SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the Fiscal Year ended December 31, 1999.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from ________ to ________.
Commission file number: 0-26828
MORO CORPORATION
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 51-0338736
---------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
Bala Pointe, Suite 240
111 Presidential Boulevard
Bala Cynwyd, Pennsylvania 19004
-----------------------------------------------------
(Address of principal executive offices and zip code)
(610) 667-9050
---------------------------
(Issuer's telephone number)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, Par Value $.001
-----------------------------
(Title of each Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. YES [X] NO[ ]
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in a definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or amendment to this
Form 10-K [X]
Issuer's revenues for its most recent fiscal year: $0.
As of April 12, 2000, the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock was $0.
<PAGE>
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports to be filed by
Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by the court. Yes [X] No [ ].
As of April 12, 2000, the number of shares outstanding of each class of common
equity was 5,600,000 shares of Common Stock, par value $.001.
<PAGE>
PART I
Item 1. Description of Business
The Company was organized as a Delaware corporation on February 12, 1992 to
establish a national television network to broadcast high quality television
programming, under the trade name "Cafe USA", to large, enclosed shopping mall
food courts throughout the country. The Company's business was not successful,
generated limited revenues, and substantial losses were incurred.
On August 13, 1998, the Company filed a Petition for relief under Chapter
11 of the Bankruptcy Code. On May 7, 1999, the United States Bankruptcy Court
for the District of Delaware confirmed the First Modified Chapter 11 Plan of
Reorganization of the Company ("Plan"). The Plan provided for allocation of the
Company's remaining assets pursuant to the priorities established by the
Bankruptcy Code. The Plan also provided that all of the equity securities of the
Company outstanding prior to confirmation of the Plan were canceled and that the
stock of the Company would be issued as follows: 85% to David and Jacqueline
Menard; 10% to the Company's former shareholders; and 5% to the Company's
unsecured creditors.
On June 7, 1999, the Company changed its name from Food Court Entertainment
Network, Inc. to Moro Corporation.
Following its emergence from bankruptcy, the Company has engaged in the
identification, evaluation and investigation of prospective business
opportunities. On March 31, 2000, the Company acquired substantially all of the
operating assets and inventories of J.M. Ahle Co., Inc., a distributor of
reinforcing steel to the construction industry. The Company intends to expand
the business of J.M. Ahle Co., Inc., and to continue to investigate and, if
appropriate, pursue other potential business acquisitions. Management presently
has no other specific additional businesses in mind for potential acquisition.
At the close of business on March 31, 2000, the Company, through its newly
formed subsidiary, Moro Acquisition Corp. ("MAC"), purchased substantially all
of the operating assets and inventories of J.M. Ahle Co., Inc., a New Jersey
corporation ("Ahle"). Ahle is a distributor of reinforcing steel to contractors
and subcontractors for use in the construction of highways, airports, bridges,
treatment facilities, schools, public facilities, industrial and commercial
buildings, and other structures. The Company, through its subsidiary MAC,
intends to
<PAGE>
continue the business of Ahle under the name J.M. Ahle Co., Inc.
As part of the transaction, MAC assumed substantially all of the known
operating liabilities of Ahle. In addition, MAC acquired the assets of Ahle for
their net book value plus $100,000, all as set forth in the Asset Purchase
Agreement. At the time of the closing, the purchase price paid by MAC to Ahle
was estimated by the parties to be $1,570,000. The final purchase price will be
determined by the parties following the preparation of the closing balance sheet
of Ahle.
For calendar year 1999, Ahle reported unaudited sales and operating income
before taxes of approximately $8,000,000 and $540,000, respectively.
An amount equal to $250,000 of the purchase price is to be paid pursuant to
two promissory notes of MAC, each of which were guaranteed by David W. Menard
and his wife. The first note is in the amount of $150,000, is due in full on
March 31, 2001, and bears interest at 8% per annum. The second note is in the
amount of $100,000, does not bear interest, and is payable in 12 equal quarterly
installments commencing on April 1, 2001 with the final installment due on
January 1, 2004. The remainder of the purchase price was funded by the Company's
cash resources and a line of credit made available to MAC from Sovereign Bank of
Wyomissing, Pennsylvania, in the amount of up to $1,250,000, a term loan of
$125,000 from Sovereign Bank to MAC, and a subordinated loan from David W.
Menard and his wife to MAC in the amount of $300,000.
In connection with this transaction, David W. Menard and his wife, the
Company's principal stockholder, contributed $205,750 of cash as additional
paid-in-capital and in connection therewith no additional shares of Common
Stock were issued. In addition, 571,429 shares of Common Stock were sold by the
Company in a private placement at $.35 per share resulting in total proceeds of
$200,000.
Any financial statements required to be filed in connection with the
acquisition of Ahle pursuant to Item 7 of Form 8-K will be filed not later than
sixty days after the date of this filing.
Employees
As of December 31, 1999, the Company did not have any employees. As of the
close of business on March 31, 2000, the Company had 17 employees, all employed
by MAC on a full time basis.
2
<PAGE>
Item 2. Description of Property.
Following the confirmation of the Plan, the Company has been headquartered
at the offices of Colmen Menard Company, Inc. ("Colmen Menard") at 111
Presidential Boulevard, Suite 240, Bala Cynwyd, Pennsylvania 19004, telephone
610-667-9050, fax 610-667- 9915. Colmen Menard, which is owned by the David
Menard, has agreed to provide, for the foreseeable future, offices, facilities
and secretarial and administrative services without cost to the Company.
The Company's subsidiary, MAC, operates from an approximately 2,000 square
foot leased warehouse facility and contiguous 3 acre yard site located at Foot
of Herman Street, South River, New Jersey. The lease provides for a rental
payment of $3764 per month and expires on May 1, 2001.
Item 3. Legal Proceedings.
Following the confirmation of the Plan, all existing litigation involving
the Company was discharged, and the Company is not currently involved in any
legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, par value $.001 per share, and 5,000,000 shares of preferred
stock, par value $.001 per share (the "Preferred Stock"). In view of the
Company's present financial status and contemplated financial requirements, the
payment of dividends in the foreseeable future is highly unlikely. No current
public trading market for the shares of Common Stock exists. The extent of the
market for the shares and the prices at which the shares may trade cannot be
predicted.
On March 31, 2000, the Company sold 571,429 shares of Common Stock at $.35
per share for an aggregate of $200,000 to four accredited investors and issued
28,571 shares at $.35 per share in exchange for legal services rendered to the
Company. The shares were issued pursuant to the exemption from registration set
forth in Section 4(2) and Rule 506 promulgated under the Act, and
3
<PAGE>
constitute restricted securities as such term is defined under Rule 144
promulgated under the Act.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
The Company engages in the identification, evaluation and investigation of
prospective business opportunities, and if believed warranted, to acquire such
businesses. On March 31, 2000, the Company acquired substantially all of the
operating assets of J.M. Ahle Co., Inc. ("Ahle"), a distributor of reinforcing
steel to the construction industry. The Company intends to expand the business
of Ahle and to continue to investigate and, if appropriate, pursue other
potential business acquisitions. Management presently has no other specific
additional businesses in mind for potential acquisition.
Liquidity and Capital Resources
The Company's sole officer and director, David W. Menard, intends, for the
foreseeable future, to advance to the Company such funds as are necessary for
the Company to comply with its reporting requirements under any applicable
federal and state securities laws, and to file all required federal, state and
local tax returns. Mr. Menard estimates that these expenses will aggregate
approximately $50,000 during the first year. It is anticipated that such
advances will be accrued as a liability of the Company to Mr. Menard unless
otherwise determined between the Company and Mr. Menard. Mr. Menard may,
however, discontinue such advances at any time in his sole discretion.
The Company financed the purchase of Ahle in March 2000 through a
combination of bank financing, loans and capital contributions from its
principal stockholder, and sales of equity securities of the Company. The
Company intends to finance the operations of Ahle through use of the bank line
of credit as well as from funds generated by the operations of Ahle.
4
<PAGE>
Item 7. Financial Statements.
Page
----
Report of Independent Auditors F-1
Balance Sheets F-2
Statement of Operations F-3
Statement of Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
5
<PAGE>
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
Effective June 14, 1999, the Company retained Schiffman Hughes Brown, P.C.,
CPA's, 790 Penllyn Pike, Suite 302, Blue Bell, Pennsylvania 19422 to audit the
Company's 1998 financial statements. The Company's management determined that an
accounting firm located in close proximity to the Company's new location could
perform the audit more efficiently. On January 1, 2000 Schiffman Hughes Brown,
P.C. merged its practice with Larson Allen Weishair & Co., LLP.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
Effective as of the confirmation of the Plan, David W. Menard became the
sole director and officer of the Company. With his spouse, Mr. Menard was as of
December 31, 1999 the owner of 85% of the outstanding shares of the Company's
Common Stock. In the future, it is possible that additional directors and
officers will be selected.
David W. Menard is founder, principal shareholder, President and CEO of
Colmen Menard Company, a private investment banking firm founded in 1993, that
provides merger and acquisition, corporate finance and business advisory
services. David W. Menard was co- founder, President and a fifty percent
shareholder of a predecessor affiliate founded in 1983. During the past fifteen
years, David W. Menard has managed and overseen, in the role of an intermediary,
over one hundred merger and acquisition transactions.
Prior to 1983, David W. Menard was employed, chronologically, in a variety
of primarily accounting, financial and general management positions with Price
Waterhouse (accounting/management consulting), WR Grace & Co. (controllership/
planning/acquisitions), First Jersey National Corporation now part of Fleet
Financial Group (Vice President-Finance and CFO), and IU International
Corporation (Vice President and CFO of Gotaas-Larsen Shipping
Corporation/Corporate Vice President of Audit Services).
David W. Menard obtained a BS Degree in Economics from Cornell University
and an MBA in accounting and finance from the Johnson Graduate School of
Management at Cornell University. He completed the Harvard Business School
Corporate Financial Management Program. He is a Certified Public Accountant in
New York State. He is
6
<PAGE>
sixty-one years of age.
Item 10. Executive Compensation.
David W. Menard will, for the foreseeable future, provide his services at
no cost to the Company. Finders or brokerage fees are not anticipated to be paid
or accrued to any officer or director.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
As of December 31, 1999, the shares of Common Stock of the Company were
owned of record by approximately 500 persons.
The following table sets forth information regarding beneficial ownership
of Common Stock by all persons known to the Company to have owned more than 5%
of the outstanding shares of Common Stock on December 31, 1999, and the Common
Stock beneficially owned by the sole director and officer of the Company as of
such date.
Percentage of
Name and Address Number of Shares Outstanding Shares
---------------- ---------------- ------------------
David W. & 4,250,000 85%
Jacqueline J. Menard
Suite 240
111 Presidential Boulevard
Bala Cynwyd, PA 19004
Item 12. Certain Relationships and Related Transactions.
On March 31, 2000, and as part of the purchase of Ahle by the Company,
David W. Menard and his wife loaned MAC the sum of $300,000. The loan bears
interest at nine percent per annum payable on a monthly basis, in arrears, with
the principal payable in four equal consecutive annual installments of $75,000
with the first such installment due on April 1, 2002. The payment by MAC of the
principal and interest thereunder is subordinated to the payment of all
indebtedness due by MAC to Sovereign Bank. On March 31, 2000, the Menards
borrowed the sum of $300,000 from Sovereign Bank on substantially the same terms
and conditions as exist in connection with the loan made to MAC by the Menards
in the identical principal amount. The Company and MAC have guaranteed repayment
of the loan to the Menards from Sovereign Bank.
7
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
Number Title
------ -----
2.1 First Modified Chapter 11 Plan of Reorganization (with
attached Disclosure Statement and Supplemental Disclosure
Statement) incorporated by reference from Exhibit 2.1 to
Form 10-KSB for the year ended December 31, 1997)
3.1 Amended And Restated Certificate of Incorporation of the
Company (incorporated by reference from Exhibit 3.1 to Form
10-KSB for the year ended December 31, 1997)
3.1.1 Certificate of Amendment, filed June 7, 1999, to the Amended
and Restated Certificate of Incorporation (incorporated by
reference from Exhibit 3.1 of the Report on Form 8-K filed
on June 16, 1999)
3.2 By-laws of the Company (incorporated by reference from
Exhibit 3.2 to Amendment No. 1 to Registration Statement on
Form SB-2 (File No. 33-91054))
**10.1 Asset Purchase Agreement dated March 29, 2000 between Moro
Acquisition Corp., David W. Menard and Jacqueline J. Menard,
J.M. Ahle Co., Inc., James M. Ahle, Raymond J. Donovan, and
Ronald A. Schiavone, as trustee of the Ronald A. Schiavone
Living Trust u/t/a/d June 21, 1991, and Ronald A. Schiavone,
individually
**10.2 Loan And Security Agreement dated March 31, 2000, by and
between Sovereign Bank, Moro Acquisition Corp. and David W.
and Jacqueline J. Menard
**10.3 Subordinated Term Note dated March 31, 2000 by Moro
Acquistion Corp., as maker, in favor of David W. Menard and
Jacqueline J. Menard, as payee, in the principal amount of
$300,000
**10.4 Surety Agreement dated March 31, 2000 by Moro Corporation in
favor of Sovereign Bank
8
<PAGE>
**10.5 Acquisition Term Note dated March 31, 2000 by David W.
Menard and Jacqueline J. Menard, as maker, in favor of
Sovereign Bank, as payee, in the principal amount of
$300,000
**27.1 Financial Data Schedule (Electronic Filing Only)
- --------------
**Filed herewith.
(b) Reports on Form 8-K
None.
9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Moro Corporation
Bala Cynwyd, Pennsylvania
We have audited the accompanying balance sheet of Moro Corporation as of
December 31, 1999, and the related statements of operations and stockholders'
deficit and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of Moro Corporation as of December 31, 1998 were audited by Schiffman
Hughes Brown, PC (whose practice became a part of Larson, Allen, Weishair & Co.,
LLP effective January 1, 2000) whose report dated June 14, 1999, on those
statements included an explanatory paragraph that described the Company's
agreement to sell substantially all of its assets and cease operations,
discussed in Note 1 to the financial statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Moro Corporation as of December
31, 1999 and the results of its operations and its cash flows for the twelve
months ended December 31, 1999 in conformity with generally accepted accounting
principles.
As more fully described in Note 3 to the financial statements, effective May 3,
1999 the Company emerged from protection under Chapter 11 of the U.S. Bankruptcy
Code pursuant to a Reorganization Plan which was confirmed by the Bankruptcy
Court. In accordance with AICPA Statement of Position 90-7, the Company adopted
"Fresh Start Reporting" whereby its assets, liabilities and new capital
structure were adjusted to reflect estimated fair values as of April 30, 1999.
As a result, the financial statements for the periods subsequent to April 30,
1999 reflect the Successor Company's new basis of accounting and are not
comparable to the Predecessor Company's pre-reorganization consolidated
financial statements.
LARSON, ALLEN WEISHAIR & CO., LLP
Blue Bell, Pennsylvania
March 23, 2000
F-1
<PAGE>
MORO CORPORATION
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Reorganized Predecessor
Company Company
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ $ 231,679
Prepaid taxes 5,197
--------- ---------
Total current assets $ -- $ 236,876
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Note payable $ 50,000 $
Accounts payable 142,170
Accrued payroll 70,000
Other accrued expenses 1,674 309,128
Due to former employee 240,000
Obligation under employment contract 204,123
--------- ---------
Total current liabilities 51,674 965,421
--------- ---------
Stockholders' deficit:
Common stock, $.001 par value; authorized
25,000,000 shares; issued and outstanding
5,000,000 shares in 1999 58,825
Net liabilities in liquidation (728,545)
Accumulated deficit (from May 1, 1999) (110,499)
--------- ---------
(51,674) (728,545)
--------- ---------
$ -- $ 236,876
========= =========
</TABLE>
F-2
<PAGE>
MORO CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Reorganized Company Predecessor Company
------------------- -------------------------------------
Eight Months Four Months
Ended Ended Year Ended
December 31, 1999 April 30, 1999 December 31, 1998
------------------- -------------- ------------------
<S> <C> <C> <C>
Operating expenses:
Sales and marketing $ $ $ 1,032
Programming 16,366
Network costs 57,508
Amortization of
reorganization asset 103,628
General and administrative expense 5,197 42,736 315,844
--------- -------- ---------
108,825 42,736 390,750
--------- -------- ---------
Operating loss (108,825) (42,736) (390,750)
Other expense:
Interest 1,674 4,795
--------- -------- ---------
Net loss before reorganization items (110,499) (42,736) (395,545)
--------- -------- ---------
Reorganization items 771,281
--------- --------
Net income (loss) $(110,499) $728,545 $(395,545)
========= ======== ==========
</TABLE>
F-3
<PAGE>
MORO CORPORATION
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Net Assets Common Accumulated
in Liquidation Stock Deficit Total
-------------- ------ ----------- -----------
<S> <C> <C> <C> <C>
Predecessor Company, beginning $ 1,579,455 $ $ $ 1,579,455
Write-down of fixed assets to estimated realizable value (2,045,000) (2,045,000)
Accrual of obligation under employment contract (263,000) (263,000)
----------- -----------
Net liabilities in liquidation - Predecessor Company
December 31, 1998 (728,545) (728,545)
Net loss for four months - Predecessor Company (42,736) (42,736)
Reorganization 771,281 771,281
New stock issuance 58,825 58,825
Net loss for eight months - Reorganized Company (110,499) (110,499)
----------- ------- --------- -----------
Balance at December 31, 1999 - Reorganized Company $ -- $58,825 $(110,499) $ (51,674)
=========== ======= ========= ===========
</TABLE>
F-4
<PAGE>
MORO CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Reorganized Company Predecessor Company
------------------- ------------------------------------
Eight Months Four Months
Ended Ended Year Ended
December 31, 1999 April 30, 1999 December 31, 1998
------------------- -------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(110,499) $ 728,545 $(395,545)
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Amortization 103,628
Changes in assets and liabilities:
Decrease in prepaid taxes 5,197
(Increase) decrease in other assets (103,628) 15,803
Increase (decrease) in accounts
payable and accrued expenses 1,674 (915,421) (94,579)
--------- --------- ---------
Net cash used in operating activities -- (290,504) (474,321)
--------- --------- --------
Net cash provided by investing activities:
Sale of property and equipment 422,000
---------
Cash flows from financing activities:
Loan payable from employee
Proceeds from issuance of
common stock - new -- 58,825 --
--------- --------- ---------
Net cash provided by financing activities -- 58,825 --
--------- --------- ---------
Net decrease in cash (231,679) (52,321)
Cash at beginning of period -- 231,679 284,000
--------- --------- ---------
Cash at end of period $ -- $ -- $ 231,679
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,266
=========
</TABLE>
F-5
<PAGE>
MORO CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
Note 1 The Company and basis of presentation:
Moro Corporation, formerly Food Court Entertainment Network, Inc. (the
"Company"), is a Delaware corporation, which was incorporated on
February 12, 1992. The Company changed its name on June 7, 1999. The
Company's plan was to establish a national television network to
broadcast a high quality television program called Cafe USA,
specifically to large, enclosed shopping mall food courts across the
United States. The Company's activities have consisted primarily of
designing, developing and producing its Cafe USA programming,
establishing contacts and entering into agreements with potential
advertisers and mall operators, producing and evaluating market tests
of its programming, developing a system for delivery of programming
into mall food courts, engaging management, employees and consultants
for operations, including marketing, installing and operating Cafe USA
in various mall food courts.
The Company, which had been a development stage company, was unable to
market its Cafe USA network to advertisers, incurred substantial
losses and was unable to obtain additional financing. Accordingly, the
Company, while maintaining the operation of its Cafe USA network in
twenty malls and continuing to supply updated programming to the malls
each week, sought a purchaser for its assets. In July 1998, the assets
and operating leases were sold to Prime Spot Media U.S.A. for
$422,000. In connection therewith, the Company has written down the
carrying value of its assets subject to the sales agreement to their
selling price and has also written off certain other assets and has
accrued a liability for an obligation under an existing employment
agreement. As a result of the foregoing, the Company has no active
business operations.
On June 24, 1998, the Board of Directors adopted a resolution that the
corporation file a petition for relief under Chapter 11 of Title II of
the United States Code (the Bankruptcy Code). The voluntary petition
was subsequently filed on August 13, 1998.
Note 2 Financial statement presentation:
Fresh start reporting:
Due to the Restructuring and implementation of Fresh Start Reporting,
Condensed Consolidated Financial Statements for the new Reorganized
Company (period starting April 30, 1999) are not comparable to those
of the Predecessor Company. For financial reporting purposes, the
effective date of the bankruptcy is considered to be the close of
business on April 30, 1999.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
F-6
<PAGE>
MORO CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
Note 2 Financial statement presentation (continued):
Amortization:
Costs associated with reorganization were fully amortized in the
period incurred.
Recent accounting pronouncement:
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133, which is effective,
as amended, for all quarters in fiscal years beginning after June 15,
2000, establishes accounting and reporting standards for derivative
financial instruments and hedging activities related to those
instruments, as well as other hedging activities. As the Company does
not currently engage in derivative or hedging activities, the adoption
of this standard is not expected to have a significant impact on the
Company's financial statements.
Loss per share of common stock:
Net loss per share of common stock is based on the weighted average
number of shares outstanding during the period.
The weighted average number of common shares outstanding and net
income (loss) per common share for periods prior to April 30, 1999
have not been presented because, due to the restructuring and
implementation of Fresh Start Reporting, they are not comparable to
subsequent periods.
Note 3 Recent developments:
On May 3, 1999 (the "Confirmation Date"), the U.S. Bankruptcy Court
confirmed the Company's Plan of Reorganization (the "Reorganization"),
and the Company emerged from bankruptcy. Pursuant to the
Reorganization, on such date certain indebtedness of the Company was
canceled in exchange for cash and new equity interests.
Holders of the Company's shares before the confirmation of
reorganization received 10% of the shares in the emerging entity.
The Company's creditors received all of the Company's net cash assets,
5% of the Company stock in the emerging entity, plus a total of
$50,000 cash payable plus interest of 5% in May 2000.
F-7
<PAGE>
MORO CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
Note 4 Fresh start reporting:
As of April 30, 1999, the Company adopted Fresh Start Reporting in
accordance with the American Institute of Certified Public
Accountant's Statement of Position 90-7 "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code", ("SOP 90-7").
Fresh Start Reporting resulted in material changes to the Condensed
Consolidated Balance Sheet, including valuation of assets, intangible
assets (including goodwill) and liabilities at fair market value and
valuation of equity based on the appraised reorganization value of the
ongoing business.
The Reorganization and the adoption of Fresh Start Reporting resulted
in the following adjustments to the Company's Condensed Consolidated
Balance Sheet for the period ended April 30, 1999:
<TABLE>
<CAPTION>
Predecessor Reorganization and Reorganized
Company Fresh Start Adjustments Company
-------------- ------------------------ --------------
April 30, 1999 Debit Credit April 30, 1999
-------------- -------- -------- --------------
<S> <C> <C> <C> <C>
Cash and equivalents $ 187,851 $ 50,000 $237,851
Prepaid taxes 5,197 $ 5,197
--------- -------- -------- --------
193,048 50,000 237,851 5,197
--------- -------- -------- --------
Reorganization value in excess
of identifiable assets 103,628 103,628
--------- --------- -------- --------
$ 193,048 $153,628 $237,851 $108,825
========= ======== ======== ========
Accounts payable $ 142,170 $142,170
Accrued payroll 70,000 70,000
Other accrued expense 308,035 258,035 $ 50,000
Due to former employee 240,000 240,000
Obligation under employment contract 204,124 204,124
--------- --------
964,329 914,329 50,000
--------- -------- --------
Common stock - net $ 58,825 58,825
Net (liabilities in liquidation) (771,281) 771,281
--------- -------- -------- --------
$ 193,048 $914,329 $830,106 $108,825
========= ======== ======== ========
</TABLE>
Note 5 Reorganization items:
In accordance with SOP 90-7, expenses resulting from the Chapter 11
reorganization should be reported separately as reorganization items
in the Condensed Consolidated Statements of Operations.
F-8
<PAGE>
MORO CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999 AND 1998
Note 6 Legal proceedings:
The Company is not a party to any pending legal proceedings.
Note 7 Capital stock:
The total number of shares of all classes of stock which the Company
has authority to issue is 30,000,000 shares, consisting of (a)
twenty-five million (25,000,000) shares of Common Stock, par value
$.001 per share, and (b) five million (5,000,000) shares of Preferred
Stock, par value $.001 per share. The preferred stock may be issued in
one or more series, and may have such voting powers, full or limited,
or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights and qualifications,
limitations, or restrictions as shall be stated in the resolution or
resolutions providing for the issue thereof adopted by the Board of
Directors of the Company, from time to time.
Note 8 Subsequent events:
At the close of business on March 31, 2000, the Company, through its
newly formed subsidiary, Moro Acquisition Corp. ("MAC"), purchased
substantially all of the operating assets and inventories of J.M. Ahle
Co., Inc., a New Jersey corporation ("Ahle"). Ahle is a distributor of
reinforcing steel to contractors and subcontractors for use in the
construction of highways, airports, bridges, treatment facilities,
schools, public facilities, industrial and commercial buildings, and
other structures. The Company, through its subsidiary MAC, intends to
continue the business of Ahle under the name J.M. Ahle Co., Inc.
As part of the transaction, MAC assumed substantially all of the known
operating liabilities of Ahle. In addition, MAC acquired the assets of
Ahle for their net book value plus $100,000, all as set forth in the
Asset Purchase Agreement. At the time of the closing, the purchase
price paid by MAC to Ahle was estimated by the parties to be
$1,570,000. The final purchase price will be determined by the parties
following the preparation of the closing balance sheet of Ahle.
An amount equal to $250,000 of the purchase price is to be paid to two
promissory notes of MAC. The first note is in the amount of $150,000,
is due in full on March 31, 2001, and bears interest at 8% per annum.
The second note is in the amount of $100,000, does not bear interest,
and is payable in 12 equal quarterly installments commencing on April
1, 2001 with the final installment due on January 1, 2004. The
remainder of the purchase price was funded by the Company's cash
resources and a line of credit made available to MAC in the amount of
up to $1,250,000, a term loan of $125,000, and a subordinated loan in
the amount of $300,000.
In connection with this transaction, the Company's principal
stockholder contributed $205,750 of cash as additional paid-in-capital
and in connection therewith no additional shares of Common Stock were
issued.
F-9
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MORO CORPORATION
By: /s/ David W. Menard
-------------------
David W. Menard,
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ David W. Menard President and Director April 12, 2000
- ------------------- (Principal Executive Officer
David W. Menard and Principal Accounting
Officer)
ASSET PURCHASE AGREEMENT
AGREEMENT made and entered into this 29th day of March, 2000, by and
between: MORO ACQUISITION CORP., a Delaware corporation ("MORO"); DAVID W.
MENARD and JACQUELINE J. MENARD (hereinafter, "Guarantors"); J.M. AHLE CO.,
INC., a New Jersey corporation ("AHLE"); each of JAMES M. AHLE, RAYMOND J.
DONOVAN, and RONALD A. SCHIAVONE, as trustee of the Ronald A. Schiavone Living
Trust u/t/a/d June 21, 1991 (hereinafter, "Shareholder" or "Shareholders"); and
RONALD A. SCHIAVONE, individually ("Schiavone").
BACKGROUND
AHLE is a distributor of reinforcing steel to contractors and
subcontractors for use in the construction of highways, airports, bridges,
treatment facilities, schools, public facilities, industrial and commercial
buildings, and other structures. AHLE desires to sell to MORO and MORO desires
to purchase substantially all of the operating assets and inventories of AHLE,
and to assume substantially all of the known operating liabilities of AHLE, all
as more fully set forth herein.
AGREEMENT
NOW THEREFORE, intending to be legally bound hereby, and in consideration
of the mutual agreements, covenants, warranties,
<PAGE>
representations and undertakings of the parties hereto, the undersigned mutually
agree as follows:
I. Sale of Assets. Subject to the terms and conditions hereof, MORO hereby
agrees to purchase, and AHLE hereby agrees to sell, assign, transfer, set over,
confirm, convey and deliver to MORO at the closing herein described in Article
IX ("Closing"), title to and possession of, or, where applicable, right of AHLE
to, all of the assets of AHLE, whether tangible, intangible, personal or
otherwise, and wherever located, other than Excluded Assets (as defined in
Article II) (the "Assets"). The Assets shall be conveyed and delivered to MORO
at the Closing free and clear of all liens, security interests, claims, pledges,
charges, agreements, encumbrances, options, or any other adverse claims
whatsoever, whether known or unknown, whether arising before or after the date
hereof or by reason of the consummation of the transactions herein described or
by reason of operation of law, or otherwise.
Other than Excluded Assets, the Assets shall include all of AHLE's
inventories, receivables, fixed assets, supplies, deposits, contract rights,
warranties, indemnities, guaranties, purchase orders, computers, corporate
names, trade names, permits, licenses, books, leasehold improvements, real
property and fixed asset
2
<PAGE>
leases, computer software, furniture, fixtures, machinery, equipment, and
records, and shall, without limitation, include:
A. Trade names. All trade names or trademarks including, without
limitation, J.M. Ahle & Co., Inc. At the time of Closing, AHLE shall have
changed its corporate name to something other than J.M. Ahle Co., Inc., or any
name containing the word "Ahle".
B. Inventory. All of the inventory of AHLE which MORO and AHLE mutually
determine to be saleable, usable, and of good quality, or for which there is,
based on historical usage, not more than a nine month supply existing as of the
date of Closing ("Inventory"). The Inventory shall be valued in the manner
described in Article VIII.A. Any dispute with respect to what should be included
in Inventory shall be resolved by arbitration pursuant to Article IV.B.
C. Fixed Asset Leases. All of AHLE's right, title and interest in and to
the lease agreements for equipment or machinery leased from others by AHLE and
the security deposits paid to lessors by AHLE, set forth in Schedule I.C.
hereto.
D. Contracts, Purchase Orders. All of AHLE's right, title and interest in
and to any and all written contracts with suppliers and purchase orders with
customers entered into in the
3
<PAGE>
ordinary course of business, and the agreements set forth in Schedule I.D.
hereto.
E. Receivables. All of AHLE's notes or accounts receivable which are not
more than ninety (90) days old from invoice date as of the date of Closing
("Included Receivables").
F. Prepaid Expenses; Deposits. The prepaid expenses and deposits of AHLE,
of the type set forth in Schedule I.F. hereto.
G. Fixed Assets. All fixed assets owned by AHLE, including but not limited
to, the machinery and equipment set forth in Schedule I.G. hereto.
H. Real Estate Lease. All of AHLE's right, title and interest in and to the
existing lease agreement for the real estate premises (the "Premises") currently
occupied by AHLE at South River, New Jersey (the "Real Estate Lease"), together
with the consent of the landlord.
II. Excluded Assets. The Assets which are not to be acquired by MORO
hereunder ("Excluded Assets") are: (i) all cash, securities, and cash
equivalents of AHLE on hand or existing at Closing; (ii) all notes receivable
and accounts receivable of AHLE which are more than ninety (90) days old as of
the date of Closing ("Excluded Receivables"); (iii) all prepaid expenses and
deposits of AHLE that are not described in Schedule I.F. hereto; (iv) all
4
<PAGE>
lease agreements for equipment or machinery leased from others by AHLE and the
security deposits paid to lessors by AHLE which are not described in Schedule
I.C. hereto; and (v) any Inventory which is determined not to be usable,
saleable, or of good quality (the "Unacceptable Inventory"), or that portion of
any Inventory to the extent for which there is, based on historical usage, more
than a nine month supply existing as of the date of Closing ("Excess Inventory",
and together with the Unacceptable Inventory, the "Excluded Inventory").
III. Liabilities of AHLE.
A. Except for the Assumed Liabilities (as defined in Article III.B.
hereof), MORO is not assuming and shall not pay or be liable for any claims,
demands, obligations, debts, liability, judgments, causes of action, or damages
whatsoever, of whatever nature, and whether known or unknown, against or of
AHLE, arising or incurred by AHLE, prior to or after the Closing or arising in
whole or in part by reason of the performance of the terms of this Agreement by
AHLE, or by reason of the sale of the Assets by AHLE, as herein set forth.
Specifically, but without limiting the foregoing, and except for the Assumed
Liabilities, MORO shall not assume or be liable for the following debts,
liabilities and obligations of AHLE:
5
<PAGE>
1. Violation of Representations. Debts, obligations or liabilities which
arise or exist in violation of any of the representations, warranties, covenants
or agreements of AHLE or a Shareholder contained in this Agreement, or in any
statement or certificate delivered to MORO by or on behalf of AHLE or a
Shareholder on or before the Closing pursuant to this Agreement, or in
connection with the transactions contemplated hereby.
2. Taxes. Liabilities for federal, state, county, local, or other income,
sales, use, real estate, excise, employee payroll or other taxes or assessments
(including interest and penalties) of any kind whatsoever for periods prior to
the Closing.
3. Taxes Due On Sale. Liabilities for federal, state, county, local, or
other income, use or other taxes or assessments (including interest and
penalties) of any kind whatsoever arising from, based upon, or related to, the
sale, transfer, or delivery of the Assets, or the execution and delivery of the
assignment of the Real Estate Lease pursuant to this Agreement.
4. Pension and Other Employee Plans. Unless specifically included as an
Assumed Liability, debts, obligations or liabilities under any pension, profit
sharing, savings, retirement, vacation pay, health, medical, life, disability,
dental, deferred compensation, bonus, incentive, severance pay,
6
<PAGE>
group insurance or other similar or dissimilar employee plans or arrangements of
AHLE, or under or pursuant to any policies, handbooks, or custom or practices,
or under or pursuant to any collective bargaining agreement, or union agreement
or arrangement, or any employment agreements of AHLE, whether express or
implied, written or oral, applicable to any employee of AHLE at any time prior
to the Closing.
5. Personal Injury and Other Claims. Debts, obligations or liabilities
arising out of any claim for personal injury or property damage arising prior to
the Closing (whether or not then asserted) or any pending or threatened
litigation or actions.
6. Infringements. Any liability or obligation arising out of any wrongful
or unlawful violation or infringement of any trademark or trade name right of
any person or entity occurring on or prior to the Closing.
B. Assumed Liabilities. The liabilities and obligations of AHLE which are
to be assumed by MORO hereunder ("Assumed Liabilities") shall be limited to and
are solely the following: (i) all current liabilities of AHLE which MORO has
agreed to assume following the Closing, including all accounts payable and
accrued expenses; and (ii) all obligations of AHLE accruing with respect to
periods after Closing under the lease agreements for equipment and
7
<PAGE>
machinery leased from others by AHLE and under the Real Estate Lease; and (iii)
any and all liabilities or obligations relating to any contracts, purchase
orders or agreements entered into in the ordinary course of business or which
MORO has elected to assume. At Closing, and as a condition thereof, MORO shall
execute and deliver to AHLE an assumption agreement with indemnification
provisions in the form attached hereto as Exhibit "A".
IV. Purchase Price.
A. The purchase price for the Assets shall be equal to the Net Book Value
of the Assets of AHLE as reflected on the Closing Balance Sheet plus the sum of
One Hundred Thousand Dollars ($100,000) (the "Purchase Price").
The term "Net Book Value of the Assets" as used herein shall mean the
excess of (i) the aggregate net book value of the Assets as reflected on the
Closing Balance Sheet, over (ii) the aggregate amount of all Assumed Liabilities
reflected on the Closing Balance Sheet.
The "Closing Balance Sheet" shall mean a balance sheet of AHLE to be
prepared by AHLE as of the close of business on the business day immediately
preceding the date of Closing. The Closing Balance Sheet shall be prepared from
the books and records of AHLE in accordance with generally accepted accounting
principles, consistently applied, and shall be accompanied by the
8
<PAGE>
compilation report of AHLE's accountants. AHLE and its representatives shall be
afforded complete and unfettered access to the books and records of AHLE which
remain on the Premises after Closing to enable AHLE to prepare the Closing
Balance Sheet. For purposes thereof, the Inventory shall include only items
which MORO and AHLE mutually determine to be saleable, usable, and of good
quality, or for which there is, based on historical usage, not more than a nine
month supply existing as of the date of Closing. The Inventory shall be valued
at an amount equal to the lower of cost or market. The Closing Balance Sheet
shall not reflect any intangible assets, goodwill, or capitalized assets.
B. Within ninety days following the Closing, AHLE will deliver to MORO the
Closing Balance Sheet as well as a computation of the Purchase Price based
thereon. AHLE shall also furnish to MORO such financial schedules and
information as MORO and its accountants shall reasonably require for the
purposes of reviewing the calculations. If the accountants for MORO and the
accountants for AHLE can not agree upon the Purchase Price, then either MORO or
AHLE may request that the Purchase Price be determined by arbitration to be held
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. The hearing shall be held at the American Arbitration Association
office closest to AHLE's place of business, and shall be conducted
9
<PAGE>
by a single arbitrator. The decision and award of the arbitrator shall be final,
conclusive and binding upon the parties. If upon the determination of the
Purchase Price, any amount is due to AHLE, the amount shall be paid to AHLE by
MORO within five days thereafter. If upon the determination of the Purchase
Price, any amount is to be returned to MORO, then such amount shall be paid by
AHLE to MORO within five days thereafter. Any such amounts shall bear interest
from and after the Closing until paid at the rate of eight percent (8%) per
annum.
1. Any such amounts due from MORO to AHLE shall be paid in immediately
available funds. MORO's obligation to make such payments shall be guaranteed,
jointly and severally, by the Guarantors pursuant to the Guaranty Agreement
attached hereto as Exhibit "C".
2. Any such amounts to be returned to MORO shall first be satisfied by
delivery by the escrow agent of the appropriate portion of the $100,000 escrow
amount referred to in Article IV.C.3. below. If such escrow amount is not
sufficient, the balance shall be delivered in immediately available funds by
AHLE to MORO.
C. The Purchase Price shall be payable by MORO to AHLE, as follows:
10
<PAGE>
1. MORO shall execute and deliver to AHLE at the time of and as a condition
of Closing the interest bearing promissory note of MORO in the principal amount
of $150,000, in the form attached hereto as Exhibit "B". The note shall be
guaranteed jointly and severally by the Guarantors pursuant to the Guarantee
Agreement attached hereto as Exhibit "C".
2. MORO shall execute and deliver to AHLE at the time of and as a condition
of Closing the non-interest bearing promissory note of MORO in the principal
amount of $100,000, in the form attached hereto as Exhibit "D". The note shall
be guaranteed jointly and severally by the Guarantors pursuant to the Guarantee
Agreement attached hereto as Exhibit "E".
3. Subject to the post-Closing adjustment pursuant to Article IV.B., the
balance of the Purchase Price shall be paid to AHLE by MORO at the Closing in
immediately available funds; provided, however, that $100,000 thereof shall be
held in escrow as described in Article V.B. hereof.
D. The Purchase Price shall be allocated among the Assets as set forth in
the Closing Balance Sheet and the imputed value of the $100,000 non-interest
bearing promissory note referred to in Article IV.C.2. above shall be allocated
to the fixed assets being purchased by MORO. MORO, AHLE and the Shareholders
shall take all steps required to report the results of the transactions
11
<PAGE>
contemplated hereby for tax purposes in a manner consistent with and utilizing
such allocations.
V. Estimated Purchase Price.
A. Because the Closing Balance Sheet will not be available until after the
Closing, MORO shall deliver to AHLE at Closing an amount equal to the Purchase
Price as calculated by and agreed to by MORO and AHLE based upon the most
recently available balance sheet of AHLE ("Estimated Purchase Price"), currently
contemplated to be the balance sheet dated February 29, 2000; provided, however,
that such balance sheet shall reflect the preliminary inventory amount referred
to in Article VIII.A. and shall be updated on an estimated basis by MORO and
AHLE as close as is possible to March 31, 2000. MORO and AHLE agree that, if
based upon the December 31, 1999 balance sheet of AHLE, a copy of which is
attached as Schedule V.A., the Estimated Purchase Price would be $100,000 plus
$1,157,288. In this regard, it has been assumed that none of the accounts
receivable are Excluded Receivables, there is no Excess Inventory or
Unacceptable Inventory, MORO has not utilized the prepaid insurance or prepaid
taxes, MORO has assumed the deposit reflected thereon, and MORO has not assumed
any sales taxes payable.
B. As provided in Article IV.C.3., the sum of $100,000 otherwise payable by
MORO to AHLE in immediately available funds
12
<PAGE>
shall not be delivered to AHLE at the time of Closing but shall be placed in an
interest bearing escrow account with MORO's legal counsel acting as escrow
agent. As a condition of Closing and at the time thereof, MORO, AHLE, and such
legal counsel shall execute and deliver the Escrow Agreement in the form
attached hereto as Exhibit "F". Pursuant thereto, the escrow funds shall be held
in such escrow account pending the preparation of the Closing Balance Sheet and
shall be disbursed promptly following the final determination of the Purchase
Price pursuant to Article IV.B. The escrowed funds shall be applied first
towards any amounts and accrued interest thereon due from AHLE to MORO, if any,
upon final determination of the Purchase Price and then the balance (if there is
any) or the entire amount of the escrowed funds (if no amounts are due from AHLE
to MORO) shall be paid over to AHLE by the escrow agent.
VI. James M. Ahle Consulting Agreement.At the time of Closing, and as a
condition thereof, James M. Ahle and MORO shall execute and deliver a consulting
agreement in the form attached hereto as Exhibit "G".
VII. Other Employment or Non-Compete Agreements.
A. At the time of Closing, and as a condition thereof, John Ahle and MORO
shall execute and deliver an employment and
13
<PAGE>
non-compete agreement in mutually satisfactory form to be negotiated and agreed
to between them prior to Closing.
B. At the time of Closing, and as a condition thereof, Ronald Perlman and
MORO shall execute and deliver an employment and non-compete agreement in
mutually satisfactory form to be negotiated and agreed to between them prior to
Closing.
C. At the time of Closing, and as a condition thereof, Douglas Ahle and
MORO shall execute and deliver an employment and non-compete agreement in
mutually satisfactory form to be negotiated and agreed to between them prior to
Closing.
D. At the time of Closing, and as a condition thereof, each of Raymond J.
Donovan and Ronald A. Schiavone shall execute and deliver a non-compete
agreement with MORO in the form attached hereto as Exhibit "H".
VIII. Accounts Receivable; Inventory.
A. Method of Valuation. A preliminary itemized physical count of the
Inventory shall be taken by AHLE with representatives of MORO present to check
and verify such count prior to the Closing. MORO shall purchase all of the
Inventory (other than Excluded Inventory) for an amount equal to the lower of
cost or market as shown by the results of such physical count. The results of
such physical count and valuation thereof, indicating the Inventory, the
Unacceptable Inventory and the Excess Inventory,
14
<PAGE>
will be delivered at Closing, and shall be used to determine the Estimated
Purchase Price.
B. Excess Inventory. The Excluded Inventory may remain at the Premises rent
free, and representatives of AHLE shall have access thereto after the Closing.
Following the Closing, MORO shall have the obligation to purchase from AHLE any
Excess Inventory on an as needed basis at the lower of cost or market. MORO
shall make payment to AHLE therefore within thirty days of purchase. AHLE may
sell or otherwise dispose of any of the Unacceptable Inventory and the Excess
Inventory at any time to anyone.
C. Accounts Receivable. MORO shall have the right to and authority to
collect for its own account all Included Receivables and other items which shall
be transferred to MORO as part of the Assets and to endorse with the name of
AHLE any checks received on account of any such receivable or other items. AHLE
shall promptly transfer and deliver to MORO any cash or other property which
AHLE may receive following Closing in respect of such Included Receivables or
other items. MORO shall use its best efforts following Closing to collect for
the account of AHLE any Excluded Receivables, and shall promptly transfer and
deliver to AHLE any cash or other property which MORO may receive in respect of
such receivables. All sums collected by MORO from customers who
15
<PAGE>
owe Excluded Receivables and Included Receivables shall be applied first in
payment of the Excluded Receivables on a "FIFO" basis.
IX. Closing. The Closing of all of the transactions under this Agreement
(the "Closing") will commence at 9:00 A.M., Philadelphia, Pennsylvania time, on
March 31, 2000, unless MORO and AHLE shall have agreed on another date and time
in writing. In the event that either MORO or AHLE is entitled not to close on
the scheduled date because a condition to the Closing set forth in Articles XIV
or XV hereof has not been met (or waived by the party or parties entitled to
waive it), such party may postpone the Closing from time to time, by giving at
least five days notice to the other party, until the condition has been met
(which all parties will use their best efforts to cause to happen), but in no
event to a date later than April 30, 2000. The place of Closing will be at the
offices of Lurio & Associates, P.C., Suite 2340, 2005 Market Street,
Philadelphia, PA 19103, or such other place as MORO and AHLE shall mutually
agree upon in writing. The sale of assets hereunder shall be effective as of the
close of AHLE's business on the date of Closing.
X. Representations and Warranties of AHLE. AHLE, each of the Shareholders
and Schiavone, jointly and severally, hereby represent and warrant to MORO, as
follows:
16
<PAGE>
A. Corporate Organization. AHLE is a corporation duly organized, validly
existing and in good standing under the laws of the state of New Jersey, with
all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now being conducted. AHLE is not
required to be qualified to do business in any other jurisdictions. AHLE has
previously delivered to MORO complete and correct copies of the Certificate of
Incorporation and By-laws, including all amendments to the date hereof, of AHLE.
The Shareholders are the sole record and beneficial owners of all of the issued
and outstanding stock of AHLE.
B. Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of AHLE and by each of the Shareholders of AHLE and no
other corporate proceedings on the part of AHLE are necessary to authorize this
Agreement or to carry out the transactions contemplated hereby. AHLE and each
Shareholder has the right, power and authority to enter into and perform this
Agreement. This Agreement constitutes the valid and binding agreement of AHLE
and each Shareholder enforceable in accordance with its terms, except that such
enforceability may be limited by bankruptcy, insolvency or similar
17
<PAGE>
laws affecting creditors' rights generally and subject to the discretion of a
court in granting equitable remedies.
C. Conflicts with Instruments. Neither the execution or delivery of this
Agreement by AHLE, or the consummation of the transactions contemplated by this
Agreement by AHLE, nor the compliance with the terms of this Agreement by AHLE
will: (i) conflict with or result in a breach of any provision of the
Certificate of Incorporation or By-laws, as amended, of AHLE; (ii) except for
consents or waivers required under certain agreements, leases, or other
instruments or documents with respect to which the failure to so obtain will not
have a material adverse effect, and except for the consents which are
specifically set forth in Schedule X.C attached hereto, violate, conflict with
or result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under
or result in the termination, give others a right of termination, acceleration
or cancellation of, or accelerate the performance required by, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties of AHLE, or result in being declared void, voidable or without
further binding effect any of the terms, conditions or provisions of any lease,
agreement or other material instrument or commitment or obligation to which AHLE
is a party, or by which its properties
18
<PAGE>
may be bound or affected; or (iii) violate any order, writ, injunction, decree,
judgment or ruling of any court or administrative or governmental body or agency
or arbitration tribunal, or violate any material provision of any permit,
license, certificate or registration to which AHLE is subject or pursuant to
which it conducts business, or any law, rule or regulation.
D. No Violation. AHLE has not been charged with or given notice of, nor
does there exist, to the best of their knowledge, any outstanding violation of
any applicable law, statute, order, rule, regulation, policy or guideline
promulgated, or judgment entered by any federal, state or local court or
administrative or governmental authority or arbitration tribunal which would
materially adversely affect AHLE or its business, or any of its properties.
E. Financial Statements. AHLE has delivered to MORO its financial
statements together with its accountant's compilation report thereon for the
fiscal years ended December 31, 1995, December 31, 1996, December 31, 1997 and
December 31, 1998, all of which are attached hereto as Schedule X.E (the
"Financial Statements"). The Financial Statements have been prepared from and
are in accordance with the books and records of AHLE and present fairly the
financial position of AHLE as of the dates indicated, and the results of
operations for the periods indicated, and are
19
<PAGE>
true and correct in all material respects. The Financial Statements have been
prepared in conformity with generally accepted accounting principles,
consistently applied.
F. Legal Proceedings. AHLE has not received written notice of any claim or
proceeding (including any arbitration proceeding) pending against, relating to
or affecting AHLE (or any of its officers or directors in connection with the
business or affairs of AHLE). To the best of their knowledge, there are no such
claims or proceedings pending challenging the validity or propriety of the
transactions contemplated by this Agreement. AHLE is not subject to any
judgment, order, decree, administrative ruling or other judicial or
administrative mandate or arbitration proceeding specifically directed against
AHLE. AHLE has not received written notice from any governmental or
administrative authority contending that AHLE has not conducted, and, to the
best of their knowledge, AHLE has conducted, its business in all material
respects, in accordance with all applicable material federal, state and local
laws and regulations including any Environmental Laws (as defined in
Article X.P).
20
<PAGE>
G. Licenses and Trademarks. AHLE (i) has all permits, approvals,
authorizations, consents, licenses, certificates and registrations which are
material to the conduct of its business, all of which are valid and in full
force and effect in accordance with their terms and all of which are set forth
in Schedule X.G, and (ii) owns or possesses adequate rights to use all
tradenames, trademarks, and copyrights and all technology, processes, computer
programs, know-how and formulae which are material to the conduct of its
business and the use thereof does not violate or infringe upon the rights of any
other party.
H. Title to Properties and Related Matters. AHLE has title, leasehold and
license rights, as applicable, to each and every Asset. Except as set forth in
Schedule X.H, all such Assets are held free and clear of liens, pledges, claims,
charges, security interests or other encumbrances and are not subject to any
rights of way, building or use restrictions, exceptions, variances, reservations
or limitations of any nature whatsoever. All of the Included Receivables and the
Excluded Receivables, have been incurred in the ordinary course of business. The
Assets, including the leasehold improvements, equipment, fixtures, machinery,
and personal property, together with the Real Estate Lease, comprise all the
assets used in the conduct of the business as currently conducted.
I. Taxes and Tax Returns. AHLE has duly filed, or obtained extensions to
file, all federal, state, county, and local tax returns required to be filed by
it (the "Tax Returns") and has duly paid all taxes (including required estimated
taxes),
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assessments and other governmental charges or impositions (including any
interest or penalties) which are due and payable (the "Taxes"). There are no
claims asserted for Taxes, nor are there outstanding agreements or waivers
extending the statutory period of limitation applicable to any Tax Return for
any period. AHLE has withheld proper and accurate amounts from its employees'
compensation in substantial compliance with all withholding and similar
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and
any and all other applicable laws, statutes, codes, ordinances, rules and
regulations. AHLE has not received any notice of assessment or proposed
assessment by the Internal Revenue Service or any other taxing authority in
connection with any Tax Returns and there are no pending tax examinations of or
tax claims asserted against AHLE.
J. Agreements. Except as listed in Schedule X.J or any other Schedule
attached hereto, AHLE is not a party to any written or oral: (a) contract with
any labor union; (b) contract for the future purchase of fixed assets; (c)
contracts for the future purchase of materials, supplies or equipment other than
in the ordinary course of business; (d) contract for the employment of any
officer, individual employee or other person on a full-time basis or any
contract with any person on a consulting basis; (e) bonus, pension,
profit-sharing, retirement, stock purchase, stock option,
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hospitalization, medical insurance or similar plan, contract or understanding in
effect with respect to employees or any of them or the employees of others; (f)
agreement or indenture relating to the borrowing of money or to the mortgaging,
pledging or otherwise placing of a lien on any Assets; (g) guaranty of any
obligation for borrowed money or otherwise; (h) lease or agreement under which
AHLE is lessee of or holds or operates any property, real or personal, owned by
any other party; (i) lease, license or other agreement under which AHLE is
lessor of, or permits any third party to hold or operate any property, real or
personal, owned or controlled by it; (j) agreement or other commitment for
capital expenditures in excess of normal operating requirements; (k) contract,
agreement or commitment under which AHLE is obligated to pay any broker's fees,
finder's fees or any such similar fees, to any third party; (l) contract,
agreement, or commitment under which AHLE is required to supply goods or
products to any customer or other person other than in the ordinary course of
business; or (m) any other contract, agreement, arrangement or understanding
which is material to the business of AHLE (each of the foregoing being referred
to collectively herein as "Contracts"). AHLE has furnished to MORO true and
correct copies of all such written Contracts. To the best of their knowledge,
all Contracts are valid and in full force and effect on the date hereof, and
AHLE has not
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breached any material provision of, or is in default under any material
provisions of, any Contract.
K. Absence of Changes. Since December 31, 1999, there has not been: (a) any
material adverse change in the financial condition, results of operations,
assets, liabilities or business of AHLE; (b) any material liability or
obligation of any nature whatsoever (contingent or otherwise) incurred by AHLE,
other than current liabilities or obligations incurred in the ordinary course of
business; (c) any Asset made subject to a lien of any kind; (d) any waiver of
any valuable right of AHLE, or the cancellation of any material debt or claim
held by AHLE; (e) any mortgage, pledge, sale, assignment or transfer of Assets
except in the ordinary course of business; (f) any damage, destruction or loss
(whether or not covered by insurance) which adversely affects or may adversely
affect the Assets; (g) any change in the accounting methods or practices
followed by AHLE; or (h) any other event, development or condition, of any
character, or threat of the same (excluding macro economic conditions generally
effecting the business), which materially adversely affects the business or
business prospects of AHLE.
L. Disclosure. No representation or warranty in this Agreement or in any
exhibit, schedule, certificate, statement or other document required to be
delivered by AHLE or a Shareholder
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hereunder contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein or
herein not misleading.
M. No Defaults. AHLE is not in default in any material respect beyond
applicable grace, notice and cure periods under any lease agreement, contract,
purchase order or other instrument or agreement to which it is a party or by
which it or any of its property is bound or affected. To the best of their
knowledge, there exists no condition, event or act which constitutes, or which
after notice, lapse of time or both could constitute, a default by AHLE under
any of the foregoing.
N. Compensation Arrangements. Schedule X.N contains a correct list setting
forth, or a true and correct copy of, the names of all persons who are employed
by AHLE, together with (i) a statement of the full amount paid or payable (to
the extent ascertainable) to or in respect of each such person for services
rendered or to be rendered in the current year and the basis therefor, (ii) an
indication of the method by which each is compensated (e.g. salary plus
commission, straight commission, draw against commission), (iii) their job
descriptions, and a copy of any employment or other agreement pursuant to which
such compensation was or is to be paid, and (iv) the names and titles of all
directors and officers of AHLE.
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O. Consents, etc. Except as described in Schedule X.C, no consent,
authorization, order or approval of, or filing or registration with, any
governmental commission, board or other regulatory body or any other person or
entity is required for or in connection with the execution or delivery of this
Agreement by AHLE or the consummation by AHLE of the transactions contemplated
hereby, and if so required, such consent, authorization, or approval shall have
been obtained or filing shall have been effected at or prior to Closing.
P. Environmental Laws. Any and all permits, licenses and other
authorizations which are required under federal, state, local, or other laws
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials or wastes
("Environmental Laws") have been obtained by AHLE in respect of the business
currently conducted by it. AHLE is in compliance, in all material respects, with
all terms and conditions of the required permits, licenses and authorizations in
connection with the business conducted by it, and
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is also complying, in all material respects, with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in those laws or contained in any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder. In respect of the business conducted by
AHLE, and to the best of their knowledge during AHLE's period of ownership of
the Assets, there have been no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans of AHLE which
would interfere with or prevent continued compliance, or which may give rise to
any common law or statutory legal liability or obligation, or otherwise form the
basis of any claim, action, suit, proceeding, hearing or investigation, based on
or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, release
or threatened release into the environment, of any pollutant, contaminant, or
hazardous or toxic material or waste material.
Q. Insurance. Schedule X.Q contains a true, complete and correct list of
all insurance policies in force in which AHLE is named as an insured, and for
which AHLE has paid any premium, and which insure any of the Assets or the real
property covered by the Real Estate Lease, or cover any liabilities of the
business,
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and states for each such policy the name of the insurer, type and amount of
coverage, deductible amounts, if any, expiration date and the annual premium
amount. Such policies are in full force and effect and all premiums with respect
to such policies are currently paid.
XI. Covenants of AHLE.
A. AHLE and each Shareholder covenants and agrees that from the date of the
execution and delivery of this Agreement, to the date of the Closing:
1. AHLE shall continue to conduct its business in the ordinary course and
in the same manner as heretofore, and will use reasonable, diligent commercial
efforts to preserve its business organization intact and keep available to MORO
the services of its present employees and preserve the good will of customers
and suppliers and others having business relations with AHLE. AHLE shall
maintain the Assets in their condition as of the date hereof, subject to
ordinary wear and tear. It is the intent of MORO and MORO agrees to extend
employment offers, such that after Closing all of the present employees of AHLE
(other than James M. Ahle) would continue to be employees of MORO at their
present pay scales and employee benefits.
2. AHLE shall give to MORO and its representatives full access during
normal business hours, and on reasonable prior
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notice, to all of the Assets, books, records, employees and payroll lists and
records, agreements, and documents of AHLE, including, without limitation, all
of the books of account and business records or other writings, computer data
and information, computer programs, sales invoices and credit memos, ledgers,
journals, bank statements, canceled checks, deposit slips, tax returns, tax
assessments and notices, claims by or against AHLE, judgments, financing
statements, security agreements, liens, computer runs, marketing and promotional
plans, promotional or pricing allowances, price lists, credits, rebates, and/or
discounts, payment and credit terms with suppliers and customers, customer
complaints and claims, and insurance claims, wherever located (collectively
hereinafter the "Books and Records"). AHLE will furnish to MORO all information
with respect to the affairs of AHLE which MORO may from time to time reasonably
request, and MORO and its representatives may, prior to the Closing, make such
examination and investigation of said Books and Records and of its properties,
assets, and business, as MORO deems necessary or advisable, and examining the
real estate covered by the Real Estate Lease, and may examine any financial
statements, including without limitation, internally prepared financial
statements or management reports, and the work papers of the accountant or
accountants employed by or servicing the Books and Records and business of AHLE
for all periods prior to the
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Closing. The mere fact of such examination or investigation by MORO or its
representatives, however, shall not, of itself, affect the representations,
warranties or covenants hereunder of either AHLE, a Shareholder, or Schiavone,
unless MORO has obtained actual knowledge as a result of such investigation or
examination which is contrary to any such representation, warranty, or covenant.
From and after the date hereof, MORO shall have the right, on reasonable prior
notice, to have one or more of its representatives present on the business
premises of AHLE during normal business hours.
3. AHLE shall not, without first obtaining the written consent of MORO: (1)
make any commitment, or enter into any transaction, which materially and
adversely affects the Assets; (2) enter into any agreement with respect to or
affecting the Assets, other than in the ordinary and usual course of its
business, which does not terminate or is not terminable without penalty by AHLE
prior to the Closing; (3) further encumber, lien or grant a security interest in
any of the Assets; (4) make any loans or advances or assume, guarantee, endorse
or otherwise become responsible for the obligations of any other person or
entity which would affect in any manner the Assets; (5) cancel, amend or
terminate any existing agreement relating in any manner to the business, except
in the ordinary and usual course of its business or as otherwise required by
this Agreement; (6) enter into or
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terminate any contract, agreement, plan, or lease, or make any change in any of
its contracts, agreements, plans or leases, other than in the ordinary and usual
course of its business; (7) make any changes in its authorized, issued or
outstanding capital stock, and make no amendment to or change its Certificate of
Incorporation or By-laws; (8) not dispose of or agree to dispose of, any assets,
real, personal, or intangible, except in the ordinary course of business; and
(9) make no change to any of its contracts with, nor enter into any agreements
granting any additional benefits to, any director, employee, shareholder, or
consultant.
4. AHLE will, through the date of Closing, keep in force and undiminished
its existing insurance in connection with the Assets and in connection with the
Premises. Prior to Closing, all risk of loss, damage or destruction to all or
part of the Assets or such Premises shall be borne exclusively by AHLE.
5. AHLE shall carry on its business substantially in the same manner as
heretofore and will make or institute no unusual or novel methods of
distribution, purchase, sale, management or operation of its business, including
but not limited to the payment or non-payment of its debts or liabilities.
6. The Shareholders shall not transfer, assign, encumber, hypothecate,
sell, or transfer any interest whatsoever in any of the securities of AHLE.
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B. From and after the Closing, AHLE shall, at no cost or expense to AHLE,
furnish all financial information reasonably necessary for, and shall cooperate
with MORO with respect to, the preparation after the date of Closing of such
financial statements relating to the Assets as MORO is required to prepare.
C. Immediately after the execution of this Agreement, AHLE shall, at its
sole cost and expense, cause a reputable search company to issue and deliver to
MORO within twenty days of the date hereof, a certificate of such search company
or other evidence reasonably satisfactory to MORO that a central and local
search has been made of the records wherein financing statements and security
agreements, or the local equivalents thereof, are filed under the applicable
Uniform Commercial Code or comparable local law, as well as for judgments,
judgment liens and all tax liens. Such certificate shall identify all security
interests and liens of any kind or nature whatsoever and wherever located that
are claimed by any person against any of the Assets.
D. Phase One Audit. Promptly after the execution and delivery hereof, AHLE
shall, at its sole cost and expense, obtain a current phase one environmental
audit ("Phase One Audit") of the Premises. The results of such Phase One Audit,
including a copy of any and all reports, letters, or other documents produced in
connection therewith, shall be delivered to MORO. If MORO, its
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bank, or its legal advisors, are not completely satisfied with the results of
such Phase One Audit, MORO may terminate this Agreement in accordance with
Article XVI (iv).
XII. Representations and Warranties of MORO and the Guarantors to AHLE.
MORO and the Guarantors hereby jointly and severally represent and warrant to
AHLE, as follows:
A. Corporate Organization. MORO is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware with all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now being conducted. MORO is qualified to do
business in New Jersey.
B. Authority. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of MORO and no other corporate proceedings on the part
of MORO are necessary to authorize this Agreement or to carry out the
transactions contemplated hereby. MORO and each Guarantor has the right, power
and authority to enter into and perform this Agreement. This Agreement
constitutes the valid and binding agreement of MORO and each Guarantor
enforceable in accordance with its terms, except that such enforceability may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
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generally and subject to the discretion of a court in granting equitable
remedies.
C. Conflicts with Instruments. Neither the execution or delivery of this
Agreement by MORO, or the consummation of the transactions contemplated by this
Agreement by MORO, nor the compliance with the terms of this Agreement by MORO
will: (i) conflict with or result in a breach of any provision of the
Certificate of Incorporation or By-laws, as amended, of MORO; or (ii) violate
any order, writ, injunction, decree, judgment or ruling of any court or
administrative or governmental body or agency or arbitration tribunal, or
violate any material provision of any permit, license, certificate or
registration to which MORO is subject or pursuant to which it conducts business,
or any law, rule or regulation.
D. No Violation. MORO has not been charged with or given notice of, nor
does there exist, to the best of their knowledge, any outstanding violation of
any applicable law, statute, order, rule, regulation, policy or guideline
promulgated, or judgment entered by any federal, state or local court or
administrative or governmental authority or arbitration tribunal which would
materially adversely affect MORO or its business, or any of its properties.
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E. Legal Proceedings. MORO has not received written notice of any claim or
proceeding (including any arbitration proceeding) pending against, relating to
or affecting MORO (or any of its officers or directors in connection with the
business or affairs of MORO). To the best of their knowledge, there are no such
claims or proceedings pending challenging the validity or propriety of the
transactions contemplated by this Agreement. MORO is not subject to any
judgment, order, decree, administrative ruling or other judicial or
administrative mandate or arbitration proceeding specifically directed against
MORO. MORO has not received written notice from any governmental or
administrative authority contending that MORO has not conducted, and, to the
best of their knowledge, MORO has conducted, its business in all material
respects, in accordance with all applicable material federal, state and local
laws and regulations including any Environmental Laws (as defined in
Article X.P).
F. Consents, etc. No consent, authorization, order or approval of, or
filing or registration with, any governmental commission, board or other
regulatory body or any other person or entity is required for or in connection
with the execution or delivery of this Agreement by MORO or the consummation by
MORO of the transactions contemplated hereby.
XIII. Non-Competition.
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A. From and after the date of Closing, AHLE shall not act as a stockholder,
agent, lessor, sublessor, partner or consultant of, or otherwise participate in
or assist, any enterprise or organization which is or which becomes engaged in
the business, or similar type business, presently carried on or engaged in by
AHLE.
B. From and after the date of Closing, except for the sale or other
disposition of any of the Excluded Inventory, AHLE shall not solicit, interfere
with or endeavor to entice away from MORO, any customer, supplier, or any
person, firm or corporation dealing with MORO, or interfere with or employ or
induce to leave the employment of MORO, any employee of MORO.
C. In the event of a breach of any of the terms of this Article, MORO shall
be entitled to apply for and obtain injunctive relief in any court of competent
jurisdiction, without limitation as to any other or further remedies which may
be available to MORO.
XIV. Conditions to Closing by MORO. The obligation of MORO to close under
this Agreement is subject to the satisfaction of the following conditions
precedent (all or any of which may be waived, in whole or in part, in writing by
MORO in its sole discretion) on or prior to the date of Closing:
A. Covenants, Agreements. AHLE and the Shareholders shall have performed
all covenants and agreements to be performed
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by each of them on or before Closing pursuant to the terms of this Agreement.
B. Authorizations. AHLE shall have delivered to MORO: (1) a certified copy
of a resolution or resolutions unanimously adopted by the Board of Directors and
Shareholders of AHLE authorizing AHLE to execute, deliver and fully perform this
Agreement and approving same; and (2) such other instruments, documents and
certificates as MORO or its counsel may reasonably request for the purpose of
consummating the transactions contemplated herein; and (3) a certificate signed
by the President and Secretary of AHLE, dated the date of Closing, to which the
corporate seal is affixed, to the effect that all representations and warranties
of AHLE and the Shareholders are true and correct on and as of the Closing, with
the same effect as though such representations and warranties had been made on
and as of such date and time and that the agreements, covenants and obligations
to be performed by AHLE and the Shareholders pursuant to this Agreement shall
have been so performed in all material respects.
C. Representations, Warranties. The representations and warranties of AHLE,
the Shareholders, and Schiavone contained in this Agreement shall be true and
correct, in all material respects, on and as of the Closing, with the same
effect as though such
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representations and warranties had been made on and as of such date and time.
D. Destruction of Assets. There shall have been no fire or other damage to
any material portion of the Assets or a substantial portion of the Premises.
E. Phase One Audit. AHLE shall have delivered to MORO, at no cost or
expense to MORO, the Phase One Audit which is satisfactory to MORO, its bank,
and its legal advisors.
F. Financing Commitment. MORO shall have received a financing commitment
from its bank in an amount, form, and substance acceptable to MORO and the bank
shall have funded thereunder.
G. Real Estate Lease. AHLE shall have executed and delivered to MORO an
assignment and assumption of the Real Estate Lease in form and substance
reasonably satisfactory to MORO, and the landlord shall have executed and
delivered to MORO the landlord's consent to such assignment and assumption, and
shall have delivered to MORO any waivers, non-disturbance and attornment
agreements which have been requested by MORO's bank.
H. James M. Ahle Agreement. MORO and James M. Ahle shall have executed and
delivered the consulting and non-competition agreement.
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I. Employment Agreements. MORO and each of John Ahle, Douglas Ahle, and
Ronald Perlman shall have executed and delivered an employment and
non-competition agreement.
J. Non-Compete Agreements. MORO and each of Raymond J. Donovan and Ronald
A. Schiavone shall have executed and delivered a non-compete agreement.
K. Opinion of Counsel. MORO shall have received the written opinion, dated
the date of Closing, and as of such date, of Orloff, Lowenbach, Stifelman &
Siegel, special counsel to AHLE, the Shareholders and Schiavone, in form and
substance reasonably satisfactory to MORO, substantially to the effect that:
1. AHLE is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Jersey and has corporate power and
authority to own all of its respective properties and assets and to carry on its
business as they understand it is now being conducted.
2. AHLE has the corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated on its part hereby;
AHLE has taken all necessary corporate proceedings to authorize the execution
and delivery by it of this Agreement and the consummation by it of the
transactions contemplated on its part hereby; and this Agreement, the consulting
agreement, non-compete agreements, and other closing
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documents to which each is a party, has been duly executed and delivered by
AHLE, each Shareholder, and Schiavone, and is the valid and binding agreement of
each of them enforceable against each of them in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or similar laws and equitable principles relating to or
affecting the rights or remedies of creditors.
3. The execution and delivery by AHLE of this Agreement and the
consummation by it of the transactions contemplated on their part hereby does
not violate any provision of the Certificate of Incorporation or By-Laws, as
amended, of AHLE.
4. The execution and delivery by AHLE of this Agreement and the
consummation by AHLE of the transactions contemplated on its part hereby, (A)
does not violate, or with the giving of notice or the lapse of time or both
result in a violation of, any law, rule, or regulation, or, to their knowledge,
any provision of, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or lapse of time of both) any
obligation under, or result in the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance upon the property of AHLE
pursuant to any provision of, any material lien, lease, agreement, license,
instrument, law, ordinance, regulation, order, arbitration award, judgment or
decree
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to which AHLE is a party or by which it is bound, and (B) to their knowledge,
does not and will not constitute an event permitting termination of any material
lease, agreement, license or instrument to which AHLE is a party or by which it
is bound.
5. To their knowledge, there is no claim, action, suit, arbitration or
proceeding pending, contemplated or threatened against AHLE or any of its
properties which seeks to prohibit, restrict or delay consummation of the
transactions contemplated hereby or any of the conditions to consummation of the
transactions contemplated hereby or to limit in any manner any material aspect
of the business of AHLE or the use of the Assets after the Closing, nor is there
any judgment, decree, injunction, ruling or order of any court, governmental
department, commission, agency or instrumentality or arbitrator outstanding
against AHLE which has or may in the future have any such effect.
L. Transfer of Title. AHLE shall deliver to MORO bills of sales,
assignments and other appropriate instruments of transfer effective to vest in
MORO title (and all of AHLE's right, title and interest) in and to the Assets
(free and clear of liens, security interests, claims or other encumbrances of
every nature), in each case in form and substance reasonably satisfactory to
MORO and counsel for MORO.
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M. Consents, Authorizations. AHLE shall deliver to MORO the consents set
forth in Schedule X.C. hereto. AHLE shall have obtained all permits, consents,
waivers from and approvals of, and made filings and registrations with any
federal, state and local governmental board, commission, authority or any other
regulatory body, which are required for the consummation by AHLE of the
transactions contemplated on its part hereby.
XV. Conditions to Closing by AHLE. The obligation of AHLE to close under
this Agreement is subject to the satisfaction of the following conditions
precedent (all or any of which may be waived, in whole or in part, in writing by
AHLE), on or prior to the date of Closing:
A. Covenants. MORO shall have performed all covenants and agreements to be
performed by MORO on or before the Closing pursuant to the terms of this
Agreement.
B. Authorizations. MORO shall have delivered to AHLE: (1) a certified copy
of a resolution or resolutions unanimously adopted by its Board of Directors
authorizing MORO to make, deliver and perform this Agreement and approving same;
(2) such other instruments, documents and certificates as AHLE or its counsel
may reasonably request for the purpose of consummating the transactions
contemplated herein; and (3) a certificate signed by the President and Secretary
of MORO, to which the corporate seal is affixed,
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dated the date of Closing, to the effect that all representations and warranties
of MORO are true and correct on and as of the Closing, with the same effect as
though such representations and warranties had been made on and as of such date
and time and that the agreements, covenants and obligations to be performed by
MORO pursuant to this Agreement shall have been so performed in all material
respects.
C. Representations, Warranties. The representations and warranties of MORO
and the Guarantors contained in this Agreement shall be true and correct in all
material respects on and as of the date of Closing, with the same effect as
though such representations and warranties had been made on and as of the time
and date of the Closing.
D. James M. Ahle Agreement. MORO and James M. Ahle shall have executed and
delivered the consulting and non-competition agreement.
E. Employment Agreements. MORO and each of John Ahle, Douglas Ahle, and
Ronald Perlman shall have executed and delivered an employment and
non-competition agreement.
F. Opinion of Counsel. AHLE shall have received the written opinion, dated
the date of Closing, and as of such date, of Lurio & Associates, P.C., counsel
to MORO and the Guarantors, in
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form and substance reasonably satisfactory to AHLE, substantially to the effect
that:
1. MORO is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has corporate power and
authority to own all of its respective properties and assets and to carry on its
business as they understand it is now being conducted. MORO is qualified to do
business in New Jersey.
2. MORO has the corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated on its part hereby;
MORO has taken all necessary corporate proceedings to authorize the execution
and delivery by it of this Agreement and the consummation by it of the
transactions contemplated on its part hereby; and this Agreement, the notes,
guarantees and other closing documents to which each is a party, has been duly
executed and delivered by MORO and each Guarantor, and is the valid and binding
agreement of each of them enforceable against each of them in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws and equitable principles
relating to or affecting the rights or remedies of creditors.
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3. The execution and delivery by MORO of this Agreement and the
consummation by it of the transactions contemplated on their part hereby does
not violate any provision of the Certificate of Incorporation or By-Laws, as
amended, of MORO.
4. To their knowledge, there is no claim, action, suit, arbitration or
proceeding pending, contemplated or threatened against MORO or any of its
properties which seeks to prohibit, restrict or delay consummation of the
transactions contemplated hereby or any of the conditions to consummation of the
transactions contemplated hereby.
G. Closing Documents. MORO and the Guarantors shall execute and deliver to
AHLE, as appropriate, the Assumption Agreement in the form attached hereto as
Exhibit "A", the cash purchase price referred to in Article IV.C.3., the
$150,000 Note in the form of Exhibit "B", the Guaranty thereof in the form of
Exhibit "C", the $100,000 Note in the form of Exhibit "D", the Guaranty thereof
in the form of Exhibit "E", the Escrow Agreement in the form of Exhibit "F", and
shall deliver to AHLE such other appropriate instruments and documents as
otherwise shall be required in this Agreement.
XVI. Termination.
Anything herein or elsewhere to the contrary notwithstanding, this
Agreement may be terminated (i) by either
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MORO or AHLE by notice to all the other parties hereto if Closing shall not have
been consummated prior to 5:30 p.m., Philadelphia, Pennsylvania time on April
30, 2000; or (ii) by MORO if any time prior to the consummation of Closing it is
not completely satisfied with its due diligence investigation of the Assets, or
the business of AHLE, or the Premises; or (iii) by MORO if a material adverse
change shall have occurred to the business of AHLE, or to the Assets, or to the
Premises, at any time after the date hereof; or (iv) by MORO if it, its bank, or
its legal advisors, is not satisfied with the Phase One Audit. It is understood
and agreed that (i) any such termination shall not in and of itself be a breach
of this Agreement, and (ii) any such termination shall not limit, extinguish or
modify any claim or cause of action which may otherwise exist for a breach of
any covenant, warranty, representation or obligation contained herein.
XVII. Indemnification of MORO.
A. From and after the date hereof, and subject to the limitations set forth
in Article XVII.C. below, AHLE, each Shareholder, and Schiavone, jointly and
severally, agrees to indemnify against, and to protect, save and keep MORO, its
officers, directors, shareholders, agents, employees, and affiliates (jointly
and severally, "Indemnified Party") harmless from, and to assume liability for,
payment of all liabilities,
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<PAGE>
obligations, losses, damages, penalties, interest, claims, actions, suits,
judgments, settlements, charges, out-of-pocket costs, expenses and disbursements
(including reasonable costs of investigation, and reasonable fees of attorneys,
accountants and expert witnesses) of whatsoever kind and nature (collectively
referred to as "Damages") that may be imposed on or incurred by an Indemnified
Party as a consequence of or in connection with any claims, suits, demands,
threats, causes of actions, obligations, debts, liability, or damages
whatsoever, (i) arising or incurred by AHLE prior to or after the Closing unless
MORO has assumed such obligation or liability in this Agreement, or (ii) arising
in whole or in part by reason of the performance of the terms of this Agreement
or any breach of any representation, warranty, or covenant in this Agreement by
AHLE, a Shareholder, or Schiavone, or (iii) by reason of or the result of the
operation by any person or entity of the business of AHLE prior to the Closing
unless assumed by MORO, or (iv) by reason of or the result of any asserted or
actual violation by any person or entity whatsoever of any Environmental Law
with respect to facts or circumstances existing as of Closing in connection with
the business of AHLE or the Assets, or in connection with the Premises(but only
if based upon facts or circumstances which first existed during AHLE's period of
possession of the Premises).
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<PAGE>
B. Any claim for indemnity hereunder shall be made by written notice to
AHLE and the Shareholders specifying in reasonable detail the basis of the
claim. MORO agrees to give prompt written notice to AHLE and the Shareholders of
any claim by a third party against an Indemnified Party which might give rise to
a claim against AHLE or a Shareholder hereunder, stating the nature and basis of
such claim and, if ascertainable, the amount thereof; provided, that any failure
to give prompt notice shall not negate or impair this indemnity, but shall only
entitle the indemnitors to offset any damages caused to them by such failure. In
connection with any such third party claim, AHLE may, at its election and
expense, have the right to participate in the defense of such third party claim.
If AHLE and each Shareholder shall have acknowledged in writing its obligation
to indemnify in respect of any third party claim which might give rise to a
claim for indemnity hereunder and the provision of security therefor reasonably
satisfactory to MORO, MORO agrees not to settle such third party claim without
the consent of AHLE, which shall not be unreasonably withheld, and MORO further
agrees upon the written request of AHLE, to assign all rights and liabilities
with respect to such third party claim to AHLE and to cooperate in the
prosecution and defense thereof; provided,however, AHLE agrees not to settle any
third party claim without the consent of MORO if any relief, other than
48
<PAGE>
the payment of money damages, would be granted by such settlement that might
affect the business operations or reputation of MORO.
C. Notwithstanding anything contained herein to the contrary, no
Indemnified Party shall be entitled to indemnification for any Damages, nor
shall MORO be entitled to offset any amount against the notes referred to in
Article IV.C. as a result of a breach of a representation, warranty, or covenant
(a "Note Offset"), until the amount of such Damages or Note Offset exceeds
$10,000. The amount of any Damages for which indemnification is provided under
this Article XVII and the amount of any Note Offset shall: (i) be net of any
amounts recovered by such Indemnified Party or MORO under insurance policies,
(ii) be limited to the amount by which all such Damages or Note Offsets, in the
aggregate, exceed $10,000; and (iii) shall not exceed the Purchase Price under
this Agreement under any circumstances.
XVIII. Brokers and Finders. AHLE and the Shareholders, and MORO and the
Guarantors hereby severally represent to each other that other than Maple
Business Consultants, no broker or finder has been employed or engaged by any of
them in connection with the transactions contemplated in this Agreement and that
all negotiations relative to this Agreement have been carried on directly
between the parties hereto without the intervention of any other person;
provided, however, that MORO shall be responsible
49
<PAGE>
for, and shall indemnify and hold harmless AHLE and the Shareholders from, the
brokerage fees due to Maple Business Consultants.
XIX. No Shop Provision. From and after the date hereof and until the
termination of this Agreement, other than with MORO, neither AHLE nor the
Shareholders, shall solicit, encourage, or initiate any discussions,
negotiations, or agreements for the purpose of disposing of or transferring all
or any portion of its assets, or the merger, consolidation, liquidation, sale of
stock, or any similar transactions involving AHLE. From and after the date
hereof and until the termination of this Agreement, AHLE, and the Shareholders
shall negotiate exclusively with MORO and shall not discuss with any third
parties in any manner whatsoever any of the matters referred to in the prior
sentence. From and after the date hereof, AHLE shall promptly communicate to
MORO the terms of any acquisition proposal or offer that AHLE or a Shareholder
receives from any person or entity other than MORO.
XX. Survival of Representations, Warranties, Covenants, Agreements and
Remedies.
All representations, warranties, covenants, agreements and remedies of the
parties hereto shall survive the Closing for a period of eighteen (18) months,
and shall be effective regardless of the mere fact of (as opposed to any actual
knowledge obtained as
50
<PAGE>
a result of) any investigation that may have been made or which may be made at
any time by or on behalf of any party hereto. The foregoing shall not apply,
however, to Article XIII hereof, and the terms and conditions of such Article
shall survive such eighteen (18) month period in accordance with their terms.
XXI. Entire Agreement. This Agreement constitutes the entire understanding
and agreement between the parties hereto with respect to the transactions
contemplated herein, supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties, including but not limited to the letter of intent between MORO and AHLE
dated January 12, 2000, as amended, and there have been no warranties,
representations or promises, written or oral, made by any of the parties hereto
except as herein expressly set forth herein.
XXII. Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, as well as their respective heirs, personal
representatives, successors and assigns but no party may assign its obligations
hereunder.
XXIII. Waiver, Modification, etc.. Any party to this Agreement may waive
any of the terms or conditions of this Agreement or agree to an amendment or
modification to this Agreement by an agreement in writing executed in the same
manner (but not necessarily by the same persons) as this Agreement. No
51
<PAGE>
amendment or modification of this Agreement shall be binding unless in writing
executed by all of the parties to this Agreement. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall any waiver constitute
a continuing waiver unless otherwise expressly provided.
XXIV. Notice. Any notice or other communications required or permitted
hereunder shall be sufficiently given: (i) three (3) business days after if sent
by certified mail, return receipt requested, postage prepaid, or (ii) one (1)
business day after sent by Federal Express or other overnight courier providing
delivery confirmation for next business day delivery, or (ii) when delivered by
personal delivery, in any event delivered to or addressed as follows:
If to AHLE, the Shareholders or Schiavone:
J.M. Ahle Co., Inc.
Foot of Herman Street
South River, New Jersey 08882
Attn: James M. Ahle, President
With copy to:
William J. Adelson, Esquire
Orloff, Lowenbach, Stifelman & Siegel
101 Eisenhower Parkway
Roseland, New Jersey 07068-1082
If to MORO:
52
<PAGE>
MORO Acquisition Corp.
111 Presidential Boulevard
Suite 240
Bala Cynwyd, Pennsylvania 19004
Attn: David W. Menard, President
With copy to:
Douglas M. Lurio, Esquire
Lurio & Associates, P.C.
2005 Market Street
Suite 2340
Philadelphia, PA 19103
XXV. New Jersey Law Controls. This Agreement shall be construed in
accordance with and shall be governed by the laws of the State of New Jersey
without regard to its conflicts of law rules.
XXVI. Consent to Jurisdiction. Except as specifically provided otherwise in
Article IV.B. hereof, each of the parties hereto irrevocably consents and agrees
that any legal action or proceeding whatsoever arising out of or in any way
connected with this Agreement or the transactions contemplated hereby may be
commenced, filed, instituted or brought in the state or federal courts of the
State of New Jersey, and each of the parties hereto irrevocably submits and
accepts with regard to any such legal action or proceeding to the jurisdiction
of such courts. Each of the parties irrevocably consents to service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail,
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<PAGE>
postage prepaid, to the parties hereto, such service to become effective upon
mailing. Each of the parties hereto hereby irrevocably waive, to the fullest
extent permitted by law, any objection which any of them may now or hereafter
have to the laying of the venue of any suit, action or proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby, brought
in such New Jersey courts, and hereby further irrevocably waives any claim, that
any such suit, action or proceeding brought in such courts, has been brought in
an inconvenient forum.
XXVII. Counterparts. This agreement may be signed in two or more
counterparts which counterparts shall constitute a single, integrated agreement
binding upon all the signatories to such counterparts.
XXVIII. Expenses. Except as specifically provided otherwise herein, each
party hereto shall pay its own expenses arising from this Agreement and the
transactions contemplated hereby, including, without limitation, all legal and
accounting fees and disbursements; provided, however, that nothing herein shall
limit or otherwise modify any right of the parties to recover such expenses from
the other in the event any party hereto breaches this Agreement.
XXIX. Further Assurances. Each of the parties hereto shall hereafter
execute and deliver such further documents and
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instruments and do such further acts and things as may be required or useful to
carry out the intent and purpose of this Agreement and as are not inconsistent
with the terms hereof. In the event any consent required for the transfer of all
or any part of the Assets to MORO is waived by MORO, then AHLE and the
Shareholders, shall use each of their best efforts to see that MORO receives the
benefit of all or part of the Assets to which MORO has waived the obtaining of
such consents.
XXXI. Consents. AHLE and the Shareholders, shall use their reasonable
commercial best efforts to obtain, at the earliest possible date and prior to
the Closing, and at their sole cost and expense, the consents described in
Schedule X.C. hereof, which includes the letter of nonapplicability with respect
to the Industrial Site Recovery Act. The parties expressly waive compliance with
any applicable bulk sales clearance requirements.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
executed as of the day and year first above written.
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MORO ACQUISITION CORP.
Attest: /s/ David W. Menard By: /s/ David W. Menard
------------------------------- ------------------------------------
David W. Menard, David W. Menard, President
Secretary
(Corporate Seal)
Witness: /s/ David W. Menard
------------------------------ ------------------------------------
DAVID W. MENARD
Witness: /s/ Jacqueline J. Menard
------------------------------ ------------------------------------
JACQUELINE J. MENARD
J.M. AHLE CO., INC.
Attest: By: /s/ James M. Ahle
------------------------------ ------------------------------------
(Corporate Seal)
Witness: /s/ James M. Ahle
------------------------------ ------------------------------------
JAMES M. AHLE
Witness: /s/ Raymond J. Donovan
------------------------------ ------------------------------------
RAYMOND J. DONOVAN
Witness:
------------------------------ /s/ Ronald A. Schiavone
------------------------------------
RONALD A. SCHIAVONE, individually
and as trustee of the Ronald A.
Schiavone Living Trust u/t/a/d
June 21, 1991
<PAGE>
EXHIBITS TO ASSET PURCHASE AGREEMENT
Exhibit "A" - Assumption of Liabilities Agreement between Moro and AHLE
Exhibit "B" - $150,000 Promissory Note from Moro to AHLE
Exhibit "C" - Menard Guaranty Agreement of $150,000 Promissory Note
Exhibit "D" - $100,000 Promissory Note from Moro to AHLE
Exhibit "E" - Menard Guaranty Agreement of $100,000 Promissory Note
Exhibit "F" - Escrow Agreement between Lurio & Associates, P.C., Moro and AHLE
Exhibit "G" - Consulting Agreement between James M. Ahle and Moro
Exhibit "H" - Non-Compete Agreement between each of Raymond J. Donovan and
Ronald A. Schiavone and Moro
<PAGE>
SCHEDULES TO ASSET PURCHASE AGREEMENT
Schedule I.C. - Fixed Asset Leases of AHLE Assumed by MORO
Schedule I.D. - Contracts Assumed by MORO Which Are Not in the Ordinary Course
of AHLE's Business
Schedule I.F. - Prepaid Expenses and Deposits of AHLE Assumed by MORO
Schedule I.G. - Fixed Asset List of AHLE
Schedule V.A. - December 31, 1999 Balance Sheet of AHLE
Schedule X.C. - Required Third Party Waivers or Consents of AHLE
Schedule X.E. - Financial Statements of AHLE
Schedule X.G. - Permits and Approvals of AHLE
Schedule X.H. - Liens and Encumbrances on AHLE Assets
Schedule X.J. - List of AHLE Contracts
Schedule X.N. - List of AHLE Employees and Compensation Arrangements
Schedule X.Q. - List of AHLE Insurance Policies
================================================================================
LOAN AND SECURITY AGREEMENT
among
SOVEREIGN BANK
and
MORO ACQUISITION CORP.
and
DAVID W. and JACQUELINE J. MENARD
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS .............................. 1
1.1 Definitions ............................................................ 1
1.2 Undefined Terms; Accounting Terms ...................................... 7
ARTICLE 2
AMOUNTS, TERMS AND CONDITIONS OF LINE OF CREDIT,
TERM LOAN AND ACQUISITION TERM LOAN .................. 7
2.1 Line of Credit Facility ................................................ 7
2.2 Line of Credit Note .................................................... 7
2.3 Term Loan .............................................................. 8
2.4 Term Note .............................................................. 8
2.5 Acquisition Term Loan .................................................. 9
2.6 Acquisition Term Note .................................................. 9
2.7 Payments ............................................................... 10
2.8 Computations ........................................................... 10
2.9 Confirmation of Borrowers' Liabilities ................................. 11
2.10 Late Charge ............................................................ 11
ARTICLE 3
SECURITY INTEREST ........................... 11
3.1 Grant of Security Interest and Assignment of Accounts .................. 11
3.2 Future Advances ........................................................ 12
3.3 Additional Security .................................................... 12
3.4 Perfection of Security Interest ........................................ 12
3.5 Power of Attorney ...................................................... 12
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BORROWERS................ 13
4.1 Organization, Qualification ............................................ 13
4.2 Affiliations; Fictitious Names ......................................... 13
4.3 Authority, Authorization ............................................... 14
4.4 Enforceability ......................................................... 14
4.5 Conflicts .............................................................. 14
4.6 Litigation ............................................................. 15
4.7 Compliance with Laws ................................................... 15
4.8 Taxes .................................................................. 15
4.9 Financial Condition .................................................... 16
4.10 Accounts ............................................................... 16
4.11 Equipment and Inventory ................................................ 16
4.12 Collateral ............................................................. 17
4.13 Contingent Liabilities ................................................. 18
<PAGE>
4.14 Trademarks, Tradenames, Patents and Copyrights ......................... 18
4.15 ERISA .................................................................. 18
4.16 Operations of Moro Acquisition ......................................... 18
4.17 Labor .................................................................. 18
4.18 COBRA Continuation Coverage ............................................ 18
4.19 Environmental Representations, Obligations and Covenants ............... 18
ARTICLE 5
CONDITIONS OF LENDING........................... 20
5.1 Loan Documents ......................................................... 21
5.2 Representations, Warranties ............................................ 21
5.3 Defaults ............................................................... 21
5.4 Certificates, Supporting Documents ..................................... 21
5.5 Collateral Security Documents .......................................... 21
5.6 Insurance .............................................................. 22
5.7 Subordination Agreement ................................................ 22
5.8 Equity Investment ...................................................... 22
5.9 Acquisition Documents .................................................. 22
5.10 Landlord's Waiver ...................................................... 22
ARTICLE 6
AFFIRMATIVE COVENANTS ......................... 22
6.1 Financial Statements ................................................... 22
6.2 Maximum Funded Senior Debt/Tangible Capital Funds Ratio ................ 23
6.3 Minimum Tangible Capital Funds ......................................... 23
6.4 Debt Coverage Ratio .................................................... 24
6.5 Minimum Net Working Capital ............................................ 24
6.6 Liabilities ............................................................ 24
6.7 ERISA .................................................................. 24
6.8 Notice of Default, Labor Troubles, Litigation .......................... 24
6.9 Corporate Existence, Properties ........................................ 24
6.10 Insurance .............................................................. 25
6.11 Policies; Proceeds ..................................................... 25
6.12 Books, Records, Audits ................................................. 25
6.13 Returned Merchandise ................................................... 26
6.14 Taxes, Etc. ............................................................ 26
6.15 Compliance with Laws ................................................... 26
6.16 Banking Relationship ................................................... 26
6.17 Financial Condition .................................................... 26
6.18 Use of Proceeds ........................................................ 26
6.19 Guarantor's Financial Statements ....................................... 26
6.20 Year 2000 Compliance ................................................... 26
<PAGE>
ARTICLE 7
NEGATIVE COVENANTS ........................... 27
7.1 Debt ................................................................... 27
7.2 Liens .................................................................. 27
7.3 Endorsements, Etc. ..................................................... 28
7.4 Change in Business; Mergers, Consolidations ............................ 28
7.5 Control ................................................................ 28
7.6 Subsidiaries ........................................................... 28
7.7 Contingent Liabilities ................................................. 29
7.8 Sales and Lease-Backs .................................................. 29
7.9 Limitation of Leases ................................................... 29
7.10 Voluntary Prepayments, Modification of Debt Instruments ................ 29
7.11 Removal and Protection of Property ..................................... 29
7.12 Transactions with Affiliates ........................................... 29
7.13 Disposition of Assets .................................................. 30
7.14 Disposition of Accounts ................................................ 30
7.15 Capital Expenditures ................................................... 30
ARTICLE 8
EVENTS OF DEFAULT, REMEDIES....................... 30
8.1 Events of Default ...................................................... 30
8.2 Acceleration and Termination of Commitments ............................ 32
8.3 Right of Set-Off ....................................................... 33
8.4 Marshalling ............................................................ 33
8.5 Cumulative Remedies .................................................... 33
ARTICLE 9
MISCELLANEOUS ............................. 33
9.1 Waivers ................................................................ 33
9.2 Notices ................................................................ 33
9.3 Legal Costs; Filing Costs .............................................. 34
9.4 Right of Entry ......................................................... 35
9.5 Warrant to Confess Judgment in Replevin ................................ 35
9.6 No Waiver .............................................................. 35
9.7 Application of Proceeds ................................................ 35
9.8 Representation, Warranties ............................................. 36
9.9 Successors ............................................................. 36
9.10 Governing Law .......................................................... 36
9.11 Headings ............................................................... 36
9.12 Severability ........................................................... 36
9.13 Entire Agreement ....................................................... 37
9.14 Location of Business; Inventory; Records ............................... 37
9.15 Conflicting Provisions ................................................. 37
9.16 Submission to Jurisdiciton ............................................. 37
9.17 Name Change ............................................................ 37
<PAGE>
LOAN AND SECURITY AGREEMENT
among
SOVEREIGN BANK
and
MORO ACQUISITION CORP.
and
DAVID W. and JACQUELINE J. MENARD
LOAN AND SECURITY AGREEMENT, (the "Agreement") dated March 31, 2000, among
SOVEREIGN BANK (the "Bank"), a federally-chartered, SAIF-insured savings
institution with offices at 1130 Berkshire Boulevard, Wyomissing, Pennsylvania
19610; MORO ACQUISITION CORP., a Delaware corporation ("Moro Acquisition");
DAVID W. and JACQUELINE J. MENARD ("Menards'," together with Moro Acquisition
sometimes hereinafter individually referred to as a "Borrower" and collectively
referred to as "Borrowers"), with offices at 111 Presidential Boulevard, Suite
240, Bala Cynwyd, Pennsylvania 19004, and MORO CORPORATION, a Delaware
corporation ("Guarantor").
Borrowers and Bank, intending to be legally bound, hereby agree as follows.
ARTICLE 1
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the following meanings when such terms are capitalized in the text
including when such terms are used in the definition of other defined terms in
Article 1:
Account Debtor. The party who is obligated on or under any Account.
Acquisition Documents. "Acquisition Documents" shall mean the Asset
Purchase Agreement, the Seller Notes and all other agreements, documents and/or
instruments executed and delivered by Borrowers to Seller in connection with the
acquisition of Seller's assets.
Acquisition Term Loan. The meaning provided at Section 2.5 hereof.
<PAGE>
Acquisition Term Note. The term note executed by the Menards' in the
principal amount specified in Section 2.6 hereof and in the form of Exhibit "C"
attached hereto and made apart hereof.
Advances. "Advances" shall have the meaning given to such term in Section
2.1(a) hereof.
Affiliate. With respect to any Person, another Person directly or
indirectly Controlling, Controlled by or under common Control with any such
Person.
Agreement. This Loan and Security Agreement and all amendments,
modifications and supplements hereto and restatements hereof.
Bank. Sovereign Bank, a federally-chartered, SAIF-insured savings
institution, or any successor bank.
Bankruptcy Code. The Bankruptcy Reform Act of 1994 and all similar or
successor statutes, and all rules and regulations of Federal agencies and
authorities promulgated under those statutes, all as they have been and may be
amended from time to time.
Borrowing Base. At any time, an amount equal to: (i) 80 % of Qualified
Accounts less than 90 days from invoice date plus (ii) 60% of Qualified
Inventory, with borrowings against inventory capped at $375,000 less (iii) the
Reserve Amount.
Borrowing Date. Each date upon which the Bank makes an Advance to a
Borrower.
Borrowers. Collectively, Moro Acquisition Corp., a Delaware corporation,
and David W. and Jacqueline J. Menard.
Business Day. A day other than a Saturday, Sunday or Holiday on which the
Bank is open for the transaction of banking business.
Code. The Internal Revenue Code of 1986, as amended.
Collateral. "Collateral" shall have the meaning given to such term in
Section 3.1 hereof.
Control. The possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
Controlled Group. "Controlled Group" shall have the meaning set forth for
"Controlled group of corporations" at Section 1563 of the Code.
Current Assets. The aggregate amount carried as current assets on the books
of Moro Acquisition; provided, however, that in no event shall Current Assets
include any deferred assets, other than prepaid items such as insurance, taxes,
interest, commissions, rents, royalties, and
2
<PAGE>
similar items or any other items that are not treated as current assets under
generally accepted accounting principles consistently applied.
Current Liabilities. The aggregate amount carried as liabilities on the
books of Moro Acquisition for accounts payable, accrued salaries, accrued
expenses, current taxes, current rent or lease payments, installments of
long-term Debt which are due on demand or within one (1) year after the date as
of which Current Liabilities are to be determined, any other Debt due on demand
or within one (1) year after the date as of which Current Liabilities are to be
determined, and any other amounts that are treated as current liabilities under
generally accepted accounting principles consistently applied.
Debt. (a) All items of indebtedness or liability which, in accordance with
generally accepted accounting principles consistently applied, would be included
in determining total liabilities as shown on a balance sheet as of the date as
of which the Debt is to be determined, (b) all indebtedness secured by any
mortgage, pledge, lien or security interest existing on property owned by the
Person whose Debt is being determined, whether or not the indebtedness secured
thereby is an obligation of such entity, and (c) guaranties, endorsements (other
than for purposes of collection in the ordinary course of business), other
contingent obligations in respect of, or to purchase or to otherwise acquire,
indebtedness of others, and other contingent obligations of a type described in
Section 7.8 hereof.
Debt Coverage Ratio. "Debt Coverage Ratio" shall mean Moro Acquisition's
net income plus depreciation and amortization divided by the current portion of
long-term Debt (excluding the $150,000 Seller Note).
Default. Any event specified in Section 8.1 of this Agreement, whether or
not any requirement for notice or passage of time or any other condition has
been satisfied.
ERISA. The Employee Retirement Income Security Act of 1974, as amended,
together with the rules and regulations promulgated thereunder.
Event of Default. Any event specified in Section 8.1 of this Agreement,
provided that any requirement for notice or passage of time or any other
condition has been satisfied.
Guarantor. Moro Corporation, a Delaware corporation.
Landlord's Waiver. The Landlord's Waiver substantially in the form of
Exhibit "D" attached hereto and made a part hereof.
Liabilities. The obligations of Borrowers to the Bank:
(a) To pay the principal of and all interest on the Notes in accordance
with the terms thereof, to pay all other amounts due by Borrowers in accordance
with the terms hereof, and to satisfy all of Borrowers' liabilities to the Bank,
whether hereunder or otherwise, whether now
3
<PAGE>
existing or hereafter incurred, matured or unmatured, direct or contingent,
primary or secondary, joint or several, including any extensions, modifications,
renewals thereof and substitutions therefor and liabilities of either Borrower
which the Bank may have obtained by assignment, subrogation, or otherwise, and
all liabilities of either Borrower as guarantor, surety or endorser of the
obligations of any third party or parties to the Bank;
(b) To repay the Bank all amounts advanced by the Bank hereunder or
otherwise on behalf of either Borrower, including, but without limitation,
advances for principal or interest, payments to prior secured parties,
mortgagees, or lienors, or for taxes, levies, insurance, securities,
registration fees, or agency fees for any of the Collateral;
(c) To reimburse the Bank, on demand, for all of the Bank's expenses
and costs, including the reasonable fees and expenses of its counsel, in
connection with the preparation of and closing under this Agreement and the
administration, amendment, modification, or enforcement of this Agreement and
the documents required hereunder, including, without limitation, any proceeding
brought or threatened to enforce payment of any of the obligations referred to
in the foregoing paragraphs (a) and (b), unless any of the foregoing are
occasional as a result of the Bank's willful misconduct or gross negligence.
Line of Credit Facility. The meaning provided at Section 2.1 hereof.
Line of Credit Note. The line of credit note executed by Moro Acquisition
in the principal amount specified in Section 2.2 hereof and in the form of
Exhibit "A" attached hereto and made a part hereof.
Loans. The Line of Credit Facility, the Term Loan and the Acquisition Term
Loan.
Loan Account. "Loan Account" shall mean the separate accounts of Borrowers
on the books of the Bank in which are recorded, inter alia, the Advances and the
payments of principal and interest made by Borrowers to the Bank.
Loan Documents. Individually and collectively, this Agreement, the Notes,
the Surety Agreement and all other existing and future agreements, pledges,
instruments, documents, assignments, leases, guarantees and contracts (including
amendments, modifications and supplements to and restatements of any of the
foregoing) delivered by or on behalf of either Borrower in connection with this
Agreement.
Loan Termination Date. The meaning provided at Section 2.1 hereof.
Maximum Funded Senior Debt/Tangible Capital Funds Ratio. "Maximum Funded
Senior Debt/Tangible Capital Funds Ratio" shall mean total Liabilities of Moro
Acquisition minus Subordinated Debt divided by Tangible Net Worth plus
Subordinated Debt.
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Minimum Net Working Capital. "Minimum Net Working Capital" shall mean the
excess of Current Assets over Current Liabilities.
Minimum Tangible Capital Funds. "Minimum Tangible Capital Funds" shall mean
Tangible Net Worth plus Subordinated Debt.
Notes. The Line of Credit Note, the Term Note and the Acquisition Term
Note.
PBGC. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
Person. Any individual, corporation, partnership, association, joint-stock
company, trust, unincorporated organization, joint venture, court or government
or political subdivision or agency thereof.
Plan. Any plan subject to Title IV of ERISA and maintained for employees of
Moro Acquisition, any of its subsidiaries or any members of a Controlled Group
of which Moro Acquisition is a part.
Prime Rate. "Prime Rate" shall mean the prime rate announced by the Bank,
from time to time, which may not represent the lowest rate charged by the Bank
to borrowers at any time or from time to time.
Qualified Accounts. At any time, all Accounts of Moro Acquisition but
excluding the following: (a) contra accounts, (b) offset accounts, (c) C.O.D. or
sight draft accounts, (d) commission accounts, (e) employee and salesmen
accounts, (f) consignment accounts, (g) guaranteed sales accounts, (h)
inter-company accounts, (i) any amount known to be not readily collectable for
any reason, (j) any invoice without a definite due date, (k) pre-billed
invoices, (l) the amount of any account which is more than 90 days past invoice
date, (m) accounts in litigation or arbitration, (n) all retainers (including,
but not limited to construction retainages), (o) accounts with 10% or more of
the balance 90 days past invoice date, (p) accounts not generated in the
ordinary course of business, (q) interest, (r) finance charges, (s) accounts
arising out of a contract with any department or instrumentality of the United
States of America, unless such account has been assigned to the Bank under the
provisions of the Federal Assignment of Claims Act, (t) accounts in which the
Bank does not have a first lien, and (u) such other accounts deemed to be
unqualified, in whole or in part, by the Bank in its discretion. Although the
above items are deemed unqualified for Advance purposes, they remain part of the
Collateral pledged to the Bank and perfected under the Uniform Commercial Code.
Qualified Inventory. At any time, all Inventory of Moro Acquisition which
meets all of the following criteria: (a) the Inventory is readily saleable in a
bona fide arm's length transaction, or is usable, in the ordinary course of
business of Moro Acquisition; (b) the title of Moro Acquisition to the Inventory
is absolute and is not subject to any prior assignment or encumbrance, except
the security interest of the Bank; (c) if the Inventory is located on leased
premises, a landlord's waiver
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satisfactory in form and substance to the Bank shall have been delivered to the
Bank for such premises; (d) the Inventory has not been designated or otherwise
identified as belonging to any entity other than Moro Acquisition; and (e) the
Inventory is located in Middlesex County, New Jersey, unless otherwise agreed in
writing by the Bank. Qualified Inventory shall not include any Inventory
drop-shipped or held on consignment by any other company than Moro Acquisition.
Reportable Event. "Reportable Event" has the meaning assigned to such term
in Section 4043(b) of ERISA or regulations issued thereunder.
Reserve Amount. "Reserve Amount" shall mean at any given time and from time
to time hereafter, the aggregate amount reserved under the availability under
the Line of Credit Note to pay all amounts owed by Moro Acquisition under the
$150,000 Seller Note. The Reserve Amount shall be measured in twelve (12) equal,
monthly installments in the amount of $12,500 each, commencing May 1, 2000 and
continuing on the first day of each month thereafter until April 1, 2001, at
which time the Reserve Amount shall equal $150,000.
Seller. "Seller" shall mean J.M. Ahle Co., Inc., a New Jersey corporation.
Seller Notes. "Seller Notes" shall mean Moro Acquisition's separate
promissory notes in the principal amounts of $100,000 and $150,000,
respectively, and payable to Seller.
Subordination Agreement. The Subordination Agreement substantially in the
form of Exhibit "F" attached hereto and made a part hereof, and all amendments,
modifications and supplements thereto and restatements thereof.
Subordinated Debt. "Subordinated Debt" shall mean the indebtedness of Moro
Acquisition evidenced by the note attached hereto as Exhibit "E."
Subordinated Lender. "Subordinated Lender" shall mean David W. Menard and
Jacqueline J. Menard.
Surety Agreement. The Surety Agreement substantially in the form of Exhibit
"G" attached hereto and made a part hereof, and all amendments, modifications
and supplements thereto and restatements thereof.
Term Loan. The meaning provided at Section 2.3 hereof.
Term Note. The term note executed by Moro Acquisition in the principal
amount specified in Section 2.4 hereof and in the form of Exhibit "B" attached
hereto and made a part hereof.
Total Liabilities. The aggregate amount which, in accordance with generally
accepted accounting principles consistently applied, is carried as total
liabilities on the books of Moro Acquisition.
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1.2 Undefined Terms; Accounting Terms. Unless expressly provided in this
Agreement, or unless the context requires otherwise:
(a) terms used in this Agreement without definition including but not
limited to Accounts, Chattel Paper, Documents, Equipment, General Intangibles,
Goods, Instruments, Inventory, and Proceeds, which are defined in the New Jersey
Uniform Commercial Code shall have the meanings assigned to them in the New
Jersey Uniform Commercial Code as amended from time to time, and
(b) all accounting terms not specifically defined herein shall be
construed, and all financial data submitted pursuant to this Agreement shall be
prepared, in accordance with generally accepted accounting principles, as
applied in the preparation of the latest reviewed financial statements delivered
to the Bank pursuant to Section 4.9 of this Agreement.
ARTICLE 2
AMOUNTS, TERMS AND CONDITIONS OF LINE OF CREDIT,
TERM LOAN AND ACQUISITION TERM LOAN
2.1 Line of Credit Facility.
(a) Subject to, and in accordance with, the terms and conditions of
this Agreement, the Bank agrees to make advances in integral multiples of $1,000
(the "Advances") to Moro Acquisition upon request at any time and from time to
time during the period commencing on the date hereof and ending on the earlier
of (i) the occurrence of an Event of Default (as defined in Section 8.1 hereof),
or (ii) April 30, 2001 (the "Loan Termination Date") unless extended in writing
by the Bank in its sole discretion, in an amount which in the aggregate shall
not exceed the lesser of (A) the Borrowing Base, or (B) $1,250,000 in all cases,
less the sum of the then unpaid principal amount of all previous Advances.
(b) Moro Acquisition may request on Advance by notice to the Bank not
later than 2:00 P.M., Philadelphia, Pennsylvania time, on the Business Day on
which Moro Acquisition wishes the Bank to make the Advance.
(c) Moro Acquisition, subject to the terms and conditions of this
Agreement, may reborrow any amount repaid by Moro Acquisition at any time and
from time to time on or before the termination of the Bank's commitment under
this Section 2.1.
(d) The term of this Line of Credit shall commence on the date hereof
and, unless earlier terminated, shall terminate on the earlier to occur of (i)
an Event of Default, or (ii) the Loan Termination Date, unless extended in
writing by the Bank in its sole discretion.
2.2 Line of Credit Note. The obligation of Moro Acquisition to pay the
principal of, and accrued interest on, the Line of Credit shall be evidenced by
its promissory note dated this date (the "Line of Credit Note"):
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(a) payable to the order of the Bank in the face amount of One Million
Two Hundred Fifty Thousand Dollars ($1,250,000);
(b) bearing interest on its unpaid principal amount of all Advances at
an annual rate equal to the Prime Rate plus three quarters percent (.75%).
Interest shall fluctuate with changes in the Prime Rate, shall be computed on
the actual number of days elapsed on the basis of a 360-day year and shall be
payable monthly on the first day of each month;
(c) payable as to interest monthly in arrears on the first day of each
calendar month commencing May 1, 2000 through and including the first day on
which:
(i) the Line of Credit shall have been terminated, and
(ii) Moro Acquisition shall have repaid in full the Line of Credit
(it being understood that interest shall again accrue upon any subsequent
borrowing under this Line of Credit);
(d) payable as to principal as follows:
(i) if the unpaid balance of the Line of Credit exceeds the
limitations set forth in Section 2.1(a) hereof, at any time, then within three
(3) Business Days after notification from the Bank, but only as to such excess;
or
(ii) in full on the earlier to occur of an Event of Default or the
Loan Termination Date, unless extended in writing by the Bank in its sole
discretion;
(e) secured by the Collateral and the Surety Agreement;
(f) prepayable by Moro Acquisition without penalty or premium but with
accrued interest to the date of such prepayment on the amount prepaid, at any
time and from time to time, in whole or in part, upon notification to the Bank
of such prepayment not later than 10:00 a.m. on the date of such prepayment; and
(g) substantially in the form of Exhibit "A" attached hereto and made a
part hereof.
2.3 Term Loan. Subject to, and in accordance with, the terms and conditions
of this Agreement, the Bank agrees to loan Moro Acquisition the principal amount
of One Hundred Twenty-Five Thousand Dollars ($125,000.00) (the "Term Loan").
2.4 Term Note. The obligation of Moro Acquisition to pay the principal of,
and accrued interest on, the Term Loan shall be evidenced by its promissory note
dated this date (the "Term Note"):
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(a) payable to order of the Bank in the face amount of One Hundred
Twenty-Five Thousand Dollars ($125,000.00);
(b) bearing interest on the unpaid principal amount at a fixed annual
rate of nine percent (9.00%);
(c) with interest payable on a monthly basis in arrears on the first
day of each calendar month commencing May 1, 2000;
(d) with principal payable in fifty-nine (59) equal, consecutive
monthly installments in the amount of $2,083.00 each, plus interest thereon,
commencing on May 1, 2000 and continuing on the first day of each month
thereafter until April 1, 2005, at which time the remaining unpaid principal
balance, plus all accrued interest thereon, shall be paid in full, or due in
full upon the occurrence of an Event of Default;
(e) prepayable by Moro Acquisition without penalty or premium but with
accrued interest to the date of such prepayment on the amount prepaid, at any
time and from time to time, in whole or in part, upon notification to the Bank
of such prepayment not later than 10:00 a.m. on the date of such prepayment;
(f) secured by the Collateral and the Surety Agreement; and
(g) in the form of Exhibit "B" attached hereto and made a part hereof.
2.5 Acquisition Term Loan. Subject to, and in accordance with, the terms
and conditions of this Agreement, the Bank agrees to loan the Menards' the
principal amount of Three Hundred Thousand Dollars ($300,000.00) (the
"Acquisition Term Loan").
2.6 Acquisition Term Note. The obligation of the Menards' to pay the
principal of, and accrued interest on, the Acquisition Term Loan shall be
evidenced by their promissory note dated this date (the "Acquisition Term
Note"):
(a) payable to order of the Bank in the face amount of Three Hundred
Thousand Dollars ($300,000.00);
(b) bearing interest on the unpaid principal amount at a fixed annual
rate of nine percent (9.00%);
(c) with interest payable on a monthly basis in arrears on the first
day of each calendar month commencing May 1, 2000;
(d) with principal payable in three (3) equal, consecutive annual
installments in the amount of $75,000.00 each, plus interest thereon, commencing
on April 1, 2002 and continuing on the first day of each April thereafter until
April 1, 2005, at which time the remaining unpaid
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principal balance of $75,000.00, plus all accrued interest thereon, shall be
paid in full, or due in full upon the occurrence of an Event of Default;
(e) prepayable by the Menards' without penalty or premium but with
accrued interest to the date of such prepayment on the amount prepaid, at any
time and from time to time, in whole or in part, upon notification to the Bank
of such prepayment not later than 10:00 a.m. on the date of such prepayment;
(f) secured by the Surety Agreement; and
(g) substantially in the form of Exhibit "C" attached hereto and made a
part hereof.
2.7 Payments.
(a) All payments by Borrowers under the Loan Documents shall be made to
the Bank at its office described in the heading of this Agreement, or such other
place or places as the Bank may direct in writing, prior to 2:00 P.M.,
Philadelphia, Pennsylvania time, on the date of payment (or, if the date of
payment is not a Business Day, the next Business Day) in funds which are
immediately available to the Bank.
(b) All payments received by the Bank in immediately available funds
prior to 2:00 P.M., Philadelphia, Pennsylvania time, on any Business Day will be
credited to Borrowers' Loan Accounts on the date of receipt. All payments
received by the Bank in immediately available funds after 2:00 P.M.,
Philadelphia, Pennsylvania time, on any Business Day will be credited to
Borrowers' Loan Accounts on the next Business Day.
(c) All payments received by the Bank which are not in immediately
available funds shall be subject to a clearance of three (3) Business Days.
2.8 Computations.
(a) Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed (365/360 or 366/360, as the case may be). Interest
for each month shall be added to principal as of the close of each month.
(b) Any change in interest rate resulting from a change in the Prime
Rate shall be effective as of the opening of business on the day on which the
Bank announces the change.
(c) Except as otherwise expressly provided in this Agreement, whenever
a payment of principal becomes due on a day which is not a Business Day, the
maturity of the Liabilities shall be extended to the next succeeding Business
Day and interest shall accrue on such Liabilities at the applicable rate during
the extension.
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2.9 Confirmation of Borrowers' Liabilities. Each and every statement of
account transmitted by Bank to Borrowers hereunder, whether in person, or by
ordinary mail or otherwise, shall be final, conclusive and binding upon
Borrowers in all respects as to all loans, fees, interest, charges, payments,
receipts, balances, Collateral and all other matters reflected therein unless
Borrowers, within thirty (30) days after the mailing thereof, shall give notice
to Bank in writing of all objections to any such statement of account specifying
those items considered by Borrowers to be in dispute. Borrowers agree that their
failure to specify items in dispute within the foregoing thirty (30) day period
shall operate as a waiver of their rights to do so at a later time.
2.10 Late Charge. If any of the payments under the Notes shall become
overdue for a period of ten (10) days, Borrowers shall pay the Bank a "late
charge" of five percent (5%) of the monthly interest payment then past due.
ARTICLE 3
SECURITY INTEREST
3.1 Grant of Security Interest and Assignment of Accounts.
(a) To secure the payment to the Bank of Moro Acquisition's
Liabilities, and to secure performance of all of its obligations under this
Agreement, Moro Acquisition hereby grants to the Bank a first lien security
interest in all of Moro Acquisition's presently owned and hereafter acquired
Accounts, Chattel Paper, Documents, Equipment (including, but not limited to,
machinery, equipment, fixtures, office equipment and furniture and motor
vehicles), General Intangibles (including, but not limited to, goodwill,
trademarks, tradenames, trade styles, patents, copyrights and telephone numbers
and listings), Goods, Instruments, Inventory, Investment Property, Letters of
Credit and Advices of Credit and all accessions thereto, all products and cash
and non-cash Proceeds of the same (collectively, the "Collateral"), and Moro
Acquisition hereby assigns, transfers and sets over to the Bank all of its
presently owned and hereafter acquired Accounts and Proceeds thereof. Moro
Acquisition agrees that the aforesaid grant of security interest is intended as
a contemporaneous exchange for value given to Moro Acquisition.
(b) The right to Proceeds provided for above does not, and shall not be
interpreted to, constitute authorization or consent by the Bank to any
disposition of any Collateral. This Agreement and the security interest granted
herein shall stand as general and continuing security for all Liabilities and
may be retained by the Bank until all Liabilities have been satisfied in full;
provided, however, that this Agreement shall not be rendered void by the fact
that no commitment by the Bank to make Advances to Moro Acquisition exists as of
any particular date, but shall continue in full force and effect until all
Liabilities have been satisfied in full and neither party hereto has any
obligation to the other under any of the Loan Documents.
(c) As additional security for the Liabilities, Moro Acquisition
conveys, assigns and grants a security interest to the Bank in and to all
present and future files, books, ledgers, records, bills, invoices, receipts,
deeds, certificates or documents of ownership, warranties, bills of sale and all
other data and data storage systems, storage media and computer software used or
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required in connection with generating, processing, and storing such records or
otherwise used or acquired in connection with documenting information concerning
or pertaining to any of the Collateral.
3.2 Future Advances. The Liabilities secured hereby include all future
advances, including payments on guarantees, made by the Bank at any time or
times to or for the benefit of Moro Acquisition, whether obligatory or optional,
including all costs, expenses, court costs and reasonable attorneys' fees
incurred in the collection of the Liabilities and/or the Collateral, or for the
establishment, maintenance or enforcement of the Bank's security interest
therein.
3.3 Additional Security. As additional Collateral to secure the
Liabilities, each Borrower grants to the Bank a security interest in all of such
Borrower's present and future deposits or other monies due from instruments,
documents, policies and certificates of insurance, securities, goods, accounts
receivable, choses in action, chattel paper, currency, property and the proceeds
thereof, owned by such Borrower or in which it has an interest, now or hereafter
in the possession or control of the Bank or in transit by mail or carrier to or
from the Bank or in the possession of any other person acting in the Bank's
behalf, without regard to whether the Bank received the same in pledge, for
safekeeping, as agent for collection or transmission or otherwise, or whether
the Bank has conditionally released the same. The property described in this
paragraph shall constitute part of the Collateral for all purposes under this
Agreement.
3.4 Perfection of Security Interest. Moro Acquisition shall execute and
deliver to the Bank concurrently with the execution of this Agreement, and at
any time or times hereafter at the request of Bank all assignments, certificates
of title, conveyances, assignment statements, financing statements, renewal
financing statements, security agreements, affidavits, notices and all other
agreements, instruments and documents that the Bank may reasonably request, in
form satisfactory to the Bank, and shall take any and all other steps reasonably
requested by the Bank, in order to perfect and maintain the security interests
and liens granted herein by Moro Acquisition to the Bank and in order to fully
consummate all of the transactions contemplated herein and under this Agreement.
3.5 Power of Attorney. Moro Acquisition does hereby irrevocably make,
constitute and appoint the Bank and any of its officers, employees or agents as
the true and lawful attorneys of Moro Acquisition so long as any of the
Liabilities remain unpaid with power to:
(a) sign the name of Moro Acquisition on any financing statement,
renewal financing statement, notice or other similar document which, in the
Bank's opinion, must be filed in order to perfect or continue perfected the
security interests granted in this Agreement;
(b) following an Event of Default which is continuing beyond any
applicable grace period, receive, endorse, assign and deliver, in the name of
Moro Acquisition or in the name of the Bank, all checks, notes, drafts and other
instruments relating to any Collateral including but not limited to receiving,
opening and properly disposing of all mail addressed to Moro Acquisition
concerning Accounts;
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(c) following an Event of Default which is continuing beyond any
applicable grace period, sign the name of Moro Acquisition on any invoice or
bill of lading relating to any Account, drafts against Account Debtors,
schedules and assignments of Accounts, notices of assignment, verifications of
Accounts and notices to Account Debtors, including, but not limited to, notices
to Account Debtors advising them to make payments on Accounts directly to the
Bank;
(d) take or bring at Moro Acquisition's cost, in its name or in the
name of the Bank, all steps, actions and suits deemed by Bank necessary or
desirable to effect collections of Accounts, to enforce payment of any Account,
to settle, compromise, sell, assign, discharge or release, in whole or in part,
any amounts owing on Accounts, to prosecute any action or proceeding with
respect to Accounts, to extend the time of payment of any and all Accounts, and
to make allowances and adjustments with respect thereto;
(e) following an Event of Default which is continuing beyond any
applicable grace period, do all other things necessary to carry out this
Agreement.
Neither the Bank nor any attorney will be liable for any act of
commission (other than an act of willful misconduct by the Bank) or omission nor
for any error of judgment or mistake of fact or law. This power, being coupled
with an interest, is irrevocable so long as any of the Liabilities remain
unpaid.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BORROWERS
To induce the Bank to enter into this Agreement, and to make the Loans
provided for herein, Borrowers, jointly and severally, represent and warrant to
the Bank that:
4.1 Organization Qualification of Moro Acquisition.
(a) Moro Acquisition is a corporation duly organized, validly
subsisting and in good standing under the laws of the State of Delaware.
(b) Moro Acquisition is duly licensed or qualified as a foreign
corporation and in good standing under the laws of each jurisdiction in which
the nature of the business transacted by it and the character of the property
owned or leased by it make such licensing or qualification necessary and where
the failure to be so licensed or qualified is material to the business of Moro
Acquisition.
(c) Moro Acquisition has no subsidiaries.
4.2 Affiliations; Fictitious Names.
(a) Moro Acquisition is not a member of any partnership or joint
venture.
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(b) Except for Moro Corporation, Moro Acquisition is not affiliated, by
stock ownership or otherwise, with any other business entity.
(c) Moro Acquisition has never conducted business under or otherwise
used any fictitious names or trade names.
4.3 Authority. Authorization.
(a) Each Borrower has the power to execute, deliver and perform the
Loan Documents to which it is a party, and to borrow under this Agreement and
the Notes.
(b) Each Borrower has taken all necessary action to authorize the
borrowings provided for in this Agreement and the execution, delivery and
performance of the Loan Documents to which such Borrower is a party.
(c) No consent of any other party (including shareholders of Moro
Acquisition) and no consent, license, approval or authorization of, or
registration or declaration with, any governmental authority, bureau or agency
is required in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any Loan Documents to which either Borrower
is a party.
4.4 Enforceability.
(a) This Agreement has been duly and validly executed by Borrowers and
constitutes a legal, valid and binding contract of Borrowers, enforceable in
accordance with its terms, except as its enforceability may be limited by
bankruptcy, insolvency or other similar laws of general application relating to
or affecting the enforcement of creditors' rights.
(b) All other Loan Documents, when executed and delivered to the Bank
pursuant to the terms of this Agreement or those Loan Documents, will be legal,
valid and binding obligations enforceable in accordance with their terms and the
terms of this Agreement, except as the enforcement of any of them may be limited
by bankruptcy, insolvency or other similar laws of general application relating
to or affecting the enforcement of creditors' rights.
4.5 Conflicts.
(a) The execution, delivery and performance of the Loan Documents to
which each Borrower is a party will not conflict with, result in a breach of, or
constitute a default under any provision of:
(i) any existing law or regulation or order of any court,
governmental authority, bureau or agency having jurisdiction;
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(ii) the Certificate of Incorporation or By-Laws of Moro
Acquisition; or
(iii) any agreement or instrument to which either Borrower is a
party or which purports to be binding upon it any of its assets.
(b) The execution, delivery and performance of the Loan Documents to
which either Borrower is a party will not result in the creation or imposition
of any lien on any of its assets pursuant to the provisions of any agreement or
instrument to which either Borrower is a party or which purports to be binding
upon it or any of its assets other than such liens as are created by the Loan
Documents themselves.
4.6 Litigation.
(a) There is no litigation or governmental proceeding pending or, to
the knowledge of Borrowers, threatened which is reasonably likely to:
(i) have a material adverse effect on the financial condition or
business of either Borrower so as to impair the ability of either Borrower to
perform this Agreement or any of the Loan Documents; or
(ii) prohibit, restrict or limit payment of the Notes or
performance of this Agreement by either Borrower.
(b) Neither Borrower is in default with regard to any order of any
court or governmental authority.
4.7 Compliance with Laws. Moro Acquisition's business is in compliance in
all material respects with all laws, ordinances and other governmental
regulations; there is no outstanding notice of any uncorrected violation of any
such law, ordinance or governmental regulation; Moro Acquisition has all
permits, licenses, approvals and other authorizations from federal, state and
local authorities that are necessary for the conduct of its business as now
conducted or intended to be conducted in the future, and, to the best of Moro
Acquisition's knowledge, no claim is pending or threatened to revoke any of said
permits, licenses, approvals and other authorizations or to declare them invalid
in any respect.
4.8 Taxes.
(a) Each Borrower has filed or caused to be filed all tax returns
(including, without limitation, those relating to Federal and state income
taxes) required to be filed and has paid all taxes shown to be due and payable
on those returns or on any assessments made against it (other than those being
contested in good faith by appropriate proceedings for which adequate reserves
have been provided on its books). Neither Borrower knows of any proposed
additional tax assessment against it not adequately covered by reserves.
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(b) The reserves and provisions for taxes on the books of Moro
Acquisition are adequate for all open years and for its current fiscal period.
(c) No tax liens have been filed against the assets of either Borrower,
and no claims are being asserted with respect to such taxes which, if adversely
determined, would have a material adverse effect upon the financial condition,
business or operations of either Borrower.
4.9 Financial Condition. To the best of Borrowers' knowledge, information
and belief, all balance sheets, profit and loss statements, and other financial
statements of Moro Acquisition which have heretofore been delivered to the Bank,
and all financial statements and data of Moro Acquisition which will hereafter
be furnished to Bank, are or will be (when furnished) true and correct and do or
will (when furnished) present fairly, accurately and completely the financial
position of Moro Acquisition and the results of its operations as of the dates
and for the periods for which the same are furnished. All such financial
statements of Moro Acquisition have been and will be prepared in accordance with
generally accepted accounting principles and practices applied on a consistent
basis. Moro Acquisition does not possess and will not possess any "loss
contingency" (as that term is defined in Financial Accounting Standards Board,
Statement of Financial Accounting Standards No. 5 - "FASB 5 ") which is not
accrued, reflected, or reserved against in its reviewed balance sheet or
disclosed in the footnotes to such reviewed balance sheet. There has been no
material adverse change in the business, properties, operations or condition
(financial or otherwise) of Moro Acquisition since the date of the financial
statements which were most recently furnished by Moro Acquisition to the Bank.
No event has occurred which could reasonably be expected to interfere with the
normal business operations of Moro Acquisition, except as disclosed in writing
to Bank heretofore or concurrently herewith.
4.10 Accounts. Moro Acquisition represents and warrants that:
(a) it is now and at all times hereafter shall be the absolute owner,
free and clear of all liens, encumbrances and security interests, except the
liens and security interests granted or permitted herein and the potential liens
of any state government to enforce possible sales tax liabilities, of
indefeasible title to its Accounts; and
(b) every Account described in the certifications delivered in
accordance with Section 6.1(a)(iii) hereof will be a good and valid Account
representing an undisputed bona fide indebtedness of a debtor to Moro
Acquisition and there are and will be no defenses, setoffs, contraclaims, or
counterclaims of any nature whatsoever against any such Account; and no
agreement under which any deduction, discount, allowance or special terms of
payment may be claimed, has been or will be made with any Account Debtor except
as shown on the statement or invoice furnished to the Bank with reference
thereto.
4.11 Equipment and Inventory. Moro Acquisition represents and warrants
that;
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(a) it is now, and at all times hereafter shall be, the sole owner,
free and clear of all liens, encumbrances and security interests, except the
liens and security interests granted or permitted herein, of indefeasible title
to its Equipment and Inventory; and
(b) except for depreciation and obsolescence, Moro Acquisition will
keep its Equipment in good repair and maintained in a state of good operating
efficiency, and will make all necessary repairs, replacements of and renewals so
that the value and operating efficiency thereof shall at all times be maintained
and preserved in a manner consistent with good management.
4.12 Collateral. Moro Acquisition represents and warrants that:
(a) it is the lawful owner of all Collateral and has the right to
pledge, sell, assign and transfer the same and grant a security interest
therein; no Collateral has been or will be pledged, sold, assigned or
transferred to any person, firm or corporation, other than the Bank or in any
way encumbered and Moro Acquisition will warrant and defend all Collateral
against the claims and demands of all persons, firms or corporations;
(b) all representations made by Moro Acquisition to the Bank with
reference to the description, content or valuation of any and all of the
Collateral are true and correct; the sale of all merchandise which gives rise to
an Account is an absolute sale and not on consignment or approval and all such
merchandise shall have been the absolute property of Moro Acquisition, free of
lien, and Moro Acquisition does not have the same on consignment or approval;
all services which give rise to an Account have actually been performed; all
invoices, records, notes, documents of title, shipping, and delivery receipts
and any and all other instruments, memoranda and documents presented or
delivered to the Bank shall be valid, genuine and not subject to any dispute or
defense;
(c) as of the execution of this Agreement, no other financing
agreements are in force and no claim of any security interest, lien or
encumbrance in or on the Collateral is on file in any public office;
(d) there is no fact that Borrowers have not disclosed to the Bank in
writing and described in Schedule 4.12(d) hereof that could materially adversely
affect the properties, business or financial condition of either Borrower or of
the Collateral or the Loans provided for in this Agreement;
(e) this Agreement, upon the filing of financing statements in the
appropriate governmental offices, will create in favor of the Bank a valid and
perfected first lien security interest in the Collateral; and
(f) the Collateral and all of the records, ledger sheets,
correspondence and invoice documents and instruments, relating to or evidencing
the Collateral shall be kept on the premises described in Section 9.14 of this
Agreement, such records to be kept in appropriate
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containers in safe places. The Bank at all reasonable times shall have full
access to and the right to audit the Borrowers' books and records.
4.13 Continent Liabilities. There are no suretyship agreements, guarantees
or other contingent liabilities of either Borrower that are not disclosed in the
financial statements described in Section 4.9 or in Schedule 4.13, except such
liabilities as are created by the Loan Documents.
4.14 Trademarks, Tradenames, Patents and Copyrights. All trademarks,
tradenames, patents and copyrights owned by either Borrower, as well as all
applications for any of the foregoing, are described in Schedule 4.14 attached
hereto and made a part hereof.
4.15 ERISA. No Reportable Event has occurred with respect to any Plan. Each
Plan has been maintained, in all material respects, in accordance with its terms
and with all provisions of ERISA applicable thereto. Moro Acquisition has not
incurred any liability to the PBGC.
4.16 Operations of Moro Acquisition. All operations of Moro Acquisition
have been carried on in accordance with all applicable laws, statutes,
ordinances, rules and regulations, including, but not limited to, those relating
to degradation of the environment. No investigation by any governmental
authority, federal, state or local, is pending or threatened against either
Borrower.
4.17 Labor. Moro Acquisition is not involved in any strike, lock-out,
boycott or any other labor trouble, similar or dissimilar, nor is it involved in
labor negotiations. Moro Acquisition is not a party to any collective bargaining
agreement.
4.18 COBRA Continuation Coverage. Moro Acquisition provides COBRA
Continuation Coverage under group health plans (if any) for separating employees
in accordance with the provisions of Section 4980B of the Code.
4.19 Environmental Representations. Obligations and Covenants.
(a) Borrowers represent and warrant that they have conducted all
appropriate inquiry and do not know or have reason to know of any activity at
any real property leased or owned by either Borrower (collectively, the "Real
Property") which has been conducted, or is being conducted, except in compliance
with all statutes, ordinances, regulations, orders and requirements of common
law concerning (i) those activities, (ii) repairs or construction of any
improvements, (iii) handling of any materials, (iv) discharges to the air, soil,
surface water or ground water, and (v) storage treatment or disposal of any
waste at or connected with any activity at the Real Property ("Environmental
Statutes").
(b) Borrowers shall cause all activities at the Real Property to be
conducted in compliance with all Environmental Statutes. Borrowers shall cause
all permits, licenses or approvals to be obtained, and shall cause all
notifications to be made, as required by Environmental
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Statutes. Borrowers shall, at all times, cause compliance with the terms and
conditions of any such approvals or notifications.
(c) Borrowers represent and warrant that, to the best of their
knowledge, no contamination is present at the Real Property. Borrowers shall not
permit contamination of the Real Property by hazardous substances. Borrowers
shall cause hazardous substances to be handled on the Real Property in a manner
which will not cause an undue risk of the contamination of the Real Property.
(d) For purposes of this section, the term "contamination" shall mean
the uncontained presence of hazardous substances at the Real Property, or
arising from the Real Property, which may require remediation under any
applicable law.
(e) For purposes of this section, "hazardous substances" shall mean
"hazardous substances" or "contaminants" as defined pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601-9657, as -- amended by the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (Oct. 17, 1986), "regulated
substances" within the meaning of subtitle I of the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6991-69911, as -- amended by the Superfund
Amendments and Reauthorization Act of 1986 Pub. L. No. 99-499, 100 Stat. 1613
(Oct. 17, 1986), and "hazardous substances" or "contaminants" as defined
pursuant to the Pennsylvania Hazardous Sites Cleanup Act, Pa. Stat. Ann. tit.
35, Section 6020.101 to .1305 (Purdon Supp. 1989), or any other substances which
may be the subject of liability pursuant to Sections 316 or 401 of the
Pennsylvania Clean Streams Law, Pa. Stat. Ann. tit. 35, Section 691.1 to .1001
(Purdon 1977 and Supp. 1989).
(f) Borrowers represent and warrant that they have conducted all
appropriate inquiry and does not know or have any reason to know of any:
(i) polychlorinated biphenyls or substances containing
polychlorinated biphenyls present on the Real Property,
(ii) asbestos or materials containing asbestos present on the Real
Property, or
(iii) urea formaldehyde foam insulation on the Real Property.
(g) Borrowers represent and warrant that they do not know or have
reason to know of any investigation of the Real Property for presence of radon
gas or the presence of the radioactive decay products of radon.
(h) Borrowers represent and warrant that, to the best of their
knowledge after due inquiry, no tanks presently or formerly used for the storage
of any gas, chemical or petroleum product above or below ground are present at
the Real Property. Borrowers shall neither install
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nor permit to be installed any temporary or permanent tanks for the storage of
any liquid or gas above or below ground except as in compliance with the other
provisions of this Section.
(i) Upon the occurrence of an Event of Default and acceleration of
payment of all obligations of Borrowers under Section 8.2 hereof, the Bank may,
at its discretion, commission an investigation at Borrowers' expense of (i)
compliance at the Real Property with Environmental Statutes, (ii) the presence
of hazardous substances or contamination at the Real Property, (iii) the
presence at the Real Property of material which is the subject of subparagraph
(f) of this section, (iv) the presence at the Real Property of radon, or (v) the
presence at the Real Property of tanks which are the subject of subparagraph (h)
of this Section.
(j) In connection with any investigation pursuant to subparagraph (i)
of this paragraph, Borrowers shall comply with any reasonable request for
information made by the Bank or its agents in connection with any such
investigation. Borrowers represent and warrant that any response to any such
request for information will be full and complete.
(k) Borrowers will assist the Bank and its agents to obtain any
records pertaining to the Real Property or to either Borrower in connection with
an investigation pursuant to subparagraph (i) of this Section.
(l) Borrowers will afford the Bank and its agents access to all areas
of the Real Property at reasonable times and in reasonable manners in connection
with any investigation pursuant to subparagraph (i) of this Section.
(m) No investigation commissioned pursuant to subparagraph (i) shall
have any effect upon the representations or warranties made by Borrowers to the
Bank under this Section.
(n) Borrowers hereby, jointly and severally, agree to indemnify and to
hold harmless the Bank of, from and against any and all expenses, loss or
liability suffered by the Bank by reason of either Borrower's breach of any of
the provisions of this Section including (but not limited to) (i) any and all
expenses that the Bank may incur in complying with the Environmental Statutes;
(ii) any and all costs that the Bank may incur in studying or remedying any
contamination of the Real Property; (iii) any and all fines, penalties or other
sanctions (including a voiding of any transfer of the Real Property) assessed
upon the Bank by reason of failure of either Borrower to have complied with
Environmental Statutes; (iv) any and all loss of value of the Real Property by
reason of: (A) failure to comply with Environmental Statutes; (B) the presence
on the Real Property of any hazardous substances; (C) the presence on the Real
Property of any materials which are the subject of this section; (D) the
presence on the Real Property of radon; or (E) the presence on the Real Property
of any tank; and (v) any and all legal and professional fees and costs incurred
by the Bank in connection with the foregoing. This indemnification shall survive
payment of the Notes.
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ARTICLE 5
CONDITIONS OF LENDING
The obligation of the Bank to make any Advances is subject to the
accuracy of the representations and warranties in Article 4 of this Agreement as
of the date of this Agreement, the performance by Borrowers of their obligations
to be performed under this Agreement before the date of each of the Advances,
and the satisfaction of the following conditions:
5.1 Loan Documents. Borrowers shall have executed and delivered or caused
to be executed and delivered to the Bank all Loan Documents.
5.2 Representations, Warranties. The representations and warranties
contained in Article 4 of this Agreement shall be true at and as of the date of
the making of any Advance with the same effect as if made at and as of such
time, except to the extent that the facts upon which such representations and
warranties are based may be changed in the ordinary course by the transactions
permitted or contemplated by this Agreement.
5.3 Defaults. There shall exist no Default or condition which, with the
giving of notice or the passage of time or both, would result in an Event of
Default upon consummation of any Advance.
5.4 Certificates. Supporting Documents. The Bank shall have received:
(a) copies, certified by the Secretary of Moro Acquisition, of the
resolutions of the Board of Directors of Moro Acquisition authorizing the
execution, delivery and performance of the Loan Documents to which Moro
Acquisition is a party and the borrowings under this Agreement;
(b) certificates of the Secretary of Moro Acquisition as to the
incumbency and signatures of the officers of Moro Acquisition signing the Loan
Documents to which it is a party;
(c) a certificate of the Secretary of State of the jurisdiction of
incorporation of Moro Acquisition as to the good standing of Moro Acquisition
dated no more than ten (10) days prior to the date of this Agreement;
(d) a financial statement, in form satisfactory to Bank, from the
Guarantor; and
(e) an opinion of counsel to Borrowers and Guarantor satisfactory in
form and substance to the Bank and its counsel.
5.5 Collateral Security Documents. Borrowers shall have delivered or shall
have caused to be delivered to the Bank the Surety Agreement and such other
collateral security documents as shall be required by the Bank. Financing
statements describing the Collateral shall have been filed or readied for filing
in each jurisdiction and in each office as shall have been required by the Bank.
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5.6 Insurance. Moro Acquisition shall have provided the Bank with
certificates of insurance evidencing Moro Acquisition's compliance with the
requirements of Section 6.10 hereof.
5.7 Subordination Agreement. Moro Acquisition and the Subordinated Lender
shall have delivered the Subordination Agreement to the Bank.
5.8 Equity Investment. Borrowers shall have furnished the Bank evidence
satisfactory to the Bank that David W. Menard and/or members of his immediate
family have contributed $200,000 to the capital of Moro Acquisition.
5.9 Acquisition Documents. The Bank and its counsel shall have received and
reviewed copies of all the Acquisition Documents in executable form.
5.10 Landlord's Waiver. Borrowers shall have delivered the Landlord's
Waiver to the Bank.
ARTICLE 6
AFFIRMATIVE COVENANTS
On and after the date of this Agreement and so long as the Notes remain
outstanding and unpaid in whole or in part, or so long as the credit
availability evidenced thereby remains in effect, whichever is longer, Borrowers
will observe the following covenants unless the Bank shall otherwise consent in
writing:
6.1 Financial Statements.
(a) Moro Acquisition will furnish to the Bank the financial information
described below:
(i) Annual Statements. As soon as available, and in any event not
later than ninety (90) days after the close of each fiscal year of Moro
Acquisition beginning with the fiscal year ending December 31, 2000, the annual
reviewed financial report of Moro Acquisition containing a balance sheet of Moro
Acquisition as of the end of such fiscal year and related statements of income,
shareholders' equity and changes in financial position of Moro Acquisition for
such fiscal year, setting forth in each case in comparative form the
corresponding figures of the previous annual report, all in reasonable detail,
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved, and reviewed without
exception or qualification by independent certified public accountants selected
by and satisfactory to the Bank.
(ii) Quarterly Statements. As soon as available, and in any event
not later than fortyfive (45) days after the close of each quarter of each
fiscal year of Moro Acquisition, a balance sheet of Moro Acquisition as of the
end of such quarter and related statements of income, shareholders' equity and
changes in financial position of Moro Acquisition for such period and for
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the period from the beginning of the current fiscal year to the end of such
quarter, setting forth in each case in comparative form the corresponding
figures for the corresponding periods of the preceding fiscal year, all in
reasonable detail, prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved, and
compiled by the chief financial officer of Moro Acquisition.
(iii) Agings. As soon as possible, but in any event not later than
fifteen (15) days after the close of each month of the fiscal year of Moro
Acquisition, an accounts receivable aging certified by the principal financial
officer of Moro Acquisition.
(iv) Borrowing Base Certification. As soon as possible, but in any
event not later than ten (10) days after the close of each month of the fiscal
year of Moro Acquisition, a Borrowing Base certificate substantially in the form
of Exhibit "G" attached hereto and made a part hereof.
(v) Chief Financial Officer's Certificate. Concurrently with the
delivery of the financial statements referred to in paragraph (ii) above, a
certificate of the officer of Moro Acquisition who certified such statements, to
the effect that:
(A) no Event of Default or Default has occurred and is
continuing under this Agreement, or, if any such Event of Default or Default
exists, specifying its nature, the period of its existence and the curative
action Moro Acquisition has taken or proposes to take, and
(B) Moro Acquisition is not in default under any material
agreement to which it is a party, and
(C) from time to time, such additional financial and other
information as the Bank may request.
(b) As soon as available and not later than ninety (90) days after the
close of each calendar year beginning with the year ending December 31, 2000,
the Menards' will deliver their personal financial statement to the Bank and,
upon filing thereof, their annual income tax returns.
6.2 Maximum Funded Senior Debt/Tangible Capital Funds Ratio. Moro
Acquisition will maintain a Maximum Funded Senior Debt to Tangible Capital Funds
Ratio of 4.25x on the date hereof, 2.75x as of December 31, 2000, and 2.50x as
of December 31, 2001 and thereafter. Moro Acquisition's compliance with this
covenant shall be verified at the close of each fiscal quarter in accordance
with generally accepted accounting principles consistently applied.
6.3 Minimum Tangible Capital Funds. Moro Acquisition will maintain Tangible
Capital Funds of not less than $325,000 on the date hereof, $475,000 as of
December 31, 2000, and $625,000 as of December 31, 2001 and thereafter. Moro
Acquisition's compliance with this covenant shall be verified at the close of
each fiscal quarter in accordance with generally accepted accounting principles
consistently applied.
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6.4 Debt Coverage Ratio. At all times during the term of the Loans, Moro
Acquisition will maintain a Debt Coverage Ratio of 1.2x. Moro Acquisition's
compliance with this covenant shall be verified at the close of each fiscal year
in accordance with generally accepted accounting principles consistently
applied.
6.5 Minimum Net Working Capital. During the period commencing on the date
hereof and continuing through March 31, 2001, Moro Acquisition shall maintain
Minimum Net Working Capital of not less than $200,000. Moro Acquisition's
compliance with this covenant shall be verified at the close of each fiscal
quarter in accordance with generally accepted accounting principles consistently
applied.
6.6 Liabilities. Borrowers will pay and discharge, at or before their
maturity, all of their respective obligations and liabilities (including,
without limitation, tax liabilities), except those which may be contested in
good faith, and maintain in accordance with generally accepted accounting
principles and practices adequate reserves for any of the same.
6.7 ERISA. Moro Acquisition will comply in all material respects with
ERISA. Moro Acquisition will furnish to the Bank, as soon as possible and in any
event within thirty (30) days after Moro Acquisition knows or has reason to know
that any Reportable Event has occurred with respect to any Plan or that the PBGC
or Moro Acquisition has instituted or will institute proceedings under Title IV
of ERISA to terminate any Plan, a certificate of the chief financial officer of
Moro Acquisition setting forth details as to such Reportable Event and the
action which Moro Acquisition proposes to take with respect thereto, together
with a copy of any notice of such Reportable Event that may be required to be
filed with the PBGC, or any notice delivered by the PBGC evidencing its intent
to institute such proceedings or any notice to the PBGC that such Plan is to be
terminated, as the case may be. For all purposes of this Section 6.7, Moro
Acquisition shall be deemed to have all knowledge or knowledge of all facts
attributable to the administrator of such Plan.
6.8 Notice of Default, Labor Troubles, Litigation. Moro Acquisition will
promptly give notice in writing to the Bank of the occurrence of any Event of
Default or Default under this Agreement, or of any event of default under any
instrument or other agreement of Moro Acquisition, or of the occurrence of any
strike, lock-out, boycott or any other labor dispute affecting Moro Acquisition
and any dispute between Moro Acquisition or any other party, if such litigation,
proceeding or dispute might substantially interfere with the normal business
operations of Moro Acquisition or, if resolved other than in the favor of Moro
Acquisition, such litigation, proceeding or dispute would have a material
adverse effect on Moro Acquisition's financial condition.
6.9 Corporate Existence, Properties. Moro Acquisition will maintain, (a)
its corporate existence, its qualification to do business and its good standing
in each jurisdiction in which qualification is necessary for the proper conduct
of its businesses, (b) all licenses, permits and other authorizations necessary
for the ownership and operation of its properties and businesses, and
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(c) its properties in good repair, working order and condition and to make all
necessary or appropriate repairs, renewals, replacements and substitutions, so
that the efficiency of all such property shall at all times be properly
preserved and maintained.
6.10 Insurance. Moro Acquisition will maintain, with respect to all its
properties, assets and businesses, insurance with financially sound and
reputable insurers against loss or damage of the kinds customarily insured
against by corporations or other business entities of established reputation
engaged in the same or similar business and similarly constituted, in such types
and amounts as are customarily carried under similar circumstances by such other
corporations or other business entities, and/or as are required by the Bank,
including, without limitation, fire and extended coverage insurance on all
insurable assets which will contain standard loss payee clauses in favor of the
Bank, will be in an amount not less than 80% of the insurable value of such
assets or 100% of the Loans, whichever is greater, and business interruption
insurance, and will provide for thirty (30) days' notice of cancellation to the
Bank. Moro Acquisition shall provide the Bank with a certificate of insurance
prior to settlement.
6.11 Policies: Proceeds. Moro Acquisition shall deliver to the Bank on
demand certified copies of all such insurance policies (or, at the option of the
Bank, certificates evidencing coverage) covering the risks set forth in Section
6.10 above, with loss payable clauses in a form satisfactory to the Bank naming
the Bank as payee and co-insured. All proceeds payable under any of said
policies shall be payable in all events to the Bank, but at the option of the
Bank any such proceeds may be released to Moro Acquisition. Moro Acquisition
hereby grants to the Bank a continuing security interest in and to all said
policies and the proceeds thereof to secure the repayment of the Liabilities and
agrees that the Bank shall have the right, in the name of Moro Acquisition or in
the name of the Bank, to file claims under any insurance policies, to receive,
receipt and give acquittance for any payments that may be made thereunder, and
to execute any and all endorsements, receipts, releases, assignments,
reassignments or other documents that may be necessary to effect the collection,
compromise or settlement of any such claims under any such insurance policies.
6.12 Books, Records. Audits.
(a) Moro Acquisition will maintain accurate and complete records and
books of account with respect to all its operations in accordance with generally
accepted accounting principles consistently applied.
(b) Moro Acquisition will permit, at all reasonable times and upon
reasonable prior notice, officers and representatives of the Bank to examine and
make copies from its books and records, and to discuss the affairs, finances and
accounts of Moro Acquisition with its officers and public accountants, to visit
and inspect its real and personal property. Upon the occurrence of an Event of
Default and so long as the same remains uncured, the Bank may perform audits at
any time upon reasonable notice.
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6.13 Returned Merchandise. Moro Acquisition shall promptly notify the Bank
of all merchandise returned or to be returned and of all disputes and claims by
Account Debtors; all returned merchandise shall remain part of the Collateral;
upon request, Moro Acquisition will forthwith pay to the Bank the amount
represented for Advances against the merchandise returned.
6.14 Taxes, Etc. Borrowers' will pay when due all taxes, assessments and
charges imposed upon their property or that they are required to withhold and
pay over; except where contested in good faith and where adequate reserves have
been set aside. Upon the Bank's request, Moro Acquisition shall furnish the Bank
with proof satisfactory to the Bank of the making of the payment or deposit of
all Federal, state and local withholding taxes required of Moro Acquisition by
applicable law; such proof shall be furnished within five (5) days after the due
date of each such payment or deposit established by law.
6.15 Compliance with Laws. Moro Acquisition will comply with all laws and
regulations applicable to it in the operation of its business. Borrowers will
comply with all of their obligations under Section 4.19.
6.16 Banking Relationship. Borrowers, at all times when the Notes remain
outstanding in whole or in part, will maintain the Bank as their primary bank of
account.
6.17 Financial Condition. Borrowers will immediately give the Bank written
notice of any material adverse change in their financial conditions, operations
or collateral from that described in the most recent financial statements of
Borrowers previously delivered to the Bank.
6.18 Use of Proceeds. Borrowers shall use the proceeds of the Loans (i) to
finance the acquisition of the assets of Seller pursuant to the terms of the
Acquisition Documents and (ii) for working capital purposes.
6.19 Guarantor's Financial Statements. Borrowers will cause Guarantor to
deliver to the Bank quarterly management-prepared financial statements and,
within ninety (90) days after the close of each fiscal year beginning with the
fiscal year ending December 31, 2000, annual audited financial statements during
each year of the term of the Loans.
6.20 Year 2000 Compliance.
(a) To the best of Borrowers' knowledge, none of the computer
software, computer firmware, computer hardware (whether general or special
purpose) or other similar or related items of automated, computerized or
software systems that are used or relied on by either Borrower in the conduct of
its business will malfunction, will cease to function, will generate incorrect
data or will produce incorrect results when processing, providing or receiving
(i) daterelated data from, into and between the 20th and 21st centuries or (ii)
date-related data in connection with any valid date in the 20th and 21st
centuries.
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(b) None of the products and services sold, licensed, rendered, or
otherwise provided by either Borrower in the conduct of its business will
malfunction, will cease to function, will generate incorrect data or will
produce incorrect results when processing, providing or receiving (i)
date-related data from, into and between the 20th and 21st centuries or (ii)
date-related data in connection with any valid date in the 20th and 21st
centuries.
(c) Neither Borrower has made any other representations or warranties
specifically relating to the ability of any product or service sold, licensed,
rendered, or otherwise provided by either Borrower in the conduct of its
business to operate without malfunction, to operate without ceasing to function,
to generate correct data or to produce correct results when processing,
providing or receiving (i) date-related data from, into and between the 20th and
21st centuries and (ii) date-related data in connection with any valid date in
the 20th and 21st centuries.
ARTICLE 7
NEGATIVE COVENANTS
On and after the date of this Agreement and so long as the Notes remain
outstanding and unpaid, in whole or in part, or so long as the credit
availability evidenced thereby remains in effect, whichever is longer, Borrowers
will, jointly and severally, observe the following covenants unless the Bank
shall otherwise consent in writing:
7.1 Debt. Mono Acquisition. will not create, incur, assume, guarantee or in
any manner become or remain liable with regard to any debt, except:
(a) Debt existing on the date of this Agreement and described in
Schedule 7.1 attached hereto and made a part hereof, including, but not limited
to, the Subordinated Debt (excluding debt evidenced by the Notes);
(b) The Notes; and
(c) Debt with regard to accounts payable and other extensions of trade
credit and customary accrued liabilities incurred in the ordinary course of
business and which is not more than 60 days overdue, unless either Borrower is
contesting, in good faith and by appropriate proceedings, its obligation to make
payment, and has established such reserve with regard to the contested
obligation as its certified public accountants shall consider adequate.
7.2 Liens. Mono Acquisition will not create, incur, assume or suffer to
exist any lien upon any of its existing or future, tangible or intangible, real,
personal or mixed property, except:
(a) Pledges or deposits under workmen's compensation laws,
unemployment compensation laws or other similar laws;
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(b) Good faith deposits in connection with bids, tenders, contracts
(other than for the purpose of borrowing money or obtaining credit) and leases
to which either Borrower is a party, including rent security deposits;
(c) Deposits to secure public or statutory obligations of either
Borrower, surety or appeal bonds to which either Borrower is a party, payment of
contested taxes of either Borrower, or payment of import duties of either
Borrower;
(d) Any lien which is imposed by law, e.g., those of carriers,
materialmen, mechanics and warehousemen, if payment secured by that lien is not
yet due, or if the validity or the amount of payment is being contested in good
faith by appropriate proceedings for which adequate reserves have been
established;
(e) Any lien arising from a judgment or award against either Borrower
with regard to which such Borrower is prosecuting an appeal or proceedings for
review, and has obtained a stay of execution pending such appeal or proceedings
for review;
(f) Any lien for taxes, assessments or other governmental charges or
levies not yet subject to penalties for nonpayment, or the validity or amount of
which is being contested by appropriate legal proceedings, and with regard to
which adequate reserves have been established;
(g) Any lien created for the sole purpose of extending, renewing or
refunding any lien permitted under paragraphs (a) through (f), if such lien is
limited to all or part of the same property covered by the original lien, and if
the amount of the debt secured by the lien does not exceed the amount of debt
secured by the lien at the time of extension, renewal or refunding; and
(h) Any lien created in connection with purchase money indebtedness,
subject to the dollar limitations in Section 7.15.
7.3 Endorsements, Etc. Moro Acquisition shall not endorse, guarantee or
become surety for the obligations of any person, firm or corporation, except
either Borrower may endorse checks in the ordinary course of business.
7.4 Change in Business; Mergers, Consolidations. Borrowers will not make
any substantial change in the nature of the business of Moro Acquisition, or
merge or consolidate with any other corporation (other than the purchase of
assets of Seller on even date herewith).
7.5 Control. David Menard and his immediate family will own not less than
fifty-one percent (51%) of the outstanding stock of Guarantor on a
fully-diluted basis and will cause Guarantor to own not less than one hundred
percent (100%) of the outstanding stock of Moro Acquisition on a fully-diluted
basis.
7.6 Subsidiaries. Moro Acquisition will not create any new subsidiaries.
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7.7 Contingent Liabilities. Moro Acquisition will not become or remain
liable, directly or indirectly, in connection with the obligations, stock or
dividends of any person, firm, corporation or other entity, whether by
guarantee, endorsement, agreement to supply or advance funds, agreement to
maintain working capital or net worth, agreement to purchase or repurchase goods
or services whether or not such goods or services are actually acquired, or
otherwise, other than in connection with the Loans, except that Moro Acquisition
may endorse negotiable instruments for collection in the ordinary course of its
business.
7.8 Sales and Lease-Backs. Moro Acquisition will not enter into any
arrangement, directly or indirectly, with any Person, firm, corporation or other
entity, whereby any of them shall sell or transfer any property, real or
personal, whether now owned or hereafter acquired, and thereafter rent or lease
such property or other property which the lessee intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
7.9 Limitation of Leases. Except for those leases existing as of the date
hereof and reflected on Schedule 7.9 attached hereto and made a part hereof,
Moro Acquisition will not incur, create or assume any commitment to make any
direct or indirect payment, whether as rent or otherwise, under any lease,
rental or other arrangement for the use or hire of property of any person, firm,
corporation or other entity, if, after giving effect thereto, the aggregate
amount of such payments to be made by Moro Acquisition under all such leases,
rentals or other arrangements would be in excess of $100,000 (excluding leases
required to be capitalized under Financial Accounting Standards Board, Statement
of Accounting Standards No. 13) during any fiscal year of Moro Acquisition.
7.10 Voluntary Prepayments, Modification of Debt Instruments. Except in the
ordinary course of business, Moro Acquisition will not (a) prepay, purchase,
redeem or otherwise acquire for value prior to the stated maturity thereof all
or any part of any indebtedness for borrowed money, including, but not limited
to, the Subordinated Debt (other than indebtedness evidenced by the Notes, or
any other indebtedness to the Bank, subject to any applicable prepayment
penalty) or (b) amend, modify or supplement in any way, or request any waiver of
the provisions of, any instrument providing for or evidencing any indebtedness
for borrowed money or constituting the deferred purchase price of property or
assets.
7.11 Removal and Protection of Property. Except as otherwise expressly
permitted herein, Moro Acquisition will not remove (other than in the ordinary
course of business) any Equipment, Goods, Inventory, or General Intangibles (as
defined in the New Jersey Uniform Commercial Code) from the place of business
where presently located, nor permit the value of any property to be impaired.
7.12 Transactions with Affiliates. Moro Acquisition shall not, except as
otherwise expressly permitted by this Agreement, directly or indirectly enter
into any transaction or modify any existing transaction with any Affiliate
including, without limitation, (a) investments in, or loans, advances or
distributions to, an Affiliate (other than distributions by Moro Acquisition to
Guarantor to pay tax liabilities in amounts equal to the amount Moro Acquisition
would be
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obligated to pay if it filed on an unconsolidated basis and distributions
permitted by the terms of the Subordination Agreement), (b) the transfer, sale,
lease, assignment or other disposition of any assets to an Affiliate, (c) the
merger into or consolidation with or purchase or acquisition of assets from an
Affiliate, or (d) any other transaction directly or indirectly with or for the
benefit of any Affiliate (including, without limitation, any guarantees or
assumptions of obligations of an Affiliate by either Borrower or of either
Borrower by an Affiliate). The Bank may withhold its consent to any such
transaction with an Affiliate if (i) an Event of Default has occurred and is
continuing, or (ii) such transaction, based upon the reasonable assumptions of
the Bank, could (A) result in a material adverse change in the business,
operations, financial condition or prospects of either Borrower, (B) affect
either Borrower's ability to repay the indebtedness evidenced by the Notes or
any other indebtedness of either Borrower to the Bank, (C) prejudice or impair,
or result in the diminution of, any rights of the Bank with respect to the
indebtedness evidenced by the Notes or any other indebtedness of either Borrower
to the Bank or any collateral pledged to secure such indebtedness, or (D) result
in a Default or an Event of Default hereunder or under the Loan Documents or a
default under or with respect to any other document or instrument evidencing
and/or securing the Loans or any other material obligation of either Borrower to
any Person.
7.13 Disposition of Assets. Moro Acquisition will not liquidate or dissolve
itself (or suffer any liquidation or dissolution), and neither Borrower will
convey, sell, lease, pledge, or otherwise transfer or dispose of all or any
substantial part of its property, assets or business other than in the ordinary
course of business.
7.14 Disposition of Accounts. Moro Acquisition will not sell, discount or
otherwise dispose of its notes, Accounts, Chattel Paper, Documents, General
Intangibles or Instruments (all as defined in the New Jersey Uniform Commercial
Code) except to, or with, the Bank.
7.15 Capital Expenditures. Moro Acquisition shall not permit its annual
capital expenditures, including, but not limited to, purchase money
indebtedness, to exceed $100,000 in any year of the Loans.
ARTICLE 8
EVENTS OF DEFAULT. REMEDIES
8.1 Events of Default. Each of the following shall constitute an Event of
Default:
(a) Payment. Failure by either Borrower to pay the principal of, or
accrued interest on, the Notes or any other instrument or obligation of either
Borrower to the Bank when such amounts become due, or the failure of either
Borrower to pay any other amount payable to the Bank under the Loan Documents,
within five (5) days after such amount becomes due.
(b) Representations, Warranties. Any representation or warranty made by
either Borrower in the Loan Documents shall prove to be false or misleading in
any material respect as of the date when made.
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(c) Covenants. Failure by either Borrower to observe or perform any
covenants, conditions or provisions applicable to it contained in the Loan
Documents [other than those described in paragraphs (a) and (b) above] provided
that such failure shall continue for a period of thirty (30) days after written
notice from the Bank to such Borrower.
(d) Other Obligations. Either Borrower defaults in:
(i) any payment of principal of, or interest on, any obligations
for borrowed money, including, but not limited to, the Subordinated Debt (other
than the Notes or any such obligation payable to the Bank), or for the deferred
purchase price of property beyond any grace and/or cure period provided with
regard to such payment,
(ii) the performance of any other material agreement, term or
condition contained in any such obligation or in any agreement relating to such
obligation subject to any grace and/or cure period with respect thereto, or
(iii) the performance of any lease or other contract material to
either Borrower's business, if the effect of such default is to cause such
obligation to become due or such lease or contract to be terminated prior to its
stated maturity.
(e) Voluntary Bankruptcy. Filing by either Borrower of a voluntary
petition in bankruptcy or a voluntary petition or any answer seeking
reorganization, arrangement, readjustment of its debts or for any other relief
under the Bankruptcy Code, or under any other existing or future federal or
state insolvency act or law, or any formal written consent to, approval of, or
acquiescence in, any such petition or proceeding by either Borrower, the
application by either Borrower for, or the appointment by consent or
acquiescence of, a receiver or trustee of, either Borrower or for all or a
substantial part of its property; the making by either Borrower of an assignment
for the benefit of creditors.
(f) Involuntary Bankruptcy. Filing of any involuntary petition against
either Borrower in bankruptcy or seeking reorganization, arrangement or
readjustment of its debts or for any other relief under the Bankruptcy Code, or
under any other existing or future federal or state insolvency act or law; or
the involuntary appointment of a receiver or trustee of either Borrower, or for
all or a substantial part of the property of either Borrower; and the
continuance of any of such events for a period of sixty (60) days undismissed,
unbonded or undischarged.
(g) Reportable Event. If (1) any Reportable Event that the Bank
reasonably determines in good faith creates a reasonable possibility of the
termination of any Plan or of the appointment by the appropriate United States
district court of a trustee to administer any Plan shall have occurred and be
continuing 30 days after written notice to such effect shall have been given to
Moro Acquisition by the Bank, or (2) any Plan shall be terminated, or (3) the
plan administrator of any Plan shall file with the PBGC a notice of intention to
terminate such Plan, or (4) the PBGC shall institute proceedings to terminate
any Plan or to appoint a trustee to administer any Plan and such proceedings
shall remain undismissed or unstayed for three (3) business days and if, in any
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of the cases described in the foregoing clauses (1) to (4), the Bank further
reasonably determines in good faith that the amount of the unfunded guaranteed
benefits (within the meaning of Title IV of ERISA) resulting upon termination of
such Plan would have a material adverse effect on the financial condition,
properties or operations of Moro Acquisition if alien against the assets of Moro
Acquisition were to result under ERISA.
(h) Default by Guarantor. The occurrence of an Event of Default as
defined in any document or instrument executed and delivered by the Guarantor to
the Bank as collateral security for the Loans provided for herein.
(i) Material Adverse Change. The occurrence of a material adverse
change in the financial condition of Moro Acquisition in the reasonable business
judgment of the Bank.
8.2 Acceleration and Termination of Commitments. (a) Upon the occurrence of
an Event of Default specified in paragraphs (a) through (d) and (g) through (i)
of Section 8.1 of this Agreement, the Bank may:
(i) terminate immediately and irrevocably the unused portions of
the credit availability evidenced by the Notes;
(ii) declare the unpaid principal balance of, all accrued, unpaid
interest on, and all other sums payable with regard to, the Notes and all other
Liabilities from Borrowers to the Bank to be immediately due and payable
whereupon the Notes, all such accrued interest and all such Liabilities shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by
Borrowers; and
(iii) pursue all other remedies of the Bank provided for in the
Loan Documents as well as those available at law and in equity.
(b) Upon the occurrence of an Event of Default specified in paragraphs
(e) and (f) of Section 8.1 of this Agreement, the unused portions of the credit
availability evidenced by the Notes shall automatically and immediately
terminate and the unpaid principal balance of, all accrued, unpaid interest on,
and all other sums payable with regard to, the Notes and all other instruments
of obligation of the Guarantor and Borrowers to the Bank shall automatically and
immediately become due and payable, in all cases without any action on the part
of the Bank.
(c) Upon the occurrence of an Event of Default, the rate of interest on
the Notes shall be increased to a rate equal to two percent (2%) above the
interest rate payable on the date of default (the "Default Rate"). Interest at
the rate provided for in the Notes, or at the Default Rate, shall continue to
accrue at such rate, and continue to be paid even after default, maturity,
acceleration, recovery of judgment, bankruptcy or insolvency proceeding of any
kind until such monetary default has been cured.
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8.3 Right of Set-Off. Upon the occurrence of an Event of Default, the Bank
shall have the right, in addition to all other rights and remedies available to
it, to set-off against the unpaid balance of the Notes, any debt owing to
Borrowers by the Bank and any funds in any deposit account maintained by any of
them with the Bank.
8.4 Marshalling.
(a) If an Event of Default shall have occurred and be continuing, the
Bank shall not be required to marshal any present or future security for, or
guarantees of, the Liabilities or to resort to any such security or guarantees
in any particular order.
(b) Each Borrower waives, to the fullest extent it lawfully can, any
right it might have to require the Bank to pursue any particular remedy before
proceeding against it, and any right to the benefit of, or to direct the
application of the proceeds of, any Collateral until the Notes and all other
Liabilities have been paid in full.
8.5 Cumulative Remedies. The rights and remedies provided in the Loan
Documents are cumulative and not exclusive of any rights or remedies provided by
law or in equity.
ARTICLE 9
MISCELLANEOUS
9.1 Waivers.
(a) No failure or delay on the part of the Bank in exercising any
right, power or privilege under the Loan Documents shall operate as a waiver of
any right, power or privilege, except as and to the extent that the assertion of
such right, power or privilege shall be barred by an applicable statute of
limitations.
(b) No single or partial exercise of, or abandonment or discontinuance
of steps to enforce, any right, power or privilege under the Loan Documents
shall preclude any other or further exercise of such right, power or privilege,
or the exercise of any other right, power or privilege.
(c) EACH BORROWER DOES HEREBY EXPRESSLY WAIVE THE RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING OF ANY KIND WHETHER ARISING OUT OF, UNDER OR BY
REASON OF THE LOAN DOCUMENTS OR ANY ASSIGNMENT OR TRANSACTION THEREUNDER. EACH
BORROWER UNDERSTANDS THAT THE BANK IS RELYING ON THIS WAIVER IN MAKING THE LOANS
PROVIDED FOR HEREIN.
9.2 Notices. All notices, requests and demands to or upon the parties shall
be deemed to have been given or made on the day of personal service or on the
day they are deposited in the mails, postage prepaid, registered or certified
mail, return receipt requested, or by nationally-
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recognized overnight courier providing proof of delivery, or, in the case of
telegraphic notice, when delivered to the telegraph company, charges prepaid,
addressed to the parties at the addresses set forth below or to such other
address as may be hereafter designated in writing in accordance herewith:
Borrowers:
c/o Moro Corporation
111 Presidential Boulevard
Suite 240
Bala Cynwyd, Pennsylvania 19004
Attention: David W. Menard, President
with a copy to their counsel:
Lurio & Associates, P.C.
One Commerce Square
Suite 2340
Philadelphia, Pennsylvania 19103-7015
Attention: Douglas M. Lurio, Esquire
The Bank:
Sovereign Bank
Two Aldwyn Center
Lancaster Avenue & Route 320
Villanova, Pennsylvania 19085
Attention: Thomas M. McGrory, Vice President
9.3 Legal Costs; Filing Costs. If at any time or times hereafter the Bank
employs counsel to prepare or consider approvals, waivers or consents, or to
intervene, file a petition, answer, motion or other pleading in any suit or
proceeding relating to this Agreement or relating to any Collateral, or to
protect, take possession of, or liquidate any Collateral, or to attempt to
enforce any security interest or lien in any Collateral, or to enforce any
rights of the Bank or liabilities of either Borrower's Account Debtors, or any
other person, firm or corporation which may be obligated to the Bank by virtue
of the Loan Documents, then in any of such events, all of the reasonable
attorneys' fees arising from such services, and any expenses, costs and charges
relating thereto, shall become a part of Borrowers' Liabilities secured by the
Collateral, payable on demand.
Borrowers further agree to reimburse the Bank for its out-of-pocket
expenses, including but not limited to attorneys' fees and other costs of
preparation and filing of the Loan Documents and other documents as required by
law or deemed necessary by the Bank, including, but not limited to, the cost of
all lien searches deemed necessary by the Bank. Such costs and expenses shall be
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paid simultaneously with the execution of this Agreement and all such expenses
hereafter incurred shall be paid within fifteen (15) days after notice by the
Bank.
9.4 Right of Entry. Upon the occurrence of an Event of Default, the Bank
shall have the right to enter and remain upon the premises of Borrowers without
cost or charge to the Bank, and to use the same, together with materials,
supplies, books and records of Borrowers, for the purpose of liquidating or
collecting the Collateral, or for the purpose of preparing for and conducting
the sale of Collateral, whether by foreclosure, auction or otherwise.
9.5 Warrant to Confess Judgment in Replevin. Upon the occurrence of an
Event of Default, Borrowers authorize and empower the Prothonotary or any
attorney of any court of record to appear for Borrowers and confess judgment
against Borrowers in favor of the Bank in any action of replevin instituted by
the Bank to recover possession of the Collateral or any part thereof, for which
this shall be his sufficient warrant. An affidavit made by someone acting on
behalf of the Bank setting forth the facts necessary to authorize the entry of
judgment shall be conclusive evidence of such facts, and no bond need be filed
by the Bank. Upon the entry of judgment in replevin for possession, a writ of
possession may issue forthwith, without any prior writ or proceedings
whatsoever. The right to confess judgment herein contained may be exercised from
time to time and shall not be exhausted by one or more exercises thereof.
Borrowers hereby expressly agree that in exercising the right to confess
judgment herein contained, the Bank need not cause the original of this
Agreement to be filed, but a copy authenticated by someone acting on behalf of
the Bank shall be sufficient.
9.6 No Waiver. The Bank's failure at any time or times hereafter to require
strict performance by Borrowers of any of the provisions, warranties, terms and
conditions contained in this Agreement shall not waive, affect or diminish any
right of the Bank at any time or times hereafter to demand strict performance
therewith and with respect to any other provisions, warranties, terms and
conditions contained in this Agreement and any waiver of any Event of Default
shall not waive or affect any other Event of Default, whether prior or
subsequent thereto, and whether of the same or a different type. None of the
warranties, conditions, provisions and terms contained in this Agreement shall
be deemed to have been waived by any act or knowledge of the Bank, its agents,
officers or employees except by an instrument in writing signed by an officer of
the Bank and directed to Borrowers specifying such waiver.
9.7 Application of Proceeds.
(a) On and after the date, if any, on which the Borrowers' Liabilities
to the Bank are accelerated pursuant to Section 8.2 of this Agreement, Borrowers
irrevocably waive the right to direct the application of all subsequent payments
(including proceeds of Collateral) which the Bank receives from or for the
benefit of Borrowers.
(b) The proceeds of any sale or other disposition of any Collateral
shall be applied by the Bank in the following order:
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(i) first, to the payment of all costs and expenses due under the
Loan Documents, including without limitation all costs and expenses of
collecting Borrowers' Liabilities and reasonable attorneys' fees;
(ii) second, to the payment in full of all accrued and unpaid
interest on Borrowers' Liabilities;
(iii) third, to the payment in full of the principal balance of
Borrowers' Liabilities; and
(iv) fourth, to Borrowers to the extent of any surplus.
(c) Borrowers shall remain liable to the Bank for any deficiency in
payment of Borrowers' Liabilities after application of the proceeds in
accordance with paragraph (b).
9.8 Representation, Warranties.
(a) All representations, warranties, covenants and agreements made in
the Loan Documents shall survive the execution and delivery of this Agreement,
the making of the Advances under this Agreement and the issuance of the Notes.
(b) The provisions of Section 9.3 of this Agreement shall survive
payment of the Notes and all other Liabilities of Borrowers to the Bank.
9.9 Successors. This Agreement shall be binding upon and inure to the
benefit of Borrowers and the Bank and their respective successors, heirs and
assigns, except that neither Borrower may assign or transfer its rights under
this Agreement without the prior written consent of the Bank.
9.10 Governing Law. The Loan Documents, and the rights and obligations of
the parties under the Loan Documents, shall be governed by, and construed and
interpreted in accordance with, the domestic, internal laws, but not the law of
conflict of laws, of the Commonwealth of Pennsylvania, other than the rights and
obligations of the parties under the Uniform Commercial Code, which shall be
governed by the New Jersey Uniform Commercial Code.
9.11 Headings. The section, subsection, paragraph and other headings in
this Agreement are for reference purposes only and shall not control or affect
the construction or interpretation of this Agreement in any respect.
9.12 Severability. The parties intend the provisions of this Agreement to
be severable. If any provision of this Agreement is held to be invalid or
unenforceable in whole or in part in any jurisdiction, such provision, as to
such jurisdiction, shall be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
of that
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provision in any other jurisdiction, or the remaining provisions of this
Agreement in any jurisdiction.
9.13 Entire Agreement. This Agreement and the Loan Documents represent the
entire agreement and understanding of the parties, and may not be amended
subsequently by oral statements of, or courses of dealing between, the parties.
9.14 Location of Business; Inventory; Records. Moro Acquisition maintains
its only place of business and substantially all of its records, inventory and
assets at the following location:
Foot of Herman Street
South River, New Jersey 08882
Borrowers will notify the Bank in advance of any change in the location of
any business of Moro Acquisition, including any change in the location of
records and inventory, whether by reason of the establishment of a new place of
business or the discontinuance of a present place of business.
9.15 Conflicting Provisions. In the event of any direct conflict between
the provisions of this Agreement and the provisions of other Loan Documents, the
provisions of this Agreement shall control.
9.16 Submission to Jurisdiction. Each Borrower hereby irrevocably and
unconditionally waives any right to claim immunity in respect of itself or any
of its property or assets, including immunity from jurisdiction, immunity from
attachment prior to entry of judgment, immunity from attachment in aid of
execution of judgment, in any suit, action or proceeding arising out of or
relating to this Agreement. In addition, each Borrower and the Bank agree that
any suit, action or proceeding may be instituted in the Courts of Common Pleas
of Delaware or Montgomery County, Pennsylvania or in the United States District
Court of the Eastern District of Pennsylvania, and irrevocably and
unconditionally submit to the jurisdiction of any such court for such purpose.
9.17 Name Change. Borrowers and the Bank hereby acknowledge and agree that
Moro Acquisition will change its corporate name to "J. M. Ahle Co., Inc." upon
the consummation of the transactions contemplated by the Acquisition Documents.
It is the stated intention of the parties
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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hereto that all references in this Agreement and/or any of the other Loan
Documents to "Morn Acquisition Corp." and/or any variant thereof shall be deemed
to include for all purposes hereof and thereof "J. M. Ahle Co., Inc." and all
variants thereof.
IN WITNESS WHEREOF, Borrowers, intending to be legally bound hereby, have
caused this Agreement to be duly executed on the day and year first above
written.
BORROWERS:
MORO ACQUISITION CORP.
By: /s/ David W. Menard
------------------------------------------
David W. Menard, President
/s/ David W. Menard
----------------------------------------------
David W. Menard, individually, on a joint
and several basis with Jacqueline J. Menard
/s/ Jacqueline J. Menard
----------------------------------------------
Jacqueline J. Menard, individually, on a joint
and several basis with David W. Menard
GUARANTOR:
MORO CORPORATION
By: /s/ David W. Menard
------------------------------------------
David W. Menard, President
SOVEREIGN BANK
By: /s/ Thomas M. McGrory
------------------------------------------
Thomas M. McGrory, President
THIS SUBORDINATED TERM NOTE IS SUBJECT TO ALL OF THE TERMS AND CONDITIONS OF THE
SUBORDINATION AGREEMENT DATED OF EVEN DATE HEREWITH BY AND AMONG MAKER, PAYEE,
SOVEREIGN BANK, AND MORO CORPORATION. REFERENCE IS MADE TO THE SUBORDINATION
AGREEMENT FOR ALL OF THE TERMS, CONDITIONS, AND COVENANTS CONTAINED THEREIN.
SUBORDINATED TERM NOTE
Amount: $300,000 Dated: March 31, 2000
I. NAME AND ADDRESS; PRINCIPAL AMOUNT; INTEREST RATE.
FOR VALUE RECEIVED, MORO ACQUISITION CORP., a Delaware corporation, with an
address of Foot of Herman Street, South River, New Jersey 08882 (hereinafter
"Maker"), promises to pay to the order of DAVID W. MENARD and JACQUELINE J.
MENARD, with an address of 111 Presidential Boulevard, Suite 240, Bala Cynwyd,
Pennsylvania 19004 (hereinafter "Payee"), without defalcation or setoff, the sum
of THREE HUNDRED THOUSAND DOLLARS($300,000), in lawful money of the United
States of America, together with interest accruing on the outstanding balance
thereof from and after the date hereof. Interest shall accrue at the same rate
of interest as is provided for in the Acquisition Term Note dated of even date
herewith in the original principal amount of $300,000, from David W. Menard and
Jacqueline J. Menard, as Maker, in favor of Sovereign Bank, as Payee, which is
nine percent (9%) per annum.
II. PAYMENT TERMS.
Subject to Section IV hereof, the principal amount due hereunder along with
all accrued interest thereon shall be paid as follows:
A. Interest accrued on the principal amount hereunder shall be payable
monthly, in arrears, on the first day of each calendar month commencing on
May 1, 2000.
B. The principal balance of this Subordinated Term Note shall be payable in
three (3) equal, consecutive annual instalments of $75,000 each, plus interest
thereon, commencing on April 1, 2002, and continuing on the first day of each
April thereafter until April 1, 2005, at which time the remaining unpaid
principal
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balance of $75,000, plus all accrued interest thereon, shall be paid in full.
III. SUBORDINATION.
This Subordinated Term Note is subject to all of the terms and conditions
of the Subordination Agreement dated of even date herewith by and between
Sovereign Bank, Maker, Payee, and Moro Corporation, a Delaware corporation
("Subordination Agreement"). The terms and conditions of the Subordination
Agreement are incorporated herein by reference in their entirety. Reference is
made to the Subordination Agreement for all of the terms, conditions, and
covenants contained therein. In the event of a conflict between the terms of
this Subordinated Term Note and the Subordination Agreement, the terms of the
Subordination Agreement shall control.
IV. EVENTS OF DEFAULT.
A. The entire unpaid principal balance of this Subordinated Term Note,
together with all accrued and unpaid interest, shall immediately become due and
payable without presentment, demand, protest or notice of any kind (all of which
are expressly waived) upon the occurrence of any of the following events (each
of which shall constitute an "Event of Default"):
(1) Maker fails to make any payment of principal or interest in full as and
when due, which failure continues for five days after written notice of such
failure;
(2) Maker's liquidation and/or dissolution;
(3) Any one or more of Maker or Moro Corporation (collectively, the
"Obligors") files a voluntary petition in bankruptcy or insolvency, or are
adjudicated a bankrupt or insolvent, or files any petition or answer seeking any
reorganization, arrangement, composition, adjustment, liquidation, or similar
relief under the present or any future federal bankruptcy act or any other
present or any future applicable federal, state, or other statute or law, or
make an assignment for the benefit of creditors or seeks or consents to or
acquiesces in the appointment of any trustee, receiver, or liquidator for all or
any part of their assets; or
(4) Any case, proceeding, or other action against any
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one or more of the Obligors is commenced seeking to have an order for relief
entered against any one of them as debtor, or seeking reorganization,
arrangement, adjustment, or liquidation under any law relating to bankruptcy,
insolvency, reorganization, or relief of debtors, or seeking appointment of a
receiver, trustee, custodian, or other similar official for any one of them or
for all or any substantial part of their assets, and such case, proceeding, or
other action (i) results in the entry of an order for relief or (ii) remains
undismissed for a period of sixty (60) days.
B. If an Event of Default occurs, then interest shall accrue on the
outstanding principal balance of this Subordinated Term Note, from the date of
such Event of Default until the date payment is made in full, calculated at the
rate (the "Default Rate") equal to the lesser of (i) fifteen (15%) percent per
year, or (ii) the maximum rate of interest allowed by applicable law.
C. Upon the occurrence of an Event of Default hereunder, Payee shall have
all rights and remedies provided under all applicable laws and shall be deemed
to have exercised the same immediately without notice or further action.
V. WAIVERS; NOTICES; COLLECTION.
Presentment for payment or acceptance, and notice of dishonor of payment or
acceptance, notice of protest and notice of any renewal, extension, modification
or change of time, manner, place or terms of payment, are hereby waived by
Maker. Any notice to Maker shall be sufficiently served for all purposes if
placed in the mail addressed to, or left upon the premises, at the address of
Maker set forth above.
Any failure or delay of Payee to exercise any right hereunder shall not be
construed as a waiver of the right to exercise the same or any other right at
any other time or times. The waiver by Payee of a breach or default of any
provisions of this Subordinated Term Note shall not operate or be construed as a
waiver of any subsequent breach or default thereof.
Maker agrees to pay all costs and expenses, including reasonable attorneys'
fees and disbursements, incurred in effecting collection of all amounts due
under this Subordinated Term Note upon the occurrence of an Event of Default,
whether incurred before or after judgment and specifically including costs and
expenses incurred to enforce and collect any judgment. All such costs and
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expenses shall be added to the principal amount due under this Subordinated Term
Note, and shall bear interest at the Default Rate.
VI. OTHER PROVISIONS.
This Subordinated Term Note shall be construed according to, and shall be
governed by, the laws of the Commonwealth of Pennsylvania without regard to its
conflict of laws rules. The provisions of this Subordinated Term Note shall be
deemed severable, so that if any provision hereof is declared invalid under the
laws of any state where it is in effect, or of the United States, all other
provisions of this Subordinated Term Note shall continue in full force and
effect. This Subordinated Term Note may be amended only by a writing signed on
behalf of Maker and Payee.
Any obligations of Maker hereunder shall not be revoked, impaired or
affected in any manner or to any extent by the dissolution or change in the form
or status of Maker. This Subordinated Term Note shall be binding upon the
successors and assigns of Maker, and shall inure to the benefit of and be fully
enforceable by the heirs, personal representatives, successors and assigns of
Payee or any other holder hereof. This Subordinated Term Note is intended to
take effect as an instrument under seal.
VII. COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT
This Subordinated Term Note constitutes the complete agreement between the
parties with respect to the subject matter hereof, supersedes all prior
agreements, commitments, understandings or inducements (oral or written,
expressed or implied), and may not be modified, altered or amended except by a
written agreement signed by the parties.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
Subordinated Term Note on the day and year first above written.
MORO ACQUISITION CORP.
By: /s/ David W. Menard
-------------------
David W. Menard,
President
4
SURETY AGREEMENT
TO: SOVEREIGN BANK, 1130 Berkshire Boulevard, Wyomissing, Pennsylvania 19610
("Lender")
Attention: Thomas M. McGrory, Vice President:
In consideration of Lender making or continuing to make loans or otherwise
becoming or continuing as a creditor of MORO ACQUISITION CORP., a Delaware
corporation, and DAVID W. and JACQUELINE J. MENARD (collectively "Debtors"), and
intending to be legally bound hereby, Undersigned unconditionally becomes surety
to Lender, its successors, endorsees or assigns, for the prompt payment when due
of all amounts now or hereafter due to Lender by Debtors, whether at maturity,
or by demand, declaration, acceleration or otherwise (collectively,
"Liabilities").
This Agreement shall continue in full force and effect until payment in
full of all Liabilities and shall continue in full force and effect until
written notice of termination shall be given to Undersigned by Lender, provided
that any termination hereof shall not affect any outstanding Liabilities in
existence prior to the termination hereof which continue beyond the date on
which such termination notice is sent. The provisions hereof shall survive
termination hereof.
All of the Liabilities shall become immediately due and payable by
Undersigned, anything contained herein to the contrary notwithstanding,
immediately upon the occurrence of an Event of Default (as defined in Section
8.1 of the Loan and Security Agreement of even date herewith by and among Lender
and Debtors), as such Agreement may be amended, modified, supplemented, or
restated, at anytime from and after the date hereof.
Undersigned waives: (a) all notices, including, but not limited to: (i)
notice of acceptance of this Agreement; (ii) notice of presentment, demand for
payment, or protest of any of the Liabilities, or the obligation of any person,
firm or corporation held by Lender as collateral security; (b) all defenses,
offsets and counterclaims which either Debtor or Undersigned may at any time
have to any of the Liabilities; (c) trial by jury and the right thereto in any
action or proceeding of any kind, whether arising on, out of, under or by reason
of this Agreement or any other agreement or transaction between Undersigned,
Lender and/or either Debtor; and (d) all notices of the financial condition or
of any adverse or other change in the financial condition of either Debtor.
The Liabilities shall not be affected, impaired or discharged, in whole or
in part, by reason of the dissolution of Undersigned or the fact that any of the
Liabilities may become due or payable in, or in connection with, or by reason
of, any agreement or transaction (or part thereof) which may be invalid,
irregular or unenforceable for any reason. The Liabilities of any partnership,
firm, corporation or other company which may be a successor to either Debtor
shall be included among the Liabilities for which Undersigned is surety
hereunder. Lender shall have the right to proceed against Undersigned
immediately upon any default by either Debtor and shall not be required to take
any action or proceeding of any kind against either Debtor or any other party
liable for the Liabilities, or any security which Lender may hold, before
proceeding against Undersigned hereunder.
The Liabilities of Undersigned shall not be affected, impaired or
discharged, in whole or in part, by reason of any action whatsoever taken by
Lender (including, without limitation, sale, lease, disposition, liquidation or
other realization) which may be negligent, willful or otherwise in respect
<PAGE>
to any security in which Lender may at any time have any interest or against any
other party liable for all or any part of the Liabilities.
Lender shall have the right from time to time, and at any time in its sole
discretion, without notice to or consent from Undersigned, and without
affecting, impairing or discharging, in whole or in part, the Liabilities, to
modify, change or supplement, in any respect whatsoever, any indebtedness or
evidence thereof, or any agreement or transaction between Lender and either
Debtor or between Lender and any other party liable for the Liabilities, or any
portion or provision of any thereof; to grant extensions of time and other
indulgences of any kind to either Debtor or any such other party; to compromise,
release, substitute, exercise, enforce or fail or refuse to exercise or enforce
any claims, rights or remedies of any kind which Lender may have at any time
against either Debtor or any other party liable for the Liabilities, or any
thereof, or with respect to any security of any kind held by Lender at any time
under any agreement or otherwise.
Lender shall have a continuing lien upon all monies, deposits, stocks,
bonds and all other personal property, tangible or intangible, similar or
dissimilar thereto, at any time coming into possession of Lender belonging to
Undersigned, as security for the obligations of Undersigned hereunder. Lender
shall have the right forthwith in case of default by either Debtor or by
Undersigned to seize and set-off on account of any of the Liabilities hereunder
any such monies or deposits and with the right to sell any or all personal
property under the terms and provisions of the Pennsylvania Uniform Commercial
Code. If at any time either Debtor shall be in default of the terms of any
obligation to or agreement with Lender, the entire indebtedness of Debtors shall
be immediately due and payable to Lender, for purposes of this Agreement and the
obligations hereunder, anything to the contrary notwithstanding in any agreement
or undertaking by and between Lender and Debtors.
Undersigned represents that at the time of the execution and delivery of
this Agreement nothing exists to impair the effectiveness of the obligations of
Undersigned to Lender hereunder, or the immediate taking effect of this
Agreement between Undersigned and Lender with respect to becoming surety for the
Liabilities. Undersigned agrees to deliver annual financial statements and tax
returns to Lender during each year until payment in full of all Liabilities.
Undersigned hereby authorizes and empowers the Prothonotary, Clerk of Court
or similar official or any attorney of any Court of record in the United States
or elsewhere following an event of default which is continuing beyond any
applicable grace period to appear for Undersigned in any or all actions which
may be brought to enforce Undersigned's obligations hereunder (including costs,
expenses and/or reasonable attorneys' fees agreed to be paid by Undersigned)
and/or to sign for Undersigned an agreement for entering an amicable actions)
for the recovery of all sums due by Undersigned (including costs, expenses and
reasonable attorneys' fees), and in said suits or in said amicable action or
actions to confess judgment against Undersigned for all or any part of the
obligations hereunder and all such costs, expenses and reasonable attorneys'
fees. Such authority shall not be exhausted by one exercise but judgment may be
confessed as aforesaid from time to time as any sums and/or costs, expenses or
reasonable attorneys' fees shall be due. Undersigned waives all relief from any
and all appraisement or exemption laws now in force or hereafter enacted.
Undersigned agrees and consents to the exclusive jurisdiction of the Court
of Common Pleas of Pennsylvania in any and all actions and proceedings arising
hereunder or pursuant hereto or under any other agreement or undertaking, and
irrevocably agrees to service of process by certified mail,
2
<PAGE>
return receipt requested, to Undersigned's address set forth herein, or such
address as may appear in Lender's records.
If claim is ever made upon Lender for repayment or recovery of any amount
or amounts received by Lender in payment or on account of any of the Liabilities
and Lender repays all or part of said amount by reason of (a) any judgment,
decree or order of any court or administrative body having jurisdiction over
Lender or any of its property, or (b) any settlement or compromise of any such
claim effected by Lender with any such claimant (including either Debtor), then
and in such event Undersigned agrees that any such judgment, decree, order,
settlement or compromise shall be binding upon Undersigned, notwithstanding any
revocation hereof or the cancellation of any note or other instrument evidencing
any Liability of either Debtor and Undersigned shall be and remain liable to
Lender hereunder for the amount so repaid or recovered to the same extent as if
such amount had never originally been received by Lender.
The waiver of any right by Lender or failure to exercise promptly any right
shall not be construed as the waiver of any other right to exercise the same at
any time thereafter.
Any acknowledgment, new promise, payment of principal or interest or
otherwise by either Debtor or others with respect to the Liabilities, shall be
deemed to be made as agent of Undersigned for the purposes hereof, and shall, if
the statute of limitations in favor of Undersigned against Lender shall have
commenced to run, toll the running of such statute of limitations, and if such
statute of limitations shall have expired, prevent the operation of such
statute.
The obligations of Undersigned shall bind the successors and assigns of
Undersigned, as the case may be, and shall inure to the benefit of Lender, its
successors and assigns.
All rights and remedies of Lender are cumulative and not alternative.
This Agreement is made, executed and delivered in the Commonwealth of
Pennsylvania and shall be governed, interpreted and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
The execution and delivery of this Agreement is in addition to, and not in
derogation of, any other surety agreements) heretofore executed and delivered to
Lender unless such prior agreements) have been terminated in writing pursuant to
the terms thereof. No agreement, unless in writing and signed by Lender, and no
course of dealing between Undersigned and Lender, shall be effective to change
or modify, or to discharge in whole or in part this Agreement. No waiver of any
rights or powers of Lender or consent by it shall be valid unless in writing,
signed by an authorized officer.
Executed this 31st day of March, 2000.
MORO CORPORATION
By: /s/ David W. Menard
---------------------------------
David W. Menard, President
3
ACQUISITION TERM NOTE
$300,000.00 Radnor, Pennsylvania
Date: March 31, 2000
FOR VALUE RECEIVED, without set-off or deduction, the undersigned, DAVID W.
and JACQUELINE J. MENA ("Makers"), in accordance with the terms and conditions
set forth below, hereby jointly and severally promise to pay to the order of
SOVEREIGN BANK (the "Bank"), the principal sum of up to Three Hundred Thousand
Dollars ($300,000.00), in lawful money of the United States of America, together
with interest thereon from the date hereof at a fixed annual rate of nine
percent (9.00%), and both payable as hereinafter provided.
(a) Interest on amounts advanced to Makers under this Note shall be payable
monthly, in arrears, on the first day of each calendar month commencing on May
1, 2000.
(b) The principal balance of this Note shall be payable in three (3) equal,
consecutive annual installments of $75,000.00 each, plus interest thereon,
commencing on April 1, 2002, and continuing on the first day of each April
thereafter until April 1, 2005, at which time the remaining unpaid principal
balance of 75,000.00, plus all accrued interest thereon, shall be paid in full,
or due in full upon the occurrence of an Event of Default (as defined in Article
8 of the Loan Agreement).
(c) Upon the occurrence of an Event of Default, the rate of interest shall
be increased to a rate equal to two percent (2%) above the then current rate of
interest specified herein (the "Default Rate"). Interest at the rate provided
for herein, or the Default Rate, shall continue to accrue at such rate, and
continue to be paid even after default, maturity, acceleration, recovery of
judgment, bankruptcy or insolvency proceeding of any kind until such monetary
default has been cured.
(d) This Note shall be prepayable by Makers at any time without penalty or
premium but with accrued interest to the date of such prepayment on the amount
prepaid, at anytime and from time to time, in whole or in part, upon
notification to the Bank of such prepayment not later than 10:00 a.m. on the
date of such prepayment.
(e) All payments of principal and interest with regard to this Note shall
be made in lawful money of the United States of America in immediately available
funds at the Bank's office at 1130 Berkshire Boulevard, Wyomissing, Pennsylvania
19610, or at such other place as the Bank shall designate in writing.
<PAGE>
(f) Makers shall not be obligated to pay and the Bank shall not collect
interest at a rate in excess of the maximum permitted by law or the maximum that
will not subject the Bank to any civil or criminal penalties. If, because of the
acceleration of maturity, the payment of interest in advance or any other
reason, Makers are required, under the provisions of the Loan and Security
Agreement, dated March 31, 2000, among Moro Acquisition Corp., Makers and the
Bank (the "Loan Agreement"), to pay interest at a rate in excess of such maximum
rate, the rate of interest under such provisions shall immediately and
automatically be reduced to such maximum rate, and any payment made in excess of
such maximum rate, together with interest thereon at a rate provided herein from
the date of such payment, shall be immediately and automatically applied to the
reduction of the unpaid principal balance of this Note as of the date on which
such excess payment is made. If the amount to be so applied to reduction of the
unpaid principal balance exceeds the unpaid principal balance, the amount of
such excess shall be refunded by the Bank to Makers.
(g) This Note is the Note referred to in Section 2.6 of the Loan Agreement
and is entitled to all the benefits of such Loan Agreement and all the security
referred to therein. In the event of a conflict between the terms of this Note
and the terms of the Loan Agreement, the terms of the Loan Agreement shall
control.
(h) All of the agreements, conditions, covenants, provisions and
stipulations contained in the Loan Agreement (as defined in said Loan
Agreement), which are to be kept and performed by Makers are hereby made a part
of this Note to the same extent and with the same force and effect as if they
were fully set forth herein, and Makers covenant and agree to keep and perform
them, or cause them to be kept and performed, strictly in accordance with their
terms.
(i) Upon the occurrence of an Event of Default, then, and in such event,
the Bank may declare this Note to be due and payable, whereupon the entire
unpaid balance of principal, together with all accrued interest thereon, shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived, anything herein or
in the Loan Agreement to the contrary notwithstanding.
(j) UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, MAKERS HEREBY IRREVOCABLY
AUTHORIZE AND EMPOWER THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF THE
COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE TO APPEAR AT ANY TIME FOR MAKERS IN
ANY ACTION BROUGHT AGAINST SUCH MAKERS ON THIS NOTE AT THE SUIT OF THE BANK,
WITH OR WITHOUT DECLARATION FILED, AS OF ANY TERM, AND THEREIN TO CONFESS OR
ENTER JUDGMENT AGAINST MAKERS FOR THE ENTIRE UNPAID PRINCIPAL OF THIS NOTE AND
ALL OTHER SUMS PAYABLE BY OR ON BEHALF OF MAKERS PURSUANT TO THE TERMS OF THIS
NOTE OR THE LOAN AGREEMENT, AND ALL ARREARAGES OF INTEREST THEREON, TOGETHER
WITH COSTS OF SUIT, ATTORNEY'S COMMISSION FOR COLLECTION OF FIVE PERCENT (5%) OF
THE TOTAL AMOUNT THEN DUE BY MAKERS TO THE BANK (BUT IN ANY EVENT NOT LESS THAN
ONE THOUSAND DOLLARS ($1,000)), AND FOR SO DOING THIS NOTE OR A COPY HEREOF
VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. THE AUTHORITY GRANTED
HEREIN TO CONFESS JUDGMENT SHALL NOT BE EXHAUSTED BY ANY EXERCISE THEREOF BUT
SHALL CONTINUE FROM TIME TO TIME AND AT ALL TIMES UNTIL PAYMENT IN FULL OF ALL
THE AMOUNTS DUE HEREUNDER.
2
<PAGE>
(k) The remedies of the Bank as provided herein or in the Loan Agreement,
and the warranties contained herein or in the Loan Agreement, shall be
cumulative and concurrent, and may be pursued singly, successively, or together
at the sole discretion of the Bank, and may be exercised as often as occasion
therefor shall occur; and the failure to exercise any such right or remedy shall
in no event be construed as a waiver or release thereof.
(l) Makers hereby waive and release all errors, defects and imperfections
in any proceedings instituted by the Bank under the terms of this Note or of the
Loan Agreement, as well as all benefit that might accrue to Makers by virtue of
any present or future laws exempting any property, real or personal, or any part
of the proceeds arising from any sale of any such property, from attachment,
levy, or sale under execution, or providing for any stay of execution, exemption
from civil process, or extension of time for payment; and Makers agree that any
real estate that may be levied upon pursuant to a judgment obtained by virtue
hereof, on any writ of execution issued thereon, may be sold upon any such writ
in whole or in part in any order desired by the Bank.
(m) Makers and all endorsers, sureties and guarantors hereby jointly and
severally waive presentment for payment, demand, notice of demand, protest and
notice of protest of this Note, and all other notices in connection with the
delivery, acceptance, performance, default, or enforcement of the payment of
this Note, and they agree that the liability of each of them shall be
unconditional, without regard to the liability of any other party, and shall not
be affected in any manner by any indulgence, extension of time, renewal, waiver
or modification granted or consent to any and all extensions of time, renewals,
waivers, or payment or other provisions of this Note, and to the release of the
collateral or any part thereof, with or without substitution, and agree that
additional Makers, endorsers, guarantors, or sureties may become parties hereto
without notice to them or affecting their liability hereunder.
(n) The Bank shall not be deemed, by any act of omission or commission, to
have waived any of its rights or remedies hereunder unless such waiver is in
writing and signed by the Bank, and then only to the extent specifically set
forth in the writing. A waiver on one event shall not be construed as continuing
or as a bar to or waiver of any right or remedy to a subsequent event.
(o) This instrument shall be governed by and construed according to the
domestic, internal law (but not the law of conflict of laws) of the Commonwealth
of Pennsylvania.
(p) Whenever used, the singular number shall include the plural, the plural
the singular, the use of any gender shall be applicable to all genders, and the
words "Bank" and "Makers" shall be deemed to include the respective successors
and assigns of the Bank and Makers.
(q) Any provision contained in this Note which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability, without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
3
<PAGE>
IN WITNESS WHEREOF, Makers, intending to be legally bound hereby, have
caused this Note to be duly executed the day and year first above written.
/s/ David W. Menard
---------------------------------
David Menard
/s/ Jacqueline J. Menard
---------------------------------
Jacqueline J. Menard
4
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
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<TOTAL-ASSETS> 51,674
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0
0
<COMMON> 58,825
<OTHER-SE> (110,499)
<TOTAL-LIABILITY-AND-EQUITY> 51,674
<SALES> 0
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<OTHER-EXPENSES> 153,235
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