EXHIBIT 10
SECOND AMENDMENT TO LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT (this "Agreement"), made and
entered into on January 3, 2003, by CINTECH SOLUTIONS, INC., an Ohio corporation
("Lessee") and FIFTH THIRD BANK, an Ohio banking corporation ("Bank"), as
assignee of The Fifth Third Leasing Company ("Fifth Third Leasing"), is as
follows:
Recitals
A. The Bank, as assignee of Fifth Third Leasing, and Lessee are parties to
the Master Equipment Lease dated December 18, 2001 and one or more Equipment
Schedules A, as amended by the Addendum dated August 21, 2002 which was itself
amended by the Amendment to Addendum dated on or about August 21, 2002 (as
amended, the "Lease Agreement").
B. The Bank and Lessee desire to amend the Lease Agreement on the terms,
and subject to the conditions of, this Amendment.
STATEMENT OF AMENDMENT
In consideration of the mutual covenants and agreements, and conditions
set forth in this Amendment, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Bank and Lessee
hereby agree as follows:
1. Amendments to the Lease Agreement. The Lease Agreement is amended
to add new provisions as Sections 27, 28, and 29 providing in their entirety as
follows:
SECTION 27. ASSET BASE COVERAGE.
(a) At all times during the term of this Master Lease, the
Asset Base (as defined in subparagraph (c)) must be greater than or at
least equal to the aggregate unpaid balance of the Obligations then owing
to the Bank, which Obligations are at least equal to $1,068,000 as of the
date of this Amendment.
(b) By no later than Thursday of each week (commencing on
January 9, 2003), or sooner if available, Lessee will deliver to the Bank
(i) an Asset Base Certificate, in the form attached as Exhibit A ("Asset
Base Certificate") and (ii) a report ("Current Receivables Report"), which
is based on an accounting cut-off as of the end of business on the
immediately preceding Friday ("Cut-Off Date"), of: (A) Lessee's sales,
credits to sales or credit memoranda applicable to sales, collections and
non-cash charges (from whatever source, including, without limitation,
sales and noncash journals or other credits to Receivables) for the
applicable period ending as of Cut-Off Date, (B) the dollar value of all
Current Receivables, and (C) the dollar amount of any Outstanding
Judgments (as defined in subparagraph (g)). By no later than the tenth day
of each calendar month, Lessee will deliver to the Bank monthly agings
("Agings Report"), broken down by invoice
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date, of Receivables, which have been reconciled to the Current
Receivables Reports for the prior month and Lessee's general ledger, and
setting forth any changes in the reserves made for bad debts or any
extensions of the due date, or any other material changes in the terms, of
any Receivables.
(c) The "Asset Base" means, as of any date of determination,
an amount in U.S. dollars equal to (i) the sum of (A) 85% of the then net
amount of Lessee's Current Receivables (as defined in subparagraph (d))
and (B) the then aggregate Value (as defined in subparagraph (f)) of the
Securities (as defined in Section 28(a)) in the Securities Account (as
defined in Section 28(a)) minus (ii) the then Outstanding Judgments.
(d) "Current Receivables" means Receivables (as defined in
subparagraph (e)): (i) with respect to which not more than 90 days have
elapsed since the date of the original invoice applicable thereto, (ii)
with respect to which the account debtor (A) is not an affiliate of Lessee
and (B) has not filed bankruptcy or gone out of business, (iii) with
respect to which the services covered thereby have been rendered and
accepted by the account debtor and the finished goods covered thereby have
been delivered to the account debtor and accepted by such account debtor,
(iv) which are owing from the same account debtor or its affiliates so
long as not more than 50% of such Receivables are unpaid more than 90 days
after the original invoice date applicable thereto, and (v) in which the
Bank has a first priority security interest.
(e) "Receivables" means ordinary trade accounts receivable (1)
payable in terms ranging from net 30 to net 60 days in U.S. dollars, (2)
owned solely by Lessee, and (3) arise from final sales of goods or
services made in the ordinary course of Lessee's business as presently
conducted by it to account debtors whose principal place of business and
chief executive is in the United States of America or Canada.
(f) "Value" means, as of the applicable time, the most recent
closing price for the Securities in the applicable exchange, if any, in
which the Securities are traded and, as applicable, the most recent
quotation for money market funds and mutual funds, all as reported in The
Wall Street Journal (Midwest Edition). If The Wall Street Journal
discontinues publishing any or all of the foregoing information, then the
Bank may select and substitute for The Wall Street Journal another
comparable publication or source for purposes of determining the foregoing
information.
(g) "Outstanding Judgments" means, as of any date of
determination, the total of (i) all money judgments (collectively, "Money
Judgments") issued or rendered against Lessee in excess of any applicable
insurance with respect to which the insurer has admitted liability and
(ii) all writs of attachment, garnishment, execution or similar processes
issued or rendered against the Collateral or any accounts of Lessee at the
Bank ("Garnishments").
SECTION 28. ADDITIONAL COLLATERAL.
(a) As additional security for the full and prompt payment and
performance of all of the Obligations, Lessee hereby grants to the Bank,
for the benefit of
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itself and its affiliates, a continuing security interest in, and right of
setoff and common law pledge and lien against, all right, title, and
interest of Lessee in, to and under the following described property and
interests in property (collectively, the "Collateral"): (i) all accounts,
chattel paper, payment intangibles, and instruments; (ii) all of the
investment property and other financial assets and properties
(collectively, the "Securities") now or in the future held in, credited
to, or otherwise comprising, account number 01-01-002-0000000 at the Bank
(the "Securities Account"); (iii) the Securities Account, all security
entitlements ("Securities Entitlements") with respect to (A) the
Securities Account and (B) any and all of the property described in clause
(ii) above and all cash and other funds from time to time held in, or
credited to, the Securities Account; (iv) all income, funds, earnings,
interest, dividends, securities, payments and other distributions or
exchanges with respect to, and all claims and rights in respect of, the
Securities and the Securities Account; (v) all supporting obligations;
(vi) all proceeds of any or all of the foregoing described property,
whether in the form of originally described collateral, accounts, chattel
paper, deposit accounts, documents, general intangibles, instruments,
investment property, or cash; and (vii) all of the foregoing described
property, whether now owned or existing or hereafter acquired or arising
or in which Lessee now has or hereafter acquires any rights or interests.
The Bank and Lessee each agree that this Master Lease gives the Bank
control for all purposes of the Uniform Commercial Code of the Securities,
the Securities Account, all Securities Entitlements, and all investment
property, cash and other funds from time to time held in, credited to, or
comprising the Securities Account.
(b) Lessee hereby irrevocably authorizes the Bank at any time
and from time to time to file in any filing office in any jurisdiction any
initial financing statements and amendments thereto (i) describing the
Collateral and all proceeds thereof as being of an equal or lesser scope
or with greater detail from that set forth in this Section 28 and (ii)
provide any other information required by Part 5 of Article 9 of the
Uniform Commercial Code for the sufficiency or filing office acceptance of
any financing statement or amendment, including Lessee's type of
organization and any organizational identification number issued to
Lessee. Lessee hereby irrevocably authorizes the Bank at any time and from
time to time to correct or complete, or to cause to be corrected or
completed, any financing statements, continuation statements or other such
documents as have been filed naming Lessee as debtor and the Bank as
secured party.
(c) Lessee agrees that, until all of the Obligations are paid
in full, Lessee may not request that the Securities Account be closed or
that any of the Securities be transferred to any other account of Lessee
at the Bank unless, in each case, the Bank has given its prior written
consent, provided that for purposes only of this subparagraph (c)
"Securities" will not include any cash in the Securities Account;
provided, further, that the transfer of cash in the Securities Account is
subject to the terms of Section 29.
SECTION 29. ADDITIONAL REMEDIES.
(a) During any period of time that (i) a Deficiency (as
defined in subparagraph (d)) exists or (ii) Lessee has failed to supply an
Asset Base Certificate, Current Receivables Report or Agings Report in
accordance with the terms of this Master Lease when due ("Reporting
Default"), Lessee will not have any right to withdraw any
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funds from the Securities Account or any other account of Lessee at the
Bank or otherwise issue to the Bank any entitlement orders, instructions
or directions of any kind concerning the Collateral until such Deficiency
or Reporting Default is cured; provided, that Lessee may withdraw
available funds from its deposit accounts and pay the same over to the
Bank to the extent necessary to cure any Deficiency.
(b) If a Payment Default, a Deficiency Default, or an
Insolvency Default (as each is defined in subparagraph (d)) occurs, then
(i) Lessee will immediately cease to have any right to withdraw any funds
from the Securities Account or any other account of Lessee at Bank or
otherwise issue to the Bank any entitlement orders, instructions or
directions of any kind concerning the Collateral and (ii) the Bank, for
the benefit of itself and its affiliates, may immediately set off against
all investment property, cash and other funds held in any and all accounts
of the Lessee at the Bank, including, without limitation, the Securities
Account and each deposit account (to the extent necessary to satisfy the
Obligations).
(c) If a Triggering Event of Default (as defined in
subparagraph (d)) occurs, it will be an Event of Default under this Master
Lease and:
(i) The Bank will immediately have the rights and
remedies (A) provided for in the Uniform Commercial Code, as enacted in
any state of applicable jurisdiction and as the same may be amended from
time to time (the "UCC"), and (B) as provided by this Master Lease and by
law;
(ii) The Bank may immediately notify Lessee's customers,
account debtors and any other persons (A) obligated on the Collateral to
make payment or otherwise render performance to or for the benefit of the
Bank and (B) that, without limiting the generality of clause (B), the
Collateral has been assigned to the Bank and that payments should be made
directly to the Bank; and
(iii) The Bank is by this Master Lease authorized and
empowered, at its election, as proxy and attorney-in-fact of Lessee (with
full power of substitution), (A) to transfer or register any of the
Collateral in the Bank's name or the name of its nominee, (B) to sell,
assign and deliver all or any part of the Collateral (to the extent
necessary to satisfy the Obligations) at any broker's board, securities
exchange or market, or at any public or private sale or other disposition;
and (C) to apply any available proceeds of any disposition of the
Collateral to the Obligations. The Bank is authorized at any sale of the
Collateral (if it deems advisable to do so) to restrict the prospective
bidders or purchasers to persons who will represent that they are
purchasing the Collateral for their own account in compliance with any
applicable securities law or under any applicable exemption thereunder.
Inasmuch as the Securities are property of a type customarily sold on a
recognized market, no notice of the time and place of any public sale or
the time after which any private sale or other intended disposition of the
Securities need be given to Lessee. Any requirement of reasonable notice
of any disposition of any of the other Collateral will be satisfied if
such notice is sent to Lessee 10 days prior to such disposition. LESSEE
ACKNOWLEDGES THAT ANY SALE OF THE COLLATERAL UNDER THE CIRCUMSTANCES
DESCRIBED IN THIS SECTION 29 WILL BE COMMERCIALLY
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REASONABLE. The powers conferred on the Bank by this Section 29 are solely
to protect its own interest and will not impose any duties on the Bank to
exercise such powers, and none of the Bank or its directors, officers,
employees, or agents will be liable for any action taken or omitted in the
absence of a finding by a court of competent jurisdiction of gross
negligence or willful misconduct. All proceeds and other amounts received
by the Bank under this Master Lease will be applied by the Bank to the
Obligations in such order and method of application as may be elected by
the Bank in its discretion.
(d) "Triggering Event of Default" means:
(i) Lessee fails to make any payment when due under this
Master Lease and Lessee does not cure that default within 3 business days
after the date the Bank notifies Lessee of the existence of that payment
default ("Payment Default");
(ii) (A) if, as at any time, the aggregate unpaid
balance of the Obligations then owing to the Bank are greater than the
Asset Base (a "Deficiency") and (B) Lessee does not cure that Deficiency
within 3 business days after the date the Bank notifies Lessee of the
existence of the Deficiency (a "Deficiency Default");
(iii) The bankruptcy, reorganization, receivership,
assignment for the benefit of creditors or other formal or informal
insolvency, dissolution or liquidation proceeding of Lessee, whether
initiated by Lessee or by others against Lessee, occurs or Lessee ceases
business operations (an "Insolvency Default");
(iv) Lessee does not (A) supply the Asset Base
Certificate, the Current Receivables Report or Agings Report in accordance
with the terms of this Master Lease within 5 days after the same is due or
(B) provide reasonable access during normal business hours, following
reasonable advance notice from the Bank, for the Bank or its auditors to
the Collateral or to the books and records of Lessee for verification of
the Collateral;
(v) Any Asset Base Certificate, Current Receivables
Report or Agings Report proves to have been false or misleading in any
material respect when made; or
(vi) Lessee creates or permits to be created or to exist
any security interest or other lien on any of the Collateral except in
favor of the Bank.
2. Release. Except as set forth in the immediately following sentence,
Lessee, on behalf of itself and its predecessors, successors,successors-in-
interest, and assigns (each, a "Lessee Releasor" and collectively, the "Lessee
Releasors"): (a) does hereby forever release, remise and discharge each of the
Bank, Fifth Third Leasing, their respective affiliates, their respective present
and former officers, directors, stockholders, employees, attorneys, agents and
other representatives, and the respective predecessors, successors,
successors-in-interest, assigns, heirs, and representatives of each of the
foregoing (each, a "Bank Releasee" and collectively, the "Bank Releasees") from
any and all actions,
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causes of action, counterclaims, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments, extents,
executions, rights, claims, demands, liabilities, losses, rights to
reimbursement, subrogation, indemnification or other payment, costs or expenses,
and reasonable attorneys' fees, whether in law or in equity, of any nature
whatsoever, known or unknown, suspected or unsuspected, fixed or contingent, and
whether representing a past, present or future obligation of the Bank Releasees,
or any of them, that any of the Lessee Releasors ever had, may have or hereafter
can, may or shall have against the Bank Releasees, or any of them, which have
arisen or accrued prior to or as of the date of this Amendment (each a "Claim"
and collectively, "Claims") and (b) hereby agrees and covenants not to assert or
prosecute against any or all of the Bank Releasees any Claims. Notwithstanding
the foregoing, nothing in this Section 2 shall be construed to constitute a
release of, or a covenant not to xxx in respect of, any Claims for breach of any
express obligation of the Bank under this Amendment or the Lease Agreement
arising after the date of this Amendment.
3. Continuing Effect of Lease Agreement. Except as amended hereby, all of
the provisions of the Lease Agreement are ratified and confirmed and remain in
full force and effect. The Lease Agreement, as amended by this Amendment, will
be construed as one agreement. All references to the Lease Agreement will be
deemed to be references to the Lease Agreement as amended by this Amendment.
Lessee acknowledges that this Amendment does not constitute a waiver of any
existing Event of Default under the Lease Agreement.
4. Confidentiality.
(a) The Bank agrees and acknowledges that Confidential Information
(as defined in subparagraph (b) of this Section 4) provided to the Bank from
time to time may only be disclosed to (i) Lessee and its officers, directors,
employees, auditors, accountants and attorneys and (ii) the Bank's officers,
directors, employees, auditors, accountants and attorneys who need to know such
information for the purposes of the Lease Agreement and the lending, deposit,
and banking relationships between the Bank and Lessee. Notwithstanding the
foregoing or anything else to the contrary in this Amendment, (A) the Bank may
disclose Confidential Information as may be required by law (including, without
limitation, to the Federal Reserve and the Division of Financial Institutions of
the State of Ohio) or by an order or subpoena of a court, arbitrator or other
tribunal and (B) the Bank's obligations in this Amendment with respect to the
non-disclosure of Confidential Information will be the same as the Bank's
obligations under the law with respect to the confidentiality of information
provided by its customers generally.
(b) "Confidential Information" means any or all of the following
information: any of Lessee's financial statements or business plans delivered
from time to time to the Bank; all Asset Base Certificates, Current Receivables
Reports, and Aging Reports delivered from time to time to the Bank; proprietary
information related to Lessee's software and IT (information) technology known
by the Bank; and the then status (i.e., open, closed, or frozen) or balances of,
or any summary of activities in, any deposit accounts of Lessee at the Bank and
the Securities Account. "Confidential Information" does not include information
which (i) has become generally available to the public or commonly known other
than as a result of a breach by the Bank of any obligation to Lessee or (ii) was
disclosed to the Bank or its affiliates on a non-confidential basis by a third
party who, to the Bank's knowledge, did not owe an obligation of confidence to
Lessee with respect to the disclosed information.
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5. Status of Deposit Accounts. As of the date of this Amendment, the
Bank is not refusing Lessee the right to withdraw available funds from any of
its deposit accounts at the Bank subject to the restrictions created by this
Amendment.
6. General. The headings to the Sections of this Amendment have been
inserted for convenience of reference only and shall in no way modify or
restrict any provisions hereof or be used to construe any such provisions. This
Amendment and the Lease Agreement set forth the entire agreement of the parties
with respect to the subject matter of this Amendment and supersede all previous
understandings, written or oral, in respect of this Amendment. There are no
representations made by either party with respect to the subject matter of this
Amendment on which a party has relied except those representations which are
expressly set forth in this Amendment. This Amendment may be signed by facsimile
signatures, and if so signed, (a) may be relied on by each party as if the
document were a manually signed original and (b) will be binding on each party
for all purposes. All of the uncapitalized terms contained in this Amendment
which are defined under the UCC, as now or hereafter enacted in the State of
Ohio (the "Ohio Code"), will, unless defined in this Amendment or the context
indicates otherwise, have the meanings now or hereafter provided for in the Ohio
Code. Capitalized terms used, but not defined, in this Amendment which are
defined in the Lease Agreement will have the meanings given to them in the Lease
Agreement.
7. Warrant of Attorney. Lessee authorizes any attorney of record to
appear for it in any court of record in the State of Ohio, after maturity of the
Obligations, whether by the terms of this Amendment, the Lease Agreement, or any
other agreement or instrument evidencing or governing the terms thereof, or upon
a Triggering Event of Default, acceleration or otherwise, to waive the issuance
and service of process, and release all errors, and to confess judgment against
it in favor of the Bank for the amount of the Obligations due the Bank together
with interest, charges, court costs and reasonable attorneys' fees. Stay of
execution and all exemptions are hereby waived. If this Amendment, the Lease
Agreement or any Obligation is referred to an attorney for collection, Lessee
shall pay to the Bank or the then holder of the Obligations its reasonable
attorneys' fees. LESSEE AGREES THAT AN ATTORNEY WHO IS COUNSEL TO THE BANK OR
ANY OTHER HOLDER OF SUCH OBLIGATION MAY ALSO ACT AS ATTORNEY OF RECORD FOR
LESSEE WHEN TAKING THE ACTIONS DESCRIBED ABOVE IN THIS PARAGRAPH. LESSEE AGREES
THAT ANY ATTORNEY TAKING SUCH ACTIONS MAY BE PAID FOR THOSE SERVICES BY THE BANK
OR HOLDER OF SUCH OBLIGATION. LESSEE WAIVES ANY CONFLICT OF INTEREST THAT MAY BE
CREATED BECAUSE THE ATTORNEY REPRESENTING LESSEE IS BEING PAID BY THE BANK OR
THE HOLDER OF SUCH OBLIGATION.
IN WITNESS WHEREOF, the Bank and Lessee have executed this Amendment
to be effective as of the date set forth in the opening paragraph of this
Amendment.
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WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
Signed and acknowledged CINTECH SOLUTIONS, INC.
in the presence of:
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxxx
----------------------------- -----------------------------
Name: Xxxxx X. Xxxxxxxx
----------------------------
/s/ Xxxx Xxxxxxxxx Title: Chief Executive Officer
-----------------------------
FIFTH THIRD BANK
/s/ Xxxxxxxx X. Xxxxxxxx By:/s/ Xxxxxx X. Xxxx
----------------------------- ------------------------------
Name: Xxxxxx X. Xxxx
----------------------------
/s/ Xxxxx X. Xxxxxx, Xx. Title: Vice President
-----------------------------
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EXHIBIT A
ASSET BASE CERTIFICATE
Cintech Solutions, Inc. Today's date: , 200
------------------------ --
Receivables Reported as of: , 200
--------------------- --
Securities Balance Reported as of: , 200
------- --
I. CURRENT RECEIVABLES:
1. Total Receivables as of , 200 $
------------------------ ------- -----------------------------------
LESS:
2. Past 90 Days from date of invoice ($ )
----------------------
3. Affiliate Receivables ($ )
----------------------
4. Receivables from bankrupt or out-of-business account debtors ($ )
----------------------
5. Non U.S./Canada Receivables ($ )
----------------------
6. All Receivables from account debtor or its affiliates
if more than 50% of total of such Receivables are past 90 Days
from invoice date ($ )
---------------------
7. Other: [Receivables not meeting other terms of Second Amendment] ($ )
----------------------
8. Total Ineligible (sum of lines 2 through 7) ($ )
----------------------
9. TOTAL CURRENT RECEIVABLES (Line 1 minus Line 8) $
-----------------------------------
10. Advance Rate 85%
--
11. CURRENT RECEIVABLES AVAILABILITY (Line 10 times line 9) $
-----------------------------------
II. SECURITIES (XXX ACCOUNT) BALANCE AVAILABLE:
12. Total Securities balance as of , 200 $
----------------- ------- -----------------------------------
13. Total Credit for Current Receivables and Securities (Line 12 plus line 11) $
-----------------------------------
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III. MONEY JUDGMENTS/GARNISHMENTS:
14. Total Money Judgments/Garnishments as of , 200 ($ )
----------- - -----------------------
IV. TOTAL ASSET BASE:
15. (LINE 13 MINUS LINE 14): $
-----------------------------------
V. TOTAL OBLIGATIONS:
16. Lease Balance as of , 200 $
---------------- ------- -----------------------------------
17. EXCESS (DEFICIENCY) OF COLLATERAL (LINE 15 MINUS LINE 16): $
===================================
The undersigned certifies that the foregoing report is true and correct and in
accordance with the terms of the Master Lease Agreement with Fifth Third Bank
dated December 18, 2001 (heretofore or hereafter amended, the "Lease Agreement")
and that no Deficiency or Triggering Event of Default has occurred or is
continuing under the Lease Agreement.
CINTECH SOLUTIONS, INC.
By:
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Name:
-------------------------------------------------------
Title:
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