SUBORDINATION AGREEMENT
EXHIBIT 10.35
(MAXCO, INC.)
In consideration of financial accommodation now or hereafter extended
by THE HUNTINGTON NATIONAL BANK, a national banking association, of Troy,
Michigan ("Bank"), to the undersigned Borrower and in order to induce Bank to,
at any time or from time to time, make loans, extensions of credit or other
accommodations to or for the account of Borrower, or to purchase or extend
credit upon any instrument or writing in respect of which Borrower may be liable
in any capacity, or to grant such renewals or extensions of any thereof as Bank
may deem advisable, Creditor hereby agrees that it will not ask, demand, xxx
for, take or receive from Borrower, by set-off or any other manner, the whole or
any part of any indebtedness of Borrower to Creditor (other than payments for
federal and state income taxes allocable to the Borrower as if it were not a
member of a controlled group, as well as actual, out-of-pocket payments Creditor
may make after the date hereof on behalf of Borrower for reimbursable expenses),
whether absolute or contingent, due or to become due, now existing or hereafter
arising, direct or indirect, secured or unsecured, and however evidenced and in
whatever amount, together with all accrued and accruing interest, including
without limitation all amounts advanced by Creditor to National City Bank in
payment of loan obligations of the Borrower to National City Bank ("Subordinated
Indebtedness"), nor any security therefor, unless and until all indebtedness and
obligations of Borrower to Bank, whether now existing or hereafter arising and
in whatever amount, direct or indirect, absolute or contingent, secured or
unsecured, due or not due, and whether arising directly between Borrower and
Bank or acquired outright, conditionally or as collateral security from another
by Bank ("Senior Indebtedness"), shall have been fully paid with interest,
except that the Borrower may pay the "Permitted Payments" only as identified on
the attached Schedule "A" and only so long as Borrower has not defaulted under
any indebtedness or obligations owed to Bank.
Creditor and Borrower represent and warrant to Bank: that the
Subordinated Indebtedness is presently $3,183,363 and is presently evidenced by
a promissory note dated January 3, 1997, by Borrower payable to Creditor (the
"Note") without counterclaim, defense, or offset. Creditor and Borrower further
agree that at no time hereafter will any part of the said Subordinated
Indebtedness (other than the Note) be represented by any notes or other
negotiable instruments except such notes or other negotiable instruments, if
any, as Bank shall request to be executed and delivered for the purpose of
evidencing said Subordinated Indebtedness or any part thereof, and in that case
said notes or other negotiable instruments shall either be made payable to and
delivered to Bank, or, if payable to Creditor, shall be endorsed by Creditor and
delivered to Bank.
Creditor hereby transfers and assigns to Bank subject to the prior
security interest of Comerica Bank, as collateral security for any and all said
obligations of Borrower to Bank, all of the said claims or demand of Creditor
against Borrower, including its security interest and/or liens in any and/or all
of the assets of Borrower with full right on the part of Bank, in its own name
or in the name of Creditor, to collect and enforce said claims, by suit, proof
of debt in bankruptcy, or other liquidation proceedings, or otherwise. Further,
Creditor agrees that any of its security interests or liens in any and/or all of
the assets of Borrower shall remain subordinated and inferior to Bank's security
interests and/or liens as long as Borrower is indebted to Bank.
Should any payment or security be received by Creditor for or on account of any
of said claims or demands, prior to the satisfaction of all said obligations of
Borrower to Bank (except any Permitted Payments), Creditor will forthwith
deliver same to Bank, in precisely the form received (except for Creditor's
endorsement where necessary), for application on account of Borrower's
obligations to Bank and, until so delivered, same shall be held in trust by
Creditor as the property of Bank; in the event of the failure of Creditor to
endorse any instrument for the payment of money, so received by Creditor,
payable to Creditor's order, Bank or any officer or employee are hereby
irrevocably constituted and appointed attorneys in fact for Creditor, with full
power to make any such endorsement, and with full power of substitution. Bank
agrees to assign back to Creditor all remaining rights granted under this
paragraph upon the indefeasible repayment in full of the Senior Indebtedness. If
Bank exercises its rights under this paragraph with respect to the Subordinated
Indebtedness then, upon the indefeasible repayment in full of the Senior
Indebtedness, Creditor shall be subrogated to all of the Bank's rights
(including collateral) with respect to the Senior Indebtedness.
This Agreement shall constitute a continuing agreement of
subordination, even though at times Borrower is not indebted to Bank, and Bank
may continue, without notice to Creditor to lend monies, extend Credit and make
other financial accommodations to or for the account of Borrower on the faith
hereof until cancelled by Bank or until written notice of revocation of this
Agreement shall be delivered to Bank by Creditor and receipt thereof
acknowledged by Bank. Any such notice of revocation shall not affect this
Agreement in relation to any obligations or liabilities of Borrower then
existing or any obligations or liabilities created thereafter pursuant to any
previous commitment of Bank to Borrower, or any extensions or renewals of any
such obligations and liabilities and extensions or renewals thereof. This
Agreement shall continue effective until the same shall have been fully paid
with interest.
Creditor agrees that Bank, at any time and from time to time, either
before or after any such notice of revocations, may enter into such agreement or
agreements with Borrower as Bank may deem proper extending the time of payment
or renewing or otherwise altering the terms of all or any of the obligations of
Borrower to Bank or affecting any security underlying any or all of such
obligations, or may exchange, sell or surrender or otherwise deal with any such
security, or may release any balance of funds of Borrower with Bank, without
notice to Creditor and without in any way impairing or affecting this Agreement.
From time to time upon request from Bank, Borrower and Creditor shall
permit Bank to inspect and make extracts from their books and records pertaining
to the Subordinated Indebtedness, and in the event Creditor has failed to turn
over all evidence of the Subordinated Indebtedness, Creditor shall permit Bank
at all reasonable times to examine any instrument or instruments held by
Creditor evidencing the Subordinated Indebtedness.
No waiver shall be deemed to be made by Bank of any of its rights
hereunder unless same shall be in writing, and each waiver, if any, shall be a
waiver only with respect to the specific instance involved and shall in no way
impair Bank's rights and/or the obligations of Creditor to it in any other
respect or at any other time.
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Creditor agrees to reimburse Bank for any and all costs and expenses
(including, but not limited to, actual attorney fees) incurred in enforcing any
of the duties and obligations of Creditor under this Agreement.
This Agreement shall be binding upon, and inure to the benefit of,
Creditor and Bank and their respective successors and assigns.
Notice of acceptance by Bank of this agreement is hereby waived by
Creditor, and this Agreement and all of the terms and provisions hereof shall be
immediately binding upon Creditor from the date of execution hereof.
This Agreement shall be construed according to the laws of the State of
Michigan.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed this 18th day of November, 2003.
MAXCO, INC.,
a Michigan corporation, Creditor
By:/s/ Xxx X. Xxxx
-------------------------------------
Its: President
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ATMOSPHERE ANNEALING, INC.,
a Michigan corporation, Borrower
By:/s/ Xxxxxxx Xxxxxxxxx
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Its: President
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ACKNOWLEDGEMENT BY COMERICA BANK
Comerica Bank ("Comerica"), as pledgee of the Note hereby acknowledges and
consents to the Subordination Agreement between Creditor and Bank and agrees
that in the event Comerica becomes the holder of the Note, it will be bound by
the terms thereof.
COMERICA BANK
a Michigan banking corporation
By: /s/Xxxx X. Xxxxxx
----------------------------
Its: Corporate Banking Officer
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RE: THE HUNTINGTON NATIONAL BANK/ATMOSPHERE ANNEALING, INC.
SUBORDINATION AGREEMENT
SCHEDULE A
PERMITTED PAYMENTS
Notwithstanding anything to the contrary in the Subordination
Agreement, Creditor may ask for, demand, xxx for, take or receive from Borrower
the regularly scheduled payments of accrued interest (but not prepayments,
whether voluntary or by acceleration or otherwise) which may come due under the
subordinated promissory note ("Note") at a rate of not more than 10% per annum;
provided, however, that Creditor may not ask for, demand, xxx for, take or
receive from Borrower any such payments after Creditor is given written notice
by the Bank that a Default or Event of Default exists or has occurred under any
note(s), guaranty(ies), and/or agreement(s) between the Bank and the Borrower or
that any loan(s) between Borrower and Bank has (have) been called. All such
payments due Creditor under the Note must be suspended until such time (if ever)
as Creditor receives subsequent written notice from the Bank stating that the
Default has been cured and/or the loan(s) has (have) been paid. The Bank agrees
to give Borrower copies of the notices, but the Bank's failure to do so shall
not affect its rights under this Agreement or any other Agreement with Borrower.
The Note may not be modified or prepaid or accelerated without the
prior written consent of the Bank.
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