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Exhibit 2.1
STOCK PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this 11th day of January,
2001, by and among ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ of Rye, New Hampshire, individually and as
trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust - 1995, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ of Stratham,
New Hampshire, individually and as trustee of The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable
Trust of 1998 (in each of such capacities, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
individually a "Seller" and collectively the "Sellers"), and FINANCIAL
PERFORMANCE CORPORATION, a New York corporation with a principal place of
business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ("Buyer").
WHEREAS, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is the legal and beneficial owner of
Eighty-Four (84) shares of common stock, no par value, of ▇▇▇▇▇▇ Brothers, Inc.,
a New Hampshire corporation (the "Company") ("▇▇▇▇▇▇ ▇▇▇▇▇▇ Stock"); and
WHEREAS, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is the legal and beneficial owner of
Eighty-Four (84) shares of common stock, no par value, of the Company ("▇▇▇▇▇
▇▇▇▇▇▇ Stock," and collectively with the ▇▇▇▇▇▇ ▇▇▇▇▇▇ Stock, the "Shares"); and
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase
from Sellers all of the Shares for the consideration and on the terms set forth
in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Buyer and Seller agree as
follows:
1. DEFINITIONS
Unless the context otherwise requires, the following terms shall have the
following meanings, and such definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:
1.1 "Affiliate" shall mean any Person which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, another Person. The term "control" means the possession,
directly or indirectly, of more than fifty percent (50%) of the voting interests
of the Person.
1.2 "Best Efforts" shall mean the efforts that a prudent Person
desirous of achieving the result would use in similar circumstances to ensure
that such result is achieved as expeditiously as possible.
1.3 "Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in Manchester, New Hampshire or New York, New York are
required by law to close or are permitted to close.
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1.4 "Buyer" shall have the meaning assigned to such term in the
recitals of this Agreement.
1.5 "Claims" shall mean all liabilities, demands, claims, actions or
causes of action, regulatory, legislative or judicial proceedings or
investigations, assessments, levies, losses, fines, penalties, damages, costs
and expenses, including, without limitation, reasonable attorneys',
accountants', investigators', and experts' fees and expenses, sustained or
incurred in connection with the defense or investigation of any such Claim.
1.6 "Closing" shall have the meaning provided therefor in Section 2.3.
1.7 [Intentionally Left Blank]
1.8 "Designated Trust" shall mean, with respect to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust - 1995, his spouse, any of his lineal descendants or any
trust for the exclusive benefit of any of the foregoing, and, with respect to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Trust of 1998, his spouse, any
of his lineal descendants or any trust for the exclusive benefit of any of the
foregoing.
1.9 "FPCX Average Closing Share Price" shall mean the average "close"
or "last" share price of FPCX Shares on the NASDAQ or NASDAQ Small Cap
exchanges, or other recognized exchange, which exchange the FPCX Shares are
currently traded, as reported in the eastern edition of the Wall Street Journal,
for a period of thirty (30) Business Days.
1.10 "FPCX Shares" shall mean the common stock, $0.01 par value, of the
Buyer.
1.11 "Fraud" shall mean a false representation of a matter of fact
which is intended to deceive another person and does so.
1.12 "GAAP" shall mean generally accepted accounting principles in
effect in the United States of America at the time of determination.
1.13 "Knowledge." The phrase "to the Buyer's knowledge" and phrases
with similar language or effect shall mean the actual knowledge of ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇. The phrases "to Seller's
knowledge," "known by the Sellers" and phrases with similar language or effect
shall mean the actual knowledge of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇. The
phrases "to Company's knowledge," "known by the Company" and phrases with
similar language or effect shall mean the actual knowledge of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇.
1.14 "Material Adverse Effect" means any change, circumstance, or
effect that, individually or in the aggregate with all other changes,
circumstances or effects, is or is reasonably likely to be materially adverse to
(a) the properties, business, operations, profits or condition (financial or
otherwise) of the party and its Subsidiaries taken as a whole, (b) the ability
of the party or any Subsidiary to perform its obligations under this Agreement
or any of the other transaction documents contemplated hereby, or (c) the
legality, validity or
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enforceability of any party's material obligations under this Agreement or any
of the other transaction documents contemplated hereby.
1.15 "Person" shall mean an individual, a partnership, corporation,
limited liability company, limited liability partnership, trust or
unincorporated organization, and a government or agency or authority or
political subdivision thereof.
1.16 "Registerable Securities" shall mean (i) FPCX Shares issued or
issuable upon conversion of the Term Notes; (ii) FPCX Shares issued or issuable
upon conversion of the 24- Month Notes; (iii) FPCX Shares held by a Seller or
his Designated Trust after giving effect to the transactions contemplated by
this Agreement; and (iv) FPCX Shares issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, any securities described in clause (i), clause (ii) or this
clause (iii) of this definition. Notwithstanding the foregoing, Registerable
Securities shall not include any securities sold by a Seller or his Designated
Trust to the public either pursuant to a registration statement or Rule 144.
1.17 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or successor law.
1.18 "Securities Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, or any successor law, and regulations and rules issued
pursuant to that Act or successor law.
1.19 "Sellers" shall have the meaning assigned to such term in the
recitals of this Agreement.
1.20 "Shares" shall have the meaning assigned to such term in the
recitals of this Agreement.
1.21 "Subsidiary" shall mean, with respect to any Person (the "Owner"),
any corporation or other Person of which securities or other interests having
the power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
1.22 "Target Price" shall mean Six Dollars ($6.00) per share, as
adjusted to give effect to stock splits, stock dividends or similar capital
transactions.
1.23 "Taxes" shall mean any tax (including any income tax, capital
gains tax, value- added tax, sales tax, property tax, gift tax, employment tax,
payroll tax or estate tax), levy, assessment, tariff, duty (including any
customs duty), deficiency, or other fee, and any related charge or amount
(including any fine, penalty, interest, or addition to tax), imposed, assessed,
or collected by or under the authority of any federal, state, local, municipal
foreign or other governmental or quasi-governmental authority or payable
pursuant to any tax-sharing agreement
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or any other contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
1.24 "Tax Return" shall mean a report, return or other information
required to be supplied to or filed with a governmental entity with respect to
any Taxes.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 Shares. Subject to the terms and conditions of this Agreement, at
Closing, Sellers shall cause the Shares to be sold and transferred to Buyer and
Buyer shall purchase the Shares.
2.2 Purchase Price. The purchase price for the Shares consists of the
following (the "Purchase Price"):
2.2.1 [Intentionally Left Blank]
2.2.2 Two subordinated convertible term promissory notes, as
more particularly described in Section 3, in the original principal amount of
Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000) (individually, a
"Term Note" and collectively, the "Term Notes") in a form substantially similar
to Exhibit 2.2.2 to be delivered at Closing, one to each of the Sellers or their
Designated Trusts (such Term Notes to have an aggregate original principal
amount of Seven Million Five Hundred Thousand Dollars ($7,500,000));
2.2.3 The earn-out, as more particularly described in Section
4 (the "Earn-Out");
2.2.4 Such number of fully paid and non-assessable FPCX Shares
as provided in Section 5.1 to be issued to each of the Sellers or their
Designated Trusts; and
2.2.5 Two 24-month subordinated convertible promissory notes,
as more particularly described in Section 15, in the original principal amount
of One Million Dollars ($1,000,000) (individually, a "24-Month Note" and
collectively the "24-Month Notes") in a form substantially similar to Exhibit
2.2.5 to be delivered at Closing, one to each of the Sellers of their Designated
Trusts (such 24-Month Notes to have an aggregate original principal amount of
Two Million Dollars ($2,000,000)).
2.3 Closing. The purchase and sale ("Closing") provided for in this
Agreement will take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 a.m. (local time) on
Thursday, January 11, 2001, or at such other time and place as Buyer and Sellers
may agree ("Closing Date").
3. SUBORDINATED TERM PROMISSORY NOTES
3.1 Term and Transferability. The outstanding principal balance and all
accrued interest shall be due and payable to the holder of each Term Note on the
fifth anniversary of the Closing (the "Maturity Date"). Transferability of the
Term Notes shall be restricted to transfers to Designated Trusts upon prior
written notice by the transferor to Buyer.
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3.2 Interest. Interest shall be payable quarterly in cash, in arrears,
and shall accrue on the then outstanding principal balance of the Term Notes at
the 90-day LIBOR rate as of the Closing Date plus 150 basis points, per annum,
adjusted quarterly on and as of the 10th day of April, July, October and January
of each year following the Closing.
3.3 Additional Conditions. Notwithstanding anything contained herein or
in the Term Notes to the contrary, payments to be made under the Term Notes
shall be subject to the terms and conditions of the Loan and Security Agreement
between Fleet Capital Corporation and the Company, dated as of January 11, 2001
(the "Loan and Security Agreement"), relating thereto.
3.4 Subordination. The Term Notes shall be subordinated, as more
specifically set forth in the Term Notes, to present and future indebtedness or
obligations of the Buyer, the Company and their Affiliates for borrowed money.
3.5 Conversion. Upon ten (10) days written notice by either (i) the
holder of a Term Note or (ii) the Buyer, to the other parties of the exercising
party's intent to exercise their conversion right under a Term Note, the then
outstanding principal pursuant to such Term Note shall be convertible into FPCX
Shares as follows:
3.5.1 on the first anniversary of the Closing Date (the "First
Anniversary") or any date thereafter through the Maturity Date, twenty-five
percent (25%) of each Term Note may be converted, provided that during the
thirty (30) days immediately preceding the First Anniversary or any thirty (30)
day period thereafter through the Maturity Date, as the case may be, the FPCX
Average Closing Share Price meets or exceeds the Target Price;
3.5.2 on the second anniversary of the Closing Date (the
"Second Anniversary") or any date thereafter through the Maturity Date, up to an
additional twenty-five percent (25%) of each Term Note may be converted,
provided that during the thirty (30) days immediately preceding the Second
Anniversary or any thirty (30) day period thereafter through the Maturity Date,
as the case may be, the FPCX Average Closing Share Price meets or exceeds the
Target Price;
3.5.3 on the third anniversary of the Closing Date (the "Third
Anniversary") or any date thereafter through the Maturity Date, up to an
additional twenty-five percent (25%) of each Term Note may be converted,
provided that during the thirty (30) days immediately preceding the Third
Anniversary or any thirty (30) day period thereafter through the Maturity Date,
as the case may be, the FPCX Average Closing Share Price meets or exceeds the
Target Price; and
3.5.4 on the fourth anniversary of the Closing Date (the
"Fourth Anniversary") or any date thereafter through the Maturity Date, up to an
additional twenty-five percent (25%) of each Term Note may be converted,
provided that during the thirty (30) days immediately preceding the Fourth
Anniversary or any thirty (30) day period thereafter through the Maturity Date,
as the case may be, the FPCX Average Closing Share Price meets or exceeds the
Target Price.
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Accrued interest on the portion of the Term Note being converted at the date of
conversion shall be paid to the Sellers in cash. Subject to the Securities Act,
Sellers and their Designated Trusts shall have the right to sell any FPCX Shares
to satisfy any Taxes resulting from the conversion or convertibility of any
portion of either Term Note or from any event that renders any portion of either
Term Note taxable.
3.6 Price Basis Upon Conversion. The price basis upon conversion,
subject to adjustment as provided in the Term Notes for stock splits, stock
dividends, or similar capital transactions, shall be $4.00 per share.
3.7 Shareholder Approval. Notwithstanding anything in this Section 3 or
in the Term Notes to the contrary, neither any holder of a Term Note nor the
Buyer shall have the right to deliver any written notice provided for in Section
3.4 above to exercise their respective conversion rights under the Term Notes
until such time as the Buyer obtains the approval of its shareholders to the
extent necessary to comply with the shareholder approval requirement of the
National Association of Securities Dealers, Inc. applicable to the Buyer.
4. EARN-OUT
4.1 Term. The Earn-Out Term shall be a five-year term commencing on
January 1, 2001.
4.2 Payments. Buyer shall annually make payments pursuant to the
Earn-Out obligation subject to the provisions in this Section 4, as follows:
4.2.1 in the event that the Company's earnings before
interest, taxes, depreciation and amortization ("EBITDA") in any one fiscal year
during the Earn-Out Term exceeds $4,000,000, then Buyer shall pay to each of the
Sellers, or their Designated Trusts, Two Hundred Fifty Thousand Dollars
($250,000) (such payments to aggregate Five Hundred Thousand Dollars ($500,000);
provided that,
4.2.2 in the event that EBITDA in any one fiscal year during
the Earn-Out Term exceeds $5,000,000, and in lieu of the payment provided for in
Subsection 4.2.1, then Buyer shall pay to each of the Sellers, or their
Designated Trusts, Three Hundred Thousand Dollars ($300,000) (such payments to
aggregate Six Hundred Thousand Dollars ($600,000)).
4.3 Calculation.
4.3.1 The Buyer (i) shall annually calculate EBITDA and its
Earn-Out payment obligations and (ii) shall pay to the Sellers or their
Designated Trusts all amounts currently due pursuant to the Earn-Out obligation
within one hundred five (105) days following the end of each fiscal year of the
Company. The Buyer shall provide such calculation in reasonable detail to
Sellers or their Designated Trusts within ninety (90) days following the end of
each fiscal year of the Company.
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4.3.2 Sellers or their Designated Trusts, collectively, shall
have the right to challenge the Buyer's EBITDA calculation by filing a written
notice with the Buyer within fifteen (15) Business Days of receipt of the
Buyer's EBITDA calculation. If the parties cannot mutually agree on said
calculation, then any disputed calculation shall be submitted for binding
arbitration by an independent and nationally recognized accounting firm mutually
acceptable to the Sellers or their Designated Trusts, acting collectively, and
the Buyer, the decision of such accounting firm being final, absent manifest
error. If the parties are unable to agree on an accounting firm, then the
accounting firm of the disputing Seller or their Designated Trust, acting
collectively, on the one hand, and the Buyer, on the other hand, shall designate
an independent and nationally recognized accounting firm to serve as arbitrator.
4.4 EBITDA. For purposes of the Earn-Out, EBITDA shall mean EBITDA, as
prepared under GAAP on a basis consistent with the Company's prior practices,
for the operations of the Company (including the Subsidiary set forth in
Schedule 6.1.1 of the Disclosure Schedule), calculated on a stand-alone basis,
exclusive of Buyer's corporate overhead, management fee, premium for key person
life insurance covering each of the Sellers, and other Buyer's expenses
allocated or charged to the Company and its Subsidiaries by the Buyer which are
not directly related to the Company and its Subsidiaries, any
acquisition-related income, fees and expense relating to this Agreement and the
transactions contemplated hereby, and expenses not directly related to the
Company's business. Any acquisition-related income, fees and expense relating to
and any future acquisitions of the Buyer, the Company or their Subsidiaries and
any interest and principal payments and related fees and expenses pursuant to
the 24-Month Notes shall be excluded from the calculation of EBITDA unless the
parties hereto shall mutually agree otherwise.
4.5 Notwithstanding the foregoing, payment obligations pursuant to this
Section 4 which have not yet been earned shall terminate only upon (A) the
resignation of employment of either ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ during
the four-year period immediately following the Closing Date, or (B) the
resignation of employment of both ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ during the
fifth year immediately following the Closing Date; provided that upon
resignation of either Seller during the fifth year immediately following the
Closing Date the Buyer shall pay to the non-resigning Seller, or his Designated
Trusts, one hundred percent (100%) of the payments which would have been due to
both of the Sellers or their Designated Trusts pursuant to the Earn-Out
obligation.
4.6 Notwithstanding anything contained herein to the contrary, payments
to be made under the Earn-Out shall be subject to the terms and conditions of
the Loan and Security Agreement relating thereto. If such payments are not made
as a result of the restrictions set forth in the Loan and Security Agreement, or
otherwise, interest shall accrue on the then outstanding balance at the 90-day
LIBOR rate as published in The Wall Street Journal plus 150 basis points on the
date such payments are otherwise due.
5. FPCX SHARES
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5.1 Calculation of FPCX Shares. The number of FPCX Shares to be
delivered, pursuant to Section 2.2.4, by Buyer to each of the Sellers or their
respective Designated Trusts shall be equal to Seven Hundred Fifty-Six Thousand
Two Hundred Fifty (756,250) shares (and, in the aggregate, One Million Five
Hundred Twelve Thousand Five Hundred (1,512,500) shares).
5.2 Transfer Restrictions. The FPCX Shares delivered to the Sellers or
their respective Designated Trusts shall bear a legend restricting the transfer
of such shares in accordance with this Agreement and federal and state
securities laws as follows:
The holder, as well as their designees and
transferees, (i) shall not sell the securities represented by
this certificate (the "FPCX Shares") during the twelve month
period immediately following January 11, 2001, (ii) shall not
sell more than twenty- five percent (25%) of the FPCX shares
originally issued to the holder during each of the second and
third twelve month periods following January 11, 2001, and
(iii) shall not sell more than fifty percent (50%) of the FPCX
shares originally issued to the holder during each of the
fourth or fifth twelve month periods following January 11,
2001; and provided that the holder of such shares may transfer
such shares to the holder's spouse, any immediate descendants
of the transferor or any trust for the exclusive benefit of
any of the foregoing; and provided further that such holder
shall provide Financial Performance Corporation with prior
written notice of any such transfer.
5.3 Piggyback Registrations.
5.3.1 Buyer shall notify Sellers or the Designated Trust
Representatives (as defined below), if a Term Note or any FPCX shares have been
transferred in accordance with Sections 3.1 or 5.2, respectively, in writing at
least thirty (30) days prior to the filing of any registration statement under
the Securities Act for purposes of a public offering of securities of the Buyer
(including, but not limited to, registration statements relating to secondary
offerings of securities of the Buyer, but excluding registration statements
relating to employee benefit plans and corporate reorganizations) and will
afford each Seller or their Designated Trusts, through the Designated Trust
Representatives, an opportunity to include in such registration statement all or
part of such Registerable Securities held by such Sellers or their Designated
Trusts. Each Seller or their Designated Trusts, through the Designated Trust
Representatives, desiring to include in any such registration statement all or
any part of the Registerable Securities held by it shall, within twenty (20)
days after receipt of the above-described notice from the Buyer, so notify the
Buyer in writing. Such notice shall state the number of Registerable Securities
proposed to be included and the intended method of disposition of the
Registerable Securities by such Sellers or their Designated Trusts. If a Seller
or their Designated Trust, through his Designated Trust Representatives, decides
not to include all of its Registerable Securities in any registration
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statement thereafter filed by the Buyer, such Seller or their Designated Trust,
as the case may be, shall nevertheless continue to have the right to include any
of its Registerable Securities in any subsequent registration statement or
registration statements as may be filed by the Buyer with respect to offerings
of its securities, all upon the terms and conditions set forth in this Section
5.3.
5.3.2 If the registration statement under which the Buyer
gives notice under this Section 5.3 is for an underwritten
offering, the Buyer shall so advise the Sellers or the
Designated Trust Representatives. In such event, the right of
any such Sellers or their Designated Trusts to include such
Registerable Securities in a registration pursuant to this
Subsection 5.3.2 shall be conditioned upon such Sellers' or
their Designated Trusts' participation in such underwriting
and the inclusion of such person's Registerable Securities in
the underwriting to the extent provided herein. The Sellers,
or their Designated Trusts, , through the Designated Trust
Representatives, proposing to distribute their Registerable
Securities through such underwriting shall enter into an
underwriting agreement upon the terms of underwriting as
agreed upon between the Buyer and the underwriter or
underwriters selected by the Buyer for such underwriting.
Notwithstanding any other provision of this Agreement, if the
underwriter determines in its sole discretion that marketing
factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the
underwriting shall be allocated first to the Buyer, and second
to the Sellers or their Designated Trusts and any other
present or future shareholders of the Buyer having "piggyback"
registration rights on a pro rata basis. In such event, the
Buyer shall use its best efforts so that the aggregate amount
of securities of the selling Sellers or their Designated
Trusts included in the registration shall not be reduced below
ten percent (10%) of the total amount of securities included
in such registration.
5.3.3 If the registration statement under
which the Buyer gives notice under this Section 5.3 is for
non-underwritten offering in which the Buyer is selling
shares, the Buyer shall so advise the Sellers or their
Designated Trust Representatives. In such event, the right of
any such Sellers or their Designated Trusts to include such
Registerable Securities in a registration pursuant to this
Subsection 5.3.3 shall be conditioned upon such Sellers' or
their Designated Trusts' participation in such offering and
the inclusion of such person's Registerable Securities in the
offering to the extent provided herein. The Sellers, or their
Designated Trusts,
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through the Designated Trust Representatives, proposing to
distribute their Registerable Securities through such offering
shall enter into an agreement upon the terms of the offering
as reasonably proposed by the Buyer. Notwithstanding any other
provision of this Agreement, if the Buyer determines in its
sole discretion that marketing factors require a limitation of
the number of shares to be offered in an offering under this
subsection, the number of shares that may be included in the
offering shall be allocated first to the Buyer, and second to
the Sellers or their Designated Trusts and any other present
or future shareholders of the Buyer having "piggyback"
registration rights on a pro rata basis. In such event, the
Buyer shall use its best efforts so that the aggregate amount
of securities of the selling Sellers or their Designated
Trusts included in the registration shall not be reduced below
ten percent (10%) of the total amount of securities included
in such registration.
5.3.4 Notwithstanding any other provision of this Section 5,
the Sellers or their Designated Trusts shall have piggyback rights no less
favorable than piggyback rights granted to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ III and ▇▇▇▇▇
▇▇▇▇▇▇▇▇, and Persons obtaining such piggyback rights subsequent to the Closing
in connection with an acquisition consummated by the Buyer or an Affiliate of
the Buyer.
5.3.5 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, individually and as trustee of the ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ Trust - 1995, appoints and designates ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as the
representative of his Designated Trust and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, individually and as
trustee of The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Revocable Trust of 1998, appoints and designates
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as the representative of his Designated Trust (each, the
respective "Designated Trust Representative") to receive all demands and notices
on or with respect to a Designated Trust, as such Designated Trust's true and
lawful attorney-in-fact and agent, and for such Designated Trust and in such
Designated Trust's name, to (a) receive all demands, notices or other
communications directed to such Designated Trust under Section 5 of this
Agreement and to take any action (or to determine to refrain from taking any
action) with respect thereto as he may deem appropriate as effectively as such
Designated Trust could act for itself and (b) execute and deliver all
instruments and documents of every kind incident to the foregoing with the same
effect as if such Designated Trust had executed and delivered such instruments
and documents personally. Accordingly, any demands, notices or other
communications directed to the Designated Trust hereunder shall be deemed
effective if given to the Designated Trust Representative. Upon the death,
resignation or incapacity of the Designated Trust Representative, a successor
shall be appointed by the Sellers within the thirty (30) day period immediately
following the date of such death, resignation or incapacity, and such successor
shall either be a Seller or any other person reasonably acceptable to Buyer who
shall agree in writing to accept such appointment in accordance with the terms
hereof. The resignation of any Designated Trust Representative shall not be
effective until a successor Designated Trust Representative has been appointed,
and has accepted such appointment in accordance with the
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provisions of this Section 5.3.5. The selection of a successor Designated Trust
Representative appointed in any manner permitted in this Section 5.3.5 shall be
final and binding upon all of the Designated Trusts and written notice of such
selection and appointment shall be provided to Buyer promptly.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLERS
The Sellers, jointly and severally, covenant, warrant and represent to
the Buyer as follows:
6.1 Corporate Organization; Good Standing. True, correct and complete
copies of the Company's Certificate of Incorporation, as amended, or Deed of
Incorporation, as the case may be and By-Laws of each of the Company and the
Subsidiary, certified by an Officer of the Company, are attached as Exhibit 6.1.
The Company:
6.1.1 is a corporation duly organized, validly existing and in
good standing under the laws of the State of New Hampshire. Attached hereto as
Schedule 6.1.1 of the Disclosure Schedule is a list of the Subsidiaries of the
Company, if any, setting forth the authorized and issued capital stock and
ownership interest of each of such Subsidiaries;
6.1.2 and each of its Subsidiaries has all requisite power and
authority and all necessary licenses and permits to own and operate its
properties and to carry on its business as now conducted and to enter into and
perform its obligations under this Agreement, and the transactions contemplated
hereby; and
6.1.3 and each of its Subsidiaries, except as set forth on
Schedule 6.1.3 of the Disclosure Schedule, has duly qualified and are authorized
to do business and are in good standing as a foreign corporation in each
jurisdiction where the nature and conduct of its business requires. Schedule
6.1.3 of the Disclosure Schedule sets forth each jurisdiction in which the
Company is authorized to do business as a foreign corporation.
6.2 Capitalization. The authorized equity securities of the Company
consist of three hundred (300) shares of common stock, no par value, of which
three hundred (300) shares were issued and outstanding immediately prior to the
redemption described in Section 12.2 of this Agreement and one hundred
sixty-eight (168) shares are issued and outstanding immediately following the
redemption described in Section 12.2 of this Agreement. Sellers are, and will be
as of the Closing, the legal and beneficial owners of the Shares. All of the
issued and outstanding shares have been duly authorized and validly issued and
are fully paid and nonassessable. There are no contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of the
Company. None of the outstanding equity securities or other securities of the
Company was issued in violation of the Securities Act.
6.3 Title to Shares; Authority. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as trustee of the ▇▇▇▇▇
▇. ▇▇▇▇▇▇ Trust - 1995 and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as trustee of The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Revocable Trust of 1998 have valid legal and beneficial title and interest in
and to all of the ▇▇▇▇▇ ▇▇▇▇▇▇ Stock, ▇▇▇▇▇▇ ▇▇▇▇▇▇ Stock, as well as those
shares redeemed pursuant to Section 12.2 of this Agreement,
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respectively, free and clear of any and all liens, encumbrances, equities and
claims, and have the full right, power and authority to sell, transfer and
deliver such shares as provided in this Agreement.
6.4 Legal, Valid and Binding Obligations. This Agreement and any other
documents executed by or on behalf of the Sellers or the Company in connection
with the transactions contemplated in this Agreement hereby or thereby each
constitutes the legal, valid and binding obligation of the Sellers and the
Company, enforceable in accordance with the respective terms hereof and thereof,
except as the same may be limited by bankruptcy, insolvency, reorganization or
other similar laws relating to or affecting the enforcement of creditors' rights
generally and by equitable principles.
6.5 Contracts. Except as set forth on Schedule 6.5 of the Disclosure
Schedule, each Seller is not a party to any contract or agreement affecting or
relating to the Shares, as well as those shares redeemed pursuant to Section
12.2 of this Agreement, other than the Shareholder Agreement, the agreement for
redemption as set forth in Section 12.2 of this Agreement, and the Voting
Agreement referred to in Sections 10.9 and 11.10 of this Agreement, or to any
contract, arrangement or understanding with the Company or any Affiliate of the
Company.
6.6 Title to Properties. The Company and its Subsidiary has good and
marketable ownership, title and interest to its properties and assets reflected
on the Company's Financial Statements or acquired by it since the Company's
Balance Sheet Date (other than properties and assets disposed of in the ordinary
course of business since the Company's Balance Sheet Date), and all such
properties and assets are free and clear of mortgages, pledges, security
interests, liens, charges, claims, restrictions and other encumbrances
(including without limitation, easements and licenses), except for those set
forth on Schedule 6.6 of the Disclosure Schedule, liens for or current taxes not
yet due and payable and minor imperfections of title, if any, not material in
nature or amount and not materially detracting from the value or impairing the
use of the property subject thereto or impairing the operations or proposed
operations of the Company or its Subsidiary, including without limitation, the
ability of the Company or its Subsidiary to secure financing using such
properties and assets as collateral. To the Sellers' and the Company's
knowledge, there are no condemnation, environmental, zoning or other land use
regulation proceedings, either instituted or planned to be instituted, which
would adversely affect the use or operation of either the Company's or its
Subsidiary's properties and assets for their respective intended uses and
purposes, or the value of such properties, and the Company and its Subsidiary
have not received notice of any special assessment proceedings which would
affect such properties and assets. The Company and its Subsidiary owns or has
valid leases or licenses to use all tangible properties necessary to conduct its
business substantially in the manner in which it is presently being conducted.
6.7 Patents, Trademarks, Etc. Set forth in Schedule 6.7 of the
Disclosure Schedule, and incorporated herein, is a list of all domestic and
foreign patents, patent rights, patent applications, trademarks, trademark
applications, service marks, service ▇▇▇▇ applications, trade names and
copyrights, and all applications for such which are in the process of being
prepared, owned by or registered in the name of the Company or its Subsidiary,
or of which the Company or its
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Subsidiary is a licensor or licensee or in which the Company or its Subsidiary
has any right. To the Sellers' and the Company's knowledge, the Company and its
Subsidiary owns or possesses adequate licenses or other rights to use all
patents, patent applications, trademarks, trademark applications, service marks,
service ▇▇▇▇ applications, trade names, copyrights, manufacturing processes,
formulae, trade secrets, customer lists and know how (collectively,
"Intellectual Property") necessary or desirable to the conduct of its business
as conducted and as proposed to be conducted, and no claim is pending or, to the
Sellers' and the Company's knowledge, threatened to the effect that the
operations of the Company or its Subsidiary infringe upon or conflict with the
asserted rights of any other person under any Intellectual Property, and, to the
Sellers' and the Company's knowledge, there is no basis for any such claim
(whether or not pending or threatened). No claim is pending or threatened to the
effect that any such Intellectual Property owned or licensed by the Company or
its Subsidiary, or which the Company or its Subsidiary otherwise has the right
to use, is invalid or unenforceable by the Company or its Subsidiary, and, to
the Sellers' and the Company's knowledge, there is no basis for any such claim
(whether or not pending or threatened). All prior art known to the Company which
may be or may have been pertinent to the examination of any United States patent
or patent application listed in Schedule 6.7 of the Disclosure Schedule has been
cited to the United States Patent and Trademark Office.
6.8 Leasehold Interests. Each lease or agreement to which the Company
is a party or under which it is a lessee of any property, real or personal, is a
valid and existing agreement, duly authorized and entered into, without any
default of the Company or its Subsidiary thereunder and, to the Sellers' and the
Company's knowledge, without any default thereunder of any other party thereto.
No event has occurred and is continuing which, with due notice or lapse of time
or both, would constitute a default or event of default by the Company or its
Subsidiary under any such lease or agreement or, to the Sellers' and the
Company's knowledge, by any other party thereto. The Company's possession of
such property has not been disturbed and, to the Sellers' and the Company's
knowledge, no claim has been asserted against the Company or its Subsidiary
adverse to its rights in such leasehold interests. Schedule 6.8 of the
Disclosure Schedule sets forth all of such leases with complete details as to
rent, term and security deposits.
6.9 Material Contracts. Schedule 6.9 of the Disclosure Schedule
contains a list of all presently existing contracts, agreements and commitments
(or group of related contracts, agreements and commitments with the same party)
that includes a commitment and/or obligation equal to or exceeding $25,000 or
which is otherwise material to the Company or Subsidiary, to which the Company
or the Subsidiary, as the case may be, is a party or by which it is bound (the
"Contracts"). All such instruments are valid and enforceable in accordance with
their terms and, to the knowledge of Sellers and the Company, the Company has
complied with all the provisions of such Contracts and are not in default
thereunder, and Sellers and the Company are not aware of any defaults by the
other parties thereto, nor does any condition of it exist that with notice or
lapse of time or both would constitute a default. Sellers have furnished to
Buyer, and Buyer acknowledges receipt of, complete copies of such documents.
Sellers have provided to Buyer, and Buyer acknowledges receipt of, a list of
customer purchase orders to be filled after the Closing.
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6.10 Loans and Advances. Except as set forth in Schedule 6.10 of the
Disclosure Schedule, the Company does not have any outstanding loans or advances
to any Person and is not obligated to make any such loans or advances, except,
in each case, for advances to employees of the Company in respect of
reimbursable business expenses anticipated to be incurred by them in connection
with their performance of services for the Company in accordance with past
practices and incurred during the ordinary course of business.
6.11 Assumptions, Guaranties, Etc. of Indebtedness of Other Persons.
The Company has not assumed, guaranteed, endorsed or otherwise become directly
or contingently liable on any indebtedness of any other Person (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor, or otherwise to assure the creditor against loss), except for
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business as set forth in Schedule 6.11 of the Disclosure
Schedule.
6.12 Significant Customers and Suppliers. Set forth on Schedule 6.12 of
the Disclosure Schedule, and incorporated herein, is a list of the twenty-five
(25) largest customers of and suppliers to the Company and each supplier of the
Company which accounted for in excess of $25,000 of sales to the Company during
the fiscal years ended December 31, 1999 and December 31, 1998 and from January
1, 2000 through October 31, 2000, and the dollar volume of business with each
such customer for the fiscal years ended December 31, 1999 and 1998 and from
January 1, 2000 through October 31, 2000. No current customer or supplier,
during the period covered by the Company's Financial Statements or which has
been significant to the Company thereafter, has terminated, materially reduced
or, to the Sellers' or the Company's knowledge, threatened to terminate or
materially reduce its purchases under existing contracts or provision of
products or services to the Company, as the case may be.
6.13 Broker. Except as set forth on Schedule 6.13 of the Disclosure
Schedule, Sellers and the Company have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or other similar payment
in connection with this Agreement or the transactions contemplated hereby.
6.14 Taxes. All tax returns required to be filed by the Company and its
Subsidiary in any jurisdiction have been timely and accurately filed and all
Taxes, assessments, fees and other governmental charges upon the Company and its
Subsidiary or upon any of their properties, income or franchises, which are
shown to be due and payable in such returns have been paid except for such
taxes, assessments, fees and other governmental charges set forth on Schedule
6.14 of the Disclosure Schedule, and incorporated herein, the payment of which
are being contested by the Company in good faith by appropriate proceedings and
with respect to which the Company has set aside on its books reserves in
accordance with GAAP. The Company and its Subsidiary has filed all required Tax
Returns for all taxable years or periods which ended on or prior to the Closing
Date, and, to the Sellers' and the Company's knowledge, all Federal and state
tax liabilities of the Company for such years have been satisfied. The Company
has not executed any waiver or waivers that would have the effect of extending
the applicable statute of
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limitations in respect of tax liabilities. Except as set forth on Schedule 6.14
of the Disclosure Schedule, the Company and the Sellers do not know of any
proposed additional tax assessment against the Company and its Subsidiaries for
which provision has not been made on its accounts, and no controversy in respect
of additional Federal or state taxes due is pending or, to the Sellers' and the
Company's knowledge, threatened. Except as set forth on Schedule 6.14 of the
Disclosure Schedule, the Company and the Sellers are not aware of any audit or
challenge for any federal or state tax liability for any period by the Internal
Revenue Service or any state taxing authority. The provisions for Taxes on the
books of the Company are deemed adequate in all material respects by the
Company. The Company has delivered to the Buyer true and correct copies of
federal and state income tax returns for all years in which the statute of
limitations has not expired.
6.15 Machinery and Equipment. Schedule 6.15 of the Disclosure Schedule
sets forth a true, correct and complete list of all material machinery and
equipment, all machinery and equipment having a fair market value of over ten
thousand dollars ($10,000) and any lease agreement, security interest or
financing arrangement relating to same, as of the date hereof, which are used in
or relate to the business of the Company and its Subsidiary and all lease
agreements and financing agreements relating thereto and all agreements or
instruments granting a security interest therein. All items of machinery,
equipment and other tangible personal property used in the Company's and its
Subsidiary's business have been maintained and repaired in the normal course of
the Company's and its Subsidiary business.
6.16 Inventory. The Company's inventory reflected in the Company
Financial Statements for the year ending December 31, 1999 and acquired by the
Company during the period from January 1, 2000 through the Closing Date are of
good and merchantable quality, usable and saleable within twelve (12) months of
the Closing Date subject to reserves consistent with the Company's past
practices, and at a customary gross profit consistent with the average gross
profit of the Company for the twelve month period ending December 31, 1999,
except as reserved against in the Company's Financial Statements.
6.17 Financial Statements and Records. The Sellers have delivered to
the Buyer the Company's financial statements, including the notes thereto, for
the years ending December 31, 1997 and 1998 reviewed by ▇.▇. ▇▇▇▇▇▇ & Company
and for the year ending December 31, 1999 audited by ▇.▇. ▇▇▇▇▇▇ & Company, and
for the eleven (11) month period ended November 30, 2000 (unaudited), copies of
which are attached hereto as Exhibit 6.17 (collectively, the "Company's
Financial Statements"). The Company's Financial Statements fairly present the
financial position of the Seller as of November 30, 2000 (the "Company's Balance
Sheet Date") and the results of operations for the periods covered thereby, and
have been prepared in accordance with GAAP applied on a basis consistent with
the Company's prior practices, except, in the case of interim financial
statements, for normal year-end audit adjustments and the absence of footnotes.
The books and records of the Company fully and fairly reflect all of its
transactions, properties, assets and liabilities. The Company's Financial
Statements reflect all adjustments necessary for a fair presentation of the
financial information contained therein. The Sellers have delivered to the Buyer
a Closing Date Balance Sheet in the form attached hereto as
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Schedule 6.17 of the Disclosure Schedule (the "Closing Date Balance Sheet") As
of the date hereof, $2,869,389 (the cash represented on the Closing Date Balance
Sheet), plus $4,500,000 (the trailing twelve months EBITDA for the year ended
12/31/00), multiplied by 2.5, minus $8,000,000 ($6,119,389), is sufficient to
serve the Company's existing business.
6.18 No Undisclosed Liabilities. The Company and its Subsidiary has no
liabilities or obligations of any nature, whether known or unknown and whether
absolute, accrued, contingent, or otherwise, except for liabilities or
obligations reflected or reserved against in the Company's Financial Statements
and current liabilities incurred in the ordinary course of business since the
Company's Balance Sheet Date which do not have and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
6.19 Absence of Certain Changes and Events. Except as set forth in
Schedule 6.19 of the Disclosure Schedule, since December 31, 1999, the Company
and its Subsidiaries have conducted their business only in, and have not engaged
in any transaction other than according to, the ordinary and usual course of
such business in a manner consistent with its past practice, and, subject
thereto, there have not been (i) any changes in the business, condition
(financial or otherwise), results of operations of the Company or its
Subsidiaries or any development or combination of developments of which the
Company has knowledge that, individually or in the aggregate, have had or are
reasonably likely to have a Material Adverse Effect; (ii) any material damage,
destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by the Company or its Subsidiaries,
whether or not covered by insurance; (iii) any distribution of or with respect
to the Shares or the shares redeemed pursuant to Section 12.2 of this Agreement;
(iv) any change by the Company in its accounting practices, principles or
methods; or (v) any increase in the compensation, benefits or term of employment
of officers or employees of the Company or its Subsidiaries (including any such
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment).
6.20 Insurance. The Company is insured and has been insured since
January 1, 1999, under various policies of fire, liability and other forms of
insurance as set forth on Schedule 6.20 of the Disclosure Schedule (specifying
the insurer, the policy number and the aggregate limit, if any, of the insurer's
liability thereunder), which policies are in full force and effect, valid and
enforceable in accordance with their terms and provide adequate insurance for
the business of the Company and its assets and properties.
6.21 Accounts Receivable. All accounts receivable reflected in the
Company's Financial Statements and all accounts receivable arising after the
date thereof up to and including the date hereof (to the extent not heretofore
or theretofore collected) arose from bona fide transactions in the ordinary
course of business and will be fully collectible in the ordinary course of
business without resort to litigation, except to the extent of any provision or
reserve established with respect thereto in accordance with GAAP.
6.22 Employee Benefit Plans.
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6.22.1 Schedule 6.22 of the Disclosure Schedule sets forth
each employee benefit plan which the Company currently sponsors or to which the
Company contributes as well as each employee benefit plan which the Company
sponsored or to which the Company contributed since January 1, 1995. The Company
and each of the Sellers is not, and has not been since January 1, 1995, an
Affiliate of any other Person other than the Company.
6.22.2 The Company (i) has satisfied all respective
contribution obligations in respect of each employee benefit plan, and (ii) is
and has at all times been in compliance in all material respects with all
applicable provisions of the federal Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and the Internal Revenue Code of 1986, as amended
(the "Code"), with respect to each such plan. No employee benefit plan or trust
created thereunder has at no time incurred any accumulated funding deficiency
(as such term is defined in Section 302 of ERISA), whether or not waived.
6.22.3 Neither the Company nor any employee benefit plan
thereof, or any trust created thereunder or any trustee or administrator
thereof, has engaged in any prohibited transaction (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) that would subject any person
to the penalty or tax on such transactions imposed by Section 502 of ERISA or
4975 of the Code. As used in this Section 6.22, the term "employee benefit plan"
shall have the meaning specified in Section 3 of ERISA.
6.23 Environmental. To the knowledge of the Sellers or the Company, (i)
the Company and its assets and business, and all real properties owned by the
Company and/or at which the Company's assets or business are or have been
operated (the "Properties"), are now and at all times have been, in compliance
with all Environmental Laws (as herein defined) and Environmental Permits (as
herein defined); (ii) except as set forth in Schedule 6.23 of the Disclosure
Schedule, there is not now nor has there been any storage, handling, use,
disposal or Release (as herein defined) of any Hazardous Materials (as herein
defined) on, at, in or under any of the Properties and there are no Hazardous
Materials within any structure on any of the Properties requiring remediation,
decommissioning, decontamination, abatement or removal pursuant to Environmental
Laws; (iii) there are no above or below ground tanks or reservoirs used or
installed for the purpose of storage or containment of Hazardous Materials at,
on or under any of the Properties; (iv) copies of all notices, notices of
violation, citations, inquiries, information requests or demands and complaints
which the Company or the Seller has received respecting any alleged violation of
or non-compliance with any Environmental Law or Environmental Permit are
appended to Schedule 6.23 of the Disclosure Schedule, and all such violations
and non-compliance alleged in such documents have been corrected by the Company
to the satisfaction of the applicable governmental agency; (v) there are no
Claims pending or, to the knowledge of the Company or the Sellers, threatened
against the Sellers, the Company or the Company's assets or business or any of
the Properties under Environmental Laws; (vi) the Company possesses all
Environmental Permits which are required for the operation of its assets and
business at the Properties as the same are currently being operated; (vii) all
Environmental Permits issued to the Company are disclosed in Schedule 6.23 of
the Disclosure Schedule, and Seller has delivered copies of all such
Environmental Permits to Buyer; (viii) Seller and the
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Company shall take all necessary actions to have any Environmental Permits
issued to the Seller or the Company, which by their terms or by operation of law
will expire or otherwise become ineffective on or before the Closing Date,
renewed or reissued to the Company prior to the Closing Date so as to allow
Buyer to continue the operation of the Company's assets and business without
interruption after the Closing Date; (iv) Schedule 6.23 of the Disclosure
Schedule sets forth all environmental studies, reports, audits, summaries,
proposals, recommendations, work plans and field and laboratory data in Seller's
or the Company's possession, custody or control relating or referring to
environmental conditions or the presence or Release of Hazardous Materials on,
at, under or emanating from any of the Properties, including without limitation,
with respect to any soil, surface water or groundwater contamination at any of
the Properties and Seller or the Company has delivered copies of such documents
to Buyer. As used in this Agreement,
6.23.1 "Environmental Laws" means all federal, state,
regional, county, and local statutes, ordinances, rules, regulations, policies,
orders, decrees, guidances, directives, judgments, arbitration awards and common
law, which pertain to public health and safety, damage to or protection of the
environment, pollution or contamination of any type whatsoever and Releases of
Hazardous Materials into the environment;
6.23.2 "Environmental Permits" means licenses, permits,
registrations, authorizations, certificates, approvals, agreements and consents
which are required under or are issued pursuant to Environmental Laws;
6.23.3 "Hazardous Materials" means any substance, materials or
waste, whether solid, liquid or gaseous, and any pollutant or contaminant, that
is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or hazardous, or that is defined, listed, regulated,
controlled or limited by any Environmental Law or for which a standard is set by
any Environmental Law, and
6.23.4 "Release" means any intentional or unintentional
spilling, leaking, disposing, discharging, emitting, depositing, injecting,
leaching, escaping, release, burial, pumping, pouring, emptying or dumping into
the environment in violation of environmental laws in violation of Environmental
Laws.
6.24 Litigation. Other than as set forth on Schedule 6.24 of the
Disclosure Schedule, there is no litigation, or judicial or administrative
actions or proceedings pending or, to the knowledge of Sellers or the Company,
threatened against or relating to the Company or its Subsidiary, their
respective properties or business, nor to the knowledge of Sellers or the
Company is there any basis for any such action, or for any governmental
investigation relative to the Company or its Subsidiary, their respective
properties or business, which, either individually or in the aggregate, would
have a Material Adverse Effect on the Company, or on the properties or
operations of the Company's or its Subsidiary's business, or which might prevent
or hinder the consummation of the transactions contemplated by this Agreement.
6.25 Compliance with Law. Without otherwise limiting in any way the
other representations and warranties in this Section 6, the Company (a) has not
been, to its knowledge,
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within the last five (5) years, and is not currently, in violation or default of
any laws, ordinances, governmental rules or regulations, orders, judgments,
decrees or rulings of any arbitration board, or governmental, regulatory or
judicial authority to which it is subject, which violation or default could
reasonably be expected to have a Material Adverse Effect and (b) has not failed
to obtain any licenses, permits, franchises or other governmental authorizations
for which the failure to obtain would have a Material Adverse Effect on the
ownership of its properties or to the conduct of its business.
6.26 Governmental Consent. Except for federal and state securities
laws, no consent, approval or authorization of, or filing, registration or
qualification with, any Person is necessary or required on the part of the
Sellers in connection with the execution and delivery of this Agreement and the
documents and transactions contemplated hereby to which the Sellers are parties,
compliance with the terms hereof or thereof, or in connection with the offer,
issue, sale or delivery of the Shares.
6.27 No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by this Agreement
conflicts or will conflict with or results or will result in a breach of the
terms, conditions or provisions of, or constitute, or will on the Closing Date
constitute, a default under, the Certificate of Incorporation or the By-Laws of
the Company or, except as set forth on Schedule 6.27 of the Disclosure Schedule,
a material breach or violation of or default under or grounds for termination
of, or an event which with the lapse of time or notice and the lapse of time
could cause a default under or breach or violation of, or grounds for
termination of, any note, indenture, mortgage, license, title retention
agreement or any other agreement or instrument to which either the Company or
any of the Sellers, is a party or by which the Company or any of its assets is
bound, or would result in the creation of any lien, charge or other security
interest or encumbrance upon any property or asset or right of the Company, or
violate, require consent or filings under any existing law, order, rule
regulation, writ, injunction or decree of any union or any government,
governmental department, commission, board, bureau, agency, body or court,
domestic or foreign, having jurisdiction over the Company or any of its
properties. No governmental authorization, approval, order, license, permit,
franchise or consent, and no registration, declaration or filing with any
governmental authority is required, in connection with the execution, delivery
and performance of this Agreement by the Company and Sellers.
6.28 Labor Matters. The Company has no union contracts with respect to
any of its employees. The Company has not committed, and neither the Sellers nor
the Company has received any notice of or claim that the Company has committed
any unfair labor practice under applicable federal or state law. The Company is
and has been in compliance in all material respects with all federal, state and
local laws and regulations relating to employment and employment practices,
including, but not limited to, the Fair Labor Standards Act, Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, Americans
with Disabilities Act, state and local human rights laws, WARN, the
Rehabilitation Act of 1974, the Occupational Safety and Health Act, state
workers' compensation laws, state disability laws, state unemployment laws, the
Immigration Reform and Control Act of 1986, the Equal Pay Act,
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the Family and Medical Leave Act and COBRA. The Company has not engaged in any
violation of the common law relating to employment and employment contracts,
including, but not limited to, wrongful discharge, breach of employment
contract, intentional infliction of emotional distress, defamation, negligent
retention, negligent hiring or negligent supervision, and the information
contained in the personnel records of any of the Company's employees is true and
correct in all material respects and was not recorded in violation of any
applicable employment laws. Except as set forth on Schedule 6.28 of the
Disclosure Schedule, the Company and its Subsidiary have no employment contract
or arrangement, written or verbal, with any of its employees.
6.29 Bank Accounts. Schedule 6.29 of the Disclosure Schedule sets forth
(i) the name and location of each bank, trust company, securities or other
broker or other financial institution with which the Company or its Subsidiary
has an account, credit line or safe deposit box or vault or otherwise maintains
relations, (ii) the names of all signatories thereto and persons authorized to
draw thereon or to have access to any safe deposit box or vault, and (iii) the
names of all persons authorized by proxies, powers of attorneys or other
instruments to act on behalf of the Company or its Subsidiary on matters
concerning its business or affairs.
6.30 Investor. Each Seller is a sophisticated investor with sufficient
knowledge and experience in investing in companies similar to the Buyer so as to
be able to evaluate the risks and merits of its investment in the Buyer and that
he is financially able to hold the shares of the Buyer to be acquired by him and
to bear the risks thereof. Each Seller is an "accredited investor" as defined
under Rule 501 under the Securities Act.
6.31 Full Disclosure. No representation or warranty of the Sellers or
the Company in this Agreement, taken as a whole, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein, in the light of the circumstances under which
such statements were made, not misleading. There is no fact known to the Sellers
or the Company that materially adversely affects the condition (financial or
otherwise), operations or management of the Company that has not been set forth
in this Agreement or in the other documents, certificates or statements
furnished to the Buyer by or on behalf of the Sellers prior to the date hereof
in connection with the transactions contemplated hereby. The financial
projections heretofore supplied to Buyer were prepared by the Company and the
Sellers in good faith on the basis of assumptions which assumptions were
reasonable when made and such financial projections are not intended to be
projections or assurances of future performance to be relied upon.
The failure to cross-reference an exception to a particular representation or
warranty which appropriately appears in a section of any of the Disclosure
Schedules to another applicable section of any of the Disclosure Schedules shall
not be deemed a failure to disclose such exception.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
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The Buyer covenants, warrants and represents to Sellers as follows:
7.1 Corporate Organization; Good Standing. True, correct and complete
copies of the Buyer's Certificate of Incorporation, as amended, and By-Laws,
certified by the Secretary of the Buyer, are attached as Exhibit 7.1. The Buyer:
7.1.1 is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York;
7.1.2 and each of its Subsidiaries has all requisite power and
authority and all necessary licenses and permits to own and operate its
properties and to carry on its business as now conducted and, as the case may
be, to enter into and perform its obligations under this Agreement, and the
transactions contemplated hereby; and
7.1.3 and each of its Subsidiaries has duly qualified and are
authorized to do business and are in good standing as a foreign corporation in
each jurisdiction where the nature and conduct of its business requires.
7.2 Capitalization. The authorized equity securities of the Buyer
consist of sixty million (60,000,000) shares of which fifty million (50,000,000)
shares are common stock, $0.01 par value per share, and ten million (10,000,000)
shares are preferred stock, $.01 par value per share. The Buyer's common stock
is traded on NASDAQ Small Cap exchange and as of July 31, 2000 there were eleven
million four hundred fifty-eight thousand one hundred forty (11,458,140) shares
of common stock of the Buyer issued and outstanding. All of the issued and
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable. Except as set forth in Schedule 7.2 of the Disclosure
Schedules, the Buyer has no contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of the Buyer. None of the
outstanding equity securities or other securities of the Buyer was issued in
violation of the Securities Act.
7.3 Title to Shares; Duly Authorized.
7.3.1 The Buyer has the right to issue the FPCX Shares
delivered to the Sellers or their Designated Trusts on the Closing Date pursuant
to Section 2.2.4, and upon conversion of the 24-Month Notes to the Sellers or
their Designated Trusts, and the FPCX Shares delivered to ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇ on the Closing Date as provided in Section 11.9 hereof. Such shares are
duly authorized, all necessary corporate action has been taken to issue such
shares to the Sellers or their Designated Trusts and to ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇, and, when such shares are issued, they will be validly issued, fully
paid, and non-assessable.
7.3.2 Subject to the provisions of Section 3.7 hereof, the
Buyer has the right to issue the FPCX Shares to be delivered upon conversion of
the Term Notes to the Sellers or their Designated Trusts pursuant to Section 3
hereof as contemplated by this Agreement, such shares are duly authorized, all
necessary corporate action has been taken to issue such shares to the Sellers or
their Designated Trusts, and, when such shares are issued, they will be validly
issued, fully paid, and non-assessable.
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7.4 Legal, Valid and Binding Obligations; Authorized. This Agreement
and any other documents executed by or on behalf of the Buyer in connection with
the transactions contemplated hereby or thereby each constitutes the legal,
valid and binding obligation of the Buyer, enforceable in accordance with the
respective terms hereof and thereof, except as the same may be limited by
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting the enforcement of creditors' rights generally and by equitable
principles. The execution, delivery and performance of this Agreement, the Term
Notes, the 24-Month Notes and the other documents contemplated hereby by the
Buyer:
7.4.1 have been duly authorized by all necessary corporate
action and do not, except as provided in Section 3.7 above, require any
stockholder approval, or approval or consent of any trustee or holders of any
indebtedness or obligations of the Buyer except such as have been duly obtained;
and
7.4.2 are within the corporate powers of the Buyer.
7.5 No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by this Agreement
conflicts or will conflict with or results or will result in a breach of the
terms, conditions or provisions of, or constitute, or will on the Closing Date
constitute, a default under, the Certificate of Incorporation or the By-Laws of
the Buyer or, except as set forth on Schedule 7.5 of the Disclosure Schedule, a
material breach or violation of or default under or grounds for termination of,
or an event which with the lapse of time or notice and the lapse of time could
cause a default under or breach or violation of, or grounds for termination of,
any note, indenture, mortgage, license, title retention agreement or any other
agreement or instrument to which the Buyer, is a party or by which the Buyer or
any of its assets is bound, or would result in the creation of any lien, charge
or other security interest or encumbrance upon any property or asset or right of
the Buyer, or violate, require consent or filings under any existing law, order,
rule regulation, writ, injunction or decree of any union or any government,
governmental department, commission, board, bureau, agency, body or court,
domestic or foreign, having jurisdiction over the Buyer or any of its
properties. Except as provided in Section 3.7 above, no governmental
authorization, approval, order, license, permit, franchise or consent, and no
registration, declaration or filing with any governmental authority is required,
in connection with the execution, delivery and performance of this Agreement by
the Buyer.
7.6 Certain Proceedings. There is no pending action, arbitration,
audit, hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any federal, state, local or foreign
governmental or quasi-governmental body or arbitrator involving the Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, this Agreement or any of the transactions
contemplated herein. To Buyer's knowledge, no such action, arbitration, audit,
hearing, investigation, litigation, or suit has been threatened.
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7.7 No Undisclosed Liabilities. The Buyer has no liabilities or
obligations of any nature, whether known or unknown and whether absolute,
accrued, contingent, or otherwise which do not have and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
except for liabilities or obligations reflected or reserved against in Buyer's
most recent Form 10-QSB filed with the Securities and Exchange Commission (the
"Form 10-QSB") and current liabilities incurred in the ordinary course of
business since period ending date of such Form 10-QSB.
7.8 Absence of Changes and Events. Since the period ending date of the
Form 10-QSB, except as set forth in Schedule 7.8 of the Disclosure Schedule, the
Buyer and its Subsidiaries have conducted their business only in, and have not
engaged in any transaction other than according to, the ordinary and usual
course of such business in a manner consistent with its past practice, and there
have not been (i) any changes in the business, condition (financial or
otherwise), results of operations of the Buyer or its Subsidiaries or any
development or combination of developments of which the Buyer has knowledge
that, individually or in the aggregate, have had or are reasonably likely to
have a Material Adverse Effect; (ii) any material damage, destruction or other
casualty loss with respect to any material asset or property owned, leased or
otherwise used by the Buyer or its Subsidiaries, whether or not covered by
insurance; (iii) any distribution of or with respect to the FPCX Shares; (iv)
any change by the Buyer in its accounting practices, principles or methods.
7.9 Broker. Buyer has incurred no obligation or liability, contingent
or otherwise, for brokerage or finders' fees or other similar payment in
connection with this Agreement.
7.10 Governmental Consent. Except for federal and state securities laws
and as provided in Section 3.7 above, no consent, approval or authorization of,
or filing, registration or qualification with, any Person is necessary or
required on the part of the Buyer in connection with the execution and delivery
of this Agreement and the other documents and transactions contemplated hereby
to which the Buyer is a party, compliance with the terms hereof or thereof, or
in connection with the offer, issue, sale or delivery of the FPCX Shares.
7.11 Full Disclosure. No representation or warranty of the Buyer in
this Agreement or any filings made by the Buyer pursuant to the Securities Act
and Securities Exchange Act since November 1999, taken as a whole, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein, in the light of the
circumstances under which such statements were made, not misleading. There is no
fact known to the Buyer that materially adversely affects the condition
(financial or otherwise), operations or management of the Buyer that has not
been set forth in this Agreement or in the other documents, certificates or
statements furnished to the Sellers by or on behalf of the Buyer prior to the
date hereof in connection with the transactions contemplated hereby.
The failure to cross-reference an exception to a particular representation or
warranty which appropriately appears in a section of any of the Disclosure
Schedules to another applicable
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section of any of the Disclosure Schedules shall not be deemed a failure to
disclose such exception.
8. SURVIVAL OF REPRESENTATION AND WARRANTIES; NON-WAIVER
All representations and warranties shall survive the Closing for
eighteen (18) months regardless of any investigation or lack of investigation by
any of the parties hereto, except for the Sellers' representations and
warranties with respect to Taxes, environmental matters, and employee benefit
plans which shall survive for the period of the applicable statute of
limitations, and except for the Sellers' representations and warranties with
respect to title made in Section 6.3 and the Buyer's representations and
warranties with respect to title made in Section 7.3 which shall survive
forever. The failure in any one or more instances of a party to insist upon
performance of any of the terms, covenants or conditions of this Agreement, to
exercise any right or privilege in this Agreement conferred, or the waiver by
said party of any breach of any of the terms, covenants or conditions of this
Agreement, shall not be construed as a subsequent waiver of any such terms,
covenants, conditions, rights or privileges, but the same shall continue and
remain in full force and effect as if no such forbearance or waiver has
occurred. No waiver shall be effective unless it is in writing and signed by an
authorized representative of the waiving party.
9. LIMITATION OF LIABILITY
Notwithstanding anything to the contrary in this Agreement, the maximum
liability of the Sellers or their Designated Trusts, as the case may be, under
this Agreement for indemnification or Claims asserted by Buyer, including, but
not limited to, Claims for (i) any inaccuracy in or breach of any representation
or warranty made by the Sellers to the Buyer herein, or (ii) the breach by
Sellers of, or failure of Sellers to comply with, any of the covenants or
obligations under this Agreement to be performed by the Sellers, shall be
limited in the aggregate to seven million five hundred thousand dollars
($7,500,000), except, however, that the liability of the Sellers or their
Designated Trusts, as the case may be, resulting from Fraud or a breach of
Sellers' representations and warranties made with respect to title in Section
6.3 shall be limited to the Purchase Price received by the Sellers plus fifteen
million three hundred forty thousand dollars ($15,340,000); provided, however,
that in no event shall Sellers or their Designated Trust, as the case may be, be
liable to Buyer for individual Claims of less than ten thousand dollars
($10,000); and provided further that in no event shall Sellers or their
Designated Trust, as the case may be, be liable to Buyer in any respect or in
any amount until the value of all Claims equals or exceeds three hundred fifty
thousand dollars ($350,000), in which event Sellers or their Designated Trust,
as the case may be, (subject to the minimum Claim requirement above) shall be
liable only to the extent that any damages arising from such Claims exceed such
amount. In no event shall the Sellers or their Designated Trusts, as the case
may be, be liable for any amount in excess of the consideration received by
Sellers or their Designated Trusts under the Buyer's obligations pursuant to
Sections 2.2.2, 2.2.3, and 2.2.4, in that order, except in the case of
indemnification or Claims asserted by Buyer resulting from (i) Fraud or (ii) a
breach by Sellers
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of Sellers' representations and warranties made with respect to title in Section
6.3 in which case Sellers or their Designated Trusts, as the case may be, shall
additionally be liable for the consideration received by Sellers or their
Designated Trusts under the Buyer's obligations pursuant to Section 2.2.5 plus
cash of fifteen million three hundred forty thousand dollars ($15,340,000), in
that order, to the extent that the liability exceeds the consideration received
by Sellers or their Designated Trusts, as the case may be, under the Buyer's
obligations pursuant to Sections 2.2.2, 2.2.3, and 2.2.4. Notwithstanding
anything to the contrary in this Agreement, neither the Sellers nor their
Designated Trusts shall be liable for the aggregate amount of interest paid by
the Buyer to the Sellers or their Designated Trusts pursuant to the Term Notes
and the 24-Month Notes.
10. CLOSING CONDITIONS OF BUYER
The Buyer's obligation to purchase and pay for the Shares to be
delivered to Buyer at the Closing shall be subject to the following conditions
precedent:
10.1 Delivery of Shares. Sellers shall deliver, or cause to be
delivered, to Buyer certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock transfer powers).
10.2 Articles of Incorporation and Certificates of Good Standing.
Sellers shall deliver to Buyer at Closing:
10.2.1 a certified copy of the Company's Articles of
Incorporation, as amended, issued by the Secretary of State of the State of New
Hampshire within fifteen (15) days of the Closing Date;
10.2.2 a Certificate of Good Standing / Legal Existence of the
Company issued by the Secretary of State of the State of New Hampshire within
fifteen (15) days of the Closing Date; and
10.2.3 the current Bylaws of the Company and its Subsidiary.
10.3 Closing Certificate. Sellers shall deliver to Buyer a certificate
executed by Sellers representing and warranting to Buyer that each of the
Sellers' representations and warranties in this Agreement was accurate in all
respects as of the date of this Agreement and is accurate in all respects as of
the Closing Date as if made on the Closing Date.
10.4 Employment Agreements.
10.4.1 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have executed an employment
agreement with the Company in a form substantially similar to attached Exhibit
10.4.1; and
10.4.2 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have executed an employment
agreement with the Company in a form substantially similar to attached Exhibit
10.4.2.
10.5 Legal Opinions. At Closing, the Buyer shall have received from
McLane, Graf, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ Professional Association, counsel to Sellers
in this transaction, its
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opinion dated the Closing Date, in form and substance reasonably satisfactory to
the Buyer and its counsel, ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, and covering such matters
as the Buyer and such counsel may require.
10.6 Certificate of the Secretary. The Sellers shall deliver to the
Buyer at Closing a certificate of the Company's corporate secretary, in a form
reasonably acceptable to Buyer and their counsel, certifying as to the Company's
articles of incorporation, bylaws, capitalization, and the incumbency of
officers.
10.7 Shareholders Agreement. Sellers shall deliver to Buyer a
termination of the Shareholders Agreement dated November 11, 1998 (the
"Shareholder Agreement") by and among the Company and the Sellers.
10.8 Certificate of Authority. Sellers shall deliver to Buyer a
Certificate of Authority for the Trustee of each of the Designated Trusts.
10.9 Voting Agreement. Sellers and certain other shareholders of Buyer
shall deliver an agreement of Buyer, Sellers and such other shareholders
pursuant to which Buyer shall call a shareholders meeting at which Sellers and
such other shareholders shall vote their shares of Common Stock of the Buyer in
favor of the proposal referenced in Section 3.7 above, seeking, among other
matters, shareholder approval of the conversion rights contained in the Term
Notes.
11. CLOSING CONDITIONS OF SELLERS
The Sellers' obligations to sell and transfer the Shares to be
delivered to Buyer at the Closing shall be subject to the following conditions
precedent:
11.1 Buyer shall deliver to Sellers or their Designated Trusts:
11.1.1 [Intentionally Left Blank]
11.1.2 Two Term Notes in a form substantially similar to
Exhibit 2.2.2;
11.1.3 Two 24-Month Notes in a form substantially similar to
Exhibit 2.2.5; and
11.1.4 Certificates representing such number of duly
authorized and validly issued FPCX Shares as provided in Section 5.1.
11.2 Articles of Incorporation and Certificates of Good Standing. Buyer
shall deliver to Sellers at Closing:
11.2.1 a certified copy of the Buyer's Articles of
Incorporation, as amended, issued by the Secretary of State of the State of New
York within fifteen (15) days of the Closing Date;
11.2.2 a Certificate of Good Standing / Legal Existence of the
Buyer issued by the Secretary of State of the State of New York within fifteen
(15) days of the Closing Date; and
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11.2.3 the current Bylaws of the Buyer.
11.3 Closing Certificate. Buyer shall deliver to Sellers a certificate
executed by a duly authorized officer of the Buyer representing and warranting
to Sellers that each of the Buyer's representations and warranties in this
Agreement is accurate in all respects as of the Closing Date as if made on the
Closing Date.
11.4 Employment Agreements.
11.4.1 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have executed an employment
agreement with the Company in a form substantially similar to attached Exhibit
10.4.1.
11.4.2 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have executed an employment
agreement with the Company in a form substantially similar to attached Exhibit
10.4.2.
11.5 Legal Opinions. At Closing, the Sellers shall have received from
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel to Buyer in this transaction, its opinion
dated the Closing Date, in form and substance reasonably satisfactory to the
Sellers and their counsel, McLane, Graf, ▇▇▇▇▇▇▇▇▇ & Middleton Professional
Association, and covering such matters as the Sellers and such counsel may
require.
11.6 Certificate of the Secretary. The Buyer shall deliver to the
Sellers at Closing a certificate of the Buyer's corporate secretary, in a form
reasonably acceptable to Sellers and their counsel, certifying as to the Buyer's
articles of incorporation, bylaws, capitalization, and the incumbency of
officers.
11.7 Resolutions. The Buyer shall deliver to the Sellers at Closing
certified resolutions of the Buyer's board of directors approving this Agreement
and the transactions contemplated hereby.
11.8 Approval of Senior Lender. Buyer shall deliver to the Sellers at
Closing evidence of Fleet Capital Corporation's acknowledgement, acceptable to
Sellers of the payment obligations of the Buyer pursuant to the Term Notes and
the 24-Month Notes, subject to Section 8.2.15 of the Loan and Security Agreement
dated the date hereof between Fleet Capital Corporation and the Company.
11.9 FPCX Shares to ▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇.
11.9.1 The Buyer shall deliver to ▇▇▇▇▇ ▇▇▇▇▇ at or before
Closing thirty thousand (30,000) shares of FPCX Shares.
11.9.2 The Buyer shall deliver to ▇▇▇▇▇ ▇▇▇▇▇ at or before
Closing twenty thousand (20,000) shares of FPCX Shares.
11.10 Voting Agreement. Sellers and certain other shareholders of Buyer
shall deliver an agreement of Buyer, Sellers and such other shareholders
pursuant to which Buyer shall call a shareholders meeting at which Sellers and
such other shareholders shall vote their shares of
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Common Stock of the Buyer in favor of the proposal referenced in Section 3.7
above, seeking, among other matters, shareholder approval of the conversion
rights contained in the Term Notes.
12. POST-CLOSING COVENANTS
12.1 Capital Contribution. The Buyer shall, immediately after the
Closing, make a capital contribution of five million five hundred thousand
dollars ($5,500,000) to the Company.
12.2 Redemption. The Company shall, immediately after the Closing,
redeem sixty-six (66) shares of the Company's common stock held by each of the
Sellers.
12.3 The Buyer and Sellers agree that following the Closing, each shall
execute and deliver such documents, instruments, certificates, notices or other
further assurances as counsel of the requesting party shall reasonably deem
necessary or desirable to complete consummation of this Agreement and the
transactions contemplated hereby.
12.4 Tax Matters.
12.4.1 Cooperation. The Sellers shall cooperate fully with the
Company in connection with its filing of tax returns required to be filed by the
Company in any jurisdiction and with any audit, litigation or other proceeding
with respect to Taxes related to the operation of the Company prior to Closing.
The Buyer shall cooperate fully with the Sellers in connection with any audit,
litigation or other proceeding with respect to Taxes related to the operation of
the Company prior to Closing. Such Cooperation shall include the retention and
(upon the other party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Sellers
agree to provide Buyer with any tax returns required to be filed for periods
prior to the Closing Date within a reasonable time prior to filing.
12.5 Reservation of Shares. For so long as there is an outstanding
balance on either the Term Notes or the 24-Month Notes, Buyer shall reserve such
number of shares of common stock of the Buyer as may be issuable from time to
time upon exercise of the conversion rights provided in such Term Notes and
24-Month Notes.
12.6 Post-Closing. The Buyer will prepare and submit to its
shareholders, as soon as practicable following the Closing, a proxy statement,
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission, including, among other matters, a proposal seeking
shareholder approval of the conversion rights contained in the Term Notes. The
Board of Directors of the Buyer will recommend that the shareholders of the
Buyer vote in favor of the proposal. The Buyer will use its best efforts to
obtain such shareholder approval.
12.7 Management Fee. For so long as there is an outstanding balance on
either of the Term Notes or on either of the 24-Month Notes, Buyer's management
fee and any other fees or
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distributions payable by the Company to the Buyer shall not be paid if such
payment shall (i) constitute an Event of Default of the Company, as that term is
defined in the Loan and Security Agreement between Fleet Capital Corporation and
▇▇▇▇▇▇ Brothers, Inc., or trigger a prohibition of any payments under the Term
Notes or 24-Month Notes under said Loan and Security Agreement, or (ii)
constitute an event of default under any future indebtedness for borrowed money
and triggers a prohibition of any payment under the Term Notes or 24-Month
Notes.
13. INDEMNIFICATION
13.1 General. From and after the Closing, the parties shall indemnify
each other as provided in this Section 13.
13.2 Sellers' Indemnification Obligations.
13.2.1 The Sellers and their Designated Trust, to the extent
of their receipt of any of the Purchase Price plus fifteen million three hundred
forty thousand dollars ($15,340,000) and subject to the limitation set forth in
Section 9, shall jointly and severally indemnify, save and keep Buyer and its
successors and assigns (each a "Buyer Indemnitee" and collectively, the "Buyer
Indemnities") harmless against and from all Claims sustained or incurred by any
Buyer Indemnitee, as a result of or arising out of or by virtue of (i) any
inaccuracy in or breach of any representation or warranty made by the Sellers to
the Buyer herein or in any closing document delivered to the Buyer in connection
therewith; or (ii) the breach by Sellers of, or failure of Sellers to comply
with, any of the covenants or obligations under this Agreement to be performed
by the Sellers.
13.2.2 Buyer Indemnities shall be entitled to make claims for
indemnification for a period of eighteen (18) months following the Closing Date,
except for claims for indemnification with respect to the Sellers'
representations and warranties with respect to Taxes, environmental matters, and
employee benefit plans which Buyer Indemnities shall be entitled to make for a
period equal to the unexpired term of the applicable statute of limitations, and
except for claims for indemnification with respect to the Sellers'
representations and warranties with respect to title made in Section 6.3 and
Fraud which the Buyer Indemnities shall be entitled to make forever.
13.3 Buyer's Indemnification Obligations.
13.3.1 Buyer shall indemnify, save and keep the Sellers and
their respective heirs and personal representatives ("Seller Indemnities"),
harmless against and from all Claims of any Seller Indemnitee, as a result of or
arising out of or by virtue of (i) any inaccuracy in or breach of any
representation or warranty made by Buyer to the Sellers herein or in any closing
document delivered to the Sellers in connection herewith, (ii) any failure to
perform or breach of any covenant or obligation to be performed by the Buyer, or
(iii) any Claim asserted by third parties against the Sellers arising out of the
operation of the business after the Closing Date provided the Seller acted in
good faith and in a manner reasonably believed to be in, or not opposed, to the
best interests of the Company, and, with respect to any criminal action or
preceding, had no reasonable cause to believe the conduct was unlawful.
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13.3.2 Seller Indemnities shall be entitled to make claims for
indemnification for a period of eighteen (18) months following the Closing Date,
except for claims for indemnification with respect to the Buyer's
representations and warranties with respect to title made in Section 7.3 and
Fraud which the Seller Indemnities shall be entitled to make forever.
13.4 Indemnification Procedures. The procedure set forth below shall be
followed with respect to every claim for indemnification by any Seller
Indemnities under Section 13.3 and by any Buyer Indemnities under Section 13.2:
13.4.1 Notice. The party seeking indemnification (the
"Indemnified Party") shall give to the party from whom indemnification is sought
(the "Indemnifying Party") written notice of any Claims for which indemnity may
be sought under either Section 13.2 or 13.3, promptly but in any event within
thirty (30) calendar days after the Indemnified Party receives notice thereof;
provided, however, that failure by the Indemnified Party to give such notice
shall not relieve the Indemnifying Party from any liability it shall otherwise
have pursuant to this Agreement except to the extent that the Indemnifying Party
is actually prejudiced by such failure. Such notice shall set forth in
reasonable detail the basis for such potential Claims and shall be given in
accordance with Section 14.1 below. The indemnification period provided for
herein shall be tolled for a particular claim for a period beginning on the date
that the Indemnified Party receives written notice of such Claims until the
final resolution of the claim.
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13.4.2 Defense and Control of Third Party Claims. The
Indemnifying Party shall have the right, at its option, to be represented by
counsel of its choice and to assume the defense or otherwise control the
handling of any third party Claims for which indemnity is sought by notifying
the Indemnified Party in writing to such effect with ten (10) days of receipt of
such notice. If the Indemnifying Party does not give timely notice in accordance
with the preceding sentence, or abandons the defense of such Claims, the
Indemnifying Party shall be deemed to have given notice that it does not wish to
control the handling of such third party Claims for which indemnity is sought.
In the event the Indemnifying Party elects (by written notice within such ten
(10) day period) to assume the defense of or otherwise control the handling of
any such third party Claims for which indemnity is sought, the Indemnified Party
shall cooperate, at the expense of the Indemnifying Party, and the Indemnifying
Party shall indemnify and hold harmless the Indemnified Party from and against
all Claims suffered therefrom, notwithstanding the fact that the Indemnifying
Party may not have been so liable to the Indemnified Party had it not elected to
assume the defense of or to otherwise control the handling of such third party
Claims. In the event that the Indemnifying Party does not assume the defense or
otherwise control the handling of third party Claims for which the Indemnified
Party is entitled to indemnification hereunder, the Indemnified Party may retain
counsel, as an indemnifiable expense, to defend such third party Claims. Any
such expense shall be borne by the Indemnifying Party and the Indemnified Party
shall have final authority with respect to any such matter. In any event, the
Indemnified Party and the Indemnifying Party each may participate, at its own
expense, in the defense of such third party Claim. If the Indemnifying Party
chooses to defend any claim, the Indemnified Party shall make available to the
Indemnifying Party any personnel or any books, records or other documents within
its control that are reasonably necessary or appropriate for such defense,
subject to the receipt of appropriate confidentiality agreements.
13.4.3 Cooperation. The parties shall cooperate in the defense
of any third party Claims and shall make available all books and records which
are relevant in connection with such third party Claims. The Indemnifying Party
will not consent to the entry of any judgment or enter into any settlement with
respect to any matter which does not include a provision whereby the plaintiff
or claimant in the matter releases the Indemnified Party from all liability with
respect thereto, without the written consent of the Indemnified Party, which
consent shall not be unreasonably withheld.
13.4.4 Setoff. Subject to Section 9, in the event that there
is an indemnification for (i) any inaccuracy in or breach of any representation
or warranty made by the Sellers to the Buyer herein, or (ii) the breach by
Sellers of, or failure of Sellers to comply with, any of the covenants or
obligations under this Agreement to be performed by the Sellers, such
indemnification shall be setoff first equally against the Buyer's obligations
pursuant to the Term Notes held by the Sellers or their Designated Trusts and
second equally against the Buyer's Earn-Out obligations pursuant to Section 4
which have been earned and not paid by Buyer to Sellers or their Designated
Trusts.
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14. MISCELLANEOUS
14.1 Notice. All notices, requests, consents or other communications to
be sent or given under this Agreement shall be in writing and shall be delivered
by hand, overnight courier, certified mail or electronic facsimile, in each case
with written confirmation of receipt. Notice to any party shall be deemed
received on the day of delivery if delivered, with confirmation of receipt, by
electronic facsimile, by courier or by hand during normal business hours, and
the following day if delivered after normal business hours. Delivery of all
notices shall be made to the following persons at the address provided or such
other person or address as a party shall designate by written instrument
provided to the other parties:
If to Sellers or a Designated Trust With a copy to:
Representative:
▇▇▇▇▇▇▇ V.A. ▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ McLane, Graf, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇ Professional Association
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇
overnight delivery address: ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ overnight delivery address:
▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Facsimile: 603-625-5650
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Buyer: With a copy to:
Financial Performance Corporation ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
14.2 Entire Agreement. This Agreement constitutes the entire Agreement
among the parties hereto with respect to the subject matter hereto and
supersedes all prior correspondence, conversations and negotiations.
14.3 Interpretation Guidelines. In this Agreement: the use of any
gender shall include all genders; the singular number shall include the plural
and the plural the singular as the context may require; whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms; the words "include," "including," and "such as" shall
each be construed as if followed by the phrases "without being limited to"; the
words "herein," "hereof," "hereunder" and words of similar import shall be
construed to refer to this Agreement as a whole and not to any particular
Section hereof unless expressly so stated; the
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section headings herein are for convenience of reference only and shall not
affect in any way the interpretation of any of the provisions hereof.
14.4 No Presumption Against Drafter. Each of the parties hereto has
participated in the negotiation and drafting of this Agreement. In the event
that there arises any ambiguity or question of intent or interpretation with
respect to this Agreement, this Agreement shall be construed as if drafted
jointly by all of the parties hereto and no presumptions or burdens of proof
shall arise favoring any party by virtue of the authorship of any of the
provisions of this Agreement.
14.5 Expenses. Except as otherwise provided herein, each party hereto
shall bear all fees and expenses incurred by such party in connection with,
relating to or arising out of the negotiation, preparation, execution, delivery
and performance of this Agreement and the consummation of the transaction
contemplated hereby, including, without limitation, attorneys', accountants' and
other professional fees and expenses.
14.6 Publicity. Each party agrees to submit to the other party for
approval prior to its release any advertising, press releases or other publicity
relating to this Agreement and the transactions contemplated thereby, which
approval shall not be unreasonably withheld, subject to SEC disclosure
requirements.
14.7 Assignment. Neither party may assign or otherwise transfer this
Agreement or any of its rights or obligations hereunder to any third party
without the prior without the prior written consent of the other parties, except
for (i) an assignment by a Seller to their Designated Trust or another Seller,
(ii) an assignment by a Designated Trust to a Seller or another Designated
Trust, or (iii) an assignment in connection with the consolidation or
reorganization of the Company with, or merger into, any other corporation, or
the sale by the Company of all or substantially all of its assets; provided that
any such assignee shall have agreed in writing to assume the obligations of the
assignor, to be bound by the terms of this Agreement, and to provide the other
parties hereto with copies of such assumptions. If a party assigns this
Agreement or any right created hereby without such an exception and without the
prior written consent of the other parties, as the case may be, the assignment
shall be null and void.
14.8 Counterparts; Facsimile Execution. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an original
instrument and all of which together shall constitute a single document.
Signatures and other longhand notations transmitted by electronic facsimile
shall be deemed to be original for purposes of the construction and enforcement
of this Agreement.
14.9 Modification. No modification of this Agreement shall be valid
unless such modification is in writing and signed by Buyer and Seller.
14.10 Waiver. No waiver of any provision of this Agreement shall be
valid unless in writing and signed by the person or party against whom charged.
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34
14.11 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions of
this Agreement, and this Agreement shall be construed as if the invalid or
unenforceable provision was omitted.
14.12 Governing Law and Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York, without
regard to conflict of laws principles. The parties, to the extent that they can
legally do so, hereby consent to service of process, and to be sued, in the
State of New Hampshire and consent to the jurisdiction of the courts of the
State of New Hampshire and the United States District Court for the District of
New Hampshire, as well as to the jurisdiction of all courts to which an appeal
may be taken from such courts, for the purpose of any suit, action or other
proceeding arising out of any of their obligations hereunder or with respect to
the transactions contemplated hereby, and expressly waive any and all objections
they may have to venue in such courts.
15. 24-MONTH SUBORDINATED CONVERTIBLE PROMISSORY NOTES
15.1 24-Month Notes. The Buyer will provide at the Closing to each of
the Sellers or their Designated Trusts a promissory note in the original
principal amount of One Million Dollars ($1,000,000) on such terms and
conditions as provided in a form substantially similar to Exhibit 2.2.5 attached
hereto.
15.2 Subordination. The 24-Month Notes shall be subordinated to present
and future indebtedness or obligations of the Buyer and the Buyer's Affiliates
for borrowed money.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have set their hands, duly
authorized where applicable, as of the date and year first above written.
WITNESSES SELLERS:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/
---------------------------------- ------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/
---------------------------------- ------------------------------------
THE ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ REVOCABLE TRUST
OF 1998
By: /s/
---------------------------------- ------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ TRUST - 1995
By: /s/
---------------------------------- ------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Trustee
BUYER:
FINANCIAL PERFORMANCE CORPORATION
By: /s/
---------------------------------- ------------------------------------
Name:
Title:
-35-
36
SUBORDINATED CONVERTIBLE TERM PROMISSORY NOTE
$3,750,000 U.S. January 11, 2001
New York, New York
FOR VALUE RECEIVED, the undersigned, FINANCIAL PERFORMANCE CORPORATION,
a New York corporation with a principal place of business located in New York,
New York ("FPC"), hereby promises to pay to the order of The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Revocable Trust of 1998 (the "Creditor"), at such address, or such other place
or places as the holder hereof may designate in writing from time to time
hereafter, the principal sum of THREE MILLION SEVEN HUNDRED FIFTY THOUSAND
DOLLARS ($3,750,000), together with interest as hereinafter provided, in lawful
money of the United States of America.
Interest on the outstanding principal balance of this Note shall accrue
at the rate equal to the 90-day LIBOR rate as defined herein plus 150 basis
points, per annum beginning on the date hereof. The interest rate shall be
adjusted on and as of April 11, 2001, and quarterly thereafter, on and as of the
11th day of April, July, October and January of each year, to reflect any change
in the 90-day LIBOR rate, as reported in The Wall Street Journal, plus 150 basis
points. The initial interest rate shall be 6.92%, per annum. Interest shall be
calculated and shall accrue daily on the basis of actual days elapsed over a
three hundred sixty (360) day banking year. FPC shall pay to the holder of this
Note accrued interest, in cash, in arrears, beginning on April 11, 2001, and
quarterly thereafter, on and as of the 11th day of April, July, October and
January of each year, until the obligations under this Note are paid in full.
A single payment of the total outstanding principal balance plus all
accrued and unpaid interest and other charges hereunder shall be due and payable
on January 11, 2007 (the "Maturity Date").
FPC's obligations pursuant to this Note are and shall be subordinate to
present and future indebtedness or obligations of FPC and FPC's Affiliates for
borrowed money, including under the Loan Agreement (as hereinafter defined).
Affiliate shall mean a person: (i) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, a person; (ii) which beneficially owns or holds 5% or more of any class of
the voting stock of a person; or (iii) 5% or more of the voting stock (or in the
case of a person which is not a corporation, 5% or more of the equity interest)
of which is beneficially owned or held by a person or a subsidiary of a person.
This Note is issued pursuant to Section 3 of the Stock Purchase
Agreement of even date between FPC and the Creditor (the "Purchase Agreement").
The holder of this Note is entitled to all of the benefits and rights of the
Creditor or their Designated Trusts, including but not limited to, those under
Sections 3 and 12 of the Purchase Agreement. However, neither this reference to
the Purchase
37
Agreement nor any provision thereof shall impair the absolute and unconditional
obligation of the undersigned to pay the principal and interest on this Note as
herein provided.
Any capitalized term used in this Note which is not otherwise expressly
defined herein shall have the meaning ascribed thereto in the Purchase
Agreement.
FPC shall have the right, at any time, to prepay without penalty all or
any part of the outstanding principal amount hereof. All payments by or on
behalf of FPC received hereunder shall be applied first to any outstanding
obligations hereunder other than principal or interest, second to accrued
interest and, thereafter, to principal.
The holder may impose upon FPC a delinquency charge of five percent
(5%) of the amount of any amount payable hereunder not paid on or before the
tenth (10th) day after such payment is due.
Upon ten (10) days written notice by either (i) the holder of this Note
or (ii) FPC, to the other party of the exercising party's intent to exercise its
conversion right (the "Conversion Option") under this Note, a portion of the
then outstanding principal balance shall be convertible into shares of common
stock of FPC (the "FPCX Shares") as follows:
(a) on the first anniversary of the date of this Note (the "First
Anniversary") or any date thereafter through the Maturity Date, twenty-five
percent (25%) of the original principal balance of this Note may be converted,
provided that during the thirty (30) days immediately preceding the First
Anniversary or any thirty (30) day period thereafter, as the case may be, the
FPCX Average Closing Share Price, subject to adjustment for stock splits, stock
dividends, or similar capital transactions, meets or exceeds the Target Price;
(b) on the second anniversary of the date of this Note (the "Second
Anniversary") or any date thereafter through the Maturity Date, up to an
additional twenty-five percent (25%) of the original principal balance of this
Note may be converted, provided that during the thirty (30) days immediately
preceding the Second Anniversary or any thirty (30) day period thereafter, as
the case may be, the FPCX Average Closing Share Price, subject to adjustment for
stock splits, stock dividends, or similar capital transactions, meets or exceeds
the Target Price;
(c) on the third anniversary of the date of this Note (the "Third
Anniversary") or any date thereafter through the Maturity Date, up to an
additional twenty-five percent (25%) of the original principal balance of this
Note may be converted, provided that during the thirty (30) days immediately
preceding Third Anniversary or any thirty (30) day period thereafter, as the
case may be, the FPCX Average Closing Share Price, subject to adjustment for
stock splits, stock dividends, or similar capital transactions, meets or exceeds
the Target Price; and
(d) on the fourth anniversary of the date of this Note (the "Fourth
Anniversary") or any date thereafter through the Maturity Date, up to an
additional twenty-five percent (25%) of the original principal balance of this
Note may be converted, provided that during the thirty (30)
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38
days immediately preceding Fourth Anniversary or any thirty (30) day period
thereafter, as the case may be, the FPCX Average Closing Share Price, subject to
adjustment for stock splits, stock dividends, or similar capital transactions,
meets or exceeds the Target Price.
Notwithstanding anything in this Note to the contrary, neither any
holder of this Note nor FPC shall have the right to deliver any written notice
provided for above to exercise their respective conversion rights under this
Note until such time as the Buyer obtains the approval of its shareholders to
the extent necessary to comply with the shareholder approval requirement of the
National Association of Securities Dealers, Inc. applicable to FPC.
Accrued interest on the portion of the this Note being converted at the
date of conversion shall be paid to the holder of this Note in cash. Subject to
the Securities Act, the holder shall have the right to sell any FPCX Shares to
satisfy any Taxes resulting from the conversion or convertibility of any portion
of this Note or from any event that renders any portion of this Note, or a
promissory note of even date, taxable.
Upon written notice to exercise a conversion right under this Note,
some or all of the then outstanding balance, as provided herein, shall be
convertible into shares of common stock of FPC at Four Dollars ($4.00) per
share, subject to adjustment for stock splits, stock dividends, or similar
capital transactions.
For so long as there is an outstanding principal balance on this Note,
FPC shall reserve such number of shares of common stock of FPC as may be
issuable from time to time upon exercise of the conversion rights provided in
this Note.
Upon the occurrence and continuation of an Event of Default as defined
herein (i) the entire principal amount of the indebtedness evidenced hereby, all
interest accrued and accruing thereon, and all other amounts accrued or accruing
hereunder, may be declared to be forthwith due and payable, provided that, upon
the occurrence of any Event of Default described in clause (c) below the entire
principal amount of the indebtedness evidenced hereby, together with all
interest accrued and accruing thereon and all other amounts accrued or accruing
hereunder, shall become immediately due and payable without requirement of any
notice or demand; and (ii) the outstanding principal amount of this Note shall
bear interest, without notice, at the rate of interest previously charged under
this Note plus five percent (5%) per annum (the "Default Rate") until this Note
is paid in full, in addition to any delinquency charge as provided above.
Each of the following is deemed to be an "Event of Default":
(a) any material breach by FPC of its obligations
pursuant to the Purchase Agreement or any agreement
or instrument in connection thereto;
(b) the failure of FPC to make any payment due hereunder
or under any other obligation owing to the holder
when such payment is due after giving effect to any
applicable grace period; or
-3-
39
(c) the occurrence of any of the following with respect
to FPC: admission in writing of FPC's inability, or
being generally unable, to pay its debts as they
become due, insolvency, bankruptcy, appointment of a
receiver of any part of its property, legal or
equitable assignment, conveyance or transfer of its
property for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy
or insolvency laws by, or against, FPC.
Notwithstanding anything herein to the contrary, upon a termination of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as an employee of ▇▇▇▇▇▇ Brothers, Inc. without Good Reason, as
provided in Section 11(a)(vi) of the Employment Agreement between ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇▇ Brothers, Inc., dated January 11, 2001, the remaining
principal amount, after conversion as aforesaid, and any accrued interest
thereon, shall be forgiven and this Note shall be delivered, assigned and
transferred to FPC and be null and void.
This Note and the provisions hereof shall be binding upon the
undersigned and the undersigned's permitted successors and assigns and shall
inure to the benefit of the holder, the holder's heirs, administrators,
executors, legal representatives and permitted successors and assigns.
Creditor agrees that, notwithstanding anything contained in this Note
to the contrary, this Note shall be subject to the terms and conditions of the
Loan and Security Agreement dated as of January 11, 2001 by and between Fleet
Capital Corporation and ▇▇▇▇▇▇ Brother, Inc. and, in particular, Section 8.2.15
thereof, and acknowledges that payments due hereunder shall be made only in
compliance with said provisions.
The undersigned agrees to pay on demand all of the holder's reasonable
out-of-pocket costs of collection and enforcement hereof, including court costs,
service fees, and reasonable attorneys' fees.
No delay or omission on the part of the holder in exercising any right,
privilege or remedy shall impair such right, privilege or remedy or be construed
as a waiver thereof or of any other right, privilege or remedy. No waiver of any
right, privilege or remedy or any amendment to this Note shall be effective
unless made in writing and signed by the holder. Under no circumstances shall an
effective waiver of any right, privilege or remedy on any one occasion
constitute or be construed as a bar to the exercise of or a waiver of such
right, privilege or remedy on any future occasion. The acceptance by the holder
hereof of any payment after any default hereunder shall not operate to extend
the time of payment of any amount then remaining unpaid hereunder or constitute
a waiver of any Event of Default occasioned by such delinquent payment or of any
rights or remedies of the holder hereof under this Note or applicable law.
All rights and remedies of the holder, whether granted herein or
otherwise, shall be cumulative and may be exercised singularly or concurrently.
-4-
40
Every maker, endorser, or guarantor of this Note, or the obligations
represented by this Note, waives all exemption rights, valuation and
appraisement, presentment, protest and demand, demand for payment, notice of
dishonor and protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note, and
assents to any extension or postponement of the time of payment or any other
indulgence, and/or to the addition or release of any other party or person
primarily or secondarily liable.
The word "holder", as used in this Note, shall mean the payee or
endorsee of this Note who is in possession of it.
Neither the holder of this Note nor FPC may assign or otherwise
transfer this Note or any of their respective rights or obligations hereunder to
any third party without the prior written consent of the other party, except for
(i) an assignment by the holder to a Seller or Designated Trust or (ii) an
assignment in connection with the consolidation or reorganization of FPC with,
or merger into, any other corporation, or the sale by FPC of all or
substantially all of its assets; provided that any such assignee shall have
agreed in writing to assume the obligations of the assignor and to be bound by
the terms of this Note. If a party assigns this Note or any right created hereby
without such an exception and without the prior written consent of the other
parties, the assignment shall be null and void.
Creditor and its Affiliates agree to release and renounce any and all
claims against ▇▇▇▇▇▇ Brothers, Inc. and its subsidiaries (other than under and
pursuant to the Employment Agreement) arising prior to the date hereof.
This Note and the provisions hereof shall be binding upon the
undersigned and the undersigned's permitted successors and assigns and shall
inure to the benefit of the holder, the holder's heirs, administrators,
executors, legal representatives and permitted successors and assigns.
[The Remainder of this Page Intentionally Left Blank.]
-5-
41
This Note may not be amended, changed or modified in any respect except
by a written document which has been executed by each party. This Note
constitutes a New York contract to be governed by the laws of such state and to
be paid and performed therein.
IN THE PRESENCE OF: Financial Performance Corporation ("FPC")
By: /s/
------------------------------ -------------------------------------
Name:
Title:
-6-
42
SUBORDINATED CONVERTIBLE TERM PROMISSORY NOTE
$3,750,000 U.S. January 11, 2001
New York, New York
FOR VALUE RECEIVED, the undersigned, FINANCIAL PERFORMANCE
CORPORATION, a New York corporation with a principal place of business located
in New York, New York ("FPC"), hereby promises to pay to the order of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ Trust - 1995 (the "Creditor"), at such address, or such other place or
places as the holder hereof may designate in writing from time to time
hereafter, the principal sum of THREE MILLION SEVEN HUNDRED FIFTY THOUSAND
DOLLARS ($3,750,000), together with interest as hereinafter provided, in lawful
money of the United States of America.
Interest on the outstanding principal balance of this Note shall accrue
at the rate equal to the 90-day LIBOR rate as defined herein plus 150 basis
points, per annum beginning on the date hereof. The interest rate shall be
adjusted on and as of April 11, 2001, and quarterly thereafter, on and as of the
11th day of April, July, October and January of each year, to reflect any change
in the 90-day LIBOR rate, as reported in The Wall Street Journal, plus 150 basis
points. The initial interest rate shall be 6.92%, per annum. Interest shall be
calculated and shall accrue daily on the basis of actual days elapsed over a
three hundred sixty (360) day banking year. FPC shall pay to the holder of this
Note accrued interest, in cash, in arrears, beginning on April 11, 2001, and
quarterly thereafter, on and as of the 11th day of April, July, October and
January of each year, until the obligations under this Note are paid in full.
A single payment of the total outstanding principal balance plus all
accrued and unpaid interest and other charges hereunder shall be due and payable
on January 11, 2007 (the "Maturity Date").
FPC's obligations pursuant to this Note are and shall be subordinate to
present and future indebtedness or obligations of FPC and FPC's Affiliates for
borrowed money, including under the Loan Agreement (as hereinafter defined).
Affiliate shall mean a person: (i) which directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under common control
with, a person; (ii) which beneficially owns or holds 5% or more of any class of
the voting stock of a person; or (iii) 5% or more of the voting stock (or in the
case of a person which is not a corporation, 5% or more of the equity interest)
of which is beneficially owned or held by a person or a subsidiary of a person.
This Note is issued pursuant to Section 3 of the Stock Purchase
Agreement of even date between FPC and the Creditor (the "Purchase Agreement").
The holder of this Note is entitled to all of the benefits and rights of the
Creditor or their Designated Trusts, including but not limited to, those under
Sections 3 and 12 of the Purchase Agreement. However, neither this reference to
the Purchase
43
Agreement nor any provision thereof shall impair the absolute and unconditional
obligation of the undersigned to pay the principal and interest on this Note as
herein provided.
Any capitalized term used in this Note which is not otherwise expressly
defined herein shall have the meaning ascribed thereto in the Purchase
Agreement.
FPC shall have the right, at any time, to prepay without penalty all or
any part of the outstanding principal amount hereof. All payments by or on
behalf of FPC received hereunder shall be applied first to any outstanding
obligations hereunder other than principal or interest, second to accrued
interest and, thereafter, to principal.
The holder may impose upon FPC a delinquency charge of five percent
(5%) of the amount of any amount payable hereunder not paid on or before the
tenth (10th) day after such payment is due.
Upon ten (10) days written notice by either (i) the holder of this Note
or (ii) FPC, to the other party of the exercising party's intent to exercise its
conversion right (the "Conversion Option") under this Note, a portion of the
then outstanding principal balance shall be convertible into shares of common
stock of FPC (the "FPCX Shares") as follows:
(a) on the first anniversary of the date of this Note (the "First
Anniversary") or any date thereafter through the Maturity Date, twenty-five
percent (25%) of the original principal balance of this Note may be converted,
provided that during the thirty (30) days immediately preceding the First
Anniversary or any thirty (30) day period thereafter, as the case may be, the
FPCX Average Closing Share Price, subject to adjustment for stock splits, stock
dividends, or similar capital transactions, meets or exceeds the Target Price;
(b) on the second anniversary of the date of this Note (the "Second
Anniversary") or any date thereafter through the Maturity Date, up to an
additional twenty-five percent (25%) of the original principal balance of this
Note may be converted, provided that during the thirty (30) days immediately
preceding the Second Anniversary or any thirty (30) day period thereafter, as
the case may be, the FPCX Average Closing Share Price, subject to adjustment for
stock splits, stock dividends, or similar capital transactions, meets or exceeds
the Target Price;
(c) on the third anniversary of the date of this Note (the "Third
Anniversary") or any date thereafter through the Maturity Date, up to an
additional twenty-five percent (25%) of the original principal balance of this
Note may be converted, provided that during the thirty (30) days immediately
preceding Third Anniversary or any thirty (30) day period thereafter, as the
case may be, the FPCX Average Closing Share Price, subject to adjustment for
stock splits, stock dividends, or similar capital transactions, meets or exceeds
the Target Price; and
(d) on the fourth anniversary of the date of this Note (the "Fourth
Anniversary") or any date thereafter through the Maturity Date, up to an
additional twenty-five percent (25%) of the original principal balance of this
Note may be converted, provided that during the thirty (30)
-2-
44
days immediately preceding Fourth Anniversary or any thirty (30) day period
thereafter, as the case may be, the FPCX Average Closing Share Price, subject to
adjustment for stock splits, stock dividends, or similar capital transactions,
meets or exceeds the Target Price.
Notwithstanding anything in this Note to the contrary, neither any
holder of this Note nor FPC shall have the right to deliver any written notice
provided for above to exercise their respective conversion rights under this
Note until such time as the Buyer obtains the approval of its shareholders to
the extent necessary to comply with the shareholder approval requirement of the
National Association of Securities Dealers, Inc. applicable to FPC.
Accrued interest on the portion of the this Note being converted at the
date of conversion shall be paid to the holder of this Note in cash. Subject to
the Securities Act, the holder shall have the right to sell any FPCX Shares to
satisfy any Taxes resulting from the conversion or convertibility of any portion
of this Note or from any event that renders any portion of this Note, or a
promissory note of even date, taxable.
Upon written notice to exercise a conversion right under this Note,
some or all of the then outstanding balance, as provided herein, shall be
convertible into shares of common stock of FPC at Four Dollars ($4.00) per
share, subject to adjustment for stock splits, stock dividends, or similar
capital transactions.
For so long as there is an outstanding principal balance on this Note,
FPC shall reserve such number of shares of common stock of FPC as may be
issuable from time to time upon exercise of the conversion rights provided in
this Note.
Upon the occurrence and continuation of an Event of Default as defined
herein (i) the entire principal amount of the indebtedness evidenced hereby, all
interest accrued and accruing thereon, and all other amounts accrued or accruing
hereunder, may be declared to be forthwith due and payable, provided that, upon
the occurrence of any Event of Default described in clause (c) below the entire
principal amount of the indebtedness evidenced hereby, together with all
interest accrued and accruing thereon and all other amounts accrued or accruing
hereunder, shall become immediately due and payable without requirement of any
notice or demand; and (ii) the outstanding principal amount of this Note shall
bear interest, without notice, at the rate of interest previously charged under
this Note plus five percent (5%) per annum (the "Default Rate") until this Note
is paid in full, in addition to any delinquency charge as provided above.
Each of the following is deemed to be an "Event of Default":
(a) any material breach by FPC of its obligations
pursuant to the Purchase Agreement or any agreement
or instrument in connection thereto;
(b) the failure of FPC to make any payment due hereunder
or under any other obligation owing to the holder
when such payment is due after giving effect to any
applicable grace period; or
-3-
45
(c) the occurrence of any of the following with respect
to FPC: admission in writing of FPC's inability, or
being generally unable, to pay its debts as they
become due, insolvency, bankruptcy, appointment of a
receiver of any part of its property, legal or
equitable assignment, conveyance or transfer of its
property for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy
or insolvency laws by, or against, FPC.
Notwithstanding anything herein to the contrary, upon a termination of
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as an employee of ▇▇▇▇▇▇ Brothers, Inc. without Good Reason, as
provided in Section 11(a)(vi) of the Employment Agreement between ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇▇ Brothers, Inc., dated January 11, 2001, the remaining
principal amount, after conversion as aforesaid, and any accrued interest
thereon, shall be forgiven and this Note shall be delivered, assigned and
transferred to FPC and be null and void.
This Note and the provisions hereof shall be binding upon the
undersigned and the undersigned's permitted successors and assigns and shall
inure to the benefit of the holder, the holder's heirs, administrators,
executors, legal representatives and permitted successors and assigns.
Creditor agrees that, notwithstanding anything contained in this Note
to the contrary, this Note shall be subject to the terms and conditions of the
Loan and Security Agreement dated as of January 11, 2001 by and between Fleet
Capital Corporation and ▇▇▇▇▇▇ Brother, Inc. and, in particular, Section 8.2.15
thereof, and acknowledges that payments due hereunder shall be made only in
compliance with said provisions.
The undersigned agrees to pay on demand all of the holder's reasonable
out-of-pocket costs of collection and enforcement hereof, including court costs,
service fees, and reasonable attorneys' fees.
No delay or omission on the part of the holder in exercising any right,
privilege or remedy shall impair such right, privilege or remedy or be construed
as a waiver thereof or of any other right, privilege or remedy. No waiver of any
right, privilege or remedy or any amendment to this Note shall be effective
unless made in writing and signed by the holder. Under no circumstances shall an
effective waiver of any right, privilege or remedy on any one occasion
constitute or be construed as a bar to the exercise of or a waiver of such
right, privilege or remedy on any future occasion. The acceptance by the holder
hereof of any payment after any default hereunder shall not operate to extend
the time of payment of any amount then remaining unpaid hereunder or constitute
a waiver of any Event of Default occasioned by such delinquent payment or of any
rights or remedies of the holder hereof under this Note or applicable law.
All rights and remedies of the holder, whether granted herein or
otherwise, shall be cumulative and may be exercised singularly or concurrently.
-4-
46
Every maker, endorser, or guarantor of this Note, or the obligations
represented by this Note, waives all exemption rights, valuation and
appraisement, presentment, protest and demand, demand for payment, notice of
dishonor and protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note, and
assents to any extension or postponement of the time of payment or any other
indulgence, and/or to the addition or release of any other party or person
primarily or secondarily liable.
The word "holder", as used in this Note, shall mean the payee or
endorsee of this Note who is in possession of it.
Neither the holder of this Note nor FPC may assign or otherwise
transfer this Note or any of their respective rights or obligations hereunder to
any third party without the prior written consent of the other party, except for
(i) an assignment by the holder to a Seller or Designated Trust or (ii) an
assignment in connection with the consolidation or reorganization of FPC with,
or merger into, any other corporation, or the sale by FPC of all or
substantially all of its assets; provided that any such assignee shall have
agreed in writing to assume the obligations of the assignor and to be bound by
the terms of this Note. If a party assigns this Note or any right created hereby
without such an exception and without the prior written consent of the other
parties, the assignment shall be null and void.
Creditor and its Affiliates agree to release and renounce any and all
claims against ▇▇▇▇▇▇ Brothers, Inc. and its subsidiaries (other than under and
pursuant to the Employment Agreement) arising prior to the date hereof.
This Note and the provisions hereof shall be binding upon the
undersigned and the undersigned's permitted successors and assigns and shall
inure to the benefit of the holder, the holder's heirs, administrators,
executors, legal representatives and permitted successors and assigns.
[The Remainder of this Page Intentionally Left Blank.]
-5-
47
This Note may not be amended, changed or modified in any respect except
by a written document which has been executed by each party. This Note
constitutes a New York contract to be governed by the laws of such state and to
be paid and performed therein.
IN THE PRESENCE OF: Financial Performance Corporation ("FPC")
By: /s/
------------------------------ -------------------------------------
Name:
Title:
-6-
48
SUBORDINATED CONVERTIBLE TERM PROMISSORY NOTE
$1,000,000 U.S. January 11, 2001
New York, New York
FOR VALUE RECEIVED, the undersigned, FINANCIAL PERFORMANCE
CORPORATION, a New York corporation with a principal place of business located
in New York, New York ("FPC"), hereby promises to pay to the order of The ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ Revocable Trust of 1998 (the "Creditor"), ▇/▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other place or places as the
holder hereof may designate in writing from time to time hereafter, the
principal sum of ONE MILLION DOLLARS ($1,000,000), together with interest as
hereinafter provided, in lawful money of the United States of America.
Interest on the outstanding principal balance of this Note shall accrue
at the rate of 11% per annum. Interest shall be calculated and shall accrue
daily on the basis of actual days elapsed over a three hundred sixty (360) day
banking year. The principal balance shall be increased by the accrued interest
on and as of April 11, 2001 and quarterly, thereafter, on and as of the 11th day
of April, July, October and January of each year, until the obligations under
this Note are paid in full.
FPC shall make payments of principal in the amounts, and on the dates
indicated, as follows:
April 11, 2001 $50,000
July 11, 2001 $50,000
October 11, 2001 $62,500
January 11, 2002 $62,500
April 11, 2002 $62,500
July 11, 2002 $62,500
October 11, 2002 $62,500
A single payment of the total outstanding principal balance plus all
accrued and unpaid interest and other charges hereunder shall be due and payable
on January 11, 2003 (the "Maturity Date").
"Affiliate" shall mean any Person which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, another Person. The term "control" means the possession,
directly or indirectly, of more than fifty percent (50%) of the voting interests
of the Person.
FPC's obligations pursuant to this Note are and shall be subordinate to
present and future indebtedness or obligations of FPC and FPC's Affiliates for
borrowed money, including under the Loan Agreement. Affiliate shall mean a
person: (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, a person;
49
(ii) which beneficially owns or holds 5% or more of any class of the voting
stock of a person; or (iii) 5% or more of the voting stock (or in the case of a
person which is not a corporation, 5% or more of the equity interest) of which
is beneficially owned or held by a person or a subsidiary of a person.
Notwithstanding the first sentence of the preceding paragraph, until
payment in full of FPC's obligations pursuant to this Note, FPC and FPC's
Affiliates shall not incur any indebtedness or obligations for borrowed money
for the purpose of acquiring, whether through the purchase of assets, stock,
merger, consolidation, or otherwise, any property or business of another person,
other than in the ordinary course of their respective businesses without the
prior written consent of either ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, which
consent shall not be unreasonably withheld. It is expressly understood that the
existing operations and ordinary business of FPC and FPC's Affiliates is not
intended to include the acquisition of other businesses or investment property.
This Note is issued pursuant to Section 15 of the Stock Purchase
Agreement of even date between FPC and the Creditor (the "Purchase Agreement").
The holder of this Note is entitled to all of the benefits and rights of the
Creditor or their Designated Trusts, including but not limited to, those under
Section 12 and 15 of the Purchase Agreement. However, neither this reference to
the Purchase Agreement nor any provision thereof shall impair the absolute and
unconditional obligation of the undersigned to pay the principal and interest on
this Note as herein provided.
Any capitalized term used in this Note which is not otherwise expressly
defined herein shall have the meaning ascribed thereto in the Purchase
Agreement.
FPC shall have the right, at any time, to prepay without penalty all or
any part of the outstanding principal amount hereof. All payments by or on
behalf of FPC received hereunder shall be applied first to any outstanding
obligations hereunder other than principal or interest, second to accrued
interest and, thereafter, to principal.
The holder may impose upon FPC a delinquency charge of five percent
(5%) of the amount of any amount payable hereunder not paid on or before the
tenth (10th) day after such payment is due.
Upon ten days' written notice by the holder of this Note to FPC at any
time this note is outstanding of the holder's intent to exercise their
conversion right (the "Conversion Option") under this Note, some or all of the
then outstanding balance shall be convertible into shares of common stock of FPC
at $3.00 per share, subject to adjustment for stock splits, stock dividends, or
similar capital transactions; provided that the holder shall not be entitled to
exercise the Conversion Option unless the Average Closing Price Per Share of
FPC's common stock, as defined herein, is greater than five dollars ($5.00) per
share. "Average Closing Price Per Share" shall mean the average "close" or
"last" share price of FPC's common stock on the NASDAQ or NASDAQ SmallCap
Exchanges, or other recognized exchange, which exchange FPC's common stock is
currently traded, as reported in the eastern edition of the Wall Street Journal,
for a period of seven (7) consecutive Business Days.
-2-
50
At the option of the holder of this Note, accrued interest on the
portion of the outstanding principal balance being converted at the date of
conversion shall be paid to the holder of the Note in cash.
For so long as there is an outstanding principal balance on this Note,
FPC shall reserve such number of shares of common stock of FPC as may be
issuable from time to time upon exercise of the conversion rights provided in
this Note.
Upon the occurrence and continuation of an Event of Default as defined
herein (i) the entire principal amount of the indebtedness evidenced hereby, all
interest accrued and accruing thereon, and all other amounts accrued or accruing
hereunder, may be declared to be forthwith due and payable, provided that, upon
the occurrence of any Event of Default described in clause (c) below the entire
principal amount of the indebtedness evidenced hereby, together with all
interest accrued and accruing thereon and all other amounts accrued or accruing
hereunder, shall become immediately due and payable without requirement of any
notice or demand; and (ii) the outstanding principal amount of this Note shall
bear interest, without notice, at the rate of interest previously charged under
this Note plus five percent (5%) per annum (the "Default Rate") until this Note
is paid in full, in addition to any delinquency charge as provided above.
Each of the following is deemed to be an "Event of Default":
(a) any material breach by FPC of its
obligations pursuant to the Purchase Agreement or any
agreement or instrument in connection thereto;
(b) the failure of FPC to make any payment due
hereunder or under any other obligation owing to the holder
when such payment is due after giving effect to any applicable
grace period; or
(c) the occurrence of any of the following with
respect to FPC: admission in writing of FPC's inability, or
being generally unable, to pay its debts as they become due,
insolvency, bankruptcy, appointment of a receiver of any part
of its property, legal or equitable assignment, conveyance or
transfer of its property for the benefit of creditors by, or
the commencement of any proceedings under any bankruptcy or
insolvency laws by, or against, FPC.
The undersigned agrees to pay on demand all of the holder's reasonable
out-of-pocket costs of collection and enforcement hereof, including court costs,
service fees, and reasonable attorneys' fees.
No delay or omission on the part of the holder in exercising any right,
privilege or remedy
-3-
51
shall impair such right, privilege or remedy or be construed as a waiver thereof
or of any other right, privilege or remedy. No waiver of any right, privilege or
remedy or any amendment to this Note shall be effective unless made in writing
and signed by the holder. Under no circumstances shall an effective waiver of
any right, privilege or remedy on any one occasion constitute or be construed as
a bar to the exercise of or a waiver of such right, privilege or remedy on any
future occasion. The acceptance by the holder hereof of any payment after any
default hereunder shall not operate to extend the time of payment of any amount
then remaining unpaid hereunder or constitute a waiver of any Event of Default
occasioned by such delinquent payment or of any rights or remedies of the holder
hereof under this Note or applicable law.
All rights and remedies of the holder, whether granted herein or
otherwise, shall be cumulative and may be exercised singularly or concurrently.
Every maker, endorser, or guarantor of this Note, or the obligations
represented by this Note, waives all exemption rights, valuation and
appraisement, presentment, protest and demand, demand for payment, notice of
dishonor and protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note, and
assents to any extension or postponement of the time of payment or any other
indulgence, and/or to the addition or release of any other party or person
primarily or secondarily liable.
The word "holder", as used in this Note, shall mean the payee or
endorsee of this Note who is in possession of it.
Neither the holder of this Note nor FPC may assign or otherwise
transfer this Note or any of their respective rights or obligations hereunder to
any third party without the prior written consent of the other party, except for
(i) an assignment by the holder to a Seller or Designated Trust or (ii) an
assignment in connection with the consolidation or reorganization of FPC with,
or merger into, any other corporation, or the sale by FPC of all or
substantially all of its assets; provided that any such assignee shall have
agreed in writing to assume the obligations of the assignor and to be bound by
the terms of this Note. If a party assigns this Note or any right created hereby
without such an exception and without the prior written consent of the other
parties, the assignment shall be null and void.
This Note and the provisions hereof shall be binding upon the
undersigned and the undersigned's permitted successors and assigns and shall
inure to the benefit of the holder, the holder's heirs, administrators,
executors, legal representatives and permitted successors and assigns.
Creditor agrees that, notwithstanding anything contained herein to the
contrary, this Note shall be subject to the terms and conditions of the Loan and
Security Agreement dated as of January 11, 2001 by and between Fleet Capital
Corporation and ▇▇▇▇▇▇ Brothers, Inc., and, in particular, Section 8.2.15
thereof, and acknowledges that payments due hereunder shall be made only in
compliance with said provisions.
-4-
52
Creditor and its Affiliates agree to release and renounce any and all
claims against ▇▇▇▇▇▇ Brothers, Inc. and its subsidiaries (other than under and
pursuant to the Employment Agreement) arising prior to the date hereof.
[The Remainder of this Page Intentionally Left Blank.]
-5-
53
This Note may not be amended, changed or modified in any respect except
by a written document which has been executed by each party. This Note
constitutes a New York contract to be governed by the laws of such state and to
be paid and performed therein.
IN THE PRESENCE OF: Financial Performance Corporation ("FPC")
By: /s/
------------------------------ -------------------------------------
Name:
Title:
-6-
54
SUBORDINATED CONVERTIBLE TERM PROMISSORY NOTE
$1,000,000 U.S. January 11, 2001
New York, New York
FOR VALUE RECEIVED, the undersigned, FINANCIAL PERFORMANCE
CORPORATION, a New York corporation with a principal place of business located
in New York, New York ("FPC"), hereby promises to pay to the order of the ▇▇▇▇▇
▇. ▇▇▇▇▇▇ Trust - 1995 (the "Creditor"), ▇/▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇.▇.▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other place or places as the holder hereof may
designate in writing from time to time hereafter, the principal sum of ONE
MILLION DOLLARS ($1,000,000), together with interest as hereinafter provided, in
lawful money of the United States of America.
Interest on the outstanding principal balance of this Note shall accrue
at the rate of 11% per annum. Interest shall be calculated and shall accrue
daily on the basis of actual days elapsed over a three hundred sixty (360) day
banking year. The principal balance shall be increased by the accrued interest
on and as of April 11, 2001 and quarterly, thereafter, on and as of the 11th day
of April, July, October and January of each year, until the obligations under
this Note are paid in full.
FPC shall make payments of principal in the amounts, and on the dates
indicated, as follows:
April 11, 2001 $50,000
July 11, 2001 $50,000
October 11, 2001 $62,500
January 11, 2002 $62,500
April 11, 2002 $62,500
July 11, 2002 $62,500
October 11, 2002 $62,500
A single payment of the total outstanding principal balance plus all
accrued and unpaid interest and other charges hereunder shall be due and payable
on January 11, 2003 (the "Maturity Date").
"Affiliate" shall mean any Person which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, another Person. The term "control" means the possession,
directly or indirectly, of more than fifty percent (50%) of the voting interests
of the Person.
FPC's obligations pursuant to this Note are and shall be subordinate to
present and future indebtedness or obligations of FPC and FPC's Affiliates for
borrowed money, including under the Loan Agreement. Affiliate shall mean a
person: (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, a person;
55
(ii) which beneficially owns or holds 5% or more of any class of the voting
stock of a person; or (iii) 5% or more of the voting stock (or in the case of a
person which is not a corporation, 5% or more of the equity interest) of which
is beneficially owned or held by a person or a subsidiary of a person.
Notwithstanding the first sentence of the preceding paragraph, until
payment in full of FPC's obligations pursuant to this Note, FPC and FPC's
Affiliates shall not incur any indebtedness or obligations for borrowed money
for the purpose of acquiring, whether through the purchase of assets, stock,
merger, consolidation, or otherwise, any property or business of another person,
other than in the ordinary course of their respective businesses without the
prior written consent of either ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, which
consent shall not be unreasonably withheld. It is expressly understood that the
existing operations and ordinary business of FPC and FPC's Affiliates is not
intended to include the acquisition of other businesses or investment property.
This Note is issued pursuant to Section 15 of the Stock Purchase
Agreement of even date between FPC and the Creditor (the "Purchase Agreement").
The holder of this Note is entitled to all of the benefits and rights of the
Creditor or their Designated Trusts, including but not limited to, those under
Section 12 and 15 of the Purchase Agreement. However, neither this reference to
the Purchase Agreement nor any provision thereof shall impair the absolute and
unconditional obligation of the undersigned to pay the principal and interest on
this Note as herein provided.
Any capitalized term used in this Note which is not otherwise expressly
defined herein shall have the meaning ascribed thereto in the Purchase
Agreement.
FPC shall have the right, at any time, to prepay without penalty all or
any part of the outstanding principal amount hereof. All payments by or on
behalf of FPC received hereunder shall be applied first to any outstanding
obligations hereunder other than principal or interest, second to accrued
interest and, thereafter, to principal.
The holder may impose upon FPC a delinquency charge of five percent
(5%) of the amount of any amount payable hereunder not paid on or before the
tenth (10th) day after such payment is due.
Upon ten days' written notice by the holder of this Note to FPC at any
time this note is outstanding of the holder's intent to exercise their
conversion right (the "Conversion Option") under this Note, some or all of the
then outstanding balance shall be convertible into shares of common stock of FPC
at $3.00 per share, subject to adjustment for stock splits, stock dividends, or
similar capital transactions; provided that the holder shall not be entitled to
exercise the Conversion Option unless the Average Closing Price Per Share of
FPC's common stock, as defined herein, is greater than five dollars ($5.00) per
share. "Average Closing Price Per Share" shall mean the average "close" or
"last" share price of FPC's common stock on the NASDAQ or NASDAQ SmallCap
Exchanges, or other recognized exchange, which exchange FPC's common stock is
currently traded, as reported in the eastern edition of the Wall Street Journal,
for a period of seven (7) consecutive Business Days.
-2-
56
At the option of the holder of this Note, accrued interest on the
portion of the outstanding principal balance being converted at the date of
conversion shall be paid to the holder of the Note in cash.
For so long as there is an outstanding principal balance on this Note,
FPC shall reserve such number of shares of common stock of FPC as may be
issuable from time to time upon exercise of the conversion rights provided in
this Note.
Upon the occurrence and continuation of an Event of Default as defined
herein (i) the entire principal amount of the indebtedness evidenced hereby, all
interest accrued and accruing thereon, and all other amounts accrued or accruing
hereunder, may be declared to be forthwith due and payable, provided that, upon
the occurrence of any Event of Default described in clause (c) below the entire
principal amount of the indebtedness evidenced hereby, together with all
interest accrued and accruing thereon and all other amounts accrued or accruing
hereunder, shall become immediately due and payable without requirement of any
notice or demand; and (ii) the outstanding principal amount of this Note shall
bear interest, without notice, at the rate of interest previously charged under
this Note plus five percent (5%) per annum (the "Default Rate") until this Note
is paid in full, in addition to any delinquency charge as provided above.
Each of the following is deemed to be an "Event of Default":
(a) any material breach by FPC of its
obligations pursuant to the Purchase Agreement or any
agreement or instrument in connection thereto;
(b) the failure of FPC to make any payment due
hereunder or under any other obligation owing to the holder
when such payment is due after giving effect to any applicable
grace period; or
(c) the occurrence of any of the following with
respect to FPC: admission in writing of FPC's inability, or
being generally unable, to pay its debts as they become due,
insolvency, bankruptcy, appointment of a receiver of any part
of its property, legal or equitable assignment, conveyance or
transfer of its property for the benefit of creditors by, or
the commencement of any proceedings under any bankruptcy or
insolvency laws by, or against, FPC.
The undersigned agrees to pay on demand all of the holder's reasonable
out-of-pocket costs of collection and enforcement hereof, including court costs,
service fees, and reasonable attorneys' fees.
No delay or omission on the part of the holder in exercising any right,
privilege or remedy
-3-
57
shall impair such right, privilege or remedy or be construed as a waiver thereof
or of any other right, privilege or remedy. No waiver of any right, privilege or
remedy or any amendment to this Note shall be effective unless made in writing
and signed by the holder. Under no circumstances shall an effective waiver of
any right, privilege or remedy on any one occasion constitute or be construed as
a bar to the exercise of or a waiver of such right, privilege or remedy on any
future occasion. The acceptance by the holder hereof of any payment after any
default hereunder shall not operate to extend the time of payment of any amount
then remaining unpaid hereunder or constitute a waiver of any Event of Default
occasioned by such delinquent payment or of any rights or remedies of the holder
hereof under this Note or applicable law.
All rights and remedies of the holder, whether granted herein or
otherwise, shall be cumulative and may be exercised singularly or concurrently.
Every maker, endorser, or guarantor of this Note, or the obligations
represented by this Note, waives all exemption rights, valuation and
appraisement, presentment, protest and demand, demand for payment, notice of
dishonor and protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note, and
assents to any extension or postponement of the time of payment or any other
indulgence, and/or to the addition or release of any other party or person
primarily or secondarily liable.
The word "holder", as used in this Note, shall mean the payee or
endorsee of this Note who is in possession of it.
Neither the holder of this Note nor FPC may assign or otherwise
transfer this Note or any of their respective rights or obligations hereunder to
any third party without the prior written consent of the other party, except for
(i) an assignment by the holder to a Seller or Designated Trust or (ii) an
assignment in connection with the consolidation or reorganization of FPC with,
or merger into, any other corporation, or the sale by FPC of all or
substantially all of its assets; provided that any such assignee shall have
agreed in writing to assume the obligations of the assignor and to be bound by
the terms of this Note. If a party assigns this Note or any right created hereby
without such an exception and without the prior written consent of the other
parties, the assignment shall be null and void.
This Note and the provisions hereof shall be binding upon the
undersigned and the undersigned's permitted successors and assigns and shall
inure to the benefit of the holder, the holder's heirs, administrators,
executors, legal representatives and permitted successors and assigns.
Creditor agrees that, notwithstanding anything contained herein to the
contrary, this Note shall be subject to the terms and conditions of the Loan and
Security Agreement dated as of January 11, 2001 by and between Fleet Capital
Corporation and ▇▇▇▇▇▇ Brothers, Inc., and, in particular, Section 8.2.15
thereof, and acknowledges that payments due hereunder shall be made only in
compliance with said provisions.
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Creditor and its Affiliates agree to release and renounce any and all
claims against ▇▇▇▇▇▇ Brothers, Inc. and its subsidiaries (other than under and
pursuant to the Employment Agreement) arising prior to the date hereof.
[The Remainder of this Page Intentionally Left Blank.]
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This Note may not be amended, changed or modified in any respect except
by a written document which has been executed by each party. This Note
constitutes a New York contract to be governed by the laws of such state and to
be paid and performed therein.
IN THE PRESENCE OF: Financial Performance Corporation ("FPC")
By: /s/
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Name:
Title:
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