U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-10902
INTERFACE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-1857379
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
5855 Interface Drive, Ann Arbor, Michigan 48103
(Address of principal executive offices)
(313) 769-5900
(Registrant's telephone number, including area code)
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. [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.10 par value, 4,408,383 shares as of March 31, 1997.
<PAGE>
INTERFACE SYSTEMS, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets at March 31, 1997 and September 30, 1996
Consolidated Statements of Operations for the Quarters and Six Month Ended
March 31, 1997 and 1996
Consolidated Statements of Cash Flows for the Six Months Ended March 31,
1997 and 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
INTERFACE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, September 30,
1997 1996
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 710,988 $ 1,694,725
Accounts receivable, net 14,404,753 11,007,983
Refundable income taxes 1,802,282 1,378,093
Inventories 10,311,766 10,478,322
Prepaid expenses and other 1,259,145 1,232,423
Deferred income taxes 549,000 549,000
---------- ----------
Total current assets 29,037,934 26,340,546
Property and equipment, net 4,769,962 4,816,815
Other assets 6,545,200 7,721,598
---------- ----------
$40,353,096 $38,878,959
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 8,346,939 $ 5,691,546
Accounts payable 11,103,651 9,088,765
Accrued expenses 451,342 693,767
Deferred revenue 213,670 280,703
Current portion of long-term
debt 25,900 52,400
Total current liabilities 20,141,502 15,807,181
---------- ----------
Long-term debt 219,933 234,794
Deferred income taxes 1,584,000 1,584,000
---------- ----------
Total liabilities 21,945,435 17,625,975
Stockholders' equity:
Common stock, $.10 par value,
20,000,000 shares authorized;
4,408,383 and 4,535,879
shares issued and outstanding 440,838 453,588
Additional paid-in-capital 10,497,337 11,122,063
Cumulative translation
adjustment (219,115) (236,051)
Retained earnings 7,688,601 9,913,384
Total stockholders' equity 18,407,661 21,252,984
---------- ----------
$40,353,096 $38,878,959
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INTERFACE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Quarters ended Six months ended
March 31, March 31,
1997 1996 1997 1996
(unaudited) (unaudited)
Net revenues $23,319,188 $21,906,167 $42,913,585 $40,616,741
Cost of revenues 21,444,053 18,394,323 38,409,560 33,796,744
---------- ---------- ---------- ----------
Gross profit 1,875,135 3,511,844 4,504,025 6,819,997
Product development
costs 625,780 430,909 1,127,530 867,748
Selling, general and
administrative
expenses 3,202,613 2,527,274 6,205,435 4,961,449
--------- --------- --------- ---------
Income (loss) from
operations (1,953,258) 553,661 (2,828,940) 990,800
Interest expense (157,505) (114,687) (314,804) (217,533)
Dividend and interest
income 1,091 55,433 40,655 108,323
Gain on sale of
securities - - 74,777 -
--------- --------- --------- --------
Income (loss)
before income
taxes (2,109,672) 494,407 (3,028,312) 881,590
Income tax (benefit)
provision (609,943) 130,413 (803,530) 317,785
--------- -------- --------- --------
Net income (loss) $(1,499,729) $ 363,994 $(2,224,782) $ 563,805
========= ======== ========== ========
Net income (loss)
per share $ (0.34) $ 0.08 $ (0.50) $ 0.12
========= ======== ========== ========
Weighted average
shares outstanding 4,408,384 4,761,316 4,472,132 4,578,651
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INTERFACE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended March 31,
1997 1996
(unaudited)
Cash flows from operating activities:
Net income (loss) $(2,224,782) $ 563,805
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,813,479 1,552,712
Deferred income taxes - 40,000
Gain on sale of securities (74,777) -
Loss on sale of fixed assets 2,056 -
Write-off of software development
costs 357,358 -
Change in operating assets and
liabilities:
Accounts receivable (3,396,770) (4,674,338)
Refundable income taxes (424,189) -
Inventories 166,556 (1,313,466)
Prepaid expenses and other (129,557) 193,861
Other assets (248,393) (175,720)
Accounts payable 2,014,886 5,090,562
Accrued expense (242,424) 54,031
Deferred revenue (67,033) (26,280)
---------- ---------
Net cash provided by (used in)
operating activities (2,453,490) 1,305,167
---------- ---------
Cash flows from investing activities:
Additions to notes receivable - (735,000)
Reduction of notes receivable 52,811 -
Additions to property and
equipment (437,862) (629,767)
Additions to software development
costs (953,675) (1,136,959)
Investment in foreign subsidiary - (48,806)
Proceeds from sale of securities 177,61 -
--------- ---------
Net cash provided by (used in)
investing activities (1,161,114) (2,550,532)
========= ==========
Cash flows from financing activities:
Increase (decrease) in notes
payable 2,655,393 (84,198)
Reduction of long-term debt (41,361) (25,607)
Sale of stock - 1,943,704
--------- ---------
Net cash provided by (used in)
financing activities 2,614,032 1,833,899
--------- ---------
Effect of exchange rate changes on cash 16,835 (30,973)
--------- ---------
Net (decrease) increase in cash and
cash equivalents (983,737) 557,561
Cash and cash equivalents, beginning
of period 1,694,725 3,735,758
Cash and cash equivalents, end of
period $ 710,988 $4,293,319
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
INTERFACE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The interim consolidated financial statements of Interface Systems, Inc.
have been prepared by the Company without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The
information included in this report should be read in conjunction with the
financial statements for the year ended September 30, 1996 and notes thereto
included in the Company's Annual Report on Form 10-K.
In the opinion of management, the accompanying interim consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the Company's
financial position, results of operations and cash flows for the periods
presented. The results for the quarter ended March 31, 1997 are not
necessarily indicative of the results to be expected for any future period
or for the entire year.
NOTE B - BORROWINGS
On February 19, 1997, the Company renewed its credit facilities with a bank
which provide for aggregate borrowings of up to $11.5 million. As of March
31, 1997, $8,346,939 was outstanding under these facilities. Advances
under these facilities bear interest at the bank's prime rate (8.5% at March
31, 1997) plus 1/2%, are payable on demand and are collateralized by
substantially all of the Company's assets. The credit facilities expire
August 31, 1997 and are subject to renewal thereafter.
Under the terms of the agreements, the Company is required to maintain
certain minimum working capital, net worth and profitability levels and
other specific financial ratios. In addition, the agreements prohibit the
payment of cash dividends and contain certain restrictions on the Company's
ability to borrow money or purchase assets or interests in other entities
without the prior written consent of the bank.
NOTE C - TREASURY SHARES TO BE ACQUIRED
During the quarter, the Company acquired 127,495 shares of its Common Stock
valued at $637,476, upon the default in payment of all principal and
interest due and owing as of such date by a former officer of the Company
under the terms of a note payable owed by such officer to the Company. The
value of the shares is equal to all indebtedness which was owed to the
Company at the time of default.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations Results of Operations
Net Revenues.
Revenues for the second quarter ended March 31, 1997 were $23.3 million, an
increase of 6.5% over revenues of $21.9 million for the second quarter of
fiscal 1996. Revenues for the first six months of fiscal 1997 were $42.9
million, an increase of 5.7% over revenues of $40.6 million for the same
period of fiscal 1996. The increases for both the quarter and six month
periods were primarily due to increased distribution revenue of Interface
Systems International Ltd. ("ISIL") and increased sales of Enterprise
Network core products, offset by a decrease in sales of printer products.
Cost of Revenues. Cost of revenues increased to $21.4 million, or 92% of
net revenues for the second quarter ended March 31, 1997, from $18.4
million, or 84% of net revenues for the second quarter of fiscal 1996. Cost
of revenues increased to $38.4 million, or 90% of net revenues for the first
six months of fiscal 1997, from $33.8 million, or 83% of net revenues for
the same period of fiscal 1996. For the second quarter and the first six
months of fiscal 1997, cost of revenues increased in absolute dollars and as
a percentage of net revenue primarily due to write-offs related to the
printer business consisting of $1,445,000 of inventory and $320,000 of
software development costs. The write-offs reflect obsolescence and pricing
pressures in the rapidly changing printer market and the Company's shift
towards greater emphasis on software products. Cost of revenues for the
second quarter and the first six months of fiscal 1997, excluding the effect
of the write-offs, was 84% and 85% of sales, respectively. In addition, the
increase in cost of revenues results from increased ISIL distribution
revenue which has higher component cost and lower gross profit margins.
Product Development Costs. Product development costs increased 45% to
$626,000 for the second quarter of fiscal 1997 from $431,000 for the second
quarter of fiscal 1996. Product development costs increased 30% to
$1,128,000 for the first six months of fiscal 1997 from $868,000 for the
same period of fiscal 1996. The increase for both periods primarily
reflects a change in the Company's strategy towards greater emphasis on
developing software products, which resulted in a decrease in the amount of
expense deferred through capitalization of internally developed software.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 27% to $3.2 million for the second quarter
of fiscal 1997 from $2.5 million for the second quarter of fiscal 1996.
Selling, general and administrative expenses increased 25% to $6.2 million
for the first six months of fiscal 1997 from $4.9 million for the same
period of fiscal 1996. The increase in these expenses is due to increased
selling and marketing personnel in the United Kingdom to support the growth
in ISIL's distribution business and to expenses associated with an interim
management team and the hiring of a new CEO. In addition, the increase for
the first six months of fiscal 1997 is due to marketing expenses incurred to
promote the Company's Oasis products.
Interest Expense. For the second quarter of fiscal 1997, interest expense
increased to $158,000 from $115,000 for the same period of 1996. For the
first six months of fiscal 1997, interest expense increased to $315,000 from
$218,000 for the same period of 1996. The increases were due to increased
borrowing, primarily at ISIL.
Income Taxes. The effective tax rate for the quarter and six months ended
March 31, 1997 was a benefit of 28.9% and 26.5%, respectively. The tax
benefit for these periods was below the statutory rate because losses at
ISIL are not eligible for tax benefit.
Liquidity and Capital Resources
At March 31, 1997, the Company's primary sources of liquidity included cash
and cash equivalents of $711,000 and short-term credit facilities with a
bank providing for $11.5 million of borrowings, of which $3.2 million was
available.
<PAGE>
For the first six months of fiscal 1997, net cash of $2.5 million was used
in operating activities compared to net cash of $1.3 million provided by
operating activities for the same period of fiscal 1996. Cash was used in
operating activities for the first six months of fiscal 1997 primarily as a
result of net operating losses for the period and increased accounts
receivable partially offset by increased accounts payable. Net cash used in
investing activities was $1.2 million for the first six months of fiscal
1997 compared with $2.6 million for the same period of fiscal 1996. The
decrease was primarily due to a $735,000 note receivable funded in the first
half of fiscal 1996, partially offset by proceeds from sale of securities of
$177,000 in the first half of fiscal 1997. In addition, the decrease was
due to reduction in additions to fixed assets and software development costs
in the first six months of fiscal 1997.
In February 1997, the Company renewed its credit facilities with a bank
which provide for aggregate borrowings of up to $11.5 million. As of March
31, 1997, $8.3 million was outstanding under these facilities. The
borrowings are used primarily by ISIL in the operation of its distribution
business. Advances under these facilities bear interest at prime plus 1/2%
are payable on demand and are collateralized by accounts receivable,
inventory and machinery and equipment. The credit facilities expire August
31, 1997 and are subject to renewal thereafter. Under the terms of the
agreements, the Company is required to maintain certain minimum working
capital, net worth and profitability levels and other specific financial
ratios. In addition, the agreements prohibit the payment of cash dividends
and contain certain restrictions on the Company's ability to borrow money or
purchase assets or interests in other entities without the prior written
consent of the bank.
The Company believes that its existing cash balances, available credit
facility and future operating cash flows are sufficient for near term
operating needs. The Company believes it will renew the bank credit
facilities prior to expiration of the facilities.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on April 18, 1997
in Ann Arbor, Michigan. At the Company's Annual Meeting, the Stockholders
approved the election of the following directors for one year terms as
follows:
For Against
Garnel F. Graber 3,648,695 116,086
Robert A. Nero 3,654,617 110,164
George W. Perrett 3,648,852 115,929
David O. Schupp 3,637,195 127,586
David C. Seigle 3,562,718 202,063
Robert A. Seigle 3,562,031 202,750
Lloyd A. Semple 3,650,228 114,553
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Credit Authorization Agreement dated February 19, 1997
between Interface Systems, Inc. (the "Company") and NBD Bank
("NBD").
10.2 Credit Authorization Agreement dated February 19, 1997
between I.G.K. Industries and NBD.
10.3 Debenture dated March 10, 1997 between Interface Systems
International Limited and The First National Bank of
Chicago.
10.4 Master Demand Business Loan Note dated February 19, 1997
(the "Company").
10.5 Master Demand Business Loan Note dated February 19, 1997
(I.G.K.).
10.6 Continuing Pledge Agreement dated February 19, 1997 between
the Company and NBD.
10.7 Continuing Security Agreement dated February 19, 1997
between the Company and NBD.
10.8 Continuing Security Agreement dated February 19, 1997
between I.G.K. and NBD.
10.9 Future Advance Mortgage dated February 19, 1997 between
Interface and NBD.
10.10 Future Advance Mortgage dated February 19, 1997 between
I.G.K. and NBD.
10.11 Continuing Guaranty between the Company and NBD.
10.12 Continuing Guaranty and Indemnity for International Credits
between the Company and NBD.
10.13 Continuing Guaranty and Indemnity for International Credits
between I.G.K. and NBD.
27 Financial Data Schedule. (Edgar version only)
(b) Forms 8-K
None.
All other items omitted are not applicable or the answers thereto are
negative.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERFACE SYSTEMS, INC.
/S/ John R. Ternes
- -----------------------
Date: May 14, 1997
John R. Ternes
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer and a duly authorized officer
ofthe Registrant)
CREDIT AUTHORIZATION AGREEMENT
NBD Bank (the "Bank"), 611 Woodward Avenue, Detroit, Michigan 48226-
3947, has approved the credit facilities listed below (collectively, the
"Credit Facilities," and individually, as designated below) to Interface
Systems, Inc. (the "Borrower"), 5855 Interface Drive, Ann Arbor, Michigan
48103 (Borrower's Address), subject to the terms and conditions set forth in
this agreement.
1.0 Credit Facilities. (Check and complete applicable sections)
1.1 Uncommitted Credit Authorizations. The Bank has approved
the uncommitted credit authorizations listed below (collectively, the
"Credit Authorizations," and individually, as designated below) subject to
the terms and conditions of this agreement and the Bank's continuing
satisfaction with the Borrower's financial status. Disbursements under the
Credit Authorizations are solely at the Bank's discretion. Any disbursement
on one or more occasions shall not commit the Bank to make any subsequent
disbursement.
[ x ] A. Facility A. The Bank has approved an uncommitted
Credit Authorization to the Borrower in the principal sum not to exceed
$3,500,000.00 in the aggregate at any one time outstanding ("Facility A").
Credit under Facility A shall be in the form of disbursements evidenced by
credits to the Borrower's account and shall be repayable as set forth in a
Master Demand Note executed concurrently (referred to in this agreement both
singularly and together with any other promissory notes referenced in this
Section 1 as the "Notes"). The proceeds of Facility A shall be used for the
following purpose: Working capital. Facility A shall expire on August 31,
1997 unless earlier withdrawn.
[ ] B. Facility B (Including Letters of Credit). The Bank
has approved an uncommitted Credit Authorization to the Borrower in the
principal sum not to exceed $
in the aggregate at any one time outstanding ("Facility B"). Facility B
shall include the issuance of [commercial/standby] letters of credit not
exceeding $ in the aggregate at any one time
outstanding, expiring not later than , 199
[which shall include time drafts expiring not later than
, 199 ] (the "Letters of Credit"). (Strike bracketed words if
inapplicable.) Each Letter of Credit shall be in form acceptable to the Bank
and shall bear a fee of % per year of the face amount of each standby
Letter of Credit plus an issuance fee of
$ upon issuance of each Letter of Credit. (If
no fee is listed, the Letters of Credit shall bear a fee to be agreed upon
by the Bank and the Borrower). Credit under Facility B shall be in the form
of disbursements evidenced by credits to the Borrower's account and shall be
repayable as set forth in a Master Demand Note executed concurrently
(referred to in this agreement both singularly and together with any other
promissory notes referenced in this Section 1 as the "Notes") or by issuance
of a Letter of Credit upon completion of an application acceptable to the
Bank. The proceeds of Facility B shall be used for the following purpose:
.
Facility B shall expire on , 199 unless earlier
withdrawn.
[x ] C. Facility C (Purchase Money Term Loans *and Leases).
The Bank has approved an uncommitted credit authorization to the Borrower in
the principal sum not to exceed $200,000.00 in the aggregate at any one time
outstanding ("Facility C"). Facility C shall be in the form of loans
evidenced by the Borrower's notes on the Bank's form (referred to in this
agreement both singularly and together with any other promissory notes
referenced in this Section 1 as the "Notes"), the proceeds of which shall be
used to purchase the following equipment
. Interest on
each loan shall accrue at a rate to be agreed upon by the Bank and the
Borrower at the time the loan is made. The maturity of each note shall not
exceed 60 months from the note date. Notwithstanding the aggregate amount
of Facility C stated above, the original principal amount of each loan shall
not exceed the lesser of 80% of the cost of the equipment purchased with
loan proceeds or $200,000.00. Facility C shall expire on August 31, 1997
unless earlier withdrawn. *Leases will not exceed 100%.
[ ] 1.2 Term Loans. The Bank agrees to extend credit to the
Borrower in the form of term loan(s) (whether one or more, the "Term Loans")
in the principal sum(s) of $250,000.00 respectively, bearing interest and
payable as set forth in the Term Note(s) executed concurrently (referred to
in this agreement both singularly and together with any other promissory
notes referenced in this Section 1 as the "Notes"). The proceeds of the
Term Loans shall be used for the following purpose:
.
2.0 Conditions Precedent.
2.1 Conditions Precedent to Initial Extension of Credit. Before
the first extension of credit under this agreement, whether by disbursement
of a loan, issuance of a letter of credit, or otherwise, the Borrower shall
deliver to the Bank, in form and substance satisfactory to the Bank:
A. Loan Documents. The Notes; the letter of credit
applications required by Section 1.2; the security agreements, financing
statements, and mortgages required by Section 5.1; the guaranties required
by Section 6.0; the subordination agreements required by Section 7.0; and
any other loan documents which the Bank may reasonably require to give
effect to the transactions contemplated by this agreement;
B. Evidence of Due Organization and Good Standing.
Evidence satisfactory to the Bank of the due organization and good standing
of the Borrower and every other business entity that is a party to this
agreement or any other loan document required by this agreement; and
C. Evidence of Authority to Enter into Loan Documents.
Evidence satisfactory to the Bank that (i) each party to this agreement or
any other loan document required by this agreement is authorized to enter
into the transactions contemplated by this agreement and the other loan
documents, and (ii) the person signing on behalf of each such party is
authorized to do so.
2.2 Conditions Precedent to Each Extension of Credit. Before
any extension of credit under this agreement, whether by disbursement of a
loan, issuance of a letter of credit, or otherwise, the following conditions
shall have been satisfied:
A. Representations. The representations contained in
Section 10 shall be true on and as of the date of the extension of credit;
B. No Event of Acceleration. No event of acceleration
shall have occurred and be continuing or would result from the extension of
credit;
C. Continued Satisfaction. The Bank shall have
remained satisfied with the Borrower's managerial and financial status;
D. Additional Approvals, Opinions, and Documents. The
Bank shall have received such other approvals, opinions and documents as it
may reasonably request; and
E. Other Conditions.
3.0 Borrowing Base/Annual Pay Down.
3.1 Borrowing Base. (check and complete if applicable)
Notwithstanding any other provision of this agreement, the aggregate
principal amount outstanding at any one time under (check applicable
clauses)
[ x ] Facility A
[ ] Facility B
shall not exceed the lesser of the Borrowing Base or $3,500,000.00 Borrowing
Base means: (Check and complete applicable clauses)
[x] A. 75% of the Borrower's trade accounts receivable
in which the Bank has a perfected, first priority security interest,
excluding accounts more than 90 days past due from the date of invoice,
accounts subject to offset or defense, government, bonded, affiliate and
foreign accounts, accounts from trade debtors of which more than % of
the aggregate amount owing from the trade debtor to the Borrower is more
than days past due, and accounts otherwise unacceptable to the
Bank, plus
[x] B. Inventory of the Borrower in which the Bank
has a perfected first priority security interest, valued at the lower of
cost or market but not exceeding $ N/A in the aggregate, as
follows:
[ ] (1) N/A % of aggregate inventory; or
[X] (1) 30% of purchased parts inventory; and
[X] (2) 0% of work-in-process inventory and
service stock and demos; and
[ ] (3) 30% of finished goods inventory, plus
[ ] C. % of the value of
the Borrower's machinery and equipment in which the Bank has a perfected,
first priority security interest, but not exceeding
$ , plus
[ ] D. Additional Borrowing Base provisions are contained
in the attached addendum.
3.2 Annual Pay Down. (complete if applicable) Notwithstanding
any other provision of this agreement, there shall be no debt outstanding
under for a period of
(Facility A, Facility B, etc.)
consecutive months during each fiscal year of the Borrower.
4.0 Fees and Expenses. (complete if applicable)
4.1 Fees. Upon closing of a Facility C Loan, the Borrower shall
pay the Bank the following fees, all of which the Borrower acknowledges have
been earned by the Bank: $25,000.00.
4.2 Out-of-Pocket Expenses. In addition to any fee set forth in
Section 4.1 above, the Borrower shall reimburse the Bank for its out-of-
pocket expenses and reasonable attorney's fees (including the fees of in-
house counsel) allocated to the Credit Facilities.
5.0 Security.
5.1 Payment of the borrowings under the Credit Facilities shall
be secured by a first security interest and/or real estate mortgage, as the
case may be, covering the following property and all its additions,
substitutions, increments, proceeds and products, whether now owned or later
acquired ("Collateral"): (check and complete applicable clauses)
[x] A. Accounts Receivable. All of the Borrower's
accounts, chattel paper, general intangibles, instruments, and documents (as
those terms are defined in the Michigan Uniform Commercial Code), rights to
refunds of taxes paid at any time to any governmental entity, and any
letters of credit and drafts under them given in support of the foregoing,
wherever located. The Borrower shall deliver to the Bank executed security
agreements and financing statements in form and substance satisfactory to
the Bank.
[x] B. Inventory. All of the Borrower's inventory,
wherever located. The Borrower shall deliver to the Bank executed security
agreements and financing statements in form and substance satisfactory to
the Bank.
[x] C. Equipment. All of the Borrower's equipment,
wherever located. The Borrower shall deliver to the Bank executed security
agreements and financing statements in form and substance satisfactory to
the Bank.
[x] D. Real Estate. The real property, including
improvements, located at 5855 Interface Drive, Ann Arbor, Michigan and 7232
Jackson Road, Ann Arbor, MI. The Borrower shall deliver to the Bank an
executed mortgage, ALTA mortgage title insurance policy without exceptions,
mortgage survey certified to the Bank and, where applicable, an assignment
of rents, subordinations of leases, and/or collateral assignments of land
contracts, all in form and substance satisfactory to the Bank.
[ ] E. Pledge of 65.6% or 1,400,000 shares of Interface
Systems International, Ltd.
5.2 No forbearance or extension of time granted any subsequent
owner of the Collateral shall release the Borrower from liability.
5.3 Additional Collateral/Setoff. To further secure payment of
the borrowings under the Credit Facilities and all of the Borrower's other
liabilities to the Bank, the Borrower grants to the Bank a continuing
security interest in: (i) all securities and other property of the Borrower
in the custody, possession or control of the Bank (other than property held
by the Bank solely in a fiduciary capacity) and (ii) all balances of deposit
accounts of the Borrower with the Bank. The Bank shall have the right at any
time to apply its own debt or liability to the Borrower, or to any other
party liable for payment of the borrowings under the Credit Facilities, in
whole or partial payment of such borrowings or other present or future
liabilities, without any requirement of mutual maturity.
5.4 Cross Lien. Any of the Borrower's other property in which
the Bank has a security interest to secure payment of any other debt,
whether absolute, contingent, direct or indirect, including the Borrower's
guaranties of the debts of others, shall also secure payment of and be part
of the Collateral for the Credit Facilities.
[ ] 6.0 Guaranties. (check and complete if applicable) Payment of
the Borrower's liabilities under the Credit Facilities shall be guaranteed
by I.G.K. Industries, Inc., by execution of the Bank's form of guaranty
agreement. The liability of the guarantors, if more than one, shall be joint
and several.
[ ] 7.0 Subordination. (check and complete if applicable)
The Credit Facilities shall be supported by the subordination of all
debt owing from the Borrower to
, including without limitation debt currently owing in the
amount of $ , in manner and by
agreement satisfactory to the Bank.
8.0 Affirmative Covenants. So long as any debt remains
outstanding under the Credit Facilities, the Borrower, and each of its
subsidiaries, if any, shall:
8.1 Insurance. Maintain insurance with financially sound and
reputable insurers covering its properties and business against those
casualties and contingencies and in the types and amounts as shall be in
accordance with sound business and industry practices.
8.2 Existence. Maintain its existence and business operations as
presently in effect in accordance with all applicable laws and regulations,
pay its debts and obligations when due under normal terms, and pay on or
before their due date, all taxes, assessments, fees and other governmental
monetary obligations, except as they may be contested in good faith if they
have been properly reflected on its books and, at the Bank's request,
adequate funds or security has been pledged to insure payment.
8.3 Financial Records. Maintain proper books and records of
account, in accordance with generally accepted accounting principles where
applicable, and consistent with financial statements previously submitted to
the Bank.
8.4 Notice. Give prompt notice to the Bank of the occurrence of
(i) any event of acceleration, and (ii) any other development, financial or
otherwise, which would affect the Borrower's business, properties or affairs
in a materially adverse manner.
8.5 Collateral Audits. (complete if applicable) Permit the Bank
or its agents to perform
audits
of the Collateral. The Borrower shall compensate the Bank for such audits in
(monthly, annual, etc.) accordance with the Bank's schedule of fees as may
be amended from time to time. Whether or not this section has been
completed, the Bank shall retain the right to inspect the Collateral and
business records related to it at such times and at such intervals as the
Bank may reasonably require.
8.6 Management. (complete if applicable) Maintain Interface
Systems, Inc. as Shareholder.
8.7 Financial Reports. Furnish to the Bank whatever information,
books, and records the Bank may reasonably request, including at a minimum:
(Check and complete applicable clauses. If the Borrower has subsidiaries,
all financial statements required will be provided on a consolidated and on
a separate basis.)
[x] A. Within 30 days after each monthly period, a
consolidating balance sheet as of the end of that period and statements of
income, cash flows, and retained earnings from the beginning of that fiscal
year to the end of that period, certified as correct by one of its
authorized agents.
[ x ] B. Within 90 days after, and as of the end of, each of
its fiscal years, a detailed audit including a balance sheet and statements
of income, retained earnings, and cash flows certified by an independent
certified public accountant of recognized standing.
[x] C. Within 30 days after and as of the end of each
calendar month*, the following lists, each certified as correct by one of
its authorized agents: (check applicable clauses) *when borrowing
[x] (1) a list of accounts receivable, aged from
date of invoice;
[x] (2) a list of accounts payable, aged from date
of receipt;
[x] (3) a list of inventory, valued at the lower of
cost or market.
[ ] D. Within ________________ days after and as of the
end of each calendar year, the signed personal financial statement of .
(Borrower/Guarantor/other)
[ ] E. Within five (5) days after filing, a signed copy of
the annual tax return, with exhibits, of .
(Borrower/Guarantor/other)
[ ] F. An Environmental Certificate on the Bank's form on
and as of the date of this agreement and thereafter as required by the
Environmental Certificate.
[ x ] G. Quarterly 10-Q's
[ x ] H. Within 30 days after each month end, a borrowing
base exhibit indicating compliance with Section 3.1 herein, when borrowing.
9.0 Negative Covenants
9.1 Definitions. As used in this agreement, the following terms
shall have the following respective meanings:
A. "Subordinated Debt" means debt subordinated to the
Bank in manner and by agreement satisfactory to the Bank.
B. "Tangible Net Worth" means total assets less
intangible assets and total liabilities. Intangible assets include goodwill,
patents, copyrights, mailing lists, catalogs, trademarks, bond discount and
underwriting expenses, organization expenses, and all other intangibles.
9.2 Unless otherwise noted, the financial requirements set forth
in this section shall be computed in accordance with generally accepted
accounting principles applied on a basis consistent with financial
statements previously submitted by the Borrower to the Bank.
9.3 Without the written consent of the Bank, so long as any debt
remains outstanding under the Credit Facilities, the Borrower shall not:
(where appropriate, covenants apply on a consolidated basis - clauses H-O
apply only if completed).
A. Dividends. Acquire or retire any of its shares of
capital stock, or declare or pay dividends or make any other distributions
upon any of its shares of capital stock, except dividends payable in its
capital stock and dividends payable to "Subchapter S" corporation
shareholders in amounts sufficient in amount to pay the shareholders' income
tax obligations related to the Borrower's taxable income.
B. Sale of Shares. Issue, sell or otherwise dispose of
any shares of its capital stock or other securities, or rights, warrants or
options to purchase or acquire any such shares or securities.
C. Debt. Incur, or permit to remain outstanding, debt
for borrowed money or installment obligations, except debt reflected in the
latest financial statement of the Borrower furnished to the Bank prior to
execution of this agreement and not to be paid with proceeds of borrowings
under the Credit Facilities. For purposes of this covenant, the sale of any
accounts receivable shall be deemed the incurring of debt for borrowed
money.
D. Guaranties. Guarantee or otherwise become or remain
secondarily liable on the undertaking of another, except for endorsement of
drafts for deposit and collection in the ordinary course of business.
E. Liens. Create or permit to exist any lien on any of
its property, real or personal, except: existing liens known to the Bank;
liens to the Bank; liens incurred in the ordinary course of business
securing current nondelinquent liabilities for taxes, worker's compensation,
unemployment insurance, social security and pension liabilities; and liens
for taxes being contested in good faith.
F. Advances and Investments. Purchase or acquire any
securities of, or make any loans or advances to, or investments in, any
person, firm or corporation, except obligations of the United States
Government, open market commercial paper rated one of the top two ratings by
a rating agency of recognized standing, or certificates of deposit in
insured financial institutions.
G. Use of Proceeds. Use, or permit any proceeds of
the Credit Facilities to be used, directly or indirectly, for the purpose of
"purchasing or carrying any margin stock" within the meaning of Federal
Reserve Board Regulation U. At the Bank's request, the Borrower shall
furnish to the Bank a completed Federal Reserve Board Form U-1.
H. Working Capital. Permit the difference between its
current assets [less all sums owing from stockholders, member or partners,
as the case may be, and officers, managers and directors] and current
liabilities [plus all sums (other than Subordinated Debt) owing to
stockholders, members or partners, as the case may be, and officers,
managers and directors] to be less than
$ . (Strike bracketed words if not
applicable.)
I. Net Worth. Permit its Worth to be less than
$19,000,000 at 12-31-96 and increasing by 75% of monthly net income thereafter.
J. Current Rates. Permit the ratio of its current
assets to current liabilities to be less than to 1.00.
K. Leverage Ratio. Permit the ratio of its total
liabilities to its Tangible Net Worth to exceed 1.50 to 1.00.
L. Fixed Assets. Expend for, contract for, lease, rent, or
otherwise acquire fixed assets, if the expense to the Borrower, and its
subsidiaries, if any shall exceed $ in the aggregate.
M. Leases. Contract for or assume in any manner, lease
obligations if the aggregate of all payments shall exceed $ in any one
fiscal year.
N. Compensation. Pay or award compensation of any kind, in any one
fiscal year to exceeding $ .
O. Maintain Debt Service Coverage (defined as EBITDA divided by
principal plus interest payments of not less than 1.50 to 1.0.
10.0 Representations by Borrower: Each Borrower represents: (a)
that the execution and delivery of this note and the performance of the
obligations it imposes do not violate any law, conflict with any agreement
by which it is bound, or require the consent or approval of any governmental
authority or any third party; (b) that this note is a valid and binding
agreement, enforceable according to its terms; and (c) that all balance
sheets, profit and loss statements, and other financial statements furnished
to the Bank are accurate and fairly reflect the financial condition of the
organizations and persons to which they apply on their effective dates,
including contingent liabilities of every type, which financial condition
has not changed materially and adversely since those dates. Each Borrower,
other than a natural person, further represents: (a) that it is duly
organized, existing and in good standing pursuant to the laws under which it
is organized; and (b) that the execution and delivery of this note and the
performance of the obligations it imposes (i) are within its powers and have
been duly authorized by all necessary action of its governing body; and (ii)
do not contravene the terms of its articles of incorporation or
organization, its by laws, or any partnership, operating or other agreement
governing its affairs.
11.0 Acceleration
11.1 Events of Acceleration: If any of the following events occur,
the Credit Facilities shall terminate and all borrowings under them shall
become due immediately, without notice at the Bank's option, whether or not
the Bank has made demand:
A. The Borrower or guarantor of any of the Credit Facilities (the
"Guarantor") fails to pay when due any amount payable under the Credit
Facilities or under any agreement or instrument evidencing debt to any
creditor.
B. The Borrower or Guarantor (i) fails to observe or perform any term
of this agreement or the notes; (ii) makes any materially incorrect or
misleading representation, warranty, or certificate to the Bank (iii) makes
any materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (iv) defaults under
the terms of any agreement or instrument relating to any debt for borrowed
money (other than borrowings under the Credit Facilities), including any
capitalized lease obligation, such that the creditor declares the debt due
before its maturity.
C. There is a default under the terms of any loan agreement, mortgage,
security agreement, or any other document executed as part of the Credit
Facilities or any guaranty of the liabilities under the Credit Facilities
becomes unenforceable in whole or in part, or any guarantor fails to
promptly perform under its guaranty.
D. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of any
Guarantor or Borrower or any affiliate of any Guarantor or Borrower, or if
any of them becomes subject to any multi-employer plan.
E. The Borrower or any Guarantor becomes insolvent or unable to pay
its debts as they become due.
F. The Borrower or any Guarantor (i) makes an assignment for the
benefit of creditors; (ii) consents to the appointment of a custodian,
receiver, or trustee for itself or for a substantial part of its assets; or
(iii) commences any proceeding under any bankruptcy, reorganization,
liquidation, insolvency or similar laws of any jurisdiction.
G. A custodian, receiver or trustee is appointed for any Guarantor or
Borrower or for a substantial part of its assets without its consent, and is
not removed within 60 days after the appointment.
H. Proceedings are commenced against any Borrower or Guarantor under
any bankruptcy, reorganization, liquidation, insolvency or similar laws of
any jurisdiction, and they remain dismissed for 60 days after commencement;
or any Guarantor or Borrower consents to the commencement of those
proceedings.
I. Any judgment is entered against Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of any
Guarantor or Borrower.
J. The Borrower or any Guarantor dies.
K. The Borrower or any Guarantor, without the Bank's written consent,
(i) is dissolved, (ii) merges or consolidates with any third party, (iii)
leases, sells or otherwise conveys a material part of its assets or business
outside the ordinary course of business, (iv) leases, purchases or otherwise
acquires a material part of the assets of any other corporation or business
entity except in the ordinary course of such business, or (v) agrees to do
any of the foregoing.
L. The loan-to-value ratio of any pledged securities at any time
exceeds N/A % and that excess continues for five (5) days after notice from
the Bank to the Borrower.
M. There is a substantial change in the existing or prospective
financial condition of the Borrower or any Guarantor which the Bank in good
faith determines to be materially adverse.
N. The Bank in good faith deems itself insecure.
11.2 Remedies: If the amounts owning under the Credit Facilities
are not paid at maturity, whether by demand, acceleration or otherwise, the
Bank shall have all of the rights and remedies provided for by law or under
any agreement. Any requirement of reasonable notice shall be met if the
Bank sends notice at least seven (7) days prior to the date of sale,
disposition or other event which requires notice. The Bank is authorized to
cause all or any part of the Collateral to be transferred to or registered
in its name or in the name of any other person, firm or corporation, with
or without designating the capacity of that nominee. The Borrower shall be
liable for any deficiency remaining after disposition of any Collateral.
The Borrowere is liable to the Bank for all reasonable costs and expenses of
every kind incurred in the making or collection of the Credit Facilitites,
including, without limitation, reasonable attorneys' fees and court costs
whether attributable to the Bank's in-house or outside counsel. These costs
and expenses shall include, without limitation, any costs or expenses
incurred by the Bank in any bankruptcy, reorganization, insolvency or other
similar proceeding.
12.0 Miscellaneous.
12.1 Notice from one party to another relating to this agreement
shall be deemed effective if made in writing (including telecommunications)
and delivered to the recipient's address, telex number or telecopier number
set forth under its name by any of the following means: (a) hand delivery,
(b) registered or certified mail, postage prepaid, with return receipt
requested, (c) first class or express mail, postage prepaid, (d) Federal
Express, Purolator Courier or like overnight courier service or (e)
telecopy, telex or other wire transmission with request for assurance of
receipt in a manner typical with respect to communications of that type.
Notice made in accordance with this section shall be deemed delivered on
receipt if delivered by hand or wire transmission, on the third business day
after mailing if mailed by first class. registered or certified mail, or on
the next business day after mailing or deposit with an overnight courier
service if delivered by express mail or overnight courier.
12.2 No delay on the part of the Bank in the exercise of any right
or remedy shall operate as a waiver. No single or partial exercise by the
Bank of any right or remedy shall preclude any other future exercise of it
or the exercise of any other right or remedy. No waiver or indulgence by
the Bank of any default shall be effective unless in writing and signed by
the Bank, nor shall a waiver on one occasion be construed as a bar to or
waiver of that right on any future occasion.
12.3 This agreement, the Notes and any related loan documents
embody the entire agreement and understanding between the Borrower and the
Bank and supersede all prior agreements and understanding relating to
their subject matter. If any one or more of the obligations of the Borrower
under this agreement or the Notes shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, illegality, unenforceability in one
jurisdiction shall not affect the validity, legality or enforceability of
the obligations of the Borrowere under this agreement or the Notes in any
other jurisdiction.
12.4 The Borrower, if more than one, shall be jointly and severally
liable.
12.5 This agreement is delivered in the state of Michigan and
governed by Michigan law.
12.6 Sections headings are for convenience of reference only and
shall not affect the interpretation of this agreement.
.
13.0 Waiver of Jury Trial: The Bank and the Borrower, after
consulting or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may have to a
trial by jury in any litigation based upon or arising out of this note or
any related instrument or agreement or any of the transactions contemplated
by this note or any course of conduct, dealing, statements whether oral or
written, or actions of either of them. Neither the Bank nor the Borrower
shall seek to consolidate, by counterclaim or otherwise, any action in which
a jury trial has been waived with any other action in which a jury trial
cannot be or has not been waived. These provisions shall not be deemed to
have been modified in any respect or relinquished by either the Bank or the
Borrower except by a written instrument executed by both of them.
Executed by the parties on February 19, 1997.
"Bank" "Borrower"
NBD BANK INTERFACE SYSTEMS, INC.
By: Michael K. Kelly By: David O. Schupp
First Vice President Treasurer
Address for Notices: Address for Notices:
125 S. Main Street 5855 Interface Drive
Ann Arbor, MI 48102 Ann Arbor, MI 48103
Fax/Telex No. (313) 995-8000 Fax/Telex No. (313) 769-1047
CREDIT AUTHORIZATION AGREEMENT
NBD Bank (the "Bank"), 611 Woodward Avenue, Detroit, Michigan 48226-
3947, has approved the credit facilities listed below (collectively, the
"Credit Facilities," and individually, as designated below) to I.G.K.
Industries, Inc. (the "Borrower"), 7332 Jackson Road, Ann Arbor, MI 48103
(Borrower's Address), subject to the terms and conditions set forth in this
agreement.
1.0 Credit Facilities. (Check and complete applicable sections)
1.1 Uncommitted Credit Authorizations. The Bank has approved
the uncommitted credit authorizations listed below (collectively, the
"Credit Authorizations," and individually, as designated below) subject to
the terms and conditions of this agreement and the Bank's continuing
satisfaction with the Borrower's financial status. Disbursements under the
Credit Authorizations are solely at the Bank's discretion. Any disbursement
on one or more occasions shall not commit the Bank to make any subsequent
disbursement.
[ x ] A. Facility A. The Bank has approved an uncommitted
Credit Authorization to the Borrower in the principal sum not to exceed
$150,000.00 in the aggregate at any one time outstanding ("Facility A").
Credit under Facility A shall be in the form of disbursements evidenced by
credits to the Borrower's account and shall be repayable as set forth in a
Master Demand Note executed concurrently (referred to in this agreement both
singularly and together with any other promissory notes referenced in this
Section 1 as the "Notes"). The proceeds of Facility A shall be used for the
following purpose: Working capital. Facility A shall expire on August 31,
1997 unless earlier withdrawn.
[ ] B. Facility B (Including Letters of Credit). The Bank
has approved an uncommitted Credit Authorization to the Borrower in the
principal sum not to exceed $
in the aggregate at any one time outstanding ("Facility B"). Facility B
shall include the issuance of [commercial/standby] letters of credit not
exceeding $ in the aggregate at any one time
outstanding, expiring not later than , 199
[which shall include time drafts expiring not later than
, 199 ] (the "Letters of Credit"). (Strike bracketed words if
inapplicable.) Each Letter of Credit shall be in form acceptable to the Bank
and shall bear a fee of % per year of the face amount of each standby
Letter of Credit plus an issuance fee of
$ upon issuance of each Letter of Credit. (If
no fee is listed, the Letters of Credit shall bear a fee to be agreed upon
by the Bank and the Borrower). Credit under Facility B shall be in the form
of disbursements evidenced by credits to the Borrower's account and shall be
repayable as set forth in a Master Demand Note executed concurrently
(referred to in this agreement both singularly and together with any other
promissory notes referenced in this Section 1 as the "Notes") or by issuance
of a Letter of Credit upon completion of an application acceptable to the
Bank. The proceeds of Facility B shall be used for the following purpose:
.
Facility B shall expire on , 199 unless earlier
withdrawn.
[x ] C. Facility C (Purchase Money Term Loans *and Leases).
The Bank has approved an uncommitted credit authorization to the Borrower in
the principal sum not to exceed $200,000.00 in the aggregate at any one time
outstanding ("Facility C"). Facility C shall be in the form of loans
evidenced by the Borrower's notes on the Bank's form (referred to in this
agreement both singularly and together with any other promissory notes
referenced in this Section 1 as the "Notes"), the proceeds of which shall be
used to purchase the following equipment
. Interest on
each loan shall accrue at a rate to be agreed upon by the Bank and the
Borrower at the time the loan is made. The maturity of each note shall not
exceed 60 months from the note date. Notwithstanding the aggregate amount
of Facility C stated above, the original principal amount of each loan shall
not exceed the lesser of 80% of the cost of the equipment purchased with
loan proceeds or $200,000.00. Facility C shall expire on August 31, 1997
unless earlier withdrawn. *Leases will not exceed 100%.
[ ] 1.2 Term Loans. The Bank agrees to extend credit to the
Borrower in the form of term loan(s) (whether one or more, the "Term Loans")
in the principal sum(s) of , respectively, bearing
interest and payable as set forth in the Term Note(s) executed concurrently
(referred to in this agreement both singularly and together with any other
promissory notes referenced in this Section 1 as the "Notes"). The proceeds
of the Term Loans shall be used for the following purpose:
.
2.0 Conditions Precedent.
2.1 Conditions Precedent to Initial Extension of Credit. Before
the first extension of credit under this agreement, whether by disbursement
of a loan, issuance of a letter of credit, or otherwise, the Borrower shall
deliver to the Bank, in form and substance satisfactory to the Bank:
A. Loan Documents. The Notes; the letter of credit
applications required by Section 1.2; the security agreements, financing
statements, and mortgages required by Section 5.1; the guaranties required
by Section 6.0; the subordination agreements required by Section 7.0; and
any other loan documents which the Bank may reasonably require to give
effect to the transactions contemplated by this agreement;
B. Evidence of Due Organization and Good Standing.
Evidence satisfactory to the Bank of the due organization and good standing
of the Borrower and every other business entity that is a party to this
agreement or any other loan document required by this agreement; and
C. Evidence of Authority to Enter into Loan Documents.
Evidence satisfactory to the Bank that (i) each party to this agreement or
any other loan document required by this agreement is authorized to enter
into the transactions contemplated by this agreement and the other loan
documents, and (ii) the person signing on behalf of each such party is
authorized to do so.
2.2 Conditions Precedent to Each Extension of Credit. Before
any extension of credit under this agreement, whether by disbursement of a
loan, issuance of a letter of credit, or otherwise, the following conditions
shall have been satisfied:
A. Representations. The representations contained in
Section 10 shall be true on and as of the date of the extension of credit;
B. No Event of Acceleration. No event of acceleration
shall have occurred and be continuing or would result from the extension of
credit;
C. Continued Satisfaction. The Bank shall have
remained satisfied with the Borrower's managerial and financial status;
D. Additional Approvals, Opinions, and Documents. The
Bank shall have received such other approvals, opinions and documents as it
may reasonably request; and
E. Other Conditions.
3.0 Borrowing Base/Annual Pay Down.
3.1 Borrowing Base. (check and complete if applicable)
Notwithstanding any other provision of this agreement, the aggregate
principal amount outstanding at any one time under (check applicable
clauses)
[ x ] Facility A
[ ] Facility B
shall not exceed the lesser of the Borrowing Base or $150,000.00. Borrowing
Base means: (Check and complete applicable clauses)
[x] A. 80% of the Borrower's trade accounts receivable
in which the Bank has a perfected, first priority security interest,
excluding accounts more than 90 days past due from the date of invoice,
accounts subject to offset or defense, government, bonded, affiliate and
foreign accounts, accounts from trade debtors of which more than % of
the aggregate amount owing from the trade debtor to the Borrower is more
than days past due, and accounts otherwise unacceptable to the
Bank, plus
[ ] B. Inventory of the Borrower in which the Bank
has a perfected first priority security interest, valued at the lower of
cost or market but not exceeding $ in the aggregate, as
follows:
[ ] (1) ____________________% of aggregate
inventory; or
[ ] (1) ____________________% of raw material
inventory; and
[ ] (2) ____________________% of work-in-
process inventory; and
[ ] (3) ____________________% of finished goods
inventory, plus
[ ] C. % of the value of
the Borrower's machinery and equipment in which the Bank has a perfected,
first priority security interest, but not exceeding
$ , plus
[ ] D. Additional Borrowing Base provisions are contained
in the attached addendum.
3.2 Annual Pay Down. (complete if applicable) Notwithstanding
any other provision of this agreement, there shall be no debt outstanding
under for a period of
(Facility A, Facility B, etc.)
consecutive months during each fiscal year of the Borrower.
4.0 Fees and Expenses. (complete if applicable)
4.1 Fees. Upon closing of a Facility C Loan, the Borrower shall
pay the Bank the following fees, all of which the Borrower acknowledges have
been earned by the Bank: 1% of loan amount.
4.2 Out-of-Pocket Expenses. In addition to any fee set forth in
Section 4.1 above, the Borrower shall reimburse the Bank for its out-of-
pocket expenses and reasonable attorney's fees (including the fees of in-
house counsel) allocated to the Credit Facilities.
5.0 Security.
5.1 Payment of the borrowings under the Credit Facilities shall
be secured by a first security interest and/or real estate mortgage, as the
case may be, covering the following property and all its additions,
substitutions, increments, proceeds and products, whether now owned or later
acquired ("Collateral"): (check and complete applicable clauses)
[x] A. Accounts Receivable. All of the Borrower's
accounts, chattel paper, general intangibles, instruments, and documents (as
those terms are defined in the Michigan Uniform Commercial Code), rights to
refunds of taxes paid at any time to any governmental entity, and any
letters of credit and drafts under them given in support of the foregoing,
wherever located. The Borrower shall deliver to the Bank executed security
agreements and financing statements in form and substance satisfactory to
the Bank.
[x] B. Inventory. All of the Borrower's inventory,
wherever located. The Borrower shall deliver to the Bank executed security
agreements and financing statements in form and substance satisfactory to
the Bank.
[x] C. Equipment. All of the Borrower's equipment,
wherever located. The Borrower shall deliver to the Bank executed security
agreements and financing statements in form and substance satisfactory to
the Bank.
[ ] D. Real Estate. The real property, including
improvements, located at
. The Borrower shall deliver to the Bank an
executed mortgage, ALTA mortgage title insurance policy without exceptions,
mortgage survey certified to the Bank and, where applicable, an assignment
of rents, subordinations of leases, and/or collateral assignments of land
contracts, all in form and substance satisfactory to the Bank.
[ ] E. .
5.2 No forbearance or extension of time granted any subsequent
owner of the Collateral shall release the Borrower from liability.
5.3 Additional Collateral/Setoff. To further secure payment of
the borrowings under the Credit Facilities and all of the Borrower's other
liabilities to the Bank, the Borrower grants to the Bank a continuing
security interest in: (i) all securities and other property of the Borrower
in the custody, possession or control of the Bank (other than property held
by the Bank solely in a fiduciary capacity) and (ii) all balances of deposit
accounts of the Borrower with the Bank. The Bank shall have the right at any
time to apply its own debt or liability to the Borrower, or to any other
party liable for payment of the borrowings under the Credit Facilities, in
whole or partial payment of such borrowings or other present or future
liabilities, without any requirement of mutual maturity.
5.4 Cross Lien. Any of the Borrower's other property in which
the Bank has a security interest to secure payment of any other debt,
whether absolute, contingent, direct or indirect, including the Borrower's
guaranties of the debts of others, shall also secure payment of and be part
of the Collateral for the Credit Facilities.
[ ] 6.0 Guaranties. (check and complete if applicable) Payment of
the Borrower's liabilities under the Credit Facilities shall be guaranteed
by Interface Systems, Inc., by execution of the Bank's form of guaranty
agreement. The liability of the guarantors, if more than one, shall be joint
and several.
[ ] 7.0 Subordination. (check and complete if applicable)
The Credit Facilities shall be supported by the subordination of all
debt owing from the Borrower to
, including without limitation debt currently owing in the
amount of $ , in manner and by
agreement satisfactory to the Bank.
8.0 Affirmative Covenants. So long as any debt remains
outstanding under the Credit Facilities, the Borrower, and each of its
subsidiaries, if any, shall:
8.1 Insurance. Maintain insurance with financially sound and
reputable insurers covering its properties and business against those
casualties and contingencies and in the types and amounts as shall be in
accordance with sound business and industry practices.
8.2 Existence. Maintain its existence and business operations as
presently in effect in accordance with all applicable laws and regulations,
pay its debts and obligations when due under normal terms, and pay on or
before their due date, all taxes, assessments, fees and other governmental
monetary obligations, except as they may be contested in good faith if they
have been properly reflected on its books and, at the Bank's request,
adequate funds or security has been pledged to insure payment.
8.3 Financial Records. Maintain proper books and records of
account, in accordance with generally accepted accounting principles where
applicable, and consistent with financial statements previously submitted to
the Bank.
8.4 Notice. Give prompt notice to the Bank of the occurrence of
(i) any event of acceleration, and (ii) any other development, financial or
otherwise, which would affect the Borrower's business, properties or affairs
in a materially adverse manner.
8.5 Collateral Audits. (complete if applicable) Permit the Bank
or its agents to perform
audits
of the Collateral. The Borrower shall compensate the Bank for such audits in
(monthly, annual, etc.) accordance with the Bank's schedule of fees as may
be amended from time to time. Whether or not this section has been
completed, the Bank shall retain the right to inspect the Collateral and
business records related to it at such times and at such intervals as the
Bank may reasonably require.
8.6 Management. (complete if applicable) Maintain Interface
Systems, Inc. as Shareholder.
8.7 Financial Reports. Furnish to the Bank whatever information,
books, and records the Bank may reasonably request, including at a minimum:
(Check and complete applicable clauses. If the Borrower has subsidiaries,
all financial statements required will be provided on a consolidated and on
a separate basis.)
[x] A. Within 30 days after each monthly period, a balance
sheet as of the end of that period and statements
of income, cash flows, and retained earnings from the beginning of that
fiscal year to the end of that period, certified as correct by one of its
authorized agents.
[ x ] B. Within days after, and as of the end of, each of
its fiscal years, a detailed financial statement including a balance sheet
and statements of income, retained earnings, and cash flows complied by an
independent certified public accountant of recognized standing.
[x] C. Within 30 days after and as of the end of each
calendar month*, the following lists, each certified as correct by one of
its authorized agents: (check applicable clauses) *when borrowing
[x] (1) a list of accounts receivable, aged from
date of invoice;
[x] (2) a list of accounts payable, aged from date
of receipt;
[x] (3) a list of inventory, valued at the lower of
cost or market.
[ ] D. Within ________________ days after and as of the
end of each calendar year, the signed personal financial statement of .
(Borrower/Guarantor/other)
[ ] E. Within five (5) days after filing, a signed copy of
the annual tax return, with exhibits, of .
(Borrower/Guarantor/other)
[ ] F. An Environmental Certificate on the Bank's form on
and as of the date of this agreement and thereafter as required by the
Environmental Certificate.
[ x ] G. Within 30 days after each calendar month, a
borrowing base certificate including compliance with Section 3.1 herein,
when borrowing.
9.0 Negative Covenants
9.1 Definitions. As used in this agreement, the following terms
shall have the following respective meanings:
A. "Subordinated Debt" means debt subordinated to the
Bank in manner and by agreement satisfactory to the Bank.
B. "Tangible Net Worth" means total assets less
intangible assets and total liabilities. Intangible assets include goodwill,
patents, copyrights, mailing lists, catalogs, trademarks, bond discount and
underwriting expenses, organization expenses, and all other intangibles.
9.2 Unless otherwise noted, the financial requirements set forth
in this section shall be computed in accordance with generally accepted
accounting principles applied on a basis consistent with financial
statements previously submitted by the Borrower to the Bank.
9.3 Without the written consent of the Bank, so long as any debt
remains outstanding under the Credit Facilities, the Borrower shall not:
(where appropriate, covenants apply on a consolidated basis - clauses H-O
apply only if completed).
A. Dividends. Acquire or retire any of its shares of
capital stock, or declare or pay dividends or make any other distributions
upon any of its shares of capital stock, except dividends payable in its
capital stock and dividends payable to "Subchapter S" corporation
shareholders in amounts sufficient in amount to pay the shareholders' income
tax obligations related to the Borrower's taxable income.
B. Sale of Shares. Issue, sell or otherwise dispose of
any shares of its capital stock or other securities, or rights, warrants or
options to purchase or acquire any such shares or securities.
C. Debt. Incur, or permit to remain outstanding, debt
for borrowed money or installment obligations, except debt reflected in the
latest financial statement of the Borrower furnished to the Bank prior to
execution of this agreement and not to be paid with proceeds of borrowings
under the Credit Facilities. For purposes of this covenant, the sale of any
accounts receivable shall be deemed the incurring of debt for borrowed
money.
D. Guaranties. Guarantee or otherwise become or remain
secondarily liable on the undertaking of another, except for endorsement of
drafts for deposit and collection in the ordinary course of business.
E. Liens. Create or permit to exist any lien on any of
its property, real or personal, except: existing liens known to the Bank;
liens to the Bank; liens incurred in the ordinary course of business
securing current nondelinquent liabilities for taxes, worker's compensation,
unemployment insurance, social security and pension liabilities; and liens
for taxes being contested in good faith.
F. Advances and Investments. Purchase or acquire any
securities of, or make any loans or advances to, or investments in, any
person, firm or corporation, except obligations of the United States
Government, open market commercial paper rated one of the top two ratings by
a rating agency of recognized standing, or certificates of deposit in
insured financial institutions.
G. Use of Proceeds. Use, or permit any proceeds of
the Credit Facilities to be used, directly or indirectly, for the purpose of
"purchasing or carrying any margin stock" within the meaning of Federal
Reserve Board Regulation U. At the Bank's request, the Borrower shall
furnish to the Bank a completed Federal Reserve Board Form U-1.
H. Working Capital. Permit the difference between its
current assets [less all sums owing from stockholders, member or partners,
as the case may be, and officers, managers and directors] and current
liabilities [plus all sums (other than Subordinated Debt) owing to
stockholders, members or partners, as the case may be, and officers,
managers and directors] to be less than
$ . (Strike bracketed words if not
applicable.)
I. Tangible Net Worth [Plus Subordinated Debt]. Permit
its Tangible Net Worth to be less than $1,100,000 at 12-31-96 and
increasing by 50% of net income thereafter.
J. Current Rates. Permit the ratio of its current
assets to current liabilities to be less than to 1.00.
K. Leverage Ratio. Permit the ratio of its total
liabilities to its Tangible Net Worth to exceed 1.50 to 1.00.
L. Fixed Assets. Expend for, contract for, lease, rent, or
otherwise acquire fixed assets, if the expense to the Borrower, and its
subsidiaries, if any shall exceed $ in the aggregate.
M. Leases. Contract for or assume in any manner, lease
obligations if the aggregate of all payments shall exceed $ in any one
fiscal year.
N. Compensation. Pay or award compensation of any kind, in any one
fiscal year to exceeding $ .
O. Maintain Debt Service Coverage (defined as EBITDA divided by
principal plus interest payments of not less than 1.50 to 1.0.
10.0 Representations by Borrower: Each Borrower represents: (a)
that the execution and delivery of this note and the performance of the
obligations it imposes do not violate any law, conflict with any agreement
by which it is bound, or require the consent or approval of any governmental
authority or any third party; (b) that this note is a valid and binding
agreement, enforceable according to its terms; and (c) that all balance
sheets, profit and loss statements, and other financial statements furnished
to the Bank are accurate and fairly reflect the financial condition of the
organizations and persons to which they apply on their effective dates,
including contingent liabilities of every type, which financial condition
has not changed materially and adversely since those dates. Each Borrower,
other than a natural person, further represents: (a) that it is duly
organized, existing and in good standing pursuant to the laws under which it
is organized; and (b) that the execution and delivery of this note and the
performance of the obligations it imposes (i) are within its powers and have
been duly authorized by all necessary action of its governing body; and (ii)
do not contravene the terms of its articles of incorporation or
organization, its by laws, or any partnership, operating or other agreement
governing its affairs.
11.0 Acceleration
11.1 Events of Acceleration: If any of the following events occur,
the Credit Facilities shall terminate and all borrowings under them shall
become due immediately, without notice at the Bank's option, whether or not
the Bank has made demand:
A. The Borrower or guarantor of any of the Credit Facilities (the
"Guarantor") fails to pay when due any amount payable under the Credit
Facilities or under any agreement or instrument evidencing debt to any
creditor.
B. The Borrower or Guarantor (i) fails to observe or perform any term
of this agreement or the notes; (ii) makes any materially incorrect or
misleading representation, warranty, or certificate to the Bank (iii) makes
any materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (iv) defaults under
the terms of any agreement or instrument relating to any debt for borrowed
money (other than borrowings under the Credit Facilities), including any
capitalized lease obligation, such that the creditor declares the debt due
before its maturity.
C. There is a default under the terms of any loan agreement, mortgage,
security agreement, or any other document executed as part of the Credit
Facilities or any guaranty of the liabilities under the Credit Facilities
becomes unenforceable in whole or in part, or any guarantor fails to
promptly perform under its guaranty.
D. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of any
Guarantor or Borrower or any affiliate of any Guarantor or Borrower, or if
any of them becomes subject to any multi-employer plan.
E. The Borrower or any Guarantor becomes insolvent or unable to pay
its debts as they become due.
F. The Borrower or any Guarantor (i) makes an assignment for the
benefit of creditors; (ii) consents to the appointment of a custodian,
receiver, or trustee for itself or for a substantial part of its assets; or
(iii) commences any proceeding under any bankruptcy, reorganization,
liquidation, insolvency or similar laws of any jurisdiction.
G. A custodian, receiver or trustee is appointed for any Guarantor or
Borrower or for a substantial part of its assets without its consent, and is
not removed within 60 days after the appointment.
H. Proceedings are commenced against any Borrower or Guarantor under
any bankruptcy, reorganization, liquidation, insolvency or similar laws of
any jurisdiction, and they remain dismissed for 60 days after commencement;
or any Guarantor or Borrower consents to the commencement of those
proceedings.
I. Any judgment is entered against Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of any
Guarantor or Borrower.
J. The Borrower or any Guarantor dies.
K. The Borrower or any Guarantor, without the Bank's written consent,
(i) is dissolved, (ii) merges or consolidates with any third party, (iii)
leases, sells or otherwise conveys a material part of its assets or business
outside the ordinary course of business, (iv) leases, purchases or otherwise
acquires a material part of the assets of any other corporation or business
entity except in the ordinary course of such business, or (v) agrees to do
any of the foregoing.
L. The loan-to-value ratio of any pledged securities at any time
exceeds N/A % and that excess continues for five (5) days after notice from
the Bank to the Borrower.
M. There is a substantial change in the existing or prospective
financial condition of the Borrower or any Guarantor which the Bank in good
faith determines to be materially adverse.
N. The Bank in good faith deems itself insecure.
11.2 Remedies: If the amounts owning under the Credit Facilities
are not paid at maturity, whether by demand, acceleration or otherwise, the
Bank shall have all of the rights and remedies provided for by law or under
any agreement. Any requirement of reasonable notice shall be met if the
Bank sends notice at least seven (7) days prior to the date of sale,
disposition or other event which requires notice. The Bank is authorized to
cause all or any part of the Collateral to be transferred to or registered
in its name or in the name of any other person, firm or corporation, with
or without designating the capacity of that nominee. The Borrower shall be
liable for any deficiency remaining after disposition of any Collateral.
The Borrowere is liable to the Bank for all reasonable costs and expenses of
every kind incurred in the making or collection of the Credit Facilitites,
including, without limitation, reasonable attorneys' fees and court costs
whether attributable to the Bank's in-house or outside counsel. These costs
and expenses shall include, without limitation, any costs or expenses
incurred by the Bank in any bankruptcy, reorganization, insolvency or other
similar proceeding.
12.0 Miscellaneous.
12.1 Notice from one party to another relating to this agreement
shall be deemed effective if made in writing (including telecommunications)
and delivered to the recipient's address, telex number or telecopier number
set forth under its name by any of the following means: (a) hand delivery,
(b) registered or certified mail, postage prepaid, with return receipt
requested, (c) first class or express mail, postage prepaid, (d) Federal
Express, Purolator Courier or like overnight courier service or (e)
telecopy, telex or other wire transmission with request for assurance of
receipt in a manner typical with respect to communications of that type.
Notice made in accordance with this section shall be deemed delivered on
receipt if delivered by hand or wire transmission, on the third business day
after mailing if mailed by first class. registered or certified mail, or on
the next business day after mailing or deposit with an overnight courier
service if delivered by express mail or overnight courier.
12.2 No delay on the part of the Bank in the exercise of any right
or remedy shall operate as a waiver. No single or partial exercise by the
Bank of any right or remedy shall preclude any other future exercise of it
or the exercise of any other right or remedy. No waiver or indulgence by
the Bank of any default shall be effective unless in writing and signed by
the Bank, nor shall a waiver on one occasion be construed as a bar to or
waiver of that right on any future occasion.
12.3 This agreement, the Notes and any related loan documents
embody the entire agreement and understanding between the Borrower and the
Bank and supersede all prior agreements and understanding relating to
their subject matter. If any one or more of the obligations of the Borrower
under this agreement or the Notes shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, illegality, unenforceability in one
jurisdiction shall not affect the validity, legality or enforceability of
the obligations of the Borrowere under this agreement or the Notes in any
other jurisdiction.
12.4 The Borrower, if more than one, shall be jointly and severally
liable.
12.5 This agreement is delivered in the state of Michigan and
governed by Michigan law.
12.6 Sections headings are for convenience of reference only and
shall not affect the interpretation of this agreement.
.
13.0 Waiver of Jury Trial: The Bank and the Borrower, after
consulting or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may have to a
trial by jury in any litigation based upon or arising out of this note or
any related instrument or agreement or any of the transactions contemplated
by this note or any course of conduct, dealing, statements whether oral or
written, or actions of either of them. Neither the Bank nor the Borrower
shall seek to consolidate, by counterclaim or otherwise, any action in which
a jury trial has been waived with any other action in which a jury trial
cannot be or has not been waived. These provisions shall not be deemed to
have been modified in any respect or relinquished by either the Bank or the
Borrower except by a written instrument executed by both of them.
Executed by the parties on February 19, 1997.
"Bank" "Borrower"
NBD BANK I.G.K. INDUSTRIES, INC.
By: Michael K. Kelly By: David O. Schupp
First Vice President Treasurer
Address for Notices: Address for Notices:
125 S. Main Street 7232 Jackson Road
Ann Arbor, MI 48102 Ann Arbor, MI 48103
Fax/Telex No. (313) 995-8000
DATED 10 MARCH 1997
INTERFACE SYSTEMS INTERNATIONAL LIMITED (1)
and
THE FIRST NATIONAL BANK OF CHICAGO (2)
DEBENTURE
CONTENTS
Clause Heading Page
1 Interpretation 1
2 Covenant to Pay 4
3 Charges 5
4 Set-off 7
5 Undertakings 8
6 Further Assurance 13
7 Certain powers of the Bank: Enforcement 14
8 Appointment and Powers of Receiver 15
9 Application of Proceeds; Purchasers 18
10 Indemnities; Costs and Expenses 18
11 Power of Attorney 19
12 Continuing Security and Other Matters 20
13 Currencies 21
14 Representations and Warranties 21
15 Miscellaneous 24
16 Notices 25
17 Law 25
THIS DEBENTURE dated March 30, 1997 and made BETWEEN:
(1) INTERFACE SYSTEMS INTERNATIONAL LIMITED (No. 3253366) whose
registered office is at Halcyon House, 5 London Road,
Bicester, Oxfordshire, OX6 7BY (the "Company"); and
(2) THE FIRST NATIONAL BANK OF CHICAGO acting through its office
at First Chicago House, 90 Long Acre, London WC2E 9RB (the
"Bank")
WITNESSES as follows:
1 Interpretation
1.1 Definitions: In this Deed, unless the context otherwise
requires
"Charged Assets" means all the undertaking, goodwill,
property, assets and rights of the Company described in
clauses 3.1 and 3.2;
"Collateral Instruments" means negotiable and non-negotiable
instruments, guarantees, indemnities and other assurances
against financial loss and any other documents or instruments
which contain or evidence an obligation (with or without
security) to pay, discharge or be responsible directly or
indirectly for, any liabilities of any person and includes
any document or instrument creating or evidencing an
Encumbrance;
"Debts" means the assets of the Company described in clause
3. 1 (d);
"Default Rate" means 3 per cent. per annum over the Bank's
base, rate for sterling overdrafts from time to time, such
interest to be compounded by reference to such periods as the
Bank shall in its absolute discretion determine;
"disposal" includes any sale, lease, sub-lease, assignment or
transfer, the grant of an option or similar right, the grant
of any easement, right or privilege, the creation of a trust
or other equitable interest in favour of a third party, a
sharing or parting with possession or occupation whether by
way of licence or otherwise and the granting of access to any
other person over any intellectual property, and "dispose"
and "disposition" shall be construed accordingly;
"Encumbrance" means any mortgage, charge (whether fixed or
floating), pledge, lien, hypothecation, standard security,
assignment by way of security or other security interest of
any kind;
"Enforcement Date" means the date on which the Bank demands
the payment or discharge of all or any part of the Secured
Obligations or, if earlier, the date on which a petition for
an administration order is presented in relation to the
Company;
"Environmental Claim" means any claim, notice of violation,
prosecution, demand, action, official warning, abatement or
other order (conditional or otherwise) relating to
Environmental Matters and any notification or order requiring
compliance with the terms of any Environmental Licence or
Environmental Law;
"Environmental Laws" includes all or any laws, statutes,
rules, regulations, treaties, directives, directions, by-
laws, codes of practice, circulars, guidance notes, orders,
notices, demands, decisions of the courts or anything like
any of the foregoing of any governmental authority or agency
or any regulatory body or any other body whatsoever in any
Jurisdiction or the European Community relating to
Environmental Matters applicable to the Company, the business
carried on at any time by the Company, the Properties, the
operation of any business from or using any of the Properties
or the occupation or use of any of the Properties;
"Environmental Licence" means any permit, licence,
authorisation, consent or other approval required at any time
by any Environmental Law in relation to the Company, the
business carried on by the Company, the Properties or the
occupation or use of, or the operation of any business from
or using, any of the Properties;
"Environmental Matters" means (a) the generation, deposit,
disposal, keeping, treatment, transportation, transmission,
handling, importation, exportation, processing, collection,
sorting, presence or manufacture of any waste (as defined in
the Environmental Protection Act 1990) or any Relevant
Substance; (b) nuisance, noise, defective premises, health
and safety at work or elsewhere; (c) the carrying out of any
development (as defined In section 55(l) Town and Country
Planning Act 1990); and (d) the pollution, conservation or
protection of the environment (both natural and built) or of
man or any living organisms supported by the environment or
any other matter whatsoever affecting the environment or any
part of it;
"Floating Charge Assets' means the assets of the Company from
time to time expressed to be charged by this Deed by way of
floating charge;
"Insurances" means all present and future contracts or
policies of insurance (including life policies) in which the
Company from time to time has an interest;
"Intellectual Property Rights" means the assets of the
Company described in clause 3. 1 (g);
"Material Environmental Effect" means a material adverse
effect in the opinion of the Bank on (i) the financial
condition of the Company or any of its Subsidiaries or (ii)
the ability of the Company to perform Its obligations under
or otherwise comply with the terms of this Deed or (iii) the
value or marketability of any premises owned, leased or
occupied by the Company;
"Permitted Encumbrance" means any Encumbrance arising by way
of retention of title of goods by the, supplier of such goods
where such goods are supplied on credit and are acquired in
the ordinary course of trading of the Company;
"Properties" means the assets of the Company described in
clause 3. 1 (a) and all present and future heritable and
leasehold property of the Company situate in Scotland and all
liens, charges, options, agreements, rights and interests in
or over land or the proceeds of sale of land situate in
Scotland and all buildings, fixtures (including trade
fixtures) and fixed plant and machinery from time to time on
such property or land together with all rights, easements,
servitudes and privileges appurtenant to, or benefitting, the
same, in all cases both present and future;
"Receiver" means any one or more receivers and/or managers or
administrative receivers appointed by the Bank pursuant to
this Deed in respect of the Company or over all or any of the
Charged Assets;
"Relevant Substance" means any substance whatsoever (whether
in a solid or liquid form or in the form of a gas or vapour
and whether alone or in combination with any other substance)
or waste (as defined in the Environmental Protection Act
1990) which is capable of causing harm to man or any other
living organism supported by the Environment, or damaging the
Environment or public health or welfare;
"Secured Obligations" means all moneys,, obligations and
liabilities covenants to be paid or discharged by the Company
under or pursuant to clause 2;
"Securities" means the assets of the Company described in
clause 3. 1 (c);
"Subsidiary" shall have the meaning given to it by section
736 Companies Act 1985; and
"Supplemental Facility Letter" means the supplemental
facility letter from the Bank to the Company dated on or
about the date of this Deed.
1.2 Successors and assigns: The expressions "Bank", and "Company"
include, where the context admits, their respective
successors, and, in the case of the Bank, its transferees and
assignees, whether immediate or derivative.
1.3 Headings: Clause headings and the contents page are inserted
for convenience of reference only and shall be ignored in the
interpretation of this Deed.
1.4 Construction of certain terms: In this Deed, unless the
context otherwise requires:
(a) references to clauses are to be construed as
references to the clauses of this Deed;
(b) reference to (or to any specified provision of)
this Deed or any other document shall be construed
as references to this Deed, that provision or that
document as in force for the time being and as
amended in accordance with the terms thereof or,
as the case may be, with the agreement of the
relevant parties and (where such consent is, by
the terms of this Deed or the relevant document,
required to be obtained as a condition to such
amendment being permitted) the prior written
consent of the Bank;
(c) words importing the plural shall include the
singular and vice versa;
(d) references to a person shall be construed as
including references to an individual, firm,
company, corporation, unincorporated body of
persons or any State or any agency thereof; and
(e) references to statutory provisions shall be
construed as references to those provisions as
replaced, amended or re- enacted from time to
time.
1.5 Effect as a deed: This deed is intended to take effect as a
deed notwithstanding that the Bank may have executed it under
hand only.
2. Covenant to Pay
2.1 Secured obligations: The Company hereby covenants that it win
on demand pay to the Bank all moneys and discharged all
obligations and liabilities now or hereafter due, owing or
incurred to the Bank when the same become due for payment or
discharge whether by acceleration or otherwise, and whether
such moneys, obligations or liabilities are express or
implied; present, future or contingent; joint or several;
incurred as principal or surety; originally owing to the Bank
or purchased or otherwise acquired by it; denominated in
sterling or in any other currency; or incurred on any banking
account or in any other manner whatsoever.
2.2 Certain liabilities: The liabilities referred to in clause
2.1 shall, without limitation, include:
(a) all liabilities under or in connection with
foreign exchange transactions, interest rate swaps
and other arrangements entered into for the
purpose of limiting exposure to fluctuations in
interest or exchange rates;
(b) all liabilities arising from the issue,
acceptance, endorsement, confirmation or discount
of any negotiable or non-negotiable instruments,
documentary or other credits, bonds, guarantees,
indemnities or other instruments of any kind; and
(c) interest (both before and after judgment) to date
of payment at such rates and upon such terms as
may from time to time be agreed, commission, fees
and other charges and all legal and other costs,
charges and expenses on a full and unqualified
indemnity basis which may be incurred by the Bank
in relation to any such moneys, obligations or
liabilities or generally in respect of the
Company.
3 Charges
3.1 Fixed Charge: The Company hereby charges to the Bank by way
of first fixed charge (and as regards all those parts of the
freehold and leasehold property in England and Wales now
vested in the Company by way of first legal mortgage) with
full title guarantee and as a continuing security for the
payment and discharge of the Secured Obligations the
following assets, both present and future, from time to time
owned by the Company or in which the Company may from time to
time have an interest:
(a) Properties: all freehold and leasehold property of
the Company situate in England and Wales and all
liens, charges, options, agreements, rights and
interests in or over land or the proceeds of sale
of land situate in England and Wales and all
buildings, fixtures (including trade fixtures) and
fixed plant and machinery from time to time on
such property or land together with all rights,
easements and privileges appurtenant to, or
benefitting, the same;
(b) Plant and Machinery: all plant, machinery,
vehicles, computers and office and other equipment
and the benefit of all contracts and warranties
relating to the same;
(c) Securities: all stocks, shares, bonds and
securities of any kind whatsoever whether
marketable or otherwise and all other interests
(including but not limited to loan capital) in any
person, including all allotments, rights, benefits
and advantages whatsoever at any time accruing,
offered or arising in respect of or incidental to
the same and all money or property accruing or
offered at any time by way of conversion,
redemption, bonus, preference, option, dividend,
distribution, interest or otherwise in respect
thereof;
(d) Debts: all book and other debts, revenues and
claims, whether actual or contingent, whether
arising under contracts or in any other manner
whatsoever and whether originally owing to the
Company or purchased or otherwise acquired by it
including, without limitation, any amount from
time to time standing to the credit of any bank or
other account with the Bank or with any other
person and all things in action which may give
rise to any debt, revenue or claim, together with
the full benefit of any Encumbrances, Collateral
Instruments and any other rights relating thereto
including, without limitation, reservations of
proprietary rights, rights of tracing and unpaid
vendor's liens and associated rights;
(e) Insurances: all moneys from time to time payable
to the Company under pursuant to the Insurances
including without limitation the refund of any
premiums;
(f) Goodwill and uncalled capital: all goodwill and
uncalled capital;
(g) Intellectual Property Rights: all patents, patent
applications, trade marks and service
marks(whether registered or not), trade mark
applications, service mark applications, trade
names, registered designs, design rights,
copyrights, computer programmes, know- how and
trade secrets and all other industrial or
intangible property or rights and all licences,
agreements and ancillary and
connected rights relating to, intellectual and
intangible property.
3.2 Floating Charge: The Company hereby charges to the Bank by
way of first floating charge with full title guarantee and as
a continuing security for the payment and discharge of the
Secured Obligations its undertaking and all its property,
assets and rights whatsoever and wheresoever both present and
future, other than any property or assets from time to time
effectively charged by way of legal mortgage or fixed charge
or assignment pursuant to clause 3.1 or otherwise pursuant to
this Deed but including (without limitation and whether or
not so effectively charged) any of its property and assets
situated in Scotland.
3.3 Restrictions on dealing with Charged Assets: The Company
hereby covenants that it win not without the prior written
consent in writing of the Bank:
(a) dispose of, or create or attempt to create or
permit to subsist or arise any Encumbrance on or
over, the Debts or any part thereof or release,
set off or compound or deal with the same
otherwise than in accordance with clause 5. 1 (a);
(b) create or attempt to create or permit to subsist
in favour of any person other than the Bank any
Encumbrance (except a Permitted Encumbrance and a
lien arising by operation of law in the ordinary
course of trading over property other than land)
on or affecting the Charged Assets or any part
thereof; or
(c) dispose of the Charged Assets or any part thereof
or attempt or agree so to do except in the case
of:
(i) stock-in-trade, which may, subject to the other
provisions of this Deed, be sold at full market
value in the usual course of trading as now
conducted and for the purpose of carrying on the
Company's business; and
(ii) other Floating Charge Assets which may, subject to
the other provisions of this Deed, be disposed of
in the ordinary course of business.
3.4 Credit balances: The Company irrevocably and unconditionally
agrees that if there shall from time to time be any credit
balance on any of its accounts with the Bank, the Bank shall
leave the absolute right to refuse to permit such credit
balance to be utilised or withdrawn by the Company whether in
whole or in part if at that time there are outstanding any of
the Secured Obligations.
3.5 Automatic conversion of floating charge: Notwithstanding
anything expressed or implied in this Deed, if the Company
creates or attempts to create any Encumbrance over all or any
of the Floating Charge Assets without the prior consent in
writing of the Bank or if any person levies or attempts to
levy any distress, execution, sequestration or other process
or does or attempts to do any diligence in execution against
any of the Floating Charge Assets, the floating charge
created by clause 3.2 over the property or asset concerned
shall thereupon automatically without notice be converted
into a fixed charge.
3.6 Conversion of floating charge by notice: Notwithstanding
anything expressed or implied in this Deed but without
prejudice to clause 3.5, the Bank shall be entitled at any
time by giving notice in writing to that effect to the
Company to convert the floating charge over all or any part
of the Floating Charge Assets into a fixed charge as regards
the assets specified in such notice.
3.7 H.M. Land Registry: The Company hereby applies to the Chief
Land Registrar for the registration of the following
restriction against each of the registered titles to any
Property (and against any title to any unregistered property
which is or ought to be the subject of a first registration
of title at H.M. Land Registry at the date of this Deed):
"Except under an Order of the Registrar no disposition or
charge or other security interest is to be registered or
noted without the consent of the proprietor for the time
being of Charge No."
4 Set-off
4.1 Set-off: The Company hereby agrees that the Bank may at any
time without notice, notwithstanding any settlement of
account or other matter whatsoever, combine or consolidate
all or any of its then existing accounts wheresoever situate
(including accounts in the name of the Bank or of the Company
jointly with others), whether such accounts are current,
deposit, loan or of any other nature whatsoever, whether they
are subject to notice or not and whether they are denominated
in sterling or in any other currency, and set-off or transfer
any sum standing to the credit of any one or more such
accounts in or towards satisfaction of the Secured
Obligations which, to the extent not then payable, shall
automatically become payable to the extent necessary to
effect such set-off.
4.2 Purchase of currencies: For the purpose of clause 4. 1, the
Company authorises the Bank to purchase with the moneys
standing to the credit of such accounts such other currencies
as may be necessary to effect such applications.
5 Undertakings
5.1 The Company hereby undertakes with the Bank that during the
continuance of this security the Company win:
(a) Debts: collect in the ordinary course of its
business in a proper and efficient manner and pay
into its account with the Bank or such other
account as the Bank may from time to time specify
all moneys which it may receive in respect of the
Debts forthwith on receipt and not, without the
prior written consent of the Bank, seek to
compromise, compound, vary, discharge, postpone or
release any of the Debts or waive its right of
action in connection therewith or do or omit to do
anything which may delay or prejudice the full
recovery thereof;
(b) Deposit of deeds: deposit with the Bank (to be
held at the risk of the Company):
(i) all deeds and documents of title relating to the
Properties and to any subordinate interest in any
of them and the insurance policies relating
thereto;
(ii) all certificates and documents of title relating
to the Securities and such deeds of transfer in
blank and other documents as the Bank may from
time to time require for perfecting the title of
the Bank to the Securities (duly executed by or
signed on behalf of the registered holder) or for
vesting or enabling it to vest the same in itself
or its nominees or in any purchaser; and
(iii) all such other documents relating to the Charged
Assets as the Bank may from time to time require;
(c) Calls etc: duly and promptly pay all calls,
instalments or other moneys which may from time to
time become due in respect of any of its
Securities, it being acknowledged by the Company
that the Bank shall not in any circumstances incur
any liability whatsoever in respect of any such
calls, instalments or other moneys;
(d) Provision of information: provide the Bank with
such financial and other information relating to
the Company and its business as the Bank may from
time to time require;
(e) Conduct of business: conduct and carry on its
business, and procure that each of its
Subsidiaries conducts and carries on its business,
in a proper and efficient manner and keep or cause
or procure to be kept proper books of account
relating to such business and not make any
material alteration in the nature or mode of
conduct of any such business;
(f) Compliance with covenants etc: observe and perform
all covenants, burdens, stipulations, requirements
and obligations from time to time affecting the
Charged Assets and/or the use, ownership,
occupation, possession, operation, repair,
maintenance or other enjoyment or exploitation of
the Charged Assets whether Imposed by statute, law
or regulation, contract, lease, licence, grant or
otherwise, carry out all registrations or renewals
and generally do all other acts and things
(Including the taking of legal proceedings)
necessary or desirable to maintain, defend or
preserve its right, title and interest to and in
the Charged Assets without infringement by any
third party and not without the prior consent in
writing of the Bank (such consent not to be
unreasonably withheld or delayed) enter into any
onerous or restrictive obligations affecting any
of the same or agree any rent review relating to
any interest in any of the Properties;
(g) Alteration or development of Properties: not make
any structural or material alteration to or to the
user of any of its Properties or do or permit to
be done anything which is a "development" within
the meaning of the Town and Country Planning Acts
from time to time or any orders or regulations
under such Acts or do or permit or omit to be done
any act, matter or thing as a consequence of which
any provision of any statute, bylaw, order or
regulation or any condition of any consent,
licence, permission or approval (whether of a
public or private nature) from time to time in
force affecting any of the Properties is or may be
infringed;
(h) Maintenance of buildings, machinery and plant:
keep, and procure that each of its Subsidiaries
win keep, all its buildings, machinery, plant,
fixtures, vehicles, computers and office and other
equipment in good and substantial repair and in
good working order and condition and permit the
Bank and its agents or representatives to enter
and view their state and condition;
(j) Insurance:
(i) (subject to clause 5.1(i)(iv)) insure and keep
insured, and procure that each of its Subsidiaries
win insure and keep insured, at its own expense to
the full replacement or reinstatement value
thereof from time to time (including, where
applicable, the cost of demolition and site
clearance, architects', surveyors' and other
professional fees and incidental expenses in
connection with replacement or reinstatement) all
its assets of an insurable nature with insurers
previously approved by the Bank in writing against
loss or damage (including loss of rent and
profits) by fire, storm, lightning, explosion,
riot, civil commotion, malicious damage, impact,
flood, burst pipes, aircraft and other aerial
devices or articles dropped therefrom (other than
war risk), third party and public liability and
liability under the Defective Premises Act 1972
and such other risks and contingencies as the Bank
shall from time to time request, such insurances
to be effected with the interest of the Bank noted
on the policy and with the policy containing such
provisions for the protection of the Bank as the
Bank may reasonably require;
(ii) maintain such other insurance policies (with the
interest of the Bank noted thereon) containing
like provisions for the protection of the Bank as
are normally maintained by prudent companies
carrying on businesses similar to those of the
Company;
(iii) duly and promptly pay all premiums and other
moneys necessary for effecting and keeping up such
insurances and on demand produce to the Bank the
policies of such insurance and evidence of such
payments and comply in all other respects with the
terms and conditions of the relevant policies
including without limitation any stipulations or
restrictions as to the use and/or operation of any
asset;
(iv) (in the case of any leasehold property where the
Company is prohibited by the terms of the relevant
lease from complying with the obligations referred
to in clause 5.1(i)(i)) procure (where it is
empowered to do so) or otherwise use all
reasonable efforts to procure the maintenance by
the landlord (or other third party) of such
insurance obligations in accordance with the
provisions of the relevant lease;
(j) Property outgoings: punctually pay, or cause to be
paid, and indemnify the Bank and any Receiver (on
a several basis) against, all present and future
rent, rates, taxes, duties, charges, assessments,
impositions and outgoings whatsoever (whether
imposed by agreement, statute or otherwise) now or
at any time during the continuance of this
security payable in respect of the Properties or
any part thereof or by the owner or occupier
thereof;
(k) Possession of Properties: without prejudice to
the generality of clause 3.3(c), not without the
prior consent in writing of the Bank grant any
lease, part with possession or share occupation of
the whole or any part of any of the Properties or
confer any licence, right or interest to occupy or
grant any licence or permission to assign,
underlet or part with possession of the same or
any part thereof or permit any person:
(i) to be registered (jointly with the Company or
otherwise) as proprietor under the Land
Registration Acts of any of the Properties nor
create or permit to arise any overriding interest
affecting the same within the definition in those
Acts or within the meaning of the Land
Registration (Scotland) Act 1979; or
(ii) to become entitled to any right, easement,
covenant, interest or other title encumbrance
which might adversely affect the value or
marketability of any of the Properties;
(l) Variation of leasehold interests: not without the
prior consent in writing of the Bank vary,
surrender, cancel or dispose of, or permit to be
forfeit, any leasehold interest in any of the
Properties;
(m) Equipment leases etc.: not without the prior
consent in writing of the Bank surrender, cancel
or dispose of, any credit sale, hire purchase,
leasing, rental, licence or like agreement for any
equipment used in its business or agree to any
material variation of the same except in relation
to equipment which has an aggregate fair market
value no greater than $20,000;
(n) Acquisition of property: immediately inform the
Bank before contracting to purchase any estate or
interest in freehold, leasehold or heritable
property and supply the Bank with such details of
the purchase as the Bank may from time to time
request;
(o) Environmental Claims: promptly on becoming aware
of it inform the Bank of any Environmental Claim
which has been made or threatened against the
Company or any occupier of any of the Properties
or of any property owned, leased, occupied or
otherwise used by the Company or any of the
officers of the Company in their capacity as such
or any requirement by any Environmental Licence or
applicable Environmental Laws to make any
investment or expenditure or take or desist from
taking any action which might, if substantiated,
have a Material Environmental Effect;
(p) Access: procure that representatives designated by
the Bank and its representatives win be allowed
access at reasonable times to inspect the
Properties and, where the Bank reasonably believes
it to be necessary, to require testing or the
taking of samples at the expense, of the Company
to verify compliance with Environmental Law and
Environmental Licences;
(q) Relevant Substances: notify the Bank forthwith
upon becoming aware of any Relevant Substance at
or brought on to any of the Properties which might
give rise to any Environmental Claim, and take or
procure the taking of all necessary action to deal
with, remedy or remove from such Property or
prevent the incursion of (as the case may be) that
Relevant Substance in order to prevent an
Environmental Claim and in a manner that complies
with all requirements of Environmental Law;
(r) Intellectual Property Rights: without prejudice to
the generality of clause 5.1(f):
(i) take all necessary action to safeguard and
maintain its rights, present and future, in or
relating to all Intellectual Property Rights
including, without limitation, observing all
covenants and stipulations relating thereto,
paying all renewal fees and taking all other steps
necessary to maintain all registered design,
patent, trade mark and service mark registrations
held by it;
(ii) use all reasonable efforts to effect registration
of applications for registration of any registered
design, patent, trade mark and service mark and
keep the Bank informed of events relevant to any
such application and not without the prior consent
in writing of the Bank permit any Intellectual
Property Rights to be abandoned or canceled, to
lapse or to be liable to any claim of abandonment
for non-use or otherwise;
(iii) notify the Bank forthwith of any infringement or
suspected infringement or any challenge to the
validity of any of its present or future
Intellectual Property Rights which may come to its
notice, supply the Bank with all information in
its possession relating thereto and take all steps
necessary to prevent or bring to an end any such
infringement and to defend any challenge to the
validity of any such rights;
(s) Disposals to connected persons: without prejudice
to the generality of clause 3.3(c), not (without
the prior consent in writing of the Bank) dispose
of any Charged Assets to any person who is
connected (within the meaning of section 249
Insolvency Act 1986) with the Company save on
terms previously approved in writing by the Bank;
(t) Report on title: forthwith on request by the Bank,
provide the Bank with a report from solicitors
approved by the Bank in such form as the Bank may
require as to the title of the Company to such of
the Properties as the Bank shall specify;
(u) Jeopardy: not do or cause or permit to be done
anything which may in any way depreciate,
jeopardise or otherwise prejudice the value to the
Bank of any of the Charged Assets;
(v) No Subsidiaries to be formed or acquired: not
(without the prior consent in writing of the Bank)
form or acquire any Subsidiary; and
5.2 Power to remedy: If the Company at any time defaults in
complying with any of its obligations contained in this Deed,
the Bank shall, without prejudice to any other rights arising
as a consequence of such default, be entitled (but not bound)
to make good such default and the Company hereby irrevocably
authorises the Bank and its employees and agents by way of
security to do all such things (including, without
limitation, entering the Company's property) necessary or
desirable in connection therewith. Any moneys so expended by
the Bank shall be repayable by the Company to the Bank oil
demand together with interest at the Default Rate from the
date of payment by the Bank until such repayment, both before
and after judgment. No exercise by the Bank of its powers
under this clause 5.2 shall make it liable to account as a
mortgagee in possession.
6 Further Assurance
6.1 Further assurance: The Company shall if and when at any time
required by the Bank execute such further Encumbrances and
assurances in favour of the Bank and the Bank and do all such
acts and things as the Bank shall from time to time require
over or in relation to all or any of the Charged Assets to
secure the Secured Obligations or to perfect or protect the
security intended to be created by this Deed over the Charged
Assets or any part thereof or to facilitate the realisation
of the same.
6.2 Certain documentary requirements: Such further Encumbrances
and assurances shall by or on behalf of the Bank at the
expense of the Company and shall contain (a) an immediate
power of sale without notice, (b) a clause excluding section
93 Law of Property Act 1925 and the restrictions contained in
section 103 Law of Property Act 1925 and (c) such other
clauses for the benefit of the Bank as the Bank may
reasonably require (but so that in relation to property in
Northern Ireland such references shall be deemed to be
references to sections 17 and 20 respectively of the
Conveyancing and Law of Property Act 1881).
6.3 Specific security documents required: Without prejudice to
the generality of the provisions of clauses 6.1 and 6.2 the
Company shall execute as and when so required by the Bank:
(a) a mortgage, charge, standard security or
hypothecation (as specified by the Bank) over any
heritable property in Scotland owned, or any
recorded lease of heritable property in Scotland
held, by it at the date of this Deed, any
leasehold or freehold property in Northern Ireland
or the Republic of Ireland owned by it at the date
of this Deed, and any and all heritable fixtures
and fittings and fixed plant and machinery at any
time situate thereon including (without prejudice
to the generality of the foregoing) tenants
fixtures and fittings in and upon any such leased
property; and/or
(b) a legal mortgage, legal charge, standard security
or hypothecation (as specified by the Bank) over
any freehold, leasehold and heritable properties
acquired by it after the date of this Deed
(including all or any of the Properties as and
when the same are conveyed, transferred, or let to
it) and over any and all fixtures, trade fixtures
and fixed plant and machinery at any time and from
time to time situate thereon.
7 Certain powers of the Bank: Enforcement
7.1 The Securities:
(a) The Bank and its nominees at the discretion of the
Bank may exercise in the name of the Company or
otherwise at any time whether before or after
demand for payment and without any further consent
or authority on the part of the Company (but
subject to clause 7.1(d)) in respect of the
Securities any voting rights and all powers given
to trustees by section 10(3) and (4) Trustee Act,
1925 (as amended by section 9 Trustee Investments
Act, 1961) in respect of securities or property
subject to a trust and any powers or rights which
may be exercisable by the person in whose name any
of the Securities is registered or by the bearer
thereof.
(b) The Company win if so requested by the Bank
transfer all or any of the Securities to such
nominees or agents as the Bank may select.
(c) Until the Enforcement Date the Bank win hold all
dividends, distributions, interest and other
moneys paid on and received by it in respect of
the Securities for the account of the Company and
win, subject to any right of set-off and to clause
3.4, pay such dividends, interest and other moneys
to the Company upon request.
(d) Until the Enforcement Date the Bank win exercise
all voting and other rights and powers attached to
the Securities as the Company may from time to
time in writing reasonably direct provided that
the Bank shall be under no obligation to comply
with any such direction where compliance would, in
the Bank's opinion, be prejudicial to the security
created by this Deed.
7.2 Powers on enforcement: At any time on or after the
Enforcement Date or if requested by the Company, the Bank
may, without further notice, without the restrictions
contained in section 103 Law of Property Act 1925 (or in the
case of property in Northern Ireland section 20 of the
Conveyancing and Law of Property Act 1881) and whether or not
a Receiver shall have been appointed, exercise all the powers
conferred upon mortgagees by the Law of Property Act 1925 (or
in the case of property in Northern Ireland the Conveyancing
and Law of Property Act 1881) as varied or extended by this
Deed and all the powers and discretions conferred by this
Deed on a Receiver either expressly or by reference.
7.3 Subsequent Encumbrances: If the Bank receives notice of any
subsequent Encumbrance affecting the Charged Assets or any
part thereof, the Bank may open a new account for the
Company. If it does not do so then, unless the Bank gives
express written notice to the contrary to the Company, it
shall nevertheless be treated as if it had opened a new
account at the time when it received such notice and as from
that time all payments made by or on behalf of the Company to
the Bank shall be credited or be treated as having been
credited to the new account and shall not operate to reduce
the amount due from the Company to the Bank at the time when
it received such notice.
7.4 Statutory power of leasing: The Bank shall have the power to
lease and make agreements for leases at a premium or
otherwise, to accept surrenders of leases and to grant
options on such terms as the Bank shall consider expedient
and without the need to observe any of the provisions of
sections 99 and 100 Law of Property Act 1925 (or In the case
of property in Northern Ireland section 18 of the
Conveyancing and Law of Property Act 1881).
7.5 Contingencies: If the Bank enforces the security constituted
by this Deed at a time when no amount In respect of the
Secured Obligations is due and payable, the Bank (or the
Receiver) may pay the proceeds of any recoveries effected by
it into an interest-bearing suspense account. The Bank may
(subject to the payment of any claims having priority to this
security) withdraw amounts standing to the credit of such
suspense account for application as follows:
(a) paying all costs, charges and expenses incurred
and payments made by the Bank (or the Receiver) in
the course of such enforcement;
(b) paying remuneration to the Receiver as and when
the same becomes due and payable; and
(c) paying amounts due and payable in respect of the
Secured Obligations as and when the same become
due and payable.
8 Appointment and Powers of Receiver
8.1 Appointment: At any time on or after the Enforcement Date or
if requested by the Company, the Bank may by instrument in
writing executed as a deed or under the hand of any director
or other duly authorised officer appoint any qualified person
to be a Receiver of the Charged Assets or any part thereof.
Where more than one Receiver is appointed, each joint
Receiver shall have power to act severally, independently of
any other joint Receivers, except to the extent that the Bank
may specify to the contrary in the appointment. The Bank may
(subject, where relevant, to section 45 Insolvency Act 1986)
remove any Receiver so appointed and appoint another in his
place. In this clause 8 a "qualified person" is a person
who, under the Insolvency Act 1986, is qualified to act as a
receiver of the property of any company with respect to which
he is appointed or, as the case may be, an administrative
receiver of any such company.
8.2 Receiver as agent: A Receiver shall be the agent of the
Company and the Company shall be solely responsible for his
acts or defaults and for his remuneration.
8.3 Powers of Receiver: A Receiver shall have all the powers
conferred from time to time oil receivers and administrative
receivers by statute (in the case of powers conferred by the
Law of Property Act 1925, without the restrictions contained
in section 103 of that Act) and power on behalf and at the
expense of the Company (notwithstanding liquidation of the
Company) to do or omit to do anything which the Company could
do or omit to do in relation to the Charged Assets or any
part thereof. In particular (but without limitation) a
Receiver shall have power to do all or any of the following
acts and things:
(a) Take possession: take possession of, collect and
get in all or any of the Charged Assets and
exercise In respect of the Securities all voting
or other powers or rights available to a
registered holder thereof in such manner as he may
think fit;
(b) Carry on business: carry on, manage, develop,
reconstruct, amalgamate or diversify the business
of the Company or any part thereof or concur in so
doing; lease or otherwise acquire and develop or
improve properties or other assets without being
responsible for loss or damage;
(c) Borrow money: raise or borrow any money from or
incur any other liability to the Bank or others on
such terms with or without security as he may
think fit and so that any such security may be or
include a charge on the whole or any part of the
Charged Assets ranking in priority to this
security or otherwise;
(d) Dispose of assets: without the restrictions
imposed by section 103 Law of Property Act 1925
(or in the case of property in Northern Ireland
section 20 of the Conveyancing and Law of Property
Act 1881) or the need to observe any of the
provisions of sections 99 and 100 of such Act (or
section 18 of the Conveyancing and Law of Property
Act 1881 in the case of Northern Ireland), sell by
public auction or private contract, let, surrender
or accept surrenders, grant licences or otherwise
dispose of or deal with all or any of the Charged
Assets or concur in so doing in such manner for
such consideration and generally on such terms and
conditions as he may think fit with full power to
convey, let, surrender, accept surrenders or
otherwise transfer or deal with such Charged
Assets in the name and on behalf of the Company or
otherwise and so that covenants and contractual
obligations may be granted and assumed in the name
of and so as to bind the Company (or other the
estate owner) if he shall consider it necessary or
expedient so to do; any such sale, lease or
disposition may be for cash, debentures or other
obligations, shares, stock, securities or other
valuable consideration and be payable immediately
or by instalments spread over such period as he
shall think fit and so that any consideration
received or receivable shall ipso facto forthwith
be and become charged with the payment of all the
Secured Obligations; plant, machinery and other
fixtures may be severed and sold separately from
the premises containing them and the Receiver may
apportion any rent and the performance of any
obligations affecting the premises sold without
the consent of the Company;
(e) Form subsidiaries: promote the formation of
companies with a view to the same becoming a
subsidiary of the Company and purchasing, leasing,
licensing or otherwise acquiring interests in all
or any of the Charged Assets or otherwise, arrange
for such companies to trade or cease to trade and
to purchase, lease, license or otherwise acquire
all or any of the Charged Assets on such terms and
conditions whether or not including payment by
instalments secured or unsecured as he may think
fit;
(f) Compromise contracts: make any arrangement or
compromise or enter into or cancel any contracts
which he shall think expedient;
(g) Repair and maintain assets: make and effect such
repairs, renewals and improvements to the Charged
Assets or any part thereof as he may think fit and
maintain, renew, take out or increase insurances;
(h) Appoint employees: appoint managers, agents,
officers and employees for any of the purposes
referred to in this clause 8.3 or to guard or
protect the Charged Assets at such salaries and
commissions and for such periods and on such terms
as he may determine and may dismiss the same;
(1) Make calls: make calls conditionally or
unconditionally on the members of the Company in
respect of uncalled capital;
Exercise statutory leasehold powers: without any
further consent by or notice to the Company
exercise for and on behalf of the Company all the
powers and provisions conferred on a landlord or a
tenant by the Landlord and Tenant Acts, the Rent
Acts, the Housing Acts or the Agricultural
Holdings Act or any other legislation from time to
time in force in any relevant jurisdiction
relating to rents or agriculture in respect of any
part of the Properties but without any obligation
to exercise any of such powers and without any
liability in respect of powers so exercised or
omitted to be exercised;
(k) Legal proceedings: institute, continue, enforce,
defend, settle or discontinue any actions, suits
or proceedings in relation to the Charged Assets
or any part thereof or submit to arbitration as he
may think fit;
(1) Execute documents: sign any document, execute any
deed and do all such other acts and things as may
be considered by him to be incidental or conducive
to any of the matters or powers aforesaid or to
the realisation of the security created by or
pursuant to this Deed and to use the name of the
Company for all the purposes aforesaid; and
(m) Insolvency Act powers: do all the acts and things
described in Schedule I to the Insolvency Act 1986
as if the words "he" and "him" referred to the
Receiver and "company" referred to the Company.
8.4 Remuneration: The Bank may from time to time determine the
remuneration of any Receiver and section 109(6) Law of
Property Act 1925 (or in the case of property in Northern
Ireland section 24(6) of the Conveyancing and Law of Property
Act 1881) shall be varied accordingly. A Receiver shall be
entitled to remuneration appropriate to the work and
responsibilities involved upon the basis of charging from
time to time adopted by the Receiver in accordance with the
current practice of his firm.
9 Application of Proceeds; Purchasers
9.1 Application of proceeds: All moneys received by the Bank or
by any Receiver shall be applied, after the discharge of the
remuneration and expenses of the Receiver and all liabilities
having priority to the Secured Obligations, in or towards
satisfaction of such of the Secured Obligations and in such
order as the Bank in its absolute discretion may from time to
time conclusively determine, except that the Bank may credit
the same to a suspense account for so long and in such manner
as the Bank may from time to time determine and the Receiver
may retain the same for such period as he and the Bank
consider expedient.
9.2 Insurance proceeds: All moneys receivable by virtue of any of
the Insurances shall be paid to the Bank (or if not paid by
the insurers directly to the Bank shall be held on trust for
the Bank) and shall at the option of the Bank be applied in
replacing, restoring or reinstating the property or assets
destroyed, damaged or lost (any deficiency being made good by
the Company) or (except where the Company is obligated (as
landlord or tenant) to lay out such insurance moneys under
the provisions of any lease of any of the Charged Assets) in
reduction of the Secured Obligations.
9.3 Protection of purchasers: No purchaser or other person shall
be bound or concerned to see or enquire whether the right of
the Bank or any Receiver to exercise any of the powers
conferred by this Deed has arisen or be concerned with notice
to the contrary or with the propriety of the exercise or
purported exercise of such powers.
10 Indemnities; Costs and Expenses
10.1 Enforcement costs: The Company hereby undertakes with the
Bank to pay on demand all costs, charges and expenses
incurred by the Bank or by any Receiver in or about the
enforcement, preservation or attempted preservation of any of
the security created by or pursuant to this Deed or any of
the Charged Assets on a full indemnity basis, together with
interest at the Default Rate from the date on which such
costs, charges or expenses are so incurred until the date of
payment by the Company (both before and after judgment).
10.2 No liability as mortgagee in possession: Neither the Bank nor
any Receiver shall be liable to account as mortgagee or
heritable creditor in possession in respect of all or any of
the Charged Assets or be liable for any loss upon realisation
or for any neglect or default of any nature whatsoever for
which a mortgagee or heritable creditor in possession may be
liable as such.
10.3 Indemnity from Charged Assets: The Bank and any Receiver,
attorney, agent or other person appointed by the Bank under
this Deed and the Bank's officers and employees (each an
"Indemnified Party") shall be entitled to be indemnified out
of the Charged Assets in respect of all costs, losses,
actions, claims, expenses, demands or liabilities whether in
contract, tort, delict or otherwise and whether arising at
common law, in equity or by statute which may be incurred by,
or made against, any of them (or by or against any manager,
agent, officer or employee for whose liability, act or
omission any of them may be answerable) at any time relating
to or arising directly or indirectly out of or as a
consequence of:
(a) anything done or omitted in the exercise or
purported exercise of the powers contained in this
Deed; or
(b) any breach by the Company of any of its
obligations under this Deed; or
(c) an Environmental Claim made or asserted against an
indemnified Party which would not have arisen if
this Deed had not been executed and which was not
caused by the negligence or wilful default of the
relevant Indemnified Party.
11 Power of Attorney
11.1 Power of attorney: The Company by way of security hereby
irrevocably appoints each of the Bank and any Receiver
severally to be its attorney in its name and on its behalf:
(a) to execute and complete any documents or
instruments which the Bank or such Receiver may
require for perfecting the title of the Bank to
the Charged Assets or for vesting the same in the
Bank, its nominees or any purchaser;
(b) to sign, execute, seal and deliver and otherwise
perfect any further security document referred to
in clause 6; and
(c) otherwise generally to sign, seal, execute and
deliver all deeds, assurances, agreements and
documents and to do all acts and things which may
be required for the full exercise of all or any of
the powers conferred on the Bank or a Receiver
under this Deed or which may be deemed expedient
by the Bank or a Receiver in connection with any
disposition, realisation or getting in by the Bank
or such Receiver of the Charged Assets or any part
thereof or in connection with any other exercise
of any power under this Deed.
11.2 Recovery of Debts: The Bank and any manager or officer of the
Bank or of any branch irrevocably empowered to receive all
Debts and on payment to give an effectual discharge therefor
and on non-payment to take (if the Bank in its sole
discretion so decides) all steps and proceedings either in
the name of the Company or in the name of the Bank for the
recovery thereof and also to agree accounts and to make
allowances and to give time to any surety. The Bank shall
have no liability or responsibility of any kind to the
Company arising out of the exercise or non-exercise of such
rights and shall not be obliged to make any enquiry as to the
sufficiency of any sums received by it in respect of any
Debts or to make any claims or take any other action to
collect or enforce the same.
11.3 Ratification: The Company ratifies and confirms and agrees to
ratify and confirm all acts and things which any attorney as
is mentioned in clause 11.1 shall do or purport to do in the
exercise of his powers under such clause.
12 Continuing Security and Other Matters
12.1 Continuing security: This Deed and the obligations of the
Company under this Deed
(a) secure the ultimate balance from time to time
owing to the Bank by the Company and shall be a
continuing security notwithstanding any settlement
of account or other matter whatsoever;
(b) be in addition to, and not prejudice or affect,
any present or future Collateral Instrument,
Encumbrance, right or remedy held by or available
to the Bank; and
(c) not merge with or be in any way prejudiced or
affected by the existence of any such Collateral
Instruments, Encumbrance, rights or remedies or by
the same being or becoming wholly or in part void,
voidable or unenforceable on any ground whatsoever
or by the Bank dealing with, exchanging,
releasing, varying or failing to perfect or
enforce any of the same, or giving time for
payment or indulgence or compounding with any
other person liable.
12.2 Collateral Instruments: The Bank shall not be obliged to
resort to any Collateral Instrument or other means of payment
now or hereafter held by or available to it before enforcing
this Deed and no action taken or omitted by the Bank in
connection with any such Collateral Instrument or other means
of payment shall discharge, reduce, prejudice or affect the
liability of the Company nor shall the Bank be obliged to
account for any money or other property received or recovered
in consequence of any enforcement or realisation of any such
Collateral Instrument or other means of payment.
12.3 Settlements Conditional: Any release, discharge or settlement
between the Company and the Bank shall be Conditional upon no
security, disposition or payment to the Bank by the Company
or any other person being void, set aside or ordered to be
refunded pursuant to any enactment or law relating to
liquidation, administration or Insolvency or for any other
reason whatsoever and if such condition shall not be
fulfilled the Bank shall be entitled to enforce this Deed
subsequently as if such release, discharge or settlement had
not occurred and any such payment had not been made.
13 Currencies
13.1 Conversion of Currencies: All moneys received or held by the
Bank or by a Receiver under this Deed at any time on or after
the Enforcement Date in a currency other than a currency in
which the Secured Obligations are denominated may from time
to time be sold for such one or more of the currencies in
which the Secured Obligations are denominated as the Bank or
Receiver considers necessary or desirable and the Company
shall indemnify the Bank against the full sterling cost
(including all costs, charges and expenses) incurred in
relation to such sale. Neither the Bank nor any Receiver
shall have any liability to the Company in respect of any
loss resulting from any fluctuation in exchange rates after
any such sale.
13.2 Currency Indemnity: No payment to the Bank (whether under any
judgment or court order or otherwise) shall discharge the
obligation or liability of the Company in respect of which it
was made unless and until the Bank shall have received
payment in full in the currency in which such obligation or
liability was incurred. To the extent that the amount of any
such payment shall on actual conversion into such currency
fall short of such obligation or liability expressed in that
currency the Bank shall have a further separate cause of
action against the Company and shall be entitled to enforce
the charges hereby created to recover the amount of the
shortfall.
14 Representations and Warranties
14.1 Representations: The Company represents and warrants to the
Bank that:
(a) Due incorporation: it is duly incorporated and
validly existing under the laws of England and
Wales and has power to carry on its business as it
is now being conducted and to own its property and
other assets;
(b) Corporate Power: it has power to execute, deliver
and perform its obligations under this Deed; all
necessary corporate, shareholder and other action
has been taken to authorise the execution,
delivery and performance of the same and no
limitation on the powers of the Company win be
exceeded as a result of the execution and delivery
of this Deed or the performance of its obligations
under this Deed;
(c) Binding obligations: this Deed constitutes valid
and legally binding obligations of the Company
enforceable in accordance with its terms;
(d) No conflict with other obligations: the execution
and delivery of the performance of obligations
under, and compliance with the provisions of, this
Deed by the Company win not (i) contravene any
existing applicable law, statute, rule or
regulation or any judgment or permit to which it
is subject, (ii) conflict with, or result in any
breach of any of the terms of, or constitute a
default under, any agreement or other instrument
to which it is a party or is subject or by which
it or any of its property is bound, (iii)
contravene or conflict with any provision of its
Memorandum and Articles of Association, or (iv)
result in the creation of or oblige the Company to
create an Encumbrance In favour of any person
other than the Bank;
(e) No Litigation: no litigation, arbitration or
administrative proceeding is taking place, pending
or, to the knowledge of the officers of the
Company, threatened against it which could have a
material adverse effect on the business, assets or
financial condition of the Company;
(f) No default in relation to other indebtedness: the
Company is not (nor would win the giving of notice
of time or both be) in breach of or in default
under any agreement relating to Indebtedness to
which it is a party or by which it may be bound;
(g) Title to Charged Assets: it has good and
marketable title to its Charged Assets and has
full power and authority to grant to the Bank the
security interest in its Charged Assets created
pursuant to this Deed and to execute, deliver and
perform its obligations in accordance with the
terms of this Deed without the consent or approval
of any other person other than any consent or
approval which has been obtained;
(h) Ownership of Charged Assets: the Charged Assets
are beneficially owned by it free and clear of any
Encumbrance other than Encumbrances created by
this Deed;
(i) Financial statements correct and complete: the
audited financial statements of the Company in
respect of the financial year ended on 30th
September, 1996 have been prepared in accordance
with generally accepted accounting principles and
bases in England and Wales which have been
consistently applied and present fairly and
accurately the financial position of the Company
as at such date and the results of the operations
of the Company for the financial period ended on
such date and, as at such date, the Company did
not have any significant liabilities (whether
actual or contingent) or any unrealised or
anticipated losses which are not disclosed by, or
reserved against or provided for in, such
financial statements;
(j) No material adverse change: there has been no
material adverse change in the financial position
of the Company from that set forth in the
financial statements referred to in clause
14.l(l);
(k) Information accurate: the information and reports
furnished by the Company to the Bank in connection
with the negotiation and preparation of the
Supplemental Facility Letter and this Deed are
true and accurate in all material respects, are
not misleading and do not omit material facts and
all reasonable enquiries have been made to verify
the facts and statements contained therein; there
are no other facts the omission of which would
make any fact or statement therein misleading;
(1) Compliance with Environmental Laws: the Company
complies and has at all times complied with all
Environmental Laws and Environmental Licences and
has obtained and maintained in full force and
effect all Environmental Licences, and there are
no facts or circumstances entitling any such
Environmental Licences to be revoked, suspended,
amended, varied, withdrawn or not renewed where
such revocation, suspension, amendment, variation,
withdrawal or non-renewal might have a Material
Environmental Effect;
(m) No Environmental Claims: no Environmental Claim is
pending or has been made or threatened against the
Company or any occupier of any of the Properties
or any of their respective officers their capacity
as such and the Company has no reason to believe
that it has or is likely to have any liability in
relation to Environmental Matters which, in either
case, might have a Material Environmental Effect;
(n) No Relevant Substances: no Relevant Substance has
been deposited, disposed of, kept, treated,
imported, exported, transported, processed,
manufactured, used, collected, sorted or produced
at any time, or is present in the environment
(whether or not on property owned, leased,
occupied or controlled by the Company) in
circumstances which are likely to result in an
Environmental Claim against the Company which, in
either case, might have a Material Environmental
Effect;
(o) Details of environmental audits: full details have
been given to the Bank of any inspections,
investigations, studies, audits, tests, reviews or
other analyses In relation to Environmental
Matters relating to the Company or to the best of
the Company's knowledge any property now or
previously owned, leased or occupied by the
Company and of all Environmental Licences;
14.2 Repetition: The representations and warranties in clause 14.1
(which in the case of clause 14.1(i) and 14.1(j) (accounts)
shall refer for this purpose to the then latest audited
financial statements of the Company) shall be deemed to be
repeated by the Company on each day until all the Secured
Obligations have been paid or discharged in full as if made
with reference to the facts and circumstances existing on
each such day.
15 Miscellaneous
15.1 Remedies Cumulative: No failure or delay on the part of the
Bank to exercise any power, right or remedy shall operate as
a waiver thereof nor shall any single or any partial exercise
or waiver of any power, right or remedy preclude its further
exercise or the exercise of any other power, right or remedy.
15.2 Statutory power of leasing: During the continuance of this
security the statutory and any other powers of leasing,
letting, entering into agreements for leases or lettings and
accepting or agreeing to accept surrenders of leases or
tenancies shall not be exercisable by the Company in relation
to the Charged Assets or any part thereof.
15.3 Successors and assigns: Any appointment or removal of a
Receiver under clause 8 and any consents under this Deed may
be made or given in writing signed or sealed by any
successors or assigns of the Bank and accordingly the Company
hereby irrevocably appoints each successor and assign of the
Bank to be its attorney in the terms and for the purposes set
out in clause 11.
15.4 Consolidation: Section 93 Law of Property Act 1925 shall not
apply to the security created by this Deed or to any security
given to t he Bank pursuant to this is Deed.
15.5 Reorganisation of the Bank: This Deed shall remain binding on
the Company notwithstanding any change in the constitution of
the Bank or its absorption in, or amalgamation with, or the
acquisition of all or part of its undertaking by, any other
person, or any reconstruction or reorganisation of any kind.
The security granted by this Deed shall remain valid and
effective in all respects in favour of any assignee,
transferee or other successor in title of the Bank in the
same manner as if such assignee, transferee or other
successor in title had been named in this Deed as a party
instead of, or in addition to, the Bank.
15.6 Unfettered discretion: Any liability or power which may be
exercised or any determination which may be made under this
Deed by the Bank may be exercised or made in its absolute and
unfettered discretion and it shall not be obliged to give
reasons therefor.
15.7 Provisions severable: Each of the provisions of this Deed is
severable and distinct from the others and if any time one or
more of such provisions is or becomes invalid, illegal or
unenforceable the validity, legality and enforceability of
the remaining provisions of this Deed shall not in any way be
affected or impaired thereby.
16 Notices
16.1 Mode of service: Any notice or demand for payment by the Bank
under this Deed shall, without prejudice to any other
effective mode of making the same, be deemed to have been
properly served on the Company if served on any one of its
Directors or on its Secretary or delivered or sent by letter,
telex or telefax to the Company at its registered office or
any of its principal places of business for the time being.
16.2 Time of service: Any such notice or demand shall be deemed to
have been served (in the case of a letter) when delivered,
(in the case of a telex) at the time of despatch with the
correct answer back appearing at the beginning and end of the
transmission and (in the case of a telefax) when received in
complete and legible form.
16.3 Notices conclusive: Any such notice or demand or any
certificate as to the amount at any, time secured by the Deed
shall, save for manifest error be conclusive and binding upon
the Company if signed by an officer of the Bank.
17 Law
17.1 This Deed shall be governed by and shall be-construed in
accordance with English law.
IN WITNESS whereof this Deed has been executed and delivered by or on behalf
of the parties on the date stated at the beginning of this Deed.
EXECUTED and DELIVERED )
as a DEED by )
INTERFACE SYSTEMS INTERNATIONAL LIMITED )
acting by: )
Director
Director/Secretary
SIGNED for and on behalf )
of THE FIRST NATIONAL BANK OF CHICAGO by )
Authorised
Signatory
CERTIFICATE OF THE REGISTRATION
OF A MORTGAGE OR CHARGE
Pursuant to section 401(s) of the Companies Act 1985
COMPANY No. 03253366
THE REGISTRAR OF COMPANIES FOR ENGLAND AND WALES HEREBY CERTIFIES THAT A
DEBENTURE DATED THE 10TH MARCH 1997 AND CREATED BY INTERFACE INTERNATIONAL
LIMITED FOR SECURING ALL MONIES DUE OR TO BECOME DUE FROM THE COMPANY TO THE
FIRST NATIONAL BANK OF CHICAGO ON ANY ACCOUNT WHATSOEVER WAS REGISTERED
PURSUANT TO CHAPTER 1 PART XII OF THE COMPANIES ACT 1985 ON THE 26TH MARCH
1997.
GIVEN AT COMPANIES HOUSE, CARDIFF THE 2ND APRIL 1997.
for the Registrar of Companies
MASTER DEMAND BUSINESS LOAN NOTE
Due on Demand $3,500,000.00
No.7243587-0100 Date February 19, 1997
Promise to Pay: For value received, the undersigned (the "Borrower")
promises to pay On Demand to NBD Bank (the "Bank"), or order, at any office
of the Bank in the State of Michigan, the sum of Three Million Five Hundred
Thousand and no/100 DOLLARS ($3,500,000.00), or such lesser sum as is
indicated on Bank records, plus interest computed on the basis of the actual
number of days elapsed in a year of 360 days at the rate of:
------% per annum until demand or maturity, whether by
acceleration or otherwise, (the "Note Rate") and
at the rate of 3% per annum above the Note Rate on
overdue principal from the date when due until
paid; or
1/2 % per annum above the rate announced from time to
time by the Bank as its "prime" rate (the "Note
Rate"), which rate may not be the lowest rate
charged by the Bank to any of its customers, until
maturity, whether by demand, acceleration or
otherwise, and at the rate of 3% per annum above
the Note Rate on overdue principal from the date
when due until paid. Each change in the "prime"
rate will immediately change the Note Rate.
In no event shall the interest rate exceed the maximum rate allowed by law;
any interest payment which would for any reason be deemed unlawful under
applicable law shall be applied to principal.
Interest will be computed on the unpaid principal balance from the date of
each borrowing.
The Borrower will pay this sum on demand. Until demand, the Borrower will
pay consecutive Monthly (monthly/quarterly) installments of interest only
commencing February 28, 1997.
Master Demand Note: The Bank has authorized an uncommitted credit facility
to the Borrower in a principal amount not to exceed the face amount of this
note. The credit facility is in the form of loans made from time to time by
the Bank to the Borrower at the Bank's sole discretion. This note evidences
the Borrower's obligation to repay those loans. The aggregate principal
amount of debt evidenced by this note shall be the amount reflected from
time to time in the records of the Bank but shall not exceed the face amount
of this note. The Borrower acknowledges and agrees that no provision of
this note and no course of dealing by the Bank shall commit the Bank to make
loans to the Borrower and that notwithstanding any provision of this note or
any other instrument or document, all loans evidenced by this note are due
and payable on demand, which may be made by the Bank at any time, whether or
not any event of acceleration then exists.
Credit Agreement: This note evidences a debt under the terms of a Credit
Authorization Agreement between the Bank and the Borrower dated February 19,
1997, and any amendments.
Security: To secure the payment of this note and any other present or
future liability of the Borrower, whether several, joint, or joint and
several, the Borrower pledges and grants to the Bank a continuing security
interest in the following described property and all of its additions,
substitutions, increments, proceeds and products, whether now owned or later
acquired ("Collateral"):
1. All securities and other property of the Borrower in the
custody, possession or control of the Bank (other than
property held by the Bank solely in a fiduciary capacity);
2. All property or securities declared or acknowledged to
constitute security for any past, present or future liability
of the Borrower to the Bank;
3. All balances of deposit accounts of the Borrower with the
Bank;
4. The following additional property: accounts receivable,
inventory, machinery and equipment, general intangibles, and
a mortgage(s) dated February 19, 1997 on property located at
5855 Interface Drive and 7232 Jackson Road, Ann Arbor, MI
48103 .
Bank's Right to Setoff: The Bank shall have the right at any time to apply
its own debt or liability to the Borrower or to any other party liable on
this note in whole or partial payment of this note or other present or
future liabilities, without any requirement of mutual maturity.
Representations by Borrower: Each Borrower represents: (a) that the
execution and delivery of this note and the performance of the obligations
it imposes do not violate any law, conflict with any agreement by which it
is bound, or require the consent or approval of any governmental authority
or any third party; (b) that this note is a valid and binding agreement,
enforceable according to its terms; and (c) that all balance sheets, profit
and loss statements, and other financial statements furnished to the Bank
are accurate and fairly reflect the financial condition of the organizations
and persons to which they apply on their effective dates, including
contingent liabilities of every type, which financial condition has not
changed materially and adversely since those dates. Each Borrower, other
than a natural person, further represents: (a) that it is duly organized,
existing and in good standing pursuant to the laws under which it is
organized; and (b) that the execution and delivery of this note and the
performance of the obligations it imposes (i) are within its powers and have
been duly authorized by all necessary action of its governing body; and (ii)
do not contravene the terms of its articles of incorporation or
organization, its by laws, or any partnership, operating or other agreement
governing its affairs.
WAIVER OF JURY TRIAL: The Bank and the Borrower, after consulting or having
had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in
any litigation based upon or arising out of this note or any related
instrument or agreement or any of the transactions contemplated by this note
or any course of conduct, dealing, statements whether oral or written, or
actions of either of them. Neither the Bank nor the Borrower shall seek to
consolidate, by counterclaim or otherwise, any action in which a jury trial
has been waived with any other action in which a jury trial cannot be or has
not been waived. These provisions shall not be deemed to have been modified
in any respect or relinquished by either the Bank or the Borrower except by
a written instrument executed by both of them.
ADDRESS: BORROWER:
5855 Interface Drive
Ann Arbor, MI 40103 Interface Systems, Inc.
By: David O Schupp
Its: Treasurer
MASTER DEMAND BUSINESS LOAN NOTE
Due on Demand $150,000.00
No. 0034377-0200 Date February 19, 1997
Promise to Pay: For value received, the undersigned (the "Borrower")
promises to pay On Demand to NBD Bank (the "Bank"), or order, at any office
of the Bank in the State of Michigan, the sum of One Hundred Fifty Thousand
DOLLARS ($150,000.00), or such lesser sum as is indicated on Bank records,
plus interest computed on the basis of the actual number of days elapsed in
a year of 360 days at the rate of:
-----% per annum until demand or maturity, whether by
acceleration or otherwise, (the "Note Rate") and
at the rate of 3% per annum above the Note Rate on
overdue principal from the date when due until
paid; or
1/2% per annum above the rate announced from time to
time by the Bank as its "prime" rate (the "Note
Rate"), which rate may not be the lowest rate
charged by the Bank to any of its customers, until
maturity, whether by demand, acceleration or
otherwise, and at the rate of 3% per annum above
the Note Rate on overdue principal from the date
when due until paid. Each change in the "prime"
rate will immediately change the Note Rate.
In no event shall the interest rate exceed the maximum rate allowed by law;
any interest payment which would for any reason be deemed unlawful under
applicable law shall be applied to principal.
Interest will be computed on the unpaid principal balance from the date of
each borrowing.
The Borrower will pay this sum on demand. Until demand, the Borrower will
pay consecutive Monthly (monthly/quarterly) installments of interest only
commencing February 28, 1997.
Master Demand Note: The Bank has authorized an uncommitted discretionary
credit facility to the Borrower in a principal amount not to exceed the face
amount of this note. The credit facility is in the form of loans made from
time to time by the Bank to the Borrower at the Bank's sole discretion.
This note evidences the Borrower's obligation to repay those loans. The
aggregate principal amount of debt evidenced by this note shall be the
amount reflected from time to time in the records of the Bank but shall not
exceed the face amount of this note. The Borrower acknowledges and agrees
that no provision of this note and no course of dealing by the Bank shall
commit the Bank to make loans to the Borrower and that notwithstanding any
provision of this note or any other instrument or document, all loans
evidenced by this note are due and payable on demand, which may be made by
the Bank at any time, whether or not any event of acceleration then exists.
Credit Agreement: This note evidences a debt under the terms of a Credit
Authorization Agreement between the Bank and the Borrower dated February 19,
1997, and any amendments.
Security: To secure the payment of this note and any other present or
future liability of the Borrower, whether several, joint, or joint and
several, the Borrower pledges and grants to the Bank a continuing security
interest in the following described property and all of its additions,
substitutions, increments, proceeds and products, whether now owned or later
acquired ("Collateral"):
1. All securities and other property of the Borrower in the
custody, possession or control of the Bank (other than
property held by the Bank solely in a fiduciary capacity);
2. All property or securities declared or acknowledged to
constitute security for any past, present or future liability
of the Borrower to the Bank;
3. All balances of deposit accounts of the Borrower with the
Bank;
4. The following additional property: Accounts receivable,
inventory, machinery and Equipment, general intangibles, and
all other assets of Borrower.
Bank's Right to Setoff: The Bank shall have the right at any time to apply
its own debt or liability to the Borrower or to any other party liable on
this note in whole or partial payment of this note or other present or
future liabilities, without any requirement of mutual maturity.
Representations by Borrower: Each Borrower represents: (a) that the
execution and delivery of this note and the performance of the obligations
it imposes do not violate any law, conflict with any agreement by which it
is bound, or require the consent or approval of any governmental authority
or any third party; (b) that this note is a valid and binding agreement,
enforceable according to its terms; and (c) that all balance sheets, profit
and loss statements, and other financial statements furnished to the Bank
are accurate and fairly reflect the financial condition of the organizations
and persons to which they apply on their effective dates, including
contingent liabilities of every type, which financial condition has not
changed materially and adversely since those dates. Each Borrower, other
than a natural person, further represents: (a) that it is duly organized,
existing and in good standing pursuant to the laws under which it is
organized; and (b) that the execution and delivery of this note and the
performance of the obligations it imposes (i) are within its powers and have
been duly authorized by all necessary action of its governing body; and (ii)
do not contravene the terms of its articles of incorporation or
organization, its by laws, or any partnership, operating or other agreement
governing its affairs.
WAIVER OF JURY TRIAL: The Bank and the Borrower, after consulting or having
had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in
any litigation based upon or arising out of this note or any related
instrument or agreement or any of the transactions contemplated by this note
or any course of conduct, dealing, statements whether oral or written, or
actions of either of them. Neither the Bank nor the Borrower shall seek to
consolidate, by counterclaim or otherwise, any action in which a jury trial
has been waived with any other action in which a jury trial cannot be or has
not been waived. These provisions shall not be deemed to have been modified
in any respect or relinquished by either the Bank or the Borrower except by
a written instrument executed by both of them.
ADDRESS: BORROWER:
7232 Jackson Rd. I.G.K. Industries, Inc.
Ann Arbor, MI 48103 By: /s/David O Schupp
Its:Treasurer
By: -----------------------------------
Its: -----------------------------------
CONTINUING PLEDGE AGREEMENT
PLEDGE: To induce NBD Bank, of 611 Woodward Avenue, Detroit,
Michigan 48226-3497 (the "Bank"), at its option, to make loans, extend or
continue credit or some other benefit, including guaranties, letters of
credit and foreign exchange contracts, present or future, direct or
indirect, and whether several, joint or joint and several (referred to
collectively as "Liabilities"), to the undersigned and its successors (the
"Pledgor"), and
(check if applicable)
[ ] to Interface Systems, Inc. and its successors (the
"Borrower"), and because the Pledgor has determined that executing this
Pledge is in its interest and to its financial benefit, the Pledgor pledges
and transfers to the Bank, and grants the Bank a continuing security
interest in the property listed below under the heading "Schedule of
Collateral." If the Collateral consists of securities, the grant includes
any stock rights, stock dividends, liquidating dividends, new securities and
other property to which the Pledgor may become entitled because it owns the
Collateral. The Pledgor has transferred the securities to the Bank. In the
event the transfer is not complete, the Pledgor will complete it within 10
days. This security interest shall secure all Liabilities and includes
principal, interest, expenses, reasonable attorneys' fees, and all other
costs of collection. The Pledgor agrees to hold the Bank harmless from any
liability caused by its reliance on this Pledge.
SCHEDULE OF COLLATERAL:
1,400,000 shares Interface Systems, International, Ltd., Certificate #15
including substitutions, replacements, additions and proceeds. Any
securities or other property of the Pledgor at any time in the custody,
possession or control of the Bank shall also constitute Collateral, unless
the Bank holds such property solely in a fiduciary capacity.
WARRANTIES AND COVENANTS: The Pledgor warrants it owns the Collateral free
and clear of any liens. The Pledgor will not attempt to sell or assign the
Collateral or create any lien or claim against it. The Pledgor agrees to
reimburse the Bank, on demand, for any amounts paid or advanced by the Bank
for the purpose of preserving all or any part of the Collateral. The Bank
shall exercise reasonable care in the custody and preservation of the
Collateral to the extent required by applicable statute. The Bank shall use
its best efforts to take any action the Pledgor may reasonably request in
writing, but the failure to do so shall not be deemed a failure to exercise
reasonable care.
REGISTRATION RIGHTS: If any of the Collateral consists of securities not
registered under the Securities Act of 1933, and the issuer proposes to
register any of its securities, the Pledgor will give the Bank notice of
that fact. In addition, and at no cost to the Bank, the Pledgor will use
its best effort to induce the issuer to register the pledged securities so
that they may be disposed of by public sale or other public disposition.
Upon the completion of registration, the Pledgor will deliver certificates
without any restrictive legend in exchange for the unregistered securities.
The Pledgor indemnifies and holds the Bank harmless against any loss, claim,
damage or liability arising out of the registration process, and will
reimburse the Bank for any legal or other expenses incurred by the Bank as a
result.
INSTRUCTIONS REGARDING THE COLLATERAL: The Bank may act upon any
instructions given by the Pledgor whether in writing or not, with regard to
additions or substitutions or sale or other disposition of the Collateral
and its proceeds. The Pledgor agrees that any additions to, substitutions
for or proceeds of the Collateral that it or the Borrower receives will be
held for the Bank's benefit and turned over to the Bank. The Pledgor also
gives the Bank permission to have the Collateral or any part of it
transferred to or registered in the Bank's name or in the name of any other
person, firm or corporation, with or without designation of the capacity of
such nominee, and will hold the Bank harmless from any liability or
responsibility that might result. In furtherance of the Bank's rights under
this Pledge, the Pledgor irrevocably appoints the Bank as its attorney-in-
fact, with full power of substitution.
CONTINUED RELIANCE: The Bank may continue to make loans or extend credit to
the Borrower based on this Pledge until it receives written notice of
termination from the Pledgor. That notice shall be effective at the opening
of the Bank for business on the day after receipt of the notice. The
termination will not affect any of the rights given to the Bank in this
Pledge with respect to any of the Liabilities that were created, assumed or
committed to prior to the Bank's receipt of the notice, and all subsequent
renewals, extensions, modifications and amendments of the Liabilities. Upon
receipt of the notice, the Bank does not have to take any action against the
Borrower or the Collateral in order to maintain its rights. If the Pledgor
is the Borrower, this Pledge is not terminable.
LOAN-TO-VALUE RATIO: If the unpaid balance of the Liabilities shall at any
time exceed an amount equal to -------% of the then fair market value (as
reasonably determined by the Bank) of any securities constituting all or a
portion of the Collateral, and such excess continues for five (5) days after
notice from the Bank to the Pledgor, the Pledgor shall be in default under
this Pledge and the Bank may sell all or any portion of such securities and
otherwise exercise any or all of the rights and remedies set forth in this
Pledge.
DEFAULT/REMEDIES: If the Pledgor or the Borrower fails to pay any of the
Liabilities when due, or if a default exists under the terms of any
agreement related to any of the Liabilities, or if the Pledgor dies or fails
to observe or perform any term of this Pledge, or if any representation or
warranty of the Pledgor contained in this Pledge is untrue in any material
respect, or if there is a material change in the financial condition of the
Pledgor which the Bank in good faith determines to be materially adverse,
then the Bank shall have all of the rights and remedies provided by any law
to liquidate or foreclose on and sell the Collateral, including but not
limited to the rights and remedies of a secured party under the Uniform
Commercial Code. The Pledgor agrees and acknowledges that because of
applicable securities laws, the Bank may not be able to effect a public sale
of the Collateral, and sales at a private sale may be on terms and at a
price less favorable than if the securities were sold at a public sale. The
Pledgor agrees that all private sales made under these circumstances shall
be deemed to have been made in a commercially reasonable manner. These
rights and remedies shall be cumulative and not exclusive. If the Pledgor
is entitled to notice, that requirement will be met if the Bank sends notice
at least seven (7) days prior to the date of sale, disposition or other
event requiring notice. The proceeds of any sale shall be applied first to
costs, then toward payment of the Liabilities, whether or not the
Liabilities have been declared to be due and owing; provided that, to the
extent any Liabilities consist of extensions of credit to the Borrower by
the issuance of letters of credit or other like obligations of the Bank to
third parties which have not been utilized, such proceeds shall be held by
the Bank in a cash collateral account as security for the Liabilities.
WAIVERS: The Pledgor waives any right it may have to receive notice of any
of the following matters before the Bank enforces any of its rights: (a)
the Bank's acceptance of this Pledge, (b) any credit that the Bank extends
to the Borrower, (c) the Borrower's default, (d) any demand, or (e) any
action that the Bank takes regarding the Borrower, anyone else, any
collateral, or any Liability, which it might be entitled to take by law or
under any other agreement. No modification or waiver of this Pledge shall
be effective unless it is in writing and signed by the party against whom it
is being enforced. The Bank may waive or delay enforcing any of its rights
without losing them. Any waiver shall affect only the specific terms and
time period stated in the waiver. The Bank shall not be obligated to take
any action in connection with any conversion, call, redemption, retirement
or any other event relating to any of the Collateral.
WAIVER OF SUBROGATION: Until thirteen months after the principal balance of
and interest on the Liabilities, even if not covered by this Pledge, shall
have been paid in full and the Borrower shall have fully performed all of
its obligations to the Bank, the Pledgor expressly waives any and all rights
of subrogation, contribution, reimbursement, indemnity, exoneration, implied
contract, recourse to security or any other claim (including any claim, as
that term is defined in the federal Bankruptcy Code, and any amendments)
which the Pledgor may now have or later acquire against the Borrower, any
other entity directly or contingently liable for the Liabilities, or against
the Collateral arising from the existence or performance of the Pledgor's
obligations under this Pledge.
The Pledgor further agrees that such waiver is permanent and shall not be
revoked or terminated, in any event, including payment in full of the
principal balance of and interest on the Liabilities in the event that
proceedings are commenced at any time after execution of this Pledge by or
against the Borrower under any bankruptcy, reorganization, liquidation or
similar laws of any jurisdiction, including the federal Bankruptcy Code.
The Pledgor further agrees that should any payments to the Bank on the
Liabilities be in whole or in part invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or
any other party under any bankruptcy act or code, state or federal law,
common law or equitable doctrine, this Pledge and any Collateral shall
remain in full force and effect (or be reinstated as the case may be) until
payment in full of any such amounts, which payment shall be due on demand.
REPRESENTATIONS BY PLEDGOR: Each Pledgor represents: (a) that the execution
and delivery of this Pledge and the performance of the obligations it
imposes do not violate any law, conflict with any agreement by which it is
bound, or require the consent or approval of any governmental authority or
any third party; (b) that this Pledge is a valid and binding agreement,
enforceable according to its terms; and (c) that all balance sheets, profit
and loss statements, and other financial statements furnished to the Bank
are accurate and fairly reflect the financial condition of the organizations
and persons to which they apply on their effective dates, including
contingent liabilities of every type, which financial condition has not
changed materially and adversely since those dates. Each Pledgor, other
than a natural person, further represents: (a) that it is duly organized,
existing and in good standing pursuant to the laws under which it is
organized; and (b) that the execution and delivery of this Pledge and the
performance of the obligations it imposes (i) are within its powers and have
been duly authorized by all necessary action of its governing body; and (ii)
do not contravene the terms of its articles of incorporation or
organization, its by-laws, or any partnership, oeprating or other agreement
governing its affairs.
NOTICES: Notice from one party to another relating to this Pledge shall be
deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or facsimile number set
forth under its name by any of the following means: (a) hand delivery, (b)
registered or certified mail postage prepaid, (d) Federal Express, Purolator
Courier or like overnight courier service, or (e) telecopy, facsimile or
other wire transmission with request for assurance of receipt in a manner
typical with respect to communications of that type. Notice made in
accordance with this section shall be deemed delivered on receipt if
delivered by hand or wire transmission, on the third business day after
mailing if mailed by first class, registered or certified mail or on the
next business day after mailing or deposit with an overnight courier service
if delivered by express mail or overnight courier. Notwithstanding the
foregoing, notice of termination of this Pledge shall be deemed received
only upon the receipt of actual written notice by the Bank in accordance
with the paragraph above labeled "Continued Reliance."
MISCELLANEOUS: The Pledgor consents to (a) any extension, postponement,
renewal, modification and amendment of any Liability, (b) the release or
discharge of all or any part of any security for the Liabilities, and (c)
the release or discharge or suspension of any rights and remedies against
any person who may be liable for the Liabilities. The Bank does not have to
look to any other right, any other collateral or any other person for
payment before it exercises its rights under this Pledge. The Pledgor's
obligations to the Bank under this Pledge are not subject to any condition,
precedent or subsequent, and shall not be released or affected by any change
in the composition or structure of the Borrower or Pledgor, including a
merger or consolidation with any other person or entity. If this Pledge is
signed by more than one person, all shall be jointly and severally bound.
This Pledge is binding on the Pledgor and its heirs, successors and assigns,
and is for the benefit of the Bank and its successors and assigns. This
Agreement is governed by Michigan law. The use of section headings shall
not limit the provisions of this Pledge.
WAIVER OF JURY TRIAL: The Bank and the Pledgor, after consulting or having
had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in
any litigation based upon or arising out of this Pledge or any related
instrument or agreement, or any of the transactions contemplated by this
Pledge, or any course of conduct, dealing, statement (whether oral or
written), or actions of either of them. Neither the Bank nor the Pledgor
shall seek to consolidate, by counterclaim or otherwise, any action in which
a jury trial has been waived with any other action in which a jury trial
cannot be or has not been waived. These provisions shall not be deemed to
have been modified in any respect or relinquished by either the Bank or the
Pledgor except by a written instrument executed by both of them.
Dated: February 1997.
Address: PLEDGOR:
5855 Interface Drive By:David Schupp
Ann Arbor, MI 48103
Its:Treasurer
Its:---------------------
CONTINUING SECURITY AGREEMENT
NAME OF DEBTOR: Interface Systems, Inc. (the "Debtor") TAXPAYER I.D. NO.:
38-1857378
DEBTOR'S ADDRESS (Chief executive office): 5855 Interface Drive, Ann Arbor,
MI 48103
GRANT OF SECURITY INTEREST: The Debtor grants to NBD Bank, the secured
party referred to as "Bank", whose address is 611 Woodward Avenue, Detroit,
Michigan 48226, a continuing security interest in the Collateral listed
below, to secure the payment and performance of:
All of Debtor's debt to the Bank; and
(check if applicable)
[ ] All of --------------'s(Name of Borrower if other than
Debtor) debt to the Bank.
Debt shall include each and every debt, liability and obligation of every
type and description now owed or arising at a later time, whether they are
direct or indirect, joint, several, or joint and several and whether or not
of the same type or class as presently outstanding, which shall collectively
be referred to as "Liabilities." Liabilities shall also include all
interest, costs, expenses and reasonable attorney's fees accruing to or
incurred by the Bank in collecting the Liabilities or in the protection,
maintenance or liquidation of the Collateral.
COLLATERAL:
[X] Accounts Receivable [X] Equipment
[ ] Farm Products
[X] Inventory [X] Instruments
[ ] Specific (see Item 6)
NOTE: If no box is checked, it is expressly agreed by Debtor that the Bank
is granted a security interest in "All Assets." "All Assets" of Debtor
shall include Accounts Receivable, Inventory, Equipment, Instruments and
Farm Products, all as defined below.
DESCRIPTION OF COLLATERAL: The Collateral covered by this agreement is all
of the Debtor's property indicated above and defined below, present and
future, including but not limited to any items listed on any schedule or
list attached. Also included are all proceeds, including but not limited to
stock rights, subscription rights, dividends, stock dividends, stock splits,
or liquidating dividends, and all cash, accounts, chattel paper and general
intangibles arising from the sale, rent, lease, casualty loss or other
disposition of the Collateral, and any Collateral returned to, repossessed
by or stopped in transit by the Debtor.
Also included are the Debtor's books and records which relates to the
Collateral. Where the Collateral is in the possession of the Bank, the
Debtor agrees to deliver to the Bank any property which represents an
increase in the Collateral or profits or proceeds of the Collateral.
1. "Accounts Receivable" shall consist of accounts,
chattel paper and general intangibles as those terms are defined in the
Michigan Uniform Commercial Code ("UCC"). Also included is any right to a
refund of taxes paid at any time to any governmental entity. Also included
are letters of credit, and drafts under them, given in support of Accounts
Receivable. Debtor warrants that its chief executive office is at the
address shown above.
2. "Inventory" shall consist of all property held at
any location by or for Debtor for sale, rent, or lease, or furnished or to
be furnished by the Debtor under any contract of service, or raw materials
or work in process and their products, or materials used or consumed in its
business, and shall include containers and shelving useful for storing.
Without limiting the security interest granted, Inventory is presently
located at 5855 Interface Drive, Ann Arbor, MI and 300 Jackson Plaza, Ann
Arbor, MI
.
3. "Equipment" shall consist of any goods at any time
acquired, owned or held by Debtor at any location primarily for use in its
business, including, but not limited to, machinery, fixtures, furniture,
furnishings and vehicles, and any accessions, parts, attachments,
accessories, tools, dies, additions, substitutions, replacements and
appurtenances to them or intended for use with them. Without limiting the
security interest granted, Equipment is presently located at 5855 Interface
Drive, Ann Arbor, MI.
4. "Instruments" shall consist of Debtor's interest
of any kind in any negotiable instrument or security as those terms are
defined in the UCC, or any other writing which evidences a right to payment
of money and is of a type which is, in the ordinary course of business,
transferred by delivery alone or by delivery with any necessary endorsement
or assignment.
5. "Farm Products" shall consist of all poultry and
livestock and their young, along with their products and produce; all crops,
annual or perennial, and all products of the crops; and all feed, seed,
fertilizer, medicines, and other supplies used or produced in farming
operations. The Debtor will provide the Bank with a written list of the
buyers, commission merchants or selling agents to or through whom it may
sell the Farm Products, in form acceptable to the Bank. The Debtor will
keep this list current by notice to the Bank at least seven (7) days prior
to any sale. In this paragraph the terms farm products, buyers, commission
merchants and selling agents have the meanings given to them in the Federal
Food Security Act of 1985, and Section 9307 of the UCC.
6. "Specific" shall consist of the following, and all
accessions, parts, attachments, accessories, additions, substitutions,
replacements, appurtenances and their related rights: ---------------------
- ----------------------------------------------------------------------------
- --------------presently located at: ----------------------------------------
- --------------
ADDITIONAL TERMS AND CONDITIONS: The Debtor agrees to all of the Terms and
Conditions on the reverse.
WAIVER OF JURY TRIAL: The Bank and the Debtor after consulting or having
had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in
any litigation based upon or arising out of this agreement or any related
instrument or agreement, or any of the transactions contemplated by this
agreement, or any course of conduct, dealing, statements (whether oral or
written), or actions of either of them. Neither the Bank nor the Debtor
shall seek to consolidate, by counterclaim or otherwise, any action in which
a jury trial has been waived with any other action in which a jury trial
cannot be or has not been waived. These provisions shall not be deemed to
have been modified in any respect or relinquished by either the Bank or the
Debtor except by a written instrument executed by both of them.
DEBTOR:
Dated: February 19, 1997 Interface Systems, Inc.
By:-------------------------
Its:-------------------------
CONTINUING SECURITY AGREEMENT
NAME OF DEBTOR: I.G.K. Industries, Inc. (the "Debtor")
TAXPAYER I.D. NO.: 38-2365501
DEBTOR'S ADDRESS (Chief executive office): 7232 Jackson Rd., Ann Arbor, MI
48103
GRANT OF SECURITY INTEREST: The Debtor grants to NBD Bank, the secured
party referred to as "Bank", whose address is 611 Woodward Avenue, Detroit,
Michigan 48226, a continuing security interest in the Collateral listed
below, to secure the payment and performance of:
All of Debtor's debt to the Bank; and
(check if applicable)
[ ] All of ------------------'s (Name of Borrower if other
than Debtor) debt to the Bank.
Debt shall include each and every debt, liability and obligation of every
type and description now owed or arising at a later time, whether they are
direct or indirect, joint, several, or joint and several and whether or not
of the same type or class as presently outstanding, which shall collectively
be referred to as "Liabilities." Liabilities shall also include all
interest, costs, expenses and reasonable attorney's fees accruing to or
incurred by the Bank in collecting the Liabilities or in the protection,
maintenance or liquidation of the Collateral.
COLLATERAL:
[X] Accounts Receivable [X] Equipment [ ] Farm Products
[X] Inventory [ ] Instruments [ ] Specific (see Item 6)
NOTE: If no box is checked, it is expressly agreed by Debtor that the Bank
is granted a security interest in "All Assets." "All Assets" of Debtor
shall include Accounts Receivable, Inventory, Equipment, Instruments and
Farm Products, all as defined below.
DESCRIPTION OF COLLATERAL: The Collateral covered by this agreement is all
of the Debtor's property indicated above and defined below, present and
future, including but not limited to any items listed on any schedule or
list attached. Also included are all proceeds, including but not limited to
stock rights, subscription rights, dividends, stock dividends, stock splits,
or liquidating dividends, and all cash, accounts, chattel paper and general
intangibles arising from the sale, rent, lease, casualty loss or other
disposition of the Collateral, and any Collateral returned to, repossessed
by or stopped in transit by the Debtor.
Also included are the Debtor's books and records which relates to the
Collateral. Where the Collateral is in the possession of the Bank, the
Debtor agrees to deliver to the Bank any property which represents an
increase in the Collateral or profits or proceeds of the Collateral.
1. "Accounts Receivable" shall consist of accounts,
chattel paper and general intangibles as those terms are defined in the
Michigan Uniform Commercial Code ("UCC"). Also included is any right to a
refund of taxes paid at any time to any governmental entity. Also included
are letters of credit, and drafts under them, given in support of Accounts
Receivable. Debtor warrants that its chief executive office is at the
address shown above.
2. "Inventory" shall consist of all property held at
any location by or for Debtor for sale, rent, or lease, or furnished or to
be furnished by the Debtor under any contract of service, or raw materials
or work in process and their products, or materials used or consumed in its
business, and shall include containers and shelving useful for storing.
Without limiting the security interest granted, Inventory is presently
located at 7232 Jackson Rd., Ann Arbor, MI 48103.
3. "Equipment" shall consist of any goods at any time
acquired, owned or held by Debtor at any location primarily for use in its
business, including, but not limited to, machinery, fixtures, furniture,
furnishings and vehicles, and any accessions, parts, attachments,
accessories, tools, dies, additions, substitutions, replacements and
appurtenances to them or intended for use with them. Without limiting the
security interest granted, Equipment is presently located at 7232 Jackson
Rd., Ann Arbor, MI 48103
4. "Instruments" shall consist of Debtor's interest
of any kind in any negotiable instrument or security as those terms are
defined in the UCC, or any other writing which evidences a right to payment
of money and is of a type which is, in the ordinary course of business,
transferred by delivery alone or by delivery with any necessary endorsement
or assignment.
5. "Farm Products" shall consist of all poultry and
livestock and their young, along with their products and produce; all crops,
annual or perennial, and all products of the crops; and all feed, seed,
fertilizer, medicines, and other supplies used or produced in farming
operations. The Debtor will provide the Bank with a written list of the
buyers, commission merchants or selling agents to or through whom it may
sell the Farm Products, in form acceptable to the Bank. The Debtor will
keep this list current by notice to the Bank at least seven (7) days prior
to any sale. In this paragraph the terms farm products, buyers, commission
merchants and selling agents have the meanings given to them in the Federal
Food Security Act of 1985, and Section 9307 of the UCC.
6. "Specific" shall consist of the following, and all
accessions, parts, attachments, accessories, additions, substitutions,
replacements, appurtenances and their related rights: --------------------
- ----------------------------------------------------------------------------
presently located at: ------------------------------------------------------
- ---------------------------------------------------------------------------.
ADDITIONAL TERMS AND CONDITIONS: The Debtor agrees to all of the Terms and
Conditions on the reverse.
WAIVER OF JURY TRIAL: The Bank and the Debtor after consulting or having
had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in
any litigation based upon or arising out of this agreement or any related
instrument or agreement, or any of the transactions contemplated by this
agreement, or any course of conduct, dealing, statements (whether oral or
written), or actions of either of them. Neither the Bank nor the Debtor
shall seek to consolidate, by counterclaim or otherwise, any action in which
a jury trial has been waived with any other action in which a jury trial
cannot be or has not been waived. These provisions shall not be deemed to
have been modified in any respect or relinquished by either the Bank or the
Debtor except by a written instrument executed by both of them.
DEBTOR:
Dated: February 19, 1997 I.G.K. Industries, Inc.
By:--------------------------
Its: ---------------------------
Its:----------------------------
MORTGAGE
THIS IS A FUTURE ADVANCE MORTGAGE
THIS MORTGAGE is made on February 19, 1997, between Interface Systems, Inc.,
a Delaware Corporation, whose address is 5855 Interface Dr., Ann Arbor, MI
48103, the "Mortgagor"), and NBD Bank, whose address is 611 Woodward Avenue,
Detroit, Michigan 48226-3947 (the "Mortgagee").
The Mortgagor MORTGAGES AND WARRANTS to the Mortgagee real property and all
the buildings, structures and improvements on it described as:
Land located in the Township of Scio, County of Washtenaw, State of
Michigan:
Lots 18 and 19, Jackson Road Commercial-Industrial Subdivision, Township
of Scio, Washtenaw County, Michigan, according to the plat thereof as
recorded in Liber 16 of plats on page 37 and 38, Washtenaw County Records.
(the "Premises")
Commonly known as: 7232 Jackson Road, Ann Arbor, MI
Tax Parcel Identification No. 81-08-20-215-009 and 81-08-20-215-010
The Premises shall also include all of the Mortgagor's right, title and
interest in and to the following:
(1) All easements, rights-of-way, licenses, privileges and hereditaments.
(2) Land lying in the bed of any road, or the like, opened, proposed or
vacated, or any strip or gore, adjoining the Premises.
(3) All machinery, apparatus, equipment, fittings, fixtures, and articles
of personal property of every kind and nature whatsoever located now or in
the future in or upon the Premises and used or useable in connection with
any present or future operation of the Premises (all of which is called
"Equipment"). It is agreed that all Equipment is part of the Premises and
appropriated to the use of the real estate and, whether affixed or annexed
or not, shall for the purposes of this Mortgage unless the Mortgagee shall
otherwise elect, be deemed conclusively to be real estate and mortgaged and
warranted to the Mortgagee.
(4) All mineral, oil, gas and water rights, royalties, water and water
stock, if any.
(5) All awards or payments including interest made as a result of: the
exercise of the right of eminent domain, the alteration of the grade of any
street, any loss of or damage to any building or other improvement on the
Premises, any other injury to or decrease in the value of the Premises, any
refund due on account of the payment of real estate taxes, assessments or
other charges levied against or imposed upon the Premises, and the
reasonable attorney fees, costs and disbursements incurred by the Mortgagee
in connection with the collection of any such award or payment.
(6) All of the rents, issues, income and profits of the Premises under
present or future leases, or otherwise, including but not limited to all
rights conferred by Act No. 210 of Michigan Public Acts of 1953, as amended.
(MCL 554.231 et seq.)
The Premises are unencumbered except as follows: None.
("Permitted Encumbrances"). If the Premises are encumbered by Permitted
Encumbrances, the Mortgagor shall perform all obligations and make all
payments as required by the Permitted Encumbrances. The Mortgagor shall
provide copies of all writings pertaining to Permitted Encumbrances, and the
Mortgagee is authorized to request and receive that information from any
other person without the consent or knowledge of the Mortgagor.
THE DEBT. This Mortgage secures the following (the "Debt"):
(i) The note(s) dated February 19, 1997 n the principal amount(s) of
$3,500,000 and $250,000, maturing on August 31, 1997 and February 28, 2002
respectively executed and delivered by Mortgagor to the Mortgagee, together
with all extensions, renewals, modifications, and replacements; and
(ii) the guaranty of the debt of I.G.K. Industries, Inc. and Interface
Systems, International, Ltd. dated February 19, 1997 executed and delivered
by Mortgagor to the Mortgagee, together with all amendments and
replacements; and
(iii) ------------------------------------------------------ together with
all extensions, renewals, modifications and replacements; and
(iv) Future Advances and Cross-Lien: All other present and future, direct
and indirect obligations and liabilities of the Mortgagor, or any one or
more of them, with or without others, however evidenced, to the Mortgagee,
and all future advances, whether obligatory or optional, from the Mortgagee
to the Mortgagor, or any one or more of them, with or without others. (This
shall not apply to any obligation or debt incurred for personal, family or
household purposes unless the note or guaranty expressly states that it is
secured by this Mortgage.) Notwithstanding the foregoing, if this Mortgage
is a residential future advance mortgage, as defined in MCL 565.901, the
maximum principal amount secured by this Mortgage is $----------, excluding
protective advances as defined in MCL 565.901.
This Mortgage shall also secure the performance of the promises and
agreements contained in this Mortgage.
The Mortgagor promises and agrees as follows:
1. PAYMENT OF DEBT; PERFORMANCE OF OBLIGATIONS. The Mortgagor shall
promptly pay when due, whether by acceleration or otherwise, the Debt for
which the Mortgagor is liable, and shall promptly perform all obligations to
which the Mortgagor has agreed under the terms of this Mortgage and any loan
documents evidencing the Debt.
2. TAXES. The Mortgagor shall pay, when due, and before any
interest, collection fees or penalties shall accrue, all taxes, assessments,
fines, impositions, and other charges which may become a lien prior to this
Mortgage. Should the Mortgagor fail to make such payments, the Mortgagee
may, at its option and at the expense of the Mortgagor, pay the amounts due
for the account of the Mortgagor. Upon the request of the Mortgagee, the
Mortgagor shall immediately furnish to the Mortgagee all notices of amounts
due and receipts evidencing payment. The Mortgagor shall promptly notify
the Mortgagee of any lien on all or any part of the Premises and shall
promptly discharge any unpermitted lien or encumbrance.
3. CHANGE IN TAXES. In the event of the passage of any law or
regulation, state, federal or municipal, subsequent to the date of this
Mortgage in any manner changing or modifying the laws now in force governing
the taxation of mortgages or debts secured by mortgages, or the manner of
collecting such taxes, the Debt shall become due and payable immediately at
the option of the Mortgagee.
4. INSURANCE. Until the debt is fully paid the Mortgagor shall keep
the Premises and the present and future buildings and other improvements on
the Premises, constantly insured for the benefit of the Mortgagee, without
any reduction in coverage based on the Mortgagor's acts, against fire and
such other hazards and risks customarily covered by the standard form of
extended coverage endorsement available in the State of Michigan, including
risks of vandalism and malicious mischief, and shall further provide flood
insurance if the Premises are situated in an area designated as a flood risk
area by the Director of the Federal Emergency Management Agency or as
otherwise required by the Flood Disaster Protection Act of 1973 and
regulations issued under it), and such other appropriate insurance as the
Mortgagee may require from time to time. All insurance policies and
renewals must be acceptable to Mortgagee, must provide for payment to the
Mortgagee in the event of loss, must require thirty (30) days notice to the
Mortgagee in the event of nonrenewal or cancellation, and must be delivered
to the Mortgagee. Should the Mortgagor fail to insure or fail to pay the
premiums on any insurance or fail to deliver the policies or certificates or
renewals to the Mortgagee then the Mortgagee at its option may have the
insurance written or renewed and pay the premiums for the account of the
Mortgagor. In the event of loss or damage, the proceeds of the insurance
shall be paid to the Mortgagee alone. No loss or damage shall itself reduce
the Debt. The Mortgagee is authorized to adjust and compromise a loss
without the consent of the Mortgagor, to collect, receive and receipt for
any proceeds in the name of the Mortgagee and the Mortgagor and to endorse
the Mortgagor's name upon any check in payment of proceeds. The proceeds
shall be applied first toward reimbursement of all costs and expenses of the
Mortgagee in collecting the proceeds and then toward payment of the Debt or
any portion of it, whether or not then due or payable, or the Mortgagee at
its option may apply the proceeds, or any part to the repair or rebuilding
of the Premises provided that Mortgagor is not then or at any time during
the course of restoration of the Premises in default under this Mortgage and
has complied with all requirements for application of the proceeds to
restoration of the Premises as Mortgagee, in its sole discretion may
establish.
5. RESERVES FOR TAXES AND INSURANCE. The Mortgagor shall, if
requested by the Mortgagee, pay to the Mortgagee, at the time of and in
addition to the scheduled installments of principal or interest due under
the Debt, a sum equal to (a) the amount estimated by the Mortgagee to be
sufficient to enable it to pay, at least thirty (30) days before they become
due and payable, all taxes, assessments and other similar charges levied
against the Premises, plus (b) the amount of the annual premiums on any
policies of insurance required to be carried by the Mortgagor divided by (c)
the number of installments due each year. These sums may be commingled with
the general funds of the Mortgagee, and no interest shall be payable on them
nor shall these sums be deemed to be held in trust for the benefit of the
Mortgagor. Upon notice at any time, the Mortgagor will, within ten (10)
days, deposit such additional sum as may be required for the payment of
increased taxes, assessments, charges or premiums.
Notwithstanding payment of any sums by the Mortgagor to the Mortgagee
under the terms of this paragraph, the Mortgagee shall have no obligation to
pay any taxes, assessments, premiums, or other similar charges relating to
or levied against the Premises. The obligation of the Mortgagor to pay
taxes, assessments, charges, and insurance premiums is not affected or
modified by the arrangements set out in this paragraph. Payment by the
Mortgagee on any one or more occasions of all or any portion of the taxes,
assessments, premiums, or other similar charges relating to or levied
against the Premises shall not be construed as obligating the Mortgagee to
pay any taxes, assessments, premiums, or other similar charges on any other
occasion. If the Mortgagee elects to pay any taxes, assessments, or other
similar charges, it shall not be required to do so at any time prior to the
date on which penalties, interest, and/or collection fees begin to accrue.
If the Mortgagee elects to pay any premium on any policy of insurance
required to be carried by the Mortgagor, it may do so at any time prior to
cancellation of the policy.
In the event of foreclosure of this Mortgage, any of the moneys then
remaining on deposit with the Mortgagee or its agent shall be applied
against the Debt prior to the commencement of foreclosure proceedings. The
obligation of the Mortgagor to pay taxes, assessments, charges or insurance
premiums is not affected or modified by the arrangements set out in this
section. Any default by the Mortgagor in the performance of the provisions
of this section shall constitute a default under this Mortgage. The
Mortgagee shall not request the reserves provided for in this section as
long as there is no default by the Mortgagor under this Mortgage and the
Mortgagor retains title to the Premises.
6. WASTE. The Mortgagor shall keep the Premises in good repair,
shall not commit or permit waste on the Premises nor do any other act
causing the Premises to become less valuable. Non-payment of taxes and
cancellation of insurance shall each constitute waste as provided by MCL
600.2927. The Mortgagor consents to the appointment of a receiver under
this statute should the Mortgagee elect to seek such relief. Should the
Mortgagor fail to effect any necessary repairs, the Mortgagee may at its
option and at the expense of the Mortgagor make the repairs for the account
of the Mortgagor. The Mortgagor shall use and maintain the Premises in
conformance with all applicable laws, ordinances and regulations. The
Mortgagee or its authorized agent shall have the right to enter upon and
inspect the Premises at all reasonable times.
7. ALTERATIONS, REMOVAL. No building, structure, improvement,
fixture or personal property constituting any part of the Premises shall be
removed, demolished or substantially altered without the prior written
consent of the Mortgagee.
8. PAYMENT OF OTHER OBLIGATIONS. The Mortgagor shall also pay all
other obligations which may become liens or charges against the Premises for
any present or future repairs or improvements made on the Premises, or for
any other goods, services, or utilities furnished to the Premises and shall
not permit any lien or charge of any kind securing the repayment of borrowed
funds (including the deferred purchase price for any property) to accrue and
remain outstanding against the Premises.
9. ASSIGNMENT OF LEASES AND RENTS. As additional security for the
Debt, the Mortgagor assigns to the Mortgagee all oral or written leases, and
the rents, issues, income and profits under all leases or licenses of the
Premises, present and future, including all rights conferred by MCL 554.231
et seq. and MCL 554.211 et seq. This assignment shall be operative in the
event of default and during any foreclosure or other proceeding taken to
enforce this Mortgage, and during any redemption period. The Mortgagor will
comply with all terms of all leases.
10. ASSIGNMENT OF INTEREST AS TENANT OR PURCHASER. If the
Mortgagor's interest in the Premises is that of a tenant or a purchaser, the
Mortgagor also assigns, mortgages and warrants to the Mortgagee, as
additional security for the Debt, all of the Mortgagor's right, title and
interest in and to any leases, land contracts or other agreements by which
the Mortgagor is leasing or purchasing any part or all of the Premises,
including all modifications, renewals and extensions and all of the
Mortgagor's right, title or interest in any purchase options contained in
any lease or other agreement. The Mortgagor agrees to pay each installment
of rent, principal and interest required to be paid by it under the lease,
land contract or other agreement when each installment becomes due and
payable whether by acceleration or otherwise. The Mortgagor further agrees
to pay and perform all of its other obligations under the lease, land
contract or other agreement.
If the Mortgagor defaults in the payment of any installment of rent,
principal, interest or in the payment or performance of any other obligation
under the lease, land contract or other agreement, the Mortgagee shall have
the right, but not the obligation, to pay the installment or installments
and to pay or perform the other obligations on behalf of and at the expense
of the Mortgagor. On receipt by the Mortgagee from the landlord or seller
under the lease, land contract or other agreement of any written notice of
default by the Mortgagor, the Mortgagee may rely on the notice as cause to
take any action it deems necessary or reasonable to cure a default even if
the Mortgagor questions or denies the existence or nature of the default.
11. SECURITY AGREEMENT. This Mortgage also constitutes a security
agreement within the meaning of the Michigan Uniform Commercial Code ("UCC")
and the Mortgagor grants to the Mortgagee a security interest in any
Equipment and other personal property included within the definition of
Premises. Accordingly, the Mortgagee shall have all of the rights and
remedies available to a secured party under the UCC. Upon the occurrence of
an event of default under this Mortgage, the Mortgagee shall have, in
addition to the remedies provided by this Mortgage, the right to use any
method of disposition of collateral authorized by the UCC with respect to
any portion of the Premises subject to the UCC.
12. REIMBURSEMENT OF ADVANCES. If the Mortgagor fails to perform any
of its obligations under this Mortgage, or if any action or proceeding is
commenced which materially affects Mortgagee's interest in the Premises
(including but not limited to a lien priority dispute, eminent domain, code
enforcement, insolvency, bankruptcy or probate proceedings), then the
Mortgagee at its sole option may make appearances, disburse sums and take
any action it deems necessary to protect its interest (including but not
limited to disbursement of reasonable attorney's fees and entry upon the
Premises to make repairs). Any amounts disbursed shall become additional
Debt, shall be immediately due and payable upon notice from the Mortgagee to
the Mortgagor, and shall bear interest at the highest rate permitted under
any instrument evidencing any of the Debt.
13. DUE ON TRANSFER. If all or any part of the Premises or any
interest in the Premises is transferred without the Mortgagee's prior
written consent, it may, at its sole option, declare the Debt to be
immediately due and payable.
14. NO ADDITIONAL LIEN. The Mortgagor covenants not to execute any
mortgage, security agreement, assignment of leases and rentals or other
agreement granting a lien against the interest of the Mortgagor in the
Premises, without the prior written consent of the Mortgagee, and then only
when the document granting that lien expressly provides that it shall be
subject to the lien of this Mortgage for the full amount secured by this
Mortgage, and shall also be subject and subordinate to any then existing or
future leases affecting the Premises.
15. EMINENT DOMAIN. Notwithstanding any taking under the power of
eminent domain, alteration of the grade of any road, alley, or the like, or
other injury or damage to or decrease in value of the Premises by any public
or quasi-public authority or corporation, the Mortgagor shall continue to
pay the Debt in accordance with the terms of the underlying loan documents
until any award or payment shall have been actually received by the
Mortgagee. By executing this Mortgage, the Mortgagor assigns the entire
proceeds of any award or payment and any interest to the Mortgagee. The
proceeds shall be applied first toward reimbursement of all costs and
expenses of the Mortgagee, including reasonable attorney fees of the
Mortgagee in collecting the proceeds and then toward payment of the Debt
whether or not then due or payable, or the Mortgagee at its option may apply
all or any part of the proceeds to the alteration, restoration or rebuilding
of the Premises.
16. ENVIRONMENTAL PROVISIONS. From time to time the Mortgagor or
Borrower has executed and delivered, and may in the future execute and
deliver, Environmental Certificates to the Mortgagee, which include
representations, warranties, covenants, an indemnification, and right of
entry. The most recent Environmental Certificate shall supersede all prior
Environmental Certificates that have been executed, and its provisions shall
be deemed incorporated into this Mortgage.
17. EVENTS OF DEFAULT/ACCELERATION. Upon the occurrence of any of
the following, the Mortgagee shall be entitled to exercise its remedies
under this Mortgage or as otherwise provided by law: (1) The Mortgagor or,
if other than the Mortgagor or all of the undersigned, any principal obligor
of the Debt (collectively, the "Borrower") fails to pay when due any amount
payable under the note(s), the guaranty, or any other agreement evidencing
the Debt; (2) the Mortgagor or Borrower (a) fails to observe or perform any
other term of the note(s), the guaranty, or any other agreement evidencing
the Debt, or (b) makes any materially incorrect or misleading representation
in any financial statement or other information delivered to the Mortgagee;
(3) there is a default under the terms of this Mortgage, any loan agreement,
mortgage, security agreement, or other document executed as part of the Debt
transaction, or any guaranty of the Debt becomes unenforceable in whole or
in part, or any guarantor fails to promptly perform under its guaranty; (4)
the Mortgagor or Borrower fails to pay when due any amount payable under any
note or agreement evidencing debt to the Mortgagee, or defaults under the
terms of any agreement or instrument relating to or securing any debt for
borrowed money owing to the Mortgagee; (5) a "reportable event" (as defined
in the Employee Retirement Income Security Act of 1974 as amended) occurs
that would permit the Pension Benefit Guaranty Corporation to terminate any
employee benefit plan of the Mortgagor or Borrower or any affiliate of the
Mortgagor or Borrower; (6) the Mortgagor or Borrower becomes insolvent or
unable to pay its debts as they become due; (7) the Mortgagor or Borrower
(a) makes an assignment for the benefit of Creditors, (b) consents to the
appointment of a custodian, receiver, or trustee for itself or for a
substantial part of its assets, or (c) commences any proceeding under any
bankruptcy, reorganization, liquidation, insolvency or similar laws of any
jurisdiction; (8) a custodian, receiver, or trustee is appointed for the
Mortgagor or Borrower or for a substantial part of its assets without its
consent and is not removed within 60 days after the appointment; (9)
proceedings are commenced against the Mortgagor or Borrower under any
bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and those proceedings remain undismissed for 60 days after
commencement; or the Mortgagor or Borrower consents to the commencement of
those proceedings; (10) any judgment is entered against the Mortgagor or
Borrower, or any attachment, levy, or garnishment is issued against any
property of the Mortgagor or Borrower; (11) any proceedings are instituted
for the foreclosure or collection of any mortgage, judgment or lien
affecting the Premises; (12) the Mortgagor sells, transfers or hypothecates
any part of the Premises except as provided in this Mortgage without the
prior written consent of the Mortgagee; (13) the Mortgagor or Borrower dies;
(14) the Mortgagor or Borrower, without the Mortgagee's written consent, (a)
is dissolved, (b) merges or consolidates with any third party, (c) leases,
sells or otherwise conveys a material part of its assets or business outside
the ordinary course of its business, (d) leases, purchases or otherwise
acquires a material part of the assets of any other corporation or business
entity outside the ordinary course of its business, or (e) agrees to do any
of the foregoing; or (15) there is a substantial change in the existing or
prospective financial condition of the Mortgagor or Borrower which the
Mortgagee in good faith determines to be materially adverse.
18. REMEDIES UPON DEFAULT. Upon the occurrence of any of the events
of default set forth in this Mortgage, the Mortgagee is authorized to
commence foreclosure proceedings against the Premises through judicial
proceedings or by advertisement, at the option of the Mortgagee, and to sell
the Premises at public auction pursuant to law, and out of the proceeds to
retain all sums due the Mortgagee, including the costs of the sale and
reasonable attorney's fees, rendering any surplus to the Mortgagor. The
Premises may be sold in one parcel as an entirety or in such parcels, manner
and order as Mortgagee may elect. By executing this Mortgage, the Mortgagor
waives, in the event of foreclosure of this Mortgage or the enforcement by
the Mortgagee of any other rights and remedies in this Mortgage, any right
otherwise available in respect to marshalling of assets which secure the
Debt or to require the Mortgagee to pursue its remedies against any other
such assets. The Mortgagor waives all rights to a hearing prior to sale in
connection with any foreclosure of this Mortgage by advertisement and all
notice requirements except as set forth in any applicable state statute
providing for foreclosure by advertisement.
19. PLEDGE. If the Mortgagor is not liable for all or any part of
the Borrower's obligations to the Bank, then it agrees that:
(a) If any monies become available to the Bank from the Borrower that
it can apply to any debt, the Bank may apply them to debt not secured by
this Mortgage.
(b) Without notice to or the consent of the Mortgagor, the Bank may (i)
take any action it chooses against any Borrower, against any collateral for
the Debt, or against any other person liable for the Debt; (ii) release any
Borrower or any other person liable for the Debt, release any collateral for
the Debt, and neglect to perfect any interest in any such collateral; (iii)
forbear or agree to forbear from exercising any rights or remedies,
including any right to setoff, that it has against the Borrower, any other
person liable for the Debt, or any other collateral for the Debt; (iv)
extend to any Borrower additional Debt to be secured by this Mortgage; or
(v) renew, extend, modify or amend any Debt, and deal with the Borrower or
any other person liable for the Debt as it chooses.
(c) None of the Mortgagor's obligations under this Mortgage shall be
affected by (i) any act or omission of the Bank; (ii) the voluntary or
involuntary liquidation, sale or other disposition of all or substantially
all of the assets of any Borrower; (iii) any receivership, insolvency,
bankruptcy, reorganization or other similar proceedings affecting any
Borrower or any of its assets; or (iv) any change in the composition or
structure of any Borrower or any Mortgagor, including a merger or
consolidation with any other entity.
(d) The Bank's rights under this section and this Mortgage are
unconditional and absolute, regardless of the unenforceability of any
provision of any agreement between any Borrower and the Bank, or the
existence of any defense, setoff or counterclaim that a Borrower may be able
to assert against the Bank.
(e) It waives all rights of subrogation, contribution, reimbursement,
indemnity, exoneration, implied contract, recourse to security, and any
other claim (as that term is defined in the federal Bankruptcy Code, as
amended from time to time) that it may have or acquire in the future against
any Borrower, any other person liable for the Debt, or any collateral for
the Debt, because of the existence of this Mortgage, the Borrower's
performance under this Mortgage or the Debt, or the Bank's availing itself
of any rights or remedies under this Mortgage.
(f) If any payment to the Bank, on any of the Debt is wholly or
partially invalidated, set aside, declared fraudulent or required to be
repaid to the Borrower or anyone representing the Borrower or the Borrower's
creditors under any bankruptcy or insolvency act or code, under any state or
federal law, or under common law or equitable principles, then this Mortgage
shall remain in full force and effect or be reinstated, as the case may be,
until payment in full to the Bank of the repaid amounts, and of the Debt.
If this Mortgage must be reinstated, the Mortgagor agrees to execute and
deliver to the Bank new mortgages, if necessary, in form and substance
acceptable to the Bank, covering the Premises.
20. REPRESENTATIONS BY MORTGAGOR. Each Mortgagor represents: (a)
that the execution and delivery of this Mortgage and the performance of the
obligations it imposes do not violate any law, do not conflict with any
agreement by which it is bound, and do not require the consent or approval
of any governmental authority or any third party; (b) that this Mortgage is
a valid and binding agreement, enforceable according to its terms; and (c)
that all balance sheets, profit and loss statements, and other financial
statements furnished to the Bank are accurate and fairly reflect the
financial condition of the organizations and persons to which they apply on
their effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those
dates. Each Mortgagor, other than a natural person, further represents: (a)
that it is duly organized, existing and in good standing pursuant to the
laws under which it is organized; and (b) that the execution and delivery of
this Mortgage and the performance of the obligations it imposes (i) are
within its powers and have been duly authorized by all necessary action of
its governing body; and (ii) do not contravene the terms of its articles of
incorporation or organization, its by-laws, or any partnership, operating or
other agreements governing its affairs.
21. NOTICES. Notice from one party to another relating to this
Mortgage shall be deemed effective if made in writing (including
telecommunications) and delivered to the recipient's address, telex number
or facsimile number set forth above by any of the following means: (a) hand
delivery, (b) registered or certified mail, postage prepaid, with return
receipt requested, (c) first class or express mail, postage prepaid, (d)
Federal Express, Purolator Courier or like overnight courier service, or (e)
facsimile, telex or other wire transmission with request for assurance of
receipt in a manner typical with respect to communication of that type.
Notice made in accordance with this paragraph shall be deemed delivered upon
receipt if delivered by hand or wire transmission, 3 business days after
mailing if mailed by first class, registered or certified mail, or one
business day after mailing or deposit with an overnight courier service if
delivered by express mail or overnight courier. This notice provision shall
be inapplicable to any judicial or non-judicial proceeding where Michigan
law governs the manner and timing of notices in foreclosure or receivership
proceedings.
22. MISCELLANEOUS. If any provision of this Mortgage is in conflict
with any statute or rule of law or is otherwise unenforceable for any reason
whatsoever, then the provision shall be deemed null and void to the extent
of such conflict or unenforceability and shall be deemed severable from but
shall not invalidate any other provisions of this Mortgage. No waiver by the
Mortgagee of any right or remedy granted or failure to insist on strict
performance by the Mortgagor shall affect or act as a waiver of any right or
remedy of the Mortgagee, nor affect the subsequent exercise of the same
right or remedy by the Mortgagee for any subsequent default by the
Mortgagor, and all rights and remedies of the Mortgagee are cumulative.
These promises and agreements shall bind and these rights shall be to the
benefit of the parties and their respective heirs, successors and assigns.
If there is more than one Mortgagor or Borrower, their obligations under
this Mortgage shall be joint and several.
This Mortgage shall be governed by Michigan law except to the extent it
is preempted by federal law or regulation.
23. WAIVER OF JURY TRIAL. The Mortgagee and the Mortgagor, after
consulting or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may have to a
trial by jury in any litigation based upon or arising out of this Mortgage
or any related instrument or agreement, or any of the transactions
contemplated by this Mortgage, or any course of conduct, dealing, statements
(whether oral or written), or actions of either of them. Neither the
Mortgagee nor the Mortgagor shall seek to consolidate, by counterclaim or
otherwise, any action in which a jury trial has been waived with any other
action in which a jury trial cannot be or has not been waived. These
provisions shall not be deemed to have been modified in any respect or
relinquished by either the Mortgagee or the Mortgagor except by a written
instrument executed by both of them.
WITNESS: MORTGAGOR:
- ------------------------ Interface Systems, Inc.
Lori Morrison
- ------------------------ By: --------------------------
Jan Miles David O. Schupp
Its:Treasurer
ACKNOWLEDGMENT
State of Michigan
County of Washtenaw
The foregoing instrument was acknowledged before me on February 10, 1997
by David O. Schupp, Treasurer of Interface Systems, Inc., a Delaware
Corporation on behalf of the corporation.
Janice Miles
Notary Public, Wayne County, MI
My Commission Expires: 09-18-98
WHEN RECORDED RETURN TO: DRAFTED BY:
NBD Bank Joan M. Tisdale (P27728)
Collateral Department NBD Bank
611 Woodward Avenue 611 Woodward Avenue
Detroit, MI 48226 Detroit, Michigan 48226
Blank lines completed by:
Micheal K. Kelly
MORTGAGE
THIS IS A FUTURE ADVANCE MORTGAGE
THIS MORTGAGE is made on February 19, 1997, between Interface Systems, Inc.,
a Delaware Corporation, whose address is 5855 Interface Dr., Ann Arbor, MI
48103, the "Mortgagor"), and NBD Bank, whose address is 611 Woodward Avenue,
Detroit, Michigan 48226-3947 (the "Mortgagee").
The Mortgagor MORTGAGES AND WARRANTS to the Mortgagee real property and all
the buildings, structures and improvements on it described as:
Land located in the Township of Scio, County of Washtenaw, State of
Michigan:
Lots 18 and 19, Jackson Road Commercial-Industrial Subdivision, Township
of Scio, Washtenaw County, Michigan, according to the plat thereof as
recorded in Liber 16 of plats on page 37 and 38, Washtenaw County Records.
(the "Premises")
Commonly known as: 7232 Jackson Road, Ann Arbor, MI
Tax Parcel Identification No. 81-08-20-215-009 and 81-08-20-215-010
The Premises shall also include all of the Mortgagor's right, title and
interest in and to the following:
(1) All easements, rights-of-way, licenses, privileges and hereditaments.
(2) Land lying in the bed of any road, or the like, opened, proposed or
vacated, or any strip or gore, adjoining the Premises.
(3) All machinery, apparatus, equipment, fittings, fixtures, and articles
of personal property of every kind and nature whatsoever located now or in
the future in or upon the Premises and used or useable in connection with
any present or future operation of the Premises (all of which is called
"Equipment"). It is agreed that all Equipment is part of the Premises and
appropriated to the use of the real estate and, whether affixed or annexed
or not, shall for the purposes of this Mortgage unless the Mortgagee shall
otherwise elect, be deemed conclusively to be real estate and mortgaged and
warranted to the Mortgagee.
(4) All mineral, oil, gas and water rights, royalties, water and water
stock, if any.
(5) All awards or payments including interest made as a result of: the
exercise of the right of eminent domain, the alteration of the grade of any
street, any loss of or damage to any building or other improvement on the
Premises, any other injury to or decrease in the value of the Premises, any
refund due on account of the payment of real estate taxes, assessments or
other charges levied against or imposed upon the Premises, and the
reasonable attorney fees, costs and disbursements incurred by the Mortgagee
in connection with the collection of any such award or payment.
(6) All of the rents, issues, income and profits of the Premises under
present or future leases, or otherwise, including but not limited to all
rights conferred by Act No. 210 of Michigan Public Acts of 1953, as amended.
(MCL 554.231 et seq.)
The Premises are unencumbered except as follows: None.
("Permitted Encumbrances"). If the Premises are encumbered by Permitted
Encumbrances, the Mortgagor shall perform all obligations and make all
payments as required by the Permitted Encumbrances. The Mortgagor shall
provide copies of all writings pertaining to Permitted Encumbrances, and the
Mortgagee is authorized to request and receive that information from any
other person without the consent or knowledge of the Mortgagor.
THE DEBT. This Mortgage secures the following (the "Debt"):
(i) The note(s) dated February 19, 1997 n the principal amount(s) of
$3,500,000 and $250,000, maturing on August 31, 1997 and February 28, 2002
respectively executed and delivered by Mortgagor to the Mortgagee, together
with all extensions, renewals, modifications, and replacements; and
(ii) the guaranty of the debt of I.G.K. Industries, Inc. and Interface
Systems, International, Ltd. dated February 19, 1997 executed and delivered
by Mortgagor to the Mortgagee, together with all amendments and
replacements; and
(iii) ------------------------------------------------------ together with
all extensions, renewals, modifications and replacements; and
(iv) Future Advances and Cross-Lien: All other present and future, direct
and indirect obligations and liabilities of the Mortgagor, or any one or
more of them, with or without others, however evidenced, to the Mortgagee,
and all future advances, whether obligatory or optional, from the Mortgagee
to the Mortgagor, or any one or more of them, with or without others. (This
shall not apply to any obligation or debt incurred for personal, family or
household purposes unless the note or guaranty expressly states that it is
secured by this Mortgage.) Notwithstanding the foregoing, if this Mortgage
is a residential future advance mortgage, as defined in MCL 565.901, the
maximum principal amount secured by this Mortgage is $----------, excluding
protective advances as defined in MCL 565.901.
This Mortgage shall also secure the performance of the promises and
agreements contained in this Mortgage.
The Mortgagor promises and agrees as follows:
1. PAYMENT OF DEBT; PERFORMANCE OF OBLIGATIONS. The Mortgagor shall
promptly pay when due, whether by acceleration or otherwise, the Debt for
which the Mortgagor is liable, and shall promptly perform all obligations to
which the Mortgagor has agreed under the terms of this Mortgage and any loan
documents evidencing the Debt.
2. TAXES. The Mortgagor shall pay, when due, and before any
interest, collection fees or penalties shall accrue, all taxes, assessments,
fines, impositions, and other charges which may become a lien prior to this
Mortgage. Should the Mortgagor fail to make such payments, the Mortgagee
may, at its option and at the expense of the Mortgagor, pay the amounts due
for the account of the Mortgagor. Upon the request of the Mortgagee, the
Mortgagor shall immediately furnish to the Mortgagee all notices of amounts
due and receipts evidencing payment. The Mortgagor shall promptly notify
the Mortgagee of any lien on all or any part of the Premises and shall
promptly discharge any unpermitted lien or encumbrance.
3. CHANGE IN TAXES. In the event of the passage of any law or
regulation, state, federal or municipal, subsequent to the date of this
Mortgage in any manner changing or modifying the laws now in force governing
the taxation of mortgages or debts secured by mortgages, or the manner of
collecting such taxes, the Debt shall become due and payable immediately at
the option of the Mortgagee.
4. INSURANCE. Until the debt is fully paid the Mortgagor shall keep
the Premises and the present and future buildings and other improvements on
the Premises, constantly insured for the benefit of the Mortgagee, without
any reduction in coverage based on the Mortgagor's acts, against fire and
such other hazards and risks customarily covered by the standard form of
extended coverage endorsement available in the State of Michigan, including
risks of vandalism and malicious mischief, and shall further provide flood
insurance if the Premises are situated in an area designated as a flood risk
area by the Director of the Federal Emergency Management Agency or as
otherwise required by the Flood Disaster Protection Act of 1973 and
regulations issued under it), and such other appropriate insurance as the
Mortgagee may require from time to time. All insurance policies and
renewals must be acceptable to Mortgagee, must provide for payment to the
Mortgagee in the event of loss, must require thirty (30) days notice to the
Mortgagee in the event of nonrenewal or cancellation, and must be delivered
to the Mortgagee. Should the Mortgagor fail to insure or fail to pay the
premiums on any insurance or fail to deliver the policies or certificates or
renewals to the Mortgagee then the Mortgagee at its option may have the
insurance written or renewed and pay the premiums for the account of the
Mortgagor. In the event of loss or damage, the proceeds of the insurance
shall be paid to the Mortgagee alone. No loss or damage shall itself reduce
the Debt. The Mortgagee is authorized to adjust and compromise a loss
without the consent of the Mortgagor, to collect, receive and receipt for
any proceeds in the name of the Mortgagee and the Mortgagor and to endorse
the Mortgagor's name upon any check in payment of proceeds. The proceeds
shall be applied first toward reimbursement of all costs and expenses of the
Mortgagee in collecting the proceeds and then toward payment of the Debt or
any portion of it, whether or not then due or payable, or the Mortgagee at
its option may apply the proceeds, or any part to the repair or rebuilding
of the Premises provided that Mortgagor is not then or at any time during
the course of restoration of the Premises in default under this Mortgage and
has complied with all requirements for application of the proceeds to
restoration of the Premises as Mortgagee, in its sole discretion may
establish.
5. RESERVES FOR TAXES AND INSURANCE. The Mortgagor shall, if
requested by the Mortgagee, pay to the Mortgagee, at the time of and in
addition to the scheduled installments of principal or interest due under
the Debt, a sum equal to (a) the amount estimated by the Mortgagee to be
sufficient to enable it to pay, at least thirty (30) days before they become
due and payable, all taxes, assessments and other similar charges levied
against the Premises, plus (b) the amount of the annual premiums on any
policies of insurance required to be carried by the Mortgagor divided by (c)
the number of installments due each year. These sums may be commingled with
the general funds of the Mortgagee, and no interest shall be payable on them
nor shall these sums be deemed to be held in trust for the benefit of the
Mortgagor. Upon notice at any time, the Mortgagor will, within ten (10)
days, deposit such additional sum as may be required for the payment of
increased taxes, assessments, charges or premiums.
Notwithstanding payment of any sums by the Mortgagor to the
Mortgagee under the terms of this paragraph, the Mortgagee shall have no
obligation to pay any taxes, assessments, premiums, or other similar charges
relating to or levied against the Premises. The obligation of the Mortgagor
to pay taxes, assessments, charges, and insurance premiums is not affected
or modified by the arrangements set out in this paragraph. Payment by the
Mortgagee on any one or more occasions of all or any portion of the taxes,
assessments, premiums, or other similar charges relating to or levied
against the Premises shall not be construed as obligating the Mortgagee to
pay any taxes, assessments, premiums, or other similar charges on any other
occasion. If the Mortgagee elects to pay any taxes, assessments, or other
similar charges, it shall not be required to do so at any time prior to the
date on which penalties, interest, and/or collection fees begin to accrue.
If the Mortgagee elects to pay any premium on any policy of insurance
required to be carried by the Mortgagor, it may do so at any time prior to
cancellation of the policy.
In the event of foreclosure of this Mortgage, any of the moneys then
remaining on deposit with the Mortgagee or its agent shall be applied
against the Debt prior to the commencement of foreclosure proceedings. The
obligation of the Mortgagor to pay taxes, assessments, charges or insurance
premiums is not affected or modified by the arrangements set out in this
section. Any default by the Mortgagor in the performance of the provisions
of this section shall constitute a default under this Mortgage. The
Mortgagee shall not request the reserves provided for in this section as
long as there is no default by the Mortgagor under this Mortgage and the
Mortgagor retains title to the Premises.
6. WASTE. The Mortgagor shall keep the Premises in good
repair, shall not commit or permit waste on the Premises nor do any other
act causing the Premises to become less valuable. Non-payment of taxes and
cancellation of insurance shall each constitute waste as provided by MCL
600.2927. The Mortgagor consents to the appointment of a receiver under
this statute should the Mortgagee elect to seek such relief. Should the
Mortgagor fail to effect any necessary repairs, the Mortgagee may at its
option and at the expense of the Mortgagor make the repairs for the account
of the Mortgagor. The Mortgagor shall use and maintain the Premises in
conformance with all applicable laws, ordinances and regulations. The
Mortgagee or its authorized agent shall have the right to enter upon and
inspect the Premises at all reasonable times.
7. ALTERATIONS, REMOVAL. No building, structure, improvement,
fixture or personal property constituting any part of the Premises shall be
removed, demolished or substantially altered without the prior written
consent of the Mortgagee.
8. PAYMENT OF OTHER OBLIGATIONS. The Mortgagor shall also pay
all other obligations which may become liens or charges against the Premises
for any present or future repairs or improvements made on the Premises, or
for any other goods, services, or utilities furnished to the Premises and
shall not permit any lien or charge of any kind securing the repayment of
borrowed funds (including the deferred purchase price for any property) to
accrue and remain outstanding against the Premises.
9. ASSIGNMENT OF LEASES AND RENTS. As additional security for
the Debt, the Mortgagor assigns to the Mortgagee all oral or written leases,
and the rents, issues, income and profits under all leases or licenses of
the Premises, present and future, including all rights conferred by MCL
554.231 et seq. and MCL 554.211 et seq. This assignment shall be operative
in the event of default and during any foreclosure or other proceeding taken
to enforce this Mortgage, and during any redemption period. The Mortgagor
will comply with all terms of all leases.
10. ASSIGNMENT OF INTEREST AS TENANT OR PURCHASER. If the
Mortgagor's interest in the Premises is that of a tenant or a purchaser, the
Mortgagor also assigns, mortgages and warrants to the Mortgagee, as
additional security for the Debt, all of the Mortgagor's right, title and
interest in and to any leases, land contracts or other agreements by which
the Mortgagor is leasing or purchasing any part or all of the Premises,
including all modifications, renewals and extensions and all of the
Mortgagor's right, title or interest in any purchase options contained in
any lease or other agreement. The Mortgagor agrees to pay each installment
of rent, principal and interest required to be paid by it under the lease,
land contract or other agreement when each installment becomes due and
payable whether by acceleration or otherwise. The Mortgagor further agrees
to pay and perform all of its other obligations under the lease, land
contract or other agreement.
If the Mortgagor defaults in the payment of any installment of rent,
principal, interest or in the payment or performance of any other obligation
under the lease, land contract or other agreement, the Mortgagee shall have
the right, but not the obligation, to pay the installment or installments
and to pay or perform the other obligations on behalf of and at the expense
of the Mortgagor. On receipt by the Mortgagee from the landlord or seller
under the lease, land contract or other agreement of any written notice of
default by the Mortgagor, the Mortgagee may rely on the notice as cause to
take any action it deems necessary or reasonable to cure a default even if
the Mortgagor questions or denies the existence or nature of the default.
11. SECURITY AGREEMENT. This Mortgage also constitutes a
security agreement within the meaning of the Michigan Uniform Commercial
Code ("UCC") and the Mortgagor grants to the Mortgagee a security interest
in any Equipment and other personal property included within the definition
of Premises. Accordingly, the Mortgagee shall have all of the rights and
remedies available to a secured party under the UCC. Upon the occurrence of
an event of default under this Mortgage, the Mortgagee shall have, in
addition to the remedies provided by this Mortgage, the right to use any
method of disposition of collateral authorized by the UCC with respect to
any portion of the Premises subject to the UCC.
12. REIMBURSEMENT OF ADVANCES. If the Mortgagor fails to
perform any of its obligations under this Mortgage, or if any action or
proceeding is commenced which materially affects Mortgagee's interest in the
Premises (including but not limited to a lien priority dispute, eminent
domain, code enforcement, insolvency, bankruptcy or probate proceedings),
then the Mortgagee at its sole option may make appearances, disburse sums
and take any action it deems necessary to protect its interest (including
but not limited to disbursement of reasonable attorney's fees and entry upon
the Premises to make repairs). Any amounts disbursed shall become
additional Debt, shall be immediately due and payable upon notice from the
Mortgagee to the Mortgagor, and shall bear interest at the highest rate
permitted under any instrument evidencing any of the Debt.
13. DUE ON TRANSFER. If all or any part of the Premises or any
interest in the Premises is transferred without the Mortgagee's prior
written consent, it may, at its sole option, declare the Debt to be
immediately due and payable.
14. NO ADDITIONAL LIEN. The Mortgagor covenants not to execute
any mortgage, security agreement, assignment of leases and rentals or other
agreement granting a lien against the interest of the Mortgagor in the
Premises, without the prior written consent of the Mortgagee, and then only
when the document granting that lien expressly provides that it shall be
subject to the lien of this Mortgage for the full amount secured by this
Mortgage, and shall also be subject and subordinate to any then existing or
future leases affecting the Premises.
15. EMINENT DOMAIN. Notwithstanding any taking under the power
of eminent domain, alteration of the grade of any road, alley, or the like,
or other injury or damage to or decrease in value of the Premises by any
public or quasi-public authority or corporation, the Mortgagor shall
continue to pay the Debt in accordance with the terms of the underlying loan
documents until any award or payment shall have been actually received by
the Mortgagee. By executing this Mortgage, the Mortgagor assigns the entire
proceeds of any award or payment and any interest to the Mortgagee. The
proceeds shall be applied first toward reimbursement of all costs and
expenses of the Mortgagee, including reasonable attorney fees of the
Mortgagee in collecting the proceeds and then toward payment of the Debt
whether or not then due or payable, or the Mortgagee at its option may apply
all or any part of the proceeds to the alteration, restoration or rebuilding
of the Premises.
16. ENVIRONMENTAL PROVISIONS. From time to time the Mortgagor
or Borrower has executed and delivered, and may in the future execute and
deliver, Environmental Certificates to the Mortgagee, which include
representations, warranties, covenants, an indemnification, and right of
entry. The most recent Environmental Certificate shall supersede all prior
Environmental Certificates that have been executed, and its provisions shall
be deemed incorporated into this Mortgage.
17. EVENTS OF DEFAULT/ACCELERATION. Upon the occurrence of any
of the following, the Mortgagee shall be entitled to exercise its remedies
under this Mortgage or as otherwise provided by law: (1) The Mortgagor or,
if other than the Mortgagor or all of the undersigned, any principal obligor
of the Debt (collectively, the "Borrower") fails to pay when due any amount
payable under the note(s), the guaranty, or any other agreement evidencing
the Debt; (2) the Mortgagor or Borrower (a) fails to observe or perform any
other term of the note(s), the guaranty, or any other agreement evidencing
the Debt, or (b) makes any materially incorrect or misleading representation
in any financial statement or other information delivered to the Mortgagee;
(3) there is a default under the terms of this Mortgage, any loan agreement,
mortgage, security agreement, or other document executed as part of the Debt
transaction, or any guaranty of the Debt becomes unenforceable in whole or
in part, or any guarantor fails to promptly perform under its guaranty; (4)
the Mortgagor or Borrower fails to pay when due any amount payable under any
note or agreement evidencing debt to the Mortgagee, or defaults under the
terms of any agreement or instrument relating to or securing any debt for
borrowed money owing to the Mortgagee; (5) a "reportable event" (as defined
in the Employee Retirement Income Security Act of 1974 as amended) occurs
that would permit the Pension Benefit Guaranty Corporation to terminate any
employee benefit plan of the Mortgagor or Borrower or any affiliate of the
Mortgagor or Borrower; (6) the Mortgagor or Borrower becomes insolvent or
unable to pay its debts as they become due; (7) the Mortgagor or Borrower
(a) makes an assignment for the benefit of Creditors, (b) consents to the
appointment of a custodian, receiver, or trustee for itself or for a
substantial part of its assets, or (c) commences any proceeding under any
bankruptcy, reorganization, liquidation, insolvency or similar laws of any
jurisdiction; (8) a custodian, receiver, or trustee is appointed for the
Mortgagor or Borrower or for a substantial part of its assets without its
consent and is not removed within 60 days after the appointment; (9)
proceedings are commenced against the Mortgagor or Borrower under any
bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and those proceedings remain undismissed for 60 days after
commencement; or the Mortgagor or Borrower consents to the commencement of
those proceedings; (10) any judgment is entered against the Mortgagor or
Borrower, or any attachment, levy, or garnishment is issued against any
property of the Mortgagor or Borrower; (11) any proceedings are instituted
for the foreclosure or collection of any mortgage, judgment or lien
affecting the Premises; (12) the Mortgagor sells, transfers or hypothecates
any part of the Premises except as provided in this Mortgage without the
prior written consent of the Mortgagee; (13) the Mortgagor or Borrower dies;
(14) the Mortgagor or Borrower, without the Mortgagee's written consent, (a)
is dissolved, (b) merges or consolidates with any third party, (c) leases,
sells or otherwise conveys a material part of its assets or business outside
the ordinary course of its business, (d) leases, purchases or otherwise
acquires a material part of the assets of any other corporation or business
entity outside the ordinary course of its business, or (e) agrees to do any
of the foregoing; or (15) there is a substantial change in the existing or
prospective financial condition of the Mortgagor or Borrower which the
Mortgagee in good faith determines to be materially adverse.
18. REMEDIES UPON DEFAULT. Upon the occurrence of any of the
events of default set forth in this Mortgage, the Mortgagee is authorized to
commence foreclosure proceedings against the Premises through judicial
proceedings or by advertisement, at the option of the Mortgagee, and to sell
the Premises at public auction pursuant to law, and out of the proceeds to
retain all sums due the Mortgagee, including the costs of the sale and
reasonable attorney's fees, rendering any surplus to the Mortgagor. The
Premises may be sold in one parcel as an entirety or in such parcels, manner
and order as Mortgagee may elect. By executing this Mortgage, the Mortgagor
waives, in the event of foreclosure of this Mortgage or the enforcement by
the Mortgagee of any other rights and remedies in this Mortgage, any right
otherwise available in respect to marshalling of assets which secure the
Debt or to require the Mortgagee to pursue its remedies against any other
such assets. The Mortgagor waives all rights to a hearing prior to sale in
connection with any foreclosure of this Mortgage by advertisement and all
notice requirements except as set forth in any applicable state statute
providing for foreclosure by advertisement.
19. PLEDGE. If the Mortgagor is not liable for all or any part
of the Borrower's obligations to the Bank, then it agrees that:
(a) If any monies become available to the Bank from the
Borrower that it can apply to any debt, the Bank may apply them to debt not
secured by this Mortgage.
(b) Without notice to or the consent of the Mortgagor, the
Bank may (i) take any action it chooses against any Borrower, against any
collateral for the Debt, or against any other person liable for the Debt;
(ii) release any Borrower or any other person liable for the Debt, release
any collateral for the Debt, and neglect to perfect any interest in any such
collateral; (iii) forbear or agree to forbear from exercising any rights or
remedies, including any right to setoff, that it has against the Borrower,
any other person liable for the Debt, or any other collateral for the Debt;
(iv) extend to any Borrower additional Debt to be secured by this Mortgage;
or (v) renew, extend, modify or amend any Debt, and deal with the Borrower
or any other person liable for the Debt as it chooses.
(c) None of the Mortgagor's obligations under this Mortgage
shall be affected by (i) any act or omission of the Bank; (ii) the voluntary
or involuntary liquidation, sale or other disposition of all or
substantially all of the assets of any Borrower; (iii) any receivership,
insolvency, bankruptcy, reorganization or other similar proceedings
affecting any Borrower or any of its assets; or (iv) any change in the
composition or structure of any Borrower or any Mortgagor, including a
merger or consolidation with any other entity.
(d) The Bank's rights under this section and this Mortgage
are unconditional and absolute, regardless of the unenforceability of any
provision of any agreement between any Borrower and the Bank, or the
existence of any defense, setoff or counterclaim that a Borrower may be able
to assert against the Bank.
(e) It waives all rights of subrogation, contribution,
reimbursement, indemnity, exoneration, implied contract, recourse to
security, and any other claim (as that term is defined in the federal
Bankruptcy Code, as amended from time to time) that it may have or acquire
in the future against any Borrower, any other person liable for the Debt, or
any collateral for the Debt, because of the existence of this Mortgage, the
Borrower's performance under this Mortgage or the Debt, or the Bank's
availing itself of any rights or remedies under this Mortgage.
(f) If any payment to the Bank, on any of the Debt is wholly
or partially invalidated, set aside, declared fraudulent or required to be
repaid to the Borrower or anyone representing the Borrower or the Borrower's
creditors under any bankruptcy or insolvency act or code, under any state or
federal law, or under common law or equitable principles, then this Mortgage
shall remain in full force and effect or be reinstated, as the case may be,
until payment in full to the Bank of the repaid amounts, and of the Debt.
If this Mortgage must be reinstated, the Mortgagor agrees to execute and
deliver to the Bank new mortgages, if necessary, in form and substance
acceptable to the Bank, covering the Premises.
20. REPRESENTATIONS BY MORTGAGOR. Each Mortgagor represents:
(a) that the execution and delivery of this Mortgage and the performance of
the obligations it imposes do not violate any law, do not conflict with any
agreement by which it is bound, and do not require the consent or approval
of any governmental authority or any third party; (b) that this Mortgage is
a valid and binding agreement, enforceable according to its terms; and (c)
that all balance sheets, profit and loss statements, and other financial
statements furnished to the Bank are accurate and fairly reflect the
financial condition of the organizations and persons to which they apply on
their effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those
dates. Each Mortgagor, other than a natural person, further represents: (a)
that it is duly organized, existing and in good standing pursuant to the
laws under which it is organized; and (b) that the execution and delivery of
this Mortgage and the performance of the obligations it imposes (i) are
within its powers and have been duly authorized by all necessary action of
its governing body; and (ii) do not contravene the terms of its articles of
incorporation or organization, its by-laws, or any partnership, operating or
other agreements governing its affairs.
21. NOTICES. Notice from one party to another relating to this
Mortgage shall be deemed effective if made in writing (including
telecommunications) and delivered to the recipient's address, telex number
or facsimile number set forth above by any of the following means: (a) hand
delivery, (b) registered or certified mail, postage prepaid, with return
receipt requested, (c) first class or express mail, postage prepaid, (d)
Federal Express, Purolator Courier or like overnight courier service, or (e)
facsimile, telex or other wire transmission with request for assurance of
receipt in a manner typical with respect to communication of that type.
Notice made in accordance with this paragraph shall be deemed delivered upon
receipt if delivered by hand or wire transmission, 3 business days after
mailing if mailed by first class, registered or certified mail, or one
business day after mailing or deposit with an overnight courier service if
delivered by express mail or overnight courier. This notice provision shall
be inapplicable to any judicial or non-judicial proceeding where Michigan
law governs the manner and timing of notices in foreclosure or receivership
proceedings.
22. MISCELLANEOUS. If any provision of this Mortgage is in
conflict with any statute or rule of law or is otherwise unenforceable for
any reason whatsoever, then the provision shall be deemed null and void to
the extent of such conflict or unenforceability and shall be deemed
severable from but shall not invalidate any other provisions of this
Mortgage. No waiver by the Mortgagee of any right or remedy granted or
failure to insist on strict performance by the Mortgagor shall affect or act
as a waiver of any right or remedy of the Mortgagee, nor affect the
subsequent exercise of the same right or remedy by the Mortgagee for any
subsequent default by the Mortgagor, and all rights and remedies of the
Mortgagee are cumulative.
These promises and agreements shall bind and these rights shall be
to the benefit of the parties and their respective heirs, successors and
assigns. If there is more than one Mortgagor or Borrower, their obligations
under this Mortgage shall be joint and several.
This Mortgage shall be governed by Michigan law except to the extent
it is preempted by federal law or regulation.
23. WAIVER OF JURY TRIAL. The Mortgagee and the Mortgagor, after
consulting or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may have to a
trial by jury in any litigation based upon or arising out of this Mortgage
or any related instrument or agreement, or any of the transactions
contemplated by this Mortgage, or any course of conduct, dealing, statements
(whether oral or written), or actions of either of them. Neither the
Mortgagee nor the Mortgagor shall seek to consolidate, by counterclaim or
otherwise, any action in which a jury trial has been waived with any other
action in which a jury trial cannot be or has not been waived. These
provisions shall not be deemed to have been modified in any respect or
relinquished by either the Mortgagee or the Mortgagor except by a written
instrument executed by both of them.
WITNESS: MORTGAGOR:
- ------------------------ Interface Systems, Inc.
Lori Morrison
- ------------------------ By: --------------------------
Jan Miles David O. Schupp
Its:Treasurer
ACKNOWLEDGMENT
State of Michigan
County of Washtenaw
The foregoing instrument was acknowledged before me on February 10,
1997 by David O. Schupp, Treasurer of Interface Systems, Inc., a Delaware
Corporation on behalf of the corporation.
Janice Miles
Notary Public, Wayne County, MI
My Commission Expires: 09-18-98
WHEN RECORDED RETURN TO: DRAFTED BY:
NBD Bank Joan M. Tisdale (P27728)
Collateral Department NBD Bank
611 Woodward Avenue 611 Woodward Avenue
Detroit, MI 48226 Detroit, Michigan 48226
Blank lines completed by:
Micheal K. Kelly
CONTINUING GUARANTY
GUARANTY. To induce NBD Bank, N.A. (the "Bank"), of 611 Woodward Avenue,
Detroit, Michigan 48226-3497 at its option, to make loans, extend or
continue credit or some other benefit, including letters of credit and
foreign exchange contracts, present or future, direct or indirect, and
whether several, joint or joint and several (referred to collectively as
"Liabilities"), to Interface Systems, Inc., and its successors (the
"Borrower"), and because the undersigned (the "Guarantor") has determined
that executing this Guaranty is in its interest and to its financial
benefit, the Guarantor absolutely and unconditionally guaranties to the
Bank, as primary obligor and not merely as surety, that the Liabilities will
be paid when due, whether by acceleration or otherwise. The Guarantor will
not only pay the Liabilities, but will also reimburse the Bank for accrued
and unpaid interest, and any expenses, including reasonable attorneys' fees,
that the Bank may pay in collecting from the Borrower or the Guarantor, and
for liquidating any collateral.
LIMITATION: The Guarantor's obligation under this Guaranty is UNLIMITED.
Notwithstanding the foregoing, if these blank lines are completed,
regardless of the amount of Liabilities outstanding at any time, the
Guarantor's obligation under this Guaranty shall not exceed the principal
amount of N/A and 00/100 DOLLARS ($ N/A ), plus
interest, expenses, and fees. Unless otherwise specified below. the
Guarantor's obligation shall be payable in U.S. Dollars.
CONTINUED RELIANCE: The Bank may continue to make loans or extend credit to
the Borrower based on this Guaranty until it receives written notice of
termination from the Guarantor. That notice shall be effective at the
opening of the Bank for business on the day after receipt of the notice. If
terminated, the Guarantor will continue to be liable to the Bank for any
Liabilities created, assumed or committed to at the time the termination
becomes effective, and all subsequent renewals, extensions, modifications
and amendments of the Liabilities.
SECURITY. As security for the Guaranty, the Guarantor grants to the Bank a
continuing security interest in the following described property and all of
its additions, substitutions, increments, proceeds and products, whether now
owned or later acquired (the "Collateral"):
1. All securities and other property of the Guarantor in the custody,
possession or control of the Bank (other than property held by the
Bank solely in a fiduciary capacity);
2. All property or securities declared or acknowledged to constitute
security for any past, present or future liability, direct or
indirect of the Guarantor to the Bank;
3. All balances of deposit accounts of the Guarantor with the Bank;
4. The following additional property of the Guarantor: accounts
receivable, inventory, machinery & equipment, general intangibles,
and all other assets .
The Bank has the right at any time to apply its own debt or liability to the
Guarantor in whole or partial payment of this Guaranty or other present or
future liabilities, direct or indirect, without any requirement for mutual
maturity.
If the Guarantor fails to pay any amount owing under this Guaranty, the Bank
shall has all of the rights and remedies provided by law or under any other
agreement to liquidate or foreclose on and sell the Collateral, including
but not limited to the rights and remedies of a secured party under the
Uniform Commercial Code. These rights and remedies are cumulative and not
exclusive. If the Guarantor is entitled to notice, that requirement is met
if the Bank sends notice at least seven (7) days prior to the date of sale,
disposition or other event which requires notice. The proceeds of any sale
shall be applied first to expenses, then toward payment of the amount owing
under this Guaranty. The Bank may cause all or any part of the Collateral
to be transferred to or registered in its name or in the name of any other
person or business entity, with or without designation of the capacity of
that nominee.
INCORPORATION: (This paragraph applies if the blanks are filled in.) The
Guarantor agrees that as long as any Liability remains outstanding, the
covenants and events of default in the Credit Authorization Agreement dated
February 19, 1997 between NBD Bank and the Guarantor, as amended (the
"Agreement"), are incorporated by reference. Those covenants and events
remain in force until this Guaranty is no longer in force, notwithstanding
any termination of the Agreement.
NEGATIVE PLEDGE: The Guarantor will not allow any lien to exist on any of
its property, except liens known to the Bank and existing on the date of
this Guaranty, and new liens which, in aggregate, total less than $ N/A .
For purposes of the following paragraphs, "any collateral" shall
include the Guarantor's Collateral and any other collateral securing
the Liabilities.
ACTION REGARDING BORROWER: If any monies become available that the Bank can
apply to the Liabilities, the Bank may apply them in any manner it chooses,
including but not limited to applying them against liabilities which are not
covered by this Guaranty. The Bank may take any action against the
Borrower, any collateral, or any other person liable for any of the
Liabilities. The Bank may release the Borrower or anyone else from the
Liabilities, either in whole or in part, or release any collateral, and need
not perfect a security interest in any collateral. The Bank does not have
to exercise any rights that it has against the Borrower or anyone else, or
make any effort to realize on any collateral or right of set-off. If the
Borrower requests more credit or any other benefit, the Bank may grant it
and the Bank may grant renewals, extensions, modifications and amendments of
the Liabilities and otherwise deal with the Borrower or any other person as
the Bank sees fit and as if this Guaranty were not in effect. The
Guarantor's obligations under this Guaranty shall not be released or
affected by (a) any act or omission of the Bank, (b) the voluntary or
involuntary liquidation, sale or other disposition of all or substantially
all of the assets of the Borrower, or any receivership, insolvency,
bankruptcy, reorganization, or other similar proceedings affecting the
Borrower or any of its assets, or (c) any change in the composition or
structure of the Borrower or Guarantor, including a merger or consolidation
with any other person or entity.
NATURE OF GUARANTY: This Guaranty is a guaranty of payment and not of
collection. Therefore, the Bank may insist that the Guarantor pay
immediately, and the Bank is not required to attempt to collect first from
the Borrower, any collateral, or any other person liable for the
Liabilities. The obligation of the Guarantor shall be subject to no
conditions of any kind, and shall be absolute, regardless of the
unenforceability of any provisions of any agreement between the Borrower and
the Bank, or the existence of any defense, setoff or counterclaim which the
Borrower may assert.
OTHER GUARANTORS: If there is more than one Guarantor, the obligations
under this Guaranty shall be joint and several. In addition, each Guarantor
shall be jointly and severally liable with any other guarantor of the
Liabilities. If the Bank elects to enforce its rights against less than all
guarantors of the Liabilities, that election shall not release Guarantor
from its obligations under this Guaranty. The compromise or release of any
of the obligations of any of the other guarantors or the Borrower shall not
serve to waive, alter or release the Guarantor's obligations. This Guaranty
is not conditioned on anyone else executing this or any other guaranty.
RIGHTS OF SUBROGATION: The Guarantor agrees not to enforce any rights of
subrogation, contribution, or indemnification that it has against the
Borrower, any entity liable for the Liabilities, or any collateral, until
the Liabilities are fully paid, even if all Liabilities are not covered by
this Guaranty. The Guarantor further agrees that if any payments to the
Bank on the Liabilities are in whole or in part invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy act or code, state or
federal law, common law or equitable doctrine, this Guaranty and the Bank's
interest in any collateral remain in full force and effect (or be reinstated
as the case may be) until payment in full of those amounts. That payment is
due on demand.
WAIVERS: The Guarantor waives any right it may have to receive notice of
the following matters before the Bank enforces any of its rights: (a) the
Bank's acceptance of this Guaranty, (b) any credit that the Bank extends to
the Borrower, (c) the Borrower's default, (d) any demand, or (e) any action
that the Bank takes regarding the Borrower, anyone else, any collateral, or
any Liability, which it might be entitled to by law or under any other
agreement. Any waiver shall affect only the specific terms and time period
stated in the waiver. The Bank may waive or delay enforcing any of its
rights without losing them. No modification or waiver of this Guaranty
shall be effective unless it is in writing and signed by the party against
whom it is being enforced.
REPRESENTATIONS BY GUARANTOR: Each Guarantor represents that: (a) the
execution and delivery of this Agreement and the performance of the
obligations it imposes do not violate any law, conflict with any agreement
by which it is bound, or require the consent or approval of any governmental
authority or any third party; (b) this Agreement is a valid and binding
agreement enforceable according to its terms; and (c) all balance sheets,
profit and loss statements, and other financial statements furnished to the
Bank are accurate and fairly reflect the financial condition of the
organizations and persons to which they apply on their effective dates,
including contingent liabilities of every type, which financial condition
has not changed materially and adversely since those dates. Each Guarantor,
other than a natural person, further represents that: (a) it is duly
organized, existing and in good standing under the laws where it is
organized; and (b) the execution and delivery of this note and the
performance of the obligations it imposes (i) are within its powers; (ii)
have been duly authorized by all necessary action of its governing body; and
(iii) do not contravene the terms of its articles of incorporation or
organization, its by-laws or any agreement governing its affairs.
NOTICES: Notice from one party to another relating to this Guaranty shall
be deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or telecopier number set
forth under its name by any of the following means: (a) hand delivery, (b)
registered or certified mail, postage prepaid, with return receipt
requested, (c) first class or express mail, postage prepaid, (d) Federal
Express, Purolator Courier or like overnight courier service or (e)
telecopy, telex or other wire transmission with request for assurance of
receipt in a manner typical with respect to communications of that type.
Notice made in accordance with this section shall be deemed delivered on
receipt if delivered by hand or wire transmission, on the third business day
after mailing if mailed by first class. registered or certified mail, or on
the next business day after mailing or deposit with an overnight courier
service if delivered by express mail or overnight courier. Notwithstanding
the foregoing, notice of termination of this Guaranty shall be deemed
received only upon the receipt of actual written notice by the Bank in
accordance with the paragraph above labeled "Continued Reliance."
LAW AND JUDICIAL FORUM THAT APPLY: This agreement is governed by Michigan
law. The Guarantor agrees that any legal action or proceeding against it
with respect to any of its obligations under this Guaranty may be brought in
any state or federal court located in the State of Michigan, as the Bank in
its sole discretion may elect. By the execution and delivery of this
Guaranty, the Guarantor submits to and accepts, with regard to any such
action or proceeding, for itself and in respect of its property, generally
and unconditionally. the jurisdiction of those courts. The Guarantor waives
any claim that the State of Michigan is not a convenient forum or the proper
venue for any such suit, action or proceeding.
FOREIGN CURRENCY. (This paragraph applies if the blanks are filled in.)
This Guaranty arises in the context of an international transaction, and the
specification of payment in the following currency
("Foreign Currency") at
("Conversion Location") is of the essence. The Foreign Currency is the
currency of account and payment under this Guaranty. The obligation of the
Guarantor is not discharged by an amount paid in any other currency or at
another place, whether pursuant to a judgment or otherwise, to the extent
that the amount so paid, on prompt conversion into the Foreign Currency and
transfer to the Conversion Location under normal banking procedure, does not
yield the amount of Foreign Currency due under this Guaranty.
MISCELLANEOUS: The Guarantor's liability under this Guaranty is independent
of its liability under any other guaranty previously or subsequently
executed by the Guarantor or any one of them, singularly or together with
others, as to all or any part of the Liabilities. and may be enforced for
the full amount of this Guaranty regardless of the Guarantor's liability
under any other guaranty. This Guaranty binds the Guarantor and its heirs,
successors and assigns, and benefits the Bank and its successors and
assigns. The use of headings shall not limit the provisions of this
Guaranty. All discussions and documents arising between this Guaranty and
the last guaranty signed by the Guarantor as to the Borrower are merged into
this Guaranty.
WAIVER OF JURY TRIAL: The Bank and the Guarantor, after consulting or
having had the opportunity to consult with counsel, knowingly, voluntarily
and intentionally waive any right either of them may have to a trial by jury
in any litigation based upon or arising out of this Guaranty or any related
instrument or agreement, or any of the transactions contemplated by this
Guaranty, or any course of conduct, dealing, statement (whether oral or
written), or actions of either of them. Neither the Bank nor the Guarantor
shall seek to consolidate, by counterclaim or otherwise, any action in which
a jury trial has been waived with any other action in which a jury trial
cannot be or has not been waived. These provisions shall not be deemed to
have been modified in any respect or relinquished by either the Bank or the
Guarantor except by a written instrument executed by both of them.
Dated: February 19, 1997
GUARANTOR:
I.G.K. Industries, Inc.
Address:
7232 Jackson Road By: David O. Schupp
Ann Arbor, MI 48103 Its: Treasurer
CONTINUING GUARANTY AND INDEMNITY FOR INTERNATIONAL CREDITS
(For U.S. Resident Guarantors)
GUARANTY: To induce NBD Bank of 611 Woodward Avenue, Detroit, Michigan
48226, directly or through any of its affiliates including The First
National Bank of Chicago, acting through any of their respective branch
offices, subsidiaries or affiliates (the "Bank"), at its option, to make
loans, extend or continue credit or some other transaction, including
letters of credit and foreign exchange contracts, present or future, direct
and indirect, and whether several, joint or joint and several (referred to
collectively as "Liabilities"), to Interface Systems International, Ltd.,
and its their successors (the "Borrowers"), and because the undersigned (the
"Guarantor) has determined that executing this Guaranty is in its interest
and to its financial benefit, the Guarantor absolutely and unconditionally
guarantees to the Bank, a primary obligor and not merely as surety, that the
Liabilities will be paid when due, whether by acceleration or otherwise, in
accordance with the terms and conditions of the documentation related to the
Liabilities. The Guarantor will not only pay the Liabilities, but will also
reimburse the Bank for accrued and unpaid interest, taxes and any expenses,
including reasonable attorneys' fees, that the Bank may pay in relation to
the Liabilities or this Agreement, and for liquidating any collateral.
INDEMNITY: As an additional and continuing obligation, the Guarantor
independently, unconditionally and irrevocably agrees that, should the
Liabilities not be recoverable from the Guarantor under the preceding
paragraph for any reason whatsoever, the Guarantor will on demand pay the
Bank in the currency and otherwise as provided in the documentation for the
Liabilities, the outstanding balance of the Liabilities, including accrued
and unpaid interest, taxes and expenses, including reasonable attorneys'
fees, that the Bank may pay in relation to the Liabilities or this
Agreement, and for liquidating any collateral, by way of a full indemnity.
NO DEDUCTION: All payments of the Liabilities will be made by the Guarantor
without deduction for or on account of any present or future charges of
whatever nature imposed by any governmental authority. If those charges are
imposed, the Guarantor will pay them in addition to paying the Liabilities
as required by this Agreement, and will furnish certified copies of all
official receipts evidencing payment of the charges to the Bank within 45
days after their due date.
LIMITATION: [The Guarantor's obligation under this Agreement is UNLIMITED.]
[Regardless of the amount of Liabilities outstanding at any time, the
Guarantor's obligation under this Agreement does not exceed the principal
amount of N/A ( ) the amount(s) reflected in Exhibit A, plus
interest, expenses, and fees.]
CONTINUED RELIANCE: The Bank may continue to make loans or extend credit to
the Borrower based on this Agreement until it receives written notice of
termination from the Guarantor. That notice shall be effective at the
opening of the Bank on the first business day following receipt of the
notice at the address specified above. If terminated, the Guarantor will
continue to be liable to the Bank for any Liabilities created, assumed or
committed to at the time the termination becomes effective, and all
subsequent renewals, extensions, modifications and amendments of those
Liabilities.
SECURITY: As security for this Agreement, the Guarantor pledges and grants
to the Bank a continuing security interest in the property described below
and all of its additions, substitutions, increments, proceeds and products,
whether now owned or later acquired (the "Collateral"):
1. All securities and other property of the Guarantor in the custody,
possession or control of the Bank's Commercial Loan Department except
property held in a fiduciary capacity.
2. All property or securities declared or acknowledged to constitute
security for any past, present or future liability, direct or indirect, of
the Guarantor to the Bank;
3. All balances of deposit accounts of the Guarantor with the Bank.
4. The following additional property of the Guarantor: accounts
receivable, inventory, machinery and equipment, general intangibles and real
property located at 5855 Interface Dr. and 7232 Jackson Rd., Ann Arbor, MI
48103.
The Bank has the right at any time to apply its own debt or liability to the
Guarantor in whole or partial payment or this Agreement or other present or
future liabilities of the Guarantor to the Bank, direct or indirect, without
any requirement of mutual maturity.
INCORPORATION: The Guarantor agrees that so long as any Liability remains
outstanding, it will observe, for the benefit of the Bank, the covenants and
events of default set forth in the Credit Authorization Agreement dated
February 19, 1997 between NBD Bank and the Guarantor, as amended (the
"Credit Agreement"), which are incorporated by reference. Those covenants
and events of default shall remain in force until this Guaranty is no longer
in force, notwithstanding any termination of the Credit Agreement.
EVENTS OF DEFAULT/ACCELERATION: The Bank has the right to terminate any
commitment to extend credit or complete other transactions with any
Borrower, and demand payment under this Agreement whether or not all of any
part of the Liabilities have matured, if any of the following events occurs:
1. Any Guarantor or Borrower fails to pay when due any amount payable
under this Agreement or under any agreement or instrument evidencing debt to
any creditor.
2. Any Guarantor or Borrower (i) fails to observe or perform any term of
this Agreement or the Liabilities; (ii) makes any materially incorrect or
misleading representation, warranty, or certificate to the Bank (iii) makes
any materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (iv) defaults under
the terms of any agreement or instrument relating to any debt for borrowed
money (other than the debt evidenced by this Agreement), including any
capitalized lease obligation, such that the creditor declares the debt due
before its maturity.
3. There is a default under the terms of any loan agreement, mortgage,
security agreement, or any other document executed as part of any loan by
any Borrower or Guarantor from any creditor, or any guarantor fails to
promptly perform under its guaranty.
4. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of any
Guarantor or Borrower or any affiliate of any Guarantor or Borrower, or if
any of them becomes subject to any multi-employer plan.
5. Any Guarantor or Borrower becomes insolvent or unable to pay its
debts as they become due.
6. Any Guarantor or Borrower (i) makes an assignment for the benefit of
creditors; (ii) consents to the appointment of a custodian, receiver, or
trustee for itself or for a substantial part of its assets; or (iii)
commences any proceeding under any bankruptcy, reorganization, liquidation,
insolvency or similar laws of any jurisdiction.
7. A custodian, receiver or trustee is appointed for any Guarantor or
Borrower or for a substantial part of its assets without its consent, and is
not removed within 60 days after the appointment.
8. Proceedings are commenced against any Guarantor or Borrower under any
bankruptcy, reorganization, liquidation, insolvency or similar laws of any
jurisdiction, and they remain dismissed for 60 days after commencement; or
any Guarantor or Borrower consents to the commencement of those proceedings.
9. Any judgment is entered against any Guarantor or Borrower, or any
attachment, levy, or garnishment is issued against any property of any
Guarantor or Borrower, where the USD equivalent of the claim exceeds $ N/A.
10. Any Guarantor or Borrower dies.
11. Any Guarantor or Borrower, without the Bank's written consent, (i) is
dissolved, (ii) merges or consolidates with any third party, (iii) leases,
sells or otherwise conveys a material part of its assets or business outside
the ordinary course of business, (iv) leases, purchases or otherwise
acquires a material part of the assets of any other corporation or business
entity except in the ordinary course of such business, or (v) agrees to do
any of the foregoing.
12. The loan-to-value ratio of any pledged securities at any time exceeds
N/A % and that excess continues for five (5) days after notice from the Bank
to any Guarantor.
13. There is a substantial change in the existing or prospective
financial condition of any Guarantor or Borrower which the Bank in good
faith determines to be materially adverse.
14. The Bank in good faith deems itself insecure.
REMEDIES ON DEFAULT: In addition, the Bank has all of the rights and
remedies provided by law or under any other agreement to liquidate or
foreclose on and sell the Collateral, including but not limited to the
rights and remedies of a secured part under the Uniform Commercial Code.
These rights and remedies are cumulative and not exclusive. If the
Guarantor is entitled to notice, that requirement is met if the Bank sends
notice at least seven (7) days prior to the date of sale, disposition or
other event which requires notice. The proceeds of any sale will be applied
first to costs, then toward payment of the amount owing under this
Agreement. The Bank may cause all or any part of the Collateral to be
transferred to or registered in its name or in the name of any other person
or business entity, with or without designating the capacity of that
nominee.
For purposes of the following paragraphs, "any collateral" shall
include the Guarantor's Collateral and any other collateral securing the
Liabilities.
NEGATIVE PLEDGE: The Guarantor will not allow any lien to exist on any of
its property or any property belonging to any Borrower, except liens known
to the Bank and existing on the date of this Agreement and new liens which
in aggregate, total less than USD -------- or equivalent with respect to the
Guarantor and -------- or equivalent in the aggregate with respect to the
Borrowers. Guarantor further agrees that it will not execute any agreement
containing a negative pledge clause with any other lender.
ACTION REGARDING BORROWER: If any monies become available that the Bank can
apply to the Liabilities, the Bank may apply them in any manner it chooses,
including but not limited to applying them against liabilities which are not
covered by this Agreement. The Bank may take any action against any
Borrower, any collateral, or any other person liable for any of the
Liabilities. The Bank may release any Borrower or anyone else from the
Liabilities, either in whole or in part, or release any collateral, and need
not perfect a security interest in any collateral. The Bank does not have
to exercise any rights that it has against any Borrower or anyone else, or
make any effort to realize on any collateral or right of set-off. If any
borrower requests more credit or any other benefit, the Bank may grant it
and the Bank may grant renewals, extensions, modifications and amendments of
the Liabilities and otherwise deal with any Borrower or any other person as
the Bank sees fit and as if this Agreement were not in effect.
The Guarantor's obligations under this Agreement are not released or
affected by (a) any act or omission of the Bank, (b) the voluntary or
involuntary liquidation, sale or other disposition of all or substantially
all of the assets of the Borrower, (c) any receivership, insolvency,
bankruptcy, reorganization, or other similar proceedings affecting any
Borrower or any of its assets, (d) any change in the composition or
structure or any Borrower or Guarantor, including a merger or consolidation
with any other person or entity, or (e) the full or partial assignment of
any Liability.
NATURE OF GUARANTY: This Agreement is a guaranty of payment and not of
collection. Therefore, the Bank may insist that the Guarantor pay
immediately, and the Bank is not required to attempt to collect first from
the Borrower, any collateral, or any other person liable for the
Liabilities. The obligation of the Guarantor is unconditional and absolute,
even if all or any part of any agreements between the Bank and the Borrower
is unenforceable, void voidable or illegal, and regardless of the existence
of any defense, setoff or counterclaim which the Borrower may assert.
OTHER GUARANTORS: Any Guarantor's obligations under this Agreement are
joint and several with any other guarantor of the Liabilities. If the Bank
elects to enforce its rights against less than all guarantors of the
Liabilities, that election does not release any Guarantor from its
obligations under this Agreement. The compromise or release of any of the
obligations of any of the other guarantors or the Borrower does not serve to
waive, alter or release the Guarantor's obligations.
RIGHTS OF SUBROGATION: The Guarantor will not enforce any rights of
subrogation, contribution or indemnification that it has against the
Borrower, any person liable on the Liabilities, or any collateral, until the
Borrower and the Guarantor have fully performed all their obligations to the
Bank, even if those obligations are not covered by this Agreement. The
Guarantor further agrees that if all or any part of the payments to the Bank
on the Liabilities are invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or
any other party under any bankruptcy act or code, state or federal law,
common law or equitable doctrine, then this Agreement and any Collateral
remain in full force and effect (or are reinstated as the case may be) until
payment in full of those amounts. That payment is due on demand.
WAIVERS: The Guarantor waives any right it may have to receive notice of
the following matters before the Bank enforces any of its rights: (i) the
Bank's acceptance of this Agreement, (ii) any credit that the Bank extends
to the Borrower, (iii) the Borrower's default, (iv) any demand, (v) any
action that the Bank takes regarding the Borrower, anyone else, any
collateral, or any Liability, which it is entitled to by law or under any
other agreement. Any waiver affects only the specific terms and time period
stated in the waiver. The Bank may waive or delay enforcing any of its
rights without losing them. No modification or waiver of this Agreement is
effective unless it is in writing and signed by the party against whom it is
being enforced.
REPRESENTATIONS BY GUARANTOR: Each Guarantor represents that: (a) the
execution and delivery of this Agreement and the performance of the
obligations it imposes do not violate any law, conflict with any agreement
by which it is bound, or require the consent or approval of any governmental
authority or any third party; (b) this Agreement is a valid and binding
agreement enforceable according to its terms; and (c) all balance sheets,
profit and loss statements, and other financial statements furnished to the
Bank are accurate and fairly reflect the financial condition of the
organizations and persons to which they apply on their effective dates,
including contingent liabilities of every type, which financial condition
has not changed materially and adversely since those dates. Each Guarantor,
other than a natural person, further represents that: (a) it is duly
organized, existing and in good standing under the laws where it is
organized; and (b) the execution and delivery of this note and the
performance of the obligations it imposes (i) are within its powers; (ii)
have been duly authorized by all necessary action of its governing body; and
(iii) do not contravene the terms of its articles of incorporation or
organization, its by-laws or any agreement governing its affairs.
NOTICES: Notice from one party to another relating to this Agreement is
effective if made in writing (including telecommunications) and delivered to
the recipients address, telex number or facsimile number set forth under its
name by any of the following means: (a) hand delivery, (b) registered or
certified mail, postage prepaid, with return receipt requested, (c) first
class or express mail, postage prepaid, (d) Federal Express, Purolator
Courier or like overnight courier service, or (e) telex, facsimile or other
wire transmission with request for assurance of receipt in a manner typical
with respect to communications of that type. Notice made in accordance with
this section is deemed delivered on receipt if delivered by hand or wire
transmission, on the third business day after mailing by first class,
registered or certified mail or on the next business day after mailing or
deposit with an overnight courier service.
LAW AND JUDICIAL FORUM THAT APPLY: This Agreement is governed by Michigan
law. The Guarantor agrees that any legal action or proceeding against it
with respect to any of its obligations under this Agreement may be brought
in any court of the State of Michigan or of the United States of America for
the Eastern or Western District of Michigan, as the Bank in its sole
discretion elects. By the execution and delivery of this Agreement, the
Guarantor submits to and accepts the jurisdiction of those courts with
regard to any action or proceeding, for itself and in respect of its
property, generally and unconditionally, and agrees that service of process
pursuant to the NOTICE section, or pursuant to court rule, will grant
personal jurisdiction over the Guarantor to that court. The Guarantor
waives any claim that the State of Michigan is not a convenient forum or the
proper venue for any suit, action or proceeding.
FOREIGN CURRENCY: The specification of payment in a specific place and time
pursuant to the documentation relating to the Liabilities is essential.
That currency or those currencies are also the currency of account and
payment under this Agreement. In the event that any payment, whether
pursuant to a judgment or otherwise, does not result in payment of the
amount of currency due under this Agreement upon conversion to the currency
of account and transfer to the place specified for payment, the Bank has an
independent cause of action against the Guarantor for the deficiency.
MISCELLANEOUS: The Guarantor's liability under this Agreement is
independent of its liability under any other guaranty previously or
subsequently executed by the Guarantor or any one of them, singularly or
together with others, as to all or any part of the Liabilities, and may be
enforced for the full amount of this Agreement regardless of the Guarantor's
liability under any other guaranty. This Agreement binds the Guarantor's
heirs, successors and assigns, and benefits the Bank and its successors and
assigns. The use of headings does not limit the provisions of this
Agreement.
WAIVER OF JURY TRIAL: The Bank and the Guarantor, after consulting or
having had the opportunity to consult with counsel, knowingly, voluntarily
and intentionally waive any right either of them has to a trial by jury in
any litigation based on or arising out of this Agreement or any related
instrument or agreement, or any of the transactions implied by this
Agreement, or any course of conduct, dealing, statements (whether oral or
written), or actions of either of them. Neither the Bank nor the Guarantor
may seek to consolidate, by counterclaim or otherwise, any action in which a
jury trial has been waived with any other action in which a jury trial
cannot be or has not been waived. These provisions may not be modified in
any respect or relinquished by either the Bank or any Guarantor except by a
written instrument executed by all of them.
Dated: February 19, 1997
GUARANTOR
Interface Systems, Inc.
Address for Notices: By: David O. Schuppp
5855 Interface Dr. Its: Treasurer
Ann Arbor, MI 48103
CONTINUING GUARANTY AND INDEMNITY FOR INTERNATIONAL CREDITS
(For U.S. Resident Guarantors)
GUARANTY: To induce NBD Bank of 611 Woodward Avenue, Detroit, Michigan
48226, directly or through any of its affiliates including The First
National Bank of Chicago, acting through any of their respective branch
offices, subsidiaries or affiliates (the "Bank"), at its option, to make
loans, extend or continue credit or some other transaction, including
letters of credit and foreign exchange contracts, present or future, direct
and indirect, and whether several, joint or joint and several (referred to
collectively as "Liabilities"), to Interface Systems International, Ltd.,
and its their successors (the "Borrowers"), and because the undersigned (the
"Guarantor") has determined that executing this Guaranty is in its interest
and to its financial benefit, the Guarantor absolutely and unconditionally
guarantees to the Bank, a primary obligor and not merely as surety, that the
Liabilities will be paid when due, whether by acceleration or otherwise, in
accordance with the terms and conditions of the documentation related to the
Liabilities. The Guarantor will not only pay the Liabilities, but will also
reimburse the Bank for accrued and unpaid interest, taxes and any expenses,
including reasonable attorneys' fees, that the Bank may pay in relation to
the Liabilities or this Agreement, and for liquidating any collateral.
INDEMNITY: As an additional and continuing obligation, the Guarantor
independently, unconditionally and irrevocably agrees that, should the
Liabilities not be recoverable from the Guarantor under the preceding
paragraph for any reason whatsoever, the Guarantor will on demand pay the
Bank in the currency and otherwise as provided in the documentation for the
Liabilities, the outstanding balance of the Liabilities, including accrued
and unpaid interest, taxes and expenses, including reasonable attorneys'
fees, that the Bank may pay in relation to the Liabilities or this
Agreement, and for liquidating any collateral, by way of a full indemnity.
NO DEDUCTION: All payments of the Liabilities will be made by the Guarantor
without deduction for or on account of any present or future charges of
whatever nature imposed by any governmental authority. If those charges are
imposed, the Guarantor will pay them in addition to paying the Liabilities
as required by this Agreement, and will furnish certified copies of all
official receipts evidencing payment of the charges to the Bank within 45
days after their due date.
LIMITATION: [The Guarantor's obligation under this Agreement is UNLIMITED.]
[Regardless of the amount of Liabilities outstanding at any time, the
Guarantor's obligation under this Agreement does not exceed the principal
amount of N/A ( ) the amount(s) reflected in Exhibit A, plus
interest, expenses, and fees.]
CONTINUED RELIANCE: The Bank may continue to make loans or extend credit to
the Borrower based on this Agreement until it receives written notice of
termination from the Guarantor. That notice shall be effective at the
opening of the Bank on the first business day following receipt of the
notice at the address specified above. If terminated, the Guarantor will
continue to be liable to the Bank for any Liabilities created, assumed or
committed to at the time the termination becomes effective, and all
subsequent renewals, extensions, modifications and amendments of those
Liabilities.
SECURITY: As security for this Agreement, the Guarantor pledges and grants
to the Bank a continuing security interest in the property described below
and all of its additions, substitutions, increments, proceeds and products,
whether now owned or later acquired (the "Collateral"):
1. All securities and other property of the Guarantor in the custody,
possession or control of the Bank's Commercial Loan Department except
property held in a fiduciary capacity.
2. All property or securities declared or acknowledged to constitute
security for any past, present or future liability, direct or indirect, of
the Guarantor to the Bank;
3. All balances of deposit accounts of the Guarantor with the Bank.
4. The following additional property of the Guarantor: accounts
receivable, inventory, machinery and equipment.
The Bank has the right at any time to apply its own debt or liability to the
Guarantor in whole or partial payment or this Agreement or other present or
future liabilities of the Guarantor to the Bank, direct or indirect, without
any requirement of mutual maturity.
INCORPORATION: The Guarantor agrees that so long as any Liability remains
outstanding, it will observe, for the benefit of the Bank, the covenants and
events of default set forth in the Credit Authorization Agreement dated
February 19, 1997 between NBD Bank and the Guarantor, as amended (the
"Credit Agreement"), which are incorporated by reference. Those covenants
and events of default shall remain in force until this Guaranty is no longer
in force, notwithstanding any termination of the Credit Agreement.
EVENTS OF DEFAULT/ACCELERATION: The Bank has the right to terminate any
commitment to extend credit or complete other transactions with any
Borrower, and demand payment under this Agreement whether or not all of any
part of the Liabilities have matured, if any of the following events occurs:
1. Any Guarantor or Borrower fails to pay when due any amount payable
under this Agreement or under any agreement or instrument evidencing debt to
any creditor.
2. Any Guarantor or Borrower (i) fails to observe or perform any term of
this Agreement or the Liabilities; (ii) makes any materially incorrect or
misleading representation, warranty, or certificate to the Bank (iii) makes
any materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (iv) defaults under
the terms of any agreement or instrument relating to any debt for borrowed
money (other than the debt evidenced by this Agreement), including any
capitalized lease obligation, such that the creditor declares the debt due
before its maturity.
3. There is a default under the terms of any loan agreement, mortgage,
security agreement, or any other document executed as part of any loan by
any Borrower or Guarantor from any creditor, or any guarantor fails to
promptly perform under its guaranty.
4. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of any
Guarantor or Borrower or any affiliate of any Guarantor or Borrower, or if
any of them becomes subject to any multi-employer plan.
5. Any Guarantor or Borrower becomes insolvent or unable to pay its
debts as they become due.
6. Any Guarantor or Borrower (i) makes an assignment for the benefit of
creditors; (ii) consents to the appointment of a custodian, receiver, or
trustee for itself or for a substantial part of its assets; or (iii)
commences any proceeding under any bankruptcy, reorganization, liquidation,
insolvency or similar laws of any jurisdiction.
7. A custodian, receiver or trustee is appointed for any Guarantor or
Borrower or for a substantial part of its assets without its consent, and is
not removed within 60 days after the appointment.
8. Proceedings are commenced against any Guarantor or Borrower under any
bankruptcy, reorganization, liquidation, insolvency or similar laws of any
jurisdiction, and they remain dismissed for 60 days after commencement; or
any Guarantor or Borrower consents to the commencement of those proceedings.
9. Any judgment is entered against any Guarantor or Borrower, or any
attachment, levy, or garnishment is issued against any property of any
Guarantor or Borrower, where the USD equivalent of the claim exceeds $ N/A.
10. Any Guarantor or Borrower dies.
11. Any Guarantor or Borrower, without the Bank's written consent, (i) is
dissolved, (ii) merges or consolidates with any third party, (iii) leases,
sells or otherwise conveys a material part of its assets or business outside
the ordinary course of business, (iv) leases, purchases or otherwise
acquires a material part of the assets of any other corporation or business
entity except in the ordinary course of such business, or (v) agrees to do
any of the foregoing.
12. The loan-to-value ratio of any pledged securities at any time exceeds
N/A % and that excess continues for five (5) days after notice from the Bank
to any Guarantor.
13. There is a substantial change in the existing or prospective
financial condition of any Guarantor or Borrower which the Bank in good
faith determines to be materially adverse.
14. The Bank in good faith deems itself insecure.
REMEDIES ON DEFAULT: In addition, the Bank has all of the rights and
remedies provided by law or under any other agreement to liquidate or
foreclose on and sell the Collateral, including but not limited to the
rights and remedies of a secured part under the Uniform Commercial Code.
These rights and remedies are cumulative and not exclusive. If the
Guarantor is entitled to notice, that requirement is met if the Bank sends
notice at least seven (7) days prior to the date of sale, disposition or
other event which requires notice. The proceeds of any sale will be applied
first to costs, then toward payment of the amount owing under this
Agreement. The Bank may cause all or any part of the Collateral to be
transferred to or registered in its name or in the name of any other person
or business entity, with or without designating the capacity of that
nominee.
For purposes of the following paragraphs, "any collateral" shall
include the Guarantor's Collateral and any other collateral securing the
Liabilities.
NEGATIVE PLEDGE: The Guarantor will not allow any lien to exist on any of
its property or any property belonging to any Borrower, except liens known
to the Bank and existing on the date of this Agreement and new liens which
in aggregate, total less than USD NA or equivalent with respect to the
Guarantor and --NA------ or equivalent in the aggregate with respect to the
Borrowers. Guarantor further agrees that it will not execute any agreement
containing a negative pledge clause with any other lender.
ACTION REGARDING BORROWER: If any monies become available that the Bank can
apply to the Liabilities, the Bank may apply them in any manner it chooses,
including but not limited to applying them against liabilities which are not
covered by this Agreement. The Bank may take any action against any
Borrower, any collateral, or any other person liable for any of the
Liabilities. The Bank may release any Borrower or anyone else from the
Liabilities, either in whole or in part, or release any collateral, and need
not perfect a security interest in any collateral. The Bank does not have
to exercise any rights that it has against any Borrower or anyone else, or
make any effort to realize on any collateral or right of set-off. If any
borrower requests more credit or any other benefit, the Bank may grant it
and the Bank may grant renewals, extensions, modifications and amendments of
the Liabilities and otherwise deal with any Borrower or any other person as
the Bank sees fit and as if this Agreement were not in effect.
The Guarantor's obligations under this Agreement are not released or
affected by (a) any act or omission of the Bank, (b) the voluntary or
involuntary liquidation, sale or other disposition of all or substantially
all of the assets of the Borrower, (c) any receivership, insolvency,
bankruptcy, reorganization, or other similar proceedings affecting any
Borrower or any of its assets, (d) any change in the composition or
structure or any Borrower or Guarantor, including a merger or consolidation
with any other person or entity, or (e) the full or partial assignment of
any Liability.
NATURE OF GUARANTY: This Agreement is a guaranty of payment and not of
collection. Therefore, the Bank may insist that the Guarantor pay
immediately, and the Bank is not required to attempt to collect first from
the Borrower, any collateral, or any other person liable for the
Liabilities. The obligation of the Guarantor is unconditional and absolute,
even if all or any part of any agreements between the Bank and the Borrower
is unenforceable, void voidable or illegal, and regardless of the existence
of any defense, setoff or counterclaim which the Borrower may assert.
OTHER GUARANTORS: Any Guarantor's obligations under this Agreement are
joint and several with any other guarantor of the Liabilities. If the Bank
elects to enforce its rights against less than all guarantors of the
Liabilities, that election does not release any Guarantor from its
obligations under this Agreement. The compromise or release of any of the
obligations of any of the other guarantors or the Borrower does not serve to
waive, alter or release the Guarantor's obligations.
RIGHTS OF SUBROGATION: The Guarantor will not enforce any rights of
subrogation, contribution or indemnification that it has against the
Borrower, any person liable on the Liabilities, or any collateral, until the
Borrower and the Guarantor have fully performed all their obligations to the
Bank, even if those obligations are not covered by this Agreement. The
Guarantor further agrees that if all or any part of the payments to the Bank
on the Liabilities are invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or
any other party under any bankruptcy act or code, state or federal law,
common law or equitable doctrine, then this Agreement and any Collateral
remain in full force and effect (or are reinstated as the case may be) until
payment in full of those amounts. That payment is due on demand.
WAIVERS: The Guarantor waives any right it may have to receive notice of
the following matters before the Bank enforces any of its rights: (i) the
Bank's acceptance of this Agreement, (ii) any credit that the Bank extends
to the Borrower, (iii) the Borrower's default, (iv) any demand, (v) any
action that the Bank takes regarding the Borrower, anyone else, any
collateral, or any Liability, which it is entitled to by law or under any
other agreement. Any waiver affects only the specific terms and time period
stated in the waiver. The Bank may waive or delay enforcing any of its
rights without losing them. No modification or waiver of this Agreement is
effective unless it is in writing and signed by the party against whom it is
being enforced.
REPRESENTATIONS BY GUARANTOR: Each Guarantor represents that: (a) the
execution and delivery of this Agreement and the performance of the
obligations it imposes do not violate any law, conflict with any agreement
by which it is bound, or require the consent or approval of any governmental
authority or any third party; (b) this Agreement is a valid and binding
agreement enforceable according to its terms; and (c) all balance sheets,
profit and loss statements, and other financial statements furnished to the
Bank are accurate and fairly reflect the financial condition of the
organizations and persons to which they apply on their effective dates,
including contingent liabilities of every type, which financial condition
has not changed materially and adversely since those dates. Each Guarantor,
other than a natural person, further represents that: (a) it is duly
organized, existing and in good standing under the laws where it is
organized; and (b) the execution and delivery of this note and the
performance of the obligations it imposes (i) are within its powers; (ii)
have been duly authorized by all necessary action of its governing body; and
(iii) do not contravene the terms of its articles of incorporation or
organization, its by-laws or any agreement governing its affairs.
NOTICES: Notice from one party to another relating to this Agreement is
effective if made in writing (including telecommunications) and delivered to
the recipients address, telex number or facsimile number set forth under its
name by any of the following means: (a) hand delivery, (b) registered or
certified mail, postage prepaid, with return receipt requested, (c) first
class or express mail, postage prepaid, (d) Federal Express, Purolator
Courier or like overnight courier service, or (e) telex, facsimile or other
wire transmission with request for assurance of receipt in a manner typical
with respect to communications of that type. Notice made in accordance with
this section is deemed delivered on receipt if delivered by hand or wire
transmission, on the third business day after mailing by first class,
registered or certified mail or on the next business day after mailing or
deposit with an overnight courier service.
LAW AND JUDICIAL FORUM THAT APPLY: This Agreement is governed by Michigan
law. The Guarantor agrees that any legal action or proceeding against it
with respect to any of its obligations under this Agreement may be brought
in any court of the State of Michigan or of the United States of America for
the Eastern or Western District of Michigan, as the Bank in its sole
discretion elects. By the execution and delivery of this Agreement, the
Guarantor submits to and accepts the jurisdiction of those courts with
regard to any action or proceeding, for itself and in respect of its
property, generally and unconditionally, and agrees that service of process
pursuant to the NOTICE section, or pursuant to court rule, will grant
personal jurisdiction over the Guarantor to that court. The Guarantor
waives any claim that the State of Michigan is not a convenient forum or the
proper venue for any suit, action or proceeding.
FOREIGN CURRENCY: The specification of payment in a specific place and time
pursuant to the documentation relating to the Liabilities is essential.
That currency or those currencies are also the currency of account and
payment under this Agreement. In the event that any payment, whether
pursuant to a judgment or otherwise, does not result in payment of the
amount of currency due under this Agreement upon conversion to the currency
of account and transfer to the place specified for payment, the Bank has an
independent cause of action against the Guarantor for the deficiency.
MISCELLANEOUS: The Guarantor's liability under this Agreement is
independent of its liability under any other guaranty previously or
subsequently executed by the Guarantor or any one of them, singularly or
together with others, as to all or any part of the Liabilities, and may be
enforced for the full amount of this Agreement regardless of the Guarantor's
liability under any other guaranty. This Agreement binds the Guarantor's
heirs, successors and assigns, and benefits the Bank and its successors and
assigns. The use of headings does not limit the provisions of this
Agreement.
WAIVER OF JURY TRIAL: The Bank and the Guarantor, after consulting or
having had the opportunity to consult with counsel, knowingly, voluntarily
and intentionally waive any right either of them has to a trial by jury in
any litigation based on or arising out of this Agreement or any related
instrument or agreement, or any of the transactions implied by this
Agreement, or any course of conduct, dealing, statements (whether oral or
written), or actions of either of them. Neither the Bank nor the Guarantor
may seek to consolidate, by counterclaim or otherwise, any action in which a
jury trial has been waived with any other action in which a jury trial
cannot be or has not been waived. These provisions may not be modified in
any respect or relinquished by either the Bank or any Guarantor except by a
written instrument executed by all of them.
Dated: February 19, 1997
GUARANTOR
I.G. K. Industries, Inc.
Address for Notices: By: David O. Schuppp
7332 Jackson Rd. Its: Treasurer
Ann Arbor, MI 48103
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<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 710,988
<SECURITIES> 0
<RECEIVABLES> 14,404,753
<ALLOWANCES> 0
<INVENTORY> 10,311,766
<CURRENT-ASSETS> 29,037,934
<PP&E> 4,769,962
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,353,096
<CURRENT-LIABILITIES> 8,346,939
<BONDS> 0
<COMMON> 10,938,175
0
0
<OTHER-SE> 7,469,486
<TOTAL-LIABILITY-AND-EQUITY> 40,353,096
<SALES> 23,319,188
<TOTAL-REVENUES> 23,319,188
<CGS> 21,444,053
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (157,505)
<INCOME-PRETAX> (2,109,672)
<INCOME-TAX> (609,943)
<INCOME-CONTINUING> (2,109,672)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,499,729)
<EPS-PRIMARY> (0.34)
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