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HomeMy WebLinkAbout06-3185 JOSEPH CALABRESE d/b/a : IN THE COURT OFOMMON PLEAS OF CALABRESE & SONS, INC, : CUMBERLAND CO NTY, PENNSYLVANIA Plaintiff P V. : DOCKET NO. CMG • ? 185 C'L'. T, COMMERCE BANK/HARRISBURG, N.A: Defendant : CIVIL ACTION - PRAECIPE TO ISSUE WRIT OF TO THE PROTHONOTARY: Please Issue a Writ of Summons against the above-referenced Defendant. Commerce Bank/Harrisburg N.A. c/o Eugene E. Pepinsky, Jr., Esquire Keefer Wood Allen & Rahal, LLP 210 Walnut Street P. O. Box 11963 Harrisburg, PA 17108 Respectfully FENSTERMACHER AND ASSOCIATES, P.C. $upreme Court I. . #29940 Matthew Aaron S ith Supreme Court I. . #94603 5115 East Trindl Road Mechanicsburg, A 17050 (717) 691-5400 Attorneys for De ndant DATED: ds T?U6 t? ?? !?.) C? ? ?? ?ry ? ? Z (? ? ` ? ? W U? ? r; -;- ' ` ? .? J "? _ - ?C ?, 6 C ? _ .. --? l rn ? 1 . 1 Commonwealth of Pennsylv County of Cumberland WRIT OF SUMMONS Joseph Calabrese d/b/a Calabrese & Sons, Inc. Plaintiff Court of Common Vs. No 06-3185 Commerce Bank/Harrisburg, N.A. c/o Eugene E. Pepinsky, Jr., Esquire 210 Walnut Steet, PO Box 11963 Harrisburg, Pa. 17108 In CivilAc Defendant To Commerce Bank/Harrisburg NA, You are hereby notified that Joseph Calabrese d/b/a Cal brese & Sons, Inc. the Plaintiff(s) has / have commenced an action in Civil Action-Law gainst you which you are required to defend or a default judgment may be entered again ;t you. (SEAL) Curtis R. Long Prothonotary Date June 5, 2006 By J,,? (,) Deputy Attorney: Matthew Aaron Smith Name: Fenstermacher And Associates Address: 5115 East Trindle Road Mechanicsburg, Pa. 17050 Attorney for: Plaintiff Telephone: 717)691-5400 Supreme Court ID No. 94603 JOSEPH CALABRESE d/b/a IN THE COURT OF COMMON PLEAS OF CALABRESE AND SONS, INC., CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff V. COMMERCE BANK/HARRISBURG, DOCKET NO. 06-3185 N.A., Defendant NOTICE YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after this Complaint and Notice are served by entering a written appearance personally or by attorney and filing in writing with the Court your defenses or objections to the claims set forth against you. You are warned that if you fail to do so the case may proceed without you and a judgment may be entered against you by the Court without further notice for any money claimed in the Complaint or for any other claim or relief requested by Plaintiffs. You may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. CUMBERLAND COUNTY BAR ASSOCIATION 2 LIBERTY AVENUE CARLISLE, PA 17013 (717) 249-3166 ? a Yr l JOSEPH CALABRESE d/b/a CALABRESE AND SONS, INC., Plaintiff V. COMMERCE BANK/HARRISBURG, N.A., Defendant IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA DOCKET NO. 06-3185 COMPLAINT AND NOW comes the Plaintiff, by and through their attorneys, the Offices of Fenstermacher and Associates, P.C., and files this Complaint, as follows: 1. Plaintiff Calabrese and Sons, Inc., hereinafter "Calabrese," is a Pennsylvania military defense corporation with an address for conducting business at P.O. Box 1667, 406 Brandy Lane, Mechanicsburg, Cumberland County, Pennsylvania 17055. 2. Defendant Commerce Bank/Harrisburg, N.A., hereinafter "Commerce," is a Pennsylvania banking corporation with an address for conducting business at P.O. Box 4999, 3800 Paxton Street, Harrisburg, Dauphin County, Pennsylvania 17111. 3. Calabrese is a corporation in Cumberland County, doing business in Mechanicsburg for over 50 years. 4. Calabrese is a private military defense contractor with its primary customer being the United States Military. 2 -r 5. Around June or July of 1986, Joseph Calabrese, hereinafter "Joe Calabrese," and Michael P. Calabrese bought Calabrese and Sons, Inc., from their father. 6. In 1999, Joe Calabrese purchased Michael Calabrese's interest in Calabrese, whom he shared ownership of Calabrese equally with, and a Board of Directors, hereinafter the "Board," was established. 7. Initially, at the request of the leadership of Commerce, the Board was composed of Joe Calabrese, Michael Calabrese, Pete Ressler, Gary Nalbandian, Dr. Joe Greene, and Jim Lyons. 8. The Board's purpose was to take control of Calabrese out of the hands of Joe Calabrese, to institute a neutral board and to ensure that Commerce's interests would be represented. 9. Nalbandian also sat on the Board of Directors for Commerce while he sat on the Board of Directors and served as Secretary for Calabrese. 10. While on the Board of Directors of Calabrese as Chairman of the Board, Ressler was also an attorney with a firm that represented Commerce. 11. While on Calabrese's Board, Ressler was on Commerce's Board. 12. In addition to being Calabrese's Chairman of the Board, Ressler was also: a. Calabrese's attorney, b. Joe Calabrese's mother's financial advisor, c. Joe Calabrese's father's estate's trustee, d. a Senior Board member for Commerce, and e. a stock holder in Commerce. 3 13. Dr. Joe Greene was a friend of Ressler. 4 14. On or about December 6, 2001, Commerce loaned Calabrese approximately $700,000.00. A true and correct copy of the "Commitment Letter" is attached and hereto incorporated as Exhibit "A," a true and accurate copy of the "Term Loan Agreement" is attached and hereto incorporated as Exhibit "B," and a true and accurate copy of the "Term Loan Note" is attached an hereto incorporated as Exhibit "C." 15. On or about December 6, 2001, Commerce loaned Calabrese approximately $500,000.00. A true and correct copy of the "Commitment Letter" is attached and hereto incorporated as Exhibit "D," a true and accurate copy of the "Term Loan Agreement" is attached and hereto incorporated as Exhibit "E," and a true and accurate copy of the "Term Loan Note" is attached an hereto incorporated as Exhibit "F." 16. At the time the loans were made to Calabrese, Jim Gibson was President/CEO, hereinafter "President," of Commerce Bank. 17. It was the President's understanding that one of the criteria for Commerce granting the loans to Calabrese was that Ressler and Nalbandian sit on the Board of Directors of Calabrese so that Commerce could control Calabrese's actions. 18. During their time on the Board of Directors of Calabrese, Ressler and Nalbandian told Joe Calabrese what and when to borrow and to borrow exclusively from Commerce. 4 -r r 19. Nalbandian resigned from the Calabrese Board of Directors in March/April 2002 when Jim Gibson's 13-year tenure at Commerce ended. Nalbandian subsequently became President/CEO of Commerce. 20. The relationship between Commerce and Calabrese deteriorated subsequent to Nalbandian's hiring as CEO of Commerce. 21. Ressler no longer pursued loans on behalf of Calabrese once Nalbandian became President/CEO of Commerce. 22. On or about March, 2003, Calabrese began to pursue a Department of Agriculture Loan through PNC Bank because Commerce stated they would not grant a Department of Agriculture Loan request. 23. Following six (6) to seven (7) months of waiting for a decision from PNC on the Agriculture Loan, Commerce, through Ressler, contacted Calabrese stating that they would fund the Department of Agriculture Loan. 24. Due to the long loan approval process, Calabrese began to run short on funds. 25. Joe Calabrese informed Ressler that Calabrese was running short on funds. As a result, Ressler told Joe Calabrese to apply for a bridge loan, on behalf of Calabrese, from Commerce in the amount of $200,000 to $250,000. 26. Because of Calabrese's application for a bridge loan, Commerce rejected Calabrese's request for the Department of Agriculture Loan citing Calabrese's lack of cash. 5 rr ' 27. At the time of the application for the bridge loan, Calabrese was +r attempting to obtain the Department of Agriculture Loan in an amount of 3.4 million dollars. 28. Between the Fall of 2005 and the Spring of 2006, Commerce refused to provide further financing to Calabrese do to what is believe to be a perceived liability in relation to their tortuous actions towards Calabrese. 29. Calabrese has been forced to seek financing elsewhere as a result of Commerce's actions. 30. Calabrese has yet to secure necessary funding. 31. Calabrese has been forced to liquidate assets because of the interference and actions of Commerce. COUNTI LENDER LIABILITY: BREACH OF DUTY TO PERFORM IN GOOD FAITH 32. Paragraphs 1 through 31 are incorporated fully herein by reference. 33. Commerce and Calabrese are parties to two separate loan agreements where Commerce is the lender and Calabrese the borrower. 34. As a party to the loan agreements, Commerce had an obligation of good faith in its performance of its duties per the terms of the contract. 35. "Good faith" is defined as honesty in fact in the conduct concerned. 36. Commerce required Commerce Board of Directors members to sit on the Calabrese Board of Directors as a prerequisite for the approval of loans. 6 V , ` 37. Such conduct constitutes a breach of Commerce's duty to perform in good ?r faith. 38. As a direct and proximate result of Commerce's intentional breach of their duty to perform in good faith Calabrese has suffered financial harm in the amount of $5,000,000.00. WHEREFORE, Plaintiff Calabrese and Sons, Inc., requests judgment against Commerce Bank/Harrisburg, N.A., in the amount of $5,000,000.00, which exceeds the compulsory arbitration limitations, plus costs and such other relief as the Court deems just and proper. COUNT II LENDER LIABILITY: BREACH OF DUTY TO PERFORM IN GOOD FAITH 39. Paragraphs 1 through 38 are incorporated fully herein by reference. 40. Commerce placed Commerce employees, Ressler and Nalbandian, on the Calabrese Board of Directors in an effort to manipulate Calabrese's business decisions. 41. As members of Calabrese's Board, Ressler and Nalbandian were to make decisions in the best interest of Calabrese. 42. Commerce, through Ressler and Nalbandian, directed Calabrese what and when to borrow, and to borrow exclusively from Commerce. 7 43. Such direction was meant to preserve the interests of Commerce only with no regard to the best interest of Calabrese. 44. Such conduct constitutes a breach of Commerce's duty to perform in good faith. 45. As a direct and proximate result of Commerce's intentional breach of their duty to perform in good faith, through its Board Members Ressler and Nalbandian, Calabrese was denied loans, forced to liquidate assets, and suffered financial harm in the amount of $5,000,000.00. WHEREFORE, Plaintiff Calabrese and Sons, Inc., requests judgment against Commerce Bank/Harrisburg, N.A., in the amount of $5,000,000.00, which exceeds the compulsory arbitration limitations, plus costs and such other relief as the Court deems just and proper. 8 V Respectfully submitted, FENSTERMACHER AND ASSOCIATES, P.C. By: ohn R. enstermacher Supreme Court I.D. #29940 Matthew Aaron Smith Supreme Court I.D. #94603 5115 East Trindle Road Mechanicsburg, PA 17055 (717) 691-5400 Attorneys for Plaintiff Dated: ??- ?,?,?r?r,??.r, - 10V7 9 EXHIBIT "A" 10 October 26, 2001 Calabrese & Sons, Inc. Joseph A. Calabrese, President 406 Brandy Lane Mechanicsburg, PA. 17055 Dear Mr. Calabrese, Commerce @!Bank. We are pleased to advise you that Commerce Bank/Harrisburg, N.A. ("Bank") has approved your request for a commercial loan ("Loan"). This commitment is subject to the following terms and conditions: BORROWER: Calabrese & Sons, Inc. LOAN AMOUNT: $700,000.00 PURPOSE: The provision of funds to pay-off existing accounts payable obligations. INTEREST RATE: The rate of interest shall be fixed at 9.25% per annum. Interest will be calculated on the outstanding principal balance for the actual number of days elapsed at a daily rate based upon a year of 360 days. TERM: Seven (7) years. AMORTIZATION: Principal and interest shall be due in level monthly payments over the term COMMITMENT FEE: The Borrower shall pay a one percent (1.0%) commitment fee in the amount of $7,000.00 at the time of settlement. CLOSING COST: The Borrower shall agree to pay all closing costs and fees including charges for documentation preparation, Good Standing Certification, recording fees, counsel fees of the Bank, and any other fees, which may be required to complete this transaction. COLLATERAL Commerce Bank. N.A. P.O. Box 8599 100 Senate Avenue Camp Hill, Pennsylvania 17001-8599 FOR THE LOAN: The Bank shall have the following collateral: A valid, perfected first lien security interest in all of Borrower's now existing and hereafter acquired tangible and intangible personal property and assets, including, but not limited to, the following: (i) Accounts, Chattel Paper (including Tangible Chattel Paper and Electronic Chattel Paper), Deposit Accounts, Documents, Equipment, Furniture, Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter of Credit Rights, Payment Intangibles, Supporting Obligations, books and records (including, but not limited to, manual records, computer runs, print outs, tapes, disks, software, programs, source codes and other computer prepared information and equipment of any kind), policies of insurance and insurance proceeds and unearned premiums in connection therewith, and all accessions, additions to, replacements for and substitutions of the foregoing personal property, and all cash and non-cash Proceeds and products of any of the foregoing personal property, all as provided in either (i) Article 9 of the Uniform Commercial Code as in force in the Commonwealth of Pennsylvania, or (ii) Article 9 of the Uniform Commercial Code as in force at any relevant time in the jurisdiction in which this financing statement is filed, except as hereinafter expressly provided (collectively, the "Collateral"). "General Intangibles" shall include, without being limited to, all designs, patents, patent rights and applications therefore, trademarks and registrations and applications therefore, trade names, inventions, copyrights and all registrations and applications therefore, license rights, trade secrets, methods, know how, specifications, customer lists, franchises, tax refunds and unearned insurance premiums, regardless of any contrary interpretation of such term as now or hereafter used in the Uniform Commercial Code (the "Collateral"). A title-insured second mortgage lien on the real estate and improvements located at 404 Brandy Lane, Mechanicsburg Borough, Cumberland County, Pennsylvania, (the "Mortgaged Premises"). The Loan, its payment and performance shall be unconditionally guaranteed by Joseph A. Calabrese (the "Guarantor"). DEPOSIT REQUIREMENTS: The Borrower shall maintain at the Bank it's primary deposit relationships. GENERAL REQUIREMENTS: Borrower shall submit at or prior to closing of the loan the following documentation: The following corporate documents: (a) A certified copy of the Borrower's Articles of Incorporation: 2 (b) A certified copy of the minutes of the Board of Directors of ` Borrower authorizing the creation of the loan(s) and - * execution of and delivery of all required documents and naming the officer or officers of Borrower authorized to negotiate the loan(s) and execute and deliver the required documents on behalf of the Borrower; (c) A current incumbency certificate setting forth the names and titles of incumbent corporate officers; (d) A certification by the Borrower that the Borrower is current with respect to federal, state and local tax payments and that there are no federal, state and local tax liens; (e) A lien certificate form the Bureau of Corporation Taxes, Department of Revenue, certifying that there are no Pennsylvania taxes owed or due; (f) A certification by the Borrower that there is no pending or threatened litigation against the Borrower or against or affecting the Collateral or the Mortgaged Premises; (g) Certificates of Good Standing with respect to the Borrower. A commitment to issue on the closing date an ALTA Mortgage Policy of title insurance issued by a company satisfactory to the Bank, in an amount equal to the amount of the Loan, insuring the mortgage. The policy shall contain endorsements required by the Bank, and only those exceptions satisfactory to the Bank. Insurance as may be reasonably required by Bank, including adequate fire, hazard, casualty, liability, and flood, if applicable. The insurance coverage shall be in an amount and with a company satisfactory to the Bank The full amount of casualty and/or flood insurance, as applicable, carried on the Mortgaged Premises and Collateral shall be made payable to Bank under the standard mortgagee clause, loss payee clause or additional insured clause, as applicable. Borrower may be required to complete Bank's Environmental Risk Assessment Questionnaire. Answers to said questionnaire must be acceptable to Bank. Bank reserves the right, in the event the Bank has an environmental concern with the subject property, as a result of the Environmental Risk Assessment Questionnaire or otherwise, to require an environmental inspection of the Mortgaged Premises (including a Phase I or H environmental assessment) by an environmental consultant approved by the Bank. Any such environmental assessment shall be at the expense of the Borrower. Bank shall have the right to require such other security, representations, terms or conditions as the Bank in its sole discretion deems appropriate to protect its collateral as the result of any disclosure contained in an environmental inspection report. Yf • OPINION OF COUNSEL: The Borrower shall provide an Opinion of Counsel, satisfactory to Bank, to the effect that the transaction is properly authorized, that the loan documents do not violate the Borrower's articles of incorporation or any other document applicable to Borrower, its officers or any Guarantor, that the loan documents when executed shall be binding upon all parties thereto in accordance with their terms, and with respect to such other matters as required by Bank and its counsel. Such Opinion shall contain only those exceptions, qualifications and restrictions as are acceptable to Bank and its counsel. LOAN DOCUMENTS: The loan documents shall contain: A fifteen (15) day default clause and a due on transfer clause. Prepayment of any amount of the principal sum shall be subject to a penalty charge of 5.00% during the first year of amortization and declining 1.00% per year thereafter to par. Bank shall have the right to collect a late charge of five percent (5.0%) of the unpaid debt service after any grace period provided in the Loan Documents. Any and all obligations of the Borrower owing to Michael Calabrese and Virginia L. Calabrese shall be subordinate to any and all obligations of the Borrower to Bank. Such other provisions and requirements as the Bank or its counsel may deem appropriate in order to maintain the adequacy of repayment of the Loan. CROSS COLLATERAL CROSS DEFAULT: Borrower acknowledges and agrees that an event of default under any loans or loan documents between Bank and Borrower or a default under the Loan shall constitute a default under all of them, and further, the Collateral for the Loan and for all other loans from the Bank to the Borrower shall server as collateral for all of them as long as Borrower is obligated on the Loan or any other loans to the Bank FINANCIAL STATEMENTS: The Borrower shall provide to Bank, within thirty (30) days of the end of each fiscal quarter, a balance sheet and income statement indicating the operating results of the company for the fiscal year up to the date of the quarter then ended. Said statements shall be in form and content as indicated by Generally Accepted Accounting Principles (GAAP). 4 The Borrower shall provide the Bank for each fiscal year during the Loan term a copy of its federal income tax return and financial statements reviewed by an independent certified public accountant, in a form acceptable to the Bank. The Bank reserves the right to request this financial information at more frequent intervals. The statements shall be submitted within 90 days of the fiscal year end. TRANSFER OF ASSETS OR INTERESTS: NO ADVERSE CHANGE: The Borrower shall also cause to be provided annually, during the Loan term, a current personal financial statement, in form acceptable to the Bank, and a copy of the current federal income tax return for the Guarantor. The Bank reserves the right to request a financial statement at more frequent intervals. The financial information shall be provided to the Bank no later than April 30'' of each calendar year during the Loan term. The Borrower shall not sell or dispose of any significant portion of assets, merge or consolidate with any other entity, or sell, assign, redeem, or dispose of a significant number of shares of Borrower's stock or Borrower's ownership interest in any entity, without the Bank's prior written consent. The Borrower shall not permit any additional liens to encumber the Bank's collateral without the prior written consent of the Bank. Prior to loan closing, there shall be no adverse change in the financial condition of the Borrower or any Guarantor of the Loan, or in the set of facts or other data submitted in connection with the Borrower's application. Any such change shall render this commitment null and void, at the sole discretion of the Bank. BANK COUNSEL: The Bank's counsel shall be Geoffrey A. Shuff, Saidis Flower Shuff & Lindsay, 2109 Market Street, Camp Hill, PA. 17011, who shall be responsible for the preparation, examination, review and receipt of all documentation necessary to the closing of the loan. All fees charged by the Bank's Counsel in connection with this transaction shall be borne by the Borrower. All Loan Documents must be in form and substance acceptable to the Bank. MERGER AND The Borrower shall have the right to be represented in this transaction by an attorney of the Borrower's selection, whose fee shall be borne by the Borrower. SURVIVAL: The terms and conditions hereof shall survive the execution and delivery of the Loan Documents and shall continue to remain in effect until the Loan has been paid in full. This commitment contains the entire understanding relative to this transaction, all prior understandings are merged herein, and any modifications of this commitment shall be in writing and agreed to be all parties hereto. If you understand and agree to the terms and conditions of this commitment, please sign where indicated below and return one copy to my attention. If not signed and returned within fifteen (15) days from the date of this correspondence, the commitment will expire. c- c ' Witness Borrower: Calabrese & Sons, Inc. (J`gseph A. Calabrese - President Guarantor: 3.5seph A. Calabrese 6 '--A- .I I.4l-+1 Accepted this day of ©ataber2001. EXHIBIT "B" 11 TERM LOAN AGREEMENT ($700,000.00) THIS AGREEMENT is made as of this 6th day of December, 2001, between COMMERCE BANK/HARRISBURG, N.A. (the "Lender"), a national banking association organized and existing under the laws of the United States of America, with offices at 100 Senate Avenue, Camp Hill, Pennsylvania 17001-8599 and CALABRESE & SONS, INC., a business corporation organized under the laws of the Commonwealth of Pennsylvania, whose chief executive office is located at 406 Brandy Lane, Mechanicsburg, Pennsylvania 17055 (the "Borrower"). FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower, with intent to be legally bound hereby, covenant and agree as follows: Section 1. Construction of Agreement and Definitions. All of the capitalized terms used herein (or in any Schedules hereto) which are defined by the Uniform Commercial Code as presently enacted in the Commonwealth of Pennsylvania (the "Commonwealth") (the "Uniform Commercial Code" or the "UCC"), shall have the meanings ascribed to them by the UCC unless and to the extent varied by this Agreement or the Schedules hereto. All accounting terms used herein (or in any Schedules. hereto) shall have the meanings assigned to them as determined by generally accepted accounting principles ("GAAP"). The use of the singular herein may also refer to the plural and vice versa, and use of the neuter or any gender shall be applicable to any other gender or to the neuter. As used herein, the following terms shall have the following meanings: 1.01 "Business Day" shall mean any day that is not a Saturday, Sunday or other day on which Lender is authorized or obligated to remain closed. 1.02 "Collateral" shall mean the first lien security interest in all of Borrower's business assets granted to Lender pursuant to a Security Agreement of even date herewith, and the third lien Open-End Mortgage and Security Agreement of even date herewith given by Borrower to Lender on the premises known as 406 Brandy Lane, Mechanicsburg, Cumberland County, Pennsylvania, and the guarantee of Joseph A. Calabrese. 1.03 "Event of Default" shall mean any of the events described in Section 8 hereof. 1.04 "Default Interest Rate" shall mean the rate of interest payable with respect to any amount that has not been paid when due or upon the occurrence of an Event of Default as provided in the Note. 1 J, 1.05 "Loan" shall refer to all advances made by Lender to Borrower ' pursuant to Section 2 hereof. 1.06 "Maximum Loan Amount" shall mean Seven Hundred Thousand Dollars ($700,000.00). 1.07 "Obligations" shall mean and include the Loan and all other present and future debts, liabilities and obligations of Borrower to Lender hereunder and all other present and future debts, liabilities and obligations of Borrower to Lender of every kind and description, matured or unmatured, direct or indirect, absolute or contingent, joint or several and whether or not now contemplated, including all extensions and renewals thereof and substitutions therefor. 1.08 "Other Agreements" shall mean and include all Schedules hereto and all commitment letters, mortgages, security agreements, financing statements, promissory notes, subordination agreements, leases, contracts, guaranties, instruments, documents and any other agreement, now or hereafter existing between Lender and Borrower and evidencing, guaranteeing, securing or in any other manner relating to any of the Obligations. 1.09 "Permitted Proceeds Use(s)" shall mean payoff of existing accounts payable obligations approved by Lender. 1.10 "Permitted Encumbrances" shall mean the encumbrances listed on Schedule 1.10 and Schedule 4.06 attached hereto. 1.11 "Premises" shall mean the real property and all improvements thereon constituting Borrower's business facilities located at 406 Brandy Lane, Mechanicsburg Borough, Cumberland County, Pennsylvania. 1.12 "Schedule" shall mean and include any Cash Management Schedule, Investment Schedule, Additional Terms Schedule and any other Schedule now or hereafter executed by Borrower and accepted by Lender in connection with this Agreement. Section 2. The Loan. Subject to all terms and conditions of this Agreement and any Schedules, Lender hereby agrees to advance to Borrower an amount up to, but not exceeding, the Maximum Loan Amount to be applied to Borrower for Permitted Proceeds Uses. Even if the total principal amount of advances outstanding hereunder shall at any time and for any reason exceed the Maximum Loan Amount, Borrower and any guarantors shall nonetheless be liable for the entire principal amount outstanding with interest thereon in accordance with this Agreement, and shall nonetheless be liable and responsible for observance and performance of all covenants, warranties and duties on their parts to be observed or performed under this Agreement, and all of the Other 2 i Agreements. If the total principal amount of advances outstanding hereunder shall at any time and for any reason exceed the Maximum Loan Amount, Borrower shall immediatelypay to Lender upon demand the amount of such excess, with interest thereon at the rate and determined in the manner hereinafter provided. The Loan shall be repaid in accordance with the Note (hereinafter defined). Section 3. Conditions Precedent tc Loan Advance. The obligation of the Lender to make the Loan is and shall be subject to satisfaction of the following conditions precedent: Borrower shall have delivered or caused to be delivered to the Lender the following: 3.01 A Promissory Note in the face amount of Seven Hundred Thousand Dollars ($700,000.00), duly executed by Borrower and dated the date of this Agreement (the "Note"); 3.02 All of the Other Agreements necessary to create and perfect a lien with the priority required by Lender against all of the Collateral or otherwise to evidence and/or secure the Loan, including, without limitation, the Security Agreement and the Mortgage described in Section 1.02, and any further documents that may be reasonably required by the Lender; 3.03 Certified copies of resolutions of Borrower's Board of Directors authorizing the borrowing hereunder, the execution and delivery of this Agreement, the Note, the Other Agreements and all other documents and instruments to be executed hereunder, and such other papers as Lender shall reasonably request, and the performance of all terms and conditions hereof or thereof; 3.04 All documents evidencing other necessary corporate action, consents and governmental approvals, if any, with respect to this Agreement, the Note, the Other Agreements and all other documents and instruments to be issued hereunder and as Lender shall reasonably request, including, specifically, any and all consents and approvals necessary or desirable to provide and confirm Lender's required lien against and security interest in and to the Collateral; 3.05 A certificate of the Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement, the Note, the Other Agreements and all other documents and instruments to be delivered hereunder and as Lender shall reasonably request to effect the borrowings hereunder; 3.06 A favorable opinion of Borrower's counsel satisfactory to the Lender as to the matters referred to in Sections 4.01- 4.03 and 4.05 - 4.06 hereof and such other matters as the Lender may reasonably require; 3 t 3.07 Payment of the $7,000.00 nonrefundable loan fee, and any and all ' other fees, costs and expenses required to be paid pursuant to this Agreement or any of the Other Agreements as a condition to closing; 3.08 Waivers of all liens that could be asserted by any landlords of all premises occupied by Borrower; 3.09 Unconditional continuing guaranty and suretyship agreement of Joseph A. Calabrese; 3.10 Copies of insurance policies or insurance certificates providing liability insurance and insuring the properties and assets pledged to Lender (with proper mortgagee and loss payee clauses attached in favor of Lender) sufficient to afford full replacement of any or all property damaged or destroyed without reduction or diminution by virtue of co-insurance; 3.11 Policy of title insurance upon the Premises, in an amount not less than Seven Hundred Thousand Dollars ($700,000.00), or the amount of available equity in the Premises, as determined by the Lender in its discretion, whichever is less, insuring Lender's mortgage third lien, free and clear of liens, charges and encumbrances, except Permitted Encumbrances, including mechanic's liens. issued by a title insurance company licensed to do business in the Commonwealth of Pennsylvania, containing endorsements 100 and 300 and any other endorsements required by Lender; 3.12 If required by Lender or the title insurance company, a current survey of the Premises certified to Lender and the title insurance company showing the location of all buildings, improvements, utility lines, easements and means of access to and from the Premises; 3.13 Copies of all written leases of any part of the Premises -and a certification by Borrower, in writing, of the terms of any oral leases or agreements to which Borrower is a party affecting the Premises. Borrower shall certify to Lender any written or oral modifications, extensions, or amendments thereto at such time or times as such are made; 3.14 Written subordinations of any and all leases of all or any part of the Premises to the lien of the Mortgage; and 3.15 An appraisal of the Premises certified by an MAI appraiser approved by Lender, in form satisfactory to Lender. 4 Section 4. Representations and Warranties. To induce Lender to enter into this Agreement and to make the Loan, Borrower covenants, represents and warrants to Lender that: 4.01 Borrower is duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, has the power to own its property and to engage in the business it conducts; 4.02 Borrower has full power and authority to enter into this Agreement and the Other Agreements and to incur and perform its obligations hereunder and thereunder, all of which have been duly authorized by all necessary and proper action and no consent of any person which has not been obtained is required as a condition to the validity or enforceability hereof or thereof; 4.03 The execution, delivery and performance by Borrower of this Agreement and the Other Agreements does not and will not (a) violate any provision of law, any order, rule or regulation of any court or agency of government, any contract, agreement or other instrument to which Borrower is a party or by which Borrower or its property is bound, or the Charter or By-Laws of Borrower, or (b) result in a breach of or constitute (with due notice and/or lapse of time) a default under any such contract, agreement or other instrument or result in the creation or imposition of any security interest in, or lien or encumbrance upon, any assets of Borrower, except in favor of Lender; 4.04 The conduct by Borrower of its business, and the ownership and use by Borrower of its properties, complies, in all respects, with all federal, state and local laws, rules, regulations, judicial decisions and decrees pertaining to the use, storage or disposal of hazardous waste or toxic materials. To Borrower's knowledge: (a) no hazardous substance, pollutant or contaminant (as defined in Section 101 of th° Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. §9601, as amended by the Superfund Amendments and Reauthorization Act of 1986 (Pub. L. No. 99.499, 100 Stat. 1613 (1986) (SARA) or 40 C.F.R. Part 261, whichever is applicable) is present on any of Borrower's property in any quantity in excess of those allowed by applicable law; 5 a (b) no hazardous wane, residual waste or solid waste, as f those terms are defined in Section 103 of the Pennsylvania Solid Waste Management Act, 35 P.S. §6018.103 and/or 25 Pa. Code § § 75.260 and 75.261 and no hazardous waste or substance within the meaning of the Hazardous Sites Cleanup Act, Act of October 18, 1988, 35 P.S. §6020.101 et seg. (commonly known as the Pennsylvania Superfund Act) is present on any of Borrower's property in any quantity in excess of that allowed by applicable law; (c) the primary operations of any business being conducted by Borrower do not involve the use, discharge, storage or release of any hazardous substance or waste within the meaning of any other applicable state or local environmental laws, rules, regulations or ordinances; (d) Borrower has not been identified in any litigation, administrative proceedings or investigation as a responsible party for any liability under the above referenced laws or otherwise; and (e) all materials that are located at any of Borrower's property in lawful amounts are properly stored and maintained in containers appropriate for such purposes. 4.05 This Agreement and the Other Agreements constitute the valid and legally binding obligations of Borrower and are fully enforceable against Borrower in accordance with their respective terms; 4.06 Except as disclosed to Lender in Schedule 4.06 attached hereto, there are no judgments, injunctions or similar orders or decrees outstanding against Borrower and there are no claims, actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower or its properties which, if determined adversary to Borrower, could result in any material adverse change in Borrower's financial condition, property, operations, prospects or ability to perform its obligations under this Agreement and the Other Agreements, and Borrower is not, to its knowledge, in violation of or default under any judgment, order, writ, injunction, decree, rule or regulation of any court or governmental agency; 4.07 Borrower has paid and will pay all federal, state and local taxes to the extent that such taxes are due and has filed and will file all federal, state and local tax returns required to be filed by Borrower; 6 4.08 Each financial statement of Borrower heretofore delivered to Lender is true and complete in all material respects, presents fairly the financial position of Borrower as at the date indicated and was prepared in accordance with GAAP applied on a consistent basis for prior periods; 4.09 After giving effect to the Loan, the Note, and the Other Agreements: (i) the value of the assets and properties of Borrower, at a fair valuation, is greater than the total amount of all Borrower's liabilities and claims, including contingent claims; (ii) the aggregate present fair saleable value of Borrower's assets is greater than the amount that will be required to pay Borrower's probable liability on Borrower's debts, including contingent liabilities, as they become absolute and matured; (iii) Borrower has sufficient capital for the conduct of its business and has no reason to believe that in the foreseeable future that it will not have sufficient capital for the conduct of its business; and (iv) Borrower intends not to incur, and does not believe that it is incurring, obligations beyond its ability to pay such obligations as they mature. The Loan constitutes fair and reasonable consideration for the incurrence by Borrower of the obligations with respect thereto and the granting by Borrower to Lender of the security interests in respect to the Collateral. 4.10 No representation or warranty by Borrower contained herein, in any of the Other Agreements or in any statement, certificate or other document furnished to Lender contains any untrue statement of material fact or omits to state a material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made; and 4.11 No broker's or finder's fee or commission is. or will be paid in connection with this Agreement or the transactions contemplated hereby and Borrower agrees to save harmless and indemnify Lender from and against any claim, demand, action, suit, proceeding or liability for any such fee or commission. Section 5. General Affirmative Covenants. Borrower covenants and agrees that so long as the Obligations have not been repaid in full, Borrower shall: 5.01 Deliver to Lender CPA-reviewed financial statements, including a balance sheet and income statement and such other financial statements and reports as reasonably requested by Lender, and a copy of Borrower's federal income tax return for the previous year, as filed, including all schedules, statements and forms, within ninety (90) days after the end of each fiscal year; 5.02 Deliver to Lender, within thirty (30) business days after the end of each fiscal quarter, financial statements, including a balance sheet and income statement certified to be true and correct by Borrower's chief financial officer; 5.03 Deliver or cause to be delivered to Lender no later than April 30"' of each calendar year a current personal financial statement, in form acceptable to Lender, and a copy of the federal income tax return for the previous year, as filed, including all schedules, statements and forms, for the Guarantor; 5.04 Deliver or cause to be delivered to Lender from time to time such additional financial statements and information for Borrower and the Guarantor as the Bank may request; 5.05 Notify Lender of any litigation, proceedings or events involving Borrower which might have a material adverse affect on Borrower's financial condition or business or the payment in full of the Obligations; 5.06 Keep and maintain all of Borrower's property and assets in good condition and repair, and maintain fire, public liability and other insurance in coverages and amounts as Lender from time to time may require and deliver to Lender certificates of all such insurance in effect; 5.07 Comply in the conduct of its business and in the ownership and use of its properties, in all respects, with all federal, state and local laws, rules, regulations, judicial decisions and decrees pertaining to the use, storage or disposal of hazardous waste or toxic materials; 5.08 Cause all policies of insurance covering any of the Collateral to have loss payee endorsements in favor of Lender, naming Lender as loss payee and to provide that they shall not be subject to cancellation or material change unless thirty (30) days prior notice thereof shall have been received by Lender; 5.09 Make all books and reccrds available for inspection and audit by Lender at all reasonable times upon twenty-four (24) hours prior oral notice; 5.10 Pay all reasonable costs and expenses, including, without limitation, attorneys' fees incurred by Lender in negotiating, documenting and enforcing the Obligations and any subsequent accommodations or modifications thereof; 5.11 Maintain proper books of account in accordance with GAAP, consistently applied, and maintain all books and records at Borrower's principal corporate offices at 406 Brandy Lane, Mechanicsburg, Pennsylvania 17055; 5.12 Duly pay and discharge all taxes, assessments and governmental charges upon Borrower or any of its property, whether real or personal, tangible or intangible, prior to the date upon which penalties are attached thereto; 8 5.13 Pay when due and furnish, within five (5) days after Lender's request therefor, proof satisfactory to Lender of the making of payment or deposit of, all federal, state and/or local withholding, sales or other trust taxes; 5.14 Promptly give notice to Lender of the occurrence of any event that (i) could cause any representation or warranty made or given herein to be untrue at any time or (ii) is, or with the giving of notice or the passage of time may become an Event of Default under this Agreement or any Other Agreements; 5.15 Furnish to Lender such additional information and data concerning the Collateral and the business and financial condition of the Borrower as Lender may reasonably request; 5.16 Maintain Borrower's principal depository accounts at Lender and transfer all available funds deposited in accounts not maintained at Lender to Borrower's accounts at Lender before the end of each Business Day; and . Section 6. Financial Maintenance Covenants. None applicable. Section 7. Negative Covenants. Borrower covenants and agrees that, as long as any Obligations have not been repaid in full, Borrower shall not: 7.01 Create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, security interest or other encumbrance upon the Collateral except such as (i) are maintained in favor of the Lender or (ii) are Permitted Encumbrances; . 7.02 Sell, lease or otherwise dispose of the Borrower's assets other than in the ordinary course of business; 7.03 Make one or more loans to, guarantee or otherwise become surety for the payment or performance of any liability or obligation of, any individual; firm, corporation or other entity; or 7.04 Change the general character of the business of Borrower from that in which it is currently engaged; enter into proceedings in total or partial dissolution; or merge or consolidate with any other corporation or permit any other corporation to merge with Borrower. Section 8. Events of Default. The occurrence of any one or more of the following events shall constitute an Event of Default hereunder: 9 a 8.01 Failure of Borrower to pay any of the Obligations as and when the same shall become due, whether by demand, stated maturity, acceleration or otherwise; 8.02 Failure of Borrower to observe or perform any warranty, covenant, condition or agreement to be observed or performed by Borrower under this Agreement or any of the Other Agreements; 8.03 The occurrence of any event that with the giving of notice or the passage of time would constitute a default by Borrower with respect to any indebtedness or liability of Borrower to any person or with respect to any security interest, lien or document securing any indebtedness or liability of Borrower to any person; 8.04 Any representation, covenant or warranty made herein, in. any of the Other Agreements or in any statement, certificate or other document furnished by Borrower to Lender shall be false or misleading in any material respect; 8.05 Borrower shall (i) admit in writing its insolvency or its inability to pay its debts as they mature; (ii) make a general assignment for the benefit of creditors; and (iii) commence a case under or otherwise seek to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law, statute or proceeding or by any act indicate its consent to, approval of or acquiescence in any such proceeding or the appointment of any receiver of or trustee for Borrower or a substantial part of its property or suffer any such receivership, trusteeship or proceeding to continue undismissed for a period of sixty (60) days; 8.06 Borrower shall become a debtor in any case under any chapter of the United States Bankruptcy Code; 8.07 Entry of any order, judgment or decree for the dissolution of Borrower; 8.08 Except as set forth on Schedule 4.06, entry of any judgment against Borrower, unless such judgment shall have been discharged or execution thereof stayed within 30 days after entry thereof or discharged within 30 days after the expiration of any such stay; 8.09 Lender shall determine in good faith, but in its sole discretion, that any material adverse change has occurred in the prospects or financial condition of Borrower, in the value of any collateral or in the ability of Borrower to pay and perform its Obligations to Lender; 10 8.10 Injunction or restraint of Borrower from conducting its business in whole or in material part and a determination by Lender that the same could result in any material adverse change in Borrower's prospects, financial condition. property or ability to pay and perform its Obligations to Lender; 8.11 Any assets of Borrower shall be attached, levied upon, seized or repossessed or come into the possession of a trustee, receiver or other custodian; 8.12 Borrower shall be or become insolvent or unable to pay its debts as they mature; 8.13 Uninsured loss, theft, substantial damage, destruction or transfer or encumbrance of any assets of Borrower; 8.14 Without Lender's prior written consent, Borrower shall enter into or be a party to any merger, voluntary dissolution, consolidation or share exchange; . 8.15 Without Lender's prior written consent, Borrower shall sell, assign, transfer, convey or lease any interest in its assets except in the ordinary course of Borrower's business as now being conducted; or 8.16 Without prior written notice to Lender, Borrower shall change Borrower's name or reorganize in a different jurisdiction. Section 9. Rights and Remedies. Upon the occurrence of an Event of Default, Lender may, without notice or demand, exercise in any jurisdiction in which enforcement hereof is sought the following rights and remedies: 9.01 Declare all of the Obligations to be immediately due and payable and the same shall thereupon become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; 9.02 Institute any proceeding or proceedings to enforce the Obligations and Lender's rights with respect to any Collateral, including entry of judgment by confession. In addition to any rights and remedies of Lender under the UCC, all such rights and remedies of Lender hereunder and under the Other Agreements and all other rights and remedies of Lender under applicable law are cumulative and enforceable alternatively, successively or concurrently. ' 11 Section 10. Notices. 10.01 All notices required or permitted to be given hereunder by Lender or Borrower to the other shall be in writing and shall be personally delivered or sent by United States certified or registered mail, return receipt requested, to be effective on personal delivery or mailing, in the following manner: Borrower: Calabrese & Sons, Inc. 406 Brandy Lane Mechanicsburg, PA 17055 Attn: President Lender: Commerce Bank/Harrisburg, N.A. 100 Senate Avenue P.O. Box 8599 Camp Hill, PA 17001-8599 Attn: Commercial Loan Department 10.02 Either Borrower or Lender may change the address to which any such notice, report, demand or other instrument is to be delivered or mailed, by furnishing written notice of such change to the other, but no such notice of change of mailing address shall be deemed effective until received by the other. Section 11. General Provisions. Borrower and Lender further agree as follows: 11.01 Lender shall have the right to collect a late charge of five percent (5%) of any delinquent installment after expiration of any grace period provided in the Note or Other Agreements. 11.02 Borrower agrees and hereby authorizes that Lender may, in Lender's sole discretion (but Lender shall not be obligated to) and without notice to or request from Borrower and regardless of the then-owing Obligations, make advances to or for the benefit of Borrower hereunder which Lender deems necessary or appropriate to ensure compliance with any of the terms of this Agreement or of any of the Other Agreements, to protect Lender's interests hereunder or under any of the Other Agreements (including, without limitation, payment of premiums for required insurance.or satisfaction of tax obligations of Borrower), to fund overdrafts in any deposit account of Borrower at Lender or to pay interest charges, service charges or any other sums due Lender under this Agreement or any of the Other Agreements. 12 - 11.03 All payments received by Lender from or on behalf of Borrower may be applied by Lender to any of the Obligations as Lender may determine in its sole discretion without notice to or consent of Borrower, Borrower hereby expressly waiving, to the extent permitted by law, all rights to make or manifest any binding instruction upon Lender as to application of such payments except as otherwise specifically provided herein. 11.04 Neither any failure nor any delay on the part of Lender in exercising any right, power or remedy hereunder or under any of the Other Agreements shall operate as a waiver thereof, nor shall single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Borrower hereby waives, to the extent the same may be waived under applicable law: (i) all claims, causes of action and rights of Borrower against Lender on account of actions taken or not taken by Lender in' he exercise of Lender's rights or remedies hereunder or under the Other. Agreements (except willful, malicious or grossly negligent acts or omissions); (ii) presentment, demand for payment, protest and notice of non-payment and all exemptions; (iii) all other notices or demands which by applicable law must be given to or made upon Borrower by Lender; (iv) all rights of setoff and rights to interpose counterclaims of any nature; and (v) substitution, impairment, exchange or release of any Collateral. Borrower agrees that Lender may exercise any or all of its rights and/or remedies hereunder, under the Other Agreements and under applicable law without resorting to and without regard to any collateral security or sources.of liability with respect to any of the Obligations. 11.05 If any provision, or any part of any provision, of this Agreement or any of the Other Agreements shall for any reason be held invalid or unenforceable by any court or governmental agency of competent jurisdiction, such invalidity or unenforceability shall not affect the remainder of such provision nor any other provision, and this Agreement and the Other Agreements shall survive and be construed as if such invalid provision had not been contained herein or therein. This Agreement contains the entire agreement of the parties hereto with respect-to the matters covered hereby and no other agreement, statement or promise made by any party hereto, or by any employee or agent of any party hereto, which is not contained herein, shall be valid or binding. No modification or waiver of any provision of this Agreement or any of the Other Agreements and no consent to any departure by Borrower therefrom, shall be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand upon Borrower in any case shall entitle Borrower to any other or further notice or demand in the same, similar or other circumstances. 11.06 All covenants, agreements, representations and warranties contained herein and in the Other Agreements shall survive the execution and delivery hereof 13 and shall continue in full force and effect until all of the Obligations have been paid in full and there exists no commitment on the part of Lender which could give rise to any Obligations. Each reference in this Agreement and the Other Agreements to a party hereto shall be deemed to include the successors and assigns of such party. Borrower may not assign any of it rights hereunder without the prior written consent of Lender. 11.07 This Agreement and all Other Agreements shall be interpreted according to and governed by the laws of the Commonwealth of Pennsylvania. 11.08 Borrower hereby consents to the exclusive jurisdiction of the Court of Common Pleas of Cumberland County, Pennsylvania, and/or the United States District Court for the Middle District of Pennsylvania in any and all actions or proceedings arising hereunder or pursuant hereto, and irrevocably agrees to service of process by personal service upon Borrower wherever Borrower may be then located, or by certified or registered mail, return receipt requested, directed-to Borrower at his last known address. 11.09 BORROWER HEREBY WAIVES THE RIGHT TO HAVE ANY MATTERS OR CONTROVERSIES ARISING HEREUNDER OR UNDER ANY OF THE OTHER AGREEMENTS TRIED BY A JURY. 11.10 The headings and sub-headings contained in the titling of this Agreement are intended to be used for convenience only and do not constitute part of this Agreement or a basis for the interpretation hereof. IN WITNESS WHEREOF, the parties hereto have duly executed or caused to be duly 14 executed this Agreement under seal as of the day and year first above written. ATTEST: (Assistant) Secretary CAL.ABRESE & SONS, INC. By l 9?eph A. Calabrese President (CORPORATE SEAL) 15 Title: V e Cam- f r6S 16I LLt L Schedule 1.10 Permitted Encumbrances First lien mortgage on the Premises in favor of Pennsylvania National Bank (now M & T Bank), dated March 31, 1998, and recorded April 3, 1998, in Mortgage Book 1443, page 726. Second lien mortgage on the Premises in favor of Lender in the original principal amount of $500,000, dated January 28, 1999, and recorded on March 8, 1999, in Mortgage Book 1524, page 540. Subordinate Judgment (subordinate to the Open-End Mortgage and Security Agreement from Borrower to Lender of even date herewith and intended to be recorded immediately following execution of this Agreement ("Mortgage")) for $61,000 in the case of Virginia L. Calabrese and Calabrese & Sons, Inc., at No. 2001-03296, dated May 30, 2001. Subordinate Judgment (subordinate to the Mortgage) in favor of Erie Forge and Steel, Inc., and against Calabrese & Sons, Inc., in the approximate amount of $330,000, plus interest and costs, to be entered against Calabrese & Sons, Inc., in the United States Bankruptcy Court for the Western District of Pennsylvania, in connection with unpaid invoices. 16 Schedule 4.06 Judgments and Pending or Threatened Claims 1. Judgment for $61;000 in the case of Virginia L. Calabrese v. Joseph A. Calabrese and Calabrese & Sons, Inc., at No. 2001-03296, dated May 30, 2001. 2. Judgment in favor of Erie Forge and Steel, Inc. and against Calabrese & Sons, Inc. in the approximate amount of $330,000, plus interest and costs, to be entered against Calabrese & Sons, Inc. in the United States Bankruptcy Court for the Western District of Pennsylvania, in connection with unpaid invoices. 17 EXHIBIT "C" 12 S700,000.00 TERM LOAN NOTE Camp Hill, Pennsylvania December 6, 2001 FOR VALUE RECEIVED, CAL ABRESE &,.SONS, INC., a Pennsylvania corporationwith offices at 406 Brandy Lane, Mechanicsburg, Pennsylvania 17055 (hereinafter the "Maker") hereby promises to pay to the order of COMMERCE BANK HkRRISBURG, N.T..A., with offices at 100 Senate Avenue, P.O. Box 8599, Camp Hill, Pennsylvania 17001-8599 ("Payee") the principal sum of 5700,000.00, as advanced to or for Maker by Payee pursuant to the terms of a Term Loan Agreement (hereinafter the "Loan Agreement") bearing even date herewith between Maker and Payee, together with interest from the date of disbursement on the outstanding balance thereof at the rate of 9.25% per annum (the "Interest Rate"). v The obligation evidenced hereby shall be fully amortized over a period of eighty-four (84) months from the date hereof. Interest shall be calculated based on the outstanding principal balance on the basis of a 360 day year, but shall be charged for the actual number of days elapsed. Principal and interest shall be payable, in lawful money of the United States, at the office of the Payee designated above or such other place as the holder of this Note may designate, in the following manner: (a) Commencing January 1, 2002, and on the first day of each month thereafter, the principal sum and accrued interest at the Interest Rate shall be due and payable in 83 installments of Eleven Thousand Three Hundred Eighty-Four and 18/100 Dollars ($11,3 84.18), with a final payment on the "Maturity Date" (as hereinafter defined), of the unpaid balance of the principal sum plus all accrued interest thereon and all other sums owed by Maker to Payee, each such installment to be applied first to the payment of accrued interest and then to the reduction of the principal sum. (b) A final payment in the full amount of the entire outstanding balance of principal plus all interest accrued thereon and all other sums owed by Maker to Payee shall be due and payable on December 1, 2008 (hereinafter the "Maturity Date"). In the event that after the date of this Note the implementation of or any change in any law or regulation, or any guideline or directive (whether or not having the force of law) or the interpretation or administration thereof by any central bank or other authority charged with the administration thereof, imposes, modifies or deems applicable any capital adequacy, reserve maintenance, risk based capital, capital ratio or similar requirement (including without limitation a request or requirement which affects the manner in which the Payee allocates capital resources to.its commitments, including the indebtedness evidenced hereby) and as a result thereof, in the sole opinion of the Payee, the rate of return on the Payee's capital as a consequence of the indebtedness evidenced hereby and of Payee's compliance with such requirement is reduced to a level below that which the Payee could have achieved but for such circumstances, then in each such case within ten (10) days after demand from time to time the Maker shall pay to the Payee such additional amount or amounts as shall compensate the Payee for such reduction in rate of return. A certificate of the Payee claiming compensation under this provision and setting forth the additional amount or amounts to be paid to Payee hereunder, as determined by Payee, in the absence of mathematical error, shall be final and conclusive. In determining such amount the Payee may use any reasonable averaging and attribution methods. Prepayment of any amount of the principal sum (whether the prepayment is voluntary or involuntary, including any prepayment by reason of Payee's acceleration of the indebtedness upon Maker's default) shall be accompanied by accrued interest and a prepayment privilege fee in the amount of five percent (5.0%) of the total amount prepaid during the first Loan Year (as defined below), declining one percent (1.0%) during each Loan Year thereafter. For purposes of the preceding two sentences, a "Loan Year" means a twelve (12) month period commencing on the date of this Note and any anniversary of the date of this Note. Any partial prepayment shall be applied to installments of principal last falling due. Maker agrees that in the event any installment of principal or interest is not paid when due, Maker shall pay to Payee a late charge of five percent (5%) of the amount past due to cover the additional expense incident to such delinquency. This late charge provision shall not be construed to obligate Payee to accept any overdue installment nor to limit Payee's rights and remedies for Maker's default, as hereinafter set forth. This Note is secured by certain security documents (hereinafter the "Security Documents"), including an Open-End Mortgage and Security Agreement and a Security Agreement, each of even date herewith, as well as personal guarantees, security interests and other collateral. Any failure by Maker to comply with the terms, covenants or conditions of the Security Documents or the Loan Agreement, or any of them, shall automatically constitute a default under this Note. At its option Payee may pay any tax, payment in lieu of taxes, assessment, water rent, insurance premium or other sums which under the terms of the Loan Agreement and the Security Documents may be paid out by Payee for the account of Maker, and the amount so paid shall be added to and become part of the principal sum hereunder and secured by the Security Documents, and shall be payable on demand. Maker agrees that if Maker shall, without in each instance obtaining the prior written consent of Payee, sell, transfer or convey (herein all called "transfer") any of Maker's assets- or any interest therein other than in the ordinary course of Maker's business, whether voluntarily or by operation of law, then, at the option of Payee, the maturity of this Note shall be advanced to the date of such transfer, whereupon the obligations of Maker evidenced by this Note shall immediately be due and payable. For purposes of this paragraph, Maker's merger or consolidation with any other entity, or -I)- the redemption, sale, transfer or encumbrance of any stock of Maker, or the issuance of additional stock of Maker which results in a transfer of control of Maker, shall constitute a transfer of Maker's assets. If Maker shall fail to pay any sum when due or if Maker shall in any other way be in default hereunder or under the Loan Agreement or any of the Security Documents, or if any certification, warranty or representation made or hereafter made by Maker to Payee should prove to be materially false, then the entire unpaid principal balance of this Note, together with interest accrued thereon and with all other sums due or owed by Maker hereunder or under the terms of the Security Documents and the Loan Agreement shall at the option of Payee and without notice to Maker become due and payable immediately with interest (after such default and acceleration and until Maker's indebtedness to Payee is paid in full, including the period following entry of anv judgment) at a rate which is 4.0% per annum in excess of the Interest Rate hereinabove specified (the "Default Interest Rate"), together with all attorney's fees for collection, but not less than 5500.00, and the cost of any search, appraisal, environmental assessment or other cost incurred by Payee in connection with such proceedings; and payment of the same may be enforced and recovered by the entry of judgment on this Note and the issuance of execution thereon. MAKER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OFAlvY COURT OF RECORD TO.APPEAR FOR AND CONFESS JUDGMENT THEREIN AGAINST MAKER FOR THE AMOUNT FOR WHICH MAKER MAY BE OR BECOME LIABLE TO PAYEE UNDER THIS NOTE, WITH OR WITHOUT DEFAULT, PLUS AN ATTORNEY'S COMMISSION OF FIVE PERCENT (5%) OF SUCH AMOUNT, BUT NOT LESS THAN FIVE HUNDRED ($500.00) DOLLARS, WITH COSTS OF SUIT, RELEASE OF ERRORS, AND WITHOUT RIGHT OF APPEAL. MAKER WAIVES THE RIGHT TO ANY STAY OF EXECUTION AND THE BENEFIT OF ALL EXEMPTION LAWS NOW OR HEREAFTER 1N EFFECT. EXECUTION MAY IMMEDIATELY BE ISSUED ON THE JUDGMENT, WITHOUT PRIOR NOTICE OR HEARING, TO GARNISH, LEVY OR ATTACH ANY PERSONAL PROPERTY OF MAKER. NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE VALID, VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE PAYEE SHALL ELECT, UNTIL ALL SUMS PAYABLE OR THAT MAY BECOME PAYABLE BY MAKER HAVE BEEN PAID IN FULL. The remedies of Payee provided herein and in the Security Documents and the Loan Agreement or otherwise available to Payee at law or in equity and the warrants of attorney herein or therein contained shall be cumulative and concurrent, and may be pursued singly, successively and together at the sole discretion of Payee, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such ri ght or remedy shall in no event be construed as a waiver or release of the same. Maker hereby releases Payee and said attorney or attorneys from all errors, defects and imperfections whatsoever in entering judgment by confession hereon as aforesaid or in issuing any process or instituting any proceedings relating thereto and hereby waives all benefit that might accrue to Maker by virtue of any present or future laws exempting Maker's property, real or personal, or any part of the proceeds arising from any sale of any such property, from attachment, levy or sale under execution, or providing for any stay of execution, exemption from civil process or extension of time, and agrees that such property may be sold to satisfy any judgment entered on this Note or the Security Documents, in whole or in part and in any order as may be desired by Payee. Maker (and all endorsers, sureties and guarantors) waive the right to presentment for payment, demand, notice of demand, notice of non-payment or dishonor, protest and notice of protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default, or enforcement of the payment of this Note; liability hereunder shall be unconditional and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification granted or consented to by Payee. Maker shall pay the cost of any revenue, tax or other stamps now or hereafter required bylaw at any time to be affixed to this Note or the Security Documents, and if any taxes shall be imposed with respect to debts secured by the Security Documents or with respect to notes evidencing debts so secured. Maker agrees to pay or to reimburse Payee upon demand the amount of such taxes, and if Maker fails or refuses or is not legally permitted to do so, Payee may at its option accelerate this Note to maturity as in the case of default by Maker. Maker hereby consents to the exclusive jurisdiction of the Court of Common Pleas of Cumberland County, Pennsylvania, and for the District Court for the Middle District of Pennsylvania, in any and all actions or proceedings arising hereunder or pursuant hereto, and irrevocably agrees to service of process by certified mail, return receipt requested, to the address for Maker set forth above or to such other address as Maker may direct-by notice to Payee This instrument shall be construed according to and governed by the laws of the Commonwealth of Pennsylvania. MAKER AND PAYEE EACH HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF AhIY MATTERS OR CONTROVERSIES ARISING HEREUNDER. The words "Payee" and "Maker" whenever occurring herein shall be deemed and construed to include the respective heirs, personal representatives, successors and assigns of Payee and Maker. The obligation of the persons named as Maker shall be joint and several. IN WITNESS WHEREOF, Maker has duly executed this Note under seal the day and year -4- first above mentioned. ATTEST: (Assistant) Secretary MAKER: CALABRESE & SONS, INC. By A. Calabrese ,-,President -5- EXHIBIT "D" 13 October 26, 2001 Calabrese & Sons, Inc. Joseph A. Calabrese, President 406 Brandy Lane Mechanicsburg, PA. 17055 Dear Mr. Calabrese, Commerce @!Bankw We are pleased to advise you that Commerce Bank/Harrisburg, N.A. ("Bank") has approved your request for a commercial loan ("Loan"). This commitment is subject to the following terms and conditions: BORROWER: Calabrese & Sons, Inc. LOAN AMOUNT: $500,000.00 PURPOSE: The provision of funds to pay-off an existing loan with M & T Bank. INTEREST RATE: The rate of interest shall be fixed at 8.75% per annum. Interest will be calculated on the outstanding principal balance for the actual number of days elapsed at a daily rate based upon a year of 360 days. TERM: Five (5) years. AMORTIZATION: Principal and interest shall be due in level monthly payments over the term COMMITMENT FEE: The Borrower shall pay a one percent (1.0%) commitment fee in the amount of $5,000.00 at the time of settlement. CLOSING COST: The Borrower shall agree to pay all closing costs and fees including charges for documentation preparation, Good Standing Certification, recording fees, counsel fees of the Bank, and any other fees, which may be required to complete this transaction. Commerce Bank, N.A. P.O. Box 8599 100 Senate Avenue Camp Hill, Pennsylvania 17001-8599 'z COLLATERAL FOR THE LOAN: The Bank shall have the following collateral: The Loan, its payment and performance shall be unconditionally guaranteed by Joseph A. Calabrese. Virginia L. Calabrese shall deliver to Bank a guaranty, which shall be limited to an amount not to exceed $500.000.00. Said guaranty shall be supported by the pledge, assignment and delivery of cash security in an amount of not less than $500,000.00, which shall be in the form of a Bank deposit account. DEPOSIT REQUIREMENTS: The Borrower shall maintain at the Bank it's primary deposit relationships. GENERAL REQUIREMENTS: Borrower shall submit at or prior to closing of the loan the following documentation:. The following corporate documents: (a) A certified copy of the Borrower's Articles of Incorporation: (b) A certified copy of the minutes of the Board of Directors of Borrower authorizing the creation of the loan(s) and execution of and delivery of all required documents and naming the officer or officers of Borrower authorized to negotiate the loan(s) and execute and deliver the required documents on behalf of the Borrower; (c) A current incumbency certificate setting forth the names and titles of incumbent corporate officers; (d) A certification by the Borrower that the Borrower is current with respect to federal, state and local tax payments and that there are no federal, state and local tax liens; (e) A lien certificate form the Bureau of Corporation Taxes, Department of Revenue, certifying that there are no Pennsylvania taxes owed or due; (f) A certification by the Borrower that there is no pending or threatened litigation against the Borrower or against or affecting the Mortgaged Premises; (g) Certificates of Good Standing with respect to the Borrower. Borrower may be required to complete Bank's Environmental Risk Assessment Questionnaire. Answers to said questionnaire must be acceptable to Bank. Bank reserves the right, in the event the Bank has an environmental concern with the subject property, as a result of the Environmental Risk Assessment Questionnaire or otherwise, to require an environmental inspection of the Mortgaged Premises (including a Phase I or H environmental assessment) by an environmental consultant approved 2 by the Bank. Any such environmental assessment shall be at the expense of the Borrower. Bank shall have the right to require such other security, representations, terms or conditions as the Bank in its sole discretion deems appropriate to protect its collateral as the result of any disclosure contained in an environmental inspection report. OPINION OF COUNSEL: The Borrower shall provide an Opinion of Counsel, satisfactory to Bank, to the effect that the transaction is properly authorized, that the loan documents do not violate the Borrower's articles of incorporation or any other document applicable to Borrower, its officers or any Guarantor, that the loan documents when executed shall be binding upon all parties thereto in accordance with their terms, and with respect to such other matters as required by Bank and its counsel. Such Opinion shall contain only those exceptions, qualifications and restrictions as are acceptable to Bank and its counsel. LOAN DOCUMENTS: The loan documents shall contain: A fifteen (15) day default clause and a due on transfer clause. Prepayment of any amount of the principal sum shall be subject to a penalty charge of 5.00% during the first year of amortization and declining 1.00% per year thereafter to par. Bank shall have the right to collect a late charge of five percent (5.0%) of the unpaid. debt service after any grace period provided in the Loan Documents. Any and all obligations of the Borrower owing to Michael Calabrese and Virginia L. Calabrese shall be subordinate to any and all obligations of the Borrower to Bank. Such other provisions and requirements as the Bank or its counsel may deem appropriate in order to maintain the adequacy of repayment. of the Loan. CROSS COLLATERAL CROSS DEFAULT: Borrower acknowledges and. agrees that an event of default under any loans or loan documents between Bank and Borrower or a default under the Loan shall constitute a default under all of them, and further, the Collateral for the Loan and for all other loans from the Bank to the Borrower shall server as collateral for all of them as long as.Borrower is obligated on the Loan or any other loans to the Bank. 3 -ti FINANCIAL STATEMENTS: The Borrower shall provide to Bank, within thirty (30) days of the end of each fiscal quarter, a balance sheet and income statement indicating the operating results of the company for the fiscal year up to the date of the quarter then ended. Said statements shall be in form and content as indicated by Generally Accepted Accounting Principles (GAAP). The Borrower shall provide the Bank for each fiscal year during the Loan term a copy of its federal income tax return and financial statements reviewed by an independent certified public accountant, in a form acceptable to the Bank. The Bank reserves the right to request this financial information at more frequent intervals. The statements shall be submitted within 90 days of the fiscal year end. The Borrower shall also cause to be provided annually, during the Loan term, a current personal financial statement, in form acceptable to the Bank, and a copy of the current federal income tax return for the Guarantors. The Bank reserves the right to request a financial statement at more frequent intervals. The financial information shall be provided to the Bank no later than April 30`'' of each calendar year during the Loan term. TRANSFER OF ASSETS OR INTERESTS: The Borrower shall not sell or dispose of any significant portion of assets, merge or consolidate with any other entity, or sell, assign, redeem, or dispose of a significant number of shares of Borrower's stock or Borrower's ownership interest in any entity, without the Bank's prior written consent. The Borrower shall not permit any additional liens to. encumber the Bank's collateral without the prior written consent of the Bank. NO ADVERSE CHANGE: Prior to loan closing, there shall be no adverse change in the financial condition of the Borrower or any Guarantor of the Loan, or in the set of facts or other data submitted in connection with the Borrower's application. Any such change shall render this commitment null and void, at the sole discretion of the Bank. BANK COUNSEL: The Bank's counsel shall be Geoffrey A. Shuff, Saidis Flower Shuff & Lindsay, 2109 Market Street, Camp Hill, PA. 17011, who shall be responsible for the preparation, examination, review and receipt of all documentation necessary to the closing of the loan. All fees charged by the Bank's Counsel in connection with this transaction shall be borne by the Borrower. All Loan Documents must be in form and substance acceptable to the Bank. The Borrower shall have the right to be represented in this transaction by an attorney of the Borrower's selection, whose fee shall be borne by the Borrower. 4 MERGER AND SURVIVAL: The terms and conditions hereof shall survive the execution and delivery of the Loan Documents and shall continue to remain in effect until the Loan has been paid in full. This commitment contains the entire understanding relative to this transaction, all prior understandings are merged herein, and any modifications of this commitment shall be in writing and agreed to be all parties hereto. If you understand and agree to the terms and conditions of this commitment, please sign where indicated below and return one copy to my attention. If not signed and returned within fifteen (15) days from the date of this correspondence, the commitment will expire. bl" ? Accepted this day of-Getelor-2001. Borrower: Calabrese & Sons, Inc. 11:i ??y7 4-v '/-7 J seph A. Calabrese - President Guarantors: Witness Witness A t, seph A. Calabrese Vir ' is L. Calabrese EXHIBIT "E" 14 TERM LOAN AGREEMENT ($500,000.00) THIS AGREEMENT is made as of this 6`h day of December, 2001, between CONIMERCE BANK/HARRISBURG, N.A. (the "Lender"), a national banking association organized and existing under the laws of the United States of America, with offices at 100 Senate Avenue, Camp Hill, Pennsylvania 17001-8599 and CALABRESE & SONS, INC., a business corporation organized under the laws of the Commonwealth of Pennsylvania, whose chief executive office is located at 406 Brandy Lane, Mechanicsburg, Pennsylvania 17055 (the "Borrower"). FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower, with intent to be legally bound hereby, covenant and agree as follows: Section 1. Construction of Agreement and Definitions. All of the capitalized terms used herein (or in any Schedules hereto) which are defined by the Uniform Commercial Code as presently enacted in the Commonwealth of Pennsylvania (the "Commonwealth") (the "Uniform Commercial Code" or the "UCC"), shall have the meanings ascribed to them by the UCC unless and to the extent varied by this Agreement or the Schedules hereto. All accounting terms used herein (or in any Schedules hereto) shall have the meanings assigned to them as determined by generally accepted accounting principles ("GAAP"). The use of the singular herein may also refer to the plural and vice versa, and use of the neuter or any gender shall be applicable to any other gender or to the neuter. As used herein, the following terms shall have the following meanings: 1.01 "Business Day" shall mean any day that is not a Saturday, Sunday or other day on which Lender is authorized or obligated to remain closed. 1.02 "Collateral" shall mean the deposit account maintained or to be maintained with the Lender by Virginia L. Calabrese and pledged to the Lender pursuant to a Bank Deposit Pledge Agreement of even date herewith, and the guarantees of Joseph A. Calabrese and Virginia L. Calabrese. 1.03 "Event of Default" shall mean any of the events described in Section 8 hereof. 1.04 "Default Interest Rate" shall mean the rate of interest payable with respect to any amount that has not been paid when due or upon the occurrence of an Event of Default as provided in the Note. 1.05 "Loan" shall refer to all advances made by Lender to Borrower pursuant to Section 2 hereof. 1 .1 1.06 "Maximum Loan Amount" shall mean Five Hundred Thousand Dollars ($500,000.00). 1.07 "Obligations" shall mean and include the Loan and all other present and future debts, liabilities and obligations of Borrower to Lender hereunder and all other present and future debts, liabilities and obligations of Borrower to Lender of every kind and description, matured or unmatured, direct or indirect, absolute or contingent, joint or several and whether or not now contemplated, including all extensions and renewals thereof and substitutions therefor. 1.08 "Other Agreements" shall mean and include all Schedules hereto and all commitment letters, mortgages, security agreements, financing statements, promissory notes, subordination agreements, leases, contracts, guaranties, instruments, documents and any other agreement, now or hereafter existing between Lender and Borrower and evidencing, guaranteeing, securing or in any other manner relating to any of the Obligations. 1.09 "Permitted Proceeds Use(s)" shall mean payment in full of an existing loan with M&T Bank. 1.10 "Permitted Encumbrances" shall mean the encumbrances listed on Schedule 1.10 and Schedule 4.06 attached hereto. 1.11 "Schedule" shall mean and include any Cash Management Schedule, Investment Schedule, Additional Terms Schedule and any other Schedule now or hereafter executed by Borrower and accepted by Lender in connection with this Agreement. Section 2. The Loan. Subject to all terms and conditions of this Agreement and any Schedules, Lender hereby agrees to advance to Borrower an amount up to, but not exceeding, the Maximum Loan Amount to be applied to Borrower for Permitted Proceeds Uses. Even if the total principal amount of advances outstanding hereunder shall at anytime and for any reason exceed the Maximum Loan Amount, Borrower and any guarantors (except Virginia L. Calabrese, whose guarantee shall be limited as provided in her guaranty and suretyship agreement executed and delivered to Lender of even date herewith) shall nonetheless be liable for the entire principal amount outstanding with interest thereon in accordance with this Agreement, and shall nonetheless be liable and responsible for observance and performance of all covenants, warranties and duties on their parts to be observed or performed under this Agreement, and all of the Other Agreements. If the total principal amount of advances outstanding hereunder shall at any time and for any reason exceed the Maximum Loan Amount, Borrower shall immediately pay to Lender upon demand the amount of such excess, with interest thereon at the rate and determined in the manner hereinafter provided. The Loan shall be repaid in accordance with the Note (hereinafter defined). 2 Section 3. Conditions Precedent to Loan Advance. The obligation of the Lender to make the Loan is and shall be subject to satisfaction of the following conditions precedent: Borrower shall have delivered or caused to be delivered to the Lender the following: 3.01 A Promissory Note in the face amount of Five Hundred Thousand Dollars ($500,000.00), duly executed by Borrower and dated the date of this Agreement (the "Note"); 3.02 All of the Other Agreements necessary to create and perfect a first priority lien against all of the Collateral or otherwise to evidence and/or secure the Loan, including, without limitation, the Bank Deposit Pledge Agreement described in Section 1.02, and any further documents that may be reasonably required by the Lender; 3.03 Certified copies of resolutions of Borrower's Board of Directors authorizing the borrowing hereunder, the execution and delivery of this Agreement, the Note, the Other Agreements and all other documents and instruments to be executed hereunder, and such other papers as Lender shall reasonably request, and the performance of all terms and conditions hereof or thereof; 3.04 All documents evidencing other necessary corporate action, consents and governmental approvals, if any, with respect to this Agreement, the Note, the Other Agreements and all other documents and instruments to be issued hereunder and as Lender shall reasonably request, including, specifically, any and all consents and approvals necessary or desirable to provide and confirm Lender's first lien security interest in and to the Collateral; 3.05 A certificate of the Secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement, the Note, the Other Agreements and all other documents and instruments to be delivered hereunder and as Lender shall reasonably request to effect the borrowings hereunder; 3.06 A favorable opinion of Borrower's counsel satisfactory to the Lender as to the matters referred to in Sections 4.01- 4.03 and 4.05 - 4.06 hereof and such other matters as the Lender may reasonably require; 3.07 Payment of the $5,000.00 nonrefundable loan fee, and any and all other fees, costs and expenses required to be paid pursuant to this Agreement or any of the Other Agreements as a condition to closing; 3 3.08 Unconditional continuing guaranty and suretyship agreement of Joseph A. Calabrese and the limited guaranty and suretyship agreement of Virginia L. Calabrese (the "Guarantors"). 3.09 Copies of insurance policies or insurance certificates providing liability insurance and insuring the properties and assets pledged to Lender (with proper mortgagee and loss payee clauses attached in favor of Lender) sufficient to afford full replacement of any or all property damaged or destroyed without reduction or diminution by virtue of co-insurance; Section 4. Representations and Warranties. To induce Lender to enter into this Agreement and to make the Loan, Borrower covenants, represents and warrants to Lender that: 4.01 Borrower is duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania, has the power to own its property and to engage in the business it conducts; 4.02 Borrower has full power and authority to enter into this Agreement and the Other Agreements and to incur and perform its obligations hereunder and thereunder, all of which have been duly authorized by all necessary and proper action and no consent of any person which has not been obtained is required as a condition to the validity or enforceability hereof or thereof; 4.03 The execution, delivery and performance by Borrower of this Agreement and the Other Agreements does not and will not (a) violate any provision of law, any order, rule or regulation of any court or agency of government, any contract, agreement or other instrument to which Borrower is a party or by which Borrower or its property is bound, or the Charter or By-Laws of Borrower, or (b) result in a breach of or constitute (with due notice and/or lapse of time) a default under any such contract, agreement or other instrument or result in the creation or imposition of any security interest in, or lien or encumbrance upon, any assets of Borrower, except in favor of Lender; 4.04 The conduct by Borrower of its business, and the ownership and use by Borrower of its properties, complies, in all respects, with all federal, state and local laws, rules, regulations, judicial decisions and decrees pertaining to the use, storage or disposal of hazardous waste or toxic materials. To Borrower's knowledge: 4 . ; (a) no hazardous substance, pollutant or contaminant (as defined in Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. §9601, as amended by the Superfund Amendments and Reauthorization Act of 1986 (Pub. L. No. 99.499, 100 Stat. 1613 (1986) (SARA) or 40 C.F.R. Part 261, whichever is applicable) is present on any of Borrower's property in any quantity in excess of those allowed by applicable law; (b) no hazardous waste, residual waste or solid waste, as those terms are defined in Section 103 of the Pennsylvania Solid Waste Management Act, 35 P.S. §6018.103 and/or 25 Pa. Code § §75.260 and 75.261 and no hazardous waste or substance within the meaning of the Hazardous Sites Cleanup Act, Act of October 18, 1988, 35 P.S. §6020.101 et seg. (commonly known as the Pennsylvania Superfund Act) is present on any of Borrower's property in any quantity in excess of that allowed by applicable law; (c) the primary operations of any business being conducted by Borrower do not involve the use, discharge, storage or release of any hazardous substance or waste within the meaning of any other applicable state or local environmental laws, rules, regulations or ordinances; (d) Borrower has not been identified in any litigation, administrative proceedings or investigation as a responsible party for any liability under the above referenced laws or otherwise; and (e) all materials that are located at any of Borrower's property in lawful amounts are properly stored and maintained in containers appropriate for such purposes. 4.05 This Agreement and the Other Agreements constitute the valid and legally binding obligations of Borrower and are fully enforceable against Borrower in accordance with their respective terms; 4.06 Except as disclosed to Lender in Schedule 4.06 attached hereto, there are no judgments, injunctions or similar orders or decrees outstanding against Borrower and there are no claims, actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against or affecting Borrower or its properties which, if determined adversary to Borrower, could result in any material adverse change in Borrower's financial condition, property, operations, prospects or ability to perform its obligations under this Agreement and the Other Agreements, and 5 Borrower is not, to its knowledge, in violation of or default under any judgment, order, writ, injunction, decree, rule or regulation of any court or governmental agency; 4.07 Borrower has paid and will pay all federal, state and local taxes to the extent that such taxes are due and has filed and will file all federal, state and local tax returns required to be filed by Borrower; 4.08 Each financial statement of Borrower heretofore delivered to Lender is true and complete in all material respects, presents fairly the financial position of Borrower as at the date indicated and was prepared in accordance with GAAP applied on a consistent basis for prior periods; 4.09 After giving effect to the Loan, the Note, and the Other Agreements: (i) the value of the assets and properties of Borrower, at a fair valuation, is greater than the total amount of all Borrower's liabilities and claims, including contingent claims; (ii) the aggregate present fair saleable value of Borrower's assets is greater than the amount that will be required to pay Borrower's probable liability on Borrower's debts, including contingent liabilities, as they become absolute and matured; (iii) Borrower has sufficient capital for the conduct of its business and has no reason to believe that in the foreseeable future that it will not have sufficient capital for the conduct of its business; and (iv) Borrower intends not to incur, and does not believe that it is incurring, obligations beyond its ability to pay such obligations as they mature. The Loan constitutes fair and reasonable consideration for the incurrence by Borrower of the obligations with respect thereto and the granting by Borrower to Lender of the security interests in respect to the Collateral. 4.10 No representation or warranty by Borrower contained herein, in any of the Other Agreements or in any statement, certificate or other document furnished to Lender contains any untrue statement of material fact or omits to state a material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made; and 4.11 No broker's or finder's fee or commission is or will be paid in connection with this Agreement or the transactions contemplated hereby and Borrower agrees to save harmless and indemnify Lender from and against any claim, demand, action, suit, proceeding or liability for any such fee or commission. Section 5. General Affirmative Covenants. Borrower covenants and agrees that so long as the Obligations have not been repaid in full, Borrower shall: 5.01 Deliver to Lender CPA-reviewed financial statements, including a balance sheet and income statement and such other financial statements and reports 6 f as reasonably requested by Lender, and a copy of Borrower's federal income tax return for the previous year, as filed, including all schedules, statements and forms, within ninety (90) days after the end of each fiscal year; 5.02 Deliver to Lender, within thirty (30) business days after the end of each fiscal quarter, financial statements, including a balance sheet and income statement certified to be true and correct by Borrower's chief financial officer; 5.03 Deliver or cause to be delivered to Lender no later than April 30t' of each calendar year a current personal financial statement, in form acceptable to Lender, and a copy of the federal income tax return for the previous year, as filed, including all schedules, statements and forms, for each of the Guarantors; 5.04 Deliver or cause to be delivered to Lender from time to time such additional financial statements and information for Borrower and the Guarantors as the Bank may request; 5.05 Notify Lender of any litigation, proceedings or events involving Borrower which might have a material adverse affect on Borrower's financial condition or business or the payment in full of the Obligations; 5.06 Keep and maintain all of Borrower's property and assets in good condition and repair, and maintain fire, public liability and other insurance in coverages and amounts as Lender from time to time may require and deliver to Lender certificates of all such insurance in effect; 5.07 Comply in the conduct of its business and in the ownership and use of its properties, in all respects, with all federal, state and local laws, rules, regulations, judicial decisions and decrees pertaining to the use, storage or disposal of hazardous waste or toxic materials; 5.08 Cause all policies of insurance covering any of the Collateral to have loss payee endorsements in favor of Lender, naming Lender as loss payee and to provide that they shall not be subject to cancellation or material change unless thirty (30) days prior notice thereof shall have been received by Lender; 5.09 Make all books and records available for inspection and audit by Lender at all reasonable times upon twenty-four (24) hours prior oral notice; 5.10 Pay all reasonable costs and expenses, including, without limitation, attorneys' fees incurred by Lender in negotiating, documenting and enforcing the Obligations and any subsequent accommodations or modifications thereof; 7 5.11 Maintain proper books of account in accordance with GAAP, consistently applied, and maintain all books and records at Borrower's principal corporate offices at 406 Brandy Lane, Mechanicsburg, Pennsylvania 17055; 5.12 Duly pay and discharge all taxes, assessments and governmental charges upon Borrower or any of its property, whether real or personal, tangible or intangible, prior to the date upon which penalties are attached thereto; 5.13 Pay when due and furnish, within five (5) days after Lender's request therefor, proof satisfactory to Lender of the making of payment or deposit of, all federal, state and/or local withholding, sales or other trust taxes; 5.14 Promptly give notice to Lender of the occurrence of any event that (i) could cause any representation or warranty made or given herein to be untrue at any time or (ii) is, or with the giving of notice or the passage of time may become an Event of Default under this Agreement or any Other Agreements; 5.15 Furnish to Lender such additional information and data concerning the Collateral and the business and financial condition of the Borrower as Lender may reasonably request; 5.16 Maintain Borrower's principal depository accounts at Lender and transfer all available funds deposited in accounts not maintained at Lender to Borrower's accounts at Lender before the end of each Business Day; and Section 6. Financial Maintenance Covenants. None applicable. Section 7. Negative Covenants. Borrower covenants and agrees that, as long as any Obligations have not been repaid in full, Borrower shall not: 7.01 Create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, security interest or other encumbrance upon the Collateral except such as (i) are maintained in favor of the Lender or (ii) are Permitted Encumbrances; 7.02 Sell, lease or otherwise dispose of the Borrower's assets other than in the ordinary course of business; 7.03 Make one or more loans to, guarantee or otherwise become surety for the payment or performance of any liability or obligation of, any individual, firm, corporation or other entity; or 7.04 Change the general character of the business of Borrower from that in which it is currently engaged; enter into proceedings in total or partial dissolution; or 8 merge or consolidate with any other corporation or permit any other corporation to merge with Borrower. Section 8. Events of Default. The occurrence of any one or more of the following events shall constitute an Event of Default hereunder: 8.01 Failure of Borrower to pay any of the Obligations as and when the same shall become due, whether by demand, stated maturity, acceleration or otherwise; 8.02 Failure of Borrower to observe or perform any warranty, covenant, condition or agreement to be observed or performed by Borrower under this Agreement or any of the Other Agreements; 8.03 The occurrence of any event that with the giving of notice or the passage of time would constitute a default by Borrower with respect to any indebtedness or liability of Borrower to any person or with respect to any security interest, lien or document securing any indebtedness or liability of Borrower to any person; 8.04 Any representation, covenant or warranty made herein, in any of the Other Agreements or in any statement, certificate or other document furnished by Borrower to Lender shall be false or misleading in any material respect; 8.05 Borrower shall (i) admit in writing its insolvency or its inability to pay its debts as they mature; (ii) make a general assignment for the benefit of creditors; and (iii) commence a case under or otherwise seek to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law, statute or proceeding or by any act indicate its consent to, approval of or acquiescence in any such proceeding or the appointment of any receiver of or trustee for Borrower or a substantial part of its property or suffer any such receivership, trusteeship or proceeding to continue undismissed for a period of sixty (60) days; 8.06 Borrower shall become a debtor in any case under any chapter of the United States Bankruptcy Code; 8.07 Entry of any order, judgment or decree for the dissolution of Borrower; 8.08 Except as set forth on Schedule 4.06, entry of any judgment against Borrower, unless such judgment shall have been discharged or execution thereof 9 stayed within 30 days after entry thereof or discharged within 30 days after the expiration of any such stay; 8.09 Lender shall determine in good faith, but in its sole discretion, that any material adverse change has occurred in the prospects or financial condition of Borrower, in the value of any collateral or in the ability of Borrower to pay and perform its Obligations to Lender; 8.10 Injunction or restraint of Borrower from conducting its business in whole or in material part and a determination by Lender that the same could result in any material adverse change in Borrower's prospects, financial condition. property or ability to pay and perform its Obligations to Lender; 8.11 Any assets of Borrower shall be attached, levied upon, seized or repossessed or come into the possession of a trustee, receiver or other custodian; 8.12 Borrower shall be or become insolvent or unable to pay its debts as they mature; 8.13 Uninsured loss, theft, substantial damage, destruction or transfer or encumbrance of any assets of Borrower; 8.14 Without Lender's prior written consent, Borrower shall enter into or be a party to any merger, voluntary dissolution, consolidation or share exchange; 8.15 Without Lender's prior written consent, Borrower shall sell, assign, transfer, convey or lease any interest in its assets except in the ordinary course of Borrower's business as now being conducted; or 8.16 Without prior written notice to Lender, Borrower shall change Borrower's name or reorganize in a different jurisdiction. Section 9. Rights and Remedies. Upon the occurrence of an Event of Default, Lender may, without notice or demand, exercise in any jurisdiction in which enforcement hereof is sought the following rights and remedies: 9.01 Declare all of the Obligations to be immediately due and payable and the same shall thereupon become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; 9.02 Institute any proceeding or proceedings to enforce the Obligations and Lender's rights with respect to any Collateral, including entry of judgment by confession. 10 In addition to any rights and remedies of Lender under the UCC, all such rights and remedies of Lender hereunder and under the Other Agreements and all other rights and remedies of Lender under applicable law are cumulative and enforceable alternatively, successively or concurrently. Section 10. Notices. 10.01 All notices required or permitted to be given hereunder by Lender or Borrower to the other shall be in writing and shall be personally delivered or sent by United States certified or registered mail, return receipt requested, to be effective on personal delivery or mailing, in the following manner: Borrower: Calabrese & Sons, Inc. 406 Brandy Lane Mechanicsburg, PA 17055 Attn: President Lender: Commerce Bank/Harrisburg, N.A. 100 Senate Avenue P.O. Box 8599 Camp Hill, PA 17001-8599 Attn: Commercial Loan Department 10.02 Either Borrower or Lender may change the address to which any such notice, report, demand or other instrument is to be delivered or mailed, by furnishing written notice of such change to the other, but no such notice of change of mailing address shall be deemed effective until received by the other. Section 11. General Provisions. Borrower and Lender further agree as follows: 11.01 Lender shall have the right to collect a late charge of five percent (5%) of any delinquent installment after expiration of any grace period provided in the Note or Other Agreements, if any. 11.02 Borrower agrees and hereby authorizes that Lender may, in Lender's sole discretion (but Lender shall not be obligated to) and without notice to or request from Borrower and regardless of the then-owing Obligations, make advances to or for the benefit of Borrower hereunder which Lender deems necessary or appropriate to ensure compliance with any of the terms of this Agreement or of any of the Other Agreements, to protect Lender's interests hereunder or under any of the Other Agreements (including, without limitation, payment of premiums for required 11 insurance or satisfaction of tax obligations of Borrower), to fund overdrafts in any deposit account of Borrower at Lender or to pay interest charges, service charges or any other sums due Lender under this Agreement or any of the Other Agreements. 11.03 All payments received by Lender from or on behalf of Borrower may be applied by Lender to any of the Obligations as Lender may determine in its sole discretion without notice to or consent of Borrower, Borrower hereby expressly waiving, to the extent permitted by law, all rights to make or manifest any binding instruction upon Lender as to application of such payments except as otherwise specifically provided herein. 11.04 Neither any failure nor any delay on the part of Lender in exercising any right, power or remedy hereunder or under any of the Other Agreements shall operate as a waiver thereof, nor shall single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Borrower hereby waives, to the extent the same may be waived under applicable law: (i) all claims, causes of action and rights of Borrower against Lender on account of actions taken or not taken by Lender in the exercise of Lender's rights or remedies hereunder or under the Other Agreements (except willful, malicious or grossly negligent acts or omissions); (ii) presentment, demand for payment, protest and notice of non-payment and all exemptions; (iii) all other notices or demands which by applicable law must be given to or made upon Borrower by Lender; (iv) all rights of setoff and rights to interpose counterclaims of any nature; and (v) substitution, impairment, exchange or release of any Collateral. Borrower agrees that Lender may exercise any or all of its rights and/or remedies hereunder, under the Other Agreements and under applicable law without resorting to and without regard to any collateral security or sources of liability with respect to any of the Obligations. 11.05 If any provision, or any part of any provision, of this Agreement or any of the Other Agreements shall for any reason be held invalid or unenforceable by any court or governmental agency of competent jurisdiction, such invalidity or unenforceability shall not affect the remainder of such provision nor any other provision, and this Agreement and the Other Agreements shall survive and be construed as if such invalid provision had not been contained herein or therein. This Agreement contains the entire agreement of the parties hereto with respect to the matters covered hereby and no other agreement, statement or promise made by any party hereto, or by any employee or agent of any party hereto, which is not contained herein, shall be valid or binding. No modification or waiver of any provision of this Agreement or any of the Other Agreements and no consent to any departure by Borrower therefrom, shall be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand upon Borrower in any case shall 12 entitle Borrower to any other or further notice or demand in the same, similar or other circumstances. 11.06 All covenants, agreements, representations and warranties contained herein and in the Other Agreements shall survive the execution and delivery hereof and shall continue in full force and effect until all of the Obligations have been paid in full and there exists no commitment on the part of Lender which could give rise to any Obligations. Each reference in this Agreement and the Other Agreements to a party hereto shall be deemed to include the successors and assigns of such party. Borrower may not assign any of it rights hereunder without the prior written consent of Lender. 11.07 This Agreement and all Other Agreements shall be interpreted according to and governed by the laws of the Commonwealth of Pennsylvania. 11.08 Borrower hereby consents to the exclusive jurisdiction of the Court of Common Pleas of Cumberland County, Pennsylvania, and/or the United States District Court for the Middle District of Pennsylvania in any and all actions or proceedings arising hereunder or pursuant hereto, and irrevocably agrees to service of process by personal service upon Borrower wherever Borrower maybe then located, or by certified or registered mail, return receipt requested, directed to Borrower at his last known address. 11.09 BORROWER HEREBY WANES THE RIGHT TO HAVE ANY MATTERS OR CONTROVERSIES ARISING HEREUNDER OR UNDER ANY OF THE OTHER AGREEMENTS TRIED BY A JURY. 11.10 The headings and sub-headings contained in the titling of this Agreement are intended to be used for convenience only and do not constitute part of this Agreement or a basis for the interpretation hereof. IN WITNESS WHEREOF, the parties hereto have duly executed or caused to be duly 13 executed this Agreement under seal as of the day and year first above written. ATTEST: CALABRESE & SONS, INC. By / (Assistant) Secretary J seph A. Calabrese 15resident (CORPORATE SEAL) N.A. e• M Q Title: ?'e?S1cGe? 14 Schedule 1. 10 Permitted Encumbrances NONE 15 Schedule 4.06 Judgments and Pending or Threatened Claims 1. Judgment for $61,000 in the case of Virginia L. Calabrese v. Joseph A. Calabrese and Calabrese & Sons, Inc., at No. 2001-03296, dated May 30, 2001. 2. Judgment in favor of Erie Forge and Steel, Inc. and against Calabrese & Sons, Inc. in the approximate amount of $330,000, plus interest and costs, to be entered against Calabrese & Sons, Inc. in the United States Bankruptcy Court for the Western District of Pennsylvania, in connection with unpaid invoices. 16 EXHIBIT "F" 15 a' $500,000.00 TERM LOAN NOTE Camp Hill, Pennsylvania December 6, 2001 FOR VALUE RECEIVED, CALABRESE & SONS, INC., a Pennsylvania corporation with offices at 406 Brandy Lane, Mechanicsburg, Pennsylvania 17055 (hereinafter the "Maker") hereby promises to pay to the order of COMMERCE BANK/HARRISBURG, N.A., with offices at 100 Senate Avenue, P.O. Box 8599, Camp Hill, Pennsylvania 17001-8599 ("Payee") the principal sum of $500,000.00, as advanced to or for Maker by Payee pursuant to the terms of a Term, LoanAgreement (hereinafter the "Loan Agreement") bearing even date herewith between Maker and Payee, together with interest from the date of disbursement on the outstanding balance thereof at the rate of 8.75 % per annum. (the "Interest Rate"). The obligation evidenced hereby shall be fully amortized over a period of sixty (60) months from the date hereof. Interest shall be calculated based on the outstanding principal balance on the basis of a 360 day year, but shall be charged for the actual number of days elapsed. Principal and interest shall be payable, in lawful money of the United States, at the office of the Payee designated above or such other place as the holder of this Note may designate, in the following manner: (a) Commencing January 1, 2002, and on the first day of each month thereafter, the principal sum and accrued interest at the Interest Rate shall be due and be payable in 59 installments of Ten Thousand Three Hundred Thirty-Six and 30/100 Dollars ($10,336.30), with a final payment on the "Maturity Date" (as hereinafter defined) of the unpaid balance of the principal sum plus all accrued interest thereon and all other sums owed by Maker to Payee, each such installment to be applied first to the payment of accrued interest and then to the reduction of the principal sum. (b) A final payment in the full amount of the entire outstanding balance of principal plus all interest accrued thereon and all other sums owed by Maker to Payee shall be due and payable on December 1, 2006 (hereinafter the "Maturity Date"). In the event that after the date of this Note the implementation of or any change in any law or regulation, or any guideline or directive (whether or not having the force of law) or the interpretation or administration thereof by any central bank or other authority charged with the administration thereof, imposes, modifies or deems applicable any capital adequacy, reserve maintenance, risk based capital, capital ratio or similar requirement (including without limitation a request or requirement which affects the manner in which the Payee allocates capital resources to its commitments, including the indebtedness evidenced hereby) and as a result thereof, in the sole -1- ii opinion of the Payee, the rate of return on the Payee's capital as a consequence of the indebtedness evidenced hereby and of Payee's compliance with such requirement is reduced to a level below that which the Payee could have achieved but for such circumstances, then in each such case within ten (10) days after demand from time to time the Maker shall pay to the Payee such additional amount or amounts as shall compensate the Payee for such reduction in rate of return. A certificate of the Payee claiming compensation under this provision and setting forth the'additional amount or amounts to be paid to Payee hereunder, as determined by Payee, in the absence of mathematical error, shall be final and conclusive. In determining such amount the Payee may use any reasonable averaging and attribution methods. Prepayment of any amount of the principal sum (whether the prepayment is voluntary or involuntary, including any prepayment by reason of Payee's acceleration of the indebtedness upon Maker's default) shall be accompanied by accrued interest and a prepayment privilege fee in the amount of five percent (5.0%) of the total amount prepaid during the first Loan Year (as defined below), declining one percent (1.0%) during each Loan Year thereafter. For purposes of the preceding two sentences, a "Loan Year" means a twelve (12) month period commencing on the date of this Note and any anniversary of the date of this Note. Any partial prepayment shall be applied to installments of principal last falling due. Maker agrees that in the event any installment of principal or interest is not paid when due, Maker shall pay to Payee a late charge of five percent (5%) of the amount past due to cover the additional expense incident to such delinquency. This late charge provision shall not be construed to obligate Payee to accept any overdue installment nor to limit Payee's rights and remedies for Maker's default, as hereinafter set forth. This Note is secured by certain security documents (hereinafter the "Security Documents"), including a Bank Deposit Pledge Agreement of even date herewith, as well as personal guarantees, security interests and other collateral. Any failure by Maker to comply with the terms, covenants or conditions of the Security Documents or the Loan Agreement, or any of them, shall automatically constitute a default under this Note. At its option Payee may pay any tax, payment in lieu of taxes, assessment, water rent, insurance premium or other sums which under the terms of the Loan Agreement and the Security Documents may be paid out by Payee for the account of Maker, and the amount so paid shall be added to and become part of the principal sum hereunder and secured by the Security Documents, and shall be payable on demand. Maker agrees that if Maker shall, without in each instance obtaining the prior written consent of Payee, sell, transfer or convey (herein all called "transfer") any of Maker's assets or any interest therein other than in the ordinary course of Maker's business, whether voluntarily or by operation of law, then, at the option of Payee, the maturity of this Note shall be advanced to the date of such transfer, whereupon the obligations of Maker evidenced by this Note shall immediately be due and payable. For purposes of this paragraph, Maker's merger or consolidation with any other entity, or -2- the redemption, sale, transfer or encumbrance of any stock of Maker, or the issuance of additional stock of Maker which results in a transfer of control of Maker, shall constitute a transfer of Maker's assets. If Maker shall fail to pay any sum when due or if Maker shall in any other way be in default hereunder or under the Loan Agreement or any of the Security Documents, or if any certification, warranty or representation made or hereafter made by Maker to Payee should prove to be materially false, then the entire unpaid principal balance of this Note, together with interest accrued thereon and with all other sums due or owed by Maker hereunder or under the terms of the Security Documents and the Loan Agreement shall at the option of Payee and without notice to Maker become due and payable immediately with interest (after such default and acceleration and until Maker's indebtedness to Payee is paid in full, including the period following entry of any judgment) at a rate which is 4.0% per annum in excess of the Interest Rate hereinabove specified (the "Default Interest Rate"), together with all attorney's fees for collection, but not less than $500.00, and the cost of any search, appraisal, environmental assessment or other cost incurred by Payee in connection with such proceedings; and payment of the same may be enforced and recovered by the entry of judgment on this Note and the issuance of execution thereon. MAKER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR AND CONFESS JUDGMENT THEREIN AGAINST MAKERFOR THE AMOUNT FOR WHICH MAKER MAY BE OR BECOME LIABLE TO PAYEE UNDER THIS NOTE, WITH OR WITHOUT DEFAULT, PLUS AN ATTORNEY'S COMMISSION OF FIVE PERCENT (5%) OF SUCH AMOUNT, BUT NOT LESS THAN FIVE HUNDRED ($500.00) DOLLARS, WITH COSTS OF SUIT, RELEASE OF ERRORS, AND WITHOUT RIGHT OF APPEAL. MAKER WAIVES THE RIGHT TO ANY STAY OF EXECUTION AND THE BENEFIT OF ALL EXEMPTION LAWS NOW OR HEREAFTER IN EFFECT. EXECUTION MAY IMMEDIATELY BE ISSUED ON THE JUDGMENT, WITHOUT PRIOR NOTICE ORHEARING, TO GARNISH, LEVY OR ATTACH ANY PERSONAL PROPERTY OF MAKER. NO SINGLE EXERCISE OF THE FOREGOING WARRANT AND POWER TO CONFESS JUDGMENT SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE VALID, VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE PAYEE SHALL ELECT, UNTIL ALL SUMS PAYABLE OR THAT MAY BECOME PAYABLE BY MAKER HAVE BEEN PAID IN FULL. The remedies of Payee provided herein and in the Security Documents and the Loan Agreement or otherwise available to Payee at law or in equity and the warrants of attorney herein or therein contained shall be cumulative and concurrent, and may be pursued singly, successively and together at the sole discretion of Payee, and may be exercised as often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release of the same. -3- y? Maker hereby releases Payee and said attorney or attorneys from all errors, defects and imperfections whatsoever in entering judgment by confession hereon as aforesaid or in issuing any process or instituting any proceedings relating thereto and hereby waives all benefit that might accrue to Maker by virtue of any present or future laws exempting Maker's property, real orpei sonal, or any part of the proceeds arising from any sale of any such property, from attachment, levy or sale under execution, or providing for any stay of execution, exemption from civil process or extension of time, and agrees that such property may be sold to satisfy any judgment entered on this Note or the Security Documents, in whole or in part and in any order as may be desired by Payee. Maker (and all endorsers, sureties and guarantors) waive the right to presentment for payment, demand, notice of demand, notice of non-payment or dishonor, protest and notice ofprotest of this Note, and all other notices in connection with the delivery, acceptance, performance, default, or enforcement of the payment of this Note; liability hereunder shall be unconditional and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification granted or consented to by Payee. Maker shall pay the cost of any revenue, tax or other stamps now or hereafter required by law at any time to be affixed to this Note or the Security Documents, and if any taxes shall be imposed with respect to debts secured by the Security Documents or with respect to notes evidencing debts so secured, Maker agrees to pay or to reimburse Payee upon demand the amount of such taxes, and if Maker fails or refuses or is not legally permitted to do so, Payee may at its option accelerate this Note to maturity as in the case of default by Maker. Maker hereby consents to the exclusive jurisdiction of the Court of Common Pleas of Cumberland County, Pennsylvania, and for the District Court for the Middle District of Pennsylvania, in any and all actions or proceedings arising hereunder or pursuant hereto, and irrevocably agrees to service of process by certified mail, return receipt requested, to the address for Maker set forth above or to such other address as Maker may direct by notice to Payee This instrument shall be construed according to and governed by the laws of the Commonwealth of Pennsylvania. MAKER AND PAYEE EACH HEREBY WANES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS OR CONTROVERSIES ARISING HEREUNDER. The words "Payee" and "Maker" whenever occurring herein shall be deemed and construed to include the respective heirs, personal representatives, successors and assigns of Payee and Maker. The obligation of the persons named as Maker shall be joint and several. IN WITNESS WHEREOF, Maker has duly executed this Note under seal the day and year -4- first above mentioned. ATTEST: (Assistant) Secretary MAKER: CALABRESE & SONS, INC. 1 13 4seph A. Calabrese President -5- 02/22/2007 12:17 7176976506 - 16Y19912007 19:33 7170M441 y v„ CALABRESE AND SONS F'ENSTERMACHER&ASSOC. PAGE 01/01 PAGE: I 1 WRWICAT ON 1, Joseph Calabrese, Plaintg in the above-captioned rte, hereby twtify and verify that the facts set forth in the foregoing Uomplaint are uue ana correm to the best of my knowlledoe. information and belief. I understand #* anv false statements herein are subject to the penalfim of 18 Pa. C. S. §4904 relating to unworn falsi motion to authorlt :?,' alab+rese CATE.. ?? '7 16 w? r* CERTIFICATE OF SERVICE AND NOW, on this day ofd, 2007, i, Matthew Aaron Smith, Esquire, hereby certify that I have served the foregoing Complaint by mailing a true and correct copy by United States first class mail, addressed as follows: Eugene E. Pepinsky, Jr., Esq. 210 Walnut Street P.O. Box 11963 Harrisburg, PA 17108 FENSTERMACHER AND ASSOCIATES, P.C. By: atthew Aaron mith 17 C'? r- ? ?:, tJ -rt ,.., "*'t ? ? ?+ r x? ? _ 7.7 C? '- i(rD . __ ? ? ` ? f l t .7' r' ? ? ?U (?? _ ? 6 "'? JOSEPH CALABRESE d/b/a CALABRESE AND SONS, INC., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA Plaintiff V. DOCKET NO. 06-3185 COMMERCE BANK/HARRISBURG, N.A., Defendant PRELIMINARY OBJECTIONS OF DEFENDANT COMMERCE BANK/HARRISBURG, N.A. Pursuant to Rule 1028 of the Pennsylvania Rules of Civil Procedure, Defendant Commerce Bank/Harrisburg, N.A. (hereinafter "the Bank"), by and through its attorneys, file these preliminary objections to Plaintiff's complaint and in support thereof, states the following: FIRST PRELIMINARY OBJECTION LEGAL INSUFFICIENCY (DEMURRER) 1. Rule 1028(a)(4) of the Pennsylvania Rules of Civil Procedure allows a party to challenge the legal sufficiency of a pleading by filing preliminary objections in the nature of a demurrer. 2. Plaintiff alleges in its complaint that the Bank and Plaintiff are parties to two separate loan agreements entered in which the Bank is the lender and plaintiff is the borrower. [Complaint ¶¶ 14, 15, 33.] 3. Each of the two loan agreements were memorialized by a separate Term Loan Agreement and a Tenn Loan Note entered into and executed by the parties on December 6, 2001. [Complaint ¶¶ 14, 15 and Exhibits B, C, E, and F.] 4. Plaintiff contends that, as a party to the loan agreements, the Bank "had an obligation of good faith in its performance of its duties per the terms of the contract." [Complaint ¶ 34.] 1 SLl 720258v1 /064375.00009 5. In both Count I and Count II, Plaintiff purports to bring identically styled claims labeled as "Lender Liability: Breach of Duty to Perform in Good Faith." [Complaint p. 6-7.] 6. In Count I, Plaintiff contends in conclusory and unsupported allegations that the Bank breached this purported duty of good faith because it "required Commerce Board of Directors members to sit on the Calabrese Board of Directors as a prerequisite for the approval of loans." [Complaint ¶ 36.] 7. Count II of Plaintiff's complaint alleges in conclusory and unsupported allegations that the Bank breached a duty of good faith because it "directed Calabrese what and when to borrow, and to borrow exclusively from Commerce," and that "such direction was meant to preserve the interest of Commerce only with no regard to the best interest of Calabrese." [Complaint ¶¶ 42-43.] 8. Plaintiff does not allege that the Bank breached any term of the loan agreements between the Bank and Plaintiff, and does not plead any facts that would support a claim of breach of any of the express provisions contained in the loan agreements. 9. The Bank has no duty of good faith or other obligation to Plaintiff to surrender the Bank's contractual rights, and the Bank cannot be liable for a breach of duty to perform in good faith based on the Bank's adherence to the terms of the loan agreements and its enforcement of its legal or contractual rights as a creditor. Creeger Brick and Building Supply, Inc. v. Mid-State Bank and Trust Co., 560 A.2d 151, 154 (Pa. Super. 1989) (affirming the trial court's order sustaining preliminary objections in the nature of a demurrer and dismissing a breach of duty of good faith claim asserted against bank). 2 SLi 720259vl/064375.00009 10. Under the facts alleged, the Bank cannot be liable to Plaintiff for any theory of breach of a purported duty to perform in good faith. WHEREFORE, pursuant to Rule 1028(a)(4), the Bank respectfully requests that the Court dismiss the complaint in its entirety with prejudice for legal insufficiency, and grant such other relief as the Court deems appropriate. SECOND PRELIMINARY OBJECTION INSUFFICIENT SPECIFICITY IN A PLEADING 11. Rule 1028(a)(3) of the Pennsylvania Rules of Civil Procedure allows a party to object to a pleading for insufficient specificity. 12. As stated in the Bank's First Preliminary Objection, the complaint should be dismissed in its entirety with prejudice for legal insufficiency. As stated therein, there are no facts that were alleged, or could truthfully be alleged, that could state a claim against the Bank for breach of a purported duty of good faith. 13. In the alternative, if the complaint is not dismissed in its entirety with prejudice (and the Bank respectfully submits it should be so dismissed), Plaintiff should be ordered to replead with more specificity. 14. Plaintiff has failed to plead, in either Count I or Count II, specific facts sufficient to state the precise nature of the purported breaches of good faith that it is attempting to assert here. 15. Plaintiff contends that the Bank required members of the Bank's Board of Directors to sit on the Plaintiff's Board of Directors, but fails to allege any facts supporting the existence of such a requirement and fails to allege any facts describing how or why such requirement breached an alleged duty to perform in good faith. 3 S L 1720258v l 1064375.00009 16. Similarly, as to Count II of the complaint, Plaintiff fails to allege any facts describing the supposed "direction", how such a "direction" preserved the interests of the Bank and not Plaintiff, and how such a "direction" breached an alleged duty to perform in good faith. 17. In the absence of such factual allegations pertaining to the purported duties and breaches by the Bank, Plaintiff's complaint is insufficiently specific. WHEREFORE, pursuant to Rule 1028(a)(3), the Bank respectfully requests that the Court dismiss the complaint in its entirety for insufficient specificity, and grant such other relief as the Court deems appropriate. THIRD PRELIMINARY OBJECTION IN THE NATURE OF A MOTION TO STRIKE JURY DEMAND 18. Plaintiff attempted to demand a jury in this case. [See, e.g., Notice filed by Plaintiff on April 4, 2007.] 19. Under Pennsylvania law, the right to trial by jury may be waived by express agreement. Eighth North-Val, Inc. v. Parkinson, 773 A.2d 1248, 1256 (Pa. Super. 2001) (affirming trial court order striking demand for a jury based on express waiver contained in promissory notes). 20. The allegations of the complaint and exhibits attached thereto and incorporated therein demonstrate on the face of the complaint that Plaintiff affirmatively and appropriately waived any right to a jury trial in any action against the Bank arising out of the loan agreements. 21. As evidenced by the various loan agreements entered into and forming the basis of Plaintiff's purported claims here, Plaintiff expressly waived any right to a jury trial. [December 6, 2001 Term Loan Agreement ($700,000) T 11.09 (Exhibit B to Complaint); December 6, 2001 Term Loan Note ($700,000) p. 4 (Exhibit C to Complaint); December 6, 2001 4 SLl 720258v1 /064375.00009 Term Loan Agreement ($500,000) ¶ 11.09 (Exhibit E to Complaint); and December 6, 2001 Term Loan Note ($500,000) p. 4 (Exhibit F to Complaint).] 22. A challenge to the propriety of Plaintiff's demand for a jury trial may appropriately be raised on preliminary objections. See Campanaro v. Pennsylvania Electric Co., 738 A.2d 472, 475 (Pa. Super. 1999) (trial court had granted defendant's preliminary objections in the nature of a motion to strike plaintiff's demand for a jury trial); Miller v. Northern Tier Career Center, 49 Pa. D&C. 4th 413, 417 (Bradford Cty. Sep. 11, 2000) (same). 23. Given Plaintiff's express waiver of its right, if any, to a jury trial, Plaintiff's jury demand should be stricken, in the event the Complaint is not dismissed with prejudice. WHEREFORE, the Bank respectfully requests that Plaintiff's jury demand be stricken and for such other relief as the Court deems appropriate. FOURTH PRELIMINARY OBJECTION FAILURE TO CONFORM TO LAW OR RULE OF COURT 24. Rule 1028(a)(2) of the Pennsylvania Rules of Civil Procedure allows a party to object to a pleading for failing to conform to law or rule of court by filing preliminary objections. 25. Counts I and II of the Complaint both assert a claim for damages in the specific sum of $5,000,000.00. [Complaint pp. 7-8.] 26. Rule 1021(b) of the Pennsylvania Rules of Civil Procedure prohibits Plaintiff from demanding relief for unliquidated damages in a specific sum. 27. Counts I and II violate Rule 1021(b) in this regard and Plaintiff's claim for unliquidated damages in a specific sum should be stricken in the event the Complaint is not dismissed with prejudice. 5 SLl 720258v 11064375.00009 WHEREFORE, pursuant to Rule 1028(a)(2), the Bank respectfully requests that the Court strike Plaintiff s demand for relief for unliquidated damages in a specific sum, and for such other relief as the Court deems appropriate. Dated: May 3, 2007 STEVENS & LEE By Mark D. Bradshaw Attorney I.D. No. 61975 17 N. Second Street, 16th Floor Harrisburg, PA 17101 (717) 234-1090 Matthew W. Rappleye Attorney I.D. No. 81746 111 North Sixth Street P.O. Box 679 Reading, PA 19603 (610) 478-2000 Attorneys for Defendant Commerce Bank/Harrisburg, N.A. 6 SLI 720258v 1 /064375.00009 CERTIFICATE OF SERVICE I, MATTHEW W. RAPPLEYE, ESQUIRE, certify that on this date, I served a certified true and correct copy of the foregoing Preliminary Objections of Defendant Commerce Bank/Harrisburg, N.A. upon the following parties and counsel of record, by United States mail, postage prepaid, addressed as follows: John R. Fenstermacher Matthew Aaron Smith Fenstermacher and Associates, P.C. 5115 East Trindle Road Mechanicsburg, PA 17055 Date: May 3, 2007 S L 1 720259v 1 /064375.00009 C'? ? C3 _.. ;: , ?? c;z? '! ' i -:? ?3 C..7 3 t"; ? 4 r, . .. __. r- ? ?' ? s°s'i ??; ? G. t? IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA JOSEPH CALABRESE d/b/a CALABRESE AND SONS, INC., Plaintiff V. COMMERCE BANK/HARRISBURG, N.A., Defendant DOCKET NO. 06-3185 PLAINTIFF'S REPLY IN OPPOSITION TO PRELIMINARY OBJECTIONS OF DEFENDANT COMMERCE BANK/HARRISBURG, N.A. AND NOW comes the Plaintiff, Joseph Calabrese d/b/a Calabrese and Sons, Inc., by and through his attorneys, the Offices of Fenstermacher and Associates, P.C., and files this Plaintiff's Reply in Opposition to Preliminary Objections of Defendant Commerce Bank/Harrisburg, N.A., as follows: REPLY IN OPPOSITION TO DEFENDANT'S FIRST PRELIMINARY OBJECTION 1. Admitted. 2. Admitted. 3. Admitted. 4. Admitted. 5. Admitted in part, denied in part. Admitted in part in so much as Plaintiff has brought two claims identically labeled as "Lender Liability: Breach of Duty to Perform in Good Faith." Denied in so much as each claim memorializes separate instances where Defendant breached its duty to perform in good faith. 6. Denied in so much as averment 36 of Plaintiff's complaint is a statement of fact and not a legal conclusion and therefore cannot be "conclusory." Moreover it is not an unsupported allegation in so much as Joseph Calabrese testified to the veracity of the averment when he signed the Verification to the Complaint. 7. Denied in so much as averments 42-43 of Plaintiff's complaint are statements of fact and not legal conclusions and therefore cannot be "conclusory." Moreover they are not unsupported allegations in so much as Joseph Calabrese testified to the veracity of the averments when he signed the Verification to the Complaint. 8. Admitted. 9. Denied. Plaintiff has not averred that the Bank has breached a duty of good faith or other obligation in the Bank's performance of its contractual rights or in its adherence to the terms of the loan agreements or enforcement of its legal or contractual rights as a creditor. Plaintiff has averred that the Bank has breached implied duties to perform in good faith. 10. Denied. This paragraph asserts a legal conclusion to which no response is required. Waiving none of the foregoing, to the extent that a response is required, this paragraph is hereby denied. WHEREFORE, Plaintiff Joseph Calabrese d/b/a Calabrese and Sons, Inc., respectfully requests that the Court dismiss Defendant Commerce Bank/Harrisburg, N.A.'s, First Preliminary Objection, with prejudice, and grant such other relief as the Court deems appropriate. REPLY IN OPPOSITION TO DEFENDANT'S SECOND PRELIMINARY OBJECTION 2 1 1. Admitted. 12. Denied as set forth in Plaintiff's answers to Defendant's First Preliminary Objection. 13. Denied. This paragraph asserts a legal conclusion to which no response is required. Waiving none of the foregoing, to the extent that a response is required, this paragraph is hereby denied. 14. Denied. Plaintiff has plead the facts sufficiently enough for Defendant to list them and then object to them in paragraph 15 of its Second Preliminary Objection. 15. Admitted in part, denied in part. Plaintiff admits that such allegations were plead, it is denied, however, that they were not supported. In support of such allegations, Joseph Calabrese testified to the veracity of the averments when he signed the Verification to the Complaint. In addition, averment 17 of Plaintiff's Complaint clearly implies that Jim Gibson, former president of Commerce Bank, can corroborate the assertion. 16. Denied. Averments 25 - 26 of Plaintiffs Complaint are clear examples of the alleged "direction." 17. Denied. This paragraph asserts a legal conclusion to which no response is required. Waiving none of the foregoing, to the extent that a response is required, this paragraph is hereby denied. WHEREFORE, Plaintiff Joseph Calabrese d/b/a Calabrese and Sons, Inc., respectfully requests that the Court dismiss Defendant Commerce Bank/Harrisburg, N.A.'s, Second Preliminary Objection, with prejudice, and grant such other relief as the Court deems appropriate. 3 REPLY IN OPPOSITION TO DEFENDANT'S THIRD PRELIMINARY OBJECTION 18. Admitted. 19. Admitted. 20. Admitted. 21. Admitted. 22. Admitted. 23. Admitted. WHEREFORE, Plaintiff Joseph Calabrese d/b/a Calabrese and Sons, Inc., respectfully acknowledges the validity of Defendant Commerce Bank/Harrisburg, N.A.'s, Third Preliminary Objection and replies without opposition to Defendant's request that the jury demand be stricken. REPLY IN OPPOSITION TO DEFENDANT'S FOURTH PRELIMINARY OBJECTION 24. Admitted. 25. Denied. Plaintiff has requested judgment in an amount that exceeds compulsory arbitration limits. 26. Admitted. 27. Denied. This paragraph asserts a legal conclusion to which no response is required. Waiving none of the foregoing, to the extent that a response is required, this paragraph is hereby denied. 4 WHEREFORE, Plaintiff Joseph Calabrese d/b/a Calabrese and Sons, Inc., respectfully requests that the Court dismiss Defendant Commerce Bank/Harrisburg, N.A.'s, Fourth Preliminary Objection, with prejudice, and grant such other relief as the Court deems appropriate. NEW MATTER 28. Defendant averred in paragraph 9 of its Preliminary Objections of Defendant Commerce Bank/Harrisburg, N.A.,: First Preliminary Objection that "The Bank has no duty of good faith or other obligation to Plaintiff to surrender the Bank's contractual rights, and the Bank cannot be liable for a breach of duty to perform in good faith based on the Bank's adherence to the terms of the loan agreements and its enforcement of its rights as a creditor. 29. Defendant relies on the Superior Court of Pennsylvania's ruling in Creeger Brick and Building Supply, Inc. v. mid-State Bank and Trust Co., 560 A.2d 151 (Pa. Super. 1989). 30. The Third Circuit of the United States, however, has stated that Creeger stands for the "unremarkable proposition that `the implied duty of good faith cannot defeat express contractual rights by imposing upon that party specific obligations that it is entitled by express agreement, to resist."' Fremont v. E.I. DuPont DeNemours & Co., 988 F.Supp. 870, 875 (E.D.Pa. 1997); citing Seal v. Riverside Federal Savings Bank, 825 F.Supp. 686 (E.D.Pa. 1993). 5 31. Plaintiff has not made any allegations or averments that could be interpreted as attempting to utilize the doctrine of implied duty of good faith to defeat any express contractual right that the Defendant may possess. 32. Plaintiff has not made any allegations or averments that could be interpreted as attempting to utilize the doctrine of implied duty of good faith to impose obligations upon the Defendant that it is entitled to resist. 33. Defendant has not made any allegations or averments stating that it had a contractual right to require Commerce Board of Directors members to sit on the Calabrese Board of Directors as a prerequisite for the approval of loans. 34. Defendant has not made any allegations or averments stating that it had a contractual right to use Pete Ressler and Gary Nalbandian, within their capacity as Commerce Board of Directors members and Calabrese Board of Directors members, in such a way as to preserve the interests of Commerce at the expense of Calabrese and Sons. 35. The duty of good faith and fair dealing "has been embraced with increased vigor by the Pennsylvania Superior Court in recent years." Freemont, 988 F.Supp. at 875. WHEREFORE, Plaintiff Joseph Calabrese d/b/a Calabrese and Sons, Inc., respectfully requests that the Court dismiss Defendant's Preliminary Objections of Defendant Commerce Bank/Harrisburg, N.A., in their entirety, with prejudice, and grant such other relief as the Court deems appropriate. 6 Respectfully submitted, FENSTERMACHER AND ASSOCIATES, P.C. By: Matthew Aaron Smith Supreme Court I.D. #94603 5115 East Trindle Road Mechanicsburg, PA 17050 (717) 691-5400 Attorneys for Defendant V- DATED: CERTIFICATE OF SERVICE AND NOW, on this ?6r day of June, 2007, I, Matthew Aaron Smith, Esquire, hereby certify that I have served the foregoing Plaintiff's Reply in Opposition to Preliminary Objections of Defendant Commerce Bank/Harrisburg, N.A. by mailing a true and correct copy by United States first class mail, addressed as follows: Mark D. Bradshaw, Esq. STEVENS & LEE 17 North Second Street, 16th Floor Harrisburg, Pennsylvania 17101 Attorney for Defendant Commerce Bank/Harrisburg, N.A. FENSTERMACHER AND ASSOCIATES, P.C. By. z "--- -? -'J atthew A on Sm h 8 ? i;_ ?`? i ? r ? ?? ? --?' 3 ? ?"1 C) ' _' C" C?J _? ?