EXHIBIT 10.1
EXECUTION COPY
================================================================================
NECI ACQUISITION, INC.
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 20, 2004
COMERICA BANK
================================================================================
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, made as of the 20th day of September, 2004, by
and between NECI ACQUISITION, INC., a Florida corporation ("Company"), and
COMERICA BANK, a Michigan banking corporation, of Detroit, Michigan ("Bank").
RECITALS
A. Company has requested that Bank extend it credit and letters of
credit on the terms and conditions set forth herein.
B. Bank is prepared to extend such credit as aforesaid, but only on the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants contained herein, the
Company and Bank agree as follows:
WITNESSETH:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
"Acquisition" shall mean the purchase by Company of substantially all
of the assets of the Seller under the Purchase Agreement.
"Advance" shall mean a borrowing requested by Company and made by Bank
under Section 2 of this Agreement, including any refunding or conversions of
such borrowings pursuant to Section 4.A.3. and shall include a Eurodollar-based
Advance and a Prime-based Advance.
"Advance Formula Agreement" shall mean the Advance Formula Agreement in
the form of Exhibit "D" attached hereto, as amended or modified from time to
time and any Advance Formula Agreement delivered in replacement thereof.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and executive officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation for the purposes of this definition if such Person possesses,
directly or indirectly, the power (i) to vote 10% or more of the securities
having ordinary voting power for the election of directors of such corporation
or (ii) to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
2
"Alternate Base Rate" shall mean for any day a rate per annum (rounded
upwards, if necessary, to the next higher 1/16th of 1%) equal to the Federal
Funds Effective Rate in effect on such day plus one percent (1%).
"Applicable Interest Rate" shall mean (a) with respect to the Revolving
Credit Note, the Eurodollar-based Rate or the Prime-based Rate, as selected by
Company from time to time subject to the terms and conditions of this Agreement,
and (b) with respect to the Term Note, the Prime-based Rate.
"Business Day" shall mean any day on which commercial banks are open
for domestic and international business (including dealings in foreign exchange)
in Detroit, London and New York.
"Capital Expenditure" shall mean, without duplication, any payment made
directly or indirectly for the purpose of acquiring or constructing fixed
assets, real property or equipment which in accordance with GAAP would be added
as a debit to the fixed asset account of Company, including, without limitation,
amounts paid or payable under any conditional sale or other title retention
agreement or under any lease or other periodic payment arrangement which is of
such a nature that payment obligations of Company thereunder would be required
by GAAP to be capitalized and shown as liabilities on the balance sheet of
Company.
"Capital Lease" shall mean any lease of any property (whether real,
personal or mixed) by Company as lessee which, in conformity with GAAP, is, or
is required to be accounted for as, a capital lease on the balance sheet of
Company, together with any renewals of such leases (or entry into new leases) on
substantially similar terms.
"Continuing Collateral Mortgage" shall mean the Continuing Collateral
Mortgage in the form of Exhibit "E" attached hereto, as amended or modified from
time to time.
"Current Ratio" shall mean, as of any date of determination, the ratio
of (i) the current assets of Company as of such date to (ii) the current
liabilities of Company as of such date, all as determined in accordance with
GAAP.
"Debt Service Coverage Ratio" shall mean, as of any date of
determination, the ratio of (i) EBITDA for the Measuring Period then ending, to
(ii) the sum of all payments of principal and interest paid or due and payable
during such period with respect to Funded Debt of Company.
"EBITDA" shall mean, for any period, the net income of Company for such
period, plus, to the extent deducted in determining such net income, the sum of
income tax expense, interest expense, and depreciation and amortization, all as
determined in accordance with GAAP.
"Environmental Laws" shall mean all federal, state and local laws
including statutes, regulations, ordinances, codes, rules, and other
governmental restrictions and requirements, relating to environmental pollution,
contamination or other impairment of the environment or any hazardous or toxic
substances of any nature. These Environmental Laws shall include but not be
limited to the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the
3
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of
1976, the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, and the Federal Superfund Amendments and Reauthorization
Act of 1986.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor act or code.
"Eurodollar-based Advance" shall mean an Advance which bears interest
at the Eurodollar-based Rate.
"Eurodollar-based Rate" shall mean for the Revolving Credit Note a per
annum interest rate which is equal to the Eurodollar Margin plus the quotient
of:
(a) the per annum interest rate at which Bank's Eurodollar Lending
Office offers deposits to prime banks in the eurodollar market
in an amount comparable to the relevant Eurodollar-based
Advance or relevant principal portion of the Term Note and for
a period equal to the relevant Interest Period at
approximately the time Company requests such Advance on the
first day of such Interest Period; divided by
(b) a percentage equal to 100% minus the maximum rate on such date
at which Bank is required to maintain reserves on
"Euro-currency Liabilities" as defined in and pursuant to
Regulation D of the Board of Governors of the Federal Reserve
System or, if such regulation or definition is modified, and
as long as Bank is required to maintain reserves against a
category of liabilities which includes eurodollar deposits or
includes a category of assets which includes eurodollar loans,
the rate at which such reserves are required to be maintained
on such category;
all as conclusively determined by Bank, such sum to be rounded upward, if
necessary, to the nearest whole multiple of 1/16th of 1%.
"Eurodollar Lending Office" shall mean Bank's office located at Grand
Cayman, British West Indies or such other branch of Bank, domestic or foreign,
as it may hereafter designate as its Eurodollar Lending Office by notice to
Company.
"Eurodollar Margin" shall mean 3.75%.
"Event of Default" shall mean any of the Events of Default specified in
Section 11 hereof.
"Federal Funds Effective Rate" shall mean, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by Bank from three Federal funds brokers of recognized standing
selected by it.
4
"Funded Debt" shall mean, as of any date of determination, the sum,
without duplication, of (a) all indebtedness of Company for borrowed money or
for the deferred purchase price of property or services as of such date (other
than trade liabilities incurred in the ordinary course of business and payable
in accordance with customary practices) or which is evidenced by a note, bond,
debenture or similar instrument, (b) all obligations of Company under
capitalized leases as of such date, (c) all obligations of Company in respect of
letters of credit, acceptances or similar obligations issued or created for the
account of Company as of such date, (d) all liabilities secured by any lien on
any property owned by Company as of such date even though Company has not
assumed or otherwise become liable for the payment thereof, (e) all Guarantee
Obligations of Company as of such date, and (f) all contingent obligations of
the Company, in each case determined in accordance with GAAP.
"GAAP" shall mean, as of any applicable date of determination,
generally accepted accounting principles consistently applied, as in effect on
the date of this Agreement.
"Guarantee Obligations" shall mean as to any person (the "guaranteeing
person") (a) any obligation of the guaranteeing person or (b) any obligation of
another person (including, without limitation, any bank under any letter of
credit), the creation of which was induced by a reimbursement, counter indemnity
or similar obligation issued by the guaranteeing person, in either case
guaranteeing or in effect guaranteeing any debt, leases, dividends or other
obligations (the "primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Company in good faith.
"Indebtedness" shall mean all loans, advances, indebtedness,
obligations and liabilities of Company to Bank under this Agreement, together
with all other indebtedness, obligations and liabilities whatsoever of Company
to Bank arising under or in connection with this Agreement, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising.
5
"Interest Period" shall mean a period of one (1), two (2), three (3) or
six (6) months, as selected by Company pursuant to the provisions of this
Agreement commencing on the day a Eurodollar-based Advance is made or on the
effective date of an election of the Eurodollar-based Rate made with respect to
the Term Note.
"Leverage Ratio" shall mean, as of the end of each fiscal quarter of
Company, the ratio of (i) Total Liabilities of Company as of such date to (ii)
Tangible Effective Net Worth as of such date.
"Letter of Credit" shall have the meaning set forth in Section 2.6.
"Letter of Credit Reserve" shall mean, for any period, an amount equal
to the aggregate principal amount of all undrawn Letters of Credit issued by
Bank for the account of Company under and pursuant to this Agreement and the
amount of all draws under Letters of Credit paid by Bank and not reimbursed by
Company.
"Loan Documents" shall mean collectively, this Agreement, the Notes,
the Advance Formula Agreement, the Security Agreement, the Continuing Collateral
Mortgage, the Subordination Agreements, and any other instruments or agreements
executed at any time pursuant to or in connection with any such documents.
"Measuring Period" shall mean (a) for the fiscal quarters ending on
December 31, 2004, March 31, 2005 and June 30, 2005, the period beginning on the
date hereof, and ending on the applicable quarter-end, and (b) for each fiscal
quarter ending thereafter, the four fiscal quarters then ending.
"Note" shall mean the Revolving Credit Note and the Term Note, as the
case may be, as any may be amended or modified from time to time, and "Notes"
shall refer to each of them.
"Permitted Liens" shall mean with respect to any Person:
(a) liens for taxes not yet due and payable or which are being
contested in good faith by appropriate proceedings diligently
pursued, provided that provision for the payment of all such
taxes has been made on the books of such Person as may be
required by GAAP;
(b) mechanics', materialmen's, banker's, carriers', warehousemen's
and similar liens and encumbrances arising in the ordinary
course of business and securing obligations of such Person
that are not overdue for a period of more than 60 days or are
being contested in good faith by appropriate proceedings
diligently pursued, provided that in the case of any such
contest (i) any proceedings commenced for the enforcement of
such liens and encumbrances shall have been duly suspended;
and (ii) such provision for the payment of such liens and
encumbrances has been made on the books of such Person as may
be required by GAAP;
(c) liens arising in connection with worker's compensation,
unemployment insurance, old age pensions and social security
benefits and similar statutory obligations which are not
6
overdue or are being contested in good faith by appropriate
proceedings diligently pursued, provided that in the case of
any such contest (i) any proceedings commenced for the
enforcement of such liens shall have been duly suspended; and
(ii) such provision for the payment of such liens has been
made on the books of such Person as may be required by GAAP;
(d) (i) liens incurred in the ordinary course of business to
secure the performance of statutory obligations arising in
connection with progress payments or advance payments due
under contracts with the United States government or any
agency thereof entered into in the ordinary course of business
and (ii) liens incurred or deposits made in the ordinary
course of business to secure the performance of statutory
obligations, bids, leases, fee and expense arrangements with
trustees and fiscal agents and other similar obligations
(exclusive of obligations incurred in connection with the
borrowing of money, any lease-purchase arrangements or the
payment of the deferred purchase price of property), provided
that full provision for the payment of all such obligations
set forth in clauses (i) and (ii) has been made on the books
of such Person as may be required by GAAP; and
(e) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities
and other similar purposes, or zoning or other restrictions as
to the use of real properties, which do not materially
interfere with the business of such Person.
(f) liens described in attached Schedule 9.5; and
(g) liens and security interests upon fixed or capital assets
acquired by Company after the date of this Agreement
(including by virtue of a Capital Lease) to secure
indebtedness permitted by Section 9.13(d), provided that (i)
any such lien or security interest is created solely for the
purpose of securing indebtedness representing, or incurred to
finance, the cost of the item of property subject thereto;
(ii) the principal amount of the indebtedness secured by such
lien does not exceed 100% of the fair value of the property at
the time it was acquired, and (iii) the lien or security
interest does not cover any property other than such item of
property and the proceeds thereof.
"Person" or "person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency, or other entity.
"Prime Margin" shall mean one percent (1%) with respect to any
Revolving Credit Advance and one and one-half percent (1-1/2%) with respect to
amounts outstanding under the Term Loan.
"Prime Rate" shall mean the per annum interest rate established by Bank
as its prime rate for its borrowers as such rate may vary from time to time,
which rate is not necessarily the lowest rate on loans made by Bank at any such
time.
7
"Prime-based Advance" shall mean an Advance which bears interest at the
Prime-based Rate.
"Prime-based Rate" shall mean for any day a per annum interest rate
which is the sum of the applicable Prime Margin, plus the greater of (i) the
Prime Rate or (ii) the Alternate Base Rate.
"Purchase Agreement" shall mean the Asset Purchase Agreement dated as
of September __, 2004, between Seller and Company.
"Request for Advance" shall mean a Request for Advance issued by
Company under this Agreement in the form of Exhibit "B" attached hereto.
"Revolving Credit" shall mean the revolving credit facility extended by
Bank to Company under Section 2 of this Agreement.
"Revolving Credit Maturity Date" shall mean July 1, 2005.
"Revolving Credit Note" shall mean the Note described in Section 2.1
hereof made by Company to Bank in the form of Exhibit "A" attached hereto.
"Security Agreement" shall mean the Security Agreement in the form of
Exhibit "F" attached hereto, as amended from time to time, pursuant to which
Company granted to Bank a first priority security interest in all accounts,
chattel paper, documents, equipment, fixtures, general intangibles, goods,
instruments and inventory, wherever located and whether now owned or hereafter
acquired, together with all replacements thereof, substitutions therefor,
accessions thereto and all proceeds and products of all the foregoing.
"Seller" shall mean Nexus Custom Electronics, Inc., a Delaware
corporation.
"Subordination Agreement" shall mean the Subordination Agreement dated
as of the date hereof between Seller and Bank in the form of Exhibit "G"
attached hereto.
"Subordinated Debt" shall mean indebtedness of Company to Seller which
has been subordinated in payment and priority to the Indebtedness pursuant to
the Subordination Agreement.
"Subsidiary" shall mean a corporation of which more than fifty percent
(50%) of the outstanding voting stock is owned by Company, either directly or
indirectly, through one or more intermediaries.
"Tangible Effective Net Worth" shall mean, as of any date of
determination, the shareholders' equity of Company as of such date as determined
in accordance with GAAP, minus amounts due, if any, from Affiliates of Company
or any other related parties, and all patents, patent rights, trademarks, trade
names, franchises, copyrights, licenses, goodwill and other similar intangible
assets of Company at such time, after all appropriate deductions in accordance
with GAAP (including without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization), plus Subordinated Debt as of such
date.
8
"Term Loan" shall mean the term loan requested by Company and made by
Bank under Section 3 of this Agreement.
"Term Loan Maturity Date" shall mean September 20, 2009.
"Term Note" shall mean the term note issued by Company under Section 3
of this Agreement in the form of Exhibit "C" attached hereto.
"Total Liabilities" shall mean, as of any date, all items of
indebtedness and other liabilities as of such date that would be required to be
classified as liabilities on a balance sheet of Company as prepared in
accordance with GAAP.
2. THE INDEBTEDNESS: REVOLVING CREDIT
2.1 Bank agrees to make Advances to Company at any time and from time
to time from the effective date hereof until the Revolving Credit Maturity Date,
not to exceed Five Million Dollars ($5,000,000) in aggregate principal amount at
any one time outstanding. All of the Advances under this Section 2 shall be
evidenced by the Revolving Credit Note under which Advances, repayments and
readvances may be made, subject to the terms and conditions of this Agreement.
2.2 The Revolving Credit Note shall mature on the Revolving Credit
Maturity Date and each Advance from time to time outstanding thereunder shall
bear interest at its Applicable Interest Rate. The amount and date of each
Advance, its Applicable Interest Rate, its Interest Period, if applicable, and
the amount and date of any repayment shall be noted on Bank's records, which
records will be conclusive evidence thereof absent manifest error.
2.3 Company may request an Advance under this Section 2 upon the
delivery to Bank of a Request for Advance executed by an authorized officer of
Company, subject to the following:
(a) each such Request for Advance shall set forth the information
required on the Request for Advance form annexed hereto as
Exhibit "B";
(b) each such Request for Advance shall be delivered to Bank by
12:00 p.m. three (3) Business Days prior to the proposed date
of Advance, except in the case of a Prime-based Advance, for
which the Request for Advance must be delivered by 11:00 a.m.
on the proposed date of Advance;
(c) the principal amount of such Advance, plus the amount of any
outstanding indebtedness to be then combined therewith having
the same Applicable Interest Rate and Interest Period, if any,
shall be in the case of a Eurodollar-based Advance at least
$500,000 or any larger amount in $100,000 increments;
(d) the principal amount of such Advance, plus the sum of the
aggregate amount of all other outstanding Advances under this
Section 2, plus the Letter of Credit Reserve shall not exceed
the formula set forth in the Advance Formula Agreement;
9
(e) a Request for Advance, once delivered to Bank, shall not be
revocable by Company.
Bank may, at its option, lend under this Section 2 upon the telephone
request of an authorized officer of Company and, in the event Bank makes any
such advance upon a telephone request, the requesting officer shall, if so
requested by Bank, mail to Bank, on the same day as such telephone request, a
Request for Advance in the form attached as Exhibit "B". Company hereby
authorizes Bank to disburse Advances under this Section 2 pursuant to the
telephone instructions of any person purporting to be an authorized officer of
Company and Company shall bear all risk of loss resulting from disbursements
made upon any telephone request. Each telephone request for an Advance shall
constitute a certification of the matters set forth in the Request for Advance
form as of the date of such requested Advance.
2.4 Company may prepay all or part of the outstanding balance of the
Prime-based Advance(s) under the Revolving Credit Note at any time. Upon one (1)
Business Day prior notice to Bank, Company may prepay all or part of any
Eurodollar-based Advance, provided that the amount of any such partial
prepayment shall be at least $500,000 or any larger amount in $100,000
increments and the unpaid portion of such Advance which is refunded or converted
under Section 4.A.3 shall be subject to the limitations of Section 2.3(c)
hereof. Any prepayment of a Prime-based Advance or a Eurodollar-based Advance on
the last day of the Interest Period therefor made in accordance with this
Section shall be without premium, penalty or prejudice to Company's right to
reborrow under the terms of this Agreement. Any other prepayment shall be
subject to the provisions of Section 5.1 hereof.
2.5 The aggregate principal amount at any one time outstanding under
the Revolving Credit Note plus the Letter of Credit Reserve shall never exceed
the formula in the Advance Formula Agreement. Company shall immediately make all
payments necessary to comply with this provision. Any such payments shall be
applied first to outstanding Prime-based Advances and the remainder, if any, to
outstanding Eurodollar-based Advances.
2.6 In addition to direct Advances under the Revolving Credit Note to
be provided to Company by Bank pursuant to Section 2.1 of this Agreement, Bank
further agrees to issue, from time to time, standby letters of credit for the
account of Company (individually a "Letter of Credit" and collectively, "Letters
of Credit") in aggregate undrawn amounts not to exceed Seven Hundred Fifty
Thousand Dollars ($750,000) at any one time outstanding; provided, however, that
the sum of the aggregate amount of Advances outstanding under the Revolving
Credit Note plus the Letter of Credit Reserve shall not exceed Five Million
Dollars ($5,000,000) at any one time; and provided further, that no Letter of
Credit shall, by its terms, have an expiration date which extends beyond the
earlier of (i) five (5) Business Days prior to the Revolving Credit Maturity
Date or (ii) one (1) year after issuance. In addition to the terms and
conditions of this Agreement, the issuance of any Letters of Credit shall also
be subject to the terms and conditions of any letter of credit applications and
agreements executed and delivered by Company to Bank with respect thereto.
Company shall pay to Bank annually in advance a fee equal to three and three
quarters percent (3-3/4%) per annum of the amount of each Letter of Credit.
Company shall also pay all standard letter of credit fees charged by Bank in
connection with letters of credit.
10
2.7 Company agrees to pay to Bank an unused fee equal to one percent
(1%) per annum multiplied by the average daily balance of the unused portion of
the Revolving Credit commitment during the applicable fiscal quarter of
determination, computed on the actual number of days elapsed using a year of 360
days. The unused fee shall be payable quarterly in arrears on the first day of
each July, October, January and April, commencing January 1, 2005, and on the
Revolving Credit Maturity Date. For purposes of calculating the unused fee,
outstanding Letters of Credit shall be considered usage of the commitment.
2.8 Proceeds of Advances under the Revolving Credit Note shall be used
to finance the Acquisition, for fixed asset acquisitions, and for working
capital purposes.
3. THE INDEBTEDNESS: TERM LOAN
3.1 Bank agrees to loan to Company and Company agrees to borrow, on the
date of execution of this Agreement, the sum of One Million Two Hundred Thousand
Dollars ($1,200,000). At the time of borrowing, Company agrees to execute the
Term Note as evidence of the indebtedness hereunder. The loan made under this
Section 3 shall be subject to the terms and conditions of this Agreement.
3.2 The indebtedness represented by the Term Note shall be repaid in
equal consecutive principal installments in the amount of Twenty Thousand
Dollars ($20,000) each, commencing November 1, 2004, and on the first day of
each month thereafter until the Term Loan Maturity Date, when the entire unpaid
balance of principal and interest thereon shall be due and payable.
3.3 Interest on the Term Note shall accrue and be payable as set forth
in Section 4.B.
3.4 The proceeds of the Term Note shall be used to finance the
Acquisition.
4.A. INTEREST, INTEREST PERIODS, CONVERSIONS, PREPAYMENTS -
REVOLVING CREDIT.
4.A.1 The Revolving Credit Note and the Advances thereunder shall bear
interest from the date thereof on the unpaid principal balance thereof from time
to time outstanding, at a rate per annum equal to the Prime-based Rate or the
Eurodollar-based Rate, as the Company may elect subject to the provisions of
this Agreement. With respect to Prime-based Advances, interest shall be payable
monthly on the first Business Day of each month, commencing on the first
Business Day following the month during which such Advance is made, and at
maturity. With respect to Eurodollar-based Advances, interest shall be payable
on the last day of each Interest Period applicable thereto. Notwithstanding the
foregoing, from and after the occurrence of any Event of Default and solely
during the continuation thereof, the Advances shall bear interest, payable on
demand, at a rate per annum equal to: (i) in the case of Prime-based Advances,
three percent (3%) above the Prime-based Rate; and (ii) in the case of a
Eurodollar-based Advance, three percent (3%) above the rate which would
otherwise be applicable under this Section 4.A.1 until the end of the then
current Interest Period, at which time such Advance shall bear interest at the
rate provided for in clause (i) of this Section 4.A.1. Interest on all Advances
11
shall be calculated on the basis of a 360 day year for the actual number of days
elapsed. The interest rate with respect to any Prime-based Advance shall change
on the effective date of any change in the Prime-based Rate.
4.A.2 Each Interest Period for a Eurodollar-based Advance shall
commence on the date such Eurodollar-based Advance is made or is converted from
an Advance of another type pursuant to Section 4.A.3 hereof or on the last day
of the immediately preceding Interest Period for such Eurodollar-based Advance,
and shall end on the date one, two, three or six months thereafter, as the
Company may elect as set forth below, subject to the following:
(i) no Interest Period shall extend beyond the Revolving Credit
Maturity Date; and
(ii) any Interest Period which would otherwise end on a day which
is not a Business Day shall be extended to the next succeeding
Business Day unless the next succeeding Business Day falls in
another calendar month, in which case, such Interest Period
shall end on the immediately preceding Business Day and when
an Interest Period begins on a day which has no numerically
corresponding day in the calendar month during which such
Interest Period is to end, it shall end on the last Business
Day of such calendar month.
The Company shall elect the initial Interest Period applicable to a
Eurodollar-based Advance by its Request for Advance given to the Bank pursuant
to Section 2.3 or by its notice of conversion given to the Bank pursuant to
Section 4.A.3, as the case may be. Provided that no Event of Default shall have
occurred and be continuing, the Company may elect to continue an Advance as a
Eurodollar-based Advance by giving irrevocable written, telephonic or
telegraphic notice thereof to the Bank, before 1:30 p.m. (Detroit time) on the
last day of the then current Interest Period applicable to such Eurodollar-based
Advance, specifying the duration of the succeeding Interest Period therefor. If
the Bank does not receive timely notice of the election and the Interest Period
elected by the Company, the Company shall be deemed to have elected to convert
such Eurodollar-based Advance to a Prime-based Advance at the end of the then
current Interest Period.
4.A.3 Provided that no Event of Default shall have occurred and be
continuing, the Company may, on any Business Day, convert any outstanding
Advance into an Advance of another type in the same aggregate principal amount,
provided that any conversion of a Eurodollar-based Advance shall be made only on
the last Business Day of the then current Interest Period applicable to such
Advance. If the Company desires to convert an Advance, it shall give the Bank
written, telephonic or telegraphic notice, specifying the date of such
conversion, the Advances to be converted, the type of Advance elected and, if
the conversion is into a Eurodollar-based Advance, the duration of the first
Interest Period therefor, which notice shall be given not later than 1:30 p.m.
(Detroit time) on the applicable date of conversion.
4.B. INTEREST, PREPAYMENTS - TERM LOAN
4.B.1 The Term Note and the loan thereunder shall bear interest from
the date thereof on the unpaid principal balance thereof from time to time
outstanding, at a rate per annum equal to the Prime-based Rate. Interest shall
be payable monthly on the first Business Day of each month and at maturity
(whether by acceleration or otherwise). Notwithstanding the foregoing, from and
12
after the occurrence of an Event of Default and during the continuation thereof,
the principal outstanding under the Term Note shall bear interest payable on
demand, at a rate per annum equal to three percent (3%) above the rate that
would otherwise be applicable under this Section 4.B.1. Interest shall be
calculated on the basis of a 360 day year for the actual number of days elapsed.
The interest rate applicable to the Term Note shall change on the effective date
of any change in the Prime-based Rate.
4.B.2 (a) At its option and upon one (1) Business Day's prior written,
telephonic or telegraphic notice to the Bank, the Company may prepay any portion
of the Term Loan in whole at any time or in part from time to time, with accrued
interest on the principal being prepaid to the date of such prepayment, and
without premium or penalty except as provided in Section 4.C, provided that each
partial prepayment shall be in an amount not less than $100,000 or an integral
multiple thereof.
(b) Each partial prepayment of the Term Loan or the principal
outstanding under the Term Note shall be applied to the
principal payments due thereunder in the inverse order of
their maturities.
4.C TERMINATION.
4.C.1 (a) Upon at least thirty (30) days' prior written notice to Bank,
Company may, at its option, terminate this Agreement; provided, however, that no
such termination shall be effective until Company has indefeasibly paid all the
Indebtedness. Any such notice of termination shall be irrevocable and Company
shall be required to pay, on the termination date contained in such notice, all
the Indebtedness in immediately available funds.
(b) Subject to the provisions of Sections 5.5 and 5.6 hereof, at the
effective date of any such termination, Company shall pay to Bank a termination
fee (in addition to the then outstanding principal, accrued interest and other
charges owing under this Agreement and any of the other documents related
thereto), as liquidated damages for the loss of bargain and not as a penalty, in
an amount equal to (i) one percent (1%) of the principal amount of the
Indebtedness as of the date of such notice if the termination is effective on or
prior to the first yearly anniversary of the date of this Agreement, or one-half
of one percent (1/2%) of such amount if the termination is effective after the
first yearly anniversary of the date of this Agreement and on or before the
second yearly anniversary of the date of this Agreement. No termination fee
shall be applicable to any termination occurring thereafter.
(c) All of the Indebtedness shall be forthwith due and payable upon any
termination of this Agreement in accordance with its terms. Except as otherwise
expressly provided in this Agreement or any other Loan Document, no termination
or cancellation (regardless of cause or procedure) of this Agreement shall in
any way affect or impair the rights, powers or privileges of Bank or the
obligations, duties, or liabilities of Company in any way relating to (i) any
transaction or event occurring prior to such termination or cancellation or (ii)
any of the undertakings, agreements, covenants, warranties, or representations
of Company contained in this Agreement or any other Loan Document. All such
13
undertakings, covenants, warranties and representations of Company shall survive
such termination and Bank shall retain its liens and security interests, and all
of its rights and remedies under this Agreement and the other Loan Documents
notwithstanding such termination until Company has paid the Indebtedness to
Bank, in full, in immediately available funds.
(d) It is understood that Company may elect to terminate this Agreement
in its entirety only; no section or lending facility may be terminated
separately.
(e) Upon termination of this Agreement, and in addition to payment in
full of the Indebtedness as provided above, Company shall deliver cash
collateral to Bank in an amount equal to the Letter of Credit Reserve.
5. SPECIAL PROVISIONS, CHANGES IN CIRCUMSTANCES AND YIELD PROTECTION.
5.1 If Company makes any payment of principal with respect to any
Eurodollar-based Advance on any day other than the last day of the Interest
Period applicable thereto (whether voluntarily, by acceleration, or otherwise),
or if Company fails to borrow any Eurodollar-based Advance after notice has been
given by Company to Bank in accordance with the terms hereof requesting such
Advance, or if Company fails to make any payment of principal or interest when
due in respect of a Eurodollar-based Advance, Company shall reimburse Bank on
demand for any resulting loss, cost or expense incurred by Bank as a result
thereof, including, without limitation, any such loss, cost or expense incurred
in obtaining, liquidating, employing or redeploying deposits from third parties,
whether or not Bank shall have funded or committed to fund such Advance. Such
amount payable by Company to Bank may include, without limitation, an amount
equal to the excess, if any, of (a) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, refunded or converted, for
the period from the date of such prepayment or of such failure to borrow, refund
or convert, through the last day of the relevant Interest Period, at the
applicable rate of interest for said Advance(s) over (b) the amount of interest
(as reasonably determined by Bank) which would have accrued to Bank on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. Calculation of any amounts payable to
Bank under this paragraph shall be made as though Bank shall have actually
funded or committed to fund the relevant Eurodollar-based Advance through the
purchase of an underlying deposit in an amount equal to the amount of such
Advance and having a maturity comparable to the relevant Interest Period;
provided, however, that Bank may fund any Eurodollar-based Advance in any manner
it deems fit and the foregoing assumptions shall be utilized only for the
purpose of the calculation of amounts payable under this paragraph. Upon the
written request of Company, Bank shall deliver to Company a certificate setting
forth the basis for determining such losses, costs and expenses, which
certificate shall be presumed correct, absent manifest error.
5.2 For any Interest Period for which the Applicable Interest Rate is
the Eurodollar-based Rate, if Bank shall designate a Eurodollar Lending Office
which maintains books separate from those of the rest of Bank, Bank shall have
the option of maintaining and carrying the relevant Advance on the books of such
Eurodollar Lending Office.
14
5.3 If with respect to any Interest Period Bank determines that, by
reason of circumstances affecting the foreign exchange and interbank markets
generally, deposits in Eurodollars in the applicable amounts are not being
offered to the Bank for such Interest Period, then Bank shall forthwith give
notice thereof to the Company. Thereafter, until Bank notifies Company that such
circumstances no longer exist, the obligation of Bank to make Eurodollar-based
Advances, and the right of Company to convert an Advance to or refund an Advance
as a Eurodollar-based Advance shall be suspended.
5.4 If, after the date hereof, the introduction or implementation of,
or any change in, any applicable law, rule or regulation or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by Bank (or its
Eurodollar Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, shall make it unlawful or impossible
for the Bank (or its Eurodollar Lending Office) to honor its obligations
hereunder to make or maintain any Advance which bears interest at the
Eurodollar-based Rate, Bank shall forthwith give notice thereof to Company.
Thereafter (a) the obligation of Bank to make Eurodollar-based Advances and the
right of Company to convert an Advance or refund an Advance as a
Eurodollar-based Advance shall be suspended and thereafter Company may select as
Applicable Interest Rates only those which remain available, and (b) if Bank may
not lawfully continue to maintain an Advance, to the end of the then current
Interest Period applicable thereto, the Prime-based Rate shall be the Applicable
Interest Rate for the remainder of such Interest Period.
5.5 If the adoption or implementation after the date hereof, or any
change after the date hereof in, any applicable law, rule or regulation of any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
Eurodollar Lending Office) with any request or directive (whether or not having
the force of law) made by any such authority, central bank or comparable agency
after the date hereof:
(a) shall subject Bank (or its Eurodollar Lending Office) to any
tax, duty or other charge with respect to any Advance or shall
change the basis of taxation of payments to Bank (or its
Eurodollar Lending Office) of the principal of or interest on
any Advance or any Note or any other amounts due under this
Agreement in respect thereof (except for changes in the rate
of tax on the overall net income of Bank or its Eurodollar
Lending Office imposed by any jurisdiction in which Bank is
organized or engaged in business); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for
the account of, or credit extended by Bank (or its Eurodollar
Lending Office) or shall impose on Bank (or its Eurodollar
Lending Office) or the foreign exchange and interbank markets
any other condition affecting any Advance;
and the result of any of the foregoing is to increase the costs to Bank of
maintaining any part of the Indebtedness or to reduce the amount of any sum
received or receivable by Bank under this Agreement, by an amount deemed by the
Bank to be material, then Bank shall promptly notify Company of such fact and
15
demand compensation therefor and, within fifteen days after demand by Bank,
Company agrees to pay to Bank such additional amount or amounts as will
compensate Bank for such increased cost or reduction, and, if such additional
amount is over $25,000, Company may terminate this Agreement without any
termination fee as described in Section 4.C.1. Bank will promptly notify Company
of any event of which it has knowledge which will entitle Bank to compensation
pursuant to this Section. A certificate of Bank setting forth the basis for
determining such additional amount or amounts necessary to compensate Bank shall
be presumed to be correct save for manifest error.
5.6 In the event that at any time after the date of this Agreement any
change in law such as described in Section 5.5, hereof, shall, in the reasonable
opinion of Bank require that the credit provided under Section 2 of this
Agreement be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by Bank or any
corporation controlling Bank and such change has or would have the effect of
reducing the rate of return on Bank's or Bank's parent's capital or assets as a
consequence of the Bank's obligations hereunder to a level below that which Bank
or Bank's parent would have achieved but for such change, then Bank shall notify
Company and demand compensation therefor and, within fifteen days after demand
by Bank, Company agrees to pay to Bank such additional amount or amounts as will
compensate Bank for such reduction, and, if such additional amount is over
$25,000, Company may terminate this Agreement without any termination fee as
described in Section 4.C.1. A certificate of Bank setting forth the basis for
determining such additional amount or amounts necessary to compensate Bank shall
be presumed to be correct save for manifest error.
6. CONDITIONS AND SECURITY
6.1 Company agrees to furnish Bank prior to the initial borrowing under
this Agreement, in form and substance to be satisfactory to Bank, with (i)
certified copies of the Articles of Incorporation and Bylaws of Company; (ii)
certified copies of resolutions of the board of directors of Company evidencing
approval of the borrowings and transactions contemplated hereunder; (iii) a
certificate of good standing from the state of Company's incorporation and from
the state(s) in which Company is required to be qualified to do business; (iv)
an opinion of counsel to Company in form satisfactory to Bank; and (v) such
other documents and instruments as Bank may reasonably require.
6.2 As security for all indebtedness of Company to Bank hereunder,
Company agrees to furnish, execute and deliver to Bank, or cause to be
furnished, executed and delivered to Bank, prior to or simultaneously with the
initial borrowing hereunder, in form to be satisfactory to Bank and supported by
appropriate resolution in certified form authorizing same, the following:
(a) The Continuing Collateral Mortgage;
(b) The Security Agreement;
(c) The Subordination Agreement;
16
(d) Financing Statements required or requested by Bank to perfect
all security interests to be conferred upon Bank under this
Agreement and to accord Bank a perfected first priority
security position under the Uniform Commercial Code; and
(e) Such other documents or agreements of security and appropriate
assurances of validity and perfected first priority of lien or
security interest as Bank may reasonably request at any time.
6.3 Concurrently herewith, Company pays to Bank its $62,500 loan
origination fee. Such fee has been fully earned and is non-refundable.
6.4 The obligation of Bank to make the initial loan or Advance under
this Agreement is subject to the satisfaction of all of the following
conditions:
(a) All terms of the Acquisition (including, without limitation,
the amount and form of consideration included in the purchase
price thereunder) shall be in form and substance satisfactory
to Bank; and all of the conditions to purchase contained
therein shall have been satisfied (and not waived) to the
satisfaction of Bank. All parties shall have in all material
respects done and performed such acts and observed such
covenants which they are required to do or perform under the
Purchase Agreement;
(b) The closing of the Acquisition shall have occurred, and
Company shall have provided evidence satisfactory in form and
content to Bank that such closing was in full compliance with
the Purchase Agreement;
(c) satisfaction of all real estate requirements listed on
Schedule 6.4;
(d) Bank shall have received an opening borrowing base report
showing that after giving effect to the closing of the
Acquisition and the payment of related expenses, Company has
borrowing availability under the Revolving Credit Note in an
amount not less than $350,000;
(e) Company shall have delivered to Bank a pro forma balance sheet
of Company certified by an executive officer of Company that
it fairly presents the pro forma adjustments reflecting the
consummation of the transactions contemplated in this
Agreement, including all fees and expenses in connection
herewith;
(f) there shall have been no material adverse change since January
1, 2004 in the financial condition, business prospects or
operations of the Seller; and
(g) Company shall have provided Bank with evidence that it has
received at least $5,250,000 in cash contributions to its
common equity.
7. REPRESENTATIONS AND WARRANTIES
17
Company represents and warrants and such representations and warranties
shall be deemed to be continuing representations and warranties during the
entire life of this Agreement and after giving effect to the Acquisition:
7.1 Company is a corporation duly organized and existing in good
standing under the laws of the State of Florida; Company and each of its
Subsidiaries is in good standing in each jurisdiction in which it is required to
be qualified to do business, except where the failure to be so qualified would
not have a material adverse effect on the financial condition of Company and its
Subsidiaries or their ability to carry on their business; execution, delivery
and performance by Company of this Agreement and other documents and instruments
required under this Agreement, and the issuance of the Notes by Company are
within its corporate powers, have been duly authorized, are not in contravention
of law or the terms of Company's Articles of Incorporation or Bylaws, and do not
require the consent or approval of any governmental body, agency or authority;
and this Agreement and other documents and instruments required under this
Agreement and Notes to which Company is a party, when issued and delivered, will
be valid and binding on the Company in accordance with their terms.
7.2 The execution, delivery and performance by Company of this
Agreement and any other documents and instruments required under this Agreement,
and the issuance of the Notes by Company are not in contravention of the
unwaived terms of any indenture, agreement or undertaking to which Company is a
party or by which it is bound.
7.3 Except as set forth on Schedule 7.3, no litigation or other
proceeding before any court or administrative agency is pending, or to the
knowledge of the officers of Company is threatened, against Company or any of
its Subsidiaries, the outcome of which would reasonably be expected to
materially impair Company's or any Subsidiary's financial condition (taken as a
whole) or the ability of Company or any Subsidiary to carry on its business.
7.4 There are no security interests in, liens, mortgages, or other
encumbrances on any of Company's or any Subsidiary's assets, except to Bank or
the Permitted Liens.
7.5 Neither Company nor any Subsidiary maintains or contributes to any
employee pension benefit plan subject to title IV of the "Employee Retirement
Income Security Act of 1974" (herein called "ERISA") ("Pension Plan"), except
those set forth in attached Schedule 7.5. There was no unfunded past service
liability of any pension plan maintained by the Company as of June 30, 2004, and
there is no accumulated funding deficiency within the meaning of ERISA, or any
existing material liability with respect to any pension plan owed to the Pension
Benefit Guaranty Corporation ("PBGC") or any successor thereto, except any
funding deficiency for which an application to the PBGC for waiver is pending or
for which a waiver has been granted by the PBGC.
7.6 The financial statements of Seller dated December 31, 2003 and July
31, 2004, previously furnished to Bank, were prepared in accordance with GAAP,
and fairly present in all material respects the financial condition of the
Seller as of such dates; and since January 1, 2004, there has been no material
adverse change in the financial condition of the Seller.
18
7.6.1 All financial statements of Company furnished to Bank pursuant to
Section 8.1(a) and (b) hereof will be prepared in accordance with GAAP (subject
to customary year end audit adjustments in the case of interim financial
statements) and will fairly present in all material respects the financial
condition of the Company as of the date(s) thereof.
7.6.2 The pro forma balance sheet of Company referred to in Section
6.4(e) hereof fairly presents in all material respects the financial condition
of the Company as of such date; to the best knowledge of Company's officers, (x)
Company does not have any material obligations, contingent or otherwise
(including any tax liability) not disclosed by or reserved against in said
balance sheet, and (y) at the present time there are no material unrealized or
anticipated losses from any present commitment of Company.
7.7 To the best knowledge of the officers of Company, the financial
projections previously furnished by Company to Bank were as of the date thereof
and are as of the date of execution of this Agreement reasonable in all material
respects taking into account all facts and information known or reasonably
available to Company.
7.8 All tax returns and tax reports of Company and its Subsidiaries
required by law to have been filed have been duly filed or extensions obtained,
and all taxes, assessments and other governmental charges or levies (other than
those presently payable without penalty and those currently being contested in
good faith for which adequate reserves have been established) upon Company and
its Subsidiaries (or any of its or their properties) which are due and payable
and for which the failure to pay would materially adversely affect its business
or the value of its property or assets have been paid. The charges, accruals and
reserves on the books of Company in respect of the Federal income tax for all
periods are adequate in the opinion of Company.
7.9 Except as set forth in Schedule 7.9, there are no Subsidiaries of
Company.
7.10 Except as set forth in Schedule 7.10:
(a) Company and each of its Subsidiaries, in the conduct of its
business, is in compliance in all material respects with all
federal, state or local laws, statutes, ordinances and
regulations applicable to any of them. Company and its
Subsidiaries have all approvals, authorizations, consents,
licenses, orders and other permits of all governmental
agencies and authorities, whether federal, state or local,
required to permit the operation of their business as
presently conducted, except such approvals, authorizations,
consents, licenses, orders and other permits.
(b) Neither Company nor any Subsidiary is a party to any
litigation or administrative proceeding, nor so far as is
known by the officers of Company is any litigation or
administrative proceeding threatened against Company or any
Subsidiary, which in either case (i) asserts or alleges that
Company or any Subsidiary violated Environmental Laws, (ii)
asserts or alleges that Company or any Subsidiary is required
to clean up, remove, or take remedial or other response action
due to the disposal, depositing, discharge, leaking or other
release of any hazardous substances or materials, (iii)
19
asserts or alleges that Company or any Subsidiary is required
to pay all or a portion of the cost of any past, present, or
future cleanup, removal or remedial or other response action
which arises out of or is related to the disposal, depositing,
discharge, leaking or other release of any hazardous
substances or materials by Company or any Subsidiary.
(c) Neither Company nor any Subsidiary is subject to any judgment,
decree, order or citation related to or arising out of
applicable Environmental Laws and to the best knowledge of the
officers of Company, neither Company nor any Subsidiary has
been named or listed as a potentially responsible party by any
governmental body or agency in a matter arising under any
applicable Environmental Laws.
(d) To the best of Company's officers' knowledge, Company and its
Subsidiaries have all permits, licenses and approvals required
under applicable Environmental Laws.
7.11 Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. Company is not engaged principally,
or as one of its important activities, directly or indirectly, in the business
of extending credit for the purpose of purchasing or carrying margin stock, and
none of the proceeds of any of the loans hereunder will be used, directly or
indirectly, for any purpose which would violate the provisions of Regulation U
or X of the Board of Governors of the Federal Reserve System. Terms for which
meanings are provided in Regulation U of the Board of Governors of the Federal
Reserve System or any regulations substituted therefor, as from time to time in
effect, are used in this paragraph with such meanings.
7.12 Company has good and valid title to the property pledged,
mortgaged or otherwise encumbered or to be encumbered by it under the Security
Agreement and the Continuing Collateral Mortgage.
7.13 The Acquisition has closed in accordance with its terms and the
Company has good and valid title to the property acquired in connection with the
Acquisition.
8. AFFIRMATIVE COVENANTS
Company covenants and agrees that it will, so long as Bank may make any
Advance under this Agreement and thereafter so long as any indebtedness remains
outstanding under this Agreement:
8.1 Furnish Bank:
(a) within one hundred twenty (120) days after and as of the end
of each fiscal year of Company, a detailed audit report of
Company, prepared in accordance with GAAP and certified by
independent certified public accountants satisfactory to Bank;
(b) within thirty (30) days after and as of the end of each month,
a balance sheet and statement of profit and loss of Company
for such month and fiscal year-to-date in form satisfactory to
Bank, prepared in accordance with GAAP (subject to customary
20
year-end adjustments) and certified by an authorized officer
of Company as being correct and accurate to the best of his
knowledge;
(c) within one hundred twenty (120) days after the date hereof, a
detailed audit report of the Seller for each of the years
ending June 30, 2004 and June 30, 2003, prepared in accordance
with GAAP and audited by Xxxxx Xxxxxxxx or by other
independent certified public accountants satisfactory to Bank
(d) within twenty (20) days after and as of the end of each month,
including the last month of each fiscal year, (i) a borrowing
base report, (ii) agings of Company's accounts receivable and
accounts payable, and (iii) an inventory report, each in form
reasonably acceptable to Bank;
(e) on or before January 15 of each year, financial projections
for the income statement of the Company and its Subsidiaries
on a month by month basis for such year, in form satisfactory
to Bank;
(f) such information as required by the terms and conditions of
the Security Agreement and the Advance Formula Agreement; and
(g) promptly, and in form to be reasonably satisfactory to Bank,
such other information as Bank may reasonably request from
time to time.
8.2 Pay and discharge, and cause its Subsidiaries to pay and discharge,
all taxes and other governmental charges, and all contractual obligations
calling for the payment of money, before the same shall become overdue, unless
and to the extent only that such payment is being contested in good faith.
8.3 Maintain, and cause its Subsidiaries to maintain, insurance
coverage on their physical assets and against other business risks in such
amounts and of such types as are customarily carried by companies similar in
size and nature, and in the event of acquisition of additional property, real or
personal, or of incurrence of additional risks of any nature, increase such
insurance coverage in such manner and to such extent as prudent business
judgment and present practice would dictate; and in the case of all policies
covering property mortgaged or pledged to Bank or property in which Bank shall
have a security interest of any kind whatsoever, other than those policies
protecting against casualty liabilities to strangers, all such insurance
policies shall provide that the loss payable thereunder shall be payable to
Company and Bank (as mortgagee) as their respective interests may appear, all
said policies or copies thereof, including all endorsements thereon and those
required hereunder, to be deposited with Bank.
8.4 Permit Bank, through its authorized attorneys, accountants and
representatives, to examine Company's and each Subsidiary's books, accounts,
records, ledgers and assets of every kind and description at all reasonable
times (not to exceed four times per fiscal year of Company, provided that such
limitation shall not apply during the continuance of an Event of Default ) upon
oral or written request of Bank, which shall include but shall not be limited to
semi-annual collateral audits of Company conducted by Bank, at Company's cost
and expense.
21
8.5 Promptly notify Bank of any condition or event which constitutes or
with the running of time and/or the giving of notice would constitute an Event
of Default under this Agreement, and promptly inform Bank of the existence or
occurrence of any condition or event (other than conditions having an effect on
the economy in general) which could reasonably be expected to have a material
adverse effect upon Company's or any Subsidiary's financial condition (taken as
a whole).
8.6 Maintain, and cause its Subsidiaries to maintain, in good standing
all licenses required by the States of Vermont and Florida or any agency
thereof, or other governmental authority that may be necessary or required for
Company and its Subsidiaries to carry on its general business objects and
purposes.
8.7 Comply, and cause its Subsidiaries to comply, with all material
requirements imposed by ERISA as presently in effect or hereafter promulgated,
including but not limited to, the minimum funding requirements of any Pension
Plan.
8.8 Promptly notify Bank after the occurrence thereof in writing of any
of the following events:
(a) the termination of a Pension Plan pursuant to Subtitle C of
Title IV of ERISA or otherwise;
(b) the appointment of a trustee by a United States District Court
to administer a Pension Plan;
(c) the commencement by the Pension Benefit Guaranty Corporation,
or any successor thereto of any proceeding to terminate a
Pension Plan;
(d) the failure of a Pension Plan to satisfy the minimum funding
requirements for any plan year as established in Section 412
of the Internal Revenue Code of 1954, as amended or any
similar provision under the Internal Revenue Code of 1986, as
amended;
(e) the withdrawal of Company or any Subsidiary from a Pension
Plan; or
(f) a reportable event, within the meaning of Title IV of ERISA.
8.9 Furnish Bank, upon Bank's request, in form reasonably satisfactory
to Bank with pledges, assignments, mortgages, lien instruments or other security
instruments covering any or all of Company's and each domestic Subsidiary's real
and personal property, of every nature and description, whether now owed or
hereafter acquired, to the extent that Bank may in its sole reasonable
discretion require.
8.10 Furnish to the Bank concurrently with the delivery of each of the
financial statements required by Section 8.1(a) and each financial statement
required by Section 8.1(b) for the months of March, June, September and
December, a statement prepared and certified by the chief financial officer of
Company in his capacity as an officer of Company (or in such officer's absence,
a responsible senior officer of Company in his capacity as an officer of
22
Company) (a) setting forth all computations necessary to show compliance by
Company with the financial covenants contained in Sections 8.11 through 8.14
hereof, (b) stating that as of the date thereof, no condition or event which
constitutes an Event of Default hereunder or which with the running of time
and/or the giving of notice would constitute an Event of Default hereunder has
occurred and is continuing, or if any such event or condition has occurred and
is continuing or exists, specifying in detail the nature and period of existence
thereof and any action with respect thereto taken or contemplated to be taken by
Company and (c) stating that the signer has personally reviewed in his capacity
as an officer of Company this Agreement and that such certificate is based on an
examination sufficient to assure that such certificate is accurate.
8.11 Maintain, as of the last day of each fiscal quarter of Company
commencing with the quarter ending on September 30, 2004, a Current Ratio of not
less than 1.5 to 1.0.
8.12 Maintain, as of the last day of each fiscal quarter of Company
commencing with the quarter ending on December 31, 2004, a Debt Service Coverage
Ratio for the Measuring Period then ending of not less than 1.2 to 1.0.
8.13 Maintain, as of the last day of each fiscal quarter of Company
during the periods specified below, a Leverage Ratio of not more than the
following:
=================================== =======================
PERIOD RATIO
----------------------------------- -----------------------
09/30/04-06/30/05 1.5 to 1
----------------------------------- -----------------------
09/30/05-03/31/06 2 to 1
----------------------------------- -----------------------
06/30/06 and thereafter 2.5 to 1
=================================== =======================
8.14 Maintain, as of the last day of each fiscal quarter of Company
commencing with the quarter ending on September 30, 2004, Tangible Effective Net
Worth of not less than $5,500,000.
8.15 Maintain all primary bank accounts with Bank.
8.16 Cause each person that is or becomes a Subsidiary of the Company
from time to time to execute and deliver a secured Guaranty to the Bank
guaranteeing payment of the indebtedness of Company to Bank, together with such
other documentation as Bank may require.
8.17 Deliver or cause to be delivered to Bank, on or before the date
that is 90 days after the date hereof, an appraisal of the real property subject
to the Continuing Collateral Mortgage performed by an appraisal firm selected by
Bank; and in the event the fair market value of such property as determined by
such appraisal is less than $400,000, within ten (10) days after delivery of
such appraisal, Company shall obtain a cash contribution to its common equity in
an amount equal to the excess of $400,000 over the amount of such appraisal.
8.18 On or before April 1, 2004, own free of any security interests in,
liens, mortgages, or other encumbrances (other than those in favor of Bank), all
equipment which Company leased from KeyCorp Leasing as of September 20, 2004.
9. NEGATIVE COVENANTS
23
Company covenants and agrees that, so long as Bank may make any
Advances under this Agreement and thereafter so long as any Indebtedness remains
outstanding under this Agreement, it will not, and will cause its Subsidiaries
not to:
9.1 Purchase, acquire, issue or redeem any of its stock or make any
material change in its capital structure.
9.2 Enter into any merger or consolidation or sell, lease, transfer, or
dispose of all, substantially all, or any part of its assets, except (i) sales
of inventory in the ordinary course of its business and (ii) the sale, lease or
transfer of fixed assets in an amount not to exceed $50,000 in the aggregate
during any fiscal year of Company.
9.3 Guarantee, endorse, or otherwise become secondarily liable for or
upon the obligations of others, except by endorsement for deposit in the
ordinary course of business and guaranties in favor of Bank.
9.4 Purchase or otherwise acquire or become obligated for the purchase
of all or substantially all of the assets or business interests of any Person,
or any shares of stock of any Person or in any other manner effectuate or
attempt to effectuate an expansion of present business by acquisition.
9.5 Affirmatively pledge or mortgage any of its assets, whether now
owned or hereafter acquired, or create, suffer or permit to exist any lien,
security interest in, or encumbrance thereon, except:
(a) to Bank; and
(b) the Permitted Liens.
9.6 Sell, assign, transfer or confer a security interest in any
account, contract, note, trade acceptance or other receivable, except to Bank.
9.7 Materially alter the character of its business from that conducted
as of the date of this Agreement.
9.8 Declare or pay any dividends or make any other distribution upon
its stock, other than any dividend payable in the capital stock of Company.
9.9 Make any Capital Expenditure during any fiscal year if after giving
effect thereto, the aggregate amount of all Capital Expenditures made by Company
during such fiscal year would exceed $750,000.
9.10 Enter into any transaction or series of transactions with any
Affiliate other than on terms and conditions as favorable to Company as would be
obtainable in a comparable arms-length transaction with a Person other than an
Affiliate.
9.11 Make or allow to remain outstanding any investment (whether such
investment shall be of the character of investment in shares of stock, evidence
of indebtedness or other securities or otherwise) in, or any loans or advances
or extensions of credit to, any Person, except:
24
(a) investments of surplus cash in cash equivalents;
(b) sales on open account and in the ordinary course of business;
(c) deposits made in the ordinary course of business in order to obtain
goods or services
9.12 Enter into or become subject to any agreement (other than this
Agreement) (i) prohibiting the creation or assumption of any lien or encumbrance
upon the properties or assets of Company or (ii) requiring an obligation to
become secured (or further secured) if another obligation is secured or further
secured.
9.13 Become or remain obligated for any indebtedness for borrowed
money, or for any indebtedness incurred in connection with the acquisition of
any property, real or personal, tangible or intangible, except:
(a) indebtedness to Bank;
(b) current unsecured trade payables and accrued liabilities
arising in the ordinary course of Company's business
(including, without limitation, obligations under operating
leases);
(c) indebtedness described in attached Schedule 9.13;
(d) purchase money indebtedness incurred in connection with the
acquisition of fixed or capital assets in an amount not
exceeding $200,000 in the aggregate at any time outstanding;
(e) the Subordinated Debt; and
(f) earn-out payments to the Seller under Section 2.9(c) of the
Purchase Agreement.
9.14 Prepay, purchase or redeem any Subordinated Debt or make any
payments in respect thereof, except payments specifically permitted by the
Seller Subordination Agreement.
9.15 Amend or modify any of the terms and conditions of those documents
evidencing the Subordinated Debt in any manner which could reasonably be
expected to be adverse to Bank.
9.16 Pay or otherwise advance, directly or indirectly, to any Affiliate
or any other Person, any management, consulting, monitoring or similar fee,
except for (a) reasonable directors' fees and (b) annual consulting fees in
amounts not to exceed $200,000 in any fiscal year; provided, however, that no
such fees may be paid if a Default or Event of Default shall have occurred and
be continuing, either before the payment of any such fees or after giving effect
thereto. Notwithstanding the foregoing, Company is not prohibited from paying
salaries to its officers and employees.
25
10. ENVIRONMENTAL PROVISIONS
10.1 Company shall comply, and shall cause its Subsidiaries to comply,
with all applicable Environmental Laws.
10.2 Company shall provide to Bank, promptly upon receipt, copies of
any correspondence, notice, pleading, citation, indictment, complaint, order,
decree, or other document from any source asserting or alleging a circumstance
or condition which requires or may require a financial contribution by Company
or any Subsidiary to a cleanup, removal, remedial action, or other response by
or on the part of Company or any Subsidiary under applicable Environmental Laws
or which seeks damages or civil, criminal or punitive penalties from Company for
an alleged violation of Environmental Laws.
10.3 Company shall promptly notify Bank in writing as soon as Company
becomes aware of the occurrence or existence of any condition or circumstance
which makes the environmental warranties contained in this Agreement incomplete
or inaccurate in any material respect as of any date.
10.4 In the event of any condition or circumstance that makes any
environmental warranty, representation and/or agreement incomplete or inaccurate
in any material respect as of any date, Company shall, at the reasonable request
of Bank, at its sole expense, retain an environmental consultant, acceptable to
Bank, to conduct a thorough and complete investigation regarding the changed
condition and/or circumstance. A copy of the environmental consultant's report
will be promptly delivered to both Bank and Company upon completion.
10.5 At any time Company, directly or indirectly through any
environmental consultant or other representative, determines to undertake an
environmental audit, assessment or investigation, Company shall promptly provide
Bank with written notice of the initiation of the environmental audit, fully
describing the purpose and intended scope of the environmental audit. Upon
receipt, Company will promptly provide to Bank copies of any such environmental
investigation.
10.6 Company hereby indemnifies, saves and holds Bank and any of its
past, present and future officers, directors, shareholders, employees,
representatives and consultants harmless from any and all loss, damages, suits,
penalties, costs, liabilities and expenses (including but not limited to
reasonable investigation, environmental audit(s), and legal expenses) arising
out of any claim, loss or damage to any property, injuries to or death of
persons, contamination of or adverse affects on the environment, or any
violation of any applicable Environmental Laws, caused by or in any way related
to any property owned or operated by Company, or due to any acts of Company or
such person's, officers, directors, shareholders, employees, consultants and/or
representatives; provided, however, that the foregoing indemnification shall not
be applicable when arising solely from events or conditions occurring while the
Bank is in sole possession (subject to the rights of any creditors of Company)
of such property. In no event shall Company be liable hereunder for any loss,
damages, suits, penalties, costs, liabilities or expenses arising from any act
of gross negligence of Bank, or its agents or employees.
26
It is expressly understood and agreed that the indemnifications granted
herein are intended to protect Bank, its past, present and future officers,
directors, shareholders, employees, consultants and representatives from any
claims that may arise by reason of the security interest, liens and/or mortgages
granted to Bank, or under any other document or agreement given to secure
repayment of any indebtedness from Company, whether or not such claims arise
before or after Bank has foreclosed upon and/or otherwise become the owner of
any such property. All obligations of indemnity as provided hereunder shall be
secured by the collateral documents.
It is expressly agreed and understood that the provisions hereof shall
and are intended to be continuing and shall survive the repayment of any
indebtedness from Company to Bank.
10.7 Company shall maintain, and shall cause its Subsidiaries to maintain, all
permits, licenses and approvals required under applicable Environmental Laws.
11. EVENTS OF DEFAULT
11.1 Upon occurrence of any of the following Events of Default:
(a) non-payment of any installment of the principal or interest on
the Notes when due or any reimbursement obligation with
respect to any Letter of Credit or nonpayment of any other
outstanding Indebtedness when due;
(b) default in the observance or performance of any of the
conditions, covenants or agreements of Company set forth in
Sections 2.5, 8.1, 8.3, 8.4, 8.5, 8.9, 8.10, 8.11, 8.12, 8.13,
8.14, 8.17 or set forth in Section 9 (in its entirety);
(c) default in observance or performance of any of the other
conditions, covenants or agreements of Company herein set
forth, and continuance thereof for thirty (30) days after
written notice to Company by Bank;
(d) any representation or warranty made by Company or any other
Person herein or in any instrument submitted pursuant hereto
proves untrue in any material respect when made or deemed
made;
(e) default in the observance or performance of any of the
conditions, covenants or agreements of Company or any other
Person set forth in any collateral document which may be given
to secure the Indebtedness or in any other collateral document
related to or connected with this Agreement or the
Indebtedness which remains uncured after the expiration of any
applicable cure period provided therein;
(f) default in the payment of any other obligation of Company or
any Subsidiary for borrowed money in excess of One Hundred
Thousand Dollars ($100,000), or in the observance or
performance of any conditions, covenants or agreements related
or given with respect thereto, which has not been cured or
waived within thirty (30) days of such default;
27
(g) judgments for the payment of money in excess of the sum of One
Hundred Thousand Dollars ($100,000) in the aggregate shall be
rendered against Company or any Subsidiary, and such judgments
shall remain unpaid, unvacated, unbonded or unstayed by appeal
or otherwise for a period of thirty (30) consecutive days from
the date of its entry and such judgment is not covered by
insurance from a solvent insurer who is defending such action
without reservation of rights;
(h) the occurrence of any "reportable event", as defined in the
Employee Retirement Income Security Act of 1974 and any
amendments thereto, which is determined to constitute grounds
for termination by the Pension Benefit Guaranty Corporation of
any employee pension benefit plan maintained by or on behalf
of Company or any Subsidiary for the benefit of any of its
employees or for the appointment by the appropriate United
States District Court of a trustee to administer such plan and
is reasonably likely that the occurrence of such event would
result in a material adverse effect on Company, and such
reportable event is not corrected and such determination is
not revoked within thirty (30) days after notice thereof has
been given to the plan administrator or Company; or the
institution of proceedings by the Pension Benefit Guaranty
Corporation to terminate any such employee benefit pension
plan or to appoint a trustee to administer such plan; or the
appointment of a trustee by the appropriate United States
District Court to administer any such employee benefit pension
plan;
(i) if for any reason (i) Xxxxxx Xxxx shall for any reason cease
to hold the office of President of Company, or (ii) Xxxxxx
Xxxxxxx and Xxxxxx Xxxxxxx shall fail to own and control,
directly or indirectly, at least 70% of the capital stock of
Company having voting rights;
(j) if the Subordination Agreement is revoked;
(k) if any material provision of the Security Agreement or the
Continuing Collateral Mortgage shall at any time for any
reason cease to be valid, binding and enforceable against
Company, or if the validity, binding effect or enforceability
thereof shall be contested by Company, or Company shall deny
that it has any further liability or obligation under the
Security Agreement or the Continuing Collateral Mortgage, or
if the Security Agreement or the Continuing Collateral
Mortgage shall be terminated, invalidated, revoked or set
aside or in any way cease to give or provide to Bank the
benefits purported to be created thereby;
then, or at any time thereafter, unless such default is remedied, Bank may give
notice to Company declaring all outstanding indebtedness hereunder and under the
Notes to be due and payable, whereupon all indebtedness then outstanding
hereunder and under the Notes shall immediately become due and payable without
further notice and demand, and Bank shall not be obligated to make further
Advances or issue any Letters of Credit hereunder.
11.2 If a creditors' committee shall have been appointed for the
business of Company or any Subsidiary in connection with any bankruptcy or
insolvency; or if Company or any Subsidiary shall have made a general assignment
for the benefit of creditors or shall have been adjudicated bankrupt, or shall
28
have filed a voluntary petition in bankruptcy or for reorganization or to effect
a plan or arrangement with creditors; or shall file an answer to a creditor's
petition or other petition filed against it, admitting the material allegations
thereof for an adjudication in bankruptcy or for reorganization; or shall have
applied for or permitted the appointment of a receiver, or trustee or custodian
for any of its property or assets; or such receiver, trustee or custodian shall
have been appointed for any of its property or assets (otherwise than upon
application or consent of Company or any Subsidiary), and such receiver, trustee
or custodian so appointed shall not have been discharged within sixty (60) days
after the date of his appointment or if an order shall be entered and shall not
be dismissed or stayed within sixty (60) days from its entry, approving any
petition for reorganization of Company or any Subsidiary, then the Notes and all
indebtedness then outstanding hereunder shall automatically become immediately
due and payable and Bank shall not be obligated to make further Advances or
issue any Letters of Credit under this Agreement.
11.3 Upon the occurrence of any Event of Default, unless all of the
Indebtedness is then immediately fully paid, Bank shall have and may exercise
any one or more of the rights and remedies for which provision is made for a
secured party under the UCC, under the Security Agreement or under any other
document contemplated hereby or for which provision is provided by law or in
equity, including, without limitation, the right to take possession and sell,
lease or otherwise dispose of any or all of the collateral and to set off
against the Indebtedness any amount owing by Bank to Company and/or any property
of Company in possession of Bank. Company agrees, upon request of Bank, to
assemble the collateral and make it available to Bank at any place designated by
Bank.
11.4 All of the Indebtedness shall constitute one loan secured by
Bank's security interest in the collateral and by all other security interests,
mortgages, liens, claims, and encumbrances now and from time to time hereafter
granted from Company to Bank. Upon the occurrence and during the continuance of
an Event of Default which is not cured within the cure period, if any, provided
hereunder, Bank may in its sole discretion apply the collateral to any portion
of the Indebtedness. The proceeds of any sale or other disposition of the
Collateral authorized by this Agreement shall be applied by Bank, first upon all
expenses authorized by the Michigan Uniform Commercial Code (or other applicable
law) or otherwise in connection with the sale and all reasonable attorneys' fees
and legal expenses incurred by Bank; the balance of the proceeds of such sale or
other disposition shall be applied in the payment of the Indebtedness, first to
interest, then to principal, then to other Indebtedness and the surplus, if any,
shall be paid over to Company or to such other Person or Persons as may be
entitled thereto under applicable law. Company shall remain liable for any
deficiency, which Company shall pay to Bank immediately upon demand.
11.5 The remedies provided for herein are cumulative to the remedies
for collection of the Indebtedness as provided by law, in equity or by any
mortgage, security agreement or other document contemplated hereby. Nothing
herein contained is intended, nor shall it be construed, to preclude Bank from
pursuing any other remedy for the recovery of any other sum to which Bank may be
or become entitled for the breach of this Agreement by Company.
11.6 Upon the occurrence and during the continuance of any Event of
Default, Company shall immediately upon demand by Bank deposit with Bank cash
collateral in the amount equal to the maximum amount available to be drawn at
any time under any Letters of Credit then outstanding.
29
12. MISCELLANEOUS
12.1 This Agreement shall be binding upon and shall inure to the
benefit of Company and Bank and their respective successors and assigns, except
that the credit provided for under this Agreement and no part thereof and no
obligation of Bank hereunder shall be assignable or otherwise transferable by
Company.
12.2 Company shall pay all closing costs and expenses, including, by
way of description and not limitation, reasonable outside attorney fees, lien
search fees, approval fees and title policy fees incurred by Bank in connection
with the commitment, consummation and closing of this Agreement. All of said
amounts required to be paid by Company may, at Bank's option, be charged by Bank
as an advance against the proceeds of the Notes. All costs, including reasonable
attorney fees incurred by Bank in protecting or enforcing any of its or any of
the Bank's rights against Company or any collateral or in defending Bank from
any claims or liabilities by any party or otherwise incurred by Bank in
connection with an Event of Default or the enforcement of this Agreement or the
related documents, including by way of description and not limitation, such
charges in any court or bankruptcy proceedings or arising out of any claim or
action by any person against Bank which would not have been asserted were it not
for Bank's relationship with Company hereunder, shall also be paid by Company.
12.3 Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, it shall be done in accordance with GAAP.
12.4 No delay or failure of Bank in exercising any right, power or
privilege hereunder shall affect such right, power or privilege, nor shall any
single or partial exercise thereof preclude any further exercise thereof, or the
exercise of any other power, right or privilege. The rights of Bank under this
Agreement are cumulative and not exclusive of any right or remedies which Bank
would otherwise have.
12.5 Except as expressly provided otherwise in this Agreement, all
notices and other communications provided to any party hereto under this
Agreement shall be in writing and shall be given by personal delivery, by mail,
by reputable overnight courier or by facsimile and addressed or delivered to it
at its address set forth below or at such other address as may be designated by
such party in a notice to the other parties that complies as to delivery with
the terms of this Section 12.5. Any notice, if personally delivered or if mailed
and properly addressed with postage prepaid and sent by registered or certified
mail, shall be deemed given when received; any notice, if given to a reputable
overnight courier and properly addressed, shall be deemed given two (2) Business
Days after the date on which it was sent, unless it is actually received sooner
by the named addressee; and any notice, if transmitted by facsimile, shall be
deemed given when received (answerback confirmed in the case of telexes and
receipt confirmed in the case of telecopies). Bank may, but shall not be
required to, take any action on the basis of any notice given to it by telephone
30
(except as otherwise expressly provided herein), but Company shall promptly
confirm such notice in writing, and such notice will not be deemed to have been
received until such confirmation is deemed received in accordance with the
provisions of this Section set forth above. If such telephonic notice conflicts
with any such confirmation, the terms of such telephonic notice shall control.
To Company:
00 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx Xxxxxxx/Xxxxxx Xxxxxxx
To Bank:
000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Mail Code 3394
Attention: Group Manager, Middle Market Banking IV - Central
12.6 This Agreement and the Notes have been delivered at Detroit,
Michigan, and shall be governed by and construed and enforced in accordance with
the laws of the State of Michigan. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
12.7 No amendments or waiver of any provisions of this Agreement nor
consent to any departure by Company therefrom shall in any event be effective
unless the same shall be in writing and signed by the Bank, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No amendment, waiver or consent
with respect to any provision of this Agreement shall affect any other provision
of this Agreement.
12.8 All sums payable by Company to Bank under this Agreement or the
other documents contemplated hereby shall be paid directly to Bank at its
principal office set forth in Section 12.5 hereof in immediately available
United States funds, without set off, deduction or counterclaim. In its sole
discretion after the occurrence of an Event of Default, Bank may charge any and
all deposit or other accounts (including without limit an account evidenced by a
certificate of deposit) of Company with Bank for all or a part of any
Indebtedness then due; provided, however, that this authorization shall not
affect Company's obligation to pay, when due, any Indebtedness whether or not
account balances are sufficient to pay amounts due.
12.9 Any payment of the Indebtedness made by mail will be deemed
tendered and received only upon actual receipt by Bank at the address designated
for such payment, whether or not Bank has authorized payment by mail or any
other manner, and shall not be deemed to have been made in a timely manner
unless received on the date due for such payment, time being of the essence.
Company expressly assumes all risks of loss or liability resulting from
non-delivery or delay of delivery of any item of payment transmitted by mail or
in any other manner. Acceptance by Bank of any payment in an amount less than
the amount then due shall be deemed an acceptance on account only, and the
31
failure to pay the entire amount then due shall be and continue to be an Event
of Default, and at any time thereafter and until the entire amount then due has
been paid, Bank shall be entitled to exercise any and all rights conferred upon
it herein upon the occurrence of an Event of Default. Company waives the right
to direct the application of any and all payments at any time or times hereafter
received by Bank from or on behalf of Company. Company agrees that Bank shall
have the continuing exclusive right to apply and to reapply any and all payments
received at any time or times hereafter against the Indebtedness in such manner
as Bank may deem advisable, notwithstanding any entry by Bank upon any of its
books and records. Company expressly agrees that to the extent that Bank
receives any payment or benefit and such payment or benefit, or any part
thereof, is subsequently invalidated, declared to be fraudulent or preferential,
set aside or is required to be repaid to a trustee, receiver, or any other party
under any bankruptcy act, state or federal law, common law or equitable cause,
then to the extent of such payment or benefit, the Indebtedness or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or benefit had not been made and, further, any such repayment
by Bank, to the extent that Bank did not directly receive a corresponding cash
payment, shall be added to and be additional Indebtedness payable upon demand by
Bank.
12.10 In the event Company's obligation to pay interest on the
principal balance of the Notes is or becomes in excess of the maximum interest
rate which Company is permitted by law to contract or agree to pay, giving due
consideration to the execution date of this Agreement, then, in that event, the
rate of interest applicable shall be deemed to be immediately reduced to such
maximum rate and all previous payments in excess of such maximum rate shall be
deemed to have been payments in reduction of principal and not of interest.
12.11 COMPANY AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
[Signatures to follow on next page]
32
12.12 This Agreement shall become effective upon the execution hereof by Bank
and Company.
WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK NECI ACQUISITION, INC.
By: By:
-------------------------- --------------------------
By: By:
-------------------------- --------------------------
33
SCHEDULE 6.4
REAL ESTATE REQUIREMENTS
1. An ALTA mortgage title insurance policy from a title insurance
company satisfactory to Bank, without standard exceptions, in the amount equal
to the lesser of the appraised value of the property or the Indebtedness,
insuring the mortgage securing the Indebtedness to be a lien on the property,
subject only to those exceptions acceptable to Bank. The policy shall contain
last dollar, zoning compliance, usury, comprehensive and any other endorsements
required by Bank.
2. An ALTA/ACSM mortgage survey satisfactory to and certified to Bank
and the title company, by a surveyor approved by Bank, showing no encroachments
or adverse rights, other than those acceptable to Bank and showing ingress and
egress, all recorded easements affecting the property, whether or not the
property lies in a flood plain area, and such other information as Bank or the
title company requests.
3. Evidence of casualty and public liability insurance all satisfactory
to Bank as to form, amount and insurer. In addition, Company shall provide
evidence of flood insurance, if required by applicable law.
4. Copies of any leases of the mortgaged premises, together with
Subordination, Non-Disturbance and Attornment Agreements and estoppel
certificates from each tenant.
5. Such other documentation as Bank may reasonably require in
connection therein, in form and substance satisfactory to Bank.
1
SCHEDULE 7.3
LITIGATION
None.
1
SCHEDULE 7.5
PENSION PLANS
None.
1
SCHEDULE 7.10
COMPLIANCE WITH LAWS
None.
1
SCHEDULE 9.5
PERMITTED LIENS
1. Financing Statements filed by KeyCorp Leasing for equipment leased from
KeyCorp Leasing by Company under leases executed prior to the date of the Credit
Agreement until the earlier of (i) April 1, 2004 or (ii) the date on which such
lease obligations have been paid in full.
2. Financing Statements filed by Canon for copiers leased from Canon by Company
under leases dated April 21, 2004, June 21, 2002 and June 30, 2003.
3. Financing Statement filed by US Bancorp for one color copier leased from US
Bancorp by Company under a lease dated March 31, 2004.
1
SCHEDULE 9.13
PERMITTED INDEBTEDNESS
1. Indebtedness owed to KeyCorp Leasing for equipment leased from KeyCorp
Leasing by Company under leases executed prior to the date of the Credit
Agreement until the earlier of (i) April 1, 2004 or (ii) the date on which such
lease obligations have been paid in full.
2. Indebtedness owed to Canon for copiers leased from Canon by Company under
leases dated April 21, 2004, June 21, 2002 and June 30, 2003.
3. Indebtedness owed to US Bancorp for one color copier leased from US Bancorp
by Company under a lease dated March 31, 2004.
1
EXHIBIT "A"
REVOLVING CREDIT NOTE
$5,000,000 Detroit, Michigan
September 20, 2004
On or before the Revolving Credit Maturity Date, FOR VALUE RECEIVED,
NECI Acquisition, Inc., a Florida corporation ( "Company"), promises to pay to
the order of COMERICA BANK, a Michigan banking corporation ("Bank") at its Main
Office at 000 Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx, or any other office of Bank
located in the State of Michigan, in lawful money of the United States of
America the indebtedness or so much of the sum of Five Million Dollars
($5,000,000) as may from time to time have been advanced and then be outstanding
hereunder pursuant to the Credit Agreement dated as of September 20, 2004 made
by and between Company and Bank (as the same may be amended or modified from
time to time, herein called "Agreement"), together with interest thereon as
hereinafter set forth.
Each of the Advances hereunder shall bear interest at the Applicable
Interest Rate from time to time applicable thereto under the Agreement or as
otherwise determined thereunder, and interest shall be computed, assessed and
payable as set forth in the Agreement.
This Note is a note under which advances, repayments and readvances may
be made from time to time, subject to the terms and conditions of the Agreement.
This Note evidences borrowing under, is subject to, is secured in accordance
with, and may be matured under, the terms of the Agreement, to which reference
is hereby made. As additional security for this Note, Company grants Bank a lien
on all property and assets including deposits and other credits of the Company,
at any time in possession or control of or owing by Bank for any purpose.
Company hereby waives presentment for payment, demand, protest and
notice of dishonor and nonpayment of this Note and agrees that no obligation
hereunder shall be discharged by reason of any extension, indulgence, or
forbearance granted by any holder of this Note to any party now or hereafter
liable hereon. Any transferees of, or endorser, guarantor or surety paying this
Note in full shall succeed to all rights of Bank, and Bank shall be under no
further responsibility for the exercise thereof or the loan evidenced hereby.
Nothing herein shall limit any right granted Bank by other instrument or by law.
All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
NECI ACQUISITION, INC.
By:
--------------------------
Its:
-------------------------
1
EXHIBIT "B"
REQUEST FOR ADVANCE
Pursuant to the Credit Agreement dated as of September 20, 2004, (as
amended from time to time herein called "Agreement"), the undersigned hereby
requests COMERICA BANK to make a(an) * Advance to the undersigned on , 200__, in
the amount of
DOLLARS, ($ ) under the Revolving Credit Note dated September 20, 2004, issued
by the undersigned to said Bank (herein called "Note"). The Interest Period for
the requested Advance, if applicable, shall be .** The last day of the Interest
Period for the amounts being converted or refunded hereunder, if applicable, is
, 200__.
The undersigned certifies that no event has occurred or condition
exists which constitutes, or with the passage of time and/or giving of notice
would constitute, a default under the Agreement or the Note, and none will exist
upon the making of the Advance requested hereunder. The undersigned further
certifies that upon advancing the sum requested hereunder, the aggregate
principal amount outstanding under the Note will not exceed the face amount
thereof or any advance formula applicable to Advances under such Note. If the
amount advanced to the undersigned under the Note shall at any time exceed the
face amount thereof or any advance formula applicable to Advances under such
Note, the undersigned will pay such excess amount on demand.
The undersigned hereby authorizes said Bank to disburse the proceeds of
this Request for Advance by crediting the account of the undersigned with Bank
separately designated by the undersigned or as the undersigned may otherwise
direct, unless this Request for Advance is being submitted for a conversion or
refunding, in which case it shall refund or convert that portion stated above of
the existing outstandings under the Note.
Dated this _____ day of ________________, 200__.
NECI ACQUISITION, INC.
By:
--------------------------
Its:
-------------------------
--------
* Insert, as applicable, "Eurodollar-based", or "Prime-based".
** For a Eurodollar-based Advance insert, as applicable, "one month", "two
months", "three months" or "six months".
1
EXHIBIT "C"
TERM NOTE
$1,200,000 Detroit, Michigan
September 20, 2004
FOR VALUE RECEIVED, NECI Acquisition, Inc., a Florida corporation
("Company") promises to pay to the order of COMERICA BANK, a Michigan banking
corporation ("Bank"), at its Main Office at 000 Xxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx or any other office of Bank located in the State of Michigan, the
principal sum of One Million Two Hundred Thousand Dollars ($1,200,000) in lawful
money of the United States of America payable in monthly principal installments
in the amounts and on the dates set forth in Section 3.2 of the Agreement
(hereinafter defined), until the Term Loan Maturity Date, when the entire unpaid
balance of principal and interest thereon shall be due and payable, together
with interest thereon as hereinafter set forth.
The principal balance from time to time outstanding hereunder shall
bear interest at the rate set forth in the Agreement and interest shall be
computed, assessed and payable as set forth in the Agreement.
This Note evidences borrowing under, is subject to, is secured in
accordance with, may be prepaid in accordance with, and may be matured under the
terms of the Credit Agreement dated as of September 20, 2004 by and between
Company and Bank (as the same may be amended or modified from time to time,
"Agreement") to which reference is hereby made. As additional security for this
Note, Company grants Bank a lien on all property and assets, including deposits
and other credits, of the Company, at any time in possession or control of or
owing by Bank for any purpose.
Company hereby waives presentment for payment, demand, protest and
notice of protest and notice of dishonor and nonpayment of this Note and agrees
that no obligation hereunder shall be discharged by reason of any extension,
indulgence, or forbearance granted by any holder of this Note to any party now
or hereafter liable hereon. Any transferees of, or endorser, guarantor or surety
paying this Note in full shall succeed to all rights of Bank, and Bank shall be
under no further responsibility for the exercise thereof or the loan evidenced
hereby. Nothing herein shall limit any right granted by other instrument or by
law.
All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
NECI ACQUISITION, INC.
By:
---------------------------
Its:
---------------------------
1
EXHIBIT "D"
FORM OF ADVANCE FORMULA AGREEMENT
[COMERICA LOGO] ADVANCE FORMULA AGREEMENT
--------------------------------------------------------------------------------
As of September __, 2004, this Agreement is made by NECI ACQUISITION,
INC., a Florida corporation ("Debtor"), unto COMERICA BANK, a Michigan banking
corporation ("Bank").
For and in consideration of the loans and other credit which Debtor may
now or hereafter obtain or request from Bank which are secured pursuant to a
Security Agreement dated September __, 2004, executed and delivered by Debtor
unto Bank (the "Security Agreement"), and for other good and valuable
consideration, Debtor agrees as follows:
13. FORMULA LOANS. The credit which Bank may now or hereafter extend to
Debtor subject to the limitations of this Agreement and to the
conditions and limitations of any other agreement between Debtor and
Bank is identified as follows:
$5,000,000 secured revolving line of credit
and any extensions, renewals or substitutions thereof, whether
in a greater or lesser amount, including any letters of credit issued
thereunder ("Formula Loans").
14. ADVANCE FORMULA. Debtor warrants and agrees that Debtor's indebtedness
to Bank for the Formula Loans shall never exceed the sum of:
14.1 Eighty percent (80%) of its Eligible Accounts, as hereinafter
defined; plus
14.2 the lesser of (i) twenty-five percent (25%) of its Eligible
Inventory, as hereinafter defined, (ii) Two Million Two
Hundred Fifty Thousand Dollars ($2,250,000; provided, however,
that beginning on ________________, 2005, no more than fifty
percent (50%) of the outstanding Formula Loans as of any date
of determination may be based on this sub-section (b); minus
14.3 the Equipment Lease Reserve.
15. FORMULA COMPLIANCE. If the limitations in paragraph 2, above, are
exceeded at any time, Debtor shall immediately pay Bank sums sufficient
to reduce the Formula Loans by the amount of such excess.
16. ELIGIBLE ACCOUNT. "Eligible Account" shall mean an Account (as
hereinafter defined) arising in the ordinary course of Debtor's
business which meets each of the following requirements:
16.1 it is not owing more than ninety (90) days after the date of
the original invoice or other writing evidencing such Account;
16.2 it is not owing by an Account Debtor (as hereinafter defined)
who has failed to pay twenty-five percent (25%) or more of the
aggregate amount of its Accounts owing to Debtor within ninety
(90) days after the date of the respective invoices or other
writings evidencing such Accounts;
2
16.3 it arises from the sale or lease of goods and such goods have
been shipped or delivered to the Account Debtor under such
Account; or it arises from services rendered and such services
have been performed;
16.4 it is evidenced by an invoice, dated not later than the date
of shipment or performance, rendered to such Account Debtor or
some other evidence of billing acceptable to Bank;
16.5 it is not evidenced by any note, trade acceptance, draft or
other negotiable instrument or by any chattel paper, unless
such note or other document or instrument previously has been
endorsed and delivered by Debtor to Bank;
16.6 it is a valid, legally enforceable obligation of the Account
Debtor thereunder, and is not subject to any offset,
counterclaim or other defense on the part of such Account
Debtor or to any claim on the part of such Account Debtor
denying liability thereunder in whole or in part;
16.7 it is subject to a first priority, properly perfected security
interest in favor of Bank, and it is not subject to any sale
of accounts, any rights of offset, assignment, lien or
security interest whatsoever other than to Bank;
16.8 it is not owing by a subsidiary or affiliate of Debtor;
16.9 it is not owing by an Account Debtor which (i) does not
maintain its chief executive office in the United States of
America or Canada, (ii) is not organized under the laws of the
United States of America or Canada, or any state or province
thereof, as applicable, or (iii) is the government of any
foreign country or sovereign state, or of any state, province,
municipality or other instrumentality thereof;
16.10 it is not an Account owing by the United States of America or
any state or political subdivision thereof, or by any
department, agency, public body corporate or other
instrumentality of any of the foregoing, unless all necessary
steps are taken to comply with the Federal Assignment of
Claims Act of 1940, as amended, or with any comparable state
law, if applicable, and all other necessary steps are taken to
perfect Bank's security interest in such Account;
16.11 it is not owing by an Account Debtor for which Debtor has
received a notice of (i) the death of the Account Debtor or
any partner of the Account Debtor, (ii) the dissolution,
liquidation, termination of existence, insolvency or business
failure of the Account Debtor, (iii) the appointment of a
receiver for any part of the property of the Account Debtor,
or (iv) an assignment for the benefit of creditors, the filing
of a petition in bankruptcy, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or
against the Account Debtor;
16.12 it is not an Account billed in advance, payable on delivery,
for consigned goods, for guaranteed sales, for unbilled sales,
for progress xxxxxxxx, payable at a future date in accordance
with its terms, subject to a retainage or holdback by the
Account Debtor or insured by a surety company; and
16.13 it is not owing by any Account Debtor whose obligations Bank,
acting in its reasonable discretion, shall have notified
Debtor are not deemed to constitute Eligible Accounts.
An Account which is at any time an Eligible Account, but which
subsequently fails to meet any of the foregoing requirements, shall
forthwith cease to be an Eligible Account.
3
For purposes of this Agreement, an "Account" shall mean any
right of Debtor to payment for goods sold or leased or for services
rendered, but shall not include interest or service charges; and
"Account Debtor" shall mean the person who is obligated on or under an
Account.
17. ELIGIBLE INVENTORY. Unless stated otherwise in paragraph 13 below,
"Eligible Inventory" (a) shall be valued at the cost or present market
value of Debtor's Inventory (as defined in the Michigan Uniform
Commercial Code, as amended and in effect from time to time) determined
in accordance with generally accepted accounting principles,
consistently applied ("GAAP"), and (b) shall mean all of Debtor's
Inventory which is in good and merchantable condition, which is not
obsolete or discontinued, which would be properly classified as
"work-in-process" or "raw materials" or as "finished goods inventory"
under and in accordance with GAAP, provided, however, that
"work-in-process" advances based on Inventory shall not exceed
$350,000, and which is subject to a first priority, properly perfected
security interest in favor of Bank, but excluding (1) consigned goods,
inventory located outside the United States of America or Canada, (2)
Inventory covered by or subject to a seller's right to repurchase, or
any consensual or nonconsensual lien or security interest (including,
without limitation, purchase money security interests) other than in
favor of Bank, whether senior or junior to Bank's security interest,
and (3) Inventory that Bank, acting in its reasonable discretion, after
having notified Debtor, excludes. Inventory which is at any time
Eligible Inventory, but which subsequently fails to meet any of the
foregoing requirements, shall forthwith cease to be Eligible Inventory.
18. CERTIFICATES, SCHEDULES AND REPORTS. Debtor will, within seven (7) days
after and as of the end of each month (and at such other times as Bank
may request), deliver to Bank agings of the Accounts and a schedule
identifying each Eligible Account (not previously so identified) and
reports as to the amount of Eligible Inventory. Debtor will from time
to time deliver to Bank such additional schedules, certificates and
reports respecting all or any of the Collateral (as defined in the
Security Agreement), the items or amounts received by Debtor in full or
partial payment of any of the Collateral, and any goods (the sale or
lease of which by Debtor shall have given rise to any of the
Collateral) possession of which has been obtained by Debtor, all and as
to such extent as Bank may request. Any such schedule, certificate or
report shall be executed by a duly authorized officer of Debtor and
shall be in such form and detail as Bank may specify. Any such schedule
identifying any Eligible Account shall be accompanied (if Bank so
requests) by a true and correct copy of the invoice evidencing such
Eligible Account and by evidence of shipment or performance.
19. INSPECTIONS; COMPLIANCE. Debtor shall permit Bank and its designees
from time to time to make such inspections and audits, and to obtain
such confirmations or other information, with respect to any of the
Collateral or any Account Debtor as Bank is entitled to make or obtain
under the Credit Agreement dated as of the date hereof between Debtor
and Bank, as amended from time to time, and shall reimburse Bank on
demand for all costs and expenses incurred by Bank in connection with
such inspections and audits. Debtor shall further comply with all of
the other terms and conditions of the Security Agreement.
20. DEFAULT. Any failure by Debtor to comply with this Agreement shall
constitute a default under the Formula Loans and under the Security
Agreement and the Indebtedness, as defined therein.
21. AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
terminated only in writing duly executed by Debtor and Bank. No delay
by Bank in requiring Debtor's compliance herewith shall constitute a
waiver of such right. The rights granted to Bank hereunder are
cumulative, and in addition to any other rights Bank may have by
agreement or under applicable law. This Agreement shall supersede and
replace in their entirety any prior advance formula agreements in
4
effect between Bank and Debtor. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Michigan, without regard to conflict of laws principles.
22. DEMAND BASIS FORMULA LOANS. Notwithstanding anything to the contrary
set forth in this Agreement, in the event that the Formula Loans are at
any time on a demand basis, Debtor hereby acknowledges and agrees that
the formula set forth in paragraph 2 hereof is merely for advisory and
guidance purposes and Bank shall not be obligated to make any loans or
advances under the Formula Loans, and, notwithstanding the terms of
paragraph 3 above, Bank may at any time, at its option, demand payment
of any or all of the Formula Loans, whereupon the same shall become due
and payable. Bank and Debtor acknowledge and agree that the Formula
Loans are not on a demand basis as of the date hereof.
23. DILUTION OF ACCOUNTS. In the event that Bank, at any time in its sole
discretion, determines that the dollar amount of Eligible Accounts
collectable by Debtor is reduced or diluted as a result of discounts or
rebates granted by Debtor to the respective Account Debtor(s), returned
or rejected Inventory or services, or such other reasons or factors as
Bank deems applicable, Bank may, in its sole discretion, upon five (5)
business days' prior written notice to Debtor, reduce or otherwise
modify the percentage of Eligible Accounts included within the Advance
Formula under paragraph 2(a) above and/or reduce the dollar amount of
Debtor's Eligible Accounts by an amount determined by Bank in its sole
discretion.
24. JURY WAIVER. DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY
JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,
AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR
MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY
RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
25. SPECIAL PROVISIONS: "Equipment Lease Reserve" shall mean the total
amount outstanding under all all equipment leases of Debtor which are
in effect as of September __, 2004.
5
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
DEBTOR:
Debtor's Chief Executive Office Address:
00 Xxxxx Xxxx Xxxxxx, Xxxxx 000 NECI ACQUISITION, INC.
Iselin, Xxx Xxxxxx 00000
By:__________________________________________
SIGNATURE OF
Its:_________________________________________
TITLE
Accepted and Approved:
COMERICA BANK
By: __________________________________________________
SIGNATURE OF
Its: _________________________________________________
TITLE
6
EXHIBIT "E"
FORM OF CONTINUING COLLATERAL MORTGAGE
[COMERICA LOGO] CONTINUING COLLATERAL MORTGAGE
(This is a Future Advance Mortgage)
--------------------------------------------------------------------------------
This Continuing Collateral Mortgage ("Mortgage") is made as of
September __, 2004, by NECI ACQUISITION, INC., a Florida corporation
("Mortgagor"), located at 00 Xxxxx Xxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxx Xxxxxx
00000, to COMERICA BANK ("Mortgagee"), located at 00000 Xxx Xxxx Xxxx, Xxxxxxx,
Xxxxxxxx 00000, Attention: Commercial Loan Documentation, Mail Code 7578.
As security for the purposes stated in this Mortgage, Mortgagor does
hereby mortgage, grant and convey to Mortgagee, its successors and assigns, the
real property in the Town of Xxxxxxx, County of Rutland, State of Vermont,
legally described as:
See Schedule A attached hereto.
Parcel Identification No. 000-000-00000
Commonly Known As: 000 Xxxxxxxx Xxxxxx Xxxxxxx XX 00000
-------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP
together with: (a) all related easements, hereditaments, appurtenances,
rights, licenses and privileges; (b) all buildings and improvements now or later
situated under, upon or over any of the above described land; (c) all the rents,
issues, profits, revenues, accounts and general intangibles arising from the
above described land, or relating to any business conducted by Mortgagor on it,
under present or future leases, licenses or otherwise; (d) all machinery,
equipment, goods, fixtures, and articles of personal property of every kind and
nature (other than Household Goods, as defined by 12 CFR 227.12, as amended from
time to time, and other than consumer goods, as defined in the Uniform
Commercial Code, of the State in which the goods are located, unless such goods
were purchased with the proceeds of any loan specifically referenced as being
secured by this Mortgage), now or later located upon the above described land
and useable in connection with any present or future operation on the land
(individually and collectively the "equipment") including, without limit, all
lighting, heating, cooling, ventilating, air- conditioning, incinerating,
refrigerating, plumbing, sprinkling, communicating and electrical systems, and
all general intangibles, including without limit software, acquired or used in
connection therewith. It is agreed that all equipment shall for the purposes of
this Mortgage, unless Mortgagee shall otherwise elect, be deemed conclusively to
be real estate and mortgaged under this Mortgage; (e) all "as-extracted
collateral"; and (f) all awards or payments, and interest on them, made with
respect to the Premises as a result of (i) any eminent domain proceeding, (ii)
any street grade alteration, (iii) any loss of or damage to any building or
other improvement, (iv) any other injury to or decrease in the value of the
Premises, (v) any refund due on account of the payment of real estate taxes,
assessments or other charges levied against the Premises or (vi) any refund of
utility deposits or right to any tenant deposit (all of the above individually
and collectively the "Premises"). Unless otherwise indicated, a reference to the
"Premises" means all and/or any part of the Premises.
TO HAVE AND TO HOLD said granted premises, with all the privileges and
appurtenances thereof, to the said Mortgagee, and its successors and assigns, to
their own use and behoof forever; and the said Mortgagor does covenant with said
Mortgagee that until the ensealing of these presents, Mortgagor is the sole
7
owner of the Premises and has good right and title to mortgage, grant and convey
the same in the manner aforesaid, SUBJECT, HOWEVER, to all encumbrances and
other matters set forth as exceptions in the lender's title insurance policy
delivered in connection herewith (the "Permitted Encumbrances") and as set forth
in Schedule B attached hereto.
This Mortgage is made to secure when due, whether by stated maturity,
demand, acceleration or otherwise, all existing and future indebtedness
("Indebtedness") to Mortgagee of N/A ("Borrower") and/or Mortgagor, including
without limit payment of Six Million Two Hundred Thousand Dollars ($6,200,000),
as evidenced by the $5,000,000 Revolving Credit Note and the $1,200,000 Term
Note dated as of the date hereof delivered by Mortgagor pursuant to the Credit
Agreement dated as of the date hereof between Mortgagor and Mortgagee. Any loan
or future advances for borrowed money made by Mortgagee to Mortgagor after the
date of this Mortgage, and any other further Indebtedness of Mortgagor to
Mortgagee of any kind, with interest and other charges as agreed upon, shall be
secured by this Mortgage, provided (but only in the case of Indebtedness in
respect of loans or advances for borrowed money) such Indebtedness is evidenced
by a writing that states that such Indebtedness is secured by the Premises or
this Mortgage. This reference to a dollar amount does not limit the dollar
amount secured by this Mortgage.
Indebtedness includes, without limit, any and all obligations or
liabilities of whatever amount of Borrower and/or Mortgagor to Mortgagee,
whether absolute or contingent, direct or indirect, voluntary or involuntary,
liquidated or unliquidated, joint or several, known or unknown; any and all
indebtedness, obligations or liabilities for which Borrower and/or Mortgagor
would otherwise be liable to Mortgagee were it not for the invalidity,
irregularity or unenforceability of them by reason of any bankruptcy, insolvency
or other law or order of any kind, or for any other reason; any and all
amendments, modifications, renewals and/or extensions of any of the above; all
costs incurred by Mortgagee in establishing, determining, continuing, or
defending the validity or priority of its lien or security interest, or to
protect the value of the Premises, or for any appraisal, environmental audit,
title examination or title insurance policy relating to the Premises, or in
pursuing its rights and remedies under this Mortgage or under any other
agreement between Mortgagee and Borrower and/or Mortgagor; all costs incurred by
Mortgagee in connection with any suit or claim involving or against Mortgagee in
any way related to the Premises, the Indebtedness or this Mortgage; and all
costs of collecting Indebtedness; all of the above costs including, without
limit, attorney fees incurred by Mortgagee. Mortgagor agrees to pay Mortgagee,
upon demand, all costs incurred by Mortgagee which are Indebtedness, and until
paid all costs shall bear interest from the time incurred at the highest per
annum rate applicable to any of the Indebtedness, but not in excess of the
maximum rate permitted by law. Any reference in this Mortgage to attorney fees
shall be deemed a reference to all reasonable fees, charges, costs and expenses
of both in-house and outside counsel and paralegals, whether or not a suit or
action is instituted, and to court costs if a suit or action is instituted, and
whether attorney fees or court costs are incurred at the trial court level, on
appeal, in a bankruptcy, administrative or probate proceeding or otherwise.
Notwithstanding the foregoing, this Mortgage shall not secure that part of the
Indebtedness, if any, which constitutes a consumer loan, other than a consumer
loan made at the same time as this Mortgage and specifically referenced as being
secured by this Mortgage (and all extensions, renewals, modifications or
replacements thereof).
Mortgagor, on a continuing basis, warrants, covenants and agrees to and
with Mortgagee, which covenants, warranties and agreements, to the extent
permitted by law, shall be deemed to run with the land, as follows:
1. Mortgagor will pay to Mortgagee all Indebtedness according to the
terms of the relevant instruments evidencing it, and Mortgagor agrees that this
Mortgage is a continuing mortgage securing the payment of the Indebtedness.
8
2. Mortgagor has good and indefeasible title to the entire Premises in
fee simple and with full power to sell, mortgage and convey it; the Premises are
free of all easements, restrictions, liens, leases and encumbrances whether now
existing or later created, except those matters listed on attached Schedule B
(if any) to which this Mortgage is expressly subject, and Mortgagor will warrant
and defend the Premises against all other claims. Mortgagee shall have the
right, at its option and at such times as it, in its sole discretion deems
necessary, to take whatever action it may deem necessary to defend or uphold the
lien of this Mortgage or otherwise enforce any of its rights under this Mortgage
or any obligation secured by this Mortgage including, without limit, the right
to institute appropriate legal proceedings for these purposes. With respect to
the right, title, or lien of any person or entity which is superior to the lien
of this Mortgage, Mortgagee has the right, but not the obligation, to acquire
and/or pay off the holder of such right, title, or lien and add the amount so
paid to the Indebtedness.
3. Mortgagor shall not mortgage or pledge the Premises as security for
any other indebtedness or obligations. Mortgagor shall pay when due, and before
any interest, collection fees or penalties accrue or default occurs, all
payments required under any mortgages on the Premises, and all taxes,
assessments, and other charges and impositions (subject to the Mortgagor's right
to contest such taxes, assessments and other charges, provided that such right
to contest does not interfere with the Mortgagee's rights under this Mortgage)
levied, assessed or existing with respect to (i) the Premises or (ii) the
execution, delivery or recordation of this Mortgage or any note or other
instrument evidencing or securing repayment of the Indebtedness or the interest
of Mortgagee in the Premises, and will deliver to Mortgagee without demand
official receipts showing these payments. If Mortgagor fails to pay these
mortgage payments, taxes, assessments, other charges or impositions when due, or
if Mortgagor fails to pay all interest, collection fees and penalties accrued on
them, Mortgagee, at its sole option, may (but is not obligated to) pay them and
the monies paid shall be added to the Indebtedness. Mortgagor shall pay (before
the same become liens or encumbrances against the Premises) any and all
obligations or liabilities for repairs or improvements to the Premises or for
any other goods, services, or utilities furnished to the Premises. At the sole
option of Mortgagee, Mortgagor shall pay to Mortgagee on the first day of each
month a pro rata portion of all taxes, assessments, liens, mortgages, and other
charges levied, assessed or existing on the Premises in an amount sufficient to
pay them when due, plus payments (based on single item or aggregate analysis, as
determined by Mortgagee under applicable law) sufficient to maintain an
additional balance of not more than one-sixth of that amount, all as estimated
by Mortgagee. In the event that sufficient funds have been deposited with
Mortgagee to cover the amount of these taxes, assessments, liens, mortgages, and
other charges when they become due and payable, Mortgagee shall pay them. In the
event that sufficient funds have not been deposited to cover the amount of these
taxes, assessments, liens, mortgages and other charges at least fifteen (15)
days prior to the time when they become due and payable, Mortgagor shall
immediately upon request by Mortgagee pay the amount of the deficiency to
Mortgagee. Mortgagee shall not be required to keep in a separate account or to
pay Mortgagor any interest or earnings whatever on the funds held by Mortgagee
for the payment of taxes, assessments, liens, mortgages, or other charges
pursuant to this paragraph or for the payment of insurance premiums under
paragraph (4) below, or on any other funds deposited with Mortgagee in
connection with this Mortgage. If an Event of Default occurs under this
Mortgage, any funds then remaining on deposit with Mortgagee may be applied
against the Indebtedness immediately upon or at any time after the Event of
Default occurs, and without notice to Mortgagor. No lienholder junior to this
Mortgage may exercise any rights with respect to the Premises, and all rents and
other proceeds from the Premises shall be held in trust by the junior lienholder
as the property of Mortgagee, until satisfaction in full of the Indebtedness.
Nothing in this paragraph shall be considered a consent by Mortgagee to any
lien, mortgage or encumbrance on the Premises unless set forth on attached
Schedule B, if any.
4. Mortgagor shall keep the buildings and all other improvements now or
later existing on the Premises constantly insured for the benefit of Mortgagee
against fire and other hazards and risks, including without limit vandalism and
malicious mischief, as Mortgagee may reasonably require and shall further
provide flood insurance (if the Premises are situated in a special flood hazard
9
area as determined by the Director of the Federal Emergency Management Agency or
other governing agency), loss of rents insurance, public liability and product
liability insurance and any other insurance as Mortgagee may require from time
to time, all in amounts and in forms and with companies as are satisfactory to
Mortgagee. Mortgagor shall deliver to Mortgagee the policies evidencing the
required insurance with premiums fully paid for one year in advance and with
standard mortgagee clauses satisfactory to Mortgagee. Renewals of the required
insurance (together with evidence of premium prepayment for one year in advance)
shall be delivered to Mortgagee at least thirty (30) days before the expiration
of any existing policies. All policies and renewals shall provide that they may
not be canceled or amended without giving Mortgagee thirty (30) days prior
written notice of cancellation or amendment. All policies and renewals shall be
held by, and are pledged to, Mortgagee, along with all insurance premium
rebates, as additional security for the Indebtedness. Should Mortgagor fail to
insure or fail to pay the premiums on any required insurance or fail to deliver
the policies or renewals of them as provided above, Mortgagee may (but is not
obligated to) have the insurance issued or renewed (and pay the premiums on it
for the account of Mortgagor) in amounts and with companies and at premiums as
Mortgagee deems appropriate. If Mortgagee elects to have insurance issued or
renewed to insure Mortgagee's interest, Mortgagee shall have no obligation to
also insure Mortgagor's interest or to notify Mortgagor of Mortgagee's actions.
Any sums paid by Mortgagee for insurance as provided above shall be added to the
Indebtedness. In the event of loss or damage, the proceeds of all required
insurance shall be paid to Mortgagee alone. No loss or damage shall itself
reduce the Indebtedness. Mortgagee and any of Mortgagee's employees is each
irrevocably appointed attorney-in-fact for Mortgagor and is authorized to adjust
and compromise each loss without the consent of Mortgagor, to collect, receive
and receipt for the insurance proceeds in the name of Mortgagee and Mortgagor
and to endorse Mortgagor's name upon any check in payment of the loss. The
proceeds shall be applied first toward reimbursement of all costs and expenses
of Mortgagee in collecting the proceeds (including, without limit, attorneys'
fees), and then toward payment of the Indebtedness or any portion of it, whether
or not then due or payable and in whatever order of maturity as Mortgagee may
elect, or Mortgagee, at its option, may apply any or all the insurance proceeds
to the repair or rebuilding of the Premises. Application of proceeds by
Mortgagee toward later maturing installments of the Indebtedness shall not
excuse Mortgagor from making the regularly scheduled installment payments nor
shall such application extend the due date or reduce the amount of any of these
payments. Application of proceeds by Mortgagee toward payment of the
Indebtedness shall constitute an acceleration and prepayment and shall subject
Mortgagor to any applicable prepayment premium or formula. In the event of a
foreclosure of this Mortgage, or the giving of a deed in lieu of foreclosure,
the purchaser or grantee of the Premises shall succeed to all of the rights of
Mortgagor under said insurance policies. At the sole option of Mortgagee,
Mortgagor shall pay to Mortgagee on the first day of each month a pro rata
portion of the annual premiums (as estimated by Mortgagee) for the required
insurance in an amount sufficient to pay them when due, plus payments (based on
single item or aggregate analysis, as determined by Mortgagee under applicable
law) sufficient to maintain an additional balance of not more than one-sixth of
that amount. In the event that sufficient funds have been deposited with
Mortgagee to cover the amount of the insurance premiums for required insurance
when the premiums become due and payable, Mortgagee shall pay the premiums. In
the event that sufficient funds have not been deposited with Mortgagee to pay
the insurance premiums at least fifteen (15) days prior to the time when they
become due and payable, Mortgagor shall immediately upon request pay the amount
of this deficiency to Mortgagee. Mortgagor shall promptly repair, replace or
rebuild each part of the Premises which may be damaged or destroyed by fire or
other casualty or which may be affected by any eminent domain proceedings,
notwithstanding application by Mortgagee of the insurance proceeds or eminent
domain award to payment of the Indebtedness.
5. Mortgagor shall abstain from commission of waste upon the Premises,
keep the Premises in good repair, and promptly comply with all laws, regulations
and requirements of all governmental bodies affecting the Premises. If Mortgagee
determines that the Premises requires inspection, testing, appraisal, repair,
care, alteration or attention of any kind, Mortgagee or its representatives may
(but is not obligated to) enter upon the Premises, and inspect, test, appraise,
repair, alter or maintain the Premises as Mortgagee may deem necessary, and
Mortgagor shall reimburse Mortgagee upon demand for all resulting costs and
10
expenses incurred by Mortgagee. Any inspection, audit, appraisal or examination
by Mortgagee or its representatives of the Premises or of information or
documents pertaining to the Premises is for the sole purpose of protecting
Mortgagee's interests under this Mortgage and is not for the benefit or
protection of Mortgagor or any third party. Mortgagee has no obligation to
provide Mortgagor or any third party with information concerning, or results of,
any inspection, audit, appraisal or examination by Mortgagee or its
representatives. If Mortgagee, in its sole discretion, discloses information to
Mortgagor this disclosure is for the sole protection of Mortgagee, does not
constitute an agreement to further disclosure and does not create a warranty by
Mortgagee as to the accuracy, sufficiency or any other aspect of the disclosure.
Mortgagee may spend money as Mortgagee deems essential to protect the value of
the Premises. Mortgagor shall not make or permit any other party to make any
material alterations, additions or improvements of any type to the Premises
(individually and collectively the "Improvements"), regardless of whether the
Improvements would increase the value of the Premises, without Mortgagee's prior
written consent. This consent may be withheld by Mortgagee in its sole
discretion. If Mortgagee consents to the making of any Improvements and the
Improvements are not completed with due diligence in accordance with the plans
and specifications approved in writing by Mortgagee, or if construction of the
Improvements should cease before completion for a period of thirty (30) days,
then and in either event it shall be an Event of Default under this Mortgage and
Mortgagee shall have all the rights and remedies provided in this Mortgage,
including without limitation, the right (but not the obligation) to enter or
cause entry to be made upon the Premises and complete the Improvements and its
costs shall be added to the Indebtedness. If any action is threatened or
commenced which affects Mortgagee's interest in the Premises, including, without
limit, building, environmental or zoning proceedings, Mortgagee may take such
action as it deems necessary to protect its interest and its costs shall be
added to the Indebtedness.
6. In the event the Premises is taken under power of eminent domain, or
by condemnation, the entire proceeds of the award shall be paid directly to
Mortgagee and applied toward reimbursement of all Mortgagee's costs and expenses
incurred in connection with collecting the award (including, without limit,
attorney fees), and the balance applied upon the Indebtedness whether or not
then due or payable in whatever manner Mortgagee deems advisable. Application by
Mortgagee of any condemnation award or portion of it toward the last maturing
installments of the Indebtedness shall not excuse Mortgagor from making the
regularly scheduled payments nor extend the due date or reduce the amount of
these payments. Application of any condemnation award by Mortgagee toward
payment of the Indebtedness shall constitute an acceleration and a prepayment
and shall subject Mortgagor to any applicable prepayment premium or formula.
Mortgagee or any of Mortgagee's employees is irrevocably appointed
attorney-in-fact and is duly authorized and empowered to receive, receipt for,
discharge and satisfy any condemnation award and judgment, whether joint or
several, on behalf of Mortgagor. Mortgagee shall not be liable for failure to
collect any condemnation award, regardless of the cause of such failure.
7. The Indebtedness shall become due and payable immediately, without
notice, at the option of Mortgagee, if Mortgagor shall convey, assign or
transfer the Premises by deed, land contract or other instrument, or if title to
the Premises shall become vested in any other person or party in any manner
whatsoever or if there is any disposition (through one or more transactions) of
legal or beneficial title to a controlling interest of Mortgagor. In the event
ownership of the Premises becomes vested in a person or persons other than
Mortgagor (with or without the prior written approval of Mortgagee), Mortgagee
may (but shall not be obligated to) deal with and may enter into any contract or
agreement with the successor(s) in interest with reference to this Mortgage in
the same manner as with Mortgagor, without in any manner discharging or
otherwise affecting the lien of this Mortgage or Mortgagor's liability under
this Mortgage or upon the Indebtedness.
8. This Mortgage shall, as to any personal property covered by it, be
deemed to grant a security interest in the personal property pursuant to the
Uniform Commercial Code of the State in which the personal property is located.
Mortgagor agrees, upon request of Mortgagee from time to time, to promptly
11
furnish a detailed list of personal property subject to this Mortgage and, upon
request by Mortgagee, to immediately execute, deliver and/or file any mortgage,
security agreement or financing statement to include specifically this list of
personal property and to immediately take such other actions as deemed necessary
or desirable by Mortgagee to evidence, perfect or continue the security
interests granted in this Mortgage; and Mortgagee or any agent of Mortgagee is
hereby authorized in its own name, and is also hereby irrevocably appointed
(which appointment is coupled with an interest) the true and lawful attorney in
fact for Mortgagor (with full power of substitution) in the name and place of
Mortgagor, to execute and file such security agreements and financing statements
and to take such other actions as deemed necessary or desirable by Mortgagee to
evidence, perfect or continue the security interests granted in this Mortgage.
Upon the occurrence of any Event of Default under this Mortgage, Mortgagee shall
have all of the rights and remedies of a secured party under the Uniform
Commercial Code of the State in which the personal property is located or
otherwise provided by law or by this Mortgage including, without limit, the
right to require Mortgagor to assemble the personal property and make it
available to Mortgagee at a place to be designated by Mortgagee which is
reasonably convenient to both parties, the right to take possession of the
personal property with or without demand and with or without process of law and
the right to sell and dispose of it and distribute the proceeds according to
law. Mortgagor agrees that any requirement of reasonable notice shall be met if
Mortgagee sends notice to Mortgagor at least ten (10) days prior to the date of
sale, disposition or other event giving rise to the required notice. Mortgagor
agrees that the proceeds of any disposition of the personal property may be
applied by Mortgagee first to Mortgagee's reasonable expenses in connection with
the disposition including, without limit, attorney fees, and then to payment of
the Indebtedness. At any sale or other disposition of the personal property
pursuant to this paragraph, Mortgagee disclaims all warranties which would
otherwise be given under the Uniform Commercial Code, including without limit a
disclaimer of any warranty relating to title, possession, quiet enjoyment or the
like, and Mortgagee may communicate these disclaimers to a purchaser at such
disposition. This disclaimer of warranties will not render the sale commercially
unreasonable. Mortgagor agrees that Mortgagee shall be under no obligation to
accept any noncash proceeds in connection with any sale or disposition of the
personal property covered by this Mortgage, unless failure to do so would be
commercially unreasonable. If Mortgagee agrees in its sole discretion to accept
noncash proceeds (unless the failure to do so would be commercially
unreasonable), Mortgagee may ascribe any commercially reasonable value to such
proceeds. Without limiting the foregoing, Mortgagee may apply any discount
factor in determining the present value of proceeds to be received in the future
or may elect to apply proceeds to be received in the future only as and when
such proceeds are actually received in cash by Mortgagee. Mortgagor represents
that its exact name is its name as set forth in this Mortgage and that Mortgagor
is located (as determined pursuant to Article 9 of the Uniform Commercial Code)
in Michigan, unless otherwise expressly specified in this Mortgage. Mortgagor
will give Mortgagee not less than 90 days prior written notice of all
contemplated changes in Mortgagor's name, location, chief executive office, or
principal place of business, but the giving of this notice shall not cure any
Event of Default caused by this change. "Uniform Commercial Code" means the
Uniform Commercial Code, Title 9A of the Vermont Statutes Annotated, as amended,
revised or replaced from time to time. Notwithstanding the foregoing, the
parties intend that the terms used herein which are defined in the Uniform
Commercial Code have, at all times, the broadest and most inclusive meanings
possible. Accordingly, if the Uniform Commercial Code shall in the future be
amended or held by a court to define any term used herein more broadly or
inclusively than the Uniform Commercial Code in effect on the date of this
Mortgage, then such term, as used herein, shall be given such broadened meaning.
If the Uniform Commercial Code shall in the future be amended or held by a court
to define any term used herein more narrowly, or less inclusively, than the
Uniform Commercial Code in effect on the date of this Mortgage, such amendment
or holding shall be disregarded in defining terms used in this Mortgage.
9. As additional security for the payment and performance of the
Indebtedness, Mortgagor grants a security interest to Mortgagee in all deposit
or other accounts with Mortgagee and Mortgagor assigns to Mortgagee all its
right, title and interest in all written and oral leases and occupancy
agreements, now or later existing, covering the Premises (but without an
12
assumption by Mortgagee of liabilities of Mortgagor under any of these leases or
occupancy agreements by virtue of this assignment), and Mortgagor assigns to
Mortgagee the rents, issues and profits of the Premises. If an Event of Default
occurs under this Mortgage, Mortgagee may receive and collect the rents, issues
and profits personally or through a receiver so long as the Event of Default
exists and during the pendency of any foreclosure proceedings and during any
redemption period. Mortgagor agrees to consent to the appointment of a receiver
if this is believed necessary or desirable by Mortgagee to enforce its rights
under this Mortgage. Mortgagee shall at no time have any obligation to attempt
to collect rent or other amounts from any tenant or occupier of the Premises.
Mortgagee shall at no time have any obligation to enforce any other obligations
owed by tenants or occupiers of the Premises to Mortgagor. No action taken by
Mortgagee under this Mortgage shall make Mortgagee a "mortgagee in possession."
Mortgagor shall at no time collect advance rent under any lease or occupancy
agreement pertaining to the Premises in excess of one month (other than as a
security deposit) and Mortgagee shall not be bound in any respect by any rent
prepayment in violation of this prohibition. The assignment of licenses and
permits under this Mortgage shall not be construed as a consent by Mortgagee to
any license or permit so assigned, or to impose upon Mortgagee any obligations
with respect to them. Mortgagor shall not cancel or amend any of the licenses
and permits assigned (nor permit any of them to terminate if they are necessary
or desirable for the operation of the Premises) without first obtaining the
written approval of Mortgagee. This paragraph shall not be applicable to any
license or permit that terminates if it is assigned without the consent of
another party (other than Mortgagor), unless this consent has been obtained nor
shall this paragraph be construed as a present assignment of any license or
permit that Mortgagor is required by law to hold. Mortgagor shall comply with
and perform as required all obligations and restrictions imposed upon Mortgagor
or the Premises under applicable deed restrictions, restrictive covenants,
easements, leases, land contracts, condominium or planned unit development
documents, or other agreements affecting the Premises, but this is not a consent
by Mortgagee to take subject to any of these agreements unless specifically set
forth on attached Schedule A, if any, and Mortgagee does not assume any
obligations under these agreements. Mortgagor shall promptly provide Mortgagee
with certificates of occupancy, licenses, rent rolls, income and expense
statements and other documents and information pertaining to the Premises and
its operations as Mortgagee, from time to time, may request.
10. Subject to the provisions of the following paragraph of this
Section 10, (a) Mortgagor represents and covenants that Mortgagor has not used
Hazardous Materials (as later defined) on or affecting the Premises in any
manner which violates Environmental Laws (as later defined), that there is no
condition concerning the Premises which could require remediation pursuant to
Environmental Laws, and that, to the best of Mortgagor's knowledge, no prior
owner of the Premises or any current or prior occupant has used Hazardous
Materials on or affecting the Premises in any manner which violates
Environmental Laws. Mortgagor covenants and agrees that neither it nor any
occupant shall use, introduce or maintain Hazardous Materials on the Premises
unless done in strict compliance with all Environmental Laws; (b) Mortgagor
shall conduct and complete all investigations, environmental audits, studies,
sampling and testing, and all remedial, removal and other actions necessary to
clean up and remove all Hazardous Materials on or affecting the Premises,
whether caused by Mortgagor or a third party, in accordance with all
Environmental Laws to the satisfaction of Mortgagee, and in accordance with the
orders and directives of all federal, state and local governmental authorities,
and Mortgagor shall notify Mortgagee in writing prior to taking, and continually
after that of the status of, all such actions. Mortgagor shall, promptly upon
Mortgagee's request, provide Mortgagee with copies of the results of all such
actions and all related documents and information. Any remedial, removal or
other action by Mortgagor shall not be deemed a cure or waiver of any breach of
this paragraph 10 due to the presence or use of Hazardous Materials on or
affecting the Premises. Additionally, Mortgagor shall defend, indemnify and hold
harmless Mortgagee, its employees, agents, shareholders, officers and directors,
from and against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs or expenses (including, without limit, attorney
fees) of whatever kind arising out of or related to (i) the presence, disposal,
release or threatened release of any Hazardous Materials on, from or affecting
the Premises or the soil, water, air, vegetation, buildings, personal property,
persons or animals on the Premises, (ii) any personal injury (including, without
limit, wrongful death) or property damage (real or personal) arising out of or
related to these Hazardous Materials, (iii) any lawsuit brought or threatened,
13
settlement reached or government order related to these Hazardous Materials,
(iv) the cost of removal of Hazardous Materials from any portion of the
Premises, (v) taking necessary precautions to protect against the release of
Hazardous Materials on or affecting the Premises, (vi) complying with all
Environmental Laws and/or (vii) any violation of Environmental Laws or
requirements of Mortgagee, which are in any way related to Hazardous Materials
including, without limit, attorneys and consultants' fees (the attorneys and
consultants to be selected by Mortgagee), investigation and laboratory fees and
environmental studies required by Mortgagee (whether prior to foreclosure, or
otherwise). Upon the request of Mortgagee, Mortgagor and any guarantor shall
execute a separate indemnity consistent with this paragraph; (c) Mortgagor has
never received any notice ("Environmental Complaint") of any potential violation
of Environmental Laws with respect to Mortgagor or the Premises (and, within
five (5) days of receipt of any Environmental Complaint, Mortgagor shall give
Mortgagee a copy of it), and to the best of Mortgagor's knowledge, there have
been no actions commenced or threatened by any party with respect to Mortgagor
or the Premises for noncompliance with any Environmental Laws; (d) In the event
this Mortgage is foreclosed or Mortgagor tenders a deed in lieu of foreclosure,
Mortgagor shall deliver the Premises to Mortgagee, purchaser or grantee, as the
case may be, free of Hazardous Materials so that the condition of the Premises
shall not be a violation of any Environmental Laws; (e) Upon ten (10) days
notice to Mortgagor (except in an emergency or where not practical under
applicable law, in which case notice is waived), and without limitation of
Mortgagee's other rights under this Mortgage or elsewhere, Mortgagee has the
right, but not the obligation, to enter on the Premises and to take those
actions as it deems appropriate to investigate or test for, clean up, remove,
resolve, minimize the impact of or advise governmental agencies of the possible
existence of any Hazardous Materials upon Mortgagee's receipt of any notice from
any source asserting the existence of any Hazardous Materials or an
Environmental Complaint pertaining to the Premises which, if true, could result
in an order, suit or other action against Mortgagor or any part of the Premises
which, in the sole opinion of Mortgagee, could jeopardize its security under
this Mortgage. Any such actions conducted by Mortgagee shall be solely for the
benefit of and to protect the interests of Mortgagee and shall not be relied
upon Mortgagor or any third party for any purpose. By conducting any such
actions, Mortgagee does not assume control over the environmental affairs or
operations of Mortgagor nor assume any liability of Mortgagor or any third
party; (f) The provisions of this paragraph 10 shall be in addition to all other
obligations and liabilities Mortgagor may have to Mortgagee at common law or
pursuant to any other agreement, and shall survive (i) the repayment of the
Indebtedness, (ii) the satisfaction of all other obligations of Mortgagor under
this Mortgage and under the other loan documents, (iii) the discharge of this
Mortgage, and (iv) the foreclosure of this Mortgage or acceptance of a deed in
lieu of foreclosure; and (g) For purposes of this Mortgage, (i) "Hazardous
Materials" means each and all of the following: hazardous materials and/or
substances as defined in any Environmental Law, asbestos, petroleum, petroleum
by-products, natural gas, flammable explosives, radioactive materials, and toxic
materials, and (ii) "Environmental Laws" mean any and all federal, state, local
or other laws (whether under common law, by legislative action or otherwise),
rules, policies, ordinances, directives, orders, statutes, or regulations an
object of which is to regulate or improve health, safety, or the environment.
It is understood and agreed that while the Credit Agreement
(hereinafter defined) is in effect (and not at any other time), the provisions
of sub-sections (a) through (c) above shall not apply, and the provisions of the
Credit Agreement shall apply.
11. Upon the occurrence of any Event of Default, as defined in the
Credit Agreement dated as of the date hereof between Mortgagor and Mortgagee, as
amended from time to time ("Credit Agreement"), Mortgagor shall be in default
under this Mortgage.
12. Acceleration of the Indebtedness as provided in this Mortgage shall
trigger any applicable prepayment premium or formula. Without limiting when a
prepayment premium may be due, it is agreed that, at any time after
acceleration, a tender of payment of the amount necessary to satisfy the entire
Indebtedness by or on behalf of Mortgagor or otherwise, must include any
applicable prepayment premium or formula.
14
13. Immediately upon the occurrence of any Event of Default, Mortgagee
shall have the option to do any or all of the following: (a) Declare the entire
unpaid amount of the Indebtedness, including, without limit, accrued and unpaid
interest on it and any applicable prepayment premium or formula, and all other
charges payable by Mortgagor to Mortgagee, to be immediately due and payable
and, at Mortgagee's option, (i) to bring suit for the same, or (ii) to take all
steps and institute all other proceedings that Mortgagee deems necessary to
enforce payment of the Indebtedness and performance under this Mortgage and to
protect the lien of this Mortgage; (b) Commence foreclosure proceedings against
the Premises through judicial proceedings or by advertisement, at the option of
Mortgagee. The commencement by Mortgagee of foreclosure proceedings shall be
deemed an exercise by Mortgagee of its option to accelerate the Indebtedness,
unless such proceedings on their face specifically indicate otherwise. Mortgagor
grants power to Mortgagee to sell the Premises or to cause the same to be sold
at public sale, and to convey the same to the purchaser, in a single parcel or
in several parcels at the option of Mortgagee; (c) Procure new or cause to be
updated abstracts, tax histories, title insurance, or title reports; (d) Obtain
a receiver to manage the Premises and collect the rents, profits and income from
it; (e) Contest the amount or validity of any taxes applicable to the Premises
by appropriate proceedings either in Mortgagee's name, Mortgagor's name or
jointly with Mortgagor. Mortgagor shall execute and deliver to Mortgagee, upon
demand, whatever documents and information Mortgagee determines may be necessary
or proper to so contest the taxes or to secure payment of any resulting refund.
Mortgagor shall reimburse Mortgagee for all costs and expenses, including,
without limit, attorney fees, incurred in connection with each tax contest
proceeding. All refunds resulting from each tax contest proceeding shall belong
to Mortgagee to be applied against the Indebtedness with the surplus, if any, to
be paid to Mortgagor. Mortgagee and any of its employees is each irrevocably
appointed attorney-in-fact for Mortgagor and is authorized to execute and
deliver in the name of Mortgagor those documents deemed necessary or proper by
Mortgagee to carry out any tax contest proceeding or receive any resulting
refunds; and/or (f) In the event of any sale of the Premises by foreclosure,
through judicial proceedings, by advertisement or otherwise, apply the proceeds
of any such sale in the following order or such other order as Mortgagee may
elect: to (i) all expenses incurred for the collection of the Indebtedness and
the foreclosure of this Mortgage including, without limit, attorney fees; (ii)
all sums expended or incurred by Mortgagee directly or indirectly in carrying
out terms, covenants and agreements of or under this Mortgage or any related
document, together with interest as provided in this Mortgage; (iii) all accrued
and unpaid interest and late payment charges upon the Indebtedness; (iv) any
applicable prepayment premium or formula; (v) the unpaid principal amount of the
Indebtedness; and (vi) the surplus, if any, paid to Mortgagor unless a court of
competent jurisdiction decrees otherwise.
Mortgagor hereby grants to Mortgagee a power of sale, and accordingly,
Mortgagee shall have all the rights and powers granted by Vermont law to the
holder of a mortgage containing a power of sale, including the right, to the
extent permitted by Vermont law, to foreclose Mortgagor's equity of redemption
upon an event of default under this Mortgage, by exercising the power of sale,
without first commencing a foreclosure action or obtaining a foreclosure decree,
and to give such notices and to do all other acts, including the giving of a
foreclosure deed upon completion of the foreclosure sale, as are permitted or
required by 12 V.S.A. ss.ss.4531a-4553a to foreclose a mortgage without judicial
action. If it shall be necessary to initiate any legal action to determine the
person or persons legally entitled to any excess proceeds of the sale, then the
Mortgagee's cost of said action shall be deducted from the said excess and
reimbursed to Mortgagee before its ultimate disbursal.
Notwithstanding any stated remedies herein, Mortgagee may exercise all
rights and remedies available to it at law or in equity.
14. No single or partial exercise, or delay in the exercise, of any
right or power under this Mortgage, shall preclude other or further exercise of
the rights and powers under this Mortgage. The unenforceability of any provision
of this Mortgage shall not affect the enforceability of the remainder. This
Mortgage constitutes the entire agreement of Mortgagor and Mortgagee with
respect to the subject matter of this Mortgage. No amendment of this Mortgage
shall be effective unless the same shall be in writing and signed by Mortgagor
15
and an authorized officer of Mortgagee. If there is more than one Mortgagor, all
undertakings, warranties and covenants made by Mortgagor and all rights and
powers given to Mortgagee are made or given jointly and severally. This Mortgage
shall be binding on Mortgagor and Mortgagee and on Mortgagor's and Mortgagee's
heirs, legal representatives, successors and assigns including, without limit,
any debtor in possession or trustee in bankruptcy for Mortgagor. This shall not
be deemed a consent by Mortgagee to a conveyance by Mortgagor of all or part of
the Premises or of any ownership interest in Mortgagor. Mortgagee may sell,
assign or grant participations in any of the Indebtedness and any related
obligations, including, without limit, this Mortgage. Mortgagee may provide
information relating to this Mortgage or relating to Mortgagor to Mortgagee's
parent, affiliates, subsidiaries, service providers, assignees and participants.
In the event of foreclosure of this Mortgage or the enforcement by Mortgagee of
any other remedies under this Mortgage, Mortgagor waives any right otherwise
available in respect to marshalling of assets which secure the Indebtedness or
to require Mortgagee to pursue its remedies against any other assets or any
other party. Upon full and final payment of the Indebtedness and performance by
Mortgagor of all its other obligations under this Mortgage, except as otherwise
provided in paragraphs 10(f) and 20, the parties shall automatically each fully
and finally release and discharge the other from any claim, liability or
obligation in connection with this Mortgage and the Indebtedness. The creation,
perfection and enforcement of the lien of this Mortgage shall be governed by the
laws of the State of Vermont without reference to the principles of conflicts of
laws. Subject to the foregoing, in all other respects, this Mortgage shall be
governed by the substantive laws of the State of Michigan without reference to
the principles of conflicts of laws.
15. Promptly upon the request of Mortgagee, Mortgagor shall execute,
acknowledge and deliver all further documents, and do all further acts as
Mortgagee may reasonably require in its sole discretion to confirm and protect
the lien of this Mortgage or otherwise to accomplish the purposes of this
Mortgage.
16. Nothing in this Mortgage shall be construed to preclude Mortgagee
from pursuing any available remedy provided by law for the collection of the
Indebtedness or enforcement of its rights upon an Event of Default. Nothing in
this Mortgage shall reduce or release any rights or security interests of
Mortgagee contained in any existing agreement between Borrower, Mortgagor, or
any guarantor and Mortgagee. No waiver of default or consent to any act by
Mortgagor shall be effective unless in writing and signed by an authorized
officer of Mortgagee. No waiver of any default or forbearance on the part of
Mortgagee in enforcing any of its rights under this Mortgage shall operate as a
waiver of any other default or of the same default on a future occasion or of
any rights.
17. At the sole option of Mortgagee, this Mortgage shall become
subordinate, in whole or in part (but not with respect to priority as to
insurance proceeds or any eminent domain award) to any or all leases and/or
occupancy agreements of the Premises upon the execution by Mortgagee, and
recording in the appropriate official land records where the premises are
located, of a unilateral declaration to that effect.
18. All notices and demands required or permitted to be given to
Mortgagor shall be deemed given when delivered to Mortgagor or when placed in an
envelope addressed to Mortgagor at the address above, or at such other address
as Mortgagee may have on its records, and deposited, with postage, in a
depository under the custody of the United States Postal Service or delivered to
an overnight delivery courier. The mailing may be certified, first class or
overnight delivery mail.
19. To the extent that any of the Indebtedness is payable upon demand,
nothing contained in this Mortgage shall modify the terms and conditions of that
Indebtedness nor prevent Mortgagee from making demand, without notice and with
or without reason, for immediate payment of any or all of that Indebtedness at
any time(s), whether or not an Event of Default has occurred.
16
20. Notwithstanding any prior revocation, termination or discharge of
this Mortgage, (except as to the rights of subsequent intervening bona fide
purchasers or lienholders) the effectiveness of this Mortgage shall
automatically continue or be reinstated in the event that (a) any payment
received or credit given by Mortgagee in respect of the Indebtedness is
returned, disgorged or rescinded as a preference, impermissible setoff,
fraudulent conveyance, diversion of trust funds, or otherwise under any
applicable law, in which case this Mortgage shall be enforceable as if the
returned, disgorged or rescinded payment or credit had not been received or
given, whether or not Mortgagee relied upon this payment or credit or changed
its position as a consequence of it; or (b) any liability is sought to be
imposed against Mortgagee relating to any matter as to which Mortgagor agreed to
indemnify Mortgagee under this Mortgage, including, without limit, as to the
presence of Hazardous Materials on, in or about the Premises, whether this
matter is known or unknown, now or later exists (excluding only matters which
arise after any acquisition by Mortgagee of the Premises, by foreclosure, deed
in lieu of foreclosure or otherwise, to the extent due to the wrongful act or
omission of Mortgagee), in which case this Mortgage shall be enforceable to the
extent of all liability, costs and expenses (including, without limit, attorney
fees) incurred by Mortgagee as the direct or indirect result thereof. In the
event of continuation or reinstatement of this Mortgage, Mortgagor agrees upon
demand by Mortgagee to execute and deliver to Mortgagee those documents which
Mortgagee determines are appropriate to further evidence (in the public records
or otherwise) this continuation or reinstatement, although the failure of
Mortgagor to do so shall not affect in any way the reinstatement or
continuation. If Mortgagor does not execute and deliver to Mortgagee upon demand
such documents, Mortgagee and each employee is irrevocably appointed (which
appointment is coupled with an interest) the true and lawful attorney of
Mortgagor (with full power of substitution) to execute and deliver such
documents in the name and on behalf of Mortgagor.
21. MORTGAGOR AND MORTGAGEE ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
MAY BE A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS MORTGAGE OR THE INDEBTEDNESS.
22. Notwithstanding any provision in this Mortgage to the contrary, in
the event any insurance proceeds become available as a result of any hazard
insurance loss, such proceeds shall be held by Mortgagee, or escrow agent
satisfactory to Mortgagee, without application to the Indebtedness and used to
reimburse Mortgagor for the repair and restoration of the Premises to the
condition existing immediately prior to the loss, or such other condition as
Mortgagee may approve in writing, subject to the following terms and conditions:
25.2 There shall be no Event of Default under this Mortgage;
25.3 Mortgagee shall be satisfied that the Premises can be restored to
an architectural and economic unit of substantially the same character and value
as existed prior to the casualty, and shall have approved in writing plans and
specifications of an architect satisfactory to Mortgagee and contractor's cost
estimates by contractors satisfactory to Mortgagee;
25.4 Such proceeds shall have been deemed sufficient by Mortgagee to
pay all costs of, and expenses incidental to, such repair or restoration and, if
such proceeds shall be deemed insufficient to pay same, Mortgagor shall have
deposited with Mortgagee or such escrow agent such additional sums as Mortgagee
deems necessary, in its reasonable judgment, when combined with such proceeds,
to pay such costs and expenses;
25.5 The repair or restoration can be completed before the maturity of
the Indebtedness;
17
25.6 Mortgagee shall be entitled to deduct from each such advance all
costs reasonably incurred by Mortgagee in connection therewith;
25.7 The improvements on the Premises shall not have been damaged to
the extent of 75% or more of the value of such improvements;
25.8 Mortgagee shall be satisfied that the leases of the Premises are
not subject to termination because of the hazard loss;
25.9 Mortgagor shall not be entitled to interest on any proceeds held
by Mortgagee;
25.10 Mortgagee shall not be deemed a fiduciary, and shall have no
obligation to restore or repair the Premises;
25.11 At Mortgagee's option, disbursement of proceeds shall be subject
to Mortgagee's usual construction loan requirements.
If these conditions cannot be satisfied, in Mortgagee's sole
discretion, then Mortgagee may at its option apply the insurance proceeds to the
Indebtedness, and Mortgagor shall be liable for any prepayment or fee resulting
therefrom.
IN WITNESS WHEREOF, Mortgagor has signed and delivered this Mortgage
the day and year first written above.
WITNESS: MORTGAGOR
NECI ACQUISITION, INC.
---------------------------
By:
----------------------------------
SIGNATURE OF
Its:
---------------------------------
TITLE (IF APPLICABLE)
STATE OF ________________
COUNTY OF________________
On the ____ day of September, 2004, personally appeared __________, the
___________ and duly authorized agent of NECI Acquisition, Inc., a Florida
corporation, who acknowledged the signing of this document was his/her free act
and deed and the free act and deed of the corporation.
Notary Public, ________________________ County, _______
My Commission Expires:
-------------------------------
18
--------------------------------------------------------------- ----------------
DRAFTED BY AND RETURN TO:
Xxxxxxx X. Xxxxxxxxxx
Xxxxxx LLP
000 Xxxx Xxx Xxxxxx Xxxx, Xxxxx 000
Xxxx, Xxxxxxxx 00000
(000) 000-0000
--------------------------------------------------------------- ----------------
19
EXHIBIT "F"
FORM OF SECURITY AGREEMENT
[COMERICA LOGO] SECURITY AGREEMENT
(All Assets)
--------------------------------------------------------------------------------
As of September __, 2004, for value received, the undersigned
("Debtor") grants to Comerica Bank, a Michigan banking corporation ("Bank"),
whose address is 00000 Xxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000, Attention:
Commercial Loan Documentation, Mail Code 7578, a continuing security interest
and lien (any pledge, assignment, security interest or other lien arising
hereunder is sometimes referred to herein as a "security interest") in the
Collateral (as defined below) to secure payment when due, whether by stated
maturity, demand, acceleration or otherwise, of all existing and future
indebtedness ("Indebtedness") to the Bank of N//A ("Borrower") and/or Debtor.
Indebtedness includes without limit any and all obligations or liabilities of
the Borrower and/or Debtor to the Bank, whether absolute or contingent, direct
or indirect, voluntary or involuntary, liquidated or unliquidated, joint or
several, known or unknown; any and all obligations or liabilities for which the
Borrower and/or Debtor would otherwise be liable to the Bank were it not for the
invalidity or unenforceability of them by reason of any bankruptcy, insolvency
or other law, or for any other reason; any and all amendments, modifications,
renewals and/or extensions of any of the above; all costs incurred by Bank in
establishing, determining, continuing, or defending the validity or priority of
its security interest, or in pursuing its rights and remedies under this
Agreement or under any other agreement between Bank and Borrower and/or Debtor
or in connection with any proceeding involving Bank as a result of any financial
accommodation to Borrower and/or Debtor; and all other costs of collecting
Indebtedness, including without limit attorney fees. Debtor agrees to pay Bank
all such costs incurred by the Bank, immediately upon demand, and until paid all
costs shall bear interest at the highest per annum rate applicable to any of the
Indebtedness, but not in excess of the maximum rate permitted by law. Any
reference in this Agreement to attorney fees shall be deemed a reference to
reasonable fees, costs, and expenses of both in-house and outside counsel and
paralegals, whether or not a suit or action is instituted, and to court costs if
a suit or action is instituted, and whether attorney fees or court costs are
incurred at the trial court level, on appeal, in a bankruptcy, administrative or
probate proceeding or otherwise. Debtor further covenants, agrees and represents
as follows:
26. Collateral SHALL MEAN ALL OF THE FOLLOWING PROPERTY DEBTOR NOW OR
LATER OWNS OR HAS AN INTEREST IN, WHEREVER LOCATED:
26.1 all Accounts Receivable (for purposes of this Agreement, "Accounts
Receivable" consists of all accounts; general intangibles; chattel paper
(including without limit electronic chattel paper and tangible chattel paper);
contract rights; deposit accounts; documents; instruments; rights to payment
evidenced by chattel paper, documents or instruments; health care insurance
receivables; commercial tort claims; letters of credit; letter of credit rights;
supporting obligations; and rights to payment for money or funds advanced or
sold),
26.2 all Inventory,
26.3 all Equipment and Fixtures,
26.4 all Software (for purposes of this Agreement, "Software" consists
of all (i) computer programs and supporting information provided in connection
with a transaction relating to the program, and (ii) computer programs embedded
20
in goods and any supporting information provided in connection with a
transaction relating to the program whether or not the program is associated
with the goods in such a manner that it customarily is considered part of the
goods, and whether or not, by becoming the owner of the goods, a person acquires
a right to use the program in connection with the goods, and whether or not the
program is embedded in goods that consist solely of the medium in which the
program is embedded),
26.5 specific items listed on attached Schedule A, if any, is/are also
included in Collateral.
26.6 all goods, instruments, documents, policies and certificates of
insurance, deposits, money, investment property or other property (except real
property which is not a fixture) which are now or later in possession or control
of Bank, or as to which Bank now or later controls possession by documents or
otherwise, and
26.7 all additions, attachments, accessions, parts, replacements,
substitutions, renewals, interest, dividends, distributions, rights of any kind
(including but not limited to stock splits, stock rights, voting and
preferential rights), products, and proceeds of or pertaining to the above
including, without limit, cash or other property which were proceeds and are
recovered by a bankruptcy trustee or otherwise as a preferential transfer by
Debtor.
In the definition of Collateral, a reference to a
type of collateral shall not be limited by a separate
reference to a more specific or narrower type of that
collateral.
27. Warranties, Covenants and Agreements. DEBTOR WARRANTS,
COVENANTS AND AGREES AS FOLLOWS:
(a) Debtor shall furnish to Bank, in form and at intervals as Bank
may request, any information Bank may reasonably request and
allow Bank to examine, inspect, and copy any of Debtor's books
and records. Debtor shall, at the request of Bank, xxxx its
records and the Collateral to clearly indicate the security
interest of Bank under this Agreement.
(b) At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Bank, Debtor shall
be deemed to have warranted that (a) Debtor is the lawful
owner of the Collateral and has the right and authority to
subject it to a security interest granted to Bank; (b) none of
the Collateral is subject to any security interest other than
that in favor of Bank; (c) there are no financing statements
on file, other than in favor of Bank; (d) no person, other
than Bank, has possession or control (as defined in the
Uniform Commercial Code) of any Collateral of such nature that
perfection of a security interest may be accomplished by
control; and (e) Debtor acquired its rights in the Collateral
in the ordinary course of its business.
(c) Debtor will keep the Collateral free at all times from all
claims, liens, security interests and encumbrances other than
those in favor of Bank. Debtor will not, without the prior
written consent of Bank, sell, transfer or lease, or permit to
be sold, transferred or leased, any or all of the Collateral,
except for Inventory in the ordinary course of its business
and will not return any Inventory to its supplier. Bank or its
representatives may at all reasonable times inspect the
Collateral and may enter upon all premises where the
Collateral is kept or might be located.
(d) Debtor will do all acts and will execute or cause to be
executed all writings requested by Bank to establish, maintain
and continue an exclusive, perfected and first security
interest of Bank in the Collateral. Debtor agrees that Bank
has no obligation to acquire or perfect any lien on or
security interest in any asset(s), whether realty or
personalty, to secure payment of the Indebtedness, and Debtor
is not relying upon assets in which the Bank may have a lien
or security interest for payment of the Indebtedness.
21
(e) Debtor will pay within the time that they can be paid without
interest or penalty all taxes, assessments and similar charges
which at any time are or may become a lien, charge, or
encumbrance upon any Collateral, except to the extent
contested in good faith and bonded in a manner satisfactory to
Bank. If Debtor fails to pay any of these taxes, assessments,
or other charges in the time provided above, Bank has the
option (but not the obligation) to do so and Debtor agrees to
repay all amounts so expended by Bank immediately upon demand,
together with interest at the highest lawful default rate
which could be charged by Bank on any Indebtedness.
(f) Debtor will keep the Collateral in good condition and will
protect it from loss, damage, or deterioration from any cause.
Debtor has and will maintain at all times (a) with respect to
the Collateral, insurance under an "all risk" policy against
fire and other risks customarily insured against, and (b)
public liability insurance and other insurance as may be
required by law or reasonably required by Bank, all of which
insurance shall be in amount, form and content, and written by
companies as may be satisfactory to Bank, containing a
lender's loss payable endorsement acceptable to Bank. Debtor
will deliver to Bank immediately upon demand evidence
satisfactory to Bank that the required insurance has been
procured. If Debtor fails to maintain satisfactory insurance,
Bank has the option (but not the obligation) to do so and
Debtor agrees to repay all amounts so expended by Bank
immediately upon demand, together with interest at the highest
lawful default rate which could be charged by Bank on any
Indebtedness.
(g) On each occasion on which Debtor evidences to Bank the account
balances on and the nature and extent of the Accounts
Receivable, Debtor shall be deemed to have warranted that
except as otherwise indicated (a) each of those Accounts
Receivable is valid and enforceable without performance by
Debtor of any act; (b) each of those account balances are in
fact owing, (c) there are no setoffs, recoupments, credits,
contra accounts, counterclaims or defenses against any of
those Accounts Receivable, (d) as to any Accounts Receivable
represented by a note, trade acceptance, draft or other
instrument or by any chattel paper or document, the same have
been endorsed and/or delivered by Debtor to Bank, (e) Debtor
has not received with respect to any Account Receivable, any
notice of the death of the related account debtor, nor of the
dissolution, liquidation, termination of existence,
insolvency, business failure, appointment of a receiver for,
assignment for the benefit of creditors by, or filing of a
petition in bankruptcy by or against, the account debtor, and
(f) as to each Account Receivable, except as may be expressly
permitted by Bank to the contrary in another document, the
account debtor is not an affiliate of Debtor, the United
States of America or any department, agency or instrumentality
of it, or a citizen or resident of any jurisdiction outside of
the United States. Debtor will do all acts and will execute
all writings requested by Bank to perform, enforce performance
of, and collect all Accounts Receivable. Debtor shall neither
make nor permit any modification, compromise or substitution
for any Account Receivable without the prior written consent
of Bank. Debtor shall, at Bank's request, arrange for
verification of Accounts Receivable directly with account
debtors or by other methods acceptable to Bank.
(h) Debtor at all times shall be in strict compliance with all
applicable laws, including without limit any laws, ordinances,
directives, orders, statutes, or regulations an object of
which is to regulate or improve health, safety, or the
environment ("Environmental Laws").
(i) If Bank, acting in its sole discretion, redelivers Collateral
to Debtor or Debtor's designee for the purpose of (a) the
ultimate sale or exchange thereof; or (b) presentation,
collection, renewal, or registration of transfer thereof; or
22
(c) loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing with it
preliminary to sale or exchange; such redelivery shall be in
trust for the benefit of Bank and shall not constitute a
release of Bank's security interest in it or in the proceeds
or products of it unless Bank specifically so agrees in
writing. If Debtor requests any such redelivery, Debtor will
deliver with such request a duly executed financing statement
in form and substance satisfactory to Bank. Any proceeds of
Collateral coming into Debtor's possession as a result of any
such redelivery shall be held in trust for Bank and
immediately delivered to Bank for application on the
Indebtedness. Bank may (in its sole discretion) deliver any or
all of the Collateral to Debtor, and such delivery by Bank
shall discharge Bank from all liability or responsibility for
such Collateral. Bank, at its option, may require delivery of
any Collateral to Bank at any time with such endorsements or
assignments of the Collateral as Bank may request.
(j) At any time and without notice following the occurrence of an
Event of Default, Bank may (a) cause any or all of the
Collateral to be transferred to its name or to the name of its
nominees; and (b) receive or collect by legal proceedings or
otherwise all dividends, interest, principal payments and
other sums and all other distributions at any time payable or
receivable on account of the Collateral, and hold the same as
Collateral, or apply the same to the Indebtedness, the manner
and distribution of the application to be in the sole
discretion of Bank; (c) At any time and without notice Bank
may enter into any extension, subordination, reorganization,
deposit, merger or consolidation agreement or any other
agreement relating to or affecting the Collateral, and deposit
or surrender control of the Collateral, and accept other
property in exchange for the Collateral and hold or apply the
property or money so received pursuant to this Agreement; and
(d) take such actions in its own name or in Debtor's name as
Bank, in its sole but reasonable discretion, deems necessary
or appropriate to establish exclusive control (as defined in
the Uniform Commercial Code) over any Collateral of such
nature that perfection of Bank's security interest may be
accomplished by control.
(k) Bank may assign any of the Indebtedness and deliver any or all
of the Collateral to its assignee, who then shall have with
respect to Collateral so delivered all the rights and powers
of Bank under this Agreement, and after that Bank shall be
fully discharged from all liability and responsibility with
respect to Collateral so delivered.
(l) Reserved.
(m) Debtor shall defend, indemnify and hold harmless Bank, its
employees, agents, shareholders, affiliates, officers, and
directors from and against any and all claims, damages, fines,
expenses, liabilities or causes of action of whatever kind,
including without limit consultant fees, legal expenses, and
attorney fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any law,
including, without limit, Environmental Laws, or of any
remediation relating to any property required by any law,
including without limit Environmental Laws.
28. Collection of Proceeds.
(a) Debtor agrees to collect and enforce payment of all Collateral
until Bank shall direct Debtor to the contrary. Immediately
upon notice to Debtor by Bank and at all times after that,
Debtor agrees to fully and promptly cooperate and assist Bank
in the collection and enforcement of all Collateral and to
hold in trust for Bank all payments received in connection
with Collateral and from the sale, lease or other disposition
of any Collateral, all rights by way of suretyship or guaranty
and all rights in the nature of a lien or security interest
23
which Debtor now or later has regarding Collateral.
Immediately upon and after such notice, Debtor agrees to (a)
endorse to Bank and immediately deliver to Bank all payments
received on Collateral or from the sale, lease or other
disposition of any Collateral or arising from any other rights
or interests of Debtor in the Collateral, in the form received
by Debtor without commingling with any other funds, and (b)
immediately deliver to Bank all property in Debtor's
possession or later coming into Debtor's possession through
enforcement of Debtor's rights or interests in the Collateral.
Debtor irrevocably authorizes Bank or any Bank employee or
agent to endorse the name of Debtor upon any checks or other
items which are received in payment for any Collateral, and to
do any and all things necessary in order to reduce these items
to money. Bank shall have no duty as to the collection or
protection of Collateral or the proceeds of it, nor as to the
preservation of any related rights, beyond the use of
reasonable care in the custody and preservation of Collateral
in the possession of Bank. Debtor agrees to take all steps
necessary to preserve rights against prior parties with
respect to the Collateral. Nothing in this Section 3.1 shall
be deemed a consent by Bank to any sale, lease or other
disposition of any Collateral.
(b) Debtor agrees that immediately upon Bank's request (whether or
not any Event of Default exists) the Indebtedness shall be on
a "remittance basis" as follows: Debtor shall at its sole
expense establish and maintain (and Bank, at Bank's option may
establish and maintain at Debtor's expense): (a) an United
States Post Office lock box (the "Lock Box"), to which Bank
shall have exclusive access and control. Debtor expressly
authorizes Bank, from time to time, to remove contents from
the Lock Box, for disposition in accordance with this
Agreement. Debtor agrees to notify all account debtors and
other parties obligated to Debtor that all payments made to
Debtor (other than payments by electronic funds transfer)
shall be remitted, for the credit of Debtor, to the Lock Box,
and Debtor shall include a like statement on all invoices; and
(b) a non-interest bearing deposit account with Bank which
shall be titled as designated by Bank (the "Cash Collateral
Account") to which Bank shall have exclusive access and
control. Debtor agrees to notify all account debtors and other
parties obligated to Debtor that all payments made to Debtor
by electronic funds transfer shall be remitted to the Cash
Collateral Account, and Debtor, at Bank's request, shall
include a like statement on all invoices. Debtor shall execute
all documents and authorizations as required by Bank to
establish and maintain the Lock Box and the Cash Collateral
Account.
(c) All items or amounts which are remitted to the Lock Box, to
the Cash Collateral Account, or otherwise delivered by or for
the benefit of Debtor to Bank on account of partial or full
payment of, or with respect to, any Collateral shall, at
Bank's option, (a) be applied to the payment of the
Indebtedness, whether then due or not, in such order or at
such time of application as Bank may determine in its sole
discretion, or, (b) be deposited to the Cash Collateral
Account. Debtor agrees that Bank shall not be liable for any
loss or damage which Debtor may suffer as a result of Bank's
processing of items or its exercise of any other rights or
remedies under this Agreement, including without limitation
indirect, special or consequential damages, loss of revenues
or profits, or any claim, demand or action by any third party
arising out of or in connection with the processing of items
or the exercise of any other rights or remedies under this
Agreement. Debtor agrees to indemnify and hold Bank harmless
from and against all such third party claims, demands or
actions, and all related expenses or liabilities, including,
without limitation, attorney fees, unless caused by the
willful misconduct or gross negligence of the Bank.
29. Defaults, Enforcement and Application of Proceeds.
24
(a) Upon the occurrence of any Event of Default, as defined in the
Credit Agreement dated as of the date hereof between Bank and
Debtor, as amended from time to time, Debtor shall be in
default under this Agreement.
(b) Upon the occurrence of any Event of Default, Bank may at its
discretion and without prior notice to Debtor declare any or
all of the Indebtedness to be immediately due and payable, and
shall have and may exercise any one or more of the following
rights and remedies:
(i) Exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured
parties under the provisions of the Uniform
Commercial Code and other applicable law;
(ii) Institute legal proceedings to foreclose upon the
lien and security interest granted by this Agreement,
to recover judgment for all amounts then due and
owing as Indebtedness, and to collect the same out of
any Collateral or the proceeds of any sale of it;
(iii) Institute legal proceedings for the sale, under the
judgment or decree of any court of competent
jurisdiction, of any or all Collateral; and/or
(iv) Personally or by agents, attorneys, or appointment of
a receiver, enter upon any premises where Collateral
may then be located, and take possession of all or
any of it and/or render it unusable; and without
being responsible for loss or damage to such
Collateral, hold, operate, sell, lease, or dispose of
all or any Collateral at one or more public or
private sales, leasings or other disposition, at
places and times and on terms and conditions as Bank
may deem fit, without any previous demand or
advertisement; and except as provided in this
Agreement, all notice of sale, lease or other
disposition, and advertisement, and other notice or
demand, any right or equity of redemption, and any
obligation of a prospective purchaser or lessee to
inquire as to the power and authority of Bank to
sell, lease, or otherwise dispose of the Collateral
or as to the application by Bank of the proceeds of
sale or otherwise, which would otherwise be required
by, or available to Debtor under, applicable law are
expressly waived by Debtor to the fullest extent
permitted.
At any sale pursuant to this Section 4.2,
whether under the power of sale, by virtue of
judicial proceedings or otherwise, it shall not be
necessary for Bank or a public officer under order of
a court to have present physical or constructive
possession of Collateral to be sold. The recitals
contained in any conveyances and receipts made and
given by Bank or the public officer to any purchaser
at any sale made pursuant to this Agreement shall, to
the extent permitted by applicable law, conclusively
establish the truth and accuracy of the matters
stated (including, without limit, as to the amounts
of the principal of and interest on the Indebtedness,
the accrual and nonpayment of it and advertisement
and conduct of the sale); and all prerequisites to
the sale shall be presumed to have been satisfied and
performed. Upon any sale of any Collateral, the
receipt of the officer making the sale under judicial
proceedings or of Bank shall be sufficient discharge
to the purchaser for the purchase money, and the
purchaser shall not be obligated to see to the
application of the money. Any sale of any Collateral
under this Agreement shall be a perpetual bar against
Debtor with respect to that Collateral. At any sale
or other disposition of Collateral pursuant to this
Section 4.2, Bank disclaims all warranties which
would otherwise be given under the Uniform Commercial
Code, including without limit a disclaimer of any
25
warranty relating to title, possession, quiet
enjoyment or the like, and Bank may communicate these
disclaimers to a purchaser at such disposition. This
disclaimer of warranties will not render the sale
commercially unreasonable.
(c) Debtor shall at the request of Bank, notify the account
debtors or obligors of Bank's security interest in the
Collateral and direct payment of it to Bank. Bank may, itself,
upon the occurrence of any Event of Default so notify and
direct any account debtor or obligor. At the request of Bank,
whether or not an Event of Default shall have occurred, Debtor
shall immediately take such actions as Bank shall request to
establish exclusive control (as defined in the Uniform
Commercial Code) by Bank over any Collateral which is of such
a nature that perfection of a security interest may be
accomplished by control.
(d) The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first
upon all expenses authorized by the Uniform Commercial Code
and all reasonable attorney fees and legal expenses incurred
by Bank; the balance of the proceeds of the sale or other
disposition shall be applied in the payment of the
Indebtedness, first to interest, then to principal, then to
remaining Indebtedness and the surplus, if any, shall be paid
over to Debtor or to such other person(s) as may be entitled
to it under applicable law. Debtor shall remain liable for any
deficiency, which it shall pay to Bank immediately upon
demand. Debtor agrees that Bank shall be under no obligation
to accept any noncash proceeds in connection with any sale or
disposition of Collateral unless failure to do so would be
commercially unreasonable. If Bank agrees in its sole
discretion to accept noncash proceeds (unless the failure to
do so would be commercially unreasonable), Bank may ascribe
any commercially reasonable value to such proceeds. Without
limiting the foregoing, Bank may apply any discount factor in
determining the present value of proceeds to be received in
the future or may elect to apply proceeds to be received in
the future only as and when such proceeds are actually
received in cash by Bank.
(e) Nothing in this Agreement is intended, nor shall it be
construed, to preclude Bank from pursuing any other remedy
provided by law for the collection of the Indebtedness or for
the recovery of any other sum to which Bank may be entitled
for the breach of this Agreement by Debtor. Nothing in this
Agreement shall reduce or release in any way any rights or
security interests of Bank contained in any existing agreement
between Borrower, Debtor, or any Guarantor and Bank.
(f) No waiver of default or consent to any act by Debtor shall be
effective unless in writing and signed by an authorized
officer of Bank. No waiver of any default or forbearance on
the part of Bank in enforcing any of its rights under this
Agreement shall operate as a waiver of any other default or of
the same default on a future occasion or of any rights.
(g) Debtor (a) irrevocably appoints Bank or any agent of Bank
(which appointment is coupled with an interest) the true and
lawful attorney of Debtor (with full power of substitution) in
the name, place and stead of, and at the expense of, Debtor
and (b) authorizes Bank or any agent of Bank, in its own name,
at Debtor's expense, to do any of the following, as Bank, in
its sole discretion, deems appropriate:
1. to demand, receive, xxx for, and give receipts or acquittances for
any moneys due or to become due on any Collateral (including without limit to
draft against Collateral) and to endorse any item representing any payment on or
proceeds of the Collateral;
26
2. to execute and file in the name of and on behalf of Debtor all
financing statements or other filings deemed necessary or desirable by Bank to
evidence, perfect, or continue the security interests granted in this Agreement;
and
3. to do and perform any act on behalf of Debtor permitted or required
under this Agreement.
(h) Upon the occurrence of an Event of Default, Debtor also
agrees, upon request of Bank, to assemble the Collateral and
make it available to Bank at any place designated by Bank
which is reasonably convenient to Bank and Debtor.
(i) The following shall be the basis for any finder of fact's
determination of the value of any Collateral which is the
subject matter of a disposition giving rise to a calculation
of any surplus or deficiency under Section 9.615 (f) of the
Uniform Commercial Code (as in effect on or after July 1,
2001): (a) the Collateral which is the subject matter of the
disposition shall be valued in an "as is" condition as of the
date of the disposition, without any assumption or expectation
that such Collateral will be repaired or improved in any
manner; (b) the valuation shall be based upon an assumption
that the transferee of such Collateral desires a resale of the
Collateral for cash promptly (but no later than 30 days)
following the disposition; (c) all reasonable closing costs
customarily borne by the seller in commercial sales
transactions relating to property similar to such Collateral
shall be deducted including, without limitation, brokerage
commissions, tax prorations, attorneys' fees, whether inside
or outside counsel is used, and marketing costs; (d) the value
of the Collateral which is the subject matter of the
disposition shall be further discounted to account for any
estimated holding costs associated with maintaining such
Collateral pending sale (to the extent not accounted for in
(c) above), and other maintenance, operational and ownership
expenses; and (e) any expert opinion testimony given or
considered in connection with a determination of the value of
such Collateral must be given by persons having at least 5
years experience in appraising property similar to the
Collateral and who have conducted and prepared a complete
written appraisal of such Collateral taking into consideration
the factors set forth above. The "value" of any such
Collateral shall be a factor in determining the amount of
proceeds which would have been realized in a disposition to a
transferee other than a secured party, a person related to a
secured party or a secondary obligor under Section 9-615(f).
30. Miscellaneous.
(a) Until Bank is advised in writing by Debtor to the contrary,
all notices, requests and demands required under this
Agreement or by law shall be given to, or made upon, Debtor at
the first address indicated in Section 5.15 below.
(b) Debtor will give Bank not less than 90 days prior written
notice of all contemplated changes in Debtor's name, location,
chief executive office, principal place of business, and/or
location of any Collateral, but the giving of this notice
shall not cure any Event of Default caused by this change.
(c) Bank assumes no duty of performance or other responsibility
under any contracts contained within the Collateral.
(d) Bank has the right to sell, assign, transfer, negotiate or
grant participations or any interest in, any or all of the
Indebtedness and any related obligations, including without
limit this Agreement. In connection with the above, but
without limiting its ability to make other disclosures to the
full extent allowable, Bank may disclose all documents and
information which Bank now or later has relating to Debtor,
27
the Indebtedness or this Agreement, however obtained. Debtor
further agrees that Bank may provide information relating to
this Agreement or relating to Debtor to the Bank's parent,
affiliates, subsidiaries, and service providers.
(e) In addition to Bank's other rights, any indebtedness owing
from Bank to Debtor can be set off and applied by Bank on any
Indebtedness at any time(s) either before or after maturity or
demand without notice to anyone. Any such action shall not
constitute an acceptance of collateral in discharge of the
Indebtedness.
(f) Debtor, to the extent not expressly prohibited by applicable
law, waives any right to require the Bank to: (a) proceed
against any person or property; (b) comply with the provisions
of Sections 9-611 or 9-621 of the Uniform Commercial Code; or
(c) pursue any other remedy in the Bank's power. Debtor waives
notice of acceptance of this Agreement and presentment,
demand, protest, notice of protest, dishonor, notice of
dishonor, notice of default, notice of intent to accelerate or
demand payment of any Indebtedness, any and all other notices
to which the undersigned might otherwise be entitled except as
provided in this Agreement or the Credit Agreement, and
diligence in collecting any Indebtedness. Debtor
unconditionally and irrevocably waives each and every defense
and setoff of any nature which, under principles of guaranty
or otherwise, would operate to impair or diminish in any way
the obligation of Debtor under this Agreement, and
acknowledges that such waiver is by this reference
incorporated into each security agreement, collateral
assignment, pledge and/or other document from Debtor now or
later securing the Indebtedness, and acknowledges that as of
the date of this Agreement no such defense or setoff exists.
(g) Reserved.
(h) In the event that applicable law shall obligate Bank to give
prior notice to Debtor of any action to be taken under this
Agreement, Debtor agrees that a written notice given to Debtor
at least ten days before the date of the act shall be
reasonable notice of the act and, specifically, reasonable
notification of the time and place of any public sale or of
the time after which any private sale, lease, or other
disposition is to be made, unless a shorter notice period is
reasonable under the circumstances. A notice shall be deemed
to be given under this Agreement when delivered to Debtor or
when placed in an envelope addressed to Debtor and deposited,
with postage prepaid, in a post office or official depository
under the exclusive care and custody of the United States
Postal Service or delivered to an overnight courier. The
mailing shall be by overnight courier, certified, or first
class mail.
(i) Notwithstanding any prior revocation, termination, surrender,
or discharge of this Agreement in whole or in part, the
effectiveness of this Agreement shall automatically continue
or be reinstated in the event that any payment received or
credit given by Bank in respect of the Indebtedness is
returned, disgorged, or rescinded under any applicable law,
including, without limitation, bankruptcy or insolvency laws,
in which case this Agreement, shall be enforceable against
Debtor as if the returned, disgorged, or rescinded payment or
credit had not been received or given by Bank, and whether or
not Bank relied upon this payment or credit or changed its
position as a consequence of it. In the event of continuation
or reinstatement of this Agreement, Debtor agrees upon demand
by Bank to execute and deliver to Bank those documents which
Bank determines are appropriate to further evidence (in the
public records or otherwise) this continuation or
reinstatement, although the failure of Debtor to do so shall
not affect in any way the reinstatement or continuation.
28
(j) This Agreement and all the rights and remedies of Bank under
this Agreement shall inure to the benefit of Bank's successors
and assigns and to any other holder who derives from Bank
title to or an interest in the Indebtedness or any portion of
it, and shall bind Debtor and the heirs, legal
representatives, successors, and assigns of Debtor. Nothing in
this Section 5.10 is deemed a consent by Bank to any
assignment by Debtor.
(k) If there is more than one Debtor, all undertakings, warranties
and covenants made by Debtor and all rights, powers and
authorities given to or conferred upon Bank are made or given
jointly and severally.
(l) Except as otherwise provided in this Agreement, all terms in
this Agreement have the meanings assigned to them in Article 9
(or, absent definition in Article 9, in any other Article) of
the Uniform Commercial Code, as those meanings may be amended,
revised or replaced from time to time. "Uniform Commercial
Code" means Act No. 174 of the Michigan Public Acts of 1962,
as amended, revised or replaced from time to time, including
without limit as amended by Act No. 348 of the Michigan Public
Acts of 2000. Notwithstanding the foregoing, the parties
intend that the terms used herein which are defined in the
Uniform Commercial Code have, at all times, the broadest and
most inclusive meanings possible. Accordingly, if the Uniform
Commercial Code shall in the future be amended or held by a
court to define any term used herein more broadly or
inclusively than the Uniform Commercial Code in effect on the
date of this Agreement, then such term, as used herein, shall
be given such broadened meaning. If the Uniform Commercial
Code shall in the future be amended or held by a court to
define any term used herein more narrowly, or less
inclusively, than the Uniform Commercial Code in effect on the
date of this Agreement, such amendment or holding shall be
disregarded in defining terms used in this Agreement.
(m) No single or partial exercise, or delay in the exercise, of
any right or power under this Agreement, shall preclude other
or further exercise of the rights and powers under this
Agreement. The unenforceability of any provision of this
Agreement shall not affect the enforceability of the remainder
of this Agreement. This Agreement constitutes the entire
agreement of Debtor and Bank with respect to the subject
matter of this Agreement. No amendment or modification of this
Agreement shall be effective unless the same shall be in
writing and signed by Debtor and an authorized officer of
Bank. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Michigan,
without regard to conflict of laws principles.
(n) To the extent that any of the Indebtedness is payable upon
demand, nothing contained in this Agreement shall modify the
terms and conditions of that Indebtedness nor shall anything
contained in this Agreement prevent Bank from making demand,
without notice and with or without reason, for immediate
payment of any or all of that Indebtedness at any time(s),
whether or not an Event of Default has occurred.
(o) Debtor represents and warrants that Debtor's exact name is the
name set forth in this Agreement. Debtor further represents
and warrants the following and agrees that Debtor is, and at
all times shall be, located in the following place [xxxx
applicable provision]:
[ ] Debtor is an individual, and Debtor is located (as
determined pursuant to the Uniform Commercial Code)
at Debtor's principal residence which is (street
address, state and county or parish):
_________________________________________________.
29
[X] Debtor is a registered organization which is
organized under the laws of one of the states
comprising the United States (e.g. corporation,
limited partnership, registered limited liability
partnership or limited liability company), and Debtor
is located (as determined pursuant to the Uniform
Commercial Code) in the state under the laws of which
it was organized, which is (street address, state and
county or parish): [Insert address of Debtor].
[ ] Debtor is a domestic organization which is not a
registered organization under the laws of the United
States or any state thereof (e.g. general
partnership, joint venture, trust, estate or
association), and Debtor is located (as determined
pursuant to the Uniform Commercial Code) at its sole
place of business or, if it has more than one place
of business, at its chief executive office, which is
(street address, state and county or
parish):____________________________.
[ ] Debtor is a registered organization organized under
the laws of the United States, and Debtor is located
in the state that United States law designates as its
location or, if United States law authorizes the
Debtor to designate the state for its location, the
state designated by Debtor, or if neither of the
foregoing are applicable, at the District of
Columbia. Debtor is located (as determined pursuant
to the Uniform Commercial Code) at (street address,
state and county or
parish):____________________________________________.
[ ] Debtor is a foreign individual or foreign
organization or a branch or agency of a bank that is
not organized under the laws of the United States or
a state thereof. Debtor is located (as determined
pursuant to the Uniform Commercial Code) at:
_______________________.
If Collateral is located at other than the
address specified above, such Collateral is located
and shall be maintained at the locations listed on
Schedule 5.15. Collateral shall be maintained only at
the locations identified in this Section 5.15.
(p) A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform
Commercial Code and may be filed by Bank in any filing office.
(q) This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable
provisions of the Uniform Commercial Code, but the obligations
contained in Section 2.13 of this Agreement shall survive
termination.
31. DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
30
32. Special Provisions Applicable to this Agreement. FROM AND AFTER THE
DATE OF THIS AGREEMENT (AND UNLESS AND UNTIL BANK NOTIFIES DEBTOR IN WRITING TO
THE CONTRARY), ALL OF THE INDEBTEDNESS SHALL BE ON A REMITTANCE BASIS AND ALL OF
THE PROVISIONS OF SECTION 3.2 SHALL BE IMMEDIATELY APPLICABLE, INCLUDING WITHOUT
LIMITATION, THE REQUIREMENT TO ESTABLISH AND MAINTAIN A LOCK BOX AND CASH
COLLATERAL ACCOUNT.
Debtor:
NECI ACQUISITION, INC.
By:
---------------------------
SIGNATURE OF
Its:
---------------------------
TITLE (If applicable)
31
SCHEDULE 5.15
LOCATIONS OF COLLATERAL
[TO BE COMPLETED BY DEBTOR]
EXHIBIT "G"
FORM OF SUBORDINATION AGREEMENT
[COMERICA LOGO] SUBORDINATION AGREEMENT
(All Indebtedness and Liens)
--------------------------------------------------------------------------------
NECI Acquisition, Inc.("Borrower") is indebted to the undersigned ("Creditor")
in the principal sum of Two Million Seven Hundred Fifty Thousand Dollars
($2,750,000) evidenced by [ ] AN OPEN ACCOUNT [X] A PROMISSORY NOTE OTHER
(DESCRIBE) _______________________ which indebtedness is [X] UNSECURED [ ]
SECURED BY ______________________, and Borrower is also indebted to Comerica
Bank ("Bank").
For good and valuable consideration, receipt of which is hereby acknowledged,
Creditor agrees as follows:
1. Any and all obligations and liabilities of Borrower to Creditor
under the above-described promissory note (the "Subordinated Indebtedness") are
subordinated in right of payment to any and all obligations and liabilities of
Borrower to the Bank, including principal and interest payments, whether direct
or indirect, absolute or contingent, joint or several, secured or unsecured, due
or to become due, now existing or later arising and however evidenced, together
with all other sums due thereon and all costs of collecting the same (including,
without limit, reasonable attorney fees) for which Borrower is liable, in
amounts up to (but not exceeding) the Senior Indebtedness Cap (the "Senior
Indebtedness"). "Senior Indebtedness Cap" shall mean $10,000,000 principal plus
interest thereon. It is understood and agreed that although any amounts owing by
Borrower to Bank in excess of the Senior Indebtedness Cap shall not constitute
"Senior Indebtedness" for purposes of this Agreement, neither the incurrence
thereof by Borrower, nor the lending thereof by Bank, shall constitute a breach
of this Agreement.
2. Creditor will not ask for, demand, xxx for, take or receive (by way
of voluntary payment, acceleration, set-off or counterclaim, foreclosure or
other realization on security, dividends in bankruptcy or otherwise), or offer
to make any discharge or release of, any of the Subordinated Indebtedness, and
Creditor waives any such rights with respect to the Subordinated Indebtedness
nor shall Creditor exercise any rights of subrogation or other similar rights
with respect to the Senior Indebtedness.
3. Creditor will not exercise any of Creditor's rights in any
collateral now or later securing the Subordinated Indebtedness. All rights of
Creditor in any collateral now or later securing the Subordinated Indebtedness
are subordinated to all rights of the Bank now or later existing in any of the
same collateral securing the Senior Indebtedness.
4. Creditor authorizes and empowers the Bank to demand, enforce payment
by legal proceedings, receive and give acquittances for the Subordinated
Indebtedness and to exercise all rights of Creditor in any security (other than
a deed of trust, mortgage or security interest covering real property or a
principal dwelling) now or later held for the Subordinated Indebtedness.
2
5. Should any payment, distribution or security or proceeds from the
foregoing be received by Creditor upon or with respect to the Subordinated
Indebtedness prior to the satisfaction in full of the Senior Indebtedness,
Creditor shall immediately deliver same to the Bank in the form received (except
for endorsement or assignment by Creditor where required by the Bank), for
application on the Senior Indebtedness (whether or not then due and in such
order of maturity as Bank elects) and, until so delivered, the same shall be
held in trust by Creditor as the property of the Bank.
6. Creditor represents and warrants that, except for granting interests
in the Subordinated Indebtedness for collateral purposes to its lenders, it has
not made or permitted to be made and shall not make or permit any assignment,
transfer, pledge, or disposition for collateral purposes or otherwise, of all or
any part of the Subordinated Indebtedness or any collateral or other security
for the Subordinated Indebtedness so long as this Agreement remains in effect,
unless consented to by Bank, which consent shall not be unreasonably withheld
(it being understood that any transferee of the Subordinated Indebtedness shall
be required to assume all obligations of Creditor under this Agreement).
Creditor further makes, constitutes and appoints Bank its true and lawful
attorney-in-fact with full power of substitution to take any action in
furtherance of this Agreement, including, but not limited to, the endorsing of
instruments and the execution and delivery of all documents and agreements
necessary to obtain or accomplish any protection for or collection or
disposition of any part of any collateral. Such appointment shall be deemed
irrevocable and coupled with an interest.
7. This Agreement constitutes a continuing agreement of subordination,
even though at times Borrower is not indebted to the Bank. The Bank may
continue, in reliance on this Agreement, without notice to Creditor, to lend
monies, extend credit, modify, renew or make other financial accommodations, to
or for the account of Borrower until the fifth (5th) day ("effective date")
following written acknowledgment by an officer of the Bank that the Bank
received written notice of revocation of this Agreement from Creditor. Any such
notice of revocation shall not be effective as to any Senior Indebtedness
existing at the effective date of revocation or any Senior Indebtedness created
after that pursuant to any commitment or agreement of the Bank or pursuant to
any Borrower loan (whether advances or readvances by the Bank after the
effective date of revocation are optional or obligatory) existing at the
effective date of revocation or any modifications or renewals of any such Senior
Indebtedness, whether in whole or in part. Possession by the Bank of any note or
other evidence of indebtedness made, endorsed or guaranteed by Borrower shall be
conclusive evidence (but not the only means of establishing) that Borrower is
indebted to the Bank.
8. Creditor shall indemnify the Bank against all claims, damages,
costs, and expenses, including, without limit, reasonable attorneys' fees,
incurred by the Bank in connection with any suit, claim or action against the
Bank arising solely out of the termination of this Agreement by Creditor or any
refusal by the Bank to extend additional credit to Borrower solely as a result
of the revocation of this Agreement by Creditor.
9. Creditor delivers this Agreement based solely on Creditor's
independent investigation of (or decision not to investigate) the financial
condition of Borrower and is not relying on any information furnished by the
Bank. Creditor assumes full responsibility for obtaining any further information
concerning Borrower's financial condition, the status of the Senior Indebtedness
or any other matter which Creditor may deem necessary or appropriate now or
3
later. Creditor waives any duty on the part of the Bank, and agrees that
Creditor is not relying upon nor expecting the Bank to disclose to Creditor any
fact now or later known by the Bank, whether relating to the operations or
condition of Borrower, the existence, liabilities or financial condition of any
guarantor of the Senior Indebtedness, the occurrence of any default with respect
to the Senior Indebtedness, or otherwise, notwithstanding any effect such fact
may have upon Creditor's risk or Creditor's rights against Borrower. Creditor
knowingly accepts the full range of risk encompassed in this Agreement, which
risk includes, without limit, the possibility that Borrower may incur Senior
Indebtedness to the Bank after the financial condition of Borrower, or its
ability to pay Borrower's debts as they mature, has deteriorated. Creditor
acknowledges and agrees that the Bank's rights under this Agreement are not
conditioned upon pursuit by the Bank of any remedy the Bank may have against
Borrower or any other person or any other security. The absence of Borrower's
signature at the end of this Agreement shall in no way impair or affect the
validity of this Agreement.
10. The Bank, in its sole discretion, without notice to Creditor, may
release, exchange, enforce and otherwise deal with any security now or later
held by the Bank for payment of the Senior Indebtedness or release any party now
or later liable for payment of the Senior Indebtedness without affecting in any
manner the Bank's rights under this Agreement. Creditor acknowledges and agrees
that the Bank has no obligation to acquire or perfect any lien on or security
interest in any asset(s), whether realty or personalty, to secure payment of the
Senior Indebtedness, and Creditor is not relying upon assets in which the Bank
has or may have a lien or security interest for payment of the Senior
Indebtedness.
11. Notwithstanding any prior revocation, termination, surrender, or
discharge of this Agreement in whole or in part, the effectiveness of this
Agreement shall automatically continue or be reinstated in the event that any
payment received or credit given by the Bank in respect of the Senior
Indebtedness is returned, disgorged, or rescinded under any applicable state or
federal law, including, without limitation, laws pertaining to bankruptcy or
insolvency, in which case this Agreement, shall be enforceable against the
Creditor as if the returned, disgorged, or rescinded payment or credit had not
been received or given by the Bank, and whether or not the Bank relied upon this
payment or credit or changed its position as a consequence of it. In the event
of continuation or reinstatement of this Agreement, the Creditor agrees upon
demand by the Bank to execute and deliver to the Bank those documents which the
Bank determines are appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the failure of the
Creditor to do so shall not affect in any way the reinstatement or continuation.
12. Creditor waives any right to require the Bank to: (a) proceed
against any person or property; (b) give notice of the terms, time and place of
any public or private sale of personal property security held from Borrower or
any other person, or otherwise comply with the provisions of Section 9-611 or
9-621 of the Michigan or other applicable Uniform Commercial Code, as the same
may be amended, revised or replaced from time to time; or (c) pursue any other
remedy in the Bank's power. Creditor waives notice of acceptance of this
Agreement and presentment, demand, protest, notice of protest, dishonor, notice
of dishonor, notice of default, notice of intent to accelerate or demand payment
of any Senior Indebtedness, any and all other notices to which the undersigned
might otherwise be entitled, and diligence in collecting any Senior
4
Indebtedness, and agrees that the Bank may, once or any number of times, modify
the terms of any Senior Indebtedness, compromise, extend, increase, accelerate,
renew or forbear to enforce payment of any or all Senior Indebtedness, or permit
the Borrower to incur additional Senior Indebtedness, all without notice to
Creditor and without affecting in any manner the unconditional obligations of
Creditor under this Agreement.
13. Creditor acknowledges that the Bank has the right to sell, assign,
transfer, negotiate or grant participations or any interest in, any or all of
the Senior Indebtedness and any related obligations, including without limit
this Agreement. In connection with the above, but without limiting its ability
to make other disclosures to the full extent allowable, the Bank may disclose
all documents and information which the Bank now or later has or acquires
relating to Creditor and this Agreement, however obtained. Creditor further
agrees that the Bank may disclose such documents and information to Borrower.
Creditor further agrees that the Bank may provide information relating to this
Agreement or relating to Creditor to the Bank's parent, affiliates, subsidiaries
and service providers.
14. No waiver or modification of any of its rights under this Agreement
shall be effective unless the waiver or modification shall be in writing and
signed by an authorized officer on behalf of the Bank. Each waiver or
modification shall be a waiver or modification only with respect to the specific
matter to which the waiver or modification relates and shall in no way impair
the rights of the Bank or the obligations of Creditor to the Bank in any other
respect.
15. This Agreement shall bind and be for the benefit of Creditor and
the Bank and their respective successors and assigns, and shall be construed
according to the laws of the State of Michigan, without regard to conflict of
laws principles. If this Agreement is executed by two or more persons, it shall
bind each of them individually as well as jointly.
16. The term "Borrower", as used in this Agreement, includes any
person, corporation, partnership or other entity which succeeds to the interests
or business of Borrower named above, and the term "Senior Indebtedness" includes
indebtedness of any such successor Borrower to the Bank.
17. Creditor agrees to reimburse the Bank upon demand for any and all
costs and expenses (including, without limit, court costs, reasonable legal
fees, and reasonable attorney fees whether inside or outside counsel is used,
whether or not suit is instituted and, if instituted, whether at the trial or
appellate level, in a bankruptcy, probate or administrative proceeding, or
otherwise) incurred in enforcing any of the duties and obligations of Creditor
under this Agreement.
18. Creditor waives any defense against the enforceability of this
Agreement based upon or arising by reason of the application by Borrower of the
proceeds of any Indebtedness for purposes other than the purposes represented by
Borrower to the Bank or intended or understood by the Bank or Creditor. Creditor
waives all rights to require the Bank to xxxxxxxx the Collateral or any other
property the Bank may at any time have as security for the Indebtedness and
waives all right to require the Bank to first proceed against any guarantor or
other person before proceeding against the Collateral.
5
19. The relative priorities of the Bank and Creditor in the Collateral
as set forth in this Agreement control irrespective of the time, method or order
of attachment or perfection of the liens and security interests acquired by the
parties in the Collateral and irrespective of the priorities as would otherwise
be determined by reference to the Uniform Commercial Code or other applicable
laws. Creditor shall not contest the validity, priority or perfection of the
Bank's security interest in the Collateral (regardless of whether the Bank's
security interest in the Collateral is valid or perfected). The priorities of
any liens or security interests of the parties in any property of the Borrower
other than the Collateral are not affected by this Agreement and shall be
determined by reference to applicable law. The Bank's rights under this
Agreement are in addition to, and not in substitution of, its rights under any
other subordination agreement with Creditor.
20. Special Provisions: Notwithstanding anything to the contrary in
this Agreement, Creditor may ask for, demand, xxx for, take or receive from
Borrower, and, subject to the following proviso, may keep and retain all
payments of principal and interest which may come due under the Subordinated
Indebtedness; provided, however, that Creditor may not ask for, demand, xxx for,
take or receive from Borrower any such payments after Creditor is given written
notice (the "Blockage Notice") by the Bank that a Default or Event of Default
exists or has occurred under any Senior Indebtedness, which restriction shall
continue until such time as either (i) Creditor receives subsequent written
notice from the Bank stating that the Default has been cured and/or the loan(s)
has (have) been paid, or (ii) if such Default or Event of Default is not in
respect of payments required to be made under the Senior Indebtedness (a
"Non-Payment Default"), the passage of 120 days from the date on which the
Creditor received the Blockage Notice. The Bank agrees that it will not give
more than two (2) Blockage Notices for Non-Payment Defaults in any 365-day
period. During any period in which Bank is collecting or attempting to collect
Senior Indebtedness through legal action or realization of collateral, Creditor
shall not be prevented hereby from taking any enforcement action in respect of
the Subordinated Indebtedness, providing that any payments received as a result
thereof shall be subject to the provisions of this Agreement.
21. Nothing contained in the subordination provisions of this Agreement
is intended to or shall impair, as between Borrower, its creditors other than
the Bank and the Creditor, the obligation of Borrower, which is absolute and
unconditional, to pay to the Creditor when due the principal of and the interest
on the above-described promissory note, or is intended to or shall affect the
relative rights of the Creditor and the creditors of Borrower other than the
Bank.
22. Subject to the indefeasible payment in full in cash of all Senior
Indebtedness, Creditor shall be subrogated to the extent of any distributions
made by Creditor to Bank, or otherwise applied to payment of such Senior
Indebtedness solely by reason of the provisions of this Agreement, to any rights
of the Bank to receive payments and distribution of cash, securities and other
property applicable to the Senior Indebtedness, if any, until the Subordinated
Indebtedness shall have been paid in full.
-------------------------------------
THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
6
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS AGREEMENT.
IN WITNESS WHEREOF, Creditor has caused this Agreement to be executed as of
September __, 2004.
JACO ELECTRONICS, INC. CREDITOR'S ADDRESS
----------------------------------
[CREDITOR]
BY:
------------------------------- -------------------------------------
SIGNATURE OF STREET ADDRESS
ITS:
------------------------------ -------------------------------------
TITLE (IF APPLICABLE) CITY STATE ZIP
BORROWER'S ACKNOWLEDGMENT
NECI Acquisition, Inc. ("Borrower") accepts notice of subordination created by
this Agreement and agrees that it will take no action inconsistent with this
Agreement and that, except as specifically provided above or except with the
prior written approval of Bank, no payment or distribution shall be made by
Borrower on or with respect to the Subordinated Indebtedness, so long as this
Agreement remains in effect. Borrower agrees that the Bank may, at its option,
without notice and without limiting Bank's other rights, upon any breach by
Creditor of, or purported termination by the Creditor of, this Agreement,
declare all Senior Indebtedness to be immediately due and payable and/or
terminate any commitments of Bank to Borrower.
NECI ACQUISITION, INC. BORROWER'S ADDRESS
----------------------------------
[BORROWER]
BY: 000 Xxxxx Xxxx Xxxxxx, Xxxxx 000
------------------------------- -------------------------------------
SIGNATURE OF STREET ADDRESS
ITS: Xxxxxx XX 00000
------------------------------ -------------------------------------
TITLE (IF APPLICABLE) CITY STATE ZIP
Dated: September __, 2004
7
