schedule 10.7, Rose Shanis has all authorizations, approvals,
licenses and orders of and from all governmental and regulatory officers and
bodies necessary to carry on its business as it is currently being conducted, to
own or hold under lease the properties and assets it owns or holds under lease
and to perform all of its obligations under all agreements to which it is a
party, and Rose Shanis has been and is in compliance with all applicable
federal, state and local laws, regulations and administrative orders to which
its business and its employment of labor or its use or occupancy of properties
or any part are subject, the failure to obtain or the violation of which would
have a material adverse effect upon the assets, liabilities, results of
operations, financial condition, business or prospects of Rose Shanis.
10.8. Rose Shanis Contracts. Schedule 10.8 contains a
true and complete list of all contracts of Rose Shanis, including:
10.8.1. all bonds, debentures, notes,
mortgages, indentures or guarantees to which Rose Shanis is a party or by which
any of its properties or assets (real, personal or mixed, tangible or
intangible) is bound;
10.8.2. all leases to which Rose Shanis is a
party or by which any of its properties or assets (real, personal or mixed,
tangible or intangible) is bound;
10.8.3. all loans and credit commitments to
Rose Shanis which are outstanding, together with a brief description of such
commitments and the name of each financial institution granting the same;
<PAGE>
10.8.4. all contracts or agreements which
limit or restrict Rose Shanis or any of Rose Shanis' officers or employees from
engaging in any business in any jurisdiction;
10.8.5. all agreements for the purchase of
goods, services, equipment or other assets;
10.8.6. any agency, brokerage, sales
representative, marketing or other similar contract arrangement; and
10.8.7. all other existing contracts and
commitments to which Rose Shanis is a party or by which any of its properties or
assets may be bound.
The contracts listed in Schedule 10.8 represent all
of the contracts to which Rose Shanis is a party or by which any of its
properties or assets may be bound. True and complete copies of all of the
contracts have been made available to Mason-Dixon and are valid and enforceable
in accordance with their respective terms with respect to Rose Shanis, and are
valid and enforceable in accordance with their respective terms with respect to
any other party thereto, in each case to the extent material to the Business.
Rose Shanis has physical possession of all equipment and other assets in which
Rose Shanis is a lessee under a lease. Except for events or occurrences, the
consequences of which, individually or in the aggregate, would not have a
material adverse effect on the assets, liabilities, results of operations,
financial condition, business or prospects of Rose Shanis, there is not under
Rose Shanis' contracts any existing breach, default or event of default by Rose
Shanis, or event that with notice or lapse of time or both would constitute a
breach, default or event of default by Rose Shanis.
10.9. Tax Returns; Taxes. Since January 1, 1987, the
corporate Rose Shanis entities have been "small business corporations" and have
maintained a valid election to be an "S corporation" under Subchapter S of the
Internal Revenue Code of 1986, as amended (the "Code"). Rose Shanis is not
subject to income, franchise, sales or use tax or any other form of taxation in
any state other than Maryland. Rose Shanis has duly filed all federal, state,
and local tax returns required to be filed by it, all such returns are accurate
in all material respects, and Rose Shanis or the Owners have duly paid or made
adequate provision for the payment of all taxes (including any interest,
penalties and additions to tax) which are due and payable pursuant to such
returns or which otherwise are due and payable in any jurisdiction, whether or
not in connection with such returns. The liability for taxes reflected in Rose
Shanis' financial statements (excluding any portion of any deferred tax
liability attributable to timing differences in reporting income or deductions
for financial accounting and tax purposes) is sufficient for the payment of all
unpaid taxes (including any interest, penalties and additions to tax), whether
or not disputed, that are accrued or applicable for the period ended December
31, 1996 and for all years and periods ended prior thereto. No unpaid tax
deficiencies have been asserted against Rose Shanis as a result of any
examination by the Internal Revenue Service or any other taxing authority. To
the best knowledge of Rose Shanis, there are no pending claims asserted for
taxes of Rose Shanis or outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return of Rose Shanis for
any period. Rose Shanis has made all estimated income tax deposits and all other
required tax payments or deposits and has complied for all prior periods in all
respects with the tax withholding provisions of all applicable federal, state,
local and other laws. All accounting periods and methods used by Rose Shanis for
tax reporting purposes are permissible periods and methods under applicable law.
Rose Shanis has not been a member of an affiliated group of corporations filing
a consolidated federal income tax return. Rose Shanis
<PAGE>
has made available to Mason-Dixon true, complete and correct copies of its
federal income tax returns, state and local income tax returns and sales tax
returns for the taxable years ended on December 31 in 1994, 1995 and 1996 and
has made available such other tax returns requested by Mason-Dixon.
10.10. Rose Shanis Computer Software and Hardware.
10.10.1. Schedule 1.1.10 sets forth a true
and complete list of all software used in connection with the business of Rose
Shanis (the "Rose Shanis Software.") Rose Shanis owns no software. The Rose
Shanis Software consists of: (i) source and object code embodied in magnetic
media; and (ii) all development and procedural tools necessary to maintain the
Rose Shanis Software, including licenses to use compilers, assemblers, libraries
and other aids. Rose Shanis employs individuals who are familiar with the
business of Rose Shanis and who are qualified to maintain the Rose Shanis
Software and the related computer hardware used by Rose Shanis in its operations
(the "Rose Shanis Hardware")
10.10.2. The use of the Rose Shanis Software
does not breach any terms of any license or other contract between Rose Shanis
and any third party. Schedule 1.1.10 sets forth a true and complete list of all
license agreements in favor of Rose Shanis relating to the Rose Shanis Software
(the "Rose Shanis License Agreements"). To the best knowledge of Rose Shanis,
Rose Shanis has been granted under the Rose Shanis License Agreements valid and
subsisting license rights with respect to all software comprising the Rose
Shanis Software. Rose Shanis is in material compliance in all respects with each
of the terms and conditions of each of the Rose Shanis License Agreements.
10.10.3. To the best knowledge of Rose
Shanis, the Rose Shanis Software does not infringe any United States patent,
copyright, trade secret or other intellectual property right of any third party.
10.10.4. Rose Shanis has not granted rights
in the Rose Shanis Software to any third party.
10.10.5. Rose Shanis believes that the Rose
Shanis Software and the Rose Shanis Hardware are adequate in all material
respects with the other assets of Rose Shanis to run the Business. Schedule
1.1.10 contains a summary description of any material problems experienced by
Rose Shanis in the past twelve (12) months with respect to the Rose Shanis
Software or the Rose Shanis Hardware which resulted, or reasonably could be
expected to result, in any disruption of the Business.
10.11. Transactions with Affiliates. Other than as
specified on Schedule 10.11, no stockholder, officer or director of Rose Shanis,
or any person with whom any such stockholder, officer or director has any direct
or indirect relation by blood, marriage or adoption, or any entity in which any
such person owns any beneficial interest (other than a publicly held corporation
whose stock is traded on a national securities exchange or quotation system or
in the over-the-counter market and less than 1% of the stock of which is
beneficially owned by all such persons), has any interest in: (i) any contract,
arrangement or understanding with, or relating to, the Business; (ii) any loan,
arrangement, understanding, agreement or contract for or relating to
indebtedness of Rose Shanis; or (iii) any property (real, personal or mixed),
tangible or intangible, used or currently intended to be used in, the Business.
<PAGE>
10.12. Insurance. Schedule 10.12 contains a list of
all insurance policies of Rose Shanis (the "Insurance Policies"), setting forth
the name of the insurer, a description of the policy, the amount of coverage,
the amount of the premium and the expiration date of the policy. Rose Shanis has
delivered to Mason-Dixon true and correct copies of all Insurance Policies. Rose
Shanis is not in breach of or in default under the provisions of any of the
Insurance Policies, and the Insurance Policies are not subject to any existing,
or, to the best knowledge of Rose Shanis, threatened, notice of violation,
cancellation or material premium increase. The insurance premiums paid by Rose
Shanis on such Insurance Policies are substantially the same as the insurance
premiums customarily charged to and paid by other similar businesses in the
State of Maryland.
10.13. ERISA and Benefit Plans.
10.13.1. For purposes of this Agreement,
"Employees" shall be defined as all of the employees employed by Rose Shanis as
of the date hereof and all of the employees employed by Rose Shanis as of the
Closing, and "Former Employees" shall be defined as all employees formerly
employed by Rose Shanis as of the date hereof and/or as of the Closing.
10.13.2. Except as set forth on Schedule
10.13.2, neither Rose Shanis nor any of its Affiliates sponsors, maintains or
contributes to, or has in the past sponsored, maintained or contributed to, (1)
any "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or (2) any other
plan, contract or arrangement which provides to any Employee or Former Employee
any other compensation or benefits (collectively, the "Benefit Plans").
10.13.3. As used herein, the term
"Affiliate" means a member of a controlled group of corporations, a group of
trades or businesses under common control or an affiliated service group with
Rose Shanis, under Section 414 of the Internal Revenue Code of 1986, as amended
(the "Code").
10.13.4. With respect to each Benefit Plan,
Rose Shanis has delivered to Mason-Dixon true, correct and complete copies,
including amendments, of the following (to the extent applicable): (i) the
current Plan document or other writing and all prior versions thereof, (ii) the
current and all prior Summary Plan Descriptions (including summaries of material
modifications thereto) (iii) the two most recently filed Form 5500s including
all schedules and attachments (iv) the two most recent determination letters
issued by the IRS, (v) the two most recent actuarial valuations and/or
allocation reports, and (vi) any current or prior employee handbooks or policy
manuals which refer to such Plan.
10.13.5. All Benefit Plans are currently in
full force and effect, and comply with all applicable agreements, arrangements
and understandings between Rose Shanis and their Employees and Former Employees.
All contributions, premiums and other payments due in respect of each Benefit
Plan have been paid. Rose Shanis is in compliance with the requirements of each
Benefit Plan, and no condition presently exists which, with the passage of time,
would cause any Benefit Plan to be in non-compliance with any applicable law,
regulation or order, or would cause Rose Shanis to be in non-compliance with any
provisions of any Benefit Plan.
<PAGE>
10.13.6. Rose Shanis has no present or
contingent obligation or liability with respect to any Benefit Plan, including
any employee benefit plan previously maintained by Rose Shanis or any Affiliate.
Rose Shanis is not required to offer, contribute to, or maintain any employee
benefit plan other than the Benefit Plans either at the present time or in the
future.
10.13.7. With respect to each Benefit Plan:
no prohibited transaction (as defined in Section 4975 of the Code and Section
406 of ERISA) has occurred; each Benefit Plan is and at all times has been in
conformity with the Code, ERISA and all other applicable laws; all persons
and/or entities having any fiduciary responsibility are in compliance with the
applicable provisions of ERISA; there has not been a breach of any fiduciary
duty; there are no pending ruling requests or appeals (either formal or
informal), investigations, or audits by or before any Governmental Agency; there
have been no audits or investigations of any Benefit Plan by any governmental
agency except as set forth on Schedule 10.13.2; there is no dispute, claim,
demand, suit, proceeding or cause of action pending, threatened or anticipated
with respect to any Benefit Plan, and there is no liability except for
reasonable and customary administrative expenses and benefits payable pursuant
to the terms of each Benefit Plan. Each Retirement Plan that is or was intended
to constitute a qualified plan under Section 401(a) of the Internal Revenue Code
is, and has at all times been, qualified, in form and operation, under Section
401(a) of the Internal Revenue Code and is the subject of a favorable
determination letter from the IRS. No Benefit Plan is or was a "multiple
employer welfare arrangement" (within the meaning of ERISA Section 3(40)), nor
has Rose Shanis or any Affiliate ever maintained, sponsored or been required to
make contributions to any such arrangement.
10.13.8. With respect to any Benefit Plan
which is unfunded, Rose Shanis has adequately provided for, and its financial
statements accurately reflect (in accordance with GAAP consistently applied),
the amount of all accrued benefits under such Plan, and such accrued benefits
were computed based on actuarial methods, tables and assumptions, each of which
is itself reasonable.
10.13.9. If and to the extent Mason-Dixon
assumes sponsorship of any Benefit Plan after Closing, there are no restrictions
on Mason-Dixon's right to terminate or decrease prospectively the level of
benefits under any Benefit Plan after the Closing Date without liability to any
Employee or Former Employee of Rose Shanis or any Affiliates.
10.13.10. The Transactions will not (either
alone or upon the occurrence of any additional or subsequent events) constitute
an event under any Benefit Plan, individual agreement or other arrangements that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, vesting or increase in benefits with respect to any Employee or
Former Employee, or present or former officer or director of Rose Shanis.
10.13.11. With respect to any Benefit Plan
that is funded wholly or partially through an insurance policy, or if Rose
Shanis is the beneficiary of an insurance policy with respect to the liabilities
or expenses of a Benefit Plan, there will be no liability of Rose Shanis or any
Affiliate as of the Closing under any such insurance policy or ancillary
agreement with respect to such insurance policy in the nature of a retroactive
rate adjustment, loss sharing arrangement or other actual contingent liability
arising wholly or partially out of events occurring prior to the Closing. The
consummation of the Transactions will not cause a revocation or material
modification of any such insurance policy, and all such policies can be
<PAGE>
assumed by Mason-Dixon at its option. Schedule 10.13.11 includes all insurance
policies described in this subsection.
10.13.12. Each "group health plan" (within
the meaning of Section 607(1) of ERISA) maintained by Rose Shanis and its
Affiliates has been administered in compliance with all applicable requirements
of Sections 601-608 of ERISA and Section 4980B of the Code ("COBRA"). A list of
all persons who, as of Closing, (1) are eligible to elect to continue their
group health plan coverage under COBRA, or (2) have elected to continue their
group health plan coverage under COBRA and whose maximum required period of
continuation coverage has not yet expired, is attached as Schedule 10.13.12. The
list specifies the date such coverage or eligibility to elect coverage began for
each person and the date the maximum required period of coverage for such person
will end. No Benefit Plan provides health, medical, life insurance or similar
benefits to retirees or other former employees of Rose Shanis or their
beneficiaries (except to the extent required under COBRA).
10.14. Employee Matters.
10.14.1. None of the Employees are
represented by a labor organization, no petition for representation has been
filed with the National Labor Relations Board with respect to the Employees, and
Rose Shanis is not aware of any union organizational activity with respect to
the Employees.
10.14.2. Rose Shanis has fully complied with
all applicable equal employment opportunity laws, wage and hour laws,
occupational safety and health laws, immigration laws, plant closing laws, and
all other federal, state or local laws (including common law) relating to
employment, except for immaterial violations which can be cured at no material
cost or expense to Rose Shanis and/or Mason-Dixon or the Subsidiaries and, with
or without being cured, will not prevent Rose Shanis and/or Mason-Dixon or the
Subsidiaries from fully continuing the Business. Rose Shanis has provided to
Mason-Dixon a full explanation of all claims, investigations, charges, and
employment-related suits or controversies which have occurred since January 1,
1990 or which are presently pending or threatened under any employment-related
federal, state, or local law (including common law). Rose Shanis has satisfied
and performed fully all judgments, decrees, conciliation agreements, or
settlement agreements by which it is bound or to which it is subject concerning
employment-related matters, and has provided to Mason-Dixon a copy of all such
judgments, decrees, or agreements.
10.14.3. Rose Shanis has not adopted and is
not subject to any obligations under any affirmative action plan or similar
programs or arrangements.
10.14.4. Rose Shanis has provided Mason-
Dixon with a copy of all employee handbooks, manuals, and written policies and a
description of all employment policies.
10.14.5. Except as described on Schedule
10.14.5, Rose Shanis has not entered into any employment or consulting agreement
or become obligated under any other document, policy or practice which gives to
any person a right to employment or compensation after the date of Closing; all
Employees can be terminated at will; and Rose Shanis has no contractual
obligation nor any termination or severance arrangement with respect to any
Employee or Former Employee.
<PAGE>
10.14.6. Rose Shanis has paid all wages and
benefits due and payable (including all required taxes, insurance, and
withholding thereon) through the date hereof.
10.14.7. Schedule 10.14.7 is a complete and
accurate list of each of the Employees as of September 30, 1997, and includes:
10.14.7.1. the amounts of all
accrued leave (including vacation and sick leave), accrued severance
entitlement, and accrued bonuses due to the Employees and Former Employees as of
the date hereof and such amounts expected to be accrued as of the Closing Date;
10.14.7.2. such Employee's date of
hire, position, present salary, amounts and dates of salary increases and
bonuses since December 31, 1996, amounts and dates of any future salary
increases or bonus of which Rose Shanis has made a commitment prior to the date
hereof, and announced termination date (if any); and
10.14.7.3. each lending, insurance
and other license currently in effect for such Employee and its expiration date.
10.14.8. Rose Shanis has provided
Mason-Dixon with access to the personnel files and employment records of all
Employees and Former Employees.
10.14.9. Each Employee has all
authorizations and licenses from all governmental bodies necessary to carry on
his or her job at Rose Shanis.
10.15. Financial Statements. The audited Financial
Statements of Rose Shanis as of, and for the years ended, December 31, 1994,
1995 and 1996 delivered to Mason-Dixon present fairly, in all material respects,
the financial condition of Rose Shanis, and the results of its operations, as of
such dates and for such years, and have been prepared in accordance with
generally accepted accounting principles consistently applied and in a manner
consistent with the past practices and policies of Rose Shanis. Rose Shanis has
also delivered to Mason-Dixon interim financial statements prepared internally
by Rose Shanis as of and for the period ending September 30, 1997, which present
fairly in all material respects the financial condition and results of operation
of Rose Shanis as of and for the period ending September 30, 1997. The reserve
for possible loan losses at September 30, 1997 has been adjusted for chargeoff
and recovery activity and includes additions for provisions for loan losses
charged to Rose Shanis' earnings through September 30, 1997. An annual review of
the adequacy of the reserve for possible loan losses by Rose Shanis' external
audit firm has not been performed at the interim statement date.
10.16. Accounts Receivable (Excluding Loans). Except
as shown on Schedule 10.16, all Accounts Receivable (Excluding Loans) of Rose
Shanis which are reflected on Rose Shanis' Balance Sheet (i) are valid and
existing, (ii) represent monies due for goods sold and delivered or services
rendered in the ordinary course of business, (iii) are not subject to any
refunds or adjustments or any defenses, rights of set-off, assignment,
restrictions, security interests or other encumbrances, (iv) are current, and
(v) Rose Shanis is not aware of any dispute regarding the collectibility of any
such accounts receivable.
<PAGE>
10.17. Loans.
10.17.1. As of September 30, 1997, Rose
Shanis holds not less than an aggregate principal balance of $47,000,000 million
of Loans. Rose Shanis is the sole owner of each Loan and has the right to assign
and transfer the Loan to Mason-Dixon. Rose Shanis has not sold, assigned or
otherwise transferred any right or interest in or to the Loans to any other
person or entity and has not pledged the Loans as collateral for any loan or
obligation of Rose Shanis.
10.17.2. Except as described on Schedule
1.1.2, each Loan is genuine and each is the legal and binding obligation of the
borrower or buyer ("borrower") as described therein, enforceable in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, moratorium or similar laws and general principles of equity
affecting the rights of creditors generally. Each Loan was validly executed by
the borrower named therein. None of the Loans or guaranties, mortgages, security
agreements or other documents are forged, contain false information, or have
affixed any unauthorized signature or have been entered into by persons without
the required legal capacity.
10.17.3. Except as described on Schedule
1.1.2, Rose Shanis has complied with any and all requirements of any federal,
state or local law, rule, regulation and administrative requirements applicable
to the making, holding, servicing and collecting of the Loans, including,
without limitation, disclosure and licensing laws. Except as specified on
Schedule 1.1.2, each Loan complies with applicable state and federal laws,
regulations, rules and other administrative requirements, including, without
limitation, the Federal Fair Credit Reporting Act and Regulations, the federal
Truth-in-Lending Act and Regulation Z, the federal Equal Credit Opportunity Act
and Regulation B, the federal Real Estate Settlement Procedures Act and
Regulations, the Federal Trade Commission Act , the federal Debt Collection
Practices Act, the federal Home Mortgage Disclosure Act, the Maryland Consumer
Protection Act, and Maryland credit and usury laws and regulations. All
disclosures required by law, federal, state or local, were properly made by Rose
Shanis or the original creditor prior to the closing of each Loan.
10.17.4. The proceeds of each Loan have been
fully disbursed.
10.17.5. Each Loan originated by another
individual or entity or in which another individual or entity is named as the
original creditor has been duly transferred and assigned to Rose Shanis by the
person or entity owning the entire beneficial interest of the creditor
thereunder pursuant to a valid assignment executed by an authorized signatory
transferring to Rose Shanis the entire right, title and interest of the creditor
under such Loan.
10.17.6. Except as specified on Schedule
1.1.2, there is no agreement with any borrower regarding any variation of the
interest rate and schedule of payment (except as described in the Loan note) or
other terms and conditions of the Loan, no borrower has been released from
liability on the Loan, and no property has been released from any mortgage or
security agreement. If the Loan is a variable rate loan, Rose Shanis represents
and warrants that all applicable notices required by law or regulation have been
provided to the borrower and that the right to future changes in the interest
rate and payment schedule has not been waived by Rose Shanis or any previous
holder of the Loan.
10.17.7. Except as specified on Schedule
1.1.2, Rose Shanis has a valid and enforceable security interest in each item of
collateral which secures a Loan. Except
<PAGE>
when non-filing insurance has been sold in connection with the Loan, Rose Shanis
has a perfected security interest in each item of collateral which secures each
Loan.
10.18. Title to Properties and Related Matters. Rose
Shanis has good and marketable title to or valid leasehold interests in its
properties reflected in Rose Shanis' Balance Sheet or acquired after the date
thereof (other than properties sold or otherwise disposed of in the ordinary
course of business), and all of such properties are held free and clear of all
title defects, liens, encumbrances and restrictions, except, with respect to all
such properties, (a) mortgages and liens securing debt reflected as liabilities
on Rose Shanis' Balance Sheet and (b)(i) liens for current taxes and assessments
not in default, (ii) mechanics', carriers', workmen's, repairmen's, statutory or
capital law liens which have arisen in the ordinary course of business and which
are either not delinquent or being contested in good faith, and (iii) rights of
way, building or use restrictions, easements, exceptions, variances,
reservations and other similar matters or limitations, if any, which do not have
a material adverse effect on the use of the property affected.
10.19. Environmental Matters. The Facilities are in
substantial compliance with all environmental laws and pending, promulgated or
proposed regulations, and Rose Shanis has not received notice of any claim or
obligation asserted against Rose Shanis under any environmental law or
regulation.
10.20. Proprietary Rights. Rose Shanis owns all of
the Intellectual Property. All of Rose Shanis' rights in and to the Intellectual
Property are valid and enforceable. Rose Shanis has not licensed, leased or
otherwise assigned, transferred or granted any right to use any of its
Intellectual Property to any other person or entity, and, to the best knowledge
of Rose Shanis, no person or entity is infringing upon the Intellectual
Property. Rose Shanis is not infringing upon or in violation of any patent,
trademark, trade name, service mark, copyright or registration of any other
person or entity.
10.21. Relationship with Dealers, Suppliers, Vendors.
Rose Shanis is not aware of any occurrence which, with or without the giving of
notice or the lapse of time or both, would constitute a default under any
agreement or arrangement with any of its dealers and banks which would adversely
affect Rose Shanis' relationship with any such party. Since January 1, 1997,
Rose Shanis has not suffered the loss of any supplier(s), dealer(s), vendor(s),
customer(s) or bank(s) which has had or may have a material adverse effect on
Rose Shanis' financial condition, results of operation, business or prospects.
10.22. Corporate Name. The use by Rose Shanis of the
name "Rose Shanis" and all variations does not infringe upon the rights of any
third party and Rose Shanis has not granted any third party any right to use
such name or any variation.
10.23. Full Disclosure. This Agreement together with
all other agreements and documents executed by the parties in connection with
the Transactions does not contain any untrue statement of a material fact by
Rose Shanis or omit to state any material fact necessary to make the statements
contained herein not misleading. Rose Shanis has provided Mason-Dixon access to
all relevant documents, materials and information relative to its Business and
Rose Shanis has not withheld any documents, materials or information material to
the conditions and operations of its Business. There is no fact known to Rose
Shanis which is not disclosed in this Agreement together with all other
agreements and documents executed by the parties in connection with the
Transactions which materially and adversely affects the accuracy of the
<PAGE>
representations and warranties contained in this Agreement or Rose Shanis'
financial condition, operations, business, earnings, assets, or liabilities.
11. Mason-Dixon's Warranties and Representations.
Mason-Dixon represents and warrants to Rose Shanis
that:
11.1. Mason-Dixon is a corporation duly organized and
validly existing in good standing under the laws of the State of Maryland, and
has the corporate power and authority necessary to own and operate its
properties and carry on its business as now being conducted by it.
11.2. Mason-Dixon has full power and authority to
enter into this Agreement, to consummate the Transactions and to take all other
actions required to be taken by it. The execution, delivery and performance of
this Agreement have been duly and properly authorized by its Board of Directors.
The execution and performance of this Agreement by it does not constitute a
violation or breach of its Articles of Incorporation or Bylaws. This Agreement
constitutes its valid and legally binding obligation, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency and other similar
laws affecting the enforcement of creditors' rights generally, general equitable
principles and the discretion of courts in granting equitable remedies.
11.3. The execution, delivery and performance of this
Agreement, and the fulfillment of and compliance with the terms and conditions
of this Agreement do not and will not, with the passing of time or the giving of
notice or both, violate or conflict with, constitute a breach of or default
under, result in the loss of any material benefit under, or permit the
acceleration of any obligation under, (i) any term or provision of its Articles
of Incorporation or Bylaws, (ii) any judgment, decree or order of any court or
governmental authority or agency to which Mason-Dixon is a party or by which
Mason-Dixon or any of its properties is bound, or (iii) any statute, law,
regulation or rule applicable to Mason-Dixon, so as to have a material adverse
effect on the assets, liabilities, results of operations, financial condition,
business or prospects of Mason-Dixon.
11.4. There is no litigation, claim, arbitration,
proceedings, or governmental investigation pending challenging its right to
perform under this Agreement to which it is a party, or to its knowledge,
threatened against it.
11.5. On the Closing Date, Mason-Dixon shall have
financial capacity to consummate the Transactions and pay the Purchase Price.
11.6. On the Closing Date, the Subsidiaries shall be
limited liability companies duly organized and validly existing in good standing
under the laws of the State of Maryland, and have the power and authority
necessary to own and operate their properties and carry on their businesses.
11.7. On the Closing Date, the Subsidiaries shall
have full power and authority to consummate the Transactions and to take all
other actions required to be taken by them under this Agreement. Consummation of
the Transactions shall not constitute a violation or breach of their
organizational documents. The Assumption Agreements shall constitute their valid
and legally binding obligations, enforceable in accordance with their terms,
subject to
<PAGE>
applicable bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally, general equitable principles and the
discretion of courts in granting equitable remedies.
12. Covenants of the Owners.
The Owners hereby covenant and agree to vote their
stock in Rose Shanis in favor of the execution of this Agreement by Rose Shanis
and of the Transactions and shall take such other actions as may be necessary or
appropriate to implement the provisions of this Agreement and the Transactions,
including, but not limited to, using their best efforts to obtain the Kahn
Agreement referred to in Section 7.1.12.
13. Covenants of Rose Shanis.
Rose Shanis hereby covenants and agrees as follows:
13.1. In the period between the date hereof and
Closing, Rose Shanis shall carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted, and
shall use its best efforts to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, dealers, suppliers and others having
business dealings with it to the end that its goodwill and on-going business
shall be unimpaired at Closing. Rose Shanis shall use its best efforts to
maintain insurance coverages and its books, accounts and records in the usual
manner consistent with prior practices; comply in all material respects with all
applicable laws, ordinances and regulations of governmental authorities;
maintain and keep its properties and equipment in good repair, working order and
condition, ordinary wear and tear excepted; and perform in all material respects
its obligations under all contracts and commitments to which it is a party or by
which it is bound.
13.2. In the period between the date hereof and
Closing, Rose Shanis shall not and shall not propose to sell or pledge or agree
to sell or pledge any capital stock owned by it; amend its partnership
agreement, articles or certificate of incorporation or bylaws; split, combine or
reclassify its outstanding capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock; declare, set aside or pay any dividend or other
distribution payable in cash, stock or property; or directly or indirectly
redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise
acquire any shares of its capital stock.
13.3. In the period between the date hereof and
Closing, Rose Shanis shall not issue, deliver or sell or agree to issue, deliver
or sell any additional shares of, or rights of any kind to acquire any shares
of, its capital stock of any class, any indebtedness (other than pursuant to
existing lines of credit, and renewals and extensions thereof, for use in the
ordinary course of business, and consistent with past practices) or any option,
rights or warrants to acquire, or securities convertible into, shares of capital
stock; acquire, lease or dispose or agree to acquire, lease or dispose of any
capital assets or any other assets other than in the ordinary course of
business, provided, however, Rose Shanis may sell its 4 automobiles for the
higher of the average trade-in (wholesale) value in the October 1997 Edition of
the NADA Used Car Guidebook or the current book value; incur additional
indebtedness or encumber or grant a security interest in any asset, with the
exception of indebtedness and security described in Item B of Schedule 2.1 or
enter into any other material transaction other than in each case in the
ordinary course of
<PAGE>
business; acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in, or by any other manner, any
business; or enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing.
13.4. In the period between the date hereof and
Closing, without the prior written consent of Mason-Dixon, Rose Shanis shall not
adopt, enter into, terminate or amend any bonus, profit sharing, compensation,
severance, termination, stock option, pension, retirement, deferred
compensation, employment or other benefit plan, agreement, trust, fund or other
arrangement for the benefit or welfare of any director, officer or employee; pay
any benefit not required under any existing plan or arrangement; grant any
awards under any bonus, incentive, performance or other compensation plan or
arrangement or benefit plan (including, without limitation, the grant of stock
options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any benefit plans or agreements or awards made thereunder); take any action
to fund or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or benefit plan; or adopt,
enter into, amend or terminate any contract, agreement, commitment or
arrangement to do any of the foregoing. Consent of Mason-Dixon is granted to the
following: Christmas bonuses as provided on Schedule 13.4; profit sharing plan
contributions consistent with past practices; and VIP employee incentive
payments as provided on Schedule 13.4. Following Closing, Rose Shanis will
comply with the provisions of Section 14.5.1 regarding the Rose Shanis and
Company, Inc. Profit Sharing Plan and Trust.
13.5. In the period between the date hereof and
Closing, the Owners shall not sell or pledge or agree to sell or pledge any
capital stock or interest in Rose Shanis.
13.6. In the period between the date hereof and
Closing, Rose Shanis shall not make any investments in non-investment grade
securities exceeding $5,000 or sell, at a loss of greater than $5,000, any debt
securities held for investment purposes.
13.7. Without the prior written consent of
Mason-Dixon, in the period between the date hereof and Closing, Rose Shanis
shall not sell or otherwise dispose of any Loans.
13.8. Rose Shanis will cooperate with and make
available to Mason-Dixon all of its books and records and access to its
premises, employees, attorneys and accountants at reasonable times and upon
reasonable notice.
13.9. In the period between the date hereof and
Closing, Rose Shanis will use its best efforts to obtain all required consents
to assignments or written waivers of the provisions of any contract requiring
the consent of third parties.
13.10. During the period from the date of this
Agreement to the Closing Date, an individual designated by Mason-Dixon shall
have the right to attend all meetings of the boards of directors or Partners of
Rose Shanis in a nonvoting observer capacity, to receive notice of such meetings
and to receive the information provided by Rose Shanis to its boards of
directors and Partners. Rose Shanis shall consult with Mason-Dixon regarding the
Business on a regular basis.
13.11. At or immediately following the Closing, Rose
Shanis will execute and file all appropriate documents to be filed pursuant to
the laws of Maryland which are
<PAGE>
necessary to implement the Transactions, including Articles of Transfer and
Articles of Amendment changing its name to a name which does not include the
name "Rose Shanis" or any variation, in form and substance satisfactory to
counsel to Mason-Dixon.
13.12. Rose Shanis and the Owners will not use and
will keep and maintain the confidentiality of all confidential information
concerning Mason-Dixon disclosed to Rose Shanis or the Owners prior to Closing,
except to their directors, officers and employees, to their attorneys and
accountants, and to others to the extent necessary in connection with the
Transactions. If this Agreement does not close for any reason, Rose Shanis and
the Owners shall promptly return to Mason-Dixon all written and computer
documents, materials and discs in their possession dealing with Mason-Dixon, and
shall retain no copies.
14. Covenants of Mason-Dixon and the Subsidiaries.
Mason-Dixon and the Subsidiaries hereby covenant and
agree as follows:
14.1. Mason-Dixon agrees not to use and to keep and
maintain and to cause the Subsidiaries not to use and to keep and maintain the
confidentiality of all confidential information concerning Rose Shanis disclosed
to Mason-Dixon or the Subsidiaries prior to Closing, except to its directors,
officers and employees, to its attorneys and accountants, and to others to the
extent necessary in connection with the Transactions. If this Agreement does not
close for any reason, Mason-Dixon shall promptly return and shall cause the
Subsidiaries to promptly return to Rose Shanis all written and computer
documents, materials and discs in its possession dealing with Rose Shanis, the
Assets or the Business, and shall retain no copies.
14.2. At or immediately following the Closing, the
Subsidiaries will execute and file all appropriate documents to be filed
pursuant to the corporate laws of Maryland which are necessary to implement the
Transactions, including Articles of Transfer.
14.3. Mason-Dixon and the Subsidiaries shall take
such actions as may be necessary or appropriate to implement the provisions of
this Agreement and the Transactions, including, but not limited to, using their
best efforts to have the Consumer Finance Subsidiary enter into a credit
facility replacing the credit facility identified in Item B of Schedule 2.1 on
terms substantially similar to the terms described in Schedule 8.1.10. The
assumption of liabilities contained in Section 2 is deemed to be a covenant
hereunder.
14.4. Mason-Dixon guarantees to Rose Shanis the full
and timely payment and performance of all obligations to be performed by the
Subsidiaries hereunder.
14.5. Following Closing, and in accordance with
Sections 14.5.1 and 14.5.2 below, Mason-Dixon or the Subsidiaries will provide
employee benefits to employees hired from Rose Shanis in accordance with Section
15, with the exception of Charles D. Stickline, which are comparable to the
benefits provided to those employees by Rose Shanis immediately before Closing.
The Subsidiaries shall recognize the past service of the Employees with Rose
Shanis to determine the waiting period or eligibility period for benefits under
the benefit plans of the Subsidiaries, however, the value of the benefits to be
offered the Employees by the Subsidiaries shall be determined solely by the
Subsidiaries. Notwithstanding this Section 14.5, nothing in this Agreement
restricts the right of Mason-Dixon or the Subsidiaries to amend any employee
benefit plan for such employees in any manner Mason-Dixon or the Subsidiaries
deem appropriate.
<PAGE>
14.5.1. Neither Mason-Dixon nor any of the
Subsidiaries will assume sponsorship of the Rose Shanis and Company, Inc. Profit
Sharing Plan and Trust ("Profit Sharing Plan"). Rose Shanis will remain sponsor
of the Profit Sharing Plan. Rose Shanis will at its own expense terminate the
Profit Sharing Plan after Closing. When making distributions in connection with
the termination, Rose Shanis will cooperate with Mason-Dixon to make available
to participants a direct rollover of distributions to a tax qualified retirement
plan maintained by Mason-Dixon or one of the Subsidiaries. For employees hired
from Rose Shanis in accordance with Section 15, any tax qualified retirement
plan maintained by Mason-Dixon or one of the Subsidiaries which covers such
employees will recognize all service those employees had with Rose Shanis that
was recognized under the Profit Sharing Plan immediately before Closing.
14.5.2. Mason-Dixon or the Subsidiaries will
make best efforts to assume and continue the insurance policies for any health,
dental, life and disability insurance coverages listed on Schedule 10.13.2 with
respect to employees hired from Rose Shanis. In lieu thereof, Mason-Dixon or the
Subsidiaries may cover employees hired from Rose Shanis under other insurance
policies or funding arrangements that cover other employees of Mason-Dixon (or
its subsidiaries).
15. Employees of Rose Shanis.
Except as provided in this Agreement, neither
Mason-Dixon nor the Subsidiaries shall be obligated to hire any Employee or
shall be responsible for any obligation of Rose Shanis to its Employees. The
Subsidiaries covenant and agree to offer employment to substantially all of the
Employees.
16. No Solicitation.
Prior to Closing or termination of this Agreement,
the Owners and Rose Shanis (through any of their officers, directors, employees
or agents) agree not to, directly or indirectly, without Mason-Dixon's consent,
solicit, encourage (including furnishing any information to any third person or
entity), respond to, negotiate or assist in any manner any other offer, bid, or
proposal involving the sale of any shares of stock of Rose Shanis or any of its
assets other than in the ordinary course of business.
17. Publicity.
Rose Shanis and the Owners shall not disseminate, or
cause any dissemination of, any press releases or other publicity concerning the
sale of the Business. Mason-Dixon may disseminate any press releases and other
publicity concerning the sale of the Business as required by applicable law, and
with the approval of Norman J. Glick, which approval shall not be unreasonably
withheld. Mason-Dixon may make any public filing concerning the sale of the
Business as required by applicable law.
18. Termination.
18.1. Termination Events. This Agreement may, by
notice given prior to or at the Closing, be terminated:
<PAGE>
(a) by either Mason-Dixon or Rose Shanis if
a material breach of any provision of this Agreement has been committed by the
other party and such breach has not been waived or cured within a reasonable
period of time not to exceed 60 days;
(b) (i) by Mason-Dixon if any of the
conditions in Section 8 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Mason-Dixon to comply with its obligations under this Agreement)
and Mason-Dixon has not waived such condition on or before the Closing Date; or
(ii) by Rose Shanis, if any of the conditions in Section 9 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Rose Shanis to comply with
their obligations under this Agreement) and Rose Shanis has not waived such
condition on or before the Closing Date;
(c) by mutual consent of Mason-Dixon and
Rose Shanis; or
(d) by either Mason-Dixon or Rose Shanis if
the Closing has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before 60 days after the scheduled Closing, or such later
date as the parties may agree upon.
18.2. Effect of Termination. For purposes of this
Section, a "breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any document delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been any material
inaccuracy in or material breach of, or any material failure to perform or
comply with, such representation, warranty, covenant, obligation, or other
provision, or any claim (by any person) or other occurrence or circumstance that
is or was inconsistent with such representation, warranty, covenant, obligation,
or other provision. The exclusive effect of either party's termination under
Section 18.1 shall be limited to the remedies, if any, set forth below or in
Section 19, as applicable:
(a) If Mason-Dixon terminates this Agreement
due to a breach of the Agreement by Rose Shanis or the failure of Rose Shanis to
satisfy one or more of the conditions to the Closing and such breach or failure
has not been due to any deliberate, willful and culpable act of Rose Shanis
amounting to "bad faith," then Rose Shanis shall not incur any liability to
Mason-Dixon and termination shall be Mason-Dixon's sole remedy.
(b) If Mason-Dixon terminates this Agreement
due to a breach of the Agreement by Rose Shanis or the failure of Rose Shanis to
satisfy one or more of the conditions to the Closing and such breach or failure
has been due to a deliberate, willful and culpable act of Rose Shanis amounting
to "bad faith," then Rose Shanis will be liable to Mason-Dixon for damages;
provided, however, such damages shall be limited to Mason-Dixon's actual
out-of-pocket expenses incurred in the Transactions (excluding any allocated
cost of Mason-Dixon's management) unless Mason-Dixon terminates because the
Owners or Rose Shanis (through any of their officers, directors, employees or
agents) directly or indirectly, without Mason-Dixon's consent, agree or act to
solicit, encourage (including furnishing any information to any third party or
entity), respond to, negotiate or assist in any manner any other offer, bid or
proposal involving the sale of any shares of stock in or equity interests of
Rose Shanis or any substantial portion of its assets other than in the ordinary
course of business. If Mason-Dixon terminates because the Owners or Rose Shanis
(through any of their officers, directors, employees or agents) directly or
indirectly, without Mason-Dixon's consent, agree or act to solicit, encourage
<PAGE>
(including furnishing any information to any third party or entity), respond to,
negotiate or assist in any manner any other offer, bid or proposal involving the
sale of any shares of stock in or equity interests of Rose Shanis or any
substantial portion of its assets other than in the ordinary course of business,
then the foregoing limitation on damages shall not apply.
(c) If Rose Shanis terminates this Agreement
due to a breach of the Agreement by Mason-Dixon or the failure of Mason-Dixon to
satisfy one or more of the conditions to the Closing and such breach or failure
has not been due to any deliberate, willful and culpable act of Mason-Dixon
amounting to "bad faith," then Mason-Dixon shall not incur any liability to Rose
Shanis and termination shall be Rose Shanis' sole remedy.
(d) If Rose Shanis terminates this Agreement
due to a breach of the Agreement by Mason-Dixon or the failure of Mason-Dixon to
satisfy one or more of the conditions to the Closing and such breach or failure
has been due to a deliberate, willful and culpable act of Mason-Dixon amounting
to "bad faith," then Mason-Dixon will be liable to Rose Shanis for damages;
provided, however, such damages shall be limited to Rose Shanis' out-of-pocket
expenses incurred in the Transactions (excluding any allocated cost of Rose
Shanis' management). If Rose Shanis terminates because Mason-Dixon (through any
of its officers, directors, employees or agents, ) directly or indirectly,
without Rose Shanis' and the Owners' consents, agrees or acts to, solicits,
encourages (including furnishing any information to any third party or entity),
responds to, negotiates or assists in any manner any offer, bid or proposal
involving the sale of any shares of its stock or any substantial portion of its
assets which transaction will preclude Mason-Dixon from consummating the
Transactions on terms and conditions contained in this Agreement, then the
foregoing limitation on damages shall not apply.
(e) Except as otherwise specifically set
forth in this Agreement, all further obligations of the parties under this
Agreement will terminate, except that the obligations in Sections 13.12, 14.1
and 21 will survive.
19. Specific Performance.
The parties acknowledge that the provisions of this
Agreement are of particular importance for the protection and promotion of their
existing and future interests; that the relationships of the parties to each
other will be such that, in the unique and special circumstances set forth in
this Section 19, a claim for monetary damages may not constitute an adequate
remedy; and that it may therefore be necessary to apply for the specific
performance of this Agreement. Where authorized herein, the parties agree that
no objection to the form of the action or the relief prayed for in any
proceeding for specific performance of this Agreement shall be raised by any
party, in order that such relief may be expeditiously obtained by an aggrieved
party. The parties hereby authorize as a remedy specific performance of this
Agreement, only as set forth below:
(a) If prior to the Closing or termination
of this Agreement, the Owners or Rose Shanis (through any of their officers,
directors, employees or agents) directly or indirectly, without Mason-Dixon's
consent, agree or act to, solicit, encourage (including furnishing any
information to any third party or entity), respond to, negotiate or assist in
any manner any other offer, bid or proposal involving the sale of any shares of
stock in or equity interests of Rose Shanis or any substantial portion of its
assets other than in the ordinary course of business.
<PAGE>
(b) If prior to the Closing or termination
of this Agreement, Mason- Dixon (through any of its officers, directors,
employees or agents,) directly or indirectly, without Rose Shanis' and the
Owners' consents, agrees or acts to, solicits, encourages (including furnishing
any information to any third party or entity), responds to, negotiates or
assists in any manner any offer, bid or proposal involving the sale of any
shares of its stock or any substantial portion of its assets which transaction
will preclude Mason-Dixon from consummating the Transactions on terms and
conditions contained in this Agreement.
(c) Specific performance herein as a remedy
by Mason-Dixon shall be available to Mason-Dixon only if Mason-Dixon tenders the
full Purchase Price (adjusted by the Adjustment Amount), without other
deductions or offsets. If specific performance herein shall be available as a
remedy by Rose Shanis and the Owners, Mason-Dixon shall be obligated to pay Rose
Shanis the full Purchase Price (adjusted by the Adjustment Amount), without
other deductions or offsets.
20. No Brokerage.
Except as disclosed in Schedule 20, each of the
parties represents that it employed no broker or finder in connection with any
of the Transactions, and, insofar as it knows, no other broker or other person
is entitled to any compensation including, without limitation, a commission or
finder's fee, in connection with any of these Transactions. The Owners shall pay
the fees of BT Alex. Brown Incorporated. Mason-Dixon shall pay the fees of
Friedman, Billings, Ramsey & Co., Inc.
21. Expenses.
Except as otherwise provided herein, the expenses of
the Owners shall be borne by the Owners, the expenses of Rose Shanis paid or
incurred after September 26, 1997, shall be borne by the Owners, the expenses of
Rose Shanis paid or incurred on or before September 26, 1997, shall be borne by
Rose Shanis, and the expenses of Mason-Dixon shall be borne by Mason-Dixon,
including the expenses of their respective attorneys and accountants in
connection with the Transactions. The costs, if any, of the transfer of the
Assets to the Subsidiaries shall be borne by Mason-Dixon.
22. Severability.
In case any of the provisions of this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement, but this Agreement shall be construed as if
such invalid, illegal or unenforceable provision or provisions had never been
contained herein.
23. Entire Agreement and Amendment.
The Recitals are a substantive part of this
Agreement. This Agreement supersedes all prior agreements between the parties
with respect to its subject matter and constitutes (along with the documents
referred to in this Agreement and all other documents and agreements executed
and delivered by the parties in connection with the Transactions) a complete and
exclusive statement of the terms of the agreement between the parties with
respect to its
<PAGE>
subject matter. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
24. Binding Agreement.
This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, personal representatives,
successors and assigns. This Agreement shall not be assignable by any party
without the prior written consent of the other parties.
25. Further Assurances.
Rose Shanis, the Owners and Mason-Dixon each agree to
execute, acknowledge, seal and deliver, after the date hereof, such further
assurances, instruments and documents and to take such further actions as the
other may reasonably request in order to fulfill the intent of this Agreement
and the Transactions and Mason-Dixon agrees to cause the Subsidiaries to do the
same. Mason-Dixon and the Subsidiaries agree to cooperate with and make
available to Rose Shanis and the Owners from time to time after Closing books
and records transferred to the Subsidiary at Closing and former employees of
Rose Shanis which are employed by the Subsidiaries at reasonable times and upon
reasonable notice for the purpose of permitting Rose Shanis and the Owners to
defend or prosecute lawsuits currently pending against Rose Shanis. Rose Shanis
and the Owners agree to cooperate with and make available to Mason-Dixon and the
Subsidiaries from time to time after Closing all books and records, including
Minute Books, tax returns, and litigation papers, not transferred to the
Subsidiaries at Closing at reasonable times and upon reasonable notice.
26. Notices.
All notices, writings and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and shall be given by hand-delivery or transmitted by United States certified
mail, return receipt requested, postage prepaid, or via overnight carrier, to
the address set forth below:
If to Rose Shanis or the Owners: Rose Shanis Financial Services
313 N. Howard Street
Baltimore, Maryland 21201
Attn: Norman J. Glick
With a copy to: Adelberg, Rudow, Dorf, Hendler & Sameth, LLC
600 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, Maryland 21201
Attn: David B. Rudow, Esquire
If to Mason-Dixon or the Mason-Dixon Bancshares, Inc.
Subsidiaries: 45 West Main Street
Westminster, Maryland 21157
Attn: Thomas K. Ferguson, President and CEO
<PAGE>
With a copy to: Gordon, Feinblatt, Rothman, Hoffberger
& Hollander, LLC
233 East Redwood Street
Baltimore, Maryland 21202
Attn: Carla Stone Witzel, Esquire
Each notice shall be deemed to have been received: (i) for hand deliveries, on
the date of transmittal; (ii) for mailing, on the second day following such
mailing; and (iii) for overnight deliveries, on the day following such
transmittal. The parties shall have the right to change their respective
addresses set forth in this Section by giving notice of such change in
accordance with this Section.
27. Survival.
The warranties, covenants and agreements herein
contained shall survive the execution and delivery of this Agreement, and the
completion of the Transactions. The right to indemnification, payment of damages
or other remedy based on such representations, warranties, covenants, and
obligations will not be affected by any investigation conducted with respect to,
or any knowledge acquired (or capable of being acquired) at any time, whether
before or after the execution and delivery of this Agreement or the Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The Indemnity and Escrow
Agreement shall be the exclusive mechanism for exercising Mason-Dixon's right to
indemnification. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations.
28. Counterparts.
This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will
constitute one agreement.
29. Governing Law.
This Agreement shall be construed under, governed by
and enforced pursuant to the laws of the State of Maryland.
IN WITNESS WHEREOF, the parties have executed this Agreement
under seal, with the intention of making it a sealed instrument, as of the day
and year first above written.
ROSE SHANIS & CO., INC.
By:/s/ Norman J. Glick (SEAL)
-------------------------------------
ROSE SHANIS SONS, INC.
By:/s/ Norman J. Glick (SEAL)
-------------------------------------
<PAGE>
STEPHEN CORP.
By:/s/ Norman J. Glick (SEAL)
-------------------------------------
ROSE SHANIS & CO.
By: /s/ Susan M. Glick (SEAL)
-------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Susan M. Glick (SEAL)
-------------------------------------
Susan M. Glick, Trustee of the Stephen J. Glick
Trust Share of the Bernice Shanis Trust,
General Partner
By:/s/ Susan M. Glick (SEAL)
-------------------------------------
Susan M. Glick, Trustee of the Stephen J. Glick
Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Susan M. Glick (SEAL)
----------------------------------------
Susan M. Glick, Trustee of the Nor
Trust Share of the Bernice Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
-------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
--------------------------------------
Norman J. Glick, Trustee of the Stephen J. Glick
Trust Share of the Bernice Shanis Trust,
General Partner
<PAGE>
By:/s/ Norman J. Glick (SEAL)
-------------------------------------
Norman J. Glick, Trustee of the Stephen J. Glick
Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
-------------------------------------
Norman J. Glick, Trustee of the Norman J. Glick
Trust Share of the Bernice Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
-------------------------------------
Norman J. Glick, General Partner
By:/s/ Susan M. Glick (SEAL)
-------------------------------------
Susan M. Glick, Personal Representative of the
Estate of Stephen J. Glick, General Partner
NORMAN J. GLICK
/s/ Norman J. Glick (SEAL)
----------------------------------------
SUSAN M. GLICK, PERSONAL
REPRESENTATIVE OF THE ESTATE OF
STEPHEN J. GLICK
/s/ Susan M. Glick (SEAL)
----------------------------------------
/s/ Mitzi S. Glick (SEAL)
----------------------------------------
Mitzi S. Glick, Trustee u/a Norman J. Glick
dated May 14, 1997, FBO Robert S. Glick
/s/ Eugene Schreiber (SEAL)
----------------------------------------
Eugene Schreiber, Trustee u/a Norman J. Glick
dated May 14, 1997, FBO Robert S. Glick
/s/ Mitzi S. Glick (SEAL)
----------------------------------------
Mitzi S. Glick, Trustee u/a Norman J. Glick
dated May 14, 1997, FBO Bonnie G. Dubin
<PAGE>
/s/ Eugene Schreiber (SEAL)
----------------------------------------
Eugene Schreiber, Trustee u/a Norman J. Glick
dated May 14, 1997, FBO Bonnie G. Dubin
/s/ Susan M. Glick (SEAL)
----------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust
/s/ Susan M. Glick (SEAL)
----------------------------------------
Susan M. Glick, Trustee of the Stephen J. Glick
Trust Share of the Bernice Shanis Trust
/s/ Norman J. Glick (SEAL)
----------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust
/s/ Norman J. Glick (SEAL)
----------------------------------------
Norman J. Glick, Trustee of the Stephen J. Glick
Trust Share of the Bernice Shanis Trust
/s/ Susan M. Glick (SEAL)
----------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick Trust Share of the Ely Shanis Trust
/s/ Norman J. Glick (SEAL)
----------------------------------------
Norman J. Glick, Trustee of the Stephen J. Glick
Trust Share of the Ely Shanis Trust
/s/ Susan M. Glick (SEAL)
----------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis Trust
/s/ Norman J. Glick (SEAL)
----------------------------------------
Norman J. Glick, Trustee of the Norman J. Glick
Trust Share of the Bernice Shanis Trust
<PAGE>
SUSAN M. GLICK AND GAIL GLICK,
TRUSTEES OF MARITAL TRUST UNDER THE
LAST WILL AND TESTAMENT OF
STEPHEN J. GLICK
/s/ Susan M. Glick (SEAL)
----------------------------------------
Susan M. Glick, Trustee
/s/ Gail Glick (SEAL)
----------------------------------------
Gail Glick, Trustee
SUSAN M. GLICK AND GAIL GLICK,
TRUSTEES OF BYPASS TRUST UNDER THE
LAST WILL AND TESTAMENT OF
STEPHEN J. GLICK
/s/ Susan M. Glick (SEAL)
----------------------------------------
Susan M. Glick, Trustee
/s/ Gail Glick (SEAL)
----------------------------------------
Gail Glick, Trustee
MASON-DIXON BANCSHARES, INC.
By:/s/ Thomas K. Ferguson (SEAL)
-------------------------------------
Thomas K. Ferguson, President
<PAGE>
LIST OF SCHEDULES*
SCHEDULE 1.1.2 Loans
SCHEDULE 1.1.3 Insurance Assets
SCHEDULE 1.1.5 Furniture, Fixtures and Equipment
SCHEDULE 1.1.6 Facilities
SCHEDULE 1.1.9 Intellectual Property
SCHEDULE 1.1.10 Computer Systems
SCHEDULE 1.1.11 Claims
SCHEDULE 1.2 Excluded Assets
SCHEDULE 2.1 List of Assumed Liabilities
SCHEDULE 8.1.10 Credit Facility Terms
SCHEDULE 8.1.12 Year 2000 Certification
SCHEDULE 10.4 Rose Shanis -- Capital Stock Information
SCHEDULE 10.5.1 Adverse Changes, Dividends and Distributions
SCHEDULE 10.5.2 Losses and Liabilities
SCHEDULE 10.6 Legal Proceedings
SCHEDULE 10.7 Compliance with Law
SCHEDULE 10.8 Rose Shanis' Contracts
SCHEDULE 10.11 Transactions with Affiliates
SCHEDULE 10.12 Rose Shanis' Insurance Policies
SCHEDULE 10.13.2 Employee Benefit Plans
SCHEDULE 10.13.11 Insurance Policies Funding Benefit Plans
SCHEDULE 10.13.12 COBRA Beneficiaries
SCHEDULE 10.14.5 Employment and Consulting Agreements
SCHEDULE 10.14.7 Employee List
SCHEDULE 10.16 Accounts Receivable
SCHEDULE 13.4 VIP Employee Incentive Payments and Christmas Bonuses
SCHEDULE 20 Brokers
*Pursuant to Regulation S-K, Item 601(b)(2), Mason-Dixon will furnish
supplementally to the Commission upon its request copies of the schedules.
<PAGE>
LIST OF EXHIBITS
EXHIBIT 1.1 - BALANCE SHEET
EXHIBIT 7.1.1 - BILL OF SALE
EXHIBIT 7.1.2 - ASSIGNMENT OF CONTRACTS
EXHIBIT 7.1.3 - OPINION OF COUNSEL TO ROSE SHANIS
EXHIBIT 7.1.4 - OPINION OF COUNSEL TO ESTATE OF STEPHEN J. GLICK
EXHIBIT 7.1.5 - OPINION OF COUNSEL TO THE MARITAL AND BYPASS TRUSTS
EXHIBIT 7.1.6 - OPINION OF COUNSEL TO THE _______ TRUST
EXHIBIT 7.1.10 - ARTICLES OF TRANSFER
EXHIBIT 7.1.11 - INDEMNITY AND ESCROW AGREEMENT
EXHIBIT 7.1.12 - KAHN AGREEMENT
EXHIBIT 7.1.17 - SHAREHOLDERS' EQUITY ESCROW AGREEMENT
EXHIBIT 7.2.1 - OPINION OF MASON-DIXON AND THE SUBSIDIARIES' COUNSEL
EXHIBIT 7.2.4 - ASSUMPTION AGREEMENT
<PAGE>
EXHIBIT 1.1
BALANCE SHEET
[intentionally omitted]
<PAGE>
EXHIBIT 7.1.1
BILL OF SALE
Rose Shanis _____________("Rose Shanis"), for good and
valuable consideration paid by ______________ ("Mason-Dixon"), at or before the
delivery of these presents, the receipt and sufficiency of which is hereby
acknowledged by Rose Shanis, hereby grants, bargains, sells, assigns, transfers
and delivers to Mason-Dixon, it successors and assigns, all of the assets owned
by Rose Shanis, as described on Schedule A attached hereto and incorporated
herein by reference (the "Assets"), to have and hold for its own use and benefit
forever.
Rose Shanis hereby warrants and represents that the Assets are
free and clear of all liens, security interests, claims, taxes, and encumbrances
of any nature whatsoever, excluding any lien for sales or transfer tax created
by this sale. Mason-Dixon is responsible for the payment of sales tax on the
transfer of the Assets.
Rose Shanis, for itself and its successors and assigns,
warrants and agrees to defend title to all of the Assets against any and every
person whomsoever for the benefit of Mason-Dixon, its successors and assigns.
In Witness Whereof, the undersigned has caused this Bill of
Sale to be executed under seal with the intention that this be a sealed
instrument on this ___ day of ____________, 1997.
Rose Shanis _____________
By:__________________________(Seal)
<PAGE>
SCHEDULE A
To Bill of Sale
List of Assets
<PAGE>
EXHIBIT 7.1.2
ASSIGNMENT OF CONTRACTS
This Assignment of Contracts (this "Assignment") is made this
___ day of ____, 1997, by and between Rose Shanis & Co., Inc., Rose Shanis Sons,
Inc., Rose Shanis & Co. and Stephen Corp. ( "Assignor") and _____________
("Assignee"), pursuant to an Asset Purchase Agreement (the "Asset Purchase
Agreement") dated _______, 1997, by, among others, Assignor and Assignee,
involving the sale of substantially all of the assets of the Assignor.
Assignor and Assignee desire by this Assignment for the
Assignor to assign to the Assignee, and for the Assignee to accept from the
Assignor, all of the rights and obligations of the Assignor under the provisions
of the contracts attached hereto as or listed in Schedule A (individually and
collectively referred to as the "Contracts"), all upon the terms and subject to
the conditions set forth below.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the foregoing, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Assignor and Assignee agree as follows:
Section 1. Assignment. The Assignor hereby assigns to the
Assignee all of the Assignor's rights, privileges, powers, liabilities and
immunities under the provisions of the Contracts and the Assignee hereby accepts
and assumes all of the obligations and expense under the provisions of the
Contracts. Assignee shall defend, indemnify and hold Assignor harmless against
and from any and all liability to any person, firm, corporation, political
subdivision, or other entity for any failure of Assignee to pay any obligations
assumed.
Section 2. Representation By Assignor and Assignee. The
Assignor and the Assignee represent and warrant to the other that each has been
duly authorized to execute and deliver this Assignment, and to perform its
obligations hereunder.
Section 3. General.
3.1. Amendment. This Assignment may not be amended or
terminated orally but only as expressly provided herein or by an instrument in
writing duly executed by all of the parties.
3.2. Waiver. No party hereto shall be deemed to have waived
the exercise of any right which it hold hereunder unless such waiver is made
expressly and in writing and, without limiting the generality of the foregoing,
no delay or omission by any party hereto in exercising any such right shall be
deemed a waiver of its future exercise. No such waiver made in any instance
involving the exercise of any such right shall be deemed a waiver as to any
other such instance, or any other such right.
3.3. Applicable law. The Assignment shall be given effect and
construed by application of the law of Maryland.
<PAGE>
3.4. Headings. The headings of the sections and subsections
hereof are provided herein for and only for convenience of reference, and shall
not be considered in construing their contents.
3.5. Successors and Assigns. This Assignment shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns hereunder.
3.6. Further Assurances. The parties agree that they will take
whatever action or actions are found to be reasonably necessary from time to
time to effectuate the provisions and intent of this Assignment, and, to that
end, the parties agree that they will execute any further documents or
instruments which may be necessary to give full force and effect to this
Assignment or to any of its provisions.
3.7. Binding Effect. This Assignment shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
3.8. Severability. In case any of the provisions of this
Assignment shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Assignment, but this Assignment
shall be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein.
3.9. Counterparts. This Assignment may be executed in any
number of counterparts, each of which will be an original, but all of which
together will constitute one assignment.
IN WITNESS WHEREOF, the Assignor and the Assignee have each
executed under seal this Assignment or caused it to be executed under seal on
its behalf by its duly authorized representatives, as of the day and year first
above written.
-----------------------------
By:_______________________________(SEAL)
ROSE SHANIS & CO., INC.
By:_______________________________(SEAL)
ROSE SHANIS SONS, INC.
By:_______________________________(SEAL)
<PAGE>
STEPHEN CORP.
By:_______________________________(SEAL)
ROSE SHANIS & CO.
By:________________________________(SEAL)
Trustee, Ely Shanis Trust,
General Partner
By:________________________________(SEAL)
Trustee, Bernice Shanis Trust,
General Partner
By:________________________________(SEAL)
Norman J. Glick, General Partner
By:________________________________(SEAL)
Susan M. Glick, Personal
Representative of the Estate
of Stephen J. Glick, General Partner
<PAGE>
EXHIBIT 7.1.3
OPINION OF COUNSEL TO ROSE SHANIS
---------------, -----
Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, Maryland 21157
Re: Asset Purchase Agreement among Rose Shanis & Co.,
Inc., Rose Shanis Sons, Inc., Rose Shanis & Co. and
Stephen Corp., and their respective Owners, and
Mason-Dixon Bancshares, Inc.
Ladies and Gentlemen:
We have acted as counsel to Rose Shanis & Co., Inc. ("RSC
Inc."), a Maryland corporation; Rose Shanis Sons, Inc. ("RSS Inc."), a Maryland
corporation; Stephen Corporation ("SC"), a Maryland corporation; and Rose Shanis
& Co. (the "Partnership"), a Maryland general partnership, in connection with
the purchase (the "Purchase") by Mason-Dixon Bancshares, Inc. ("Mason-Dixon"), a
Maryland corporation, of substantially all of the assets of RSC Inc., RSS Inc.,
SC, and the Partnership (the "Assets"), pursuant to an Asset Purchase Agreement
dated November ___, 1997, and all Exhibits and Schedules attached thereto (the
"Agreement"), among RSC Inc., RSS Inc., SC (collectively, the "Companies"), the
Partnership, and their respective owners, and Mason-Dixon. All capitalized terms
used in this letter that are not otherwise defined herein shall have the
meanings set forth in the Agreement.
In rendering the opinions expressed below, we have examined
the following documents:
1. The Agreement and the other documents executed in
connection therewith (collectively, the "Purchase Documents");
2. Copies of the Articles of Incorporation and Bylaws of each
of the Companies;
3. Copies of the Partnership Agreement (the "Partnership
Agreement") of the Partnership, dated January 31, 1942, among Bernice Shanis,
David Glick and Rose S. Glick, as amended through the date of this letter;
4. Copies of the resolutions adopted by the Board of Directors
and Owners of the Companies in connection with the Purchase, certified by the
Secretary of each of the Companies;
<PAGE>
5. Copies of the records of the proceedings of, and of actions
taken by, the Partnership and its Partners in connection with the Purchase;
6. A Certificate of Good Standing from the Maryland State
Department of Assessments and Taxation ("SDAT") dated November __ , 1997, to the
effect that RSC Inc. is duly incorporated and is an existing corporation in
Maryland;
7. A Certificate of Good Standing from the Maryland State
Department of Assessments and Taxation ("SDAT") dated November __ , 1997, to the
effect that RSS Inc. is duly incorporated and is an existing corporation in
Maryland;
8. A Certificate of Good Standing from the Maryland State
Department of Assessments and Taxation ("SDAT") dated November __ , 1997, to the
effect that SC is duly incorporated and is an existing corporation in Maryland;
9. A Certificate of the Companies and the Partnership with
respect to each of the Companies' and the Partnership's representations in the
Agreement and with respect to certain facts concerning each of the Companies and
the Partnership (the "Certificate").
In basing the opinions and other matters set forth herein on
"our knowledge," the words "our knowledge" signify that, in the course of our
representation of the Companies and the Partnership in matters with respect to
which we have been engaged by them as counsel, no information has come to our
attention that would give us actual knowledge or actual notice that any such
opinions or other matters are not accurate or that any of the foregoing
documents, certificates, reports, and information on which we have relied are
not accurate and complete. Except as otherwise stated herein, we have undertaken
no independent investigation or verification of such matters. The words "our
knowledge" and similar language used herein are intended to be limited to the
knowledge of the lawyers within our firm who have recently worked on matters on
behalf of the Companies and the Partnership.
In reaching the opinions set forth below, we have assumed, and
to our knowledge there are no facts inconsistent with, the following:
(a) Each of the parties to the Purchase Documents
(other than the Companies and the Partnership) has duly and validly executed and
delivered each instrument, document, and agreement executed in connection with
the Purchase to which such party is a signatory, and such party's obligations
set forth therein are its legal, valid, and binding obligations, enforceable in
accordance with their respective terms;
(b) each person executing any such instrument,
document, or agreement on behalf of any such party (other than the Companies and
the Partnership) is duly authorized to do so;
(c) each natural person executing any such
instrument, document, or agreement is legally competent to do so;
(d) there are no oral or written modifications of or
amendments to the Purchase Documents, and there has been no waiver of any of the
provisions of the Purchase Documents, by actions or conduct of the parties or
otherwise;
<PAGE>
(e) all documents submitted to us as originals are
authentic, all documents submitted to us as certified or photostatic copies
conform to the original document, all signatures on all documents submitted to
us for examination are genuine, and all public records reviewed are accurate and
complete.
Based on our review of the foregoing and subject to the
assumptions and qualifications set forth herein, it is our opinion that, as of
the date of this letter:
1. Each of the Companies is a corporation duly organized and
validly existing in good standing under the laws of the State of Maryland. Each
of the Companies has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now conducted by it,
to execute and deliver the Agreement, and to consummate the sale of the Business
and all other Transactions, and to take all other actions required to be taken
by it. The execution and delivery of the Purchase Documents and performance by
each of the Companies of the obligations under the Purchase Documents and all
other documents executed in connection therewith have been duly and properly
authorized by the Owners and the Board of Directors of each of the Companies in
full compliance with their Articles of Incorporation, By-laws and the
corporation laws of the State of Maryland. To our knowledge, the Companies are
not qualified to conduct business in any jurisdiction other than the State of
Maryland, which is the only jurisdiction in which the nature of its business or
the ownership of the properties makes such qualification necessary.
2. The Partnership is a general partnership validly existing
under the Partnership Agreement and the laws of the State of Maryland. The
Partnership has all requisite power and authority to own, lease and operate its
business as is now being conducted. To our knowledge, the Partnership is not
qualified to conduct business in any jurisdiction other than the State of
Maryland, which is the only jurisdiction in which the nature of its business or
the ownership of the properties makes such qualification necessary.
3. The Purchase Documents have been duly executed and
delivered by the Companies and the Partnership and constitute the valid and
legally binding obligations of each, enforceable against the Companies and the
Partnership in accordance with their terms, subject to the following:
i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent
conveyance and other laws affecting the
rights of creditors generally; and
ii) the exercise of judicial discretion in
accordance with general principles of
equity.
4. Based upon the Certificate and our knowledge, the execution
and delivery of the Purchase Documents and performance of the obligations under
the Purchase Documents, and the fulfillment of and compliance with the terms and
conditions of the Purchase Documents do not and will not, with the passing of
time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit under, or
permit the acceleration of any obligation under, (i) any term or provision in
any of the Companies' Articles of Incorporation or Bylaws or the Partnership's
Partnership Agreement, (ii) any contracts described in Section 10.8 of the
Agreement; (iii) any judgment, decree or order of any court or governmental
authority or agency to which any of
<PAGE>
the Companies or the Partnership is a party or by which any of the Companies or
Partnership, or any of their properties, is bound or (iv) any statute, law,
regulation or rule applicable to any of the Companies or the Partnership, so as
to have a material adverse effect on the assets, liabilities, results of
operations, financial condition, business or prospects of any of the Companies
or the Partnership.
5. Except for compliance with the applicable requirements of
filing and recording of Articles of Transfer as required by the Maryland General
Corporation Law, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency or public or
regulatory unit, agency, body or authority with respect to the Companies or the
Partnership is required in connection with the execution, delivery or
performance of the Agreement by the Companies or the Partnership or the
consummation of the Transactions by the Companies or the Partnership.
6. All of the issued and outstanding shares of capital stock
of the Companies are duly authorized, validly issued, fully paid and
nonassessable and free of preemptive rights; and no such shares of capital stock
have been issued in violation of any federal or state securities law. To our
knowledge, there are no shares of capital stock of the Companies outstanding,
and there are no subscriptions, options, convertible securities, calls, rights,
warrants or other agreements, claims or commitments of any nature whatsoever
obligating the Companies to issue, transfer, deliver or sell, or cause to be
issued, transferred, delivered or sold, additional shares of capital stock or
other securities of the Companies or obligating the Companies to grant, extend
or enter into any such agreement or commitment. To our knowledge, no prior
offer, issue, redemption, call, purchase, sale, transfer, negotiation or other
transaction of any nature with respect to the capital stock or equity interests
of the Companies has given or may give rise to any valid claim or action by any
person which is enforceable against the Companies or the Clients. To our
knowledge, the persons who are the Owners of all of the issued and outstanding
shares of the Companies' capital stock are the owners of the of all of the
issued and outstanding shares of the Companies' capital stock free and clear of
all liens, pledges, security interests, charges, claims, restrictions and
encumbrances of any nature.
7. Based upon the Certificate and our knowledge, there are no
suits, actions, claims or proceedings pending, or threatened against the
Companies or the Partnership relating to or involving the Companies or the
Partnership, and there are no investigations pending or threatened before any
court, arbitrator or administrative or governmental body, which, if finally
determined adversely, are reasonably likely, individually or in the aggregate,
to have an adverse effect on the assets, liabilities, results of operations,
financial condition, business or prospects of the Companies or the Partnership.
To the best of our knowledge, the Companies and the Partnership are not subject
to any judgment, decree, injunction, rule or order of any court, and, the
Companies and the Partnership are not subject to any governmental restriction,
which is reasonably likely (i) to have a material adverse effect on the assets,
liabilities, results of operations, financial condition, business or prospects
of the Companies or the Partnership, or (ii) to cause a limitation on
Mason-Dixon's or its subsidiaries ability to operate the business of the
Companies and the Partnership after the date of this letter.
8. The Companies and the Partnership have all authorizations,
approvals, licenses and orders of and from all governmental and regulatory
officers and bodies necessary
<PAGE>
to carry on its business as it is currently being conducted, to own or hold
under lease the properties and assets it owns or holds under lease.
9. To our knowledge, the use by the Companies and the
Partnership of the name "Rose Shanis" and all variations does not infringe on
the rights of any third party.
We express no opinion as to the laws of any jurisdiction other
than the laws of the State of Maryland and the laws of the United States of
America. The opinions expressed herein concern only the effect of the laws
(excluding the principles of conflict of laws) of the State of Maryland and the
United States of America as currently in effect. We assume no obligation to
supplement this opinion if any applicable laws change after the date hereof or
if we become aware of any facts that might change the opinions expressed herein
after the date hereof.
The opinions expressed in this letter are solely for your use
and these opinions may not be relied on by any other persons without prior
written approval. The opinions expressed in this letter are limited to the
matters set forth in this letter, and no other opinions should be inferred
beyond the matters expressly stated.
Very truly yours,
Adelberg, Rudow, Dorf, Hendler
& Sameth, LLC
By:__________________________
David B. Rudow, Member
<PAGE>
EXHIBIT 7.1.4
OPINION OF COUNSEL TO ESTATE OF STEPHEN J. GLICK
November __, 1997
Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, Maryland 21157
Re: Asset Purchase Agreement among Rose Shanis & Co.,
Inc., Rose Shanis Sons, Inc., Rose Shanis & Co. and
Stephen Corp., and their respective Owners, and
Mason-Dixon Bancshares, Inc.
Ladies and Gentlemen:
We have acted as counsel to Susan M. Glick, as Personal
Representative to the Estate of Stephen J. Glick (the "Glick Estate"), with
respect to the asset purchase (the "Purchase") described in the Asset Purchase
Agreement dated November ___, 1997, and all Exhibits and Schedules attached
thereto (the "Agreement"), by and among Rose Shanis & Co., Inc. ("RSC Inc."), a
Maryland corporation; Rose Shanis Sons, Inc. ("RSS Inc."), a Maryland
corporation; Stephen Corporation ("SC"), a Maryland corporation; and Rose Shanis
& Co. (the "Partnership"), a Maryland general partnership, and their respective
Owners, and by Mason-Dixon Bancshares, Inc. ("Mason-Dixon"), a Maryland
corporation, whereby Mason-Dixon will acquire substantially all of the Assets of
RSC Inc., RSS Inc., SC, and the Partnership. The Glick Estate owns, inter alia,
shares of stock in RSS Inc., RSC Inc., and SC (the "Shares") and interests (the
"Interests") in the Partnership. All capitalized terms used in this letter that
are not otherwise defined herein shall have the meanings set forth in the
Agreement.
In rendering the opinions expressed below, we have examined
the following documents:
1. The Agreement, as well as all other documents executed or
required to be executed in connection therewith (collectively, the "Purchase
Documents");
2. The Last Will and Testament of Stephen J. Glick, as well as
any modifications, amendments, and other documents pertaining thereto;
3. All letters of administration issued by the Orphans' Court
of Baltimore City, Maryland pertaining to the Estate of Stephen J. Glick, Estate
Number A-40822; and
4. Such other documents and records as we have deemed
necessary as a basis for the opinions expressed below.
In basing the opinions and other matters set forth herein on "our knowledge,"
the words "our knowledge" signify that, in the course of our representation of
the Glick Estate in matters
<PAGE>
with respect to which we have been engaged as counsel, no information has come
to our attention that would give us actual knowledge or actual notice that any
such opinions or other matters are not accurate or that any of the foregoing
documents, certificates, reports, and information on which we have relied are
not accurate and complete. Except as otherwise stated herein, we have undertaken
no independent investigation or verification of such matters. The words "our
knowledge" and similar language used herein are intended to be limited to the
knowledge of the lawyers within our firm who have recently worked with the Glick
Estate.
In reaching the opinions set forth below, we have assumed, and
to our knowledge there are no facts inconsistent with, the following:
(a) Each of the parties to the Purchase Documents
(other than the Glick Estate) has duly and validly executed and delivered each
instrument, document, and agreement executed in connection with the Purchase to
which such party is a signatory, and such party's obligations set forth therein
are its legal, valid, and binding obligations, enforceable in accordance with
their respective terms;
(b) each person executing any such instrument,
document, or agreement on behalf of any such party (other than the Glick Estate)
is duly authorized to do so;
(c) each natural person executing any such
instrument, document, or agreement is legally competent to do so;
(d) there are no oral or written modifications of or
amendments to the Purchase Documents, and there has been no waiver of any of the
provisions of the Purchase Documents, by actions or conduct of the parties or
otherwise;
(e) all documents submitted to us as originals are
authentic, all documents submitted to us as certified or photostatic copies
conform to the original documents, all signatures on all documents submitted to
us for examination are genuine, and all public records reviewed are accurate and
complete.
Based on our review of the foregoing and subject to the
assumptions and qualifications set forth herein, it is our opinion that, as of
the date of this letter:
1. Susan M. Glick has been appointed personal representative
of the Glick Estate by the Orphans' Court of Baltimore City, Maryland, pursuant
to letters of administration issued by the Orphans' Court for Estate Number
A-40822, and has the power and authority to execute and deliver the Agreement,
and to consummate the sale of the business and all other Transactions, and to
take all other actions required to be taken by or on behalf of the Glick Estate.
2. To our knowledge, the Glick Estate, as Partner in the
Partnership, owns its Interests in the Partnership free and clear of all liens,
pledges, security interests, charges, claims, restrictions and encumbrances of
any nature.
3. The Purchase Documents have been duly executed and
delivered by the Glick Estate and constitute its valid and legally binding
obligations, enforceable against the Glick Estate in accordance with its terms,
subject to the following:
<PAGE>
i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent
conveyance and other laws affecting the
rights of creditors generally; and
ii) the exercise of judicial discretion in
accordance with general principles of
equity.
4. Based upon our knowledge, the execution and delivery of the
Purchase Documents and performance of the obligations under the Purchase
Documents, and the fulfillment of and compliance with the terms and conditions
of the Purchase Documents do not and will not, with the passing of time or the
giving of notice or both, violate or conflict with, constitute a breach of or
default under, result in the loss of any material benefit under, or permit the
acceleration of any obligation under, any judgment, decree or order of any court
or governmental authority or agency to which the Glick Estate is a party or by
which the Glick Estate, or any its properties, is bound or any statute, law,
regulation or rule applicable to the Glick Estate.
5. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency or public or
regulatory unit, agency, body or authority with respect to the Glick Estate is
required in connection with the execution, delivery or performance of the
Agreement by the Glick Estate or the consummation of the Transactions by the
Glick Estate.
6. No consent, approval or authorization of any kind from any
beneficiary of the Glick Estate, whether known or unknown, is required in
connection with the execution, delivery or performance of the Agreement or
consummation of the Transactions by the Glick Estate.
7. To our knowledge, the Glick Estate, as holder of the Shares
and Interests, holds such shares and Interests free and clear of all liens,
pledges, security interest, charges, claims, restrictions and encumbrances of
any nature.
We express no opinion as to the laws of any jurisdiction other
than the laws of the State of Maryland and the laws of the United States of
America. The opinions expressed herein concern only the effect of the laws
(excluding the principles of conflict of laws) of the State of Maryland and the
United States of America as currently in effect. We assume no obligation to
supplement this opinion if any applicable laws change after the date hereof or
if we become aware of any facts that might change the opinions expressed herein
after the date hereof.
The opinions expressed in this letter are solely for your use
and these opinions may not be relied on by any other persons without prior
written approval. The opinions expressed in this letter are limited to the
matters set forth in this letter, and no other opinions should be inferred
beyond the matters expressly stated.
Very truly yours,
Freishtat & Sandler
<PAGE>
By:__________________________
----------------
<PAGE>
EXHIBIT 7.1.5
OPINION OF COUNSEL TO THE MARITAL AND BYPASS TRUSTS
November __, 1997
Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, Maryland 21157
Re: Asset Purchase Agreement among Rose Shanis & Co.,
Inc., Rose Shanis Sons, Inc., Rose Shanis & Co. and
Stephen Corp., and their respective Owners, and
Mason-Dixon Bancshares, Inc.
Ladies and Gentlemen:
We have acted as counsel to Susan M. Glick and Gail Glick, as
Trustees of (i) the Marital Trust under the Last Will and Testament of Stephen
J. Glick (the "Marital Trust"), and (ii) the Bypass Trust under the Last Will
and Testament of Stephen J. Glick (the "Bypass Trust"), with respect to an asset
purchase (the "Purchase") described in the Asset Purchase Agreement dated
November ___, 1997, and all Exhibits and Schedules attached thereto (the
"Agreement"), by and among Rose Shanis & Co., Inc. ("RSC Inc."), a Maryland
corporation; Rose Shanis Sons, Inc. ("RSS Inc."), a Maryland corporation;
Stephen Corporation ("SC"), a Maryland corporation; and Rose Shanis & Co. (the
"Partnership"), a Maryland general partnership, and their respective Owners, and
by Mason-Dixon Bancshares, Inc. ("Mason-Dixon"), a Maryland corporation, whereby
Mason-Dixon will acquire substantially all of the Assets of RSC Inc., RSS Inc.,
SC, and the Partnership. The Marital Trust and Bypass Trust (collectively, the
"Trusts") own, inter alia,* shares of stock in RSC Inc., RSS Inc., and SC (the
"Shares"), and interests (the "Interests") in the Partnership. All capitalized
terms used in this letter that are not otherwise defined herein shall have the
meanings set forth in the Agreement.
In rendering the opinions expressed below, we have examined
the following documents:
1. The Agreement, as well as all other documents executed or
required to be executed in connection therewith (collectively, the "Purchase
Documents");
* (If, in fact, the Trusts own shares at the Closing Date).
2. The Last Will and Testament, as well as any modifications,
amendments, and other documents pertaining thereto (collectively, the "Trust
Instrument"); and
3. Such other documents and records as we have deemed
necessary as a basis for the opinions expressed below.
<PAGE>
In basing the opinions and other matters set forth herein on "our knowledge,"
the words "our knowledge" signify that, in the course of our representation of
the Trusts in matters with respect to which we have been engaged as counsel, no
information has come to our attention that would give us actual knowledge or
actual notice that any such opinions or other matters are not accurate or that
any of the foregoing documents, certificates, reports, and information on which
we have relied are not accurate and complete. Except as otherwise stated herein,
we have undertaken no independent investigation or verification of such matters.
The words "our knowledge" and similar language used herein are intended to be
limited to the knowledge of the lawyers within our firm who have recently worked
with the Trusts.
In reaching the opinions set forth below, we have assumed, and
to our knowledge there are no facts inconsistent with, the following:
(a) Each of the parties to the Purchase Documents
(other than the Trusts) has duly and validly executed and delivered each
instrument, document, and agreement executed in connection with the Purchase to
which such party is a signatory, and such party's obligations set forth therein
are its legal, valid, and binding obligations, enforceable in accordance with
their respective terms;
(b) each person executing any such instrument,
document, or agreement on behalf of any such party (other than the Trusts) is
duly authorized to do so;
(c) each natural person executing any such
instrument, document, or agreement is legally competent to do so;
(d) there are no oral or written modifications of or
amendments to the Purchase Documents, and there has been no waiver of any of the
provisions of the Purchase Documents, by actions or conduct of the parties or
otherwise; and
(e) all documents submitted to us as originals are
authentic, all documents submitted to us as certified or photostatic copies
conform to the original documents, all signatures on all documents submitted to
us for examination are genuine, and all public records reviewed are accurate and
complete.
Based on our review of the foregoing and subject to the
assumptions and qualifications set forth herein, it is our opinion that, as of
the date of this letter:
1. Susan M. Glick and Gail Glick, as Trustees of the Trusts,
collectively hold the requisite power and authority granted by the Trust
Instrument to act, by their unanimous consent, on behalf of the respective
Trusts to execute and deliver the Agreement, to consummate the sale of the
business and all other Transactions, and to take all other actions required to
be taken by or on behalf of the Trusts.
2. To our knowledge, the Trusts, as Partners in the
Partnership, own their respective Interests free and clear of all liens,
pledges, security interests, charges, claims, restrictions and encumbrances of
any nature.
3. To our knowledge, the Trusts, as holders of the Shares, own
their respective Shares free and clear of all liens, pledges, security
interests, charges, claims, restrictions and encumbrances of any nature.
<PAGE>
4. The Purchase Documents have been duly executed and
delivered by the Trustees on behalf of the Trusts and constitute valid and
legally binding obligations, enforceable against the Trusts in accordance with
their terms, subject to the following:
i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent
conveyance and other laws affecting the
rights of creditors generally; and
ii) the exercise of judicial discretion in
accordance with general principles of
equity.
5. Based upon our knowledge, the execution and delivery of the
Purchase Documents and performance of the obligations under the Purchase
Documents, and the fulfillment of and compliance with the terms and conditions
of the Purchase Documents do not and will not, with the passing of time or the
giving of notice or both, violate or conflict with, constitute a breach of or
default under, result in the loss of any material benefit under, or permit the
acceleration of any obligation under, any judgment, decree or order of any court
or governmental authority or agency to which the either of the Trusts is a party
or by which either of the Trusts, or any of their respective properties, is
bound or any statute, law, regulation or rule applicable to such Trust.
6. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency or public or
regulatory unit, agency, body or authority with respect to the Marital Trust or
Bypass Trust is required in connection with the execution, delivery or
performance of the Agreement by either Trust or the consummation of the
Transactions by either Trust.
7. No consent, approval or authorization of any kind from any
beneficiary of either of the Trusts, whether known or unknown, is required in
connection with the execution, delivery or performance of the Agreement or
consummation of the Transactions by either Trust.
8. To our knowledge, the Trusts, as the holders of the Shares
and Interests, each hold such Shares and Interests free and clear of all liens,
pledges, security interests, charges, claims, restrictions and encumbrances of
any nature.
We express no opinion as to the laws of any jurisdiction other
than the laws of the State of Maryland and the laws of the United States of
America. The opinions expressed herein concern only the effect of the laws
(excluding the principles of conflict of laws) of the State of Maryland and the
United States of America as currently in effect. We assume no obligation to
supplement this opinion if any applicable laws change after the date hereof or
if we become aware of any facts that might change the opinions expressed herein
after the date hereof.
The opinions expressed in this letter are solely for your use
and these opinions may not be relied on by any other persons without prior
written approval. The opinions
<PAGE>
expressed in this letter are limited to the matters set forth in this letter,
and no other opinions should be inferred beyond the matters expressly stated.
Very truly yours,
---------------
By:__________________________
----------------
<PAGE>
EXHIBIT 7.1.6
OPINION OF COUNSEL TO THE ________________ TRUST
November __, 1997
Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, Maryland 21157
Re: Asset Purchase Agreement among Rose Shanis & Co.,
Inc., Rose Shanis Sons, Inc., Rose Shanis & Co. and
Stephen Corp., and their respective Owners, and
Mason-Dixon Bancshares, Inc.
Ladies and Gentlemen:
We have acted as counsel to ___________________, as Trustee(s)
of _______________ (the "Trust"), with respect to an asset purchase (the
"Purchase") described in the Asset Purchase Agreement dated November ___, 1997,
and all Exhibits and Schedules attached thereto (the "Agreement"), by and among
Rose Shanis & Co., Inc. ("RSC Inc."), a Maryland corporation; Rose Shanis Sons,
Inc. ("RSS Inc."), a Maryland corporation; Stephen Corporation ("SC"), a
Maryland corporation; and Rose Shanis & Co. (the "Partnership"), a Maryland
general partnership, and their respective Owners, and by Mason-Dixon Bancshares,
Inc. ("Mason-Dixon"), a Maryland corporation, whereby Mason-Dixon will acquire
substantially all of the Assets of RSC Inc., RSS Inc., SC, and the Partnership.
The Trust owns, inter alia, shares of stock in [RSC Inc., RSS Inc., and/or SC
(the "Shares"), and/or interests (the "Interests") in the Partnership]. All
capitalized terms used in this letter that are not otherwise defined herein
shall have the meanings set forth in the Agreement.
In rendering the opinions expressed below, we have examined
the following documents:
1. The Agreement, as well as all other documents executed or
required to be executed in connection therewith (collectively, the "Purchase
Documents");
2. The [ Trust Instrument ], as well as any modifications,
amendments, and other documents pertaining thereto (collectively, the "Trust
Instrument"); and
3. Such other documents and records as we have deemed
necessary as a basis for the opinions expressed below.
In basing the opinions and other matters set forth herein on "our knowledge,"
the words "our knowledge" signify that, in the course of our representation of
the Trust in matters with respect to which we have been engaged as counsel, no
information has come to our attention that would give us actual knowledge or
actual notice that any such opinions or other matters
<PAGE>
are not accurate or that any of the foregoing documents, certificates, reports,
and information on which we have relied are not accurate and complete. Except as
otherwise stated herein, we have undertaken no independent investigation or
verification of such matters. The words "our knowledge" and similar language
used herein are intended to be limited to the knowledge of the lawyers within
our firm who have recently worked with the Trust.
In reaching the opinions set forth below, we have assumed, and
to our knowledge there are no facts inconsistent with, the following:
(a) Each of the parties to the Purchase Documents
(other than the Trust) has duly and validly executed and delivered each
instrument, document, and agreement executed in connection with the Purchase to
which such party is a signatory, and such party's obligations set forth therein
are its legal, valid, and binding obligations, enforceable in accordance with
their respective terms;
(b) each person executing any such instrument,
document, or agreement on behalf of any such party (other than the Trust) is
duly authorized to do so;
(c) each natural person executing any such
instrument, document, or agreement is legally competent to do so;
(d) there are no oral or written modifications of or
amendments to the Purchase Documents, and there has been no waiver of any of the
provisions of the Purchase Documents, by actions or conduct of the parties or
otherwise;
(e) all documents submitted to us as originals are
authentic, all documents submitted to us as certified or photostatic copies
conform to the original documents, all signatures on all documents submitted to
us for examination are genuine, and all public records reviewed are accurate and
complete.
Based on our review of the foregoing and subject to the
assumptions and qualifications set forth herein, it is our opinion that, as of
the date of this letter:
1. _________________, as Trustee(s) of the Trust, has(ve) the
requisite power and authority granted by the Trust Instrument to act on behalf
of the Trust to execute and deliver the Agreement, to consummate the sale of the
business and all other Transactions, and to take all other actions required to
be taken by or on behalf of the Trust.
2. To our knowledge, the Trust, as a Partner in the
Partnership, owns the Interests free and clear of all liens, pledges, security
interests, charges, claims, restrictions and encumbrances of any nature.
3. To our knowledge, the Trust, as a holder of the Shares,
owns the Shares free and clear of all liens, pledges, security interests,
charges, claims, restrictions and encumbrances of any nature.
4. The Purchase Documents have been duly executed and
delivered by the Trust and constitute its valid and legally binding obligations,
enforceable against the Trust in accordance with their terms, subject to the
following:
<PAGE>
i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent
conveyance and other laws affecting the
rights of creditors generally; and
ii) the exercise of judicial discretion in
accordance with general principles of
equity.
5. Based upon our knowledge, the execution and delivery of the
Purchase Documents and performance of the obligations under the Purchase
Documents, and the fulfillment of and compliance with the terms and conditions
of the Purchase Documents do not and will not, with the passing of time or the
giving of notice or both, violate or conflict with, constitute a breach of or
default under, result in the loss of any material benefit under, or permit the
acceleration of any obligation under, any judgment, decree or order of any court
or governmental authority or agency to which the Trust is a party or by which
the Trust, or any of its properties, is bound or any statute, law, regulation or
rule applicable to such Trust.
6. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental agency or public or
regulatory unit, agency, body or authority with respect to the Trust is required
in connection with the execution, delivery or performance of the Agreement by
the Trust or the consummation of the Transactions by the Trust.
7. No consent, approval or authorization of any kind from any
beneficiary of the Trust, whether known or unknown, is required in connection
with the execution, delivery or performance of the Agreement or consummation of
the Transactions by the Trust.
8. To our knowledge, the Trust, as the holder of the Shares
and Interests, holds such Shares and Interests free and clear of all liens,
pledges, security interests, charges, claims, restrictions and encumbrances of
any nature.
We express no opinion as to the laws of any jurisdiction other
than the laws of the State of Maryland and the laws of the United States of
America. The opinions expressed herein concern only the effect of the laws
(excluding the principles of conflict of laws) of the State of Maryland and the
United States of America as currently in effect. We assume no obligation to
supplement this opinion if any applicable laws change after the date hereof or
if we become aware of any facts that might change the opinions expressed herein
after the date hereof.
The opinions expressed in this letter are solely for your use
and these opinions may not be relied on by any other persons without prior
written approval. The opinions expressed in this letter are limited to the
matters set forth in this letter, and no other opinions should be inferred
beyond the matters expressly stated.
<PAGE>
Very truly yours,
---------------
By:__________________________
----------------
<PAGE>
EXHIBIT 7.1.10
ARTICLES OF TRANSFER
FROM
-------------------------------
TO
___________________________, LLC
THESE ARTICLES OF TRANSFER, made and entered into this day of
November, 1997, by and between ___________________________, a Maryland
corporation (the "Transferor"), and __________________________, LLC, a Maryland
limited liability company (the "Transferee").
FIRST: The Transferor agrees to transfer substantially all of
its property and assets to the Transferee.
SECOND: The name, address and principal place of business of
the Transferee is _________, LLC, 233 East Redwood Street, Baltimore, Maryland
21202.
THIRD: (a) ________________________________, the Transferor,
was incorporated under the General Laws of the State of Maryland.
(b) ______________________ LLC, the Transferee, was
organized as a limited liability company under the General Laws of the State of
Maryland.
FOURTH:(a) The principal office in the State of Maryland of
the Transferor is located in County.
(b) The Transferor owns an interest in land in ________
County, Maryland. The interest in land is not being transferred to the
Transferee.
FIFTH: The amount of the consideration paid by the Transferee
for the transfer of the property and assets of the Transferor hereunder is
[allocation] Dollars ($----------).
SIXTH: (a) The terms and conditions of the transaction set
forth in these Articles of Transfer have been advised, authorized, and approved
by the Transferor in the manner and by the vote required by its Charter and the
laws of the State of Maryland by the execution of a Unanimous Consent of the
Board of Directors and Stockholders in Lieu of Special Meeting dated November
___, 1997.
(b) The terms and conditions of the transaction set
forth in these Articles of Transfer have been advised, authorized and approved
by the Transferee in the manner
<PAGE>
and by the vote required by its Operating Plan and the laws of the State of
Maryland by the execution of a Consent by the Member dated _______________,
1997.
SEVENTH: The effective time of the transfer is the later of
_____, 1997, or the time the State Department of Assessments and Taxation
accepts the Articles of Transfer for record.
IN WITNESS WHEREOF, the Transferor, and the sole Member of the
Transferee, has caused these Articles to be signed and acknowledged in its name
and on its behalf by its President and its corporate seal to be affixed and
attested by its Secretary on the day and year first above written, and each such
signatory hereby acknowledges the same to be the act and deed of such
Corporation and that to the best of his knowledge, information and belief, all
matters and facts stated herein are true in all material respects, such
statements being made under the penalty of perjury.
TRANSFEROR: _________________________________
ATTEST: ____________________________
__________________________________ By:__________________________(SEAL)
, Secretary , President
TRANSFEREE: _________________________, LLC
ATTEST: Mason-Dixon Bancshares, Inc.
__________________________________ By:_________________________(SEAL)
, Secretary Thomas K. Ferguson, President
Mason-Dixon Bancshares, Sole Member
of ___________, LLC
<PAGE>
EXHIBIT 7.1.11
INDEMNITY AND ESCROW AGREEMENT
THIS Indemnity and Escrow Agreement (this "Indemnity and
Escrow Agreement") is entered into as of the _________ day of ______________,
1997, by and among Rose Shanis & Co., Inc., Rose Shanis Sons, Inc., Rose Shanis
& Co. and Stephen Corp. (collectively "Rose Shanis"), Norman J. Glick, Susan M.
Glick, individually and as Personal Representative of the Estate of Stephen J.
Glick, Susan M. Glick and Gail Glick, Trustees of the Marital Trust under the
Last Will and Testament of Stephen J. Glick, Susan M. Glick and Gail Glick,
Trustees of the Bypass Trust under the Last Will and Testament of Stephen J.
Glick, Mitzi S. Glick and Eugene Schreiber, Trustees u/a Norman J. Glick dated
May 14, 1997, FBO Robert S. Glick, and Mitzi S. Glick and Eugene Schreiber,
Trustees u/a Norman J. Glick dated May 14, 1997, FBO Bonnie G. Dubin, the Ely
Shanis Trust, and the Bernice Shanis Trust (Norman J. Glick and Susan M. Glick,
individually and as Personal Representative of the Estate of Stephen J. Glick,
Mitzi S. Glick and Eugene Schreiber, Trustees u/a Norman J. Glick dated May 14,
1997, FBO Robert S. Glick, Mitzi S. Glick and Eugene Schreiber, Trustees u/a
Norman J. Glick dated May 14, 1997, FBO Bonnie G. Dubin, the Ely Shanis Trust,
the Bernice Shanis Trust, Susan M. Glick and Gail Glick, Trustees of the Marital
Trust under the Last Will and Testament of Stephen J. Glick, and Susan M. Glick
and Gail Glick, Trustees of the Bypass Trust under the Last Will and Testament
of Stephen J. Glick, are sometimes collectively called the "Owners"),
Mason-Dixon Bancshares, Inc. ("Mason-Dixon"), ____________ and ______________
(the "Subsidiaries") and ________________ ("Escrow Agent"). Capitalized terms
used and not otherwise defined herein shall have the meanings as defined in the
Asset Purchase Agreement as of ________________ , 1997 (the "Asset Purchase
Agreement").
RECITALS
Execution and delivery of this Indemnity and Escrow Agreement
by Rose Shanis and the Owners is a condition to the obligations of Mason-Dixon
and the Subsidiaries to close under the Asset Purchase Agreement. The Asset
Purchase Agreement provides that a portion of the Purchase Price shall be held
in escrow in accordance with the terms and conditions of this Indemnity and
Escrow Agreement. Rose Shanis and the Owners have approved the transactions
contemplated by the Asset Purchase Agreement ("Transactions") and desire to
enter into this Indemnity and Escrow Agreement to induce Mason-Dixon and the
Subsidiaries to consummate the Transactions. This Indemnity and Escrow Agreement
shall be the exclusive mechanism for exercising Mason-Dixon's right to
indemnification under the Asset Purchase Agreement. The Owners plan to liquidate
Rose Shanis shortly after the date of this Indemnity and Escrow Agreement. The
individuals named above as trustees under the Trusts identified above and the
Personal Representative sign this Indemnity and Escrow Agreement solely in their
fiduciary capacities and shall have no personal liability hereunder unless such
individuals also sign this Indemnity and Escrow Agreement individually. The
personal liability of Susan M. Glick is limited to the greater of the Escrowed
Amount (as defined in Section 4.2) or the amount of the Purchase Price she
receives as beneficiary of the Marital and Bypass Trusts under the Last Will and
Testament of Stephen J. Glick.
NOW, THEREFORE, in consideration of and in reliance upon the
promises and covenants in this Indemnity and Escrow Agreement, the parties agree
as follows:
<PAGE>
1. Indemnification by Rose Shanis and the Owners.
1.1. Rose Shanis and the Owners, jointly and
severally, subject to the limitations of Section 1.3, shall be liable for,
indemnify Mason-Dixon and the Subsidiaries, their successors and assigns and
their affiliates and each director, officer, employee and agent of each of the
foregoing (each being sometimes called an "Indemnified Party" and collectively
the "Indemnified Parties") with respect to, hold the Indemnified Parties
harmless from, and reimburse the Indemnified Parties for, any claims, actions,
demands, proceedings, losses, liabilities, damages (including incidental and
consequential damages), expenses (including reasonable attorneys' fees), or
diminution of value, whether or not involving a third-party claim,
(collectively, the "Mason-Dixon Losses," and singly, a "Mason-Dixon Loss"),
which arise out of or are in respect of, directly or indirectly:
1.1.1. any breach of any representation or
warranty of Rose Shanis contained in the Asset Purchase Agreement;
1.1.2. the breach of any covenant, agreement
or obligation of the Owners or Rose Shanis contained in the Asset Purchase
Agreement; or
1.1.3. any claim by any third party arising
from any act or omission by Rose Shanis or its officers, employees, agents or
affiliates relating to or arising out of the Business, including, but not
limited to, claims relating to or arising out of the origination, purchase,
servicing, collection or sale of Loans by Rose Shanis prior to and including the
Closing Date, whether such a transaction was completed before, on or after the
Closing Date (except with respect to any liability or obligation arising out of
any action by Mason-Dixon or the Subsidiaries after the Closing Date).
The right to indemnification shall not be affected by an investigation conducted
with respect to or any knowledge acquired by Mason-Dixon at any time, whether
before or after the execution and delivery of this Indemnity and Escrow
Agreement, with respect to the accuracy or inaccuracy of or compliance with, any
representation, warranty, covenant or obligation of Rose Shanis.
1.2. Notice of Claim. Promptly after notice by
Mason-Dixon of any facts or events that may result in a Mason-Dixon Loss,
Mason-Dixon shall give written notice ("Notice of Claim") to the Owners and the
Escrow Agent. The Notice of Claim shall set forth the amount of the claim, or
Mason-Dixon's then best estimate of the amount of the claim. Mason-Dixon shall
furnish to the Owners, in reasonable detail, such information as Mason-Dixon may
have with respect to such claim (including copies of any summons, complaint or
other pleading which may have been served and any written claim, demand,
invoice, billing or other document evidencing or asserting the same). No failure
or delay by Mason-Dixon in the performance of the foregoing shall reduce or
otherwise affect the obligation of Rose Shanis and the Owners to indemnify and
hold Mason-Dixon harmless, except to the extent that such failure or delay has
adversely affected Rose Shanis or the Owners' ability to defend against, settle
or satisfy the claim.
1.3. Limitations. The obligation of Rose Shanis and
the Owners to indemnify the Indemnified Parties is subject to the following
limitations:
1.3.1. The Indemnified Parties shall look
first to the Escrowed Amount (as defined in Section 4.2) for the discharge of
Rose Shanis and the Owners' obligations
<PAGE>
hereunder. Such action by the Indemnified Parties, however, shall not release or
satisfy any of Rose Shanis' or the Owners' obligations hereunder to the
Indemnified Parties, except to the extent satisfied out of the Escrowed Amount.
1.3.2. From the date hereof until the first
anniversary of this Indemnity and Escrow Agreement (__________, 1999) ("First
Anniversary"), the obligation of Rose Shanis and the Owners to indemnify the
Indemnified Parties with respect to any Mason-Dixon Loss incurred as a result of
or in connection with any claim by any state or federal regulatory authority
arising out of or relating to 16 C.F.R. ss. 444.4 (1997), as it may be amended,
is limited to Notices of Claim made during this period in an aggregate amount of
the Purchase Price.
1.3.3. From the date hereof until the First
Anniversary, the obligation of Rose Shanis and the Owners to indemnify the
Indemnified Parties with respect to Mason-Dixon Losses not included in Section
1.3.2 is limited to Notices of Claim made during this period in an aggregate
amount of $7,500,000.
1.3.4. From the First Anniversary until the
second anniversary of this Indemnity and Escrow Agreement (__________, 2000)
("Second Anniversary"), the obligation of Rose Shanis and the Owners to
indemnify the Indemnified Parties with respect to Mason-Dixon Losses is limited
to Notices of Claim made during this period in an aggregate amount of
$4,000,000.
1.3.5. From the Second Anniversary until the
third anniversary of this Indemnity and Escrow Agreement (__________, 2001)
("Termination Date"), the obligation of Rose Shanis and the Owners to indemnify
the Indemnified Parties with respect to Mason-Dixon Losses is limited to Notices
of Claim made during this period in an aggregate amount of $2,000,000.
1.3.6. Notwithstanding any other provision
of this Indemnity and Escrow Agreement, the aggregate amount Rose Shanis and the
Owners are obligated to pay under this Indemnity and Escrow Agreement shall not
exceed $7,500,000 plus the amount paid under Section 1.3.2, but in no event
shall Rose Shanis and the Owners pay more than the Purchase Price.
2. Mason-Dixon's Obligation to Mitigate. Except for claims
asserted by third parties, Mason-Dixon shall exercise commercially reasonable
efforts to mitigate the amount of any Mason-Dixon Loss.
3. Rose Shanis and the Owners' Defense.
This Section applies only to claims asserted by third
parties. If the claim asserted by a Notice of Claim arises because of a claim or
demand that is asserted by a third party, including, but not limited to, any
governmental unit or a Rose Shanis borrower, Rose Shanis and the Owners shall
have 15 days after the date of the Notice of Claim to notify Mason-Dixon in
writing of their election to defend the claim on behalf of the Indemnified
Party. If Rose Shanis and the Owners elect to defend the claim, the Indemnified
Party shall make available to Rose Shanis and the Owners all records and other
materials which are reasonably required in the defense of the claim and shall
otherwise cooperate with and assist Rose Shanis and the Owners in the defense of
the claim. So long as Rose Shanis and the Owners are defending the claim in
<PAGE>
good faith, the Indemnified Party shall not pay, settle or compromise the claim.
If Rose Shanis and the Owners elect to defend the claim, the Indemnified Party
shall have the right to participate in the defense of the claim, at its own
expense. If Rose Shanis and the Owners do not elect to defend the claim, or do
not defend the claim in good faith, then the Indemnified Party shall have the
right, in addition to any other right or remedy it may have hereunder, at Rose
Shanis and the Owners' expense, to defend the claim or to pay or settle the
claim. Notwithstanding any of the foregoing, (a) the Indemnified Party shall not
have any obligation to participate in the defense of, or defend, the claim; and
(b) the Indemnified Party's defense of or its participation in the defense of
the claim shall not in any way diminish the obligations of Rose Shanis and the
Owners. Rose Shanis and the Owners shall not make any settlement of the claim
without written consent of Mason-Dixon.
4. Creation of Escrow.
4.1. Appointment. Mason-Dixon, the Subsidiaries, Rose
Shanis and the Owners jointly appoint the Escrow Agent as the escrow agent for
purposes of and to act in accordance with the terms and conditions hereof, and
the Escrow Agent accepts such appointment.
4.2. Escrow Property. At Closing, Mason-Dixon shall
pay to the Escrow Agent a portion of the Purchase Price equal to $7,500,000
(such amount, less the amount of any payments by the Escrow Agent to Mason-Dixon
in accordance with the terms hereof, is referred to as the "Escrowed Amount").
Notwithstanding such payment to the Escrow Agent, Mason-Dixon shall be deemed to
have fully satisfied its obligation to pay such part of the Purchase Price
payable pursuant to the Asset Purchase Agreement. Rose Shanis (or the Owners)
will report all income earned on, or derived from, the Escrowed Amount as their
income. The Escrowed Amount shall be received and maintained by the Escrow Agent
in an account (the "Escrow Account") until paid out in accordance with the terms
of this Indemnity and Escrow Agreement.
4.3. Investments. The Escrow Agent shall invest the
amounts in the Escrow Account in the direct obligations of, or in the
obligations of any agency or authority of, the United States, any state of the
United States and any political subdivision thereof, in any fund that invests
only in such obligations, or in such other investments as are directed by a
writing signed by Rose Shanis, the Owners and Mason-Dixon. The Escrow Agent
shall not be required to invest any sums to the extent it reasonably determines
that it will be required to distribute, use or otherwise expend such funds
within 30 days. The Escrow Agent shall not be liable or otherwise responsible
for any losses resulting from any investments provided for pursuant to this
Indemnity and Escrow Agreement. All earnings in the Escrow Account shall be paid
out to the Owners not less frequently than quarterly, within 30 days after the
end of each calendar quarter.
4.4. Payment of Claims. The Indemnified Parties shall
be entitled to payment from the Escrow Account if Rose Shanis or the Owners are
obligated to indemnify the Indemnified Party as provided in Section 1.
4.5. Demand for Payment. From time to time,
Mason-Dixon may give written notice ("Demand for Payment") to the Owners and the
Escrow Agent specifying in reasonable detail the nature and dollar amount of any
claim an Indemnified Party may have under Section 1 for which a Notice of Claim
has been made and requesting payment of the claim from the Escrow Account.
<PAGE>
4.6. Disputed Claims, Arbitration. If the Owners do
not object in writing to the Demand for Payment to the Escrow Agent and
Mason-Dixon within 30 days after the date the Demand for Payment is given, the
Escrow Agent shall pay the amount reported in the Demand for Payment to
Mason-Dixon to the extent the Escrow Account contains sufficient funds for that
purpose. If the Owners object to such payment, they shall give written notice to
the Escrow Agent and Mason-Dixon of their objection to the payment of the claim
(the "Objection Notice") within 30 days after the Demand for Payment was given.
If the Objection Notice is timely given, the Escrow Agent shall make no payment
to Mason-Dixon in respect of the claim reported in the Demand for Payment unless
Mason-Dixon and the Owners jointly in writing instruct the Escrow Agent to make
such payment. Mason-Dixon and the Owners shall make a good faith attempt to
resolve the dispute. In the absence of joint instructions from Mason-Dixon and
the Owners, upon written request by the Owners or Mason-Dixon made not earlier
than 30 days after the Objection Notice is given, the Escrow Agent promptly
shall refer the dispute concerning the Demand for Payment to the American
Arbitration Association for settlement by arbitration in accordance with the
Association's Commercial Arbitration Rules. Judgment upon any resulting
arbitration award may be entered in any court of competent jurisdiction. As part
of such award, the arbitrator may establish his fee and expenses in connection
therewith, which Mason-Dixon shall promptly pay. However, any award in an
Indemnified Party's favor shall be increased by a percentage of such fees and
expenses equal to the same percentage of an Indemnified Party's claim that is
awarded to an Indemnified Party in arbitration. Any award shall be a conclusive
determination of the matter and shall be final and binding upon all parties. The
Escrow Agent promptly shall pay the amount of any award in an Indemnified
Party's favor to Mason-Dixon, to the extent the Escrow Account contains
sufficient funds for that purpose. Arbitration proceedings shall be held in
Baltimore, Maryland, unless the Owners and Mason-Dixon agree upon another
location.
4.7. Periodic Determination of Escrowed Amount. On
the first anniversary hereof (the "First Determination Date"), the Escrow Agent
shall determine the amount of any Notices of Claim and Demands for Payment made
against the Escrow Account, the validity and amount of which have not been
determined or the validity and amount of which have been determined, but which
have not been paid. This amount is called the "Reserve." The Escrow Agent shall
pay to the Owners an amount from the Escrow Account equal to the Escrowed Amount
minus the Reserve and minus $4,000,000, to the extent the Escrow Account
contains sufficient funds for that purpose.
Each time an arbitration award is made regarding a
claim after the First Determination Date and before the Second Determination
Date (as defined below), the Escrow Agent shall pay to the Owners an amount from
the Escrow Account equal to the Escrowed Amount minus the then Reserve and minus
$4,000,000, to the extent the Escrow Account contains sufficient funds for that
purpose.
On the second anniversary hereof (the "Second
Determination Date"), the Escrow Agent shall determine the then amount of the
Reserve and shall pay to the Owners an amount from the Escrow Account equal to
the Escrowed Amount minus the Reserve and minus $2,000,000, to the extent the
Escrow Account contains sufficient funds for that purpose.
Each time an arbitration award is made regarding a
claim after the Second Determination Date and before the Termination Date (as
defined below), the Escrow Agent shall pay to the Owners an amount from the
Escrow Account equal to the Escrowed Amount minus
<PAGE>
the then Reserve and minus $2,000,000, to the extent the Escrow Account contains
sufficient funds for that purpose.
On the Termination Date, the Escrow Agent shall
determine the then amount of the Reserve and shall pay to the Owners an amount
from the Escrow Account equal to the Escrowed Amount minus the Reserve, to the
extent the Escrow Account contains sufficient funds for that purpose. The Escrow
Agent shall hold all amounts withheld until the claims described above are
resolved. Upon resolution of any claims in favor of an Indemnified Party, the
amount thereof shall be paid to the Indemnified Party. Upon resolution of all
claims, the remaining amount shall be distributed to the Owner.
No transfer to the Owners under this Section shall
affect (i) any rights of any Indemnified Party with respect to pending claims
for which an amount is held under this paragraph, or (ii) the continuing
obligation of indemnity of Rose Shanis and Owners under Section 1 for the period
set forth therein.
4.8. Escrow Agent's Responsibility; Resignation;
Removal.
4.8.1. The Escrow Agent shall retain the
Escrowed Amount in accordance with the terms and conditions of this Indemnity
and Escrow Agreement, and shall be under no responsibility or obligation other
than to follow the provisions hereof.
4.8.2. The Escrow Agent may resign at any
time upon 30 days written notice to Mason-Dixon and the Owners; within 20 days
after receipt of such notice, Mason-Dixon shall select an independent bank or
trust company to serve as the successor Escrow Agent, subject to the reasonable
consent of the Owners (which consent shall not be unreasonably withheld or
delayed). In the event a successor is not selected and agreed upon within the
time described above, the Escrow Agent may deposit the Escrowed Amount into a
court of competent jurisdiction and request that the court appoint or cause the
parties to appoint a successor Escrow Agent. Upon such deposit, the Escrow Agent
shall be relieved of all future responsibilities under this Indemnity and Escrow
Agreement.
4.8.3. The Escrow Agent may be removed at
any time upon written notice from both Mason-Dixon and the Owners.
4.9. No Liability of Escrow Agent. The Escrow Agent
shall not be liable for any act or omission in good faith and in the absence of
fraud or willful misconduct. The Escrow Agent shall in all cases be entitled to
rely upon and be fully protected in acting or in refraining from acting under
this Indemnity and Escrow Agreement in accordance with any and all written
notifications received by it in accordance with this Indemnity and Escrow
Agreement.
4.10. Indemnification of Escrow Agent. Mason-Dixon
and the Owners hereby agree to indemnify and hold the Escrow Agent harmless from
and against any and all actions, suits, proceedings, losses, liabilities,
damages, costs and expenses (including attorneys' and experts' fees, costs of
investigation, court costs, and sums expended in settlement of claims or
litigation, pending or threatened) arising out of or in connection with this
Indemnity and Escrow Agreement, the failure of any party to perform its
obligations hereunder, or arising out of or in connection with any action or
failure to act in good faith by the Escrow Agent from and
<PAGE>
after the date of this Indemnity and Escrow Agreement, save only any action or
failure to act by the Escrow Agent that constitutes fraud or willful misconduct.
4.11. Compensation. The Escrow Agent shall be
entitled to reasonable compensation for all services rendered by it under this
Indemnity and Escrow Agreement as provided for in Schedule A attached hereto.
Such compensation shall be borne 50% by Rose Shanis and the Owners and 50% by
Mason-Dixon and the Subsidiaries.
4.12. Successor Escrow Agent. If the Escrow Agent
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association, without any further act, shall be the successor Escrow
Agent with the same effect as if it had been named as the Escrow Agent herein,
unless Mason-Dixon and the Owners provide otherwise.
5. Miscellaneous.
5.1. Representations, Warranties and Covenants of
Rose Shanis and the Owners. Rose Shanis and the Owners hereby represent, warrant
and covenant to Mason-Dixon, the Subsidiaries and the Escrow Agent that they
have the full right, power and authority to enter into this Indemnity and Escrow
Agreement; this Indemnity and Escrow Agreement constitutes their valid, legal
and binding obligations, enforceable against them in accordance with its terms;
and no set-off, counterclaim or other defense to enforcement of this Indemnity
and Escrow Agreement exists or may be asserted by them in connection herewith.
5.2. Governing Law. This Indemnity and Escrow
Agreement shall be governed by and construed and enforced in accordance with the
internal, substantive laws of the State of Maryland without giving effect to the
conflict of law rules thereof.
5.3. Notices. All notices, writings and other
communications required or permitted to be given pursuant to this Indemnity and
Escrow Agreement shall be in writing and shall be given by hand-delivery or
transmitted by United States certified mail, return receipt requested, postage
prepaid, or via overnight carrier, to the addresses set forth below:
If to Rose Shanis
or the Owners: Norman J. Glick
With a copy to: Adelberg, Rudow, Dorf, Hendler & Sameth, LLC
600 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, Maryland 21201
Attn: David B. Rudow, Esquire
If to Mason- Mason-Dixon Bancshares, Inc.
Dixon or the 45 West Main Street
Subsidiaries Westminster, Maryland 21157
Attn: Thomas K. Ferguson, President and CEO
<PAGE>
With a copy to: Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
233 East Redwood Street
Baltimore, Maryland 21202
Attn: Carla Stone Witzel, Esquire
If to Escrow Agent:
With a copy to:
Each notice shall be deemed to have been received: (i) for hand deliveries, on
the date of transmittal; (ii) for mailing, on the day following such mailing;
and (iii) for overnight deliveries, on the day following such transmittal. The
parties shall have the right to change their respective addresses set forth in
this Section by giving notice of such change in accordance with this Section.
5.4. Entire Agreement. The Recitals are a substantive
part of this Indemnity and Escrow Agreement. This Indemnity and Escrow Agreement
together with all other agreements and documents executed by the parties in
connection with the Transactions represents the entire agreement between the
parties and supersedes and cancels any prior oral or written agreement, letter
of intent or understanding related to the subject matter hereof.
5.5. Counterparts. This Indemnity and Escrow
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed to be one and
the same instrument, and shall become effective when one or more counterparts
have been signed by each of the parties.
IN WITNESS WHEREOF, this Indemnity and Escrow Agreement has
been duly executed by the parties hereto as of the day and year first above
written.
ROSE SHANIS & CO., INC.
By:______________________________________(SEAL)
ROSE SHANIS SONS, INC.
By:______________________________________(SEAL)
ROSE SHANIS & CO.
By:______________________________________(SEAL)
Trustee, Ely Shanis Trust,
General Partner
<PAGE>
By:______________________________________(SEAL)
Trustee, Bernice Shanis Trust,
General Partner
By:______________________________________(SEAL)
Norman J. Glick, General Partner
By:______________________________________(SEAL)
Susan M. Glick, Personal Representative
of the Estate of Stephen J. Glick,
General Partner
STEPHEN CORP.
By:______________________________________(SEAL)
NORMAN J. GLICK
_________________________________________(SEAL)
SUSAN M. GLICK
_________________________________________(SEAL)
SUSAN M. GLICK, PERSONAL
REPRESENTATIVE OF THE
ESTATE OF STEPHEN J. GLICK
_________________________________________(SEAL)
_________________________________________(SEAL)
Mitzi S. Glick, Trustee u/a Norman J.Glick
dated May 14, 1997, FBO Robert S. Glick
<PAGE>
_________________________________________(SEAL)
Eugene Schreiber, Trustee u/a Norman J.
Glick dated May 14, 1997, FBO Robert S. Glick
_________________________________________(SEAL)
Mitzi S. Glick, Trustee u/a Norman J. Glick
dated May 14, 1997, FBO Bonnie G. Dubin
_________________________________________(SEAL)
Eugene Schreiber, Trustee u/a Norman J. Glick
dated May 14, 1997, FBO Bonnie G. Dubin
_________________________________________(SEAL)
, Trustee, Ely Shanis Trust
_________________________________________(SEAL)
, Trustee, Bernice Shanis Trust
_________________________________________(SEAL)
Susan M. Glick and Gail Glick, Trustees of
Marital Trust under the Last Will and Testament
of Stephen J. Glick
_________________________________________(SEAL)
Susan M. Glick, Trustee
_________________________________________(SEAL)
Gail Glick, Trustee
_________________________________________(SEAL)
Susan M. Glick and Gail Glick, Trustees under
Bypass Trust under the Last Will and Testament
of Stephen J. Glick
_________________________________________(SEAL)
Susan M. Glick, Trustee
_________________________________________(SEAL)
Gail Glick, Trustee
<PAGE>
MASON-DIXON BANCSHARES, INC.
By:______________________________________(SEAL)
Thomas K. Ferguson, President
-----------------------------
By:______________________________________(SEAL)
, President
-----------------------------
By:______________________________________(SEAL)
, President
- ----------------------------
By:_________________________(SEAL)
Escrow Agent
<PAGE>
EXHIBIT 7.1.12
KAHN AGREEMENT
THIS AGREEMENT, made as of the _____ day of ________________,
1998, by and between Bay Finance, LLC, a Maryland limited liability company
("Bay Finance") and William R. Kahn ("Kahn").
R E C I T A L S:
A. Bay Finance is engaged in the consumer finance business
("the Business"); and
B. Bay Finance desires to engage Kahn to perform certain
consulting services; and
C. Kahn desires to work for Bay Finance; and
D. Bay Finance and Kahn desire to set forth in writing the
terms and conditions of their agreements and understandings.
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises contained in this Agreement, and other good and valuable consideration,
the receipt and adequacy of which are acknowledged, the parties, intending to be
legally bound, agree that the following terms and conditions shall apply:
1. ENGAGEMENT - Bay Finance agrees to engage Kahn, and Kahn
agrees to perform consulting services for Bay Finance, upon the terms and
conditions set forth in this Agreement.
2. TERM - The term of this Agreement (the "Term") shall be for
a period of two (2) years commencing on the date first written above, and ending
exactly two (2) years after such date.
3. DUTIES OF KAHN -
3.1 Kahn agrees to serve as a consultant for Bay
Finance and to perform the duties on behalf of Bay Finance as shall from time to
time be mutually agreed between Bay Finance and Kahn.
3.2 Kahn covenants and agrees that at all times
during the term of this Agreement, Kahn shall not, directly or indirectly:
engage or participate in any activities at any time during the term of this
Agreement which interferes with the performance of Kahn's duties or otherwise
conflicts with the best interests of Bay Finance, render services to or for, or
be employed by, any person, firm or corporation or other organization for
compensation, nor engage in any activity or maintain an interest in any
enterprise that competes with the interests of Bay Finance, whether Kahn is
acting individually or as an officer, director, employee, shareholder, partner
or fiduciary.
<PAGE>
4. PAYMENTS TO KAHN - Subject to the provisions of this
Agreement, Bay Finance shall pay Kahn as his full payment for services rendered
under this Agreement at the rate of Fifty-five Thousand Dollars ($55,000)per
year, payable in equal monthly installments. Kahn will be an independent
contractor with respect to all services provided to Bay Finance under this
Agreement; it being the understanding of the parties that Kahn and not Bay
Finance shall be solely responsible for any and all wages, benefits, workers'
compensation and other insurance, FICA/FUTA, income tax withholding, etc.
Kahn agrees to indemnify and hold Bay Finance harmless for his
failure to pay taxes or insurance, with respect to services provided under this
Agreement.
5. RESTRICTIVE COVENANTS -
5.1 Organizing or Engaging in Competitive Business -
During the period Kahn provides services to Bay Finance, and for a period of two
(2) years following the date Kahn is last entitled to payments from Bay Services
hereunder, Kahn agrees that he will not directly or indirectly, either as an
officer, stockholder, director, employee, representative, agent, partner, sole
proprietor or in any other manner or capacity, undertake planning for or
organize or engage in any business activity within the "Restricted Areas", as
hereinafter defined, which is competitive with Bay Finance's Business, or
combine or act in concert with employees or representatives of Bay Finance's
sources of referrals for the purpose of organizing or engaging in any such
competitive business activity. "Restricted Areas" shall, for purposes of this
Agreement, mean the entire State of Maryland, the District of Columbia, and
those counties in states in which either (a) Bay Finance conducts any business
during the term of this Agreement, or (b) Bay Finance's sources of referral
during the term of this Agreement are located. During the first year of this
Agreement, for purposes of Article 5, the term of this Agreement shall be deemed
to include periods of Kahn's employment with Rose Shanis & Co., Inc. or any
entity affiliated with it.
5.2 Anti-Solicitation: Customers and Referral Sources
- - Other than on behalf of Bay Finance during the period Kahn is entitled to
payments from Bay Finance, and for a period of two (2) years following the date
on which Kahn is last entitled to receive such payments, Kahn shall not within
the Restricted Areas, either as an officer, stockholder, director, employee,
representative, partner, sole proprietor or in any other manner or capacity,
solicit or accept business for the purpose of making loans, directly or
indirectly, from any of Bay Finance's customers, nor shall Kahn solicit or
accept customers from any of Bay Finance's sources of referral. For the purposes
of this Agreement, "Bay Finance's customers" shall mean any person, corporation
or other entity to which Bay Finance is providing financing or other lending
services as of the date on which Kahn ceases to be entitled to payment from Bay
Finance, or to which Bay Finance (or Rose Shanis & Co., Inc. or any entity
affiliated with it) provided such services during the one (1) year period
preceding such date. For the purposes of this Agreement, "Bay Finance's sources
of referrals" shall mean any person or corporation or other entity which has
referred a customer or customers for the purpose of making a loan from Bay
Finance (or Rose Shanis & Co., Inc. or any entity affiliated with it) during the
three year period preceding the last date on which Kahn is entitled to receive
payment from Bay Finance hereunder.
5.3 Anti-Solicitation. - During the period that Kahn
provides services to Bay Finance, and for a period of ten (10) years following
the date on which he is last entitled to receive payment from Bay Services
hereunder, Kahn agrees that he will not, directly or indirectly, induce or
influence or seek to induce or influence any person who has been engaged by Bay
Finance as an executive, employee, manager, salesman, independent contractor or
<PAGE>
otherwise, to terminate his or her relationship with Bay Finance or employ or
have an interest in (as owner, stockholder, partner, co-venturer, director,
officer or employee) any person or entity who employs any person employed by Bay
Finance or Rose Shanis & Co., Inc. or any entity affiliated with it at any time
during the one (1) year period preceding the date hereof.
5.4 Business and Trade Secrets - Kahn specifically
agrees that he will not at any time, whether during or subsequent to the period
of time he is entitled to payment from Bay Finance hereunder, in any fashion,
form, or manner, unless specifically consented to in writing by Bay Finance,
either directly or indirectly, use or divulge, disclose or communicate to any
person, firm, or corporation, in any manner whatsoever, any confidential
information of any kind, nature, or description concerning any matters affecting
or relating to the business of Bay Finance, including, without limiting the
generality of the foregoing, the names, contact persons, habits, or practices of
any of its customers; the business, financial, and marketing strategies,
forecasts, methods, procedures, techniques, practices, and standards of Bay
Finance; or confidential business or financial information, including Bay
Finance's financial and planning data, compilations of business and financial
data, records, reports, studies, manuals, memoranda, notebooks, files,
documents, correspondence, and other confidential business or financial
information of, about, or concerning the business of Bay Finance, its manner of
operation, or other confidential data of any kind, nature or description, the
parties stipulating that as between them, the same are important, material and
confidential business and trade secrets and affect the successful conduct of Bay
Finance's business and its goodwill, and that any breach in whole or in part of
any term of this section is a material breach of this Agreement.
5.5 Corporate Opportunity - During the period that
Kahn provides services to Bay Finance, Kahn shall bring to the attention of Bay
Finance and shall use his best efforts to make available to Bay Finance any
opportunities related to Bay Finance's Business. Kahn may participate in any
such opportunity for his own account only if such opportunity is first brought
to the attention of the chief executive officer of Bay Finance who determines
that Bay Finance will not participate in such opportunity and who gives the Kahn
written approval to participate in such opportunity.
5.6 Ownership Covenant - All files, records,
compilations, reports, studies, manuals, memoranda, notebooks, documents,
databases, correspondence, and other confidential information or records and
similar items relating to the Business of Bay Finance, whether prepared by Kahn
or otherwise coming into his possession, are, and shall remain, the exclusive
property of Bay Finance, and shall be promptly delivered up to Bay Finance upon
the request of Bay Finance.
5.7 Enforcement - Bay Finance and Kahn acknowledge
that the parties have entered into this Agreement as an inducement to the
acquisition of the assets of Rose Shanis & Co., Inc. and related entities and
Kahn is engaged in a position where he will have access to business and trade
secrets, and will be rendering personal services of a special, unique, unusual
or extraordinary character. In recognition of these facts, Kahn agrees that the
breach by Kahn of the covenants of this Agreement could not reasonably or
adequately be compensated in damages in an action at law and that Bay Finance by
reason thereof shall be entitled to preliminary and permanent injunctive relief,
which may include, but shall not be limited to, restraining Kahn from rendering
any service that would breach such covenants. In addition, in the event of a
breach of such covenants by Kahn, Kahn agrees to pay Bay Finance for the
attorneys' fees and other costs incurred by Bay Finance in seeking damages
and/or injunctive relief on account of such breach. However, no remedy conferred
by the specific provisions of
<PAGE>
this Section 5 is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise.
5.8 Modification of Restrictions - If any of the
provisions of this Section 5 shall be held to be invalid or unenforceable, the
remaining provisions thereof shall nevertheless continue to be valid and
enforceable as though invalid or unenforceable parts had not been included
therein. In the event that any provision of this Section 5 relating to the time
period and/or the areas of restriction shall be declared by a court of competent
jurisdiction to exceed the maximum time period or areas such court deems
reasonable and enforceable, the time period and/or areas of restriction deemed
reasonable and enforceable by the court shall become and thereafter be the
maximum time period and/or areas.
5.9 Remedy for Breach - The parties recognize that
the services to be rendered under this Agreement by Kahn are of a special and
unique character, and that in the event of the breach by Kahn of the terms and
conditions of this Agreement to be performed by him, or in the event Kahn shall,
in violation of the restrictions set forth in this section, engage in any
business in competition with Bay Finance's Business or disclose to such person,
firm or corporation Bay Finance's methods, secrets or systems, then Bay Finance
shall be entitled, if it so elects, to institute and prosecute proceedings in
any court of competent jurisdiction, at law and/or in equity, to obtain damages
for any breach of this Agreement, and to enforce the specific performance hereof
and to enjoin Kahn from violating these Restrictive Covenants. Nothing herein
contained shall be construed to prevent Bay Finance's election of any such
remedy in the event of the breach of this Agreement by Kahn.
5.10 The provisions of this Section 5 are applicable
regardless of the reason for the termination of Kahn's services.
6. ABSENCE OF RESTRICTIONS - Kahn represents and warrants to
Bay Finance that:
6.1 As of the commencement date of the Term, Kahn is
not subject to any restrictive covenant.
6.2 Kahn is not under any obligation to any other
party inconsistent with or in conflict with this Agreement or which would
prevent, limit or impair in any way his performance of his obligations under
this Agreement.
7. TERMINATION -
7.1 Notwithstanding any other provision hereof, Bay
Finance may terminate Kahn's engagement under this Agreement at any time for
cause in which event its obligations to Kahn hereunder shall cease. Such a
termination shall be evidenced by written notice to Kahn, which shall specify
the cause for termination, which termination shall be effective immediately upon
giving such notice. For purposes hereof, the term "cause" shall include, without
limitation, the following: dishonesty; theft; conviction of a crime; unethical
business conduct; a material breach of this Agreement; willful insubordination;
or other action or omission to act that in the opinion of Bay Finance may
materially adversely affect Bay Finance's business or operations.
<PAGE>
In the event Bay Finance terminates Kahn's services
under this Agreement for a reason other than for cause, then Kahn shall be
entitled to receive as his full remedy the amounts he would have received under
Section 4.1 had his engagement continued in effect for the remainder of the
Term, subject to standard principles of mitigation. Prior to receiving any
payment, Kahn shall be required to sign and become bound by a release prepared
by Bay Finance confirming that Kahn will accept such amount as the exclusive
remedy and shall not pursue any other claims against Bay Finance, entities
affiliated with Bay Finance, or their officers, employees, and agents arising
out of or related to Kahn's engagement hereunder (including the termination of
such engagement).
7.2 Upon termination of Kahn's engagement under this
Agreement, this Agreement and all of the rights, duties and obligations
hereunder shall terminate, except that the restrictions imposed on Kahn as set
forth in Section 5 and the remedies available to Bay Finance as set forth in
this Agreement shall remain in effect.
8. BURDEN AND BENEFIT - This Agreement shall be binding upon,
and shall inure to the benefit of Bay Finance and Kahn, and their respective
heirs, personal and legal representatives, successors and assigns.
9. GOVERNING LAW - In view of the fact that the principal
office of Bay Finance is located in the State of Maryland, it is understood and
agreed that the construction and interpretation of this Agreement shall at all
times and in all respects be governed by the laws of the State of Maryland. The
parties agree that the personal jurisdiction and venue of any action brought
under this Agreement shall be in courts in Maryland.
10. SEVERABILITY - The provisions of this Agreement shall be
deemed severable, and the invalidity or unenforceability of any one or more of
the provisions of this Agreement shall not affect the validity and
enforceability of the other provisions.
11. BAY FINANCE - As used herein, the term "Bay Finance" shall
include any corporation or other entity which succeeds to the business of Bay
Finance and to which Bay Finance assigns its rights and obligations hereunder.
12. NOTICES -
12.1 All notices and communications hereunder shall
be in writing and shall be deemed given when either hand delivered or sent
postage prepaid by registered or certified mail, return receipt requested to the
parties as follows:
To Bay Finance:
With a copy to: Gordon, Feinblatt, Rothman,
Hoffberger & Hollander, LLC
233 East Redwood Street
Baltimore, Maryland 21202
Attn: Carla Stone Witzel, Esquire
To Kahn:
<PAGE>
With a copy to: Edward F. Patz, Esquire
39 Island Estates Parkway
Palm Coast, Florida 32137
12.2 Either party may change its address by written
notice in accordance with this section.
13. COVENANT NOT TO SUE - Kahn hereby covenants and agrees not
to make or assert any claim or commence or maintain any suit, action or
proceeding against Bay Finance, or any of Bay Finance's subsidiaries or
affiliates, in respect of any matter on account of or arising out of, related to
or concerning, whether directly or indirectly, proximately or remotely, Kahn's
employment by Rose Shanis & Co., Inc., or any of its affiliates prior to the
date hereof, except for a claim based on a default by Bay Finance under any
promissory note payable to Kahn which has been assumed in writing by Bay
Finance.
14. ENTIRE AGREEMENT - This Agreement contains the entire
agreement and understanding by and between Bay Finance and Kahn with respect to
the engagement of Kahn to perform consulting services and the obligations of Bay
Finance to Kahn and no representations, promises, agreements, or understandings,
written or oral, not contained herein shall be of any force or effect. No change
or modification of this Agreement shall be valid or binding unless it is in
writing and signed by the party intended to be bound. No waiver of any provision
of this Agreement shall be valid unless it is in writing and signed by the party
against whom the waiver is sought to be enforced. No valid waiver of any
provision of this Agreement at any time shall be deemed a waiver of any other
provision of this Agreement at such time or in any other time.
15. RECITALS - The foregoing recitals are made a substantive
part of this Agreement.
IN WITNESS WHEREOF, Bay Finance and Kahn have duly executed
this Agreement under seal as of the day and year first above written.
BAY FINANCE, LLC
______________________________ By:_________________________________(SEAL)
______________________________ ____________________________________(SEAL)
William R. Kahn
<PAGE>
EXHIBIT 7.1.17
SHAREHOLDERS' EQUITY ESCROW AGREEMENT
This Shareholders' Equity Escrow Agreement, dated as of
____________, 199_ (the "Closing Date"), among Mason-Dixon Bancshares, Inc.,
__________ and __________ (collectively "Mason-Dixon") and Rose Shanis & Co.,
Inc., Rose Shanis Sons, Inc., Rose Shanis & Co. and Stephen Corp. (collectively
"Rose Shanis") and ___________, a ___________, as escrow agent ("Escrow Agent").
RECITALS
Capitalized terms used and not otherwise defined herein shall
have the meanings as defined in the Asset Purchase Agreement as of
________________ , 1997 (the "Asset Purchase Agreement"). Execution and delivery
of this Shareholders' Equity Escrow Agreement by Rose Shanis is a condition to
the obligations of Mason-Dixon to close under the Asset Purchase Agreement. The
Asset Purchase Agreement provides that a portion of the Purchase Price shall be
held in escrow in accordance with the terms and conditions of this Shareholders'
Equity Escrow Agreement. Rose Shanis has approved the transactions contemplated
by the Asset Purchase Agreement ("Transactions") and desires to enter into this
Shareholders' Equity Escrow Agreement to induce Mason-Dixon to consummate the
Transactions.
NOW, THEREFORE, in consideration of and in reliance upon the
promises and covenants in this Shareholders' Equity Escrow Agreement, the
parties agree as follows:
1. Establishment of Escrow
1.1. Mason-Dixon is depositing with Escrow Agent an
amount equal to $2,000,000 in immediately available funds (as increased by any
earnings thereon and as reduced by any losses on investments, the "Escrow
Fund"). Notwithstanding such payment to the Escrow Agent, Mason-Dixon shall be
deemed to have fully satisfied its obligation to pay such part of the Purchase
Price payable pursuant to the Asset Purchase Agreement. Rose Shanis (or the
owners of Rose Shanis) will report all income earned on, or derived from, the
Escrow Fund as their income. Escrow Agent acknowledges receipt thereof.
1.2. Escrow Agent hereby agrees to act as escrow
agent and to hold, safeguard and disburse the Escrow Fund pursuant to the terms
and conditions hereof.
2. Investment of Funds
Escrow Agent shall invest the Escrow Fund in the direct
obligations of, or in the obligations of any agency or authority of, the United
States, any state of the United States and any political subdivision thereof, in
any fund that invests only in such obligations, or in such other investments as
are directed by a writing signed by Rose Shanis and Mason-Dixon. Escrow Agent
shall not be required to invest any sums to the extent it reasonably determines
that it will be required to distribute, use or otherwise expend such funds
within 30 days. Escrow Agent shall not be liable or otherwise responsible for
any losses resulting from any investments provided for pursuant to this
Shareholders' Equity Escrow Agreement.
<PAGE>
3. Claims
3.1. If Mason-Dixon gives a notice to Rose Shanis and
Escrow Agent stating that the Adjustment Amount has been determined in
accordance with Section 5.2 of the Asset Purchase Agreement and specifying the
dollar amount payable to Mason-Dixon pursuant to Section 5.2 of the Asset
Purchase Agreement as a result of such determination, on the 10th business day
following such notice Escrow Agent shall pay to Mason-Dixon the dollar amount so
specified from (and only to the extent of) the Escrow Fund. Escrow Agent shall
not inquire into or consider whether the Adjustment Amount has been determined
in accordance with the requirements of the Asset Purchase Agreement.
3.2. Escrow Agent shall pay and distribute the then
remaining amount of the Escrow Fund, including any income earned on the Escrow
Fund, to Rose Shanis.
3.3. If Rose Shanis gives a notice to Mason-Dixon and
Escrow Agent prior to the 10th business day following Mason-Dixon's notice
referred to in Section 3.1, Escrow Agent shall make no payment to Mason-Dixon in
the absence of joint instructions from Mason-Dixon and Rose Shanis. Mason-Dixon
and Rose Shanis shall make a good faith attempt to resolve their dispute. Upon
written request by Rose Shanis or Mason-Dixon made not more than 10 days after
Rose Shanis' notice, Escrow Agent promptly shall refer the dispute concerning
the Escrow Fund to the American Arbitration Association for settlement by
arbitration in accordance with the Association's Commercial Arbitration Rules.
Judgment upon any resulting arbitration award may be entered in any court of
competent jurisdiction. As part of such award, the arbitrator may establish his
fee and expenses in connection therewith, which Mason-Dixon shall promptly pay.
However, any award in a party's favor shall be increased by a percentage of such
fees and expenses equal to the same percentage of a party's claim that is
awarded to a party in arbitration. Any award shall be a conclusive determination
of the matter and shall be final and binding upon all parties. Escrow Agent
promptly shall pay the amount of any award to the prevailing party to the extent
the Escrow Fund contains sufficient funds for that purpose. Arbitration
proceedings shall be held in Baltimore, Maryland, unless Rose Shanis and
Mason-Dixon agree upon another location.
4. Termination of Escrow
On May 31, 1998, Escrow Agent shall pay and distribute the
then amount of the Escrow Fund to Rose Shanis, unless prior thereto Mason-Dixon
has notified Escrow Agent to make no disbursement of the Escrow Fund. In that
case the entire Escrow Fund shall be retained by Escrow Agent until it receives
joint written instructions of Rose Shanis and Mason-Dixon. Upon written request
by Rose Shanis or Mason-Dixon, Escrow Agent promptly shall refer the dispute to
arbitration as described above in Section 3.3.
5. Escrow Agent's Responsibility; Resignation; Removal.
5.1. Escrow Agent shall retain the Escrow Fund in
accordance with the terms and conditions of this Shareholders' Equity Escrow
Agreement, and shall be under no responsibility or obligation other than to
follow the provisions hereof.
5.2. Escrow Agent may resign at any time upon 30 days
written notice to Mason-Dixon and Rose Shanis; within 20 days after receipt of
such notice, Mason-Dixon shall select an independent bank or trust company to
serve as the successor Escrow Agent, subject to
<PAGE>
the reasonable consent of Rose Shanis (which consent shall not be unreasonably
withheld or delayed). In the event a successor is not selected and agreed upon
within the time described above, Escrow Agent may deposit the Escrow Fund into a
court of competent jurisdiction and request that the court appoint or cause the
parties to appoint a successor Escrow Agent. Upon such deposit, Escrow Agent
shall be relieved of all future responsibilities under this Shareholders' Equity
Escrow Agreement.
5.3. Escrow Agent may be removed at any time upon
written notice from both Mason-Dixon and Rose Shanis.
5.4. No Liability of Escrow Agent. Escrow Agent shall
not be liable for any act or omission in good faith and in the absence of fraud
or willful misconduct. Escrow Agent shall in all cases be entitled to rely upon
and be fully protected in acting or in refraining from acting under this
Shareholders' Equity Escrow Agreement in accordance with any and all written
notifications received by it in accordance with this Escrow Agreement.
5.5. Indemnification of Escrow Agent. Mason-Dixon and
Rose Shanis hereby agree to indemnify and hold Escrow Agent harmless from and
against any and all actions, suits, proceedings, losses, liabilities, damages,
costs and expenses (including attorneys' and experts' fees, costs of
investigation, court costs, and sums expended in settlement of claims or
litigation, pending or threatened) arising out of or in connection with this
Shareholders' Equity Escrow Agreement, the failure of any party to perform its
obligations hereunder, or arising out of or in connection with any action or
failure to act in good faith by Escrow Agent from and after the date of this
Shareholders' Equity Escrow Agreement, save only any action or failure to act by
the Escrow Agent that constitutes fraud or willful misconduct.
5.6. Compensation. Escrow Agent shall be entitled to
reasonable compensation for all services rendered by it under this Shareholders'
Equity Escrow Agreement as provided for in Schedule A attached hereto. Such
compensation shall be borne 50% by Rose Shanis and 50% by Mason-Dixon.
5.7. Successor Escrow Agent. If Escrow Agent
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association, without any further act, shall be the successor Escrow
Agent with the same effect as if it had been named as Escrow Agent herein,
unless Mason-Dixon and Rose Shanis provide otherwise.
6. Miscellaneous.
6.1. Governing Law. This Shareholders' Equity Escrow
Agreement shall be governed by and construed and enforced in accordance with the
internal, substantive laws of the State of Maryland without giving effect to the
conflict of law rules thereof.
6.2. Notices. All notices, writings and other
communications required or permitted to be given pursuant to this Shareholders'
Equity Escrow Agreement shall be in writing and shall be given by hand-delivery
or transmitted by United States certified mail, return receipt requested,
postage prepaid, or via overnight carrier, to the addresses set forth below:
If to Rose Shanis: Norman J. Glick
<PAGE>
With a copy to: Adelberg, Rudow, Dorf, Hendler & Sameth, LLC
600 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, Maryland 21201
Attn: David B. Rudow, Esquire
If to Mason-Dixon: Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, Maryland 21157
Attn: Thomas K. Ferguson, President and CEO
With a copy to: Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
233 East Redwood Street
Baltimore, Maryland 21202
Attn: Carla Stone Witzel, Esquire
If to Escrow Agent:
With a copy to:
Each notice shall be deemed to have been received: (i) for hand deliveries, on
the date of transmittal; (ii) for mailing, on the day following such mailing;
and (iii) for overnight deliveries, on the day following such transmittal. The
parties shall have the right to change their respective addresses set forth in
this Section by giving notice of such change in accordance with this Section.
6.3. Entire Agreement. This Shareholders' Equity
Escrow Agreement together with all other agreements and documents executed by
the parties in connection with the Transactions represents the entire agreement
between the parties and supersedes and cancels any prior oral or written
agreement, letter of intent or understanding related to the subject matter
hereof.
6.4. Counterparts. This Shareholders' Equity Escrow
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original and all of which together shall be deemed to be one and
the same instrument, and shall become effective when one or more counterparts
have been signed by each of the parties.
IN WITNESS WHEREOF, this Shareholders' Equity Escrow Agreement
has been duly executed by the parties hereto as of the day and year first above
written.
ROSE SHANIS & CO., INC.
By: _______________________________(SEAL)
<PAGE>
ROSE SHANIS SONS, INC.
By: _______________________________(SEAL)
ROSE SHANIS & CO.
By: _______________________________(SEAL)
Trustee, Ely Shanis Trust,
General Partner
By: _______________________________(SEAL)
Trustee, Bernice Shanis Trust,
General Partner
By: _______________________________(SEAL)
Norman J. Glick, General Partner
By: _______________________________(SEAL)
Susan M. Glick, Personal Representative
of the Estate of Stephen J. Glick,
General Partner
STEPHEN CORP.
By: _______________________________(SEAL)
MASON-DIXON BANCSHARES, INC.
By: _______________________________(SEAL)
Thomas K. Ferguson, President
-----------------------------
By: _______________________________(SEAL)
, President
<PAGE>
-----------------------------
By: _______________________________(SEAL)
, President
Escrow Agent:
By:___________________________
<PAGE>
EXHIBIT 7.2.1
OPINION OF MASON-DIXON AND THE SUBSIDIARIES' COUNSEL
--------------, ----
Owners of Rose Shanis & Co., Inc.,
Rose Shanis Sons, Inc., Rose Shanis & Co.
and Stephen Corp.
c/o Norman J. Glick
313 N. Howard Street
Baltimore, Maryland 21201
Re: Asset Purchase Agreement among Rose Shanis & Co.,
Inc., Rose Shanis Sons, Inc., Rose Shanis & Co. and
Stephen Corp., and their respective Owners, and
Mason-Dixon Bancshares, Inc.
Ladies and Gentlemen:
We have acted as counsel to Mason-Dixon Bancshares, Inc., a
Maryland corporation ("Mason-Dixon"), and two of its subsidiaries, Bay Finance,
LLC, a Maryland limited liability company ("Consumer Finance Subsidiary"), and
Bay Insurance, LLC, a Maryland limited liability company ("Insurance Agent
Subsidiary") (collectively, the "Subsidiaries") in connection with the purchase
(the "Purchase") by Mason-Dixon and the Subsidiaries of substantially all of the
Assets of Rose Shanis & Co., Inc., a Maryland corporation, Rose Shanis Sons,
Inc., a Maryland corporation, Rose Shanis & Co., a Maryland general partnership,
and Stephen Corp., a Maryland corporation (collectively, "Rose Shanis"),
pursuant to an Asset Purchase Agreement dated November ___, 1997, and all
Exhibits and Schedules attached thereto (the "Agreement"), among Mason-Dixon,
Rose Shanis, and all of the Owners of Rose Shanis. All capitalized terms used in
this letter that are not otherwise defined herein shall have the meanings set
forth in the Agreement.
In our capacity as counsel to Mason-Dixon and the Subsidiaries
and for purposes of this opinion, we have examined the following documents:
1. The Agreement and the other documents executed in
connection therewith (collectively, the "Purchase Documents").
2. A copy of the Articles of Incorporation and Bylaws of
Mason-Dixon;
3. A copy of the Articles of Organization and Operating Plan
of Consumer Finance Subsidiary;
4. A copy of the Articles of Organization and Operating Plan
of Insurance Agent Subsidiary;
5. Copies of the resolutions adopted by the Board of Directors
of Mason- Dixon in connection with the Purchase, certified by Mason-Dixon's
Secretary;
<PAGE>
6. Copies of the records of the proceedings of, and of actions
taken by, the single member of Consumer Finance Subsidiary with respect to the
Purchase;
7. Copies of the records of the proceedings of, and actions
taken by, the single member of Insurance Agent Subsidiary with respect to the
Purchase;
8. A Certificate of Good Standing from the Maryland State
Department of Assessments and Taxation ("SDAT") dated November __ , 1997, to the
effect that Mason-Dixon is duly incorporated and is an existing corporation in
Maryland;
9. A Certificate of Good Standing from SDAT dated November __,
1997, to the effect that Consumer Finance Subsidiary is a limited liability
company existing under the laws of the State of Maryland and is in good standing
to transact business in the State of Maryland;
10. A Certificate of Good Standing from SDAT dated November
__, 1997, to the effect that Insurance Agent Subsidiary is a limited liability
company existing under the laws of the State of Maryland and is in good standing
to transact business in the State of Maryland;
11. A Certificate of Mason-Dixon, Consumer Finance Subsidiary,
and Insurance Agent Subsidiary with respect to Mason-Dixon's representations in
the Agreement and with respect to certain facts concerning Mason-Dixon, Consumer
Finance Subsidiary and Insurance Agent Subsidiary (the "Certificate").
In basing the opinions and other matters set forth herein on
"our knowledge," the words "our knowledge" signify that, in the course of our
representation of Mason-Dixon and the Subsidiaries in matters with respect to
which we have been engaged by Mason-Dixon and the Subsidiaries as counsel, no
information has come to our attention that would give us actual knowledge or
actual notice that any such opinions or other matters are not accurate or that
any of the foregoing documents, certificates, reports, and information on which
we have relied are not accurate and complete. Except as otherwise stated herein,
we have undertaken no independent investigation or verification of such matters.
The words "our knowledge" and similar language used herein are intended to be
limited to the knowledge of the lawyers within our firm who have recently worked
on matters on behalf of Mason-Dixon and the Subsidiaries.
In reaching the opinions set forth below, we have assumed, and
to our knowledge there are no facts inconsistent with, the following:
(a) each of the parties to the Purchase Documents
(other than Mason- Dixon and the Subsidiaries) has duly and validly executed and
delivered each instrument, document, and agreement executed in connection with
the Purchase to which such party is a signatory, and such party's obligations
set forth therein are its legal, valid, and binding obligations, enforceable in
accordance with their respective terms;
(b) each person executing any such instrument,
document, or agreement on behalf of any such party (other than Mason-Dixon and
the Subsidiaries) is duly authorized to do so;
(c) each natural person executing any such
instrument, document, or agreement is legally competent to do so;
<PAGE>
(d) there are no oral or written modifications of or
amendments to the Purchase Documents, and there has been no waiver of any of the
provisions of the Purchase Documents, by actions or conduct of the parties or
otherwise;
(e) all documents submitted to us as originals are
authentic, all documents submitted to us as certified or photostatic copies
conform to the original document, all signatures on all documents submitted to
us for examination are genuine, and all public records reviewed are accurate and
complete.
Based on our review of the foregoing and subject to the
assumptions and qualifications set forth herein, it is our opinion that, as of
the date of this letter:
1. Mason-Dixon is a corporation duly organized and validly
existing in good standing under the laws of the State of Maryland. Mason-Dixon
has the corporate power and authority necessary to own and operate its
properties and carry on its business as now conducted by it, to enter into the
Agreement, and to consummate the Transactions and to take all other actions
required to be taken by it. The execution and delivery of the Purchase Documents
and performance by Mason-Dixon of the obligations under the Purchase Documents
and all other documents executed in connection therewith have been duly and
properly authorized by Mason-Dixon's Board of Directors in full compliance with
its Articles of Incorporation, Bylaws and the corporation laws of the State of
Maryland.
2. Each of the Subsidiaries is a limited liability company
duly organized and validly existing in good standing under the laws of the State
of Maryland. Each of the Subsidiaries has the full power and authority to own
and operate its properties and to carry on its business as and where such
business is now conducted, to execute, acknowledge, seal and deliver the
Purchase Documents and to consummate the Transactions contemplated by the
Purchase Documents. The execution and delivery of the Purchase Documents and
performance by each of the Subsidiaries and all other documents executed in
connection therewith have been duly authorized by all necessary action in full
compliance with each Subsidiaries' Articles of Organization, Operating Plan, and
the limited liability company laws of the State of Maryland.
3. The Purchase Documents, including the Assumption
Agreements, have been duly executed and delivered by Mason-Dixon and the
Subsidiaries and constitute the valid and legally binding obligations of each,
enforceable against Mason-Dixon and the Subsidiaries in accordance with its
terms, subject to the following:
i) applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent
conveyance and other laws affecting the
rights of creditors generally; and
ii) the exercise of judicial discretion in
accordance with general principles of
equity.
4. Based upon the Certificate and our knowledge, the execution
and delivery of the Purchase Documents and performance of the obligations under
the Purchase Documents, and the fulfillment of and compliance with the terms and
conditions of the Purchase Documents do not and will not, with the passing of
time or the giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material benefit under, or
permit the acceleration of any obligation under, (i) any term or provision in
Mason-Dixon's
<PAGE>
Articles of Incorporation or Bylaws, (ii) any judgment, decree or order of any
court or governmental authority or agency to which Mason-Dixon is a party or by
which Mason-Dixon or any of its properties is bound, or (iv) any statute, law,
regulation or rule applicable to Mason-Dixon, so as to have a material adverse
effect on the assets, liabilities, results of operations, financial condition,
business or prospects of Mason-Dixon.
5. Based upon the Certificate and our knowledge, Mason-Dixon
and Subsidiary have taken all actions, and obtained all consents, approvals,
authorizations, and made all required filings with all governmental authorities
which is required for the execution and delivery by them of the Purchase
Documents.
6. Based upon the Certificate and our knowledge, Mason-Dixon
has the financial capacity to consummate the Transactions and pay the Purchase
Price.
7. Based upon the Certificate and our knowledge, there is no
litigation, claim, arbitration, proceedings, or governmental investigation
pending challenging Mason-Dixon's right to perform under the Purchase Documents
to which Mason-Dixon is a party, or, based on our knowledge, threatened against
Mason-Dixon.
We express no opinion as to the laws of any jurisdiction other
than the laws of the State of Maryland and the laws of the United States of
America. The opinions expressed herein concern only the effect of the laws
(excluding the principles of conflict of laws) of the State of Maryland and the
United States of America as currently in effect. We assume no obligation to
supplement this opinion if any applicable laws change after the date hereof or
if we become aware of any facts that might change the opinions expressed herein
after the date hereof.
The opinions expressed in this letter are solely for your use
and these opinions may not be relied on by any other persons without prior
written approval. The opinions expressed in this letter are limited to the
matters set forth in this letter, and no other opinions should be inferred
beyond the matters expressly stated.
Very truly yours,
Gordon, Feinblatt, Rothman,
Hoffberger & Hollander, LLC
By:__________________________
Carla Stone Witzel, Member
<PAGE>
EXHIBIT 7.2.4
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (the "Agreement") is made this _____
day of ______________, 1997, by and between Rose Shanis & Co., Inc., Rose Shanis
Sons, Inc., Rose Shanis & Co. and Stephen Corp. (collectively "Seller"),
Mason-Dixon Bancshares, Inc. ("Mason-Dixon) and _____________ ("Purchaser"),
pursuant to an Asset Purchase Agreement (the "Asset Purchase Agreement") dated
_______, 1997, by, among others, Seller and Purchaser, involving the sale of
substantially all of the assets of the Seller (the "Assets"). Capitalized terms
used and not otherwise defined herein shall have the meanings as defined in the
Asset Purchase Agreement.
WHEREAS, pursuant to the Asset Purchase Agreement, Seller has
agreed to transfer to Purchaser the Assets used by Seller in its business in
exchange for, among other things, the assumption of certain of the Seller's
liabilities and obligations;
WHEREAS, Mason-Dixon owns Purchaser and desires to guaranty
Purchaser's performance of the assumed liabilities;
NOW, THEREFORE, in consideration of the transfer to Purchaser
of the Assets, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, Seller, Purchaser and Mason-Dixon agree as
follows:
1. Assumption of Obligations. Subject to the terms of this
Agreement, effective on the date hereof, Purchaser, for itself and its
successors and assigns, hereby covenants and agrees to assume and accept those
debts, liabilities and obligations of Seller as are listed or described on
Schedule A to this Agreement (the "Assumed Liabilities").
2. Indemnification. Purchaser shall defend, indemnify and hold
Seller and the Owners harmless against and from any and all liability to any
person, firm, corporation, political subdivision, or other entity for any
failure of Purchaser to pay the Assumed Liabilities.
3. Representations of Seller. All representations and
warranties of Seller relating to the Assumed Liabilities contained in the Asset
Purchase Agreement are hereby incorporated by reference herein. Seller hereby
further represents and warrants to Purchaser that, as of the effective date of
this Agreement, Seller has not received notice of any default by Seller in
connection with the Assumed Liabilities, and to the best of Seller's knowledge,
information and belief, Seller is not in default in connection with the Assumed
Liabilities.
4. Further Assurances. The parties agree that they will take
whatever action or actions are found to be reasonably necessary from time to
time to effectuate the provisions and intent of this Agreement, and, to that
end, the parties agree that they will execute any further documents or
instruments which may be necessary to give full force and effect to this
Agreement or to any of its provisions.
5. Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
<PAGE>
6. Severability. In case any of the provisions of this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions had never been
contained herein.
7. Amendment. This Agreement may not be amended or terminated
orally but only as expressly provided herein or by an instrument in writing duly
executed by all of the parties.
8. Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be an original, but all of which together
will constitute one agreement.
9. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland.
10. Mason-Dixon's Guaranty. Mason-Dixon unconditionally and
irrevocably guarantees to Seller and the Owners the full and timely performance
by Purchaser of all obligations to be performed by Purchaser hereunder,
including, but not limited to, the payment by Purchaser of the Assumed
Liabilities. Mason-Dixon shall defend, indemnify and hold Seller and the Owners
harmless against and from any and all liability to any person, firm,
corporation, political subdivision, or other entity for any failure of Purchaser
to pay the Assumed Liabilities.
IN WITNESS WHEREOF, Seller and Purchaser have each executed
under seal this Assumption Agreement or caused it to be executed under seal on
its behalf by its duly authorized representatives, as of the day and year first
written above.
-----------------------------
By:________________________________(SEAL)
ROSE SHANIS & CO., INC.
By:________________________________(SEAL)
ROSE SHANIS SONS, INC.
By:________________________________(SEAL)
<PAGE>
STEPHEN CORP.
By:________________________________(SEAL)
ROSE SHANIS & CO.
By:________________________________(SEAL)
Trustee, Ely Shanis Trust,
General Partner
By:________________________________(SEAL)
Trustee, Bernice Shanis Trust,
General Partner
By:________________________________(SEAL)
Norman J. Glick, General Partner
By:________________________________(SEAL)
Susan M. Glick, Personal
Representative of the Estate
of Stephen J. Glick, General Partner
MASON-DIXON BANCSHARES, INC.
By:________________________________(SEAL)
Thomas K. Ferguson, President
<PAGE>
SCHEDULE A
TO ASSUMPTION AGREEMENT
ASSUMED LIABILITIES
<PAGE>
EXHIBIT 2.2
AMENDMENT TO ASSET PURCHASE AGREEMENT
This Amendment to Asset Purchase Agreement (the "Amendment"),
is made this 11th day of February, 1998 by and among Rose Shanis & Co., Inc.,
Rose Shanis Sons, Inc., Rose Shanis & Co. and Stephen Corp., Norman J. Glick,
Susan M. Glick, Personal Representative of the Estate of Stephen J. Glick, Susan
M. Glick and Gail Glick, Trustees of the Marital Trust under the Last Will and
Testament of Stephen J. Glick, Susan M. Glick and Gail Glick, Trustees of the
Bypass Trust under the Last Will and Testament of Stephen J. Glick, Mitzi S.
Glick and Eugene Schreiber, Trustees u/a Norman J. Glick dated May 14, 1997, FBO
Robert S. Glick, and Mitzi S. Glick and Eugene Schreiber, Trustees u/a Norman J.
Glick dated May 14, 1997, FBO Bonnie G. Dubin, and Norman J. Glick and Susan M.
Glick, Trustees of the Norman J. Glick Trust Share of the Bernice Shanis Trust,
the Stephen J. Glick Trust Share of the Bernice Shanis Trust, the Norman J.
Glick Trust Share of the Ely Shanis Trust, and the Stephen J. Glick Trust Share
of the Ely Shanis Trust and Mason-Dixon Bancshares, Inc. Capitalized terms used
and not otherwise defined herein shall have the meanings as defined in the Asset
Purchase Agreement.
RECITALS
A. The parties executed an Asset Purchase Agreement on
November 26, 1997.
B. The parties desire to amend the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the Recitals and for other
good and valuable consideration, the receipt and sufficiency of which is
acknowledged, the parties agree as follows:
1. Section 3 of the Asset Purchase Agreement is deleted in its
entirety and the following inserted in lieu thereof:
Closing.
Closing ("Closing") shall take place at the offices
of Gordon, Feinblatt, Rothman, Hoffberger &
Hollander, LLC, 233 East Redwood Street in Baltimore,
Maryland beginning at 9:00 o'clock a.m. on February
11, 1998, effective as of 6:00 p.m. on such date
("Closing Date") or at such other time and date as
the parties may mutually agree.
2. The following is added to Section 25 of the Asset Purchase
Agreement:
Rose Shanis and the Owners agree to reimburse the
Subsidiaries and Mason-Dixon at the rate of $33.00
per hour for the time spent by any management level
employee of the Subsidiaries or Mason-Dixon in
assisting Rose Shanis and the Owners in defending or
prosecuting lawsuits.Rose Shanis and the Owners agree
to reimburse the Subsidiaries and Mason-Dixon at a
reasonable rate based on the total regular
compensation of the employee for the time spent by
any sub-management
<PAGE>
level employee of the Subsidiaries or Mason-Dixon in
assisting Rose Shanis and the Owners in defending or
prosecuting lawsuits.
3. Certain dealer reserve liabilities identified on Exhibit A
to this Amendment were not assumed by the Subsidiaries at Closing. An equivalent
amount of cash was not transferred to the Subsidiaries at Closing. If
Mason-Dixon is provided with a Master Dealer Agreement and a Consent to
Assignment satisfactory to Mason-Dixon and its counsel from the appropriate
dealer prior to December 31, 1998, the Consumer Finance Subsidiary will assume
the related dealer reserve liability upon transfer to the Consumer Finance
Subsidiary of an equivalent amount of cash and the parties agree to jointly
instruct the Escrow Agent under the Indemnity and Escrow Agreement to release to
the Owners such equivalent amount of cash. Further, the parties agree to jointly
instruct the Escrow Agent under the Indemnity and Escrow Agreement to release to
the Owners promptly after each anniversary of the Indemnity and Escrow Agreement
an amount of cash equal to the difference between the beginning dealer reserve
liability balance identified on Exhibit A and the total of the then dealer
reserve liability balance and all prior cash distributions from the Escrow
Account pursuant to this Paragraph and to Mason-Dixon on account of Mason-Dixon
Dealer Reserve Losses.
4. The Schedules attached to this Amendment supercede and
replace the Schedules attached to the Asset Purchase Agreement. The consumer
loans and credit sales included in the information transmitted via electronic
transmission to counsel for Mason-Dixon shall supplement and amend to the extent
of any inconsistency Schedule 1.1.2 attached to the Asset Purchase Agreement.
5. Except as expressly modified herein, all of the terms,
conditions and provisions of the Asset Purchase Agreement are hereby ratified
and confirmed as being in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
under seal, with the intention of making it a sealed instrument, as of the day
and year first above written.
ROSE SHANIS & CO., INC.
By:/s/ Norman J. Glick (SEAL)
---------------------------------------
ROSE SHANIS SONS, INC.
By:/s/ Norman J. Glick (SEAL)
---------------------------------------
STEPHEN CORP.
By:/s/ Norman J. Glick (SEAL)
---------------------------------------
ROSE SHANIS & CO.
By:/s/ Susan M. Glick (SEAL)
---------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Susan M. Glick (SEAL)
---------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
---------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
---------------------------------------
Norman J. Glick, Trustee of the Stephen J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
<PAGE>
By:/s/ Susan M. Glick (SEAL)
---------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis
Trust, General Partner
By:/s/ Susan M. Glick (SEAL)
---------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick Trust Share of the Bernice Shanis
Trust, General Partner
By:/s/ Norman J. Glick (SEAL)
---------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis
Trust, General Partner
By:/s/ Norman J. Glick (SEAL)
---------------------------------------
Norman J. Glick, Trustee of the Stephen J.
Glick Trust Share of the Bernice Shanis
Trust, General Partner
By:/s/ Norman J. Glick (SEAL)
---------------------------------------
Norman J. Glick, General Partner
By:/s/ Susan M. Glick (SEAL)
---------------------------------------
Susan M. Glick, Personal
Representative of the Estate
of Stephen J. Glick, General Partner
NORMAN J. GLICK
/s/ Norman J. Glick (SEAL)
------------------------------------------
SUSAN M. GLICK, PERSONAL
REPRESENTATIVE OF THE ESTATE OF
STEPHEN J. GLICK
/s/ Susan M. Glick (SEAL)
------------------------------------------
<PAGE>
/s/ Mitzi S. Glick (SEAL)
------------------------------------------
Mitzi S. Glick, Trustee u/a Norman J.
Glick dated May 14, 1997, FBO Robert S.
Glick
/s/ Eugene Schreiber (SEAL)
------------------------------------------
Eugene Schreiber, Trustee u/a Norman J.
Glick dated May 14, 1997, FBO Robert S.
Glick
/s/ Mitzi S. Glick (SEAL)
------------------------------------------
Mitzi S. Glick, Trustee u/a Norman J.
Glick dated May 14, 1997, FBO Bonnie G.
Dubin
/s/ Eugene Schreiber (SEAL)
------------------------------------------
Eugene Schreiber, Trustee u/a Norman J.
Glick dated May 14, 1997, FBO Bonnie G.
Dubin
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick Trust Share of the Ely Shanis Trust
/s/ Norman J. Glick (SEAL)
-----------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust
/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Stephen J.
Glick Trust Share of the Ely Shanis Trust
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis
Trust
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick Trust Share of the Bernice Shanis
Trust
<PAGE>
/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis
Trust
/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Stephen J.
Glick Trust Share of the Bernice Shanis
Trust
SUSAN M. GLICK AND GAIL GLICK,
TRUSTEES OF MARITAL TRUST UNDER THE
LAST WILL AND TESTAMENT OF
STEPHEN J. GLICK
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee
/s/ Gail Glick (SEAL)
------------------------------------------
Gail Glick, Trustee
SUSAN M. GLICK AND GAIL GLICK,
TRUSTEES OF BYPASS TRUST UNDER THE
LAST WILL AND TESTAMENT OF
STEPHEN J. GLICK
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee
/s/ Gail Glick (SEAL)
------------------------------------------
Gail Glick, Trustee
MASON-DIXON BANCSHARES, INC.
By:/s/ Thomas K. Ferguson (SEAL)
-----------------------------------------
Thomas K. Ferguson, President
<PAGE>
AMENDMENT TO ASSET PURCHASE AGREEMENT
EXHIBIT A
List of Dealer Reserve Liabilities
Not Assumed
- ---------------------------------------------------
RESERVE
- ---------------------------------------------------
CHESAPEAKE C $120,982
- ---------------------------------------------------
MD AUTO BUYERS C $143
- ---------------------------------------------------
VARIETY AUTO C $52,838
- ---------------------------------------------------
TOTALS $173,963
- ---------------------------------------------------
<PAGE>
AMENDMENT TO ASSET PURCHASE AGREEMENT
EXHIBIT A (cont.)
- --------------------------------------------------------
DEALER
RESERVE
1/30/98
- --------------------------------------------------------
BILL CRAEMER C $20,622
- --------------------------------------------------------
COLUMBIA AUTO C $4
- --------------------------------------------------------
MERIT MTR C $56,724
- --------------------------------------------------------
NORTHEAST C $1,176
- --------------------------------------------------------
THRIFT C $12,693
- --------------------------------------------------------
USED CAR CONN C $4,906
- --------------------------------------------------------
TOTALS $96,125
- --------------------------------------------------------
<PAGE>
AMENDMENT TO ASSET PURCHASE AGREEMENT
EXHIBIT A (cont.)
- -----------------------------------------------------------
DEALER
RESERVE
1/30/98
- -----------------------------------------------------------
BELTWAY B $455
- -----------------------------------------------------------
BOULDEN B $1,612
- -----------------------------------------------------------
CARPET & FLOOR GALLERY B $ 1,566
- -----------------------------------------------------------
CECIL AUTO B $14
- -----------------------------------------------------------
EASTERN MTR B $2,490
- -----------------------------------------------------------
G&W MOTOR B $19,744
- -----------------------------------------------------------
JESSUP MTR B $99
- -----------------------------------------------------------
MAIN STREET B $14,745
- -----------------------------------------------------------
R&F AUTO B $929
- -----------------------------------------------------------
TOTALS $41,654
- -----------------------------------------------------------
<PAGE>
EXHIBIT 2.3
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (the "Agreement") is made this 11th
day of February, 1998, by and among Rose Shanis & Co., Inc., Rose Shanis Sons,
Inc., Rose Shanis & Co., Stephen Corp. (collectively, "Seller"); Norman J.
Glick, Susan M. Glick, Personal Representative of the Estate of Stephen J.
Glick, Susan M. Glick and Gail Glick, Trustees of the Marital Trust under the
Last Will and Testament of Stephen J. Glick, Susan M. Glick and Gail Glick,
Trustees of the Bypass Trust under the Last Will and Testament of Stephen J.
Glick, Mitzi S. Glick and Eugene Schreiber, Trustees u/a Norman J. Glick dated
May 14, 1997, FBO Robert S. Glick, and Mitzi S. Glick and Eugene Schreiber,
Trustees u/a Norman J. Glick dated May 14, 1997, FBO Bonnie G. Dubin, and Norman
J. Glick and Susan M. Glick, Trustees of the Norman J. Glick Trust Share of the
Bernice Shanis Trust, the Stephen J. Glick Trust Share of the Bernice Shanis
Trust, the Norman J. Glick Trust Share of the Ely Shanis Trust, and the Stephen
J. Glick Trust Share of the Ely Shanis Trust (collectively called "Owners");
Mason-Dixon Bancshares, Inc. ("Mason-Dixon"); and Bay Finance, LLC and Bay
Insurance, LLC (collectively, "Purchaser"), pursuant to an Asset Purchase
Agreement (the "Asset Purchase Agreement") dated November 26, 1998, by Seller,
Owners, and Mason-Dixon, involving the sale of substantially all of the assets
of the Seller (the "Assets"). Capitalized terms used and not otherwise defined
herein shall have the meanings as defined in the Asset Purchase Agreement.
WHEREAS, pursuant to the Asset Purchase Agreement, Seller and
Owners have agreed to transfer to Purchaser the Assets used by Seller in its
business in exchange for, among other things, the assumption of certain of the
Seller's liabilities and obligations;
WHEREAS, Mason-Dixon owns Purchaser and desires to guaranty
Purchaser's performance of the assumed liabilities;
NOW, THEREFORE, in consideration of the transfer to Purchaser
of the Assets, and for other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, Seller, Purchaser and Mason-Dixon agree as
follows:
1. Assumption of Obligations. Subject to the terms of this
Agreement, effective on the date hereof, Purchaser, for itself and its
successors and assigns, hereby covenants and agrees to assume and accept those
debts, liabilities and obligations of Seller as are listed or described on
Schedule A to this Agreement (the "Assumed Liabilities"). Bay Insurance, LLC
shall assume and accept Assumed Liabilities of Stephen Corp. Bay Finance, LLC
shall assume and accept all other Assumed Liabilities of the Seller.
2. Indemnification. Purchaser shall defend, indemnify and hold
Seller and the Owners harmless against and from any and all liability to any
person, firm, corporation, political subdivision, or other entity for any
failure of Purchaser to pay the Assumed Liabilities. 3.Representations of
Seller. All representations and warranties of Seller relating to the Assumed
Liabilities contained in the Asset Purchase Agreement are hereby incorporated by
reference herein. Seller hereby further represents and warrants to Purchaser
that, as of the effective date of this Agreement, Seller has not received notice
of any default by Seller in
<PAGE>
connection with the Assumed Liabilities, and to the best of Seller's knowledge,
information and belief, Seller is not in default in connection with the Assumed
Liabilities.
4. Further Assurances. The parties agree that they will take
whatever action or actions are found to be reasonably necessary from time to
time to effectuate the provisions and intent of this Agreement, and, to that
end, the parties agree that they will execute any further documents or
instruments which may be necessary to give full force and effect to this
Agreement or to any of its provisions.
5. Binding Effect. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
6. Severability. In case any of the provisions of this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions had never been
contained herein.
7. Amendment. This Agreement may not be amended or terminated
orally but only as expressly provided herein or by an instrument in writing duly
executed by all of the parties.
8. Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be an original, but all of which together
will constitute one agreement.
9. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland.
10. Mason-Dixon's Guaranty. Mason-Dixon unconditionally and
irrevocably guarantees to Seller and the Owners the full and timely performance
by Purchaser of all obligations to be performed by Purchaser hereunder,
including, but not limited to, the payment by Purchaser of the Assumed
Liabilities. Mason-Dixon shall defend, indemnify and hold Seller and the Owners
harmless against and from any and all liability to any person, firm,
corporation, political subdivision, or other entity for any failure of Purchaser
to pay the Assumed Liabilities.
IN WITNESS WHEREOF, Seller, Mason-Dixon, Owners, and Purchaser
have each executed under seal this Assumption Agreement or caused it to be
executed under seal on its behalf by its duly authorized representatives, on the
day and year first written above, to be effective February 11, 1998, at 6:00
p.m.
ROSE SHANIS & CO., INC.
By:/s/ Norman J. Glick (SEAL)
---------------------------------------
ROSE SHANIS SONS, INC.
By:/s/ Norman J. Glick (SEAL)
---------------------------------------
<PAGE>
STEPHEN CORP.
By: /s/ Norman J. Glick (SEAL)
------------------------------------------
ROSE SHANIS & CO.
By: /s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By: /s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick
Trust Share of the Ely Shanis Trust,
General Partner
By: /s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By: /s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Stephen J.
Glick
Trust Share of the Ely Shanis Trust,
General Partner
By: /s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis
Trust, General Partner
By: /s/ Susan M. Glick (SEAL)
-----------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick
Trust Share of the Bernice Shanis Trust,
General Partner
By: /s/ Norman J. Glick (SEAL)
-----------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis
Trust, General Partner
<PAGE>
By:/s/ Norman J. Glick (SEAL)
-----------------------------------------
Norman J. Glick, Trustee of the Stephen
J. Glick Trust Share of the Bernice
Shanis Trust, General Partner
By:/s/ Norman J. Glick (SEAL)
-----------------------------------------
Norman J. Glick, General Partner
By:/s/ Susan M. Glick (SEAL)
-----------------------------------------
Susan M. Glick, Personal
Representative of the Estate
of Stephen J. Glick, General Partner
NORMAN J. GLICK
/s/ Norman J. Glick (SEAL)
------------------------------------------
SUSAN M. GLICK, PERSONAL
REPRESENTATIVE OF THE ESTATE OF
STEPHEN J. GLICK
/s/ Susan M. Glick (SEAL)
------------------------------------------
/s/ Mitzi S. Glick (SEAL)
------------------------------------------
Mitzi S. Glick, Trustee u/a Norman J.
Glick dated May 14, 1997, FBO Robert S.
Glick
/s/ Eugene Schreiber (SEAL)
------------------------------------------
Eugene Schreiber, Trustee u/a Norman J.
Glick dated May 14, 1997, FBO Robert S.
Glick
/s/ Mitzi S. Glick (SEAL)
------------------------------------------
Mitzi S. Glick, Trustee u/a Norman J.
Glick dated May 14, 1997, FBO Bonnie G.
Dubin
/s/ Eugene Schreiber (SEAL)
------------------------------------------
Eugene Schreiber, Trustee u/a Norman J.
Glick dated May 14, 1997, FBO Bonnie G.
Dubin
<PAGE>
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick Trust Share of the Ely Shanis Trust
/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust
/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Stephen J.
Glick Trust Share of the Ely Shanis Trust
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis
Trust
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick Trust Share of the Bernice Shanis
Trust
/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis
Trust
/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Stephen J.
Glick Trust Share of the Bernice Shanis
Trust
SUSAN M. GLICK AND GAIL GLICK,
TRUSTEES OF MARITAL TRUST UNDER THE
LAST WILL AND TESTAMENT OF
STEPHEN J. GLICK
/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee
<PAGE>
/s/ Gail Glick (SEAL)
------------------------------------------
Gail Glick, Trustee
SUSAN M. GLICK AND GAIL GLICK,
TRUSTEES OF BYPASS TRUST UNDER THE
LAST WILL AND TESTAMENT OF
STEPHEN J. GLICK
/s/ Susan M. Glick(SEAL)
------------------------------------------
Susan M. Glick, Trustee
/s/ Gail Glick(SEAL)
------------------------------------------
Gail Glick, Trustee
MASON-DIXON BANCSHARES, INC.
By:/s/ Thomas K. Ferguson (SEAL)
------------------------------------------
Thomas K. Ferguson, President
BAY FINANCE, LLC
By:/s/ Thomas K. Ferguson (SEAL)
------------------------------------------
Thomas K. Ferguson, President
Mason-Dixon Bancshares, Sole Member of Bay
Finance, LLC
BAY INSURANCE, LLC
By:/s/ Thomas K. Ferguson (SEAL)
------------------------------------------
Thomas K. Ferguson, President
Mason-Dixon Bancshares, Sole Member of Bay
Finance, LLC
<PAGE>
Assumption Agreement
Schedule A
A. Family loans as follows, up to maximum amount of $1,343,000.00 plus interest
accrued from December 31, 1997:
Principal Date Interest Maturity
Amount Made Rate Date
--------- ---- -------- --------
Glick, Susan 129,000 12-31-97 12% 6-30-98
Glick, Norman 100,000 12-31-97 12% 6-30-98
Glick, Mitzi 26,000 12-31-97 12% 6-30-98
Glick, Stephen 300,000 12-31-97 12% 6-30-98
(Estate of)
Glick, Rachae l70,000 12-31-97 12% 6-30-98
Glick, Robert 100,000 12-31-97 12% 6-30-98
Glick, Valerie 78,000 12-31-97 12% 6-30-98
Glick, Wm. 90,000 12-31-97 12% 6-30-98
Flamm, E. Kahn 100,000 12-31-97 11.5% 6-30-98
Kahn, Richard 100,000 12-31-97 11.5% 6-30-98
Kahn, Wm. R. 100,000 12-31-97 11% 6-30-98
Seiderman, S. 50,000 12-31-97 8.25% 6-30-98
Thomas, R. 60,000 12-31-97 7.5% 6-30-98
Thomas, R. 40,000 12-31-97 8% 6-30-98
B. NationsBank, N.A., CoreStates Bank, N.A., Harris Trust and Savings Bank
under loan agreement dated September 29, 1995, as amended and extended, up
to a maximum amount of $33,000,000, unless additional borrowings are
approved in writing by Mason-Dixon (which approval shall not be unreasonably
withheld or delayed) to enable Rose Shanis to fund additional consumer loans
or credit sales or cover operating expenses which are incurred by Rose
Shanis in the ordinary course of business.
C. $440,833.
D. Dealer Reserves specified on attached Schedule A.
<PAGE>
E. Unearned Insurance Commissions up to $563,397 as shown on Rose Shanis'
September 30, 1997 Balance Sheet.
F. Obligation to pay "pay to stay" retention bonuses under the bonus program
described in Item #4 of Schedule 10.14.7 up to $237,000.
G. Accounts Payable and Accrued Expenses up to amounts shown on Rose Shanis'
internally prepared December 31, 1997 Balance Sheet, adjusted by audited
December 31, 1997 Statement and further adjusted through the date of Closing
by expenses incurred in the ordinary course of business.
<PAGE>
Assumption Agreement
Schedule A (cont.)
- -----------------------------------------------------------
DEALER
RESERVE
1/30/98
- -----------------------------------------------------------
1ST STEP MTR A $18,066
- -----------------------------------------------------------
AOK A $0
- -----------------------------------------------------------
AUTO GALLERY A $ 2,777
- -----------------------------------------------------------
AUTOMART $550
(J.Q.E., Ltd.) A
- -----------------------------------------------------------
BALT BEST A $15,333
- -----------------------------------------------------------
BAYCOUNTRY AUT A $5,240
- -----------------------------------------------------------
BRUNS MTR A $24,790
- -----------------------------------------------------------
CAMBRIDGE A $0
- -----------------------------------------------------------
CAR CAPITAL A $ 4,911
- -----------------------------------------------------------
CATONAUTO A $0
- -----------------------------------------------------------
COUNTRY CLUB A $0
- -----------------------------------------------------------
DAYS AUTO A $ 2,432
- -----------------------------------------------------------
FARMAX CORP. T/A $0
COUNTY LINE A
- -----------------------------------------------------------
H2ONLY, INC. A $2,140
- -----------------------------------------------------------
HAKER AUTO A $0
- -----------------------------------------------------------
JO LEE USED CAR A $ 3,996
- -----------------------------------------------------------
K B AUTO A $14,766
- -----------------------------------------------------------
LDB AUTO A $0
- -----------------------------------------------------------
M & M AUTO A $13,396
- -----------------------------------------------------------
MORAN MTR. A $ 22,589
- -----------------------------------------------------------
MVSTEVENS A $0
- -----------------------------------------------------------
N WEST VIEW A $2,233
- -----------------------------------------------------------
ROSEDALE CYCLE $14,162
WORLD, INC. A
- -----------------------------------------------------------
RYAN AUTO A $17,735
<PAGE>
- -----------------------------------------------------------
SELECT USED CARS A $ 1,100
- -----------------------------------------------------------
SPORTS & IMPORTS I A $20,386
- -----------------------------------------------------------
SPORTS & IMPORTS II A $18,669
- -----------------------------------------------------------
SPORTSMAN A $2,262
- -----------------------------------------------------------
UNIVERSAL A $ 1,847
- -----------------------------------------------------------
TOTALS $209,380
- -----------------------------------------------------------
<PAGE>
EXHIBIT 2.4
SHAREHOLDERS' EQUITY ESCROW AGREEMENT
This Shareholders' Equity Escrow Agreement, dated February 11, 1998, among
Mason-Dixon Bancshares, Inc., Bay Finance, LLC, and Bay Insurance, LLC
(collectively "Mason-Dixon") and Rose Shanis & Co., Inc., Rose Shanis Sons,
Inc., Rose Shanis & Co. and Stephen Corp. (collectively "Rose Shanis") and FMB
Trust Company, N.A., a national banking association organized under the laws of
the United States, as escrow agent ("Escrow Agent").
RECITALS
Capitalized terms used and not otherwise defined herein shall have the
meanings as defined in the Asset Purchase Agreement as of November, 26, 1997
(the "Asset Purchase Agreement"). Execution and delivery of this Shareholders'
Equity Escrow Agreement by Rose Shanis is a condition to the obligations of
Mason-Dixon to close under the Asset Purchase Agreement. The Asset Purchase
Agreement provides that a portion of the Purchase Price shall be held in escrow
in accordance with the terms and conditions of this Shareholders' Equity Escrow
Agreement. Rose Shanis has approved the transactions contemplated by the Asset
Purchase Agreement ("Transactions") and desires to enter into this Shareholders'
Equity Escrow Agreement to induce Mason-Dixon to consummate the Transactions.
NOW, THEREFORE, in consideration of and in reliance upon the promises and
covenants in this Shareholders' Equity Escrow Agreement, the parties agree as
follows:
1. Establishment of Escrow
1.1. Mason-Dixon is depositing with Escrow Agent an amount equal to
$2,000,000 in immediately available funds (as increased by any earnings thereon
and as reduced by any losses on investments, the "Escrow Fund"). Notwithstanding
such payment to the Escrow Agent, Mason-Dixon shall be deemed to have fully
satisfied its obligation to pay such part of the Purchase Price payable pursuant
to the Asset Purchase Agreement. Rose Shanis (or the owners of Rose Shanis) will
report all income earned on, or derived from, the Escrow Fund as their income.
Escrow Agent acknowledges receipt thereof.
1.2. Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Fund pursuant to the terms and conditions
hereof.
2. Investment of Funds
Escrow Agent shall invest the Escrow Fund at the written direction of Rose
Shanis and Mason-Dixon or of any person designated in writing by such parties
(for purposes of this Section 2, the "Investment Agent") in the direct
obligations of, or in the obligations of any agency or authority of, the United
States, any state of the United States and any political subdivision thereof
(the "Government Obligations"), or in such other investments as are
<PAGE>
directed by a writing signed by Rose Shanis and Mason-Dixon. Uninvested funds
shall be swept using a sweep investment vehicle that invests only in
Government Obligations, including, without limitation, an open-end management
type investment company registered under the Federal Investment Company Act of
1940 for which Escrow Agent or an affiliate provides services as investment
adviser, custodian, transfer agent, registrar or similar or related services
until the Escrow Agent receives written direction from the Investment Agent.
Escrow Agent shall not be liable or otherwise responsible for failure to achieve
any particular rate of return, or for any losses resulting from any investments
provided for pursuant to this Shareholders' Equity Escrow Agreement.
3. Claims
3.1. If Mason-Dixon gives a notice to Rose Shanis and Escrow Agent stating
that the Adjustment Amount has been determined in accordance with Section 5.2 of
the Asset Purchase Agreement and specifying the dollar amount payable to
Mason-Dixon pursuant to Section 5.2 of the Asset Purchase Agreement as a result
of such determination, on the 10th business day (as specified in the notice)
following such notice Escrow Agent shall pay to Mason-Dixon the dollar amount so
specified from (and only to the extent of) the Escrow Fund. Escrow Agent shall
not inquire into or consider whether the Adjustment Amount has been determined
in accordance with the requirements of the Asset Purchase Agreement.
3.2. Escrow Agent shall pay and distribute the then remaining amount of the
Escrow Fund, including any income earned on the Escrow Fund, to Rose Shanis.
3.3. If Rose Shanis gives a notice to Mason-Dixon and Escrow Agent prior to
the 10th business day following Mason-Dixon's notice referred to in Section 3.1,
Escrow Agent shall make no payment to Mason-Dixon in the absence of joint
instructions from Mason-Dixon and Rose Shanis. Mason-Dixon and Rose Shanis shall
make a good faith attempt to resolve their dispute. Upon written request by Rose
Shanis or Mason-Dixon made not more than 10 business days after Rose Shanis'
notice, Escrow Agent promptly shall refer the dispute concerning the Escrow Fund
to the American Arbitration Association for settlement by arbitration in
accordance with the Association's Commercial Arbitration Rules. Judgment upon
any resulting arbitration award may be entered in any court of competent
jurisdiction. As part of such award, the arbitrator may establish his fee and
expenses in connection therewith, which Mason-Dixon shall promptly pay. However,
any award in a party's favor shall be increased by a percentage of such fees and
expenses equal to the same percentage of a party's claim that is awarded to a
party in arbitration. Any award shall be a conclusive determination of the
matter and shall be final and binding upon all parties. Escrow Agent promptly
shall pay the amount of any award to the prevailing party to the extent the
Escrow Fund contains sufficient funds for that purpose. Arbitration proceedings
shall be held in Baltimore, Maryland, unless Rose Shanis and Mason-Dixon agree
upon another location.
4. Termination of Escrow
On June 1, 1998, Escrow Agent shall pay and distribute the then amount of
the Escrow Fund to Rose Shanis, unless prior thereto Mason-Dixon has notified
Escrow Agent to make no
<PAGE>
disbursement of the Escrow Fund. In that case the entire Escrow Fund shall be
retained by Escrow Agent until it receives joint written instructions of Rose
Shanis and Mason-Dixon. Upon written request by Rose Shanis or Mason-Dixon,
Escrow Agent promptly shall refer the dispute to arbitration as described above
in Section 3.3.
5. Escrow Agent's Responsibility; Resignation; Removal.
5.1. Escrow Agent shall retain the Escrow Fund in accordance with the terms
and conditions of this Shareholders' Equity Escrow Agreement, and shall be under
no responsibility or obligation other than to follow the provisions hereof.
5.2. Escrow Agent may resign at any time upon 30 days written notice to
Mason-Dixon and Rose Shanis; within 20 days after receipt of such notice,
Mason-Dixon shall select an independent bank or trust company to serve as the
successor Escrow Agent, subject to the reasonable consent of Rose Shanis (which
consent shall not be unreasonably withheld or delayed). In the event a successor
is not selected and agreed upon within the time described above, Escrow Agent
may deposit the Escrow Fund into a court of competent jurisdiction and request
that the court appoint or cause the parties to appoint a successor Escrow Agent.
Upon such deposit, Escrow Agent shall be relieved of all future responsibilities
under this Shareholders' Equity Escrow Agreement.
5.3. Escrow Agent may be removed at any time upon written notice from both
Mason-Dixon and Rose Shanis and shall thereupon remit all Escrow Funds as
directed in the written notice.
5.4. Escrow Agent shall not be liable for any act or omission in good faith
and in the absence of fraud or willful misconduct. Escrow Agent shall in all
cases be entitled to rely upon and be fully protected in acting or in refraining
from acting under this Shareholders' Equity Escrow Agreement in accordance with
any and all written notifications received by it in accordance with this Escrow
Agreement.
5.5. Mason-Dixon and Rose Shanis hereby agree jointly and severally to
indemnify and hold Escrow Agent harmless from and against any and all actions,
suits, proceedings, losses, liabilities, damages, costs and expenses (including
attorneys' and experts' fees, costs of investigation, court costs, and sums
expended in settlement of claims or litigation, pending or threatened) arising
out of or in connection with this Shareholders' Equity Escrow Agreement, the
failure of any party to perform its obligations hereunder, or arising out of or
in connection with any action or failure to act in good faith by Escrow Agent
from and after the date of this Shareholders' Equity Escrow Agreement, save only
any action or failure to act by the Escrow Agent that constitutes fraud or
willful misconduct.
5.6. Escrow Agent shall be entitled to reasonable compensation for all
services rendered by it under this Shareholders' Equity Escrow Agreement as
provided for in Schedule A attached hereto. Such compensation shall be borne 50%
by Rose Shanis and 50% by Mason-Dixon provided that the total amount of such
compensation shall be the joint and several obligation of each of Rose Shanis
and Mason-Dixon.
<PAGE>
5.7. If Escrow Agent consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association, without any further act,
shall be the successor Escrow Agent with the same effect as if it had been named
as Escrow Agent herein, unless Mason-Dixon and Rose Shanis provide otherwise.
5.8. This Shareholders' Equity Escrow Agreement expressly sets forth all the
duties of the Escrow Agent with respect to any and all matters pertinent hereto.
No implied duties or obligations shall be read into this Shareholders' Equity
Escrow Agreement against the Escrow Agent. The Escrow Agent shall not be bound
by any provisions of any agreement among the other parties hereto except this
Shareholders' Equity Escrow Agreement.
5.9. The Escrow Agent shall be entitled to rely in good faith upon any
order, judgment, certification, demand, notice, instrument, award, or other
writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety or
validity of the service thereof. The Escrow Agent may act in reliance upon any
instrument or signature believed by it in good faith to be genuine and may
assume that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
5.10. The Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Shareholders' Equity Escrow Agreement and
shall not be liable for any action taken or omitted in good faith in accordance
with such advice.
5.11. The Escrow Agent makes no representations as to the validity, value or
genuineness of any amounts, documents or instruments held by or delivered to it.
5.12. MASON-DIXON, ROSE SHANIS AND THE ESCROW AGENT SPECIFICALLY WAIVE THE
RIGHT TO TRIAL BY JURY IN RESOLVING ANY CLAIM OR COUNTERCLAIM RELATED TO THIS
SHAREHOLDERS' EQUITY ESCROW AGREEMENT.
6. Miscellaneous.
6.1. This Shareholders' Equity Escrow Agreement shall be governed by and
construed and enforced in accordance with the internal, substantive laws of the
State of Maryland without giving effect to the conflict of law rules thereof.
6.2. All notices, writings and other communications required or permitted to
be given pursuant to this Shareholders' Equity Escrow Agreement shall be in
writing and shall be given by hand-deliveryor transmitted by United States
certified mail, return receipt requested, postage prepaid, or via overnight
carrier, to the addresses set forth below:
<PAGE>
If to Rose Shanis: Norman J. Glick
3502 Round Hollow Road
Baltimore, Maryland 21208
With a copy to: Adelberg, Rudow, Dorf, Hendler & Sameth, LLC
600 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, Maryland 21201
Attn: David B. Rudow, Esquire
If to Mason-Dixon: Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, Maryland 21157
Attn: Thomas K. Ferguson, President and CEO
With a copy to: Gordon, Feinblatt, Rothman, Hoffberger &
Hollander, LLC
233 East Redwood Street
Baltimore, Maryland 21202
Attn: Carla Stone Witzel, Esquire
If to Escrow Agent: FMB Trust Company, N.A.
25 South Charles Street, Mail Code 101-591
Baltimore, Maryland 21201
Attn: Ms. Pamela S. Hazelip
Each notice shall be deemed to have been received: (i) for hand deliveries,
on the date of transmittal: (ii) for mailing, on the day following such mailing;
and (iii) for overnight deliveries, on the day following such transmittal. The
parties shall have the right to change their respective addresses set forth in
this Section by giving notice of such change in accordance with this Section.
6.3. This Shareholders' Equity Escrow Agreement together with all other
agreements and documents executed by the parties in connection with the
Transactions represents the entire agreement between the parties and supersedes
and cancels any prior oral or written agreement, letter of intent or
understanding related to the subject matter hereof.
6.4. This Shareholders' Equity Escrow Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument, and shall
become effective when one or more counterparts have been signed by each of the
parties.
IN WITNESS WHEREOF, this Shareholders' Equity Escrow Agreement has been duly
executed by the parties hereto on the day and year first above written.
<PAGE>
ROSE SHANIS & CO., INC.
By:/s/ Norman J. Glick (SEAL)
------------------------------------------
ROSE SHANIS SONS, INC.
By:/s/ Norman J. Glick (SEAL)
------------------------------------------
ROSE SHANIS & CO.
By:/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Stephen J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis
Trust, General Partner
<PAGE>
By:/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Trustee of the Stephen J.
Glick Trust Share of the Bernice Shanis
Trust, General Partner
By:/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis
Trust, General Partner
By:/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, Trustee of the Stephen J.
Glick Trust Share of the Bernice Shanis
Trust, General Partner
By:/s/ Norman J. Glick (SEAL)
------------------------------------------
Norman J. Glick, General Partner
By:/s/ Susan M. Glick (SEAL)
------------------------------------------
Susan M. Glick, Personal Representative of
the Estate of Stephen J. Glick, General
Partner
STEPHEN CORP.
By:/s/ Norman J. Glick (SEAL)
------------------------------------------
MASON-DIXON BANCSHARES, INC.
By:/s/ Thomas K. Ferguson (SEAL)
------------------------------------------
Thomas K. Ferguson, President
BAY FINANCE, LLC
By:/s/ Thomas K. Ferguson (SEAL)
------------------------------------------
Thomas K. Ferguson, President of Mason-
Dixon Bancshares, Inc., Member
<PAGE>
BAY INSURANCE, LLC
By:/s/ Thomas K. Ferguson (SEAL)
------------------------------------------
Thomas K. Ferguson, President of Mason-
Dixon Bancshares, Inc., Member
FMB TRUST COMPANY, N.A.
By:/s/ Ronald J. Kruppa (SEAL)
------------------------------------------
Ronald J. Kruppa, Escrow Agent
<PAGE>
EXHIBIT 2.5
INDEMNITY AND ESCROW AGREEMENT
THIS Indemnity and Escrow Agreement (this "Indemnity and Escrow Agreement")
is entered into as of the 11th day of February, 1998, by and among Rose Shanis &
Co., Inc., Rose Shanis Sons, Inc., Rose Shanis & Co. and Stephen Corp.
(collectively "Rose Shanis"); Norman J. Glick, Susan M. Glick, individually and
as Personal Representative of the Estate of Stephen J. Glick, Susan M. Glick and
Gail Glick, Trustees of the Marital Trust under the Last Will and Testament of
Stephen J. Glick, Susan M. Glick and Gail Glick, Trustees of the Bypass Trust
under the Last Will and Testament of Stephen J. Glick, Mitzi S. Glick and Eugene
Schreiber, Trustees u/a Norman J. Glick dated May 14, 1997, FBO Robert S. Glick,
and Mitzi S. Glick and Eugene Schreiber, Trustees u/a Norman J. Glick dated May
14, 1997, FBO Bonnie G. Dubin, and Norman J. Glick and Susan M. Glick, Trustees
of the Norman J. Glick Trust Share of the Bernice Shanis Trust, the Stephen J.
Glick Trust Share of the Bernice Shanis Trust, the Norman J. Glick Trust Share
of the Ely Shanis Trust, and the Stephen J. Glick Trust Share of the Ely Shanis
Trust (collectively the "Owners"); Mason-Dixon Bancshares, Inc. ("Mason-Dixon");
Bay Finance, LLC, and Bay Insurance, LLC (the "Subsidiaries"); and FMB Trust
Company, N.A., a national banking association organized under the laws of the
United States ("Escrow Agent"). Capitalized terms used and not otherwise defined
herein shall have the meanings as defined in the Asset Purchase Agreement as of
November 26, 1997, as amended (the "Asset Purchase Agreement").
RECITALS
Execution and delivery of this Indemnity and Escrow Agreement by Rose
Shanis and the Owners is a condition to the obligations of Mason-Dixon and the
Subsidiaries to close under the Asset Purchase Agreement. The Asset Purchase
Agreement provides that a portion of the Purchase Price shall be held in escrow
in accordance with the terms and conditions of this Indemnity and Escrow
Agreement. Rose Shanis and the Owners have approved the transactions
contemplated by the Asset Purchase Agreement ("Transactions") and desire to
enter into this Indemnity and Escrow Agreement to induce Mason-Dixon and the
Subsidiaries to consummate the Transactions. This Indemnity and Escrow Agreement
shall be the exclusive mechanism for exercising Mason-Dixon's right to
indemnification under the Asset Purchase Agreement. The Owners plan to liquidate
Rose Shanis shortly after the date of this Indemnity and Escrow Agreement. The
individuals named above as trustees under the Trusts identified above and the
Personal Representative sign this Indemnity and Escrow Agreement solely in their
fiduciary capacities and shall have no personal liability hereunder unless such
individuals also sign this Indemnity and Escrow Agreement individually. The
personal liability of Susan M. Glick is limited to the greater of the Escrowed
Amount (as defined in Section 4.2) or the amount of the Purchase Price she
receives as beneficiary of the Marital and Bypass Trusts under the Last Will and
Testament of Stephen J. Glick.
NOW, THEREFORE, in consideration of and in reliance upon the promises and
covenants in this Indemnity and Escrow Agreement, the parties agree as follows:
<PAGE>
1. Indemnification by Rose Shanis and the Owners.
1.1. Rose Shanis and the Owners, jointly and severally, subject to the
limitations of Section 1.3, shall be liable for, indemnify Mason-Dixon and the
Subsidiaries, their successors and assigns and their affiliates and each
director, officer, employee and agent of each of the foregoing (each being
sometimes called an "Indemnified Party" and collectively the "Indemnified
Parties") with respect to, hold the Indemnified Parties harmless from, and
reimburse the Indemnified Parties for, any claims, actions, demands,
proceedings, losses, liabilities, damages (including incidental and
consequential damages), expenses (including reasonable attorneys' fees), or
diminution of value, whether or not involving a third-party claim,
(collectively, the "Mason-Dixon Losses," and singly, a "Mason-Dixon Loss"),
which arise out of or are in respect of, directly or indirectly:
1.1.1. any breach of any representation or warranty of Rose
Shanis contained in the Asset Purchase Agreement;
1.1.2. the breach of any covenant, agreement or obligation of the
Owners or Rose Shanis contained in either the Asset Purchase Agreement or the
Assignment of Master Dealer Agreements; or
1.1.3. any claim by any third party arising from any act or
omission by Rose Shanis or its officers, employees, agents or affiliates
relating to or arising out of the Business, including, but not limited to,
claims relating to or arising out of the origination, purchase, servicing,
collection or sale of Loans by Rose Shanis prior to and including the Closing
Date, whether such a transaction was completed before, on or after the Closing
Date (except with respect to any liability or obligation arising out of any
action by Mason-Dixon or the Subsidiaries after the Closing Date).
"Mason-Dixon Loss" also includes all amounts which Bay Finance, LLC, would have
had the right to charge against the Reserve Funds identified on Exhibit A
pursuant to the terms of the appropriate Master Dealer Agreement if Bay Finance,
LLC, had acquired such Reserve Funds, or, if no Master Dealer Agreement is
effective at the date hereof, all amounts which Bay Finance, LLC, would have had
the right to charge against the Reserve Funds identified on Exhibit B had the
Master Dealer Agreement attached as Exhibit C been effective. These Mason-Dixon
Losses are sometimes called "Mason-Dixon Dealer Reserve Losses."
"Mason-Dixon Loss" further includes interest computed on the total amount of
Reserve Funds identified on Exhibits A and B for which the liability has not
been assumed by Bay Finance, LLC, or discharged by payment to the dealers, as
such amount changes from time to time, at an annual interest rate equivalent to
the Prime Rate published in the Money Rates Section of The Wall Street Journal
from time to time. Such Mason-Dixon Losses are called "Mason-Dixon Dealer
Reserve Interest Losses." Mason-Dixon may give Notice of Claim (as described in
Section 1.2) with respect to Mason-Dixon Dealer Reserve Interest Losses not more
frequently than quarterly beginning April 1, 1998.
<PAGE>
The right to indemnification shall not be affected by any investigation
conducted with respect to or any knowledge acquired by Mason-Dixon at any time,
whether before or after the execution and delivery of this Indemnity and Escrow
Agreement, with respect to the accuracy or inaccuracy of or compliance with, any
representation, warranty, covenant or obligation of Rose Shanis.
1.2. Notice of Claim. Promptly after notice by Mason-Dixon of any
facts or events that may result in a Mason-Dixon Loss, Mason-Dixon shall give
written notice ("Notice of Claim") to the Owners and the Escrow Agent. The
Notice of Claim shall set forth the amount of the claim, or Mason-Dixon's then
best estimate of the amount of the claim. Mason-Dixon shall furnish to the
Owners, in reasonable detail, such information as Mason-Dixon may have with
respect to such claim (including copies of any summons, complaint or other
pleading which may have been served and any written claim, demand, invoice,
billing or other document evidencing or asserting the same). No failure or delay
by Mason-Dixon in the performance of the foregoing shall reduce or otherwise
affect the obligation of Rose Shanis and the Owners to indemnify and hold
Mason-Dixon harmless, except to the extent that such failure or delay has
adversely affected Rose Shanis or the Owners' ability to defend against, settle
or satisfy the claim.
1.3. Limitations. The obligation of Rose Shanis and the Owners to
indemnify the Indemnified Parties is subject to the following limitations:
1.3.1. The Indemnified Parties shall look first to the Escrowed
Amount (as defined in Section 4.2) for the discharge of Rose Shanis and the
Owners' obligations hereunder. Such action by the Indemnified Parties, however,
shall not release or satisfy any of Rose Shanis' or the Owners' obligations
hereunder to the Indemnified Parties, except to the extent satisfied out of the
Escrowed Amount.
1.3.2. From the date hereof until the first anniversary of this
Indemnity and Escrow Agreement (February 11, 1999) ("First Anniversary"), the
obligation of Rose Shanis and the Owners to indemnify the Indemnified Parties
with respect to any Mason-Dixon Loss incurred as a result of or in connection
with any claim by any state or federal regulatory authority arising out of or
relating to 16 C.F.R. ss. 444.4 (1997), as it may be amended, is limited to
Notices of Claim made during this period in an aggregate amount of the Purchase
Price.
1.3.3. From the date hereof until the First Anniversary, the
obligation of Rose Shanis and the Owners to indemnify the Indemnified Parties
with respect to Mason-Dixon Losses not included in Section 1.3.2 is limited to
Notices of Claim made during this period in an aggregate amount of $7,811,742.
1.3.4. From the First Anniversary until the second anniversary of
this Indemnity and Escrow Agreement (February 11, 2000) ("Second Anniversary"),
the obligation of Rose Shanis and the Owners to indemnify the Indemnified
Parties with respect to Mason-Dixon Losses is limited to Notices of Claim made
during this period in an aggregate amount of $4,311,742.
<PAGE>
1.3.5. From the Second Anniversary until the third anniversary of
this Indemnity and Escrow Agreement (February 11, 2001) ("Third Anniversary"),
the obligation of Rose Shanis and the Owners to indemnify the Indemnified
Parties with respect to Mason-Dixon Losses is limited to Notices of Claim made
during this period in an aggregate amount of $2,311,742.
1.3.6. From the Third Anniversary until the fourth anniversary of
this Indemnity and Escrow Agreement (February 11, 2002) ("Termination Date"),
the obligation of Rose Shanis and the Owners to indemnify the Indemnified
Parties with respect to Mason-Dixon Dealer Reserve Losses is limited to Notices
of Claim made during this period in an aggregate amount of $311,742. From the
Third Anniversary until the fourth anniversary of this Indemnity and Escrow
Agreement (February 11, 2002) ("Termination Date"), the obligation of Rose
Shanis and the Owners to indemnify the Indemnified Parties with respect to
Mason-Dixon Dealer Reserve Interest Losses is limited to Notices of Claim made
during this period in an aggregate amount of $25,000.
1.3.7. Notwithstanding any other provision of this Indemnity and
Escrow Agreement, the aggregate amount Rose Shanis and the Owners are obligated
to pay under this Indemnity and Escrow Agreement shall not exceed $7,811,742
plus the amount paid under Section 1.3.2, but in no event shall Rose Shanis and
the Owners pay more than the Purchase Price.
2. Mason-Dixon's Obligation to Mitigate. Except for claims asserted by
third parties and Mason-Dixon Dealer Reserve Losses, Mason-Dixon shall exercise
commercially reasonable efforts to mitigate the amount of any Mason-Dixon Loss.
3. Rose Shanis and the Owners' Defense.
This Section applies only to claims asserted by third parties. If the
claim asserted by a Notice of Claim arises because of a claim or demand that is
asserted by a third party, including, but not limited to, any governmental unit
or a Rose Shanis borrower, Rose Shanis and the Owners shall have 15 days after
the date of the Notice of Claim to notify Mason-Dixon in writing of their
election to defend the claim on behalf of the Indemnified Party. If Rose Shanis
and the Owners elect to defend the claim, the Indemnified Party shall make
available to Rose Shanis and the Owners all records and other materials which
are reasonably required in the defense of the claim and shall otherwise
cooperate with and assist Rose Shanis and the Owners in the defense of the
claim. So long as Rose Shanis and the Owners are defending the claim in good
faith, the Indemnified Party shall not pay, settle or compromise the claim. If
Rose Shanis and the Owners elect to defend the claim, the Indemnified Party
shall have the right to participate in the defense of the claim, at its own
expense. If Rose Shanis and the Owners do not elect to defend the claim, or do
not defend the claim in good faith, then the Indemnified Party shall have the
right, in addition to any other right or remedy it may have hereunder, at Rose
Shanis and the Owners' expense, to defend the claim or to pay or settle the
claim. Notwithstanding any of the foregoing, (a) the Indemnified Party shall not
have any obligation to participate in the defense of, or defend, the claim; and
(b) the Indemnified Party's defense of or its participation in the
<PAGE>
defense of the claim shall not in any way diminish the obligations of Rose
Shanis and the Owners. Rose Shanis and the Owners shall not make any settlement
of the claim without written consent of Mason-Dixon.
4. Creation of Escrow.
4.1. Appointment. Mason-Dixon, the Subsidiaries, Rose Shanis and the
Owners jointly appoint the Escrow Agent as the escrow agent for purposes of and
to act in accordance with the terms and conditions hereof, and the Escrow Agent
accepts such appointment.
4.2. Escrow Property. At Closing, Mason-Dixon shall pay to the Escrow
Agent a portion of the Purchase Price equal to $7,811,742 (such amount, less the
amount of any payments by the Escrow Agent to Mason-Dixon in accordance with the
terms hereof, is referred to as the "Escrowed Amount"). Notwithstanding such
payment to the Escrow Agent, Mason-Dixon shall be deemed to have fully satisfied
its obligation to pay such part of the Purchase Price payable pursuant to the
Asset Purchase Agreement. Rose Shanis (or the Owners) will report all income
earned on, or derived from, the Escrowed Amount as their income. The Escrowed
Amount shall be received and maintained by the Escrow Agent in an account (the
"Escrow Account") until paid out in accordance with the terms of this Indemnity
and Escrow Agreement.
4.3. Investments. The Escrow Agent shall invest the amounts in the
Escrow Account at the written direction of Rose Shanis, the Owners and
Mason-Dixon, or of any person designated in writing by such parties (for
purposes of this Section 4.3, the "Investment Agent") in the direct obligations
of, or in the obligations of any agency or authority of, the United States, any
state of the United States and any political subdivision thereof (the
"Government Obligations") or in such other investments as are directed by a
writing signed by Rose Shanis, the Owners and Mason-Dixon. Uninvested funds
shall be swept using a sweep investment vehicle that invests only in Government
Obligations, including, without limitation, an open-end management type
investment company registered under the Federal Investment Company Act of 1940
for which Escrow Agent or an affiliate provides services as investment advisor,
custodian, transfer agent, registrar or similar of related services until the
Escrow Agent receives written instructions from the Investment Agent. The Escrow
Agent shall not be liable or otherwise responsible for failure to achieve any
particular rate of return, or for any losses resulting from any investments
provided for pursuant to this Indemnity and Escrow Agreement. All earnings in
the Escrow Account shall be paid out to the Owners not less frequently than
quarterly, within 30 days after the end of each calendar quarter.
4.4. Payment of Claims. The Indemnified Parties shall be entitled to
payment from the Escrow Account if Rose Shanis or the Owners are obligated to
indemnify the Indemnified Party as provided in Section 1.
4.5. Demand for Payment. From time to time, Mason-Dixon may give
written notice ("Demand for Payment") to the Owners and the Escrow Agent
specifying in
<PAGE>
reasonable detail the nature and dollar amount of any claim an Indemnified Party
may have under Section 1 for which a Notice of Claim has been made and
requesting payment of the claim from the Escrow Account.
4.6. Disputed Claims, Arbitration. If the Owners do not object in
writing to the Demand for Payment to the Escrow Agent and Mason-Dixon within 30
days after the date the Demand for Payment is received, the Escrow Agent shall
pay the amount reported in the Demand for Payment to Mason-Dixon to the extent
the Escrow Account contains sufficient funds for that purpose. If the Owners
object to such payment, they shall give written notice to the Escrow Agent and
Mason-Dixon of their objection to the payment of the claim (the "Objection
Notice") within 30 days after the Demand for Payment was received. If the
Objection Notice is timely received, the Escrow Agent shall make no payment to
Mason-Dixon in respect of the claim reported in the Demand for Payment unless
Mason-Dixon and the Owners jointly in writing instruct the Escrow Agent to make
such payment. Mason-Dixon and the Owners shall make a good faith attempt to
resolve the dispute. In the absence of joint instructions from Mason-Dixon and
the Owners, upon written request by the Owners or Mason-Dixon made not earlier
than 30 days after the Objection Notice is received, the Escrow Agent promptly
shall refer the dispute concerning the Demand for Payment to the American
Arbitration Association for settlement by arbitration in accordance with the
Association's Commercial Arbitration Rules. Judgment upon any resulting
arbitration award may be entered in any court of competent jurisdiction. As part
of such award, the arbitrator may establish his fee and expenses in connection
therewith, which Mason-Dixon shall promptly pay. However, any award in an
Indemnified Party's favor shall be increased by a percentage of such fees and
expenses equal to the same percentage of an Indemnified Party's claim that is
awarded to an Indemnified Party in arbitration. Any award shall be a conclusive
determination of the matter and shall be final and binding upon all parties. The
Escrow Agent promptly shall pay the amount of any award in an Indemnified
Party's favor to Mason-Dixon, to the extent the Escrow Account contains
sufficient funds for that purpose. Arbitration proceedings shall be held in
Baltimore, Maryland, unless the Owners and Mason-Dixon agree upon another
location.
4.7. Periodic Determination of Escrowed Amount. On the First
Anniversary, the Escrow Agent shall notify the Owners and Mason-Dixon of the
amount of any Notices of Claim and Demands for Payment made against the Escrow
Account, the validity and amount of which have not been determined or the
validity and amount of which have been determined, but which have not been paid.
The Owners and Mason-Dixon shall promptly certify to Escrow Agent that each is
in agreement with such amount. This amount is called the "Reserve." Within 5
business days of the First Anniversary, the Escrow Agent shall pay to the Owners
an amount from the Escrow Account equal to the Escrowed Amount minus the Reserve
and minus $4,311,742, to the extent the Escrow Account contains sufficient funds
for that purpose.
Each time an arbitration award is made regarding a claim after
the First Anniversary and before the Second Anniversary, the Escrow Agent shall
pay to the Owners an amount from the Escrow Account equal to the Escrowed Amount
minus the then Reserve and minus $4,311,742, to the extent the Escrow Account
contains sufficient funds for that purpose.
<PAGE>
On the Second Anniversary, the Escrow Agent shall notify the
Owners and Mason-Dixon of the then amount of the Reserve and, subject to
certification of agreement with such amount by the Owners and Mason-Dixon, shall
pay to the Owners within 5 business days of the Second Anniversary an amount
from the Escrow Account equal to the Escrowed Amount minus the Reserve and minus
$2,311,742, to the extent the Escrow Account contains sufficient funds for that
purpose.
Each time an arbitration award is made regarding a claim after
the Second Anniversary and before the Third Anniversary, the Escrow Agent shall
pay to the Owners an amount from the Escrow Account equal to the Escrowed Amount
minus the then Reserve and minus $2,311,742, to the extent the Escrow Account
contains sufficient funds for that purpose.
On the Third Anniversary, the Escrow Agent shall notify the
Owners and Mason-Dixon of the then amount of the Reserve and, subject to
certification of agreement with such amount by the Owners and Mason-Dixon, shall
pay to the Owners within 5 business days of the Third Anniversary an amount from
the Escrow Account equal to the Escrowed Amount minus the Reserve and minus
$336,742, to the extent the Escrow Account contains sufficient funds for that
purpose.
On the Termination Date, the Escrow Agent shall notify the Owners
and Mason-Dixon of the then amount of the Reserve and, subject to certification
of agreement with such amount by the Owners and Mason-Dixon, shall pay to the
Owners within 5 business days of the Termination Date an amount from the Escrow
Account equal to the Escrowed Amount minus the Reserve, to the extent the Escrow
Account contains sufficient funds for that purpose. The Escrow Agent shall hold
the Reserve until the claims described above are finally resolved. Upon
resolution of any claims in favor of an Indemnified Party, the amount thereof
shall be paid to the Indemnified Party. Upon resolution of all claims, the
remaining amount shall be distributed to the Owners.
No transfer to the Owners under this Section shall affect (i) any
rights of any Indemnified Party with respect to pending claims for which an
amount is held under this paragraph, or (ii) the continuing obligation of
indemnity of Rose Shanis and Owners under Section 1 for the period set forth
therein.
The Escrow Agent shall disburse funds from the Escrow Account
from time to time upon written notice from both Mason-Dixon and the Owners.
4.8. Escrow Agent's Responsibility; Resignation; Removal.
4.8.1. The Escrow Agent shall retain the Escrowed Amount in
accordance with the terms and conditions of this Indemnity and Escrow Agreement,
and shall be under no responsibility or obligation other than to follow the
provisions hereof.
4.8.2. The Escrow Agent may resign at any time upon 30 days
written notice to Mason-Dixon and the Owners; within 20 days after receipt of
such notice, Mason-Dixon shall select an independent bank or trust company to
serve as the successor Escrow
<PAGE>
Agent, subject to the reasonable consent of the Owners (which consent shall not
be unreasonably withheld or delayed). In the event a successor is not selected
and agreed upon within the time described above, the Escrow Agent may deposit
the Escrowed Amount into a court of competent jurisdiction and request that the
court appoint or cause the parties to appoint a successor Escrow Agent. Upon
such deposit, the Escrow Agent shall be relieved of all future responsibilities
under this Indemnity and Escrow Agreement.
4.8.3. The Escrow Agent may be removed at any time upon written
notice from both Mason-Dixon and the Owners.
4.8.4. This Indemnity and Escrow Agreement expressly sets forth
all the duties of the Escrow Agent with respect to any and all matters pertinent
hereto. No implied duties or obligations shall be read into this Indemnity and
Escrow Agreement against the Escrow Agent. The Escrow Agent shall not be bound
by any provisions of any agreement among the other parties hereto except this
Indemnity and Escrow Agreement.
4.8.5. The Escrow Agent shall be entitled to rely in good faith
upon any order, judgment, certification, demand, notice, instrument, award, or
other writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety or
validity of the service thereof. The Escrow Agent may act in reliance upon any
instrument or signature believed by it in good faith to be genuine and may
assume that any person purporting to give notice or receipt or advice or make
any statement or execute any document in connection with the provisions hereof
has been duly authorized to do so.
4.8.6. The Escrow Agent may act pursuant to the advice of counsel
with respect to any matter relating to this Indemnity and Escrow Agreement and
shall not be liable for any action taken or omitted in good faith in accordance
with such advice.
4.8.7. The Escrow Agent makes no representations as to the
validity, value or genuineness of any amounts, documents or instruments held by
or delivered to it.
4.8.8. MASON-DIXON, ROSE SHANIS AND THE ESCROW AGENT SPECIFICALLY
WAIVE THE RIGHT TO TRIAL BY JURY IN RESOLVING ANY CLAIM OR COUNTERCLAIM RELATED
TO THIS INDEMNITY AND ESCROW AGREEMENT.
4.9. No Liability of Escrow Agent. The Escrow Agent shall not be
liable for any act or omission in good faith and in the absence of fraud or
willful misconduct. The Escrow Agent shall in all cases be entitled to rely upon
and be fully protected in acting or in refraining from acting under this
Indemnity and Escrow Agreement in accordance with any and all written
notifications received by it in accordance with this Indemnity and Escrow
Agreement.
<PAGE>
4.10. Indemnification of Escrow Agent. Mason-Dixon and the Owners
hereby agree jointly and severally to indemnify and hold the Escrow Agent
harmless from and against any and all actions, suits, proceedings, losses,
liabilities, damages, costs and expenses (including attorneys' and experts'
fees, costs of investigation, court costs, and sums expended in settlement of
claims or litigation, pending or threatened) arising out of or in connection
with this Indemnity and Escrow Agreement, the failure of any party to perform
its obligations hereunder, or arising out of or in connection with any action or
failure to act in good faith by the Escrow Agent from and after the date of this
Indemnity and Escrow Agreement, save only any action or failure to act by the
Escrow Agent that constitutes fraud or willful misconduct.
4.11. Compensation. The Escrow Agent shall be entitled to reasonable
compensation for all services rendered by it under this Indemnity and Escrow
Agreement as provided for in Schedule A attached hereto. Such compensation shall
be borne 50% by Rose Shanis and the Owners and 50% by Mason-Dixon and the
Subsidiaries provided that the total amount of such compensation shall be the
joint and several obligation of each of Mason-Dixon and the Subsidiaries, on the
one hand, and Rose Shanis and the Owners, on the other.
4.12. Successor Escrow Agent. If the Escrow Agent consolidates with,
merges or converts into, or transfers all or substantially all of its corporate
trust business to, another corporation or national banking association, the
resulting, surviving or transferee corporation or national banking association,
without any further act, shall be the successor Escrow Agent with the same
effect as if it had been named as the Escrow Agent herein, unless Mason-Dixon
and the Owners provide otherwise.
5. Miscellaneous.
5.1. Representations, Warranties and Covenants of Rose Shanis and the
Owners. Rose Shanis and the Owners hereby represent, warrant and covenant to
Mason-Dixon, the Subsidiaries and the Escrow Agent that they have the full
right, power and authority to enter into this Indemnity and Escrow Agreement;
this Indemnity and Escrow Agreement constitutes their valid, legal and binding
obligations, enforceable against them in accordance with its terms; and no
set-off, counterclaim or other defense to enforcement of this Indemnity and
Escrow Agreement exists or may be asserted by them in connection herewith.
5.2. Governing Law. This Indemnity and Escrow Agreement shall be
governed by and construed and enforced in accordance with the internal,
substantive laws of the State of Maryland without giving effect to the conflict
of law rules thereof.
5.3. Notices. All notices, writings and other communications required
or permitted to be given pursuant to this Indemnity and Escrow Agreement shall
be in writing and shall be given by hand-delivery or transmitted by United
States certified mail, return receipt requested, postage prepaid, or via
overnight carrier, to the addresses set forth below:
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
If to Rose Shanis
or the Owners: Norman J. Glick
3502 Round Hollow Road
Baltimore, Maryland 21208
With a copy to: Adelberg, Rudow, Dorf, Hendler & Sameth, LLC
600 Mercantile Bank & Trust Building
2 Hopkins Plaza
Baltimore, Maryland 21201
Attn: David B. Rudow, Esquire
If to Mason-Dixon Mason-Dixon Bancshares, Inc.
or the Subsidiaries: 45 West Main Street
Westminster, Maryland 21157
Attn: Thomas K. Ferguson, President and CEO
With a copy to: Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
233 East Redwood Street
Baltimore, Maryland 21202
Attn: Carla Stone Witzel, Esquire
If to Escrow Agent: FMB Trust Company, N.A.
25 South Charles Street, Mail Code 101-591
Baltimore, Maryland 21201
Attn: Ms. Pamela S. Hazelip
</TABLE>
Each notice shall be deemed to have been received: (i) for hand deliveries, on
the date of transmittal; (ii) for mailing, on the day following such mailing;
and (iii) for overnight deliveries, on the day following such transmittal. The
parties shall have the right to change their respective addresses set forth in
this Section by giving notice of such change in accordance with this Section.
5.4. Entire Agreement. The Recitals are a substantive part of this
Indemnity and Escrow Agreement. This Indemnity and Escrow Agreement together
with all other agreements and documents executed by the parties in connection
with the Transactions represents the entire agreement between the parties and
supersedes and cancels any prior oral or written agreement, letter of intent or
understanding related to the subject matter hereof.
5.5. Counterparts. This Indemnity and Escrow Agreement may be executed
in one or more counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument, and
shall become effective when one or more counterparts have been signed by each of
the parties.
<PAGE>
IN WITNESS WHEREOF, this Indemnity and Escrow Agreement has been duly
executed by the parties hereto on the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
ROSE SHANIS & CO., INC.
By:/s/ Norman J. Glick (SEAL)
ROSE SHANIS SONS, INC.
By:/s/ Norman J. Glick (SEAL)
ROSE SHANIS & CO.
By:/s/ Susan M. Glick (SEAL)
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Susan M. Glick (SEAL)
Susan M. Glick, Trustee of the Stephen J. Glick
Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
Norman J. Glick, Trustee of the Stephen J. Glick
Trust Share of the Ely Shanis Trust,
General Partner
By:/s/ Susan M. Glick (SEAL)
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis Trust,
General Partner
<PAGE>
By:/s/ Susan M. Glick (SEAL)
Susan M. Glick, Trustee of the Stephen J. Glick
Trust Share of the Bernice Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Bernice Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
Norman J. Glick, Trustee of the Stephen J. Glick
Trust Share of the Bernice Shanis Trust,
General Partner
By:/s/ Norman J. Glick (SEAL)
Norman J. Glick, General Partner
By:/s/ Susan M. Glick (SEAL)
Susan M. Glick, Personal Representative of
the Estate of Stephen J. Glick, General Partner
STEPHEN CORP.
By:/s/ Norman J. Glick (SEAL)
NORMAN J. GLICK
/s/ Norman J. Glick (SEAL)
<PAGE>
SUSAN M. GLICK
/s/ Susan M. Glick (SEAL)
SUSAN M. GLICK, PERSONAL
REPRESENTATIVE OF THE
ESTATE OF STEPHEN J. GLICK
/s/ Susan M. Glick (SEAL)
/s/ Mitzi S. Glick (SEAL)
Mitzi S. Glick, Trustee u/a Norman J. Glick
dated May 14, 1997, FBO Robert S. Glick
/s/ Eugene Schreiber (SEAL)
Eugene Schreiber, Trustee u/a Norman J. Glick
dated May 14, 1997, FBO Robert S. Glick
/s/ Mitzi S. Glick (SEAL)
Mitzi S. Glick, Trustee u/a Norman J. Glick
dated May 14, 1997, FBO Bonnie G. Dubin
/s/ Eugene Schreiber (SEAL)
Eugene Schreiber, Trustee u/a Norman J. Glick
dated May 14, 1997, FBO Bonnie G. Dubin
/s/ Susan M. Glick (SEAL)
Susan M. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust
/s/ Susan M. Glick (SEAL)
Susan M. Glick, Trustee of the Stephen J. Glick
Trust Share of the Bernice Shanis Trust
<PAGE>
/s/ Norman J. Glick (SEAL)
Norman J. Glick, Trustee of the Norman J.
Glick Trust Share of the Ely Shanis Trust
/s/ Norman J. Glick (SEAL)
Norman J. Glick, Trustee of the Stephen J. Glick
Trust Share of the Bernice Shanis Trust
Susan M. Glick and Gail Glick, Trustees of Marital
Trust under the Last Will and Testament of Stephen
J. Glick
/s/ Susan M. Glick (SEAL)
Susan M. Glick, Trustee
/s/ Gail Glick (SEAL)
Gail Glick, Trustee
Susan M. Glick and Gail Glick, Trustees under
Bypass Trust under the Last Will and Testament of
Stephen J. Glick
/s/ Susan M. Glick (SEAL)
Susan M. Glick, Trustee
/s/ Gail Glick (SEAL)
Gail Glick, Trustee
MASON-DIXON BANCSHARES, INC.
By:/s/ Thomas K. Ferguson (SEAL)
Thomas K. Ferguson, President
<PAGE>
BAY FINANCE, LLC
By:/s/ Thomas K. Ferguson (SEAL)
Thomas K. Ferguson, President
of Mason-Dixon Bancshares, Inc.,
Member
BAY INSURANCE, LLC
By:/s/ Thomas K. Ferguson (SEAL)
Thomas K. Ferguson, President
of Mason-Dixon Bancshares, Inc.,
Member
</TABLE>
FMB TRUST COMPANY, N.A.
By:/s/ Ronald J. Kruppa (SEAL)
Ronald J. Kruppa, Escrow Agent
<PAGE>
Exhibit A
Dealer Reserve list (Dealers with Written Agreements)
- -----------------------------------------------------------
DEALER
RESERVE
1/30/98
- -----------------------------------------------------------
BELTWAY B $455
- -----------------------------------------------------------
BOULDEN B $1,612
- -----------------------------------------------------------
CARPET & FLOOR $ 1,566
GALLERY B
- -----------------------------------------------------------
CECIL AUTO B $14
- -----------------------------------------------------------
EASTERN MTR B $2,490
- -----------------------------------------------------------
G&W MOTOR B $19,744
- -----------------------------------------------------------
JESSUP MTR B $99
- -----------------------------------------------------------
MAIN STREET B $14,745
- -----------------------------------------------------------
R&F AUTO B $929
- -----------------------------------------------------------
TOTALS $41,654
- -----------------------------------------------------------
<PAGE>
Exhibit B
Dealer Reserve list (Dealers without Written Agreements)
- --------------------------------------------------------
DEALER
RESERVE
1/30/98
- --------------------------------------------------------
BILL CRAEMER C $20,622
- --------------------------------------------------------
COLUMBIA AUTO C $4
- --------------------------------------------------------
MERIT MTR C $56,724
- --------------------------------------------------------
NORTHEAST C $1,176
- --------------------------------------------------------
THRIFT C $12,693
- --------------------------------------------------------
USED CAR CONN C $4,906
- --------------------------------------------------------
TOTALS $95,065
- --------------------------------------------------------
- ---------------------------------------------------------
RESERVE
- ---------------------------------------------------------
CHESAPEAKE C $120,982
- ---------------------------------------------------------
MD AUTO BUYERS C $143
- ---------------------------------------------------------
VARIETY AUTO C $52,838
- ---------------------------------------------------------
TOTALS $173,963
- ---------------------------------------------------------
<PAGE>
Exhibit C
MASTER DEALER AGREEMENT
This Agreement made this ___ day of _____, ____, by and between ROSE
SHANIS CO., INC., hereinafter referred to as "Lender", and ____________,
hereinafter referred to as "Dealer".
1. From time to time Dealer desires to sell Lender certain notes,
chattel mortgages, conditional sales agreements, retail installment contracts,
lease agreements and other obligations (all herein called "notes") endorsed or
assigned by Dealer, all of which Dealer hereby warrants will be valid and
enforceable deferred payment obligations, in accordance with the terms thereof,
of the respective debtors to whom Dealer has leased or sold merchandise, and
which Dealer further warrant are not subject to any disputes, setoffs or
counterclaims. Lender is not obligated hereunder to buy any notes which are not
acceptable to Lender, but when any such notes are sold to lender, the terms and
conditions of this Master Dealer Agreement shall apply to each such sale. The
purchase price for each note shall be agreed to by Lender and Dealer at the time
each note is purchased. Dealer shall furnish Lender all original documents
requested by Lender at the time of purchase. All notes purchased by Lender prior
to the date of this Agreement are also subject to the terms of this Agreement.
2. WARRANTIES AND RIGHTS. With regard to each note sold to Lender under
this agreement:
(a) Dealer represents and warrants that any note sold to Lender will
have resulted from the sale or lease of Dealer's own property. Dealer further
represents and warrants that any merchandise covered by said notes shall have
been unconditionally accepted by the debtors and that at the time of assignment
of any note by Dealer to Lender the merchandise will be in the possession of the
debtor and will be the identical merchandise described in the note. Dealer
further represents and warrants that Dealer has fully complied with, and that
all notes covered by the terms hereof, shall be valid under all laws and
regulations relative to said notes (including, but not limited to, the
provisions of the Federal Truth-In-Lending Act, the Federal Equal Credit
Opportunity Act, the Laws of the State of Maryland, and any and all laws and
regulations controlling consumer and/or installment credit transactions). Dealer
further represents and warrants that the debtors on any such notes shall not
assert or allege and shall not have asserted or alleged at any time whether
before or after the sale of such notes to Lender, any claims, counterclaims,
setoffs or defenses of any nature whatsoever to such notes offered from Dealer
for purchase by Lender. If any debtor should return to us any merchandise
covered by any note sold by Dealer to Lender or if any debtor is dissatisfied
with such merchandise, Dealer agrees to remedy any defect or to make adjustments
to Lender's satisfaction. Lender shall have the right to make any compromise
settlement with any debtor where the amount due upon any note is in dispute or
where claims are made for allowances or discounts upon returned merchandise, but
before consummating same Lender shall notify Dealer and Dealer shall thereupon
be entitled to take a reassignment of such account upon the payment of the
amount thereof to Lender, less any unearned discount. If any rebate or credit is
allowed to any debtor by Dealer or by Lender, as provided for in this paragraph,
Dealer agrees to reimburse Lender for such amounts within ten (10) days after
demand.
<PAGE>
(b) If Dealer makes any settlement with a debtor on any of the notes
without Lender's prior written consent, or in the event that any of the
warranties, representatives and/or covenants of Dealer's set forth herein or in
any note offered to Lender shall not be fully complied with or shall be found to
be untrue or materially misleading, Dealer shall be liable to Lender for the
unpaid balance of any such notes and Dealer hereby agrees that, at Lender's
option and Immediately upon Dealer's request therefor, Dealer will repurchase
any Lender's notes from Lender and Dealer further agrees that Dealer will not
contest said transfer and reassignment of any such notes made pursuant to the
terms hereof.
(c) Lender's rights and remedies hereunder shall be cumulative and
Lender may exercise any right or remedy, whether against the debtors under the
notes, against the security therefor, against the sums withheld or retained by
Lender hereunder, against Dealer or against any combination of the foregoing, in
such order as Lender sees fit without thereby releasing any other right Lender
may have.
(d) Lender does not assume any obligation or liability of Dealer's
in respect to any note, merchandise or service covered by any note or otherwise,
as well as any claim, counterclaim, set-off, or defense of any nature whatsoever
alleged or asserted by any debtor arising therefrom or as a result thereof and
Dealer will indemnify and hold Lender harmless from and against any and all
expense (including, without limitation, attorneys' fees), obligation, liability,
loss, damage and penalty incurred or suffered by Lender as the result of or
arising out of any liability, obligation, misfeasance, malfeasance, action or
omission of ours relating in any way whatsoever thereto or to any applicable
federal, state or local law or regulation (including, but not limited to, the
provisions of the Federal Truth-In-Lending Act, the Federal Equal Credit
Opportunity Act, the Laws of the State of Maryland, and any and all laws and
regulations controlling consumer and/or installment credit transactions).
3. COLLECTIONS. Lender shall have the sole right to make collections on
all notes and to notify each debtor of such purchase. Dealer agrees not to
solicit or make any collections with respect to any notes sold to Lender except
pursuant to Lender's written instruments, and to forward to Lender promptly all
communications, inquiries and the identical remittances which Dealer may receive
with reference to said notes, and Lender may endorse Dealer's name upon any
commercial paper received in payment upon said notes. Lender may audit Dealer's
books and records relating to said notes.
4. HOLDBACK. APPLICABLE IF INITIALLED _____ DEALER _____ LENDER At the
time of any assignment of notes by Dealer, Lender may withhold from the agreed
purchase price an amount equal to ______ percent of the total unpaid balance of
the notes then purchased by Lender, and _____________ days after the date of
each such purchase, Lender agrees to pay such holdback to Dealer, provided that,
if before such date Lender shall find that there is a breach of warranty or
representation regarding any of the notes, if the balances due on said notes
cannot be verified, or if for any reason any of the notes are not acceptable to
Lender, the amount to be paid to Dealer from the holdback shall be diminished by
the amount of the unpaid balance of each such note, less the discount as shown
by Lender's records, and Lender shall release to Dealer all right and interest
which Lender may have in respect to the particular notes deducted from the
holdback.
5. RESERVE. APPLICABLE IF INITIALLED _____ DEALER _____ LENDER
<PAGE>
(a) From the amount which Lender agrees to pay upon each assignment
or transfer by Dealer or any notes, Lender may retain an amount equal to
________ percent of the total unpaid balance of all the notes then purchased by
Lender, to be called a Reserve Fund.
(b) From the amount which Lender agrees to pay upon each assignment
or transfer of any notes, Lender may retain from the finance charge contained in
each such note $___________ per $100 per annum as Lender's sole property. All
that part of the finance charge in excess thereof shall be called a Reserve
Fund.
Dealer agrees to use only those rate charts which shall be first
approved by Lender. It is agreed that Dealer shall within ten (10) days of
Lender's request, repurchase for cash any notes in default which are endorsed
"With Recourse," "Repurchase," or "partial Recourse" without charging such notes
to the Reserve Fund. However, all such notes and all other notes purchased by
Lender under the terms of any other agreement may, at Lender's option, be
charged against said Reserve Fund. The Reserve Fund may at Lender's option, be
used to pay any payments and expenses incurred by Lender or other defaults and
losses which may occur _________ any and all notes purchased by Lender from
Dealer which Dealer has not repurchased or upon those notes which Dealer has
agreed to repurchase, but has not paid lender the entire balance of said notes.
The repurchase price shall be the full amount remaining unpaid under the note
plus all expenses incurred by Lender.
The Reserve Fund shall be subject to the terms and conditions as
follows:
(a) It shall be in Lender's entire discretion and judgment as to
which notes shall be considered losses or in default and when such notes shall
be charged against said Reserve fund.
(b) Upon charging a note against the said Reserve Fund Lender
shall be obligated to reassign such note to Dealer in the event the note is
fully paid thereby and in the event Dealer requests such reassignment in
writing.
(c) If Lender has taken any action, whether by suit or
otherwise, upon any such note, or security therefor, Lender will only be
obligated to reassign to Dealer the rights which Lender then has in any such
note or security.
(d) Unless such reassignment is so requested by Dealer, the
notes charged against said Reserve Fund shall be held by Lender as part of said
Reserve Fund and any collections upon such notes shall be added to and treated
as part of said Reserve Fund.
(e) The Reserve Fund may be used at Lender's option by Lender to
satisfy any losses, costs, damages, or expenses which Lender may suffer or incur
by reason of Dealer's default or of any breach by Dealer of any of the
provisions set out in this agreement or because of any breach or default of any
of the provisions in the notes purchased pursuant to the terms of this
agreement.
(f) Every _______ months after the date of this agreement, or
more often if Lender desires, Lender shall determine if the amount in said
Reserve Fund exceeds ____ percent of the unpaid balances of all notes which
Lender has purchased from Dealer, and which are then unpaid. The amount of any
such excess so purchased from Dealer, and which are then
<PAGE>
unpaid. The amount of any such excess so determined shall be paid by Lender to
Dealer, provided Dealer has complied with the terms and provisions of this
agreement, and further provided that such excess so determined shall not be paid
by Lender to Dealer which would reduce the Reserve Fund below the Amount of
$200.00. There shall be no obligation upon lender under this sub-paragraph,
unless Lender receives from Dealer a written request for an accounting is
desired. In the event Dealer stops selling notes to Lender, or Lender stops
buying notes from Dealer, Lender may hold and apply the Reserve Fund until
Liquidation of all notes purchased from Dealer.
(g) Lender may charge Dealer's regular or special reserve
account or reduce Dealer's advance to provide Lender with a minimum charge of
$____________ on any note.
(h) In the event that any note is prepaid, refinanced, or if the
goods securing the same are repossessed or if Lender shall sustain any loss with
respect to any note, Dealer agrees to refund to Lender the same percentage of
all reserves credited to or paid Dealer on such note as the amount of refund
which Lender makes bears to the amount of the original finance charge exclusive
of insurance premiums.
(i) The Reserve Fund shall remain in Dealer's possession until
paid out to Lender in accordance with the foregoing and Lender agrees to sign
all documents requested by Dealer to perfect Dealer's Lien on said Reserve Fund,
and Lender covenants not to encumber or pledge or otherwise transfer said funds,
and that said funds shall not be the subject of any of Lender's creditors'
claims.
6. TERMINATION. Either Dealer or Lender may terminate this agreement at
any time in writing to that effect to the other; but such notice shall not
effect any obligation hereunder on the part of either party to this agreement,
which arose out of purchase of notes hereunder prior to the termination.
7. WAIVER. The waiver of any default hereunder shall not operate as a
waiver of successive defaults, but all rights hereunder shall continue
notwithstanding one or more waivers. No waiver or change of any provision herein
shall be binding on Lender unless evidenced in writing signed by Lender and this
agreement shall inure to and bind the respective legal representatives,
successors and assigns of the parties to this agreement, and any company
affiliated with Lender which may transact business hereunder.
This agreement shall be deemed as being made in the State of Maryland
and shall be governed by and construed in accordance with the laws of the State
of Maryland. This agreement is valid and enforceable only if signed by an
officer of Dealer's corporation if Dealer is a valid corporation, if signed by
the owner if Dealer is a sole proprietorship, or if signed by all partners if
Dealer is a partnership.
WITNESS our hands and seal the date first above written.
ROSE SHANIS CO., INC.
LENDER
<PAGE>
BY____________________________ BY_______________________________________
BY_______________________________________
NAME TITLE
GUARANTY. If completed, the undersigned, jointly and severally if more
than one, do hereby absolutely and unconditionally PERSONALLY guarantee to
Lender and its assigns the prompt payment of all funds due Lender under the
Agreement and/or the prompt performance of all requirements of the Agreement if
Dealer defaults on the Agreement in any manner. Each of the undersigned
expressly waives presentment, protest, demand, notice of dishonor or default,
notice of acceptance of this Guaranty and notice of any kind with respect to
said Agreement or this Guaranty or the performance of the obligations under said
Agreement or this Guaranty. Each of the undersigned consent to and agrees to be
bound by all terms and provisions of the Agreement.
- --------------------------------- ------------------------------------------
WITNESS GUARANTOR
- --------------------------------- ------------------------------------------
WITNESS GUARANTOR
- --------------------------------- ------------------------------------------
WITNESS GUARANTOR
- --------------------------------- ------------------------------------------
WITNESS GUARANTOR
<PAGE>
EXHIBIT 2.6
GUARANTY OF PAYMENT AGREEMENT
THIS GUARANTY OF PAYMENT AGREEMENT (this "Agreement") is made this
11th day of February, 1998, by MASON-DIXON BANCSHARES, INC., a corporation
organized under the laws of the State of Maryland (the "Guarantor") for the
benefit of NATIONSBANK, N.A., a national banking association, as both
administrative and collateral agent for itself and other Banks (as defined
below) (the "Agent").
RECITALS
A. Bay Finance, LLC, a limited liability company organized under the
laws of the State of Maryland and soon to be known as "Rose Shanis Loans, LLC"
(the "Borrower"), has entered into a Loan Agreement of even date herewith (as
amended, modified, restated, substituted, extended and renewed at any time and
from time to time, the "Loan Agreement") with NationsBank, N.A., a national
banking association ("NationsBank"), CoreStates Bank, N.A., a national banking
association ("CoreStates"), Harris Trust and Savings Bank ("Harris") (each of
NationsBank, CoreStates and Harris individually a "Bank" and collectively the
"Banks") and the Agent.
B. Pursuant to the terms and conditions of the Loan Agreement, the
Banks have agreed to provide to the Borrower a revolving credit facility in the
maximum principal amount of $38,000,000.
C. All defined terms used in this Agreement and not defined herein
shall have the meaning given to such terms in the Loan Agreement.
D. The Guarantor has requested that the Banks enter into the Loan
Agreement with the Borrower and make the credit facilities described in the Loan
Agreement available to the Borrower.
E. The Banks and the Agent have required, as a condition to entering
into the Loan Agreement, that the Guarantor execute this Agreement as additional
security for the payment and performance of the "Obligations" (as defined in the
Loan Agreement).
NOW, THEREFORE, in order to induce the Banks and the Agent to enter
into the Loan Agreement, the Guarantor covenants and agrees with the Banks and
the Agent as follows:
I. THE GUARANTY
1.1 Guaranty.
The Guarantor hereby unconditionally and irrevocably guarantees to the
Banks and the Agent:
a) the due and punctual payment in full (and not merely the
collectibility) of the principal of the Obligations and the interest thereon, in
each case when due and payable, all
<PAGE>
according to the terms of any promissory note evidencing all or any part of the
Obligations and the other Loan Documents (as that term is defined in the Loan
Agreement);
b) the due and punctual payment in full (and not merely the
collectibility) of all other sums and charges which may at any time be due and
payable in accordance with, or secured by, any promissory note evidencing all or
any part of the Obligations or any of the other Loan Documents;
c) the due and punctual performance of all of the other terms,
covenants and conditions contained in the Loan Documents; and
d) all indebtedness, obligations and liabilities of any kind and nature
of the Borrower to the Banks and the Agent, whether now existing or hereafter
created or arising, direct or indirect, matured or unmatured, and whether
absolute or contingent, joint, several or joint and several, and howsoever
owned, held or acquired.
1.2 Guaranty Unconditional.
The obligations and liabilities of the Guarantor under this Agreement
shall be absolute and unconditional, irrespective of the genuineness, validity,
priority, regularity or enforceability of the Loan Agreement, any promissory
note evidencing all or any part of Obligations, or any of the other Loan
Documents or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or guarantor. The Guarantor expressly agrees
that each of the Banks and the Agent may, in its sole and absolute discretion,
without notice to or further assent of the Guarantor and without in any way
releasing, affecting or in any way impairing the obligations and liabilities of
the Guarantor hereunder:
a) waive compliance with, or any defaults under, or grant any other
indulgences under or with respect to any of the Loan Documents;
b) modify, amend, change or terminate any provisions of any of the Loan
Documents;
c) grant extensions or renewals of or with respect to any promissory
note evidencing all or any part of Obligations, any of the other Loan Documents
or any of the Obligations;
d) affect any release, subordination, compromise or settlement in
connection with any promissory note evidencing all or any part of the
Obligations, any of the other Loan Documents, or any of the Obligations;
e) agree to the substitution, exchange, release or other disposition of
the Collateral (as defined in that certain Security Agreement of even date
herewith by and among the Guarantor, the Agent and the Banks) (as amended,
modified, restated, substituted, extended and renewed at any time and from time
to time, the "Security Agreement") or any part thereof, or any other collateral
for the Obligations or to the subordination of any lien or security interest
therein;
f) make advances for the purpose of performing any term, provision or
covenant contained in the Loan Agreement or any of the other Loan Documents with
respect to which the Borrower shall then be in default;
<PAGE>
g) make future advances to the Borrower pursuant to the Loan Agreement
or any of the other Loan Documents;
h) assign, pledge, hypothecate or otherwise transfer the Loan
Agreement, any of the Loan Documents or this Agreement or any interest therein;
i) deal in all respects with the Borrower as if this Agreement were not
in effect; and
j) effect any release, compromise or settlement with another guarantor.
1.3 Guaranty Primary.
The obligations and liabilities of the Guarantor under this Agreement
shall be primary, direct and immediate, shall not be subject to any
counterclaim, recoupment, setoff, reduction or defense based upon any claim that
the Guarantor may have against the Borrower, the Banks and/or the Agent, and/or
any other guarantor and shall not be conditional or contingent upon pursuit or
enforcement by the Banks and the Agent of any remedies they may have against the
Borrower with respect to any promissory note evidencing all or any part of the
Obligations or any of the other Loan Documents, whether pursuant to the terms
thereof or by operation of law. Without limiting the generality of the
foregoing, the Banks and the Agent shall not be required to make any demand upon
the Borrower, or to sell the Collateral or otherwise pursue, enforce or exhaust
their remedies against the Borrower or the Collateral either before,
concurrently with or after pursuing or enforcing their rights and remedies
hereunder. Any one or more successive or concurrent actions or proceedings may
be brought against the Guarantor under this Agreement, either in the same
action, if any, brought against the Borrower or in separate actions or
proceedings, as often as the Banks and the Agent may deem expedient or
advisable. Without limiting the foregoing, it is specifically understood that
any modification, limitation or discharge of any of the liabilities or
obligations of the Borrower, any other guarantor or any obligor under any of the
Loan Documents, arising out of, or by virtue of, any bankruptcy, arrangement,
reorganization or similar proceeding for relief of debtors under federal or
state law initiated by or against the Borrower or the Guarantor or any obligor
under any of the Loan Documents shall not modify, limit, lessen, reduce, impair,
discharge, or otherwise affect the liability of the Guarantor hereunder in any
manner whatsoever, and this Agreement shall remain and continue in full force
and effect. It is the intent and purpose of this Agreement that the Guarantor
shall and does hereby waive all rights and benefits which might accrue to any
other guarantor by reason of any such proceeding, and the Guarantor agrees that
it shall be liable for the full amount of the obligations and liabilities under
this Agreement, regardless of, and irrespective to, any modification, limitation
or discharge of the liability of the Borrower, any other guarantor or any
obligor under any of the Loan Documents, that may result from any such
proceedings.
1.4 Certain Waivers by the Guarantor.
The Guarantor hereby unconditionally, irrevocably and expressly waives:
a) presentment and demand for payment of the principal of or interest
on any promissory note evidencing all or any part of Obligations and protest of
non-payment;
<PAGE>
b) notice of acceptance of this Agreement and of presentment, demand
and protest thereof;
c) notice of any default hereunder or under the Loan Agreement, or any
of the other Loan Documents and notice of all indulgences;
d) notice of any increase in the amount of any portion of or all of the
indebtedness guaranteed by this Agreement;
e) demand for observance, performance or enforcement of any of the
terms or provisions of this Agreement, the Loan Agreement or any of the other
Loan Documents;
f) all errors and omissions in connection with the Banks' and the
Agent's administration of all indebtedness guaranteed by this Agreement, except
errors and omissions resulting from acts of gross negligence or bad faith;
g) any right or claim of right to cause a marshalling of the assets of
the Borrower;
h) any act or omission of the Banks and the Agent (except acts or
omissions in gross negligence or bad faith) which changes the scope of the
Guarantor's risk hereunder; and
i) all other notices and demands otherwise required by law which the
Guarantor may lawfully waive.
1.5 Reimbursement for Expenses.
In the event the Banks and the Agent shall commence any action or
proceeding for the enforcement of this Agreement, then the Guarantor will
reimburse the Banks and the Agent, promptly upon demand, for any and all
reasonable expenses incurred by the Banks and the Agent in connection with such
action or proceeding including, without limitation, reasonable attorneys' fees
together with interest thereon at the Post-Default Rate (as defined in the
Security Agreement).
1.6 Events of Default.
Without implying any limitation of the Banks' and the Agent's rights to
immediate payment at any time of any Obligations which are payable on demand,
the occurrence of any one or more of the following events shall constitute an
"Event of Default" under the provisions of this Agreement (individually, an
"Event of Default" and collectively, the "Events of Default"):
a) The failure of the Guarantor to pay any of the Obligations as and
when due and payable in accordance with the provisions of this Agreement and,
except a the failure to pay the Obligations at maturity, such failure continues
uncured for five (5) days following written notice from the Agent to the
Guarantor of the failure.
b) Any representation or warranty made in this Agreement or in any
report, statement, schedule, certificate, opinion (including any opinion of
counsel for the Guarantor), financial statement or other document furnished in
connection with this Agreement, shall prove
<PAGE>
to have been false or misleading when made (or, if applicable, when reaffirmed)
in any material respect.
c) The failure of the Guarantor to perform, observe or comply with any
covenant, condition or agreement contained in this Agreement, which default
shall remain unremedied for thirty (30) days after written notice thereof to the
Guarantor by the Agent.
d) The pledge by the Guarantor of any of the common stock of either of
Carroll County Bank and Trust or Bank of Maryland (collectively, the "Subsidiary
Banks").
e) The failure of the Subsidiary Banks to maintain a "well-capitalized"
equity position as defined in Section 1831(o)(b) of the Federal Deposit
Insurance Corporation Improvement Act of 1991, as amended.
f) The failure of the Guarantor to maintain, tested as of the last day
of each of the Guarantor's fiscal quarters for the four (4) quarter period
ending on that date, a ratio of "Cash Flow" to "Debt Service" of not less than
1.75 to 1.0. "Cash Flow" is defined as dividends and other cash distributions
available to be paid to the Guarantor by its Subsidiaries (not to exceed 100% of
such Subsidiaries' pretax income and, in the case of the Borrower, also not to
exceed the limitations in subsection (g) immediately following) less all taxes,
shareholder dividends and holding company expenses. "Debt Service" means for any
period of determination thereof an amount equal to the total of the aggregate
amount of all payments of principal and interest with respect to Indebtedness
(as defined in the Loan Agreement) of the Guarantor and its subsidiaries
scheduled to be due and payable during such period.
g) The payment of distributions by the Borrower to the Guarantor which
distributions exceed the lesser of (i) fifty percent (50%) of net income after
tax for the period or (ii) $1,300,000 measured annually.
h) A default shall occur under any other Indebtedness (other than that
with respect to the Loan Agreement) of the Guarantor in excess of $100,000,
which Indebtedness is not subordinated in writing to the payment by the
Guarantor of the Obligations in a manner approved by the Agent in writing and
the default is a failure to pay at maturity or the result of the default is the
acceleration of the maturity of such Indebtedness prior to its stated maturity.
i) A default shall occur under any of the other Loan Documents and such
default is not cured within any applicable grace period provided therein.
j) The Guarantor shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or any of its property, (ii) admit in
writing its inability to pay its debts as they mature, (iii) make a general
assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or
insolvent, (v) file a voluntary petition in bankruptcy or a petition or an
answer seeking or consenting to reorganization or an arrangement with creditors
or to take advantage of any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law, or take corporate action for the purposes of effecting any of the
foregoing, or (vi) by any act indicate its consent to, approval of or
acquiescence in any such proceeding or the appointment of any receiver of or
trustee for any of its property, or suffer any such receivership, trusteeship or
proceeding to continue undischarged for a period of sixty (60) days, or (vii) by
any act indicate its consent to, approval of or
<PAGE>
acquiescence in any order, judgment or decree by any court of competent
jurisdiction or any Governmental Authority (as defined in the Loan Agreement)
enjoining or otherwise prohibiting the operation of a material portion of the
Guarantor's business or the use or disposition of a material portion of the
Guarantor's assets.
k) (i) An order for relief shall be entered in any involuntary case
brought against the Guarantor under the Bankruptcy Code, or (ii) any such case
shall be commenced against the Guarantor and shall not be dismissed within sixty
(60) days after the filing of the petition, or (iii) an order, judgment or
decree under any other law is entered by any court of competent jurisdiction or
by any other Governmental Authority on the application of a Governmental
Authority or of a person (as defined in the Loan Agreement) other than the
Guarantor (A) adjudicating the Guarantor bankrupt or insolvent, or (B)
appointing a receiver, trustee or liquidator of the Guarantor, or of a material
portion of the Guarantor's assets, or (C) enjoining, prohibiting or otherwise
limiting the operation of a material portion of the Guarantor's business or the
use or disposition of a material portion of the Guarantor's assets, and such
order, judgment or decree continues unstayed and in effect for a period of
thirty (30) days from the date entered.
l) Unless adequately insured in the opinion of the Agent, the entry of
a final judgment for the payment of money involving more than $100,000 against
the Guarantor, and the failure by the Guarantor to discharge the same, or cause
it to be discharged, within thirty (30) days from the date of the order, decree
or process under which or pursuant to which such judgment was entered, or to
secure a stay of execution pending appeal of such judgment.
m) If the Agent in its sole discretion determines in good faith that a
material adverse change has occurred in the financial condition of the
Guarantor.
n) If the Guarantor shall liquidate, dissolve or terminate its
existence or if the majority of the issued and outstanding common shares of the
Guarantor are owned or controlled by a single person, without the prior written
consent of the Agent.
o) If the Guarantor transfers any of the Guarantor's respective assets,
without the Agent's prior written consent, except for transfers for which the
Guarantor receives consideration substantially equivalent to the fair market
value of the asset transferred.
1.7 Rescission of Election to Accelerate.
In the event the Banks and the Agent shall elect to accelerate the
maturity of any promissory note evidencing all or any part of Obligations as to
the Guarantor pursuant to the provisions of this Agreement, such election may be
rescinded by written acknowledgment to that effect by the Banks and the Agent;
provided, however, that the acceptance of a partial payment on account of any
promissory note evidencing all or any part of Obligations shall not alone effect
or rescind such election.
1.8 Subordination; Subrogation.
In the event the Guarantor shall advance any sums to the Borrower, or
in the event the Borrower has heretofore or shall hereafter become indebted to
the Guarantor before the Obligations have been paid in full, all such advances
and indebtedness shall be subordinate in all respects to the Obligations (the
"Guarantor Subordinated Debt"). Any payment to the
<PAGE>
Guarantor on account of the Guarantor Subordinated Debt shall be collected and
received by the Agent or the Guarantor in trust for the Agent for itself and for
the ratable benefit of the Banks and shall be paid over to the Agent for itself
and the ratable benefit of the Banks on account of the Obligations without
impairing or releasing the obligations of the Guarantor hereunder.
Without the prior written consent of the Agent, the Guarantor shall not
ask, demand, receive, accept, sue for, set off, collect or enforce the Guarantor
Subordinated Debt or any collateral and security therefor. The Guarantor
represents and warrants to the Agent that the Guarantor Subordinated Debt is
unsecured and agrees not to receive or accept any collateral or security
therefor without the prior written permission of the Agent. The Guarantor shall
not assign, transfer, hypothecate or dispose of the Guarantor Subordinated Debt
while this Agreement is in effect. In the event of any sale, receivership,
insolvency or bankruptcy proceeding, or assignment for the benefit of creditors,
or any proceeding by or against the Borrower for any relief under any bankruptcy
or insolvency law or other laws relating to the relief of debtors, readjustment
of indebtedness, reorganizations, compositions or extensions, then and in any
such event any payment or distribution of any kind or character, either in cash,
securities or other property, which shall be payable or deliverable upon, or
with respect to, all or any part of the Guarantor Subordinated Debt or otherwise
shall be paid or delivered directly to the Agent for application to the
obligations and liabilities of the Guarantor under this Agreement (whether due
or not due and in such order and manner as the Agent may determine in the
exercise of its sole discretion) until the obligations of the Guarantor
hereunder shall have been fully paid and satisfied. The Guarantor hereby
irrevocably authorizes and empowers the Agent to demand, sue for, collect and
receive every such payment or distribution on account of the Guarantor
Subordinated Debt and give acquittance therefor and to file claims and take such
other proceedings in the Agent's own name or in the name of the Guarantor or
otherwise, as the Agent may deem necessary or advisable to carry out the
provisions of this Agreement. The Guarantor hereby agrees to execute and deliver
to the Agent such powers of attorney, assignments, endorsements or other
instruments as may be requested by the Agent in order to enable the Agent to
enforce any and all claims upon, or with respect to, the Guarantor Subordinated
Debt, and to collect and receive any and all payments or distributions which may
be payable or deliverable at any time upon or with respect thereto.
Nothing contained in this Agreement shall be construed to give the
Guarantor any right of subrogation in or to the Obligations or any of the Loan
Documents, or all or any part of the interest of the Agent therein, until the
Obligations have been paid in full.
1.9 CONFESSED JUDGMENT.
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, THE GUARANTOR HEREBY
AUTHORIZES ANY ATTORNEY DESIGNATED BY THE AGENT OR ANY CLERK OF ANY COURT OF
RECORD TO APPEAR FOR THE GUARANTOR IN ANY COURT OF RECORD AND CONFESS JUDGMENT
AGAINST THE GUARANTOR WITHOUT PRIOR HEARING, IN FAVOR OF THE AGENT AND/OR THE
BANKS FOR, AND IN THE AMOUNTS OF, THE BALANCE THEN DUE UNDER ANY ONE OR MORE OF
THE PROMISSORY NOTES EVIDENCING ALL OR ANY PART OF OBLIGATIONS, ALL ACCRUED AND
UNPAID INTEREST THEREON, ALL OTHER AMOUNTS PAYABLE BY THE GUARANTOR TO THE AGENT
AND/OR THE BANKS UNDER THE TERMS OF THIS AGREEMENT, COSTS OF SUIT, AND
ATTORNEYS' FEES OF FIFTEEN PERCENT (15%) OF THE UNPAID PRINCIPAL SUM. BY ITS
ACCEPTANCE OF THIS NOTE, HOWEVER, THE BANK AGREES THAT IN THE EVENT THAT THE
BANK EXERCISES
<PAGE>
ITS RIGHT TO CONFESS JUDGMENT UNDER THIS NOTE, THE BANK SHALL USE ITS BEST
EFFORTS TO OBTAIN LEGAL COUNSEL WHO WILL CHARGE THE BANK FOR ITS SERVICES ON AN
HOURLY BASIS, AT ITS CUSTOMARY HOURLY RATE(S) AND ONLY FOR THE TIME AND
REASONABLE EXPENSES INCURRED. IN NO EVENT SHALL THE BANK ENFORCE THE PORTION OF
THE LEGAL FEES PORTION OF A CONFESSED JUDGMENT FOR AN AMOUNT IN EXCESS OF SUCH
FEES AND EXPENSES CHARGED TO THE BANK FOR SERVICES RENDERED BY ITS COUNSEL IN
CONNECTION WITH SUCH CONFESSION OF JUDGMENT AND THE COLLECTION OF SUMS OWED TO
THE BANK. THE GUARANTOR HEREBY RELEASES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ALL ERRORS AND ALL RIGHTS OF EXEMPTION, APPEAL, STAY OF EXECUTION,
INQUISITION, AND OTHER RIGHTS TO WHICH THE GUARANTOR MAY OTHERWISE BE ENTITLED
UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR OF ANY STATE OR POSSESSION OF
THE UNITED STATES OF AMERICA NOW IN FORCE AND WHICH MAY HEREAFTER BE ENACTED.
THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST THE GUARANTOR
SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF OR BY ANY IMPERFECT
EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT
THERETO. SUCH AUTHORITY MAY BE EXERCISED ON ONE OR MORE OCCASIONS OR FROM TIME
TO TIME IN THE SAME OR DIFFERENT JURISDICTIONS AS OFTEN AS THE AGENT SHALL DEEM
NECESSARY AND DESIRABLE, FOR ALL OF WHICH THIS AGREEMENT SHALL BE A SUFFICIENT
WARRANT.
II. REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties.
The Guarantor represents and warrants to the Banks and the Agent as
follows:
2.2 Good Standing.
The Guarantor (a) is a corporation duly organized, existing and in good
standing under the laws of the jurisdiction of its incorporation, (b) has the
corporate power to own its property and to carry on its business as now being
conducted, and (c) is duly qualified to do business and is in good standing in
each jurisdiction in which the character of the properties owned by it therein
or in which the transaction of its business makes such qualification necessary.
2.3 Corporate Power and Authority.
The Guarantor has full corporate power and authority to execute and
deliver this Agreement and the other Loan Documents to which it is a party and
to incur and perform the Obligations whether under this Agreement, the other
Loan Documents or otherwise, all of which have been duly authorized by all
proper and necessary corporate action. No consent or approval of shareholders or
any creditors of the Guarantor, and no consent, approval, filing or registration
with or notice to any Governmental Authority on the part of the Guarantor, is
required as a condition to the execution, delivery, validity or enforceability
of this Agreement or the other Loan Documents or the performance by the
Guarantor of the Obligations.
2.4 Binding Agreements.
<PAGE>
This Agreement and the other Loan Documents executed and delivered by
the Guarantor have been properly executed and delivered and constitute the valid
and legally binding obligations of the Guarantor and are fully enforceable
against the Guarantor in accordance with their respective terms.
2.5 No Conflicts.
Neither the execution, delivery and performance of the terms of this
Agreement or of any of the other Loan Documents executed and delivered by the
Guarantor nor the consummation of the transactions contemplated by this
Agreement will conflict with, violate or be prevented by (a) the Guarantor's
charter or bylaws, (b) any existing mortgage, indenture, contract or agreement
binding on the Guarantor or affecting its property, or (c) any laws.
2.6 Compliance with Laws.
The Guarantor is not in violation of any applicable laws (including,
without limitation, any laws relating to employment practices, to environmental,
occupational and health standards and controls) or order, writ, injunction,
decree or demand of any court, arbitrator, or any Governmental Authority
affecting the Guarantor or any of its properties, the violation of which,
considered in the aggregate, could materially adversely affect the business,
operations or properties of the Guarantor.
2.7 Litigation.
There are no proceedings, actions or investigations pending or, so far
as the Guarantor knows, threatened before or by any court, arbitrator or any
Governmental Authority which, in any one case or in the aggregate, if determined
adversely to the interests of the Guarantor, would have a material adverse
effect on the business, properties, condition (financial or otherwise) or
operations, present or prospective, of the Guarantor.
2.8 Financial Condition.
The financial statements of the Guarantor dated September 30, 1997, are
complete and correct and fairly present the financial position of the Guarantor
and the results of its operations and transactions in its surplus accounts as of
the date and for the period referred to and have been prepared in accordance
with GAAP applied on a consistent basis throughout the period involved. There
are no liabilities, direct or indirect, fixed or contingent, of the Guarantor as
of the date of such financial statements that are not reflected therein or in
the notes thereto. There has been no adverse change in the financial condition
or operations of the Guarantor since the date of such financial statements and
to the Guarantor's knowledge no such adverse change is pending or threatened.
The Guarantor has not guaranteed any Indebtedness for borrowed money or made any
investment in or advances to, any person, except as disclosed in such financial
statements and except in the ordinary course of the Guarantor's business and
except as disclosed to the Agent prior to the date of this Agreement. The
representations and warranties contained in this Section shall also cover
financial statements furnished from time to time to the Agent and the Banks
pursuant to (Financial Records; Inspection).
<PAGE>
2.9 Full Disclosure.
The financial statements referred to in Section (Financial Condition),
the Loan Documents (including, without limitation, this Agreement), and the
statements, reports or certificates furnished by the Guarantor in connection
with the Loan Documents (a) do not contain any untrue statement of a material
fact and (b) when taken in their entirety, do not omit any material fact
necessary to make the statements contained therein not misleading. There is no
fact known to the Guarantor which the Guarantor has not disclosed to the Agent
in writing prior to the date of this Agreement which materially and adversely
affects or in the future could, in the reasonable opinion of the Guarantor
materially adversely affect the condition, financial or other wise, results of
operations, business, or assets of the Guarantor.
2.10 Financial Interest.
The Guarantor has a financial interest in the Borrower and will derive
a benefit from the credit facilities extended to and the Obligations incurred by
the Borrower, and hereby waives any claim that the Agent violated the Equal
Credit Opportunity Act (15 U.S.C. 1691 et seq.) in connection with the credit
facilities, any of the Loan Documents or any of the other Obligations or
security for any obligation which is the subject thereto.
2.11 Survival; Updates of Representations and Warranties.
All representations and warranties contained in or made under or in
connection with this Agreement and the other Loan Documents shall survive the
closing date, the making of any advance under the credit facilities and the
incurring of any Obligations.
III.AFFIRMATIVE COVENANTS
The Guarantor hereby covenants and agrees as follows:
3.1 Corporate Existence.
The Guarantor shall maintain its corporate existence in good standing
in the jurisdiction in which it is incorporated and in each other jurisdiction
where it is required to register or qualify to do business if the failure to do
so in such other jurisdiction might have a material adverse effect on the
ability of the Guarantor to perform the Obligations, on the conduct of the
Guarantor's operations, on the Guarantor's financial condition, or on the value
of, or the ability of the Agent to realize upon, the Collateral.
3.2 Further Assurances.
The Guarantor will make, execute, acknowledge and deliver all and every
such further acts and assurances as the Banks and the Agent shall from time to
time require for confirming or carrying out the intentions or facilitating the
performance of the terms of this Agreement.
3.3 Financial Records; Inspection.
The Guarantor will (a) maintain or cause to be maintained full,
complete, accurate and adequate records and books of account in accordance with
generally accepted accounting
<PAGE>
principles consistently applied; and (b) permit the Banks and the Agent and
their duly authorized agents, attorneys and accountants to inspect, examine, and
copy its records and books of account at all reasonable times.
3.4 Financial Statements.
The Guarantor will furnish to the Agent in writing: (a) as soon as
available but in no event more than 45 days after the end of each fiscal
quarter, (i) a consolidated and consolidating financial statements of Guarantor
and any Subsidiaries for such period, (ii) a computation of the ratio set forth
in Section 1.6(f) computed for the applicable fiscal quarter, and (iii) a
compliance certificate of the President or chief financial officer of the
Guarantor concurrently with, and dated as of the date required for delivery of
each of, the financial statements containing a certification that the financial
statements of even date are true and correct and that there exists no Event of
Default, all in detail and scope reasonably satisfactory to the Agent, prepared
in accordance with GAAP consistently applied; (b) as soon as available but in no
event more than 120 days after the end of each fiscal year of Guarantor, a
consolidated and consolidating financial statements for such year, all in detail
and scope reasonably satisfactory to the Agent, prepared and audited in
accordance with GAAP consistently applied by independent certified public
accountants reasonably satisfactory to the Agent, accompanied by a report of
such independent certified public accountants with respect to such financial
statements; (c) promptly upon transmission thereof, copies of any financial
statements, proxy statements, reports and the like which Guarantor or any
Subsidiary sends to its shareholders and copies of all registration statements
(with exhibits) and all regular, special or periodic reports which Guarantor or
any Subsidiary files with the United States Securities and Exchange Commission
(or any governmental body or agency succeeding to the functions of the United
States Securities and Exchange Commission) or with any national stock exchange
on which any of Guarantor's or any Subsidiary's securities are listed and copies
of all press releases and other statements made available by Guarantor or any
Subsidiary to the public concerning material developments in the business of
Guarantor and/or any Subsidiary; and (d) promptly after request, such other
information with respect to the financial statements of the Guarantor as the
Banks and the Agent may from time to time reasonably require.
3.5 Estoppel Certificates.
Within ten (10) days following any reasonable request of the Agent so
to do, the Guarantor will furnish the Agent and such other persons as the Agent
may direct with a written certificate, duly acknowledged stating in detail
whether or not any credits, offsets or defenses exist with respect to this
Agreement.
IV. MISCELLANEOUS
4.1 Notices.
All notices, requests and demands to or upon the parties to this
Agreement shall be in writing and shall be deemed to have been given or made
when delivered by hand on a Banking Day, or three (3) days after the date when
deposited in the mail, postage prepaid by registered or certified mail, return
receipt requested, or when sent by overnight courier, on the Banking Day next
following the day on which the notice is delivered to such overnight courier,
addressed as follows:
<PAGE>
Guarantor: Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, MD 21157-4815
Attention: Mark. A. Keidel
with a copy to:
Carla Stone Witzel, Esquire
Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
233 E. Redwood Street
Baltimore, MD 21202
Agent and: NationsBank, N.A.
the Banks Commercial Banking
10 Light Street, 16th Floor
Baltimore, MD 21202-1499
Attention: James W. Kirschner
with a copy to:
Frederick W. Runge, Jr., Esquire
Miles & Stockbridge P.C.
10 Light Street
Baltimore, MD 21202
By written notice, each party to this Agreement may change the address
to which notice is given to that party, provided that such changed notice shall
include a street address to which notices may be delivered by overnight courier
in the ordinary course on any Banking Day.
4.2 Amendments; Waivers.
This Agreement may not be amended, modified, or changed in any respect
except by an agreement in writing signed by the Agent and the Guarantor. No
waiver of any provision of this Agreement, nor consent to any departure by the
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing. No course of dealing between the Guarantor and the Banks and the Agent
and no act or failure to act from time to time on the part of the Banks and the
Agent shall constitute a waiver, amendment or modification of any provision of
this Agreement or any right or remedy under this Agreement or under applicable
laws.
Without implying any limitation on the foregoing:
a) Any waiver or consent shall be effective only in the specific
instance, for the terms and purpose for which given, subject to such conditions
as the Banks and the Agent may specify in any such instrument.
b) No waiver of any Event of Default shall extend to any subsequent or
other Event of Default, or impair any right consequent thereto.
c) No notice to or demand on the Guarantor in any case shall entitle
the Guarantor to any other or further notice or demand in the same, similar or
other circumstance.
<PAGE>
d) No failure or delay by the Banks and the Agent to insist upon the
strict performance of any term, condition, covenant or agreement of this
Agreement or of any of the other Loan Documents, or to exercise any right, power
or remedy consequent upon a breach thereof, shall constitute a waiver, amendment
or modification of any such term, condition, covenant or agreement or of any
such breach or preclude the Banks and the Agent from exercising any such right,
power or remedy at any time or times.
e) By accepting payment after the due date of any amount payable under
this Agreement or under any of the other Loan Documents, the Banks and the Agent
shall not be deemed to waive the right either to require prompt payment when due
of all other amounts payable under this Agreement or under any of the other Loan
Documents, or to declare a default for failure to effect such prompt payment of
any such other amount.
4.3 Cumulative Remedies.
The rights, powers and remedies provided in this Agreement and in the
other Loan Documents are cumulative, may be exercised concurrently or
separately, may be exercised from time to time and in such order as the Agent
shall determine and are in addition to, and not exclusive of, rights, powers and
remedies provided by existing or future applicable laws. In order to entitle the
Agent to exercise any remedy reserved to it in this Agreement, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Agreement. Without limiting the generality of the foregoing,
the Agent may:
a) proceed against the Guarantor with or without proceeding against the
Borrower or any other person who may be liable for all or any part of the
Obligations;
b) proceed against the Guarantor with or without proceeding under any
of the other Loan Documents or against any Collateral or other collateral and
security for all or any part of the Obligations;
c) without reducing or impairing the obligation of the Guarantor and
without notice, release or compromise with any other person liable for all or
any part of the Obligations under the Loan Documents or otherwise; or
d) without reducing or impairing the obligations of the Guarantor and
without notice thereof: (i) fail to perfect the Lien in any or all Collateral or
to release any or all the Collateral or to accept substitute Collateral, (ii)
approve the making of advances under the credit facilities under the Loan
Agreement, (iii) waive any provision of this Agreement or the other Loan
Documents, (iv) exercise or fail to exercise rights of set-off or other rights,
or (v) accept partial payments or extend from time to time the maturity of all
or any part of the Obligations.
4.4 Severability.
In case one or more provisions, or part thereof, contained in this
Agreement or in the other Loan Documents shall be invalid, illegal or
unenforceable in any respect under any law, then without need for any further
agreement, notice or action:
a) the validity, legality and enforceability of the remaining
provisions shall remain effective and binding on the parties thereto and shall
not be affected or impaired thereby;
<PAGE>
b) the obligation to be fulfilled shall be reduced to the limit of such
validity;
c) if such provision or part thereof pertains to repayment of the
Obligations, then, at the sole and absolute discretion of the Agent, all of the
Obligations shall become immediately due and payable; and
d) if the affected provision or part thereof does not pertain to
repayment of the Obligations, but operates or would prospectively operate to
invalidate this Agreement in whole or in part, then such provision or part
thereof only shall be void, and the remainder of this Agreement shall remain
operative and in full force and effect.
4.5 Assignments by Agent.
The Banks and/or the Agent may, without notice to, or consent of, the
Guarantor, sell, assign or transfer to or participate with any person or persons
all or any part of the Obligations, and each such person or persons shall have
the right to enforce the provisions of this Agreement and any of the other Loan
Documents as fully as the Banks and/or the Agent, provided that the Agent shall
continue to have the unimpaired right to enforce the provisions of this
Agreement and any of the other Loan Documents as to so much of the Obligations
that the Agent has not sold, assigned or transferred. In connection with the
foregoing, the Banks and the Agent shall have the right to disclose to any such
actual or potential purchaser, assignee, transferee or participant (provided,
however, that prior to the earlier of June 11, 1998 or an Event of Default, the
Agent shall obtain the Guarantor's prior written consent to such disclosure,
which consent shall not be unreasonably withheld or delayed) all financial
records, information, reports, financial statements and documents obtained in
connection with this Agreement and any of the other Loan Documents or otherwise.
4.6 Successors and Assigns.
This Agreement shall be binding upon the Guarantor and its personal
representatives, heirs, successors and assigns, and shall inure to the benefit
of the Banks and the Agent and their successors and assigns.
4.7 Continuing Agreements.
All covenants, agreements, representations and warranties made by the
Guarantor in this Agreement and in any certificate delivered pursuant hereto
shall survive the making by the Banks and/or the Agent of advances and other
extensions of credit under the credit facilities and the execution and delivery
of each promissory note evidencing all or any part of Obligations, shall be
binding upon the Guarantor regardless of how long before or after the date
hereof any of the Obligations were or are incurred, and shall continue in full
force and effect so long as any of the Obligations are outstanding and unpaid.
From time to time upon the Agent's request, and as a condition of the release of
any one or more of the Security Documents, the Guarantor and other persons
obligated with respect to the Obligations shall provide the Agent with such
acknowledgements and agreements as the Agent may reasonably require to the
effect that there exists no defenses, rights or setoff or recoupment, claims,
counterclaims, actions or causes of action of any kind or nature whatsoever
against the Agent, its agents and others, or to the extent there are, the same
are waived and released.
4.8 Enforcement Costs.
<PAGE>
The Guarantor agrees to pay to the Agent on demand all Enforcement
Costs (as defined in the Security Agreement), together with interest thereon
from the date incurred or advanced until paid in full at a per annum rate of
interest equal at all times to the Post-Default Rate. Enforcement Costs shall be
immediately due and payable at the time advanced or incurred, whichever is
earlier. Without implying any limitation on the foregoing, the Guarantor agrees,
as part of the Enforcement Costs, to pay upon demand any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution and delivery of this Agreement and to save the Agent harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay any taxes or fees referred to in this Section. The
provisions of this Section shall survive the execution and delivery of this
Agreement, the repayment of the Obligations and the termination of this
Agreement.
4.9 Applicable Law.
As a material inducement to the Banks and the Agent to enter into this
Agreement, the Guarantor acknowledges and agrees that the Loan Documents,
including, this Agreement, shall be governed by the laws of the State of
Maryland, as if each of the Loan Documents and this Agreement had each been
executed, delivered, administered and performed solely within the State of
Maryland even though for the convenience and at the request of the Borrower, one
or more of the Loan Documents may be executed elsewhere. The Banks and the Agent
acknowledge, however, that remedies under certain of the Loan Documents that
relate to property outside the State of Maryland may be subject to the laws of
the state in which the property is located.
4.10 Duplicate Originals and Counterparts.
This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed
to be an original and all taken together shall constitute but one and the same
instrument.
4.11 Headings; Etc.
The headings in this Agreement are included herein for convenience
only, shall not constitute a part of this Agreement for any other purpose, and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof. The above Recitals are part of this Agreement.
4.12 No Partnership; Third Parties.
Nothing contained in this Agreement shall be construed in a manner to
create any relationship between the Guarantor and the Banks and the Agent other
than the relationship of guarantor and lender and the Guarantor, the Banks and
the Agent shall not be considered partners or co-venturers for any purpose. The
terms and provisions of this Agreement are for the benefit of the Banks and the
Agent and their successors, assigns, endorsees and transferees and all persons
claiming under or through it and no other person shall have any right or cause
of action on account thereof. The Banks and the Agent have no obligation to make
any advance of any loan provided for in the Loan Agreement or otherwise for the
benefit of the Guarantor; the Guarantor has no beneficial interest in the
proceeds of any of the loans or otherwise under the Obligations or rights or
claims under the Loan Agreement or any of the other Loan Documents. The
obligations and liabilities of the Guarantor shall in no manner be affected by
the actual use
<PAGE>
of the proceeds of the credit facilities under the Loan Agreement or otherwise
or whether the Banks and the Agent waive any or all of the conditions to
advances set forth in the Loan Agreement or any of the other Loan Documents.
4.13 Entire Agreement.
This Agreement is intended by the Agent and the Guarantor to be a
complete, exclusive and final expression of the agreements contained herein.
Neither the Agent nor the Guarantor shall hereafter have any rights under any
prior agreements pertaining to the matters addressed by this Agreement but shall
look solely to this Agreement for definition and determination of all of their
respective rights, liabilities and responsibilities under this Agreement.
4.14 Consent to Jurisdiction.
The Guarantor, irrevocably submits to the jurisdiction of any state or
federal court sitting in the State of Maryland over any suit, action, or
proceeding arising out of or relating to this Agreement. The Guarantor
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to laying the venue of any such suit, action, or
proceeding brought in any such court and any claim that any such suit, action,
or proceeding brought in any such court has been brought in an inconvenient
forum. Final judgment in any such suit, action, or proceeding brought in any
such court shall be conclusive and binding upon the Guarantor and may be
enforced in any court to the jurisdiction of which the Guarantor is subject, by
a suit upon such judgment provided that service of process is effected upon the
Guarantor in a manner specified in this Agreement or as otherwise permitted by
applicable law.
4.15 Service of Process.
The Guarantor hereby consents to process being served in any suit,
action, or proceeding instituted in connection with this Agreement by (a) the
mailing of a copy thereof by certified mail, postage prepaid, return receipt
requested, to the Guarantor at the Guarantor's address designated in (Notices)
and (b) serving a copy thereof upon Mark A. Keidel, the agent hereby designated
and appointed by the Guarantor as the Guarantor's agent for service of process.
The Guarantor irrevocably agrees that such service (y) shall be deemed in every
respect to be effective service of process upon it in any such suit, action, or
proceeding and (z) shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon the Guarantor. Nothing in this Section
shall affect the right of the Agent to serve process in any manner otherwise
permitted by law or limit the right of the Agent otherwise to bring proceedings
against the Guarantor in the courts of any other appropriate jurisdiction or
jurisdictions.
4.16 WAIVER OF TRIAL BY JURY.
THE GUARANTOR, THE BANKS AND THE AGENT HEREBY JOINTLY AND SEVERALLY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE GUARANTOR AND THE
LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS
AGREEMENT, (B) ANY OF THE LOAN DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH
ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO
THIS AGREEMENT.
<PAGE>
This waiver is knowingly, willingly and voluntarily made by the
Guarantor, the Banks and the Agent, and the Guarantor, the Banks and the Agent
hereby represent that no representations of fact or opinion have been made by
any individual to induce this waiver of trial by jury or to in any way modify or
nullify its effect. The Guarantor, the Banks and the Agent further represent
that they have been represented in the signing of this Agreement and in the
making of this waiver by independent legal counsel, selected of their own free
will, and that they have had the opportunity to discuss this waiver with
counsel.
4.17 Liability of the Agent.
Except for willful misconduct, the Guarantor hereby agrees that the
Agent shall not be chargeable for any negligence, mistake, act or omission of
any accountant, examiner, agency or attorney employed by the Agent in making
examinations, investigations or collections, or otherwise in perfecting,
maintaining, protecting or realizing upon any lien or security interest or any
other interest in the Collateral or other security for the Obligations.
By inspecting the Collateral or any other properties of the Borrower or
by accepting or approving anything required to be observed, performed or
fulfilled by the Borrower or to be given to the Agent pursuant to this Agreement
or any of the other Loan Documents, the Agent shall not be deemed to have
warranted or represented the condition, sufficiency, legality, effectiveness or
legal effect of the same, and such acceptance or approval shall not constitute
any warranty or representation with respect thereto by the Agent.
4.18 Reinstatement.
If at any time any payment, or portion thereof, made by, or for the
account of, the Borrower or the Guarantor on account of any of the obligations
and liabilities arising hereunder or under any of the Loan Documents is set
aside by any court or trustee having jurisdiction as a voidable preference or
fraudulent conveyance or must otherwise be restored or returned by the Banks and
the Agent to the Borrower or to the Guarantor under any insolvency, bankruptcy
or other federal and/or state laws or as a result of any dissolution,
liquidation or reorganization of the Borrower or upon, or as a result of, the
appointment of any receiver, intervenor or conservator of, or trustee, or
similar officer for, the Borrower or any substantial part of its properties or
assets, the Guarantor hereby agrees that this Agreement shall continue and
remain in full force and effect or be reinstated, as the case may be, all as
though such payment(s) had not been made.
4.19 Complete and Final Expression of Agreement.
This Agreement is intended by the Banks, the Agent and the Guarantor to
be a complete, exclusive and final expression of the agreements contained
herein. No course of dealing, course of performance or trade usage, and no parol
evidence of any nature, shall be used to supplement or modify any terms of this
Agreement. The Banks, the Agent and the Guarantor further agree that there are
no conditions to the full effectiveness of this Agreement, unless otherwise
expressly stated herein. The Guarantor has unconditionally delivered this
Agreement to the Banks and the Agent, and failure to sign this or any other
guarantee by any other person shall not discharge the liability of the Guarantor
hereunder.
<PAGE>
WITNESS the signature and seal of the Guarantor as of the day and year
first above written.
WITNESS OR ATTEST: MASON-DIXON BANCSHARES, INC.
/s/ Karen Nash-Goetz By:/s/ Thomas K. Ferguson (SEAL)
Thomas K. Ferguson
President
<PAGE>
EXHIBIT 2.7
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made as of the Effective Time
(as that term is defined below) on February 11, 1998, by and among BAY FINANCE,
LLC, soon to be known as "ROSE SHANIS LOANS, LLC", a Maryland limited liability
company (the "Borrower"), NATIONSBANK, N.A., ("NationsBank"), CORESTATES BANK,
N.A. ("CoreStates") and HARRIS TRUST AND SAVINGS BANK ("Harris") (NationsBank,
CoreStates and Harris shall jointly and severally be referred to as "Bank" or
"Banks"), and NATIONSBANK, N.A. as the agent for the Banks (in such capacity,
the "Agent").
RECITALS
R.1 Borrower has requested Banks to extend credit to Borrower up to the
aggregate amount of Thirty-eight Million Dollars ($38,000,000) (the "Loan"), and
Banks are willing to extend such credit to be evidenced by various Promissory
Notes of even date herewith (such Promissory Notes as the same may be amended,
extended and restated from time to time, are collectively referred to herein as
the "Notes"), provided, among other things, that the repayment of all sums
advanced pursuant to such Notes is secured upon the terms and conditions set
forth in this Agreement.
R.2 Subject to the terms and conditions hereinafter set forth, the
Agent is acting as agent for Banks.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained therein, and for other good, valuable and legal
consideration, the receipt and adequacy of which are hereby acknowledged,
Borrower, Banks, and the Agent, intending to be legally bound, do hereby agree
as follows:
I. CONSTRUCTION OF AGREEMENT AND DEFINITIONS OF TERMS.
Unless varied by this Agreement or unless the context otherwise
requires, all of the terms used herein without definition which are defined by
the Maryland Uniform Commercial Code, including but not limited to the term
"Accounts", shall have the meanings assigned to them by the Maryland Uniform
Commercial Code - Secured Transactions, Title 9, Commercial Law Article,
Annotated Code of Maryland, as presently adopted (the "UCC"). Unless varied by
this Agreement or unless the context otherwise requires, all accounting terms
used herein shall have the meanings assigned to them by GAAP. Whenever the
phrase "satisfactory to the Agent" and/or "satisfactory to the Banks" is used in
this Agreement, such phrase shall mean "satisfactory to the Agent and/or the
Banks as the case may be in its or their sole discretion". Whenever used herein,
the words "Borrower", "Bank", "Banks" and "Obligor" shall be deemed to include
their respective heirs, legal representatives, successors and assigns. All words
used herein shall be deemed to refer to the singular, plural, masculine,
feminine or neuter as the identity of the Person or the context may require.
The following words and terms shall have the following respective
meaning used herein, unless the context otherwise requires:
<PAGE>
"Agent" shall mean NationsBank, N.A., in its capacity as agent for
Banks, or such successor Agent as may be appointed pursuant to hereof.
"Articles of Transfer" means the Articles of Transfer required by the
Asset Purchase Agreement.
"Asset Purchase Agreement" means that certain Asset Purchase Agreement
dated as of November 26, 1997, by and among Mason Dixon, Rose Shanis, and the
"Owners" and "Trusts" described therein.
"Assumed Balance" has the meaning set forth in Section .
"Banking Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in the State are authorized or required to close.
"Bankruptcy Code" shall mean the United States Bankruptcy Code of 1978,
as amended from time to time.
"Borrowing Base" means 90% of "Net Receivables" (as hereinafter
defined) up to and including April 30, 1998, and 85% of Net Receivables
thereafter. "Net Receivables" shall mean Borrower's gross finance receivables
less unearned finance charges, less acquisition discounts, and less accounts
over ninety (90) days past due on a contractual basis, less amounts due from
persons who are the subject of bankruptcy or other insolvency proceedings less
all amounts with respect to which a repossession has occurred.
"Business Premises" shall have the meaning assigned to such term in
hereof.
"Certified" shall mean that the information, statement, schedule,
report or other document required to be "Certified" shall contain a
representation of a duly authorized officer of Borrower that such information,
statement, schedule, report or other document is true and complete.
"Certificate" shall mean a Certified written statement containing
required information.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" means all property of the Borrower (including, without
limitation, the "Collateral" described in the Security Agreement) subject from
time to time to the Liens of any of the Security Documents and/or any of the
other Loan Documents, together with any and all cash and non-cash proceeds and
products thereof.
"Consequential Loss" shall mean, with respect to Borrower's payment of
all or any portion of an advance subject to the LIBOR Rate Option on a day other
than the last day of the Interest Period related thereto, any loss, cost or
expense incurred by any Bank as a result of the timing of such payment or in
redepositing such principal amount, including the sum of (i) the interest which,
but for such payment, any such Bank would have earned in respect of such
principal amount so paid, for the remainder of the Interest Period applicable to
such sum, reduced, if such Bank is able to redeposit such principal amount so
paid for the balance of such Interest Period, by the interest earned by such
Bank as a result of so redepositing such principal amount, plus (ii) any expense
or penalty incurred by such Bank on redepositing such principal amount.
<PAGE>
"Effective Time" shall have the meaning set forth in the Articles of
Transfer.
"Eurodollar Banking Day" shall mean a Banking Day on which dealings in
Dollars are conducted in the London interbank market.
"Event of Default" shall mean any of the events described in hereof.
"GAAP" shall mean those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants consistently applied and maintained throughout the period
indicated and consistent with the prior financial practices of Borrower. In the
event of a change in GAAP, Banks and Borrower will thereafter negotiate in good
faith to revise any covenants of this Agreement affected thereby in order to
make such covenants consistent with GAAP then in effect. Whenever any accounting
term is used in this Agreement or the other Loan Documents which is not
specifically defined in this Agreement or the other Loan Documents, it shall be
interpreted in accordance with GAAP.
"Governmental Authority" shall mean any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over either Bank or over Borrower or
a Subsidiary or over any of its or their business, operations or properties.
"Guaranty" has then meaning set forth in.
"Indebtedness" shall include all items which would properly be included
in the liability section of a balance sheet or in a footnote to a financial
statement in accordance with generally accepted accounting principles, and shall
also include all contingent liabilities.
"Interest Option" shall have the meaning assigned to such term in .
"Interest Payment Date" shall mean (i) as to any advance which is
subject to the Prime Rate Option, the first Banking Day of each calendar month,
and (ii) as to any advance which is subject to the LIBOR Rate Option, also the
first Banking Day of each calendar month.
"Interest Period" shall mean with respect to any advance which is
subject to the LIBOR Rate Option
(a) initially, the period commencing on the date of the initial advance
with respect to such advance and ending thirty days, sixty days, or ninety days
(if available) thereafter as selected by Borrower in its Notice of Borrowing as
provided in Section or its irrevocable Rollover Notice as provided in ; and
(b) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such advance which is
subject to the LIBOR Rate Option and ending thirty days, sixty days, ninety
days, one hundred eighty days, or three hundred sixty days (if available)
thereafter, as selected by Borrower in its irrevocable Rollover Notice as
provided in;
provided, however, that the foregoing provisions relating to Interest Periods
are subject to the following:
<PAGE>
(a) if any Interest Period would otherwise end on a day which is
not a Eurodollar Banking Day, such Interest Period shall be extended to the next
succeeding Eurodollar Banking Day unless the result of such extension would be
to carry such Interest Period into another calendar month, in which event such
Interest Period shall end on the immediately preceding Eurodollar Banking Day;
and
(b) any Interest Period that begins on the last Eurodollar Banking
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Eurodollar Banking Day of a calendar month.
"LIBOR Rate" shall mean, with respect to each Interest Period, the rate
of interest per annum, determined by the Agent, at which deposits in immediately
available and freely transferable funds in Dollars are offered (at approximately
10:00 o'clock a.m., Baltimore Time, two (2) Eurodollar Banking Days prior to the
first day of such Interest Period) by prime banks in the London interbank
eurodollar market for deposits of dollars for a period of time equal or
comparable to such Interest Period and in an amount equal to or comparable to
the principal amount of the advance by each Bank to which such Interest Period
relates. Each determination of the LIBOR Rate by the Agent shall, in the absence
of manifest error, be conclusive and binding.
"LIBOR Rate Option" shall have the meaning assigned to such term in .
"Lien" shall mean any statutory or common law consensual or
nonconsensual mortgage, pledge, security interest, encumbrance, lien, right of
set-off, claim or charge of any kind, including, without limitation, any
conditional sale or other title retention transaction, any lease transaction in
the nature thereof and any secured transaction under the Uniform Commercial Code
of any jurisdiction.
"Loan" shall mean the aggregate amount of all sums due under the Notes.
"Loan Documents" shall mean this Agreement, the Notes, the Security
Documents, any other note, any loan commitment, letter agreement, line of credit
agreement, commercial financing agreement, security agreement, guaranty of
payment, mortgage, deed of trust, pledge agreement, loan agreement, loan and
security agreement, hypothecation agreement, indemnity agreement, letter of
credit application and agreement, assignment or any other document or agreement
previously, simultaneously or hereafter executed and delivered by Borrower
and/or by any other Obligor, singly or jointly with another Person, to Banks
and/or the Agent in connection with the Loan, whether or not the Notes are
specifically referred to therein, as the same may from time to time be amended.
"Mason-Dixon" means the Borrower's parent, Mason-Dixon Bancshares,
Inc., a Maryland corporation.
"Maturity Date" shall mean June 11, 1998.
"Notice of Borrowing" shall have the meaning assigned to such term in
Section .
"Notes" shall mean any promissory notes issued pursuant to hereof.
<PAGE>
"Obligations" shall mean the full and punctual observance and
performance of all present and future duties, covenants and responsibilities due
to Banks and/or the Agent by Borrower of any nature whatsoever, including but
not limited to all past, present and future indebtedness, liabilities and
obligations of Borrower to Banks and/or the Agent under the Loan Documents for
the payment of money (extending to all principal, interest, fees, expense
payments, liquidation costs, and attorney's fees and expenses), whether similar
or dissimilar, related or unrelated, matured or unmatured, direct or indirect,
contingent or noncontingent, primary or secondary, alone or jointly with others,
now due or to become due, now existing or hereafter created, and whether or not
now contemplated.
"Obligor" shall mean individually and collectively Borrower, each
Person who is primarily or secondarily liable for the repayment of the Notes or
any portion thereof, and each Person who has granted security for the repayment
of the Notes, together with such Person's heirs, personal representatives,
successors and assigns.
"Permitted Liens" shall mean (a) Liens of Banks, (b) Liens for taxes
not delinquent or for taxes being diligently contested in good faith by Borrower
by appropriate proceedings, subject to the conditions set forth in hereof, (c)
mechanic's, workman's, materialman's, landlord's, carrier's and other like Liens
arising in the ordinary course of business with respect to obligations which are
not due or which are being diligently contested in good faith by Borrower by
appropriate proceedings, provided such Liens did not arise in connection with
the borrowing of money or the obtaining of advances or credit and do not, in
Banks' discretion, in the aggregate materially detract from the value of
Borrower's assets or materially impair the use thereof, (d) Liens specifically
consented to by Banks in writing, and (e) Liens, if any, specifically permitted
by this Agreement or described in the Permitted Liens Exhibit attached hereto
and incorporated herein.
"person" shall include natural persons, corporations, associations,
partnerships, joint ventures, trusts, Governmental Authorities and agencies and
departments thereof and every other entity of every kind.
"Prime Rate" shall mean the floating and fluctuating per annum rate of
interest of NationsBank, N.A. at any time or from time to time established and
declared by NationsBank, N.A. in its absolute discretion as its prime rate. The
Prime Rate does not necessarily represent the lowest rate of interest charged by
NationsBank, N.A. to its borrowers.
"Prime Rate Option" shall have the meaning assigned to such term in .
"Requisite Banks" shall have the meaning set forth in .
"Rollover Notice" shall have the meaning assigned to such term in .
"Rose Shanis" means the collective reference to Rose Shanis & Co.,
Inc., a Maryland corporation; Rose Shanis Sons, Inc., a Maryland corporation;
Stephen Corp., a Maryland corporation and Rose Shanis & Co., a Maryland general
partnership.
"Security Agreement" has the meaning set forth in .
"Security Documents" means collectively any assignment, pledge
agreement, security agreement, mortgage, deed of trust, deed to secure debt,
financing statement and any similar
<PAGE>
instrument, document or agreement under or pursuant to which a Lien is now or
hereafter granted to, or for the benefit of, the Agent or the Banks on any real
or personal property of any person to secure all or any portion of the
Obligations, all as the same may from time to time be amended, restated,
supplemented or otherwise modified, including without limitation, the Security
Agreement and the Guaranty.
"Subsidiary" shall include any corporation at least a majority of the
outstanding Voting Stock of which is owned, now or in the future, by Borrower
and/or by any one or more of the Borrower's Subsidiaries.
"Voting Stock" shall mean the shares of any class of capital stock of a
corporation having ordinary voting power to elect the directors, officers or
trustees thereof, including such shares that shall or might have voting power by
reason of the occurrence of one or more conditions or contingencies.
II. THE LOANS
2.1 Loan Amount
Subject to the continued compliance by Borrower with all of the
terms and conditions of this Agreement and the other Loan Documents, the
continuing nonexistence of any Event of Default hereunder, and the continuing
nonexistence of any event, circumstance, act or omission which with the giving
of notice, the passage of time or both would constitute an Event of Default
hereunder, Banks severally (but not jointly) agree to make advances to Borrower
from time to time between the date hereof and the Maturity Date of such sums as
Borrower may request but which in the aggregate shall not exceed at any one time
the lesser of Thirty-eight Million Dollars ($38,000,000.00) or the Borrowing
Base. In the event the outstanding principal balance of the Loan exceeds the
Borrowing Base, such excess shall be immediately due and payable by the Borrower
to the Banks. The aggregate principal amount of outstanding advances at any time
shall not exceed Fifteen Million Two Hundred Thousand Dollars ($15,200,000.00)
each from NationsBank and CoreStates and Seven Million Six Hundred Thousand
Dollars ($7,600,000.00) from Harris. Any advances shall be requested by Borrower
in such manner and form and with such prior notice to the Agent as provided in
Section . Borrower agrees that Borrower shall be liable for the repayment of
each advance made by each Bank to or for Borrower hereunder, with interest at
the rates and calculated in the manner provided herein and in the applicable
Note. Each advance made in respect of the Loan shall be made by each Bank in the
proportion which that Bank's commitment to make advances hereunder bears to the
total amount of all the Banks' commitments to make advances hereunder. The
failure of any Bank to make any requested advances to be made by it on the date
specified for such advance shall not relieve any other Bank of its obligation
(if any) to make such advance on such date, but no Bank shall be responsible for
the failure of any other Bank to make such advance to be made by such other
Bank.
III. TRANSACTIONS UNDER THIS AGREEMENT.
In respect to any advance and all other matters under or in connection
with this Agreement and any transactions contemplated hereby, Borrower
authorizes the Agent to accept, rely upon, act upon and comply with, any verbal
or written instructions, requests, confirmations and orders of any of Mark A.
Keidel or Thomas K. Ferguson or Norman J. Glick. Borrower may add or delete
authorized persons by providing written notice to the Agent in accordance with .
<PAGE>
Borrower acknowledges that the transmission between Borrower and the Agent of
any such instructions, requests, confirmations and orders involves the
possibility of errors, omissions, mistakes and discrepancies and agrees to adopt
such internal measures and operational procedures to protect Borrower's
interests. By reason thereof, Borrower hereby assumes all risk of loss and
responsibility for, releases and discharges Banks and the Agent from any and all
responsibility or liability for, and agrees to indemnify, reimburse on demand
and hold Banks and the Agent harmless from, any and all claims, actions,
damages, losses, liability and expenses by reason of, arising out of or in any
way connected with or related to, (i) Banks' or the Agent's accepting, relying
and acting upon, complying with or observing any such instructions, requests,
confirmations or orders, and (ii) any such errors, omissions, mistakes and
discrepancies, except those caused by Banks' or the Agent's willful misconduct
or gross negligence.
IV. NOTES.
All advances made by each Bank under this Agreement shall be evidenced
by, and repaid with interest in accordance with, the promissory notes of
Borrower in substantially the form of Exhibits A, B and C attached hereto duly
completed, and executed by the Borrower on the date of this Agreement. The
records of each Bank relating to the amount of each advance and each renewal,
conversion, and payment of principal amount received by such Bank on account of
its advances shall, in the absence of manifest error, be conclusive as to the
outstanding balance of the Loan made by such Bank.
V. MANNER OF BORROWING.
5.1 Assumed Balance.
Pursuant to the terms of the Asset Purchase Agreement, the
Borrower agreed to assume at the Effective Time the outstanding principal
balance of loans owed by Rose Shanis to the Banks, which balance is $29,000,000
(the "Assumed Balance"). The Banks acknowledge that they have consented to that
assumption. The Agent, the Banks and the Borrowers agree that the Assumed
Balance shall be treated as the first advance under the Loan and that the
Borrower's obligation to repay the Assumed Balance, with interest, shall be
evidenced by the Notes.
5.2 Notice of Borrowing.
Borrower shall give the Agent prior oral or written notice in the
form requested by the Agent (a "Notice of Borrowing") of each requested advance
specifying (A) the aggregate amount of such requested advance, and (B) the
requested date of such requested advance. Such Notice of Borrowing shall also
specify the initial Interest Option selected in accordance with hereof. In the
event that such Notice of Borrowing specifies the LIBOR Rate Option, the
aggregate amount of the requested advance shall be in an amount not less than
Two Million Dollars ($2,000,000.00). If in selecting an Interest Option pursuant
to hereof, Borrower shall specify the LIBOR Rate Option, such Notice of
Borrowing shall also specify the length of the initial Interest Period selected
by Borrower for such requested advance, provided that Borrower may not select an
Interest Period which will extend beyond the Maturity Date. If in selecting an
Interest Option pursuant to hereof, Borrower shall specify the Prime Rate
Option, Borrower shall give the Agent the Notice of Borrowing at least one (1)
Banking Day prior to the requested date of the advance. If in selecting an
Interest Option pursuant to hereof, Borrower shall specify the LIBOR Rate
Option, Borrower shall give the Agent the Notice of Borrowing by no later than
11:30 a.m. Baltimore Time on the day which is three (3) Eurodollar Banking Days
prior to the
<PAGE>
requested date of the advance. The Agent shall notify each Bank of each such
Notice of Borrowing not later than 1:00 p.m. Baltimore Time on the date of
receipt.
5.3 Notice Irrevocable.
Each Notice of Borrowing shall be irrevocable and binding on
Borrower, and Borrower shall indemnify Banks and the Agent again any cost, loss
or expense incurred by Banks and/or the Agent as a result of any failure to
fulfill, on or before the date specified for a requested advance, the conditions
to such requested advance set forth herein, including without limitation, any
cost, loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Bank to fund the Requested Advance.
5.4 Funding.
After receiving a Notice of Borrowing in the manner provided
herein, each Bank shall, on the date of a requested advance as specified in a
Notice of Borrowing, deliver to the Agent at Baltimore, Maryland in immediately
available funds, such Bank's pro rata share of such requested advance. After the
Agent's receipt of such funds, not later than 4:00 p.m. Baltimore Time on the
date of a requested advance as specified in a Notice of Borrowing and upon
fulfillment of the applicable conditions set forth in this Agreement, the Agent
will deliver such requested advance to Borrower. The Agent shall deposit the
amount of such requested advance in immediately available funds into Borrower's
checking or other depository accounts at NationsBank.
5.5 Interest Rate Options.
When Borrower gives the Agent a Notice of Borrowing with respect
to a requested advance, Borrower shall select the LIBOR Rate Option or the Prime
Rate Option (an "Interest Option"). Notwithstanding the above or any other
provision in this Agreement, Borrower may not select the LIBOR Rate Option to
apply to any requested advance if the Loan is scheduled to mature within the
following thirty days. Prior to the termination of each Interest Period with
respect to an advance which is subject to the LIBOR Rate Option, Borrower shall
give written notice (a "Rollover Notice") to the Agent of the Interest Option
which shall be applicable to such advance upon the expiration of such Interest
Period. Such Rollover Notice shall be given to the Agent at least one (1)
Banking Day, in the event that Borrower selects the Prime Rate Option, or three
(3) Eurodollar Banking Days, in the event that Borrower selects the LIBOR Rate
Option, prior to the termination of such Interest Period. If Borrower shall
specify the LIBOR Rate Option, such Rollover Notice shall also specify the
length of the succeeding Interest Period selected by Borrower, provided that
Borrower may not select an Interest Period which will extend beyond the Maturity
Date. Each Rollover Notice shall be irrevocable and effective upon notification
thereof to the Agent. If the required Rollover Notice shall not have been timely
received by the Agent (in accordance with the above provisions of this Section)
prior to the expiration of the then relevant Interest Period in effect when such
notice was required to be given, Borrower shall be deemed to have selected the
Prime Rate Option to be applicable upon expiration of such Interest Period and
to have given the Agent notice of such selection. With respect to any advance
which is subject to the Prime Rate Option, Borrower shall have the right, on any
Eurodollar Banking Day (a "Conversion Date"), to convert such advance from the
Prime Rate Option to the LIBOR Rate Option by giving the Agent a Rollover Notice
of such election at least three (3) Eurodollar Banking Day prior to such
Conversion Date. Notwithstanding anything in this Section to the contrary, no
advance which is subject to the Prime Rate Option may be converted to the LIBOR
<PAGE>
Rate Option, and no advance which is subject to the LIBOR Rate Option may be
continued as such when any Event of Default has occurred and is continuing. In
such an event, each advance subject to the LIBOR Rate Option shall be
automatically converted to the Prime Rate Option on the last day of the
applicable Interest Period.
5.6 Special Provisions Governing Advances Subject To The LIBOR
Rate Option.
5.7 Inadequacy of LIBOR Rate Pricing.
If with respect to any Interest Period for any advance which is
subject to the LIBOR Rate Option:
5.8 the Agent determines that, by reason of circumstances affecting the
interbank eurodollar market generally, deposits in dollars (in the applicable
amounts) are not being offered to lenders in the interbank eurodollar market for
such Interest Period, or
5.9 the Agent reasonably determines that the LIBOR Rate as determined
by the Agent will not adequately and fairly reflect the cost to the Agent of
maintaining or funding such advance at the LIBOR Rate Option for such Interest
Period, then the Agent shall forthwith give notice thereof to Borrower,
whereupon until the Agent notifies Borrower that the circumstances giving rise
to such suspension no longer exist, (A) the right of Borrower to select the
LIBOR Rate Option shall be suspended, and (B) with respect to each advance
subject to the LIBOR Rate Option, Borrower shall, at Borrower's option, either
(1) repay in full the then outstanding principal amount of such advance,
together with accrued interest thereon, on the last day of the then current
Interest Period applicable to such advance, or (2) convert such advance to the
Prime Rate Option in accordance with of this Agreement on the last day of the
then current Interest Period applicable to each such advance.
5.10 Illegality.
If after the date of this Agreement, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank with any request or directive (whether or not
having the force of law) of any such Governmental Authority, central bank or
comparable agency shall make it unlawful or impossible for either Bank to make,
maintain or fund advances subject to the LIBOR Rate Option, the Agent shall
forthwith give notice thereof to Borrower. Upon receipt of such notice, Borrower
shall, at Borrower's option, either (i) repay in full the then outstanding
principal amount of any affected advance subject to the LIBOR Rate Option,
together with accrued interest thereon, or (ii) convert such advance to an
advance subject to the Prime Rate Option on either (A) the last day of the then
current Interest Period applicable to such affected advance if the Banks may
lawfully continue to maintain and fund such advance subject to the LIBOR Rate
Option until such day, or (B) immediately if any Bank may not lawfully continue
to fund and maintain such advance subject to the LIBOR Rate Option until such
day.
5.11 Effect on Interest Options.
If notice has been given pursuant to this Section requiring
advances subject to the LIBOR Rate Option to be repaid or converted, then unless
and until the Agent notifies Borrower that the circumstances giving rise to such
repayment no longer apply requiring such repayment
<PAGE>
or conversion, all subsequent advances shall be subject to the Prime Rate
Option. If the Agent notifies Borrower that the circumstances giving rise to
such repayment no longer apply, then Borrower may thereafter select the LIBOR
Rate Option in accordance with of this Agreement.
5.12 Payments Not At End of Interest Period.
If Borrower makes any payment of principal with respect to any
advance subject to the LIBOR Rate Option on any day other than the last day of
the Interest Period applicable to such advance, then Borrower shall reimburse
each Bank on demand the Consequential Loss incurred by it as a result of the
timing of such payment. A Certificate of a Bank setting forth the basis for the
determination of the amount of Consequential Loss shall be delivered to Borrower
and shall, in the absence of manifest error, be conclusive and binding. Any
conversion of an advance subject to the LIBOR Rate Option to a different
Interest Option on any day other than the last day of the Interest Period for
such advance shall be deemed a payment for purposes of this Section.
5.13 Interest Rates.
a) The Prime Rate Option.
Except as otherwise provided herein, the outstanding
principal balance of each advance as to which Borrower has selected the Prime
Rate Option shall bear interest from the date of the advances at the Prime Rate.
b) LIBOR Rate Option.
Except as otherwise provided herein, the outstanding
principal balance of each advance as to which Borrower has selected the LIBOR
Rate Option shall bear interest from the date of the advance at a floating and
fluctuating rate of interest equal to two percent (2.0%) per annum in excess of
the LIBOR Rate applicable to such advance.
5.14 Payment of Interest.
Interest upon each advance shall be payable to the Agent for the
account of each Bank monthly on each Interest Payment Date and at maturity.
After any payment of principal and/or interest is due (whether by demand, stated
maturity, acceleration or otherwise), such payment shall bear interest until
paid at a fluctuating rate equal to the applicable interest rate in effect from
time to time as provided in hereof plus two percent (2%) per annum.
5.15 Calculation of Interest Rates.
Interest on the unpaid principal of each advance shall be
calculated on the basis of the actual days elapsed in a year consisting of 360
days.
5.16 Prepayments.
At any time and from time to time, Borrower may, upon one (1)
Banking Day prior written notice to the Agent, prepay in whole or in part the
principal of the Loan. Any prepayment hereunder of any portion of the Loan shall
be applied by each Bank in the following manner: (i) first, as a prepayment of
outstanding advances subject to hereof; and (ii) second, as
<PAGE>
a prepayment of outstanding advances subject to hereof as Borrower shall select;
provided, however, that Borrower shall select such advances to be prepaid in a
manner designed to minimize the Consequential Loss resulting from such
prepayments; and provided further that if Borrower shall fail to select the
advances to which such prepayments, are to be applied, or if an Event of Default
has occurred and is continuing at the time of such prepayment, then each Bank
shall be entitled to apply the prepayment to such advances in the manner it
shall deem appropriate.
5.17 Manner and Application of Payments.
All payments and prepayments of principal and interest shall be
made by Borrower to the Agent before 11:00 a.m., Baltimore Time, in immediately
available funds in lawful money of the United States of America which shall be
legal tender in payment of all debts and dues. Such payments shall be made at
the Agent's principal banking office in Baltimore, Maryland. Any payment or
prepayment received by the Agent after 11:00 a.m., Baltimore Time, shall be
deemed to have been received by the Agent on the next succeeding Banking Day.
Should the principal of or interest on any advance become due and payable on a
day other than a Banking Day, the maturity thereof shall be extended to the next
succeeding Banking Day and the interest shall continue to accrue.
5.18 Commitment Fee.
Borrower shall pay to the Agent, in consideration of Bank's making
credit available to Borrower, a commitment fee in the amount of $100,000.00,
which shall be fully earned at the Effective Time, of which $25,000 shall be due
at the Effective Time and shall be paid from Mason-Dixon's application fee which
has been paid to the Agent and the balance shall be paid February 12, 1998, and
such fee shall be non-refundable upon payment.
5.19 Late Charge.
If any payment required to be made by Borrower hereunder is not
paid within fifteen (15) days after the date on which such payment is due,
Borrower shall pay to the Agent on demand a late charge equal to five percent
(5%) of the amount of such payment. A similar late charge may be imposed for
each successive 30 day period during which all or any portion of each payment
remains delinquent.
5.20 Bank's Determinations Conclusive, Notice of Amounts Due.
a) The determination by a Bank of the amount or amounts necessary
to compensate the Bank or its holding company pursuant to or shall be conclusive
absent manifest error. The Bank shall make such determination in good faith.
b) A Bank will notify the Borrower of any event occurring after
the date of this Agreement that will entitle the Bank to compensation pursuant
to or hereof as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation. Said notice shall be in writing and
shall set forth the amount or amounts then payable pursuant to or . The Borrower
shall pay such Bank the amount shown as due on any such notice within 10 days
after its receipt of the same.
<PAGE>
c) Failure on the part of a Bank to demand compensation for
reduction in return on capital with respect to any period pursuant to or shall
not constitute a waiver of such Bank's right to demand compensation.
5.21 Borrower's Right to Terminate.
Borrower shall have the right to terminate this Agreement upon
written notice to the Agent; provided, however, that no such notice of
termination shall be or become effective unless, at the time such notice is
given, all Obligations shall have been paid in full in immediately available
funds and there exists no commitment by either Bank which could give rise to any
Obligations. The giving of any such notice of termination by Borrower, whether
or not effective under the foregoing provisions of this Subsection, shall
immediately terminate any obligation of Banks to make advances under this
Agreement and, notwithstanding any attempt by Borrower to revoke or withdraw any
notice of termination, no obligation of Banks to make advances hereunder shall
rearise except to the extent and upon such terms and conditions as may be agreed
to by Banks in writing in Banks' sole discretion.
5.22 Increased Cost.
The Borrower shall pay to a Bank from time to time such amounts as
such Bank may determine to be necessary to compensate such Bank for any costs
incurred by the Bank which the Bank determines are attributable to its making or
maintaining any advances hereunder or to compensate such Bank for any reduction
in any amount receivable by the Bank under this Agreement or the Notes in
respect of any such advances (such increases in costs and reductions in amounts
receivable being called "Additional Costs"), resulting from any change after the
date of this Agreement in United States federal, state, municipal, or foreign
laws or regulations (including Regulation D) or the adoption or making after
such date of any interpretations, directives or requirements applying to a class
of banks including such Bank of or under any United States federal, state,
municipal, 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 ("Regulatory Change"), which: (1)
changes the basis of taxation of any amounts payable to the Bank under this
Agreement or the Notes in respect of any of such advances (other than taxes
imposed on the overall net income of the Bank or of its lending office for any
of such advances by the jurisdiction where the head office of the Bank or such
lending office is located); or (2) imposes or modifies any reserve, special
deposit, or similar requirements relating to any extension of credit or other
assets of, or any deposits with or other liabilities of, the Bank (including any
of such advances); or (3) imposes any other condition affecting this Agreement
or the Notes (or any of such advances).
5.23 Risk Based Capital.
If with respect to any advance, a Bank shall have determined that
the applicability of any law, rule, regulation or guideline or the adoption
after the date hereof of any other law, rule, regulation or guidelines regarding
capital adequacy, or any change in any of the foregoing or in the interpretation
or administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any lending office of such Bank) or such
Bank's holding company with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of increasing the percentage of
reserves applicable to any advances made or available to be made
<PAGE>
under this Agreement (whether for such Bank or on such Bank's holding company,
if any) (taking into consideration such Bank's policies and the policies of such
Bank's holding company with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time the Borrower shall pay to such
Bank on demand such additional amount or amounts as will compensate such Bank or
such Bank's holding company for any such increase suffered.
VI. SECURITY
6.1 Security Agreement.
As security for the payment and performance of the Obligations, the
Borrower shall execute and deliver a Security Agreement dated the same date as
this Agreement (as amended, modified, restated, substituted, extended and
renewed at any time and from time to time, the "Security Agreement") covering
all of the Borrower's assets.
VII.GUARANTY.
In addition to the Collateral, the Obligations shall also be secured by
unconditional and unlimited guaranty of payment (as amended, modified, restated,
substituted, extended and renewed at any time and from time to time, the
"Guaranty") of Mason-Dixon.
VIII.REPRESENTATIONS AND WARRANTIES
To induce Banks and the Agent to enter into this Agree represents and
warrants to Banks and the Agent, and shall be deemed to represent and warrant to
the Agent and the Banks at the time each request for an advance under the Loan
is submitted and again at the time any advance is made under the Loan (provided,
however, that, except with respect to Sections 4.1, 4.2, 4.3 4.4(a), 4.6, 4.8
and 4.13, the representations and warranties are made to the best of the
Borrower's knowledge):
IX. GOOD STANDING.
The Borrower is a limited liability company, and each Subsidiary is a
corporation, duly organized, legally existing and in good standing under the
laws of the State of its formation, has the power to own its property and to
carry on its business and is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties owned by
it therein or in which the transaction of its business makes such qualification
necessary.
X. AUTHORITY.
Borrower has full power and authority to enter into this Agreement, the
Notes, and the other Loan Documents to which the Borrower is a party, make the
borrowings hereunder, to execute and deliver all documents and instruments
required hereunder and to incur and perform the obligations provided for herein,
all of which have been duly authorized by all necessary and proper limited
liability company and other action, and no consent or approval of any person,
including, without limitation, members of Borrower and any public authority or
regulatory body, which has not been obtained is required as a condition to the
validity or enforceability hereof or thereof.
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XI. BINDING AGREEMENTS.
This Agreement, the Notes and the other Loan Documents to which the Borrower
is a party have been duly and properly executed by Borrower, constitute the
valid and legally binding obligation of Borrower and are fully enforceable
against Borrower in accordance with their respective terms, subject only to laws
affecting the rights of creditors generally and application of general
principles of equity.
XII. NO CONFLICTING AGREEMENTS.
The execution, delivery and performance by Borrower of this Agreement, the
Notes and the other Loan Documents to which the Borrower is a party and the
borrowings hereunder will not (a) violate (i) any provision of law or any order,
rule or regulation of any court or agency of government, (ii) any award of any
arbitrator, (iii) the Operating Agreement or Articles of Organization the
Borrower, or (iv) any indenture, contract, agreement, mortgage, deed of trust or
other instrument to which Borrower is a party or by which Borrower or any of its
property is bound, or (b) be in conflict with, result in a breach of or
constitute (with due notice and/or lapse of time) a default under, any such
award, indenture, contract, agreement, mortgage, deed of trust or other
instrument, or result in the creation or imposition of any Lien upon any of the
property or assets of Borrower except for Liens created in favor of Banks under
or pursuant to this Agreement and the other Loan Documents.
XIII. LITIGATION.
Except as disclosed to Banks on Exhibit D, there are no judgments,
injunctions or similar orders or decrees, claims, actions, suits or proceedings
pending or, to the knowledge of Borrower, threatened against or affecting
Borrower or any Subsidiary or any property of Borrower or any Subsidiary, at law
or in equity, by or before any court or any federal, State, county, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which could result in any material adverse
change in the business, operations, prospects, properties or in the condition,
financial or otherwise, of Borrower, and neither Borrower nor any Subsidiary is,
to Borrower's knowledge, in default with respect to any judgment, order, writ,
injunction, decree, rule or regulation of any court or any federal, State,
county, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which could have a material
adverse effect on Borrower.
XIV. TAXES.
Borrower and each Subsidiary has paid or caused to be paid all federal,
State and local taxes to the extent that such taxes have become due and has
filed or caused to be filed all federal, State and local tax returns which are
required to be filed by Borrower and each Subsidiary.
XV. TITLE TO PROPERTIES.
Borrower has good and marketable title to all of its properties and assets,
and all of the properties and assets of Borrower are free and clear of Liens,
except for Permitted Liens.
<PAGE>
XVI. PLACE OF BUSINESS.
Borrower's chief executive office is located at 313 North Howard Street,
Baltimore, Maryland 21201 (the "Business Premises"). Borrower will not change
such location without Banks' prior written consent. XVII. FINANCIAL INFORMATION.
All financial statements, schedules, reports and other information supplied
to Banks by or on behalf of Borrower heretofore and hereafter are and will be
true and complete.
XVIII. LICENSES AND PERMITS.
Borrower and each Subsidiary has duly obtained and now holds all licenses,
permits, certifications, approvals and the like required by federal, State and
local laws of the jurisdictions in which Borrower and each Subsidiary conducts
its business and each remains valid and in full force and effect.
XIX. BROKER'S OR FINDER'S COMMISSIONS.
Except as disclosed to Banks on EXHIBIT E, no broker's or finder's fee or
commission is or will be payable in connection with this Agreement or the
transactions contemplated hereby, and Borrower agrees to save harmless and
indemnify Banks from and against any claim, demand, action, suit, proceeding or
liability for any such fee or commission, including any costs and expenses
(including attorney's fees) incurred by Banks in connection therewith. The
provisions of this Subsection shall survive the termination of this Agreement
and the payment of all other Obligations.
XX. OUTSTANDING INDEBTEDNESS.
Borrower has no outstanding Indebtedness except as permitted by hereof and
there exists no default under the provisions of any instrument evidencing such
Indebtedness or under the provisions of any agreement relating thereto.
XXI.Regulation U.
Neither Borrower nor any Subsidiary owns or presently intends to acquire any
"margin stock" as defined in Regulation U (12 CFR Part 221) of the Board of
Governors of the Federal Reserve System. None of the proceeds of any advances
hereunder will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin stock or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin stock
or for any other purpose which might constitute this transaction a "purpose
credit" within the meaning of Regulation U. Neither Borrower nor any agent
acting on its behalf has taken or will take any action which might cause this
Agreement to violate Regulation U or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the Securities Exchange
Act of 1934, in each case as in effect now or as the same may hereafter be in
effect.
XXII. CONDITIONS OF LENDING
Unless the Agent and the Banks shall otherwise agree, neither the Agent nor
any Bank shall have any obligation to advance any funds to Borrower hereunder
unless each of the following conditions precedent shall be satisfied as provided
below:
<PAGE>
XXIII. DOCUMENTS.
There shall have been delivered to each Bank, appropriately completed and
duly executed (when applicable), the following, each in form and substance
satisfactory to the Agent and the Banks:
(a) The applicable Note
(b) All other Loan Documents.
(c) Opinions, record searches, financial statements, assignments, waivers,
certificates and other documents as the Agent may reasonably require, all in
form and substance reasonably satisfactory to the Agent and its counsel.
(d) Evidence satisfactory to the Agent that all insurance coverages and all
insurance clauses or endorsements required pursuant to this Agreement and the
other Loan Documents are in effect, together, to the extent available, with
copies of all insurance policies and endorsements.
23.1 No Default.
At the time of every advance under this Agreement, the Agent shall be
fully satisfied that (a) all of the covenants, conditions, warranties and
representations set forth herein and in the other Loan Documents have been
complied with and are true and complete on and as of such time with the same
effect as though such covenants, conditions, warranties and representations had
been made on and as of such time, (b) no Event of Default nor any event which,
upon the giving of notice and/or the lapse of time, could constitute an Event of
Default shall have occurred, and (c) the documents and matters required to be
executed, delivered, opined and/or Certified pursuant to Subsection hereof shall
be in full force and effect and/or true and complete, as the case may be.
XXIV. AFFIRMATIVE COVENANTS
Borrower covenants and agrees with Banks and the Agent that, during the
term of this Agreement and until (a) all of the Obligations have been paid in
full and (b) there exists no commitment by Banks which could give rise to any
Obligations, Borrower will absolutely and unconditionally do and perform each of
the following acts, promises and covenants:
24.1 Financial Statements.
Furnish to each Bank in writing: (a) as soon as available but in no
event more than 45 days after the end of each fiscal quarter, (i) a consolidated
statement of income and retained earnings of Borrower and any Subsidiaries for
such period, and (ii) a consolidated balance sheet of Borrower and any
Subsidiaries as at the end of such period, all in detail and scope reasonably
satisfactory to the Agent, prepared in accordance with GAAP consistently
applied; (b) as soon as available but in no event more than 120 days after the
end of each fiscal year of Borrower, a consolidated and consolidating statement
of income and retained earnings and statement of cash flows of Borrower and any
Subsidiaries for such year, and a consolidated and consolidating balance sheet
of Borrower and any Subsidiaries as at the end of such year, setting forth in
each case in comparative form corresponding figures for the preceding fiscal
year of Borrower, all in detail and scope reasonably satisfactory to the Agent,
prepared and audited in accordance with
<PAGE>
GAAP consistently applied by independent certified public accountants reasonably
satisfactory to the Agent, accompanied by a report of such independent certified
public accountants with respect to such financial statements; (c) promptly upon
transmission thereof, copies of any financial statements, proxy statements,
reports and the like which Borrower or any Subsidiary sends to its shareholders
and copies of all registration statements (with exhibits) and all regular,
special or periodic reports which Borrower or any Subsidiary files with the
United States Securities and Exchange Commission (or any governmental body or
agency succeeding to the functions of the United States Securities and Exchange
Commission) or with any national stock exchange on which any of Borrower's or
any Subsidiary's securities are listed and copies of all press releases and
other statements made available by Borrower or any Subsidiary to the public
concerning material developments in the business of Borrower and/or any
Subsidiary; (d) promptly upon receipt by the Borrower, a copy of the 1997 annual
financial statements of Rose Shanis; and (e) on the date of this Agreement and
not later than the tenth Banking Day of each month commencing March 1, 1998, a
Borrowing Base Certificate in substantially the form attached hereto as EXHIBIT
F, with appropriate insertions, containing a computation of the Borrowing Base
as of the last day of the preceding month and signed by the Borrower's President
or chief financial officer.
24.2 Taxes.
Pay and discharge, and cause each Subsidiary to pay and discharge,
all taxes, assessments and governmental charges upon Borrower and each
Subsidiary, its income and properties, prior to the date on which penalties
attach thereto unless and to the extent only that the same are being diligently
contested by Borrower or a Subsidiary, as the case may be, in good faith by
appropriate proceedings, provided, however, that (a) the Agent shall have been
given reasonable prior written notice of intention to contest, (b) nonpayment of
the same will not, in the Banks' sole discretion, materially impair any of the
Agent's or any Bank's rights or remedies or the prospect for full and punctual
payment of all of the Obligations, and (c) Borrower or such Subsidiary
establishes reasonable reserves for any liabilities being contested and for
expenses arising out of such contest.
24.3 Corporate Existence, Continuation of Business and Compliance with
Laws.
Maintain, and cause each Subsidiary to maintain, its entity
existence in good standing; continue, and cause each Subsidiary to continue, its
business operations as now being conducted; and comply with, and cause each
Subsidiary to comply with, all applicable federal, State and local laws, rules,
ordinances, regulations and orders unless and to the extent only that the
validity or applicability thereof is being diligently contested by Borrower or a
Subsidiary, as the case may be, in good faith by appropriate proceedings,
provided, however, that (a) the Agent and the Banks shall have been given
reasonable prior written notice of intention to contest, (b) such noncompliance
will not, in the Banks' reasonable discretion, materially impair any of the
Agent's or any Bank's rights or remedies or the prospect for full and punctual
payment of all of the Obligations, and (c) Borrower or such Subsidiary
establishes reasonable reserves for any liabilities or expenses which may arise
out of such noncompliance and contest.
24.4 Litigation.
Promptly notify the Agent and the Banks in writing of any action,
suit or proceeding at law or in equity by or before any court, governmental
agency or instrumentality
<PAGE>
which could result in any material adverse change in the business, operations,
prospects, properties or assets or in the condition, financial or otherwise, of
Borrower or any Subsidiary.
24.5 Extraordinary Loss.
Promptly notify the Agent and the Banks in writing of any event
causing extraordinary loss or depreciation of the value of Borrower's or any
Subsidiary's assets (whether or not insured) and the facts with respect thereto.
24.6 Books and Records.
Keep and maintain, and cause each Subsidiary to keep and maintain,
proper and current books and records in accordance with generally accepted
accounting principles consistently applied and permit access and inspection by
the Agent to, and reproduction by the Agent of and copying by the Agent from,
such books and records during normal business hours.
24.7 Maintenance of Properties.
Maintain, and cause each Subsidiary to maintain, all properties and
improvements necessary to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and cause replacements and repairs
to be made when necessary for the proper conduct of its business.
24.8 Patents, Franchises, etc.
Maintain, preserve and protect all licenses, patents, franchises,
trademarks and trade names of Borrower and each Subsidiary or licensed by
Borrower or any Subsidiary which are necessary to the conduct of the business of
Borrower or any Subsidiary as now conducted, free of any conflict with the
rights of any other person.
24.9 Insurance.
Maintain, and cause each Subsidiary to maintain, with insurers
and in amounts satisfactory to the Agent such insurance against such risks and
with such loss deductible amounts as may be reasonably satisfactory to the
Agent.
24.10 Evidence of Insurance.
Deliver to the Agent from time to time, and periodically if the
Agent shall so reasonably require, evidence satisfactory to the Agent that all
insurance and endorsements required pursuant to this Agreement and the other
Loan Documents are in effect.
24.11 Further Assurances and Corrective Instruments.
Promptly execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, to the Agent from time to time such supplements
hereto and such other instruments and documents as may be reasonably requested
by the Agent to protect and preserve the Agent's and each Bank's rights and
remedies hereunder.
<PAGE>
24.12 Financial Information.
Deliver to the Agent promptly upon the Agent's reasonable request,
and periodically if the Agent shall so require, such written statements,
schedules or reports (which shall be Certified if required by the Agent) in such
form, containing such information and accompanied by such documents as may be
satisfactory to the Agent from time to time concerning Borrower's or any
Subsidiary's financial condition or business operations or any other matter or
matters, including, without limitation, copies of federal, State and local tax
returns of Borrower and Subsidiaries, and permit the Agent, its agents and
designees, to discuss Borrower's financial condition and business operations
with Borrower's officers and employees.
24.13 Accounts Reports.
Deliver to the Agent within 45 days after the end of each month a
Certified written schedule and aging of the Accounts as of the end of such
accounting period in such form, containing such information (including, but not
limited to information about contractual delinquencies and recency
delinquencies) and accompanied by such documents as may from time to time be
reasonably required by the Agent.
24.14 Use of Proceeds.
Use the proceeds of advances made hereunder only for working capital
and other business purposes not otherwise prohibited by this Agreement, and to
pay the costs, expenses and fees payable by Borrower under this Agreement and
the other Loan Documents.
24.15 Depository Relationship.
Maintain its principal operating and other checking and deposit
accounts with NationsBank and otherwise continue to obtain from NationsBank such
non-credit services which are from time to time deemed by the Agent to be
necessary or appropriate to facilitate the Agent's administration of the Loan
and the security.
24.16 Notice of Event of Default.
Immediately notify the Agent and each Bank in writing of the
occurrence of any Event of Default or any event which, with the giving of notice
and/or the lapse of time, could constitute an Event of Default and the facts
with respect thereto.
24.17 Ratio of Liabilities to Tangible Net Worth.
Maintain on a consolidated basis a ratio of "Liabilities" (as
hereinafter defined) to Tangible Net Worth (as hereinafter defined) of less than
4.50 to 1.0, tested quarterly or on the basis of Borrower's most recent fiscal
quarter. "Liabilities" shall mean the aggregate Indebtedness of Borrower.
"Tangible Net Worth" shall mean (a) the aggregate amount of all assets of
Borrower as may be properly classified as such, other than (i) all assets of
Borrower which are properly classified as intangible assets including, without
limiting the generality of the foregoing, franchises, licenses, permits,
patents, patent applications, copyrights, trademarks, trade names, goodwill,
experimental or organizational expense and other like intangibles, including the
excess paid for assets acquired over their respective book values on the books
of the corporation from which acquired, and (ii) all investments in and loans to
the shareholders, officers, directors,
<PAGE>
employees, subsidiaries and affiliates, less (b) the aggregate amount of all
Liabilities of Borrower, all determined in accordance with GAAP, consistently
applied.
24.18 Fixed Charge Coverage Ratio.
Maintain on a ratio of (a) the sum of its net income plus interest
expense plus depreciation minus dividends paid to (b) the sum of interest
expense and principal due for such twelvemonth period equal to not less than
1.25 to 1.0, tested quarterly on a rolling fourquarter basis.
24.19 Minimum Tangible Net Worth.
Maintain a minimum Tangible Net Worth equal to not less than
$8,000,000.00 tested quarterly.
24.20 Loan Policies and Procedures.
Within a reasonable period after the date of this Agreement,
implement and maintain a list of basic policies and procedures for the extension
of credit to its customers, including, but not limited to, policies regarding
required documentation, rewrite guidelines and establishing loan approval limits
for each manager. Exceptions to established policies and guidelines must be
approved by senior management. Within a reasonable period after the date of this
Agreement, senior management will create, in writing, a basic loan
policy/procedure manual outlining the Borrower's policies and procedures.
24.21 Underwriting Guidelines.
Within a reasonable period after the date of this Agreement, (a)
implement and maintain a detailed reporting of chargeoffs, including amounts
charged against nonfile insurance, dealer reserves and dealer recourse, (b)
rewrite reports on each branch to include information on the account,
delinquency status at the time of rewrite, original terms and modified terms,
and (c) maintain a spread sheet at each branch.
24.22 ChargeOff Procedures.
Within a reasonable period after the date of this Agreement,
implement and maintain a procedure for chargeoffs. Under this procedure,
charge-offs for delinquent accounts shall occur on a monthly basis for accounts
180 days past due on a contractual basis.
XXV. NEGATIVE COVENANTS
Borrower covenants and agrees with Banks and the Agent that, until (a) all
Obligations have been paid in full and (b) there exists no commitment by Banks
which could give rise to any Obligations and, Borrower will not, directly or
indirectly, without the Banks' prior written consent:
25.1 Indebtedness.
Create, incur, assume or permit to exist any Indebtedness except (a)
Indebtedness provided for hereunder, (b) current Indebtedness incurred in the
ordinary course of business, and
<PAGE>
(c) existing Indebtedness assumed under the Asset Purchase Agreement, disclosed
herein or previously disclosed by Borrower to each Bank in writing.
25.2 Liens.
Create, incur, assume or permit to exist, directly or indirectly,
any Lien upon any of Borrower's properties or assets, now owned or hereafter
acquired by Borrower, other than Permitted Liens, provided, however, that
Borrower may grant a mortgage, encumbrance or other lien upon, or security
interest in, any property or interest therein, hereafter acquired, which
mortgage, encumbrance, lien or security interest is created contemporaneously
with such acquisition to secure or provide for the payment or financing of any
part of the purchase price thereof, provided that (i) the indebtedness secured
by any such mortgage, encumbrance, lien or security interest so created shall
not exceed 100% of the cost of the property, covered thereby to Borrower; (ii)
each such mortgage, encumbrance, lien or security interest shall attach only to
the property so acquired; (iii) the acquisition to which any such mortgage,
encumbrance, lien or security interest relates shall not result in a default
under any other provision of this Agreement; and (iv) the indebtedness secured
shall not exceed $150,000.
25.3 Merger, Sale of Assets, etc.
Enter into or be a party to any merger or consolidation; sell,
assign, transfer, convey or lease any interest in all or any substantial part of
its property except in the ordinary course of Borrower's business as now being
conducted; purchase or otherwise acquire all or substantially all of the assets
of any other person, or any shares of stock of, or similar interest in, any
other person.
25.4 Guaranties.
Guarantee or otherwise in any way become or be responsible for
obligations or Indebtedness of any other person, whether by agreement to
purchase the Indebtedness of any other person, by agreement for the furnishing
of funds to any other person for the purchase of goods, supplies or services, or
by way of stock purchase, capital contribution, advance or loan for the purpose
of paying or discharging Indebtedness of any other person, or otherwise, except
that Borrower may endorse negotiable drafts for collection in the ordinary
course of business.
25.5 Fiscal Year.
Change Borrower's fiscal year.
25.6 Subsidiaries.
Form or acquire any Subsidiary.
25.7 Change of Name.
Change the name of Borrower (except to "Rose Shanis Loans, LLC") or
permit any Subsidiary to change such Subsidiary's name.
<PAGE>
25.8 Loans.
Make or permit to exist any loans to any officer, director,
employee, Subsidiary, affiliated corporation, or other affiliated entity.
25.9 Stock Redemptions.
Directly or indirectly purchase or otherwise acquire for value any
shares of its capital stock.
25.10 Transactions with Affiliates.
Enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any affiliate, or permit any Subsidiary to enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any affiliate, (a) except in the ordinary
course of and pursuant to the reasonable requirements of the Borrower's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Borrower or such Subsidiary than would obtain in a comparable arm'slength
transaction with a person not an affiliate, and (b) except for payments made to
Mason-Dixon for services rendered and in amounts assessed against the Borrower
in the same manner as and proportionately with Mason-Dixon's other subsidiaries.
25.11 Subordinated Debt Repayment.
Make, or permit any Subsidiary to make, any payment of principal of
or interest on any subordinated debt regardless of maturity during any period
that an Event of Default has occurred and is continuing under this Agreement.
25.12 Nature of Business.
Except in the areas of home equity and second mortgage lending,
engage, or permit any Subsidiary to engage, in any business other than the
business in which they are currently engaged; make, or permit any Subsidiary to
make, any material change in the nature of the financings which the Borrower and
its Subsidiaries extend, including without limiting the generality of the
foregoing, matters relating to the size, type, terms, nature and dollar amount.
25.13 Distributions.
Declare or pay any distributions which distributions exceed the
lesser of (i) fifty percent (50%) of net income after tax for the period or (ii)
$1,300,000 measured annually, or purchase, redeem, retire, or otherwise acquire
for value any of its membership interests now or hereafter outstanding; or make
any distribution of assets to its members as such whether in cash, assets, or
obligations of the Borrower; or allocate or otherwise set apart any sum for the
payment of any other distribution on, or for the purchase, redemption, or
retirement of, any membership interests; or make any other distribution by
reduction of capital or otherwise in respect of any shares of its membership
interests; or permit any Subsidiary to purchase or otherwise acquire for value
any membership interest of the Borrower or another Subsidiary, except that the
Borrower (1) may declare and make distributions payable solely in membership
interests, and (2) may purchase or otherwise acquire membership interests by
exchange for or out of the proceeds from a substantially concurrent issue of new
membership interests.
<PAGE>
XXVI. EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
a. Any representation or warranty made herein, in any of the other Loan
Documents or in any statement, report, certificate, opinion, financial statement
or other document furnished or to be furnished in connection with this Agreement
or the other Loan Documents shall be false or misleading in any material
respect.
b. Failure of Borrower to pay any of the Obligations, including, without
limitation, any sum due any Bank under this Agreement or any of the other Loan
Documents, when and as the same shall become due, whether at the due date
thereof, by acceleration or otherwise, and, except for a the failure to pay the
Obligations at maturity, such failure continues uncured for five (5) days
following written notice from the Agent to the Borrower of the failure.
c. Default by Borrower or any Subsidiary with respect to any Indebtedness
of Borrower or any Subsidiary to any person or with respect to any Lien or
document securing any Indebtedness of Borrower or any Subsidiary to any person
after expiration of any applicable grace period but whether or not any required
notice has been given and a determination by the Agent, in good faith but in its
sole discretion, that the same could have a material adverse effect on Borrower
or the prospect for full and punctual payment and performance of all of the
Obligations.
d. Failure of Borrower or any other person to observe or perform any
warranty, covenant, condition or agreement to be observed or performed by
Borrower or such other person under this Agreement or any of the other Loan
Documents.
e. Borrower, any Subsidiary or any guarantor of any of the Obligations
shall (i) admit in writing its insolvency or its inability to pay its debts as
they mature, (ii) make a general assignment for the benefit of creditors, (iii)
commence a case under or otherwise seek to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation
law, statute or proceeding, or (iv) by any act indicate its consent to, approval
of or acquiescence in any such proceeding or the appointment of any receiver of
or trustee for Borrower, any Subsidiary or any such guarantor or a substantial
part of its property, or suffer any such receivership, trusteeship or proceeding
to continue undismissed for a period of 60 days.
f. Borrower, any Subsidiary or any guarantor of any of the Obligations
shall become a debtor in any case under any chapter of the United States
Bankruptcy Code.
g. Dissolution of, or entry of any order, judgment or decree for the
dissolution of, Borrower, any Subsidiary or any guarantor of any of the
Obligations that is not a natural person.
h. Entry of any judgment, order, award or decree against Borrower, any
Subsidiary or any guarantor of any of the Obligations and a determination by the
Banks, in good faith but in their sole discretion, that the same, when
aggregated with all other judgments, orders, awards and decrees outstanding
against Borrower, any Subsidiaries and any guarantors of any of the Obligations,
could have a material adverse effect on Borrower or the prospect for full and
punctual payment and performance of all of the Obligations, if the same shall
not have been discharged or execution thereof stayed within 30 days after entry
thereof or discharged within 30 days after the expiration of any such stay, and
if the same is not fully covered by applicable
<PAGE>
insurance (which shall not include any bonding or other arrangement in
connection with which Borrower, any Subsidiary or any guarantor of any of the
Obligations may be liable for indemnification to any extent).
i. Injunction or restraint of Borrower, any Subsidiary or any guarantor
of in any manner from conducting its business in whole or in part and a
determination by the Banks, in good faith but in their sole discretion, that the
same could have a material adverse effect on Borrower or the prospect for full
and punctual payment and performance of all of the Obligations, if the same
shall not have been terminated or stayed within 10 days after entry thereof or
terminated within 10 days after the expiration of any such stay.
j. Any material assets of Borrower, any Subsidiary or any guarantor of
any of the Obligations shall be attached, levied upon, seized or repossessed or
come into the possession of a trustee, receiver or other custodian.
k. A determination by the Banks, in good faith but in their sole
discretion, that any material adverse change has occurred in the financial
condition of Borrower or in the prospect for full and punctual payment and
performance of all of the Obligations.
l. Borrower, any Subsidiary or any guarantor of any of the Obligations
shall be or become insolvent (as defined Section 10.1(26) of the United States
Bankruptcy Code) or unable to pay its debts as they mature.
m. Without the Banks' written consent, Mason-Dixon does not own all of
the membership interests of Borrower.
XXVII. RIGHTS AND REMEDIES
27.1 Rights and Remedies of Banks.
Upon and after the occurrence of an Event of Default, the Banks
may, without notice or demand, exercise in any jurisdiction in which enforcement
hereof is sought, the following rights and remedies, in addition to the rights
and remedies available to the Banks under the other Loan Documents and all other
rights and remedies available to the Banks under applicable law, all such rights
and remedies being cumulative and enforceable alternatively, successively or
concurrently:
a) Declare the Banks' Notes, all interest accrued and unpaid
thereon and all other Obligations to be immediately due and payable and the same
shall thereupon become immediately due and payable without presentment, demand
for payment, protest or notice of any kind, all of which are hereby expressly
waived.
b) Institute any proceeding or proceedings to enforce the
Obligations of the Banks.
c) Cease making advances hereunder and under any other commitments
or credit accommodations of each Bank to Borrower and stop and retract the
making of any advance hereunder or thereunder which may have been requested by
Borrower.
XXVIII. AGENCY PROVISIONS
<PAGE>
28.1 Liability of Agent.
Neither the Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with any Loan Documents in the absence of its or
their own gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Agent: (a) may consult with legal counsel
(including counsel for Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (b) shall not have any duty to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions
of any Loan Document on the part of Borrower or any other person or to inspect
the property (including the books and records) of the Borrower; and (c) shall
incur no liability under or in respect of any Loan Document by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
facsimile, telegram, cable or telex) believed by it to be genuine and signed or
sent by the proper party or parties.
28.2 Rights of Agent as a Bank.
With respect to the advances made by it and the Note issued to it
the Agent shall have the same rights and powers under the Loan Documents as any
other Bank and may exercise the same as though it were not the Agent; and the
term "Bank" shall, unless otherwise expressly indicated, include the Agent in
its individual capacity.
28.3 Successor Agent.
The Agent may resign at any time by giving at least 60 days prior
written notice thereof to each Bank and Borrower. Upon any such resignation, the
retiring Agent may, with the consent of each Bank, appoint a successor Agent,
which shall be a commercial bank organized under the laws of the United States
of America or of any State thereof and having a combined capital and surplus of
at least One Hundred Million Dollars ($100,000,000). Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the obligations under this Agreement.
After any retiring Agent's resignation or removal hereunder as Agent, the
provisions of this Article 10 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under any of the Loan Documents.
28.4 Collateral Matters.
28.5 Release of Collateral.
The Banks hereby irrevocably authorize the Agent, at its option
and in its discretion, to release any Lien granted to or held by the Agent upon
any Collateral:
a) upon termination of all commitments to lend under this
Agreement and payment and satisfaction of all Obligations;
b) constituting property being sold or disposed of by the
Borrower in the ordinary course of business or as expressly permitted by Loan
Documents or if the Borrower certifies to the Agent that the sale or disposition
is made in compliance with the provisions of
<PAGE>
this Agreement or the other Loan Documents (and the Agent may rely in good faith
conclusively on any such certificate, without further inquiry), provided that,
following an Event of Default, in each instance the proceeds of such sale or
disposition is immediately paid to the Agent for application to the Obligations.
c) constituting property leased to the Borrower under a lease
which has expired or been terminated in a transaction or is about to expire and
which has not been, and is not intended by the Borrower to be, renewed or
extended; or
d) constituting property covered by Permitted Liens with lien
priority superior to those Liens in favor or for the benefit of the Banks.
28.6 Confirmation of Authority, Execution of Releases.
Without in any manner limiting the Agent's authority to act
without any specific or further authorization or consent by the Banks as set
forth in Section (Release of Collateral), each Bank agrees to confirm in
writing, upon request by the Borrower, the authority to release any property
covered by this Agreement or the Loan Documents conferred upon the Agent under
Section (Release of Collateral). So long as no Event of Default is then
continuing, upon receipt by the Agent of confirmation from the requisite
percentage of the Banks, of its authority to release any particular item or
types of property covered by this Agreement or the Loan Documents, and upon at
least five (5) Business Days prior written request by the Borrower, the Agent
shall (and is hereby irrevocably authorized by the Banks to) execute such
documents as may be necessary to evidence the release of the Liens granted to
the Agent for the benefit of the Banks herein or pursuant hereto upon such
Collateral; provided, however, that (a) the Agent shall not be required to
execute any such document on terms which, in the Agent's good faith opinion,
would expose the Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (b) such release shall not in any manner discharge, affect or impair the
Obligations or any Liens upon (or obligations of any person, in respect of), all
interests retained by any person, including, without limitation, the proceeds of
any sale, all of which shall continue to constitute part of the property covered
by this Agreement or the Loan Documents.
28.7 Agency for Perfection.
Each Bank hereby appoints the Agent and each other Bank as agent
for the purpose of perfecting the Banks' Liens in Collateral which, in
accordance with Article 9 of the Uniform Commercial Code in any applicable
jurisdiction or otherwise, can be perfected only by possession. Should any Bank
(other than the Agent) obtain possession of any such Collateral, such Bank shall
notify the Agent thereof, and, promptly upon the Agent's request therefor, shall
deliver such Collateral to the Agent or in accordance with the Agent's
instructions.
28.8 Exercise of Remedies.
Each Bank agrees that it will not have any right individually to
enforce or seek to enforce this Agreement or any Loan Document or to realize
upon any Collateral, it being understood and agreed that such rights and
remedies may be exercised only by the Agent.
XXIX. MISCELLANEOUS
<PAGE>
29.1 Performance for Borrower.
Borrower agrees and hereby authorizes that the Agent may, in the
Agent's good faith discretion, but the Agent shall not be obligated to,
regardless of the principal amount of the Notes, advance funds on behalf of
Borrower, without prior notice to Borrower, in order to insure Borrower's
compliance with any covenant, warranty, representation or agreement of the
Borrower made in or pursuant to this Agreement or any of the other Loan
Documents, including, without limitation, the payment of any insurance premiums
or taxes and the satisfaction or discharge of any judgment or any Lien upon
property or assets of Borrower. In the event that Agent engages an attorney in
connection with the foregoing, Agent agrees to select counsel in Baltimore City
who will charge an hourly rate commensurate with the rates charged by other
attorneys of comparable skill and experience in Baltimore City. All reasonable
sums paid or advanced by the Agent in connection with the foregoing and all
reasonable costs and expenses (including, without limitation, reasonable
attorney's fees and expenses) incurred in connection therewith (collectively,
the "Performance Payments") together with interest thereon at a per annum rate
of interest which is equal to the Post Default Rate (as that term is defined in
the Security Agreement), from the date incurred by the Agent until repaid in
full, shall be paid by Borrower to the Agent on demand. The provisions of this
Subsection shall survive the termination of this Agreement and the Agent's
security interest hereunder and the payment of all other Obligations.
29.2 Expenses.
Borrower shall pay all reasonable costs and expenses, including,
without limitation, attorney's fees and expenses, incurred by or on behalf of
the Agent and/or Banks: (a) in connection with the administration of this
Agreement and the other Loan Documents and all documents and instruments
referred to herein; and (b) in enforcing and collecting the Obligations. In the
event that the Banks engage an attorney in connection with the foregoing, the
Banks agree to select counsel in Baltimore City who will charge an hourly rate
commensurate with the rates charged by other attorneys of comparable skill and
experience in Baltimore City. All such reasonable costs and expenses as
calculated and determined by the Agent and/or Banks (collectively, the "Expense
Payments") together with interest thereon at a per annum rate of interest which
is equal to the Post Default Rate (as that term is defined in the Security
Agreement), from the date incurred until repaid in full, shall be paid by the
Borrower to the Agent and/or Banks on demand. The provisions of this Subsection
shall survive the termination of this Agreement and the payment of all other
Obligations.
29.3 Waivers by Borrower.
Borrower hereby waives, to the extent the same may be waived under
applicable law: (a) notice of acceptance of this Agreement; (b) all claims,
causes of action and rights of Borrower against the Agent and/or Banks on
account of actions taken or not taken by the Agent and/or Banks in the exercise
of the rights or remedies of the Agent and/or Banks hereunder, under the other
Loan Documents or under applicable law; (c) all claims (except those arising
from willful misconduct) of the Borrower for any negligence, mistake, act or
omission of the Agent, any of the Banks, any accountant, examiner, agency or
attorney employed by the Agent and/or any of the Banks in making examinations,
investigations or collections, or in perfecting, maintaining, protecting or
realizing upon any lien or security interest or any other interest in the
Collateral or other security for the Obligations, or otherwise relating to
enforcement of the Agent and/or Banks' rights or remedies hereunder, under the
other Loan Documents or under applicable law; (d) presentment, demand for
payment, protest and notice of nonpayment and all exemptions;
<PAGE>
(e) any and all other notices or demands which by applicable law must be given
to or made upon Borrower by the Agent and/or Banks; (f) settlement, compromise
or release of the obligations of any person primarily or secondarily liable upon
any of the Obligations. Borrower agrees that the Agent and/or Banks may exercise
any or all of its rights and/or remedies hereunder, under the other Loan
Documents and under applicable law without resorting to and without regard to
any collateral security or sources of liability with respect to any of the
Obligations.
29.4 Waivers by the Agent and/or Banks.
Neither any failure nor any delay on the part of the Agent and/or
either Bank in exercising any right, power or remedy hereunder, under any of the
other Loan Documents or under applicable Governmental Requirements shall operate
as a waiver thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy.
29.5 Banks' Right of Setoff.
Each Bank shall have the right, in addition to all other rights and
remedies available to it, to set off against any Obligations due such Bank any
debt owing to the Borrower by such Bank, including, without limitation, any
funds in any checking or other account now or hereafter maintained by the
Borrower at such Bank. The Borrower hereby confirms Banks' right to banker's
lien and setoff, and nothing in this Agreement or any of the other Loan
Documents shall be deemed a waiver or prohibition of Bank's right of banker's
lien and setoff.
29.6 Choice of Law, Forum Selection, Consent to Jurisdiction.
This Agreement shall be governed by, construed and interpreted in
accordance with the laws of the State of Maryland (excluding the choice of law
rules thereof). Borrower hereby (a) agrees that all disputes and matters
whatsoever arising under, in connection with, or incident to this Agreement
shall be litigated, if at all, in and before a court located in the State of
Maryland to the exclusion of the courts of any other state or country and (b)
irrevocably submits to the nonexclusive jurisdiction of any Maryland court or
federal court sitting in the State of Maryland in any action or proceeding
arising out of or relating to this Agreement, and hereby irrevocably waives any
objection to the laying of venue of any such action or proceeding in any such
court and any claim that any such action or proceeding has been brought in an
inconvenient forum. A final judgment in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit on the judgment
or in any other manner provided by law.
29.7 Invalidity of Any Part.
If any provision or part of any provision of this Agreement shall
for any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
(or any remaining part of any provision) of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision (or
part thereof)'had never been contained in this Agreement, but only to the extent
of its invalidity, illegality, or unenforceability.
XXX. WAIVER OF JURY TRIAL.
<PAGE>
BORROWER HEREBY (i) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY
OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (ii) WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO WHICH THE AGENT AND/OR EITHER BANK AND THE BORROWER MAY
BE PARTIES ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO THIS
AGREEMENT, ANY OF THE LOAN DOCUMENTS AND/OR ANY TRANSACTIONS, OCCURRENCES,
COMMUNICATIONS, OR UNDERSTANDINGS (OR THE LACK OF ANY OF THE FOREGOING) RELATING
IN ANY WAY TO THE BORROWERBANK OR BORROWERAGENT RELATIONSHIP BETWEEN THE
PARTIES. IT IS UNDERSTOOD AND AGREED THAT THIS WAIVER CONSTITUTES A WAIVER OF
TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS,
INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS
WAIVER OF JURY TRIAL IS SEPARATELY GIVEN, KNOWINGLY, WILLINGLY AND VOLUNTARILY
MADE BY BORROWER AND BORROWER HEREBY AGREES THAT NO REPRESENTATIONS OF FACT OR
OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY
OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE AGENT AND BANKS ARE HEREBY
AUTHORIZED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE
SUBJECT MATTER AND BORROWER SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF SUCH WAIVER
OF RIGHT TO TRIAL BY JURY. BORROWER REPRESENTS AND WARRANTS THAT IT HAS BEEN
REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND/OR THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
30.1 Service of Process.
Borrower hereby consents to process being served in any suit, action
or proceeding instituted in connection with this Agreement by the mailing of a
copy thereof to Borrower by certified mail, postage prepaid, return receipt
requested. Borrower hereby irrevocably agrees that such service shall be deemed
to be service of process upon Borrower in any such suit, action or proceeding.
Nothing in this Agreement shall affect the right of the Agent and/or either Bank
to serve process in any other manner otherwise permitted by law, and nothing in
this Agreement will limit the right of the Agent and/or either Bank otherwise to
bring proceedings against Borrower in the courts of any other jurisdiction or
jurisdictions.
30.2 Notice.
All notices, requests and demands to or upon the parties to this
Agreement shall be in writing and shall be deemed to have been given or made
when delivered by hand on a Banking Day, or three (3) days after the date when
deposited in the mail, postage prepaid by registered or certified mail, return
receipt requested, or when sent by overnight courier, on the Banking Day next
following the day on which the notice is delivered to such overnight courier,
addressed as follows::
If to the Borrower at: Mason-Dixon Bancshares, Inc.
45 West Main Street
Westminster, MD 21157-4815
Attention: Mark. A. Keidel
<PAGE>
with a copy to: Carla Stone Witzel, Esquire
Gordon, Feinblatt, Rothman,
Hoffberger & Hollander, LLC
233 E. Redwood Street
Baltimore, MD 21202
If to the Agent at: 10 Light Street
Mailstop MD 4-302-16-02
Baltimore, Maryland 21202
Attn: James W. Kirschner, Vice President
with a copy to: Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202
Attn: Frederick W. Runge, Jr.
If to the NationsBank at: 10 Light Street
Mailstop MD 4-302-16-02
Baltimore, Maryland 21202
Attn: James W. Kirschner, Vice President
with a copy to: Miles & Stockbridge P.C.
10 Light Street
Baltimore, Maryland 21202
Attn: Frederick W. Runge, Jr.
If to CoreStates at: 1339 Chestnut Street
Widener Building - 12th Floor
Philadelphia, Pennsylvania 19107-3579
Attn: Rita Stempin, Vice President
Find Code 1-8-12-7
If to Harris at: 111 West Monroe Street,
Fourth Floor East
Chicago, Illinois 60690
Attn: Michael S. Cameli, Vice President
By written notice, each party to this Agreement may change the
address to which notice is given to that party, provided that such changed
notice shall include a street address to which notices may be delivered by
overnight courier in the ordinary course on any Banking Day.
30.3 Successors and Assigns.
Each Bank may at any time, with the approval of the other Banks,
assign or participate to one or more banks or other institutions (each an
"Assignee") all or any part of its rights and obligations under this Agreement
and its Note, and such Assignee shall assume such rights and obligations,
pursuant to an Assignment and Assumption Agreement in form and substance
acceptable to the other Bank executed by such Assignee and such transferor Bank.
Upon execution and delivery of such instrument and payment by such Assignee to
such transferor Bank of an amount equal to the purchase price agreed between
such transferor Bank and such Assignee, such Assignee shall be a Bank party to
this Agreement and shall have all the rights and
<PAGE>
obligations of a Bank, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this section, the transferor Bank, the Agent and Borrower shall make
appropriate arrangements so that, if required, a new Note is issued to the
Assignee. In connection with the foregoing, the Banks may disclose to any
potential assignee, transferee or participant (provided, however, that prior to
the earlier of June 11, 1998 or an Event of Default, the Agent shall first
obtain the Borrower's prior written consent to such disclosure, which consent
shall not be unreasonably withheld or delayed), all information, reports,
financial statements and documents obtained in connection with this Agreement
and any other Loan Documents or otherwise.
30.4 Amendments, Etc.
No amendment, modification, termination, or waiver of any provision
of any Loan Document to which Borrower is a party, nor consent to any departure
by Borrower from any Loan Document to which it is a party, shall in any event be
effective unless the same shall be in writing and signed by the Agent, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given, provided, however, that no amendment,
waiver or consent, shall, unless in writing and signed by all Banks, do any of
the following: (1) waive any of the conditions precedent specified in ; (2)
subject any Bank to any additional obligations; (3) reduce the principal of, or
interest on, any Note or any fees hereunder; (4) postpone any date fixed for any
payment of principal of, or interest on, any Note or any fees hereunder; (5)
modify or waive any covenant hereof; (6) waive, release, compromise or settle
any claim against the Borrower or any other obligation with respect to the Loan;
or (7) change this , and, provided, further, that no amendment, waiver or
consent shall, unless in writing and signed by the Agent in addition to the
other Banks, affect the rights or duties of the Agent under any of the Loan
Documents. Notwithstanding the foregoing, without the consent of the Banks, the
Agent shall be able to approve asset sales of less than $100,000.00 and extend
reporting dates by no longer than 30 days. Furthermore, any other amendment,
modification, termination, or waiver of any provision of any of the Loan
Documents not specifically set forth in this shall require the consent of the
Banks which cumulatively have extended 60% or more of the outstanding balance of
the Loan (such Banks collectively, the "Requisite Banks"), shall be in writing
and shall be signed by the Agent.
30.5 Miscellaneous.
Time is of the essence under this Agreement. The paragraph headings
of this Agreement are for convenience only, and shall not limit or otherwise
affect any of the terms hereof. This Agreement and the Loan Documents, if any,
constitute the entire agreement between the parties with respect to their
subject matter and supersede all prior letters, representations, loan agreements
or other agreements, oral or written, with respect thereto. No course of dealing
or conduct shall be effective to modify, release or waive any provisions of this
Agreement or any of the other Loan Documents. This Agreement shall inure to the
benefit of and be enforceable by the Agent and Banks and their successors and
assigns and any other person to whom Banks may grant an interest in the
Obligations and shall be binding upon and enforceable against Borrower and
Borrower's personal representatives, successors, heirs and assigns. Whenever
used herein, the singular number shall include the plural, the plural the
singular, and the use of the masculine, feminine, or neuter gender shall include
all genders. This Agreement may be executed in any number of counterparts, all
of which, when taken together shall constitute one Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement under seal as of the date first above written on
separate pages which follow.
<PAGE>
LOAN AGREEMENT dated February 11, 1998
Borrower Signature Page
ATTEST/WITNESS: BAY FINANCE, LLC soon to be known as "Rose Shanis
Loans, LLC"
BY: Mason-Dixon Bancshares, Inc.,
Authorized Member
/s/ Karen Nash Goetz By:/s/ Thomas K. Ferguson (SEAL)
Thomas K. Ferguson
President
<PAGE>
LOAN AGREEMENT dated February 11, 1998
NationsBank and Agent Signature Page
NATIONSBANK, N.A.
By:/s/ James W. Kirschner (SEAL)
James W. Kirschner
Vice President
NATIONSBANK, N.A. as Agent for NationsBank
N.A., CoreStates Bank, N.A. and Harris Trust and
Savings Bank
By:/s/ James W. Kirschner (SEAL)
James W. Kirschner
Vice President
<PAGE>
LOAN AGREEMENT dated February 11, 1998
CoreStates Signature Page
CORESTATES BANK, N.A.
By:/s/ Rita Stempin (SEAL)
Rita Stempin
Vice President
<PAGE>
LOAN AGREEMENT dated February 11, 1998
Harris Signature Page
HARRIS TRUST AND SAVINGS BANK
By:/s/ Michael S. Cameli (SEAL)
Michael S. Cameli
Vice President
<PAGE>
EXHIBIT A
$15,200,000.00 Baltimore, Maryland
February 11, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, BAY FINANCE, LLC, soon to be known
as "ROSE SHANIS LOANS, LLC", a Maryland limited liability company (the
"Borrower"), hereby promises to pay to the order of NATIONSBANK, N.A., a
national banking association, or any subsequent holder of this Promissory Note
(the "Bank") the principal sum of Fifteen Million Two Hundred Thousand Dollars
($15,200,000) (the "Principal Sum") or so much thereof as may have been
disbursed to the Borrower by the Bank and is outstanding under the terms of the
Loan Agreement of even date herewith by and among the Borrower, NationsBank,
N.A., a national banking association (the "Agent"), the Bank and other banks (as
amended, modified, restated, substituted, extended and renewed at any time and
from time to time, the "Loan Agreement"), together with interest on the unpaid
Principal Sum outstanding from time to time at the rate or rates hereafter
specified and any and all other sums which may be owing to the Bank by the
Borrower pursuant to this Promissory Note. Payments of all sums due under this
Promissory Note shall be paid in immediately available funds in lawful money of
the United States of America which shall be legal tender in payment of all debts
and dues and shall be paid during the Agent's regular business hours at the
Agent's offices at 10 Light Street, Baltimore, Maryland 21202, or at such other
place as the Agent may from time to time designate. The following terms shall
apply to this Promissory Note.
1. Interest. For the period commencing on the date of this Promissory
Note until all sums due under this Promissory Note, whether principal, interest,
or other sums, have been paid in full, interest shall accrue on the unpaid
Principal Sum outstanding from time to time at the rates (including default
rates) provided in the Loan Agreement. Accrued and unpaid interest, plus any
then due applicable late payment charges or default interest, shall be payable
monthly beginning on the first calendar day of the first month immediately
following the date of this Promissory Note and continuing on the first calendar
day of each succeeding month until all sums due under this Promissory Note,
whether principal, interest, or other sums, have been paid in full.
2. Principal. The Borrower shall repay the outstanding Principal Sum
from time to time as provided for in the Loan Agreement. Special Provisions
applicable to prepayments of principal and the Payment of consequential loss are
contained in the Loan Agreement and shall apply to this Promissory Note. Unless
sooner Paid, the unpaid Principal Sum as well as all other sums due under this
Promissory Note that remain unpaid shall be repaid on June 11, 1998, which is
the final and absolute due date of this Promissory Note (the "Maturity Date").
3. Repayment Extension. If any payment of principal or interest shall
be due on a Saturday, Sunday or any other day on which banking institutions in
the State of Maryland are required or permitted to be closed, such payment shall
be made on the next succeeding business day and such extension of time shall be
included in computing interest under this Promissory Note.
<PAGE>
4. Events of Default. The following shall constitute Events of Default
under this Promissory Note: (a) a default in the payment when due of any sum due
under this Promissory Note; and (b) any Event of Default as defined in the Loan
Agreement, or a default in the performance under any other agreement or document
previously, simultaneously, or hereafter executed by or on behalf of the
Borrower for the benefit of the Bank (hereafter, collectively with the Loan
Agreement, the "Other Agreements"). The terms, covenants, conditions,
provisions, stipulations, and agreements contained in the Loan Agreement are
hereby made a part hereof to the same extent and with the same effect if fully
set forth herein.
5. Rights and Remedies Upon Default. Upon the occurrence of an Event of
Default hereunder, the Bank, in the Bank's sole discretion and without notice to
the Borrower may: (a) declare the entire outstanding Principal Sum, together
with all accrued interest and all other sums due under this Promissory Note to
be immediately due and payable, and the same shall thereupon become immediately
due and payable without presentment, demand or notice which are hereby expressly
waived; (b) exercise its right of set-off against any money, funds, credits or
other property of any nature whatsoever of the Borrower now or at any time
hereafter in the possession of, in transit to or from, under the control or
custody of, or on deposit with, the Bank or any affiliate of the Bank in any
capacity whatsoever, including without limitation, any balance of any deposit
account and any credits with the Bank or any affiliate of the Bank; (c)
terminate any outstanding commitments of the Bank to the Borrower; (d) exercise
its right to confess judgment against the Borrower as provided hereinafter; and
(e) exercise any or all rights, powers, and remedies provided for in the Loan
Agreement or now or hereafter existing at law, in equity, by statute or
otherwise.
6. Remedies Cumulative. Each right, power and remedy of the Bank
hereunder, under the Loan Agreement or now or hereafter existing at law, in
equity, by statute or otherwise shall be cumulative and concurrent, and the
exercise or beginning of the exercise of any one or more of them shall not
preclude the simultaneous or later exercise by the Bank of any or all such other
rights, powers or remedies. No failure or delay by the Bank to insist upon the
strict performance of any one or more provisions of this Promissory Note or of
the Loan Agreement or to exercise any right, power or remedy consequent upon a
breach thereof or default hereunder shall constitute a waiver thereof or
preclude the Bank from exercising any such right, power or remedy. By accepting
full or partial payment after the due date of any amount of principal of or
interest on this Promissory Note, or other amounts payable on demand, the Bank
shall not be deemed to have waived the right either to require prompt payment
when due and payable of all other amounts of principal of or interest on this
Promissory Note or other amounts payable on demand, or to exercise any rights
and remedies available to it in order to collect all such other amounts due and
payable under this Promissory Note.
7. Confession of Judgment. Upon the occurrence of any Event of Default
hereunder, the Borrower authorizes any attorney admitted to practice before any
court of record in the United States to appear on behalf of the Borrower in any
court having jurisdiction in one or more proceedings, or before any clerk
thereof or prothonotary or other court official, and to CONFESS JUDGMENT AGAINST
THE BORROWER, WITHOUT PRIOR NOTICE OR OPPORTUNITY OF THE BORROWER FOR PRIOR
HEARING, in favor of the Bank for the full amount due on this Promissory Note
(including the outstanding Principal Sum, accrued interest and any and all other
costs, fees, expenses and late charges) plus court costs and attorneys' fees of
fifteen percent (15%) of the total amount then due hereunder. By its acceptance
of this Note, however, the Bank agrees that in the event that the Bank exercises
its right to confess judgment under this Note, the Bank shall use its best
efforts to obtain legal counsel who
<PAGE>
will charge the Bank for its services on an hourly basis, at its customary
hourly rate(s) and only for the time and reasonable expenses incurred. In no
event shall the Bank enforce the portion of the legal fees portion of a
confessed judgment for an amount in excess of the fees and expenses charged to
the Bank for services rendered by its counsel in connection with such confession
of judgment and the collection of sums owed to the Bank. The Borrower waives the
benefit of any and every statute, ordinance or rule of court which may be
lawfully waived conferring upon the Borrower any right or privilege of
exemption, homestead rights, appeal, stay of execution or supplementary
proceedings, inquisition, extension upon any levy on real estate or personal
property, and any other relief from the enforcement or immediate enforcement of
a judgment or related proceedings on a judgment. The authority and power to
appear for and enter judgment against the Borrower shall not be exhausted by one
or more exercises thereof, or by any imperfect exercise thereof, and shall not
be extinguished by any judgment entered pursuant thereto; such authority and
power may be exercised on one or more occasions, from time to time, in the same
or different jurisdictions, as often as the Bank shall deem necessary or
advisable, for all of which this Promissory Note shall be sufficient authority.
8. Collection Expenses. If this Promissory Note is placed in the hands
of an attorney for collection following the occurrence of an Event of Default
hereunder, the Borrower agrees to pay to the Bank upon demand all reasonable
costs and expenses, including without limitation, all reasonable attorney's fees
and court costs incurred by the Bank in connection with the enforcement or
collection of this Promissory Note (whether or not any action has been commenced
by the Bank to enforce or collect this Promissory Note) or in successfully
defending any counterclaim or other legal proceeding brought by the Borrower
contesting the Bank's right to collect the outstanding principal amount. The
obligation of the Borrower to pay all such costs and expenses shall not be
merged into any judgment by confession against the Borrower. All of such costs
and expenses shall bear interest at the higher of the rate of interest provided
herein or any default rate of interest provided herein, from the date of payment
by the Bank until repaid in full.
9. Certain Waivers By The Borrower. The Borrower waives demand,
presentment, notice of dishonor, protest, protest and demand, notice of protest,
and notice of nonpayment of this Promissory Note.
10. Commercial Loan. The Borrower acknowledges and warrants that the
debt evidenced by this Promissory Note is a "commercial loan" within the meaning
of subtitle 1 of Title 12 of the Commercial Law Article of the Annotated Code of
Maryland (1990 Rep. Vol.). The Borrower warrants that all loan proceeds will be
used solely to acquire or carry on a business or commercial enterprise.
11. Time of the Essence. Time is of the essence under this Promissory
Note.
12. Maximum Rate of Interest. Notwithstanding any provision of this
Promissory Note or the Other Agreements to the contrary, the Borrower shall not
be obligated to pay interest pursuant to this Promissory Note in excess of the
maximum rate of interest permitted by the laws of any state determined to govern
this Promissory Note or the laws of the United States applicable to loans in
such state. If any provision of this Promissory Note shall ever be construed to
require the payment of any amount of interest in excess of that permitted by
applicable law, then the interest to be paid pursuant to this Promissory Note
shall be held subject to reduction to the amount allowed under applicable law,
and any sums paid in excess of the interest rate allowed by law shall be applied
in reduction of the Principal Sum outstanding
<PAGE>
pursuant to this Promissory Note. The Borrower acknowledges that it has been
contemplated at all times by the Borrower that the laws of the State of Maryland
will govern the maximum rate of interest that it is permissible for the Bank to
charge the Borrower pursuant to this Promissory Note.
13. Choice of Law. This Promissory Note shall be governed, construed and
interpreted strictly in accordance with the laws of the State of Maryland.
14. Miscellaneous. Neither this Promissory Note nor any term hereof may
be terminated, amended, supplemented, waived, released or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver, release, or
modification is sought. No amendment, modification, waiver, or release of this
Promissory Note shall be established by conduct, custom, or course of dealing.
Whenever used herein, the singular number shall include the plural, the plural
the singular, and the use of the masculine, feminine, or neuter gender shall
include all genders.
15. Headings. The headings used in this Promissory Note are for
convenience only and are not to be interpreted as a part of this Promissory
Note.
IN WITNESS WHEREOF, the Borrower has executed this Promissory Note
specifically intending this Promissory Note to constitute an instrument under
seal.
ATTEST/WITNESS: BAY FINANCE, LLC soon to be known as "Rose Shanis
Loans, LLC"
BY: Mason-Dixon Bancshares, Inc.,
Authorized Member
By: (SEAL)
Thomas K. Ferguson
President
<PAGE>
EXHIBIT B
$7,600,000.00 Baltimore, Maryland
February 11, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, BAY FINANCE, LLC, soon to be known
as "ROSE SHANIS LOANS, LLC", a Maryland limited liability company (the
"Borrower"), hereby promises to pay to the order of HARRIS TRUST AND SAVINGS
BANK or any subsequent holder of this Promissory Note (the "Bank") the principal
sum of Seven Million Six Hundred Thousand Dollars ($7,600,000) (the "Principal
Sum") or so much thereof as may have been disbursed to the Borrower by the Bank
and is outstanding under the terms of the Loan Agreement of even date herewith
by and among the Borrower, NationsBank, N.A., a national banking association
(the "Agent"), the Bank and other banks (as amended, modified, restated,
substituted, extended and renewed at any time and from time to time, the "Loan
Agreement"), together with interest on the unpaid Principal Sum outstanding from
time to time at the rate or rates hereafter specified and any and all other sums
which may be owing to the Bank by the Borrower pursuant to this Promissory Note.
Payments of all sums due under this Promissory Note shall be paid in immediately
available funds in lawful money of the United States of America which shall be
legal tender in payment of all debts and dues and shall be paid during the
Agent's regular business hours at the Agent's offices at 10 Light Street,
Baltimore, Maryland 21202, or at such other place as the Agent may from time to
time designate. The following terms shall apply to this Promissory Note.
1. Interest. For the period commencing on the date of this Promissory
Note until all sums due under this Promissory Note, whether principal, interest,
or other sums, have been paid in full, interest shall accrue on the unpaid
Principal Sum outstanding from time to time at the rates (including default
rates) provided in the Loan Agreement. Accrued and unpaid interest, plus any
then due applicable late payment charges or default interest, shall be payable
monthly beginning on the first calendar day of the first month immediately
following the date of this Promissory Note and continuing on the first calendar
day of each succeeding month until all sums due under this Promissory Note,
whether principal, interest, or other sums, have been paid in full.
2. Principal. The Borrower shall repay the outstanding Principal Sum
from time to time as provided for in the Loan Agreement. Special Provisions
applicable to prepayments of principal and the Payment of consequential loss are
contained in the Loan Agreement and shall apply to this Promissory Note. Unless
sooner Paid, the unpaid Principal Sum as well as all other sums due under this
Promissory Note that remain unpaid shall be repaid on June 11, 1998, which is
the final and absolute due date of this Promissory Note (the "Maturity Date").
3. Repayment Extension. If any payment of principal or interest shall
be due on a Saturday, Sunday or any other day on which banking institutions in
the State of Maryland are required or permitted to be closed, such payment shall
be made on the next succeeding business day and such extension of time shall be
included in computing interest under this Promissory Note.
<PAGE>
4. Events of Default. The following shall constitute Events of Default
under this Promissory Note: (a) a default in the payment when due of any sum due
under this Promissory Note; and (b) any Event of Default as defined in the Loan
Agreement, or a default in the performance under any other agreement or document
previously, simultaneously, or hereafter executed by or on behalf of the
Borrower for the benefit of the Bank (hereafter, collectively with the Loan
Agreement, the "Other Agreements"). The terms, covenants, conditions,
provisions, stipulations, and agreements contained in the Loan Agreement are
hereby made a part hereof to the same extent and with the same effect if fully
set forth herein.
5. Rights and Remedies Upon Default. Upon the occurrence of an Event of
Default hereunder, the Bank, in the Bank's sole discretion and without notice to
the Borrower may: (a) declare the entire outstanding Principal Sum, together
with all accrued interest and all other sums due under this Promissory Note to
be immediately due and payable, and the same shall thereupon become immediately
due and payable without presentment, demand or notice which are hereby expressly
waived; (b) exercise its right of set-off against any money, funds, credits or
other property of any nature whatsoever of the Borrower now or at any time
hereafter in the possession of, in transit to or from, under the control or
custody of, or on deposit with, the Bank or any affiliate of the Bank in any
capacity whatsoever, including without limitation, any balance of any deposit
account and any credits with the Bank or any affiliate of the Bank; (c)
terminate any outstanding commitments of the Bank to the Borrower; (d) exercise
its right to confess judgment against the Borrower as provided hereinafter; and
(e) exercise any or all rights, powers, and remedies provided for in the Loan
Agreement or now or hereafter existing at law, in equity, by statute or
otherwise.
6. Remedies Cumulative. Each right, power and remedy of the Bank
hereunder, under the Loan Agreement or now or hereafter existing at law, in
equity, by statute or otherwise shall be cumulative and concurrent, and the
exercise or beginning of the exercise of any one or more of them shall not
preclude the simultaneous or later exercise by the Bank of any or all such other
rights, powers or remedies. No failure or delay by the Bank to insist upon the
strict performance of any one or more provisions of this Promissory Note or of
the Loan Agreement or to exercise any right, power or remedy consequent upon a
breach thereof or default hereunder shall constitute a waiver thereof or
preclude the Bank from exercising any such right, power or remedy. By accepting
full or partial payment after the due date of any amount of principal of or
interest on this Promissory Note, or other amounts payable on demand, the Bank
shall not be deemed to have waived the right either to require prompt payment
when due and payable of all other amounts of principal of or interest on this
Promissory Note or other amounts payable on demand, or to exercise any rights
and remedies available to it in order to collect all such other amounts due and
payable under this Promissory Note.
7. Confession of Judgment. Upon the occurrence of any Event of Default
hereunder, the Borrower authorizes any attorney admitted to practice before any
court of record in the United States to appear on behalf of the Borrower in any
court having jurisdiction in one or more proceedings, or before any clerk
thereof or prothonotary or other court official, and to CONFESS JUDGMENT AGAINST
THE BORROWER, WITHOUT PRIOR NOTICE OR OPPORTUNITY OF THE BORROWER FOR PRIOR
HEARING, in favor of the Bank for the full amount due on this Promissory Note
(including the outstanding Principal Sum, accrued interest and any and all other
costs, fees, expenses and late charges) plus court costs and attorneys' fees of
fifteen percent (15%) of the total amount then due hereunder. By its acceptance
of this Note, however, the Bank agrees that in the event that the Bank exercises
its right to confess judgment under this Note, the Bank shall use its best
efforts to obtain legal counsel who
<PAGE>
will charge the Bank for its services on an hourly basis, at its customary
hourly rate(s) and only for the time and reasonable expenses incurred. In no
event shall the Bank enforce the portion of the legal fees portion of a
confessed judgment for an amount in excess of the fees and expenses charged to
the Bank for services rendered by its counsel in connection with such confession
of judgment and the collection of sums owed to the Bank. The Borrower waives the
benefit of any and every statute, ordinance or rule of court which may be
lawfully waived conferring upon the Borrower any right or privilege of
exemption, homestead rights, appeal, stay of execution or supplementary
proceedings, inquisition, extension upon any levy on real estate or personal
property, and any other relief from the enforcement or immediate enforcement of
a judgment or related proceedings on a judgment. The authority and power to
appear for and enter judgment against the Borrower shall not be exhausted by one
or more exercises thereof, or by any imperfect exercise thereof, and shall not
be extinguished by any judgment entered pursuant thereto; such authority and
power may be exercised on one or more occasions, from time to time, in the same
or different jurisdictions, as often as the Bank shall deem necessary or
advisable, for all of which this Promissory Note shall be sufficient authority.
8. Collection Expenses. If this Promissory Note is placed in the hands
of an attorney for collection following the occurrence of an Event of Default
hereunder, the Borrower agrees to pay to the Bank upon demand all reasonable
costs and expenses, including without limitation, all reasonable attorney's fees
and court costs incurred by the Bank in connection with the enforcement or
collection of this Promissory Note (whether or not any action has been commenced
by the Bank to enforce or collect this Promissory Note) or in successfully
defending any counterclaim or other legal proceeding brought by the Borrower
contesting the Bank's right to collect the outstanding principal amount. The
obligation of the Borrower to pay all such costs and expenses shall not be
merged into any judgment by confession against the Borrower. All of such costs
and expenses shall bear interest at the higher of the rate of interest provided
herein or any default rate of interest provided herein, from the date of payment
by the Bank until repaid in full.
9. Certain Waivers By The Borrower. The Borrower waives demand,
presentment, notice of dishonor, protest, protest and demand, notice of protest,
and notice of nonpayment of this Promissory Note.
10. Commercial Loan. The Borrower acknowledges and warrants that the
debt evidenced by this Promissory Note is a "commercial loan" within the meaning
of subtitle 1 of Title 12 of the Commercial Law Article of the Annotated Code of
Maryland (1990 Rep. Vol.). The Borrower warrants that all loan proceeds will be
used solely to acquire or carry on a business or commercial enterprise.
11. Time of the Essence. Time is of the essence under this Promissory
Note.
12. Maximum Rate of Interest. Notwithstanding any provision of this
Promissory Note or the Other Agreements to the contrary, the Borrower shall not
be obligated to pay interest pursuant to this Promissory Note in excess of the
maximum rate of interest permitted by the laws of any state determined to govern
this Promissory Note or the laws of the United States applicable to loans in
such state. If any provision of this Promissory Note shall ever be construed to
require the payment of any amount of interest in excess of that permitted by
applicable law, then the interest to be paid pursuant to this Promissory Note
shall be held subject to reduction to the amount allowed under applicable law,
and any sums paid in excess of the interest rate allowed by law shall be applied
in reduction of the Principal Sum outstanding
<PAGE>
pursuant to this Promissory Note. The Borrower acknowledges that it has been
contemplated at all times by the Borrower that the laws of the State of Maryland
will govern the maximum rate of interest that it is permissible for the Bank to
charge the Borrower pursuant to this Promissory Note.
13. Choice of Law. This Promissory Note shall be governed, construed
and interpreted strictly in accordance with the laws of the State of Maryland.
14. Miscellaneous. Neither this Promissory Note nor any term hereof may
be terminated, amended, supplemented, waived, released or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver, release, or
modification is sought. No amendment, modification, waiver, or release of this
Promissory Note shall be established by conduct, custom, or course of dealing.
Whenever used herein, the singular number shall include the plural, the plural
the singular, and the use of the masculine, feminine, or neuter gender shall
include all genders.
15. Headings. The headings used in this Promissory Note are for
convenience only and are not to be interpreted as a part of this Promissory
Note.
IN WITNESS WHEREOF, the Borrower has executed this Promissory Note
specifically intending this Promissory Note to constitute an instrument under
seal.
ATTEST/WITNESS: BAY FINANCE, LLC soon to be known as "Rose Shanis
Loans, LLC"
BY: Mason-Dixon Bancshares, Inc.,
Authorized Member
By: (SEAL)
Thomas K. Ferguson
President
<PAGE>
EXHIBIT C
$15,200,000.00 Baltimore, Maryland
February 11, 1998
PROMISSORY NOTE
FOR VALUE RECEIVED, the undersigned, BAY FINANCE, LLC, soon to be known
as "ROSE SHANIS LOANS, LLC", a Maryland limited liability company (the
"Borrower"), hereby promises to pay to the order of CORESTATES BANK, N.A., a
national banking association, or any subsequent holder of this Promissory Note
(the "Bank") the principal sum of Fifteen Million Two Hundred Thousand Dollars
($15,200,000) (the "Principal Sum") or so much thereof as may have been
disbursed to the Borrower by the Bank and is outstanding under the terms of the
Loan Agreement of even date herewith by and among the Borrower, NationsBank,
N.A., a national banking association (the "Agent"), the Bank and other banks (as
amended, modified, restated, substituted, extended and renewed at any time and
from time to time, the "Loan Agreement"), together with interest on the unpaid
Principal Sum outstanding from time to time at the rate or rates hereafter
specified and any and all other sums which may be owing to the Bank by the
Borrower pursuant to this Promissory Note. Payments of all sums due under this
Promissory Note shall be paid in immediately available funds in lawful money of
the United States of America which shall be legal tender in payment of all debts
and dues and shall be paid during the Agent's regular business hours at the
Agent's offices at 10 Light Street, Baltimore, Maryland 21202, or at such other
place as the Agent may from time to time designate. The following terms shall
apply to this Promissory Note.
1. Interest. For the period commencing on the date of this Promissory
Note until all sums due under this Promissory Note, whether principal, interest,
or other sums, have been paid in full, interest shall accrue on the unpaid
Principal Sum outstanding from time to time at the rates (including default
rates) provided in the Loan Agreement. Accrued and unpaid interest, plus any
then due applicable late payment charges or default interest, shall be payable
monthly beginning on the first calendar day of the first month immediately
following the date of this Promissory Note and continuing on the first calendar
day of each succeeding month until all sums due under this Promissory Note,
whether principal, interest, or other sums, have been paid in full.
2. Principal. The Borrower shall repay the outstanding Principal Sum
from time to time as provided for in the Loan Agreement. Special Provisions
applicable to prepayments of principal and the Payment of consequential loss are
contained in the Loan Agreement and shall apply to this Promissory Note. Unless
sooner Paid, the unpaid Principal Sum as well as all other sums due under this
Promissory Note that remain unpaid shall be repaid on June 11, 1998, which is
the final and absolute due date of this Promissory Note (the "Maturity Date").
3. Repayment Extension. If any payment of principal or interest shall
be due on a Saturday, Sunday or any other day on which banking institutions in
the State of Maryland are required or permitted to be closed, such payment shall
be made on the next succeeding business day and such extension of time shall be
included in computing interest under this Promissory Note.
<PAGE>
4. Events of Default. The following shall constitute Events of Default
under this Promissory Note: (a) a default in the payment when due of any sum due
under this Promissory Note; and (b) any Event of Default as defined in the Loan
Agreement, or a default in the performance under any other agreement or document
previously, simultaneously, or hereafter executed by or on behalf of the
Borrower for the benefit of the Bank (hereafter, collectively with the Loan
Agreement, the "Other Agreements"). The terms, covenants, conditions,
provisions, stipulations, and agreements contained in the Loan Agreement are
hereby made a part hereof to the same extent and with the same effect if fully
set forth herein.
5. Rights and Remedies Upon Default. Upon the occurrence of an Event
of Default hereunder, the Bank, in the Bank's sole discretion and without notice
to the Borrower may: (a) declare the entire outstanding Principal Sum, together
with all accrued interest and all other sums due under this Promissory Note to
be immediately due and payable, and the same shall thereupon become immediately
due and payable without presentment, demand or notice which are hereby expressly
waived; (b) exercise its right of set-off against any money, funds, credits or
other property of any nature whatsoever of the Borrower now or at any time
hereafter in the possession of, in transit to or from, under the control or
custody of, or on deposit with, the Bank or any affiliate of the Bank in any
capacity whatsoever, including without limitation, any balance of any deposit
account and any credits with the Bank or any affiliate of the Bank; (c)
terminate any outstanding commitments of the Bank to the Borrower; (d) exercise
its right to confess judgment against the Borrower as provided hereinafter; and
(e) exercise any or all rights, powers, and remedies provided for in the Loan
Agreement or now or hereafter existing at law, in equity, by statute or
otherwise.
6. Remedies Cumulative. Each right, power and remedy of the Bank
hereunder, under the Loan Agreement or now or hereafter existing at law, in
equity, by statute or otherwise shall be cumulative and concurrent, and the
exercise or beginning of the exercise of any one or more of them shall not
preclude the simultaneous or later exercise by the Bank of any or all such other
rights, powers or remedies. No failure or delay by the Bank to insist upon the
strict performance of any one or more provisions of this Promissory Note or of
the Loan Agreement or to exercise any right, power or remedy consequent upon a
breach thereof or default hereunder shall constitute a waiver thereof or
preclude the Bank from exercising any such right, power or remedy. By accepting
full or partial payment after the due date of any amount of principal of or
interest on this Promissory Note, or other amounts payable on demand, the Bank
shall not be deemed to have waived the right either to require prompt payment
when due and payable of all other amounts of principal of or interest on this
Promissory Note or other amounts payable on demand, or to exercise any rights
and remedies available to it in order to collect all such other amounts due and
payable under this Promissory Note.
7. Confession of Judgment. Upon the occurrence of any Event of Default
hereunder, the Borrower authorizes any attorney admitted to practice before any
court of record in the United States to appear on behalf of the Borrower in any
court having jurisdiction in one or more proceedings, or before any clerk
thereof or prothonotary or other court official, and to CONFESS JUDGMENT AGAINST
THE BORROWER, WITHOUT PRIOR NOTICE OR OPPORTUNITY OF THE BORROWER FOR PRIOR
HEARING, in favor of the Bank for the full amount due on this Promissory Note
(including the outstanding Principal Sum, accrued interest and any and all other
costs, fees, expenses and late charges) plus court costs and attorneys' fees of
fifteen percent (15%) of the total amount then due hereunder. By its acceptance
of this Note, however, the Bank agrees that in the event that the Bank exercises
its right to confess judgment under this Note, the Bank shall use its best
efforts to obtain legal counsel who
<PAGE>
will charge the Bank for its services on an hourly basis, at its customary
hourly rate(s) and only for the time and reasonable expenses incurred. In no
event shall the Bank enforce the portion of the legal fees portion of a
confessed judgment for an amount in excess of the fees and expenses charged to
the Bank for services rendered by its counsel in connection with such confession
of judgment and the collection of sums owed to the Bank. The Borrower waives the
benefit of any and every statute, ordinance or rule of court which may be
lawfully waived conferring upon the Borrower any right or privilege of
exemption, homestead rights, appeal, stay of execution or supplementary
proceedings, inquisition, extension upon any levy on real estate or personal
property, and any other relief from the enforcement or immediate enforcement of
a judgment or related proceedings on a judgment. The authority and power to
appear for and enter judgment against the Borrower shall not be exhausted by one
or more exercises thereof, or by any imperfect exercise thereof, and shall not
be extinguished by any judgment entered pursuant thereto; such authority and
power may be exercised on one or more occasions, from time to time, in the same
or different jurisdictions, as often as the Bank shall deem necessary or
advisable, for all of which this Promissory Note shall be sufficient authority.
8. Collection Expenses. If this Promissory Note is placed in the hands
of an attorney for collection following the occurrence of an Event of Default
hereunder, the Borrower agrees to pay to the Bank upon demand all reasonable
costs and expenses, including without limitation, all reasonble attorney's fees
and court costs incurred by the Bank in connection with the enforcement or
collection of this Promissory Note (whether or not any action has been commenced
by the Bank to enforce or collect this Promissory Note) or in successfully
defending any counterclaim or other legal proceeding brought by the Borrower
contesting the Bank's right to collect the outstanding principal amount. The
obligation of the Borrower to pay all such costs and expenses shall not be
merged into any judgment by confession against the Borrower. All of such costs
and expenses shall bear interest at the higher of the rate of interest provided
herein or any default rate of interest provided herein, from the date of payment
by the Bank until repaid in full.
9. Certain Waivers By The Borrower. The Borrower waives demand,
presentment, notice of dishonor, protest, protest and demand, notice of protest,
and notice of nonpayment of this Promissory Note.
10. Commercial Loan. The Borrower acknowledges and warrants that the
debt evidenced by this Promissory Note is a "commercial loan" within the meaning
of subtitle 1 of Title 12 of the Commercial Law Article of the Annotated Code of
Maryland (1990 Rep. Vol.). The Borrower warrants that all loan proceeds will be
used solely to acquire or carry on a business or commercial enterprise.
11. Time of the Essence. Time is of the essence under this Promissory
Note.
12. Maximum Rate of Interest. Notwithstanding any provision of this
Promissory Note or the Other Agreements to the contrary, the Borrower shall not
be obligated to pay interest pursuant to this Promissory Note in excess of the
maximum rate of interest permitted by the laws of any state determined to govern
this Promissory Note or the laws of the United States applicable to loans in
such state. If any provision of this Promissory Note shall ever be construed to
require the payment of any amount of interest in excess of that permitted by
applicable law, then the interest to be paid pursuant to this Promissory Note
shall be held subject to reduction to the amount allowed under applicable law,
and any sums paid in excess of the interest rate allowed by law shall be applied
in reduction of the Principal Sum outstanding
<PAGE>
pursuant to this Promissory Note. The Borrower acknowledges that it has been
contemplated at all times by the Borrower that the laws of the State of Maryland
will govern the maximum rate of interest that it is permissible for the Bank to
charge the Borrower pursuant to this Promissory Note.
13. Choice of Law. This Promissory Note shall be governed, construed
and interpreted strictly in accordance with the laws of the State of Maryland.
14. Miscellaneous. Neither this Promissory Note nor any term hereof may
be terminated, amended, supplemented, waived, released or modified orally, but
only by an instrument in writing signed by the party against which the
enforcement of the termination, amendment, supplement, waiver, release, or
modification is sought. No amendment, modification, waiver, or release of this
Promissory Note shall be established by conduct, custom, or course of dealing.
Whenever used herein, the singular number shall include the plural, the plural
the singular, and the use of the masculine, feminine, or neuter gender shall
include all genders.
15. Headings. The headings used in this Promissory Note are for
convenience only and are not to be interpreted as a part of this Promissory
Note.
IN WITNESS WHEREOF, the Borrower has executed this Promissory Note
specifically intending this Promissory Note to constitute an instrument under
seal.
ATTEST/WITNESS: BAY FINANCE, LLC soon to be known as "Rose
Shanis Loans, LLC"
BY: Mason-Dixon Bancshares, Inc.,
Authorized Member
By: (SEAL)
Thomas K. Ferguson
President
<PAGE>
EXHIBIT D
On January 28, 1998, a Complaint for Accounting and Damages and Request
for Jury Trial was filed in the Circuit Court of Baltimore City by Hiss
Enterprises, Inc. t/a Village Auto Brokers, Unique Rentals, Inc. t/a Beltway
Auto, Variety Auto Brokers, Inc. and William Tiernen, Trustee of the Assets of
Maryland Auto Buyers against Rose Shanis & Co., Inc., Rose Shanis Sons, Inc.,
Stephen Corp. and Rose Shanis & Co. (collectively, "Rose Shanis"). All of the
plaintiffs are dealers or former dealers with relationships and "reserve
accounts" (i.e., the liability of the Rose Shanis to pay the dealer the full
purchase price of one or more credit sale agreements) with Rose Shanis.
The Complaint alleges that recourse against the dealers was called upon
when Vendors Single Interest Insurance ("VSI") should have been applied first.
The Complaint also alleges "double dipping," i.e., that VSI proceeds were
obtained and full recourse demanded. Alternatively, the Complaint alleges that
Rose Shanis would negligently or wrongfully fail to make VSI claims. Finally,
the Complaint demands an accounting of the reserve accounts.
Counts 1 through 4 allege fraud (misrepresentation); fraud
(nondisclosure); constructive fraud; negligence; and breach of contract and ask
for compensatory damages of $3 Million; punitive damages of $10 Million;
declaration and injunction; and an accounting for reserve accounts.
Neither Borrower nor Guarantor are parties to this litigation. Borrower
does not assume any liability of Rose Shanis in connection with these matters.
None of Borrower's property is affected by this litigation. The Borrower is not
assuming the disputed reserve accounts as part of the Asset Purchase Agreement.
Rose Shanis and its owners indemnify Borrower and Guarantor in connection with
these matters.
<PAGE>
EXHIBIT E
In connection with the Asset Purchase Agreement, Rose Shanis shall pay
the fees of BT Alex. Brown Incorporated and Mason-Dixon shall pay the fees of
Friedman, Billings, Ramsey & Co., Inc.
<PAGE>
EXHIBIT F
BORROWING BASE CERTIFICATE
I, _______________________________, HEREBY CERTIFY that I am the
______________ of Mason-Dixon Bancshares, Inc., Authorized Member of ROSE SHANIS
LOANS, LLC, a Maryland limited liability company (the "Borrower") and am
authorized to make the certifications herein as follows:
a) This Certificate is given to NationsBank, N. A., as Agent under the
Loan Agreement dated as January 31, 1998 (as amended, modified, restated,
substituted, extended and renewed at any time and from time to time, the "Loan
Agreement") by and among the Borrower, the Agent, and the financial institutions
who may be "Banks" as defined in the Loan Agreement, to induce the Banks on the
date hereof to make an advance to the Borrower in the principal amount of
$_____________ pursuant to the terms and conditions of the Loan Agreement.
Capitalized terms used but not defined in this Certificate shall have the
meaning set forth in the Loan Agreement.
b) On the date hereof, the Borrowing Base (as that term is defined in
the Loan Agreement) equals $_________________ and the following calculation of
the Borrowing Base is true, correct and conformance with the terms of the Loan
Agreement:
- ----------------------------------------------------------------------------
Gross finance receivables $
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Less:
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
unearned finance charges
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
acquisition discounts
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
accounts over ninety (90) days past due on
a contractual basis
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
amounts due from persons who are the
subject of bankruptcy or other insolvency
proceedings
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
all amounts with respect to receivables
with respect to which a repossession has
occurred
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Net Receivables $
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
times Advance Rate of ___%
equals Borrowing Base of
- ----------------------------------------------------------------------------
c) The Borrower is in compliance with the terms, covenants and
conditions set forth in the Loan Agreement which are binding on it.
<PAGE>
d) As of the date hereof, there exists no Event of Default (as that
term is defined in the Loan Agreement), nor any event which, upon notice or the
lapse of time, or both, would constitute such an Event of Default.
e) On the date hereof, the Borrower's representations and warranties
under the Loan Agreement have the same effect as though such representations and
warranties had been made on the date hereof.
f) After the making of the advance requested by this Certificate, the
total aggregate principal amount outstanding under the Loan Agreement will be
$_____________.
WITNESS my signature this _____ day of ____________, __________.
ATTEST/WITNESS: ROSE SHANIS LOANS, LLC
BY: Mason-Dixon Bancshares, Inc.,
Authorized Member
By: (SEAL)
Name:
Title:
F5151.600 J:4
<PAGE>
