SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For Quarter Ended December 31, 1997 Commission File No. 1-7939
---------------------------- -------
VICON INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
NEW YORK STATE 11-2160665
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
89 Arkay Drive, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 952-2288
(Former name, address, and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
At December 31 1997, the registrant had outstanding 3,001,108 shares of Common
Stock, $.01 par value.
<PAGE>
PART I - FINANCIAL INFORMATION
VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
12/31/97 12/31/96
Net sales........................... $14,874,200 $11,297,775
Costs and expenses:
Cost of goods sold................ 10,245,524 8,116,967
Selling, general & admin.
expenses........................ 3,215,906 2,721,195
Interest expense.................. 338,797 263,948
Unrealized foreign
exchange gain................... - (33,623)
------------ ------------
Total costs and expenses....... 13,800,227 11,068,487
Income before income taxes.......... 1,073,973 229,288
Provision for income taxes.......... 65,000 14,000
----------- -----------
Net income.......................... $ 1,008,973 $ 215,288
=========== ===========
Net income per share:
Basic $ .34 $ .08
=== ===
Diluted $ .31 $ .08
--- ---
Weighted average number of shares used in computing net income per share:
Basic 3,001,000 2,777,000
Diluted 3,293,000 2,870,000
See Notes to (Condensed) Consolidated Financial Statements.
2
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VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS 12/31/97 9/30/97
CURRENT ASSETS
Cash............................................ $ 225,276 $ 287,580
Accounts receivable (less allowance
of $603,000 at December 31, 1997 and
$493,000 at September 30, 1997)............... 10,152,090 9,578,297
Inventories:
Parts, components, and materials.............. 3,356,001 3,399,133
Work-in-process............................... 1,904,228 2,046,174
Finished products............................. 10,919,277 11,188,217
----------- -----------
16,179,506 16,633,524
Prepaid expenses................................ 392,154 307,580
----------- -----------
TOTAL CURRENT ASSETS............................ 26,949,026 26,806,981
- --------------------
Property, plant and equipment................... 8,508,226 8,362,930
Less: accumulated depreciation................. (5,048,244) (4,870,717)
----------- -----------
3,459,982 3,492,213
Other assets.................................... 870,481 900,417
----------- -----------
TOTAL ASSETS.................................... $31,279,489 $31,199,611
- ------------ =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings under revolving credit agreement..... $ 471,490 $ 169,006
Current maturities of long-term debt............ 501,169 515,092
Accounts payable:
Related party................................. 6,902,119 7,146,985
Other......................................... 1,785,825 1,407,917
Accrued wages and expenses...................... 1,852,334 2,111,670
Income taxes payable............................ 152,343 105,188
---------- ----------
TOTAL CURRENT LIABILITIES 11,665,280 11,455,858
- -------------------------
Long-term debt:
Related party................................. 1,440,000 1,440,000
Other......................................... 5,776,092 6,904,368
Other long-term liabilities..................... 466,746 485,402
SHAREHOLDERS' EQUITY
Common stock, par value $.01.................... 30,470 30,470
Capital in excess of par value.................. 9,868,063 9,868,063
Retained earnings............................... 2,289,880 1,280,907
------------ -----------
12,188,413 11,179,440
Less treasury stock 45,952 shares, at cost...... (298,686) (298,686)
Foreign currency translation adjustment......... 41,644 33,229
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TOTAL SHAREHOLDERS' EQUITY 11,931,371 10,913,983
- -------------------------- ------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $ 31,279,489 $31,199,611
- ------------------------------------------ ============ ===========
See Notes to (Condensed) Consolidated Financial Statements.
3
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VICON INDUSTRIES, INC. AND SUBSIDIARIES
(CONDENSED) CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
12/31/97 12/31/96
Cash flows from operating activities:
Net income................................... $1,008,973 $ 215,288
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.............. 166,752 183,127
Amortization of sale and leaseback......... - (343,210)
Unrealized foreign exchange gain........... - (33,623)
Change in assets and liabilities:
Accounts receivable........................ (548,035) (27,179)
Inventories................................ 487,928 (819,790)
Prepaid expenses........................... (83,995) (57,163)
Other assets............................... 29,936 (13,728)
Accounts payable........................... 129,235 (107,485)
Accrued wages and expenses................. (262,876) 217,849
Income taxes payable....................... 46,419 13,844
Other liabilities.......................... (18,656) (15,136)
------------ ------------
Net cash provided by (used in)
operating activities................... 955,681 (787,206)
------------ ------------
Cash flows from investing activities:
Capital expenditures, net of
minor disposals............................ (107,865) (102,286)
------------ ------------
Net cash used in investing activities.... (107,865) (102,286)
------------ ------------
Cash flows from financing activities:
Net (repayments) borrowings under U.S.
credit and security agreement.............. (1,107,861) 767,426
Net borrowings under U.K.
revolving credit agreement................. 301,169 302,509
Repayments of other debt..................... (48,839) (158,425)
------------ ------------
Net cash (used in) provided by
financing activities.................... (855,531) 911,510
------------ -----------
Effect of exchange rate changes on cash.......... (54,589) (102,900)
------------ ------------
Net decrease in cash............................. (62,304) (80,882)
Cash at beginning of quarter..................... 287,580 205,876
------------ -----------
Cash at end of period............................ $ 225,276 $ 124,994
============ ===========
See Notes to (Condensed) Consolidated Financial Statements.
4
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VICON INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO (CONDENSED) CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 31, 1997
Note 1: Basis of Presentation
The accompanying unaudited (condensed) consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended December 31, 1997
are not necessarily indicative of the results that may be expected for the
fiscal year ended September 30, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended September 30,
1997.
Note 2: Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share" which
requires companies to present basic and diluted earnings per share (EPS),
instead of primary and fully diluted EPS that was previously required. Basic
earnings per share are computed based on the weighted average number of shares
outstanding. Diluted earnings per share reflect the maximum dilution that would
have resulted from the exercise of stock options and incremental shares issuable
under a deferred compensation agreement.
The new standard was adopted by the Company in the quarter ended December 31,
1997. All EPS figures for prior periods reported have been restated.
Note 3: Subsequent Event
In January 1998, the Company purchased its principal operating facility for
approximately $3.3 million. The purchase was financed with the proceeds of an
aggregate $2.9 million mortgage and term loan agreement with a bank. Such
agreement includes a $2,512,000 ten year mortgage loan payable in monthly
installments through January 2008, with a $1,188,000 payment due at the end of
the term. The agreement also provides a $388,000, five year term loan payable in
monthly installments through January 2003. Both loans bear interest at the
bank's prime rate minus 1.35% (7.15% at January 29, 1998).
The loans are secured by a first mortgage on the property and fixtures and
contain restrictive covenants which, among other things, require the Company to
maintain certain levels of earnings and ratios of debt service and interest
coverage and debt to net worth.
At the same time, the Company entered into interest rate swap agreements with
the same bank to effectively convert the foregoing floating rate long-term loans
to fixed rate loans. These agreements change the Company's interest rate
exposure on its $2,512,000 floating rate mortgage loan to a fixed 7.79% and its
$388,000 floating rate term loan to a fixed 7.7%. The interest rate swap
agreements mature in the same amount and over the same period as the related
mortgage and term loans.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Three Months Ended December 31, 1997 Compared with December 31, 1996
Net sales for the quarter ended December 31, 1997 increased $3.6 million or 32%
to $14.9 million compared with $11.3 million in the similar year ago period. The
sales growth was experienced worldwide as U.S. sales increased 24% to $9.0
million and international sales rose 45% to $5.9 million. The U.S. sales
increase was principally the result of video systems supplied under a contract
with the U.S. Postal Service entered into in July 1997 and sales from a new line
of dome cameras introduced in February 1997. The increase in international sales
was due to more systems sales and increased sales to a private label customer
for distribution primarily in Europe. The backlog of unfilled orders was $8.7
million at December 31, 1997 compared with $4.4 million at December 31, 1996.
Gross profit margins for the quarter increased to 31.1% compared with 28.2% in
the year ago period. The margin improvement was primarily the result of the
greater mix of more profitable products, lower procurement costs for certain
video products and greater fixed cost absorption associated with the sales
growth.
Operating expenses for the quarter were $3.2 million or 21.6% of net sales
compared with $2.7 million or 24.1% of net sales in the year ago period. The
increase of $0.5 million or 18% was principally the result of higher selling
expenses associated with the revenue growth and profit related bonus accruals.
As a percentage of sales, operating expenses were lower due to greater
absorption of fixed operating costs.
Operating income rose to $1,413,000 in the quarter compared with $460,000 in the
prior year quarter as a result of increased sales and higher gross margins and
greater absorption of fixed operating expenses.
Interest expense increased $75,000 to $339,000 principally as a result of higher
borrowing levels during the quarter.
Income taxes were $65,000 for the quarter compared with $14,000 in the prior
year quarter, an effective tax rate of approximately 6% for both periods. In
both periods, the Company has utilized a net operating loss ("NOL") carryfoward
to offset Federal and State taxable income and, as of December 31, 1997, the
remaining balance of the NOL was approximately $4.0 million. The nominal tax
provision related primarily to foreign subsidiary income.
As a result of the foregoing, net income increased to $1,009,000 for the quarter
compared with net income of $215,000 for the similar year ago period.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND FINANCIAL CONDITION
December 31, 1997 Compared with September 30, 1997
The Company's primary sources of funds for conducting its business activities
have been borrowings under its bank facilities, vendor financing and cash flow
from operations.
Net cash provided by operating activities was $956,000 for the three months
ended December 31, 1997 due primarily to the $1.0 million net profit reported
for the period. The increase in accounts receivable due to higher sales activity
was substantially offset by a reduction in inventories. Net cash used in
investing activities was $108,000 in the first quarter of 1998 as a result of
capital expenditures for office equipment. Net cash used in financing activities
was $856,000, which included a $1.1 million reduction of borrowings under the
Company's U.S. credit facility offset by increased Vicon U.K. borrowings. As a
result of the foregoing, the net decrease in cash was $62,000 for the first
quarter of 1998 after the nominal effects of exchange rate changes on the cash
position of the Company.
The Company requires liquidity and working capital primarily to finance
increases in inventories and accounts receivable associated with sales growth
and to a lesser extent for capital expenditures. The Company anticipates that in
1998 capital expenditures will be approximately $4.0 million, of which $3.3
million will represent the January 1998 acquisition of its operating facility
and $700,000 for product tooling and office equipment. The purchase of the
facility was funded by mortgage loans aggregating $2.9 million (the "Mortgage")
and from internal cash flow.
The Company maintains a bank overdraft facility of 600,000 pounds sterling
(approximately $990,000) in the U.K. to support local working capital
requirements of Vicon U.K.. At December 31, 1997, borrowings under this facility
were approximately $471,000.
The Company's domestic bank credit agreement (the "Credit Agreement") permits
borrowings up to a maximum of $6.5 million, subject to availability under a
borrowing base formula consisting of accounts receivable and inventories. The
agreement expires on January 31, 1999. Borrowings under the Credit Agreement
amounted to approximately $4.9 million at December 31, 1997.
The Company purchases certain products from Chugai Boyeki Co., Ltd (CBC) whose
interest bearing trade payables amounted to $6.4 million at December 31, 1997
and are due on demand. The Company historically has made trade payable payments
to CBC as cash availability permits.
The Company believes that cash flow from operations, the Mortgage, and
additional funds available under the Credit Agreement will be sufficient to meet
its currently anticipated operating, capital expenditures and debt service
requirements for at least the next twelve months.
7
<PAGE>
PART II
ITEM 1 - LEGAL PROCEEDINGS
The Company has no material outstanding litigation.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
No Form 8-K was required to be filed during the current quarter.
Exhibit Exhibit
Number Description Number
10 Material Contracts
(.1) Agreement of Purchase and Sale 10.1
between the Registrant and RREEF
Midamerica/East-V Nine, Inc.
dated January 29, 1998
(.2) Loan Agreement between the 10.2
Registrant and KeyBank National
Association dated January 29, 1998
(.3) Mortgage Note between the 10.3
Registrant and KeyBank National
Association dated January 29, 1998
(.4) Term Loan Note between the Registrant 10.4
and KeyBank National Association
dated January 29, 1998
(.5) Mortgage and Security Agreement in 10.5
the amount of $2,512,000 between
the Registrant and KeyBank National
Association dated January 29, 1998
(.6) Mortgage and Security Agreement in 10.6
the amount of $388,000 between the
Registrant and KeyBank National
Association dated January 29, 1998
8
<PAGE>
(.7) Interest rate master swap agreement 10.7
between the Registrant and KeyBank
National Association dated December
11, 1997
(.8) Schedule to the master agreement 10.8
between the Registrant and KeyBank
National Association dated December
11, 1997
(.9) Swap Transaction Confirmation with a 10.9
notional amount of $2,512,000 between
the Registrant and KeyBank National
Association dated December 30,1997
(.10) Swap Transaction Confirmation with a 10.10
notional amount of $388,000 between
the Registrant and KeyBank National
Association dated December 30, 1997
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
February 12, 1997
VICON INDUSTRIES, INC.
VICON INDUSTRIES, INC.
Kenneth M. Darby Arthur D. Roche
Kenneth M. Darby Arthur D. Roche
President Executive Vice President
Chief Executive Officer Chief Financial Officer
9
EXHIBIT 10.1
AGREEMENT OF PURCHASE AND SALE
VICON INDUSTRIES, INC., a New York corporation, hereinafter referred to
as "Purchaser," agrees to purchase, and RREEF MIDAMERICA/EAST-V NINE, INC., a
Delaware corporation, hereinafter referred to as "Seller," agrees to sell, that
certain improved real property, hereinafter referred to as the "Real Property,"
situated in the City of Hauppauge, Suffolk County, State of New York, consisting
of the Real Property, legally described on Exhibit A attached hereto and made a
part hereof, commonly known as 89 Arkay Drive, Heartland Executive Park,
Hauppauge, New York, an industrial building (the "Building") containing
approximately 56,000 rentable square feet in aggregate, on lots aggregating
approximately 5.07 acres all rights, privileges, easements and appurtenances
thereto, including any and all mineral rights, development rights, air rights,
all right, title and interest of Seller, if any, in and to the land lying in the
bed of any street or highway in front of or adjoining the land to the center
line thereof and to any unpaid award for any taking by condemnation or any
damage to such land by reason of a change of grade of any street or highway, and
the like. Also included is all personal property owned by the Seller and located
on or used in conjunction with the Property; any and all intangible personal
property owned and used in the operation of the Property (the "Personal
Property"), including the right to use the name of the property (but not the
name "RREEF"), to the extent assignable; contract rights, lease rights, all
licenses, permits and other written authorizations necessary for the use,
operation and ownership of the Property, records, security deposits and prepaid
rent, if any, and the benefit of any guaranties of the leases. All of the
foregoing Real Property and Personal Property is hereinafter referred to as the
"Property".
1. Purchase Price. The purchase price for the Property ("Purchase Price") shall
be Three Million Three Hundred Nineteen Thousand Five Hundred Dollars
($3,319,500.00), payable by wire transfer of funds at Closing (as defined
below).
2. Deposit.
<PAGE>
2.1 Within one (1) business day after acceptance hereof by Seller and Purchaser,
Purchaser shall deposit the amount of $150,000.00 (the "Deposit") with Seller's
attorney, the firm of D'Ancona & Pflaum ("Escrow Holder"), as earnest money to
secure Purchaser's performance hereunder. The Deposit may be invested at the
direction of Purchaser with the approval of Seller. All interest payable with
respect to the Deposit, less investment fees, if any, shall be added to and
become a part of the Deposit and shall be applied toward the Purchase Price if
closing is completed in accordance with this Agreement; otherwise all interest
shall be paid to the party entitled to the Deposit. The escrow instructions to
Escrow Holder shall be in the form of Schedule 2.1 attached hereto. Purchaser
acknowledges that Escrow Holder is Seller's attorney, and that Purchaser, having
been advised by counsel, has consented to Escrow Holder acting as escrow holder
despite also being Seller's attorney. Escrow Holder shall not be liable for any
action with respect to the Deposit taken in good faith, without gross negligence
and not in wilful disregard of this Agreement, any such liability hereby being
waived by Purchaser and Seller. Without limiting the generality of the
foregoing, Purchaser and Seller authorize and direct Escrow Holder to accept,
comply with, and obey any and all writs, orders, judgments or decrees entered or
issued by any court with or without jurisdiction; and in the case Escrow Holder
obeys or complies with any such writ, order, judgment or decree of any court, it
shall not be liable to any of the parties hereto or any other person by reason
of such compliance. In case Escrow Holder is made a party defendant to any suit
or proceedings regarding the Deposit, Purchaser and Seller, jointly and
severally, agree to pay to Escrow Holder, upon demand, all costs, reasonable
attorney's fees, and expenses incurred with respect thereto. If said costs, fees
and expenses are not paid, then Escrow Holder shall have the right to reimburse
itself out of the Deposit. Purchaser agrees and consents that the firm of
D'Ancona & Pflaum shall not be disqualified from representing Seller in any
litigation or other proceeding arising out of this Agreement, whether or not
related to the Deposit, merely due to its acting as Escrow Holder hereunder;
provided, however, that prior to undertaking any such representation, D'Ancona &
Pflaum shall cause the Deposit to be deposited with the court or a new third
party escrow holder acceptable to Purchaser and Seller.
3. Review of the Property. Upon its execution of this Agreement, Seller shall:
3.1 Subject to the provisions of Section 8.15 hereof, provide Purchaser and
its agents or consultants with access to the Property to inspect each and every
part thereof to determine its present condition and to conduct such physical and
environmental studies (including a mechanical and roof study) as Purchaser deems
appropriate.
3.2 Deliver to Purchaser copies of those documents and items listed in
Exhibit B. By executing this Agreement, Purchaser acknowledges receipt of all of
such items.
<PAGE>
3.3 Purchaser shall have the period of thirty (30) days (the "Review
Period") commencing on the date that a fully executed copy of this Agreement is
delivered to Purchaser ("Effective Date") to determine in its sole discretion
whether all matters relating to the Property (other than title and survey, which
are governed by Paragraph 4) are acceptable and whether it can obtain financing
in connection with the purchase of the Property. If Purchaser shall conclude
that any matter relating to the Property is not acceptable or Purchaser fails to
obtain an unconditional financing commitment for a loan in relation to the
Property in the amount of eighty percent (80%) of the Purchase Price, Purchaser
shall so notify Seller in writing prior to the expiration of the aforementioned
period (which notice shall contain a copy of Purchaser's environmental report
(if requested by Seller), roof/structural report and other reports or studies
obtained in connection with Purchaser's due diligence, and a specific statement
as to the conditions found to be unacceptable; however, the following shall not
be construed to limit or qualify Purchaser's absolute right to terminate this
Agreement if it does not determine that all matters relating to the Property are
acceptable), and this Agreement shall terminate without liability on the part of
Seller or Purchaser, other than Purchaser's indemnity contained in Paragraph
8.15 hereof, and the Deposit plus interest shall be returned to Purchaser. In
the event that Purchaser does not timely so notify Seller, Purchaser shall be
deemed to have concluded that the condition of the Property is acceptable, to
have obtained financing for the Property and to have elected to proceed with the
transaction upon the terms and conditions contained herein. Notwithstanding
anything in the foregoing to the contrary, Purchaser acknowledges that it is
aware that the roof requires replacement, and that Purchaser shall have no right
to either terminate this Agreement nor seek a price reduction based on the
condition of the roof.
3.4 Within five (5) days after execution and delivery of this Agreement by
both parties, Seller shall deliver or make available, at Seller's New York
office as listed in Section 8.4 of this Agreement, to Purchaser true copies of
the following documents, to the extent same are in the possession of Seller or
any Affiliate of Seller: all environmental reports, audits, and studies
concerning the Real Property, including but not limited to all reports, audits,
and studies identifying underground tanks, contamination of the soil or
groundwater of the Real Property with Hazardous Materials (hereinafter defined);
all correspondence with governmental authorities concerning the existence of
Hazardous Materials at the Real Property (all of the foregoing are collectively
referred to as the "Environmental Reports"). Seller does not warrant the
accuracy of any information contained in such Environmental Reports. The term
"Affiliate" shall mean any person or entity that controls, is under the control
of, or is under common control with Seller.
3.5 Purchaser agrees that any information obtained by Purchaser or its
authorized agents in the conduct of its due diligence will be treated as
confidential pursuant to Section 8.17.
4. Title and Survey.
<PAGE>
4.1 Upon execution and delivery of this Agreement by both parties,
Purchaser shall order (and upon receipt, promptly deliver copies to Seller), a
commitment for an ALTA Owner's title insurance policy on the Real Property from
Chicago Title Insurance Company (the "Title Insurer"). If Purchaser requires a
survey of the Real Property, it shall obtain same, from a surveyor reasonably
acceptable to Seller, not later than thirty (30) days after the Effective Date,
provided that Purchaser shall not be obligated to use an updated version of the
existing survey for the Property. No later than the end of the Review Period,
Purchaser shall notify Seller in writing of any objection Purchaser may have to
any exceptions reported in the title report or any matter shown on the survey.
At the Closing, Seller shall convey and Purchaser shall accept fee simple title
to the Real Property, subject only to: (a) the matters set forth in Exhibit D
attached hereto (the "Permitted Exceptions"); and (b) such other matters as (i)
the Title Insurer shall be willing, without special premium, to omit as
exceptions to coverage or to except with insurance against collection out of or
enforcement against the Real Property and (ii) shall be accepted by the lender
which has committed in writing to provide mortgage financing to Purchaser for
the purchase of the Real Property (the "Lender"). If the aggregate cost of
removing any objections made by Purchaser to title or survey (the "Title
Clearance Costs") plus the Violation Clearance Costs (as hereinafter defined)
shall exceed $15,000 , Seller shall not be required to remove such objections if
Seller so advises Purchaser in writing within ten (10) business days of Seller's
receipt of Purchaser's notice of objections. Notwithstanding the provisions of
the foregoing sentence, Seller shall remove all objections relating to (1) real
estate taxes, water, and sewer charges to the extent they are for periods prior
to the Commencement Date of the Lease (hereinafter defined), and (2) any
mortgage placed upon the Real Property by Seller, or to which Seller has taken
the Real Property subject and with knowledge. Upon receipt of such notice,
Purchaser may elect either to (1) terminate this Agreement, in which event the
Deposit shall be promptly refunded to Purchaser and Seller shall reimburse
Purchaser for one-half of both the Title Insurer's charges and the costs
incurred by Purchaser to update or obtain a new survey (as the case may be) or
(2) close on the purchase of the Property, in which event the Purchase Price
shall be reduced by $15,000 (the "Title Clearance Credit"). If Seller elects to
terminate this Agreement as provided above, this Agreement shall terminate upon
Purchaser's receipt of the Deposit and such reimbursement.
4.2 At the Closing, the Personal Property shall be free and clear of all
liens and encumbrances.
4.3 Except for Excluded Violations (hereinafter defined), all notes or
notices of violations of law or governmental ordinances, orders or requirements
which were noted or issued prior to the date of this Agreement by any
governmental department, agency or bureau having jurisdiction as to conditions
affecting the Property and all liens which have attached to the Real Property
prior to the closing pursuant to any applicable governmental ordinances, orders
or requirements shall be removed or complied with by Seller. If the reasonably
estimated aggregate cost to remove or comply with any violations or liens which
Seller is required to remove or comply with pursuant to the provisions of this
Paragraph (the "Violation Clearance Costs"), plus the Title Clearance Costs,
shall exceed $15,000, Seller shall have the right to cancel this Agreement, in
which event the sole liability of Seller shall be to refund to Purchaser the
Deposit and to reimburse Purchaser for one-half of both the Title Insurer's
charges and the costs incurred by Purchaser to update or obtain a new survey (as
the case may be); unless Purchaser elects to accept title to the Property
subject to all such violations or liens, in which event Purchaser shall be
entitled to a credit of an amount equal to $15,000, less the Title Clearance
Credit, against the monies payable at the Closing. "Excluded Violations" consist
of violations which Purchaser, as tenant under the Lease, is required to remove
or comply with pursuant to the terms of the Lease by reason of Purchaser's use
or occupancy. If required, Seller, upon written request by Purchaser, shall
promptly furnish to Purchaser written authorizations to make any necessary
searches for the purposes of determining whether notes or notices of violations
have been noted or issued with respect to the Property or liens have attached
thereto.
5. Representations and Warranties.
5.1 Representations and Warranties of Seller. As used in this Section 5.1
and elsewhere in this Agreement, the phrase "to the knowledge of Seller" or
phrases of similar import shall mean and be limited to the actual knowledge of
Seller's portfolio manager (Pamela Boneham) and Seller's local management
personnel having ongoing management responsibility with respect to the Property,
namely (Alane Berkowitz), without investigation, and not to any constructive
knowledge of any of the foregoing individuals or of Seller or any investment
advisor to Seller, any entity that is a partner in Seller or such investment
advisor, or any affiliates of any thereof, or to any officer, agent,
representative, or employee of Seller or such investment advisor, any such
constituent partner, or any such affiliate. Seller hereby warrants and
represents to Purchaser (with such representations and warranties to be re-made
as of closing pursuant to Section 7.6.7) as follows: 1.1
<PAGE>
5.1.1 Pending Proceedings. To the knowledge of Seller, Seller has received
no written notice of special assessments, condemnation, environmental, zoning or
other land use regulation proceedings either pending or planned to be instituted
with respect to the Property or any part thereof.
5.1.2 Status of Seller and Closing Documents. This Agreement has been, and
all the documents to be delivered by Seller to Purchaser at Closing are or will
be, duly authorized, executed, and delivered by Seller, will be sufficient to
convey insurable title and are legal, valid, and binding obligations of Seller,
are or will be enforceable in accordance with their respective terms, and do not
and will not at Closing violate any provisions of any agreement to which Seller
or the Property is subject.
5.1.3 Non-Foreign Status. Seller is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended,
and that Seller will furnish to Purchaser, prior to Closing, an affidavit in
form satisfactory to Purchaser confirming the same.
5.1.4 Compliance with Laws. Seller has received no governmental notice, not
heretofore corrected and discharged, or which Seller is in the process of
correcting and discharging, alleging that the Property or its current uses are
in violation of any zoning, building, health, traffic, environmental, flood
control or all other applicable rules, regulations, codes, ordinances, or
statutes of any local, state and federal authorities and any other governmental
authority asserting jurisdiction over the Property, and has no knowledge of any
such current violation.
5.1.5 Service Contracts. To Seller's knowledge, there are no agreements or
contracts affecting the Property as to which Seller is the contracting party
(including, without limitation, any management, leasing, services or maintenance
agreements) which are not terminable at will by Seller without further
liability, upon not more than 30 days' prior written notice. Seller has provided
Purchaser with true and correct copies of all such Service Contracts, which
contracts are listed on Exhibit E attached hereto and Seller agrees to terminate
any existing Service Contract related to the roof of the Building on or before
the Closing.
5.1.6 No Default. The execution and delivery of this Agreement, and
consummation of the transaction described in this Agreement, does not and will
not constitute a default under any contract, lease, or agreement to which Seller
is a party.
5.1.7 No Suits. To Seller's knowledge, there is no action, suit or
proceeding pending or threatened against or affecting the Property or any
portion thereof, or relating to or arising out of the ownership, management or
operation of the Property, in any court or before or by and federal, state, or
municipal department, commission, board, bureau or agency or other governmental
instrumentality.
<PAGE>
5.1.8 Environmental Condition. Each of the following representations
contained in this Section 5.1.8 is wholly qualified and limited by (a) any
matters disclosed in any materials made available or delivered to Purchaser by
Seller pursuant to Section 3 above or otherwise, (b) any matters disclosed in
any environmental reports or studies obtained by Purchaser, and (c) any other
matters about which Purchaser has actual knowledge. Subject to the foregoing,
Seller represents to its knowledge:
5.1.8.1 Except as may be disclosed in the Environmental Reports listed in
Schedule 5.1.8.1, there has been no, and there are no, Hazardous Materials on or
beneath the surface of the land constituting the Property or in any structures
or improvements thereon. For the purposes hereof, "Hazardous Material" shall
mean any substance, chemical, waste or other material which is listed, defined
or otherwise identified as "hazardous" or "toxic" under any federal, state,
local or administrative agency ordinance or law, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss.ss. 9601 et seq. and the Resource Conservation and Recovery Act, 42
U.S.C. ss.ss. 6901 et seq., or any regulation, order, rule or requirement
adopted hereunder, as well as any formaldehyde, urea, polychlorinated biphenyls,
petroleum, petroleum product or by-product, crude oil, natural gas, natural gas
liquids, liquefied natural gas, or synthetic gas usable for fuel or mixture
thereof, radon, asbestos, and "source," "special nuclear" and "by-product"
material as defined in the Atomic Energy Act of 1985, 42 U.S.C. ss.ss. 3011 et
seq.
5.1.8.2 The Property and the operations on the Property have been and are
in compliance with all environmental laws applicable thereto.
5.1.8.3 Except as may be disclosed in the Environmental Reports specified
in Schedule 5.1.8.1, no releasing, generating or handling of Hazardous Materials
has occurred on the Property, and Seller has not permitted the releasing,
generating or handling of Hazardous Materials on the Property or the
incorporation thereof in any buildings or improvements thereon, except in either
instance in minimal amounts customarily found in office uses and in compliance
with applicable law or as is otherwise allowed in compliance with applicable
law.
5.1.8.4 Seller has not received any summons, citation, directive, letter or
other communication, written or oral, from the United States Environmental
Protection Agency, the Suffolk County Department of Health Services or the New
York Department of Environmental Conservation Resources with respect to the
Property.
5.1.9 Licenses and Permits. To the knowledge of Seller, all licenses,
permits, variances, approvals, authorizations, easements, and rights of way
required for the use and operation of the Property and to insure vehicular and
pedestrian ingress and egress to the Property have been obtained.
<PAGE>
5.1.10 Construction Contracts. Except as specified in Schedule 5.1.10,
Seller has entered into no outstanding written or oral contracts with regard to
construction of improvements on the Property, which have not been fully paid for
or which will not have been fully paid for as of Closing.
5.1.11 Options. Seller has no knowledge of any options or rights of first
refusal to acquire any interest in the property not set forth in the tenant
leases delivered to Purchaser or in documents of record disclosed in the title
commitment.
5.2 Seller Covenants. Seller covenants and agrees as follows:
--------- ----------------
5.2.1 Seller shall not modify or amend any Service Contract or enter into
any new Service Contract without Purchaser's prior consent, unless the same is
terminable on or before the Closing.
5.2.2 No fixtures, equipment or personal property included in this sale
shall be removed from the Real Property without Purchaser's consent.
5.2.3 Seller shall not withdraw, settle or otherwise compromise any protest
or reduction proceeding affecting real estate taxes assessed against the Real
Property for any fiscal period in which the Closing is to occur or any
subsequent fiscal period without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld. Portions of real estate tax refunds
and credits received after the Closing Date which are attributable to periods
prior to the date of the Lease between Purchaser and Seller reference dated
December 24, 1996 (the "Lease"), shall paid to Seller, after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
5.3 Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to Seller that this Agreement has been, and all the
documents to be delivered by Purchaser to Seller will be, duly authorized,
executed, and are or will be legal, valid, and binding obligations of Purchaser,
are or will be enforceable in accordance with their respective terms, and do not
and will not at Closing violate any provisions of any agreement to which
Purchaser is subject.
<PAGE>
5.4 Continuation. The continued accuracy in all respects of the aforesaid
representations and warranties shall be a condition precedent to the parties'
obligation to close. If any of Seller's said representations and warranties is
not correct in all material respects at the time the same is made or as of
Closing, or when remade at Closing, or if such warranty or representation
becomes inaccurate in any material respect on or prior to Closing, all of the
foregoing occurring other than by reason of Seller's default hereunder,
Purchaser may, upon being notified of such occurrence either (a) terminate this
Agreement, in which event the Deposit will be returned to Purchaser, and neither
party will have any further rights or obligations hereunder except as provided
in Section 8.15, or (b) waive such matter and proceed to Closing, by written
notice to Seller given within ten (10) days after Purchaser receives written
notice from Seller, or otherwise obtains actual knowledge, of such occurrence,
but in no event later than Closing. If Purchaser fails to give any such notice
within the required time period, Purchaser will be deemed to have elected to
waive such matter and proceed to Closing. The foregoing does not prohibit
Purchaser from seeking actual (but not special, consequential, exemplary or
punitive) damages proximately caused by Seller's knowing and intentional breach,
discovered before Closing, of any of Seller's representations and warranties
contained herein. However, and in any event, if Purchaser closes this
transaction after being notified or otherwise having actual knowledge of the
breach or inaccuracy of any representation or warranty hereunder, whether or not
knowing and intentional and whether or not occurring by reason of Seller's
default, Purchaser shall be conclusively deemed to have waived such matter and
shall be barred from asserting any claim with respect thereto. Subject to the
preceding sentence and to the time limitation of Section 8.11, nothing herein
shall prohibit Purchaser from seeking actual (but not special, consequential,
exemplary or punitive) damages proximately caused by the breach, discovered
after Closing, of any of Seller's representations and warranties contained
herein, which damages shall be limited in the aggregate to $200,000.00.
5.5 Condition of Property. Except as expressly set forth in this Agreement,
Seller has not made and does not hereby make any representations, warranties or
other statements as to the condition of the Property and Purchaser acknowledges
that at Closing it is purchasing the Property on an "AS IS, WHERE IS" basis as
of the Effective Date, subject to normal wear and tear and Purchaser's repair
obligations under the Lease, and without relying on any representations and
warranties of any kind whatsoever, express or implied, from Seller, its agents
or brokers as to any matters concerning the Property. Except as expressly set
forth in this Agreement, no representations or warranties have been made or are
made and no responsibility has been or is assumed by Seller or by any partner,
officer, person, firm, agent or representative acting or purporting to act on
behalf of Seller as to the condition or repair of the Property or the value,
expense of operation, or income potential thereof or as to any other fact or
condition which has or might affect the Property or the condition, repair,
value, expense of operation or income potential of the Property or any portion
thereof. The parties agree that all understandings and agreements heretofore
made between them or their respective agents or representatives, other than the
Lease, are merged in this Agreement and the Exhibits hereto annexed, which alone
fully and completely express their agreement, and that this Agreement has been
entered into after full investigation, or with the parties satisfied with the
opportunity afforded for investigation, neither party relying upon any statement
or representation by the other unless such statement or representation is
specifically embodied in this Agreement or the Exhibits annexed hereto.
Purchaser acknowledges that Seller has requested Purchaser to inspect fully the
Property and investigate all matters relevant thereto and to rely solely upon
the results of Purchaser's own inspections or other information obtained or
otherwise available to Purchaser, rather than any information that may have been
provided by Seller to Purchaser. Nothing contained in this paragraph is intended
to affect Purchaser's rights specifically set forth elsewhere in this Agreement.
<PAGE>
5.5.1 Without limiting the generality of the foregoing, Purchaser further
acknowledges and agrees Seller has no obligation whatsoever under this Agreement
with respect to the condition of the roof other than the obligation to make
repairs to stop roof leaks. If this Agreement is terminated for any reason and
the existing lease remains in force, Seller's obligations with respect to the
roof shall be as landlord under, and as provided in, said lease; however,
Purchaser acknowledges and agrees that no major roof repair or replacement will
be undertaken by Seller/Landlord during the pendency of this Agreement, and
would not be undertaken by the landlord until spring, 1998.
6. Closing Conditions. Purchaser's obligation to proceed to Closing shall
be conditioned upon Seller's performance of the following obligations and
satisfaction of the following conditions, in addition to all of its other
obligations and conditions contained in this Agreement, provided that Purchaser
may in its sole discretion elect to waive failure by Seller to perform any
particular obligation.
6.1 The Title Insurer shall be prepared to issue a policy of title
insurance insuring Purchaser's interest in the Property being conveyed, subject
only to exceptions approved pursuant to Section 4.
6.2 All of Seller's representations and warranties made pursuant to Section
5.1 shall remain true and correct.
6.3 Seller shall have delivered all of the documents and other items
required pursuant to Section 7.6 and shall have performed all other covenants,
undertakings and obligations required by this Agreement, to be performed or
complied with by Seller at or prior to Closing.
7. Closing.
7.1 Closing of Sale. Purchaser and Seller shall use reasonable efforts to
close the purchase and sale contemplated herein (herein referred to as the
"Closing") at the office of the Purchaser's Lender's attorney on December 30,
1997, or as otherwise mutually agreed, but in no event shall the Closing occur
later than February 3, 1998 (the "Closing Date"). At Closing, Seller will
deliver to Purchaser a bargain and sale deed with covenant against grantor's
acts, in proper form for recording, duly executed and acknowledged, so as to
convey the title required by this contract ("Deed", Schedule 7.6.1) and other
closing documents required hereunder. The Deed shall also contain such recitals
as are required by the Title Insurer with respect to authorization, execution
and delivery of the Deed and Purchaser will cause payment of the Purchase Price
to be made to Seller by wire transfer. The sale (payment of Purchase Price and
delivery of Deed) may, at Purchaser's option, to be exercised by notice to
Seller at least five (5) days prior to the Closing Date, be closed through
escrow with the Title Insurer in accordance with the general provisions of the
usual form of escrow agreement used in similar transactions by such Title
Insurer with special provisions inserted as may be required to conform with this
Agreement.
<PAGE>
7.2 Proration, Adjustments. Rental income shall be prorated as of 12:01
a.m. on the date after Closing (i.e., Seller is entitled to the income of the
day of Closing). In addition, Purchaser shall receive a credit at Closing for
its Security Deposit, as defined in the Lease, in the amount of $31,546.67. To
the extent that any items to be prorated are not known with certainty, such
proration shall be based upon the most recent ascertainable amounts. All
prorations shall be final. Purchaser shall deliver the Purchase Price to Seller
in good funds by 2:00 p.m. Chicago time on the day of Closing. If Seller does
not receive the funds by such time, prorations shall be made as of the next
business day.
7.3 Proration of Service Charges. To the extent Seller, as opposed to
tenants, is responsible for payment of utility charges, Seller will attempt to
have utility meters read as of the Closing Date. To the extent that this is not
possible and to the extent that any other obligation for continuing utility
services is incurred, and statements are rendered for such services covering
periods both before and after the Closing Date, the amount will be adjusted
between the parties as of the Closing Date on a per-diem basis. Seller will
forward any such statements which it receives to Purchaser and Purchaser shall
pay the same. Purchaser will forward any such statements which it receives to
Seller and Seller will remit to Purchaser its proportionate share immediately
upon demand.
7.4 Closing Costs. Seller shall pay up to an aggregate total of $60,000.00
toward the costs (the "Closing Costs") of (i) the Title Insurer's escrow and/or
closing fees (including any payment to the closing officer of the Title Insurer
as may be the local custom at the Closing), (ii) the cost of the basic title
commitment and policy, the cost of any endorsements to the title policy required
by Purchaser, including extended coverage, and all other fees and charges of the
Title Insurer, (iii) all recording fees and taxes, including but not limited to
mortgage recording taxes, (iv) the cost of the survey, if any, and (v) all
state, county and local or other transfer taxes. Purchaser shall be responsible
for all costs of Purchaser's physical inspections of the Property
(environmental, engineering), and other due diligence activities, and all
Closing Costs in excess of $60,000.00. Except as otherwise provided in Paragraph
8.9, each party shall be responsible for its own attorneys' and other
professional fees.
7.5 Possession. Purchaser is currently in possession of the Property.
----------
7.6 Seller's Closing Documents. As part of the Closing, Seller shall
--------------------------
deliver to Purchaser:
7.6.1 the Deed, in the form of Schedule 7.6.1
7.6.2 an affidavit in customary form that Seller is not a "foreign person"
within the meaning of Section 1445(e) of the Internal Revenue Code of 1986, in
the form of Schedule 7.6.2;
7.6.3 such affidavits as are customarily required by Title Insurer in
connection with issuance of the owner's title insurance policy, including a
mechanics' lien and judgment affidavit;
7.6.4 a Lease Termination Agreement with respect to the existing lease
between Purchaser and Seller in the form of Schedule 7.6.4; 1.1.1
<PAGE>
7.6.5 an assignment of Service Contracts, contracts (if accepted by
Purchaser) and warranties in the form of Schedule 7.6.5 ("Contracts
Assignment");
7.6.6 an assignment of intangibles and of licenses and permits, to the
extent such licenses and permits are assignable and not posted at the Property,
in the form of Schedule 7.6.6 ("Intangibles Assignment");
7.6.7 a "bring down certificate" stating that Seller's representations and
warranties are true and correct as of the closing date, in the form of Schedule
7.6.7;
7.6.8 evidence of Seller's authority to enter into and consummate all of
the transactions contemplated in this Agreement;
7.6.9 if a title examination discloses judgments, bankruptcies or other
returns against persons having names the same as or similar to that of Seller,
Seller shall deliver an affidavit showing that they are not against the Seller;
7.6.10 Seller's share of the Closing Costs, which may, at Seller's option,
be deducted from Seller's proceeds from the Purchase Price; and
7.6.11 All other documents, instruments or writings which may be reasonably
required to consummate the transactions contemplated herein.
7.7 Purchaser's Closing Documents. As part of the Closing, Purchaser
-----------------------------
shall deliver to Seller:
7.7.1 Good federal funds in an amount equal to the Purchase Price, less the
Deposit, and interest thereon, the Security Deposit and plus or minus prorations
as provided herein and plus funds sufficient to pay Purchaser's closing costs
hereunder;
7.7.2 such affidavits as are customarily required by Title Insurer in
connection with issuance of the owner's title insurance policy;
7.7.3 Executed counterpart of the Lease Termination Agreement;
7.7.4 Executed counterpart of the Contracts Assignment;
7.7.5 Executed counterpart of the Intangibles Assignment;
7.7.6 All other documents, instruments or writings which may be reasonably
required to consummate the transactions contemplated herein.
<PAGE>
7.8 Joint Deliveries. At the Closing, Seller and Purchaser shall execute
and deliver to each other the following documents, in each case duly executed or
otherwise in proper form:
7.8.1 Closing Statement;
7.8.2 City, county and state transfer tax returns, declarations or similar
instruments; and
7.8.3 All other documents, instruments or writings which may be reasonably
required to consummate the transactions contemplated herein.
8. Miscellaneous.
--------------
8.1 Modifications. This Agreement can be amended only in writing.
8.2 Casualty and Condemnation. Seller shall keep its customary replacement
cost insurance covering the Property in effect until the Closing. If the
improvements on the Property or the Personal Property are destroyed or damaged
to the extent that repairs cost in excess of $200,000, or if the net proceeds of
insurance to be assigned to Purchaser shall be less than $200,000, or if
condemnation proceedings are commenced against the Property, between the date
hereof and the Closing, Purchaser may terminate this Agreement. If Purchaser
elects to accept the Property in its then condition, all proceeds of insurance
(plus the applicable deductible) or condemnation awards payable to Seller by
reason of such damage or condemnation shall be paid or assigned to Purchaser. In
the event of any other damage to the Property, which damage Seller is unwilling
to repair prior to Closing, Purchaser shall accept the Property in its then
condition, in which case Purchaser shall be entitled to a reduction in the
Purchase Price to the extent of the cost of repairing such damage, as certified
by an independent contractor selected by the parties. If Purchaser's Lender is
unwilling to consummate Purchaser's financing by reason of any casualty to, or
condemnation of, all or part of the Property, Purchaser may terminate this
Agreement. If Purchaser terminates this Agreement pursuant to this Paragraph,
Seller shall refund to Purchaser the Deposit. In the event of any damage where
Purchaser does not have the right to terminate or elects not to terminate and
Seller elects to repair such damage, the Closing Date shall be delayed for the
number of days required to repair the damage.
8.3 Time of Essence. If Purchaser, without fault of Seller, fails to close
the transaction contemplated herein on or before the Closing Date, and such
failure continues for five (5) days after written notice of such failure to
Purchaser, Seller may terminate this Agreement and direct Escrow Holder to pay
the Deposit to Seller as liquidated damages and as Seller's sole and exclusive
remedy.
8.4 Notices. All notices required or permitted hereunder shall be in
writing and shall be served on the parties at the following address:
<PAGE>
If to Purchaser: Vicon Industries, Inc.
89 Arkay Drive
Hauppauge, New York 11788
Attn: Kenneth Darby
Facsimile: (516) 951-2288
with a copy to: Schoeman Marsh & Updike, LLP
60 East 42nd Street
New York, New York 10165
Attn: Nancy Connery
Facsimile: (212) 687-2123
If to Seller: The RREEF Funds
------------ 875 North Michigan Avenue
Suite 4114
Chicago, IL 60611
Attn: Ms.Pamela Boneham & Mr.John Turney
Facsimile: (312) 266-9346
with a copy to: The RREEF Funds
401 Hackensack Avenue, Suite 701
Hackensack, New Jersey 07601
Attn: Denise Stewart
Facsimile: (201) 488-8489
with a copy to: The RREEF Funds
125 Maiden Lane
Fifth Floor
New York, NY 10038
Attn: Alane Berkowitz
Facsimile: (212) 785-3630
with a copy to: D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, Illinois 60602
Attn: Lawrence J. Moss
Facsimile: (312) 580-0923
<PAGE>
Any such notices may be sent by (a) certified mail, return receipt requested, in
which case notice will be deemed delivered five (5) business days after deposit,
postage prepaid in the U.S. mail or (b) a nationally recognized overnight
courier, in which case notice will be deemed delivered one business day after
deposit with such courier or (c) facsimile transmission, in which case notice
will be deemed delivered upon electronic verification that transmission to
recipient was completed or (d) personal delivery. The above addresses and
facsimile numbers may be changed by written notice to the other party; provided
that no notice of a change of address or facsimile number will be effective
until actual receipt of such notice.
8.5 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the heirs, successors, and assigns of the parties hereto,
provided Purchaser may not assign its rights or obligations hereunder without
the prior written consent of Seller.
8.6 Governing Law. The performance and interpretation of this Agreement
shall be controlled by the law of the State in which the Property is located.
8.7 Continuation Until Closing. Between the date of execution of this
Agreement and the Closing, Seller shall keep and perform all of the obligations
to be performed by landlord under any leases or applicable laws, subject to
Section 5.5.1.
8.8 Brokers. Seller and Purchaser each (a) represents and warrants to the
other that it has not dealt with any broker or finder in connection with the
transaction contemplated by this Agreement other than the parties, if any, to be
paid a commission as specified in Paragraph 8.10, and (b) agrees to indemnify
and hold the other harmless from and against any losses, damages, costs, or
expenses (including attorneys' fees) incurred by such other party due to a
breach of the foregoing warranty by the indemnifying party.
8.9 Attorneys' Fees. If any action is brought by either party against the
other party, the party in whose favor final judgment shall be entered shall be
entitled to recover court costs incurred and reasonable attorneys' fees, at
trial, upon appeal and on any petition for review.
8.10 Brokers Commission. There are no brokers involved in this transaction.
Seller shall indemnify and hold Purchaser harmless from any and all losses,
liability, costs or expenses (including attorneys' fees) related to any claim
for a brokerage commission by the brokers to whom Seller paid a commission with
respect to the Lease.
8.11 Continuation and Survival of Covenants. All representations and
warranties by the respective parties contained in this Agreement or made in
writing pursuant to this Agreement are intended to and shall remain true and
correct as of the Closing. Seller's representations and warranties contained
herein and claims, damages or injury for the breach thereof shall survive the
date of Closing for a period of one (1) year. Purchaser must give Seller written
notice of any claim it may have against Seller for a any breach within one (1)
year after the Closing Date. Any claim which Purchaser may have which is not so
asserted within the one (1) year period will not be valid or effective and
Seller will have no liability with respect thereto.
<PAGE>
8.12 Merger of Prior Agreements. This Agreement constitutes the entire
agreement between the parties with respect to the purchase and sale of the
Property and supersedes all prior agreements and understandings between the
parties hereto relating to said purchase and sale.
8.13 Invalidity of Provisions. In the event any provisions of this
Agreement are declared invalid or are unenforceable for any reason, such
provisions shall be deleted from such document and shall not invalidate any
other provision.
8.14 ERISA. Prior to Seller's execution of this Agreement, Purchaser shall
furnish to Seller all information regarding Purchaser, its affiliates and the
shareholders or partners of each of them (collectively, the "Purchaser Related
Parties") as Seller reasonably requests in order to enable Seller to determine
to Seller's sole satisfaction that the transaction contemplated hereby will not
constitute a sale to a "party-in-interest" within the meaning of Section 3(14)
of the Employee Retirement Security Act of 1974, as amended ("ERISA"), with
respect to any investor in Seller. Purchaser represents and warrants to Seller
that there will not be any change in any such information regarding Purchaser or
the Purchaser Related Parties, which change could lead to an ERISA violation,
prior to or on the Closing. At Seller's request, Purchaser will complete
Seller's standard Party In Interest/Prohibited Transaction Questionnaire,
substantially in the form of Exhibit C attached hereto, within five (5) working
days after receipt of such request. If Seller reasonably determines that the
transaction contemplated hereby will constitute a "prohibited transaction," or
is otherwise prohibited, under ERISA, and no exemption is available, Seller,
upon written notice to Purchaser, may cancel this Agreement and the Deposit
shall be returned to Purchaser and Seller shall reimburse Purchaser for the
Title Insurer's charges, the costs incurred by Purchaser to update or obtain a
new survey (as the case may be), the costs incurred by Purchaser to obtain any
financing commitment, and the costs incurred by Purchaser to obtain any
environmental report for the Real Property.
<PAGE>
8.15 On-Site Testing. In connection with any on-site testing, Purchaser
shall give Seller written notice thereof, including the identity of the company
or persons who will perform such testing and the proposed scope of the testing.
Seller shall approve or disapprove the scope and methodology of such proposed
testing within three (3) business days after receipt of such notice, such
approval not to be unreasonably withheld; Seller's failure to notify Purchaser
of its approval or disapproval shall be deemed to be Seller's disapproval
thereof. Any disapproval shall include a reasonably detailed statement of
Seller's basis for objection. If Purchaser or its agents, employees or
contractors take any sample from the Property in connection with any such
approved testing, upon Seller's request, Purchaser shall provide to Seller a
portion of such sample being tested to allow Seller, if it so chooses, to
perform its own testing. Seller or its representative may be present to observe
any testing or other inspection performed on the Property. Upon Seller's
request, Purchaser shall promptly deliver to Seller copies of any reports
relating to any testing or other inspection of the Property performed by
Purchaser or its agents, employees or contractors. Purchaser shall maintain, and
shall assure that its contractors maintain, public liability and property damage
insurance in amounts and in form and substance reasonably acceptable to Seller,
insuring against all liability of Purchaser, its agents, employees or
contractors, arising out of any entry or inspections of the Property pursuant to
the provisions hereof, and Purchaser shall provide Seller with evidence of such
insurance coverage upon request by Seller. Purchaser shall indemnify, defend and
hold Seller harmless from and against any costs, damages, liabilities, losses,
expenses, liens or claims (including, without limitation, reasonable attorney's
fees) arising out of or relating to damage or injury caused by any entry on the
Property by Purchaser, its agents, employees or contractors in the course of
performing the inspections, testings or inquiries provided for in this
Agreement, including without limitation damage to the Property or release of
hazardous substances or materials onto the Property, excluding, however, any
costs incurred by Seller in supervising Purchaser's testing and excluding any
damage caused by the negligence or misconduct of Seller, its contractors or
agents. The foregoing indemnity shall survive beyond the Closing, or if the sale
is not consummated, beyond the termination of this Agreement. Nothing in this
Section 8.15 shall be construed to limit or impair Purchaser's absolute right to
terminate under Section 3.
8.16 Release. Except to the extent of the representations and warranties of
Seller expressly set forth in this Agreement, but otherwise notwithstanding any
other provision of this Agreement to the contrary, Purchaser, on behalf of
itself and its successors and assigns, waives its right to recover from, and
forever releases and discharges, Seller, Seller's affiliates, Seller's
investment manager, the partners, trustees, shareholders, directors, officers,
employees and agents of each of them, and their respective heirs, successors,
personal representatives and assigns (collectively, the "Seller Related
Parties"), from any and all demands, claims, legal or administrative
proceedings, losses, liabilities, damages, penalties, fines, liens, judgments,
costs or expenses whatsoever (including, without limitation, attorneys' fees and
costs), whether direct or indirect, known or unknown, foreseen or unforeseen,
which may arise on account of or in any way be connected with the physical
condition of the Property or any law or regulation applicable thereto,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 et
seq.), the Resources Conservation and Recovery Act of 1976 (42 U.S.C. Section
6901 et seq.), the Clean Water Act (33 U.S.C. Section 466 et seq.), the Safe
Drinking Water Act (14 U.S.C. Sections 1401-1450), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Toxic Substance Control
Act (15 U.S.C. Sections 2601-2629) and the Americans with Disabilities Act of
1990 (42 U.S.C. Section 12101 et seq.).
<PAGE>
8.17 Confidential Information. The parties acknowledge that the transaction
described herein is of a confidential nature and shall not be disclosed except
to consultants, investors, advisors, and affiliates, or as required by law. No
party will make any public disclosure of the specific terms of this Agreement,
except as required by law. In connection with the negotiation of this Agreement
and the preparation for the consummation of the transactions contemplated
hereby, each party acknowledges that it will have access to confidential
information relating to the other party. Each party shall treat such information
as confidential, preserve the confidentiality thereof, and not duplicate or use
such information, except to advisors, consultants, investors and affiliates in
connection with the transactions contemplated hereby, or as required by law. In
the event of the termination of this Agreement for any reason whatsoever,
Purchaser will return to Seller, at Seller's request, all documents, work
papers, and other material (including all copies thereof) obtained from Seller
in connection with the transactions contemplated hereby, and each party shall
use its best efforts, including instructing its employees and others who have
had access to such information, to keep confidential and not to use any such
information. The provisions of this Section 8.17 will survive the Closing or, if
the purchase and sale is not consummated, any termination of this Agreement, and
will not be subject to the limitation set forth in Section 8.11. Notwithstanding
any contrary provisions of Sections 3.4 and 8.17, Seller agrees that Purchaser
may disclose information obtained by Purchaser (a) to its consultants and
professionals engaged by Purchaser in connection with Purchaser's purchase of
the Property, who shall be requested to maintain confidentiality, (b) as
required by court order or other legal process, and (c) as required by the
applicable provisions of the Securities Exchange Act of 1934, the Securities Act
of 1933, and the rules and regulations promulgated thereunder, and as required
by other applicable provisions of law.
8.18 Calculation of Time Periods. Unless otherwise specified, in computing
any period of time described herein, the day of the act or event, after which
the designated period of time begins to run, is not to be included and the last
day of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday, in which event the period shall run until the
end of the next day which is neither a Saturday, Sunday, or legal holiday. The
last day of any period of time described herein shall be deemed to end at 5 p.m.
Chicago, Illinois time on the last day of such period of time.
8.19 Exculpation Clause. The obligations of Seller contained herein are
intended to be binding only on the property of the trust party to this Agreement
of Purchase and Sale and shall not be personally binding upon, nor shall any
resort be had to the private properties of, any of the trustees, investment
managers, any general partners thereof, or any employees or agents of the
trustees or investment managers. All documents to be executed by Seller shall
also contain the foregoing exculpation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the dates set forth below.
<PAGE>
SELLER:
RREEF MIDAMERICA/EAST-V NINE, INC., a Delaware
corporation
By: RREEF America L.L.C., a Delaware limited
liability company, its investment advisor
By:
Authorized Representative
Dated:
PURCHASER:
VICON INDUSTRIES, INC., a New York corporation
By:
Kenneth Darby, President
Dated:
<PAGE>
List of Schedules and Exhibits
Schedules
2.1 Earnest Money Escrow Instructions
5.1.8.1 Possible Hazardous Materials
5.1.10 Construction Obligations
7.6.1 Form of Deed
7.6.2 FIRPTA Certificate
7.6.4 Lease Termination Agreement
7.6.5 Assignment and Assumption of
Contracts and Warranties
7.6.6 Assignment of Intangibles
7.6.7 Bring-Down Certificate
Exhibits
A Legal Description of Property
B Due Diligence Deliveries
C Party In Interest/Prohibited
Transaction Questionnaire
<PAGE>
Schedule 2.1
EARNEST MONEY ESCROW INSTRUCTIONS
ESCROW #___________
ESCROW INSTRUCTIONS
These Escrow Instructions are entered into as of this _____day of
December, 1997 by and among RREEF MIDAMERICA/EAST-V, a Delaware corporation
("Seller"), VICON INDUSTRIES, INC., a New York corporation ("Purchaser") and
D'ANCONA & PFLAUM ("Escrow Holder").
RECITALS:
A. WHEREAS, Seller and Purchaser have entered into that certain
Agreement of Purchase and Sale dated December __, 1997 (the "Agreement"),
whereby Seller agreed to sell and Purchaser agreed to purchase certain real
property located in the City of Hauppauge, Suffolk County, State of New York,
more particularly described therein (the "Property");
B. WHEREAS, the Agreement obligates Purchaser to deposit the sum of One
Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) with Escrow Holder to
secure its obligations under the Agreement at this time (such deposit, together
any interest earned thereon, the "Deposit") ; and
C. WHEREAS, the parties now desire to set forth the terms and
conditions of the Escrow.
NOW THEREFORE, in consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
AGREEMENTS:
1. The parties agree that the Deposit shall be placed in an
interest-bearing escrow account with Escrow Holder in order to secure the
obligations of Purchaser pursuant to the Agreement and that any interest earned
thereon, less investment fees, if any, shall be deemed to be part of the
Deposit. The Deposit may be invested at the direction of Purchaser with the
approval of Seller.
2. In the event that Purchaser delivers a request for the Deposit to
Escrow Holder on or before _____________, 1997 (the last day of the Review
Period under the Agreement), Escrow Holder shall deliver the Deposit to
Purchaser and notify Seller of such disbursement. Such request shall constitute
Purchaser's election to terminate the Agreement pursuant to Paragraph 3 of the
Agreement. Purchaser shall send a copy of such request to Seller simultaneously
with delivery of such request to Escrow Holder.
<PAGE>
3. Following the expiration of the Review Period, in the event that any
party hereto timely delivers a notice to the other parties hereto disputing a
disbursement request, Escrow Holder shall continue to hold such disputed funds
until Escrow Holder shall receive a joint order from Purchaser and Seller
requesting such disbursement or Escrow Holder shall receive an order, judgment
or decree of any court ordering disbursement. In the event that Escrow Holder
complies with any orders, judgments or decrees issued or entered by any court,
Escrow Holder shall not be liable to any of the parties hereto by reason of such
compliance. In the absence of such a joint order or court order, Escrow Holder
may do nothing or may commence an interpleader action as set forth in Paragraph
4 below.
4. Escrow Holder may pay the Escrow Funds into a court of competent
jurisdiction upon commencement by Escrow Holder of an interpleader action in
such court. The costs and attorneys fees of Escrow Holder for such interpleader
action shall be paid one-half by each of the parties.
5. For purposes of this Agreement, notices sent by facsimile or
personal delivery may be addressed as follows:
If to Purchaser: Vicon Industries, Inc.
89 Arkay Drive
Hauppauge, New York 11788
Attn: Kenneth Darby
Facsimile: (516) 951-2288
with a copy to: Schoeman Marsh & Updike, LLP
60 East 42nd Street
New York, New York 10165
Attn: Nancy Connery
Facsimile: (212) 687-2123
If to Seller: The RREEF Funds
------------ 875 North Michigan Avenue
Suite 4114
Chicago, IL 60611
Attn: Ms. Pamela Boneham & Mr. John Turney
Facsimile: (312) 266-9346
<PAGE>
with a copy to: The RREEF Funds
401 Hackensack Avenue, Suite 701
Hackensack, New Jersey 07601
Attn: Denise Stewart
Facsimile: (201) 488-8489
with a copy to: The RREEF Funds
125 Maiden Lane
Fifth Floor
New York, NY 10038
Attn: Alane Berkowitz
Facsimile: (212) 785-3630
with a copy to: D'Ancona & Pflaum
30 North LaSalle Street
Suite 2900
Chicago, Illinois 60602
Attn: Lawrence J. Moss
Facsimile: (312) 580-0923
If to Escrow D'Ancona & Pflaum
Holder: 30 North LaSalle Street
Suite 2900
Chicago, Illinois 60602
Attn: Lawrence J. Moss
Facsimile: (312) 580-0923
<PAGE>
6. Escrow Holder shall have only such duties as are herein specifically
provided and shall incur no liability whatsoever, except for wilful misconduct
or gross negligence so long as Escrow Holder has acted in good faith. Escrow
Holder may consult with counsel and shall be fully protected in any action taken
in good faith in accordance with such advice. Escrow Holder shall be fully
protected in acting in accordance with any written instrument given to it
hereunder and believed by it to have been signed by any proper party.
7. Purchaser acknowledges that Escrow Holder is Seller's attorney, and
that Purchaser, having been advised by counsel, has consented to Escrow Holder
acting as escrow holder despite also being Seller's attorney. Escrow Holder
shall not be liable for any action with respect to the Deposit taken in good
faith, any such liability hereby being waived by Purchaser and Seller. Without
limiting the generality of the foregoing, Purchaser and Seller authorize and
direct Escrow Holder to accept, comply with, and obey any and all writs, orders,
judgments or decrees entered or issued by any court with or without
jurisdiction. In case Escrow Holder is made a party defendant to any suit or
proceedings regarding the Deposit, Purchaser and Seller, jointly and severally,
agree to pay to Escrow Holder, upon demand, all costs, attorney's fees, and
expenses incurred with respect thereto. Purchaser agrees and consents that the
firm of D'Ancona & Pflaum shall not be disqualified from representing Seller in
any litigation or other proceeding arising out of this Agreement, whether or not
related to the Deposit, merely due to its acting as Escrow Holder hereunder;
provided, however, that prior to undertaking any such representation, D'Ancona &
Pflaum shall cause the Deposit to be deposited with the court or a new third
party escrow holder acceptable to Purchaser and Seller.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
<PAGE>
SELLER:
RREEF MIDAMERICA/EAST-V NINE, INC., a Delaware
corporation
By: RREEF America L.L.C., a Delaware limited
liability company, its investment advisor
By:
Authorized Representative
Dated:
ESCROW HOLDER:
D'ANCONA & PFLAUM
By:
Title:
Dated:
PURCHASER:
VICON INDUSTRIES, INC., a New York corporation
By:
Title:
Dated:
<PAGE>
Schedule 5.1.8.1
Environmental Reports
1. Letter from ATC Associates Inc. dated September 19, 1997.
2. Documentation regarding spill #8900915, including letter from
Diagnostic Engineering Inc. dated August 14, 1989.
3. Documentation of underground fuel storage tank.
4. Asbestos survey from ATC Associates Inc. dated December 30, 1996.
5. Asbestos Project Monitoring Report prepared by ATC Environmental Inc,
Project No. 87600-0033.
6. Closeout Submittal from EWT Contracting, Inc. dated January 1997.
<PAGE>
Schedule 5.1.10
Construction Obligations
-None-
<PAGE>
Schedule 7.6.1
Form of Deed
(To be agreed)
<PAGE>
Schedule 7.6.2
FIRPTA CERTIFICATE
Section 1445 of the Internal Revenue Code provides that a transferee of
a U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform the transferee that withholding of tax is not required upon
the disposition of a U.S. real property interest by RREEF MIDAMERICA/EAST-V
NINE, INC., a Delaware corporation ("Seller") hereby certifies the following:
1.Seller is not a foreign corporation, foreign partnership, foreign trust
or foreign estate (as those terms are defined in the Internal Revenue
Code and Income Tax Regulations);
2. Seller's U.S. employer identification number is 94-2624868; and
3. Seller's principal place of business is 650 California Street, Suite 1800,
San Francisco, CA 94108.
Seller understands that this certification may be disclosed to the
Internal Revenue Service by transferee and that any false statement contained
herein could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of Seller.
RREEF MIDAMERICA/EAST-V NINE, INC., a Delaware corporation
By: RREEF America L.L.C., a Delaware limited liability company,
its investment advisor
By:___________________________
Authorized Representative
Subscribed and sworn to
before me this ____ day of
- ------,
- ------------------------------
Notary Public
<PAGE>
Schedule 7.6.4
LEASES TERMINATION AGREEMENT
THIS TERMINATION, dated this __day of _________, 19 ___, between RREEF
MIDAMERICA/EAST-V NINE, INC., a Delaware corporation ("Landlord") and VICON
INDUSTRIES, INC., a New York corporation ("Tenant"), for the premises located in
the City of Hauppauge, County of Suffolk, State of New York, commonly known as
89 Arkay Drive, Hauppauge, New York (the "Premises").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into that certain Lease reference
dated December 24, 1996 (the "Lease"); and
WHEREAS, Landlord and Tenant desire to terminate the Lease as more
fully set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree to terminate the
Lease under the following conditions:
1. TERMINATION DATE. The Lease shall terminate on __________________,
19__, in the same manner and with the same effect as if that date had
been originally fixed in the Lease for the expiration of the term,
conditioned on the performance by the parties of the provisions of this
Agreement. If Tenant fails to vacate the Premises on the Termination
Date, Landlord's remedies shall be as specified in the Lease.
2. OUTSTANDING RENT AND OTHER CHARGES. Tenant shall pay to Landlord all
rent and other charges as specified in the Lease through the
Termination Date. Any charges which cannot be ascertained prior to the
Termination Date shall be estimated by Landlord and Tenant shall pay
such estimated amount. All such amounts shall be used and held by
Landlord for payment of such obligations of Tenant, with Tenant being
liable for any additional costs upon demand by Landlord, or with any
excess to be returned to Tenant after all such obligations have been
determined and satisfied.
3. LIMITATION OF LANDLORD'S LIABILITY. Redress for any claims against
Landlord under this Termination Agreement shall only be made against
Landlord to the extent of Landlord's interest in the property of which
the Premises are a part. The obligations of Landlord under this
Termination Agreement shall not be personally binding on, nor shall any
resort be had to the private properties of, any of its trustees or
board of directors and officers, and the case may be, the general
partners thereof or any beneficiaries, stockholders, employees or
agents of Landlord, or its investment manager.
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the day and year
first written above.
LANDLORD: TENANT:
RREEF MIDAMERICA/EAST-V VICON INDUSTRIES, INC.,
NINE, INC., a Delaware corporation a New York corporation
By: RREEF America L.L.C.,
a Delaware limited liability
company, its investment advisor
By: By:
Authorized Representative Its:
<PAGE>
Schedule 7.6.5
ASSIGNMENT AND ASSUMPTION OF CONTRACTS AND WARRANTIES
THIS ASSIGNMENT (the "Assignment"), dated this ___ day of February,
1998, is made by and among RREEF MIDAMERICA/EAST-V NINE, INC., a Delaware
corporation (the "Assignor") and VICON INDUSTRIES, INC., a New York corporation
(the "Assignee").
WHEREAS, Assignee has this day purchased Assignor's interest in the
real property legally described on the attached Exhibit A (the "Property"); and
WHEREAS, the execution and delivery of this Assignment is a
condition precedent to the purchase by the Assignee of the Property;
NOW, THEREFORE, in consideration of the purchase and sale of the
Property, and for other good and valuable consideration, Assignor agrees as
follows:
1. Assignor hereby grants, transfers and assigns to Assignee all the
right, title and interest of Assignor in and to the following:
(a) All contracts listed on Exhibit B attached hereto.
(b) All presently effective and assignable warranties,
guaranties, representations or covenants given to or made in favor of Assignor
or Assignor's affiliates in connection with the acquisition, development,
construction, maintenance, repair, renovation or inspection of the Property.
The foregoing are collectively referred to herein as the "Contracts."
2. Assignor agrees to assume full responsibility for all the
obligations under the Contracts accruing prior to the date hereof and Assignor
agrees to indemnify and hold Assignee harmless from any claims, liabilities or
costs arising from Assignor's failure to perform said obligations.
3. Assignee assumes full responsibility for all obligations accruing
from and after the date hereof and Assignee agrees to indemnify and hold
Assignor and its predecessors in title harmless from all claims, liabilities or
costs arising from Assignee's failure to perform said obligations.
4. This instrument may be executed in counterparts.
5. The obligations of Assignor contained herein are intended to be
binding only on the property of the trust party to this Agreement and shall not
be personally binding upon, nor shall any resort be had to the private
properties of, any of the trustees, investment managers, any general partners
thereof, or any employees or agents of the trustees or investment managers.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date first written above.
<PAGE>
ASSIGNOR:
RREEF MIDAMERICA/EAST-V NINE, INC., a Delaware
corporation
By: RREEF America L.L.C., a Delaware limited
liability company, its investment advisor
By:___________________________
Authorized Representative
ASSIGNEE:
VICON INDUSTRIES, INC., a New York corporation
By:
Title:
<PAGE>
EXHIBIT A
Legal Description
<PAGE>
EXHIBIT B
Contracts
<PAGE>
Schedule 7.6.6
ASSIGNMENT OF INTANGIBLES
THIS ASSIGNMENT (the "Assignment"), dated this ___ day of February,
1998, is made by and among RREEF MIDAMERICA/EAST-V NINE, INC., a Delaware
corporation (the "Assignor") and (the "Assignee").
WHEREAS, Assignee has this day purchased Assignor's interest in the
real property legally described on the attached Exhibit A (the "Property"); and
WHEREAS, the execution and delivery of this Assignment is a
condition precedent to the purchase by the Assignee of the Property;
NOW, THEREFORE, in consideration of the purchase and sale of the
Property, and for other good and valuable consideration, Assignor agrees as
follows:
1. Assignor hereby grants, transfers and assigns to Assignee all the
right, title and interest of Assignor in and to the following:
(i) All licenses, permits, certificates of occupancy,
approvals, dedications, subdivision maps or plats and entitlements
issued, approved or granted by federal, state or municipal authorities
or otherwise in connection with the Property and its renovation,
construction, use, maintenance, repair, leasing and operation; and all
licenses, consents, easements, rights of way and approvals required
from private parties to make use of utilities, to insure pedestrian
ingress and egress to the Property and to insure continued use of any
vaults under public rights-of-way presently used in the operation of
the Property.
(ii) any trade style or trade name used in connection with the
Property; and,
(iii) all correspondence with the tenants under tenant leases,
all booklets and manuals relating to the maintenance and operation of
the Property.
The foregoing are collectively referred to herein as the "Intangibles".
2. Assignor agrees to assume full responsibility for all the
obligations under the Intangibles accruing prior to the date hereof and Assignor
agrees to indemnify and hold Assignee harmless from any claims, liabilities or
costs arising from Assignor's failure to perform said obligations.
<PAGE>
3. Assignee assumes full responsibility for all obligations accruing
under the Intangibles from and after the date hereof and Assignee agrees to
indemnify and hold Assignor and its predecessors in title harmless from all
claims, liabilities or costs arising from Assignee's failure to perform said
obligations.
4. This instrument may be executed in counterparts.
5. The obligations of Assignor contained herein are intended to be
binding only on the property of the trust party to this Agreement and shall not
be personally binding upon, nor shall any resort be had to the private
properties of, any of the trustees, investment managers, any general partners
thereof, or any employees or agents of the trustees or investment managers.
IN WITNESS WHEREOF, the parties have executed this Assignment as of the
date first written above.
ASSIGNOR:
RREEF MIDAMERICA/EAST-V NINE, INC., a Delaware
corporation
By: RREEF America L.L.C., a Delaware limited
liability company, its investment advisor
By:___________________________
Authorized Representative
ASSIGNEE:
VICON INDUSTRIES, INC., a New York corporation
By:
Title:
<PAGE>
EXHIBIT A
Legal Description
<PAGE>
Schedule 7.6.7
SELLER'S CLOSING CERTIFICATE
THIS CLOSING CERTIFICATE is made as of the __ day of February, 1998, by and
between RREEF MIDAMERICA/EAST-V NINE, INC., a Delaware corporation ("Seller"),
to and in favor of VICON INDUSTRIES, INC., a New York corporation ("Purchaser"),
under and pursuant to that certain Agreement of Purchase and Sale by and between
Seller and __________, dated as of ________, (the "Agreement"), for the purchase
and sale of that certain Property situated in the City of Hauppauge, Suffolk
County, State of New York (as defined in the Agreement).
Pursuant to Sections 6.2 and 7.6.7 of the Agreement and except as
disclosed on Exhibit A attached hereto and made a part hereof, Seller hereby
reconfirms, remakes and rewarrants to Purchaser as of the date hereof each of
the representations, warranties and covenants given by Seller contained in
Section 5.1 of the Agreement in the same manner as such representations,
warranties and covenants were given in the Agreement, each of which is
incorporated herein and made a part hereof by this reference. Except as modified
hereby, Seller hereby confirms that each of said representations, warranties and
covenants are true and accurate in all material respect as of the date hereof.
Seller's reconfirming, remaking and rewarranting of its representations,
warranties and covenants is subject to the limitations set forth in Sections 5.4
and 8.11 of the Agreement.
The obligations of Seller contained herein are intended to be binding
only on the property of the trust party to this Certificate and shall not be
personally binding upon, nor shall any resort be had to the private properties
of, any of the trustees, investment managers, any general partners thereof, or
any employees or agents of the trustees or investment managers.
IN WITNESS WHEREOF, Seller has executed this Closing Certificate as of
the day and year first above written.
SELLER:
RREEF MIDAMERICA/EAST-V NINE, INC., a California
group trust
By: RREEF America L.L.C., a
Delaware limited liability company,
its investment advisor
By:
<PAGE>
EXHIBIT A
Disclosure
<PAGE>
EXHIBIT A
Legal Description of the Property
<PAGE>
EXHIBIT B
Due Diligence Deliveries
1. RREEF's most recent environmental audit of the Property.
<PAGE>
C-6
EXHIBIT C
------------------------------------------------------
(Name of Employee Benefit Plan/Trust or Investment Fund)
SALE OF ______________________________________
(Description of Property)
Party In Interest/Prohibited Transaction Questionnaire
TO BE COMPLETED BY PURCHASER
The purpose of this questionnaire is to determine whether the sale of the
property described above (the "Property") by or on behalf of the investment
fund, the assets of which are employee benefit plan assets, named above for
which RREEF America L.L.C. ("RREEF") is an investment manager (the "Plan" and,
if an entity owned by the Plan is the actual seller, the "Seller") to the
purchaser of such property (the "Purchaser") would be a prohibited transaction
within the meaning of section 406 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or section 4975(c) of the Internal Revenue Code
of 1986, as amended. Attached to this questionnaire is a list of fiduciaries of
and service providers to the Plan, employers and employee organizations whose
employees and members respectively, are covered by the Plan, and affiliates of
the Plan, the trustee(s) of the Plan, including any employee benefit plans whose
assets form a part of the Plan (the "Trustee"), RREEF and the sponsoring
employers, of which the Seller and the Plan is aware.
INSTRUCTIONS: Complete the unanswered items. Review those questions to which
answers have already been provided and note any exceptions to the answers. If
the answer to any question is YES, attach an explanation setting forth the names
of the parties, exact relationship and, if applicable, ownership interests
involved. In addition, attach a list of all Purchaser's affiliates and entities
in which Purchaser directly or through any subsidiary owns a 10% or more
interest (including partnerships and joint ventures).
A. GENERAL Y/N
1. Does Purchaser or any affiliate1 of Purchaser have, or has it during
the immediately preceding one-year period, exercised, the authority to
appoint or terminate RREEF as the Plan's asset manager or negotiate the
terms (including renewals or modifications) of RREEF's management
agreement with the Plan?
- ---
<PAGE>
2. Is the Purchaser or any affiliate of the Purchaser an owner of 5% or
more of the interests of RREEF?
___
If either of these questions is answered YES, the QPAM exemption may not apply,
in which case, the transaction must be scrutinized to ensure that neither the
Purchaser nor its affiliates are parties in interest.
<PAGE>
B. PURCHASER
1. Following the sale, will the property be a "plan asset", within the
meaning of Department of Labor regulation ss. 2510.3-101, with
___ respect to any "employee benefit plan", within the meaning of section
3(3) of the ERISA, which is subject to ERISA?
2. If the Property will be a plan asset, is the Purchaser a "qualified
plan asset manager", within the meaning of section V(c) of
Prohibited Transaction Class Exemption ("PTE") 84-14, and is PTE 84-14
applicable to the transaction?
___
3. If the Property will be a plan asset, but PTE 84-14 is not applicable
to the transaction, has Purchaser determined that the transaction
is not a prohibited transaction with respect to the employee benefit
plans with respect to which the Property is currently a plan asset?
___
4. Is the Purchaser or a Parent2 of the Purchaser, an administrator,
trustee, custodian or other fiduciary with respect to the Seller or
the Plan (including any plan whose assets form a part of the Plan),
counsel to the Purchaser or the Plan or an employee of the Plan?
___
5. Is the Purchaser or a Parent of the Purchaser providing any services to
the Seller or the Plan (including any plan whose assets form a part
of the Plan)?
___
6. Is the Purchaser, or a Parent or a Subsidiary3 of the Purchaser, an
employer any of whose employees are covered under the Plan
(including any plan whose assets form a part of the Plan)?
___
7. Is the Purchaser, or a Parent or a Subsidiary of the Purchaser, an
employee organization, any of whose members are covered by the Plan
(including any plan whose assets form a part of the Plan)?
___
<PAGE>
8. Is the Purchaser or any affiliate of the Purchaser an owner of 5% or
more of the interests of the Trustee?
- ---
9. Is the Trustee or any affiliate of the Trustee the owner of 5% or
more of the interests of the Purchaser?
___
10. Is the Purchaser a 10% joint venturer with RREEF or the Trustee?
___
PURCHASER
VICON INDUSTRIES, INC., a New York corporation,
By:______________________________________
Its:________________________________
<PAGE>
EXHIBIT D
Permitted Exceptions
<PAGE>
EXHIBIT E
Service Contracts
- --------
NOTES TO PARTY IN INTEREST/PROHIBITED TRANSACTION QUESTIONNAIRE
1. "Affiliate" means
(I) any person, directly or indirectly, controlled by, controlling or
under common control with the named person; (ii) any corporation,
partnership, trust or unincorporated enterprise of which the named
person is an officer, director or 5% or more partner; or (iii) any
director or highly compensated (within the meaning of section
4975(e)(2)(H) of the Internal Revenue Code) employee of the named
person.
2. "Parent" means a person who, directly or indirectly, owns 50% or more
of the (I) combined voting power of all classes of stock, in the case
of a corporation, (ii) capital interests or profits interests, in the
case of a partnership, or (iii) beneficial interests, in the case of a
trust.
3. "Subsidiary" means an entity in which a person owns, directly or
indirectly, 50% or more of (I) the combined voting power of all classes
of stock, in the case of a corporation, (ii) the capital or profits, in
the case of a partnership, or (iii) the beneficial interests, in the
case of a trust.
EXHIBIT 10.2
LOAN AGREEMENT
Dated: January 29, 1998
NAME OF BORROWER:
VICON INDUSTRIES, INC.
PRINCIPAL PLACE OF BUSINESS:
89 Arkay Drive Hauppauge Suffolk NY 11788
Street & No. City/Town County State Zip
Code
STATE OF INCORPORATION:
New York State
1. PREAMBLE
The Borrower has requested KEYBANK NATIONAL ASSOCIATION (the "Bank"), a
national banking association, with an office for the transaction of business
located at 1377 Motor Parkway, Islandia, New York 11788 to grant (i) a mortgage
loan in the amount of TWO MILLION FIVE HUNDRED TWELVE THOUSAND ($2,512,000)
DOLLARS (the "Mortgage Loan") and (ii) a term loan in the amount of THREE
HUNDRED EIGHTY-EIGHT THOUSAND ($388,000) DOLLARS (the "Term Loan") (the Mortgage
Loan and Term Loan are hereinafter collectively referred to as the "Loan") to
the Borrower, and the Bank is willing to do so but only upon the terms and
conditions of:
(a) this Loan Agreement (the "Agreement"),
(b) a Mortgage Note (the "Mortgage Note"), dated on even date herewith,
(c) a Term Loan Note (the "Term Loan Note"), dated on even date herewith
(the Mortgage Note and Term Loan Note hereinafter collectively referred to as
the "Note"),
(d) a first Mortgage and Security Agreement and a second Mortgage and
Security Agreement, each dated on even date herewith covering the Premises
(hereinafter defined)(collectively, the "Mortgage"),
(e) an Assignment of Leases and Rents covering the Premises (the
"Assignment of Rents"),
<PAGE>
(f) and other documents executed or provided by Borrower in connection
with this transaction (this Agreement, the Note, the Mortgage, the Assignment of
Rents, and the other documents are hereinafter collectively referred to as, the
"Loan Documents").
2. USE OF LOAN PROCEEDS
The Borrower will use the Loan proceeds to purchase the property located
at 89 Arkay Drive, Hauppauge, New York 11788 (the "Premises").
3. LOAN PAYABLE IN ACCORDANCE WITH NOTE.
The Loan shall be payable as provided for in the Note. The Bank, in
addition to its legal right of setoff shall be entitled to debit any accounts
maintained by Borrower with the Bank for payment due under the Note.
4. INTEREST
The Loan shall bear interest computed at a rate (the "Interest Rate") as
set forth in the Note.
5. SECURITY
As collateral security for the payment of all present and future debts,
obligations and liabilities of the Borrower to the Bank, including but not
limited to those set forth in the Note (collectively, the "Obligations"), the
Borrower will grant to the Bank a security interest in all of the following (the
"Collateral"):
(a) a security interest in and assignment and pledge of all monies,
deposits or other sums now or hereafter held by the Bank on deposit, in
safekeeping, transit or otherwise, at any time credited by or due from the Bank
to the Borrower, or in which the Borrower shall have an interest;
(b) a first mortgage lien on the property located 89 Arkay Drive,
Hauppauge, New York 11788 evidence by the Mortgage;
(c) a second mortgage lien on the Premises; and
(d) an assignment of leases and rents from the Premises.
<PAGE>
From time to time, the Borrower will execute and deliver to the Bank such
assignments, agreements, documents, Uniform Commercial Code ("UCC") forms and
other papers as the Bank may request in connection with the granting, perfection
or continuation of the security interests granted hereunder. Borrower hereby
authorizes the Bank to file at any time UCC forms signed only by the Bank or
copies thereof or of this Agreement.
6. CONDITIONS TO LOAN
(a) Conditions Precedent. Borrower agrees that prior to or in any event no
later than the time of the closing of the Loan under this Agreement, it will
deliver to the Bank:
(1) Certified copies of corporate resolutions authorizing the
execution and delivery of all Loan Documents;
(2) Certificate of good standing from the Secretary of State of New
York and any other state or foreign country where Borrower is doing
business as to Borrower;
(3) Proof satisfactory to the Bank that the Borrower is authorized
to do business in the State of New York;
(4) New York State franchise tax search as to Borrower;
(5) A Certificate of incumbency as to Borrower;
(6) Certificates of insurance for any insurance required pursuant to
this Agreement or any of the Loan Documents;
(7) UCC searches satisfactory to the Bank;
(8) Duly executed UCC financing statements;
(9) Duly executed Loan Documents;
(10) An opinion from counsel for the Borrower as to such matters as
may be deemed appropriate by the Bank and its counsel;
(11) Payment by the Borrower of all costs and expenses incurred by
the Bank in establishing the Loan;
<PAGE>
(12) An approval of this Loan transaction together with a
subordination of claim to the Premises and fixtures at the Premises
to the Bank from IBJ Schroeder ("IBJ") and Chugai Boyeki Co.
Ltd.("Chugai")in form satisfactory to the Bank;
(13) A copy of the purchase contract for the Premises executed by
all parties.
(b) Financial Reporting Requirements. The Borrower agrees as follows:
(1) Borrower shall furnish annually to the Bank, audited Financial
Statements of Assets and Liabilities, together with Profit and Loss
Statements and Borrower's Form 10K, not later than ninety (90) days
following the close of the Borrower's Fiscal Year, which Financial
Statements shall be prepared on a consolidated basis by an
independent Certified Public Accountant (CPA), reasonably
satisfactory to the Bank, in accordance with Generally Accepted
Accounting Principles(GAAP), including the report/letter, all
statements and all footnotes.
(2) Annually, within 90 days of its Fiscal Year End and quarterly
within 60 days of each quarter end, Borrower shall submit compliance
certificates setting forth Borrower's calculations of and
demonstrating compliance with its Financial Covenants pursuant to
this Agreement and further certifying that, to the best of its
knowledge, no Event of Default has occurred hereunder or is
occurring or, if a default or Event of Default has occurred or is
occurring, then how same shall be cured within thirty (30) days. The
compliance certificates must be duly executed by the Borrower.
(3) Annually, within 90 days of each fiscal year end and quarterly,
within 60 days of each quarter end, Borrower shall submit management
prepared consolidating financial statements.
(4) The Borrower shall, within 60 days following each quarter end,
furnish to the Bank a copy of its Form 10-Q and consolidated
Financial Statements.
<PAGE>
(5) Annually, Borrower shall submit its budget for the upcoming year
including projected Profit and Loss Statements and a Balance Sheet,
said budget to be delivered with Borrower's Year End Financial
Statements.
(6) Borrower shall submit such other financial documentation to the
Bank as the Bank may reasonably require so long as the Loan is
outstanding.
(7) Failure to deliver financial information within fifteen (15)
days of the date specified will constitute an Event of Default
hereunder.
(c) Financial Covenants. The Borrower covenants and agrees that, from and
after the date of execution of this Agreement, and so long as any amount may be
borrowed hereunder or remains unpaid on account of the Note or is otherwise due
to the Bank under this Agreement or any related document, Borrower shall comply
with each of the following covenants which shall be calculated for the Borrower
based on a non-consolidating, stand-alone basis for Vicon Industries, Inc.
(without subsidiaries):
(1) Debt Service Coverage Ratio. As of the end of each fiscal
quarter, the Debt Service Coverage Ratio (hereinafter defined) shall
not be less than 1.0:1.0, to be tested on a rolling four (4) quarter
basis. "Debt Service Coverage Ratio" shall mean as at any date of
determination thereof (i) Annual EBITDA (hereinafter defined), to
(ii) Debt Service (hereinafter defined) for the four (4) full fiscal
quarters ending on or immediately prior to such date of
determination.
"EBITDA" shall mean, for any period, with respect to the Borrower,
determined in accordance with GAAP, the sum of net income (or net
loss) for such period plus, the sum of all amounts treated as
expenses for: (a) interest, (b) depreciation, (c) amortization, and
(d) all accrued taxes on or measured by income to the extent
included in the determination of such net income (or net loss);
provided, however, unless otherwise provided for in this Agreement,
net income (or net loss) shall be computed without giving effect to
extraordinary losses or gains.
<PAGE>
"Debt Service" shall mean, with respect to the Borrower, required
payments, unless waived, of current maturities of long-term
indebtedness (exclusive of any refinancings and rescheduled current
maturities) and interest expense, all of the foregoing calculated as
at any date of determination thereof by reference to the immediately
preceding four (4) full fiscal quarters ending on or immediately
prior to such date of determination.
(2) Maximum Indebtedness to Net Worth Ratio. As of the end of each
fiscal quarter commencing March 31, 1998, the Indebtedness to Net
Worth Ratio shall not exceed 2.5:1.0. "Indebtedness to Net Worth
Ratio" shall mean on any date for which the same is to be
determined, the ratio of (i) indebtedness of the Borrower less the
amount of 1)contingent liabilities incurred due to the Borrower's
outstanding Letters of Credit under the IBJ Loan Agreement
(hereinafter defined), and 2)operating leases permitted under
Borrower's current or any future Loan Agreement or Credit Agreement
with IBJ Schroeder (the "IBJ Loan Agreement"), to (ii) Net Worth
determined as at such date.
(3) Net Income. Net Income shall not be less than $0 (which
represents losses), for each fiscal quarter throughout the term of
the Loan. "Net Income" shall mean for any period for which the same
is to be determined, the consolidated net income of the Borrower and
its subsidiaries calculated in accordance with GAAP.
(4) Cross Default with financial covenants set forth in IBJ Loan
Agreement. Any default by Borrower of any of its financial covenants
set forth in the IBJ Loan Agreement or in any subsequent agreement
executed by Borrower in connection with any refinancing of the loan
evidenced by the IBJ Loan Agreement shall constitute an event of
default under this Loan Agreement.
<PAGE>
Notwithstanding anything to the contrary herein, upon the written request
of Borrower to the Bank, (i) the Debt Service Coverage Ratio set forth above
shall be increased to 1.3:1.0 to be tested as set forth above, and (ii) the
Maximum Indebtedness to Net Worth Ratio, Net Income, and Cross Default financial
covenants set forth above shall be released PROVIDED Borrower has complied with
all of the following:
(1) The Loan to Value Ratio must be decreased to sixty-five (65%)
percent or less(either by normal amortization and/or a partial
prepayment);
(2) Borrower has provided a new appraisal of the Premises to the
Bank evidencing a Loan to Value Ratio of sixty-five (65%) percent or less
prepared by a Bank approved appraiser and in form satisfactory to the
Bank;
(3) Borrower is not in default under any financial covenants set
forth in the IBJ Agreement; and
(4) Borrower is not in default under any of the Loan Documents.
7. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
(a) The Borrower is a corporation duly organized and existing under the
laws of the State of New York and is authorized to do business in the State of
New York and, that it has full corporate power to execute this Agreement, the
Note and all other Loan Documents and do all things required of it hereunder,
and that the Borrower's main office for doing business is as indicated at the
beginning of this Agreement;
(b) The Borrower maintains offices at the following location(s):
89 Arkay Drive, Hauppauge, New York 11788;
(c) The Borrower's most recent financial statement as submitted to the
Bank fairly represents the Borrower's financial condition as of the dates shown;
that the Borrower is the owner of all of the assets and property as shown in the
financial statement, subject to no liens, encumbrances or charges whatever other
than as set forth in said financial statement, and that the Borrower has no
liabilities other than shown on said financial statement;
(d) The Borrower is the owner of the Collateral, free and clear of any
liens, claims or rights of any other party, except as listed in Schedule A;
(e) There is no action, litigation, suit, proceeding, inquiry or
investigation, at law or in equity, or before or by any court, public board or
body, pending, threatened against or affecting the Borrower which involves the
possibility of materially adversely affecting the property, business, profits or
conditions (financial or otherwise) of the Borrower;
<PAGE>
(f) The Borrower has filed all required federal, state and local tax
returns and has paid all taxes shown on such returns as they become due;
(g) The execution and delivery of this Agreement, and all other Loan
Documents will not violate any provision of this Agreement or of any other
agreement or instrument to which the Borrower is a party for which waivers of
same have not been obtained;
(h) All necessary corporate action to authorize the Borrower's entry into
this Agreement and the execution of the Loan Documents has been taken and that
the Loan Documents when executed by the Borrower shall be valid and binding
obligations of the Borrower enforceable in accordance with their terms;
(i) The execution, delivery and performance of the Loan Documents, the
consummation of the transactions therein contemplated and compliance with the
provisions of each by the Borrower does not and will not (i) conflict with,
violate or result in a breach of any of the terms or provisions of the
certificate of incorporation or by-laws of the Borrower, (ii) require consent
which has not hereto been received or will result in a breach or default of any
credit agreement, indenture, purchase agreement, mortgage, deed of trust,
commitment, guaranty agreement, or any other instrument to which the Borrower is
a party, or by which the Borrower may be bound or affected for which waivers of
same have not been obtained, or (iii) conflict with or violate any existing law,
rule, regulation, judgment, order or decree of any government, governmental
instrumentality, or court, domestic or foreign, having jurisdiction over the
Borrower or any of its properties;
(j) The Borrower possesses all licenses, trademarks, trademark rights, and
tradenames which are required for the conduct of its business without conflict
with the rights of others.
8. NEGATIVE COVENANTS
While the Loan remains outstanding, the Borrower agrees that it will not,
without prior written consent of the Bank:
(a) Merge or consolidate with any other person, firm, corporation or
business if (i) Borrower is not the surviving corporation, or (ii) the surviving
entity has a lower credit rating than Borrower; or
(b) Sell, lease, assign, transfer or otherwise dispose of any significant
assets or property, except in the normal course of business as presently
conducted, and for full and adequate consideration.
<PAGE>
9. AFFIRMATIVE COVENANTS
While the Loan remains outstanding, the Borrower agrees that it will:
(a) Make all payments required under the Note;
(b) Furnish the Bank with copies of Financial Statements and other
financial documentation as set forth herein;
(c) Pay and discharge any and all taxes, assessments and governmental
charges on the due date thereof, unless the same are being contested by the
Borrower in good faith and provided such contest does not impair the Bank's
security;
(d) Timely comply with all of the terms and conditions of the Loan
Documents;
(e) Keep all of its property insured by insurance companies licensed to do
business in New York and in such other state(s) where the property is located
against loss or damage by fire or other risk usually insured against by other
owners or users of such properties in similar businesses under extended coverage
endorsement and against theft, burglary, and pilferage together with such other
hazards as the Bank may from time to time reasonably request, in amounts
satisfactory to the Bank. The Borrower shall deliver the policy or policies of
such insurance to the Bank. All such insurance shall contain endorsements in
form satisfactory to the Bank providing that the insurance shall not be
cancelable except upon thirty (30) days prior written notice to the Bank and
showing the Bank as a party insured as its interest may appear. The Borrower
shall promptly notify the Bank of any event or occurrence causing a material
loss or decline in value of property insured or the existence of an event
justifying a material claim under any insurance and the estimated amount
thereof;
(f) Keep the Bank fully informed as to all matters that may affect the
Loan;
(g) Preserve and maintain its assets and keep the same in good order and
condition;
(h) If the Bank so reasonably requires, provide the Bank with an appraisal
or appraisals of the Premises subsequent to the closing of the Loan but not more
often than once every twelve (12) months except as otherwise set forth herein.
All costs of such future appraisals shall be paid by the Borrower.
<PAGE>
10. DEFAULT
Each of the following shall be an "Event of Default" under this Agreement:
(a) The occurrence of an Event of Default under the Note, any of the Loan
Documents; or
(b) Borrower shall fail to perform any other obligation required to be
performed under this Agreement or any other Loan Document, for thirty (30) days
after receipt of notice from the Bank of such failure; or
(c) Any warranty, representation or other statement by or on behalf of
Borrower in any Loan Document or instrument furnished in compliance with or in
reference to any Loan Document proves in the Bank's reasonable opinion to be
false or misleading in any material respect; or
(d) Borrower shall generally not be paying debts as they become due or
file a petition or seek relief under or take advantage of any insolvency law;
make an assignment for the benefit of creditors; commence a proceeding for the
appointment of a receiver, trustee, liquidator, custodian or conservator of
Borrower or of the whole or substantially all of Borrower's property or of any
collateral pledged as security for the Note; or if Borrower shall file a
petition or an answer to a petition under any chapter of the Bankruptcy Reform
Act of 1978, as amended (or any successor statute thereto), or file a petition
or seek relief under or take advantage of any other similar law or statute of
the United States of America, any State thereof, or any foreign country or
subdivision thereof; or
(e) A Court of competent jurisdiction shall enter an order, judgment or
decree appointing or authorizing a receiver, trustee, liquidator, custodian or
conservator of Borrower or of the whole or substantially all of Borrower's
property, or any portion of the collateral pledged as security for the Note, or
enter an order for relief against Borrower in any case commenced under any
chapter of the Bankruptcy Reform Act of 1978, as amended (or any successor
statute thereto), or grant relief under any other similar law or statute of the
United States of America, any State thereof, or any foreign country or
subdivision thereof and the same is not stayed or discharged within sixty (60)
days of entry; or
(f) Under the provisions of any law for the relief or aid of debtors, a
court of competent jurisdiction or a receiver, trustee, liquidator, custodian or
conservator shall assume custody or control or take possession from Borrower of
all or substantially all of Borrower's property or any portion of any collateral
pledged as security for the Note; or
<PAGE>
(g) There is commenced against Borrower any proceeding for any of the
foregoing relief or if a petition is filed against Borrower under any chapter of
the Bankruptcy Reform Act of 1978, as amended (or any successor statute
thereto), or under any other similar law or statute of the United States of
America, any State thereof, or any foreign country or subdivision thereof, and
such proceeding or petition remains undismissed for a period of sixty (60) days
or if Borrower by any act indicates consent to, approval of or acquiescence in
any such proceeding or petition; or
(h) The Bank receives a notice to creditors with regard to a bulk transfer
by Borrower pursuant to Article VI of the Uniform Commercial Code; or
(i) In the event that (a) any entity then having a lesser credit rating
than Borrower shall acquire beneficial ownership of a majority interest in the
voting stock of Borrower, or (b) the Borrower shall merge with such an entity
and shall not be the surviving corporation; or
(j) Borrower shall fail to satisfy a final judgment entered against it for
the payment of money within thirty (30) days from entry or affirmance, and in
any event, prior to any execution or enforcement thereof; or
(k) Borrower shall be in default under any other agreement or document
with the Bank.
<PAGE>
If an Event of Default occurs or, if an event which, but for the passage
of time, the giving of notice or both (unless same is required under the Loan
Documents), would constitute an Event of Default, the Bank may declare the Loan
and any other Obligations to be immediately due and payable and the Bank shall
have, in addition to all other rights and remedies including those set forth in
the Mortgage and in the Assignment of Leases and Rents, those of a secured party
under the Uniform Commercial Code of the State of New York including without
limitation, the right to institute foreclosure proceedings and the right to take
possession of all Collateral, and for that purpose the Bank may enter the
Premises where the Collateral may be situated and remove the same therefrom
without legal process. At the request of the Bank, if applicable, Borrower (i)
will disclose the exact location of any personal property Collateral, (ii)
assist in the collection of any personal property Collateral, and (iii) assemble
any personal property Collateral at a place to be designated by the Bank. The
requirements of reasonable notice shall be met if the Bank gives to the Borrower
at least five (5) days prior written notice of the time and place of any public
sale of any personal property Collateral or if the time after which any private
sale or any other intended disposition is to be made. For the purpose of
realizing the Bank's rights in the Collateral, the Bank may endorse notes,
checks, drafts, money orders, documents of title or other evidences of payment,
shipment or storage or endorse any other forms of Collateral on behalf of and in
the name of Borrower and may compromise and settle claims and otherwise
generally deal with the Collateral. The Borrower hereby irrevocably appoints the
Bank as its lawful attorney-in-fact with full power of substitution for the
Borrower in its name, place and stead to take all actions with respect to the
Collateral permitted hereunder.
Any sale or disposition of Collateral by the Bank shall be done in a
commercially reasonable manner. All decisions with respect to sale or
disposition of the Collateral shall be made solely by the Bank.
All proceeds received from the disposition and/or collection of Collateral
shall be applied by the Bank, in its discretion and in such order as it elects,
to (i) the payment of all expenses incurred in connection with the sale and/or
collection of the Collateral, including reasonable attorney's fees and other
expenses and disbursements and the reasonable expenses of retaking, collecting,
holding, preparing for sale, sale and the like and (ii) the payment of all
interest, principal and other sums due under the Loan Documents.
11. INDEMNIFICATION
The Bank by virtue of the pledge and assignment of the Collateral to it
hereunder shall not be deemed to have assumed the Borrower's obligations under
the Collateral or be responsible for servicing the Collateral and the Borrower
shall and does hereby agree to defend, indemnify and hold the Bank harmless of
and from any and all liability of any name, nature or kind which may arise or be
alleged to have arisen as a result of the pledge and assignment of the
Collateral to the Bank hereunder.
12. FEES AND EXPENSES
All filing fees, recording costs and all other fees or charges, including
reasonable attorneys fees, incurred by the Bank in connection with the
preparation of this Agreement and the other Loan Documents and in perfecting and
defending the Bank's security interests in the Collateral and its rights
hereunder, shall be deemed to be sums payable under the Note and secured by the
Collateral and shall be paid by the Borrower on demand.
13. GENERAL PROVISIONS
<PAGE>
(a) Inspection. The Bank may examine the Borrower's books and records with
respect to the Collateral and this Agreement at all reasonable times to insure
compliance with the terms of the Loan Documents. Additionally, the Borrower
hereby agrees to allow the Bank, its personnel and representatives, access to
the Borrower's books and records for the purpose of conducting periodic audits.
Such audits shall be done as frequently as the Bank may reasonably determine is
necessary and Borrower shall pay the Bank an audit fee of $650.00 per audit, it
being understood that audit fees shall be charged only at such times as an Event
of Default has occurred and is continuing.
(b) Notice To Others. The Bank may, upon the occurrence of an Event of
Default or upon the occurrence of an event which, but for the passage of time,
the giving of notice or both unless same is required under the Loan Documents,
would constitute an Event of Default, notify any party obligated to make
payments to Borrower under any lease of the Premises or portion , to make
payment directly to the Bank.
(c) Paragraph Headings. Paragraph headings are for convenience and shall
not operate to change or modify any of the terms of this Agreement.
(d) Partial Invalidity. The invalidity or unenforceability of any clause
or part of this Agreement or any other Loan Documents shall not affect the
validity or enforceability of any other clause or part hereof.
(e) Waiver. Any waiver by the Bank of any breach or of any Event of
Default shall not be deemed a waiver of any other breach or Event of Default of
the same or any other provision.
(f) Rights Cumulative. All of the Bank's rights, remedies and powers,
whether pursuant to this Agreement or any other Loan Document or otherwise
("Rights") shall be cumulative and may be exercised independently or
concurrently, partially or wholly, and as often as the Bank deems expedient. No
delay or omission in exercising such Right or any other Right shall be construed
as a waiver or acquiescence to an Event of Default. Waiver of a Right or an
Event of Default on any one occasion shall not bar or be a waiver of such Right
or Event of Default on any future occasion.
(g) Governing Law. This Agreement shall be governed by the laws of the
State of New York.
(h) Waiver Of Jury Trial. The parties hereto hereby waive trial by jury in
any litigation in any court with respect to, in connection with, or arising out
of this Agreement, any other Loan Document or the Loan, or any instrument or
document delivered in connection with the Loan, or the validity, protection,
interpretation, collection or enforcement thereof, or any other claim or dispute
howsoever arising between the Borrower and the Bank.
<PAGE>
(i) Notices. All notices and communications under this Agreement, except
those communications permitted by the terms of this Agreement to be made by
telephone, shall be: (i) personally delivered or (ii) given by registered or
certified mail, postage prepaid, return receipt requested, or (iii) forwarded by
overnight courier service, in each instance addressed to the addresses
hereinafter set forth, or such other addresses as the parties may for themselves
designate in writing as provided herein for the purpose of receiving notices
hereunder. All notices shall be in writing and shall be deemed given, in the
case of notice by personal delivery, upon actual delivery, and in the case of
appropriate mail or courier service, upon deposit with the U.S. Postal Service
or delivery to the courier service as follows:
If to Bank:
KeyBank National Association
1377 Motor Parkway
Islandia, New York 11788
Attn: James V. Maiorino, Vice President
If to Borrower:
Vicon Industries, Inc.
89 Arkay Boulevard
Hauppauge, New York 11788
Attn: Kenneth M. Darby, President
(j) Bank Approval. All Loan Documents and all other documents delivered by
Borrower to the Bank must be acceptable to the Bank and its Counsel.
(k) Entire Agreement. This Agreement and the other Loan Documents
constitute the complete agreement of the parties with respect to the subject
matters referred to herein and supersede all prior or contemporaneous
negotiations, promises, covenants, agreements or representations of every nature
whatsoever with respect thereto, all of which have become merged and finally
integrated into this Agreement. Each of the parties understands that in the
event of any subsequent litigation, controversy or dispute concerning any of the
terms, conditions or provisions of this Agreement, neither shall be permitted to
offer or introduce any oral evidence concerning any other oral promises or oral
agreements between the parties relating to the subject matter of this Agreement
not included or referred to herein and not reflected by a writing signed by the
Bank.
(l) Counterparts. This Agreement may be executed in counterparts and any
combination or group of counterparts bearing, in the aggregate, the signatures
of all of the parties hereto shall be deemed one Agreement and sufficient
execution of the within Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
VICON INDUSTRIES, INC. KEYBANK NATIONAL ASSOCIATION
By:____________________ By:_________________________
Kenneth M. Darby James V. Maiorino
President Vice President
STATE OF NEW YORK )
) SS.:
COUNTY OF SUFFOLK )
On the 29th day of January, 1998, before me personally came KENNETH M.
DARBY, to me known, who being by me duly sworn, did depose and say that he has
an address c/o Vicon Industries, Inc. 89 Arkay Drive, Hauppauge, New York; that
he is the President of VICON INDUSTRIES, INC., the corporation described in and
which executed the foregoing instrument, and he signed his name thereto by order
of said corporation.
--------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
) SS.:
COUNTY OF SUFFOLK )
On the 29th day of January, 1998, before me personally came JAMES V.
MAIORINO, to me known, who being by me duly sworn, did depose and say that he
has an address located c/o KeyBank National Association, 1377 Motor Parkway,
Islandia, New York; that he is a Vice President at KEYBANK NATIONAL ASSOCIATION,
the banking association described in and which executed the foregoing
instrument, and he signed his name thereto by like order of said association.
--------------------------
NOTARY PUBLIC
<PAGE>
SCHEDULE "A"
PRIOR LIENS, CLAIMS OR RIGHTS OF
OTHERS IN AND TO COLLATERAL
IBJ Schroeder Business Credit Corporation - security
interest in accounts and equipment
Chugai Boyeki (America) Corp. - security
interest in accounts and equipment
EXHIBIT 10.3
KEYBANK NATIONAL ASSOCIATION
MORTGAGE NOTE
BORROWER: VICON INDUSTRIES, INC.
PRINCIPAL: $2,512,000 Date: January 29, 1998
PROMISE TO PAY: The undersigned (the "Borrower"), jointly and severally if more
than one signer, does hereby promise to pay to the order of KEYBANK NATIONAL
ASSOCIATION (the "Bank") at its offices at 1377 Motor Parkway, Islandia, New
York 11788, or at any of its branches, the sum of TWO MILLION FIVE HUNDRED
TWELVE THOUSAND ($2,512,000) DOLLARS plus interest thereon, from the date hereof
in the manner set forth below.
COMPUTATION OF INTEREST: Interest on the outstanding principal balance of this
Note shall be computed on the basis of "a 360-day year for the actual number of
days elapsed" (such phrase, as used throughout this Note shall mean that in
computing interest for the subject period, the interest rate shall be multiplied
by a fraction, the denominator of which is 360 and the numerator of which is the
actual number of days elapsed from the date of the first disbursement of the
Loan or the date of the preceding interest and/or principal due date, as the
case may be, to the date of the next interest and/or principal due date).
Interest shall accrue until the date of receipt of payment.
RATE AND PAYMENT: The unpaid principal balance hereof shall bear interest at a
variable rate equal to the Prime Rate minus One Hundred Thirty-Five (135) Basis
Points ("Interest Rate"), payable monthly on the first day of the first month
following the date hereof and on the first day of each month thereafter until
this Note is paid in full. "Prime Rate" shall mean that rate set forth in
Federal Reserve Publication H15(519) under the heading "Prime Interest Rate". If
such rate does not appear on the Federal Reserve Publication H15(519) the rate
shall be the Prime Rate as published in the "Money Rates" column of the Wall
Street Journal. The Prime Rate may not be the lowest rate of interest charged by
KeyBank for commercial or other extensions of credit. Each change in the Prime
Rate shall effect a simultaneous and corresponding change in the interest rate
hereunder without notice to the Borrower. Interest shall be calculated on a
three hundred sixty (360) day year and actual number of days elapsed.
Principal repayment shall begin on March 1, 1998 when Borrower shall begin
making monthly installments of principal in accordance with Schedule "A" annexed
hereto plus accrued interest at the Interest Rate. On February 1, 2008 (the
"Maturity Date") (or such earlier date in the event Borrower defaults
hereunder), the entire unpaid principal balance of this Note and all accrued but
unpaid interest and any other sums due hereunder shall be due and payable.
<PAGE>
Each installment payment shall be applied first to interest at the Interest Rate
with the balance, if any, applied to principal. If any monthly installment
payment is insufficient to pay the interest due at the Interest Rate, KeyBank
will notify the Borrower of the amount of additional interest due and the
Borrower will remit said sum to KeyBank or KeyBank shall offset such amount (as
hereinafter provided) within five (5) business days.
PREPAYMENT: The Loan may be prepaid in whole or in part in multiples of at least
$100,000 on the first of each month following not less than ten (10) days prior
written notice, provided Borrower is not then in default.
Partial prepayment shall be credited in inverse order of maturity. Prepayments
of borrowings covered by an interest rate swap agreement or other rate
protection mechanism may require termination or adjustment of the swap and will
be subject to the terms and conditions of the swap agreement with respect to
prepayment/termination.
DEFAULT INTEREST RATE: After maturity hereof (whether by acceleration or
otherwise) the principal amount hereof and the unpaid interest and fees thereon
shall bear interest at a rate per annum equal to the greater of three (3%)
percent in excess of the highest applicable interest rate provided for herein or
sixteen (16%) percent per annum, but in no event shall the rate either be for or
after the occurrence of any event of default or acceleration exceed the highest
rate of interest, if any, permitted under applicable New York or Federal Law.
RIGHT OF OFFSET: If any payment is not made when due inclusive of any applicable
grace period, or if the entire balance becomes due and payable and is not paid,
all or part of the amount due may be offset out of any account or other property
which the Borrower has at the Bank or any affiliate of the Bank without prior
notice or demand.
LATE CHARGES: The Borrower shall pay to the Bank, prior to maturity, for each
payment of principal and interest not paid in full within ten (10) days after
its due date, a late fee equal to the greater of five (5%) percent of the amount
of such payment or fifty ($50) dollars, but not more than one thousand ($1,000)
dollars.
SECURITY: This Note is secured by:
(1) a security interest in and assignment and pledge of all monies,
deposits, or other sums now or hereafter held by the Bank on deposit, in
safekeeping, transit or otherwise, at any time credited by or due from Bank to
the Borrower, or in which the Borrower shall have an interest; and
(2) a mortgage on property located at 89 Arkay Drive, Hauppauge,
New York 11788 and known on the Suffolk County Tax Map as District 0800 Section
181.00 Block 03.00 Lot 002.013 (the "Mortgage"); and
<PAGE>
(3) an Assignment of All Leases and Rents from the premises that is
the subject of the Mortgage.
DEFAULT: The Bank may declare the entire unpaid balance of this Note due
and payable on the happening of any of the following events:
(a) Failure to pay any amount required by this Note when
due and Borrower fails to cure such default within five (5) business days or, if
applicable, failure to have sufficient funds in its account for loan payments to
be debited on the due date and Borrower fails to cure such default within five
(5) business days;
(b) Failure to perform or keep or abide by any term,
covenant or condition contained in this Note, the Mortgage, or any other
document or instrument given to the Bank in connection with this loan within any
applicable cure period;
(c) The filing of a bankruptcy proceeding, assignment for
the benefit of creditors, issuance of any execution, garnishment, or levy
against, or the commencement of any proceeding for relief from indebtedness by
or against the Borrower;
(d) The happening of any event which, in the judgment of
the Bank, materially adversely affects the Borrower's ability to repay or the
value of any collateral;
(e) If any material written representation or statement
made to the Bank by the Borrower is untrue;
(f) If any material written representation, covenant or
warranty made to the Bank by the Borrower is breached;
(g) The occurrence of a default under the Mortgage, or any
other document or instrument given to the Bank in connection with this loan and
Borrower fails to cure such default within any applicable cure period;
(h) Failure to provide any reasonable financial information
on request upon reasonable notice or permit an examination of books and records
upon reasonable notice.
Notwithstanding the foregoing, the balance of this Note shall become
immediately due and payable upon the occurrence of any of the events set forth
in (c) above.
ATTORNEYS FEES: In the event the Bank retains counsel with respect to
enforcement of this Note or any other document or instrument given to the Bank
by reason of Borrower's default, the Borrower agrees to pay the Bank's
reasonable attorneys fees (whether or not an action is commenced and whether or
not in the court of original jurisdiction, appellate court, bankruptcy court, or
otherwise).
<PAGE>
SUBSEQUENT AGREEMENTS: The Borrower shall be bound by any agreement extending
the time or modifying the above terms of payment made by the Bank and any
owner(s) of the property covered by the mortgage referred to herein, without
notice to the Borrower, and the Borrower shall continue to be liable to pay all
amounts due hereunder, but at an interest rate not exceeding the rate set forth
herein, according to the terms of any such agreement of extension or
modification.
MISCELLANEOUS: Delay or failure of the Bank to exercise any of its rights under
this Note shall not be deemed a waiver thereof. No waiver of any condition or
requirement shall operate as a waiver of any other or subsequent condition or
requirement. The Bank or any other holder of this Note does not have to present
it before requiring payment. The Borrower waives trial by jury, offset, and
counterclaim with respect to any action arising out of or relating to this Note.
This Note may not be modified or terminated orally. This Note shall be governed
by the laws of the State of New York without regard to its conflicts of laws
rules. The Borrower irrevocably consents to the jurisdiction and venue of the
New York State Supreme Court, Suffolk County in any action concerning this Note.
This Note is binding upon the Borrower, its heirs, successors and assigns.
IN WITNESS WHEREOF, the Borrower has signed this Note as of
the 29th day of January, 1998.
VICON INDUSTRIES, INC.
By:___________________________
Kenneth M. Darby, President
STATE OF NEW YORK )
) SS.:
COUNTY OF SUFFOLK )
On the 29th day of January, 1998, before me personally came KENNETH
M. DARBY, to me known, who being by me duly sworn, did depose and say that he
has an office address c/o Vicon Industries, Inc., 89 Arkay Drive, Hauppauge, New
York; that he is the President of VICON INDUSTRIES, INC., the corporation
described in and which executed the foregoing instrument, and he signed his name
thereto by order of said corporation.
--------------------------
NOTARY PUBLIC
EXHIBIT 10.4
KEYBANK NATIONAL ASSOCIATION
TERM LOAN NOTE
BORROWER: VICON INDUSTRIES, INC.
PRINCIPAL: $388,000 Date: January 29, 1998
PROMISE TO PAY: The undersigned (the "Borrower"), jointly and severally if more
than one signer, does hereby promise to pay to the order of KEYBANK NATIONAL
ASSOCIATION (the "Bank") at its offices at 1377 Motor Parkway, Islandia, New
York 11788, or at any of its branches, the sum of THREE HUNDRED EIGHTY-EIGHT
THOUSAND ($388,000) DOLLARS plus interest thereon, from the date hereof in the
manner set forth below.
COMPUTATION OF INTEREST: Interest on the outstanding principal balance of this
Note shall be computed on the basis of "a 360-day year for the actual number of
days elapsed" (such phrase, as used throughout this Note shall mean that in
computing interest for the subject period, the interest rate shall be multiplied
by a fraction, the denominator of which is 360 and the numerator of which is the
actual number of days elapsed from the date of the first disbursement of the
Loan or the date of the preceding interest and/or principal due date, as the
case may be, to the date of the next interest and/or principal due date).
Interest shall accrue until the date of receipt of payment.
RATE AND PAYMENT: The unpaid principal balance hereof shall bear interest at a
variable rate equal to the Prime Rate minus One Hundred Thirty-Five (135) Basis
Points ("Interest Rate"), payable monthly on the first day of the first month
following the date hereof and on the first day of each month thereafter until
this Note is paid in full. "Prime Rate" shall mean that rate set forth in
Federal Reserve Publication H15(519) under the heading "Prime Interest Rate". If
such rate does not appear on the Federal Reserve Publication H15(519) the rate
shall be the Prime Rate as published in the "Money Rates" column of the Wall
Street Journal. The Prime Rate may not be the lowest rate of interest charged by
KeyBank for commercial or other extensions of credit. Each change in the Prime
Rate shall effect a simultaneous and corresponding change in the interest rate
hereunder without notice to the Borrower. Interest shall be calculated on a
three hundred sixty (360) day year and actual number of days elapsed.
Principal repayment shall begin on March 1, 1998 when Borrower shall begin
making monthly installments of principal calculated on the basis of an
eighty-four (84) month amortization schedule plus accrued interest at the
Interest Rate. On February 1, 2003 (the "Maturity Date") (or such earlier date
in the event Borrower defaults hereunder), the entire unpaid principal balance
of this Note and all accrued but unpaid interest and any other sums due
hereunder shall be due and payable.
<PAGE>
Each installment payment shall be applied first to interest at the Interest Rate
with the balance, if any, applied to principal. If any monthly installment
payment is insufficient to pay the interest due at the Interest Rate, KeyBank
will notify the Borrower of the amount of additional interest due and the
Borrower will remit said sum to KeyBank or KeyBank shall offset such amount (as
hereinafter provided) within five (5) business days.
PREPAYMENT: The Loan may be prepaid in whole or in part in multiples of at least
$100,000 on the first of each month following not less than ten (10) days prior
written notice, provided Borrower is not then in default.
Partial prepayment shall be credited in inverse order of maturity. Prepayments
of borrowings covered by an interest rate swap agreement or other rate
protection mechanism may require termination or adjustment of the swap and will
be subject to the terms and conditions of the swap agreement with respect to
prepayment/termination.
DEFAULT INTEREST RATE: After maturity hereof (whether by acceleration or
otherwise) the principal amount hereof and the unpaid interest and fees thereon
shall bear interest at a rate per annum equal to the greater of three (3%)
percent in excess of the highest applicable interest rate provided for herein or
sixteen (16%) percent per annum, but in no event shall the rate either be for or
after the occurrence of any event of default or acceleration exceed the highest
rate of interest, if any, permitted under applicable New York or Federal Law.
RIGHT OF OFFSET: If any payment is not made when due inclusive of any applicable
grace period, or if the entire balance becomes due and payable and is not paid,
all or part of the amount due may be offset out of any account or other property
which the Borrower has at the Bank or any affiliate of the Bank without prior
notice or demand.
LATE CHARGES: The Borrower shall pay to the Bank, prior to maturity, for each
payment of principal and interest not paid in full within ten (10) days after
its due date, a late fee equal to the greater of five (5%) percent of the amount
of such payment or fifty ($50) dollars, but not more than one thousand ($1,000)
dollars.
SECURITY: This Note is secured by:
(1) a security interest in and assignment and pledge of all monies,
deposits, or other sums now or hereafter held by the Bank on deposit, in
safekeeping, transit or otherwise, at any time credited by or due from Bank to
the Borrower, or in which the Borrower shall have an interest; and
(2) a mortgage on property located at 89 Arkay Drive, Hauppauge,
New York 11788 and known on the Suffolk County Tax Map as District 0800 Section
181.00 Block 03.00 Lot 002.013 (the "Mortgage"); and
<PAGE>
(3) an Assignment of All Leases and Rents from the premises
that is the subject of the Mortgage.
DEFAULT: The Bank may declare the entire unpaid balance of this Note due
and payable on the happening of any of the following events:
(a) Failure to pay any amount required by this Note when
due and Borrower fails to cure such default within five (5) business days, or,
if applicable, failure to have sufficient funds in its account for loan payments
to be debited on the due date and Borrower fails to cure such default within
five (5) business days;
(b) Failure to perform or keep or abide by any term,
covenant or condition contained in this Note, the Mortgage, or any other
document or instrument given to the Bank in connection with this loan within any
applicable cure period;
(c) The filing of a bankruptcy proceeding, assignment for
the benefit of creditors, issuance of any execution, garnishment, or levy
against, or the commencement of any proceeding for relief from indebtedness by
or against the Borrower;
(d) The happening of any event which, in the judgment of
the Bank, materially adversely affects the Borrower's ability to repay or the
value of any collateral;
(e) If any material written representation or statement
made to the Bank by the Borrower is untrue;
(f) If any material written representation, covenant or
warranty made to the Bank by the Borrower is breached;
(g) The occurrence of a default under the Mortgage, or any
other document or instrument given to the Bank in connection with this loan and
Borrower fails to cure such default within any applicable cure period;
(h) Failure to provide any reasonable financial information
on request upon reasonable notice or permit an examination of books and records
upon reasonable notice.
Notwithstanding the foregoing, the balance of this Note shall become
immediately due and payable upon the occurrence of any of the events set forth
in (c) above.
ATTORNEYS FEES: In the event the Bank retains counsel with respect to
enforcement of this Note or any other document or instrument given to the Bank
by reason of Borrower's default, the Borrower agrees to pay the Bank's
reasonable attorneys fees (whether or not an action is commenced and whether or
not in the court of original jurisdiction, appellate court, bankruptcy court, or
otherwise).
<PAGE>
SUBSEQUENT AGREEMENTS: The Borrower shall be bound by any agreement extending
the time or modifying the above terms of payment made by the Bank and any
owner(s) of the property covered by the mortgage referred to herein, without
notice to the Borrower, and the Borrower shall continue to be liable to pay all
amounts due hereunder, but at an interest rate not exceeding the rate set forth
herein, according to the terms of any such agreement of extension or
modification.
MISCELLANEOUS: Delay or failure of the Bank to exercise any of its rights under
this Note shall not be deemed a waiver thereof. No waiver of any condition or
requirement shall operate as a waiver of any other or subsequent condition or
requirement. The Bank or any other holder of this Note does not have to present
it before requiring payment. The Borrower waives trial by jury, offset, and
counterclaim with respect to any action arising out of or relating to this Note.
This Note may not be modified or terminated orally. This Note shall be governed
by the laws of the State of New York without regard to its conflicts of laws
rules. The Borrower irrevocably consents to the jurisdiction and venue of the
New York State Supreme Court, Suffolk County in any action concerning this Note.
This Note is binding upon the Borrower, its heirs, successors and assigns.
IN WITNESS WHEREOF, the Borrower has signed this Note as of
the 29th day of January, 1998.
VICON INDUSTRIES, INC.
By:___________________________
Kenneth M. Darby, President
STATE OF NEW YORK )
) SS.:
COUNTY OF SUFFOLK )
On the 29th day of January, 1998, before me personally came KENNETH
M. DARBY, to me known, who being by me duly sworn, did depose and say that he
has a business address located c/o Vicon Industries, Inc., 89 Arkay Drive,
Hauppauge, New York; that he is the President of VICON INDUSTRIES, INC., the
corporation described in and which executed the foregoing instrument, and he
signed his name thereto by order of said corporation.
--------------------------
NOTARY PUBLIC
EXHIBIT 10.5
MORTGAGE
and
SECURITY AGREEMENT
Dated: January 29, 1998
in the amount of
$2,512,000
(the "Mortgage Amount")
from
VICON INDUSTRIES, INC.
having an office at:
89 Arkay Drive
Hauppauge, New York 11788
(the "Mortgagor")
to
KEYBANK NATIONAL ASSOCIATION
A National Banking Association
having an office at:
1377 Motor Parkway
Islandia, New York 11788
(the "Mortgagee")
LOCATION OF PREMISES:
Street Address : 89 Arkay Drive, Hauppauge
County of : Suffolk
State of : New York
District : 0800
Section : 181.00
Block : 03.00
Lot : 002.013
After recording, please return to:
GANDIN, SCHOTSKY, RAPPAPORT, GLASS & GREENE, LLP
445 Broad Hollow Road
Melville, N. Y. 11747
This instrument was prepared by the above-named attorneys.
<PAGE>
MORTGAGE AND SECURITY AGREEMENT
$2,512,000
THIS MORTGAGE AND SECURITY AGREEMENT, made the 29th day of January, 1998,
by VICON INDUSTRIES, INC., a New York State corporation with an office for the
transaction of business located at 89 Arkay Drive, Hauppauge, New York , the
MORTGAGOR to KEYBANK NATIONAL ASSOCIATION, a national banking association, with
an office for the transaction of business located at 1377 Motor Parkway,
Islandia, New York 11788, the MORTGAGEE.
WITNESSETH, that to secure the payment of an indebtedness evidenced by a
certain note bearing even date herewith in the principal sum of TWO MILLION FIVE
HUNDRED TWELVE THOUSAND ($2,512,000) Dollars lawful money of the United States,
as the same may be modified, renewed or extended (the "Note") which sum, with
interest thereon is to be paid by Mortgagor to Mortgagee in accordance with the
terms of said Note, and also to secure the payment by Mortgagor to Mortgagee of
all sums expended or advanced by Mortgagee pursuant to any covenant, term or
provision of this Mortgage or any other Loan Document (as that term is defined
in the Note), and to secure the performance of each covenant, term and provision
by Mortgagor to be performed pursuant to this Mortgage or any other Loan
Document, Mortgagor hereby mortgages to Mortgagee, its successors and assigns,
the following described property (the "Mortgaged Property") whether now owned or
held or hereafter acquired:
ALL THAT TRACT OR PARCEL OF LAND situate in the County of Suffolk, State
of New York, and being the same premises described in Schedule "A" hereto
annexed and made a part hereof (the "Premises").
ALL RIGHT, TITLE AND INTEREST of Mortgagor in and to any and all
buildings, structures and improvements, including without limitation, the
foundations and footings thereof, now or at any time hereafter erected,
constructed or situated upon the Premises or any part thereof (the
"Improvements").
TOGETHER with all fixtures, chattels and articles of personal property now
or hereafter attached to or used in connection with the Premises, together with
any and all replacements thereof and additions thereto (the "Chattels"). This
Mortgage shall be considered a financing statement pursuant to the provisions of
the Uniform Commercial Code, covering fixtures which are affixed to the
Premises. The types of collateral covered hereby are described in this
paragraph. The debtor is VICON INDUSTRIES, INC. The secured party is KEYBANK
NATIONAL ASSOCIATION. Their addresses are set forth above.
TOGETHER with all right, title and interest, if any, of Mortgagor of, in
and to the bed of any street, road or avenue, opened or proposed, in front of,
adjoining or abutting upon the Premises to the center line thereof.
<PAGE>
TOGETHER with any and all awards heretofore and hereafter made to the
present and all subsequent owners of the Premises by any governmental or other
lawful authorities for the taking by eminent domain of the whole or any part of
the Premises, or any easement therein, including any awards for any changes of
grade of streets, which said awards are hereby assigned to Mortgagee, who is
hereby authorized to collect and receive the proceeds of any such awards from
such authorities and to give proper receipts and acquittances therefor, and to
apply the same toward the payment of the amount owing on account of this
Mortgage and the Note, notwithstanding the fact that the amount owing thereon
may not then be due and payable.
TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its
successors and assigns, PROVIDED ALWAYS that if Mortgagor shall pay or cause to
be paid to Mortgagee, its successors and assigns, said principal sum of money
and other charges mentioned and set forth in this Mortgage and in the Note,
together with interest thereon, then and from thence forth, the Mortgaged
Property and the estate hereby granted shall cease, determine and be void.
AND Mortgagor covenants with Mortgagee as follows:
1. REPRESENTATIONS. Mortgagor hereby represents and warrants to
Mortgagee as follows:
(a) That the Loan Documents (as that term is defined in the Note)
are in all respects valid and legally binding obligations, enforceable in
accordance with their respective terms.
(b) That the execution and delivery of the Loan Documents by
Mortgagor does not, and the performance and observance by Mortgagor of its
obligations thereunder will not, contravene or result in a breach of (i) if
Mortgagor purports to be a corporation, any provision of Mortgagor's corporate
charter or by-laws, or, if Mortgagor purports to be partnership, any provision
of Mortgagor's partnership agreement or certificate, or (ii) any governmental
requirements, or (iii) any decree or judgement binding on Mortgagor, or (iv) any
agreement or instrument binding on Mortgagor for which waivers of the same have
not been obtained or any of their respective properties, nor will the same
result in the creation of any lien or security interest under any such agreement
or instrument.
(c) That there are no actions, suits, investigations or proceedings
pending, or, to the knowledge of Mortgagor, threatened against or affecting
Mortgagor (or any general partner of Mortgagor), or the Mortgaged Property, or
involving the validity or enforceability of any of the Loan Documents or the
priority of the lien thereof, or which will affect Mortgagor's ability to repay
the Note, at law or in equity or before or by any governmental authority.
(d) That Mortgagor has no knowledge of any violations or notices of
violations of any requirements for which waiver(s) of same have not been
obtained.
<PAGE>
(e) If Mortgagor (or any general partner of Mortgagor if Mortgagor
is a partnership) purports to be a corporation, that (i) it is a corporation
duly organized, validly existing and in good standing under the laws of the
state or foreign country in which it is incorporated, (ii) if required by the
laws of the state in which the Premises is located, it is duly qualified to do
business and is in good standing therein, (iii) it has the corporate power,
authority and legal right to own and operate its properties and assets, carry on
the business now being conducted and proposed to be conducted by it, and to
engage in the transactions contemplated by the Loan Documents, and (iv) the
execution and delivery of the Loan Documents to which it is a party and the
performance and observance of the provisions thereof have been duly authorized
by all necessary corporate actions.
If Mortgagor (or any general partner of Mortgagor if
Mortgagor) is a partnership, that (i) it is duly formed and validly existing
under the laws of the state in which it is formed, (ii) if required by the laws
of the state in which the Premises is located, it is fully qualified to do
business therein, (iii) it has the power, authority and legal right to own and
operate its properties and assets, to carry on the business conducted and
proposed to be conducted by it, and to engage in the transactions contemplated
by the Loan Documents, and (iv) the execution and delivery of the Loan Documents
to which it is a party and the performance and observance of the provisions
thereof have all been duly authorized by all necessary actions of its partners.
(f) That all utility services necessary and sufficient for the
construction, development and operation of the Mortgaged Property for its
intended purposes are presently available to the Premises (or the boundaries
thereof if this Mortgage is executed in conjunction with a construction loan)
through dedicated public rights of way or through perpetual private easements,
approved by Mortgagee, with respect to which the Mortgage creates a valid,
binding and enforceable first lien, including, but not limited to, water supply,
storm and sanitary sewer, gas, electric and telephone facilities, and drainage.
(g) That neither the Mortgaged Property nor any portion thereof is
now damaged or injured as result of any fire, explosion, accident, flood or
other casualty or has been the subject of any taking, and to the knowledge of
Mortgagor, no taking is pending or contemplated.
(h) That any brokerage commissions payable by Mortgagor due in
connection with the transactions contemplated hereby have been paid in full and
that any such commissions coming due in the future will be promptly paid by
Mortgagor. Mortgagor agrees to and shall indemnify Mortgagee from any liability,
claims or losses arising by reason of any such brokerage commissions. This
provision shall survive the repayment of the Note and shall continue in full
force and effect so long as the possibility of such liability, claims or losses
exists.
<PAGE>
(i) That the financial statements of Mortgagor previously delivered
to Mortgagee are true and correct in all respects, have been prepared in
accordance with generally accepted accounting principles consistently applied,
and fairly present the respective financial conditions of Mortgagor as of the
respective dates thereof and the results of their operations for the periods
covered thereby; that no materially adverse change has occurred in the assets,
liabilities, or financial conditions reflected therein since the respective
dates thereof; and that no additional borrowings (except for borrowings under
existing line of credit with IBJ Schroeder as disclosed to the Mortgagee) have
been made by Mortgagor since the date thereof other than the borrowing
contemplated hereby.
(j) That all federal, state and other tax returns of Mortgagor
required by law to be filed have been filed, that all federal, state and other
taxes, assessments and other governmental charges upon Mortgagor or its
respective properties which are due and payable have been paid, and that
Mortgagor has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods for which such
returns have been filed.
(k) That Mortgagor has made no contract or arrangement of any kind
or type whatsoever (whether oral or written, formal or informal), the
performance of which by the other party thereto could give rise to a lien or
encumbrance on the Mortgaged Property, except for contracts (all of which have
been disclosed in writing to Mortgagee) made by Mortgagor with parties who have
executed and delivered lien waivers to Mortgagor, and which, in the opinion of
Mortgagee's counsel, will not create rights in existing or future lien claimants
which may be superior to the lien of the Mortgage.
(l) That the rights of way for all roads necessary for the full
utilization of the Improvements for their intended purposes have either been
acquired by the Mortgagor, the appropriate governmental authority or have been
dedicated to public use and accepted by such governmental authority, and all
such roads shall have been completed, or all necessary steps shall have been
taken by Mortgagor and such governmental authority to assure the complete
construction and installation thereof prior to the date upon which access to the
Mortgaged Property via such roads will be necessary. All curb cuts, driveway
permits and traffic signals necessary for access to the Mortgaged Property are
existing or have been fully approved by the appropriate governmental authority.
(m) That no Event of Default (hereinbelow defined) exists and no
event which but for the passage of time, the giving of notice or both would
constitute an Event of Default has occurred.
2. THE INDEBTEDNESS. Mortgagor will pay the indebtedness as provided in
the Note or in any modification, renewal or extension of the Note.
3. INSURANCE. At all times that the Note is outstanding, including without
limitation during any construction period (a "Construction Period"), Mortgagor
shall maintain insurance with respect to the Premises the Improvements and the
Chattels against such risks and for such amounts as are customarily insured
against by businesses of like size and type paying, as the same become due and
payable, all premiums in respect thereto, including but not limited to:
<PAGE>
(a) Prior to completion of construction of the Improvements, if the
same have not been completed, builder's risk all risk (or equivalent coverage)
insurance upon any work done or material furnished in connection with
construction of the Improvements, issued to Mortgagor and Mortgagee and written
in non-reporting completed form to cover the replacement cost of the
Improvements and at such time that builder's risk insurance shall not be
available due to completion of the construction of the Improvements, or if all
Improvements have been completed, insurance protecting the interests of the
Mortgagor and Mortgagee as their interests may appear against loss or damage to
the Improvements by fire, lightning, flood and other casualties normally insured
against, with a uniform standard extended coverage endorsement, such insurance
at all times to be in an amount of the Note or the total cash replacement value
of the Improvements not covered by builder's risk insurance, as determined at
least once every three years by a recognized appraiser or insurer selected by
the Mortgagor and approved by the Mortgagee.
(b) Boiler and machinery insurance covering physical damage to the
Improvements and to the major components of any central heating, air
conditioning or ventilation systems and such other equipment as Mortgagee shall
designate.
(c) Workers' compensation insurance, disability benefits insurance,
and such other form of insurance which the Mortgagor is required by law to
provide, covering loss resulting from injury, sickness, disability or death of
employees of Mortgagor who are located at or assigned to the Premises or who are
responsible for the construction of the Improvements.
(d) Insurance protecting Mortgagor and Mortgagee against loss or
losses from liabilities imposed by law or assumed in any written contract and
arising from personal injury and death or damage to the property of others
caused by accident or occurrence, in such amounts as may be reasonably
designated from time to time by Mortgagee, excluding liability imposed upon the
Mortgagor by any applicable workers' compensation law, or such other amounts as
may be required in writing by the Mortgagee; and a blanket excess liability
policy in an amount reasonably satisfactory to the Mortgagee protecting
Mortgagor and Mortgagee against any loss or liability or damage for personal
injury or property damage.
<PAGE>
4. OTHER INSURANCE PROVISIONS. All insurance required under this Mortgage
shall be procured and maintained in financially sound and generally recognized
responsible insurance companies selected by the Mortgagor and authorized to
write such insurance in the State of New York and acceptable to the Mortgagee.
Such insurance may be written with deductible amounts comparable to those on
similar policies carried by other entities engaged in businesses similar in
size, character and other respects to those in which the Mortgagor is engaged.
All policies evidencing such insurance shall provide for (i) payment of the
losses to Mortgagor and Mortgagee as their respective interests may appear, and
(ii) at least thirty (30) days written notice to Mortgagor and Mortgagee prior
to cancellation, reduction in policy limits or material change in coverage
thereof. The insurance required by Section 3(a) shall contain a New York
Standard mortgagee endorsement in favor of Mortgagee. All insurance required
hereunder shall be in form, content and coverage satisfactory to the Mortgagee.
The original policy, or a certified duplicate copy thereof, for all insurance
required hereby shall be delivered to Mortgagee. The proceeds of any insurance
which are paid to the Mortgagee, if less than $100,000, shall be paid over to
the Mortgagor in whole or in part for the repair of the Improvements, or, if
equal to $100,000 or more, may be applied by the Mortgagee toward the payment of
any monies secured by this Mortgage, or, may be paid over, wholly or in part, to
the Mortgagor for the repair of the Improvements or for any other purpose or
object satisfactory to the Mortgagee. Mortgagor shall deliver to Mortgagee at
least thirty (30) days prior to the expiration date of any insurance coverages
required hereunder, a certificate reciting that there is in full force and
effect, with a term covering at least the next succeeding year, insurance in the
amounts and of the types required hereunder.
5. ALTERATIONS. No Improvements shall be structurally altered, removed or
demolished without the prior written consent of Mortgagee which consent shall
not be unreasonably withheld.
6. APPOINTMENT OF RECEIVER. Mortgagee in any action to foreclose this
Mortgage shall be entitled, without notice and as a matter of right and without
regard to the adequacy of any security of the indebtedness or the solvency of
Mortgagor, upon application to any court having jurisdiction, to the appointment
of a receiver of the rents, income and profits of the Mortgaged Property.
If an Event of Default (hereinbelow defined) occurs under this
Mortgage, as a matter of right and without regard to the adequacy of any
security for the Note, the Mortgagor, upon demand of the Mortgagee, shall
surrender the possession of, and it shall be lawful for Mortgagee, by such
officer or agent as it may appoint, to take possession, of all or any part of
the Mortgaged Property together with the books, papers, and accounts of the
Mortgagor pertaining thereto, and to hold, operate and manage the same, and from
time to time to make all needed repairs and improvements as Mortgagee shall deem
wise; and, if Mortgagee deems it necessary or desirable, to complete
construction and equipping of any Improvements and in the course of such
construction or equipping to make such changes to the same as it may deem
desirable; and Mortgagee may sell the Mortgaged Property or any part thereof, or
institute proceedings for the complete or partial foreclosure of the lien of
this Mortgage on the Mortgaged Property, or lease the Premises or any part
thereof in the name and for the account of the Mortgagor or Mortgagee and
collect, receive and sequester the rents, revenues, earnings, income, products
and profits therefrom, and out of the same and any other monies received
hereunder pay or provide for the payment of, all proper costs and expenses of
taking, holding, leasing, selling and managing the same, including reasonable
compensation to Mortgagee, its agents and counsel, and any charges of Mortgagee
hereunder, and any taxes and other charges prior to the lien of this Mortgage
which Mortgagee may deem it wise to pay.
<PAGE>
7. PAYMENT OF TAXES. Mortgagor will pay all taxes, assessments, sewer
rents or water rates or sums due under any payment in lieu of tax agreement
("Pilot Agreement") and in default thereof, Mortgagee may pay the same. In the
event that Mortgagee shall pay any such tax, assessment, sewer rent or water
rate, Mortgagee shall have the right, among other rights, to declare the amount
so paid with interest thereon immediately due and payable, and upon default of
Mortgagor in paying any such amount with interest thereon, Mortgagee shall have
the right to foreclose for such amount subject to the continuing lien of this
Mortgage for the balance of the mortgage indebtedness not then due.
In the event that the Mortgagor should fail to pay any sum the
Mortgagor has agreed to pay pursuant to this covenant for a period in excess of
sixty (60) days after the same is due and payable, in addition to any other
remedies available to the Mortgagee hereunder, the Mortgagee may, at its option,
require that the Mortgagor deposit with the Mortgagee, monthly, one-twelfth
(1/12th) of the annual charges for taxes and any other sums the Mortgagor is
obligated to pay pursuant to this covenant and the Mortgagor shall make such
deposits with the Mortgagee. The Mortgagor shall simultaneously therewith
deposit with the Mortgagee a sum of money which together with the monthly
installments aforementioned will be sufficient to make payment of all sums
required to be paid hereunder at least thirty (30) days prior to the due date of
such payments, it being understood that the Mortgagee shall calculate the amount
of such deposits and notify the Mortgagor of the sum due. Should an Event of
Default (hereinbelow defined) occur, the funds deposited with the Mortgagee
pursuant to this provision may be applied in payment of the charges for which
said funds shall have been deposited or to the payment of any other sums secured
by this Mortgage as the Mortgagee sees fit.
8. PAYMENT OF MORTGAGE TAXES. Mortgagor shall pay all taxes imposed
pursuant to Article 11 of the Tax Law or any other statute, order or regulation,
whether said tax is imposed at the time of recording or subsequent thereto. This
obligation shall survive the satisfaction or other termination of this Mortgage.
Mortgagee shall pay the tax imposed by Section 253 1-a(a), if applicable, if the
Mortgaged Property consists of real property principally improved or to be
improved by one or more structures containing in the aggregate not more than six
residential units, each dwelling unit having its own separate cooking
facilities.
9. STATEMENT OF AMOUNT DUE. Mortgagor, within five (5) days upon request
in person or within fifteen (15) days upon request by mail, will furnish a
written statement duly acknowledged of the amount due on this Mortgage and
whether any offsets or defenses exist against the said indebtedness.
10. NOTICES. Any notices required or permitted to be given hereunder shall
be: (i) personally delivered or (ii) given by registered or certified mail,
postage prepaid, return receipt requested, or (iii) forwarded by overnight
courier service, in each instance addressed to the addresses set forth at the
head of this Mortgage, or such other addresses as the parties may for themselves
designate in writing as provided herein for the purpose of receiving notices
hereunder. All notices shall be in writing and shall be deemed given, in the
case of notice by personal delivery, upon actual delivery, and in the case of
appropriate mail or courier service, upon deposit with the U.S. Postal Service
or delivery to the courier service.
<PAGE>
11. WARRANTY OF TITLE. Mortgagor warrants the title to the Premises,
Improvements and Chattels.
12. SALE IN ONE PARCEL. In case of a sale, the Premises may be sold in one
parcel together with the Improvements and Chattels. Should the Premises consist
of more than one parcel, in the event of a foreclosure of this Mortgage or any
mortgage at any time consolidated with this Mortgage, Mortgagor agrees that
Mortgagee shall be entitled to a judgment directing the referee appointed in the
foreclosure proceeding to sell all of the parcels constituting the Premises at
one foreclosure sale, either as a group or separately and that the Mortgagor
expressly waives any right that it may now have or hereafter acquire to (i)
request or require that the parcels be sold separately or (ii) request, if
Mortgagee has elected to sell parcels separately, that there be a determination
of any deficiency amount after any such separate sale or otherwise require a
calculation of whether said parcel or parcels separately sold were conveyed for
their "fair market value".
13. NEGATIVE COVENANTS. Mortgagor will not (i) execute an assignment of
the rents, income or profits, or any part thereof from the Mortgaged Property
except to Mortgagee, or (ii) except where the tenant is in default thereunder,
terminate or consent to the cancellation or surrender of any lease of the
Premises or Improvements or of any part thereof, now existing or hereafter to be
made, having an unexpired term of two (2) years or more, except that any lease
may be canceled provided that promptly after the cancellation or surrender
thereof a new lease is entered into with a new tenant having a credit standing,
in the judgment of the Mortgagee, at least equivalent to that of the tenant
whose lease was canceled, on substantially the same terms as the terminated or
canceled lease, or modify any such lease so as to shorten the unexpired term
thereof or so as to decrease the amount of the rents payable thereunder, or
(iii) accept prepayments of any sums to become due under such leases, except
prepayments of rent for more than one (1) month in advance or prepayments in the
nature of security for the performance of the tenants thereunder, (iv) in any
other manner impair the value of the Mortgaged Property or the security of this
Mortgage or (v) further encumber, alienate, hypothecate, grant a security
interest in or grant any other interest whatsoever in the Mortgaged Property.
Restrictions (ii) and (iii) are made with reference to Section 291-f of the Real
Property Law and actions in violation of those provisions shall be voidable at
the option of the Mortgagee. No rent reserved under any lease of the Premises or
Improvements has been assigned or anticipated, and no rent for any period
subsequent to the date hereof has been collected in advance of the due date
thereof. Mortgagor will not execute any lease of all or a substantial portion of
the Premises or Improvements except for actual occupancy by the tenant
thereunder, and will at all times promptly and faithfully perform, or cause to
be performed, all of the covenants, conditions and agreements contained in all
leases of the Premises or Improvements now or hereafter existing, on the part of
the landlord thereunder to be kept and performed and will at all times do all
things necessary to compel performance by the tenant under each lease of all
obligations, covenants and agreements by such tenant to be performed thereunder.
If any of such leases provide for the giving by the tenant of certificates with
respect to the status of such leases, Mortgagor shall exercise its right to
request such certificates within five (5) days of any demand therefor by
Mortgagee. Mortgagor shall furnish to Mortgagee, upon request of Mortgagee to do
so, a written statement containing the names of all tenants of the Premises or
Improvements, the terms of their respective leases, the space occupied and the
rentals payable thereunder.
<PAGE>
14. APPRAISAL. For the purposes of this Section, the following terms shall
be defined as follows:
(a) "Appraisal" shall mean an appraisal of the fair market value of
the Mortgaged Property prepared by an Appraiser.
(b) "Appraiser" shall mean an appraiser selected by Mortgagor and
approved by Mortgagee.
Within ninety (90) days from the date Mortgagee has mailed a written
notice to Mortgagor requesting the same, Mortgagor shall provide Mortgagee, at
Mortgagor's expense, with an Appraisal of the Mortgaged Property. An Appraisal
may be required not more frequently than once every twelve (12) months except
that it may also be required prior to any extension or renewal of the Note or as
otherwise set forth in the Loan Agreement executed on even date.
15. FINANCIAL STATEMENTS. In addition to any requirements elsewhere in the
Loan Documents, Mortgagor shall provide the Mortgagee with the following
financial statements during the term hereof:
(a) Annual audited financial statements of the Mortgagor prepared on
a consolidated basis within 90 days after the end of each applicable fiscal year
by an independent CPA satisfactory to Mortgagee, in accordance with GAAP;
(b) Annual Form 10K of Mortgagor within 90 days of each fiscal year
end;
(c) Quarterly review quality consolidated financial statements and
Form 10Q within 60 days of each quarter end;
(d) Management prepared annual, within ninety (90) days of each
fiscal year end, and quarterly, within sixty (60) days of each quarter end,
consolidating financial statements;
(e) Simultaneous with the delivery of the annual and quarterly
financial statements referred to above, a certificate will be furnished to
Mortgagee executed by a duly authorized officer of the Mortgagor setting forth
computations in detail reasonably satisfactory to Mortgagee demonstrating
compliance with the financial covenants set forth in that certain Loan Agreement
executed by Mortgagor and Mortgagee dated on even date herewith and certifying
that, to the best of his/her knowledge, no default or Event of Default has
occurred or is occurring or, in the event a default or Event of Default has
occurred or is occurring, then how same will be cured within thirty (30) days.
For purposes of the Loan covenants, all accounting terms shall be defined
according to generally accepted accounting principles (GAAP) definitions;
<PAGE>
(f) An annual budget for the upcoming year to include projected
Profit and Loss Statements and a Balance Sheet, such budget to be delivered with
the year-end financial statements;
(g) Such other financial documentation as Mortgagee may reasonably
require.
16. BOOKS AND RECORDS.
(a) In addition to any requirements elsewhere in the Loan Documents,
Mortgagor shall keep and maintain at all times at Mortgagors' addresses stated
in this Mortgage, or such other place as Mortgagee may approve in writing,
complete and accurate books of accounts and records adequate to reflect
correctly the results of the operation of the Mortgaged Property and copies of
all written contracts, leases and other instruments which affect the Mortgaged
Property. Such books, records, contracts, leases and other instruments shall be
subject to examination and inspection at any reasonable time by Mortgagee.
(b) Upon request of Mortgagee in writing, Mortgagor shall promptly
provide Mortgagee with all documents reasonably requested by Mortgagee prepared
in the form and manner called for in such request and as may reasonably relate
to the operation or condition thereof, or the financial condition of Mortgagor
or any party obligated on the Note, including, without limitation, all leases or
leasehold interests granted to or by Mortgagor, rent rolls and tenant lists,
rent and damage deposit ledgers, operating statements, profit and loss
statements and balance sheets, personal financial statements of Mortgagor or
income tax returns (including quarterly returns), any or all of which documents
shall be audited or certified as true and accurate by a certified public
accountant, if requested by Mortgagee, and shall cover such period or periods as
may be specified by Mortgagee.
(c) In addition, Mortgagor shall promptly furnish or cause to be
furnished to Mortgagee, to the extent any tenant prepares the same or the same
are required by any tenant's lease, annual financial statements of any tenant of
the Mortgaged Property where such tenant leases fifteen (15%) percent or more of
the gross leasable area of the Improvements, each such statement to be delivered
as soon as practicable following the end of each fiscal year of such tenant, but
in any event within one hundred twenty (120) days thereafter, and each such
statement to include balance sheets, statements of operations and statements of
changes in financial position as of the end of such year.
17. FUTURE LAWS. In the event of the passage after the date of this
Mortgage of any federal, state or municipal law, deducting from the value of
land for the purposes of taxation any lien thereon, or changing in any way, the
laws for the taxation of mortgages or debts secured by mortgages, or the manner
of collection of any such taxes, so as to affect Mortgagee, this Mortgage, or
said indebtedness, Mortgagee shall have the right to give thirty (30) days'
written notice to Mortgagor requiring the payment of said indebtedness. If such
notice be given, said indebtedness shall become due, payable and collectible at
the expiration of said thirty (30) days.
18. INTENTIONALLY OMITTED.
<PAGE>
19. PROVISIONS REGARDING USE OF MORTGAGED PROPERTY. Mortgagor warrants and
represents that:
(a) Mortgagor is not responsible for any action or omission, and
does not know of any action or omission by any prior owner, that would cause the
Mortgaged Property to be subject to forfeiture pursuant to any law, rule or
regulation (a "Forfeiture").
(b) The Mortgaged Property has not been acquired with any proceeds
from a transaction or an activity that would cause the Mortgaged Property to be
subject to Forfeiture.
Mortgagor covenants that Mortgagor will not use, and will not permit
any third party to use, the Mortgaged Property or any portion thereof or
interest therein for any purpose or activity that would cause a Forfeiture
thereof.
20. ACTIONS AND PROCEEDINGS. If any action or proceeding be commenced to
which action or proceeding Mortgagee is made a party and in which it becomes
necessary in the opinion of Mortgagee to defend or uphold the lien of this
Mortgage, all sums paid by Mortgagee for the expense of any litigation to
prosecute and defend the rights and lien created by this Mortgage, including
reasonable counsel fees, costs and allowances, shall, together with interest
thereon be a lien on the Mortgaged Property and secured by this Mortgage and
shall be collectible in like manner as said indebtedness and shall be paid by
Mortgagor on demand.
21. SECURITY INTEREST UNDER THE UNIFORM COMMERCIAL CODE. Mortgagee is
authorized to sign as the agent of Mortgagor such agreement in addition to this
Mortgage as Mortgagee at any time may deem necessary or proper or require to
grant to Mortgagee a perfected security interest in the Chattels. Mortgagor
hereby authorizes Mortgagee to file financing statements (as such term is
defined in said Uniform Commercial Code) with respect to the Chattels, at any
time, without the signature of Mortgagor. Mortgagor will, however, at any time
upon request of Mortgagee, sign such financing statements. Mortgagor will pay
all filing fees for the filing of such financing statements and for the refiling
thereof at the times required, in the opinion of Mortgagee, by said Uniform
Commercial Code. If the lien of this Mortgage be subject to any security
agreement covering the Chattels, then in the event of any default under this
Mortgage, all the right, title and interest of Mortgagor in and to any and all
of the Chattels is hereby assigned to Mortgagee, together with the benefit of
any deposits or payments now or hereafter made thereof by Mortgagor or the
predecessors or successors in title of Mortgagor in the Mortgaged Property.
<PAGE>
22. CONDEMNATION. Any and all awards heretofore and hereafter made to
Mortgagor and all subsequent owners of the Mortgaged Property by any
governmental or other lawful authorities for the taking by eminent domain of the
whole or any part of the Mortgaged Property or any easement therein, including
any awards for any changes of grade of streets, are hereby assigned to
Mortgagee, who is hereby authorized to collect and receive the proceeds of any
such awards from such authorities, to give proper receipts and acquittances
therefor and to apply the same toward the payment of the amount owing on account
of this Mortgage and said indebtedness, notwithstanding the fact that the amount
owing thereon may not then be due and payable provided, however, if such award
is less than $100,000 it shall be paid over to the Mortgagor for the repair if
any damages resulting from such taking; and Mortgagor hereby covenants and
agrees, upon request, to make, execute and deliver any and all assignments and
other instruments sufficient for the purpose of assigning the aforesaid awards
to Mortgagee free, clear and discharged of any and all encumbrances of any kind
or nature whatsoever. Mortgagor shall continue to make all payments required by
the Note until any such award shall have been actually received by Mortgagee and
any reduction in said indebtedness resulting from the application by Mortgagee
of such award shall be deemed to take effect only on the date of such receipt.
Notwithstanding the foregoing, if any one or more of the portions of the
Mortgaged Property described in subparagraphs (a), (b) and (c) below shall be
damaged or taken through condemnation, either temporarily or permanently, then
the entire balance due under the Note and any other Loan Documents shall, at the
option of Mortgagee, become immediately due and payable:
(a) Any portion or portions of the Improvements or the support
or foundation of any portion or portions of the Improvements; or
(b) Ten (10%) percent or more of any parking area; or
(c) Any portion or portions of the Premises which, when so damaged
or taken, would result either in (i) an impairment of access to the Improvements
from the publicly dedicated rights of way now adjoining the Premises, or (ii)
the failure of the Improvements to comply with any building code, zoning or
other governmental laws or regulations, lease or other agreement to which the
Mortgaged Property is subject.
Mortgagor authorizes Mortgagee, at Mortgagee's option, as attorney in fact
for Mortgagor, to commence, appear in and prosecute in Mortgagor's or
Mortgagee's name, any action or proceeding relating to any condemnation or other
taking of the Mortgaged Property and to settle or compromise any claim in
connection with such condemnation or other taking.
23. TITLE TO MORTGAGED PROPERTY. Mortgagor is now the owner of the
Mortgaged Property upon which this Mortgage is a valid first lien for the amount
above specified, with interest thereon at the rate set forth in the Note and
there are no defenses or offsets to this Mortgage or to the said indebtedness.
<PAGE>
24. LEASES OF THE MORTGAGED PROPERTY. Mortgagor will not lease all or any
portion of the Mortgaged Property or amend, modify or terminate (except to the
extent permitted under paragraph 13(ii) hereof) any now existing or future lease
of the Mortgaged Property without the prior written consent of Mortgagee.
Notwithstanding the foregoing, all leases covering more than fifteen percent
(15%) of the gross leasable area of the Mortgaged Property (if the Mortgaged
Property is improved rental property) must require the tenant thereunder to
provide Mortgagee with annual financial statements of the tenant certified to by
an independent certified public accountant. Mortgagor, at Mortgagee's request,
shall furnish Mortgagee with executed copies of all leases hereafter made of all
or any part of the Mortgaged Property, and all leases now or hereafter entered
into will be in form and substance subject to the approval of Mortgagee. Upon
Mortgagee's request, Mortgagor shall make a separate and distinct assignment to
Mortgagee, as additional security, of all leases hereafter made a part of the
Mortgaged Property.
25. TRANSFER OF MORTGAGED PROPERTY. In the event that (a) any entity then
having a lesser credit rating than Mortgagor shall acquire beneficial ownership
of a majority interest in the voting stock of Mortgagor, (b) the Mortgagor shall
merge with such an entity and shall not be the surviving corporation, or (c) the
Mortgaged Property or a part thereof, while this Mortgage shall remain a lien
thereon, shall be sold, conveyed or transferred by deed, any other voluntary or
involuntary act or by operation of law or otherwise, the full balance of the
indebtedness then remaining unpaid, with interest, shall at the option of the
Mortgagee, or its assigns, be immediately due and payable without notice or
demand unless the prior written consent of the Mortgagee to such acquisition,
merger, or sale, conveyance or transfer shall have been obtained. A mortgage of
the Mortgaged Property to any mortgagee other than the Mortgagee shall be deemed
a conveyance for the purpose of this Section.
26. ACCESS. Mortgagee, by its employees or agents, shall at all times have
the right to enter upon the Mortgaged Property during reasonable business hours
for the purpose of examining and inspecting the same.
27. REAL PROPERTY LAW. All covenants hereof, which are in addition to
those set forth in Sections 254 and 291-f of the Real Property Law, shall be
construed as affording to Mortgagee rights additional to, and not exclusive of,
the rights conferred under the provisions of said Sections 254 and 291-f.
28. PERFORMANCE OF MORTGAGOR'S COVENANTS BY MORTGAGEE. In the event of any
default in the performance of any of the covenants, terms, or provisions of
Mortgagor under this Mortgage, which default is not cured within any applicable
cure period, Mortgagee may, at the option of Mortgagee, perform the same and the
cost thereof, with interest, shall immediately be due from Mortgagor to
Mortgagee and secured by this Mortgage.
29. REMEDIES NOT EXCLUSIVE. Mortgagee shall have the right from time to
time, to take action to recover any amounts of past due principal indebtedness
and interest thereon, or any installment of either, or any other sums required
to be paid under the covenants, terms and provisions of this Mortgage or the
Note, as the same become due, whether or not the principal indebtedness secured,
or any other sums secured by the Note or this Mortgage shall be due, and without
prejudice to the right of Mortgagee thereafter to bring an action of
foreclosure, or any other action, for default or defaults by Mortgagor existing
at the time such earlier action was commenced.
<PAGE>
30. ADDITIONAL ACTS AND DOCUMENTS. Mortgagor covenants that it will do,
execute, acknowledge, deliver, file and/or record, or cause to be recorded every
and all such further acts, deeds, conveyances, advances, mortgages, transfers
and assurances, in law as Mortgagee shall require for the better assuring,
conveying, transferring, mortgaging, assigning and confirming unto Mortgagee all
and singular the Mortgaged Property.
31. REMEDIES CUMULATIVE. The rights and remedies herein afforded to
Mortgagee shall be cumulative and supplementary to and not exclusive of any
other rights and remedies afforded the holder of this Mortgage and the Note.
32. SUCCESSORS. All of the provisions of this Mortgage shall inure to the
benefit of Mortgagee and of any subsequent holder of this Mortgage and shall be
binding upon Mortgagor and each subsequent owner of the Mortgaged Property.
33. EFFECT OF RELEASES. Mortgagee, without notice, may release any part of
the security described herein, or any person or entity liable for any
indebtedness secured hereby without in any way affecting the lien hereof upon
any part of the security not expressly released, and may agree with any party
obligated on said indebtedness or having any interest in the security described
herein to extend the time for payment of any part or all of the indebtedness
secured hereby. Such agreement shall not in any way release or impair the lien
hereof, but shall extend the lien hereof as against the title of all parties
having any interest in said security, which interest is subject to said lien,
and no such release or agreement shall release any person or entity obligated to
pay any indebtedness secured hereby.
<PAGE>
34. WAIVERS. Any failure by Mortgagee to insist upon the strict
performance by Mortgagor of any of the covenants, terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the covenants, terms and
provisions of this Mortgage, and Mortgagee, notwithstanding any such failure,
shall have the right thereafter to insist upon the strict performance by
Mortgagor of any and all of the covenants, terms and provisions of this Mortgage
to be performed by Mortgagor. Neither Mortgagor nor any other person or entity
now or hereafter obligated for the payment of the whole or any part of said
indebtedness shall be relieved of such obligation by reason of (i) the failure
of Mortgagee to comply with any request of Mortgagor, or of any other person or
entity so obligated, (ii) the failure of Mortgagee to take action to foreclose
this Mortgage or otherwise enforce any of the covenants, terms and provisions of
this Mortgage or the Note, (iii) the release, regardless of consideration, of
the whole or any part of the security held for payment of said indebtedness or
(iv) any agreement or stipulation between any subsequent owner or owners of the
Mortgaged Property and Mortgagee modifying the covenants, terms and provisions
of this Mortgage or the Note without first having obtained the consent of
Mortgagor or such other person or entity. In the last mentioned event, Mortgagor
and all such other persons or entities shall continue liable to make such
payments according to the terms and provisions of any such agreement or
extension or modification unless expressly released and discharged in writing by
Mortgagee. Mortgagee may release, regardless of consideration, any part of the
security held for payment of said indebtedness without, as to the remainder of
the security, in any way impairing or affecting the lien of this Mortgage or the
priority of such lien over any subordinate lien. Mortgagee may resort for the
payment of said indebtedness to any other security therefor held by Mortgagee in
such order and manner as Mortgagee may elect.
35. INTEREST ON ADVANCES. Wherever, under the provisions of this Mortgage
or by law, Mortgagee is entitled to interest on advances made or expenses
incurred, such interest shall be computed at a rate per annum which shall be the
interest rate payable under the Note.
36. MORTGAGEE NOT OBLIGATED. Nothing herein contained shall be construed
as making the payment of any insurance premiums, taxes or assessments obligatory
upon Mortgagee, although Mortgagee may pay same, or as making Mortgagee liable
in any way for loss, damage or injury, resulting from the non-payment of any
such insurance premiums, taxes or assessments.
37. LIEN LAW. Mortgagor will, in compliance with Section 13 of the Lien
Law, receive the advances secured by this Mortgage and will hold the right to
receive such advances as a trust fund to be applied first for the purpose of
paying the cost of the improvement and will apply the same first to the payment
of the cost of the improvement before using any part of the total of the same
for any other purpose.
38. ENVIRONMENTAL WARRANTIES AND COVENANTS.
(a) Warranties. Mortgagor makes the following representations and
warranties: (i) Mortgagor (or the present owner of the Mortgaged Property, if
different) is in compliance in all respects with all applicable federal, state
and local laws and regulations, including, without limitation, those relating to
toxic and hazardous substances and other environmental matters (the "Laws"),
(ii) no portion of the Mortgaged Property is being used or, to the best of
Mortgagor's knowledge, has been used at any previous time, for the disposal,
storage, treatment, processing or other handling of any hazardous or toxic
substances, in a manner not in compliance with the Laws, (iii) the soil and any
surface water and ground water which are a part of the Mortgaged Property are
free from any solid wastes, toxic or hazardous substance or contaminant and any
discharge of sewage or effluent; and (iv) neither the federal government nor the
State of New York Department of Environmental Conservation or any other
governmental or quasi governmental entity has filed a lien on the Mortgaged
Property, nor are there any governmental, judicial or administrative actions
with respect to environmental matters pending, or to the best of the Mortgagor's
knowledge, threatened, which involve the Mortgaged Property.
(b) Inspection. In the event Mortgagee reasonably believes that an
environmental problem may exist, Mortgagor agrees that Mortgagee or its agents
or representatives may, at any reasonable time and at Mortgagor's expense
inspect Mortgagor's books and records and inspect and conduct any tests on the
Mortgaged Property including taking soil samples in order to determine whether
Mortgagor is in continuing compliance with the Laws.
<PAGE>
(c) Agreement to Comply. If any environmental contamination is found
on the Mortgaged Property for which any removal or remedial action is required
pursuant to Law, ordinance, order, rule, regulation or governmental action,
Mortgagor agrees that it will at its sole cost and expense, take such removal or
remedial action promptly and to Mortgagee's satisfaction.
(d) Indemnification. Mortgagor agrees to defend, indemnify and hold
harmless Mortgagee, its employees, agents, officers and directors from and
against any claims, actions, demands, penalties, fines, liabilities,
settlements, damages, costs or expenses (including, without limitation,
reasonable attorney and consultant fees, investigations and laboratory fees,
court costs and litigation expenses of whatever kind or nature known or unknown,
contingent or otherwise) arising out of or in any way related to: (i) the past
or present disposal, release or threatened release of any hazardous or toxic
substances on the Mortgaged Property; (ii) any personal injury (including
wrongful death or property damage, real or personal) arising out of or related
to such hazardous or toxic substances; (iii) any lawsuit brought or threatened,
settlement reached or government order given relating to such hazardous or toxic
substances; and/or (iv) any violation of any law, order, regulation,
requirement, or demand of any government authority, or any policies or
requirements of Mortgagee, which are based upon or in any way related to such
hazardous or toxic substances.
(e) Other Sites. Mortgagor knows of no on-site or off-site locations
where hazardous or toxic substances from the operation of any Improvement or
otherwise have been stored, treated, recycled or disposed of.
(f) Leases. Mortgagor agrees not to lease or permit the sublease of
the Mortgaged Property to a tenant or subtenant whose operations may result in
contamination of the Mortgaged Property with hazardous or toxic substances.
(g) Non-Operation by Mortgagee. Mortgagor acknowledges that any
action Mortgagee takes under this Mortgage shall be taken to protect Mortgagee's
security interest only; Mortgagee does not hereby intend to be involved in the
operations of the Mortgagor.
(h) Compliance Determinations. Mortgagor acknowledges that any
determinations Mortgagee makes under this Section regarding compliance with
environmental laws shall be made for Mortgagee's benefit only and are not
intended to be relied upon by any other party.
(i) Survival of Conditions. The provisions of this Section shall be
in addition to any other obligations and liabilities Mortgagor may have to
Mortgagee at common law, and shall survive the transactions contemplated herein.
(j) Other Insurance. Mortgagor shall carry adequate insurance to
fulfill Mortgagor's obligations under this Section if required by law.
<PAGE>
(k) Definitions. The term "hazardous substance" shall include,
without limit, any substance or material defined in 42 U.S.C. Section 9601 (as
the same may be amended from time to time), the Hazardous Materials
Transportation Act (as amended from to time), and the New York Environmental
Conservation Law or the Resource Conservation And Recovery Act (as each may be
amended from time to time) and in any regulations adopted or publications
promulgated pursuant to any of the foregoing.
39 EVENTS OF DEFAULT. The whole of the principal sum of the indebtedness
secured hereby and interest thereon, and all other sums due and payable
hereunder shall become due, at the option of Mortgagee, if one or more of the
following events (an "Event of Default") shall happen:
(a) The occurrence of an "Event of Default" under the Note; or
(b) If Mortgagor defaults in the payment of any tax, water rate or
sewer rent or payment under any Pilot Agreement against the Mortgaged Property
for thirty (30) days after the same become due and payable or fails to exhibit
to Mortgagee, within thirty (30) days after demand, receipts showing payment of
all taxes, water rates or sewer rents; or
(c) The actual or threatened removal, demolition or structural
alteration, in whole or in part, of any Improvement, without the prior written
consent of Mortgagee; or the removal, demolition or destruction in whole or in
part, of any Chattels without replacing the same with Chattels at least equal in
quality and condition to those replaced, free from any security interest or
other encumbrance thereon and free from any reservation of title thereto; or the
commission of any waste in respect to the Mortgaged Property; or
(d) Failure of Mortgagor to pay within thirty (30) days after notice
and demand any installment of any assessment made against the Premises for local
improvements, heretofore or hereafter made, which assessment is, or may become,
a lien on the Premises prior to the lien of this Mortgage, notwithstanding the
fact that such installment be not due and payable at the time of such notice and
demand; or
(e) Failure of Mortgagor to pay the said indebtedness secured by
this Mortgage within (30) days after notice and demand, in the event of the
passage after the date of this Mortgage of any federal, state or municipal law
deducting from the value of land for the purpose of taxation any lien thereon,
or changing in any way the laws now in force for the taxation of mortgages, or
of debts secured by mortgages, or the manner of collection of any such taxes, so
as to affect Mortgagee, this Mortgage or the indebtedness which is secured,
notwithstanding that Mortgagor, before or after such notice, may have the option
to pay or contest the payment of such tax; or
<PAGE>
(f) Failure of Mortgagor to maintain the Improvements on the
Premises in a rentable or tenantable state of repair to the satisfaction of
Mortgagee, for thirty (30) days after notice of such failure has been given to
Mortgagor, or to comply with any order or requirement of any municipal, state,
federal or other governmental authority having jurisdiction of the Premises
within thirty (30) days after such order or requirement shall have been issued
by any such authority; or failure of Mortgagor or of any tenant holding under
Mortgagor, to comply with any and all and singular the statutes, requirements,
orders or decrees of any federal, state or municipal authority relating to the
use of the Mortgaged Property, or of any part thereof; or failure of Mortgagor
to observe and timely perform all of the covenants, terms and provisions
contained in any lease now or hereafter affecting the Premises or the
Improvements or any portion thereof, on the part of the landlord to be observed
and performed; or
(g) Failure of Mortgagor, in the event of the entry of a final
judgment for the payment of money against Mortgagor, to discharge such judgment
or to have it stayed pending appeal within thirty (30) days from the entry
thereof, or if such judgment shall be affirmed on appeal, the failure to
discharge such judgment within thirty (30) days from the entry of such
affirmance; or
(h) Failure of Mortgagor to pay within thirty (30) days after notice
and demand any filing or refiling fees required hereunder; or
(i) Failure of Mortgagor or any occupant of the Mortgaged Property,
to allow or permit Mortgagee, or its duly authorized agent, to inspect said
Mortgaged Property at any time and from time to time during reasonable business
hours; or
(j) Default for thirty (30) days after notice and demand in the
observance or performance of any other covenant or agreement under this
Mortgage.
40 INTEREST TO ACCRUE. If the whole of the principal sum evidenced by the
Note and interest, shall become due by exercise of the option of the Mortgagee
after default by the Mortgagor under any of the terms, covenants and conditions
of this Mortgage and/or the Note, or if the whole of said principal sum and
interest shall mature and become due under the terms, covenants and conditions
of this Mortgage and the Note regardless of default, if any, on the part of the
Mortgagor, then interest on said principal sum shall continue to accrue at the
rate provided for in the Note, and in this Mortgage, until said principal sum is
fully paid.
41 FLOOD INSURANCE. In addition to the terms and provisions of this
Mortgage with regard to insurance, in the event the Premises are determined to
be in a special flood hazard area as determined by any governmental agency,
Mortgagor further covenants and agrees to fully insure the Premises and
Improvements against loss or damage by flood, with coverage as is therein
provided for by fire and other specified perils to the same extent and effect as
if such flood insurance was therein specifically set forth.
<PAGE>
42 COSTS, EXPENSES AND ATTORNEY'S FEES. Should one or more Events of
Default occur hereunder, and should an action be commenced for the foreclosure
of this Mortgage, Mortgagee shall be entitled to recover all sums due hereunder,
statutory costs, and any additional allowances made pursuant to Section 8303(a)
of the Civil Practice Law and Rules of the State of New York, and in addition
thereto, reasonable attorneys' fees in such proceeding and in all proceedings
related thereto necessary to and related to the foreclosing proceeding, and such
amount shall be added to the principal balance and interest then due and shall
be a lien on the Mortgaged Property prior to any right or title to, interest in
or claim upon the Mortgaged Property attaching and accruing subsequent to the
lien of this Mortgage, and shall be deemed to be secured by this Mortgage and
the indebtedness which it secures.
43 INTERVENING LIENS. Should any agreement be hereafter entered into
modifying or changing the terms of this Mortgage or the Note secured hereby in
any manner, the rights of the parties to such agreement shall be superior to the
rights of the holder of any intervening lien.
44 TERMS. It is understood and agreed that the words, "Mortgagor" and
"Mortgagee" herein shall include the respective heirs, successors and assigns of
Mortgagor and Mortgagee.
45 ENTIRE AGREEMENT. This Mortgage and the other Loan Documents
constitute the entire understanding between Mortgagor and Mortgagee and to the
extent that any writings not signed by Mortgagee or oral statements or
conversations at any time made or had shall be inconsistent with the provisions
of this Mortgage and the other Loan Documents, the same shall be null and void.
46 GOVERNING LAW; SEVERABILITY. This Mortgage shall be governed by the
law of the jurisdiction in which the Mortgaged Property is located. In the event
that any provision or clause of this Mortgage or the Note conflicts with
applicable law, such conflict shall not affect other provisions of this Mortgage
or the Note which can be given effect without the conflicting provision, and to
this end, the provisions of this Mortgage and the Note are declared to be
severable.
47 TIME OF THE ESSENCE. Time is of the essence with respect to each and
every covenant, agreement and obligation of Mortgagor under this Mortgage, the
Note and any and all other Loan Documents.
48 INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET.
(a) Mortgagor shall indemnify, defend and hold Mortgagee harmless
against: (i) any and all claims for brokerage, leasing, finders or similar fees
which may be made relating to the Mortgaged Property or the loan which is the
subject of the Note, and (ii) against any and all liability, obligations,
losses, damages, penalties, claims, actions, suits, costs, and expenses
(including its reasonable attorneys' fees, together with reasonable appellate
counsel fees, if any) of whatever kind or nature which may be imposed on or
incurred by Mortgagee at any time pursuant either to a judgment or decree or
other order entered into by a court or administrative agency or to a settlement
reasonably approved by Mortgagor, which judgment, decree, order or settlement
relates in any way to or arises out of the offer, sale or lease of the Mortgaged
Property and/or the ownership, use, occupation or operation of any portion of
the Mortgaged Property.
<PAGE>
(b) If Mortgagee is made a party defendant to any litigation
concerning the loan which is the subject of the Note, this Mortgage, the
Mortgaged Property, or any part thereof, or any interest therein, or the
occupancy thereof, then Mortgagor shall indemnify, defend and hold Mortgagee
harmless from all liability by reason of said litigation, including reasonable
attorneys' fees (together with reasonable appellate counsel fees, if any) and
expenses incurred by Mortgagee in any such litigation, whether or not any such
litigation is prosecuted to judgment. If Mortgagee commences an action against
Mortgagor to enforce any of the terms hereof or to prosecute any breach by
Mortgagor of any of the terms hereof or to recover any sum secured hereby,
Mortgagor shall pay to Mortgagee such reasonable attorneys' fees (together with
reasonable appellate counsel fees, if any) and expenses. The right to such
attorneys fees (together with reasonable appellate counsel fees, if any) and
expenses shall be deemed to have accrued on the commencement of such action, and
shall be enforceable whether or not such action is prosecuted to judgment. If
Mortgagor breaches any term of this Mortgage, Mortgagee may employ an attorney
or attorneys to protect its rights hereunder, and in the event of such
employment following any breach by Mortgagor, Mortgagor shall pay Mortgagee
reasonable attorneys' fees (together with reasonable appellate counsel fees, if
any) and expenses incurred by Mortgagee, whether or not an action is actually
commenced against Mortgagor by reason of such breach.
(c) A waiver of subrogation shall be obtained by Mortgagor from its
property insurance carrier and, consequently, Mortgagor waives any and all right
to claim or recover against Mortgagee, its officers, employees, agents and
representatives, for loss of or damage to Mortgagor, the Mortgaged Property,
Mortgagor's property or the property of others under Mortgagor's control from
any cause insured against or required to be insured against by the provisions of
this Mortgage.
(d) All sums payable by Mortgagor hereunder shall be paid without
notice (except as may otherwise be provided herein), demand, counterclaim,
set-off, deduction or defense and without abatement, suspension, deferment,
diminution or reduction, and the obligations and liabilities of Mortgagor
hereunder shall in no way be released, discharged or otherwise affected by
reason of: (i) any damage to or destruction of or any condemnation or similar
taking of the Mortgaged Property or any part thereof; (ii) any restriction or
prevention of or interference with any use of the Mortgaged Property or any part
thereof; (iii) any title defect or encumbrance or any eviction from the Premises
or the Improvements or any part thereof by title superior or otherwise; (iv) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation, or other like proceeding relating to Mortgagee, or any action taken
with respect to this Mortgage by any trustee or receiver of Mortgagee, or by any
court, in such proceeding; (v) any claim which Mortgagor has, or might have,
against Mortgagee; (vi) any default or failure on the part of Mortgagee to
perform or comply with any of the terms hereof or of any other agreement with
Mortgagor; or (vii) any other occurrence whatsoever, whether similar or
dissimilar to the foregoing, whether or not Mortgagor shall have notice or
knowledge of any of the foregoing. Mortgagor waives all rights now or hereafter
conferred by statute or otherwise to any abatement, suspension, deferment,
diminution, or reduction of any sum secured hereby and payable by Mortgagor.
49 WAIVER OF JURY TRIAL. The Mortgagor and the Mortgagee hereby waive
trial by jury in any litigation in any court with respect to, in connection
with, or arising out of this Mortgage or any other Loan Document, or any
instrument or document delivered in connection with the loan which is the
subject of the Note, or the validity, protection, interpretation, collection or
enforcement thereof, or the relationship between Mortgagor and Mortgagee as
borrower and lender, or any other claim or dispute howsoever arising between the
Mortgagor and Mortgagee.
<PAGE>
50 TAX LAW SECTION 253 STATEMENT. Check one box only.
[ ] This Mortgage covers real property principally improved or to be
improved by one or more structures containing in the aggregate not
more than six residential dwelling units, each having their own
separate cooking facilities.
[ X ] This Mortgage does not cover real property improved as described
above.
Where used herein, the word, "Mortgagor" may be read "Mortgagors" where
applicable.
IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor.
VICON INDUSTRIES, INC.
By:___________________________
Kenneth M. Darby, President
STATE OF NEW YORK )
) SS.:
COUNTY OF SUFFOLK )
On the 29th day of January, 1998, before me personally came KENNETH M.
DARBY, to me known, who being by me duly sworn, did depose and say that he has a
business address c/o Vicon Industries, Inc., 89 Arkay Boulevard, Hauppauge, New
York; that he is the President of VICON INDUSTRIES, INC., the corporation
described in and which executed the foregoing instrument, and he signed his name
thereto by order of said corporation.
--------------------------
NOTARY PUBLIC
EXHIBIT 10.6
MORTGAGE
and
SECURITY AGREEMENT
Dated: January 29, 1998
in the amount of
$388,000
(the "Mortgage Amount")
from
VICON INDUSTRIES, INC.
having an office at:
89 Arkay Drive
Hauppauge, New York 11788
(the "Mortgagor")
to
KEYBANK NATIONAL ASSOCIATION
A National Banking Association
having an office at:
1377 Motor Parkway
Islandia, New York 11788
(the "Mortgagee")
LOCATION OF PREMISES:
Street Address : 89 Arkay Drive, Hauppauge
County of : Suffolk
State of : New York
District : 0800
Section : 181.00
Block : 03.00
Lot : 002.013
After recording, please return to:
GANDIN, SCHOTSKY, RAPPAPORT, GLASS & GREENE, LLP
445 Broad Hollow Road
Melville, N. Y. 11747
This instrument was prepared by the above-named attorneys.
<PAGE>
MORTGAGE AND SECURITY AGREEMENT
$388,000
THIS MORTGAGE AND SECURITY AGREEMENT, made the 29th day of January,
1998, by VICON INDUSTRIES, INC., a New York State corporation with an office for
the transaction of business located at 89 Arkay Drive, Hauppauge, New York , the
MORTGAGOR to KEYBANK NATIONAL ASSOCIATION, a national banking association, with
an office for the transaction of business located at 1377 Motor Parkway,
Islandia, New York 11788, the MORTGAGEE.
WITNESSETH, that to secure the payment of an indebtedness evidenced by
a certain note bearing even date herewith in the principal sum of THREE HUNDRED
EIGHTY-EIGHT THOUSAND ($388,000) Dollars lawful money of the United States, as
the same may be modified, renewed or extended (the "Note") which sum, with
interest thereon is to be paid by Mortgagor to Mortgagee in accordance with the
terms of said Note, and also to secure the payment by Mortgagor to Mortgagee of
all sums expended or advanced by Mortgagee pursuant to any covenant, term or
provision of this Mortgage or any other Loan Document (as that term is defined
in the Note), and to secure the performance of each covenant, term and provision
by Mortgagor to be performed pursuant to this Mortgage or any other Loan
Document, Mortgagor hereby mortgages to Mortgagee, its successors and assigns,
the following described property (the "Mortgaged Property") whether now owned or
held or hereafter acquired:
ALL THAT TRACT OR PARCEL OF LAND situate in the County of Suffolk,
State of New York, and being the same premises described in Schedule "A" hereto
annexed and made a part hereof (the "Premises").
ALL RIGHT, TITLE AND INTEREST of Mortgagor in and to any and all
buildings, structures and improvements, including without limitation, the
foundations and footings thereof, now or at any time hereafter erected,
constructed or situated upon the Premises or any part thereof (the
"Improvements").
TOGETHER with all fixtures, chattels and articles of personal property
now or hereafter attached to or used in connection with the Premises, together
with any and all replacements thereof and additions thereto (the "Chattels").
This Mortgage shall be considered a financing statement pursuant to the
provisions of the Uniform Commercial Code, covering fixtures which are affixed
to the Premises. The types of collateral covered hereby are described in this
paragraph. The debtor is VICON INDUSTRIES, INC. The secured party is KEYBANK
NATIONAL ASSOCIATION. Their addresses are set forth above.
TOGETHER with all right, title and interest, if any, of Mortgagor of,
in and to the bed of any street, road or avenue, opened or proposed, in front
of, adjoining or abutting upon the Premises to the center line thereof.
<PAGE>
TOGETHER with any and all awards heretofore and hereafter made to the
present and all subsequent owners of the Premises by any governmental or other
lawful authorities for the taking by eminent domain of the whole or any part of
the Premises, or any easement therein, including any awards for any changes of
grade of streets, which said awards are hereby assigned to Mortgagee, who is
hereby authorized to collect and receive the proceeds of any such awards from
such authorities and to give proper receipts and acquittances therefor, and to
apply the same toward the payment of the amount owing on account of this
Mortgage and the Note, notwithstanding the fact that the amount owing thereon
may not then be due and payable.
TO HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its
successors and assigns, PROVIDED ALWAYS that if Mortgagor shall pay or cause to
be paid to Mortgagee, its successors and assigns, said principal sum of money
and other charges mentioned and set forth in this Mortgage and in the Note,
together with interest thereon, then and from thence forth, the Mortgaged
Property and the estate hereby granted shall cease, determine and be void.
AND Mortgagor covenants with Mortgagee as follows:
1. REPRESENTATIONS. Mortgagor hereby represents and warrants to
Mortgagee as follows:
(a) That the Loan Documents (as that term is defined in the
Note) are in all respects valid and legally binding obligations, enforceable in
accordance with their respective terms.
(b) That the execution and delivery of the Loan Documents by
Mortgagor does not, and the performance and observance by Mortgagor of its
obligations thereunder will not, contravene or result in a breach of (i) if
Mortgagor purports to be a corporation, any provision of Mortgagor's corporate
charter or by-laws, or, if Mortgagor purports to be partnership, any provision
of Mortgagor's partnership agreement or certificate, or (ii) any governmental
requirements, or (iii) any decree or judgement binding on Mortgagor, or (iv) any
agreement or instrument binding on Mortgagor for which waivers of the same have
not been obtained or any of their respective properties, nor will the same
result in the creation of any lien or security interest under any such agreement
or instrument.
(c) That there are no actions, suits, investigations or
proceedings pending, or, to the knowledge of Mortgagor, threatened against or
affecting Mortgagor (or any general partner of Mortgagor), or the Mortgaged
Property, or involving the validity or enforceability of any of the Loan
Documents or the priority of the lien thereof, or which will affect Mortgagor's
ability to repay the Note, at law or in equity or before or by any governmental
authority.
(d) That Mortgagor has no knowledge of any violations or
notices of violations of any requirements for which waiver(s) of same have not
been obtained.
(e) If Mortgagor (or any general partner of Mortgagor if
Mortgagor is a partnership) purports to be a corporation, that (i) it is a
corporation duly organized, validly existing
<PAGE>
and in good standing under the laws of the state or foreign country in which it
is incorporated, (ii) if required by the laws of the state in which the Premises
is located, it is duly qualified to do business and is in good standing therein,
(iii) it has the corporate power, authority and legal right to own and operate
its properties and assets, carry on the business now being conducted and
proposed to be conducted by it, and to engage in the transactions contemplated
by the Loan Documents, and (iv) the execution and delivery of the Loan Documents
to which it is a party and the performance and observance of the provisions
thereof have been duly authorized by all necessary corporate actions.
If Mortgagor (or any general partner of Mortgagor if Mortgagor) is a
partnership, that (i) it is duly formed and validly existing under the laws of
the state in which it is formed, (ii) if required by the laws of the state in
which the Premises is located, it is fully qualified to do business therein,
(iii) it has the power, authority and legal right to own and operate its
properties and assets, to carry on the business conducted and proposed to be
conducted by it, and to engage in the transactions contemplated by the Loan
Documents, and (iv) the execution and delivery of the Loan Documents to which it
is a party and the performance and observance of the provisions thereof have all
been duly authorized by all necessary actions of its partners.
(f) That all utility services necessary and sufficient for the
construction, development and operation of the Mortgaged Property for its
intended purposes are presently available to the Premises (or the boundaries
thereof if this Mortgage is executed in conjunction with a construction loan)
through dedicated public rights of way or through perpetual private easements,
approved by Mortgagee, with respect to which the Mortgage creates a valid,
binding and enforceable first lien, including, but not limited to, water supply,
storm and sanitary sewer, gas, electric and telephone facilities, and drainage.
(g) That neither the Mortgaged Property nor any portion
thereof is now damaged or injured as result of any fire, explosion, accident,
flood or other casualty or has been the subject of any taking, and to the
knowledge of Mortgagor, no taking is pending or contemplated.
(h) That any brokerage commissions payable by Mortgagor due in
connection with the transactions contemplated hereby have been paid in full and
that any such commissions coming due in the future will be promptly paid by
Mortgagor. Mortgagor agrees to and shall indemnify Mortgagee from any liability,
claims or losses arising by reason of any such brokerage commissions. This
provision shall survive the repayment of the Note and shall continue in full
force and effect so long as the possibility of such liability, claims or losses
exists.
<PAGE>
(i) That the financial statements of Mortgagor previously
delivered to Mortgagee are true and correct in all respects, have been prepared
in accordance with generally accepted accounting principles consistently
applied, and fairly present the respective financial conditions of Mortgagor as
of the respective dates thereof and the results of their operations for the
periods covered thereby; that no material adverse change has occurred in the
assets, liabilities, or financial conditions reflected therein since the
respective dates thereof; and that no additional borrowings (except for
borrowings under existing line of credit with IBJ Schroeder as disclosed to the
Mortgagee) have been made by Mortgagor since the date thereof other than the
borrowing contemplated hereby.
(j) That all federal, state and other tax returns of Mortgagor
required by law to be filed have been filed, that all federal, state and other
taxes, assessments and other governmental charges upon Mortgagor or its
respective properties which are due and payable have been paid, and that
Mortgagor has set aside on its books provisions reasonably adequate for the
payment of all taxes for periods subsequent to the periods for which such
returns have been filed.
(k) That Mortgagor has made no contract or arrangement of any
kind or type whatsoever (whether oral or written, formal or informal), the
performance of which by the other party thereto could give rise to a lien or
encumbrance on the Mortgaged Property, except for contracts (all of which have
been disclosed in writing to Mortgagee) made by Mortgagor with parties who have
executed and delivered lien waivers to Mortgagor, and which, in the opinion of
Mortgagee's counsel, will not create rights in existing or future lien claimants
which may be superior to the lien of the Mortgage.
(l) That the rights of way for all roads necessary for the
full utilization of the Improvements for their intended purposes have either
been acquired by the Mortgagor, the appropriate governmental authority or have
been dedicated to public use and accepted by such governmental authority, and
all such roads shall have been completed, or all necessary steps shall have been
taken by Mortgagor and such governmental authority to assure the complete
construction and installation thereof prior to the date upon which access to the
Mortgaged Property via such roads will be necessary. All curb cuts, driveway
permits and traffic signals necessary for access to the Mortgaged Property are
existing or have been fully approved by the appropriate governmental authority.
(m) That no Event of Default (hereinbelow defined) exists and
no event which but for the passage of time, the giving of notice or both would
constitute an Event of Default has occurred.
2. THE INDEBTEDNESS. Mortgagor will pay the indebtedness as provided in
the Note or in any modification, renewal or extension of the Note.
3. INSURANCE. At all times that the Note is outstanding, including
without limitation during any construction period (a "Construction Period"),
Mortgagor shall maintain insurance with respect to the Premises the Improvements
and the Chattels against such risks and for such amounts as are customarily
insured against by businesses of like size and type paying, as the same become
due and payable, all premiums in respect thereto, including but not limited to:
<PAGE>
(a) Prior to completion of construction of the Improvements,
if the same have not been completed, builder's risk all risk (or equivalent
coverage) insurance upon any work done or material furnished in connection with
construction of the Improvements, issued to Mortgagor and Mortgagee and written
in non-reporting completed form to cover the replacement cost of the
Improvements and at such time that builder's risk insurance shall not be
available due to completion of the construction of the Improvements, or if all
Improvements have been completed, insurance protecting the interests of the
Mortgagor and Mortgagee as their interests may appear against loss or damage to
the Improvements by fire, lightning, flood and other casualties normally insured
against, with a uniform standard extended coverage endorsement, such insurance
at all times to be in an amount of the Note or the total cash replacement value
of the Improvements not covered by builder's risk insurance, as determined at
least once every three years by a recognized appraiser or insurer selected by
the Mortgagor and approved by the Mortgagee.
(b) Boiler and machinery insurance covering physical damage to
the Improvements and to the major components of any central heating, air
conditioning or ventilation systems and such other equipment as Mortgagee shall
designate.
(c) Workers' compensation insurance, disability benefits
insurance, and such other form of insurance which the Mortgagor is required by
law to provide, covering loss resulting from injury, sickness, disability or
death of employees of Mortgagor who are located at or assigned to the Premises
or who are responsible for the construction of the Improvements.
(d) Insurance protecting Mortgagor and Mortgagee against loss
or losses from liabilities imposed by law or assumed in any written contract and
arising from personal injury and death or damage to the property of others
caused by accident or occurrence, in such amounts as may be reasonably
designated from time to time by Mortgagee, excluding liability imposed upon the
Mortgagor by any applicable workers' compensation law, or such other amounts as
may be required in writing by the Mortgagee; and a blanket excess liability
policy in an amount reasonably satisfactory to the Mortgagee protecting
Mortgagor and Mortgagee against any loss or liability or damage for personal
injury or property damage.
<PAGE>
4. OTHER INSURANCE PROVISIONS. All insurance required under this
Mortgage shall be procured and maintained in financially sound and generally
recognized responsible insurance companies selected by the Mortgagor and
authorized to write such insurance in the State of New York and acceptable to
the Mortgagee. Such insurance may be written with deductible amounts comparable
to those on similar policies carried by other entities engaged in businesses
similar in size, character and other respects to those in which the Mortgagor is
engaged. All policies evidencing such insurance shall provide for (i) payment of
the losses to Mortgagor and Mortgagee as their respective interests may appear,
and (ii) at least thirty (30) days written notice to Mortgagor and Mortgagee
prior to cancellation, reduction in policy limits or material change in coverage
thereof. The insurance required by Section 3(a) shall contain a New York
Standard mortgagee endorsement in favor of Mortgagee. All insurance required
hereunder shall be in form, content and coverage satisfactory to the Mortgagee.
The original policy, or a certified duplicate copy thereof, for all insurance
required hereby shall be delivered to Mortgagee. The proceeds of any insurance
which are paid to the Mortgagee, if less than $100,000, shall be paid over to
the Mortgagor in whole or in part for the repair of the Improvements, or if
equal to $100,000 or more, may be applied by the Mortgagee toward the payment of
any monies secured by this Mortgage, or, may be paid over, wholly or in part, to
the Mortgagor for the repair of the Improvements or for any other purpose or
object satisfactory to the Mortgagee. Mortgagor shall deliver to Mortgagee at
least thirty (30) days prior to the expiration date of any insurance coverages
required hereunder, a certificate reciting that there is in full force and
effect, with a term covering at least the next succeeding year, insurance in the
amounts and of the types required hereunder.
5. ALTERATIONS. No Improvements shall be structurally altered, removed
or demolished without the prior written consent of Mortgagee which consent shall
not be unreasonably withheld.
6. APPOINTMENT OF RECEIVER. Mortgagee in any action to foreclose this
Mortgage shall be entitled, without notice and as a matter of right and without
regard to the adequacy of any security of the indebtedness or the solvency of
Mortgagor, upon application to any court having jurisdiction, to the appointment
of a receiver of the rents, income and profits of the Mortgaged Property.
If an Event of Default (hereinbelow defined) occurs under this
Mortgage, as a matter of right and without regard to the adequacy of any
security for the Note, the Mortgagor, upon demand of the Mortgagee, shall
surrender the possession of, and it shall be lawful for Mortgagee, by such
officer or agent as it may appoint, to take possession, of all or any part of
the Mortgaged Property together with the books, papers, and accounts of the
Mortgagor pertaining thereto, and to hold, operate and manage the same, and from
time to time to make all needed repairs and improvements as Mortgagee shall deem
wise; and, if Mortgagee deems it necessary or desirable, to complete
construction and equipping of any Improvements and in the course of such
construction or equipping to make such changes to the same as it may deem
desirable; and Mortgagee may sell the Mortgaged Property or any part thereof, or
institute proceedings for the complete or partial foreclosure of the lien of
this Mortgage on the Mortgaged Property, or lease the Premises or any part
thereof in the name and for the account of the Mortgagor or Mortgagee and
collect, receive and sequester the rents, revenues, earnings, income, products
and profits therefrom, and out of the same and any other monies received
hereunder pay or provide for the payment of, all proper costs and expenses of
taking, holding, leasing, selling and managing the same, including reasonable
compensation to Mortgagee, its agents and counsel, and any charges of Mortgagee
hereunder, and any taxes and other charges prior to the lien of this Mortgage
which Mortgagee may deem it wise to pay.
<PAGE>
7. PAYMENT OF TAXES. Mortgagor will pay all taxes, assessments, sewer
rents or water rates or sums due under any payment in lieu of tax agreement
("Pilot Agreement") and in default thereof, Mortgagee may pay the same. In the
event that Mortgagee shall pay any such tax, assessment, sewer rent or water
rate, Mortgagee shall have the right, among other rights, to declare the amount
so paid with interest thereon immediately due and payable, and upon default of
Mortgagor in paying any such amount with interest thereon, Mortgagee shall have
the right to foreclose for such amount subject to the continuing lien of this
Mortgage for the balance of the mortgage indebtedness not then due.
In the event that the Mortgagor should fail to pay any sum the Mortgagor
has agreed to pay pursuant to this covenant for a period in excess of sixty (60)
days after the same is due and payable, in addition to any other remedies
available to the Mortgagee hereunder, the Mortgagee may, at its option, require
that the Mortgagor deposit with the Mortgagee, monthly, one-twelfth (1/12th) of
the annual charges for taxes and any other sums the Mortgagor is obligated to
pay pursuant to this covenant and the Mortgagor shall make such deposits with
the Mortgagee. The Mortgagor shall simultaneously therewith deposit with the
Mortgagee a sum of money which together with the monthly installments
aforementioned will be sufficient to make payment of all sums required to be
paid hereunder at least thirty (30) days prior to the due date of such payments,
it being understood that the Mortgagee shall calculate the amount of such
deposits and notify the Mortgagor of the sum due. Should an Event of Default
(hereinbelow defined) occur, the funds deposited with the Mortgagee pursuant to
this provision may be applied in payment of the charges for which said funds
shall have been deposited or to the payment of any other sums secured by this
Mortgage as the Mortgagee sees fit.
8. PAYMENT OF MORTGAGE TAXES. Mortgagor shall pay all taxes imposed
pursuant to Article 11 of the Tax Law or any other statute, order or regulation,
whether said tax is imposed at the time of recording or subsequent thereto. This
obligation shall survive the satisfaction or other termination of this Mortgage.
Mortgagee shall pay the tax imposed by Section 253 1-a(a), if applicable, if the
Mortgaged Property consists of real property principally improved or to be
improved by one or more structures containing in the aggregate not more than six
residential units, each dwelling unit having its own separate cooking
facilities.
9. STATEMENT OF AMOUNT DUE. Mortgagor, within five (5) days upon
request in person or within fifteen (15) days upon request by mail, will furnish
a written statement duly acknowledged of the amount due on this Mortgage and
whether any offsets or defenses exist against the said indebtedness.
10. NOTICES. Any notices required or permitted to be given hereunder
shall be: (i) personally delivered or (ii) given by registered or certified
mail, postage prepaid, return receipt requested, or (iii) forwarded by overnight
courier service, in each instance addressed to the addresses set forth at the
head of this Mortgage, or such other addresses as the parties may for themselves
designate in writing as provided herein for the purpose of receiving notices
hereunder. All notices shall be in writing and shall be deemed given, in the
case of notice by personal delivery, upon actual delivery, and in the case of
appropriate mail or courier service, upon deposit with the U.S. Postal Service
or delivery to the courier service.
11. WARRANTY OF TITLE. Mortgagor warrants the title to the Premises,
Improvements and Chattels.
<PAGE>
12. SALE IN ONE PARCEL. In case of a sale, the Premises may be sold in
one parcel together with the Improvements and Chattels. Should the Premises
consist of more than one parcel, in the event of a foreclosure of this Mortgage
or any mortgage at any time consolidated with this Mortgage, Mortgagor agrees
that Mortgagee shall be entitled to a judgment directing the referee appointed
in the foreclosure proceeding to sell all of the parcels constituting the
Premises at one foreclosure sale, either as a group or separately and that the
Mortgagor expressly waives any right that it may now have or hereafter acquire
to (i) request or require that the parcels be sold separately or (ii) request,
if Mortgagee has elected to sell parcels separately, that there be a
determination of any deficiency amount after any such separate sale or otherwise
require a calculation of whether said parcel or parcels separately sold were
conveyed for their "fair market value".
13. NEGATIVE COVENANTS. Mortgagor will not (i) execute an assignment of
the rents, income or profits, or any part thereof from the Mortgaged Property
except to Mortgagee, or (ii) except where the tenant is in default thereunder,
terminate or consent to the cancellation or surrender of any lease of the
Premises or Improvements or of any part thereof, now existing or hereafter to be
made, having an unexpired term of two (2) years or more, except that any lease
may be canceled provided that promptly after the cancellation or surrender
thereof a new lease is entered into with a new tenant having a credit standing,
in the judgment of the Mortgagee, at least equivalent to that of the tenant
whose lease was canceled, on substantially the same terms as the terminated or
canceled lease, or modify any such lease so as to shorten the unexpired term
thereof or so as to decrease the amount of the rents payable thereunder, or
(iii) accept prepayments of any sums to become due under such leases, except
prepayments of rent for more than one (1) month in advance or prepayments in the
nature of security for the performance of the tenants thereunder, (iv) in any
other manner impair the value of the Mortgaged Property or the security of this
Mortgage or (v) further encumber, alienate, hypothecate, grant a security
interest in or grant any other interest whatsoever in the Mortgaged Property.
Restrictions (ii) and (iii) are made with reference to Section 291-f of the Real
Property Law and actions in violation of those provisions shall be voidable at
the option of the Mortgagee. No rent reserved under any lease of the Premises or
Improvements has been assigned or anticipated, and no rent for any period
subsequent to the date hereof has been collected in advance of the due date
thereof. Mortgagor will not execute any lease of all or a substantial portion of
the Premises or Improvements except for actual occupancy by the tenant
thereunder, and will at all times promptly and faithfully perform, or cause to
be performed, all of the covenants, conditions and agreements contained in all
leases of the Premises or Improvements now or hereafter existing, on the part of
the landlord thereunder to be kept and performed and will at all times do all
things necessary to compel performance by the tenant under each lease of all
obligations, covenants and agreements by such tenant to be performed thereunder.
If any of such leases provide for the giving by the tenant of certificates with
respect to the status of such leases, Mortgagor shall exercise its right to
request such certificates within five (5) days of any demand therefor by
Mortgagee. Mortgagor shall furnish to Mortgagee, upon request of Mortgagee to do
so, a written statement containing the names of all tenants of the Premises or
Improvements, the terms of their respective leases, the space occupied and the
rentals payable thereunder.
<PAGE>
14. APPRAISAL. For the purposes of this Section, the following terms
shall be defined as follows:
(a) "Appraisal" shall mean an appraisal of the fair market
value of the Mortgaged Property prepared by an Appraiser.
(b) "Appraiser" shall mean an appraiser selected by Mortgagor
and approved by Mortgagee.
Within ninety (90) days from the date Mortgagee has mailed a written
notice to Mortgagor requesting the same, Mortgagor shall provide Mortgagee, at
Mortgagor's expense, with an Appraisal of the Mortgaged Property. An Appraisal
may be required not more frequently than once every twelve (12) months except
that it may also be required prior to any extension or renewal of the Note or as
otherwise set forth in the Loan Agreement executed on even date..
15. FINANCIAL STATEMENTS. In addition to any requirements elsewhere in
the Loan Documents, Mortgagor shall provide the Mortgagee with the following
financial statements during the term hereof:
(a) Annual audited financial statements of the Mortgagor
prepared on a consolidated basis within 90 days after the end of each applicable
fiscal year by an independent CPA satisfactory to Mortgagee, in accordance with
GAAP;
(b) Annual Form 10K of Mortgagor within 90 days of each fiscal
year end;
(c) Quarterly review quality consolidated financial
statements and Form 10Q within 60 days of each quarter end;
(d) Management prepared annual, within ninety (90) days of
each fiscal year end, and quarterly, within sixty (60) days of each quarter end,
consolidating financial statements;
(e) Simultaneous with the delivery of the annual and quarterly
financial statements referred to above, a certificate will be furnished to
Mortgagee executed by a duly authorized officer of the Mortgagor setting forth
computations in detail reasonably satisfactory to Mortgagee demonstrating
compliance with the financial covenants set forth in that certain Loan Agreement
executed by Mortgagor and Mortgagee dated on even date herewith and certifying
that, to the best of his/her knowledge, no default or Event of Default has
occurred or is occurring or, in the event a default or Event of Default has
occurred or is occurring, then how same will be cured within thirty (30) days.
For purposes of the Loan covenants, all accounting terms shall be defined
according to generally accepted accounting principles (GAAP) definitions;
(f) An annual budget for the upcoming year to include
projected Profit and Loss Statements and a Balance Sheet, such budget to be
delivered with the year-end financial statements;
<PAGE>
(g) Such other financial documentation as Mortgagee may
reasonably require.
16. BOOKS AND RECORDS.
(a) In addition to any requirements elsewhere in the Loan
Documents, Mortgagor shall keep and maintain at all times at Mortgagors'
addresses stated in this Mortgage, or such other place as Mortgagee may approve
in writing, complete and accurate books of accounts and records adequate to
reflect correctly the results of the operation of the Mortgaged Property and
copies of all written contracts, leases and other instruments which affect the
Mortgaged Property. Such books, records, contracts, leases and other instruments
shall be subject to examination and inspection at any reasonable time by
Mortgagee.
(b) Upon request of Mortgagee in writing, Mortgagor shall
promptly provide Mortgagee with all documents reasonably requested by Mortgagee
prepared in the form and manner called for in such request and as may reasonably
relate to the operation or condition thereof, or the financial condition of
Mortgagor or any party obligated on the Note, including, without limitation, all
leases or leasehold interests granted to or by Mortgagor, rent rolls and tenant
lists, rent and damage deposit ledgers, operating statements, profit and loss
statements and balance sheets, personal financial statements of Mortgagor or
income tax returns (including quarterly returns), any or all of which documents
shall be audited or certified as true and accurate by a certified public
accountant, if requested by Mortgagee, and shall cover such period or periods as
may be specified by Mortgagee.
(c) In addition, Mortgagor shall promptly furnish or cause to
be furnished to Mortgagee, to the extent any tenant prepares the same or the
same are required by any tenant's lease, annual financial statements of any
tenant of the Mortgaged Property where such tenant leases fifteen (15%) percent
or more of the gross leasable area of the Improvements, each such statement to
be delivered as soon as practicable following the end of each fiscal year of
such tenant, but in any event within one hundred twenty (120) days thereafter,
and each such statement to include balance sheets, statements of operations and
statements of changes in financial position as of the end of such year.
17. FUTURE LAWS. In the event of the passage after the date of this
Mortgage of any federal, state or municipal law, deducting from the value of
land for the purposes of taxation any lien thereon, or changing in any way, the
laws for the taxation of mortgages or debts secured by mortgages, or the manner
of collection of any such taxes, so as to affect Mortgagee, this Mortgage, or
said indebtedness, Mortgagee shall have the right to give thirty (30) days'
written notice to Mortgagor requiring the payment of said indebtedness. If such
notice be given, said indebtedness shall become due, payable and collectible at
the expiration of said thirty (30) days.
18. INTENTIONALLY OMITTED.
19. PROVISIONS REGARDING USE OF MORTGAGED PROPERTY. Mortgagor warrants
and represents that:
<PAGE>
(a) Mortgagor is not responsible for any action or omission,
and does not know of any action or omission by any prior owner, that would cause
the Mortgaged Property to be subject to forfeiture pursuant to any law, rule or
regulation (a "Forfeiture").
(b) The Mortgaged Property has not been acquired with any
proceeds from a transaction or an activity that would cause the Mortgaged
Property to be subject to Forfeiture.
Mortgagor covenants that Mortgagor will not use, and will not
permit any third party to use, the Mortgaged Property or any portion thereof or
interest therein for any purpose or activity that would cause a Forfeiture
thereof.
20. ACTIONS AND PROCEEDINGS. If any action or proceeding be commenced
to which action or proceeding Mortgagee is made a party and in which it becomes
necessary in the opinion of Mortgagee to defend or uphold the lien of this
Mortgage, all sums paid by Mortgagee for the expense of any litigation to
prosecute and defend the rights and lien created by this Mortgage, including
reasonable counsel fees, costs and allowances, shall, together with interest
thereon be a lien on the Mortgaged Property and secured by this Mortgage and
shall be collectible in like manner as said indebtedness and shall be paid by
Mortgagor on demand.
21. SECURITY INTEREST UNDER THE UNIFORM COMMERCIAL CODE. Mortgagee is
authorized to sign as the agent of Mortgagor such agreement in addition to this
Mortgage as Mortgagee at any time may deem necessary or proper or require to
grant to Mortgagee a perfected security interest in the Chattels. Mortgagor
hereby authorizes Mortgagee to file financing statements (as such term is
defined in said Uniform Commercial Code) with respect to the Chattels, at any
time, without the signature of Mortgagor. Mortgagor will, however, at any time
upon request of Mortgagee, sign such financing statements. Mortgagor will pay
all filing fees for the filing of such financing statements and for the refiling
thereof at the times required, in the opinion of Mortgagee, by said Uniform
Commercial Code. If the lien of this Mortgage be subject to any security
agreement covering the Chattels, then in the event of any default under this
Mortgage, all the right, title and interest of Mortgagor in and to any and all
of the Chattels is hereby assigned to Mortgagee, together with the benefit of
any deposits or payments now or hereafter made thereof by Mortgagor or the
predecessors or successors in title of Mortgagor in the Mortgaged Property.
<PAGE>
22. CONDEMNATION. Any and all awards heretofore and hereafter made to
Mortgagor and all subsequent owners of the Mortgaged Property by any
governmental or other lawful authorities for the taking by eminent domain of the
whole or any part of the Mortgaged Property or any easement therein, including
any awards for any changes of grade of streets, are hereby assigned to
Mortgagee, who is hereby authorized to collect and receive the proceeds of any
such awards from such authorities, to give proper receipts and acquittances
therefor and to apply the same toward the payment of the amount owing on account
of this Mortgage and said indebtedness, notwithstanding the fact that the amount
owing thereon may not then be due and payable provided, however, if such award
is less than $100,000 it shall be paid over to the Mortgagor for the repair if
any damages resulting from such taking ; and Mortgagor hereby covenants and
agrees, upon request, to make, execute and deliver any and all assignments and
other instruments sufficient for the purpose of assigning the aforesaid awards
to Mortgagee free, clear and discharged of any and all encumbrances of any kind
or nature whatsoever. Mortgagor shall continue to make all payments required by
the Note until any such award shall have been actually received by Mortgagee and
any reduction in said indebtedness resulting from the application by Mortgagee
of such award shall be deemed to take effect only on the date of such receipt.
Notwithstanding the foregoing, if any one or more of the portions of
the Mortgaged Property described in subparagraphs (a), (b) and (c) below shall
be damaged or taken through condemnation, either temporarily or permanently,
then the entire balance due under the Note and any other Loan Documents shall,
at the option of Mortgagee, become immediately due and payable:
(a) Any portion or portions of the Improvements or the
support or foundation of any portion or portions of the Improvements; or
(b) Ten (10%) percent or more of any parking area; or
(c) Any portion or portions of the Premises which, when so
damaged or taken, would result either in (i) an impairment of access to the
Improvements from the publicly dedicated rights of way now adjoining the
Premises, or (ii) the failure of the Improvements to comply with any building
code, zoning or other governmental laws or regulations, lease or other agreement
to which the Mortgaged Property is subject.
Mortgagor authorizes Mortgagee, at Mortgagee's option, as attorney in
fact for Mortgagor, to commence, appear in and prosecute in Mortgagor's or
Mortgagee's name, any action or proceeding relating to any condemnation or other
taking of the Mortgaged Property and to settle or compromise any claim in
connection with such condemnation or other taking.
23. TITLE TO MORTGAGED PROPERTY. Mortgagor is now the owner of the
Mortgaged Property upon which this Mortgage is a valid second lien for the
amount above specified, subject only to a first mortgage held by Mortgagee in
the original principal amount of $2,512,000, with interest thereon at the rate
set forth in the Note, subject only to a first mortgage held by Mortgagee in the
original principal amount of $2,512,000, and there are no defenses or offsets to
this Mortgage or to the said indebtedness.
<PAGE>
24. LEASES OF THE MORTGAGED PROPERTY. Mortgagor will not lease all or
any portion of the Mortgaged Property or amend, modify or terminate (except to
the extent permitted under paragraph 13(ii) hereof) any now existing or future
lease of the Mortgaged Property without the prior written consent of Mortgagee.
Notwithstanding the foregoing, all leases covering more than fifteen percent
(15%) of the gross leasable area of the Mortgaged Property (if the Mortgaged
Property is improved rental property) must require the tenant thereunder to
provide Mortgagee with annual financial statements of the tenant certified to by
an independent certified public accountant. Mortgagor, at Mortgagee's request,
shall furnish Mortgagee with executed copies of all leases hereafter made of all
or any part of the Mortgaged Property, and all leases now or hereafter entered
into will be in form and substance subject to the approval of Mortgagee. Upon
Mortgagee's request, Mortgagor shall make a separate and distinct assignment to
Mortgagee, as additional security, of all leases hereafter made a part of the
Mortgaged Property.
25. TRANSFER OF MORTGAGED PROPERTY. In the event that (a) any entity
then having a lesser credit rating than Mortgagor shall acquire beneficial
ownership of a majority interest in the voting stock of Mortgagor, (b) the
Mortgagor shall merge with such an entity and shall not be the surviving
corporation, or (c) the Mortgaged Property or a part thereof, while this
Mortgage shall remain a lien thereon, shall be sold, conveyed or transferred by
deed, any other voluntary or involuntary act or by operation of law or
otherwise, the full balance of the indebtedness then remaining unpaid, with
interest, shall at the option of the Mortgagee, or its assigns, be immediately
due and payable without notice or demand unless the prior written consent of the
Mortgagee to such acquisition, merger, or sale, conveyance or transfer shall
have been obtained. A mortgage of the Mortgaged Property to any mortgagee other
than the Mortgagee shall be deemed a conveyance for the purpose of this Section.
26. ACCESS. Mortgagee, by its employees or agents, shall at all times
have the right to enter upon the Mortgaged Property during reasonable business
hours for the purpose of examining and inspecting the same.
27. REAL PROPERTY LAW. All covenants hereof, which are in addition to
those set forth in Sections 254 and 291-f of the Real Property Law, shall be
construed as affording to Mortgagee rights additional to, and not exclusive of,
the rights conferred under the provisions of said Sections 254 and 291-f.
28. PERFORMANCE OF MORTGAGOR'S COVENANTS BY MORTGAGEE. In the event of
any default in the performance of any of the covenants, terms, or provisions of
Mortgagor under this Mortgage, which default is not cured within any applicable
cure period, Mortgagee may, at the option of Mortgagee, perform the same and the
cost thereof, with interest, shall immediately be due from Mortgagor to
Mortgagee and secured by this Mortgage.
29. REMEDIES NOT EXCLUSIVE. Mortgagee shall have the right from time to
time, to take action to recover any amounts of past due principal indebtedness
and interest thereon, or any installment of either, or any other sums required
to be paid under the covenants, terms and provisions of this Mortgage or the
Note, as the same become due, whether or not the principal indebtedness secured,
or any other sums secured by the Note or this Mortgage shall be due, and without
prejudice to the right of Mortgagee thereafter to bring an action of
foreclosure, or any other action, for default or defaults by Mortgagor existing
at the time such earlier action was commenced.
<PAGE>
30. ADDITIONAL ACTS AND DOCUMENTS. Mortgagor covenants that it will do,
execute, acknowledge, deliver, file and/or record, or cause to be recorded every
and all such further acts, deeds, conveyances, advances, mortgages, transfers
and assurances, in law as Mortgagee shall require for the better assuring,
conveying, transferring, mortgaging, assigning and confirming unto Mortgagee all
and singular the Mortgaged Property.
31. REMEDIES CUMULATIVE. The rights and remedies herein afforded to
Mortgagee shall be cumulative and supplementary to and not exclusive of any
other rights and remedies afforded the holder of this Mortgage and the Note.
32. SUCCESSORS. All of the provisions of this Mortgage shall inure to
the benefit of Mortgagee and of any subsequent holder of this Mortgage and shall
be binding upon Mortgagor and each subsequent owner of the Mortgaged Property.
33. EFFECT OF RELEASES. Mortgagee, without notice, may release any part
of the security described herein, or any person or entity liable for any
indebtedness secured hereby without in any way affecting the lien hereof upon
any part of the security not expressly released, and may agree with any party
obligated on said indebtedness or having any interest in the security described
herein to extend the time for payment of any part or all of the indebtedness
secured hereby. Such agreement shall not in any way release or impair the lien
hereof, but shall extend the lien hereof as against the title of all parties
having any interest in said security, which interest is subject to said lien,
and no such release or agreement shall release any person or entity obligated to
pay any indebtedness secured hereby.
34. WAIVERS. Any failure by Mortgagee to insist upon the strict
performance by Mortgagor of any of the covenants, terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the covenants, terms and
provisions of this Mortgage, and Mortgagee, notwithstanding any such failure,
shall have the right thereafter to insist upon the strict performance by
Mortgagor of any and all of the covenants, terms and provisions of this Mortgage
to be performed by Mortgagor. Neither Mortgagor nor any other person or entity
now or hereafter obligated for the payment of the whole or any part of said
indebtedness shall be relieved of such obligation by reason of (i) the failure
of Mortgagee to comply with any request of Mortgagor, or of any other person or
entity so obligated, (ii) the failure of Mortgagee to take action to foreclose
this Mortgage or otherwise enforce any of the covenants, terms and provisions of
this Mortgage or the Note, (iii) the release, regardless of consideration, of
the whole or any part of the security held for payment of said indebtedness or
(iv) any agreement or stipulation between any subsequent owner or owners of the
Mortgaged Property and Mortgagee modifying the covenants, terms and provisions
of this Mortgage or the Note without first having obtained the consent of
Mortgagor or such other person or entity. In the last mentioned event, Mortgagor
and all such other persons or entities shall continue liable to make such
payments according to the terms and provisions of any such agreement or
extension or modification unless expressly released and discharged in writing by
Mortgagee. Mortgagee may release, regardless of consideration, any part of the
security held for payment of said indebtedness without, as to the remainder of
the security, in any way impairing or affecting the lien of this Mortgage or the
priority of such lien over any subordinate lien. Mortgagee may resort for the
payment of said indebtedness to any other security therefor held by Mortgagee in
such order and manner as Mortgagee may elect.
<PAGE>
35. INTEREST ON ADVANCES. Wherever, under the provisions of this
Mortgage or by law, Mortgagee is entitled to interest on advances made or
expenses incurred, such interest shall be computed at a rate per annum which
shall be the interest rate payable under the Note.
36. MORTGAGEE NOT OBLIGATED. Nothing herein contained shall be
construed as making the payment of any insurance premiums, taxes or assessments
obligatory upon Mortgagee, although Mortgagee may pay same, or as making
Mortgagee liable in any way for loss, damage or injury, resulting from the
non-payment of any such insurance premiums, taxes or assessments.
37. LIEN LAW. Mortgagor will, in compliance with Section 13 of the Lien
Law, receive the advances secured by this Mortgage and will hold the right to
receive such advances as a trust fund to be applied first for the purpose of
paying the cost of the improvement and will apply the same first to the payment
of the cost of the improvement before using any part of the total of the same
for any other purpose.
38. ENVIRONMENTAL WARRANTIES AND COVENANTS.
(a) Warranties. Mortgagor makes the following representations
and warranties: (i) Mortgagor (or the present owner of the Mortgaged Property,
if different) is in compliance in all respects with all applicable federal,
state and local laws and regulations, including, without limitation, those
relating to toxic and hazardous substances and other environmental matters (the
"Laws"), (ii) no portion of the Mortgaged Property is being used or, to the best
of Mortgagor's knowledge, has been used at any previous time, for the disposal,
storage, treatment, processing or other handling of any hazardous or toxic
substances, in a manner not in compliance with the Laws, (iii) the soil and any
surface water and ground water which are a part of the Mortgaged Property are
free from any solid wastes, toxic or hazardous substance or contaminant and any
discharge of sewage or effluent; and (iv) neither the federal government nor the
State of New York Department of Environmental Conservation or any other
governmental or quasi governmental entity has filed a lien on the Mortgaged
Property, nor are there any governmental, judicial or administrative actions
with respect to environmental matters pending, or to the best of the Mortgagor's
knowledge, threatened, which involve the Mortgaged Property.
(b) Inspection. In the event Mortgagee reasonably believes
that an environmental problem may exist, Mortgagor agrees that Mortgagee or its
agents or representatives may, at any reasonable time and at Mortgagor's expense
inspect Mortgagor's books and records and inspect and conduct any tests on the
Mortgaged Property including taking soil samples in order to determine whether
Mortgagor is in continuing compliance with the Laws.
(c) Agreement to Comply. If any environmental contamination is
found on the Mortgaged Property for which any removal or remedial action is
required pursuant to Law, ordinance, order, rule, regulation or governmental
action, Mortgagor agrees that it will at its sole cost and expense, take such
removal or remedial action promptly and to Mortgagee's satisfaction.
<PAGE>
(d) Indemnification. Mortgagor agrees to defend, indemnify and
hold harmless Mortgagee, its employees, agents, officers and directors from and
against any claims, actions, demands, penalties, fines, liabilities,
settlements, damages, costs or expenses (including, without limitation,
reasonable attorney and consultant fees, investigations and laboratory fees,
court costs and litigation expenses of whatever kind or nature known or unknown,
contingent or otherwise) arising out of or in any way related to: (i) the past
or present disposal, release or threatened release of any hazardous or toxic
substances on the Mortgaged Property; (ii) any personal injury (including
wrongful death or property damage, real or personal) arising out of or related
to such hazardous or toxic substances; (iii) any lawsuit brought or threatened,
settlement reached or government order given relating to such hazardous or toxic
substances; and/or (iv) any violation of any law, order, regulation,
requirement, or demand of any government authority, or any policies or
requirements of Mortgagee, which are based upon or in any way related to such
hazardous or toxic substances.
(e) Other Sites. Mortgagor knows of no on-site or off-site
locations where hazardous or toxic substances from the operation of any
Improvement or otherwise have been stored, treated, recycled or disposed of.
(f) Leases. Mortgagor agrees not to lease or permit the
sublease of the Mortgaged Property to a tenant or subtenant whose operations may
result in contamination of the Mortgaged Property with hazardous or toxic
substances.
(g) Non-Operation by Mortgagee. Mortgagor acknowledges that
any action Mortgagee takes under this Mortgage shall be taken to protect
Mortgagee's security interest only; Mortgagee does not hereby intend to be
involved in the operations of the Mortgagor.
(h) Compliance Determinations. Mortgagor acknowledges that any
determinations Mortgagee makes under this Section regarding compliance with
environmental laws shall be made for Mortgagee's benefit only and are not
intended to be relied upon by any other party.
(i) Survival of Conditions. The provisions of this Section
shall be in addition to any other obligations and liabilities Mortgagor may have
to Mortgagee at common law, and shall survive the transactions contemplated
herein.
(j) Other Insurance. Mortgagor shall carry adequate insurance
to fulfill Mortgagor's obligations under this Section if required by law.
(k) Definitions. The term "hazardous substance" shall include,
without limit, any substance or material defined in 42 U.S.C. Section 9601 (as
the same may be amended from time to time), the Hazardous Materials
Transportation Act (as amended from to time), and the New York Environmental
Conservation Law or the Resource Conservation And Recovery Act (as each may be
amended from time to time) and in any regulations adopted or publications
promulgated pursuant to any of the foregoing.
<PAGE>
39 EVENTS OF DEFAULT. The whole of the principal sum of the
indebtedness secured hereby and interest thereon, and all other sums due and
payable hereunder shall become due, at the option of Mortgagee, if one or more
of the following events (an "Event of Default") shall happen:
(a) The occurrence of an "Event of Default" under the Note; or
(b) If Mortgagor defaults in the payment of any tax, water
rate or sewer rent or payment under any Pilot Agreement against the Mortgaged
Property for thirty (30) days after the same become due and payable or fails to
exhibit to Mortgagee, within thirty (30) days after demand, receipts showing
payment of all taxes, water rates or sewer rents; or
(c) The actual or threatened removal, demolition or structural
alteration, in whole or in part, of any Improvement, without the prior written
consent of Mortgagee; or the removal, demolition or destruction in whole or in
part, of any Chattels without replacing the same with Chattels at least equal in
quality and condition to those replaced, free from any security interest or
other encumbrance thereon and free from any reservation of title thereto; or the
commission of any waste in respect to the Mortgaged Property; or
(d) Failure of Mortgagor to pay within thirty (30) days after
notice and demand any installment of any assessment made against the Premises
for local improvements, heretofore or hereafter made, which assessment is, or
may become, a lien on the Premises prior to the lien of this Mortgage,
notwithstanding the fact that such installment be not due and payable at the
time of such notice and demand; or
(e) Failure of Mortgagor to pay the said indebtedness secured
by this Mortgage within (30) days after notice and demand, in the event of the
passage after the date of this Mortgage of any federal, state or municipal law
deducting from the value of land for the purpose of taxation any lien thereon,
or changing in any way the laws now in force for the taxation of mortgages, or
of debts secured by mortgages, or the manner of collection of any such taxes, so
as to affect Mortgagee, this Mortgage or the indebtedness which is secured,
notwithstanding that Mortgagor, before or after such notice, may have the option
to pay or contest the payment of such tax; or
<PAGE>
(f) Failure of Mortgagor to maintain the Improvements on the
Premises in a rentable or tenantable state of repair to the satisfaction of
Mortgagee, for thirty (30) days after notice of such failure has been given to
Mortgagor, or to comply with any order or requirement of any municipal, state,
federal or other governmental authority having jurisdiction of the Premises
within thirty (30) days after such order or requirement shall have been issued
by any such authority; or failure of Mortgagor or of any tenant holding under
Mortgagor, to comply with any and all and singular the statutes, requirements,
orders or decrees of any federal, state or municipal authority relating to the
use of the Mortgaged Property, or of any part thereof; or failure of Mortgagor
to observe and timely perform all of the covenants, terms and provisions
contained in any lease now or hereafter affecting the Premises or the
Improvements or any portion thereof, on the part of the landlord to be observed
and performed; or
(g) Failure of Mortgagor, in the event of the entry of a final
judgment for the payment of money against Mortgagor, to discharge such judgment
or to have it stayed pending appeal within thirty (30) days from the entry
thereof, or if such judgment shall be affirmed on appeal, the failure to
discharge such judgment within thirty (30) days from the entry of such
affirmance; or
(h) Failure of Mortgagor to pay within thirty (30) days after
notice and demand any filing or refiling fees required hereunder; or
(i) Failure of Mortgagor or any occupant of the Mortgaged
Property, to allow or permit Mortgagee, or its duly authorized agent, to inspect
said Mortgaged Property at any time and from time to time during reasonable
business hours; or
(j) Default for thirty (30) days after notice and demand in
the observance or performance of any other covenant or agreement under this
Mortgage.
40 INTEREST TO ACCRUE. If the whole of the principal sum evidenced by
the Note and interest, shall become due by exercise of the option of the
Mortgagee after default by the Mortgagor under any of the terms, covenants and
conditions of this Mortgage and/or the Note, or if the whole of said principal
sum and interest shall mature and become due under the terms, covenants and
conditions of this Mortgage and the Note regardless of default, if any, on the
part of the Mortgagor, then interest on said principal sum shall continue to
accrue at the rate provided for in the Note, and in this Mortgage, until said
principal sum is fully paid.
41 FLOOD INSURANCE. In addition to the terms and provisions of this
Mortgage with regard to insurance, in the event the Premises are determined to
be in a special flood hazard area as determined by any governmental agency,
Mortgagor further covenants and agrees to fully insure the Premises and
Improvements against loss or damage by flood, with coverage as is therein
provided for by fire and other specified perils to the same extent and effect as
if such flood insurance was therein specifically set forth.
42 COSTS, EXPENSES AND ATTORNEY'S FEES. Should one or more Events of
Default occur hereunder, and should an action be commenced for the foreclosure
of this Mortgage, Mortgagee shall be entitled to recover all sums due hereunder,
statutory costs, and any additional allowances made pursuant to Section 8303(a)
of the Civil Practice Law and Rules of the State of New York, and in addition
thereto, reasonable attorneys' fees in such proceeding and in all proceedings
related thereto necessary to and related to the foreclosing proceeding, and such
amount shall be added to the principal balance and interest then due and shall
be a lien on the Mortgaged Property prior to any right or title to, interest in
or claim upon the Mortgaged Property attaching and accruing subsequent to the
lien of this Mortgage, and shall be deemed to be secured by this Mortgage and
the indebtedness which it secures.
<PAGE>
43 INTERVENING LIENS. Should any agreement be hereafter entered into
modifying or changing the terms of this Mortgage or the Note secured hereby in
any manner, the rights of the parties to such agreement shall be superior to the
rights of the holder of any intervening lien.
44 TERMS. It is understood and agreed that the words, "Mortgagor" and
"Mortgagee" herein shall include the respective heirs, successors and assigns of
Mortgagor and Mortgagee.
45 ENTIRE AGREEMENT. This Mortgage and the other Loan Documents
constitute the entire understanding between Mortgagor and Mortgagee and to the
extent that any writings not signed by Mortgagee or oral statements or
conversations at any time made or had shall be inconsistent with the provisions
of this Mortgage and the other Loan Documents, the same shall be null and void.
46 GOVERNING LAW; SEVERABILITY. This Mortgage shall be governed by the
law of the jurisdiction in which the Mortgaged Property is located. In the event
that any provision or clause of this Mortgage or the Note conflicts with
applicable law, such conflict shall not affect other provisions of this Mortgage
or the Note which can be given effect without the conflicting provision, and to
this end, the provisions of this Mortgage and the Note are declared to be
severable.
47 TIME OF THE ESSENCE. Time is of the essence with respect to each
and every covenant, agreement and obligation of Mortgagor under this Mortgage,
the Note and any and all other Loan Documents.
48 INDEMNIFICATION; SUBROGATION; WAIVER OF OFFSET.
(a) Mortgagor shall indemnify, defend and hold Mortgagee
harmless against: (i) any and all claims for brokerage, leasing, finders or
similar fees which may be made relating to the Mortgaged Property or the loan
which is the subject of the Note, and (ii) against any and all liability,
obligations, losses, damages, penalties, claims, actions, suits, costs, and
expenses (including its reasonable attorneys' fees, together with reasonable
appellate counsel fees, if any) of whatever kind or nature which may be imposed
on or incurred by Mortgagee at any time pursuant either to a judgment or decree
or other order entered into by a court or administrative agency or to a
settlement reasonably approved by Mortgagor, which judgment, decree, order or
settlement relates in any way to or arises out of the offer, sale or lease of
the Mortgaged Property and/or the ownership, use, occupation or operation of any
portion of the Mortgaged Property.
<PAGE>
(b) If Mortgagee is made a party defendant to any litigation
concerning the loan which is the subject of the Note, this Mortgage, the
Mortgaged Property, or any part thereof, or any interest therein, or the
occupancy thereof, then Mortgagor shall indemnify, defend and hold Mortgagee
harmless from all liability by reason of said litigation, including reasonable
attorneys' fees (together with reasonable appellate counsel fees, if any) and
expenses incurred by Mortgagee in any such litigation, whether or not any such
litigation is prosecuted to judgment. If Mortgagee commences an action against
Mortgagor to enforce any of the terms hereof or to prosecute any breach by
Mortgagor of any of the terms hereof or to recover any sum secured hereby,
Mortgagor shall pay to Mortgagee such reasonable attorneys' fees (together with
reasonable appellate counsel fees, if any) and expenses. The right to such
attorneys fees (together with reasonable appellate counsel fees, if any) and
expenses shall be deemed to have accrued on the commencement of such action, and
shall be enforceable whether or not such action is prosecuted to judgment. If
Mortgagor breaches any term of this Mortgage, Mortgagee may employ an attorney
or attorneys to protect its rights hereunder, and in the event of such
employment following any breach by Mortgagor, Mortgagor shall pay Mortgagee
reasonable attorneys' fees (together with reasonable appellate counsel fees, if
any) and expenses incurred by Mortgagee, whether or not an action is actually
commenced against Mortgagor by reason of such breach.
(c) A waiver of subrogation shall be obtained by Mortgagor
from its property insurance carrier and, consequently, Mortgagor waives any and
all right to claim or recover against Mortgagee, its officers, employees, agents
and representatives, for loss of or damage to Mortgagor, the Mortgaged Property,
Mortgagor's property or the property of others under Mortgagor's control from
any cause insured against or required to be insured against by the provisions of
this Mortgage.
(d) All sums payable by Mortgagor hereunder shall be paid
without notice (except as may otherwise be provided herein), demand,
counterclaim, set-off, deduction or defense and without abatement, suspension,
deferment, diminution or reduction, and the obligations and liabilities of
Mortgagor hereunder shall in no way be released, discharged or otherwise
affected by reason of: (i) any damage to or destruction of or any condemnation
or similar taking of the Mortgaged Property or any part thereof; (ii) any
restriction or prevention of or interference with any use of the Mortgaged
Property or any part thereof; (iii) any title defect or encumbrance or any
eviction from the Premises or the Improvements or any part thereof by title
superior or otherwise; (iv) any bankruptcy, insolvency, reorganization,
composition, adjustment, dissolution, liquidation, or other like proceeding
relating to Mortgagee, or any action taken with respect to this Mortgage by any
trustee or receiver of Mortgagee, or by any court, in such proceeding; (v) any
claim which Mortgagor has, or might have, against Mortgagee; (vi) any default or
failure on the part of Mortgagee to perform or comply with any of the terms
hereof or of any other agreement with Mortgagor; or (vii) any other occurrence
whatsoever, whether similar or dissimilar to the foregoing, whether or not
Mortgagor shall have notice or knowledge of any of the foregoing. Mortgagor
waives all rights now or hereafter conferred by statute or otherwise to any
abatement, suspension, deferment, diminution, or reduction of any sum secured
hereby and payable by Mortgagor.
49 WAIVER OF JURY TRIAL. The Mortgagor and the Mortgagee hereby waive
trial by jury in any litigation in any court with respect to, in connection
with, or arising out of this Mortgage or any other Loan Document, or any
instrument or document delivered in connection with the loan which is the
subject of the Note, or the validity, protection, interpretation, collection or
enforcement thereof, or the relationship between Mortgagor and Mortgagee as
borrower and lender, or any other claim or dispute howsoever arising between the
Mortgagor and Mortgagee.
<PAGE>
50 TAX LAW SECTION 253 STATEMENT. Check one box only.
[ ] This Mortgage covers real property principally improved or
to be improved by one or more structures containing in the
aggregate not more than six residential dwelling units, each
having their own separate cooking facilities.
[ X ] This Mortgage does not cover real property improved as described
above.
Where used herein, the word, "Mortgagor" may be read "Mortgagors" where
applicable.
IN WITNESS WHEREOF, this Mortgage has been duly executed by Mortgagor.
VICON INDUSTRIES, INC.
By:___________________________
Kenneth M. Darby, President
STATE OF NEW YORK )
) SS.:
COUNTY OF SUFFOLK )
On the 29th day of January, 1998, before me personally came KENNETH
M. DARBY, to me known, who being by me duly sworn, did depose and say that he
has a business address located c/o Vicon Industries, Inc., 89 Arkay Boulevard,
Hauppauge, New York; that he is the President of VICON INDUSTRIES, INC., the
corporation described in and which executed the foregoing instrument, and he
signed his name thereto by order of said corporation.
--------------------------
NOTARY PUBLIC
EXHIBIT 10.7
(Local Currency--Single Jurisdiction)
Copyright (C)1992 by International Swap Dealers Association, Inc.
Second Printing
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of : December 11, 1997
---------------------
KEYBANK NATIONAL ASSOCIATION and
VICON INDUSTRIES, INC.
- ----------------------------------- ----------------------------------------
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) Definitions. The terms defined in Section 12 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value
on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than by
payment), such delivery will be made for receipt on the due date in the
manner customary for the relevant obligation unless otherwise specified in
the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing,
(2) the condition precedent that no Early Termination Date in respect of
the relevant Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in this Agreement.
<PAGE>
(b) Change of Account. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of branches or offices through which the parties make
and receive payments or deliveries.
(d) Default Interest; Other Amounts. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered
into) that:--
(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to perform
its obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all necessary
action to authorise such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any provision of
its constitutional documents, any order or judgment of any court or other
agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
<PAGE>
(iv) Consents. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full
force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective
terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and
subject, as to enforceability, to equitable principles of general
application (regardless of whether enforcement is sought in a proceeding
in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
4. Agreements
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--
(a) Furnish Specified Information. It will deliver to the other party any forms,
documents or certificates specified in the Schedule or any Confirmation by the
date specified in the Schedule or such Confirmation or, if none is specified, as
soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--
(i) Failure to Pay or Deliver. Failure by the party to make, when due, any
payment under this Agreement or delivery under Section 2(a)(i) or 2(d)
required to be made by it if such failure is not remedied on or before the
third Local Business Day after notice of such failure is given to the
party;
(ii) Breach of Agreement. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any payment
under this Agreement or delivery under Section 2(a)(i) or 2(d) or to give
notice of a Termination Event) to be complied with or performed
<PAGE>
by the party in accordance with this Agreement if such failure is not
remedied on or before the thirtieth day after notice of such failure is
given to the party;
(iii) Credit Support Default.
(1)Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to be
complied with or performed by it in accordance with any Credit
Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2)the expiration or termination of such Credit Support Document
or the failing or ceasing of such Credit Support Document to be
in full force and effect for the purpose of this Agreement (in
either case other than in accordance with its terms) prior to the
satisfaction of all obligations of such party under each
Transaction to which such Credit Support Document relates without
the written consent of the other party; or
(3)the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) Misrepresentation. A representation made or repeated or deemed to
have been made or repeated by the party or any Credit Support Provider of
such party in this Agreement or any Credit Support Document proves to have
been incorrect or misleading in any material respect when made or repeated
or deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to any
applicable notice requirement or grace period, there occurs a liquidation
of, an acceleration of obligations under, or an early termination of, that
Specified Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or delivery due
on the last payment, delivery or exchange date of, or any payment on early
termination of, a Specified Transaction (or such default continues for at
least three Local Business Days if there is no applicable notice
requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is
taken by any person or entity appointed or empowered to operate it or act
on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default, event
of default or other similar condition or event (however described) in
respect of such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more agreements or
instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not less than the
applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming, or becoming capable at
such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a
default by such party, such Credit Support Provider or such Specified
Entity (individually or collectively) in making one or more payments on
the due date thereof in an aggregate amount of not less than the
applicable Threshold Amount under such agreements or instruments (after
giving effect to any applicable notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to pay
its debts or fails or admits in writing its inability generally to
pay its debts as they become due; (3) makes a general assignment,
arrangement or composition with or for the benefit of its creditors;
(4) institutes or has instituted against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or a petition is presented for its
<PAGE>
winding-up or liquidation, and, in the case of any such proceeding
or petition instituted or presented against it, such proceeding or
petition (A) results in a judgment of insolvency or bankruptcy or
the entry of an order for relief or the making of an order for
its winding-up or liquidation or (B) is not dismissed,
discharged, stayed or restrained in each case within 30 days of
the institution or presentation thereof; (5) has a resolution
passed for its winding-up, official management or liquidation
(other than pursuant to a consolidation, amalgamation or merger);
(6) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver,
trustee, custodian or other similar official for it or for all or
substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter; (8)
causes or is subject to any event with respect to it which, under
the applicable laws of any jurisdiction, has an analogous effect
to any of the events specified in clauses (1) to (7) (inclusive);
or (9) takes any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the foregoing
acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider
of such party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all its assets to, another entity and, at
the time of such consolidation, amalgamation, merger or transfer:--
(1) the resulting, surviving or transferee entity fails to assume
all the obligations of such party or such Credit Support Provider
under this Agreement or any Credit Support Document to which it or
its predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other party to this
Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by such
resulting, surviving or transferee entity of its obligations under
this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, and, if specified to be applicable, a Credit
Event Upon Merger if the event is specified pursuant to (ii) below or an
Additional Termination Event if the event is specified pursuant to (iii)
below:--
(i) Illegality. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party):--
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in respect
of such Transaction or to comply with any other material provision
of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to
perform, any contingent or other obligation which the party (or such
Credit Support Provider) has under any Credit Support Document
relating to such Transaction;
<PAGE>
(ii) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified
in the Schedule as applying to the party, such party ("X"), any Credit
Support Provider of X or any applicable Specified Entity of X consolidates
or amalgamates with, or merges with or into, or transfers all or
substantially all its assets to, another entity and such action does not
constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
(iii) Additional Termination Event. If any "Additional Termination Event"
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5 (a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will
also give such other information about that Termination Event as the other
party may reasonably require.
(ii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1)
occurs and there are two Affected Parties, each party will use all
reasonable efforts to reach agreement within 30 days after notice thereof
is given under Section 6(b)(i) on action to avoid that Termination Event.
(iii) Right to Terminate. If:--
(1) an agreement under Section 6(b)(ii) has not been effected with
respect to all Affected Transactions within 30 days after an
Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality other than that referred to in Section 6(b)(ii), a
Credit Event Upon Merger or an Additional Termination
Event occurs,
either party in the case of an Illegality, any Affected Party in the case
of an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a
Credit Event Upon Merger or an Additional Termination Event if there is
only one Affected Party may, by not more than 20 days notice to the other
party and provided that the relevant Termination Event is then continuing,
designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all Affected Transactions.
<PAGE>
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under Section
6(a) or (b), the Early Termination Date will occur on the date so
designated, whether or not the relevant Event of Default or Termination
Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early Termination
Date, no further payments or deliveries under Section 2(a)(i) or 2(d) in
respect of the Terminated Transactions will be required to be made, but
without prejudice to the other provisions of this Agreement. The amount,
if any, payable in respect of an Early Termination Date shall be
determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such
quotation will be conclusive evidence of the existence and accuracy of
such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day that
notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on
which notice of the amount payable is effective (in the case of an Early
Termination Date which is designated as a result of a Termination Event).
Such amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after judgment), from
(and including) the relevant Early Termination Date to (but excluding) the
date such amount is paid, at the Applicable Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination results from an
Event of Default:--
(1) First Method and Market Quotation. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the Unpaid
Amounts owing to the Non-defaulting Party over (B) the Unpaid
Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the
Defaulting Party will pay to the Non-defaulting Party, if a positive
number, the Non-defaulting Party's Loss in respect of this
Agreement.
(3) Second Method and Market Quotation. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A) the
sum of the Settlement Amount (determined by the Non-defaulting
Party) in respect of the Terminated Transactions and the Unpaid
Amounts owing to the Non-defaulting Party less (B) the Unpaid
Amounts owing to the Defaulting Party. If that amount is a positive
number, the Defaulting Party will pay it to the Non-defaulting
party; if it is a negative number, the Non-defaulting Party will pay
the absolute value of that amount to the Defaulting Party.
<PAGE>
(4) Second Method and Loss. If the Second Method and Loss apply, an
amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute
value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a
Termination Event:--
(1) One Affected Party. If there is one Affected Party, the amount
payable will be determined in accordance with Section 6(e)(i)(3), if
Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
except that, in either case, references to the Defaulting Party and
to the Non-defaulting Party will be deemed to be references to the
Affected Party and the party which is not the Affected Party,
respectively, and, if Loss applies and fewer than all the
Transactions are being terminated, Loss shall be calculated in
respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties: --
(A) If Market Quotation applies, each party will determine a
Settlement Amount in respect of the Terminated Transactions,
and an amount will be payable equal to (I) the sum of (a)
one-half of the difference between the Settlement Amount of
the party with the higher Settlement Amount ("X") and the
Settlement Amount of the party with the lower Settlement
Amount ("Y") and (b) the Unpaid Amounts owing to X less (II)
the Unpaid Amounts owing to Y; and
(B) If Loss applies, each party will determine its Loss in
respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of the party
with the higher Loss ("X") and the Loss of the party with the
lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if
it is a negative number, X will pay the absolute value of that
amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination"
applies in respect of a party, the amount determined under this
Section 6(e) will be subject to such adjustments as are appropriate
and permitted by law to reflect any payments or deliveries made by
one party to the other under this Agreement (and retained by such
other party) during the period from the relevant Early Termination
Date to the date for payment determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation
applies an amount recoverable under this Section 6(e) is a
reasonable pre-estimate of loss and not a penalty. Such amount is
payable for the loss of bargain and the loss of protection against
future risks and except as otherwise provided in this Agreement
neither party will be entitled to recover any additional damages as
a consequence of such losses.
7. Transfer
Neither this Agreement nor any interest or obligation in or under this Agreement
may be transferred (whether by way of security or otherwise) by either party
without the prior written consent of the other party, except that: --
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
<PAGE>
8. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect
of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall be entered into as soon as practicable
and may be executed and delivered in counterparts (including by facsimile
transmission) or be created by an exchange of telexes or by an exchange of
electronic messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding supplement to
this Agreement. The parties will specify therein or through another
effective means that any such counterpart, telex or electronic message
constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
9. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement or any Credit Support Document to which the
Defaulting Party is a party or by reason of the early termination of any
Transaction, including, but not limited to, costs of collection.
<PAGE>
10. Notices
(a) Effectiveness. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--
(i) if in writing and delivered in person or by courier, on the date
it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is
received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and
will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the
equivalent (return receipt requested), on the date that mail is delivered
or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
11. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States
District Court located in the Borough of Manhattan in New York City, if
this Agreement is expressed to be governed by the laws of the State of New
York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum and further
waives the right to object, with respect to such Proceedings, that such
court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) Waiver of Immunities. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
<PAGE>
12. Definitions
As used in this Agreement:--
"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
"Affected Transactions" means (a) with respect to any Termination Event
consisting of an Illegality, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination Event, all
Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"Applicable Rate" means:--
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"consent" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as
such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section
6(a) or 6(b)(iii).
"Event of Default" has the meaning specified in Section 5(a) and, if
applicable, in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"law" includes any treaty, law, rule or regulation and "lawful" and "unlawful"
will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located, (c) in
relation to any notice or other communication, including notice contemplated
under Section 5(a)(i), in the city specified in the address for notice provided
by the recipient and, in the case of a notice contemplated by Section 2(b), in
the place where the relevant new account is to be located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to
such Specified Transaction.
<PAGE>
"Loss" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which
case expressed as a negative number) in connection with this Agreement or that
Terminated Transaction or group of Terminated Transactions, as the case may be,
including any loss of bargain, cost of funding or, at the election of such party
but without duplication, loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position
(or any gain resulting from any of them). Loss includes losses and costs (or
gains) in respect of any payment or delivery required to have been made
(assuming satisfaction of each applicable condition precedent) on or before the
relevant Early Termination Date and not made, except, so as to avoid
duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does
not include a party's legal fees and out-of-pocket expenses referred to under
Section 9. A party will determine its Loss as of the relevant Early Termination
Date, or, if that is not reasonably practicable, as of the earliest date
thereafter as is reasonably practicable. A party may (but need not) determine
its Loss by reference to quotations of relevant rates or prices from one or more
leading dealers in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Potential Event of Default" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"Reference Market-makers" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"Scheduled Payment Date" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
<PAGE>
"Set-off" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination
Date, the sum of:--
(a) the Market Quotations (whether positive or negative) for each Terminated
Transaction or group of Terminated Transactions for which a Market Quotation is
determined; and
(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"Terminated Transactions" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"Termination Event" means Illegality or, if specified to be applicable, a Credit
Event Upon Merger or an Additional Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the fair market values reasonably determined by both
parties.
<PAGE>
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
KEYBANK NATIONAL ASSOCIATION VICON INDUSTRIES, INC.
- ------------------------------------- ----------------------------------------
(Name of Party) (Name of Party)
By: _______________________________ By:________________________________
Name: Jodie Howe Kenneth M. Darby
Title: Assistant Vice President
Date: December 11, 1997
EXHIBIT 10.8
SCHEDULE TO THE MASTER AGREEMENT
dated as of December 11, 1997
between KEYBANK NATIONAL ASSOCIATION and VICON INDUSTRIES, INC.
("Party A") ("Party B")
Part 1. Termination Provisions.
(a) "Specified Entity" means in relation to Party A for the purpose of:
Section 5(a)(v), None
--------
Section 5(a)(vi), None
--------
Section 5(a)(vii), None
--------
Section 5(b)(ii), None
--------
and in relation to Party B for the purpose of:
Section 5(a)(v), Any current or future Affiliate of Party B
----------------------------------------------
Section 5(a)(vi), Any current or future Affiliate of Party B
----------------------------------------------
Section 5(a)(vii), Any current or future Affiliate of Party B
----------------------------------------------
Section 5(b)(ii), Any current or future Affiliate of Party B
----------------------------------------------
(b) "Specified Transaction" will have the meaning specified in Section 12 of
this Agreement.
(c) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party B.
(d) "Specified Indebtedness" will have the meaning specified in Section 12 of
this Agreement.
(e) "Threshold Amount" means $100,000.
(f) The "Credit Event Upon Merger" provisions of Section 5(b)(ii) will apply to
Party B.
(g) The "Automatic Early Termination" provision of Section 6(a) will apply to
Party B.
(h) Payments on Early Termination. For the purpose of Section 6(e) of this
Agreement:
(i) Market Quotation will apply.
(ii)The Second Method will apply.
(i) Additional Termination Event. For the purpose of Section 5(b) (iii) of this
Agreement, it shall be an "Additional Termination Event" with Party B being
the Affected Party if any Credit Support Document expires, terminates, or
fails or ceases to be in full force and effect for the purpose of this
Agreement in accordance with its terms prior to the satisfaction of all
obligations of Party B under each Transaction.
<PAGE>
Part 2. Agreement to Deliver Documents.
For the purpose of Section 4(a) of this Agreement, Party B agrees to deliver the
following documents:
(a) A certificate of an authorized officer of Party B evidencing the necessary
corporate authorizations, resolutions, and approvals with respect to the
execution, delivery and performance of this Agreement, and certifying the
names, true signatures, and authority of the officer(s) signing this
Agreement and executing Transactions hereunder.
(b) Quarterly and annual financial statements when requested by Party A.
Part 3. Miscellaneous.
(a) Addresses for Notices. For the purpose of Section 10(a) of this Agreement:
Address for notices or communications to Party A:
Address: 127 Public Square, 01-127-0405, Cleveland, Ohio 44114
Attention: Interest Rate Risk Management
Facsimile No.: (216) 689-4737 Telephone No:(216) 689-4961
Address for notices or communications to Party B:
Address: 89 Arkay Drive, Hauppauge, NY 11788
Attention: John Badke, Controller
Facsimile No.: (516) 951-2288 Telephone No:(516) 952-2288
(b) Calculation Agent. The Calculation Agent is Party A.
(c) Credit Support Document: Mortgage and Security Agreement dated December
1997 between Party A and Party B; Assignment of Rents and Leases dated
December 1997 between Party A and Party B.
(d) Credit Support Provider.
(e) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Ohio without reference to choice
of law doctrine.
(f) Jurisdiction. Section 11(b)(i) and that part of Section 11(b) which follows
Section 11(b)(ii) are deleted in their entirety and the following language
shall be substituted for Section 11(b)(i):
(i)submits to the exclusive jurisdiction of the Court of Common Pleas
of Cuyahoga County and the United States District Court for the
Northern District of Ohio, Eastern Division, both located in the
City of Cleveland.
<PAGE>
(g) Definitions. Section 12 is modified as follows:
(i)"Default Rate" means Prime +2%.
(h) Payments.
Party A will make payments to Party B by transfer to the account of
Party B at KeyBank National Association in Cleveland (Account Number:
323680013097).
Party B will make payments to Party A by transfer from the account of
Party B at KeyBank National Association in Cleveland (Account Number:
323680013097), and Party A is irrevocably authorized to debit such
account for each such payment (it being understood that Party B will at
all times maintain sufficient balances in such
account for such purposes).
Part 4. Other Provisions.
Additional Representation. Party B represents to Party A (which representation
will be deemed to be repeated by Party B on each date on which a Transaction is
entered into) that it, or any Credit Support Provider, has either: (i) total
assets exceeding $10,000,000, or (ii) a net worth of $1,000,000, and is entering
into the Transaction in connection with the conduct of its business or to manage
the risk of an asset or liability owned or incurred, or reasonably likely to be
owned or incurred in the conduct of its business.
Event of Default. Each Party agrees to notify the other party of the occurrence
of any Event of Default or Potential Event of Default immediately upon learning
of the occurrence thereof.
Disclaimer. In entering into this Agreement, Party B understands that there is
no assurance as to the direction in which interests rates in financial markets
may move in the future and that Party A makes no covenant, representation, or
warranty in this regard or in regard to the suitability of the terms of the
Agreement or any Transaction to the particular needs and financial situation of
Party B. Party B represents, which representation shall be deemed repeated with
respect to and at the time of each Transaction, that it has had the opportunity,
independently of Party A and Party A's affiliates, officers, employees, and
agents, to consult its own financial advisors and has determined that it is in
Party B's interest to enter into the Agreement and any Transaction.
KEYBANK NATIONAL ASSOCIATION VICON INDUSTRIES, INC.
- ---------------------------------------- -------------------------------------
By: ______________________________ By: ______________________________
Name: Jodie Howe Name: Kenneth M. Darby
Title: Assistant Vice President Title: President
EXHIBIT 10.9
KEYBANK NATIONAL ASSOCIATION
CONFIRMATION
Date: December 30, 1997
To: Vicon Industries, Inc
John Badke
From: KeyBank National Association
The purpose of this letter agreement is to set forth the terms and conditions of
the Swap Transaction entered into between KeyBank National Association ("Key")
and Vicon Industries, Inc ("Counterparty") on the Trade Date specified below
(the "Swap Transaction"). This letter agreement constitutes a "Confirmation" as
referred to in the Swap Agreement Specified below.
This Confirmation replaces that certain Confirmation with a Notional Amount of
$2,512,000 dated December 29, 1997 between Key and Counterparty.
1. The definitions and provisions contained in the 1991 ISDA
Definitions (as published by the International Swap Dealers Association, Inc.)
(the "Definitions") are incorporated into this Confirmation.
If you and we are parties to a Master Agreement that sets forth
the general terms and conditions applicable to Swap Transactions between us (a
"Swap Agreement"), this confirmation supplements, forms a part of, and is
subject to , such Swap Agreement. If you and we are not yet parties to a Swap
Agreement, this Confirmation will supplement, form a part of, and be subject to,
a Swap Agreement upon its execution and delivery by you and us. All provisions
contained or incorporated by reference in such Swap Agreement shall govern this
Confirmation except as expressly modified below. In the event of any
inconsistency between this Confirmation and the Definitions or the Swap
Agreement, this Confirmation will govern. In addition, if a Swap Agreement has
not been executed, this Confirmation will itself evidence a complete binding
agreement between you and us as to the terms and conditions of the Swap
Transaction to which this Confirmation relates.
This Confirmation will be governed by and construed in accordance
with the laws of the State of New York, without reference to choice of law
doctrine, provided that this provision will be superseded by any choice of law
provision in the Swap Agreement.
<PAGE>
Vicon Industries, Inc
Confirmation - Page 2
2. This Confirmation constitutes a Rate Swap Transaction under the Swap
Agreement and the terms of the Rate Swap Transaction to which this Confirmation
relates are as follows:
Notional Amount: $2,512,000 Amortizing per Schedule A
Trade Date: December 30, 1997
Effective Date: February 1, 1998
Termination Date: February 1, 2008
Fixed Amounts:
Fixed Rate Payer: Counterparty
Fixed Rate Payer
Payment Dates: The first day of each
month commencing with March
1, 1998 through and including the
Termination Date, subject to
adjustment in accordance with the
Modified Following Business
Day Convention.
Fixed Rate: 7.79%
Fixed Rate Day
Count Fraction: Actual/360
Floating Amounts:
Floating Rate Payer: Key
Floating Rate Payer
Payment Dates: The first day of each month
commencing with March 1, 1998
through and including the
Termination Date, subject to
adjustment in accordance with the
Modified Following Business
Day Convention.
<PAGE>
Vicon Industries, Inc
Confirmation - Page 3
Floating Rate Option: Prime-H.15, Weighted Average
Reset Dates: Daily
Spread: minus 1.35%
Floating Rate Day
Count Fraction: Actual/360
Calculation Agent: KeyBank National Association
Payment Instructions: NY Acct # 323680013097
Please confirm the foregoing correctly sets forth the terms of our Agreement by
executing the copy of this Confirmation enclosed for that purpose and returning
it to us.
Very truly yours,
KEYBANK NATIONAL ASSOCIATION
By: ______________________
Jodie Howe
Accepted and Confirmed as
of the Trade Date:
VICON INDUSTRIES, INC.
By: _____________________
Kenneth M. Darby
<PAGE>
Vicon Industries, Inc
Confirmation - Page 4
Schedule A
$2,512,000 Amortizing principal as follows:
Each Payment Date March 1, 1998 through February 1, 1999 $ 7,700
Each Payment Date March 1, 1999 through February 1, 2000 $ 8,300
Each Payment Date March 1, 2000 through February 1, 2001 $ 9,000
Each Payment Date March 1, 2001 through February 1, 2002 $ 9,700
Each Payment Date March 1, 2002 through February 1, 2003 $ 10,500
Each Payment Date March 1, 2003 through February 1, 2004 $ 11,300
Each Payment Date March 1, 2004 through February 1, 2005 $ 12,200
Each Payment Date March 1, 2005 through February 1, 2006 $ 13,200
Each Payment Date March 1, 2006 through February 1, 2007 $ 14,300
Each Payment Date March 1, 2007 through January 1, 2008 $ 15,400
February 1, 2008 $ 1,188,200
EXHIBIT 10.10
KEYBANK NATIONAL ASSOCIATION
CONFIRMATION
Date: December 30, 1997
To: Vicon Industries, Inc
John Badke
From: KeyBank National Association
The purpose of this letter agreement is to set forth the terms and conditions of
the Swap Transaction entered into between KeyBank National Association ("Key")
and Vicon Industries, Inc ("Counterparty") on the Trade Date specified below
(the "Swap Transaction"). This letter agreement constitutes a "Confirmation" as
referred to in the Swap Agreement Specified below.
This Confirmation replaces that certain Confirmation with a Notional Amount of
$388,000 dated December 29, 1997 between Key and Counterparty.
1. The definitions and provisions contained in the 1991 ISDA Definitions
(as published by the International Swap Dealers Association, Inc.) (the
"Definitions") are incorporated into this Confirmation.
If you and we are parties to a Master Agreement that sets forth
the general terms and conditions applicable to Swap Transactions between us (a
"Swap Agreement"), this confirmation supplements, forms a part of, and is
subject to , such Swap Agreement. If you and we are not yet parties to a Swap
Agreement, this Confirmation will supplement, form a part of, and be subject to,
a Swap Agreement upon its execution and delivery by you and us. All provisions
contained or incorporated by reference in such Swap Agreement shall govern this
Confirmation except as expressly modified below. In the event of any
inconsistency between this Confirmation and the Definitions or the Swap
Agreement, this Confirmation will govern. In addition, if a Swap Agreement has
not been executed, this Confirmation will itself evidence a complete binding
agreement between you and us as to the terms and conditions of the Swap
Transaction to which this Confirmation relates.
This Confirmation will be governed by and construed in accordance
with the laws of the State of New York, without reference to choice of law
doctrine, provided that this provision will be superseded by any choice of law
provision in the Swap Agreement.
<PAGE>
Vicon Industries, Inc
Confirmation - Page 2
2. This Confirmation constitutes a Rate Swap Transaction under the Swap
Agreement and the terms of the Rate Swap Transaction to which this Confirmation
relates are as follows:
Notional Amount: $388,000 Amortizing per Schedule A
Trade Date: December 30, 1997
Effective Date: February 1, 1998
Termination Date: February 1, 2003
Fixed Amounts:
Fixed Rate Payer: Counterparty
Fixed Rate Payer
Payment Dates: The first day of each month commencing with March
1, 1998 through and including the Termination Date,
subject to adjustment in accordance with the
Modified Following Business Day Convention.
Fixed Rate: 7.70%
Fixed Rate Day
Count Fraction: Actual/360
Floating Amounts:
Floating Rate Payer: Key
Floating Rate Payer
Payment Dates: The first day of each month commencing with March
1, 1998 through and including the Termination Date,
subject to adjustment in accordance with the
Modified Following Business Day Convention.
<PAGE>
Vicon Industries, Inc
Confirmation - Page 3
Floating Rate Option: Prime-H.15, Weighted Average
Reset Dates: Daily
Spread: minus 1.35%
Floating Rate Day
Count Fraction: Actual/360
Calculation Agent: KeyBank National Association
Payment Instructions: NY Acct # 323680013097
Please confirm the foregoing correctly sets forth the terms of our Agreement by
executing the copy of this Confirmation enclosed for that purpose and returning
it to us.
Very truly yours,
KEYBANK NATIONAL ASSOCIATION
By: ______________________
Jodie Howe
Accepted and Confirmed as
of the Trade Date:
VICON INDUSTRIES, INC.
By: _____________________
Kenneth M. Darby
<PAGE>
Vicon Industries, Inc
Confirmation - Page 4
Schedule A
$388,000 Amortizing principal as follows:
Each Payment Date March 1, 1998 through February 1, 1999 $ 5,500
Each Payment Date March 1, 1999 through February 1, 2000 $ 6,000
Each Payment Date March 1, 2000 through February 1, 2001 $ 6,400
Each Payment Date March 1, 2001 through February 1, 2002 $ 6,900
Each Payment Date March 1, 2002 through January 1, 2003 $ 7,500
February 1, 2003 $ 7,900
template: Confirm3
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 225,276
<SECURITIES> 0
<RECEIVABLES> 11,147,546
<ALLOWANCES> (603,302)
<INVENTORY> 16,179,506
<CURRENT-ASSETS> 26,949,026
<PP&E> 9,378,707
<DEPRECIATION> (5,048,244)
<TOTAL-ASSETS> 31,279,489
<CURRENT-LIABILITIES> 11,665,280
<BONDS> 7,682,838
0
0
<COMMON> 30,470
<OTHER-SE> 11,900,901
<TOTAL-LIABILITY-AND-EQUITY> 31,279,489
<SALES> 14,874,200
<TOTAL-REVENUES> 0
<CGS> 10,245,524
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,111,906
<LOSS-PROVISION> 104,000
<INTEREST-EXPENSE> 338,797
<INCOME-PRETAX> 1,073,973
<INCOME-TAX> 65,000
<INCOME-CONTINUING> 1,008,973
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,008,973
<EPS-PRIMARY> .34
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