EXHIBIT 10.9.12
SUBORDINATION AGREEMENT
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THIS SUBORDINATION AGREEMENT (the "AGREEMENT") is made and
entered into as of February 28, 1997 by and among Chempower, Inc., an
Ohio corporation with its principal offices at 000 Xxxx Xxxxxxxxxx
Xxxx Xxxx, Xxxxx, Xxxx 00000 (the "BORROWER"); First National Bank of
Ohio, a national banking association with its principal offices at 000
X. Xxxx Xxxxxx, Xxxxx, Xxxx 00000 (the "LENDER"); and Xxxxxx X. Xxxx,
an individual whose residence address is 0000 Xxxxxxxx Xxxxx, Xxxxx,
Xxxx 00000 ("KUKK"), Xxxx X. Rochester, an individual whose residence
address is 0000 Xxxxxxxx Xxxxxx, X. Xxxxxx, Xxxx ("ROCHESTER") and
Kukk, as agent (the "AGENT") for Rochester and Kukk, the former
principal shareholders of Borrower ("PRINCIPAL SHAREHOLDERS").
R E C I T A L S:
A. Lender and Borrower are parties to a certain Loan Agreement
of even date herewith (the "LOAN AGREEMENT" and, together with the
other documents and instruments described therein and relating
thereto, the "LOAN DOCUMENTS") pursuant to which the Lender has agreed
to make a revolving loan in the maximum principal amount at any time
outstanding of Fifteen Million Seven Hundred Thousand Dollars
($15,700,000) (the "LOAN") to Borrower.
B. The Loan is to be secured by a security interest in and to
all of the assets of Borrower and each of its Subsidiaries, including,
without limitation, accounts, inventory, equipment, fixtures and
general intangibles (the "COLLATERAL") and by a mortgage or similar
interest in and to certain real estate owned by the Borrower (the
"OWNED PROPERTIES") and certain real estate (the "PURCHASED
PROPERTIES") owned by Holiday Properties, a general partnership in
which Kukk is a general partner, and which will be sold to Borrower
pursuant to a Purchase Agreement and associated Land Installment
Contracts (the "LAND CONTRACTS").
C. Borrower will use a portion of the proceeds of the Loan to
fund certain transactions (the "MERGER TRANSACTION") provided for in
an Agreement and Plan of Merger (the "MERGER AGREEMENT") between and
among Borrower, American Eco Corporation ("AMERICAN ECO") and Sub
Acquisition Corp. ("SUB ACQUISITION"), a wholly owned subsidiary of
American Eco. As a result of the Merger Transaction, Sub Acquisition
and Borrower will merge, and Borrower, as a result, will be a wholly
owned subsidiary of American Eco.
D. In connection with the Merger Transaction, the Principal
Shareholders will enter into a Financing Agreement with American Eco
and Borrower (the "FINANCING AGREEMENT") pursuant to which Borrower
will execute and deliver to the Principal Shareholders a promissory
note or notes in the aggregate principal amount of $15,900,000 (the
"SHAREHOLDER NOTES").
E. The Shareholder Notes will be secured by a security interest
in and to the Collateral, and a mortgage or similar interest in and to
the Owned Properties and the Purchased Properties (collectively, the
("SHAREHOLDER COLLATERAL"). In addition, American Eco will guaranty
payment of the Shareholder Notes (the "GUARANTY") which Guaranty will
be secured by a pledge of Borrower's stock (the "STOCK PLEDGE").
F. Lender, as a condition for extension of the Loan to
Borrower, has required that Kukk and Rochester, as the Principal
Shareholders, and Agent (collectively, the "CREDITOR") execute and
deliver this Agreement. Principal Shareholders and Agent, in order to
facilitate the Loan, have agreed to execute and deliver this Agreement
to Lender. Borrower and Creditor each represent and acknowledge to
Lender that Creditor will benefit as a result of these financial
accommodations from Lender to Borrower, and Creditor acknowledges
receipt of valuable consideration for entering into this Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lender, Borrower,
Principal Shareholders and Agent agree as follows:
ARTICLE I
DEFINITIONS
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SECTION 1.01. DEFINED TERMS. Capitalized terms used in this
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agreement shall have the meaning as defined in the recital paragraphs,
and if not therein defined, shall have the following meanings:
"SECURITY INTEREST" means and includes, without limitation, any
type of collateral security, whether in the form of a lien, charge,
mortgage, deed of trust, land installment contract, assignment,
pledge, chattel mortgage, chattel trust, factor's lien, equipment
trust, conditional sale, trust receipt, lien or title retention
contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
"SUBORDINATED INDEBTEDNESS" means and includes, without
limitation, all present and future indebtedness, obligations,
liabilities, claims, rights, and demands of any kind which may be now
or hereafter owing from Borrower to Creditor, including, without
limitation, the Financing Agreement and the Shareholder Notes. The
term "Subordinated Indebtedness" is used in its broadcast sense and
includes without limitation all principal, all interest, all costs and
attorneys' fees, all sums paid for the purpose of protecting the
rights of a holder of security (such as a secured party paying for
insurance on collateral if the owner fails to do so), all contingent
obligations of Borrower (such as a guaranty), and all other
obligations, secured or unsecured, of any nature whatsoever; provided,
however, Subordinated Indebtedness shall not include obligations of
Borrower to Kukk or Rochester for salary or employee benefits arising
out of employment agreements provided for in the Merger Agreement or
made generally available to Borrower's executive employees and not
otherwise prohibited under the Loan Documents.
"SUBSIDIARY" means any or all corporations, partnerships, joint
ventures, associations or other business entities of which the
Borrower now or hereafter owns, directly or indirectly, securities or
other ownership interests having ordinary voting power to elect a
majority of the board of directors or other governing body thereof,
including, without limitation, Global Power Company, Brookfield
Corporation, Southwick Corporation and Controlled Power Limited
Partnership.
"SUPERIOR INDEBTEDNESS" means and includes, without limitation,
all present and future indebtedness, obligations, liabilities, claims,
rights, and demands of any kind which may be now or hereafter owing
from Borrower to Lender, including the Loan. The term "Superior
Indebtedness" is used in its broadest sense and includes without
limitation all principal, all interest, all costs and attorneys' fees,
all sums paid for the purpose of protecting Lender's rights in
security (such as paying for insurance on collateral if the owner
fails to do so), all contingent obligations of Borrower (such as a
guaranty), all obligations arising by reason of Borrower's accounts
with Lender (such as an overdraft on a checking account), and all
other obligations of Borrower to Lender, secured or unsecured, of any
nature whatsoever.
SECTION 1.02. OTHER TERMS. Terms not otherwise defined in this
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Agreement shall have the meanings attributed to such terms in the Uniform
Commercial Code. All references to dollar amounts shall mean amounts in
lawful money of the United States of America.
ARTICLE II
SUBORDINATION OF PAYMENT AND PRIORITY
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SECTION 2.01. SUBORDINATION OF SUBORDINATED INDEBTEDNESS. All
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Subordinated Indebtedness of Borrower to Creditor is and shall be
subordinated in all respects, including as to payment and priority, to
all Superior Indebtedness of Borrower to Lender. If Creditor holds one
or more Security Interests, whether now existing or hereafter
acquired, in any of Borrower's real property or personal property,
Creditor also subordinates all its Security Interests to all Security
Interests held by Lender, whether the Lender's Security Interest or
Interests exist now or are acquired later.
SECTION 2.02. PAYMENT TO CREDITOR. Borrower will not make and
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Creditor will not accept, at any time while any Superior Indebtedness
is owing to Lender, (a) any payment upon any Subordinated Indebtedness,
whether such payment is made by Borrower or by a Subsidiary, (b) any
advance, transfer, or assignment of assets of Borrower or any
Subsidiary to Creditor in any form whatsoever that would reduce at
any time or in any way the amount of Subordinated Indebtedness, or
(c) any transfer of any assets of Borrower or any Subsidiary as
security for the Subordinated Indebtedness, except upon Lender's
prior written consent. Notwithstanding the foregoing, Borrower shall
be permitted to make all regularly scheduled payments of interest on
the Subordinated Indebtedness, provided that (i) there exists, either
prior to or as a result of such payment, no default or Event of
Default under the Loan Documents of which Creditor has actual
knowledge or as to which Lender has given Creditor notice; (ii)
Borrower is Solvent (as such term is defined in the Loan Documents)
at the time of and after giving effect to any such interest payment;
and (iii) American Eco is not in default of payments on any Account
owed to Borrower.
SECTION 2.03. DISTRIBUTIONS TO CREDITOR. In the event of any
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distribution, division, or application, whether partial or complete,
voluntary or involuntary, by operation of law or otherwise, of all or
any part of the assets of Borrower or a Subsidiary, or the proceeds
thereof, in whatever form, to creditors of Borrower or a Subsidiary
or upon any indebtedness of Borrower or a Subsidiary, whether by
reason of the liquidation, dissolution or other winding-up of
Borrower or a Subsidiary, or by reason of any execution sale,
receivership, insolvency, or bankruptcy proceeding, assignment for
the benefit of creditors, proceedings for reorganization, or
readjustment of Borrower or a Subsidiary's properties, then and in
such event, (a) the Superior Indebtedness shall be paid in full
before any payment is made upon the Subordinated Indebtedness, and
(b) all payments and distributions, of any kind or character and
whether in cash, property, or securities, which shall be payable or
deliverable upon or in respect of the Subordinated Indebtedness shall
be paid or delivered directly to Lender for application in payment of
the amounts then due on the Superior Indebtedness until the Superior
Indebtedness shall have been paid in full.
SECTION 2.04. ASSIGNMENT OF SUBORDINATED INDEBTEDNESS. In order
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that Lender may establish its right to prove claims and recover for its
own account distributions based on the Subordinated Indebtedness,
Creditor does hereby assign all its right, title, and interest in
such claims to Lender. Creditor further agrees to supply such
information and evidence, provide access to and copies of such of
Creditor's records as may pertain to the Subordinated Indebtedness,
and execute such instruments as may be required by Lender to enable
Lender to enforce all such claims and collect all distributions,
payments, or other disbursements which may be made on account of the
Subordinated Indebtedness. For such purposes, Creditor hereby
irrevocably authorizes Lender in its discretion to make and present
for or on behalf of Creditor such proofs of claims on account of the
Subordinated Indebtedness as Lender may deem expedient and proper and
to vote such claims in any such proceeding and to receive and collect
any and all dividends, payments, or other disbursements made thereon
in whatever form the same may be paid or issued and to apply the same
on account of the Superior Indebtedness. Creditor agrees to deliver to
Lender, at Lender's request, all notes of Borrower to Creditor,
including the Shareholder Notes, or other evidence of the Subordinated
Indebtedness, now held or hereafter acquired by Creditor, while this
Agreement remains in effect. Attached hereto are copies of the
Financing Agreement, the Shareholder Note, and the Stock Pledge,
certified by Kukk (individually and as Agent) as true, complete and
accurate copies thereof. Creditor agrees not to sell, assign, pledge
or otherwise transfer any of such notes except subject to all the
terms and conditions of this Agreement. Should Lender receive any
payments on account of the Subordinated Indebtedness, as between
Borrower and Lender, such payments shall not be treated as payment of
the Superior Indebtedness, provided, however, that upon payment to
Lender of the Superior Indebtedness, in full, then the holder of the
Subordinated Indebtedness shall be subrogated to Lender's rights under
the Superior Indebtedness to the extent Lender received payment on
account of the Subordinated Indebtedness.
SECTION 2.05. APPLICATION OF PAYMENT. Should any payment,
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distribution, security, or proceeds thereof be received by Creditor
at any time on the Subordinated Indebtedness contrary to the terms of
this Agreement, Creditor immediately will deliver the same to Lender
in precisely the form received (except for the endorsement or
assignment of Creditor where necessary), for application on or to
secure the Superior Indebtedness, whether it is due or not due, and
until so delivered the same shall be held in trust by Creditor as
property of Lender. In the event Creditor fails to make any such
endorsement or assignment, Lender, or any of its officers on behalf
of Lender, is hereby irrevocably authorized by Creditor to make
the same.
SECTION 2.06. LEGEND ON SUBORDINATED OBLIGATIONS. Each note,
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contract, or other evidence of the Subordinated Indebtedness, including,
without limitation, the Financing Agreement, the Shareholder Note,
mortgages and UCC Financing Statements, shall contain a prominent
legend, substantially as follows:
THIS INSTRUMENT AND THE OBLIGATIONS REPRESENTED THEREBY IS
SUBORDINATE IN ALL RESPECTS TO CERTAIN OBLIGATIONS OF
CHEMPOWER, INC. AND ITS SUBSIDIARIES TO FIRST NATIONAL BANK
OF OHIO, INCLUDING A PROMISSORY NOTE IN THE MAXIMUM
PRINCIPAL AMOUNT OF $15,700,000 DATED AS OF FEBRUARY 28,
1997.
ARTICLE III
WARRANTIES AND REPRESENTATIONS OF CREDITOR
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SECTION 3.01. WARRANTIES AND REPRESENTATIONS OF CREDITOR. Kukk,
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Rochester, and Agent each represents and warrants to Lender that:
(a) no representations or agreements of any kind have been made
to Creditor which would limit or qualify in any way the terms of
this Agreement;
(b) Lender has made no representation to Creditor as to the
creditworthiness of Borrower;
(c) Creditor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's
financial condition. Lender shall have no obligation to disclose
to Creditor information or material acquired by Lender in the
course of its relationship with Borrower, including any facts,
events, or circumstances which might in any way affect Creditor's
risks under this Agreement.
(d) Each person executing this Agreement is duly, properly and
fully authorized to execute and deliver this Agreement.
(e) This Agreement is, or upon the execution of will be, a
legal, valid and binding obligation of Kukk, Rochester and the
Agent, in full force and effect and enforceable with its
respective terms, except for the effect of applicable laws
regarding bankruptcy or insolvency or general principles of
equity.
ARTICLE IV
RIGHTS, WAIVERS AND ENFORCEMENT
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SECTION 4.01. CREDITORS WAIVERS. Creditor waives any right to
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require Lender: (a) to make, extend, renew, or modify any loan to
Borrower or to grant any other financial accommodations to Borrower
whatsoever; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Superior
Indebtedness or of any nonpayment related to any Security Interests,
or notice of any action or nonaction on the part of Borrower, Lender,
any surety, endorser, or other guarantor in connection with the
Superior Indebtedness, or in connection with the creation of new or
additional Superior Indebtedness; (c) to resort for payment or to
proceed directly or at once against any person, including Borrower;
(d) to proceed directly against or exhaust any Security Interests
held by Lender from Borrower, any other guarantor, or any other
person; (e) to give notice of the terms, time, and place of any
public or private sale of personal property security held by Lender
from Borrower or to comply with any other applicable provisions of
the Uniform Commercial Code; (f) to pursue any other remedy within
Lender's power; or (g) to commit any act or omission of any kind,
at any time, with respect to any matter whatsoever.
SECTION 4.02. LENDER'S RIGHTS. Lender may take or omit any and all
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actions with respect to the Superior Indebtedness or any Security
Interests for the Superior Indetedness without affecting whatsoever
any of Lender's rights under this Agreement. In particular, without
limitation, Lender may, without notice of any kind to Creditor, (a)
make one or more additional secured or unsecured loans to Borrower;
(b) repeatedly alter, compromise, renew, extend, accelerate, or
otherwise change the time for payment or other terms of the Superior
Indebtedness or any part thereof, including increases and decreases
of the rate of interest on the Superior Indebtedness; extensions may
be repeated and may be for longer than the original loan term; (c)
take and hold Security Interests for the payment of the Superior
Indebtedness, and exchange, enforce, waive, and release any such
Security Interests, with or without the substitution of new
collateral; (d) release, substitute, agree not to xxx, or deal with
any one or more of Borrower's sureties, endorses, or guarantors on
any terms or manner Lender chooses; (e) determine how, when and what
application of payments and credits, shall be made on the Superior
Indebtedness; (f) apply such security and direct the order or manner
of sale thereof, as Lender in its discretion may determine; and (g)
assign this Agreement in whole or in part.
SECTION 4.03. DEFAULT BY BORROWER. If Borrower becomes insolvent
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or bankrupt, this Agreement shall remain in full force and effect.
In the event of a corporate reorganization or corporate arrangement
of Borrower undo the provisions of the Bankruptcy Code, as amended,
this Agreement shall remain in full force and effect and the court
having jurisdiction over the reorganization or arrangement is hereby
authorized to preserve such priority and subordination in approving
any such plan of reorganization or arrangement. Any default by
Borrower under the terms of the Subordinated Indebtedness also shall
be a default under the terms of the Superior Indebtedness to Lender
provided, however, that if the holders of the Subordinated
Indebtedness declare a default and accelerate the Subordinated
Indebtedness, such action will not cause a default in the Superior
Indebtedness if, and only if, the holder of the Subordinated
Indebtedness takes no action to enforce or collect on the Subordinated
Indebtedness other than to enforce any rights to proceed against
Borrower's stock held by American Eco Corporation as provided in the
Stock Pledge, and the default under the Subordinated Indebtedness
giving rise to such action shall not cause a default in the Superior
Indebtedness unless such default constitutes an Event of Default (as
defined in the Loan Agreement) other than an Event of Default
described in clause (i) or clause (o) of Section 8.1 of the Loan
Agreement.
SECTION 4.04. DURATION AND TERMINATION. This Agreement will take
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effect when received by Lender, without the necessity of any
acceptance by Lender, in writing or otherwise, and will remain in
full force and effect until Creditor shall notify Lender in writing
at the address shown above to the contrary. Any such notice shall
not affect the Superior Indebtedness owed Lender by Borrower at the
time of such notice, nor shall such notice affect Superior
Indebtedness thereafter granted in compliance with a commitment
made by Lender to Borrower prior to receipt of such notice, nor shall
such notice affect any renewals of or substitutions for any of the
foregoing. Such notice shall affect only indebtedness of Borrower to
Lender arising after receipt of such notice and not arising from
financial assistance granted by Lender to Borrower in compliance with
Lender's obligations under a commitment. Any notes lodged with Lender
pursuant to Section 2.04 of this Agreement need not be returned to
Creditor until this Agreement has no further force or effect.
SECTION 4.05. MODIFICATIONS TO SUBORDINATED INDEBTEDNESS.
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Borrower and Creditor agree that no modifications, alterations
or changes may be made to any documents evidencing the Subordinated
Indebtedness, including without limitation, the Financing Agreement
and the Shareholder Note, or any documents evidencing any interest
of Creditor in the Shareholder Collateral without the express written
consent of Lender.
ARTICLE V
MISCELLANEOUS PROVISIONS
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SECTION 5.01. APPLICABLE LAW. This Agreement has been delivered
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to Lender and accepted by Lender in Summit County, in the State of Ohio.
If there is a lawsuit, Creditor and Borrower agree upon Lender's request
to submit to the jurisdiction of the courts of Summit County, State of
Ohio. This Agreement shall be governed by and construed in accordance
with the laws (but not the law of conflicts) of the State of Ohio. No
provision contained in this Agreement shall be construed (a) as
requiring Lender to grant to Borrower or to Creditor any financial
assistance or other accommodations, or (b) as limiting or precluding
Lender from the exercise of Lender's own judgment and discretion about
amounts and times of payment in making loans or extending
accommodations to Borrower.
SECTION 5.02. AMENDMENTS. This Agreement constitutes the entire
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understanding and agreement of the parties as to the matters set forth
in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless made in writing and signed by Lender,
Borrower, and Creditor.
SECTION 5.03. ATTORNEYS' FEES; EXPENSES. Creditor and Borrower
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agree to pay upon demand all of Lender's costs and expenses, including
attorneys' fees and Lender's legal expenses, incurred in connection
with the enforcement of this Agreement. Lender may pay someone else
to help enforce this Agreement, and Creditor and Borrower shall pay
the costs and expenses of such enforcement. Costs and expenses
include Lender's attorneys' fees and legal expenses whether or not
there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Creditor and Borrower also pay
all court costs and such additional fees as may be directed by the
court.
SECTION 5.04. SUCCESSORS AND ASSIGNS. This Agreement shall
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extend to and bind the respective heirs, personal representatives,
successors and assigns of the parties to this Agreement, and the
covenants of Borrower and Creditor respecting subordination of the
Subordinated Indebtedness in favor of Lender shall extend to,
include, and be enforceable by any transferee or endorse to whom
Lender may transfer any or all of the Superior Indebtedness.
SECTION 5.05. WAIVER. Lender shall not be deemed to have waived
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any rights under this Agreement unless such waiver is given in writing
and signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Agreement
shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender,
nor any course of dealing between Lender and Creditor, shall
constitute a waiver of any of Lender's rights or of any of Creditor's
obligations as to any future transactions. Whenever the consent of
Lender is required under this Agreement, the granting of such consent
by Lender in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases
such consent may be granted or withheld in the sole discretion of
Lender.
BORROWER AND CREDITOR ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF
THIS SUBORDINATION AGREEMENT, AND BORROWER AND CREDITOR AGREE TO ITS
TERMS.
Chempower, Inc.
By: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, Chairman/President/CEO
/s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, Individually and as Agent
/s/ Xxxx X. Rochester
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Xxxx X. Rochester
First National Bank of Ohio
By: /s/ Xxxx Xxxxxxxx
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Its: Vice-President
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CERTIFICATE
The undersigned certifies that attached hereto are true, complete and
accurate copies of the Financing Agreement, the Shareholder Note, and
the Pledge Agreement. Capitalized terms used in this Certificate have
the respective meanings assigned to them in the Subordination
Agreement, dated as of February 28, 1997, by and among Chempower,
Inc., First National Bank of Ohio, Xxxxxx X. Xxxx, Xxxx X. Rochester,
and Xxxxxx X. Xxxx as Agent.
/s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, Principal Shareholder
/s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, Agent
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