<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1997
Commission File Number 0-2762
MAXCO, INC.
(Exact Name of Registrant as Specified in its Charter)
Michigan 38-1792842
-------- ----------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1118 Centennial Way
Lansing, Michigan 48917
(Address of principal executive (Zip Code)
offices)
Registrant's Telephone Number, including area code: (517) 321-3130
--------------
Indicate by check mark whether the registrant (1) has filed all annual,
quarterly and other reports required to be filed by Section 12 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding twelve months and (2) has
been subject to the filing requirements for at least the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 31, 1997
----- --------------------------------
Common Stock 3,305,510 shares
1
<PAGE> 2
PART I
FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
(Unaudited)
--------------------------
(in thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 883 $ 1,609
Marketable securities--Note 3 2,822 2,984
Accounts and notes receivable, less allowance of
$620,000 ($470,000 at March 31, 1997) 14,061 13,526
Inventories--Note 2 4,172 3,667
Prepaid expenses and other 619 269
------- -------
TOTAL CURRENT ASSETS 22,557 22,055
MARKETABLE SECURITIES - LONG TERM--Note 3 5,300 7,780
PROPERTY AND EQUIPMENT
Land 732 732
Buildings 10,962 9,810
Machinery, equipment, and fixtures 17,594 14,358
------- -------
29,288 24,900
Allowances for depreciation (7,853) (6,325)
------- -------
21,435 18,575
OTHER ASSETS
Investments--Note 4 17,876 12,219
Notes and contracts receivable and other 2,958 4,896
Intangibles 2,905 2,636
Restricted cash for acquisition of equipment--Note 5 2,460
------- -------
26,199 19,751
------- -------
$75,491 $68,161
</TABLE> ======= =======
2
<PAGE> 3
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
(Unaudited)
------------------------
(in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable $ 226 $ 226
Accounts payable 7,386 6,556
Employee compensation 1,135 1,699
Taxes, interest, and other liabilities 3,020 1,714
Current maturities of long-term obligations 1,253 4,458
------- -------
TOTAL CURRENT LIABILITIES 13,020 14,653
LONG-TERM OBLIGATIONS, less current maturities 24,033 16,027
DEFERRED INCOME TAXES 1,675 2,502
STOCKHOLDERS' EQUITY
Preferred stock:
Series Three: 10% cumulative redeemable, $60 face
value; 15,150 shares issued and outstanding
(15,426 at March 31, 1997) 700 716
Series Four: 10% cumulative redeemable, $51.50 face
value; 46,414 shares issued and outstanding 2,390 2,390
Series Five: 10% cumulative redeemable, $120 face
value; 6,680 shares issued and outstanding--Note 7 802
Common stock, $1 par value; 10,000,000 shares
authorized, 3,305,510 issued shares (3,517,680 at
March 31, 1997) 3,306 3,518
Net unrealized gain (loss) on marketable securities 85 (68)
Retained earnings 29,480 28,423
------- -------
36,763 34,979
------- -------
$75,491 $68,161
</TABLE> ======= =======
See notes to consolidated financial statements
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED)
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended December 31,
1997 1996
(Unaudited) (Unaudited)
---------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Net sales $24,091 $15,955
Costs and expenses:
Cost of sales and operating expenses 18,405 12,909
Selling, general and administrative 4,254 2,095
Depreciation and amortization 615 291
------- -------
23,274 15,295
------- -------
OPERATING EARNINGS 817 660
Other income (expense)
Investment income 267 396
Interest expense (548) (169)
------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE FEDERAL
INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES 536 887
Federal income tax expense 179 302
------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE EQUITY IN EARNINGS OF AFFILIATES 357 585
Equity in earnings of affiliates, net of deferred tax--Note 4 (10) (498)
------- -------
INCOME FROM CONTINUING OPERATIONS 347 87
Loss from discontinued operations (693)
------- -------
NET INCOME (LOSS) 347 (606)
Less preferred stock dividends (102) (51)
------- -------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK 245 (657)
======= =======
NET INCOME (LOSS) PER COMMON SHARE - BASIC:
Continuing operations $ .07 $ .01
Discontinued operations (.19)
------- -------
$ .07 $ (.18)
NET INCOME (LOSS) PER COMMON SHARE - ASSUMING DILUTION: ======= =======
Continuing operations $ .07 $ .01
Discontinued operations (.19)
------- -------
$ .07 $ (.18)
======= =======
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED)
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1997 1996
(Unaudited) (Unaudited)
---------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Net sales $81,272 $54,172
Costs and expenses:
Cost of sales and operating expenses 61,675 44,670
Selling, general and administrative 12,519 6,711
Depreciation and amortization 1,807 822
------- -------
76,001 52,203
------- -------
OPERATING EARNINGS 5,271 1,969
Other income (expense)
Investment income 727 802
Interest expense (1,529) (952)
------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE FEDERAL
INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES 4,469 1,819
Federal income tax expense 1,558 627
------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE EQUITY IN EARNINGS OF AFFILIATES 2,911 1,192
Equity in earnings of affiliates, net of deferred tax--Note 4 193 (304)
------- -------
INCOME FROM CONTINUING OPERATIONS 3,104 888
Income from discontinued operations 21,397
------- -------
NET INCOME 3,104 22,285
Less preferred stock dividends (288) (153)
------- ------
NET INCOME APPLICABLE TO COMMON STOCK 2,816 22,132
NET INCOME PER COMMON SHARE - BASIC: ======= =======
Continuing operations $ .82 $ .19
Discontinued operations 5.42
------- -------
$ .82 $ 5.61
NET INCOME PER COMMON SHARE - ASSUMING DILUTION: ======= =======
Continuing operations $ .80 $ .19
Discontinued operations 5.01
------- -------
$ .80 $ 5.20
======= =======
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONDENSED)
MAXCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
MAXCO, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1997 1996
(Unaudited) (Unaudited)
------------------------------
(in thousands)
OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 3,104 $ 22,285
Income from Discontinued Operations (21,397)
-------- --------
Income from Continuing Operations 3,104 888
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and other non-cash items 1,615 1,127
Changes in operating assets and liabilities (1,612) 223
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,107 2,238
INVESTING ACTIVITIES
Sale of subsidiary 40,602
Payments received on notes receivable 3,443
Net investment in marketable securities 2,874 (13,641)
Investment in affiliates (6,293) (876)
Purchase of businesses (400)
Purchases of property and equipment (4,508) (759)
Other 183 175
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (4,701) 25,501
FINANCING ACTIVITIES
Restricted cash for acquisition of equipment (2,460)
Proceeds from long-term obligations 10,095 488
Repayments on long-term obligations and notes payable (5,294) (19,728)
Changes in capital stock (1,185) (5,759)
Dividends paid on preferred stock (288) (153)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 868 (25,152)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (726) 2,587
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,609 735
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 883 $ 3,322
======== ========
</TABLE>
See notes to consolidated financial statements
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAXCO, INC. AND SUBSIDIARIES
DECEMBER 31, 1997
NOTE 1 - Basis of Presentation and Significant Accounting Policies
The accompanying unaudited, condensed, consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation of the results of the interim periods covered have
been included. For further information, refer to the consolidated financial
statements and notes thereto included in Maxco's annual report on Form 10-K
for the year ended March 31, 1997.
The results of operations for the interim periods presented are not
necessarily indicative of the results for the full year. Certain other
amounts in the consolidated financial statements have been reclassified to
conform with the current presentation.
NOTE 2 - Inventories
The major classes of inventories, at the dates indicated were as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
----------- ---------
(Unaudited)
(in thousands)
<S> <C> <C>
Raw materials $ 797 $ 783
Finished goods and
work in progress 1,457 1,212
Purchased products
for resale 1,918 1,672
----------- ---------
$ 4,172 $ 3,667
=========== =========
</TABLE>
NOTE 3 - Marketable Securities
The Company classifies its marketable securities as securities available for
sale under FASB 115, Accounting for Certain Investments in Debt and Equity
Securities. Available-for-sale securities are carried at fair value, with
the unrealized gains and losses, net of tax, reported as a separate component
of stockholders' equity. Application of this method resulted in an
unrealized gain, net of deferred tax, of approximately $85,000 being reported
as part of stockholders' equity at December 31, 1997.
7
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES
NOTE 4 - Investment in Medar, Inc.
During the quarter ended September 30, 1997, the Company participated in the
private placement by Medar, Inc. of $7.0 million of subordinated debentures.
Maxco purchased $750,000 of these debentures representing 10.7% of the total
placed. Maxco also received warrants to purchase 150,000 shares of Medar
stock at $6.86. The debentures have maturities of up to eight years and bear
interest at 12.95%. In connection with this transaction, Maxco also
purchased 150,000 shares of previously unissued Medar stock at $5.00 a share.
At December 31, 1997, Maxco owned 2,087,405 shares or approximately 23% of
Medar's common stock (aggregate market value of approximately $11.2 million
at that date).
NOTE 5 - Restricted Cash
The Company has borrowings under its variable rate tax exempt revenue bond.
The use of the proceeds from these borrowings are restricted for the
acquisition of certain equipment. The unexpended portion of $2.5 million is
included in restricted cash at December 31, 1997.
NOTE 6 - Long-Term Debt
In December 1997, the Company's Atmosphere Annealing subsidiary issued
variable rate bonds totaling $7.9 million. Approximately $3.5 million of the
proceeds was used for the refinancing of other long-term debt with the
balance used for the acquisition of machinery and equipment.
NOTE 7 - Issuance of Series Five Preferred Stock
In the quarter ended June 30, 1997, 6,767 shares of Series Five Preferred
stock were issued in exchange for 101,870 shares of common stock. These new
shares were issued in conjunction with an offer to exchange shares of common
stock for shares of the Company's non-voting Series Five Preferred Stock.
The Series Five Preferred shares have a face value of $120 and pay a dividend
at the rate of 10% of face value per annum. The Company exchanged one share
of Series Five Preferred Stock for every 15 shares of common stock
surrendered.
NOTE 8 - Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share. Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excluded any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
necessary, restated to conform to the Statement 128 requirements.
8
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
------------------ ----------------------
(in thousands, except per share data)
NUMERATOR:
<S> <C> <C> <C> <C>
Income from continuing operations $ 347 $ 87 $3,104 $ 888
Income (loss) from discontinued operations (693) 21,397
------ ------ ------ -------
Net income (loss) 347 (606) 3,104 22,285
Preferred stock dividends (102) (51) (288) (153)
------ ------ ------ -------
NUMERATOR FOR BASIC EARNING PER SHARE--INCOME
AVAILABLE TO COMMON STOCKHOLDERS
Continuing operations 245 36 2,816 735
Discontinued operations (693) 21,397
------ ------ ------ -------
Net income (loss) 245 (657) 2,816 22,132
Effect of dilutive securities:
Preferred stock dividends 27 81
------ ------ ------ -------
NUMERATOR FOR DILUTED EARNINGS PER SHARE--INCOME
TO COMMON STOCKHOLDERS AFTER ASSUMED CONVERSIONS
Continuing operations 245 63 2,816 816
Discontinued operations (693) 21,397
------ ------ ------ -------
Net income (loss) 245 (630) 2,816 22,213
DENOMINATOR:
DENOMINATOR FOR BASIC EARNINGS PER SHARE--
WEIGHTED-AVERAGE SHARES 3,416 3,690 3,437 3,946
Effect of dilutive securities:
Employee stock options 108 70 84 93
Convertible Preferred Stock 232 232
------ ------ ------ -------
Dilutive potential common shares 108 302 84 325
------ ------ ------ -------
DENOMINATOR FOR DILUTED EARNINGS PER SHARE--ADJUSTED
WEIGHTED-AVERAGE SHARES AND ASSUMED CONVERSIONS 3,524 3,992 3,521 4,271
------ ------ ------ -------
BASIC EARNINGS PER SHARE
Continuing operations $ .07 $ .01 $ .82 $ .19
Discontinued operations (.19) 5.42
------ ------ ------ -------
Net income (loss) $ .07 $ (.18) $ .82 $ 5.61
====== ====== ====== =======
DILUTED EARNINGS PER SHARE
Continuing operations $ .07 $ .01 $ .80 $ .19
Discontinued operations (.17) 5.01
------ ------ ------ -------
Net income (loss) $ .07 $ (.16) $ .80 $ 5.20
====== ====== ====== =======
</TABLE>
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MAXCO, INC. AND SUBSIDIARIES
DECEMBER 31, 1997
MATERIAL CHANGES IN FINANCIAL CONDITION
Maxco's operating activities generated $3.1 million in cash during the first
nine months of 1997. Current maturities of long-term obligations were reduced
from the March 31, 1997 level due to the refinancing of one of the Company's
lines of credit.
The cash generated from operations in 1997, as well as proceeds from the
collection of a note related to the sale of Maxco's interest in FinishMaster,
were used by Maxco principally as follows:
- - The Company invested in property and equipment of approximately $4.5
million during the first nine months.
- - The Company participated in the private placement by Medar, Inc. of $7.0
million of subordinated debentures. Maxco purchased $750,000 of these
debentures representing 10.7% of the total placed. Maxco also received
warrants to purchase 150,000 shares of Medar stock at $6.86 as part of
this transaction. The debentures have maturities of up to eight years and
bear interest at 12.95%. In connection with this transaction, Maxco
purchased 150,000 shares of previously unissued Medar stock at $5.00 a
share. Maxco has also purchased 77,200 shares of Medar stock on the open
market since April 1, 1997. At January 31, 1998, Maxco owned 2,120,605
shares of Medar's common stock.
- - The Company repurchased approximately 115,300 shares of Maxco stock during
the nine-months ended December 31, 1997.
- - The Company increased its investment in Strategic Interactive, Inc., a web
based training and education provider, from 15% to 45% ownership.
In December 1997, the Company's Atmosphere Annealing subsidiary issued variable
rate bonds totaling $7.9 million. Approximately $3.5 million of the proceeds
was used for the refinancing of other long-term debt with the balance used for
the acquisition of machinery and equipment.
In the quarter ended June 30, 1997, 6,767 shares of Series Five Preferred stock
were issued in exchange for 101,870 shares of common stock pursuant to an
exchange offer.
The Company believes that its current financial resources, together with cash
generated from operations, and its available resources under its lines of
credit will be adequate to meet its cash requirements for the next year.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Three Months Ended December 31, 1997 Compared to 1996
Net sales from continuing operations increased to $24.1 million compared to
$16.0 million in last year's third quarter. Third quarter results reflect
income from continuing operations of $347,000 compared to $87,000 for the
comparable period in 1996. Net income was $347,000 or $.07 per diluted share
compared to last year's loss of $606,000 or $.18 per diluted share. Net income
for last year's third quarter reflects a loss of $693,000 from discontinued
operations.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
MAXCO, INC. AND SUBSIDIARIES
Higher sales in the current period occurred at Maxco's construction supplies
companies (Ersco and Wisconsin Wire & Steel) over the comparable 1996 period.
This increase in sales at these companies, as well as the inclusion of the
sales for Atmosphere Annealing, acquired in January 1997, were the primary
reasons that net sales increased over the comparable period of the prior year.
The Construction Products group generated additional operating earnings in the
current period over last year due to their increased sales level and a higher
gross margin percentage. In addition, operating results for Atmosphere
Annealing, acquired in January 1997, were included in the current quarter
results. An operating loss occurred at Pak-Sak in the current quarter due to
reduced sales and a lower gross margin percentage at this location.
The change in net interest was attributable to the cash used for the purchase
of assets, investments made in affiliates, and the repurchase of Company stock.
Nine Months Ended December 31, 1997 Compared to 1996
Net sales from continuing operations increased to $81.3 million compared to
$54.2 million for last year's comparable nine month period. Results for this
period reflect income from continuing operations of $3.1 million compared to
$888,000 for the comparable period in 1996. Net income was $3.1 million or
$.80 per diluted share compared to last year's $22.3 million or $5.20 per
diluted share. Income from discontinued operations for the nine month period
of the prior year included a $22.0 million gain from the sale of FinishMaster.
The sales growth in the current period was due to an increase in sales at the
Construction Products group, and the inclusion of sales for Atmosphere
Annealing, acquired in January 1997. Sales at Pak-Sak during the nine months
declined, however, from the comparable period in 1996.
The improved operating earnings over the comparable prior period was due to
higher earnings at Ersco and Wisconsin Wire & steel, and the inclusion of
operating earnings generated by Atmosphere Annealing during the nine months.
Operating earnings were negatively impacted during this period as a result of
Pak-Sak's lower sales and a lower gross margin percentage, as this unit's
operating earnings were reduced to a break-even for the period. Net interest
expense increased for the nine months due to the cash requirements for the
investment in assets, investments in affiliates, and repurchase of Company
stock.
11
<PAGE> 12
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6(a) Exhibits
3* Restated Articles of Incorporation
3.1 By-laws are hereby incorporated by reference from Form S-4 dated November
4, 1991 (File No. 33-43855).
4.2 Resolution establishing Series Three Preferred Shares is hereby
incorporated by reference from Form S-4 dated November 4, 1991 (File No.
33-43855).
4.3 Resolution authorizing the redemption of Series Two Preferred Stock and
establishing Series Four Preferred Stock and the terms of the subordinated
notes is hereby incorporated by reference from registrants Form 10-Q dated
February 14, 1997.
4.4 Resolution establishing Series Five Preferred Shares is hereby
incorporated by reference from Form 10-K dated June 5, 1997.
12
<PAGE> 13
PART II
OTHER INFORMATION (CONTINUED)
10.1 Incentive stock option plan adopted August 15, 1983, including the
amendment (approved by shareholders August 25, 1987) to increase the
authorized shares on which options may be granted by two hundred
fifty thousand (250,000), up to five hundred thousand (500,000)
shares of the common stock of the company is hereby incorporated by
reference from the registrant's annual report on Form 10-K for the
fiscal year ended March 31, 1988.
10.8 Stock Purchase Agreement (sale of FinishMaster, Inc.) effective
July 9, 1996, is hereby incorporated by reference from registrants
Form 10-K dated June 18, 1996.
10.9 Asset purchase agreement - Wright Plastic Products, Inc. is hereby
incorporated by reference from registrants Form 10-Q dated November
14, 1996.
10.10 Amended and restated loan agreement between Comerica Bank and Maxco,
Inc. dated September 30, 1996 is hereby incorporated by reference
from registrants Form 10-Q dated November 14, 1996.
10.11 Asset purchase agreement for the purchase of Atmosphere Annealing,
Inc. is hereby incorporated by reference from registrants Form 8-K
dated January 17, 1997.
10.12 Asset purchase agreement - Axson North America, Inc. is hereby
incorporated by reference from Form 10-Q dated February 14, 1997.
10.13* Loan agreement between Michigan Strategic Fund and Atmosphere
Annealing, Inc.
10.14* Loan agreement between LAM Funding, L.L.C. and borrower including
Guaranty-Maxco, Inc.
27* Financial Data Schedule
Item 6(b) Reports on Form 8-K
None
*Filed herewith
13
<PAGE> 14
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.
MAXCO, INC.
Date February 13, 1998 \S\ VINCENT SHUNSKY
----------------- -------------------------------
Vincent Shunsky, Vice President-Finance
and Treasurer (Principal Financial and
Accounting Officer)
14
<PAGE> 15
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3* Restated Articles of Incorporation
3.1 By-laws are hereby incorporated by reference from Form S-4
dated November 4, 1991 (File No. 33-43855).
4.2 Resolution establishing Series Three Preferred Shares is hereby
incorporated by reference from Form S-4 dated November 4, 1991
(File No. 33-43855).
4.3 Resolution authorizing the redemption of Series Two Preferred
Stock and establishing Series Four Preferred Stock and the
terms of the subordinated notes is hereby incorporated by
reference from registrants Form 10-Q dated February 14, 1997.
4.4 Resolution establishing Series Five Preferred Shares is hereby
incorporated by reference from Form 10-K dated June 5, 1997.
10.1 Incentive stock option plan adopted August 15, 1983, including
the amendment (approved by shareholders August 25, 1987) to
increase the authorized shares on which options may be granted
by two hundred fifty thousand (250,000), up to five hundred
thousand (500,000) shares of the common stock of the company is
hereby incorporated by reference from the registrant's annual
report on Form 10-K for the fiscal year ended March 31, 1988.
10.8 Stock Purchase Agreement (sale of FinishMaster, Inc.) effective
July 9, 1996, is hereby incorporated by reference from
registrants Form 10-K dated June 18, 1996.
10.9 Asset purchase agreement - Wright Plastic Products, Inc. is
hereby incorporated by reference from registrants Form 10-Q
dated November 14, 1996.
10.10 Amended and restated loan agreement between Comerica Bank and
Maxco, Inc. dated September 30, 1996 is hereby incorporated by
reference from registrants Form 10-Q dated November 14, 1996.
10.11 Asset purchase agreement for the purchase of Atmosphere
Annealing, Inc. is hereby incorporated by reference from
registrants Form 8-K dated January 17, 1997.
10.12 Asset purchase agreement - Axson North America, Inc. is hereby
incorporated by reference from Form 10-Q dated February 14,
1997.
10.13* Loan agreement between Michigan Strategic Fund and Atmosphere
Annealing, Inc.
10.14* Loan agreement between LAM Funding, L.L.C. and borrower
including Guaranty-Maxco, Inc.
27* Financial Data Schedule
*Filed herewith
<PAGE> 1
EXHIBIT 3
C&S 510 (11/97)
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES - CORPORATION,
SECURITIES & LAND DEVELOPMENT BUREAU
(FOR BUREAU USE ONLY)
Date Received
January 26, 1998 FILED
January 26, 1998
Name Administrator
Warren Cameron Faust & Asciutto, P.C. MI DEPARTMENT OF CONSUMER
Address & INDUSTRY SERVICES
CORPORATION, SECURITIES
P.O. Box 26067 & LAND DEVELOPMENT BUREAU
City State Zip
Lansing MI 48909 EFFECTIVE DATE:
Document will be returned to the name and address you enter above
RESTATED ARTICLES OF INCORPORATION
For use by Domestic Profit Corporations
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Articles:
1. The present name of the corporation is: Maxco, Inc.
2. The identification number assigned by the Bureau is: 026-970
3. All former names of the corporation are: Planet Corporation
Michigan Planet Corporation
4. The date of filing the original Article of Incorporation was: April 2,
1946
The following Restated Articles of Incorporation supersede the
Articles of Incorporation as amended and shall be the Articles of
Incorporation for the corporation:
ARTICLE I
The name of the corporation is: Maxco, Inc.
ARTICLE II
The purpose or purposes for which the corporation is formed are:
See Attachment.
<PAGE> 2
ARTICLE III
The total authorized shares:
Common shares 10,000,000 Preferred shares 100,000
__________ ________
A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
See Attachment.
ARTICLE IV
1. The address of the current registered office is:
1118 Centennial Way Lansing MICHIGAN 48917
(Street Address) (City) (State) (Zip Code)
2. The mailing address of the current registered office, if different than
above:
P.O. Box 80737 Lansing MICHIGAN 48908
(Street Address) (City) (State) (Zip Code)
3. The name of the current resident agent is: Max A. Coon
ARTICLE V (OPTIONAL. DELETE IF NOT APPLICABLE.)
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any
class of them or between this corporation and its shareholders or any class
of them, a court of equity jurisdiction within the state, on application of
this corporation or of a creditor or shareholder thereof, or on application
of a receiver appointed for the corporation, may order a meeting of the
creditors or class of creditors or of the shareholders or class of
shareholders to be affected by the proposed compromise or arrangement or
reorganization, to be summoned in such manner as the court directs. If a
majority in number representing 3/4 in value of the creditors or class of
creditors, or of the shareholders or class of shareholders to be affected by
the proposed compromise or arrangement or a reorganization, agree to a
compromise or arrangement or a reorganization of this corporation as a
consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization, if sanctioned by the court to which the application
has been made, shall be binding on all the creditors or class of creditors,
or on all the shareholders or class of shareholders and also on this
corporation.
ARTICLE VI (OPTIONAL. DELETE IF NOT APPLICABLE.)
To the full extent that the laws of the State of Michigan, as they exist on
the date hereof or as they may hereafter be amended, permit the limitations
or elimination of the liability of Directors, no Directors of the Corporation
shall be personally liable to the Corporation or its stockholders for damages
for breach of any duty owed to the Corporation or its stockholders. Neither
the amendment or repeal of this Article nor the adoption of any provisions of
the Articles of Incorporation which is inconsistent with this Article shall
apply to or have any effect on the liability or alleged liability of any
Director of the Corporation for or with respect to any act or omission of
such Director occurring prior to such amendment, repeal or adoption.
In the event a law or statute is adopted in the future which allows the
limitation or elimination of the liability of Officers of the Corporation,
the provisions of such law or statute shall be incorporated herein without
the necessity for further action by the shareholders.
<PAGE> 3
5. COMPLETE SECTION (a) IF THE RESTATED ARTICLES WERE ADOPTED BY THE UNANIMOUS
CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF
DIRECTORS; OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE BOTH.
a. ___ These Restated Articles of Incorporation were duly adopted on the
___________ day of _________________, 19____, in accordance with the
provisions of Section 642 of the Act by the unanimous consent of the
incorporator(s) before the first meeting of the Board of Directors.
Signed this _____________ day of__________________, 19 ______________
____________________________ ___________________________
____________________________ ___________________________
(Signatures of Incorporators; Type or Print Name Under Each Signature)
b. X These Restated Articles of Incorporation were duly adopted on 9th
___ day of January, 1998, in accordance with the provisions of Section
642 of the Act and: (check one of the following)
X were duly adopted by the Board of Directors without a vote of the
___ shareholders. These Restated Articles of Incorporation only
restate and integrate and do not further amend the provisions of
the Articles of Incorporation as heretofore amended and there is
no material discrepancy between those provisions and the
provisions of these Restated Articles.
__ were duly adopted by the shareholders. The necessary number of
shares as required by statute were voted in favor of these
Restated Articles.
__ were duly adopted by the written consent of the shareholders
having not less than the minimum number of votes required by
statute in accordance with Section 407(1) of the Act. Written
notice to shareholders who have not consented in writing has been
given. (Note: Written consent by less than all of the
shareholders is permitted only if such provision appears in the
Articles of Incorporation.)
__ were duly adopted by the written consent of all the shareholders
entitled to vote in accordance with Section 407(2) of the Act.
Signed this 23rd day of January, 1998
/s/ J. Michael Warren
By: __________________________________________________
(Signature of an authorized officer or agent)
J. Michael Warren, Assistant Secretary
______________________________________________________
(Type or Print Name) (Type or Print Title)
<PAGE> 4
Maxco, Inc.
Article II
The purpose or purposes for which the corporation is formed are as
follows:
To purchase, own and hold the stock of other corporations; to direct
the operation of other corporations through the ownership of stock therein; to
promote, lend money to, and guaranty the notes, evidence of indebtedness,
contracts and other obligations of and otherwise aid in any matter which shall
be lawful in any corporation or association in which the corporation shall have
an interest;
To engage in the business of general contracting and construction;
To manufacture, design, machine, buy, sell, lease, trade and deal in
all kinds of personal property, including, but not limited to, conveyors and
all types of steel and special alloys; and to fabricate, erect, repair and
service conveyers and all kinds of conveying equipment for industrial or any
other use.
To buy, sell, produce, manufacture and dispose of all kinds of goods,
wares, merchandise, commodities, machinery, supplies and products, and
generally to engage in and conduct any form of manufacturing or mercantile
enterprise not contrary to law;
To invest in real estate and to lease real estate and equipment owned
or leased by the corporation;
To carry on and conduct a general agency business, to act, and to
appoint others to act, as general agent, special agent, broker, factor,
manufacturer's agent, purchasing agent, sales agent, distributing agent,
franchisee, representative and commission merchant, for individuals, firms,
associations, and corporations in the distribution, delivery, purchase and sale
of goods, wares, merchandise, property, commodities, and articles of commerce
of every kind and description, and in selling, promoting the sale of,
advertising, and introducing, and contracting for the sale, introduction,
advertisement, and use of, services of all kinds, relating to any kind and all
kinds of businesses, for any and all purposes;
To lease, buy, sell, use, mortgage, improve and otherwise handle, deal
in, and dispose of all property, real and personal, including stock and stock
rights, as may be necessary or convenient in connection with the aforesaid
business of the company;
and in general to carry on any business in connection there with and
incident thereto not forbidden by the laws of the State of Michigan, and with
all the powers conferred upon corporations by the laws of the State of
Michigan.
<PAGE> 5
Maxco, Inc.
Article III
(a) Each share of common stock shall have one vote.
(b) No holder of any shares of stock of the Corporation of any
class now or hereafter authorized shall have any preemptive right to purchase,
subscribe for or otherwise acquire any share of any class of stock of the
Corporation or any security exchangeable or convertible into any share of any
class of stock of the Corporation, or any warrants or other instruments
evidencing rights or options to subscribe for, purchase or otherwise acquire
any share of any class of stock of the Corporation.
(c) Shares of preferred stock may be issued from time to time
in one or more series, each such series to have such distinctive designation or
title and to include such number of shares as may be fixed and determined by
the Board of Directors prior to the issuance of any shares thereof. Each such
series may differ from every other series already outstanding, as may be
determined from time to time by the Board of Directors prior to issuance of any
shares thereof, in any or all of the following respects:
(i) The rate of dividend which the preferred stock of
any such series hall be entitled to receive and whether such series
shall be entitled to receive a dividend and whether such dividend
shall be cumulative or non-cumulative;
(ii) The amount per share which the preferred stock of
any such series shall be entitled to receive in case of the redemption
thereof or in case of a voluntary liquidation or sale of assets,
dissolution or winding up of the Corporation, or in case of the
involuntary liquidation, distribution or sale of assets, dissolution
or winding up of the Corporation;
(iii) The relative rights, if any, of the holders of
preferred stock of any such series to vote the same, and the extent,
terms and conditions of such voting rights;
(iv) The right, if any, of the holders of preferred
stock of any such series to convert the same into other classes of
stock, and the terms and conditions of such conversion; and
(v) The terms of the sinking fund or redemption of
purchase account, if any, to be provided for the preferred stock of
any such series.
The description and terms of the preferred stock of each series shall
be fixed and determined by the Board of Directors by appropriate resolution or
resolutions at or prior to the time of the authorization of the issue of the
original shares of each such series, shall be summarized in the certificates
therefor, and a Certificate containing the resolution of the Board establishing
and designating the series and prescribing the relative rights and preferences
thereof shall be filed with the Corporations and Securities Bureau, Michigan
Department of Commerce, and when filed shall constitute an amendment to the
Articles of Incorporation. All shares of preferred stock shall be of
<PAGE> 6
Maxco, Inc. Article III Page 2
equal rank, and shall be identical in all respects except in respect of the
particulars that may be fixed by the Board of Directors as hereinabove in this
Article III provided.
I. Series Three Preferred Stock. Series Three Preferred Stock of Maxco,
Inc. shall be 15,200 shares with a face value of Sixty Dollars
($60.00) per shares.
A. Dividends. The Corporation shall pay a Dividend upon such
Series Three Preferred Stock as follows:
1. Such Dividend shall be equal to 10% per annum of the
face value of each share.
2. The Corporation shall be obligated to declare a
Dividend each and every quarter if it shall then be
legally entitled to do so.
3. If the Dividend set forth herein is not paid and if
such Dividend did not, under the circumstances, have
to be paid, then such Dividend shall be payable in
the next period when such Dividend legally can be
made.
4. Should the surplus of said Corporation prior to any
Dividend Day be insufficient to pay the Dividend on
the Series Three Preferred Shares, such Dividend
shall be payable from future surplus, but without
interest, and no Dividend shall at any time be paid
on the Common Shares until the full amount of 10% per
annum up to such time and for the then current fiscal
year upon all of the Preferred Shares issued shall
have been paid or set apart.
B. Voting. Holders of the Series Three Preferred Stock shall be
entitled to 20 votes for each share of Series Three Preferred
Stock held.
C. Conversion. The Series Three Preferred Stock is a non-
convertible series.
D. Call. The Series Three Preferred Stock is not callable for
two years from the date of issuance. The Series Three
Preferred Stock is callable beginning the 3rd year as follows:
YEAR PRICE
Three 105%
Four 104%
Five 103%
Six 102%
<PAGE> 7
Maxco, Inc.
Article III
Page 3
Seven 101%
Thereafter 100%
II. Series Four Preferred Stock. Series Four Preferred Stock of Maxco,
Inc. shall be 50,000 shares with a face value of $51.50 per share.
A. Dividends. The Corporation shall pay a Dividend upon such
Series Four Preferred Stock as follows:
1. Such Dividend shall be equal to 10% per annum of the
face value of each share.
2. The Corporation shall be obligated to declare a
Dividend each and every quarter if it shall then be
legally entitled to do so.
3. If the Dividend set forth herein is not paid and if
such Dividend did not, under the circumstances, have
to be paid, then such Dividend shall be payable in
the next period when such Dividend legally can be
made.
4. Should the surplus of said Corporation prior to any
Dividend Day be insufficient to pay the Dividend on
the Series Four Preferred Shares, such Dividend shall
be payable from future surplus, but without interest,
and no Dividend shall at any time be paid on the
Common Shares until the full amount of 10% per annum
up to such time and for the then current fiscal year
upon all of the Preferred Shares issued shall have
been paid or set apart.
B. Redemption. The Series Four preferred Shares are redeemable
at any time after the third anniversary of their issuance in
whole or in part, at the Company's option, at 100% of
principal amount plus a declining premium amount which shall
be equal to 5% until the fourth anniversary of issuance and
shall decline 1% annually thereafter to zero following the
eighth anniversary, and plus any accumulated and unpaid
Dividends to the date of redemption.
Notice of the election of the Corporation to redeem all or a
portion of the Series Four Preferred Stock shall be given by
the Corporation by mailing a copy of such notice, not less
than 30 nor more than 90 days prior to the date designated
therein as the date for such redemption, to the holders of
record of the Series Four Preferred Stock to be redeemed,
addressed to them at their respective address appearing on the
books of the Corporation.
<PAGE> 8
Maxco, Inc.
Article III
Page 4
C. Voting. The Series Four Preferred Shares are nonvoting;
provided however if accrued but unpaid dividends on the Series
Four Preferred Shares are in arrears for six consecutive
fiscal quarters of the Company, the holders shall have the
right to elect as a class, one member of the Board of
Directors of the Corporation. Also, the consent of the
holders of two-thirds of the Series Four Preferred Stock will
be required to create or authorize any series of stock ranking
prior in liquidation to the Series Four Preferred Stock, or to
change any of the express terms of the Series Four Preferred
Stock in a manner prejudicial to the holders thereof.
D. Liquidation. In any event of dissolution of the Corporation,
the holders of Series Four Preferred Stock shall be entitled
to receive the face value of their shares, together with
accumulated dividends thereon to the date of payment, before
holders of the Common Shares shall be entitled to receive
anything thereon. Thereafter, the Series Four Preferred Stock
shall not be entitled to share in the assets of the
Corporation.
III. Series Five Preferred Stock. Series Five Preferred Stock of Maxco,
Inc. shall be 34,000 shares with a face value of $120.00 per share.
A. Dividends. The Corporation shall pay a Dividend upon such
Series Five Preferred Stock as follows:
1. Such Dividend shall be equal to 10% per annum of the
face value of each share.
2. The Corporation shall be obligated to declare a
Dividend each and every quarter if it shall then be
legally entitled to do so.
3. If the Dividend set forth herein is not paid and if
such Dividend did not, under the circumstances, have
to be paid, then such Dividend shall be payable in
the next period when such Dividend legally can be
made.
4. Should the surplus of said Corporation prior to any
Dividend Day be insufficient to pay the Dividend on
the Series Five Preferred Shares, such Dividend shall
be payable from future surplus, but without interest,
and no Dividend shall at any time be paid on the
Common Shares until the full amount of 10% per annum
up to such time and for the then current fiscal year
upon all of the Preferred Shares issued shall have
been paid or set apart.
<PAGE> 9
Maxco, Inc.
Article III
Page 5
B. Redemption. The Series Five preferred Shares are redeemable
at any time after the third anniversary of their issuance in
whole or in part, at the Company's option, at 100% of
principal amount plus a declining premium amount which shall
be equal to 5% until the fourth anniversary of issuance and
shall decline 1% annually thereafter to zero following the
eighth anniversary, and plus any accumulated and unpaid
Dividends to the date of redemption.
Notice of the election of the Corporation to redeem all or a
portion of the Series Five Preferred Stock shall be given by
the Corporation by mailing a copy of such notice, not less
than 30 nor more than 90 days prior to the date designated
therein as the date for such redemption, to the holders of
record of the Series Five Preferred Stock to be redeemed,
addressed to them at their respective address appearing on the
books of the Corporation.
C. Voting. The Series Five Preferred Shares are nonvoting;
provided however if accrued but unpaid dividends on the Series
Five Preferred Shares are in arrears for six consecutive
fiscal quarters of the Company, the holders shall have the
right to elect as a class, one member of the Board of
Directors of the Corporation. Also, the consent of the
holders of two-thirds of the Series Five Preferred Stock will
be required to create or authorize any series of stock ranking
prior in liquidation to the Series Five Preferred Stock, or to
change any of the express terms of the Series Five Preferred
Stock in a manner prejudicial to the holders thereof.
D. Liquidation. In any event of dissolution of the Corporation,
the holders of Series Five Preferred Stock shall be entitled
to receive the face value of their shares, together with
accumulated dividends thereon to the date of payment, before
holders of the Common Shares shall be entitled to receive
anything thereon. Thereafter, the Series Five Preferred Stock
shall not be entitled to share in the assets of the
Corporation.
<PAGE> 1
EXHIBIT 10.13
Execution Copy
LOAN AGREEMENT
BETWEEN
MICHIGAN STRATEGIC FUND
AND
ATMOSPHERE ANNEALING, INC.
$2,510,000
MICHIGAN STRATEGIC FUND
VARIABLE RATE DEMAND LIMITED OBLIGATION
REVENUE BONDS, SERIES 1997
(ATMOSPHERE ANNEALING, INC. PROJECT)
DATED AS OF DECEMBER 1, 1997
The interest of the Michigan Strategic Fund, the Issuer, subject to
certain specified exclusions in this Loan Agreement has been assigned to
First of America Bank, N.A., as Trustee under a Trust Indenture dated as of
December 1, 1997.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . Page 2
Section 1.2. Rules of Interpretation. . . . . . . . . . . . . . . . . . Page 4
Section 1.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . Page 4
Section 1.4. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . Page 4
ARTICLE II REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . Page 5
Section 2.1. Representations of the Issuer. . . . . . . . . . . . . . . Page 5
Section 2.2. Representations of the Obligor. . . . . . . . . . . . . . . Page 5
ARTICLE III CONSTRUCTION AND EQUIPPING OF THE PROJECT;
ISSUANCE OF THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11
Section 3.1. Construction and Equipping of the Project. . . . . . . . Page 11
Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds. . Page 12
Section 3.3. Approvals and Permits. . . . . . . . . . . . . . . . . . Page 12
Section 3.4. Title. . . . . . . . . . . . . . . . . . . . . . . . . . Page 12
Section 3.5. Investment of Moneys in the Construction Fund and the
Bond Fund. . . . . . . . . . . . . . . . . . . . . . . . Page 12
Section 3.6. Additional Bonds. . . . . . . . . . . . . . . . . . . . . Page 13
Section 3.7. Issuer Makes No Warranties Regarding the Project. . . . . Page 13
ARTICLE IV REPAYMENT PROVISIONS . . . . . . . . . . . . . . . . . . . . . . Page 13
Section 4.1. The Loan. . . . . . . . . . . . . . . . . . . . . . . . . Page 13
Section 4.2. Repayment of the Loan and Payment of Other Amounts Payable. Page 13
Section 4.3. No Defense or Setoff--Unconditional Obligation. . . . . . Page 15
Section 4.4. Assignment and Pledge of Issuer's Rights. . . . . . . . . Page 15
Section 4.5. Obligor's Performance Under Indenture. . . . . . . . . . Page 16
Section 4.6. Mandatory Purchase of the Bonds by the Obligor. . . . . . Page 16
ARTICLE V SPECIAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . Page 16
Section 5.1. Issuer's, Trustee's, and Bank's Right of Access to the
Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 16
Section 5.2. Obligor to Maintain Existence; Conditions Under Which
Exceptions Permitted. . . . . . . . . . . . . . . . . . Page 16
Section 5.3. Indemnification Covenants. . . . . . . . . . . . . . . . Page 16
Section 5.4. Insurance. . . . . . . . . . . . . . . . . . . . . . . . Page 19
Section 5.5. Eminent Domain. . . . . . . . . . . . . . . . . . . . . . Page 19
Section 5.6. Application of Net Proceeds of Insurance and Eminent
Domain. . . . . . . . . . . . . . . . . . . . . . . . . . Page 19
Section 5.7. Maintenance and Repair. . . . . . . . . . . . . . . . . . Page 19
Section 5.8. Qualification in State. . . . . . . . . . . . . . . . . . Page 20
Section 5.9. Letter of Credit. . . . . . . . . . . . . . . . . . . . . Page 20
Section 5.10. Issuer's Limited Liability. . . . . . . . . . . . . . . Page 20
Section 5.11. Compliance with Laws. . . . . . . . . . . . . . . . . . Page 20
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . Page 21
Section 6.1. Events of Default. . . . . . . . . . . . . . . . . . . . Page 21
Section 6.2. Remedies on Default. . . . . . . . . . . . . . . . . . . Page 22
Section 6.3. Agreement to Pay Attorneys' Fees and Expenses. . . . . . Page 23
Section 6.4. No Remedy Exclusive. . . . . . . . . . . . . . . . . . . Page 23
Section 6.5. No Additional Waiver Implied by One Waiver. . . . . . . . Page 23
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII PREPAYMENT OF LOAN PAYMENTS . . . . . . . . . . . . . . . . . . Page 24
Section 7.1. Obligation to Prepay the Loan Payments Upon Determination
of Taxability. . .. . . . . . . . . . . . . . . . . . . . Page 24
Section 7.2. General Option to Prepay the Loan Payments. . . . . . . . Page 24
Section 7.3. Extraordinary Optional Prepayment. . . . . . . . . . . . Page 24
Section 7.4. Prepayment from Construction Fund. . . . . . . . . . . . Page 25
Section 7.5. Obligation to Prepay Loan Payments on Failure to Renew
or Replace Letter of Credit. . . . . . . . . . . . . . . Page 25
Section 7.6. Notice of Prepayment. . . . . . . . . . . . . . . . . . . Page 25
ARTICLE VIII RECORDING AND FINANCING STATEMENTS . . . . . . . . . . . . . . Page 25
Section 8.1. Recording and Financing Statements. . . . . . . . . . . . Page 25
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . Page 26
Section 9.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . Page 26
Section 9.2. Assignments. . . . . . . . . . . . . . . . . . . . . . . Page 27
Section 9.3. Severability. . . . . . . . . . . . . . . . . . . . . . . Page 27
Section 9.4. Execution of Counterparts. . . . . . . . . . . . . . . . Page 27
Section 9.5. Amounts Remaining in Any Fund or With Trustee. . . . . . Page 27
Section 9.6. Amendments, Changes, and Modifications. . . . . . . . . . Page 28
Section 9.7. Governing Law. . . . . . . . . . . . . . . . . . . . . . Page 28
Section 9.8. Authorized Obligor Representative. . . . . . . . . . . . Page 28
Section 9.9. Term of Loan Agreement. . . . . . . . . . . . . . . . . . Page 28
Section 9.10. Binding Effect. . . . . . . . . . . . . . . . . . . . . Page 29
Section 9.11. References to Bank and Letter of Credit. . . . . . . . . Page 29
Section 9.12. Issuer Not Liable. . . . . . . . . . . . . . . . . . . . Page 29
Section 9.13. Continuing Disclosure. . . . . . . . . . . . . . . . . . Page 29
Section 9.14. Redemption of Bonds . . . . . . . . . . . . . . . . . . Page 29
EXHIBIT A Description of Project . . . . . . . . . . . . . . . . . . . . . Page A-1
EXHIBIT B Project Site . . . . . . . . . . . . . . . . . . . . . . . . . . Page B-1
EXHIBIT C Requisition Certificate . . . . . . . . . . . . . . . . . . . . . Page C-1
EXHIBIT D Completion Certificate . . . . . . . . . . . . . . . . . . . . . Page D-1
</TABLE>
<PAGE> 4
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Loan Agreement") dated as of December 1, 1997,
by and between the MICHIGAN STRATEGIC FUND, a public body corporate and
politic of the State of Michigan established and created pursuant to Act 270
of the Public Acts of Michigan of 1984, as amended (the "Issuer"), and
ATMOSPHERE ANNEALING, INC. (the "Obligor");
RECITALS:
A. The Issuer is authorized and empowered by the Act to make loans to
pay the costs of a project, all as described in the Act, for purposes of
assisting business enterprises in obtaining additional sources of financing
and to aid the State of Michigan (the "State") in achieving the goal of
long-term economic growth and full employment and otherwise achieving the
objectives of the Act; and
B. The Issuer is authorized by the Act to issue revenue bonds to
finance all or part of the cost of a project, which bonds are to be payable
solely as provided in this Loan Agreement and in a Trust Indenture between
the Issuer and First of America Bank, N.A., as trustee (in such
capacity, the "Trustee"), dated as of December 1, 1997 (the "Indenture");
and
C. The Obligor desires to acquire and install equipment in
manufacturing facilities of the Obligor located in the City of Lansing,
Ingham County, Michigan (as further described in Exhibit A, the
"Project"). The Obligor will own the Project and will use the buildings and
real property together with the new machinery and equipment for
manufacturing operations providing heat treating services, phosphate and
zinc coating and shearing/sawing operations of bar steel to the forging
and cast iron (primarily automotive) industries. The Issuer will issue and
sell its Bonds (as defined below) and loan the money to the Obligor
for the financing of the Project and other expenses incidental thereto
pursuant to and in compliance with the Act, provided, however, that the
Project Costs and the cost of all acts and requirements incident thereto
shall be paid solely from the proceeds of the sale of the Bonds or from moneys
provided by the Obligor; and
D. The Issuer has authorized the issuance of, and agrees with the
Obligor to issue, its Variable Rate Demand Limited Obligation Revenue
Bonds, Series 1997 (Atmosphere Annealing, Inc. Project) in the principal
amount of $2,510,000 (the "Bonds"); and
E. The proceeds from the sale of the Bonds will be used for the
purpose of defraying the costs of the Project; and
F. Under the terms of this Loan Agreement, the Obligor will make
Loan Payments, and will be responsible for paying all costs of issuance of
the Bonds and the Issuer's obligation with respect to the Bonds is subject to
the limitations that principal of and interest on the Bonds and any other
costs or pecuniary liability relating to the Bonds, the Loan or any
proceeding, document, or certification incidental to the foregoing, shall
never constitute nor give rise to a charge against the credit or taxing
powers of the State or any agency thereof or general funds or assets of
the Issuer (including funds pertaining to other loans or activities of
the Issuer), but shall be a limited obligation of the Issuer payable only as
provided in this Loan Agreement and the Indenture.
<PAGE> 5
NOW, THEREFORE, in consideration of the respective
representations and agreements herein contained, the parties hereto agree as
follows (provided, that in the performance of the agreements of the Issuer
herein contained, any obligation it may thereby incur shall not constitute an
indebtedness, debt or liability or loan of credit of the Issuer, the State or
any other political subdivision thereof, or a charge against their general
credit or taxing powers within the meaning of any constitutional or
statutory limitation, but shall be payable solely out of the proceeds
derived from this Loan Agreement or the Project, the sale of the Bonds, the
income from the temporary investment thereof and moneys derived from drawings
under the Letter of Credit, all as herein provided):
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. All words and phrases defined in Article XV
of the Indenture shall have the same meanings in this Loan Agreement. In
addition, the following words and phrases shall have the following meanings
unless the context in which they are used shall indicate another or different
meaning:
"Act" means the Michigan Strategic Fund Act, being Act 270 of the
Public Acts of Michigan of 1984, as amended.
"Authorized Obligor Representative" means the person at the time
designated to act on behalf of the Obligor by written certificate furnished
to the Issuer and the Trustee. That certificate may designate an alternate
or alternates. In the event that all persons so designated become
unavailable or unable to act and the Obligor fails to designate a
replacement within ten days after such unavailability or inability to
act, the Trustee may appoint an interim Authorized Obligor
Representative until such time as the Obligor designates that person.
"Bond Purchase Agreement" means, collectively, the Bond Purchase
Agreement by and between the Issuer and Underwriter and approved by the
Obligor and the Letter of Representation from the Obligor to the Issuer and the
Underwriter.
"Bond Resolution" means the resolution authorizing the issuance of the
Bonds adopted by the Issuer on December 10, 1997.
"Cost" or "Project Cost" means the cost of constructing,
acquiring and installing the Project. Cost or Project Cost
includes any engineering, architectural, legal, accounting, financial, and
other expenses incident to the construction, acquiring and installing of the
Project.
"Eminent Domain" means the taking of title to, or the temporary use
of, the Project or any part thereof pursuant to eminent domain or
condemnation proceedings, or any settlement or compromise of such proceedings
or any voluntary conveyance of the Project or any part thereof during the
pendency of, or as a result of or because of a threat of, such proceedings.
LOAN AGREEMENT
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"Event of Default" means any occurrence or event specified as such
in and defined as such by Section 6.1 hereof.
"Indemnified Persons" has the meaning set forth in Section 5.3(a)
hereof and "Indemnified Parties" has the meaning set forth in Section 5.3(d)
hereof.
"Investment Obligations" means any of the following: (i) obligations
of the United States, its agencies, or United States government sponsored
enterprises; (ii) obligations, the principal and interest of which are
guaranteed by the United States or its agencies; (iii) obligations of a
state, a territory, or a possession of the United States, or any political
subdivision of any of the foregoing or the District of Columbia as
described in Section 103(a) of the Code, as amended (these obligations
must be rated in the highest three major grades as determined by at least
one national rating service or be secured, as to payments of principal and
interest, by a letter of credit provided by a financial institution or
insurance provided by a bond insurance company which itself or its debt
is rated in the highest three major grades as determined by at least one
national rating service); (iv) banker's acceptances, commercial accounts,
certificates of deposit, or depository receipts issued by a bank, trust
company, savings and loan association, savings bank, a credit union or other
financial institution whose deposits are, as appropriate, insured by the
Federal Deposit Insurance Corporation or the National Credit Union
Administration or any successor entities; (v) commercial paper rated at the
time of purchase within the two highest classifications established by at
least one national rating service, and which matures within 270 days after
the date of issue; (vi) repurchase agreements against obligations itemized
in (i) and (ii) above, and executed by a bank or trust company or by
members of the association of primary dealers or other recognized dealers in
United States government securities, the market value of which must be
maintained at levels at least equal to the amounts advanced and which
obligations must be held in the custody of the Trustee or the Trustee's
agent; (vii) any fund or other pooling arrangement which exclusively
purchases and holds the investments itemized in paragraphs (i) through (vi)
above; (viii) an investment agreement or guaranteed investment contract
with a provider whose unsecured long-term debt is rated within the
two highest rating classifications established by at least one national
rating service or an investment agreement or guaranteed investment contract
which is guaranteed by an entity meeting the provider requirements described
in this paragraph (viii); and (ix) Eurodollar time deposits in a bank or
branch in the United States owned by a bank domiciled outside the United
States (this type of investment must be in a bank with total assets of at
least US $45,000,000,000 and with a long-term debt rating of at least "A3"
(or its equivalent) by at least one national rating service).
"Issuance Costs" mean a one-time issuance fee of the Issuer equal to
$6,275 and items of expense payable or reimbursable directly or indirectly
by the Issuer and related to the authorization, sale and issuance of the
Bonds, which items of expense shall include, but not be limited to Issuer
application fees, printing costs, costs of reproducing documents, filing and
recording fees, initial fees and charges of the Trustee, the Tender Agent
and any paying agents, bond discounts, legal fees and charges, professional
consultants' fees, costs of credit ratings, fees and charges for execution,
transportation and safekeeping of the Bonds, and other costs, charges and fees
in connection with the foregoing.
"Loan" means the loan made pursuant to Section 4.1 of this Loan Agreement.
LOAN AGREEMENT
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"Loan Payments" means the amounts required to be paid by the Obligor
pursuant to Section 4.2(a) hereof.
"Municipality" means the City of Lansing, Ingham County, Michigan.
"Person" or "persons" means natural persons, partnerships, limited
liability companies, firms, associations, corporations and public bodies.
"Project" means the Project described on Exhibit A to this Loan
Agreement located on the real property described in Exhibit B to this Loan
Agreement.
"Underwriter" means First of America Securities, Inc.
SECTION 1.2. RULES OF INTERPRETATION. For all purposes of this Loan
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Loan Agreement as a whole
and not to any particular article, section or other subdivision.
(b) The terms defined in this Article I have the meanings
assigned to them in this Article I and include the plural as well as the
singular, and the gender used shall include the other gender.
(c) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles.
(d) Any terms not defined herein, but defined in the Act shall
have the same meaning herein, unless the context otherwise requires.
SECTION 1.3. HEADINGS. The headings of the various articles and sections
herein are for convenience only and shall not define or limit the provisions
hereof.
SECTION 1.4. EXHIBITS. The following Exhibits are attached to and by
reference made a part of this Loan Agreement:
Exhibit A: Description of Project.
Exhibit B: Project Site.
Exhibit C: Form of Requisition Certificate.
Exhibit D: Form of Completion Certificate.
LOAN AGREEMENT
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ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE ISSUER. The Issuer makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Issuer is a public body corporate and politic
established and acting pursuant to the Act with full authority under the
Act to issue the Bonds and execute and enter into this Loan Agreement and
the Indenture.
(b) All of the proceedings approving this Loan Agreement
and the Indenture were conducted by the Issuer at meetings which
complied with the Open Meetings Act, Act 267 of the Public Acts of
Michigan of 1976, as amended.
(c) No member of the Issuer is directly or indirectly a party to
or in any manner whatsoever interested in this Loan Agreement, the
Bond Purchase Agreement, the Bonds or the proceedings related thereunder.
(d) Neither the execution and delivery of this Loan
Agreement, the consummation of the transactions contemplated hereby, nor
the fulfillment of or compliance with the terms and conditions of this
Loan Agreement conflicts with or results in a breach of the terms,
conditions or provisions of any restriction, agreement or instrument
to which the Issuer is a party, or by which it or any of its property
is bound, or constitutes a default under any of the foregoing.
SECTION 2.2. REPRESENTATIONS OF THE OBLIGOR. The Obligor makes the
following representations as the basis for the undertakings on its part herein
contained:
(a) The Obligor is a corporation duly organized under the laws
of the State, and is qualified to conduct its business in the State, has
the requisite power and authority to conduct its business, to own its
properties and to execute and deliver, and to perform all of its
obligations under this Loan Agreement, the Bond Purchase Agreement,
the Remarketing Agreement and the Reimbursement Agreement and by
proper action this Loan Agreement, the Bond Purchase Agreement, the
Remarketing Agreement and the Reimbursement Agreement have been duly
authorized, executed and delivered by, and, assuming due
authorization by the other parties thereto, are valid and binding
obligations of, the Obligor.
(b) Neither the authorization, execution or delivery of this
Loan Agreement, the Bond Purchase Agreement, the Remarketing
Agreement and the Reimbursement Agreement, the consummation of the
transactions contemplated by this Loan Agreement, the Bond Purchase
Agreement, the Indenture, the Remarketing Agreement and the
Reimbursement Agreement nor the fulfillment of or compliance with the
terms and conditions of this Loan Agreement, the Bond Purchase
Agreement, the Remarketing Agreement and the Reimbursement Agreement
will require any consent or approval of the directors or shareholders
of the Obligor which has not been obtained, result in a
LOAN AGREEMENT
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breach of or constitute a default under any of the terms, conditions
or provisions of any agreement or instrument to which the Obligor is
now a party or by which it is bound, or constitute a default under any
of the foregoing, or result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any of the property
or assets of the Obligor prohibited under the terms of any instrument or
agreement, or violate any provision of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently
in effect having applicability to the Obligor, or of the articles
of incorporation or bylaws of the Obligor.
(c) The Obligor is not in default (i) under any order, writ,
judgment, injunction, decree, determination or award or any indenture,
agreement, lease or instrument or (ii) under any law, rule or
regulation wherein such default could materially adversely affect the
Obligor or the ability of the Obligor to perform its obligations under
this Loan Agreement.
(d) The Project conforms with all applicable zoning, planning,
building, environmental and other regulations of the governmental
authorities having jurisdiction of the Project and all licenses and
approvals the Obligor requires to operate its facilities have been
obtained from appropriate state and federal agencies and departments
or, if not obtained on the date of this Loan Agreement, are
expected to be obtained in the normal course of business at or prior to
the time such authorizations, consents or approvals are required to be
obtained.
(e) The Project constitutes a "project" within the meaning of
the Act which the Obligor intends to operate as a project throughout
the term of this Loan Agreement as provided herein.
(f) To the best of the knowledge of the Obligor, no
authorizations, consents or approvals of governmental bodies or
agencies are required in connection with the execution and delivery
by the Obligor of this Loan Agreement, the Bond Purchase
Agreement, the Remarketing Agreement or the Reimbursement Agreement
or in connection with the carrying out by the Obligor of its obligations
under this Loan Agreement, the Bond Purchase Agreement, the Remarketing
Agreement or the Reimbursement Agreement which have not been
obtained or, if not obtained on the date of this Loan Agreement, are
expected to be obtained in the normal course of business at or prior to
the time such authorizations, consents or approvals are required to be
obtained.
(g) There are no actions or proceedings pending or threatened
before any court or administrative agency which will, in the reasonable
judgment of the Obligor, materially adversely affect the ability of
the Obligor to meet its obligations under this Loan Agreement, the
Bond Purchase Agreement, the Remarketing Agreement or the Reimbursement
Agreement.
(h) No member, director or officer of the Issuer has any interest
of any kind in the Obligor which would result, as a result of the
issuance of the Bonds, in a
LOAN AGREEMENT
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substantial financial benefit to such persons other than as a member
of the general public of the State.
(i) No portion of the proceeds of the Bonds will be used to
provide any airplane, health club facilities, skybox or other private
luxury box, facility primarily used for gambling, or store the
principal business of which is the sale of alcoholic beverages for
consumption off premises.
(j) The Obligor has heretofore supplied the Issuer estimates
of the Project Costs, the completion date and periods of usefulness of
the Project. Such estimates were made in good faith and are fair,
reasonable and realistic.
(k) Its requisitions from the Construction Fund will be such that
all of the property which is to be provided by the net proceeds of the
Bonds will be owned by the Obligor.
(l) No more than 2% of the proceeds of the Bonds will be used to
finance Issuance Costs of the Bonds.
(m) The average maturity of the Bonds does not exceed 120% of the
average reasonably expected economic life of the facilities being
financed by the Bonds, as determined pursuant to Section 147(b) of the
Code.
(n) The payment of principal of or interest on the Bonds
is not guaranteed in whole or in part by the United States or
any agency or instrumentality thereof. The Bonds are not issued as
part of an issue a significant portion of the proceeds of which are to
be used in making loans the payment of principal or interest with
respect to which are to be guaranteed in whole or in part by the United
States or any agency or instrumentality thereof, or invested directly or
indirectly in federally insured deposits or accounts. The payment of
principal of or interest on the Bonds is not otherwise indirectly
guaranteed in whole or in part by the United States or any agency or
instrumentality thereof within the meaning of Section 149(b) of the Code.
(o) The Obligor will comply with the provisions of Section 148
of the Code.
(p) The Obligor will not make any payments, or agreements to pay,
to any party other than the United States an amount that is required to
be paid to the United States under the rebate requirements under Section
148(f) of the Code by entering into any transaction that reduces the
amount required to be paid to the United State because such
transaction results in a smaller profit or a larger loss than would
have resulted if the transaction had been at arm's length and had
the yield on the Bonds not been relevant to either party. The Obligor
will not acquire with the proceeds of the Bonds any certificate of
deposit, investment contract, or any other type of investment at other
than its "fair market value" as defined by the Code.
(q) No event has occurred and no condition is existing with
respect to the Obligor that would constitute an Event of Default under
this Loan Agreement or that,
LOAN AGREEMENT
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with the lapse of time or the giving of notice or both, would become
an Event of Default under this Loan Agreement, the Bond Purchase
Agreement or the Reimbursement Agreement.
(r) No changes will be made in the Project and no actions will be
taken by the Obligor that shall in any way impair the exclusion from
gross income of interest on the Bonds for federal tax purposes.
(s) The information furnished by the Obligor and used by the
Issuer in preparing its Non-Arbitrage Certificate pursuant to the
Code and the information statement pursuant to Section 149(e) of the
Code (Form 8038), is accurate and complete as of the date of the issuance
of the Bonds.
(t) After the expiration of any applicable temporary period under
Section 148(d)(3) of the Code, at no time during any bond year will
the aggregate amount of gross proceeds of the Bonds invested in nonpurpose
investments with a yield materially higher than the yield on the Bonds
exceed 150% of the debt service on the Bonds for such bond year and
the aggregate amount of gross proceeds of the Bonds invested in
nonpurpose investments with a yield materially higher than the yield
on the Bonds, if any, will be promptly and appropriately reduced as
the amount of principal of the Bonds Outstanding is reduced, provided,
however, that the foregoing shall not require the sale or disposition
of any nonpurpose investment if such sale or disposition would result
in a loss which exceeds the amount which would be paid to the United
States (but for such sale or disposition) at the time of such
sale or disposition if a payment were due at such time.
(u) The Obligor covenants to comply with the Tax Compliance
Certificate. To the extent that the covenants in the Tax Compliance
Certificate differ from those contained in this Loan Agreement, the
covenants contained in the Tax Compliance Certificate shall control.
(v) All of the proceeds of the Bonds will be expended on the
Project and Issuance Costs or used for the redemption of Bonds pursuant to
the Indenture.
(w) The Obligor shall complete the Project as required by the
Act as promptly as practicable, and shall cause to be paid all costs of
the Project in excess of the moneys available therefor in the Construction
Fund.
(x) The Obligor expects to complete the Project within three years
after the date of issuance of the Bonds.
(y) The issue of Bonds is the only issue of obligations issued
with respect to the Project pursuant to the provisions of Section
144(a)(9) of the Code.
(z) The Project is reasonably expected to create approximately
23 new jobs in the Municipality.
LOAN AGREEMENT
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(aa) All reimbursements to Obligor for Project Costs from proceeds
of the Bonds shall be made in compliance with Treasury Regulations
Section 1.150-2 (the "Reimbursement Regulations").
(bb) At no time will any funds constituting gross proceeds of the
Bonds be used in a manner as would constitute failure of compliance with
Section 148 of the Code.
(cc) In the event that there are any "rebatable arbitrage earnings"
on the investment of the "gross proceeds" of the Bonds, if any, for
purposes of Section 148 of the Code, the Obligor will take such action to
compute, at such intervals as may be required to pay timely, such
"rebatable arbitrage earnings" to the United States in satisfaction of
the requirements of Section 148 of the Code.
(dd) The Obligor will not sell or cause to be sold any other
obligations issued by or on behalf of any state, territory or
possession of the United States, or political subdivision of the
preceding, or the District of Columbia on behalf of or for the benefit
of the Obligor or any related person to the Obligor which are private
activity bonds (within the meaning of Section 103(b) of the Code) within
15 days of the date of sale of the Bonds pursuant to a common plan
of financing with the Bonds and which will be paid from the same source
of funds as the Bonds without (a) delivering a certificate to Bond
Counsel and the Attorney General of the State to the effect that
such obligations, when aggregated with the Bonds, will not cause the
Bonds or the aggregate issue to fail to meet the requirements of the
Code, thereby impairing the tax-exempt status of the interest on the
Bonds, (b) representing that the Obligor will take all actions within
its control to insure that the tax-exempt status of the interest on such
obligations, and the obligations as a whole, is maintained, and (c)
obtaining an opinion of nationally recognized bond counsel, in a form
acceptable to Bond Counsel and the Attorney General of the State, that
the interest on such obligations is excluded from gross income for
federal income tax purposes, unless the foregoing requirements are
waived by Bond Counsel and by the Attorney General of the State. The
Obligor represents that there are no such obligations as described above
other than the Bonds.
(ee) The Obligor covenants, for the benefit of itself, the Issuer
and the owners from time to time of the Bonds, that it will not cause
or permit any proceeds of the Bonds to be invested in a manner contrary
to the provisions of Section 148 of the Code and that it will assume
compliance with such provisions on behalf of the Issuer (including,
without limitation, performing required calculations, the keeping of
proper records and the timely payment to the Department of the
Treasury of the United States, in the name of the Issuer, of all amounts
required to be so paid by Section 148 of the Code) and the Obligor shall
follow the procedures set forth in its Tax Compliance Certificate.
(ff) None of the proceeds of the Bonds will be used to provide a
facility the primary purpose of which is retail food and beverage
services, automobile sales or service, or the provision of recreation or
entertainment. No portion of the proceeds of the Bonds will be used to
provide any private or commercial golf course, country club, massage
parlor, tennis club, skating facility (including roller skating,
skateboard and ice
LOAN AGREEMENT
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skating), racquet sports facility (including any handball or
racquetball court), hot tub facility, suntan facility or racetrack.
(gg) All or a major portion of the proceeds of the Bonds will
be used directly or indirectly in the trade or business of the Obligor.
(hh) No portion of the proceeds of the Bonds will be used
for the acquisition of any property (or any interest therein) the
first use of which was not pursuant to such acquisition. No portion of
the proceeds of the Bonds will be used for the acquisition of land.
(ii) The inducement resolution adopted by the Issuer on May 21,
1997, and the actions undertaken by the Issuer as contemplated hereby
have induced the Obligor to develop the Project.
(jj) The Project was not "placed in service" within the
meaning of Regulation Section 1.150-2(d)(2)(ii) more than 18 months
prior to the date of issuance of the Bonds.
(kk) Not less than 95% of the net proceeds of the Bonds
(including investment proceeds) will be expended for the construction,
or improvement of land and the acquisition of machinery and equipment or
property of a character subject to the allowance for depreciation
within the meaning of Section 144(a)(1) of the Code paid or
incurred in compliance with the Reimbursement Regulations and not less
than 100% of the proceeds of the Bond were or will be used to pay costs
as permitted by the Act.
(ll) As of the date hereof, other than the Bonds, there are no
other issues of bonds as defined in Section 144(a)(2) of the Code, the
proceeds of which have been or will be used with respect to facilities
located within the Municipality, the principal user of which is the
Obligor or a "related person" as defined in Section 144(a)(3) of the Code.
(mm) Neither the Obligor nor any test period beneficiary have or will
have an aggregate allocable share (determined in accordance with the
provisions of Section 144(a)(10) of the Code) of outstanding tax
exempt industrial development bonds, including the Bonds, issued to
finance facilities owned or used by the Obligor or such related person
exceeding $40,000,000.
(nn) The Obligor shall not sell a portion of the Project or lease or
allow the sublease of a portion of the Project to any principal user
who, together with related persons to such principal user, would
cause the $40,000,000 limitation of Section 144(a)(10) of the Code to be
exceeded.
(oo) No nonexempt person or a related person (within the
meaning of Section 147(a) of the Code), who was a substantial user
(within the meaning of Section 147(a) of the Code) of the Project or
any part thereof will receive directly or indirectly proceeds of the
Bonds in an amount equal to 5% or more of the face amount of the Bonds
in payment for its interest in the Project or any part thereof.
LOAN AGREEMENT
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(pp) An amount equal to at least 15% of the Bond-financed portion
of the cost of acquiring a used building (and the equipment
therefor), if any, included in the Project shall be expended as
"rehabilitation expenditures" with respect to any such acquired building
(and the equipment therefor) for purposes of and within the meaning of
Section 147(d) of the Code.
(qq) None of the proceeds of the Bonds will be used directly or
indirectly to provide residential real property for family units.
(rr) None of the net proceeds of the Bonds, or any prior issue of
bonds described in Section 144(a)(11) of the Code, has been or will
be used to provide depreciable farm property.
(ss) The Obligor will not permit capital expenditures in the
Municipality by the Obligor and any principal user or related person,
as such terms are defined in the Code, cumulatively, to exceed
$10,000,000 during the period of six years beginning three years
prior to the issuance of the Bonds and extending three years
thereafter.
(tt) The Project constitutes a manufacturing facility within the
meaning of Section 144(a)(12)(C) of the Code.
(uu) None of the proceeds of the Bonds shall be applied to any
costs of the construction, acquisition or installation of the Project
which were paid or incurred (within the meaning of Section 103 of the
Code) more than 60 days prior to the inducement resolution adopted by
the Issuer with respect to the Project on May 21, 1997. No person that
is a substantial user of the Project or a related person (as those
terms are defined in the Code) after the acquisition date was also
a substantial user of the Project before March 22, 1997 (60 days prior
to the date of the inducement resolution).
(vv) The Project will not cause the transfer of employment of more
than 20 full-time persons from one municipality of the State to the
Municipality.
ARTICLE III
CONSTRUCTION AND EQUIPPING OF THE PROJECT;
ISSUANCE OF THE BONDS
SECTION 3.1. CONSTRUCTION AND EQUIPPING OF THE PROJECT.
(a) The Project will be implemented within the Municipality.
(b) The Obligor will implement the Project and the Issuer shall
have no responsibility or liability whatsoever with respect to the
Project and the construction, acquisition and installation thereof. It is
agreed and understood that the Obligor has entered into and executed and
will enter into and execute all agreements and contracts necessary to
assure and accomplish the actual construction, acquisition and
installation
LOAN AGREEMENT
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of the Project (and that the Issuer shall not execute any such
agreements or contracts) and that the Obligor will carry out, pay,
supervise, and enforce all such agreements and contracts, and will
provide for such insurance on and in connection with the
construction, acquisition and installation of the Project as it deems
necessary or advisable or as is required by law, and this Loan
Agreement. The Obligor shall pay, from proceeds from the sale and
delivery of the Bonds made available to it pursuant to this Loan
Agreement, and from any available income or earnings derived therefrom,
and from other funds of the Obligor to the extent necessary, the
entire Cost of the Project. The Obligor shall pay all taxes before they
become delinquent, including specifically all sales taxes and ad valorem
taxes, in connection with the Project and the construction,
acquisition and installation thereof. The Issuer shall loan to the
Obligor proceeds from the sale of the Bonds to be used by the Obligor to
finance the Cost of the Project, in accordance with procedures
established in the Indenture, including provisions for reimbursing the
Obligor for paying all or any part of such Cost under the aforesaid
agreements and contracts for the acquisition of the Project prior to
the issuance of the Bonds, including the Requisition Certificate and
Completion Certificate, the forms of which are attached hereto as
Exhibits C and D. It is specifically provided, however, that none of the
proceeds from the sale of the Bonds will be used to reimburse the
Obligor for, or to pay (and the Obligor hereby covenants and agrees
not to request reimbursement of or payment for) any part of the Cost
of the Project if such use or payment would result in a violation of
any of the Obligor's covenants contained in this Loan Agreement or in the
Tax Compliance Certificate.
SECTION 3.2. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. In
order to provide funds to finance the Project, as provided in Section 4.1
hereof, and at the request of the Obligor, the Issuer agrees that, pursuant
to the Indenture, it will issue, sell and cause to be delivered to the
purchaser or purchasers thereof, the Bonds bearing interest, maturing and
subject to prior redemption as set forth in the Indenture. The Issuer will
make available the proceeds of the Bonds to the Obligor by depositing the
proceeds of the Bonds in the Construction Fund pursuant to Section 4.03 of the
Indenture. Disbursements of money on deposit in the Construction Fund shall be
made in accordance with the conditions set forth in the Indenture.
SECTION 3.3. APPROVALS AND PERMITS. The Obligor has obtained all
permits necessary with respect to the construction, acquisition and
installation of the Project or, if not obtained on the date of this Loan
Agreement, are expected to be obtained in the normal course of business at or
prior to the time those permits are required.
SECTION 3.4. TITLE. Except as provided in this Loan Agreement, the Issuer
shall have no other right, title, or interest in and to the Project. Except
for making the proceeds of the Bonds available to the Obligor from the
source and in the manner provided in this Loan Agreement, the Issuer shall
not be responsible or liable in any manner for any claims, losses, damages,
penalties, costs, taxes, or fines with respect to the acquisition,
installation, construction, operation, maintenance or ownership of the
Project.
SECTION 3.5. INVESTMENT OF MONEYS IN THE CONSTRUCTION FUND AND THE BOND
FUND. Any moneys held in the Construction Fund and the Bond Fund shall be
invested or reinvested by the Trustee, at the written direction of the
Authorized Obligor Representative as provided in
LOAN AGREEMENT
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Article VI of the Indenture, to the extent permitted by law, in
Investment Obligations. Any such Investment Obligations may be purchased at
the offering or market price thereof at the time of such purchase. The
Trustee may make any and all such investments through its own investment
department.
The investments so purchased shall be held by the Trustee and shall be
deemed at all times a part of the Construction Fund or the Bond Fund, as the
case may be, and the interest accruing thereon and any profit realized
therefrom shall be credited to such Fund and any net losses resulting from
such investment shall be charged to such Fund and paid by the Obligor.
SECTION 3.6. ADDITIONAL BONDS. The Issuer covenants that it shall not
issue additional bonds on behalf of the Obligor without the prior written
consent of the Bank, and an opinion of Bond Counsel and the Attorney
General of the State to the effect that the issuance of such additional
bonds will not adversely affect the exclusion from gross income for federal
income tax purposes of interest on the Bonds Outstanding. The Obligor
understands that the Issuer is under no obligation to issue additional bonds.
SECTION 3.7. ISSUER MAKES NO WARRANTIES REGARDING THE PROJECT. The
Issuer has not made an inspection of the Project, and makes no warranty
or representation, express or implied or otherwise, with respect to the
Project or the location, use, description, design, merchantability, fitness
for use for any particular purpose, condition or durability thereof, or as to
the quality of the material or workmanship therein, it being agreed that the
Obligor is to bear all risks incident to the Project. The Issuer is to
have no responsibility or liability for any defect or deficiency in the
Project, whether patent or latent. The Issuer makes no warranty or
representation that the moneys contained in the Construction Fund will be
sufficient to pay all of the Project Costs attributable to the Project.
ARTICLE IV
REPAYMENT PROVISIONS
SECTION 4.1. THE LOAN. The Issuer covenants and agrees, upon the
terms and conditions of this Loan Agreement, to loan the proceeds received
from the sale of the Bonds to the Obligor in order to finance all or a
part of the Cost of the Project. Pursuant to this covenant and agreement,
the Issuer will issue the Bonds upon the terms and conditions contained in
the Indenture and this Loan Agreement, and will loan the proceeds of the
Bonds to the Obligor to be applied as provided in Article III hereof. These
proceeds shall be disbursed by the Trustee to or on behalf of the Obligor as
provided in Section 4.03 of the Indenture.
SECTION 4.2. REPAYMENT OF THE LOAN AND PAYMENT OF OTHER AMOUNTS PAYABLE.
(a) The Obligor covenants and agrees to make or cause to be made
Loan Payments to the Trustee, as assignee of the Issuer, equal to the
principal of, premium, if any, and interest on the Bonds for deposit by
the Trustee in the Bond Fund, which shall at all times be sufficient to
enable the Trustee to pay when due (whether at maturity or upon
redemption prior to maturity or acceleration) the principal of,
premium, if any,
LOAN AGREEMENT
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and interest on the Bonds. All Loan Payments shall be made or shall be
on deposit in immediately available funds not later than 12:00 p.m.,
Detroit, Michigan, time on the Business Day on which such payment on
the Bonds is to be made. The Excess Amount (as defined below) held by
the Trustee in the Bond Fund on an Interest Payment Date shall be
credited against the payment due on such date; and provided further,
that, subject to the provisions of the immediately following
sentence, if at any time the amount of Available Moneys held by the
Trustee in the Bond Fund should be sufficient (and remain sufficient)
to pay on the dates required the principal of, interest and premium,
if any, on the Bonds then remaining unpaid, the Obligor shall not be
obligated to make or cause to be made any further payments under the
provisions of this Section 4.2(a). Notwithstanding the provisions
of the preceding sentence, if on any date the Excess Amount held by the
Trustee in the Bond Fund is insufficient to make the then required
payments of principal (whether at maturity or upon redemption prior to
maturity or acceleration), interest and premium, if any, on the Bonds
on such date, the Obligor shall forthwith pay or cause to be paid such
deficiency. The term "Excess Amount" as of any Interest Payment Date
shall mean the amount of Available Moneys in the Bond Fund on such date
in excess of the amount required for the payment of the principal
of the Bonds which previously have matured at maturity or on a date
fixed for redemption and premium, if any, on such Bonds in all cases
where Bonds have not been presented for payment and paid, or for
the payment of interest which has previously come due in all cases
where interest checks have not been presented for payment and paid.
If the Obligor shall fail to pay or cause to be paid any Loan
Payments under this Section 4.2(a), the Loan Payment so in default shall
continue as an obligation of the Obligor until the amount so in default
shall have been fully paid.
(b) To the extent they are not paid out of the Construction
Fund, the Obligor shall pay to the Issuer the Issuer's fee at
closing and all other Issuance Costs and the following within ten days
of demand therefor, including but not limited to, (i) other
out-of-pocket costs and expenses of the Issuer incidental to the
performance of its obligations under this Loan Agreement, the Indenture
and the Bond Purchase Agreement, to the extent not paid as Project
Costs, and (ii) the out-of-pocket expenses of the Issuer related
to the Project, or incurred by the Issuer in enforcing the provisions
of this Loan Agreement and the Indenture.
(c) The Obligor also agrees to pay to the Trustee and the Tender
Agent (l) the initial acceptance fee of the Trustee and the Tender
Agent and the costs and expenses, including reasonable attorneys'
fees, incurred by the Trustee and the Tender Agent in entering into
and executing the Indenture and the Tender Agreement, and (2) during
the term of this Loan Agreement (i) an amount equal to the annual fee
of the Trustee and the Tender Agent for the services of the Trustee
and the Tender Agent rendered and its expenses incurred, under the
Indenture and the Tender Agreement, including reasonable attorneys'
fees, as and when the same become due, and (ii) the fees, charges and
expenses of the Trustee, the Tender Agent, and the Bond Registrar, as
and when the same become due.
LOAN AGREEMENT
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(d) The Trustee is authorized and directed to draw moneys
under the Letter of Credit in accordance with the provisions of the
Indenture to pay the principal of, premium, if any (to the extent
covered by the Letter of Credit), and interest on the Bonds if and
when due, and any moneys derived from a drawing under the Letter of
Credit shall constitute a credit against the obligation of the
Obligor to make payments under subsection (a) of this Section 4.2.
(e) If the date when any of the payments required to be made by
this Section 4.2 is not a Business Day, then such payments may be made
on the next Business Day with the same force and effect as if made on
the normal due date, and no interest shall accrue for the period after
such date through such next Business Day.
(f) The Obligor agrees to pay the Remarketing Agent all fees and
expenses (including reasonable attorneys' fees) due under the Remarketing
Agreement.
SECTION 4.3. NO DEFENSE OR SETOFF--UNCONDITIONAL OBLIGATION. The
obligations of the Obligor to make the payments required in Section 4.2
hereof and to perform and observe the other agreements on its part
contained herein shall be absolute and unconditional, irrespective of any
defense or any rights of setoff, recoupment or counterclaim it might
otherwise have against the Issuer, the Trustee or the Bank. During the
term of this Loan Agreement, the Obligor shall pay the payments to be made
in Section 4.2 hereof and all other payments required hereunder free of any
deductions and without abatement, diminution or setoff other than those
herein expressly provided. Until such time as the principal of, premium,
if any, and interest on the Bonds shall have been fully paid, or
provision for the payment thereof shall have been made in accordance with
the Indenture, the Obligor: (i) will not suspend or discontinue any payments
provided for in Section 4.2 hereof; (ii) will perform and observe all of
its agreements contained in this Loan Agreement; and (iii) will not terminate
this Loan Agreement for any cause, including, without limiting the
generality of the foregoing, its failure to complete the construction,
acquisition and installation of the Project, the occurrence of any
acts or circumstances that may constitute failure of consideration,
destruction of or damage to the Project, commercial frustration of purpose, any
change in the tax laws of the United States of America or the State or any
political subdivision thereof, or any failure of the Issuer, the Trustee or
the Bank to perform and observe any agreement, whether express or implied, or
any duty, liability or obligation arising out of or connected with this Loan
Agreement, except to the extent permitted by this Loan Agreement.
SECTION 4.4. ASSIGNMENT AND PLEDGE OF ISSUER'S RIGHTS. As security
for the payment of the Bonds (including redemption payments), the Issuer
will assign and pledge to the Trustee all right, title, and interest of the
Issuer in and to this Loan Agreement, including the right to receive
payments hereunder (except the right to receive payments, if any, under
Sections 4.2(b), 5.3, 6.3, and 9.12 hereof and the rights to make
determinations and receive notices as herein provided), and hereby directs
the Obligor to make said payments directly to the Trustee. The Obligor
herewith assents to such assignment and pledge and will make or cause to be
made payments directly to the Trustee without defense or setoff by reason
of any dispute between the Obligor and the Issuer, the Trustee or the Bank.
LOAN AGREEMENT
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SECTION 4.5. OBLIGOR'S PERFORMANCE UNDER INDENTURE. The Obligor agrees,
for the benefit of all Registered Owners, to do and perform all acts and
things required in the Indenture to be done or performed by it.
SECTION 4.6. MANDATORY PURCHASE OF THE BONDS BY THE OBLIGOR.
(a) The Obligor agrees to purchase on the dates on which Bonds are
to be purchased pursuant to the Demand Purchase Option, all of the Bonds
or portions thereof properly delivered to the Tender Agent for purchase
in accordance with the provisions of Section 1.04 of the Indenture, at a
price equal to 100% of the principal amount thereof, plus accrued
interest; provided, however, that if and to the extent all or a
portion of those Bonds are remarketed by the Remarketing Agent, the
Obligor shall be deemed to have satisfied its obligation to purchase the
Bonds so tendered for purchase.
(b) The Obligor shall satisfy the obligation set forth in
paragraph (a) of this Section 4.6 by providing to the Trustee a Letter
of Credit providing for the payment of the purchase price of Bonds.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. ISSUER'S, TRUSTEE'S, AND BANK'S RIGHT OF ACCESS TO THE
PROJECT. The Obligor agrees that during the term of this Loan Agreement
the Issuer, the Trustee, the Bank, and their duly authorized agents shall
have the right during regular business hours, with reasonable notice, to
enter upon and examine and inspect the Project, provided that neither the
Issuer, the Trustee, nor the Bank will materially disturb the business
operations of the Obligor and each shall hold in confidence all confidential
information, trade secrets, patents, and patentable information.
SECTION 5.2. OBLIGOR TO MAINTAIN EXISTENCE; CONDITIONS UNDER WHICH
EXCEPTIONS PERMITTED. Except as provided below, the Obligor agrees that during
the term of this Loan Agreement it will maintain its existence and will
not dispose of all or substantially all of its assets. The Obligor may
consolidate with or merge into another entity or permit one or more entities
to consolidate with or merge into it, provided that any surviving, resulting
or transferee entity shall be qualified to do business in the State and shall
assume in writing or by operation of law all of the obligations of the
Obligor, under this Loan Agreement, the Reimbursement Agreement and the
Remarketing Agreement.
SECTION 5.3. INDEMNIFICATION COVENANTS.
(a) The Issuer and its members, officers, agents, and employees
(the "Indemnified Persons") shall not be liable to the Obligor for any
reason. The Obligor shall indemnify and hold the Issuer and the
Indemnified Persons harmless from any loss, expense (including
reasonable counsel fees), or liability of any nature due to any and all
LOAN AGREEMENT
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suits, actions, legal or administrative proceedings, or claims arising
or resulting from, or in any way connected with:
(1) the acquisition, operation, use or maintenance of the
Project,
(2) any act, failure to act, or misrepresentation by any
person, firm, corporation, or governmental agency, including
the Issuer, in connection with the issuance, sale, delivery or
remarketing of the Bonds,
(3) any act, failure to act, or misrepresentation by the
Issuer in connection with this Loan Agreement, the Indenture,
the Bond Purchase Agreement, or any other document involving the
Issuer in this matter, or
(4) the selection and appointment of firms providing
services related to the Bond transaction.
If any suit, action, or proceeding is brought against the Issuer
or any Indemnified Person, that action or proceeding shall be defended
by counsel to the Issuer or the Obligor, as the Issuer shall determine.
If the defense is by counsel to the Issuer, which is the Attorney
General of the State or may, in some instances, be private, retained
counsel, the Obligor shall indemnify the Issuer and Indemnified
Persons for the reasonable cost of that defense including
reasonable counsel fees. If the Issuer determines that the Obligor
shall defend the Issuer or Indemnified Person, the Obligor shall
immediately assume the defense at its own cost. The Obligor shall not
be liable for any settlement of any proceeding made without its consent
(which consent shall not be unreasonably withheld).
(b) The Obligor shall not be obligated to indemnify the Issuer
or any Indemnified Person under subsection (a), if a court with
competent jurisdiction finds that the liability in question was caused
by the willful misconduct or sole gross negligence of the Issuer or the
involved Indemnified Person, unless the court determines that, despite
the adjudication of liability but in view of all circumstances of the
case, the Issuer or the Indemnified Person(s) is (are) fairly and
reasonably entitled to indemnity for the expenses which the court
considers proper.
(c) The Obligor shall also indemnify the Issuer for all
costs and expenses, including reasonable counsel fees, incurred in:
(1) enforcing any obligation of the Obligor under this
Loan Agreement or any related agreement,
(2) taking any action requested by the Obligor,
(3) taking any action required by this Loan
Agreement, the Indenture, the Bond Purchase Agreement or any related
agreement, or
LOAN AGREEMENT
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(4) taking any action considered necessary by the Issuer and
which is authorized by this Loan Agreement, the Indenture, the
Bond Purchase Agreement, or any related agreement.
(d) The Obligor also agrees to pay and to indemnify and hold
harmless the Trustee, any person who "controls" the Trustee within the
meaning of Section 15 of the Securities Act of 1933, as amended, and a
any member, officer, agent, director, official and employee of the Trustee
(collectively called the "Indemnified Parties") from and against, any
and all claims, damages, demands, expenses, liabilities and losses of
every kind, character and nature asserted by or on behalf of any person
in connection with (i) the issuance, offering, sale, or delivery of the
Bonds, the Indenture and this Loan Agreement and the obligations
imposed on the Trustee hereby and thereby; or the design,
installation, operation, use, occupancy, maintenance, or ownership of
the Project; (ii) any written statements or representations made or
given by the Obligor or any of its directors, members, partners or
employees to the Indemnified Parties, with respect to the Obligor, the
Project, or the Bonds, including, but not limited to, statements or
representations of facts, financial information, or its general
affairs; (iii) damage to property or any injury to or death of any person
that may be occasioned by any cause whatsoever pertaining to the Project;
and (iv) any loss or damage incurred by the Trustee as a result of
violation by the Obligor of the provisions of Section 2.2 hereof, or
arising out of, resulting from, or in any way connected with, the
condition, use, possession, conduct, management, planning, design,
acquisition, installation, renovation or sale of the Project or any
part thereof to the extent not caused or occasioned by the gross
negligence or willful misconduct of such Indemnified Party. The
Obligor also covenants and agrees, at its expense, to pay, and to
indemnify and save the Indemnified Parties harmless of, from and against,
all costs, reasonable attorney fees, expenses and liabilities incurred in
any action or proceeding brought by reason of any such claim or demand.
In the event that any action or proceeding is brought against the
Indemnified Parties by reason of any such claim or demand, the
Indemnified Parties shall immediately notify the Obligor, which shall
resist and defend any action or proceeding on behalf of the
Indemnified Parties, including the employment of counsel, the payment of
all expenses and the right to negotiate and consent to settlement. Any
one or more of the Indemnified Parties shall have the right to employ
separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Parties unless the employment of such
counsel has been specifically authorized by the Obligor. If such
separate counsel is employed, the Obligor may join in any such suit for
the protection of its own interests. The Obligor shall not be liable for
any settlement of any such action effected without its consent (which
consent shall not be unreasonably withheld), but if settled with the
consent of the Obligor or if there be a final, unappealable judgment for
the plaintiff in any such action, the Obligor agrees to indemnify and
hold harmless the Indemnified Parties.
(e) The indemnification provisions herein contained shall
not be exclusive or in limitation of, but shall be in addition to,
the rights to indemnification of the Indemnified Persons or the
Indemnified Parties under any other agreement or law by which the Obligor
is bound or to which it is subject.
LOAN AGREEMENT
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(f) The obligations of the Obligor under this section shall
survive any assignment or termination of this Loan Agreement.
SECTION 5.4. INSURANCE. The Obligor represents and covenants that it will
keep, or cause to be kept, in force adequate insurance of a nature that
entities would maintain for like facilities and in accordance with the
requirements of the Reimbursement Agreement or any agreement securing the
Reimbursement Agreement. It is understood and agreed that the Issuer and
the Trustee shall have no duties or responsibilities whatsoever with
respect to the insurance of the Project, or the performance of the Project
for its designated purposes. The net proceeds received from any casualty or
property insurance shall be applied as provided in Section 5.6 hereof.
Except as required by the Reimbursement Agreement or any agreement
securing the Reimbursement Agreement, the Obligor shall have the sole right
and responsibility to adjust any losses with its insurers and to conduct
negotiations in connection therewith.
SECTION 5.5. EMINENT DOMAIN. In the event that title to, or the
temporary use of, the Project or any part thereof shall be taken by Eminent
Domain, the Obligor shall be obligated to continue to pay the Loan Payments
specified in Section 4.2(a) hereof, and the Issuer shall cause any net
proceeds received by it or the Trustee as a result of such eminent domain to
be applied as provided in Section 5.6 hereof.
SECTION 5.6. APPLICATION OF NET PROCEEDS OF INSURANCE AND EMINENT
DOMAIN. Subject to the provisions of the Mortgage and the Security
Agreement (both as defined in the Reimbursement Agreement), the net
proceeds of property insurance carried with respect to the Project pursuant
to the provisions hereof, the net proceeds resulting from Eminent Domain
and any other amounts receivable by the Obligor, the Trustee or the Issuer
pursuant to the provisions of Section 5.4 and/or Section 5.5 hereof shall
with the consent of the Bank (so long as the Letter of Credit is in effect
and has not been wrongfully dishonored) be applied together with such other
amounts as necessary provided by the Obligor for the repair, replacement,
renewal or improvement (the "Restoration") of the Project (such funds to
remain with the Bank and to be drawn down by the Obligor for Restoration of
the Project) and any proceeds not so used shall be used to redeem the
Bonds in accordance with the provisions of the Bonds and Section 7.3
hereof. Prior to their expenditure, such amounts shall be invested so as
not to have an adverse effect on the exclusion of the interest on the Bonds
from the gross income of the registered owners for federal income tax purposes.
The Obligor agrees that if the net proceeds from insurance or
resulting from Eminent Domain relating to the Project is applied to the
Restoration of the Project, it will restore the Project, or cause the
same to be done, to a condition substantially equivalent to its
condition prior to the occurrence of the event to which the net proceeds
were attributable. The Obligor shall be entitled to the net proceeds of any
insurance or resulting from Eminent Domain relating to property of the
Obligor not constituting part of the Project as provided herein.
SECTION 5.7. MAINTENANCE AND REPAIR. The Obligor agrees that it will
maintain the Project in good repair, working order and operating condition,
making from time to time all needed and proper repairs thereto.
LOAN AGREEMENT
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SECTION 5.8. QUALIFICATION IN STATE. Subject to the provisions of
Section 5.2 hereof, the Obligor agrees that throughout the term of this Loan
Agreement, it will be qualified to do business in the State.
SECTION 5.9. LETTER OF CREDIT.
(a) On or prior to the issuance, sale and delivery of the
Bonds, the Obligor hereby covenants and agrees to obtain and deliver
to the Trustee the Letter of Credit to be issued by the Bank in favor
of the Trustee for the benefit of the owners from time to time of the
Bonds in the form of Exhibit A to the Reimbursement Agreement. The Letter
of Credit shall be dated the date of issuance and delivery of the
Bonds; shall expire on December 15, 2002, and shall comply with the
additional requirements stated in Section 5.01 of the Indenture.
(b) At any time while the Letter of Credit or a Substitute
Letter of Credit is in effect, subject to the provisions of the
Reimbursement Agreement, the Obligor from time to time may, at its
option, deliver to the Trustee a Substitute Letter of Credit in
substitution for the existing Letter of Credit. The Substitute Letter
of Credit shall be an irrevocable direct-pay letter of credit in
substantially the same form, tenor and amount as the existing Letter of
Credit and shall comply with and be delivered in compliance with
the provisions of Section 5.02 of the Indenture.
SECTION 5.10. ISSUER'S LIMITED LIABILITY. It is recognized that the
Issuer's only source of funds with which to carry out its commitments with
respect to this Loan Agreement will be from the proceeds from the sale of
the Bonds; and it is expressly agreed that the Issuer shall have no
liability, obligation, or responsibility with respect to this Loan
Agreement except to the extent of funds available from such Bond proceeds.
If, for any reason, the proceeds from the sale of the Bonds are not
sufficient to pay the Cost of the Project, the Obligor shall pay the balance
of the funds necessary to pay the Cost of the Project from its own funds,
and it shall not be entitled to reimbursement therefor.
SECTION 5.11. COMPLIANCE WITH LAWS. The Obligor shall, throughout the
term of this Loan Agreement and at no expense to the Issuer or Trustee,
promptly comply with all laws, ordinances, orders, rules, regulations
and requirements of duly constituted public authorities which are
applicable to the Project or to the repair and alteration thereof, or to the
use or manner of use of the Project, provided, however, that such laws,
ordinances, orders, rules, regulations and requirements shall not
unlawfully discriminate against the Obligor. Notwithstanding the
foregoing, the Obligor shall have the right to contest the legality of any such
law, ordinance, order, rule, regulation or requirement as applied to the
Project provided that, in the opinion of legal counsel acceptable to the Bank,
such contest shall not in any way materially and adversely affect or impair
the obligations of the Obligor under this Loan Agreement or the Indenture.
LOAN AGREEMENT
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ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. The occurrence and continuation of any
one of the following shall constitute an Event of Default hereunder:
(a) failure by the Obligor to pay or cause to be paid any
amounts required to be paid as Loan Payments under this Loan Agreement on
the dates and in the manner specified herein; or
(b) failure by the Obligor to observe and perform any covenant,
condition or agreement on its part to be observed or performed in this
Loan Agreement, other than as referred to in subsection (a) above, for
a period of 30 days after written notice, specifying such failure
and requesting that it be remedied, is given to the Obligor by the
Issuer, the Trustee or the Bank, unless (i) the Trustee and the Bank
shall agree in writing to an extension of such time prior to its
expiration or (ii) if the failure is such that it can be corrected but not
within such 30-day period, corrective action is instituted by the Obligor
within such period and diligently pursued until such failure is
corrected; or
(c) the dissolution or liquidation of the Obligor or the filing
by the Obligor of a voluntary petition in bankruptcy, or failure
by the Obligor promptly to lift any execution, garnishment or
attachment of such consequence as will impair its ability to carry on
its obligations hereunder, or an order for relief under Title 11 of the
United States Bankruptcy Code, as amended from time to time, is entered
against the Obligor, or a petition or answer proposing the entry of an
order for relief against the Obligor under Title 11 of the United
States Bankruptcy Code, as amended from time to time, or its
reorganization, arrangement or debt readjustment under any present or
future federal bankruptcy act or any similar federal or state law shall
be filed in any court and such petition or answer shall not be
discharged within 90 days after the filing thereof, or the Obligor shall
fail generally to pay its debts as they become due, or a custodian
(including without limitation a receiver, trustee, assignee for the
benefit of creditors or liquidator of the Obligor) shall be appointed
for or take possession of all or a substantial part of its property and
shall not be discharged within 90 days after such appointment or taking
possession, or the Obligor shall consent to or acquiesce in such
appointment or taking possession, or assignment by the Obligor for the
benefit of its creditors, or the entry by the Obligor into an agreement
of composition with its creditors, or the adoption of a resolution by
the directors of the Obligor or the taking of any other action to
file a petition or answer proposing the entry of an order for relief
against the Obligor under Title 11 of the United States Bankruptcy
Code, as amended from time to time, or its reorganization, arrangement
or debt readjustment under any present or future federal bankruptcy
act or any similar federal or state laws; provided, that the term
"dissolution or liquidation of the Obligor," as used in this
subsection (c), shall not be construed to include the cessation of the
corporate existence of the Obligor resulting either from a merger or
consolidation of the Obligor into or with another entity or a
dissolution or liquidation of the Obligor following a transfer of all
or substantially all of its assets as
LOAN AGREEMENT
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an entirety, under the conditions permitting such actions contained
in Section 5.2 hereof; or
(d) any material warranty, representation or other statement made
by or on behalf of the Obligor contained herein, or in any document
or certificate furnished by the Obligor in compliance with or in reference
hereto, is false or misleading in any material respect when made; or
(e) The occurrence of an Event of Default under the Indenture.
SECTION 6.2. REMEDIES ON DEFAULT. Whenever any Event of Default shall
have occurred and be continuing hereunder, the Trustee may take any one or
more of the following remedial steps:
(a) The Issuer or the Trustee may exercise any right, power or
remedy permitted to it by law, and shall have in particular, without
limiting the generality of the foregoing, the right to declare the
unpaid Loan Payments to be immediately due and payable, if
concurrently with or prior to such declaration the unpaid principal
of and all unpaid accrued interest on the Bonds have been declared to
be due and payable under the Indenture, and upon such declaration the
unpaid Loan Payments shall thereupon become forthwith due and payable in
an amount sufficient to pay the principal of and interest on the Bonds
under Section 8.02 of the Indenture, without presentment, demand or
protest, all of which are hereby expressly waived. The Obligor shall
forthwith pay to the Trustee the entire principal of and interest accrued
on the Bonds.
Any declaration of acceleration on the Bonds may be waived,
rescinded and annulled pursuant to and in accordance with Section 8.11 of
the Indenture.
(b) The Issuer or the Trustee may take whatever action at law
or in equity as may appear necessary or desirable to collect the
payments and other amounts then due and thereafter to become due or to
enforce the performance and observance of any obligation, agreement or
covenant of the Obligor under this Loan Agreement, provided, however, all
such action shall be with the consent of the Bank (which consent shall
be required only so long as the Letter of Credit is in effect and has not
been wrongfully dishonored).
(c) The Issuer or the Trustee shall, subject to the limitations set
forth in Section 5.1 of this Loan Agreement, have reasonable access to
the Project and the right to inspect, examine and make copies of the
books and records and any and all accounts, data and income tax and other
tax returns of the Obligor relating to the Project or an Event of Default
during regular business hours of the Obligor if reasonably necessary
in the opinion of the Trustee or the Issuer.
In case the Issuer or the Trustee shall have proceeded to enforce its
rights under this Loan Agreement and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely to the Issuer or the Trustee as the case may be, then and in every
such case the Obligor, the Issuer and the Trustee shall be restored
respectively to
LOAN AGREEMENT
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their several positions and rights hereunder, and all rights, remedies and
powers of the Obligor, the Issuer and the Trustee shall continue as though no
such proceeding had been taken, except to the extent of any adverse
determination.
In case there shall be pending proceedings for the bankruptcy or
for the reorganization of the Obligor under the federal bankruptcy laws
or any other applicable law, or in case a receiver or trustee shall have
been appointed for the property of the Obligor, or in the case of any other
similar judicial proceedings relative to the Obligor, or to the creditors or
property of the Obligor, the Trustee shall be entitled and empowered, by
intervention in such proceedings or otherwise, to file and prove a claim or
claims for the whole amount owing and unpaid pursuant to this Loan Agreement
and, in case of any judicial proceedings, to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have
the claims of the Trustee allowed in such judicial proceedings relative to
the Obligor, its creditors or its property, and to collect and receive any
moneys or other property payable or deliverable on any such claims, and to
distribute the same after the deduction of its charges and expenses; and
any receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized to make such payments to the Trustee, and to pay to the Trustee
any amount due it for compensation and expenses, including reasonable
attorney fees incurred by it up to the date of such distribution.
SECTION 6.3. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. In the
event the Issuer or the Trustee should employ attorneys or incur other
expenses for the collection of the payments due under this Loan Agreement
or the enforcement of the performance or observance of any obligation or
agreement on the part of the Obligor herein contained, the Obligor agrees
that it will on demand therefor pay to the Issuer or the Trustee the
reasonable fees of such attorneys and such other expenses so incurred by the
Issuer or the Trustee.
SECTION 6.4. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Issuer or the Trustee is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Loan Agreement and the Indenture now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right or power
accruing upon any Event of Default hereunder shall impair any such right
or power or shall be construed to be a waiver thereof, but any such right and
power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Issuer to exercise any remedy reserved to
it in this Article VI, it shall not be necessary to give any notice, other
than such notice as may be herein expressly required. Such rights and
remedies as are given the Issuer hereunder shall also extend to the
Trustee, and the Trustee and the Owners from time to time of the Bonds shall
be deemed third party beneficiaries of all covenants and agreements herein
contained.
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the
event any agreement contained in this Loan Agreement should be breached by
the Obligor and thereafter waived by the Issuer or the Trustee, such waiver
shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach hereunder.
LOAN AGREEMENT
Page 23
<PAGE> 27
ARTICLE VII
PREPAYMENT OF LOAN PAYMENTS
SECTION 7.1. OBLIGATION TO PREPAY THE LOAN PAYMENTS UPON
DETERMINATION OF TAXABILITY. Upon the occurrence of a Determination of
Taxability the Obligor shall have, and hereby accepts, the obligation to
prepay the Loan Payments as a whole, and not in part, in furtherance of its
obligation under Section 4.2(a) hereof, on any date not less than 30 days
or more than 60 days after the mailing by first class mail of written notice
of redemption because of the occurrence of a Determination of Taxability to
the registered owners of the Bonds pursuant to the terms of the Bonds. The
amount to be prepaid pursuant to this Section 7.1 shall be 100% of the
then outstanding principal amount of the Bonds (103% during the Fixed Rate
Period) plus accrued interest to the date fixed for redemption. The Trustee
shall, in accordance with Section 4.04 of the Indenture, draw upon the
Letter of Credit to prepay the principal of and accrued interest on the
Bonds in accordance with the terms of the Letter of Credit.
SECTION 7.2. GENERAL OPTION TO PREPAY THE LOAN PAYMENTS. With the
written consent of the Bank (so long as the Letter of Credit is in effect
and has not been wrongfully dishonored), the Obligor shall have, and is hereby
granted, the option to prepay the Loan Payments payable under Section 4.2(a)
hereof, in whole or in part, by paying to the Trustee an amount sufficient in
Available Funds to redeem all or a portion of the Bonds then Outstanding,
in the manner, at the redemption prices (including premium, if any), from
the sources and on the dates specified in Sections 1.03(a) and (b) of the
Indenture and in the Bonds for optional redemption. The Trustee shall, in
accordance with Section 4.04 of the Indenture, draw upon the Letter of
Credit to prepay the principal of and any applicable redemption premium (if
covered by the Letter of Credit) and accrued interest on the Bonds payable
under this Section 7.2 in accordance with the terms of the Letter of Credit.
The Obligor may not revoke its election to prepay all or part of the Loan
Payments without the prior written consent of the Bank.
SECTION 7.3. EXTRAORDINARY OPTIONAL PREPAYMENT. During the Fixed Rate
Period and with the written consent of the Bank (so long as the Letter of
Credit is in effect and has not been wrongfully dishonored), the Obligor
shall have, and is hereby granted, the option to prepay the unpaid balance
of the Loan Payments payable under Section 4.2(a) hereof, together with
interest thereon, as may be required to redeem, pursuant to the terms of the
Bonds, all Bond principal then outstanding if, in the reasonable opinion of
the Obligor:
(i) All or substantially all of the Project shall have been
damaged, destroyed, condemned or taken by eminent domain and the Obligor
elects not to reconstruct it; or
(ii) the construction or operation of the Project is enjoined or
prevented or is otherwise prohibited by, or conflicts with, any order,
decree, rule or regulation of any court, or federal, state or
local regulatory body, administrative agency or other governmental
body.
For purpose of this Section 7.3, the "reasonable opinion of the Obligor"
shall be expressed to the Trustee by delivery of a certificate of the
Authorized Obligor Representative stating that it is the opinion of the
Obligor that the circumstances, situations or conditions
LOAN AGREEMENT
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<PAGE> 28
described in clause (i) or (ii) have occurred to the extent required for the
Obligor to exercise the option provided.
SECTION 7.4. PREPAYMENT FROM CONSTRUCTION FUND. The Obligor acknowledges
that the Bonds are subject to mandatory redemption prior to maturity
in part in authorized denominations from funds remaining on deposit in the
Construction Fund (except certain funds identified in the Completion
Certificate) upon the earlier of the completion of the Project in accordance
with the Loan Agreement or December 1, 2000, at a redemption price of 100%
of the principal amount to be redeemed plus accrued interest to the date
fixed for redemption. In the furtherance of its obligations under Section
4.2(a) hereof, the Obligor shall cause the prepayment of Loan Payments from
funds remaining on deposit in the Construction Fund to facilitate the mandatory
redemption of Bonds.
SECTION 7.5. OBLIGATION TO PREPAY LOAN PAYMENTS ON FAILURE TO RENEW OR
REPLACE LETTER OF CREDIT. The Obligor acknowledges that the Bonds are subject
to mandatory redemption prior to maturity if the Obligor does not renew the
Letter of Credit or obtain a Substitute Letter of Credit at least 60
days prior to the date of expiration or termination of the Letter of
Credit, all as provided in Section 1.03(e) of the Indenture, at a
redemption price of 100% of the principal amount of the Bonds to be
redeemed, if the Bonds bear interest at the Weekly Rate, or at a redemption
price of up to 103% of the principal amount of the Bonds to be redeemed as
provided in Section 1.03(e) of the Indenture, if the Bonds bear interest at
the Fixed Rate.
SECTION 7.6. NOTICE OF PREPAYMENT. In furtherance of an obligation
imposed upon the Obligor or to exercise an option granted to the Obligor by
Sections 7.2, 7.3 and 7.4 hereof, the Obligor shall give not less than 40
days written notice to the Issuer, the Trustee and the Bank which notice
shall specify therein the date upon which prepayment will be made, which
date shall be not less than 40 days from the date the notice is mailed,
and shall specify that all of the outstanding Loan Payments or a
specified portion thereof is to be so prepaid. The Issuer has directed the
Trustee to take forthwith all steps (other than the payment of the
money required to redeem the Bonds) necessary under the applicable
provisions of the Indenture to effect the redemption of the Bonds (or a
portion thereof) as provided in this Article VII.
ARTICLE VIII
RECORDING AND FINANCING STATEMENTS
SECTION 8.1. RECORDING AND FINANCING STATEMENTS. The Obligor will,
at its expense, take all necessary action, if any, to maintain and preserve
the lien and security interest of the Indenture and this Loan Agreement
so long as any Bond remains Outstanding.
The Obligor will, forthwith after the execution and delivery of the
Indenture and thereafter from time to time, cause the Indenture to be filed,
registered and recorded in that manner and in those places, if any, as may
be required by law in order to publish notice of and fully to perfect and
protect the lien and security interest of the Indenture and this Loan
Agreement. The Obligor will pay or cause to be paid all filing,
registration and recording fees incident to such filing, registration and
recording, and all expenses incident to the preparation,
LOAN AGREEMENT
Page 25
<PAGE> 29
execution and acknowledgment of such instruments of further assurance,
and all federal or state fees and other similar fees, duties, imposts,
assessments and charges arising out of or in connection with the execution
and delivery of the Indenture, said financing statements and such
instruments of further assurance. Copies of those filings, as filed, shall
be provided to the Trustee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NOTICES. All notices, certificates or other communications
shall be sufficiently given and shall be deemed given on the first to occur
of (i) two Business Days after such notices are deposited in the United States
mail and sent by first class mail, postage prepaid, (ii) when the same are
delivered, in each case, to the parties at the addresses set forth below or at
such other address as a party may designate by notice to the other parties,
or (iii) when the same are sent by facsimile or telecopy (the receipt of
which is orally or electronically confirmed) promptly confirmed in writing by
first class mail, postage prepaid:
If to the Issuer:
Michigan Strategic Fund
P. 0. Box 30234
Lansing, Michigan 48909
Attention: President
Telephone No. (517) 335-4417
Facsimile No. (517) 335-3059
If to the Obligor:
Atmosphere Annealing, Inc., a Michigan corporation
209 W. Mt. Hope
Lansing, Michigan 48910
Attention: Michael W. Wisti, President
Telephone No. (517) 485-5090
Facsimile No. (517) 482-7240
with a copy to:
MAXCO, Inc.
1118 Centennial Way
Lansing, MI 48917
Attention: Vincent Shunsky, Vice President
Telephone No. (517) 321-3130
Facsimile No. (517) 321-1022
LOAN AGREEMENT
Page 26
<PAGE> 30
If to the Trustee:
First of America Bank, N.A.
1001 South Worth
Birmingham, Michigan 48009
Attention: Corporate Trust Department
Telephone No. (810) 901-1433
Facsimile No. (810) 901-2457
If to the Bank:
First of America Bank, N.A.
P. O. Box 30120
Lansing, Michigan 48909
Attention: Commercial Loan Department
Telephone No. (517) 334-1600
Facsimile No. (517) 334-5489
with a copy to:
First of America Bank, N.A.
108 East Michigan Avenue
Kalamazoo, Michigan 49007
[Mail Code K-BO1-2C]
Attention: Corporate and Municipal Finance Division
Telephone No. (616) 376-9040
Facsimile No. (616) 376-9152
A duplicate copy of each notice, certificate or other communication given
hereunder by either the Issuer or the Obligor to the other shall also be
given to the Trustee and the Bank.
SECTION 9.2. ASSIGNMENTS. The Issuer shall assign and pledge to the
Trustee its right, title and interest in and to this Loan Agreement as
provided by Section 4.4 hereof, and the Obligor may with the consent of the
Bank (so long as the Letter of Credit is in effect and has not been
wrongfully dishonored) assign to any surviving, resulting or transferee
corporation or entity its rights and obligations under this Loan Agreement as
provided by Section 5.2 hereof.
SECTION 9.3. SEVERABILITY. If any provision of this Loan Agreement
shall be held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative or unenforceable to
any extent whatsoever.
SECTION 9.4. EXECUTION OF COUNTERPARTS. This Loan Agreement
may be simultaneously executed in several counterparts, each of which shall
be an original and all of which shall constitute but one and the same
instrument.
SECTION 9.5. AMOUNTS REMAINING IN ANY FUND OR WITH TRUSTEE. It is agreed
by the parties hereto that after payment in full of (i) the principal of,
premium, if any, and interest on
LOAN AGREEMENT
Page 27
<PAGE> 31
the Bonds, (ii) the fees, charges, indemnities and expenses of the
Issuer, the Trustee and the Tender Agent in accordance herewith and with
the Indenture (the payment of which fees, charges, indemnities and expenses
shall be evidenced by a written certification of the Obligor that it has
fully paid all such fees, charges, indemnities and expenses), and (iii) all
other amounts required to be paid under this Loan Agreement and the
Indenture, any amounts remaining in any fund or account maintained under this
Loan Agreement or the Indenture, (other than amounts in the Rebate Fund
under Section 4.06 of the Indenture) and not applied to the principal of,
premium, if any, and interest on the Bonds shall belong to and be paid to
the Obligor by the Trustee, provided, that, prior to making any payments,
Trustee shall request a written statement from the Bank as to whether or
not the Bank has been reimbursed by the Obligor for any and all drawings
under the Letter of Credit pursuant to the Reimbursement Agreement or
whether any other obligations are then due and owing to the Bank under
the Reimbursement Agreement, and such amounts remaining in the Bond Fund
shall, upon written notice from the Bank that the Obligor has not reimbursed
the Bank under the Reimbursement Agreement for any such drawing under the
Letter of Credit or for any other obligation then due and owing to the Bank
under the Reimbursement Agreement (which notice shall state the
unreimbursed amount), belong to and be paid to the Bank by the Trustee to
the extent that the Obligor has not so reimbursed the Bank.
SECTION 9.6. AMENDMENTS, CHANGES, AND MODIFICATIONS. Except as
otherwise provided in this Loan Agreement or the Indenture, subsequent to the
initial issuance of the Bonds and prior to their payment in full, this Loan
Agreement may not be effectively amended, changed, modified, altered, or
terminated without the written consent of the Trustee and the Bank (so long
as the Letter of Credit is in effect and has not been wrongfully dishonored).
SECTION 9.7. GOVERNING LAW. This Loan Agreement shall be governed
exclusively by and construed in accordance with the applicable law of the
State.
SECTION 9.8. AUTHORIZED OBLIGOR REPRESENTATIVE. Whenever under the
provisions of this Loan Agreement the approval of the Obligor is required
or the Obligor is required to take some action at the request of the Issuer,
the Trustee or the Bank, such approval or such request shall be given for
the Obligor by the Authorized Obligor Representative, and the Issuer,
the Trustee, and the Bank shall be authorized to act on any such
approval or request and neither party hereto shall have any complaint
against the other or against the Trustee or the Bank as a result of any such
action taken.
SECTION 9.9. TERM OF LOAN AGREEMENT. This Loan Agreement shall be in full
force and effect from the date hereof, and shall continue in effect until
the payment in full of all principal of, premium, if any, and interest
on the Bonds, or provision for the payment thereof shall have been made
pursuant to Article XIII of the Indenture, all fees, charges, indemnities
and expenses of the Issuer and the Trustee have been fully paid or provision
made for such payment (the payment of which fees, charges, indemnities and
expenses shall be evidenced by a written certification of the Obligor that
it has fully paid all such fees, charges, indemnities and expenses) and all
other amounts due hereunder have been duly paid or provision made for such
payment and all obligations of the Obligor to the Bank under the Reimbursement
Agreement have been paid. All representations, certifications and covenants by
the Obligor as to the indemnification of various parties as described in
Section 5.3 hereof, the payment of fees and expenses of the
LOAN AGREEMENT
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<PAGE> 32
Issuer and the Trustee as described in Section 6.3 hereof, and all matters
affecting the tax-exempt status of the Bonds shall survive the termination of
this Loan Agreement.
SECTION 9.10. BINDING EFFECT. This Loan Agreement shall inure to the
benefit of and shall be binding upon the Issuer, the Obligor and their
respective successors and assigns; subject, however, to the limitations
contained in Sections 4.4 and 5.2 hereof.
SECTION 9.11. REFERENCES TO BANK AND LETTER OF CREDIT. At any time
while the Letter of Credit has been wrongfully dishonored, all references to
the Bank and the Letter of Credit shall be ineffective.
SECTION 9.12. ISSUER NOT LIABLE. Notwithstanding any other provision of
this Loan Agreement (a) the Issuer shall not be liable to the Obligor, the
Trustee, the owners of Bonds or any other person for any failure of the
Issuer to take action under this Loan Agreement unless the Issuer (i) is
requested in writing by an appropriate person to take such action, (ii)
is assured to its satisfaction of payment of, indemnification against or
reimbursement for any expenses in such action and (iii) is afforded a
reasonable period under the circumstances to take such action, and (b)
neither the Issuer nor any member of the Issuer or any other official
or employee of the Issuer or the State shall be liable to the Obligor or any
other person for any action taken by its officers, servants, agents,
members, counsel or employees, or for any failure to take action under this
Loan Agreement except that the Issuer agrees to take, or refrain from, any
action required by an injunction and to comply with any final judgment for
specific performance. In acting under this Loan Agreement, or in refraining
from acting under this Loan Agreement, the Issuer may conclusively rely on
the advice of its counsel. Nothing in this Loan Agreement is a covenant,
stipulation, obligation or agreement of any present or future employee,
member, counsel or agent of the Issuer or the State in his individual
capacity, and neither the members of the Issuer nor any official
executing this Loan Agreement or the Bonds shall be subject to any
personal liability or accountability by reason of such execution by the Issuer
or any officer or employer of the Issuer.
SECTION 9.13. CONTINUING DISCLOSURE. The Obligor hereby covenants and
agrees that it will comply with and carry out all of the provisions of
any Continuing Disclosure Agreement that may be required in connection
with the underwriting or remarketing of the Bonds, including remarketing in
connection with a conversion of the Bonds to the Fixed Rate as provided in
the Indenture. Notwithstanding any other provision of this Loan Agreement,
failure of the Obligor to comply with the Continuing Disclosure
Agreement shall not be considered an Event of Default; however, the
Trustee may (and, at the request of the Underwriter or the Owners of at least
25% in aggregate principal amount of the Outstanding Bonds and upon
indemnification of the Trustee for such actions as provided in the
Indenture, shall), or any Bondholder or Beneficial Owner may, take such
actions as may be necessary and appropriate, including seeking specific
performance by court order, to cause the Obligor to comply with its obligations
under this Section 9.13.
SECTION 9.14. REDEMPTION OF BONDS. Pursuant to the Reimbursement
Agreement between the Obligor and the Bank the Obligor has agreed to
cause Bonds to be optionally redeemed pursuant to a schedule set forth in
the Reimbursement Agreement resulting in a weighted average life of 5.20
years for the Bonds. The Obligor covenants not to agree with the Bank to
amend
LOAN AGREEMENT
Page 29
<PAGE> 33
this schedule so as to defer the payment of principal beyond the dates set
forth therein without first obtaining a written opinion of Bond Counsel and
the Attorney General that such amendment will not adversely affect the
exclusion of interest on the Bonds from gross interest for purposes of
federal income taxation. Nothing in this Section 9.14 shall be construed to
restrict the right of the Obligor, with the consent of the Bank, to cause
the redemption of the Bonds more rapidly than set forth in such schedule.
IN WITNESS WHEREOF, the Issuer and the Obligor have caused this Loan
Agreement to be executed in their respective names by their duly authorized
agents, all as of the date first above written.
MICHIGAN STRATEGIC FUND
By
_____________________________________________
Gordon B. Alexander
Its: Authorized Officer
ATMOSPHERE ANNEALING, INC.
By: _____________________________________________
Its: Treasurer
LOAN AGREEMENT
Page 30
<PAGE> 34
EXHIBIT A
DESCRIPTION OF PROJECT
This Exhibit A to Loan Agreement dated as of December 1, 1997,
between the Michigan Strategic Fund and Atmosphere Annealing, Inc., a Michigan
corporation.
The Project consists of the acquisition and installation of
equipment in manufacturing facilities of the Obligor located in the City
of Lansing, Ingham County, Michigan. The Obligor will own the Project and
use the buildings and real property together with the new machinery and
equipment for manufacturing operations providing heat treating services,
phosphate and zinc coating and shearing/sawing operations of bar steel to
the forging and cast iron (primarily automotive) industries. The Issuer
will issue and sell its Bonds and loan the money to the Obligor for the
financing of the Project and other expenses incidental thereto pursuant to
and in compliance with the Act, provided, however, that the Project Costs
and the cost of all acts and requirements incident thereto shall be paid
solely from the proceeds of the sale of the Bonds or from moneys provided
by the Obligor.
LOAN AGREEMENT
Page A-1
<PAGE> 35
EXHIBIT B
PROJECT SITE
This Exhibit B to Loan Agreement dated as of December 1, 1997,
between the Michigan Strategic Fund and Atmosphere Annealing, Inc., a Michigan
corporation.
The Project is located on real property situated in the City of Lansing,
County of Ingham, State of Michigan, described as follows:
209 W. MOUNT HOPE PROPERTY
Land in the City of Lansing, Ingham County, Michigan, described as:
Parcel No. 1:
Lot 4, Rockford Subdivision, according to the recorded plat thereof, as
recorded in Liber 6 of Plats, page 44, Ingham County Records.
Parcel No. 2:
Lot 6, Rockford Subdivision, according to the recorded plat thereof, as
recorded in Liber 6 of Plats, page 44, Ingham County Records.
Parcel No. 3:
Commencing 89.5 feet South of the Southwest corner of Lot 23, Rockford
Subdivision, thence South 38 feet, thence East 121.5 feet, thence North
38 feet, thence West 121.5 feet to the place of beginning, being a part
of the Northwest 1/4 of Section 28, Town 4 North, Range 2 West.
Parcel No. 4:
Lot 23, Rockford Subdivision, according to the recorded plat thereof, as
recorded in Liber 6 of Plats, page 44, Ingham County Records.
Parcel No. 5:
Commencing 203.5 feet South of the Southwest corner of Lot 23, Rockford
Subdivision, thence South 38 feet, thence East 121.5 feet, thence North
38 feet, thence West 121.5 feet to the place of beginning, being a part
of the Northwest 1/4 of Section 28, Town 4 North, Range 2 West.
Parcel No. 6:
Commencing 127.5 feet South of the Southwest corner of Lot 23, Rockford
Subdivision, thence South 38 feet, thence East 121.5 feet, thence North
38 feet, thence West 121.5 feet to the place of beginning, being a part
of the Northwest 1/4 of Section 28, Town 4 North, Range 2 West.
Parcel No. 7:
Commencing 241.5 feet South of the Southwest corner of Lot 23, Rockford
Subdivision, thence South 39.5 feet, thence East 121.5 feet, thence North
39.5
LOAN AGREEMENT
Page B-1
<PAGE> 36
feet, thence West 121.5 feet to the place of beginning, being a
part of the Northwest 1/4 of Section 28, Town 4 North, Range 2 West.
Parcel No. 8:
Lots 17 through 20, inclusive, Rockford Subdivision, according to the
recorded plat thereof, as recorded in Liber 6 of Plats, page 44, Ingham
County Records, ALSO, Commencing at the Northeast corner of Lot
20, Rockford Subdivision, thence Southwesterly 212.5 feet to the South
line of Lot 19, thence West 667.2 feet, thence South 120 feet, thence West
121.5 feet to the East line of Osband Avenue, thence South 50 feet,
thence East 121.5 feet, thence South 231 feet, thence West 121.5 feet,
thence South 191 feet to the Northerly corner of Lot 120, Duplex
Park Addition, thence East 50 feet, thence Southeasterly 181.1 feet to the
Southeasterly corner of Lot 120, Duplex Park Addition, thence
Southeasterly 100 feet on Easterly line of Lot l20, Duplex Park
Addition, extended to the Northerly line of New York Central Railroad,
thence Northeasterly along railroad right of way 1600 feet to the South
line of W. Mt. Hope Road, thence West 500 feet to the place of
beginning, being a part of the Northwest 1/4 of Section 28, Town 4 North,
Range 2 West.
1801 BASSETT PROPERTY
The property is legally described by:
Parts of Lots 12, 15, 16 and 21 through 26 including commencing on the
South line of Bassett Street 24.95 feet South of Northeast corner of Lot
21, thence South 132 feet West 34.3 feet, South 56.5 feet, West 40 feet,
South 141.5 feet, West 92 feet, South 132 feet, East 123.75 feet, South
165 feet, West 187.75 feet, North 114.96 feet, West 35 feet, North 50
feet, West 70.3 feet, Northerly 461.91 feet to South line of said street,
East 335.56 feet to beginning, Assessors Plat No. 11, City of Lansing,
Ingham County, Michigan.
LOAN AGREEMENT
Page B-2
<PAGE> 37
EXHIBIT C
REQUISITION CERTIFICATE
TO: First of America Bank, N.A., as Trustee
FROM: Atmosphere Annealing, Inc., a Michigan corporation (the "Obligor")
SUBJECT: Loan Agreement dated as of December 1, 1997, between the
Michigan Strategic Fund (the "Issuer") and the Obligor (the "Loan
Agreement")
This represents Requisition Certificate No. ____ in the total amount of
$______ ____ for payment of those Costs of the Project detailed in the schedule
attached.
The undersigned certifies that:
1. All of the expenditures for which moneys are requested hereby
represent proper Project Costs, have not been included in a
previous Requisition Certificate and have been properly recorded on
the Obligor's books.
2. The moneys requested hereby are not greater than those necessary
to meet obligations due and payable or to reimburse the Obligor for
funds actually advanced for Costs of the Project. The moneys
requested do not include retention or other moneys not yet due
or earned under construction contracts.
3. At least 95% of the sum of the payments herein requested
from the Construction Fund and all other payments from the
proceeds of the Bonds heretofore made from the Construction Fund
have been used to finance the acquisition and installation of
equipment which property other than land is of a character subject
to the allowance for depreciation under Section 167 of the Code,
and no more than 5% of the sum of the payments herein requested
from the Construction Fund and all other payments from the
proceeds of the Bonds heretofore made from the Construction Fund
has been or will be used, directly or indirectly, as working
capital or Issuance Costs (subject to the 2% limitation set forth
in Section 147(g) of the Code).
LOAN AGREEMENT
Page C-1
<PAGE> 38
4. Pursuant to Section 4.03(c) of the Indenture, the undersigned
certifies on behalf of the Obligor that:
a) the expenditures for which payment is to be made or for
which reimbursement is requested are listed in summary form in
the attached schedule;
b) that the amounts requested are to be or have been paid by the
Obligor for property or to contractors, subcontractors,
materialmen, engineers, architects, or other persons who
will perform or have performed necessary or appropriate
services or will supply or have supplied necessary or
appropriate materials for the acquisition, construction,
renovation, equipping, and installation of the Project, as the
case may be, and that, to the best of my knowledge, the fair
value of such property, services, or materials is not exceeded
by the amounts requested to be paid;
c) that no part of the several amounts requested to be paid
to the Obligor, as stated in such schedule, has been or is the
basis for the payment of any money in any previous or then
pending request;
d) that the payment of the amounts requested will not result in a
breach of any of the covenants of the Obligor contained
in the Loan Agreement; and
e) that the expenditure of such amounts to be paid, when added
to all previous disbursements from the Construction Fund, will
result in at least 95% of the total of such
disbursements, other than disbursements for issuance
expenses, being used to provide property of a character
subject to the allowance for depreciation under the Internal
Revenue Code of 1986, as amended (the "Code"), (which
expenditures are amounts paid or incurred which are, for
federal income tax purposes, chargeable to the Project's
capital account or would be so chargeable either with a
proper election by the Obligor [for example, under section
266 of the Code] or but for a proper election by the Obligor
to deduct such amounts).
5. The Obligor is not in default under the Loan Agreement
or the Reimbursement Agreement and nothing has occurred to the
knowledge of the Obligor that would prevent the performance of its
obligations under the Loan Agreement or the Reimbursement Agreement.
LOAN AGREEMENT
Page C-2
<PAGE> 39
6. Delivered herewith are all of the documents in form and content
required by Section 4.03 of the Indenture.
7. The terms used in this Requisition Certificate shall have the same
meaning as in the Loan Agreement.
Executed this ______ day of _____________________, 19__.
ATMOSPHERE ANNEALING, INC.
BY:_______________________________________
Authorized Obligor Representative
Approved:
FIRST OF AMERICA BANK, N.A.,
as Letter of Credit Bank
Dated:________________
By: _______________________________
Its: ______________________________
LOAN AGREEMENT
Page C-3
<PAGE> 40
SCHEDULE TO REQUISITION CERTIFICATE NO.
--------
Payee and Location Amount
- ------------------ ------
Reimbursement to Obligor Amount
- ------------------------ ------
LOAN AGREEMENT
Page C-4
<PAGE> 41
EXHIBIT D
COMPLETION CERTIFICATE
TO: Michigan Strategic Fund (the "Issuer")
First of America Bank, N.A., as Letter of Credit Bank
First of America Bank, N.A., as Trustee
FROM: Atmosphere Annealing, Inc., a Michigan corporation (the "Obligor")
SUBJECT: Loan Agreement dated as of December 1, 1997, between the Issuer
and the Obligor (the "Loan Agreement")
The undersigned hereby certify:
1. The Project has been substantially completed in such manner as to
conform with all applicable zoning, planning and building
regulations of the governmental authorities having jurisdiction of
the Project, as of _______ __________, 19__ (the "Completion Date").
2. The Costs of the Project have been paid in full except for those
not yet due and payable, which are described below and for
which moneys for payment thereof are being held in the
Construction Fund and will, in all events, be paid prior to December
1, 2000:
Cost of the Project not yet due and payable:
Description Amount
$_______
Total $_______
3. The moneys in the Construction Fund in excess of the totals set forth
in 2 above represent surplus bond proceeds and the Trustee is
hereby authorized and directed to transfer all such surplus bond
proceeds to the Bond Fund for use as provided in Section 1.03(f) of
the Indenture.
4. No Event of Default has occurred under the Loan Agreement
or the Reimbursement Agreement nor has any event occurred which
LOAN AGREEMENT
Page D-1
<PAGE> 42
with the giving of notice or lapse of time or both shall become
such an Event of Default. Nothing has occurred to the knowledge of
the Obligor that would prevent the performance of its
obligations under the Loan Agreement or the Reimbursement
Agreement.
5. The terms used in this Completion Certificate shall have the same
meaning as in the Loan Agreement.
This certificate is given without prejudice to any rights against third
parties which exist at the date hereof or which may subsequently come into
being.
Executed this ________ day of ______________, 19___.
ATMOSPHERE ANNEALING, INC.
By:____________________________________
Its: Authorized Obligor Representative
LOAN AGREEMENT
Page D-2
<PAGE> 1
EXHIBIT 10.14
Execution Copy
LOAN AGREEMENT
BETWEEN
LAM FUNDING, L.L.C.
AND
BORROWER AND GUARANTY/MAXCO, INC.
(AS SPECIFIED IN SCHEDULE I)
RELATING TO
LAM FUNDING, L.L.C.
LOAN PROGRAM NOTES
(VARIABLE RATE SERIES A)
DATED AS OF DECEMBER 1, 1997
The interest of LAM Funding, L.L.C., the Obligor, subject to certain specified
exclusions in this Loan Agreement, has been assigned to Michigan National Bank,
as Trustee under a Master Trust Indenture dated as of December 1, 1997.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I DEFINITIONS...............................................................................Page 1
Section 1.1. Definitions...................................................................Page 1
Section 1.2. Rules of Interpretation.......................................................Page 3
Section 1.3. Headings......................................................................Page 3
ARTICLE II REPRESENTATIONS..........................................................................Page 3
Section 2.1. Representations of the Obligor................................................Page 3
Section 2.2. Representations of the Borrower...............................................Page 4
ARTICLE III ISSUANCE OF THE NOTES; USE OF PROCEEDS..................................................Page 5
Section 3.1. Agreement to Issue Notes; Application of Note Proceeds........................Page 5
Section 3.2. Obligor Makes No Warranties Regarding the Loan Project........................Page 5
ARTICLE IV REPAYMENT PROVISIONS.....................................................................Page 6
Section 4.1. The Loan......................................................................Page 6
Section 4.2. Repayment of the Loan and Payment of Other Amounts Payable....................Page 6
Section 4.3. No Defense or Setoff--Unconditional Obligation................................Page 7
Section 4.4. Assignment and Pledge of Obligor's Rights.....................................Page 7
ARTICLE V SPECIAL COVENANTS AND AGREEMENTS..........................................................Page 7
Section 5.1. Obligor's, Trustee's, and Bank's Right of Access to
Loan Project..................................................................Page 7
Section 5.2. Borrower to Maintain Existence; Conditions Under
Which Exceptions Permitted....................................................Page 8
Section 5.3. Indemnification Covenants.....................................................Page 8
Section 5.4. Insurance.....................................................................Page 9
Section 5.5. Eminent Domain...............................................................Page 10
Section 5.6. Qualification in State.......................................................Page 10
Section 5.7. Letter of Credit.............................................................Page 10
Section 5.8. Obligor's Limited Liability..................................................Page 10
Section 5.9. Compliance with Laws.........................................................Page 10
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES..........................................................Page 11
Section 6.1. Events of Default............................................................Page 11
Section 6.2. Remedies on Default..........................................................Page 12
Section 6.3. Agreement to Pay Attorneys' Fees and Expenses................................Page 13
Section 6.4. No Remedy Exclusive..........................................................Page 13
Section 6.5. No Additional Waiver Implied by One Waiver...................................Page 13
ARTICLE VII PREPAYMENT OF LOAN PAYMENTS............................................................Page 14
Section 7.1. General Option to Prepay the Loan Payments...................................Page 14
Section 7.2. Obligation to Prepay Loan Payments on Failure to Renew
or Replace Letter of Credit and Other Events.................................Page 14
Section 7.3. Notice of Prepayment.........................................................Page 14
ARTICLE VIII MISCELLANEOUS.........................................................................Page 15
Section 8.1. Notices......................................................................Page 15
Section 8.2. Assignments..................................................................Page 16
Section 8.3. Severability.................................................................Page 16
Section 8.4. Execution of Counterparts....................................................Page 16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 8.5. Amounts Remaining in Any Fund or With Trustee................................Page 16
Section 8.6. Amendments, Changes, and Modifications.......................................Page 17
Section 8.7. Governing Law................................................................Page 17
Section 8.8. Authorized Borrower Representative...........................................Page 17
Section 8.9. Term of Loan Agreement.......................................................Page 17
Section 8.10. Binding Effect..............................................................Page 17
Section 8.11. References to Bank and Letter of Credit.....................................Page 18
Section 8.12. Obligor Not Liable..........................................................Page 18
</TABLE>
<PAGE> 4
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Loan Agreement") dated as of December 1,
1997, by and between LAM FUNDING, L.L.C., a Michigan limited liability company
(the "Obligor"), and the BORROWER specified in Schedule I (the "Borrower");
RECITALS:
A. Pursuant to a Master Indenture dated as of December 1, 1997 (the
"Master Indenture") between the Obligor and Michigan National Bank (the
"Trustee"), as supplemented by the Related Supplement described in Schedule I to
this Loan Agreement (the "Related Supplement") (the Master Indenture and the
Related Supplement, together, the "Indenture"), the Obligor is issuing an
Installment (the "Installment") of its Loan Program Notes of the Series
described in Schedule I (the Notes of such Series, whether issued pursuant to
the Installment or not, for purposes of this Loan Agreement, the "Notes").
B. From the proceeds of the Installment the Obligor desires to loan the
amount set forth in Schedule I (the "Loan") to the Borrower for the funding of
the project set forth in Schedule I (the "Loan Project"), a portion of which
Loan will be used by the Obligor to defray the Borrower's Pro Rata Share of
Issuance Costs.
C. Under the terms of this Loan Agreement, the Borrower will make Loan
Payments, and will be responsible for paying its Pro Rata Share of all Issuance
Costs and Administrative Expenses. It is understood that the Obligor's
obligation with respect to the Notes is subject to the limitations that
principal of and interest on the Notes and any other costs or pecuniary
liability relating to the Notes, the Loan or any proceeding, document, or
certification incidental to the foregoing, including this Loan Agreement, shall
never constitute nor give rise to a charge against the general credit, general
funds or assets of the Obligor (including funds pertaining to other loans or
activities of the Obligor), but shall be a limited obligation of the Obligor
payable only as provided in the Indenture.
NOW, THEREFORE, in consideration of the respective representations and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. Unless otherwise indicated, all words and
phrases defined in the Indenture shall have the same meanings in this Loan
Agreement. The following terms have been defined in the opening paragraph and
Recitals of this Loan Agreement: "Borrower," "Indenture," "Installment," "Loan,"
"Loan Project," "Master Indenture," "Notes," "Related Supplement" and "Trustee."
In addition, the following words and phrases shall have the following meanings
unless the context in which they are used shall indicate another or different
meaning:
<PAGE> 5
"Administrative Expenses" include all fees and expenses, other than
Issuance Costs, payable with respect to the administration and maintenance of
the Indenture and the payment and remarketing, if applicable, of the Notes,
including, but not limited to, the fees and expenses of the Trustee, the fees
and expenses of the Remarketing Agent, the annual fees and expenses of each
Rating Agency rating the Notes, the cost of providing amendments to any
disclosure document that may be necessary or desirable, fees payable to the Bank
for the Letter of Credit (unless paid directly to the Bank by the Borrower
pursuant to the Reimbursement Agreement) and annual administrative fees and
expenses payable to the Obligor.
"Authorized Borrower Representative" means the person at the time
designated to act on behalf of the Borrower by written certificate furnished to
the Obligor. That certificate may designate an alternate or alternates. In the
event that all persons so designated become unavailable or unable to act and the
Borrower fails to designate a replacement within ten days after such
unavailability or inability to act, the Obligor may appoint an interim
Authorized Borrower Representative until such time as the Borrower designates
that person.
"Event of Default" means any occurrence or event specified as such in
and defined as such by Section 6.1 hereof.
"Issuance Costs" mean items of expense payable or reimbursable directly
or indirectly by the Obligor and related to the authorization, sale and issuance
of the Notes, which items of expense shall include, but not be limited to,
Obligor application and issuance fees, printing costs, costs of reproducing
documents, filing and recording fees, initial fees and charges of the Trustee,
note discounts, legal fees and charges, professional consultants' fees, costs of
credit ratings, fees and charges for execution, transportation and safekeeping
of the Notes, and other costs, charges and fees in connection with the
foregoing.
"Loans" means, collectively, the Loan and all other loans made by the
Obligor to other borrowers from the proceeds of the Notes.
"Loan Payments" means the amounts required to be paid by the Borrower
pursuant to Section 4.2(a) hereof.
"Note Placement Agreement" means the Note Placement Agreement by and
between the Obligor and Placement Agent relating to the Installment.
"Person" or "persons" means natural persons, partnerships, limited
liability companies, firms, associations, corporations and public bodies.
"Placement Agent" means First of America Securities, Inc.
"Pro Rata Share" means (i) with respect to the payment of Issuance
Costs, a fraction the numerator of which is the original principal amount of the
Loan and the denominator is the original principal amount of all Loans funded
from the Installment; (ii) with respect to the indemnity provisions of Section
5.3 of this Loan Agreement, a fraction the numerator of which is the original
principal amount of the Loan and the denominator of which is the original
principal amount of all Loans funded from proceeds of the Notes (whether funded
from the
LOAN AGREEMENT
Page 2
<PAGE> 6
Installment or not), (iii) with respect to payment of Administrative Expenses, a
fraction the numerator of which is the weighted average principal amount of the
Loan outstanding during the period for which such Administrative Expenses are
payable and the denominator of which is the weighted average principal amount of
all Loans outstanding during the period for which such Administrative Expenses
are payable (in each case such weighted average to be determined by the Obligor
according to any method it reasonably determines to be equitable and subject to
reasonable reallocation by the Obligor in the event of a shortfall in amounts
available to pay Administrative Expenses for any reason) and (iv) with respect
to the Notes, a fraction the numerator of which is the principal amount of the
Loan outstanding and the denominator of which is the principal amount of the
Notes outstanding.
"State" means the State of Michigan.
SECTION 1.2. RULES OF INTERPRETATION. For all purposes of this Loan
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) The words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Loan Agreement as a whole and not
to any particular article, section or other subdivision.
(b) The terms defined in this Article I have the meanings
assigned to them in this Article I and include the plural as well as
the singular, and the gender used shall include the other gender.
(c) All accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles.
SECTION 1.3. HEADINGS. The headings of the various articles and
sections herein are for convenience only and shall not define or limit the
provisions hereof.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE OBLIGOR. The Obligor makes the
following representations as the basis for its undertakings under this Loan
Agreement:
(a) The Obligor is a Michigan limited liability company with
full authority to issue the Notes and execute and enter into this Loan
Agreement and the Indenture.
(b) Neither the execution and delivery of this Loan Agreement,
the consummation of the transactions contemplated hereby, nor the
fulfillment of or compliance with the terms and conditions of this Loan
Agreement conflicts with or results in a breach of the terms,
conditions or provisions of any restriction, agreement or instrument to
which the Obligor is a party, or by which it or any of its property is
bound, or constitutes a default under any of the foregoing.
LOAN AGREEMENT
Page 3
<PAGE> 7
SECTION 2.2. REPRESENTATIONS OF THE BORROWER. The Borrower makes the
following representations as the basis for its undertakings under this Loan
Agreement:
(a) The Borrower is the type of entity set forth in Schedule I
organized under the laws of the state set forth in Schedule I, and is
qualified to conduct its business in the State, has the requisite power
and authority to conduct its business, to own its properties and to
execute and deliver, and to perform all of its obligations under this
Loan Agreement and the Reimbursement Agreement and by proper action
this Loan Agreement, the Note Placement Agreement, the Remarketing
Agreement and the Reimbursement Agreement have been duly authorized,
executed and delivered by, and, assuming due authorization by the other
parties thereto, are valid and binding obligations of, the Borrower.
(b) Neither the authorization, execution or delivery of this
Loan Agreement and the Reimbursement Agreement, the consummation of the
transactions contemplated by this Loan Agreement and the Reimbursement
Agreement nor the fulfillment of or compliance with the terms and
conditions of this Loan Agreement and the Reimbursement Agreement will
require any consent or approval of the directors, shareholders,
partners and/or members, as applicable, of the Borrower which has not
been obtained, result in a breach of or constitute a default under any
of the terms, conditions or provisions of any agreement or instrument
to which the Borrower is now a party or by which it is bound, or
constitute a default under any of the foregoing, or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of the Borrower
prohibited under the terms of any instrument or agreement, or violate
any provision of any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower, or of the organizational documents of
the Borrower.
(c) The Borrower is not in default (i) under any order, writ,
judgment, injunction, decree, determination or award or any indenture,
agreement, lease or instrument or (ii) under any law, rule or
regulation wherein such default could materially adversely affect the
Borrower or the ability of the Borrower to perform its obligations
under this Loan Agreement.
(d) Each facility, if any, operated by the Borrower conforms
in all material respects with all applicable zoning, planning,
building, environmental and other regulations of the governmental
authorities having jurisdiction over the same and all licenses and
approvals the Borrower requires to operate its facilities, if any, have
been obtained from appropriate state and federal agencies and
departments or, if not obtained on the date of this Loan Agreement, are
expected to be obtained in the normal course of business at or prior to
the time such authorizations, consents or approvals are required to be
obtained.
(e) To the best of the knowledge of the Borrower, no
authorizations, consents or approvals of governmental bodies or
agencies are required in connection with the execution and delivery by
the Borrower of this Loan Agreement or the Reimbursement Agreement or
in connection with the carrying out by the Borrower of its obligations
LOAN AGREEMENT
Page 4
<PAGE> 8
under this Loan Agreement or the Reimbursement Agreement which have not
been obtained or, if not obtained on the date of this Loan Agreement,
are expected to be obtained in the normal course of business at or
prior to the time such authorizations, consents or approvals are
required to be obtained.
(f) There are no actions or proceedings pending or, to the
best of the knowledge of the Borrower, threatened before any court or
administrative agency which will, in the reasonable judgment of the
Borrower, materially adversely affect the ability of the Borrower to
meet its obligations under this Loan Agreement or the Reimbursement
Agreement.
ARTICLE III
ISSUANCE OF THE NOTES; USE OF PROCEEDS
SECTION 3.1. AGREEMENT TO ISSUE NOTES; APPLICATION OF NOTE PROCEEDS. In
order to provide funds to finance the Loan Project, as provided in Section 4.1
hereof, and at the request of the Borrower, the Obligor agrees that, pursuant to
the Indenture, it will issue, sell and cause to be delivered to the purchaser or
purchasers thereof, the Notes bearing interest, maturing and subject to prior
redemption as set forth in the Indenture. The Obligor will make available the
proceeds of the Notes to the Borrower in the amount of the Loan (less the
Borrower's Pro Rata Share of Issuance Costs) by depositing the proceeds of the
Notes in the Project Fund pursuant to the Indenture. Disbursements of money on
deposit in the Project Fund shall be made in accordance with the conditions set
forth in the Indenture.
When funds are to be requested by the Borrower, the Borrower shall
itemize the amounts requested, the payee of each amount requested, and shall,
prior to delivering the same to the Obligor, obtain the written approval of the
Bank for the disbursement requested. The Borrower shall complete a requisition
certificate, in the form set forth as Exhibit D to the Master Indenture, on
behalf of the Obligor and shall obtain the written approval of the Bank on such
certificate. Assuming that the request is in proper form, and that the amounts
requested do not exceed the aggregate amount available to be drawn down on the
Loan (with any earnings from the Project Fund attributable thereto), the Obligor
will submit the certificate to the Trustee for payment.
SECTION 3.2. OBLIGOR MAKES NO WARRANTIES REGARDING THE LOAN PROJECT.
The Obligor makes no warranty or representation, express or implied or
otherwise, with respect to the Loan Project, it being agreed that the Borrower
is to bear all risks incident to the Loan Project. The Obligor is to have no
responsibility or liability for any defect or deficiency in the Loan Project,
whether patent or latent. The Obligor makes no warranty or representation that
the moneys contained in the Project Fund will be sufficient to pay all of the
costs of the Loan Project.
LOAN AGREEMENT
Page 5
<PAGE> 9
ARTICLE IV
REPAYMENT PROVISIONS
SECTION 4.1. THE LOAN. The Obligor covenants and agrees, upon the terms
and conditions of this Loan Agreement, to loan all or a portion of the proceeds
received from the sale of the Notes in the amount of the Loan to the Borrower in
order to finance all or a part of the Loan Project. Pursuant to this covenant
and agreement, the Obligor will issue the Notes upon the terms and conditions
contained in the Indenture and this Loan Agreement, and will loan the proceeds
of the Notes in the amount of the Loan to the Borrower to be applied as provided
in Article III hereof. These proceeds shall be disbursed by the Trustee to or on
behalf of the Borrower at the direction of the Obligor as provided in Section
4.03 of the Master Indenture.
SECTION 4.2. REPAYMENT OF THE LOAN AND PAYMENT OF OTHER AMOUNTS PAYABLE.
(a) The Borrower covenants and agrees to make or cause to be
made Loan Payments to the Trustee, as assignee of the Obligor, equal to
the principal of, premium, if any, and interest on the Notes (or the
Borrower's Pro Rata Share of the Notes, if multiple Loans are made from
the proceeds of the Notes) for deposit by the Trustee in the Note Fund,
which shall at all times be sufficient to enable the Trustee to pay
when due (whether at maturity or upon redemption prior to maturity or
acceleration) the principal of, premium, if any, and interest on the
Notes (or the Borrower's Pro Rata Share of the Notes, if multiple Loans
are made from the proceeds of the Notes). All Loan Payments shall be
made or shall be on deposit in immediately available funds not later
than 12:00 p.m., Detroit, Michigan, time on the Business Day on which
such payment on the Notes is to be made. If the Borrower shall fail to
pay or cause to be paid any Loan Payments under this Section 4.2(a),
the Loan Payment so in default shall continue as an obligation of the
Borrower until the amount so in default shall have been fully paid. The
Trustee is authorized and directed to draw moneys under the Letter of
Credit in accordance with the provisions of the Indenture to pay the
principal of, premium, if any, and interest on the Notes if and when
due, and any moneys derived from a drawing under the Letter of Credit
attributable to the Borrower's Pro Rata Share of Notes shall constitute
a credit against the obligation of the Borrower to make the payments
set forth above.
(b) To the extent they are not paid out of the Project Fund
and allocated to the Borrower's Loan, the Borrower shall pay to the
Obligor the Obligor's fee at closing and Pro Rata Share of all other
Issuance Costs and the following within ten days of demand therefor,
including but not limited to, (i) other out-of-pocket costs and
expenses of the Obligor incidental to the performance of its
obligations under this Loan Agreement, the Indenture and the Note
Placement Agreement, to the extent not paid as Project Costs, and (ii)
the out-of-pocket expenses of the Obligor incurred by the Obligor in
enforcing the provisions of this Loan Agreement and the Indenture.
(c) The Borrower also agrees to pay to the Obligor, within 10
days of demand, its Pro Rata Share of Administrative Expenses.
LOAN AGREEMENT
Page 6
<PAGE> 10
(d) If the date when any of the payments required to be made
by this Section 4.2 is not a Business Day, then such payments may be
made on the next Business Day with the same force and effect as if made
on the normal due date, and no interest shall accrue for the period
after such date through such next Business Day.
SECTION 4.3. NO DEFENSE OR SETOFF--UNCONDITIONAL OBLIGATION. The
obligations of the Borrower to make the payments required in Section 4.2 hereof
and to perform and observe the other agreements on its part contained herein
shall be absolute and unconditional, irrespective of any defense or any rights
of setoff, recoupment or counterclaim it might otherwise have against the
Obligor, the Trustee or the Bank. During the term of this Loan Agreement, the
Borrower shall pay the payments to be made in Section 4.2 hereof and all other
payments required hereunder free of any deductions and without abatement,
diminution or setoff other than those herein expressly provided. Until such time
as the principal of, premium, if any, and interest on the Notes shall have been
fully paid, or provision for the payment thereof shall have been made in
accordance with the Indenture, the Borrower: (i) will not suspend or discontinue
any payments provided for in Section 4.2 hereof; (ii) will perform and observe
all of its agreements contained in this Loan Agreement; and (iii) will not
terminate this Loan Agreement for any cause, including, without limiting the
generality of the foregoing, its failure to complete the Project, the occurrence
of any acts or circumstances that may constitute failure of consideration,
destruction of or damage to the Borrower's facilities, commercial frustration of
purpose, any change in the tax laws of the United States of America or the State
or any political subdivision thereof, or any failure of the Obligor, the Trustee
or the Bank to perform and observe any agreement, whether express or implied, or
any duty, liability or obligation arising out of or connected with this Loan
Agreement, except to the extent permitted by this Loan Agreement.
SECTION 4.4. ASSIGNMENT AND PLEDGE OF OBLIGOR'S RIGHTS. As security for
the payment of the Notes (including redemption payments), the Obligor will
assign and pledge to the Trustee all right, title, and interest of the Obligor
in and to this Loan Agreement, including the right to receive payments hereunder
(except the right to receive payments, if any, under Sections 4.2(b), 4.2(c),
5.3, 6.3, and 8.12 hereof and the rights to make determinations and receive
notices as herein provided, all of which constitute "Reserved Rights" as defined
in the Indenture), and hereby directs the Borrower to make said payments
directly to the Trustee. The Borrower herewith assents to such assignment and
pledge and will make or cause to be made payments directly to the Trustee
without defense or setoff by reason of any dispute between the Borrower and the
Obligor, the Trustee or the Bank.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. OBLIGOR'S, TRUSTEE'S, AND BANK'S RIGHT OF ACCESS TO LOAN
PROJECT. The Borrower agrees that during the term of this Loan Agreement the
Obligor, the Trustee, the Bank, and their duly authorized agents shall have the
right during regular business hours, with reasonable notice, to examine and
inspect all books and records of the Borrower relating to the Loan Project,
provided that neither the Obligor, the Trustee, nor the Bank will materially
disturb
LOAN AGREEMENT
Page 7
<PAGE> 11
the business operations of the Borrower and each shall hold in confidence all
confidential information, trade secrets, patents, and patentable information.
SECTION 5.2. BORROWER TO MAINTAIN EXISTENCE; CONDITIONS UNDER WHICH
EXCEPTIONS PERMITTED. Except as provided below, the Borrower each agrees that
during the term of this Loan Agreement it will maintain its existence and will
not dispose of all or substantially all of its assets. The Borrower may
consolidate with or merge into another entity or permit one or more entities to
consolidate with or merge into it, provided that any surviving, resulting or
transferee entity shall be qualified to do business in the State and shall
assume in writing or by operation of law all of the obligations of the Borrower
under this Loan Agreement and the Reimbursement Agreement.
SECTION 5.3. INDEMNIFICATION COVENANTS.
(a) The Obligor and its members, officers, agents, and
employees (the "Indemnified Persons") shall not be liable to the
Borrower for any reason except for the breach of any obligation of the
Obligor or Indemnified Persons under this Agreement or the willful
misconduct or sole gross negligence of the Obligor or Indemnified
Persons. The Borrower shall indemnify and hold the Obligor and the
Indemnified Persons harmless from any loss, expense (including
reasonable counsel fees), or liability of any nature due to any and all
suits, actions, legal or administrative proceedings, or claims arising
or resulting from, or in any way connected with:
(1) the acquisition, operation, use or
maintenance of the Loan Project or facilities of the Borrower;
(2) any act, failure to act, or misrepresentation by
any person, firm, corporation, or governmental agency,
including the Obligor, in connection with the issuance, sale,
delivery or remarketing of the Notes;
(3) any act, failure to act, or misrepresentation by
the Obligor in connection with this Loan Agreement, the
Indenture, the Note Placement Agreement, or any other document
involving the Obligor in this matter;
(4) any liability of the Obligor to the Placement
Agent pursuant to Paragraph 7 of the Note Placement Agreement
and to the Remarketing Agent pursuant to Section 3 of the
Remarketing Agreement which arises in connection with or as a
consequence of the Loan; or
(5) the selection and appointment of firms providing
services related to the Note transaction.
If any suit, action, or proceeding is brought against the Obligor or
any Indemnified Person, that action or proceeding shall be defended by
counsel to the Obligor or the Borrower, as the Obligor shall determine.
If the defense is by counsel to the Obligor the Borrower shall
indemnify the Obligor and Indemnified Persons for the reasonable cost
of that defense including reasonable counsel fees. If the Obligor
determines that the
LOAN AGREEMENT
Page 8
<PAGE> 12
Borrower shall defend the Obligor or Indemnified Person, the Borrower
shall immediately assume the defense at its own cost. The Borrower
shall not be liable for any settlement of any proceeding made without
its consent (which consent shall not be unreasonably withheld).
(b) The Borrower shall not be obligated to indemnify the
Obligor or any Indemnified Person under subsection (a), if a court with
competent jurisdiction finds that the liability in question was caused
by the willful misconduct or sole gross negligence of the Obligor or
the involved Indemnified Person, unless the court determines that,
despite the adjudication of liability but in view of all circumstances
of the case, the Obligor or the Indemnified Person(s) is (are) fairly
and reasonably entitled to indemnity for the expenses which the court
considers proper.
(c) The Borrower shall also indemnify the Obligor for all
costs and expenses, including reasonable counsel fees, incurred in:
(1) enforcing any obligation of the Borrower
under this Loan Agreement or any related agreement;
(2) taking any action requested by the Borrower;
(3) taking any action required by this Loan
Agreement, the Indenture, the Note Placement Agreement or any
related agreement; or
(4) taking any action considered necessary by the
Obligor and which is authorized by this Loan Agreement, the
Indenture, the Remarketing Agreement, the Note Placement
Agreement, or any related agreement.
(d) The indemnification provisions herein contained shall not
be exclusive or in limitation of, but shall be in addition to, the
rights to indemnification of the Indemnified Persons or the Indemnified
Parties under any other agreement or law by which the Borrower is bound
or to which it is subject.
(e) The obligations of the Borrower under this section shall
survive any assignment or termination of this Loan Agreement.
(f) Except for an indemnification relating solely to the Loan
and not to any of the other Loans made pursuant to the Indenture, the
foregoing indemnification of the Obligor or Indemnified Persons by the
Borrower shall be limited to the Borrower's Pro Rata Share of the
amount by which the Obligor or Indemnified Persons is or are to be
indemnified by the Borrower and all other Borrowers receiving Loans.
SECTION 5.4. INSURANCE. The Borrower represents and covenants that it
will keep, or cause to be kept, in force adequate insurance of a nature that
entities would maintain for like facilities and in accordance with the
requirements of the Reimbursement Agreement or any agreement securing the
Reimbursement Agreement. It is understood and agreed that the Obligor and the
Trustee shall have no duties or responsibilities whatsoever with respect to such
LOAN AGREEMENT
Page 9
<PAGE> 13
insurance. The net proceeds received from any casualty or property insurance
shall be applied as provided in the Reimbursement Agreement or any agreement
securing the Reimbursement Agreement.
Except as required by the Reimbursement Agreement or any agreement
securing the Reimbursement Agreement, the Borrower shall have the sole right and
responsibility to adjust any losses with its insurers and to conduct
negotiations in connection therewith.
SECTION 5.5. EMINENT DOMAIN. In the event that title to, or the
temporary use of, the facilities of the Borrower shall be taken by Eminent
Domain, the Borrower shall be obligated to continue to pay the Loan Payments
specified in Section 4.2(a) hereof. Any net proceeds received by the Borrower as
a result of such eminent domain to be applied as provided in the Reimbursement
Agreement or any agreement securing the Reimbursement Agreement.
SECTION 5.6. QUALIFICATION IN STATE. Subject to the provisions of
Section 5.2 hereof, the Borrower agrees that throughout the term of this Loan
Agreement, it will be qualified to do business in the State.
SECTION 5.7. LETTER OF CREDIT. On or prior to the issuance, sale and
delivery of the Notes, the Borrower hereby covenants and agrees to assist the
Obligor to obtain and deliver to the Trustee the Letter of Credit to be issued
by the Bank in favor of the Trustee for the benefit of the owners from time to
time of the Notes. The Letter of Credit shall comply with the additional
requirements stated in Section 5.01 of the Master Indenture.
SECTION 5.8. OBLIGOR'S LIMITED LIABILITY. It is recognized that the
Obligor's only source of funds with which to carry out its commitments with
respect to this Loan Agreement will be from the proceeds from the sale of the
Notes; and it is expressly agreed that the Obligor shall have no liability,
obligation, or responsibility with respect to this Loan Agreement except to the
extent of funds available from such Note proceeds.
SECTION 5.9. COMPLIANCE WITH LAWS. The Borrower shall, throughout the
term of this Loan Agreement and at no expense to the Obligor or Trustee,
promptly comply with all laws, ordinances, orders, rules, regulations and
requirements of duly constituted public authorities which are applicable to the
Loan Project or to the repair and alteration of its facilities, or to the use or
manner of use of its facilities, provided, however, that such laws, ordinances,
orders, rules, regulations and requirements shall not unlawfully discriminate
against the Borrower. Notwithstanding the foregoing, the Borrower shall have the
right to contest the legality of any such law, ordinance, order, rule,
regulation or requirement as applied to the Loan Project or its facilities
provided that, in the opinion of legal counsel acceptable to the Bank, such
contest shall not in any way materially and adversely affect or impair the
obligations of the Borrower under this Loan Agreement.
LOAN AGREEMENT
Page 10
<PAGE> 14
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. The occurrence and continuation of any
one of the following shall constitute an Event of Default hereunder:
(a) failure by the Borrower to pay or cause to be paid any
amounts required to be paid as Loan Payments under this Loan Agreement
on the dates and in the manner specified herein; or
(b) failure by the Borrower to observe and perform any
covenant, condition or agreement on its part to be observed or
performed in this Loan Agreement, other than as referred to in
subsection (a) above, for a period of 30 days after written notice,
specifying such failure and requesting that it be remedied, is given to
the Borrower by the Obligor, the Trustee or the Bank, unless (i) the
Trustee and the Bank shall agree in writing to an extension of such
time prior to its expiration or (ii) if the failure is such that it can
be corrected but not within such 30-day period, corrective action is
instituted by the Borrower within such period and diligently pursued
until such failure is corrected; or
(c) the dissolution or liquidation of the Borrower or the
filing by the Borrower of a voluntary petition in bankruptcy, or
failure by the Borrower promptly to lift any execution, garnishment or
attachment of such consequence as will impair its ability to carry on
its obligations hereunder, or an order for relief under Title 11 of the
United States Bankruptcy Code, as amended from time to time, is entered
against the Borrower, or a petition or answer proposing the entry of an
order for relief against the Borrower under Title 11 of the United
States Bankruptcy Code, as amended from time to time, or its
reorganization, arrangement or debt readjustment under any present or
future federal bankruptcy act or any similar federal or state law shall
be filed in any court and such petition or answer shall not be
discharged within 90 days after the filing thereof, or the Borrower
shall fail generally to pay its debts as they become due, or a
custodian (including without limitation a receiver, trustee, assignee
for the benefit of creditors or liquidator of the Borrower) shall be
appointed for or take possession of all or a substantial part of its
property and shall not be discharged within 90 days after such
appointment or taking possession, or the Borrower shall consent to or
acquiesce in such appointment or taking possession, or assignment by
the Borrower for the benefit of its creditors, or the entry by the
Borrower into an agreement of composition with its creditors, or the
adoption of a resolution by the directors of the Borrower or the taking
of any other action to file a petition or answer proposing the entry of
an order for relief against the Borrower under Title 11 of the United
States Bankruptcy Code, as amended from time to time, or its
reorganization, arrangement or debt readjustment under any present or
future federal bankruptcy act or any similar federal or state laws;
provided, that the term "dissolution or liquidation of the Borrower,"
as used in this subsection (c), shall not be construed to include the
cessation of the corporate existence of the Borrower resulting either
from a merger or consolidation of the Borrower into or with another
entity or a dissolution or liquidation of the Borrower following a
transfer of all or
LOAN AGREEMENT
Page 11
<PAGE> 15
substantially all of its assets as an entirety, under the conditions
permitting such actions contained in Section 5.2 hereof; or
(d) any material warranty, representation or other statement
made by or on behalf of the Borrower contained herein, or in any
document or certificate furnished by the Borrower in compliance with or
in reference hereto, is false or misleading in any material respect
when made; or
(e) The occurrence of an Event of Default under the
Reimbursement Agreement.
SECTION 6.2. REMEDIES ON DEFAULT. Whenever any Event of Default shall
have occurred and be continuing hereunder, the Trustee may take any one or more
of the following remedial steps:
(a) The Obligor or the Trustee may exercise any right, power
or remedy permitted to it by law, and shall have in particular, without
limiting the generality of the foregoing, the right to declare the
unpaid Loan Payments to be immediately due and payable, if concurrently
with or prior to such declaration the unpaid principal of and all
unpaid accrued interest on the Notes (or a portion of the Notes
representing the Borrower's Pro Rata Share of Notes) have been declared
to be due and payable under the Indenture, and upon such declaration
the unpaid Loan Payments shall thereupon become forthwith due and
payable in an amount sufficient to pay the principal of and interest on
the Notes (or such portion of Notes) under Section 8.02 of the Master
Indenture, without presentment, demand or protest, all of which are
hereby expressly waived. The Borrower shall forthwith pay to the
Trustee the entire principal of and interest accrued on such Notes.
Any declaration of acceleration of the Notes may be waived,
rescinded and annulled pursuant to and in accordance with Section 8.11
of the Master Indenture.
(b) The Obligor or the Trustee may take whatever action at law
or in equity as may appear necessary or desirable to collect the
payments and other amounts then due and thereafter to become due or to
enforce the performance and observance of any obligation, agreement or
covenant of the Borrower under this Loan Agreement, provided, however,
all such action shall be with the consent of the Bank (which consent
shall be required only so long as the Letter of Credit is in effect and
has not been wrongfully dishonored).
(c) The Obligor or the Trustee shall, subject to the
limitations set forth in Section 5.1 of this Loan Agreement, have
reasonable access to inspect, examine and make copies of the books and
records and any and all accounts, data and income tax and other tax
returns of the Borrower relating to the Loan Project or an Event of
Default during regular business hours of the Borrower if reasonably
necessary in the opinion of the Trustee or the Obligor.
LOAN AGREEMENT
Page 12
<PAGE> 16
In case the Obligor or the Trustee shall have proceeded to enforce its
rights under this Loan Agreement and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Obligor or the Trustee as the case may be, then and in every such case
the Borrower, the Obligor and the Trustee shall be restored respectively to
their several positions and rights hereunder, and all rights, remedies and
powers of the Borrower, the Obligor and the Trustee shall continue as though no
such proceeding had been taken, except to the extent of any adverse
determination.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Borrower under the federal bankruptcy laws or any
other applicable law, or in case a receiver or trustee shall have been appointed
for the property of the Borrower, or in the case of any other similar judicial
proceedings relative to the Borrower, or to the creditors or property of the
Borrower, the Trustee shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Loan Agreement and, in case of any
judicial proceedings, to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
allowed in such judicial proceedings relative to the Borrower, its creditors or
its property, and to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized to make such payments to the Trustee, and
to pay to the Trustee any amount due it for compensation and expenses, including
reasonable attorney fees incurred by it up to the date of such distribution.
SECTION 6.3. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. In the
event the Obligor or the Trustee should employ attorneys or incur other expenses
for the collection of the payments due under this Loan Agreement or the
enforcement of the performance or observance of any obligation or agreement on
the part of the Borrower herein contained, the Borrower agrees that it will on
demand therefor pay to the Obligor or the Trustee the reasonable fees of such
attorneys and such other expenses so incurred by the Obligor or the Trustee.
SECTION 6.4. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Obligor or the Trustee is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Loan Agreement
and the Indenture now or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any Event of
Default hereunder shall impair any such right or power or shall be construed to
be a waiver thereof, but any such right and power may be exercised from time to
time and as often as may be deemed expedient. In order to entitle the Obligor to
exercise any remedy reserved to it in this Article VI, it shall not be necessary
to give any notice, other than such notice as may be herein expressly required.
Such rights and remedies as are given the Obligor hereunder shall also extend to
the Trustee, and the Trustee and the Owners from time to time of the Notes shall
be deemed third party beneficiaries of all covenants and agreements herein
contained.
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event
any agreement contained in this Loan Agreement should be breached by the
Borrower and thereafter
LOAN AGREEMENT
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<PAGE> 17
waived by the Obligor or the Trustee, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
ARTICLE VII
PREPAYMENT OF LOAN PAYMENTS
SECTION 7.1. GENERAL OPTION TO PREPAY THE LOAN PAYMENTS. With the
written consent of the Bank (so long as the Letter of Credit is in effect and
has not been wrongfully dishonored), the Borrower shall have, and is hereby
granted, the option to prepay the Loan Payments payable under Section 4.2(a)
hereof, in whole or in part, by directing the Obligor to direct the Trustee to
redeem all or a portion of the Notes then Outstanding, in the manner, at the
redemption prices (including premium, if any), from the sources and on the dates
specified in the Indenture and in the Notes for optional redemption. The Trustee
shall, in accordance with Section 4.04 of the Indenture, draw upon the Letter of
Credit to prepay the principal of and any applicable redemption premium and
accrued interest on the Notes payable under this Section 7.1 in accordance with
the terms of the Letter of Credit. The Borrower may not revoke its election to
prepay all or part of the Loan Payments without the prior written consent of the
Bank.
SECTION 7.2. OBLIGATION TO PREPAY LOAN PAYMENTS ON FAILURE TO RENEW OR
REPLACE LETTER OF CREDIT AND OTHER EVENTS. The Borrower acknowledges that the
Notes are subject to mandatory redemption prior to maturity if the Borrower does
not renew the Letter of Credit or obtain a Substitute Letter of Credit at least
60 days prior to the date of expiration or termination of the Letter of Credit,
and may be subject to other mandatory redemption, all as provided in the
Indenture. The Loan is subject to prepayment on the date of any such redemption
at a price equal to the redemption price of the Notes (or Borrower's Pro Rata
Share of Notes) to be redeemed (including accrued interest and any redemption
premium).
SECTION 7.3. NOTICE OF PREPAYMENT. To exercise an option granted to the
Borrower by Section 7.1 hereof, the Borrower shall give not less than 30 days
written notice to the Obligor (45 days if the Loan has been made from the
proceeds of Fixed Rate Notes), the Trustee and the Bank which notice shall
specify therein the date upon which prepayment will be made, which date shall be
not less than 30 days from the date the notice is mailed (45 days if the Loan
has been made from the proceeds of Fixed Rate Notes), and shall specify that all
of the outstanding Loan Payments or a specified portion thereof is to be so
prepaid. The Obligor has directed the Trustee to take forthwith all steps (other
than the payment of the money required to redeem the Notes) necessary under the
applicable provisions of the Indenture to effect the redemption of the Notes (or
a portion thereof) as provided in this Article VII.
LOAN AGREEMENT
Page 14
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. NOTICES. All notices, certificates or other communications
shall be sufficiently given and shall be deemed given on the first to occur of
(i) two Business Days after such notices are deposited in the United States mail
and sent by first class mail, postage prepaid, (ii) when the same are delivered,
in each case, to the parties at the addresses set forth below or at such other
address as a party may designate by notice to the other parties, or (iii) when
the same are sent by facsimile or telecopy (the receipt of which is orally or
electronically confirmed) promptly confirmed in writing by first class mail,
postage prepaid:
If to the Obligor:
LAM Funding, L.L.C.
c/o MAXCO, Inc.
1118 Centennial Way
Lansing, Michigan 48917
Attention: Vincent Shunsky, Vice President
Telephone: (517) 321-3130
Telefax: (517) 321-1022
and
c/o LandEquities Corporation
2163 University Park Drive
Okemos, MI 48864
Attention: Rodney C. Robinson, President
Telephone: (517) 349-5656
Telefax: (517) 349-6071
If to the Borrower:
As set forth in Schedule I.
If to the Trustee:
By First Class Mail By Hand Delivery
Michigan National Bank Michigan National Bank
77 Monroe Center, N.W. 77 Monroe Center, N.W.
P.O. Box 1707 Grand Rapids, Michigan 49503
Grand Rapids, Michigan 49501-1707 Attention: Corporate Trust
Attention: Corporate Trust Department Department
Telephone: (616) 451-7729 Telephone: (616) 451-7729
Telefax: (616) 451-7887 Telefax: (616) 451-7887
LOAN AGREEMENT
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<PAGE> 19
If to the Bank:
First of America Bank, N.A.
IBM Building, 5th Floor
One Michigan Avenue
Lansing, Michigan 48933
Telephone: (517) 334-5454
Telefax: (517) 334-5489
with a copy to:
First of America Bank, N.A.
108 East Michigan Avenue
Kalamazoo, Michigan 49009
[Mail Code K-B01-2C]
Attention: Corporate and Municipal Finance Division
Telephone: (616) 376-9040
Telefax: (616) 376-9152
A duplicate copy of each notice, certificate or other communication given
hereunder by either the Obligor or the Borrower to the other shall also be given
to the Trustee and the Bank.
SECTION 8.2. ASSIGNMENTS. The Obligor shall assign and pledge to the
Trustee its right, title and interest in and to this Loan Agreement as provided
by Section 4.4 hereof, and the Borrower may with the consent of the Bank (so
long as the Letter of Credit is in effect and has not been wrongfully
dishonored) assign to any surviving, resulting or transferee corporation or
entity its rights and obligations under this Loan Agreement as provided by
Section 5.2 hereof.
SECTION 8.3. SEVERABILITY. If any provision of this Loan Agreement
shall be held or deemed to be or shall, in fact, be illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative or unenforceable to any
extent whatsoever.
SECTION 8.4. EXECUTION OF COUNTERPARTS. This Loan Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
SECTION 8.5. AMOUNTS REMAINING IN ANY FUND OR WITH TRUSTEE. It is
agreed by the parties hereto that after payment in full of (i) the principal of,
premium, if any, and interest on the Notes, (ii) the fees, charges, indemnities
and expenses of the Obligor and the Trustee in accordance herewith and with the
Indenture (the payment of which fees, charges, indemnities and expenses shall be
evidenced by a written certification of the Obligor that it has fully paid all
such fees, charges, indemnities and expenses), and (iii) all other amounts
required to be paid under this Loan Agreement and the Indenture, any amounts
remaining in any fund or account maintained under this Loan Agreement or for the
Borrower under the Indenture, and not applied to the principal of, premium, if
any, and interest on the Notes or, as applicable, the Borrower's Pro Rata Share
of the Notes shall belong to and be paid to the Borrower by the Trustee at the
LOAN AGREEMENT
Page 16
<PAGE> 20
direction of the Obligor, provided, that, prior to making any payments, Trustee
shall request a written statement from the Bank as to whether or not the Bank
has been reimbursed by the Borrower for any and all drawings under the Letter of
Credit pursuant to the Reimbursement Agreement or whether any other obligations
are then due and owing to the Bank under the Reimbursement Agreement, and such
amounts remaining in the Note Fund shall, upon written notice from the Bank that
the Borrower has not reimbursed the Bank under the Reimbursement Agreement for
any such drawing under the Letter of Credit or for any other obligation then due
and owing to the Bank under the Reimbursement Agreement (which notice shall
state the unreimbursed amount), belong to and be paid to the Bank by the Trustee
to the extent that the Borrower has not so reimbursed the Bank.
SECTION 8.6. AMENDMENTS, CHANGES, AND MODIFICATIONS. Subsequent to the
initial issuance of the Notes and prior to their payment in full, this Loan
Agreement may not be effectively amended, changed, modified, altered, or
terminated without the written consent of the Trustee and the Bank (so long as
the Letter of Credit is in effect and has not been wrongfully dishonored).
SECTION 8.7. GOVERNING LAW. This Loan Agreement shall be governed
exclusively by and construed in accordance with the applicable law of the
State.
SECTION 8.8. AUTHORIZED BORROWER REPRESENTATIVE. Whenever under the
provisions of this Loan Agreement the approval of the Borrower is required or
the Borrower is required to take some action at the request of the Obligor, the
Trustee or the Bank, such approval or such request shall be given for the
Borrower by the Authorized Borrower Representative, and the Obligor, the
Trustee, and the Bank shall be authorized to act on any such approval or request
and neither party hereto shall have any complaint against the other or against
the Trustee or the Bank as a result of any such action taken.
SECTION 8.9. TERM OF LOAN AGREEMENT. This Loan Agreement shall be in
full force and effect from the date hereof, and shall continue in effect until
the payment in full of all principal of, premium, if any, and interest on the
Notes, or provision for the payment thereof shall have been made pursuant to
Article XIII of the Indenture, all fees, charges, indemnities and expenses of
the Obligor and the Trustee have been fully paid or provision made for such
payment (the payment of which fees, charges, indemnities and expenses shall be
evidenced by a written certification of the Borrower that it has fully paid all
such fees, charges, indemnities and expenses) and all other amounts due
hereunder have been duly paid or provision made for such payment and all
obligations of the Borrower to the Bank under the Reimbursement Agreement have
been paid. All representations, certifications and covenants by the Borrower as
to the indemnification of various parties as described in Section 5.3 hereof and
the payment of fees and expenses of the Obligor and the Trustee as described in
Section 6.3 hereof shall survive the termination of this Loan Agreement.
SECTION 8.10. BINDING EFFECT. This Loan Agreement shall inure to the
benefit of and shall be binding upon the Obligor, the Borrower and their
respective successors and assigns; subject, however, to the limitations
contained in Sections 4.4 and 5.2 hereof.
LOAN AGREEMENT
Page 17
<PAGE> 21
SECTION 8.11. REFERENCES TO BANK AND LETTER OF CREDIT. At any time
while the Letter of Credit has been wrongfully dishonored, all references to the
Bank and the Letter of Credit shall be ineffective.
SECTION 8.12. OBLIGOR NOT LIABLE. Notwithstanding any other provision
of this Loan Agreement (a) the Obligor shall not be liable to the Borrower, the
Trustee, the owners of Notes or any other person for any failure of the Obligor
to take action under this Loan Agreement unless the Obligor (i) is requested in
writing by an appropriate person to take such action, (ii) is assured to its
satisfaction of payment of, indemnification against or reimbursement for any
expenses in such action and (iii) is afforded a reasonable period under the
circumstances to take such action, and (b) neither the Obligor nor any member of
the Obligor or any other official or employee of the Obligor shall be liable to
the Borrower or any other person for any action taken by its officers, servants,
agents, members, counsel or employees, or for any failure to take action under
this Loan Agreement except that the Obligor agrees to take, or refrain from, any
action required by an injunction and to comply with any final judgment for
specific performance. In acting under this Loan Agreement, or in refraining from
acting under this Loan Agreement, the Obligor may conclusively rely on the
advice of its counsel. Nothing in this Loan Agreement is a covenant,
stipulation, obligation or agreement of any present or future employee, member,
counsel or agent of the Obligor in his individual capacity, and neither the
members of the Obligor nor any person executing this Loan Agreement or the Notes
shall be subject to any personal liability or accountability by reason of such
execution by the Obligor or any officer or employer of the Obligor.
[Execution of this Loan Agreement appears on Schedule I]
LOAN AGREEMENT
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<PAGE> 22
SCHEDULE I
TO
LOAN AGREEMENT DATED DECEMBER 1, 1997
1. Borrower's Name: Atmosphere Annealing, Inc.
2. Type of Organization: Corporation
3. State of Organization: Michigan
4. Borrower's Address, Phone
and Fax Number: 209 West Mt. Hope Avenue
Lansing, Michigan 48910
Phone: (517) 321-3130
Fax: (517) 321-1022
5. Related Supplement: Supplemental Indenture No. 1
6. Series Designation of Notes: Variable Rate Series A
7. Amount of Loan: $5,385,000
8. Description of Loan Project: To refinance various term
loans with the Bank; acquire
manufacturing facilities in
Lansing, Michigan; finance
plant renovations and equipment
purchases in Ohio and Indiana
and pay the costs of issuance.
IN WITNESS WHEREOF, the Obligor and the Borrower have caused this Loan
Agreement to be executed in their respective names by their duly authorized
agents, all as of the date first above written.
ATMOSPHERE ANNEALING, INC. LAM FUNDING, L.L.C.
By: BY: MAXCO, INC., ITS MEMBER
----------------------
Vincent Shunsky
Its: Treasurer By:
------------------------
Its: Vice President
BY: LANDEQUITIES
CORPORATION, ITS MEMBER
By:
------------------------
Its: President
<PAGE> 23
GUARANTY - MAXCO, INC.
THIS GUARANTY AGREEMENT ("Guaranty") is entered into as of December 1,
1997, by and between MAXCO, Inc., a Michigan corporation (the "Guarantor") and
First of America Bank, N.A. (together with any successors, as "Bank").
RECITALS:
A. Arrangements have been made for the sale by LAM Funding,
L.L.C. (the "Issuer") of its $43,260,000 Loan Program Notes (Variable Rate
Series A) (Installment No. 1) (collectively the "Note") issued pursuant to a
Master Trust Indenture dated as of December 1, 1997 (the "Master Indenture")
between the Borrower and Michigan National Bank, as Trustee (the "Trustee") and
Supplemental Trust Indenture No. 1 between the Issuer and the Trustee dated as
of December 1, 1997 (the "Supplemental Indenture") (the Master Indenture and
the Supplemental Indenture are herein termed the "Indenture").
B. Pursuant to a Loan Agreement between the Issuer and the
Borrower of even date herewith ("Loan Agreement") a portion of the proceeds of
the sale of the Notes (the "Loan Amount," as specified in Schedule I) will be
loaned by the Issuer to the Borrower specified on Schedule I to this Guaranty
(the "Borrower") to refinance certain existing indebtedness of the Borrower and
to finance the Project described in the Loan Agreement on certain real property
owned by the Borrower; and
C. Borrower has secured payment and performance of its
liabilities and obligations under the Reimbursement Agreement (as defined
below) with mortgagesincluding security agreements and assignment of rents and
leases as of the date hereof on certain real estate owned by the Borrower and
located in North Vernon, Indiana and Canton, Ohio ( collectively the
"Mortgage") and the Borrower has granted a security agreement to the Bank as of
the date hereof (the "Security Agreement") which also secures payment and
performance of its liabilities and obligations under the Reimbursement
Agreement (as defined below); and
D. The Borrower and the Bank are parties to a Borrower
Reimbursement Agreement (the "Reimbursement Agreement") whereby the Borrower
agrees to reimburse the Bank for its pro rata share of monies advanced by the
Bank pursuant to drafts by the Trustee on the Bank's Letter of Credit No.
023735 (the "Letter of Credit") issued pursuant to a Master Reimbursement
Agreement between the Issuer and the Bank dated as of December 1, 1997 (the
"Master Reimbursement Agreement") and which provides the liquidity facility for
payment of the purchase price of the Note upon tender thereof and a credit
facility for payment of principal of and interest on the Note on the scheduled
due dates and redemption; and
E. The Borrower is an affiliate of the Guarantor and the
Guarantor desires that the Bank issue the Letter of Credit in order to enhance
the marketability of the Notes and is willing to enter into this Guaranty as an
inducement to the Bank to issue the Letter of Credit on behalf of the Borrower
which is related to the Guarantor by common ownership and management.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the Guarantor, hereby covenants and agrees with the
Bank as follows:
<PAGE> 24
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF GUARANTOR
SECTION 1.1 The Guarantor represents and warrants as follows:
(a) The Guarantor is a Michigan corporation, and is
legally organized and validly existing under the laws of the
state of its incorporation, and is duly qualified to do
business and in good standing in every jurisdiction in which
such qualification is material to such entity's business and
operations or the ownership of its properties, and has all
authority to conduct the business now being conducted by it,
to own and operate the properties used in such business, and
to execute and carry out and perform its obligations under
this Guaranty.
(b) The execution, delivery and performance by the
Guarantor of this Guaranty to which each such entity is a
party have been duly authorized by all necessary corporate
action, do not contravene or violate (i) the Articles of
Incorporation and Bylaws of the Guarantor, (ii) any law,
order, rule or regulation applicable to the Guarantor, or
(iii) any contract or agreement to which the Guarantor is a
party or by which any such entity is bound and do not result
in or require the creation of any lien, security interest or
other charge or encumbrance (other than pursuant hereto or to
the Operative Documents (as defined in Article VIII below))
upon or with respect to any of the properties of any such
entity.
(c) All authorizations or approvals of any governmental
body required to be obtained by the Guarantor for (i) the
execution, delivery and performance by the Guarantor of this
Guaranty and (ii) the issue and sale by the Borrower of the
Notes, have been obtained and remain in full force and effect.
(d) This Guaranty is a legal, valid and binding
obligation of the Guarantor enforceable against the Guarantor,
as applicable, in accordance with its terms, except as the
enforceability may be limited by principles of equity or by
bankruptcy, insolvency or similar laws affecting the
enforcement of rights of creditors of the Guarantor generally.
(e) There is no litigation undisclosed to the Bank, legal
or administrative proceedings, investigations or any other
action of any nature, pending, or to its knowledge, threatened
or affecting the Guarantor, which includes the possibility of
any judgment or liability not covered by insurance which may
materially or adversely affect the Project or the rights of
the Guarantor to carry on business as now conducted. Details
of all litigation, legal or administrative proceedings,
investigations or any other action of a similar nature,
pending or threatened against any of the Guarantor, at any
time during the term of this Guaranty will be brought to the
attention of the Bank, in writing forthwith.
(f) All financial statements and information relating to
the Guarantor which have been or may hereafter be delivered to
the Bank are true and correct and have been prepared in
accordance with generally accepted accounting principles
consistently applied, and there have been no material adverse
changes in the
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financial condition of the Guarantor since the submission of
any financial information to Bank and no such material adverse
changes in such financial condition are imminent or
threatened.
(g) All federal, state and other tax returns and reports
of the Guarantor, including reports from any governmental
authority, for the proper maintenance and operation of the
properties, assets and business of the Guarantor, as may be
required by law to be filed or paid, have been filed, and all
federal and other taxes, assessments, fees and other
governmental charges, (other than those presently payable,
without penalty) imposed upon the Guarantor or its properties
or assets, which are due and payable, have been fully paid
unless being contested by the Guarantor or any of them in the
ordinary course of business.
(h) The Guarantor has not willfully or negligently acted
or failed to act in a manner which would violate any state or
federal environmental law in effect at such time or now in
effect with respect to use or occupancy of any of its
property.
ARTICLE II
AGREEMENTS
SECTION 2.1 The Guarantor hereby unconditionally, guarantees to the
Bank (a) the full and prompt payment of all of the Borrower's obligations and
indebtedness required to be paid under the Reimbursement Agreement, whether now
existing or later arising, when and as the same shall become due, to the extent
of the Guaranteed Amount specified in Schedule I (the "Guaranteed Amount"),
plus payment of accrued interest and reasonable attorneys' fees and court costs
for collection of such obligations and indebtedness by the Bank, and (b) the
performance of all covenants and agreements of the Borrower under the
Reimbursement Agreement. All payments by the Guarantor shall be paid in lawful
money of the United States of America. Each and every default in payment of the
principal of, premium, if any, or interest on the Reimbursement Agreement or
performance of covenants and agreements of the Borrower under the Reimbursement
Agreement shall give rise to a separate cause of action hereunder, and separate
suits may be brought hereunder as each cause of action arises. In the event
that the Guarantor shall be entitled to set off the value of any collateral
given to the Bank by the Borrower, the value of such collateral shall first be
credited to the portion of the Borrower's obligations and indebtedness under
the Reimbursement Agreement for which the Guarantor is not liable and then to
the portion of such obligations and indebtedness for which the Guarantor is
liable.
SECTION 2.2 The obligations of the Guarantor under this Guaranty
shall be absolute and unconditional and shall remain in full force and effect
until the entire obligations and indebtedness of the Borrower under the
Reimbursement Agreement shall have been paid or duly provided for, and such
obligations shall not be affected, modified or impaired upon the happening from
time to time of any event, including without limitation any of the following,
whether or not with notice to, or the consent of, the Guarantor:
(a) The waiver, compromise, settlement, release or
termination of any or all of the obligations, covenants or
agreements of the Issuer contained in the Indenture, or of the
payment, performance or observance thereof;
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(b) The failure to give notice to the Guarantor of the
occurrence of a default or an event of default under the terms
and provisions of this Guaranty, the Operative Documents, the
Reimbursement Agreement and any and all collateral documents
delivered pursuant thereto;
(c) The transfer, assignment or mortgaging or the
purported transfer, assignment or mortgaging of all or any
part of the interest of the Bank or the Borrower in the
Premises (as defined in the Reimbursement Agreement) except as
referred to in the Reimbursement Agreement or any failure of
title with respect to the Bank's or the Borrower's interest in
the Premises or in the real estate subject to the Mortgage or
the invalidity, unenforceability or termination of the
Reimbursement Agreement, the Mortgage, the Security Agreement,
the Indenture, the Personal Guaranty, the Company Guaranty, or
the Notes;
(d) The waiver, compromise, settlement, release or
termination of the Borrower's obligations, covenants or
agreements contained in the Reimbursement Agreement or the
Indenture, or of the payment, performance or observance
thereof;
(e) The extension of the time for payment of any
principal of, premium, if any, or interest on the Notes, owing
or payable on the Notes, or of the time for performance of any
obligations, covenants or agreements under or arising out of
the Operative Documents or the extension or the renewal of any
thereof;
(f) The modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth
in the Operative Documents or this Guaranty;
(g) The taking or the omission of any of the actions referred
to in this Guaranty or the Operative Documents;
(h) Any failure, omission, delay or lack on the part of
the Borrower or Bank to enforce, assert or exercise any right,
power or remedy conferred on the Borrower or the Bank in this
Guaranty or the Operative Documents, or any other act or acts
on the part of the Borrower, Bank or any of the holders from
time to time of the Notes;
(i) The voluntary or involuntary liquidation,
dissolution, sale or other disposition (other than by way of
mortgage or granting of security interest to secure borrowing
of the Guarantor) of all or substantially all the assets,
marshalling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition with
creditors or readjustment of, or other similar proceedings of
the Borrower, the Personal Guarantor, the Company Guarantor,
or any of them, or any lessee of the Project or any of the
assets of any of them, or any allegation or contest of the
validity of this Guaranty, the Indenture, the Mortgage, the
Security Agreement, the Company Guaranty, the Personal
Guaranty, or the Reimbursement Agreement, or the disaffirmance
of the Reimbursement Agreement, the Mortgage, the Security
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Agreement, the Indenture, the Company Guaranty, the Personal
Guaranty, or this Guaranty;
(j) To the extent permitted by law, any event or action
that would, in the absence of this clause, result in the
release or discharge by operation of law of the Guarantor, the
Company Guarantor, or the Personal Guarantor from the
performance or observance of any obligation, covenant or
agreement contained in this Guaranty, the Company Guaranty, or
the Personal Guaranty; or
(k) The default or failure of the Guarantor, the Company
Guarantor, or the Personal Guarantor fully to perform any of
their obligations set forth in this Guaranty, the Company
Guaranty, or the Personal Guaranty.
SECTION 2.3 No set-off, counterclaim, reduction, or diminution of an
obligation, or any defense of any kind or nature (other than performance by the
Guarantor of its obligations hereunder) which the Guarantor has or may have
against the Borrower, the Bank or any holder of the Notes shall be available
hereunder to the Guarantor against the Bank.
SECTION 2.4 In the event of a default in the performance of any
covenants and agreements by the Borrower under the Reimbursement Agreement, the
Bank may proceed to enforce its rights hereunder and the Bank shall have the
right to proceed first and directly against the Guarantor, under this Guaranty
without proceeding against or exhausting any other remedies which it may have
and without resorting to any other security or guaranty held by the Bank.
SECTION 2.5 The Guarantor hereby expressly waives notice from the
Bank of its acceptance and reliance on this Guaranty. The Guarantor agrees to
pay all costs, expenses and fees, including all reasonable attorneys' fees
which may be incurred by the Bank in enforcing or attempting to enforce this
Guaranty or protecting the rights of the Bank hereunder following any default
on the part of the Guarantor hereunder, whether the same shall be enforced by
suit or otherwise.
SECTION 2.6 This Guaranty shall not be deemed to create any right in,
or to be in whole or in part for the benefit of any person other than the Bank,
and its permitted successors and assigns, and may be enforced only by the Bank.
ARTICLE III
AFFIRMATIVE COVENANTS
SECTION 3.1 From the date hereof until any indebtedness and
obligations under the terms of the Reimbursement Agreement are paid in full,
the Guarantor covenants and agrees that it will:
(a) Reporting. Provide or cause to be provided to the
Bank within 90 days after the end of each fiscal year, the
Guarantor's annual audited financial statements internally
prepared in accordance with generally accepted accounting
principles which shall include a balance sheet, statement of
income, statement of reconcilation of stockholder's equity,
statement of cashflows, and within 45 days after the end of
each quarter, the Guarantor's quarterly direct financial
reports
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which shall include a balance sheet at the end of each such
quarterly period and an income statement for the period for
the beginning of the current fiscal year to the end of such
quarter. A quarterly financial statement shall be prepared on
substantially the same accounting basis as the annual
statements described above and shall be certified by an
officer of the Guarantor as being true and correct to
the best of his or her knowledge and belief (subject to audit
and year-end adjustments).
(b) No Default Certificate. Together with such delivery
of the financial statements required by Section 3.1 (a) above,
furnish to the Bank a certificate of an officer of the
Guarantor stating that no Event of Default has occurred
hereunder, nor has any event occurred which, with notice
and/or passage of time, would constitute such an Event of
Default, or if any such Event of Default exists or would exist
with notice and/or the passage of time, stating the nature
thereof, the period of existence thereof and what action the
Guarantor proposes to take with respect thereto.
(c) Adverse Events. Promptly inform the Bank of the
occurrence of any Event of Default or of any event which, with
notice and/or the passage of time would become an Event of
Default, or of any occurrence which has or could reasonably be
expected to have a materially adverse effect upon the
business, properties, financial condition or ability to comply
with its obligations hereunder of the Guarantor.
(d) Other Information As Requested. Promptly furnish to
the Bank such other information regarding the operations,
business affairs and financial condition of the Guarantor as
the Bank may reasonably request from time to time, permit the
Bank, its employees, attorneys and its agents, to inspect all
of the books, records and properties of the Guarantor at any
reasonable time upon reasonable notice during normal business
hours.
(e) Maintain Existence. Do or cause to be done all things
necessary to preserve and keep in full force and effect the
existence, rights and franchises of the Guarantor and comply
with all applicable laws; continue to conduct and operate the
business of the Guarantor substantially as conducted and
operated during the present and preceding calendar year; at
all times maintain, preserve and protect all franchises and
trade names and preserve all the remainder of the property
used or useful in the conduct of the business of the Guarantor
and keep the same in good repair, working order and condition;
and from time to time make, or cause to be made, all needed
and proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in
connection therewith may be properly and advantageously
conducted at all times.
(f) Maintain Insurance. Maintain insurance against fire,
theft, and other casualty on its insurable real and personal
property at full replacement cost with policy terms and
conditions and companies acceptable to the Bank and maintain
insurance against liability on account of damage to persons or
property and as required under all workers' compensation laws.
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(g) Pay Taxes and Assessments. Duly pay and discharge or
cause to be paid and discharged all taxes, assessments and
other governmental charges imposed upon the Guarantor and its
properties or any part thereof or upon the income or profits
therefrom, as well as all claims for labor, materials or
supplies which, if unpaid, might by law become a lien or
charge upon its properties, except such items as are being in
good faith appropriately contested and for which security
sufficient to cover payment of such taxes or liens has been
provided to Bank.
(h) Accounting. Maintain a standard, modern system of
accounting for the Guarantor to permit the duly authorized
representatives of Bank at all reasonable times to examine and
inspect the books and records of the Guarantor or any related
business entity of the Guarantor, and to make abstracts and
copies thereof, and to inspect any property of the Guarantor
wherever the same may be located.
(i) Use of Property. All use of the Guarantor's
properties shall be in compliance with all state and federal
environmental laws, now existing or hereinafter enacted and
all permits, approvals and licenses concerning the use and
operation of such properties.
(j) Compliance with Law. The Guarantor shall comply with
all applicable federal, state and local laws, ordinances,
rules and regulations, including, but not limited to, all
environmental laws, ordinances, rules and regulations and
shall keep their real property free and clean of any liens
imposed pursuant to such laws, ordinances, rules and
regulations, and deliver to Bank such internally prepared
information, reports and forms satisfactory to Bank, together
with such other reports as Bank may reasonably request from
time to time to establish compliance with such laws.
(k) Litigation. The Guarantor will during the term of
this Guaranty, promptly furnish to the Bank, in writing, the
details of all material litigation, legal or administrative
proceedings, investigations or other actions of any nature
affecting the Guarantor, and, upon request of the Bank, submit
to the Bank the opinion of counsel to the Guarantor as to the
merits thereof. For purposes of this covenant only, "material"
shall be deemed to be any litigation, proceeding,
investigation or other action threatened in an amount
exceeding $50,000.
(l) Subordination. Except for payments on Subordinated
Indebtedness (as defined in the Subordination Agreement
described herein) as allowed by the Subordination Agreement of
even date between the Borrower, the Guarantor and the Bank
("Subordination Agreement") and advances for insurance, taxes
or rent by the Guarantor for the benefit of the Borrower,
subordinate any and all debt of the Borrower due to the
Guarantor to monies or like obligations owed the Bank. The
Guarantor may pay any such indebtedness in accordance with its
terms so long as the Guarantor is not in default hereunder and
will not become in default as a result of such payment under
any indebtedness owed to the Bank.
(m) Tangible Net Worth. Guarantor agrees to maintain
Tangible Net Worth of not less than Thirty Million and No/100
Dollars ($30,000,000) and a ratio of Debt to Tangible Net
Worth of not more than 1.75 to 1.0. "Tangible Net Worth"
shall
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<PAGE> 30
include the amount of total assets excluding the amount of
Intangible Assets minus the amount of total liabilities,
exclusive of Subordinated Debt, if any. "Intangible Assets"
shall include at book value, without limitation, leasehold
improvements, goodwill, patents, copyrights, secret processes,
deferred expenses relating to sales, general administrative,
research and development expense, and all amounts due from any
officer, employee, director, shareholder, member or Related
Person. "Debt means all liabilities including but not limited
to, accruals, deferrals, and capitalized leases, less
Subordinated Debt, if any.
(n) Working Capital. Guarantor agrees to maintain net
working capital (excess of Current Assets over Current
Liabilities) of not less than Seven Million Five Hundred
Thousand and no/100 Dollars ($7,500,000). "Current Assets"
shall mean the sum of cash, marketable securities having a
maturity of less than one (1) year, or which can be readily
liquidated in less than one year, inventory at lower of cost
or market, and ordinary trade accounts receivable excluding
any amount due from any officer, employee, director,
shareholder, member or Related Person. "Current Liabilities"
shall include all indebtedness normally held as due within one
(1) year (exclusive of Subordinated Debt, if any), and any
unsubordinated debt due to any officer, employee, director,
shareholder, member or Related person.
ARTICLE IV
FURTHER COVENANTS
SECTION 4.1 Covenants and Agreements with Respect to Other
Indebtedness. So long as the obligations of the Borrower to the Bank under
the Reimbursement Agreement remain outstanding, the Guarantor agrees to comply
with all covenants and agreements made in any and all instruments evidencing
any Other Indebtedness owed or to be owed by Guarantor to the Bank.
ARTICLE V
[INTENTIONALLY DELETED]
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6. 1
(a) The occurrence of any of the following events shall
be an event of default hereunder unless waived in writing by
the Bank:
(i) Any representation or warranty made by the
Guarantor pursuant hereto or in any financial data or
other information now or hereafter delivered shall
prove to have been incorrect in any material respect
when made; or
(ii) If any principal, premium, if any, or
interest or any other sums, owing by the Guarantor or
any of them to the Bank, whether now existing
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or hereafter arising, are not paid when due, whether
by acceleration or otherwise; or
(iii) The Guarantor shall fail to perform or
observe any term, covenant or agreement contained in
this Guaranty (other than by reason of non-payment),
after 30 days written notice having been given to the
Guarantor by Bank; or
(iv) Any material provision of this Guaranty shall
at any time for any reason cease to be valid and
binding on the Guarantor, or shall be declared to be
null and void, or the validity or enforceability
thereof against the Guarantor shall be contested by
the Guarantor or any governmental agency or
authority, or the Guarantor shall deny that it has
any or further liability or obligation under this
Guaranty; or
(v) The default by the Guarantor in the due
payment of any of its indebtedness for borrowed money
in excess of $50,000 or in the observance or
performance of any term, covenant or condition in any
agreement or instrument evidencing, securing or
relating to such indebtedness, and such default shall
be continued for the sooner to occur of a period of
30 days or the acceleration of such indebtedness; or
(vi) The entry against the Guarantor, of one or
more judgments or decrees involving an aggregate
liability of $50,000 or more, which has or have
become non-appealable and shall remain undischarged,
unsatisfied by insurance and unstayed for more than
20 days, whether or not consecutive; or the issuance
and levy of a writ of attachment or garnishment
against the property of the Guarantor, in an action
claiming $50,000 or more, and which is not released
or appealed and bonded in a manner satisfactory to
the Bank; or
(vii) If the Guarantor, shall voluntarily suspend
transaction of its business; or if the Guarantor
shall make a general assignment for the benefit of
creditors; or shall be the object of a petition under
the United States Bankruptcy Code which is not
dismissed within 30 days of the filing of such
petition; or shall file a voluntary petition in
bankruptcy or for a reorganization or to effect a
plan or other arrangement with its creditors; or
shall file an answer to a creditor's petition or
other petition against it (admitting the material
allegations thereof) for liquidation or adjustment of
debts or for a reorganization; or shall apply for or
permit the appointment of a receiver, trustee, or
custodian for any substantial portion of its
properties or assets; or if any order shall be
entered by any court approving an involuntary
petition seeking reorganization which is not
dismissed within 30 days after entry; or if a
receiver, trustee, or custodian shall be appointed
for it or for any substantial portion of its property
or assets; or if it becomes unable to meet its
obligations as they mature; or
(viii) The occurrence of a default or an Event of
Default under any of Operative Documents.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.1 The obligations of the Guarantor hereunder shall arise
absolutely and unconditionally upon the issuance of the Letter of Credit. The
execution and delivery of this Guaranty shall not impair or diminish in any
respect the obligations of the Guarantor under this Guaranty or the Operative
Documents.
SECTION 7.2 No delay or omission to exercise any right or power
accruing upon any default, omission or failure or performance hereunder shall
impair any such right or power or shall be construed to be a waiver thereof,
but any such right and power may be exercised from time to time and as often as
may be deemed expedient. In order to entitle the Bank to exercise any remedy
reserved to it in this Guaranty, it shall not be necessary to give any notice,
other than such notice as may be expressly required herein or in the Operative
Documents. In the event any provision contained in the Guaranty should be
breached by any party and thereafter duly waived by the other party so
empowered to act, such waiver shall be limited to the particular breach so
waived and shall not be deemed to waive any other breach hereunder. No waiver,
amendment, release or modification of this Guaranty shall be established by
conduct, custom or course of dealing, but solely by an instrument in writing
duly executed by the parties to this Guaranty.
SECTION 7.3 Guarantor waives any and all defenses, claims and
discharges of the Borrower with respect to the indebtedness described in
paragraph 2.1 above, except the defense of discharge by payment. Without
limiting the generality of the foregoing, Guarantor will not assert, plead or
enforce against the Bank any defense of waiver, release, discharge of
bankruptcy, statute of limitations, res judicata, statute of frauds,
anti-deficiency statute, fraud, incapacity, minority, usury, illegality or
unenforceability that may be available to Borrower or any other person liable
in respect of any such indebtedness or any set-off available against Bank to
the Borrower or any such other person, whether or not on account of a related
transaction. Guarantor shall be liable for any deficiency remaining after
foreclosure of or realization upon any security for all or part of the
indebtedness described in paragraph 2.1 above, whether or not liability of the
Borrower or any other obligor for the deficiency changed pursuant to statute or
judicial decision.
SECTION 7.4 If any payment applied by the Bank to the indebtedness
described in paragraph 2.1 above is set aside, recovered, rescinded, or
required to be returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of the Borrower or any other obligor)
the indebtedness to which the payment was applied shall, for the purposes of
this Guaranty, be deemed to have continued in existence, notwithstanding such
application, and this Guaranty shall be enforceable as to such indebtedness as
fully as if the Bank had not made the application.
SECTION 7.5 The Guarantor agrees to indemnify the Bank and hold it
harmless from and against any and all losses, expenses, damages, costs and
reasonable attorneys' fees incurred by the Bank in connection with or as a
result of the assertion of any and all claims for the return of monies
(including the proceeds of any collateral received or applied by the Bank in
partial or full payment of the indebtedness), including without limitation all
such claims based upon allegations that monies so received by the Bank
constituted trust funds under any applicable law or that the payment of such
monies or the granting of such collateral to the Bank constituted a
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<PAGE> 33
preference or a fraudulent transfer under the Bankruptcy Act or any other
applicable law. This indemnity shall extend to and include all monies
recovered from or paid over by the Bank as a result of such claim, regardless
of the basis thereof, and all costs and expenses including reasonable
attorneys' fees incurred by the Bank in investigating, evaluating and
contesting such claims, regardless of the outcome.
SECTION 7.6 The Guarantor represents and warrants that it has
received and reviewed the Reimbursement Agreement between the Bank and the
Borrower understands its terms and provisions, and the obligations of the
Borrower which the Guarantor is guaranteeing hereby.
SECTION 7.7 The Guaranty, with respect to the obligations referred to
herein, constitutes the entire agreement, and supersedes all prior agreements
and understanding, both written and oral, between the parties with respect to
the subject matter hereof and may be executed simultaneously in several
counterparts. each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
SECTION 7.8 The invalidity or unenforceability of any one or more
phrases, sentences, clauses or sections in this Guaranty contained, shall not
affect the validity or enforceability of the remaining portions of this
Guaranty, or any part thereof.
SECTION 7.9 This Guaranty shall be construed under the laws of the
State of Michigan.
SECTION 7.10 Notices, if any, required to be given to any party
hereunder shall be given to the parties at the addresses listed in and as
provided in the Reimbursement Agreement and to the Guarantor at 1118 Centennial
Way, Lansing, Michigan 48917, Attention: Vincent Shunsky.
SECTION 7.11 This Agreement is personal to the parties hereto and is
for their sole benefit and is not made for the express or implied benefit of
any other person or entity.
SECTION 7.12 This Guaranty shall bind the Guarantor, and its
successors and assigns, and shall inure to the benefit of the Bank, its
successors and assigns.
ARTICLE VIII
DEFINITIONS
When used herein "Operative Documents" shall mean the Notes, the
Indenture, the Reimbursement Agreement, the Mortgage, the Company Guaranty, the
Personal Guaranty, and the Security Agreement and any other agreement or
instrument securing or relating to any of the foregoing.
The definitions contained in the Reimbursement Agreement are
incorporated herein by reference unless otherwise defined herein.
THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING
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<PAGE> 34
THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS GUARANTY OR
THE INDEBTEDNESS.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed as of the date first above written.
MAXCO, INC.
By:
--------------------------------
Vincent Shunsky
Its: Vice President of Finance
ACCEPTED:
FIRST OF AMERICA BANK, N.A.
By:
-----------------------------
Timothy A. Salisbury
Its: Vice President
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1997. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 883
<SECURITIES> 2,822
<RECEIVABLES> 14,681
<ALLOWANCES> 620
<INVENTORY> 4,172
<CURRENT-ASSETS> 22,557
<PP&E> 29,288
<DEPRECIATION> 7,853
<TOTAL-ASSETS> 75,491
<CURRENT-LIABILITIES> 13,020
<BONDS> 24,033
0
3,892
<COMMON> 3,306
<OTHER-SE> 29,565
<TOTAL-LIABILITY-AND-EQUITY> 36,763
<SALES> 81,272
<TOTAL-REVENUES> 81,272
<CGS> 61,675
<TOTAL-COSTS> 76,001
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,529
<INCOME-PRETAX> 4,469
<INCOME-TAX> 1,558
<INCOME-CONTINUING> 3,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,104
<EPS-PRIMARY> .82
<EPS-DILUTED> .80
</TABLE>