Contribution Agreement and Cash Collateral Security Agreement
EXHIBIT 10.2
This
Contribution Agreement and Cash Collateral Security Agreement (this “Agreement”) is entered into
as of this 31st day of March, 2010 by and among Xxxxxxxx Xxxxxxxx,
individually (the “Shareholder”), Champion
Industries, Inc., a West Virginia corporation (the “Borrower”), and Fifth Third
Bank, an Ohio
banking corporation, as Administrative
Agent for the Lenders (the “Administrative
Agent”).
Background
A.The Borrower, the Lenders party thereto
and the Administrative Agent are party to a Credit Agreement dated as of
September 14, 2007 (such Credit Agreement, as heretofore amended and
as the same may further be amended, restated, supplemented or otherwise modified
from time to time, the “Credit
Agreement”).
B.The Borrower, the Administrative Agent
and the Lenders have agreed, among other things, to amend certain provisions of
the Credit Agreement on the terms and conditions set forth in the Second
Amendment and Waiver to Credit Agreement dated on or about the date hereof (the
“Second Amendment”),
among the Borrower, the Lenders and the Administrative Agent.
C.As a condition to entering into the
Second Amendment and continuing to extend credit and other financial obligations
to the Borrower, the Administrative Agent and the Lenders require, among other
things, that the Shareholder execute and deliver this Agreement.
D.As a significant shareholder of the
Borrower, the Shareholder benefits directly and indirectly from the continued
extension of credit and other financial accommodations to the Borrower under the
Credit Agreement and is therefore agreeable to executing and delivering this
Agreement.
E.Until the Borrower meets certain
financial tests as further described herein, the Shareholder has agreed to
provide cash collateral and/or a standby letter of credit, in an aggregate
amount of no less than $2,500,000, to the Administrative Agent as collateral
security for the Shareholder’s obligations under the terms of and pursuant to
the conditions of this Agreement.
Now,
Therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties to this Agreement
hereby agree as follows:
Section 1. Definitions. All capitalized
terms herein shall have the meanings assigned to such terms on Exhibit A
attached hereto.
Section 2. Cash Collateral Account and Standby
L/C. (a) On or before the date hereof, the Shareholder shall
have:
(i)Established with the Administrative Agent a deposit account
numbered 7024701760 (including any successor, replacement or substitute accounts
therefor maintained with the Administrative Agent by the Shareholder, the “Cash Collateral Account”),
and deposited into the Cash Collateral Account, cash in an amount greater than
or equal to the Minimum Cash Collateral Amount; and
(ii)Delivered to the Administrative Agent a standby letter of credit
in favor of the Administrative Agent, for the benefit of the Lenders (the “Standby L/C”), which Standby
L/C shall be in a face amount of greater than or equal to the Minimum L/C
Amount, issued by a financial institution acceptable to the Administrative
Agent, and in a form and with drawing conditions and other terms acceptable to
the Administrative Agent in its sole discretion. Without limiting the
foregoing, the Borrower shall neither be directly or contingently obligated to
reimburse any draws made on the Standby L/C nor be directly or contingently
obligated to pay any fees or expenses with respect to the Standby L/C.
(b)The Shareholder may at any time after
the date hereof (i) increase or decrease the amount of cash held in the Cash
Collateral Account (the “Cash
Collateral Amount”) and (ii) increase or decrease the face amount of the
Standby L/C (the “L/C
Amount”) so long as the sum of the Cash Collateral Amount and the L/C
Amount shall at all times equal or exceed $2,500,000 less the sum of all amounts
received by the Administrative Agent in respect of Cash Collateral Draws and L/C
Draws.
(c)The Cash Collateral Account is and
shall be a blocked account of the Shareholder under the sole dominion and
control of the Administrative Agent, and the Shareholder may not make nor direct
any withdrawals, transfers or other dispositions from the Cash Collateral
Account. The Cash Collateral Account shall hold funds to satisfy the
obligations of the Shareholder set forth herein and the Administrative Agent
shall at all times have a first priority perfected security interest in such
account. The Cash Collateral Account may be an interest bearing
account, with interest accruing at a rate at least equal to that of similar
deposit accounts of a similar size held at Fifth Third Bank, an Ohio banking
corporation. The Shareholder hereby directs the Administrative Agent
to deposit all interest proceeds into the Cash Collateral Account.
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Section 3. Maintenance Obligation. (a)
Subject to the terms and conditions of this Agreement, the Shareholder hereby
acknowledges and agrees that upon the occurrence of any Make-Well Violation, the
Administrative Agent may, in its sole discretion, without any further direction
or instruction from or consent of the Shareholder:
(i)Withdraw cash from the Cash Collateral Account in an amount up to
the lesser of (x) the remaining amount therein and (y) the Make-Well
Amount (each such withdrawal, a “Cash Collateral Draw”);
and
(ii)Submit a draw request with respect to the Standby L/C in an
amount up to the lesser of (x) the remaining undrawn amount of the Standby L/C
and (y) the Make-Well Amount (each such draw, an “L/C Draw”).
; provided, that, with respect
to any Make-Well Violation, the sum of any Cash Collateral Draw and any L/C Draw
related thereto shall not exceed the Make-Well Amount therefor; and provided further that, to the
extent any minimum required draw amount set forth in the Standby L/C (the “Required Draw Amount”)
exceeds the amount the Administrative Agent may otherwise request in connection
with a Make-Well Violation pursuant to the terms of this Agreement (the “Permitted Amount”), the
Administrative Agent may submit a draw request with respect to the Standby L/C
in an amount equal to the Required Draw Amount and the Administrative Agent
shall deposit into the Cash Collateral Account that amount of proceeds from such
draw that is equal to the difference between the Required Draw Amount and the
Permitted Amount. Notwithstanding the foregoing, to the extent the
Borrower has not extended the maturity date of the Standby L/C or delivered a
replacement standby letter of credit to the Administrative Agent, in form and
substance satisfactory to the Administrative Agent, at least 30 days prior to
the expiration date of the Standby L/C, the Administrative Agent may, on the
expiration date of the Standby L/C, submit a draw request with respect to the
Standby L/C in an amount equal to the undrawn amount of the Standby L/C and the
Administrative Agent shall deposit all proceeds from such draw into the Cash
Collateral Account.
(b)The proceeds of each Cash Collateral
Draw and each L/C Draw shall be deemed to be a Subordinated Loan made by the
Shareholder to the Borrower under the Subordinated Note; provided that, the aggregate
amount of the Subordinated Loans made by the Shareholder pursuant to this
Agreement shall in no event exceed $2,500,000.
(c)The Administrative Agent shall apply
the proceeds of any Cash Collateral Draw and any L/C Draw to repayment of the
outstanding Term Loans in the inverse order of maturity.
(d)The Shareholder acknowledges and agrees
that the Administrative Agent has been granted a security interest in all of the
Borrower’s rights, title and interest in, to and under this Agreement and that
the Administrative Agent may enforce all rights of the Borrower hereunder and
that all rights which the Administrative Agent may have by virtue of such
security interest in the rights of the Borrower hereunder shall be in addition
to and not in substitution of any rights of the Administrative Agent as a party
to this Agreement.
(e)The Shareholder acknowledges and agrees
with the Administrative Agent for the benefit of the Lenders that its
obligations hereunder are absolute and unconditional, that he has no defense,
offset or counterclaim to his obligations to make payments under this Agreement,
all of which are hereby waived, and that he will make all payments due by him
hereunder notwithstanding the existence of any such defense, offset or
counterclaim and without any reduction of any nature whatsoever.
Section 4. Grant of Security
Interest. As collateral security for the obligations of the
Shareholder set forth herein, the Shareholder hereby pledges, assigns,
transfers, conveys, delivers, and grants to the Administrative Agent, for the
benefit of the Lenders, a first priority continuing and perfected security
interest in and lien on all of the Shareholder’s right, title and interest in
and to the following property, in each case whether now owned or hereafter
acquired and whether now existing or hereafter arising and regardless of where
located (collectively, the “Collateral”):
(i)the Cash Collateral Account and all funds, cash, checks, drafts,
certificates, instruments, and other assets deposited or held in or credited to
the Cash Collateral Account;
(ii)all interest, dividends, distributions, cash, instruments and
other property received, receivable or otherwise payable or distributed in
respect of, or in exchange for, any of the foregoing; and
(iii) all proceeds and
profits of any of the foregoing.
All terms
used in this Section 5 which are defined in the UCC and are not otherwise
defined herein shall have the meanings assigned to such terms in the
UCC.
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Section 5. Representation, Warranties and
Covenants. The
Shareholder represents and warrants to the Administrative Agent, for the benefit
of the Lenders, that:
(a)Qualification. The
Shareholder has full right, power, capacity, and authority to enter into this
Agreement, to perform all of his obligations hereunder and to consummate the
transactions contemplated hereby.
(b)Enforceability. This
Agreement has been duly executed and delivered by the Shareholder and
constitutes the legal, valid and binding obligation of the Shareholder,
enforceable in accordance with its terms.
(c)No
Conflict. This Agreement does not, nor does the performance or
observance by the Shareholder of any of the matters and things provided for
herein, (i) contravene or constitute a default under any provision of law
or any judgment, injunction, order or decree binding upon the Shareholder or
(ii) contravene or constitute a default under any covenant, indenture or
agreement of or affecting the Shareholder or any of his Property, in each case
where such contravention or default, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
(d)Solvency. The
Shareholder is solvent, has capital not unreasonably small in relation to his
existing obligations or any contemplated or undertaken transaction and has
assets having a value both at fair valuation and at present fair salable value
greater than the amount required to pay his debts as they become due and greater
than the amount that will be required to pay his probable liability on his
existing debts as they become absolute and matured. The Shareholder
does not intend to incur, or believe that he will incur, debts beyond his
ability to pay such debts as they become due. The Shareholder will
not be rendered insolvent by the execution and delivery of this
Agreement. The Shareholder does not intend to hinder, delay or
defraud his creditors by or through the execution and delivery of, or
performance of its obligations under, this Agreement.
(e)Liens on
Collateral. The Shareholder represents, warrants and covenants
that the Collateral, and every part thereof, is and shall remain free and clear
of all security interests, liens, attachments, levies, and encumbrances of every
kind, nature, and description and whether voluntary or involuntary, except for
the lien and security interest of the Administrative Agent therein.
(f)Subordinated
Note. The Shareholder shall not agree to any amendment,
modification or supplement of the Subordinated Note without the prior written
consent of the Administrative Agent and any such amendment, modification or
supplement without such written consent shall be invalid and
ineffective. The Shareholder shall not take any action to collect any
amounts due under the Subordinated Note until such time as all Obligations have
been indefeasibly repaid in full and all Commitments under the Credit Agreement
have been terminated.
Section 6. Further
Assurances. The Shareholder agrees that he will, at his
expense, promptly execute and deliver all further instruments and documents and
take all further action, that may be reasonably necessary or desirable, or that
the Administrative Agent may reasonably request, in order to more fully perfect
(with control or otherwise), evidence and protect, or establish the priority of,
any security interest granted or purported to be granted hereby, or to enable
the Administrative Agent to exercise and enforce the Administrative Agent’s
rights and remedies hereunder.
Section 7. Release of Funds from Cash
Collateral Account and Cancellation of Standby L/C. The Cash
Collateral Account shall hold funds to satisfy the obligations of the
Shareholder set forth herein and the Administrative Agent shall at all times
have a first priority perfected security interest in the Cash Collateral Account
Account. Upon the termination of this Agreement pursuant to Section
11(a) hereof, any remaining funds in the Cash Collateral Account shall be
returned by the Administrative Agent to the Shareholder and the Standby L/C
shall be cancelled by the Administrative Agent and returned to the issuer
thereof.
Section 8. Amendments,
Etc. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by the Shareholder therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Shareholder, the Borrower, and the Administrative Agent, with the prior written
consent of the Required Lenders, and then, with respect to any waiver or
consent, such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
Section 9. Addresses for
Notices. All demands, notices, and other communications
provided for hereunder shall be in writing (including facsimile) and shall be
given to such party at its address, or facsimile number set forth on the
signature pages hereof or such other address, or facsimile number as such party
may hereafter specify by notice to the other parties.
Section 10. No Waiver
Remedies. No failure on the part of the Administrative Agent
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
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Section 11. Continuing
Agreement. This Agreement is a continuing agreement and shall
(a) only remain in full force and effect until, and will automatically terminate
upon the earliest to occur of: (i) the Shareholder’s contribution of
$2,500,000 and payment in full of all other amounts payable under this
Agreement; (ii) the repayment in full of all Obligations and all amounts payable
under this Agreement and the termination of all Commitments under the Credit
Agreement; and (iii) the occurrence of a Fixed Charge Compliance Trigger; (b)
automatically run in favor of any bank or other party which becomes, on or after
the date hereof, a “Lender” under the Credit Agreement; and (c) inure to the
benefit of and be enforceable by the Borrower and the Administrative Agent, and
their respective successors, transferees, and assigns; provided, however, that
neither the Borrower nor the Shareholder may assign or otherwise transfer any of
its or his rights or obligations hereunder without the prior written consent of
the Administrative Agent, which consent shall only be given with the prior
written consent of the Required Lenders.
Section 12. Expenses. The
Borrower and the Shareholder are jointly and severally obligated to pay, and
shall pay, all reasonable out-of-pocket costs and expenses of the Administrative
Agent, including the reasonable out-of-pocket fees and disbursements of counsel
to the Administrative Agent, in connection with the enforcement of this
Agreement. The Borrower is obligated to pay, and shall pay, all
reasonable out-of-pocket costs and expenses of the Administrative Agent,
including the reasonable out-of-pocket fees and disbursements of counsel to the
Administrative Agent, in connection with any waiver or consent under or
amendment to this Agreement. In addition, the Borrower and the Shareholder are
jointly and severally obligated to pay, and shall pay any stamp or other tax
with respect to the performance by the Shareholder of his obligations
hereunder.
Section 13. Conditions
Precedent. This Agreement shall become effective upon
satisfaction of all the following conditions precedent:
(a)The Shareholder, the Borrower and the Administrative Agent shall
have executed and delivered this Agreement.
(b) The Shareholder shall have established the Cash
Collateral Account with the Administrative Agent as a full cash dominion account
and shall have deposited an amount greater than or equal to the Minimum Cash
Collateral Amount, in cash, into such account.
(c) The Shareholder shall have delivered to the
Administrative Agent the Standby L/C in form and substance reasonably
satisfactory to the Administrative Agent.
(d) The Borrower shall have delivered a fully executed
copy of the Subordinated Note, certified as being a true, correct and complete
copy thereof, to the Administrative Agent.
(e)The Shareholder shall have delivered an opinion of counsel to the
Shareholder satisfactory to the Administrative Agent and its
counsel.
Section 14. Counterparts;
Severability. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterpart signature
pages, each constituting an original, but all together one and the same
agreement. Any invalidity or unenforceability of any provision or
application of this Agreement shall not affect other lawful provisions and
applications hereof, and to this end the provisions of this Agreement are
declared to be severable.
Section 15. Enforcement. No
Lender (other than the Administrative Agent) shall have the right to institute
any suit, action or proceeding in equity or at law in connection with this
Agreement for the enforcement of any remedy under or upon this Agreement; it
being understood and intended that no one or more of the Lenders (other than the
Administrative Agent) shall have any right in any manner whatsoever to enforce
any right hereunder, and that all proceedings at law or in equity shall be
instituted, had and maintained by the Administrative Agent in the manner herein
provided and for the benefit of the Lender.
Section 16. Merger,
Integration. This Agreement sets forth the entire
understanding of the parties relating to the subject matter hereof, and all
other prior understandings, written or oral, are hereby
superseded.
Section 17. Governing Law, Consent to
Jurisdiction. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Ohio without
regard to principles of conflicts of laws. The Shareholder and the
Borrower hereby agree to submit to the jurisdiction of any Ohio State or Federal
court sitting in Cincinnati, Ohio in any action or proceeding arising out of or
relating to this Agreement, and hereby waive any defense that such forum is
inconvenient for the maintenance of such action or proceeding.
Section 18. Jury Trial
Waiver. The Shareholder, the Borrower and
the Administrative Agent hereby waive trial by jury in any act, proceeding,
claim or counterclaim, whether in contract or tort, at law or in equity, arising
out of or in any way related to this Agreement or the other Loan
Documents.
[signature
pages to follow]
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In Witness Whereof, the
parties hereto have caused this Agreement to be duly executed and delivered as
of the date first-above written:
| SHAREHOLDER: | ||
| /s/ Xxxxxxxx X. Xxxxxxxx | ||
| Xx. Xxxxxxxx Xxxxxxxx, individually | ||
| c/o Champion Industries, Inc | ||
| 0000 Xxxxx Xxxxxx | ||
| Xxxxxxxxxx, Xxxx Xxxxxxxx 00000 | ||
| Attention: Xx. Xxxxxxxx Xxxxxxxx | ||
| Telephone: (000) 000-0000 | ||
| Telecopy: (000) 000-0000 | ||
| BORROWER: | ||
| CHAMPION INDUSTRIES, INC. | ||
| By | /s/ Xxxx X. Xxx | |
| Name | Xxxx X. Xxx | |
| Title | Senior Vice President and Chief Financial Officer | |
| 0000 Xxxxx Xxxxxx | ||
| Xxxxxxxxxx, Xxxx Xxxxxxxx 00000 | ||
| Attention: Chief Financial Officer/Xxxx Xxx | ||
| Telephone: (000) 000-0000 | ||
| Telecopy: (000) 000-0000 | ||
| Administrative Agent: | ||
| FIFTH THIRD BANK, as Administrative Agent, | ||
| By | ||
| Name | ||
| Title | ||
|
Fifth Third Plaza
|
||
| 00 Xxxxxxxx Xxxxxx Xxxxx | ||
| Xxxxxxxxxx, Xxxx 00000 | ||
| Attention: Loan Syndications/Xxxx Xxxx | ||
| Telephone: (000) 000-0000 | ||
|
Telecopy: (000) 000-0000
|
||
Exhibit
A
Defined
Terms
Each
capitalized term used in this Agreement shall have the meaning set forth below,
or if such capitalized term is not defined below, shall have the meaning
assigned to such term in the Credit Agreement.
“Agreement” is defined in the
introductory paragraph of this Agreement.
“Borrower” is defined in the
introductory paragraph of this Agreement.
“Cash Collateral Account” is
defined in Section 2(a)(i) of this Agreement.
“Cash Collateral Amount” is
defined in Section 2(b) of this Agreement.
“Cash Collateral Draw” is
defined in Section 3(a)(i) of this Agreement.
“Collateral” is defined in
Section 5 of this Agreement.
“Compliance Certificate”
means a compliance certificate in the form of Exhibit E to the Credit
Agreement.
“Credit Agreement” is defined
in the Recitals of this Agreement.
“Delivery Violation” means
any failure by the Borrower to deliver a Compliance Certificate to the
Administrative Agent when due under the Credit Agreement.
“Fixed Charge Compliance
Trigger” means delivery by the Borrower of Compliance Certificates
acceptable to the Administrative Agent evidencing that the Borrower has achieved
a Fixed Charge Coverage Ratio of at least 1.2 to 1.0 as of the last day of two
consecutive fiscal quarters of the Borrower.
“Fixed Charge Violation”
means any failure by the Borrower to maintain a Fixed Charge Coverage Ratio
greater than or equal to 1.0 to 1.0 as of the last day of each fiscal quarter of
the Borrower.
“L/C Draw” is defined in
Section 3(a)(ii) of this Agreement.
“L/C Amount” is defined in
Section 2(b) of this Agreement.
“Make-Well Amounts” means
those amounts of Dollars necessary to cure any Make-Well Violation; provided that, (i) with
respect to any Fixed Charge Violation, such amounts shall be deemed to be a
dollar-for-dollar increase to EBITDA for the relevant period, and (ii) with
respect to any Delivery Violation, the Make-Well Amount shall equal $2,500,000
minus the aggregate
amount of Make-Well Amounts contributed by the Shareholder pursuant to the terms
of this Agreement prior to such Delivery Violation.
“Make-Well Violation” means
(i) any Event of Default under Section 7.1(a) of the Credit Agreement, (ii) any
Fixed Charge Violation, or (iii) any Delivery Violation .
“Minimum Cash Collateral Amount”
means the amount of Dollars the Shareholder is required to deposit into
the Cash Collateral Account on the date hereof, which when added to the Minimum
L/C Amount equals $2,500,000.
A-1
“Minimum L/C Amount” means
the face amount of the Standby L/C on the date hereof, which when added to the
Minimum Cash Collateral Amount equals $2,500,000.
“Permitted Amount” is defined
in Section 3(a) of this Agreement.
“Required Draw Amount” is
defined in Section 3(a) of this Agreement.
“Second Amendment” is defined
in the Recitals of this Agreement.
“Shareholder” is defined in
the introductory paragraph of this Agreement.
“Standby L/C” is defined in
Section 2(a)(ii) of this Agreement.
“Subordinated Loans” means
all indebtedness of the Borrower to the Shareholder evidenced by the
Subordinated Note and all other
indebtedness, obligations, and liabilities now or hereafter owing by the
Borrower to the Shareholder under the Subordinated Note.
“Subordinated Note” means the
Subordinated Note dated of even date herewith made by the Borrower in favor of
the Shareholder in the aggregate principal amount of up to $2,500,000 and in the
form attached hereto as Exhibit B.
“UCC” means the Uniform
Commercial Code of the State of Ohio as in effect from time to
time.
A-2
Exhibit
B
Form
of Subordinated Note
This
Subordinated Promissory Note (this “Note”) and the indebtedness
evidenced by this Note are subordinate to any and all indebtedness, obligations
and liabilities of the Maker to the Lenders (collectively, the “Senior Lenders”) party to
that Credit Agreement with the Maker dated as of September 14, 2007 (the “Credit Agreement”), as the
same may be amended, modified, restated or supplemented from time to time, in
the manner and to the extent set forth herein.
Subordinated
Promissory Note
| $2,500,000.00 | Cincinnati, Ohio | |
| March ___, 2010 (the “Issuance Date”) |
For value
received, the undersigned, Champion Industries,
Inc., a West Virginia corporation (the “Maker”), hereby promises to
pay to an account designated in writing by Xxxxxxxx Xxxxxxxx, a
individual residing in the State of West Virginia (the “Payee”), in lawful money of
the United States of America, in immediately available funds to such account,
the principal amount of Two Million Five Hundred
Thousand and 00/100 Dollars ($2,500,000.00)
or, if less, the aggregate unpaid principal amount of all Loans (as hereinafter
defined) made by the Payee to the Maker under the terms of this Note, together
with interest accruing on such amount from the Issuance Date, at the rate
provided in this Note.
1.Loans. Prior to
the Maturity Date, the Payee agrees, subject to the terms and conditions of, and
at the times and in the manner required by the Contribution Agreement and Cash
Collateral Security Agreement dated of event date herewith among the Maker, the
Payee and the Administrative Agent (as hereinafter defined) (such Contribution
Agreement and Cash Collateral Security Agreement, as the same may be amended,
restated, supplemented or otherwise modified in its entirety from time to time,
the “Contribution
Agreement”), to make loans (each individually a “Loan” and, collectively, the
“Loans”) in U.S.
Dollars to the Maker from time to time in an aggregate principal amount of up to
Two Million Five Hundred Thousand and 00/100 Dollars.
2.Interest. Interest under this
Note will accrue at a rate equal to ____% per annum,
beginning on the Issuance Date (computed on the basis of a 365 day year and
based upon the number of days actually elapsed).
3.Payment. Subject to the terms
hereof, the Maker shall pay all outstanding accrued interest and the outstanding
principal balance of this Note, if not paid sooner, on _________, 20___ (the
“Maturity
Date”). The Payee acknowledges that no cash payments of
principal or interest (except as provided in Section 8 hereof) shall be made
prior to January 31, 2011, and thereafter, only to the extent expressly
permitted by the Administrative Agent in writing pursuant to Section 7 hereof.
4.Event of Default. The Maker
will be in default under this Note upon the occurrence of any of the following
events of default (each, an “Event of
Default”):
(a)the failure to pay any amount of the
principal or interest due on this Note within 10 days after notice to the Maker
that such amount is past due; or
(b)the dissolution, voluntary or
involuntary bankruptcy, termination of existence, insolvency or appointment of a
receiver of any part of the property of the Maker or any of the obligations of
the Maker, and in the case of an involuntary proceeding filed against the Maker,
such proceeding is not discharged or dismissed within 90 days.
5.Default
Rate. Subject to Section 7 hereof, upon the occurrence of an
Event of Default, the then entire outstanding principal balance of this Note,
together with all accrued interest, will, at the Payee’s option (exercised then
or thereafter), accrue interest until such default is cured, payable on demand,
at a rate per annum equal to ____%.
B-1
6.Acceleration. Upon
the occurrence of any Event of Default defined in Section 3(a), and at any time
thereafter as long as any such Event of Default is continuing, subject to
Section 7 hereof, the Payee may declare all liabilities and obligations of the
Maker under this Note immediately due and payable and the same will thereupon
become immediately due and payable without any further action on the part of the
Payee. Upon the occurrence of any Event of Default defined in Section
3(b), subject to Section 7 hereof, all liabilities and obligations of the Maker
under this Note will become due and payable without any action upon the part of
the Payee.
7.Subordination.
Notwithstanding anything to the contrary contained in this Note, the
Maker and the Payee agree that all indebtedness evidenced by this Note,
including principal, interest and all other amounts payable hereunder
(collectively, the “Subordinated Indebtedness”),
shall be and remain junior and subordinate to any and all indebtedness,
obligations and liabilities, including principal and interest, of the Maker to
the Senior Lenders now existing or hereafter arising, whether direct or
indirect, secured or unsecured, absolute or contingent, joint or several or
joint and several, and howsoever owned, held or acquired, whether through
discount, purchase, direct loan or as collateral or otherwise and all
post-petition interest in a bankruptcy or similar proceeding whether or not
allowed (collectively, the “Superior Indebtedness”), all
on the following terms and conditions:
(a)So long as any Superior Indebtedness
shall remain outstanding and unpaid or the Senior Lenders have any obligation to
extend credit to the Maker, no payment either of principal or interest
(notwithstanding the expressed maturity or any time for the payment of principal
of or interest on any Subordinated Indebtedness) shall be made on the
Subordinated Indebtedness prior to January 31, 2011, and thereafter, such
payments shall only be permitted with the Administrative Agent’s prior written
consent. The Payee will take no steps, whether by suit or otherwise,
to compel or enforce the collection of Subordinated Indebtedness, nor will the
Payee use Subordinated Indebtedness by way of counterclaim, set-off, recoupment
or otherwise so as to diminish, discharge or otherwise satisfy in whole or in
part any indebtedness or liability of the Payee to the Maker, whether now
existing or hereafter arising and howsoever evidenced.
(b)In the event of any distribution,
dividend, or application, partial or complete, voluntary or involuntary, by
operation of law or otherwise, of all or any part of the assets of the Maker or
of the proceeds thereof to the creditors of the Maker or upon any indebtedness
of the Maker, occurring by reason of the liquidation, dissolution, or other
winding up of the Maker, or by reason of any execution sale, or bankruptcy,
receivership, reorganization, arrangement, insolvency, liquidation or
foreclosure proceeding of or for the Maker or involving its property, no
dividend, distribution or application shall be made, and the Payee shall not be
entitled to receive or retain any dividend, distribution, or application on or
in respect of principal of or interest on Subordinated Indebtedness, unless and
until all principal of and interest on Superior Indebtedness then outstanding
shall have been paid and satisfied in full, and in any such event any dividend,
distribution or application otherwise payable in respect of Subordinated
Indebtedness shall be paid and applied on Superior Indebtedness until such
Superior Indebtedness has been fully paid and satisfied.
(c)No Senior Lender need at any time give
the Payee notice of any kind of the creation or existence of any Superior
Indebtedness, nor of the amount or terms thereof, all such notice being hereby
expressly waived. Also, the Senior Lenders may at any time from time
to time, without the consent of or notice to the Payee, without incurring
responsibility to the Payee, and without impairing or releasing the obligation
of the Payee under this Note (i) renew, refund or extend the maturity of,
or increase or decrease the amount of, any Superior Indebtedness, or any part
thereof, or otherwise revise, amend or alter the terms and conditions thereof,
(ii) sell, exchange, release or otherwise deal with any property by
whomsoever at any time pledged, mortgaged or otherwise hypothecated or subjected
to a lien to secure any Superior Indebtedness, and (iii) exercise or
refrain from exercising any rights against the Maker and others, including the
Payee.
(d)The Payee will not sell, assign or
otherwise transfer any Subordinated Indebtedness, or any part thereof, except
subject to and in accordance with the terms of this Note and upon the agreement
of the transferee or assignee to abide by and be bound by the terms of this
Note.
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(e)The Payee represents and warrants that
the Payee has no lien on or security interest in any assets of the Maker and
will not accept any such lien or security interest so long as any Superior
Indebtedness shall remain outstanding and unpaid or the Senior Lenders have any
obligations to extend credit to the Maker. Notwithstanding the
foregoing, the Payee expressly subordinates all of the Payee’s rights in any
collateral now or later securing the Subordinated Indebtedness (the “Collateral”) to all rights
of Fifth Third Bank, as Administrative Agent for the Senior Lenders, and any and
all of its successors and assigns (collectively, the “Administrative Agent”), now
or later existing in any of the same Collateral to secure the Superior
Indebtedness, and any and every lien or security interest with respect to the
Collateral in favor of or held for the benefit of the Administrative Agent has
and shall have priority over every lien and security interest that the Payee now
has or may hereafter acquire with respect to the Collateral, all notwithstanding
any statement or provision contained in the instruments evidencing the
Subordinated Indebtedness, or agreements with respect thereto or otherwise to
the contrary and irrespective of the time or order of filing or recording of
financing statements, deeds of trust, mortgages or other notices of security
interests, liens or assignments granted pursuant thereto, and irrespective of
anything contained in any filing or agreement to which any part hereto or its
respective successors and assigns may now or hereafter be a party, and
irrespective of the ordinary rules for determining priorities under the Uniform
Commercial Code of the State of Ohio or under any other law governing the
relative priorities of secured creditors. The Payee consents to the
creation and continuance of all present and future liens and security interests
of the Administrative Agent in the Collateral to secure the Superior
Indebtedness and to the enforcement of those liens and security interests,
including the removal of the Collateral from the real property of the
Maker. This subordination as to the Collateral is intended to define
the rights and duties of the Administrative Agent and the Payee; it is not
intended that any third party shall benefit from it. If the effect of
any provision of this Note would be to give any third party a priority status to
which that party would not otherwise be entitled, that provision shall, to the
extent necessary to avoid that priority, be given no effect and the rights and
priorities of the Administrative Agent and the Payee shall be determined in
accordance with applicable law.
(f) If
notwithstanding the provisions of this Section 7, the Payee shall receive any
payment of principal or interest on Subordinated Indebtedness which the Maker is
not entitled to make pursuant to the terms hereof, whether or not the Payee has
knowledge that the Maker is not entitled to make such payment, the Payee shall
promptly account for such payment and upon the Administrative Agent’s demand pay
over such payment to the Administrative Agent for application to the Superior
Indebtedness owing to the Senior Lenders. No payment or any
distribution received by the Administrative Agent in respect of Subordinated
Indebtedness pursuant to any of the terms hereof shall entitle the Payee to any
right, whether by virtue of subrogation or otherwise, in and to any Superior
Indebtedness unless and until all Superior Indebtedness owing to the Senior
Lenders has been fully paid and satisfied and the Senior Lenders obligations, if
any, to extend credit to the Maker have expired or otherwise been
terminated.
8.Prepayment. The
Maker has the right to prepay, in whole or in part, without premium or penalty,
the unpaid principal amount (or any portion thereof) of this Note and accrued
interest on such amount (i) if consented to in writing by the Administrative
Agent and the Lenders or (ii) at any time after the payment in full in cash of
all Obligations (as defined in the Credit Agreement) and the termination of the
Credit Agreement.
9.Successors and
Assigns. This Note will bind the Maker and its successors and
assigns, and the benefits of this Note will inure to the benefit of the Payee
and its successors and assigns. The Payee may not assign all or any
portion of its rights or obligations under this Note. Furthermore,
this Note may not be assigned by the Maker without the prior written consent of
the other party. All references herein to the “Maker” and the “Payee”
are deemed to apply to the Maker and the Payee, respectively, and to their
respective successors and assigns.
10.Interest Rate
Limitation. Nothing contained in this Note or any transaction
related to this Note, will be construed or so operate as to require the Maker to
pay interest at a greater rate than is now lawful or in such case to contract
for, or to make any payment, or to do any act contrary to applicable
law. Should any interest or other charges paid by the Maker, or
parties liable for the payment of this Note, in connection with the indebtedness
evidenced by this Note or any other document delivered in connection with this
Note, result in the computation or earning of interest in excess of the maximum
legal rate of interest that is legally permitted under applicable law, then any
and all such excess will be, and the same hereby is, waived by the Payee, and
any and all such excess will be automatically credited against and in reduction
of the balance due under this Note, and the portion of said excess that exceeds
the balance due under this Note shall be paid by the Payee to the
Maker.
11.Failure to Make
Payments. If the Maker is not able to perform any of its
obligations under this Note because, in the judgment of the board of directors
of the Maker, based on the advice of counsel, such performance would violate
applicable statutes, the by-laws or the articles of incorporation of the Maker,
any agreement to which the Maker is a party or any rule, regulation, decree or
order to which the Maker is subject, the Maker will take all commercially
reasonable action (including, without limitation, seeking waivers, consents and
approvals and making partial payments to the extent permitted) to fulfill its
obligations as soon as practicable. The Maker shall not voluntarily
amend its by-laws or articles of incorporation or enter into any agreement with
the intent or result of avoiding its obligations under this Note.
12.Governing Law and
Severability. The provisions of this Note will be construed
according to the laws of the State of Ohio without regard to conflict of laws
principles. If any provision of this Note is in conflict with any
statute or rule of law of the State of Ohio or is otherwise unenforceable for
any reason whatsoever, then such provision will be ineffective to the extent of
such invalidity and will be deemed separable from and will not invalidate any
other provision of this Note.
[Signature
Page Follows]
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In witness whereof, the
Maker has caused this Note to be executed by its officer thereunto duly
authorized, as of the date first written above.
| CHAMPION INDUSTRIES, INC. | ||
| By | ||
| Name | ||
| Title | ||
| Acknowledged and Agreed to: | ||
| Xxxxxxxx Xxxxxxxx, individually |
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