FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
Commission file number 0-14299
SECOM GENERAL CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 87-0410875
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
26600 HEYN DRIVE, NOVI, MICHIGAN 48376-0705
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 305-9410
Securities registered pursuant to Section 12(b) of the
Securities Exchange Act of 1934:
None
(Title of class and name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934:
Common Stock, par value $.10 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to
such filing requirements for the past 90 days. Yes__X__ No_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in a definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [ ]
As of December 24, 1996, 5,342,200 shares of the Registrant's Common Stock
were outstanding and the aggregate market value of such Common Stock held by
non-affiliates (based on the closing price on that date as reported on the
NASDAQ National Market System) was approximately $13,355,500.
DOCUMENTS INCORPORATED BY REFERENCE
Part III - incorporated by reference from the Registrant's Proxy
Statement for its Annual Meeting to be held in March 1997.
<PAGE>
TABLE OF CONTENTS
PART I
Page
----
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
Item 6. Selected Financial Data 7
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 13
PART III
Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners
and Management 16
Item 13. Certain Relationships and Related Transactions 17
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 18
<PAGE>
PART I
Item 1. Business
General
Secom General Corporation, a Delaware corporation (the "Company"), is a
holding company with the following wholly-owned operating subsidiaries:
Metal Parts Forming Segment:
* Uniflow Corporation ("Uniflow") acquired in 1991
Tooling Segment:
* Form Flow, Inc. ("Form Flow") acquired in 1987
* L & H Die, Inc. ("L & H") acquired in 1987
* Micanol, Inc. ("Micanol") acquired in 1990
* Triple Technologies, Inc. ("Triple"), formerly known as
Triple Tool, acquired in 1991
In May 1995, Triple's operations were downsized and relocated to a Form Flow
facility. Triple's continuing business activity was absorbed into Form Flow.
Effective November 1, 1996, the Company acquired the Milford, Michigan
machining business of the VarityKelsey-Hayes Corporation ("VKH"), a business
unit of Lucas-Varity Corporation (NYSE:LAV). The business was renamed Milford
Manufacturing Corporation ("MMC"), and constitutes a third segment for the
Company -- Production Machining. In connection with the acquisition, the
Company also entered into a five year supply agreement for the manufacture and
sale of various brake valve parts to VKH. See Management's Discussion and
Analysis.
The Company's corporate address is 26600 Heyn Drive, Novi, Michigan 48374; its
telephone number is (810) 305-9410 and its facsimile number is (810) 347-9952.
Except as otherwise indicated by the context, any reference to "the Company"
shall mean the Company and its subsidiaries. The Company's fiscal year-end is
September 30.
Principal Customers, Backlog and Seasonality
In 1996, one of the Company's customers accounted for 11% of consolidated
revenues. Sales of the Company's parts, tooling and services are not
considered seasonal. The Company believes that its backlog, due to the nature
of its respective businesses, is not necessarily indicative of the level of
its present or future sales.
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<PAGE>
SEGMENT REVIEW
Metal Parts Forming Segment
General
The Metal Parts Forming Segment is comprised of the Company's Uniflow unit,
which primarily manufactures automotive and truck parts from steel bar, coil
and tubing using cold forging and forming machines and various types of
secondary machining, such as threadrolling and piercing equipment.
Sales and Competition
Uniflow's fiscal 1996 sales were comprised as follows: 32.8% wheel studs for
heavy and light duty trucks (original equipment manufacturers or "OEM" and
service part manufacturers or "aftermarket"); 24.9% automobile ball joint
suspension housings (OEM and aftermarket); 23.6% transmission gear housings
(OEM); and 18.7% miscellaneous cold headed and cold forged parts (OEM). While
Uniflow operates in competitive markets, management believes that Uniflow's
extensive tooling inventory gives it a competitive advantage in retaining
certain reorders from the same customers.
Although Uniflow is aggressively seeking sales of new parts, most of its
business base remains reorders of the same customer specific parts. Uniflow's
sales backlog usually covers a period of approximately three months of work.
As such, the backlog is not necessarily indicative of Uniflow's sales
performance beyond that time period. Management expects Uniflow's sales
mix to change in 1997 and thereafter, as it focuses on larger OEM sales
orders. See Management's Discussion and Analysis set forth in Item 7.
Uniflow's sales are concentrated with a few customers, as five customers
comprised 75% of revenue for the fiscal year ended September 30, 1996. If
Uniflow were to lose a significant customer, management believes that it could
replace that business within an estimated timeframe of 6 to 18 months,
although its gross profit margin would likely be adversely affected.
Manufacturing and Engineering
Uniflow manufactures parts from steel bar, coil and tubing using cut-off
machines, cold forging hydraulic presses, cold heading machines, CNC turning
centers, threadrollers, broaching and piercing machines. Although part
production can involve up to 14 different production steps, primary equipment
consists of the cold forging presses and cold forming (header) machines, which
form the parts into their general size and shape. The forging presses complete
one operation at a time, while the header machines complete up to five
operations in succession.
After parts are forged or formed, they are routed to various secondary
machining operations for finishing, such as CNC turning, threadrolling,
piercing and drilling. External steps completed by outside processors
typically include specialized machining, heat-treating, annealing and plating.
Production order turnaround time can vary from 4 to 12 weeks, depending on
engineering requirements, lead times from outside vendors and the production
backlog. Uniflow's tooling department makes and repairs some of the perishable
tooling used in production, while the Company's Tooling Segment also supplies
Uniflow with some of its production tooling. The engineering staff offers tool
design and production development services to customers for new or modified
parts.
Employees
As of September 30, 1996, Uniflow employed a total of 170 full-time employees
compared to 153 in the prior year, as follows: 151 direct and indirect labor
(including factory floor supervision), 6 engineering, 2 sales, 7 office and 4
management.
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<PAGE>
Tooling Segment
General
The Company's Tooling Segment ("Tooling Operations" or "Tooling Units") is
comprised of three wholly-owned operating subsidiaries, which are Form Flow, L
& H and Micanol. In May 1995, the Company significantly reduced the size of
its Triple operation by selling off certain equipment. Triple's remaining
operations were transferred to the Company's Form Flow unit, although certain
equipment was moved to the other subsidiaries. The continuing Triple business
activity has been absorbed into Form Flow. For further discussion about
Triple, reference is made to the Management's Discussion and Analysis set
forth in Item 7 and Note 2 to the financial statements set forth in Item 8.
The Tooling Operations manufacture close tolerance tooling for the hot and
cold metal forming industry. Hot and cold metal forming companies typically
make metal parts from steel coil that is automatically fed through various
stations on a "header forming" machine. A header machine cuts off a piece of
steel coil and moves it through each die station progressively, using tool
inserts to form the part. Tool life is dependent on the type of material used
to make the part and the size and shape of the part, among other things.
As part of its sales and service, the Tooling Unit's design and development
staff will advise customers about tooling issues and other engineering matters
related to the production of hot and cold formed parts. While tool orders
typically take 4 to 10 weeks to complete, design and development orders can
span over a period of months.
Sales and Competition
The Tooling Segment's customers manufacture items such as industrial
fasteners, hand tools, electronic components, automotive parts, tubing,
aircraft parts, consumer items and munitions as well as a wide array of OEM
assembly parts. The Tooling Unit's customers include OEM and aftermarket
suppliers and are mostly related to the automotive industry. Continuing
customer relations are important as significant revenue is derived from
tooling reorders.
The Tooling Segment operates in fragmented markets with numerous competitors.
Management believes its success is based on (1) the quality and durability
of the tooling, (2) the ability to fulfill delivery commitments, and
(3) price competitiveness. The Tooling Unit's design and engineering
services allow it to compete for tool development work; management
believes these services provide the Company a significant advantage in
attracting new customer business. The Tooling Segment sells principally to
customers in the United States.
Manufacturing and Engineering
All tooling orders are manufactured to customer specifications as indicated on
a tool drawing. Tools are made from bar stock steel or carbide blanks and
generally are routed through a production sequence that includes cutting,
turning (CNC/lathe work), heat treating, grinding, polishing and coating.
Form Flow, L & H and Micanol have separate plant facilities. Design and
engineering services are located at a Form Flow facility, and are offered by
all three of the Tooling Units.
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<PAGE>
Employees
As of September 30, 1996, the Tooling Segment employed a total of 158
full-time employees compared to 175 in the prior year, as follows: 132 direct
and indirect labor (including factory floor supervision), 5 engineering, 4
sales, 11 office and 6 management.
Item 2. Properties
The Company's corporate offices are located at 26600 Heyn Drive, Novi,
Michigan. The subsidiaries operate in the following facilities, all of which
are owned by the Company:
1) Form Flow is located in two 12,600 square foot adjacent buildings on
approximately four acres of land at 6901 and 6999 Cogswell in Romulus,
Michigan 48174. The 6999 Cogswell facility was acquired by the Company in
December 1995. Its telephone number is 313-729-3100.
2) L & H is located in a 12,600 square foot building on approximately two
acres of land at 38200 Ecorse Road, Romulus, Michigan 48174 and its
telephone number is 313-722-8011.
3) Micanol is located in a 12,400 square foot building on approximately two
acres of land at 46001 Grand River Avenue, Novi, Michigan 48374 and its
telephone number is 810-347-1230.
4) Uniflow is located in three buildings on approximately eight acres of land
in Novi, Michigan 48374: (1) 30,300 square feet at 26600 Heyn Drive, (2)
16,700 square feet at 46035 Grand River Avenue and (3) 32,000 square feet
at 46009 Grand River Avenue. Its telephone number is 810-348-9370.
5) MMC is located on 6.6 acres of land in an 81,500 square foot building at
101 Oak St., Milford, Michigan 48381. Its telephone number is 810-685-1573.
Item 3. Legal Proceedings.
The Company is involved in various legal proceedings arising in the normal
course of business. In the opinion of management (based on the opinion of
counsel) the outcome of such litigation will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders.
No items were submitted to a vote of the Company's stockholders during its
fourth fiscal quarter.
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<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's common stock (trading symbol "SECM") has traded on NASDAQ since
June 1987 and the NASDAQ National Market System (NMS) since January 1992. The
following table sets forth (for the respective period indicated) the high and
low trade for the common stock as reported by NASDAQ. Trade prices do not
include retail markups, markdowns or commissions.
<TABLE>
<CAPTION>
High Low
Quarter Ended Trade Trade
------------- ----- -----
<S> <C> <C>
12/31/94 3.00 2.00
3/31/95 2.62 1.62
6/30/95 2.50 1.62
9/30/95 4.09 2.25
12/30/95 3.37 2.50
3/31/96 3.37 1.75
6/30/96 3.44 1.87
9/30/96 3.12 2.00
</TABLE>
On September 30, 1996 there were approximately 1,000 nominees/persons of
record that held the Company's common stock. Of those listed of record,
approximately 2 million shares were held by brokers and nominees
representing an undetermined number of beneficial stockholders.
Owners of common stock are entitled to receive dividends declared by the Board
of Directors out of funds legally available therefor. The Company has never
paid a cash dividend and does not anticipate paying cash dividends in the
foreseeable future. Its policy is to retain earnings so it can provide funds
for operations and expansion of its business. In addition, the Company's bank
loan agreement prohibits the payment of cash dividends without written consent
from the lender.
In August 1996, Manubusiness Opportunities, Inc. ("MOI") exercised its third
and final warrant of 500,000 shares. The Company reduced the exercise price on
the final warrants from $3 per share to $2 per share, which approximated the
market trading value at the exercise date. For further discussions about
MOI, reference is made to the Management's Discussion and Analysis set forth
in Item 7 and Note 6 to the financial statements set forth in Item 8.
In June 1991 and in May 1992, the Company issued 10% common stock dividends to
stockholders of record as of May 14, 1991 and May 1, 1992, respectively.
Item 6. Selected Financial Data
See page 34 for selected financial data as of September 30, 1996, 1995, 1994,
1993 and 1992 and for the years then ended as required by this Item. This
information should be read in conjunction with the financial statements and
the footnotes thereto referred to in Item 14(a)(1) of this Form 10-K.
- 7 -
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and notes thereto contained
elsewhere in the Form 10-K.
Overview
The Company posted net income of $41,000 (one cent per share) on sales
of $30,877,000 in 1996 compared to net income of $1,204,000 (28 cents per
share) on sales of $36,276,000 in 1995. The decline in net income in 1996 from
the prior year was primarily due to the continued difficulty in turning around
the Company's Uniflow unit (see segment review below).
Although Uniflow was able to secure various long-term sales orders
during 1996 that are scheduled to ramp up in 1997 and 1998, overall sales
declined in 1996 from 1995. Although sales decreased, operating expenses
increased (as a percentage of sales), resulting in a loss in 1996 at Uniflow.
The Company's Tooling Segment sales were lower primarily related to the
downsizing of Triple Tool, which was absorbed into Form Flow's operation in
late fiscal 1995. The Tooling Segment posted another profitable year, although
net income was slightly lower than 1995.
Effective November 1, 1996, the Company acquired certain assets and
assumed certain liabilities of the VarityKelsey-Hayes' ("VKH") Milford,
Michigan machining operation and its continuing business. Assets acquired were
(1) machinery and equipment, with an estimated fair market value of $2.5
million, (2) real estate and building, with an estimated fair market value of
$1.3 million, and inventories valued at approximately $1 million, as well as
various environmental indemnifications and supply commitments with values yet
undetermined. In exchange for the assets acquired, the Company paid
approximately $5 million in consideration, as follows: (1) $1.2 million cash
at closing, (2) the assumption of certain employee pension and retiree health
care obligations, preliminarily estimated at $3 million and, (3) approximately
$800,000 for additional inventories and equipment added to the location before
the transaction closing.
The Milford operation was renamed Milford Manufacturing Corporation
("MMC") and constitutes a third Secom business segment -- Production
Machining. The Company anticipates the unit to be profitable in fiscal 1997
with sales expected to exceed $12 million. The Company's other two business
segments are Metal Parts Forming (Uniflow) and Tooling (Form Flow, L & H and
Micanol).
Results of Operations
Metal Parts Forming Segment
Chart of three year comparative operating results (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------------- ------------------- -------------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 14,748 100.0 $ 17,630 100.0 $ 16,052 100.0
Gross profit 1,197 8.1 2,226 12.6 1,533 9.6
Operating expense 1,898 12.9 1,951 11.1 1,356 8.4
Operating profit (loss) (701) (4.8) 275 1.6 177 1.1
</TABLE>
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<PAGE>
The Metal Parts Forming Segment is comprised of the Company's Uniflow
unit. Uniflow currently manufactures suspension ball-joint housings, truck
wheel fasteners, transmission shaft parts and a variety of OEM cold-formed and
forged parts. Customers are primarily automotive and trucking-related original
equipment manufacturers ("OEM") and service part manufacturers
("after-market").
Net sales decreased 16.3% in 1996 from 1995, and increased 9.8% in
1995 from 1994. The sales decrease in 1996 from 1995 primarily reflects (1)
lower order volume for Uniflow's after-market truck wheel studs and suspension
ball joint housings and, (2) additional sales in the prior year from
deliveries made on a significant past-due sales backlog of approximately $1
million. The decrease in Uniflow's after-market component parts business is
attributable to an overall slowness in the trucking after-market business, the
loss of certain business by Uniflow's customers and the resourcing of various
parts to competitors. Management does not anticipate further deterioration in
1997 after-market related sales.
To replace the lower sales, management has been seeking new business
for its cold forging press and cold forming header production capacity.
Through those efforts, Uniflow secured an order to supply starter motor shafts
for six years; shipments of $700,000 are expected in fiscal 1997, $2.5 million
in 1998 and approximately $5 million annually for the remainder of this six
year contract. The parts will be formed on Uniflow's National FX85 parts
former and machined at the Company's newly acquired MMC unit. Uniflow also has
tentatively received an order to manufacture transmission shaft parts, with
shipments anticipated to start in early 1997; sales over $1.3 million are
expected in fiscal 1997 and could exceed $8 million in 1998. Sales of airbag
housings, for which first shipments were made in August 1996, are expected to
exceed $1.5 million in 1997.
Gross profit on sales was 8.1% in 1996, 12.6% in 1995 and 9.6% in
1994. The 1996 decline in gross profit reflects the lower sales volume and
less efficient production. Management is in the process of implementing
various operating techniques designed to improve Uniflow's manufacturing
efficiency and gross profit. In particular, management is emphasizing
improvements in production planning and preparation to reduce production
costs. Management is also in the early stages of implementing a quality
system in compliance with QS 9000 and a computerized information system
that will provide on-line shop floor production and financial data.
Incremental sales increases that are expected to commence throughout fiscal
1997 should improve the gross profit.
Operating expense as a percentage of sales was 12.9% in 1996, 11.1% in
1995 and 8.4% in 1994. The percentage fluctuation was largely due to the
varying sales level. Actual operating overhead expense in 1996 was $1.9
million, down from $1.95 million in 1995. In 1995, operating expense increased
from 1994 level of $1.36 million, due primarily to increased engineering,
product quality expense and the direct allocation of certain administrative
expenses previously shown as unallocated corporate expense. Management does
not expect its operating expense level to change significantly in 1997 from
1996.
Uniflow's profit (loss) from operations was ($701,000) (-4.8% of
sales) in 1996, $275,000 (1.6% of sales) in 1995 and $177,000 (1.1% of sales)
in 1994. The profit decrease in 1996 from 1995 reflects the lower sales volume
and higher costs of production. The profit increase in 1995 from 1994
primarily reflects the higher sales level. Management expects Uniflow's
operating profit to improve with sales increases and with the implementation
of production efficiencies.
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<PAGE>
Tooling Segment
Chart of three year comparable operating results (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ----------------- -----------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Net sales (1) $18,166 100.0 $20,659 100.0 $19,143 100.0
Gross profit 4,317 23.8 4,902 23.7 4,841 25.3
Operating expense 2,325 12.8 2,445 11.8 1,833 9.6
Operating profit (loss) 1,992 11.0 2,457 11.9 3,008 15.7
<FN>
(1) Before elimination of intercompany sales.
</TABLE>
The Tooling Segment is comprised of the Form Flow, L & H and Micanol
units. The Triple unit was downsized and absorbed into Form Flow's operation
in June 1995. The Tooling Units sell tools and dies for use in the production
of hot and cold formed metal parts.
Net sales decreased 12.1% in 1996 compared to 1995 and increased 7.9%
in 1995 compared to 1994. The 1996 sales decrease from 1995 is primarily due
to the downsizing of Triple Tool, which posted sales of $1.79 million in 1995,
and lower sales at Micanol in 1996, resulting from lower order demand from
some of its customers. The 1995 sales increase over 1994 was the result of
higher sales at Form Flow, L & H and Micanol, although Triple recorded lower
sales.
Gross profit on sales was 23.8% in 1996, 23.7% in 1995 and 25.3% in
1994. The 1996 gross profit percentage was comparable with 1995, while the
decline in percentage in 1995 from 1994 primarily reflected unfavorable
operating results at the Triple unit.
Operating expense as a percentage of sales was 12.8% in 1996, 11.8% in
1995 and 9.6% in 1994. The increases in 1996 and 1995 reflect higher personnel
expense and the direct allocation of certain expenses previously unallocated
at the corporate level.
The Tooling Segment's operating profit was $1,992,000 (11.0% of sales)
in 1996, $2,457,000 (11.9% of sales) in 1995 and $3,008,000 (15.7% of sales)
in 1994. The decline in operating profit in 1996 from 1995 principally
resulted from lower profits at Form Flow, L & H and Micanol, offset by the
reduction of Triple's operating loss. In the previous year, Form Flow realized
higher profits on various special tooling development projects from certain
customers. The decline in operating profit in 1995 from 1994 was principally
related to lower sales volume from various higher margin customer accounts.
Management is seeking to maintain higher machine utilization and higher value
added tooling orders to improve its gross margin and operating profit.
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<PAGE>
Corporate Expenses
Unallocated corporate overhead was $712,000 in 1996, $858,000 in 1995
and $1,620,000 in 1994. The reductions in unallocated corporate expense in
1996 and 1995 from 1994 reflect the direct allocation of certain expenses that
relate to the respective operating units, as well as lower insurance and other
administrative costs.
Interest Expense, Miscellaneous Income and Income Taxes
Interest expense was $848,000 in 1996, $1,138,000 in 1995 and $953,000
in 1994. The decline in interest expense in 1996 from 1995 resulted from lower
average borrowing and lower average interest rates for the year. Lower
borrowings resulted in part from the exercise of stock warrants that provided
$2 million of equity to the Company and refinancing certain of its debt
agreements. Interest expense increased in 1995 from 1994 primarily due to
increased borrowing for the additions of capital equipment.
Other income (expense) was $15,000 in 1996, ($8,000) in 1995
and $386,000 in 1994. The income in 1994 reflected settlement of debts at less
than recorded values associated with Tri-Tec.
Income tax expense (benefit) was $18,000 in 1996, ($373,000) in 1995
and $61,000 in 1994. The income tax benefit in 1995 was the result of the
utilization of net operating loss carryforwards against taxable income and the
reversal of portions of the valuation allowance in anticipation of future use
of net operating loss carryforwards.
Financial Condition
The Company's working capital position, $4,908,000 at September 30,
1996, improved significantly during 1996 from $1,129,000 at September 30,
1995. The working capital increase primarily resulted from (1) a refinancing
of long-term debt, as excess proceeds of approximately $2.35 million from new
long-term debt were used to reduce short-term borrowings and (2) the exercise
of stock purchase warrants that provided $2 million in additional equity,
proceeds of which were also used to reduce short-term borrowings. Scheduled
debt payments due in fiscal 1997 total approximately $2.1 million and
management believes that internally generated cash from operations and amounts
available on bank lines of credit will provide sufficient cash flow to cover
the scheduled debt payments as well as fund continuing working capital
requirements.
Cash flows for 1996, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities ......... $ 1,838,000 $ 1,772,000 $ 356,000
Cash flows used in investing activities ...... (4,918,000) (494,000) (589,000)
Cash flows from (used in) financing activities 7,475,000 (1,274,000) 93,000
</TABLE>
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<PAGE>
Cash flows from operating activities
Cash flows provided by operating activities were $1,969,000 in 1996
before changes in working capital items and discontinued operations, compared
to $2,697,000 in 1995 and $3,030,000 in 1994. Working capital items used
$290,000 in 1996, as inventories rose $1.2 million, partially offset by lower
accounts receivable and higher accrued liabilities. Inventories in 1996 rose
principally at Uniflow, largely in connection with the timing of customer
orders. In 1995, working capital items used $882,000, primarily the result of
higher accounts receivable and prepaid items, along with lower accounts
payable. In 1994, working capital items used $2,984,000, primarily associated
with higher Tooling inventories and reduced trade payables.
Cash flows used in investing activities
In 1996, the Company made capital expenditures that totaled
$5,479,100, primarily for machinery at Uniflow associated with the manufacture
of starter motor shaft parts. In this regard, the Company has committed to the
acquisition of approximately $4 million of capital equipment. The equipment is
scheduled for delivery and installation in mid 1997. In 1995, capital
expenditures were $1,359,000, principally for a refurbished hydraulic press
dedicated for airbag housing production and Form Flow's expansion of its die
repair business, which included the acquisition of a new facility and
additional grinding equipment. In 1994, capital expenditures of $908,000 were
primarily for production tooling at Uniflow and miscellaneous equipment at the
other units. The Company received $301,000 in 1996, $863,000 in 1995 and
$149,000 in 1994, from the disposals of machinery and equipment. The disposals
for all three years principally relate to the reduction of equipment base at
the Triple unit.
Cash flows from financing activities
Cash flows provided by (used in) financing activities were $7,475,000
in 1996, ($1,274,000) in 1995 and $93,000 in 1994. In 1996, the Company
completed a major debt refinancing of its existing assets and secured $7
million in industrial development bond financing to fund new equipment
purchases associated with new sales orders. The 1996 refinancing included a $5
million note with a bank finance company due in six years; a real estate
mortgage of $2.88 million due in 15 years; and a $6 million collateralized
bank line of credit, of which $4 million is a committed revolver that expires
in 1999. The refinancing provided excess cash of approximately $2.35 million,
which was used to reduce borrowings on the bank line of credit. Also in 1996,
the Company received $1.87 million and reduced accrued interest by $132,000
through the exercise of two stock warrants, which resulted in the issuance of
1 million shares of common stock. In 1996, scheduled principal debt payments
totaled $1.4 million, compared to scheduled payments of $1.7 million in 1995
and $1.3 million in 1994. Also, in 1995 the Company extinguished a $1 million
note payable in connection with the exercise of a stock warrant.
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<PAGE>
Item 8. Financial Statements and Supplementary Data.
See Item 14(a)(1) for a list of the financial statements included in this
Form 10-K.
Refer to page 38 of this Form 10-K for the supplementary quarterly financial
data required by this Item.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
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<PAGE>
PART III
The information called for by this Part is incorporated by reference from the
Registrant's proxy statement for its Annual Meeting to be held in March 1997.
The Company's proxy statement will be filed with the Securities and Exchange
Commission in January 1997.
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<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements and Financial Statement Schedule.
Page
----
Independent Auditors' Report............................... 23
Consolidated Balance Sheets as of September 30, 1996
and 1995................................................ 24
Consolidated Statements of Operations for the Years Ended
September 30, 1996, 1995 and 1994....................... 25
Consolidated Statements of Stockholders' Equity for the
Years Ended September 30, 1996, 1995 and 1994........... 26
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1996, 1995 and 1994....................... 27
Notes to Consolidated Financial Statements................. 28-35
Schedule II - Valuation and Qualifying Accounts............ 38
Schedules other than those listed above are omitted because of the absence of
the conditions under which they are required or because the information called
for is included in the consolidated financial statements or the notes thereto.
(b) Reports filed on Form 8-K.
The Company filed a report on Form 8-K dated December 20, 1996 to report the
move of its corporate office to 26600 Heyn Drive, Novi, Michigan 48376-0705.
The Company filed a report on Form 8-K dated November 15, 1996 to report the
Company's acquisition of certain assets and assuming certain liabilities of
the VarityKelsey-Hayes' Milford, Michigan machining operation and its
continuing business.
(c) Exhibits. See the Exhibit Index on the following page.
- 15 -
<PAGE>
Exhibit Description Page*
- ------- ----------- -----
2.1 Asset Purchase Agreement between VarityKelsey-Hayes
Corporation and Milford Acquisition Corporation. 2.1*<F1>
3.1 Certificate of Incorporation of the Company filed with
the Secretary of State of Delaware on August 25, 1987. 3.1*<F2>
3.2 Amendment to Articles of Incorporation filed on
August 31, 1990. 3.2*<F3>
3.3 Certificate of Merger between the Company and Secom
General Corporation, a Utah corporation filed with the
Secretary of State of Delaware in December 1987. 3.2*<F2>
3.4 Certificate of Designation of Rights of the Class A
Preferred Stock filed with the Secretary of State of
Delaware in December 1987. 3.3*<F2>
3.5 Amendment to Articles of Incorporation filed on
December 17, 1991. 3.5*<F6>
3.6 Bylaws of the Company. 3.4*<F2>
4.1 List of instruments defining the right of security holders. 4.1*<F9>
4.3 Nonqualified Stock Option Agreement dated November
23, 1993 between Secom General Corporation as grantor
and Manubusiness Opportunities, Inc. as grantee. 4.2*<F9>
4.4 Proxy Agreement dated November 23, 1993 between Roy A.
McKnight, Larry McKnight, John Cocke and Manubusiness
Opportunities, Inc. 4.3*<F9>
10.1 Machined Valve Products Supply Agreement E-1
10.2 Amended and Restated Revolving Credit and Loan Agreement
between Secom General Corporation, Uniflow Corporation,
Miconol, Inc., L&H Die, Inc. and Form Flow, Inc. E-13
10.3 Master Equipment Lease Agreement between Secom General
Corporation and KeyCorp Leasing Ltd. E-83
10.4 Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Filing between Secom General Corporation
and Metlife Capital Financial Corporation E-107
10.5 Loan Agreement among GE Capital Public Finance, Inc.
as Lender, and Michigan Strategic Fund, as Issuer and
Secom General Corporation as Borrower dated June 1, 1996 E-131
10.6 Loan Agreement among GE Capital Public Finance, Inc.
as Lender, and Michigan Strategic Fund, as Issuer,
and Secom General Corporation, as Borrower dated
as of Sept. 1, 1996 E-174
10.7 1991 Nonqualified Stock Option Plan 10.27*<F5>
10.8 Form of Stock Option Agreement for Options granted
under the 1991 Non-qualified Stock Option Plan 10.28*<F4>
- 16 -
<PAGE>
10.9 Subordination Agreement dated December 15, 1993
between Larry McKnight as junior lender and
NBD Bank, N.A. as senior lender. 10.17*<F7>
22. Subsidiaries of the Registrant E-219
23. Consent of Deloitte & Touche LLP E-220
27. Financial Data Schedule E-221
- ------------
* See the footnotes on page 18 to locate these exhibits.
- 17 -
<PAGE>
All exhibits that have page numbers followed by an * are incorporated by
reference from the filings set forth below. The numbers set forth as page
numbers for those exhibits are the exhibit numbers those documents were given
in those other filings. All other exhibits are included in this Form 10-K at
the page numbers shown.
*<F1> Incorporated by reference from the Company's Current Report on Form
8-K dated November 15, 1996.
*<F2> Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended September 30, 1987.
*<F3> Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended September 30, 1990.
*<F4> Incorporated by reference from the Company's Current Report on Form
8-K dated September 13, 1991.
*<F5> Incorporated by reference from the Company's Registration Statement
on Form S-4 (File No. 33-40865) that was declared effective on
November 20, 1991.
*<F6> Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended September 30, 1991.
*<F7> Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended September 30, 1992.
*<F8> Incorporated by reference from the Company's Current Report on Form
8-K dated December 15, 1993.
*<F9> Incorporated by reference from the Company's Annual Report on Form
10-K for the year ended September 30, 1993.
- 18 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
SECOM GENERAL CORPORATION
Dated: December 27, 1996 By: /s/ Robert A. Clemente
-------------------------------
Robert A. Clemente
Chairman, President and CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Principal Executive Officer:
/s/ Robert A. Clemente
- ------------------------------ Chairman, President December 27, 1996
Robert A. Clemente CEO and Director
Principal Financial and
Accounting Officer:
/s/ David J. Marczak
- ------------------------------ Chief Financial Officer, December 27, 1996
David J. Marczak Secretary, Treasurer
and Director
- ------------------------------ Director December , 1996
Gregory Adamczyk
- ------------------------------ Director December , 1996
Rocco Pollifrone
/s/ Orville K. Thompson
- ------------------------------ Director December 27, 1996
Orville K. Thompson
/s/ Richard Thompson
- ------------------------------ Director December 27, 1996
Richard Thompson
- 19 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Secom General Corporation
Novi, Michigan
We have audited the accompanying consolidated balance sheets of Secom General
Corporation and subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a)(1) of Form 10-K. These consolidated financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Secom General Corporation and
subsidiaries at September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
/s/ Deloitte & Touche LLP
December 23, 1996
Detroit, Michigan
- 20 -
<PAGE>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
- ----------------------------
ASSETS 1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash ......................................... $ 319,600 $ 13,700
Receivables:
Trade (net of allowances of $21,000 and
$93,500) ................................ 4,130,700 4,484,800
Other ...................................... 33,200 320,600
Inventories (Note 3) ......................... 5,170,500 3,935,700
Prepaids and other ........................... 547,400 727,800
Deferred tax assets (Note 10) ................ 569,800 542,700
----------- -----------
Total current assets ................ 10,771,200 10,025,300
CASH RESTRICTED FOR EQUIPMENT (Note 12) ........ 4,089,000
PROPERTY, PLANT AND EQUIPMENT, NET (Note 4) .... 17,758,600 14,583,600
INTANGIBLE ASSET (Note 1) ...................... 1,994,100 2,071,300
OTHER ASSETS ................................... 341,600 266,900
----------- -----------
TOTAL ASSETS ................................... $34,954,500 $26,947,100
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term obligations
(Note 5) ................................. $ 2,121,400 $ 5,633,400
Trade accounts payable ....................... 2,856,800 2,065,500
Accrued liabilities .......................... 884,800 1,197,100
----------- -----------
Total current liabilities ........... 5,863,000 8,896,000
LONG-TERM OBLIGATIONS (Note 5) ................. 13,724,300 4,621,700
DEFERRED TAX LIABILITIES (Note 10) ............. 1,331,300 1,518,900
----------- -----------
Total liabilities ................... 20,918,600 15,036,600
STOCKHOLDERS' EQUITY (Notes 8 and 9):
Common stock, $.10 par value, 10,000,000
shares authorized; outstanding: 1996,
5,342,200 shares; 1995, 4,276,200 shares.... 534,200 427,600
Additional paid-in capital ................... 18,457,100 16,478,900
Accumulated deficit .......................... (4,955,400) (4,996,000)
----------- -----------
Total stockholders' equity .......... 14,035,900 11,910,500
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $34,954,500 $26,947,100
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
-21-
<PAGE>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
- ---------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
NET SALES ..................................... $30,877,100 $36,276,200 $32,570,900
COST OF SALES ................................. 25,064,900 29,016,100 26,048,200
----------- ----------- -----------
GROSS PROFIT .................................. 5,812,200 7,260,100 6,522,700
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES .. 4,920,700 5,282,300 4,801,500
----------- ----------- -----------
INCOME FROM OPERATIONS ........................ 891,500 1,977,800 1,721,200
OTHER INCOME (EXPENSE):
Interest .................................... (847,600) (1,137,800) (952,500)
Other, net .................................. 14,600 (8,400) 385,600
----------- ----------- -----------
INCOME BEFORE INCOME TAXES .................... 58,500 831,600 1,154,300
INCOME TAX BENEFIT (EXPENSE) (Note 10) ........ (17,900) 372,700 (60,800)
----------- ----------- -----------
NET INCOME .................................... $ 40,600 $ 1,204,300 $ 1,093,500
=========== =========== ===========
NET INCOME PER COMMON SHARE ................... $ 0.01 $ 0.28 $ 0.29
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
(Note 1) .................................... 4,874,600 4,284,200 3,795,200
=========== =========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
-22-
<PAGE>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
- -----------------------------------------------
Common Stock Additional
---------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ --------- ----------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1, 1994 ........................... 2,900,900 $ 290,100 $15,578,000 $(7,293,800) $ 8,574,300
Stock issued for settlement of stock guarantees .. 711,900 71,200 (85,500) (14,300)
Issuances to 401(k) plan (employer match
and employee elections) ........................ 37,700 3,800 79,400 83,200
Private placements ............................... 50,000 5,000 95,000 100,000
Net income ....................................... 1,093,500 1,093,500
--------- --------- ----------- ----------- ------------
BALANCE, SEPTEMBER 30, 1994 ........................ 3,700,500 370,100 15,666,900 (6,200,300) 9,836,700
Exercise of stock warrant ........................ 500,000 50,000 950,000 1,000,000
Issuances to 401(k) plan (employer match
and employee elections) ........................ 42,300 4,200 79,900 84,100
Issuances for compensation ....................... 41,800 4,100 79,500 83,600
Stock repurchases, net ........................... (8,400) (800) (31,000) (31,800)
Note issued for settlement of stock guarantee .... (266,400) (266,400)
Net income ....................................... 1,204,300 1,204,300
--------- --------- ----------- ----------- ------------
BALANCE, SEPTEMBER 30, 1995 ........................ 4,276,200 427,600 16,478,900 (4,996,000) 11,910,500
Exercise of stock warrants ....................... 1,000,000 100,000 1,900,000 2,000,000
Issuances to 401(k) plan (employer match
and employee elections) ........................ 35,700 3,600 77,600 81,200
Stock issued for note receivable ................. 25,000 2,500 35,000 37,500
Stock repurchases, net ........................... (14,300) (1,400) (32,500) (33,900)
Stock issued for settlement of stock
guarantees ..................................... 19,600 1,900 (1,900)
Net income ....................................... 40,600 40,600
--------- --------- ----------- ----------- ------------
BALANCE, SEPTEMBER 30, 1996 ........................ 5,342,200 $ 534,200 $18,457,100 $(4,955,400) $ 14,035,900
========= ========= =========== =========== ============
<FN>
See notes to consolidated financial statements.
</TABLE>
-23-
<PAGE>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
- ---------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................... $ 40,600 $ 1,204,300 $ 1,093,500
Adjustments to reconcile income from
operations to net cash provided by
operations:
Depreciation and amortization ...................... 1,983,900 1,858,600 1,983,700
Provision for (benefit from) deferred taxes ........ (214,700) (521,900) 60,800
Increase (decrease) in allowance for ............... (72,500) 17,000 (228,800)
doubtful accounts
(Gain) loss on sales of assets ..................... 115,800 (319,500) 14,100
Stock issuances to 401(k) plan ..................... 32,000 64,700 107,000
Write-off of intangibles ........................... 84,200 309,700
Stock issuances for compensation ................... 83,600
Changes in assets and liabilities that
provided (used) cash, net of effects
of acquisitions and discontinued
operations:
Trade and other receivables ...................... 512,500 (298,400) (105,300)
Inventories ...................................... (1,234,800) 134,300 (1,412,200)
Prepaids and other ............................... (36,000) (193,700) 30,300
Other assets ..................................... (192,000) 78,300 (18,000)
Trade accounts payable ........................... 842,000 (491,400) (984,400)
Accrued liabilities .............................. (181,800) (111,300) (196,900)
Other liabilities ................................ (297,200)
Net cash provided by (used in) discontinued
operations ...................................... 158,600 (42,300) 309,400
----------- ----------- -----------
Net cash provided by operating activities ... 1,837,800 1,772,000 356,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of property,
plant and equipment ............................... 301,000 863,000 149,300
Collections on notes receivable ...................... 259,800 2,300 20,600
Capital expenditures ................................. (5,479,100) (1,359,200) (907,900)
Net cash provided by discontinued operations ......... 149,200
----------- ----------- -----------
Net cash used in investing activities ........ (4,918,300) (493,900) (588,800)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in bank line of credit .................... (3,603,600) 210,600 44,900
Proceeds from long-term obligations and
use of restricted cash ........................... 8,205,500 273,100 2,469,400
Proceeds from refinancing of long-term obligations ... 7,887,500
Proceeds from issuances of stock ..................... 1,918,800 61,700
Payments on long-term obligations due to refinancing . (5,535,800)
Retirements of common stock .......................... (33,900) (12,500)
Payments on long-term obligations .................... (1,314,600) (1,634,000) (1,065,000)
Refund of restricted cash to bondholders ............. (700,000)
Payments on capital lease obligations ................ (48,500) (110,900) (234,400)
Net cash used in discontinued operations ............. (483,400)
----------- ----------- -----------
Net cash (used in) provided by financing
activities ............................... 7,475,400 (1,273,700) 93,200
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH .... 4,394,900 4,400 (139,600)
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD .......... 13,700 9,300 148,900
----------- ----------- -----------
CASH AND RESTRICTED CASH, END OF PERIOD ................ $ 4,408,600 $ 13,700 $ 9,300
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest ............... $ 902,900 $ 1,104,800 $ 965,200
=========== =========== ===========
Cash paid during the year for income taxes ........... $ 153,600 $ 120,000
=========== ===========
<FN>
See notes to consolidated financial statements.
</TABLE>
-24-
<PAGE>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
- ---------------------------------------------
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business - Secom General Corporation (the "Company") is a publicly-traded
holding company with four wholly-owned subsidiaries supplying the
automotive, truck, construction and consumer markets. The Company
operates in the following two business segments:
Tooling:
Form Flow, Inc. ("Form Flow")
L&H Die, Inc. ("L&H Die")
Micanol, Inc. ("Micanol")
Metal Parts Forming -
Uniflow Corporation ("Uniflow")
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its subsidiaries. All material
intercompany accounts and transactions have been eliminated.
Inventories are stated at the lower of cost or market, as determined
under the first-in, first-out method.
Property, Plant and Equipment are recorded at cost. The Company
capitalizes, as additions, expenditures which extend the useful life or
increase the value of related assets. Maintenance and repairs are charged
to operating expense as incurred. Expenditures for repairs and
maintenance for the three years ended September 30, 1996 were $433,700,
$408,400 and $535,900, respectively. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets.
Intangible Asset consisting of goodwill (cost in excess of net assets
acquired) is amortized on a straight-line basis over primarily 40 years.
The carrying value of goodwill is evaluated periodically in relation to
the operating performance of the underlying business and assets.
Management has evaluated the carrying value of the goodwill and has
determined at September 30, 1996 that remaining amounts are not impaired.
Accumulated amortization was $662,700 and $585,400 as of September 30,
1996 and 1995, respectively.
Income Taxes - Deferred income tax assets and liabilities are computed
annually for differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes.
Earnings per Share of common stock is computed by dividing net income by
the weighted average number of common and common equivalent shares
outstanding. Common equivalent shares consist primarily of the warrants
and options to purchase common stock outstanding during the periods
presented.
Revenue Recognition - Revenues are recognized upon completion of services
related to customer products.
-25-
<PAGE>
Significant Customer - The Company has one customer which comprises 11%
of total revenues.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
New Accounting Standards - Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," was issued in March 1995. The
Statement is effective for fiscal years beginning after December 15,
1995, and requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The Company has not yet
adopted this Statement, however, the impact of such adoption is not
expected to have a material effect on the Company's financial position or
results of operations when adopted in the 1997 fiscal year.
SFAS No. 123, "Accounting for Stock-Based Compensation," was issued in
October 1995. This Statement, which is effective for fiscal years
beginning after December 15, 1995, establishes financial accounting and
reporting standards for stock-based employee compensation plans. The
Company has not yet adopted this Statement, however, the impact of such
adoption is not expected to have a material effect on the Company's
financial position or results of operations when adopted in the 1997
fiscal year.
Noncash Transactions - The Company entered into the following noncash
investing and financing transactions for the following years ended
September 30 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cancellation of accrued interest/note payable
in exchange for exercise of stock warrant.... $ 132 $1,000
Common stock issued for services or for
reduction of other obligations............... 32 148 $107
Stock issued for note receivable................ 37
Notes receivable issued for sale of Triple
Tool equipment............................... 249
Note payable issued for settlement of stock
guarantee.................................... 266
Note receivable and assumption of obligations
from sale of Tri-Tec subsidiary.............. 1,191
</TABLE>
Reclassifications - Certain amounts in the 1995 financial statements have
been reclassified to conform with the presentation for 1996.
2. DISCONTINUED AND DOWNSIZED OPERATIONS
In the quarter ended September 30, 1993, the Company adopted a formal
plan to discontinue operations of its Plastic Molded Products Segment,
Tri-Tec. In the first quarter of 1994, Tri-Tec's inventories and
machinery and equipment were sold for cash and notes receivable and the
assumption of certain capital lease obligations. At September 30, 1995
the Company was relieved as an obligor or guarantor on leases assumed by
the buyer of Tri-Tec.
-26-
<PAGE>
In the third fiscal quarter of 1995, the Company completed its downsizing
of Triple Technologies (formerly "Triple Tool") by the sale of $725,800
(net book value) of equipment and the leasing of $342,000 (net book
value) of equipment. The Company recorded a net gain of $2,500 on this
transaction after writing down goodwill in the amount of $310,000 in
connection with the downsizing. In June 1995, Triple Technologies'
remaining operations, primarily electro-diode machining (EDM), contracts
and the related equipment (net book value $341,000) were transferred to
Form Flow. For the years ended September 30, 1996, 1995, and 1994, sales
from Triple Technologies were $30,400, $1,559,000 and $2,500,000,
respectively, and operating losses were $102,000, $399,000 and $50,200,
respectively.
3. INVENTORIES
Inventories at September 30 consist of (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Raw materials ........... $ 949 $ 372
Work-in-process ......... 2,394 1,797
Finished goods .......... 1,828 1,767
------ ------
Total ................... $5,171 $3,936
====== ======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment at September 30 consist of (in thousands):
<TABLE>
<CAPTION>
1996 1995 Life
---- ---- ----
<S> <C> <C> <C>
Machinery and equipment ............. $ 18,192 $ 14,629 2 to 20 years
Building and improvements ........... 5,154 4,714 3 to 30 years
Land and improvements ............... 572 540 N/A
Furniture and fixtures .............. 685 478 3 to 7 years
Vehicles ............................ 168 215 3 years
Construction-in-progress and deposits 538 236 N/A
-------- --------
Total .................... 25,309 20,812
Less accumulated depreciation ....... (7,550) (6,228)
-------- --------
Total ............................... $ 17,759 $ 14,584
======== ========
</TABLE>
-27-
<PAGE>
5. LONG-TERM OBLIGATIONS
Long-term obligations at September 30 consists of (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Bank line of credit (a) ...................... $ 172 $ 3,776
Real estate mortgage notes (b) ............... 3,609 1,888
Michigan Strategic Fund Limited Obligation
Revenue Bonds (c) ......................... 6,896 2,500
Equipment term notes (d) ..................... 4,778 1,176
Other notes payable (e) ...................... 390 811
Equipment capital leases ..................... 104
-------- --------
Total ............................. 15,845 10,255
Less current obligations ..................... (2,121) (5,633)
-------- --------
Long-term obligations ........................ $ 13,724 $ 4,622
======== ========
</TABLE>
(a) In July 1996, the Company entered into an amended and restated
revolving credit and loan agreement with a bank, which is for a
three year period and permits borrowings of up to $4 million under a
revolving credit note and up to $2 million under a line of credit
note. At September 30, 1996, $172,000 was outstanding under the
revolving credit note and no amounts were outstanding under the line
of credit note. The interest is at prime or the 30 day LIBOR rate
plus 215 basis points. This agreement replaced an existing agreement
in which interest was at prime plus 1/2%. The revolving credit and
loan agreement is collateralized by accounts receivable and
inventory while borrowings are limited to stated percentages of
accounts receivable and inventory. Under each note, interest is
payable monthly and any unpaid principal is due July 1999. The
agreement prohibits the payment of cash dividends and requires the
Company to maintain specific financial covenants including minimum
tangible equity, working capital, and cash flow. The Company was in
compliance with all financial covenants at September 30, 1996.
(b) During 1996, the Company refinanced its existing mortgage loans to
obtain new mortgage loans requiring monthly installments of
principal and interest. Interest on a $2.88 million mortgage note is
8.25% per annum and is collateralized by land and buildings with a
net book value of $3,729,100, while interest on a $775,000 mortgage
note is prime and is collateralized by land and building with a net
book value of $987,200. Interest under the previous agreements was
payable at prime plus 2% per annum. These agreements mature in
fiscal 1999 and 2011. Principal payments are due as follows: 1997,
$164,600; 1998, $173,500; 1999, $183,200; 2000, $193,200; 2001,
$660,200 and thereafter, $2,234,800.
(c) In June and September 1996, the Michigan Strategic Fund sold
$3,000,000 and $4,000,000, respectively, of its Limited Obligation
Revenue Bonds and the bondholders then loaned the proceeds to the
Company for the purchase of equipment. The bonds require monthly
interest and principal payments through September 1, 2002. The Bonds
bear interest at the rates of 6.15% and 5.99%, respectively, and are
collateralized by equipment and cash with a net book value of
approximately $7,000,000. Principal payments due are as follows:
1997, $1,004,600, 1998, $1,066,500, 1999, $1,133,000, 2000,
$1,203,400, 2001, $1,278,700 and thereafter, $1,209,600. The bonds
outstanding at September 30, 1995, were repaid in their entirety
during fiscal 1996. Interest was at approximately 2% below the prime
rate.
-28-
<PAGE>
(d) The equipment term note is collateralized by equipment with a net
book value of $9,902,200. Interest rate is the 30 day LIBOR plus 215
basis points (approximately 7.55% at September 30, 1996). Principal
payments due are as follows: 1997, $691,800, 1998, $746,500, 1999,
$805,500, 2000, $868,700, 2001, $937,800 and thereafter, $727,400.
The equipment term notes outstanding at September 30, 1995 were
repaid in their entirety during fiscal 1996. Interest was at prime
rate plus 2%.
(e) Interest rates on other notes payable range from 4.9% to 12%. At
September 30, 1996, the balance includes $119,900 in trade
installment notes collateralized by specific equipment. Maturity
dates range from 1997 to 2000. Principal payments due are: 1997,
$253,400; 1998, $55,400; 1999, $68,000, and 2000, $13,100.
The prime rate at September 30, 1996 and 1995 was 8.25% and 8.75%,
respectively.
Principal payments on long-term obligations for the next five years are
as follows (in thousands):
<TABLE>
<S> <C>
1997...................... $2,121
1998...................... 2,042
1999...................... 2,190
2000...................... 2,278
2001...................... 2,877
Thereafter................ 4,165
</TABLE>
6. RELATED PARTY TRANSACTIONS
In December 1993, the Company issued a $1,000,000 subordinated note
payable, maturing December 1, 1995 and requiring payment of interest
only, at the prime rate plus 3% to Manubusiness Opportunities, Inc.
(MOI), an entity controlled by three directors of the Company. Payment of
principal was due at maturity. MOI also received warrants and options to
purchase 1.7 million shares of common stock, as follows: 500,000 shares
expiring in November 1994 with an exercise price of $2 per share, 500,000
shares expiring in November 1995 with an exercise price of $2 per share,
and 500,000 shares expiring in November 1996 with an exercise price of $3
per share and 200,000 options expiring in 1998 with an exercise price of
$2.63 per share.
In November 1994, MOI exercised its first warrant to acquire 500,000
shares of common stock in exchange for the cancellation of the $1,000,000
note. In November 1995, MOI exercised its second warrant to acquire
500,000 shares of common stock in exchange for a payment of $1,000,000.
In August 1996, MOI exercised its third and final warrant of 500,000
shares. In conjunction with this exercise, the Company reduced the
exercise price on the final warrants from $3 per share to $2 per share,
which approximated market value at the new measurement date. Upon
exercise, the Company received approximately $868,000 in cash and
canceled accrued interest due to MOI of approximately $132,000. Included
in accrued liabilities at September 30, 1995, is $125,000 of interest on
the above note payable.
7. LEASES
The Company leased one manufacturing facility under a noncancelable
operating leases. Rental expense for continuing operations was $10,500,
$36,000 and $106,000 for the years ended September 30, 1996, 1995 and
1994, respectively. During fiscal 1996, the Company purchased the leased
plant facility.
-29-
<PAGE>
Machinery and equipment includes assets under capital leases having a
total cost of $438,700 and accumulated amortization of $156,700 at
September 30, 1995. During 1996, this machinery and equipment was
purchased and the Company no longer has any equipment under capital lease
agreements.
Annual payments due under noncancelable operating leases are as follows
(in thousands):
<TABLE>
<S> <C>
1997...................... $ 45
1998...................... 45
1999...................... 45
2000...................... 45
2001...................... 45
Thereafter................ 45
------
Total..................... $ 270
======
</TABLE>
8. STOCK OPTIONS AND COMMON STOCK GUARANTEES
In 1991, the Board of Directors (the "Board") adopted a nonqualified
stock option plan (the "1991 Plan"). The 1991 Plan authorizes the Board
to grant options to purchase a maximum of 400,000 shares of common stock
to employees, at not less than the fair market value at the date of
grant. The options vest at various dates as described in the related
option agreement and expire 10 years from the date of grant. At September
30, 1996, 131,200 shares were exercisable under the Plan. Transactions
under the 1991 Plan are summarized as follows:
<TABLE>
<CAPTION>
Shares Price
------ -----
<S> <C> <C>
Options outstanding September 30, 1994 .. 178,750 $2.62 - $3.00
Options terminated ...................... (16,250) 2.62
-------
Options outstanding September 30, 1995 .. 162,500 2.62 - 3.00
Options granted ......................... 272,000 1.94
Options terminated ...................... (58,500) 2.62 - 2.75
-------
Options outstanding September 30, 1996 .. 376,000 $1.94 - $3.00
=======
</TABLE>
During the year ended September 30, 1996, 175,000 options exercisable at
$1.94 were issued to an officer of the Company outside of the 1991 Plan.
At September 30, 1996, 17,500 of these options were exercisable and the
remaining options vest ratably over a five year period. These options
expire 10 years from the date of grant.
-30-
<PAGE>
The Company is contingently liable under stock price guarantees issued in
connection with 1991 private stock placements. Under the agreements the
holder is entitled to the shortfall between the amount realized from sale
of the shares during the guarantee period and the guaranteed price of the
share. At September 30, 1996, the Company had approximately 13,000 shares
remaining that are subject to guarantees with a maximum guarantee amount
of approximately $96,000.
9. EMPLOYEE BENEFIT PLAN
The Company maintains a defined contribution 401(k) plan to which it
contributes stock on a discretionary basis. The cost of the stock
contributed to the Plan resulted in a charge to expense of $123,000,
$116,000 and $107,000 for the years ended September 30, 1996, 1995 and
1994, respectively.
10. INCOME TAXES
The provision for income taxes consists of the following for the years
ended September 30:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current (expense) .............. $(232,600) $(149,200)
Deferred benefit (expense) ..... 214,700 521,900 $(60,800)
--------- --------- --------
Income tax benefit (expense) ... $ (17,900) $ 372,700 $(60,800)
========= ========= ========
</TABLE>
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
September 30
-------------------------
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax carryforwards .... $ 272,900 $ 137,200
Tax credit carryforwards ................. 108,400 108,400
Secom net operating loss carryforward .... 45,200
Net operating loss carryforwards of
acquired companies .................... 397,700 544,500
Reserves ................................. 206,600 159,100
Other .................................... 52,900 17,000
----------- -----------
Total deferred tax assets ....... 1,038,500 1,011,400
Less valuation allowance ................... (468,700) (468,700)
----------- -----------
Net deferred tax assets ......... 569,800 542,700
Current portion ............................ 569,800 542,700
----------- -----------
Long-term portion .......................... None None
=========== ===========
Deferred tax liabilities:
Depreciation ............................. $ 462,400 $ 488,100
Book and tax basis differences from
business combinations ................. 830,100 988,200
Other .................................... 38,800 42,600
----------- -----------
Total deferred tax liabilities .. 1,331,300 1,518,900
Current portion ............................ None None
=========== ===========
Long-term portion .......................... $ 1,331,300 $ 1,518,900
=========== ===========
</TABLE>
-31-
<PAGE>
During 1996 and 1995, certain tax benefits from net operating losses and
temporary differences creating deferred tax assets have been reserved
with a valuation allowance due to their uncertainty of realization.
Remaining net operating loss carryforwards as of September 30, 1996 are
available for offset against future taxable earnings through the year
2007, subject to annual limitations as set forth in the Internal Revenue
Code.
A reconciliation of the Company's statutory income tax provision computed
on pre-tax income to the recorded income tax provision for the year ended
September 30 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Statutory income tax liability ............ $(20,200) $(283,300) $(430,000)
Change in valuation allowance ............. 766,000 30,000
Nondeductible goodwill amortization ....... (26,300) (128,000) (23,000)
Book and tax basis differences from
business combinations .................. 71,100 40,000 383,000
Nondeductible other expenses .............. (42,500) (22,000) (20,800)
-------- --------- ---------
Income tax benefit (expense) .............. $(17,900) $ 372,700 $ (60,800)
======== ========= =========
</TABLE>
11. CONTINGENCIES
The Company is involved in certain legal proceedings arising in the
normal course of business. In the opinion of management, based on the
opinion of counsel, the outcome of such litigation will not have a
material adverse effect on the Company's consolidated financial position
or results of operations.
12. CASH RESTRICTED FOR EQUIPMENT
The cash restricted for equipment was received from the Michigan
Strategic Fund bondholders (see Note 5) to purchase equipment for future
production requirements. The Company has contractually agreed to purchase
the equipment and anticipates accepting delivery of such equipment in the
1997 fiscal year.
13. SUBSEQUENT EVENT
Effective November 1, 1996, the Company acquired certain assets and
assumed certain liabilities of the Varity Kelsey-Hayes Corporation's
Milford, Michigan machining business. The acquisition was accounted for
as a purchase and the results of operations will be included in the
Company's financial statements beginning as of the acquisition date. The
unit has been renamed "Milford Manufacturing Corporation."
-32-
<PAGE>
14. SEGMENT INFORMATION
The following is the business segment information applicable to
continuing operations (in thousands):
<TABLE>
<CAPTION>
Metal Eliminations
Parts and
Forming Tooling Corporate Consolidated
------- ------- ------------ ------------
<S> <C> <C> <C> <C>
September 30, 1996:
Net sales ............... $14,748 $18,136 $(2,007) $30,877
Income from operations .. (701) 2,093 (501) 891
Identifiable assets ..... 12,920 7,211 14,823 34,954
Depreciation and
amortization ......... 1,098 671 215 1,984
Capital expenditures .... 1,803 163 3,513 5,479
September 30, 1995:
Net sales ............... $17,630 $20,659 $(2,013) $36,276
Income from operations .. 275 2,457 (754) 1,978
Identifiable assets ..... 14,444 8,852 3,651 26,947
Depreciation and
amortization ......... 1,151 671 37 1,859
Capital expenditures .... 592 751 16 1,359
September 30, 1994:
Net sales ............... $16,052 $19,143 $(2,624) $32,571
Income from operations .. 177 3,008 (1,464) 1,721
Identifiable assets ..... 15,856 8,119 3,851 27,826
Depreciation and
amortization ......... 1,273 598 113 1,984
Capital expenditures .... 570 330 8 908
</TABLE>
******
-33-
<PAGE>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
- ------------------------------------------
<TABLE>
<CAPTION>
Year Ended September 30
--------------------------------------------------
1996 1995 1994 1993 1992
(In thousands; except per share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
NET SALES ........................................ $30,877 $36,276 $32,571 $29,356 $27,574
INCOME (LOSS) FROM CONTINUING OPERATIONS,
BEFORE INCOME TAXES ............................ 58 831 1,154 (13) 295
INCOME TAX BENEFIT (EXPENSE) ..................... (17) 373 (61) (80)
------- ------- ------- ------- -------
INCOME (LOSS) FROM CONTINUING OPERATIONS ......... 41 1,204 1,093 (13) 215
INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAXES ............................ (3,640) 38
------- ------- ------- ------- -------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE .............................. 41 1,204 1,093 (3,653) 253
CUMULATIVE EFFECT OF CHANGE IN METHOD OF
ACCOUNTING FOR INCOME TAXES .................... 379
------- ------- ------- ------- -------
NET INCOME (LOSS) ................................ $ 41 $ 1,204 $ 1,093 $(3,653) $ 632
======= ======= ======= ======= =======
BALANCE SHEET DATA
TOTAL ASSETS ..................................... $34,954 $26,947 $27,826 $31,291 $33,924
LONG-TERM OBLIGATIONS ............................ 13,724 4,622 7,089 7,123 10,519
STOCKHOLDERS' EQUITY ............................. 14,036 11,910 9,837 8,574 12,011
COMMON STOCK SHARES OUTSTANDING (1) .............. 5,342 4,276 3,701 2,901 2,821
EARNINGS (LOSS) PER COMMON SHARE (1):
Continuing operations .......................... $ 0.01 $ 0.28 $ 0.29 $ 0.08
Discontinued operations ........................ $ (1.27) 0.01
Change in method of accounting for income taxes. 0.14
------- ------- ------- ------- -------
NET INCOME (LOSS) PER COMMON SHARE ............... $ 0.01 $ 0.28 $ 0.29 $ (1.27) $ 0.23
======= ======= ======= ======= =======
EQUITY PER COMMON SHARE .......................... 2.63 2.79 2.66 2.96 4.26
CURRENT RATIO .................................... 1.84 1.13 1.02 0.82 0.96
LONG-TERM OBLIGATIONS TO STOCKHOLDERS' EQUITY .... 0.98 0.39 0.72 0.83 0.88
<FN>
(1) Restated for the 10% stock dividends distributed in 1992.
</TABLE>
-34-
<PAGE>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- ---------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------
1996 1995
------------------------------------- ------------------------------------
September June March December September June March December
1996 1996 1996 1995 1995 1995 1995 1994
--------- ---- ----- -------- --------- ---- ----- --------
(In thousands; except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET SALES............... $7,834 $8,254 $7,529 $7,260 $8,200 $9,915 $9,863 $8,298
GROSS PROFIT............ 1,139 1,806 1,494 1,373 1,566 2,338 2,193 1,163
INCOME (LOSS) BEFORE
INCOME TAXES.......... (221) 52 163 65 171 545 424 (308)
INCOME TAX BENEFIT
(EXPENSE)............. 77 (12) (61) (22) 255 80 (48) 85
------ ------ ------ ------ ------ ------ ------ ------
NET INCOME (LOSS)....... $ (144) $ 40 $ 102 $ 43 $ 426 $ 625 $ 376 $ (223)
====== ====== ====== ====== ====== ====== ====== ======
EARNINGS (LOSS) PER
COMMON SHARE--
Net income (loss)....... $(0.03) $ 0.01 $ 0.02 $ 0.01 $ 0.10 $ 0.14 $ 0.09 $(0.05)
====== ====== ====== ====== ====== ====== ====== ======
PRICE RANGE OF
COMMON STOCK:
High bid.............. $ 3.12 $ 3.44 $ 3.37 $ 3.37 $ 4.09 $ 2.50 $ 2.62 $ 3.00
Low bid............... 2.00 1.87 1.75 2.50 2.25 1.62 1.62 2.00
</TABLE>
-35-
<PAGE>
SECOM GENERAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- -----------------------------------------------
<TABLE>
<CAPTION>
Column B Column C Column D Column E
----------------- --------------- ------------ -----------
Balance at Charged to Cost Deductions-- Balance at
Column A Beginning of Year and Expenses Write Offs End of Year
Description
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended September 30, 1994 ......... $ 307,600 $ 9,400 $238,200 $ 78,800
Year ended September 30, 1995 ......... 78,800 127,500 112,800 93,500
Year ended September 30, 1996 ......... 93,500 51,400 123,900 21,000
Inventory reserve:
Year ended September 30, 1994 ......... 179,500 7,500 126,000 61,000
Year ended September 30, 1995 ......... 61,000 15,000 76,000
Year ended September 30, 1996 ......... 76,000 101,500 30,000 147,500
Deferred tax asset valuation allowance:
Year ended September 30, 1994 ......... 1,265,000 30,000 1,235,000
Year ended September 30, 1995 ......... 1,235,000 766,300 468,700
Year ended September 30, 1996 ......... 468,700 468,700
-36-
</TABLE>
EXHIBIT 10.1
MACHINED VALVE PRODUCTS SUPPLY AGREEMENT
THIS MACHINED VALVE PRODUCTS SUPPLY AGREEMENT ("Agreement") for the
purchase and sale of machined valve products is made this 31st day of
October, 1996, by and between MILFORD ACQUISITION, INC., a Michigan
corporation ("Milford") and KELSEY-HAYES COMPANY, A Delaware corporation
d/b/a Varity Kelsey-Hayes ("Kelsey").
WHEREAS, Milford desires to manufacture, sell and deliver to Kelsey 100% of
Kelsey's requirements of Machined Fluid Valve Products ("Products") as
listed on attached Schedule A for use in manufacturing fluid valve
bodies; and
WHEREAS, Kelsey desires to purchase 100% of its requirements of Products
from Milford.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
1. Purchase and Sale of Products.
1.1 During the term of this Agreement and subject to its terms and
conditions, Milford shall manufacture, sell and deliver to Kelsey and
Kelsey shall purchase and accept from Milford 100% of Kelsey's requirements
of Products. This Agreement applies to the current design level of the
Products described in Schedule A and any engineering changes made to the
Products through Kelsey's normal engineering change request system.
1.2 This Agreement provides the general terms and conditions applicable to
all purchases of Products by Kelsey from Milford and is intended to secure
the timely and adequate supply of Products to Kelsey from Milford.
1.3 In the event that a license is required for Milford to manufacture the
Products, and only in such event, during the term of this Agreement, Kelsey
shall grant Milford a non-exclusive, royalty free, license under any
patents, copyrights, trade secrets or other proprietary rights of Kelsey
which are necessary for Milford to manufacture, for sale to Kelsey only,
the Products.
2. Term.
2.1 This Agreement shall be for a term commencing on the date of execution
hereof and ending October 31, 2001, unless earlier terminated pursuant to
the terms and conditions herein.
<PAGE>
3. Order and Delivery.
3.1 Except as otherwise attached hereto with respect to the Products, Kelsey
shall order all Products being purchased hereunder pursuant to a standard
Kelsey purchase order ("Purchase Order"), a copy of which is attached
hereto as Schedule B. The form of the Purchase Order may be amended from
time to time by Kelsey, in its sole discretion, provided notice of said
amendment is given to Milford at least (10) days prior to the effective date
of the amendment. Any such amendments to the Purchase Order shall become a
part hereof; provided, however, in the event of a conflict between the
terms of this Agreement and the Purchase Order, as it may be now or
hereafter amended, the terms of this Agreement shall control.
Notwithstanding the above, the terms of the Purchase Order, as it may be
amended, shall be construed, to the extent possible, as consistent with the
terms and conditions set forth in this Agreement and as cumulative;
provided however, that if such construction is unreasonable, the terms and
conditions of this Agreement shall control.
3.2 The Purchase Order shall include the reasonable terms of delivery and
acceptance including the date of order, description of Products,
specifications, place of delivery and terms of payment.
3.3 Milford shall timely deliver Products in accordance with Kelsey's
"Release Schedules" provided to Milford in conjunction with the Purchase
Orders and shall ship in accordance with Kelsey's shipping instructions;
provided normally accepted lead times are given.
3.4 Subject to the obligations set forth in Section 9.1, Kelsey's
obligation to purchase Products from Milford is conditioned on Kelsey's
continued use of the Products in manufacturing fluid valve bodies. If the
current design of any of the Products becomes obsolete to Kelsey during the
term of this Agreement or Kelsey terminates its production of fluid valve
bodies, Kelsey will have no further obligation to purchase such Products
under this Agreement.
4. Price.
4.1 All Products shall be sold by Milford to Kelsey at the price as set
forth on attached Schedule A, except as modified below.
4.2. The prices set forth on Schedule A were established using an aluminum
baseline price of $1.337 per pound for aluminum extrusion as of June 11, 1996.
The aluminum baseline price will be adjusted on November 1, 1996 and quarterly
thereafter based upon any changes in the price of extruded aluminum as
established on the first day of each quarter. Any adjustment to the aluminum
baseline price will cause a corresponding adjustment to the price of the
Products (based upon weight and purchased material costs).
2
<PAGE>
4.2a The ZWAL valve body was priced at $13.00 per unit in the Milford
Sales Prospectus. The pricing assumed a direct material cost of $6.50 per
unit. The pricing from Milford to Kelsey will be adjusted quarterly,
beginning November 1, 1996 based on the change in the price of casting
(direct material cost), currently sourced from Bone Aluminum. Any change
in the direct material cost shall cause a corresponding adjustment to the
price of the ZWAL products.
4.3 Notwithstanding Section 4.2, the price for the Twin Prop shall be
$5.75 per unit for the term of this Agreement.
4.4 Milford and Kelsey agree to jointly pursue cost savings and a
competitive price for the Products while maintaining a high quality
standard. Milford and Kelsey shall actively pursue development of new
technology and improvements to the design of the Products, the method of
manufacture (excluding bargaining unit contract modifications), materials,
packaging or transportation. Milford shall notify Kelsey of any cost savings
which result from such changes and provided Kelsey agrees to such changes,
the price of Products will be reduced so that each party shares equally in the
cost savings.
4.5 Kelsey shall be responsible for all increased costs occasioned by changes
in the design of the Products requested by Kelsey and the price of the
Products will be increased accordingly.
4.6 Any price adjustments made in accordance with this Section 4 shall be
evidenced by the issuance by Kelsey of a Purchase Order Change Notice
setting forth the adjusted price for Products, and the date upon which such
adjustment becomes effective.
4.7 Kelsey shall utilize its best efforts to arrange for the purchase of
aluminum by Milford through Kelsey's aluminum purchasing program, currently
with Reynolds Aluminum, upon the same terms as Kelsey purchases aluminum.
5. Payment Terms.
5.1 The terms of payment for Products will be net 30 prox.
6. Quality Commitment.
6.1 Milford will comply with Kelsey's General Quality Standards for
Suppliers (GQS) and have a pro-active quality assurance organization in
place which possesses the technical competence and testing equipment
necessary to properly control the manufacturing process.
6.2 The parties acknowledge that the Milford Plant is not currently
complying
3
<PAGE>
with GQS nor does it posses the appropriate testing equipment or adequately
apply statistical process control techniques in its operation. Milford
will use good faith efforts to promptly improve operations as it relates to
these various standards, processes and techniques.
6.3 Milford will use statistical process control techniques and actively
participate in Kelsey's T.O.P.S. and Error-Free Launch Programs.
6.4 Milford will obtain QS 9000 certification by December 31, 1997. Such
certification must be made by a third party certified registrar not
affiliated with Milford.
6.5 Capacity verification forms for each part number supplied must be on
file with Kelsey, and the forms must be updated on a yearly basis. All
capacity planning volumes (CPV) must be met on a two shift x 9.5 hours x 5
day x 48 week/year standard.
7. Inspection.
7.1 All Products shall be subject to inspection and if non-conforming may
be rejected by Kelsey within a reasonable time after receipt.
7.2 If Kelsey finds any shortage or excess in quantity of Products or
finds any Products to be non-conforming, Kelsey shall immediately advise
Milford thereof and the following shall occur:
a. If non-conforming Products are delivered, Kelsey shall be entitled:
(i) to charge Milford for storage and handling; (ii) to return the
Products to Milford at Milford's expense; or (iii) at Milford's
request, to dispose of the Products without liability of Kelsey to
Milford. Payment for non-conforming Products by Kelsey shall not
constitute an acceptance thereof, limit or impair Kelsey's right to
assert any legal or equitable remedy, or relieve Milford from
responsibility for latent defects.
b. If Products are delivered in excess of those set forth in the
applicable Purchase Order or Release Schedule, then Kelsey may, at its
option, receive only the quantity authorized and return the excess
Products to Milford at Milford's sole cost and expense or receive the
entire quantity of Products and charge Milford for any additional
expenses, losses or costs related thereto, including storage costs.
Kelsey shall provide to Milford reasonable documentation to support
any such costs and expenses.
c. If Products are delivered in quantities less than those set forth in
the applicable Purchase Order or Release Schedule, then, Milford shall
4
<PAGE>
immediately deliver the shortfall in quantity of Products at the time
and place designated by Kelsey.
d. If, as a direct result of a shortfall in quantity or the delivery of
non-conforming Products by Milford to Kelsey, Kelsey is unable to meet
its contractual or other obligations to its customers, Milford shall
be responsible for any and all costs, expenses, penalties or damages
which are imposed or assessed against Kelsey by said customer or
otherwise.
7.3 If non-conforming Products are rejected, Kelsey shall promptly notify
Milford of such condition and may request that replacement Products be
immediately shipped to Kelsey at Milford's expenses. At its option, Kelsey
may correct any defects in such Products and charge Milford for all
reasonable costs and expenses incurred in correcting such defects. All
non-conforming Products not otherwise accepted by Kelsey shall be handled
in accordance with Section 7.2a above.
8. Warranties.
8.1 Milford expressly warrants that all Products sold hereunder shall be
free from defects in materials and workmanship; that all Products will be
manufactured in accordance with applicable federal, state and local laws,
regulations and ordinances; and that the Products will be manufactured in
conformity with the specifications of Kelsey for use in the manufacture of
fluid valve bodies. The parties acknowledge that Milford shall have no
responsibility or liability related to the specifications or design of the
Products.
8.2 Milford shalt reimburse Kelsey for all damages and costs reasonably
incurred by Kelsey as a result of Milford's breach of any warranty set
forth herein, including: (a) costs incurred as a consequence of returning,
disposing of, repairing or replacing any Products which fail to comply with
Milford's warranty; (b) damages and costs arising, from claims of personal
injury or property damage caused by defective Products.
8.3 Milford shalt defend, indemnify and hold Kelsey harmless from and
against any and all claims howsoever arising, whether sounding in tort
contract, warranty, or otherwise, and all reasonable expenses, including
without limitation, attorney fees and court costs, arising after the date
hereof and resulting from any injury to or death to any person, or any
damage to property, caused by defects in Milford's manufacture of the
Products delivered hereunder. Milford shall further indemnify and hold
Kelsey harmless from the actual withdrawal and recall costs and expenses
incurred by Kelsey due directly to defects in Milford's manufacture of
Products.
8.4 Kelsey shall give Milford notice of all claims, including proposed
recalls, which will allow Milford to participate in all phases of the
investigation and handling of
5
<PAGE>
such claims or recalls. Milford and Kelsey shall consult with each other
on each claim to reach a mutually acceptable decision respecting liability.
9. Volume Commitment.
9.1 Subject to Section 9.2, Kelsey agrees to purchase from Milford products
and services totaling at least Ten Million ($10,000.000) Dollars during the
period from November 1, 1996 through October 31, 1997. The purchases to be
used to compute the above volume commitment will include the Products as well
as any other products and services purchased by Kelsey from Milford during
such year whether or not such products and services are of the type and nature
contemplated on the date hereof.
9.2 The above volume commitment (in the case of the purchase of "Products")
is based upon the prices of the Products established utilizing the metal
baseline price of $1.337 per pound for aluminum extrusion as of June 11, 1996,
and the unit price for the Twin Prop of $5.75; the unit price for the ZWAL of
$13.00 and the unit price for the EBC5-H of $28.57.
9.3 To determine whether or not the volume commitment described in Section
9.1 above has been met, the following calculation will be made for each
type of Product sold during the year:
Number of units sold the price per unit based
and shipped during the year x upon the prices in Schedule A
The product of each such calculation will then be added together and
combined with the total sales of other products purchased and shipped and
services received compared to the volume commitment for the year.
9.4 In the event that Kelsey fails to make sufficient purchases during the
first year of this Agreement, Kelsey shall, within (60) days following the
end of such year, pay to Milford twenty-five (25%) percent of any such
shortfall. There shall be no volume commitment by Kelsey after the first
year of the term of this Agreement as it may be adjusted under Section
9.5.
9.5 In the event of a strike by the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America
("UAW"), or the Canadian Auto Workers ("CAW") in the Fall of 1996 against
Chrysler Corporation, Ford Motor Company, or General Motors Corporation,
which substantially affects the sale of Products by Milford to Kelsey, the
one (1) year period set forth in Section 9.1 shall be extended for the
purpose of determining whether the volume commitment has been met, by the
number of business days of the strike. The extension set forth herein
shall apply to the determination of the volume commitment only and shall
not otherwise extend the term of this Agreement.
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10. Termination.
10.1 If either party shall become bankrupt or insolvent, or if a receiver
or similar official is appointed for all or substantially all of its
assets, the other party may terminate this Agreement by giving ten (10) days
written notice to such party.
10.2 Except as provided in Sections 10.3 and 10.4 hereof,in the event that
Milford fails to comply with any material term of this Agreement or the
terms of the Purchase Orders, Kelsey shall give to Milford specific notice
with a thirty (30) day right to cure; thereafter, if Milford fails to cure
within the third (30) day period, Kelsey may immediately cancel this Agreement
in whole or in part.
10.3 In the event that Milford fails to meet the quality specifications
for the Products as described in Sections 6 and 8 hereof, then upon written
notice having been received from Kelsey, Milford shall provide to Kelsey a
written proposal giving Kelsey adequate assurance that Milford will
eliminate the production of non-conforming Products within a reasonable
period of time and will meet all quality specifications for such Products
on future deliveries. In the event that Milford fails to deliver to Kelsey
an acceptable proposal, within thirty (30) days of notice having been received
from Kelsey or subsequently fails to conform to the requirements of its
written proposal, then Kelsey may by written notice to Milford, cancel
in whole or in part this Agreement or any Purchase Order or part thereof
issued pursuant hereto. Notwithstanding the above, no written proposal
shall be required under this Section 10.3 unless Milford delivers to Kelsey
non-conforming Products in excess of .5% of the total amount of Products
delivered in any thirty (30) day period during the term of this Agreement.
10.4 In the event that in excess of 1.5% of the Products delivered to
Kelsey during any thirty (30) day period are not timely delivered, then,
upon written notice having been received from Kelsey, Milford shall provide
to Kelsey a written proposal giving Kelsey adequate assurance that Milford will
eliminate the delinquent deliveries within a reasonable period of time and will
meet all future deliveries on a timely basis. In the event that Milford fails
to deliver an acceptable proposal, within thirty (30) days of notice having
been received from Kelsey, or subsequently fails to conform to the requirements
of its written proposal, then Kelsey may, by written notice to Milford,
cancel in whole or in part this Agreement or any Purchase Order or part
thereof issued pursuant hereto.
11. Force Majeure.
11.1 If either party hereto is rendered unable, wholly or in part by
"force majeure" to carry out its obligations under this Agreement, it is
agreed that upon such party's giving written notice and full particulars of
such "force majeure" to the other party, then the obligations of the party
giving notice, so far as they are affected by such "force majeure," shall
be suspended during the continuance of any inability so caused, but for no
longer
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period, provided that such cause is, as far as possible, remedied with all
reasonable dispatch.
11.2 The term "force majeure" as employed herein shall mean any cause not
reasonably within the control of the party claiming suspension and which by
the exercise of due diligence such party is unable to prevent or overcome.
Such term shall include, but not be limited to: strike, lockout or other
industrial disturbance; natural disasters, such as storm, flood, fire,
lightning, explosion, or earthquake; war, riots, or insurrection; epidemics
or quarantine; and unavailability or delay in delivery of materials,
supplies or equipment.
11.3 Milford will notify Kelsey of each dispute with Milford's work force
and each dispute with a supplier that reasonably might affect Milford's
ability to manufacture and supply in accordance with this Agreement. Prior
to any labor disruption or the expiration of any labor contract, Milford,
at its expense, will fabricate and locate in an accessible area a finished
inventory of Products at the latest design level in quantities sufficient
to fulfill Milford's obligation to Kelsey for a minimum of thirty (30) days
after work stoppage.
12. Delivery.
12.1 Milford acknowledges that it has been informed that Kelsey intends to
use the Products purchased from Milford under this Agreement to manufacture
certain products which Kelsey is required to deliver to third parties at
specified intervals. Kelsey is relying upon Milford to timely deliver the
Products in strict compliance with the terms of this Agreement. In view of
the foregoing, Milford agrees to comply with all of the provisions hereof
regarding the time and quantities for the delivery of the Products to
Kelsey and shall be responsible for any failure under Section 7.2d.
12.2 THE OBLIGATION OF MILFORD TO DELIVER THE PRODUCTS UNDER THE TERMS OF
THIS AGREEMENT IS IMPORTANT TO KELSEY AND DISAGREEMENTS WITH RESPECT TO
PRICE ADJUSTMENTS SHALL NOT RELIEVE MILFORD OF THE OBLIGATION TO DELIVER
PRODUCTS TO KELSEY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. Milford
shall use its best efforts to continue to timely deliver the Products to Kelsey
in spite of any failure of the parties to agree upon any price adjustments
which may arise hereunder. Milford's sole remedy with regards to all such
disputes or disagreements shall be limited to the arbitration procedure as
provide in Section 16 hereof.
12.3 Pending any price adjustment and/or resolution of such price dispute
or disagreement, Kelsey shall continue to promptly pay to Milford all
amounts due to Milford for Products sold hereunder at the then current
price, in accordance with the provisions of Section 4 hereof, subject to
adjustment. The difference between the price paid by Kelsey and the
adjusted price shall be promptly paid by Kelsey or credited to Kelsey, as
the case may be, together with interest at the rate of ten (10%) percent
per annum, following a final
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determination of the adjusted price.
13. New Business.
13.1 Subject to any prior commitments or restrictions binding upon Kelsey,
in the event new products of the same basic manufacturing process are
required by Kelsey to replace the Products, or for new products, Milford
will be considered a preferred third party supplier and be given an
opportunity to quote those products in accordance with Kelsey's standard
bidding procedures.
13.2 Subject to the due diligence investigation and approval of Kelsey's
supply management and subject to any prior commitments or restrictions
binding on Kelsey: (i) Kelsey will designate "Form Flow" and "L & H Die,"
affiliated companies of Milford, as preferred third party suppliers, and
they will be given the opportunity to quote any non-direct sourced cold
heading tooling business required by Kelsey in accordance with Kelsey's
standard bidding procedures; and (ii) Kelsey will designate "Uniflow,"
an affiliated company of Milford, as a preferred third party supplier of
Kelsey and Uniflow will be given an opportunity to quote any new
non-direct sourced cold heading, extrusion and machining business required
by Kelsey in accordance with Kelsey's standard bidding procedures.
13.3 The status of Milford and its affiliates as preferred third party
suppliers of Kelsey and the right to bid granted hereunder shall not, nor
shall it be construed to, restrict Kelsey from manufacturing any products on
its own or give Milford a right of first refusal to manufacture any
products.
13.4 The decision to accept Milford, "Form Flow" or "L & H Die" as a third
party supplier of products shall be within the sole and absolute discretion
of Kelsey. In choosing a supplier or deciding whether to direct source the
supply of any products, Kelsey may consider a number of factors, including
but not limited to the ability of any such supplier to meet the price,
quality, delivery and other requirements of Kelsey. The past performance
of Milford and its affiliates as a supplier to Kelsey may also be
considered in any decision to award them future business.
14. Tooling.
14.1 Kelsey will be responsible, at it sole cost and expense, to purchase
any tooling required for the ZWAL and EBC5-H Projects. Such tooling will be
the sole and exclusive property of Kelsey. Milford shall be responsible,
at its sole cost and expense, to purchase any capital equipment required
for the ZWAL and EBC5-H Projects. The cost and scope of the ZWAL and
EBC5-H Projects will be mutually agreed upon by the parties.
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15. Management Fee.
15.1 Kelsey shall, upon execution of this Agreement, pay to Milford a
Management Fee of One Million ($1,000,000) Dollars. The Management fee,
among other things, is in lieu of a product price increase on current
product for the initial contract year.
16. Arbitration.
16.1 Any dispute between the parties shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association in the Detroit metropolitan area and judgement upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof. The parties acknowledge that time is of the essence
in connection with resolving any price adjustment dispute and that the
parties will cooperate with each other to promptly arbitrate any such
matters. The arbitrator shall award the prevailing party all costs,
attorneys' fees and other out of pocket expenses relating to the dispute
incurred by such party.
17. Confidentiality.
17.1 Kelsey and Milford agree to hold as strictly confidential between each
other the terms of this Agreement, to make no public disclosure thereof
except as required by law; and to limit private disclosure on a need to
know basis only to their employees, directors and consultants; provided,
however, that Kelsey and Milford further agree that should disclosure of
the terms hereof become legally required by court or administrative order
the disclosure may be made, but the party so disclosing must give the other
party reasonable notice prior to such disclosure.
18. Notice.
18.1 All notices, requests, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given if mailed first class, postage prepaid, registered or
certified mail, or via confirmed telefacsimile, if available, as follows:
IF TO MILFORD MILFORD ACQUISITION, INC.
401 S. Woodward Ave., Suite 400
Birmingham, Michigan 48009
WITH A COPY TO ANTHONY VESPA
Hardy, Lewis and Page
401 S. Woodward Ave., Suite 400
Birmingham, Michigan 48009
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IF TO KELSEY Kelsey-Hayes Company
Tech Center Drive
Livonia, Michigan 48150
Attention: Director of Supply Management
WITH A COPY TO Michael F. Golab
Butzel Long
32270 Telegraph Road, #200
Birmingham, Michigan 48025-2457
19. Miscellaneous.
19.1 This Agreement may not be assigned, either in whole or in part, by
either party without the prior written consent of the other party.
19.2 This Agreement contains the entire Agreement between the parties with
respect to the subject matter hereof, and the prior representations,
promises or conditions in connection with or in respect to the subject
hereof that are not incorporated herein are not binding upon either of the
parties.
19.3 The invalidity, illegality or unenforceability of any one or more of
the provisions of this Agreement shall in no way effect or impair the
validity, legality or enforceability of the remaining provisions hereof,
which shall remain in full force and effect.
19.4 Although Kelsey and Milford will work together to develop a strong,
mutually beneficial relationship, Kelsey and Milford will remain
independent contracting parties and this Agreement is not intended, nor
shall it create any partnership or joint venture between the parties, nor
make either party the agent or legal representative of the other for any
purpose whatsoever, nor does it grant either party any authority to assume or
to create any obligation on behalf of or in the name of the other party,
unless otherwise agreed upon by the parties and specified in any Purchase
Orders entered into by the parties.
19.5 The rights and remedies reserved to the parties in this Agreement
shall be cumulative, and additional to all other or further remedies
provided in law or equity.
19.6 This Agreement shall be governed by and construed in accordance with
the laws of the State of Michigan.
19.7 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors and permitted assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed through their duly authorized representatives.
MILFORD ACQUISITION, INC.
By:/s/ David S. Marczak
--------------------
Its:Chief Financial Officer
-----------------------
KELSEY-HAYES COMPANY
By:/s/ Bruce Harvey
----------------
Its:VP Operational Audit
--------------------
12
Exhibit 10.2
SECOM GENERAL CORPORATION
UNIFLOW CORPORATION
MICANOL, INC.
L&H DIE, INC.
FORM FLOW, INC.
$4,000,000 Committed Facility
$2,000,000 Uncommitted Facility
and $775,000 Term Loan
AMENDED AND RESTATED
REVOLVING CREDIT AND LOAN AGREEMENT
Dated as of June 30, 1996
---------
NBD BANK
<PAGE>
TABLE OF CONTENTS
PAGE
INTRODUCTION....................................................... 1
ARTICLE I. DEFINITIONS............................................. 1
1.1 Certain Definitions...................................... 1
1.2 Certain Rules of Construction............................ 11
1.3 Acknowledgment and Restatement of Credit................. 12
ARTICLE II. THE CREDIT FACILITIES.................................. 12
2.1 Revolving Loans.......................................... 12
2.2 Termination and Reduction of the Commitment.............. 14
2.3 Letters of Credit........................................ 14
2.4 Term Loan ............................................... 16
2.5 NBD Records and Determinations .......................... 16
ARTICLE III. THE LOANS ............................................ 16
3.1 Types of Loans .......................................... 16
3.2 Requests for Loans ...................................... 16
3.3 Conversion of Loans; Procedures.......................... 17
3.4 Procedures at End of Loan Period......................... 17
3.5 Requests for Negotiated Rate Loans ...................... 18
3.6 Conditions for Initial Loans............................. 18
3.7 Further Conditions for Disbursement ..................... 20
ARTICLE IV. PAYMENTS AND PREPAYMENTS OF LOANS...................... 21
4.1 Principal Payments....................................... 21
4.2 Interest Payments........................................ 21
4.3 Payment Method and Related Matters....................... 22
4.4 No Setoff or Deduction................................... 22
4.5 Payment on Non-Business Day; Payment Computations........ 22
4.6 Additional Costs ........................................ 23
4.7 Illegality and Impossibility ............................ 24
4.8 Indemnity................................................ 24
ARTICLE V. REPRESENTATIONS AND WARRANTIES.......................... 25
5.1 Corporate Existence and Power............................ 25
5.2 Corporate Authority...................................... 25
5.3 Binding Effect .......................................... 25
5.4 Subsidiaries ............................................ 25
5.5 Litigation .............................................. 25
5.6 Financial Condition ..................................... 25
5.7 Use of Loans ............................................ 26
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PAGE
5.8 Consents, Etc............................................ 26
5.9 Taxes ................................................... 26
5.10 Title to Properties...................................... 26
5.11 Compliance with Governmental Regulations ................ 26
5.12 ERISA ................................................... 26
5.13 Environmental Matters.................................... 27
5.14 Investment Company Act................................... 27
5.15 Disclosure .............................................. 27
ARTICLE VI. COVENANTS.............................................. 28
6.1 Affirmative Covenants.................................... 28
6.2 Negative Covenants....................................... 31
ARTICLE VII. DEFAULT............................................... 33
7.1 Events of Default........................................ 33
7.2 Remedies ................................................ 35
ARTICLE VIII. MISCELLANEOUS ....................................... 36
8.1 Amendments............................................... 36
8.2 Notices ................................................. 36
8.3 No Waiver By Conduct; Remedies Cumulative ............... 37
8.4 Reliance on and Survival of Various Provisions .......... 37
8.5 Expenses; Indemnification ............................... 37
8.6 Successors and Assigns .................................. 38
8.7 Participations .......................................... 38
8.9 Counterparts ............................................ 38
8.10 Governing Law ........................................... 38
8.11 Table of Contents and Headings........................... 39
8.12 Construction of Certain Provisions ...................... 39
8.13 Integration and Severability............................. 39
8.14 Independence of Covenants................................ 39
8.16 Interest Rate Limitation ................................ 39
8.17 Limitation of Liability ................................. 40
8.18 Waiver of Jury Trial..................................... 40
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EXHIBITS
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.1(b) Line of Credit note
Exhibit 2.4 Term Note
Exhibit 3.2 Request for Revolving Loan
Exhibit 3.5 Request for Negotiated Rate Loan
Exhibit 3.6(e) Guaranty Agreement
Exhibit 3.6(f) Security Agreement
SCHEDULES
Schedule 5.4 Subsidiaries
Schedule 5.5 Litigation
Schedule 5.6 Financial Statements
Schedule 5.13 Environmental Matters
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REVOLVING CREDIT AND LOAN AGREEMENT
THIS AMENDED AND RESTATED REVOLVING CREDIT AND LOAN AGREEMENT (this
"Agreement"), dated as of June 30, 1996, is by and between Secom General
Corporation, Inc., a Delaware corporation (the "Company") whose address is
46035 Grand River Avenue, Novi, MI 48374, Uniflow Corporation, a Michigan
corporation ("Uniflow"), whose address is 26600 Heyn Drive, Novi, Michigan
48450; Micanol, Inc., a Michigan corporation ("Micanol") whose address is P.O.
Box 881, 46001 Grand River, Novi, Michigan 48376; L&H Die, Inc., a Michigan
corporation ("L&H"), whose address is 38200 Ecorse Road, Romulus, Michigan
48174; and Form Flow, Inc., a Michigan corporation ("Form Flow"), whose
address is 6901 Cogswell, Romulus, Michigan 48174, as borrowers, and NBD Bank,
a Michigan banking corporation ("NBD"), formerly NBD Bank, N.A. The Company,
Uniflow, Micanol, L&H and Form Flow are collectively referred to as the
"Borrowers" and individually as a "Borrower."
INTRODUCTION
WHEREAS, Uniflow, Micanol, L&H and Form Flow are wholly owned
Subsidiaries of the Company and receive substantial benefit from the Company
and each other, including without limitation, accounting and administrative
services, research and development, marketing and sales assistance.
WHEREAS, NBD has provided a discretionary authorization of up to
$5,000,000 to the Borrowers under the terms of an Amended and Restated Credit
Agreement dated December 15, 1993, as amended by (i) the First Amendment to
Amended and Restated Credit Agreement dated July 19, 1994, (ii) the letter
dated August 19, 1994 from NBD to Secom, (iii) the Third Amendment to Amended
and Restated Loan Agreement dated December 28, 1994, (iv) the Fourth Amendment
to Amended and Restated Loan Agreement dated February 17, 1995, (v) the Fifth
Amendment to Amended and Restated Loan Agreement dated December 1, 1995 and
(vi) the Sixth Amendment to Amended and Restated Loan Agreement dated December
27, 1995 ("Existing Loan Agreement"), and has provided various other financial
accommodations to the Company and its Subsidiaries, including a term loan
secured by certain real estate and various equipment leases and letters of
credit.
WHEREAS, the Borrowers desire to obtain (i) a revolving credit facility
in the aggregate principal amount of up to $4,000,000 and (ii) a discretionary
$2,000,000 authorization, including a subfacility of up to $ 1,000,000 for the
issuance of letters of credit, issued by NBD, in order to provide funds for
the working capital and other corporate purposes of the Borrowers and NBD is
willing to establish such credit facilities in favor of the Borrowers on the
terms and conditions herein set forth.
Therefore, the parties agree as follows:
<PAGE>
ARTICLE I. DEFINITIONS
1.1 Certain Definitions. In addition to the terms defined elsewhere in
this Agreement, as used in this Agreement, the following terms shall have the
following meanings:
"Adjusted LIBO Rate" means, for any Loan Period and the applicable LIBOR
Loan, the per annum rate of interest equal to the sum of (a) 2.15% plus (b) the
per annum rate (rounded upwards, if necessary, to the nearest one-hundredth of
one percent (1/100%)) determined by dividing (i) the LIBO Rate for such Loan
Period, by (ii) an amount equal to one minus the stated maximum rate
(expressed as a decimal) of all reserve requirements (including any basic,
marginal, emergency, supplemental, special or other reserves) that is
specified from time to time during a Loan Period by the Board of Governors of
the Federal Reserve System (or any successor agency), for determining the
maximum reserve requirement with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation D of such Board)
maintained by a member bank of such System, without benefit or credit for
prorations, exemptions or offsets which might otherwise be available to NBD
from time to time under Regulation D.
"Affiliate", when used with respect to any person, means any other
person which, directly or indirectly, controls or is controlled by or is under
common control with such person. For purposes of this definition "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), with respect to any person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of
voting securities or by contract or otherwise.
"Applicable Rate" means, with respect to Revolving Loans, the Floating
Rate, the Adjusted LIBO Rate or the Negotiated Rate, as applicable.
"Authorization Amount" means the amount available to the Borrowers, in
NBD's sole discretion, under Section 2.1(b), which shall not in any event
exceed $2,000,000.
"Borrowing Base" means the sum of the following:
(a) 80% of the book value of Eligible Accounts Receivable as
reflected on the most recent Borrowing Base Certificate delivered
pursuant to Section 6.1(d)(iv); and
(b) 25% of the lower of cost or market value of Eligible
Inventory, as reflected on the most recent Borrowing Base Certificate
delivered pursuant to Section 6.1(d)(iv).
"Business Day" means a day other than a Saturday, Sunday or other day on
which NBD is not open to the public for carrying on substantially all of its
banking functions; provided, however, that, for purposes of determining the
LIBO Rate or an applicable Loan Period, references to Business Day shall
include only those days on which dealings in Dollar deposits are carried out
by U.S. financing institutions in the London interbank market.
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"Capital Expenditures" means, for any period, the additions to
property, plant and equipment and other capital expenditures of the Loan
Parties for such period, as the same are or should be set forth on the
Combined financial statements of the Loan Parties in accordance with GAAP.
"Capital Lease" of any person means any lease which, in accordance with
GAAP, is or should be capitalized on the books of such person.
"Cash Equivalents" means, as to any person, (a) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than 12
months from the date of acquisition, (b) time deposits and certificates of
deposit of any commercial bank with a long term unsecured debt rating of a
least A or its equivalent from Standard & Poor's Rating Group or at least A-2
or its equivalent from Moody's Investors Service, Inc. with maturities of not
more than six months from the date of acquisition by such person, (c)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (a) above entered into with any
bank meeting the qualifications specified in clause (b) above, (d) commercial
paper issued by any person incorporated in the United States, which commercial
paper is rated at least A1 or the equivalent thereof by Standard & Poor's
Ratings Group or at least P1 or the equivalent thereof by Moody's Investors
Service, Inc. or at least F1 or the equivalent thereof by Fitch Investor
Services, Inc. and in each case maturing not more than 180 days after the date
of issuance by such person, and (e) investments in money market funds
substantially all the assets of which are comprised of securities of the types
described in clauses (a) through (d) above.
"Cash Flow Coverage Ratio" means the relationship, expressed as a
numerical ratio, which (i) Net Cash Flow of the Loan Parties, determined on a
Combined basis bears to (ii) Fixed Charges of the Loan Parties, determined on
a Combined basis, to be calculated as of the end of each fiscal quarter of the
Company for the four consecutive fiscal quarters then ending.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the regulations thereunder.
"Combined" or "combined" means, when used with reference to any
financial term in this Agreement, the aggregate for the Loan Parties of the
amounts signified by such term for all such persons determined on a combined
basis in accordance with GAAP.
"Commitment" means the commitment of NBD to make Revolving Loans
pursuant to Section 2.1 (a) in the initial amount of $4,000,000, as such
amount may be reduced from time to time pursuant to Section 2.2.
"Contingent Liabilities" of any person means, as of any date, all
obligations of such person or of others for which such person is contingently
liable, as obligor, guarantor, surety or in any other capacity, or in respect
of which obligations such person assures a creditor against loss or
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agrees to take any action to prevent any such loss (other than endorsements of
negotiable instruments for collection in the ordinary course of business),
including all reimbursement obligations of such person in respect of any
letters of credit, surety bonds or similar obligations and all obligations of
such person to advance funds to, or to purchase assets, property or services
from, any other person in order to maintain the financial condition of such
other person.
"Current Ratio" means the relationship, expressed as a numerical ratio,
which (i) the amount of current assets of the Loan Parties, determined on a
Combined basis, which would be properly classified as a current asset under
GAAP, bears to (ii) the amount of current liabilities of the Loan Parties,
determined on a Combined basis, which would be properly classified as a
current liability under GAAP.
"Default" means any of the events or conditions described in Section
7.1 which might become an Event of Default with notice or lapse of time or
both.
"Default Rate" means the rate per annum which is two percent (2%) per
annum in excess of the Applicable Rate.
"Dollars" and "$" means the lawful money of the United States of America.
"Effective Date" means June 30, 1996.
"Eligible Accounts Receivable" means each account, or portion of an
account, owing to any of the Loan Parties which meets the following
specifications:
(a) it arose from a bona fide sale of goods, or performance of
services, in the ordinary course of business, such goods having been
delivered or shipped to, or such services have been provided to, the
account debtor and the appropriate Loan Party has genuine contracts,
purchase orders, invoices and shipping documents or receipts, and the
goods have not been returned;
(b) has been outstanding for no more than 90 days from the date
of shipment, delivery, or performance;
(c) it is owned by the appropriate Loan Party, free and clear of
any Lien, other than the Lien created in favor of the Bank;
(d) it is enforceable against the account debtor for the amount
included in the Borrowing Base; it is in compliance with applicable
laws and regulations; the portion included in the Borrowing Base is not
subject to any set-off, credit allowance or adjustment (except
discounts for prompt payment reflected in the computation thereof); and
the account debtor has not returned the goods or disputed liability
with respect to such account;
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(e) no Loan Party has notice or knowledge of any fact or
occurrence which could reasonably be expected to impair the credit
worthiness of the account debtor;
(f) the account debtor is not an Affiliate of any of the Loan
Parties, nor is it the United States of America, or any agency thereof;
(g) the account debtor is organized under the laws of and has its
principal place of business in the United States or any state thereof;
and
(h) the Bank has not notified the Loan Parties that the Bank
believes, in its sole discretion, that such account does not have
realizable value.
"Eligible Inventory" means finished goods, work-in-progress or raw
material inventory of any of the Loan Parties which meets the following
specifications:
(a) it is owned by the appropriate Loan Party free and clear of
any Lien other than the Lien created in favor of the Bank;
(b) it is in good and saleable condition and does not consist of
damaged, obsolete or slow-moving inventory; and
(c) the Bank has not notified the Loan Party that the Bank
believes, in its sole discretion, that such inventory does not have
realizable value.
"Environmental Laws" means any and all Governmental Regulations
concerning the protection of, or regulating the discharge of substances into,
the environment, including the Governmental Regulations specified in the
definition of Hazardous Materials.
"ERISA" means the Employee Retirement Income Securities Act of 1974, as
amended from time to time, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any person, any trade or
business (whether or not incorporated) which, together with such person or any
Subsidiary of such person, would be treated as a single employer under Section
414 of the Code.
"Event of Default" means any of the events or conditions described in
Section 7.1.
"Existing Loan Documents" means the Existing Loan Agreements, Existing
Notes and the Continuing Security Agreements executed by the respective
Borrowers prior to the date hereof.
"Existing Notes" means the Fourth Amended and Restated Master Demand
Business Loan Note, dated as of December 27, 1995, from the Borrowers and the
Inactive Affiliates to NBD, in the original principal amount of $4,500,000, and
the Existing Term Note, described in Section 2.4.
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"Event of Default" means any of the events or conditions described in
Section 7.1.
"Fixed Charges" means principal, interest and capital lease payments of
the Loan Parties on a combined basis.
"Fixed Rate Loan" means any LIBOR Loan or Negotiated Rate Loan.
"Floating Rate" means the per annum rate equal to the Prime Rate in
effect from time to time.
"Floating Rate Loan" means any Revolving Loan which bears interest at or
by reference to the Floating Rate.
"Funding Date" means any Business Day designated by the Company as a day
on which (a) a new Revolving Loan is to be made, (b) a Floating Rate Loan is
to be converted to a Fixed Rate Loan, or (c) a Loan Period is to be renewed or
extended, each in accordance with the terms and conditions of this Agreement.
"GAAP" means generally accepted accounting principles applied on a basis
consistent with those reflected in the financial statements listed in Schedule
5.6.
"Governmental Regulations" means any and all laws, statutes, ordinances,
rules, regulations, judgments, writs, injunctions, decrees, orders, awards and
standards, or any similar requirement, of the government of the United States,
the government of the United Kingdom or any foreign government or any state,
province, municipality or other political subdivision thereof or therein or
any court, agency, instrumentality, regulatory authority or commission of any
of the foregoing.
"Hazardous Materials" means asbestos-containing materials, mono- or
polychlorinated biphenyls, urea formaldehyde products, radon, radioactive
materials and any "hazardous substance", "hazardous waste", "pollutant",
"toxic pollutant", "oil" or "contaminant" as used in, or defined pursuant to,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 USC ss.ss.9601 et seq., and 40 CFR ss.ss.302.1 et seq.;
the Federal Clean Air Act, as amended, 42 USC ss.ss.7401 et seq., and
regulations thereunder; the Resource Conservation and Recovery Act, 42 USC
ss.ss.6901 et seq., as amended, and regulations thereunder; the Federal Water
Pollution Control Act, 33 USC ss.ss.1251 et seq., as amended, and regulations
thereunder; 40 CFR ss.ss.116.1 et seq. and ss.ss.129.1 et seq.; and any other
substance, waste, pollutant, contaminant or material, including petroleum
products and derivatives, the use, transport, disposal, storage, treatment,
recycling, handling, release, threatened release, or emission of which is
regulated or governed by any Environmental Laws.
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"Inactive Affiliates" means Triple Technologies, Inc. (formerly known as
Triple Tool, Inc.), a Michigan corporation, Tri-Tec Plastics Corporation, a
Michigan corporation, and Secom Information Products Company.
"Indebtedness" of any person means (a) all obligations of such person
for borrowed money, (b) all obligations of such person as lessee under any
Capital Lease, (c) all obligations which are secured by any Lien existing on
any asset or property of such person whether or not the obligation secured
thereby shall have been assumed by such person, (d) the unpaid purchase price
for goods, property or services acquired by such person, except for trade
accounts payable arising in the ordinary course of business that are not past
due, (e) all obligations of such person to purchase goods, property or
services where payment therefor is required regardless of whether delivery of
such goods or property or the performance of such services is ever made or
tendered (generally referred to as "take or pay contracts"), (f) all
liabilities of such person in respect of unfunded benefit liabilities
(determined in accordance with Section 4001 (a)(18) of ERISA) under any Plan
of such person or of any ERISA Affiliate, (g) all obligations of such person
in respect of any interest rate or currency swap, rate cap or other similar
transaction (valued in an amount equal to the highest termination payment, if
any, that would be payable by such person upon termination for any reason on
the date of determination), and (h) all Contingent Liabilities of such person.
"Investment" means (a) any transfer or delivery of cash, stock or other
property or value by such Person in exchange for Indebtedness, stock or any
other security of another Person; (b) any loan, advance or capital
contribution to or in any other Person; (c) any guaranty, creation or
assumption of any liability or obligation of any other Person; and (d) any
investment in any fixed property or fixed assets other than fixed properties
and fixed assets acquired and used in the ordinary course of the business of
that Person.
"L/C Documents" means the L/C and all applications and other documents
which NBD may require in connection with any issuance of an L/C by NBD
hereunder, as originally executed or as they may from time to time be
supplemented, modified, amended renewed or extended.
"L/Cs" means the letters of credit issued by NBD on behalf of any Loan
Party pursuant to Section 2.3, and any amendments, restatements, replacements,
extensions or renewals thereof.
"L/C Sublimit" means the maximum amount of L/Cs which may be outstanding
at any time, which amount shall initially be $1,000,000, as such amount may be
reduced from time to time pursuant to Section 2.2.
"LIBO Rate" means, for any LIBOR Loan and the related Loan Period, the
per annum rate of interest quoted by NBD as the rate at which deposits in U.S.
Dollars for the applicable Loan Period commencing on the first day of such
Loan Period (a "Rate Setting Date") and in an aggregate amount comparable to
the principal amount of such LIBOR Loan, were being offered by first class
banks in the London interbank market, at approximately 11:00 a.m., London
time, on the Rate Setting Date.
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"LIBOR Loan" means any Revolving Loan which bears interest at or by
reference to the Adjusted LIBO Rate.
"Lien" means any pledge, assignment, hypothecation, mortgage, security
interest, deposit arrangement, option, conditional sale or title retaining
contract, sale and leaseback transaction, financing statement filing, lessor's
or lessee's interest under any lease, subordination of any claim or right, or
any other type of lien, charge, encumbrance, preferential arrangement or other
claim or right.
"Loan Documents" means this Agreement, the Note, the Guaranty
Agreements, the L/C Documents, the Mortgage, the Security Agreements and all
other agreements, documents or instruments now or hereafter executed by or on
behalf of any of the Loan Parties and delivered to NBD in connection with this
Agreement.
"Loan Parties" means the Borrowers and any Affiliate of a Borrower that
has executed and delivered to the Bank an unlimited continuing guaranty of the
Borrowers' obligations to the Bank and a Security Agreement, substantially
similar to Exhibits 3.6(e) and 3.6(f).
"Loan Period" means, (i) with respect to each Negotiated Rate Loan, the
period commencing on the Funding Date for such Negotiated Rate Loan and ending
1, 2, 3, 6 or 12 months thereafter, as specified by the Borrowers in the
related notice under Section 3.2, and (ii) with respect to each LIBOR Loan,
the period commencing on the Funding Date for such LIBOR Loan and ending 1, 2,
3, 6 or 12 months thereafter, as specified by the Borrowers in the related
notice under Section 3.2; provided, however, that with respect to LIBOR Loans:
(a) any Loan Period which would otherwise end on a day which is
not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in another calendar month, in which case such
Loan Period shall end on the next preceding Business Day;
(b) any Loan Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Loan Period) shall, subject to
clause (c) below, end on the last Business Day of a calendar month; and
(c) any Loan Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Loans" means (i) the Revolving Loans made by NBD to the Borrowers
pursuant to Section 2.1, in each case evidenced by the Revolving Notes, and
(ii) the Term Loan made by NBD to the Company as described in Section 2.4.
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"Material Adverse Event" means any event, occurrence or state of facts
which has or could have a material adverse effect on the business, properties,
assets, operations, condition (financial or otherwise) or prospects of any
Loan Party.
"Mortgage" means that certain Amended and Restated Mortgage, dated as of
December 6, 1995, between the Company and NBD, recorded at Liber 28485, Page
10 of the Register of Deeds Office for Wayne County, Michigan, as the same may
be amended and restated from time to time.
"Multiemployer Plan" means any "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
"NBD Collateral" means the assets, rights, revenues, or property, real,
personal or mixed of any Loan Party in which NBD has at the time of
determination been granted a security interest or mortgage, whether now owned
or hereafter acquired.
"Negotiated Rate" means a per annum interest rate established by NBD
upon request by the Borrowers for a Negotiated Rate Loan.
"Negotiated Rate Loan" means any Revolving Loan which bears interest at
a Negotiated Rate.
"Net Cash Flow" means income before federal income taxes, plus
amortization, depreciation and interest, on a combined basis for all Loan
Parties.
"Notes" means the Revolving Notes and Term Note, together with any
amendments, restatements, replacements or renewals thereof.
"Obligations" means the principal of and interest on the Loans, the
aggregate amount of outstanding L/Cs and all other indebtedness, obligations
and liabilities of any of the Loan Parties to NBD, including those under,
arising out of or in connection with this Agreement or any other Loan Document
(including indemnities, fees and expenses), whether now existing or hereafter
incurred, direct or indirect, absolute or contingent, matured or unmatured,
joint or several, whether for principal, interest, reimbursement obligations,
fees, expenses or otherwise, and the due performance and compliance with the
terms and conditions of this Agreement and the other Loan Documents by any
Loan Party.
"Payment Date" means the first Business Day of each month, commencing
August 1, 1996.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means the Liens permitted by Section 6.2(e).
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"Person" or "person" includes an individual, a corporation, an
association, a partnership, a trust or estate, a joint stock company, an
unincorporated organization, a joint venture, a trade or business (whether or
not incorporated), a government (foreign or domestic) and any agency or
political subdivision thereof, or any other entity.
"Plan" means, with respect to any person, any pension plan (other than a
Multiemployer Plan) subject to Title IV of ERISA or to the minimum funding
standards of Section 412 of the Code which has been established or maintained
by such person, any Subsidiary of such person or any ERISA Affiliate, or by
any other person if such person, any Subsidiary of such person or any ERISA
Affiliate could have liability with respect to such pension plan.
"Prime Rate" means the prime rate of interest as announced by NBD at its
principal office at Detroit, Michigan, as in effect from time to time, which
rate may not be the lowest rate charged by NBD to any of its customers, which
Prime Rate shall change simultaneously with any change in such announced rate.
"Prohibited Transaction" means any transaction involving any Plan which
is proscribed by Section 406 of ERISA or Section 4975 of the Code.
"Property" means any real or personal property in which any Loan Party
has an interest or right of possession.
"Purchase Money Liens" means Liens securing purchase money Indebtedness
incurred in connection with the acquisition of capital assets by any Loan
Party in the ordinary course of business; provided that (a) such Liens do not
extend to or cover assets or properties other than those purchased in
connection with the purchase in which such Indebtedness was incurred and (b)
the obligation secured by any such Lien so created shall not exceed 100% of
the cost of the property including transportation and installation costs,
covered thereby.
"Reportable Event" means a reportable event as described in Section
4043(b) of ERISA including those events as to which the 30-day notice period
is waived under Part 2615 of the regulations promulgated by the PBGC under
ERISA.
"Restricted Payments" means any dividend (other than dividends payable
solely in capital stock of such person) or returns of capital to any
shareholder of such person, or any other distribution, payment or delivery of
property or cash to any of such person's shareholder's or any redemption,
retirement, purchase or other acquisition of capital stock of such person.
"Revolving Loan" means a loan made by NBD to the Borrowers pursuant to
Section 2.1.
"Revolving Notes" means the Revolving Credit Note and Line of Credit
Note of the Borrowers evidencing the Revolving Loans, in substantially the
form of Exhibit 2.1(a) and Exhibit 2.1(b), together with any amendments,
restatements, replacements or renewals thereof.
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"Subordinated Debt" means indebtedness of a Borrower owing to
Manubusiness Opportunities, Inc. or Larry McKnight, and any other debt to
which NBD has consented to in writing and for which NBD has received a
subordination agreement on terms and conditions acceptable to NBD.
"Subsidiary" of any person means any other person (whether now existing
or hereafter organized or acquired) in which (other than directors' qualifying
shares required by law) at least a majority of the securities or other
ownership interests of each class having ordinary voting power or analogous
right (other than securities or other ownership interests which at the time as
of which any determination is being made, are owned, have such power or right
only by reason of the happening of a contingency), beneficially and of record,
by such person or by one or more of the other Subsidiaries of such person or
by any combination thereof.
"Tangible Capital Funds" means Tangible Net Worth plus deferred tax
liabilities and Subordinated Debt.
"Tangible Net Worth" means:
(i) the amount of all assets which, under GAAP, would appear
on the combined balance sheet of the Loan Parties, but excluding
intangible items such as deferred tax assets, goodwill, treasury shares,
patents, trademarks, research and development expenses and the like;
less,
(ii) the amount of all liabilities (excluding deferred tax
liabilities) which, under GAAP, would appear on the combined balance
sheet of the Loan Parties.
"Termination Date" means the earlier to occur of (a) the third
anniversary of the Effective Date, and (b) the date on which NBD's obligations
shall be terminated pursuant to Section 7.2.
"Term Note" means the Amended and Restated Term Note of the Company
evidencing the term loan described in Section 2.4, in substantially the form
of Exhibit 2.4, together with any amendments, restatements, replacements or
renewals thereof.
"Total Liabilities" means the total of all liabilities of the Loan
Parties which would appear as liabilities on a Combined balance sheet of the
Loan Parties, determined in accordance with GAAP.
"Total Liabilities to Tangible Capital Funds Ratio" means the
relationship, expressed as a numerical ratio, which (i) Total Liabilities
bears to (ii) Tangible Capital Funds, determined for the Loan Parties on a
Combined basis.
"Type of Loan" has the meaning set forth in Section 3.1.
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1.2 Certain Rules of Construction. For purposes of this Agreement:
(a) Certain References. The words "herein," "hereof" and
"hereunder," and words of similar import, refer to this Agreement as a whole
and not to any particular provision of this Agreement, and references to
Articles, Sections, Exhibits or Schedules, and similar references, are to
Articles or Sections of, or Exhibits or Schedules to, this Agreement unless
otherwise specified.
(b) General Rules. Unless the context otherwise requires: (i) the
singular includes the plural, and vice versa; (ii) all definitions and
references to an agreement, instrument or document shall mean such agreement,
instrument or document together with all exhibits and schedules thereto and
any and all amendments, supplements or modifications thereto as the same may
be in effect at the time such definition or reference is applicable for any
purpose; (iii) all references to any party shall include such party's
successors and permitted assigns; (iv) the term "including" means including,
without limitation; and (v) reasonable attorneys' fees shall include allocated
costs of in-house counsel.
(c) Accounting Terms. All accounting terms used herein which are
not expressly defined in this Agreement shall have the meanings given to them
in accordance with GAAP, all computations made pursuant to this Agreement
shall be made in accordance with GAAP, and all financial statements shall be
prepared in accordance with GAAP.
1.3 Acknowledgment and Restatement of Credit.
(a) Acknowledgment. By executing this Agreement, NBD and the
Borrowers acknowledge and agree that as of June 30, 1996, the Indebtedness
owed to NBD under the Existing Loan Agreement by the Borrowers is in the
aggregate principal sum of $2,278,572.87 plus four outstanding letters of
credit in the aggregate face amount of $728,282 (the "Existing Indebtedness").
All borrowing on June 30, 1996 shall be deemed to be advanced under this
Agreement as Floating Rate Loans. The Borrowers further acknowledge and agree
that, as of the Effective Date, all Existing Indebtedness is and shall be owed
to NBD without offset, deduction, counterclaim or any other defense or claim
whatsoever.
(b) Effect of Restatement. The parties acknowledge and agree that
this Agreement and the other Loan Agreement amend, modify and restate the
Existing Indebtedness to NBD under the Existing Loan Documents and the
execution and delivery of this Agreement or any of the Loan Documents shall
not constitute (i) a novation or (ii) a waiver or release of any Default or
Event of Default based on any facts or events occurring or existing prior to
the date hereof and unknown to NBD prior to the date hereof. Upon the
Effective Date, all Existing Indebtedness shall constitute Obligations
hereunder and all outstanding loans under a line of credit advanced under the
Existing Loan Agreement shall be deemed Floating Rate Loans under Section 2.
1(a) of this Agreement.
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ARTICLE II. THE CREDIT FACILITIES
2.1 Revolving Loans.
(a) Revolving Loan Commitment. Subject to the terms and
conditions of this Agreement, NBD agrees to make Revolving Loans to the
Borrowers, jointly and severally, on a revolving basis from the Effective Date
and before the Termination Date as the Borrowers may from time to time request
from NBD; provided, however, that the aggregate principal amount of all
Revolving Loans which NBD shall be committed to make at any time shall not,
when added to the principal balance of the Revolving Loans outstanding at such
time plus the aggregate face amount of all outstanding L/Cs, exceed (i) the
Borrowing Base at such time; or (ii) the Commitment at such time. The
Revolving Loans shall be evidenced by a Revolving Note of the Borrowers in
substantially the form of Exhibit 2.1(a). The Revolving Note advanced under
this Section 2.1(a) shall be dated the Effective Date and stated to mature on
the Termination Date. Interest shall accrue on the unpaid principal balance of
the Revolving Loans from time to time outstanding under this Section 2.1(a)
at the Applicable Rate(s) and shall be payable in accordance with Section 4.2.
Within the limits of the Commitment and subject to the other terms and
conditions of this Agreement, the Revolving Loans may be borrowed, repaid and
reborrowed prior to the Termination Date. Although the Revolving Note shall be
expressed to be payable in the maximum amount of the Commitment, the Borrowers
shall be obligated to pay only the unpaid balance of the Revolving Loans
together with interest thereon and other amounts due in connection therewith
as provided herein and in the Revolving Note. The proceeds of Revolving Loans
shall be used by the Borrowers for working capital or other general corporate
purposes of the Loan Parties.
(b) Revolving Loan Authorization. Subject to the terms and
conditions of this Agreement, NBD may, in its sole discretion make Revolving
Loans to the Borrowers, jointly and severally, on a revolving basis from the
Effective Date and before the Termination Date as the Borrowers may from time
to time request from NBD; provided, however, that the aggregate principal
amount of all Revolving Loans which NBD outstanding hereunder shall not at any
time exceed the Authorization Amount; provided, further, that the aggregate
principal amount of all Revolving Loans which NBD shall make pursuant to
Section 2.1(a) and Section 2.1(b) at any time shall not, when added to the
principal balance of the Revolving Loans outstanding at such time plus the
aggregate face amount of all outstanding L/Cs, exceed (i) the Borrowing Base
at such time; or (ii) the Commitment plus the Authorization Amount at such
time. The Revolving Loans advanced under this Section 2.1(b) shall be
evidenced by a Line of Credit Note of the Company in substantially the form of
Exhibit 2.1(b). The Line of Credit Note shall be dated the Effective Date and
stated to mature on the Termination Date. Interest shall accrue on the unpaid
principal balance of the Revolving Loans from time to time outstanding under
this Section 2.1(b) at the Applicable Rate(s) and shall be payable in
accordance with Section 4.2. Subject to the other terms and conditions of this
Agreement, and subject to NBD's sole discretion, the Revolving Loans may be
borrowed, repaid and reborrowed prior to the Termination Date. Although the
Line of Credit Note shall be expressed to be payable in the maximum amount of
$2,000,000, the Borrowers shall be obligated to pay only the unpaid balance of
the Revolving
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Loans together with interest thereon and other amounts due in connection
therewith as provided herein and in the Line of Credit Note. The proceeds of
Revolving Loans shall be used by the Borrowers for working capital or other
general corporate purposes of the Loan Parties.
(c) Commitment Fee. The Borrowers agree to pay to NBD a commitment fee
computed at the rate of 1/4% per annum on the average daily unused portion of
the Commitment. Such commitment fee shall accrue from and after the Effective
Date, shall be calculated on a daily basis during the applicable period and
shall be due and payable quarterly in arrears, beginning on September 30, 1996
and on each December 31, March 31, June 30 and September 30 thereafter through
the Termination Date with any accrued but unpaid commitment fee due on the
Termination Date. All outstanding standby L/Cs will be considered usage under
Section 2.1(a). Revolving Loans shall first be deemed to be outstanding under
Section 2.1(a) and any remaining Revolving Loan in excess of the Commitment
minus the face amount of outstanding standby L/Cs will be deemed to be
outstanding under Section 2.1(b).
2.2 Termination and Reduction of the Commitment. The Borrowers will have
the right to terminate or reduce the Commitment at any time and from time to
time, in which case the Commitment will be terminated or permanently reduced
by the amount so specified, as the case may be; provided, however, that (a)
the Borrowers shall give notice of such termination or reduction to NBD at
least five Business Days in advance thereof, specifying the amount and
effective date thereof, (b) each partial reduction of the Commitment shall be
in a minimum amount of $1,000,000 and in an integral multiple of $100,000, (c)
no such termination or reduction shall be permitted with respect to any
portion of the Commitment as to which a request for a Revolving Loan or a L/C
is then pending, (d) the entire Commitment may not be terminated if any
Revolving Loans are then outstanding and may not be reduced below the sum of
the principal amount of Revolving Loans then outstanding plus the aggregate
amount of all then outstanding L/Cs. The Commitment or any portion thereof so
terminated or reduced pursuant to this Section 2.2 may not be reinstated.
2.3 Letters of Credit.
(a) Issuance of L/Cs. Provided there is sufficient availability
under Commitment and if requested by the Borrowers (with no less than three
Business Days prior written application in such form as requested by NBD), NBD
shall issue for the account of any Borrower standby or commercial letters of
credit, upon the following conditions:
(i) Total Amount. The total face amount of L/Cs outstanding
at any time shall not exceed an amount equal to the lesser, at such
time, of (A) the L/C Sublimit or (B) $4,000,000 minus the sum of (1)
aggregate principal balance of all Revolving Loans then outstanding
under Section 2.1(a) and (2) the aggregate face of all outstanding
L/Cs.
(ii) Expiry. The expiry date of any L/C shall not exceed a
maximum of 12 months from the date of issuance, provided, however, that
any L/Cs outstanding on
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the Termination Date will be (A) secured by cash or other collateral
satisfactory to NBD, or (B) replaced as of the Termination Date under
conditions which cause such outstanding L/Cs to be canceled.
(iii) Fees. The Borrowers will be charged a $150 issuance fee
for each standby L/C issued pursuant to this Section 2.3. Any
outstanding standby will accrue a commission at a per annum rate of
1.00% of the face amount of such L/C, payable quarterly in advance at
time of issuance.
(iv) Documentation. The Borrowers shall execute standard
documentation as requested by NBD with respect to the issuance of each
L/C.
(v) Conditions Met. On the date of issuance, all of the
conditions precedent specified in Sections 3.6 and 3.7 have been
satisfied.
(b) Obligations Unconditional. The obligation of the Borrowers to
pay to NBD the amount of any L/C shall be absolute, unconditional and
irrevocable and shall remain in full force and effect until all Obligations of
the Borrowers shall have been satisfied, and the Obligations with respect to
each L/C shall not be affected, modified or impaired upon the happening of any
event, including, without limitation, any of the following, whether or not
with notice to, or the consent of, the Borrowers:
(i) Any lack of validity or enforceability of any L/C or
any other L/C Document or to any transaction related in any way to such
L/C;
(ii) Any amendment, modification, waiver, consent, or any
substitution, exchange or release of or failure to perfect any interest
in collateral or security, with respect to any of the L/C Documents;
(iii) The existence of any claim, cutoff, defense or other
right which any Loan Party may have at any time against any beneficiary
or any transferee of any L/C (or any persons for whom any such
beneficiary or any such transferee may be acting), NBD or any other
person or entity, whether in connection with any of the L/C Documents,
the transactions contemplated herein or therein or any unrelated
transactions;
(iv) Any draft or other statement or document presented
under any L/C proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in
any respect;
(v) Payment by NBD to the beneficiary under any L/C against
presentation of documents which do not strictly comply with the terms of
the L/C, including failure of any documents to bear any reference or
adequate reference to such L/C;
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(vi) Any failure, omission, delay or lack on the part of NBD
or any party to any of the L/C Documents to enforce, assert or exercise
any right, power or remedy conferred upon NBD or any such party under
this Agreement or any of the L/C Documents, or any other acts or
omissions on the part of NBD or any such party; and
(vii) Any other event or circumstance that would, in the
absence of this clause, result in the release or discharge by operation
of law or otherwise of the Loan Parties from the performance or
observance of any obligation, covenant or agreement contained in this
Section 2.3.
(c) Repayment. The Borrowers agree, jointly and severally, to pay
to NBD, on the day on which any L/C shall come due, the face amount of such
L/C and all expenses paid or incurred by NBD relative thereto. Unless the
Borrowers shall have made such payment to NBD on such day (including by
borrowing the amount thereof with the proceeds of a Fixed Rate Loan), NBD
shall be deemed to have disbursed to the Borrowers and the Borrowers shall be
deemed to have elected to satisfy its repayment obligation by a Floating Rate
Loan in an amount equal to the amount due with respect to such L/C. Such
Floating Rate Loan shall be disbursed notwithstanding any failure to satisfy
any conditions for disbursement of any Loan set forth in Section 3.7 and, to
the extent of such Loan, the repayment obligation of the Borrowers with
respect to such L/C under this subsection shall be deemed satisfied.
2.4 Term Loan. Simultaneously with the execution of this Agreement, the
Bank will amend and restate the obligations of the Company to the Bank under
the Amended and Restated Installment Business Loan Note, dated on or about
December 6, 1995, in the original principal amount of $800,000 (the "Existing
Term Note") pursuant to the terms of the Amended and Restated Term Note given
by the Company in substantially the form of Exhibit 2.4, dated the Effective
Date. The Term Note amends and restates, but does not repay, the indebtedness
outstanding under the Existing Term Note.
2.5 NBD Records and Determinations. NBD is hereby authorized by the
Borrowers to note on NBD's books and records, the date, amount and Applicable
Rate of each Revolving Loan, the amount of each payment or prepayment thereon
and such other information as appropriate, which books and records shall
constitute prima facie evidence of the information so noted. Notwithstanding
the foregoing, the failure of NBD to record, or any error in recording, any
such information shall not relieve the Borrowers of their obligation to repay
the outstanding principal amount of the Loans, the L/Cs, all accrued interest
thereon and other amounts payable with respect thereto in accordance with the
terms of the Note, the L/C Documents, and this Agreement. NBD's determinations
of the Applicable Rates, the Default Rate, the fees any indemnity payment or
other amounts payable under this Agreement shall be presumed correct.
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ARTICLE III. THE LOANS
3.1 Types of Loans. Each Revolving Loan may be an LIBOR Loan, a
Negotiated Rate Loan or a Floating Rate Loan (each being herein called a "Type
of Loan"), as established pursuant to Sections 3.2, 3.3 or 3.4. The principal
amount of each Negotiated Rate Loan shall be at least $500,000 or a higher
integral multiple of $100,000. The principal amount of each LIBOR Loan shall
be at least $1,000,000, or a higher integral multiple of $100,000. Except for
Loans which exhaust the entire remaining amount of the Commitment and
Authorized Amount, the principal amount of each Floating Rate Loan shall be at
least $25,000 or a higher integral multiple of $25,000.
3.2 Requests for Loans. The Borrowers shall give NBD notice of each
proposed Loan: (a) in the case of a Floating Rate Loan, not later than 3:00
p.m., Detroit time, on the proposed Funding Date of such Floating Rate Loan;
(b) in the case of a Negotiated Rate Loan, not later than 3:00 p.m., Detroit
time on the proposed Funding Date of such Negotiated Rate Loan; and (c) in the
case of a LIBOR Loan, not later than 11:00 a.m., Detroit time, on the day
which is three Business Days in advance of the proposed Funding Date of such
LIBOR Loan. Each of the Borrowers hereby authorizes the Company to request
loans and to otherwise give and receive notices regarding the Loans and this
Agreement on each Borrower's behalf. Any notice received after the hour
specified above, shall be deemed to be notice given prior to such hour, on the
next succeeding Business Day. Each such request shall be effective upon
receipt by NBD, shall be in writing or by telephone to be promptly confirmed
in writing (in either case, to be in the form of Exhibit 3.2 for Floating Rate
Loans, and LIBOR Loans, and in the form of Exhibit 3.5 for Negotiated Rate
Loans), shall specify whether the request is for a new Revolving Loan, the
Applicable Rate of the requested Loan, the Funding Date and amount of the Loan
for each Type of Loan and, for any LIBOR Loan or Negotiated Rate Loan, the
Loan Period thereof. Subject to the terms and conditions of this Agreement,
the proceeds of each Revolving Loan shall be made available to the Borrowers
by depositing the proceeds thereof, in immediately available funds, in an
account to be designated by the Borrowers from time to time.
3.3 Conversion of Loans; Procedures. So long as no Default or Event of
Default exists and is continuing, the Borrowers may convert all or any part of
any outstanding Loan from one Type of Loan to another Type of Loan, if
available, by giving notice to NBD of such conversion not later than the time
required in Section 3.2 for such new Type of Loan. Each such notice shall be
effective upon receipt by NBD, shall be in writing or by telephone to be
promptly confirmed in writing (in either case, to be in the form of Exhibit
3.2), shall specify the date and amount of such conversion, the total amount
of Loans to be so converted and the Loan Period therefor. Each conversion
shall be on a Business Day, and in an amount as provided in Section 3.1.
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3.4 Procedures at End of Loan Period.
(a) Automatic Conversion. Unless the Borrowers request a new
Negotiated Rate Loan or LIBOR Loan in accordance with subsection (b) below or
repay the applicable Loan, NBD shall automatically and without request by the
Borrowers, on the last day of the applicable Loan Period, convert each
Negotiated Rate Loan and each LIBOR Loan to a Floating Rate Loan.
(b) Extension. So long as no Default or Event of Default exists
and is continuing, and subject to the limitations set forth in Section 2.1,
the Borrowers may cause all or any part of any outstanding Negotiated Rate
Loan or LIBOR Loan to continue to bear interest at a Negotiated Rate or an
Adjusted LIBO Rate, as the case may be, if available, at the end of the
then-applicable Loan Period, by (i) with respect to Negotiated Rate Loans,
notifying NBD not later than 3:00 p.m., Detroit time, the first day of the new
Loan Period or the last Business Day prior to the new Loan Period if it does
not begin on a Business Day, and (ii) with respect to LIBOR Loans, notifying
NBD not later than 11:00 a.m., Detroit time, on a day which three Business
Days prior to the first day of the new Loan Period. Each such notice shall be
effective upon receipt by NBD and shall be in writing or by telephone to be
promptly confirmed in writing (in either case to be in the form of Exhibit
3.2), and shall specify the first day of the applicable Loan Period, the
amount of the new Fixed Rate Loans and the Loan Period therefor. Each new Loan
Period for LIBOR Loans shall begin on a Business Day and the aggregate amount
of the Loans bearing the new Negotiated Rate or the new Adjusted LIBO Rate
shall be in an amount as provided in Section 3.1
3.5 Requests for Negotiated Rate Loans. Subject to the terms and
conditions of this Agreement, the Borrowers may request from NBD, from time to
time, Negotiated Rate Loans pursuant to Section 3.2. All Negotiated Rate Loans
requested by the Borrowers shall be subject to the following additional terms
and conditions:
(a) NBD shall have sole and absolute discretion to
determine the Negotiated Rate for a Negotiated Rate Loan.
(b) The Borrowers may request a maturity date for each
Negotiated Rate Loan of 1, 2, 3, 6 or 12 months from the Funding Date of
such Negotiated Rate Loan and, in any event, not later than the
Termination Date. The Borrowers will forward to NBD a written
confirmation of any Negotiated Rate Loan substantially in the form of
the attached Exhibit 3.5, including confirmation of the date, maturity
and amount of, and the Negotiated Rate applicable to, such Negotiated
Rate Loan.
(c) Each Negotiated Rate Loan shall be repayable upon the
stated maturity date requested by the Borrowers at the time of making
such loan and shall bear interest at the Negotiated Rate established by
NBD on the date of the making of such loan.
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(d) Interest on each Negotiated Rate Loan shall be payable
upon the stated maturity of such Negotiated Rate Loan.
(e) Each Negotiated Rate Loan or repayment thereof shall be
in the minimum amount of $500,000 or a higher integral multiple of
$100,000 and shall be made in immediately available funds at the
principal office of NBD.
(f) It is understood and agreed that any Negotiated Rate
for a Negotiated Rate Loan offered under this Agreement may be below or
above the Prime Rate and will not necessarily by the lowest rate charged
by NBD to any of its customers.
3.6 Conditions for Initial Loans. The obligation of NBD to make the
first Revolving Loans or to issue the first L/C hereunder is subject to
receipt by NBD of the following documents and completion of the following
matters on or prior to the Effective Date, in form and substance satisfactory
to NBD:
(a) Charter Documents. Certificates of recent date of the
appropriate authority or official of the jurisdiction of incorporation of each
of the Borrowers listing all charter documents of such Person on file in that
office and certifying as to the good standing and corporate existence of the
such Person, together with copies of such charter documents of the Borrowers
certified as of a recent date by such authority or official, and certified as
true and correct as of the Effective Date by a duly authorized officer of the
such Person.
(b) By-Laws and Corporate Authorizations. Copies of the by-laws
of each Borrower together with all authorizing resolutions and evidence of
other corporate action taken by the each Borrower to authorize the execution,
delivery and performance by such Person of this Agreement and the other Loan
Documents to which it is a party and the consummation by the such Person of
the transactions contemplated hereby, certified as true and correct as of the
Effective Date by a duly authorized officer of such Person.
(c) Incumbency Certificate. Certificates of incumbency of the
Borrowers containing, and attesting to the genuineness of, the signatures of
those officers authorized to act on behalf of the Borrowers in connection with
this Agreement and the other Loan Documents to which the Borrowers is a party
and the consummation by the Borrowers of the transactions contemplated hereby,
certified as true and correct as of the Effective Date by a duly authorized
officer of such Borrower.
(d) Note. The Notes appropriately completed and duly executed on
behalf of the Borrowers.
(e) Guaranty Agreement. The Guaranty Agreement, in the form of
the attached Exhibit 3.6(e), duly executed on behalf of each Borrower.
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(f) Security Agreements. The Amended and Restated Security
Agreements, in the form attached as Exhibit 3.6(f), duly executed on behalf of
each Borrower, together with appropriate UCC financing statements as requested
by NBD.
(g) Legal Opinion. The favorable written opinion of counsel for
the Borrowers, with respect to each of the matters set forth in Sections 5.1,
5.2, 5.3 and 5.8, and as to such other matters as NBD may reasonably request.
(h) Copies of Other Indebtedness. Full copies of the
documentation of the company's indebtedness to KeyCorp Leasing Ltd., GE
Capital Public Finance Inc., and Metro Life Capital Financial Corporation.
(i) Consents, Approvals, Etc. Copies of all governmental and
nongovernmental consents, approvals, authorizations, declarations,
registrations or filings, if any, required on the part of the Borrowers in
connection with the execution, delivery and performance of this Agreement and
the other Loan Documents or the transactions contemplated hereby or as a
condition to the legality, validity or enforceability of this Agreement or the
other Loan Documents, certified as true and correct and in full force and
effect as of the Effective Date by a duly authorized officer of the
appropriate Borrower.
(j) Satisfaction of Legal Counsel. Satisfaction of legal counsel
to NBD with all documents and instruments delivered hereunder or under any
other Loan Document and all proceedings related to the consummation of the
transactions contemplated by this Agreement and the other Loan Documents, and
delivery to NBD and such legal counsel of copies (executed or certified as may
be appropriate) of all legal documents or proceedings which NBD or such legal
counsel may reasonably request in connection with the consummation of such
transactions.
3.7 Further Conditions for Disbursement. The obligation of NBD to make
any Loan (including the first Revolving Loan or any extension or conversion of
any Revolving Loan, other than an automatic conversion of a Negotiated Rate
Loan or a LIBOR Loan to a Floating Rate Loan) or to issue any L/C (including
any renewal or extension of any L/C) is further subject to the satisfaction of
the following conditions precedent:
(a) Representations True. The representations and warranties
contained in Article V shall be true and correct on and as of the date such
Loan is made or such L/C is issued (both before and after such Loan is made or
such L/C is issued as if such representations and warranties were made on and
as of such date.
(b) No Default. No Default or Event of Default shall exist or
shall have occurred and be continuing on the date such Loan is made or such
L/C is issued (whether before or after such Loan is made or such L/C issued).
(c) No Material Adverse Event. Nothing shall have occurred since
the Effective Date which NBD shall determine either (i) constitutes a Material
Adverse Event or (ii)
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has, or may have, an adverse effect on the rights or remedies of NBD under
this Agreement or any other Loan Document.
(d) Request for Loans. In the case of the making of any Revolving
Loan, NBD shall have timely received the request for Revolving Loan, or in the
case of an extension or conversion of any Revolving Loan the applicable notice
of extension or conversion, in accordance with this Agreement, in form and
substance reasonably satisfactory to NBD.
(e) L/Cs. In the case of the issuance of any L/Cs, the Borrowers
shall have delivered the L/C Documents, as appropriate, and any other related
documentation requested by and acceptable to NBD, appropriately completed and
duly executed on behalf of the Borrowers
(f) Reaffirmation. The Borrowers shall be deemed to have made a
representation and warranty to NBD at the time of the making of each Loan or
the issuance of each L/C to the effect set forth in clauses (a) and (b) of
this Section 3.7. For purposes of this Section 3.7, the representations and
warranties contained in Section 5.6 shall be deemed made with respect to both
the financial statements referred to therein and the most recent financial
statements delivered pursuant to Section 6.1(d).
ARTICLE IV. PAYMENTS AND PREPAYMENTS OF LOANS
4.1 Principal Payments.
(a) Mandatory Prepayment. If the principal balance outstanding
under Section 2.1 plus the face amount of all outstanding L/Cs exceeds the
lesser of (i) the Commitment plus the Authorization Amount or (ii) the
Borrowing Base at any time, the Borrowers shall immediately prepay the amount
of such excess to the Bank.
(b) Optional Prepayment. The Company may at any time and from
time to time prepay all or a portion of the Revolving Loans, without premium
or penalty; provided, however, that each prepayment of a Floating Rate Loan
shall be in a minimum amount of $25,000 and in an integral multiple of
$25,000; and provided further that any prepayment of a LIBOR Loan which is
made on a day other than the last day of a Loan Period or, with respect to a
Negotiated Rate Loan, which is made on a day other than the maturity date
thereof, shall be accompanied by the indemnity payment set forth in Section
4.8 below.
(c) Final Payment of Loans. Unless earlier payment is required
under this Agreement, the Borrowers shall pay to NBD on the Termination Date
the outstanding principal amount of the Loans and provide cash collateral for,
or obtain the cancellation of, all outstanding L/Cs.
(d) Application of Prepayments; Interest. Except as otherwise
provided in Section 4.1(c) or 4.3(a), the Revolving Loans to which any
prepayments are to be applied shall
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be selected by NBD in its sole discretion. The Company shall also pay to NBD,
together with such amounts, all accrued interest to the date of payment on any
Loans so prepaid and, with respect to any Fixed Rate Loan prepaid prior to the
end of the applicable Loan Period or maturity date, the indemnity payment set
forth in Section 4.8 below.
4.2 Interest Payments.
(a) Regular Payments. The Borrowers will pay interest to NBD at
the Applicable Rate on the unpaid principal amount of each Loan as follows:
(i) Floating Rate Loans. Accrued and unpaid interest on
Floating Rate Loans shall be payable: (A) on each Payment Date; (B) as
to any portion of a Floating Rate Loan which is converted to a LIBOR
Loan, on the date of such conversion; and (C) on the Termination Date.
(ii) Fixed Rate Loans. Accrued and unpaid interest on Fixed
Rate Loans shall be payable on the last day of each Loan Period, and, if
the Loan Period is greater than three months, then also on each three
month anniversary of the Funding Date.
(b) Interest on Overdue Amounts. Notwithstanding the foregoing
Section 4.2(a) or Section 3.5, the Loan Parties shall pay interest on demand
at the Default Rate or the maximum rate permitted by law, whichever is lower,
on the outstanding principal amount of any Loan and any other amount payable
by the Loan Parties (other than interest) which is not paid in full when due
(whether upon demand, at stated maturity, by acceleration or otherwise) for
the period commencing on the due date thereof until the same is paid in full.
In addition to the foregoing, during the period that any other Event of
Default has occurred and shall be continuing, the Loan Parties shall pay on
demand, at the election of NBD, interest at the Default Rate or the maximum
rate permitted by law, whichever is lower, on the outstanding principal amount
of all the Obligations which are outstanding during such period from and after
the date of any such demand.
4.3 Payment Method and Related Matters.
(a) Payments by the Borrowers . All payments to be made by the
Borrowers hereunder will be made in Dollars and in immediately available funds
to NBD at NBD's address set forth opposite its name on the first page of this
Agreement, not later than 3:00 p.m., Detroit time, on the date on which such
payment shall become due. Payments received after the hour specified above
shall be deemed to be payments made prior to such hour on the next succeeding
Business Day. At the time of making each such payment, the Borrowers shall
specify to NBD the obligation of the Borrowers hereunder to which such payment
is to be applied, or, in the event that the Borrowers fails to so specify or
if an Event of Default shall have occurred and be continuing, NBD may apply
such payments as it may determine in its sole discretion.
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(b) Authorization of Payments. If the Borrowers shall not
otherwise have made payment of any of the Obligations as provided in this
Agreement, NBD is expressly authorized to charge any such Obligations, when
due, to any of the Borrower's demand deposit accounts maintained with NBD or,
if such accounts shall not control sufficient funds, to any other account
maintained by any Borrower with NBD.
4.4 No Setoff or Deduction. All payments of principal of and interest on
the Loans and other Obligations shall be paid by the Borrowers without setoff
or counterclaim, and free and clear of, and without deduction or withholding
for, or on account of, any present or future taxes, levies, imposts, duties,
fees, assessments, or other charges of whatever nature, imposed by any
governmental authority, or by any department, agency or other political
subdivision or taxing authority or other person.
4.5 Payment on Non-Business Day; Payment Computations. Except as
otherwise provided in this Agreement, whenever any installment of principal
of, or interest on, any Loan or any other Obligation becomes due and payable
on a day which is not a Business Day, the maturity thereof shall be extended
to the next succeeding Business Day and, in the case of any installment of
principal, interest shall be payable thereon at the then Applicable Rate
during such extension. Computations of interest and other amounts due under
this Agreement shall be made on the basis of a year of 360 days, for the
actual number of days elapsed, including the first day but excluding the last
day of the relevant period.
4.6 Additional Costs.
(a) Increased Costs. In the event that any Governmental
Regulation now or hereafter in effect and whether or not presently applicable
to NBD, or any interpretation or administration thereof by any governmental
authority (including without limitation the Board of Governors of the Federal
Reserve System) charged with the interpretation or administration thereof, or
compliance by NBD with any guideline, request or directive of any such
authority (whether or not having the force of law), shall (i) affect the basis
of taxation of payments to NBD of any amounts payable by the Borrowers under
this Agreement or any other Loan Documents (other than taxes imposed on the
overall net income of NBD, by the jurisdiction, or by any political
subdivision or taxing authority of any such jurisdiction, in which NBD has its
principal office), or (ii) impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of deposits with or for
the account of, or credit extended by NBD, or (iii) impose any other condition
with respect to this agreement, the Commitment, the Note, the Loans or any
other Obligation, and the result of any of the foregoing is to increase the
cost to NBD of providing its Commitment or making, funding or maintaining any
Loan or to reduce the amount of any sum receivable by NBD under this
Agreement, then the Borrowers shall pay to NBD, from time to time, upon
request by NBD, additional amounts sufficient to compensate NBD for such
interested cost or reduced sum receivable. A Statement as to the amount of
such increased cost or reduce sum receivable, prepared promptly, in good faith
and in reasonable detail by NBD and submitted by NBD to the Borrowers, shall
be presumed correct.
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(b) Capital Requirements. In the event that any Governmental
Regulation now or hereafter in effect and whether or not presently applicable
to NBD, or any interpretation or administration thereof by any governmental
authority (including without limitation the Board of Governors of the Federal
Reserve System) charged with the interpretation or administration thereof, or
compliance by NBD with any guideline, request or directive of any such
authority (whether or not having the force of law), including any risk-based
capital guidelines, affects or would affect the amount of capital required or
expected to be maintained by NBD (or any corporation controlling NBD) and NBD
determines that the amount of such capital is increased by or based upon the
existence of NBD's obligations hereunder and such increase has the effect of
reducing the rate of return on NBD's (or such controlling corporation's)
capital as a consequence of such obligations hereunder to a level below that
which NBD (or such controlling corporation) could have achieved but for such
circumstances (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by NBD to be material, then the Borrowers shall
pay to NBD, from time to time, upon request by NBD, additional amounts
sufficient to compensate NBD (or such controlling corporation) for any
increase in the amount of capital and reduced rate of return which NBD
reasonably determines to be allocable to the existence of NBD's obligations
hereunder. A statement as to the amount of such compensation, prepared
promptly, in good faith and in reasonable detail by NBD and submitted by NBD
to the Borrowers, shall be presumed correct.
4.7 Illegality and Impossibility.
(a) Repayment. In the event that any Governmental Regulation now
or hereafter in effect and whether or not presently applicable to NBD, or any
interpretation or administration thereof by any governmental authority
(including the Board of Governors Reserve System) charged with the
interpretation or administration thereof, or compliance by NBD with any
request or directive of such authority (whether or not having the force of
law), including exchange controls, shall make it unlawful or impossible for
NBD to maintain any LIBOR Loan at the Adjusted LIBOR Rate under this
Agreement, the Borrowers shall, upon receipt of notice thereof from NBD, repay
in full to NBD the then outstanding principal amount of such LIBOR Loan,
together with all accrued interest thereon to the date of payment and all
amounts due to NBD under Section 4.8, (i) on the last day of the then current
Loan Period applicable to the Loan if NBD may lawfully continue to maintain
such Loan at the Adjusted LIBOR Rate to such day, or (ii) immediately if NBD
may not continue to maintain such Loan at the Adjusted LIBOR Rate to such day.
(b) Conversion of LIBOR Loans to Floating Rate Loans.
Notwithstanding Section 4.7(a), if such Section would otherwise be applicable,
but NBD could lawfully maintain the LIBOR Loans at the Floating Rate then,
during such period as NBD cannot maintain the LIBOR Loans at the Adjusted LIBO
Rate, the LIBOR Loans shall bear interest at a per annum rate equal to the
Floating Rate in effect from time to time. If all events or conditions making
it unlawful or impossible for NBD to maintain the LIBOR Loans at the Adjusted
LIBO Rate cease to exist, then the LIBOR Loans shall again bear interest at
the Adjusted LIBO Rate,
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commencing on the first day of the next Loan Period immediately following the
date all such events and conditions so cease to exist.
4.8 Indemnity. If the Borrowers fail to make any payment of principal or
interest in respect of any Fixed Rate Loan when due or makes any payment or
prepayment of the principal of any Fixed Rate Loan, for any reason, on any due
other than the last day of the Loan Period applicable thereto or, with respect
to any Negotiated Rate Loan, the maturity date thereof, or if the rate of
interest with respect to any LIBOR Loan shall be converted from the Adjusted
LIBO Rate, pursuant to Section 4.7(b), on a date other than the last day of
the Loan Period applicable thereto, or if the Borrowers fail to borrow any
LIBOR Loan after requesting the same in accordance with this Agreement, the
Borrowers shall reimburse NBD on demand for any resulting loss or expense
incurred by NBD, including any loss incurred in obtaining, liquidating or
employing deposits from third parties. A statement as to the amount of such
loss or expense, prepared promptly, in good faith and in reasonable detail and
submitted by NBD to the Borrowers, shall be presumed correct. Calculation of
all amounts payable to NBD under this Section 4.8 with regard to LIBOR Loans
shall be made as though NBD shall have funded or committed to fund such
through the purchase of an underlying deposit in an amount equal to such Loans
and having a maturity comparable to such Loans; provided, however, that NBD
may fund the Fixed Rate Loans in any manner it sees fit and the foregoing
assumption shall be utilized only for the purpose of calculation of amounts
payable under this Section 4.8.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to NBD as follows, on the Effective
Date and on each Funding Date:
5.1 Corporate Existence and Power. Each Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and is duly qualified to do business, and
is in good standing, in all additional jurisdictions where such qualification
is necessary under applicable law. Each Loan Party has all requisite corporate
power to own or lease the properties used in its business and to carry on its
business as now being conducted and as proposed to be conducted, and to
execute and deliver this Agreement and the other Loan Documents to be executed
by such Loan Party and to engage in the transactions contemplated by this
Agreement.
5.2 Corporate Authority. The execution, delivery and performance by each
Loan Party of this Agreement and the other Loan Documents have been duly
authorized by all necessary corporate action and are not in contravention of
any Governmental Regulation, or of the terms of the respective Loan Party's
charter or by-laws, or of any contract or undertaking to which any Loan Party
is a party or by which such Loan Party or its property may be bound or
affected and do not result in the imposition of any Lien, except for the Liens
granted to NBD.
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5.3 Binding Effect. This Agreement is, and each of the Loan Documents
when delivered hereunder will be, legal, valid and binding obligations of each
Loan Party, which is a party to such agreement, enforceable against each Loan
Party in accordance with their respective terms.
5.4 Subsidiaries. All of the Subsidiaries of the Company (and any of the
other Loan Parties) are listed on Schedule 5.4, together with the percentage
of ownership thereof.
5.5 Litigation. Except as set forth in Schedule 5.5, there is no action,
suit or proceeding pending or, to the best of the Loan Parties' knowledge,
threatened against or affecting any Loan Party before or by any court,
governmental authority or arbitrator, which if adversely decided might result,
either individually or collectively, in any Material Adverse Event or in any
adverse effect on the legality, validity or enforceability of this Agreement
or any other Loan Document and, to the best of the Loan Parties' knowledge,
there is no basis for any such action, suit or proceeding.
5.6 Financial Condition. The financial statements listed in Schedule
5.6, copies of which have been furnished to NBD, fairly present, and the
financial statements delivered pursuant to Section 6.1(d) will fairly present,
the financial position of the Loan Parties as at the respective dates thereof,
and the results of operations of the Loan Parties for the respective periods
indicated, all on a Combined basis in accordance with GAAP (subject, in the
case of interim statements, to normal, immaterial year-end audit adjustments).
There has been no Material Adverse Event since March 31, 1996. There is no
material Contingent Liability of any Loan Party that is not reflected in such
Combined statements or in the notes thereto.
5.7 Use of Loans. The Borrowers will use the proceeds of the Loans for
working capital and other general corporate purposes of the Loan Parties. The
Loan Parties do not extend or maintain, in the ordinary course of business,
credit for the purpose, whether immediate, incidental, or ultimate, of buying
or carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
Loan will be used for the purpose, whether immediate, incidental, or ultimate,
of buying or carrying any such margin stock or maintaining or extending credit
to others for such purpose.
5.8 Consents, Etc. Except for such consents, approvals, authorizations,
declarations, registrations or filings delivered by the Loan Parties pursuant
to Section 3.6(h), if any, each of which is in full force and effect, no
consent, approval or authorization of or declaration, registration or filing
with any governmental authority or any nongovernmental person, including any
creditor, lessor or shareholder of any Loan Party, is required on the part of
any Loan Party in connection with the execution, delivery and performance of
this Agreement and the other Loan Documents or the transactions contemplated
hereby or as a condition to the legality, validity or enforceability of this
Agreement and the other Loan Documents.
5.9 Taxes. Each of the Loan Parties has filed all tax returns (federal,
state and local) required to be filed and have paid all taxes shown thereon to
be due, including interest and
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penalties, or has established adequate financial reserves on its books and
records for payment thereof. The Loan Parties do not know of any actual or
proposed tax assessment or any basis therefor, and no extension of time for
the assessment of deficiencies in any federal or state tax has been granted to
any of the Loan Parties.
5.10 Title to Properties. Except as otherwise disclosed in the latest
Combined balance sheet delivered pursuant to Section 5.6 or 6.1(d), the Loan
Parties have a valid and indefeasible ownership interest in all of the
properties and assets reflected in the Combined balance sheet of the Loan
Parties or subsequently acquired by any Loan Parties. All NBD Collateral is
free and clear of any Lien, except for Permitted Liens.
5.11 Compliance with Governmental Regulations. Each of the Loan Parties
is in compliance in all material respects with all Governmental Regulations
(including Environmental Laws) applicable to such person or its business or
properties. Without limiting the generality of the foregoing, all licenses,
permits, orders or approvals which are required under any Governmental
Regulation in connection with any of the businesses or properties of any Loan
Party ("Permits") are in full force and effect, no notice of any violation has
been received in respect of any such Permits and no proceeding is pending or,
to the knowledge of the Loan Parties, threatened to terminate, revoke or limit
any such Permits.
5.12 ERISA. The Loan Parties, their ERISA Affiliates and their
respective Plans are in compliance in all material respects with those
provisions of ERISA and of the Code which are applicable with respect to any
Plan. No Prohibited Transaction and no Reportable Event has occurred with
Respect to any such Plan. None of the Loan Parties or any of their ERISA
Affiliates is an employer with respect to any Multiemployer Plan. The Loan
Parties, and each of their ERISA Affiliates have met the minimum funding
requirements under ERISA and the Code with respect to each of their respective
Plans, if any, and have not incurred any liability to the PBGC or any Plan.
There is no material unfunded benefit liability, determined in accordance with
Section 4001(a)(18) of ERISA, with respect to any Plan of the Loan Party's or
their ERISA Affiliates.
5.13 Environmental Matters. Except as disclosed in Schedule 5.13 and
without limiting the generality of Section 5.11:
(a) No written demand, claim, notice, suit, suit in equity,
action, administrative action, investigation or inquiry whether brought by any
governmental authority, private person or otherwise, arising under, relating
to or in connection with any Environmental Laws is pending or, to the best of
the Loan Parties' knowledge, threatened against any Loan Party, any Property
or any past or present operation of any Loan Party which could result in a
Material Adverse Event.
(b) The Loan Parties do not have any knowledge that any other
person has ever received any notice, claim or allegation of any violation, and
the Loan Parties are not aware of any existing violation, of Environmental
Laws at or about any Property, and the Loan Parties do
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not have any knowledge of any actions commenced or threatened by any party for
or related to or arising out of non-compliance with Environmental Laws which
apply to any Property, activities at any Property or Hazardous Materials at,
from or affecting any Property.
(c) None of the Property appears on the National Priority List
(as defined under federal law) or any state listing which identifies sites for
remedial clean-up or investigatory actions. To the best of the Loan Parties'
knowledge, none of the Property has been contaminated with substances which
give rise to a clean-up obligation under any Environmental Law or common law.
5.14 Investment Company Act. No Loan Party is an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
5.15 Disclosure. No report or other information furnished in writing by
or on behalf of any Loan Party to NBD in connection with the negotiation or
administration of this Agreement contains any material misstatement of fact or
omits to state any material fact or any fact necessary to make the statements
contained therein not misleading. Neither this Agreement, the other Loan
Documents, nor any other document, certificate, or report or statement or
other information furnished to the NBD by or on behalf of any Loan Party in
connection with the transactions contemplated hereby contains any untrue
statement of a material fact or omits to state a material fact in order to
make the statements contained herein and therein not misleading. There is no
fact known to any Loan Party which materially and adversely affects, or which
in the future may (so far as the Loan Parties can now foresee) materially and
adversely affect, the business, properties, operations, condition, financial
or otherwise, or prospects of any Loan Party which has not been set forth in
this Agreement or in the other documents, certificates, statements, reports
and other information furnished in writing to NBD by or on behalf of any Loan
Party in connection with the transactions contemplated hereby.
ARTICLE VI. COVENANTS
6.1 Affirmative Covenants. Each Borrower covenants and agrees that,
until the Termination Date and thereafter until payment in full of the
principal of and accrued interest on the Notes and the payment or performance
of all other Obligations, unless NBD shall otherwise consent in writing, each
Borrower, and shall cause each other Loan Party to:
(a) Preservation of Corporate Existence; Etc. Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence, except to the extent permitted by Section 6.2(g), and its
qualification as a foreign corporation in good standing in each jurisdiction
in which such qualification is necessary under applicable law, and the rights,
licenses, permits (including those required under Environmental Laws),
franchises, patents, copyrights, trademarks and trade names material to the
conduct of its businesses; and defend all
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of the foregoing against all claims, actions, demands, suits or proceedings at
law or in equity or by or before any governmental instrumentality or other
agency or regulatory authority.
(b) Compliance with Laws; Etc. Comply with all Governmental
Regulations (including ERISA, the Code and Environmental Laws), in effect from
time to time; and pay and discharge promptly when due all taxes, assessments
and governmental charges or levies imposed upon it or upon its income,
revenues or property, before the same shall become delinquent or in default,
as well as all lawful claims for labor, materials and supplies or otherwise,
which, if unpaid, might give rise to any Lien upon such properties or any
portion thereof, except to the extent that payment of any of the foregoing is
then being contested in good faith by appropriate legal proceedings and with
respect to which adequate financial reserves have been established on the
books and records of such Loan Party.
(c) Maintenance of Properties; Insurance. Maintain, preserve and
protect all property that is material to the conduct of its business and keep
such property in good repair, working order and condition and from time to
time make, or cause to be made all needful and proper repairs, renewals,
additions, improvements and replacements thereto necessary in order that the
business carried on in connection therewith may be properly conducted at all
times in accordance with customary and prudent business practices for similar
businesses; and maintain in full force and effect insurance with responsible
and reputable insurance companies or associations in such amounts, on such
terms and covering such risks, including fire and other risks insured against
by extended coverage, as is usually carried by companies engaged in similar
businesses and owning similar properties similarly situated and maintain in
full force and effect public liability insurance, business interruption
insurance, insurance against claims for personal injury or death or property
damage occurring in connection with any of its activities or any of any
properties owned, occupied or controlled by it, in such amounts as it shall
reasonably deem necessary, and maintain such other insurance as may be
required by Governmental Regulations or as may be reasonably requested by NBD.
Upon request, the Loan Parties shall deliver to NBD copies of all or any of
such insurance policies or the related certificates of insurance.
(d) Reporting Requirements. Furnish to NBD the following:
(i) promptly and in any event within three calendar days
after becoming aware of the occurrence of (A) any Default or Event of
Default, (B) the commencement of any material litigation against, by or
affecting any Loan Party, and any material developments therein, or (C)
any development in the business or affairs of any Loan Party which has
resulted in or which is likely, in the reasonable judgment of the Loan
Parties, to result in a Material Adverse Event, a statement of the chief
financial officer of the Company setting forth details of such Event of
Default or such event or condition or such litigation and the action
which the affected person has taken and proposes to take with respect
thereto;
(ii) as soon as available and in any event within 45 days
after the end of each fiscal quarter of the Company (other than the
fourth fiscal quarter), (x) the
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Combined balance sheet of the Loan Parties of the end of each such
quarter and Combined statements of income, surplus and cash flow of the
Loan Parties for each such quarter and for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding figures
for the corresponding date or period of the preceding fiscal year, and
(y) the combining balance sheet and statements of income, surplus and
cash flows with respect to the Loan Parties for such periods (prepared in
a manner consistent with such Combined balance sheet and statements), all
in reasonable detail and duly certified (subject to normal, immaterial
year-end audit adjustments) by the chief financial officer or controller
of the Company as having been prepared in accordance with GAAP, together
with a certificate of the chief financial officer or controller of the
Company (A) stating that no Default or Event of Default has occurred and
is continuing or, if any Default or Event of Default has occurred and is
continuing, a statement setting forth the details thereof and the action
which the applicable person has taken and proposes to take with respect
thereto, and (B) setting forth a computation (which computation shall
accompany such certificate and shall be in reasonable detail) showing
compliance with Sections 6.2(a), (b), (c) and (d) in conformity with the
terms of this Agreement;
(iii) as soon as available and in any event within 90 days
after the end of each fiscal year of the Company, a copy of the annual
audited Combined financial statements of the Loan Parties for such fiscal
year, with a customary audit report of such independent certified public
accountants selected by the Company and reasonably acceptable to NBD,
without qualifications unacceptable to NBD, together with the unaudited
combining annual financial statements of the Loan Parties (prepared in a
manner consistent with the Company's audited Combined annual financial
statements) and a certificate of the chief financial officer or
controller of the Company (A) stating that no Default or Event of
Default has occurred or is continuing or if any Default or Event of
Default has occurred and is continuing, a statement setting forth
the details thereof and the action which the applicable person has
taken and proposes to take with respect thereto, and (B) setting forth
a computation (which computation shall accompany such certificate and
shall be in reasonable detail) showing compliance with Sections 6.2(a),
(b), (c) and (d) in conformity with the terms of this Agreement;
(iv) as soon as available, and in any event within 15 days
after the end of each month, a Borrowing Base Certificate in a form and
detail reasonably acceptable to Bank, executed by the chief financial
officers of the Loan Parties and completed as of the end of the preceding
month;
(v) as soon as available and in any event within 30 days
after the end of each fiscal quarter of the Company, a report listing the
accounts receivable aging, accounts payable aging and inventory of all of
the Loan Parties, in a form and detail reasonably acceptable to Bank,
executed by the chief financial officers of the Loan Parties and
completed as of the end of the preceding quarter;
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(vi) promptly after receipt thereof by any Loan Party, copies
of any audit or management reports submitted to it by independent
accountants in connection with any audit, interim audit or other report
submitted to the board of directors (or other governing body) of any Loan
Party;
(vii) promptly after the same are available, copies of each
annual report, proxy or financial statement or other communication sent
to a Loan Party's stockholders and copies of all annual, regular,
periodic and special reports and registration statements which the
Company may file or be required to file with the Securities and Exchange
Commission or with any securities exchange or the National Association of
Securities Dealers, Inc.; and
(viii) promptly, such other information respecting the
business, properties, operations or condition, financial or otherwise, of
any Loan Party as NBD may from time to time reasonably request upon
reasonable notice.
(e) Accounting; Access to Records, Books, Etc. Maintain a system
of accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in accordance with
GAAP and to comply with the requirements of this Agreement and, at any
reasonable time and from time to time, (i) permit NBD or any agents or
representatives thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, such person and
to discuss the affairs, finances and accounts of such person with their
respective directors, officers, employees and independent auditors, and by
this provision each Loan Party does hereby authorize the same, and (ii) permit
NBD or any of its agents or representatives to conduct a comprehensive field
audit of its books, records, properties and assets.
(f) New Affiliates. Cause any Subsidiary of a Loan Party acquired
or formed after June 30, 1996 to promptly deliver the agreements required to
become a Loan Party hereunder.
(g) Further Assurances. Execute and deliver promptly after
request therefor by NBD, all further instruments and documents and take all
further action that may be necessary or desirable, or that NBD may request, in
order to give effect to, and to aid in the exercise and enforcement of the
rights and remedies of NBD under, this Agreement and the other Loan Documents.
6.2 Negative Covenants. Each Borrower covenants and agrees that, until
the Termination Date and thereafter until payment in full of the principal of
and accrued interest on the Note and the payment and performance of all other
Obligations, unless NBD shall otherwise consent in writing, each Borrower
shall not, and shall cause each other Loan Party not to:
(a) Tangible Capital Funds. Tangible Capital Funds of the Loan
Parties to be less than $10,000,000 at any time after the Effective Date.
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(b) Current Ratio. Permit or suffer the Current Ratio to be less
than 1.25 to 1.0 at any time after the Effective Date.
(c) Total Liabilities to Tangible Capital Funds Ratio. Permit or
suffer the Total Liabilities to Tangible Capital Funds Ratio to exceed 3.0 to
1.0 at any time after the Effective Date.
(d) Cash Flow Coverage Ratio. Permit or suffer the Cash Flow
Coverage Ratio to be less than (i) 1.10 to 1.0 from the Effective Date until
December 31,1996, and (ii) 1.20 to 1.0 at any time from January 1,1997 and
thereafter.
(e) Liens. Create, incur or suffer to exist any Lien on any of
the NBD Collateral, except:
(i) Liens for taxes not delinquent or for taxes being
contested in good faith by appropriate proceedings and as to which
adequate financial reserves have been established on its books and
records;
(ii) Liens (other than any Lien imposed by ERISA) created
and maintained in the ordinary course of business which are not material
in the aggregate, and which would not constitute or result in a Material
Adverse Event, and which constitute (A) pledges or deposits under
worker's compensation laws, unemployment insurance laws or similar
legislation, (B) good faith deposits in connection with bids, tenders,
contracts or leases to which a Loan Party is a party for a purpose other
than borrowing money or obtaining credit, including rent security
deposits, (C) Liens imposed by law, such as those of carriers,
warehousemen and mechanics, if payment of the obligation secured thereby
is not yet due, (D) Liens securing taxes, assessments or other
governmental charges or levies not yet subject to penalties for
nonpayment, and (E) pledges or deposits to secure public or statutory
obligations of a Loan Party, or surety, customs or appeal bonds to which
a Loan Party is a party;
(iii) Liens affecting real property which constitute minor
survey exceptions or defects or irregularities in title, minor
encumbrances, easements or reservations of, or rights of others for,
rights of way, sewers, electric lines, telegraph and telephone lines and
other similar purposes, or zoning or other restrictions as to the use of
such real property; provided, however, that all of the foregoing, in the
aggregate, do not at any time materially detract from the value of said
properties or materially impair their use in the operation of the
businesses of any Loan Party, as the case may be; and
(iv) Liens in favor of NBD.
(f) Merger; Partnerships. Merge or consolidate or amalgamate
with any other person, nor acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of
any other person, unless (i) a Loan Party (and if the Company
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is involved, the Company) is the survivor of such merger or consolidation, and
(ii) NBD provides its prior written consent thereto; nor enter into any
partnership or similar arrangement with any other person, without the prior
written consent of NBD.
(g) Disposition of Assets; Etc. Sell, lease, license, transfer,
assign or otherwise dispose of a substantial portion of the business, assets,
rights, revenues or property, real, personal or mixed, tangible or intangible,
of a Loan Party, whether in one or a series of transactions, without the prior
written consent of NBD.
(h) Restricted Payments. Make or commit to make any Restricted
Payment at any time after the Effective Date, provided that so long as no
Default or Event of Default exists both before and after the declaring and
payment of a dividend, the other Loan Parties may pay cash dividends to the
Company.
(i) Nature of Business. Make any substantial change in the nature
of its business from that engaged in on the Effective Date or engage in any
other businesses other than manufacture, distribution and repair of plastic
and metal components.
(j) Transactions with Affiliates. Enter into, or permit or suffer
to exist, any transaction or arrangement with any Affiliate, except, with
respect to transactions with other Loan Parties, on terms which are no less
favorable to such Loan Party than could be obtained from persons who are not
Affiliates.
(k) Inactive Affiliates. Permit any Inactive Affiliate to
actively conduct business or own more assets than those owned as of June 30,
1996.
ARTICLE VII. DEFAULT
7.1 Events of Default. The occurrence of any one of the following events
or conditions shall be deemed an "Event of Default" hereunder unless waived by
NBD pursuant to Section 8.1:
(a) Nonpayment. The Borrowers shall fail to pay (i) when due
(whether by mandatory prepayment or otherwise) any principal of the Note or
the amount due under any L/C Document or (ii) more than five days after the
due date thereof, any interest on the Note or any fees or any other
Obligations payable hereunder.
(b) Other NBD Debt. Any default, event of default or event of
acceleration under any other agreement between any Loan Party, on one hand,
and NBD or any Affiliate of NBD, on the other hand, which has not been waived
in writing by NBD.
(c) Misrepresentation. Any representation or warranty made by any
Loan Party in Article V or in any certificate, report, financial statement
other document furnished by or on
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behalf of any Loan Party in connection with this Agreement, shall prove to
have been incorrect in any material respect when made or deemed made.
(d) Certain Covenants. Any term, covenant or agreement contained
in Section 6.2 shall be breached.
(e) Other Defaults. Any term, covenant or agreement contained in
this Agreement or any other Loan Document (other than Section 6.2 or with
regard to payments) shall be breached, and such breach shall remain unremedied
for 10 calendar days after written notice is sent by NBD to any Loan Party.
(f) Cross Default. Any Loan Party shall fail to pay any part of
the principal of, the premium, if any, or the interest on, or any other
payment of money due under, any of its Indebtedness (other than Indebtedness
under this Agreement), beyond any period of grace provided with respect
thereto, which individually or together with other such Indebtedness as to
which any such failure exists has an aggregate outstanding principal amount in
excess of $100,000; or any Loan Party shall fail to perform or observe any
other term, covenant or agreement contained in any agreement, document or
instrument evidencing or securing any Indebtedness in an aggregate outstanding
principal amount in excess of $100,000, or under which any such Indebtedness
was issued or created, beyond any period of grace, if any, if the effect of
such failure is to cause, or permit the holders of such Indebtedness (or a
trustee on behalf of such holders) to cause, any payment in respect of such
Indebtedness to become due prior to its due date.
(g) Judgments. One or more judgments or orders for the payment of
money in an aggregate amount of $250,000 or more shall be rendered against any
of the Loan Parties or any other judgment or order (whether or not for the
payment of money) shall be rendered against or shall affect any Loan Party
which causes or could cause a Material Adverse Event or which does or could
have an adverse effect on the legality, validity or enforceability of this
Agreement or any other Loan Document and either (i) such judgment or order
shall have remained unsatisfied and such Loan Party shall not have taken
action necessary to stay enforcement thereof by reason of pending appeal or
otherwise, prior to the expiration of the applicable period of limitations for
taking such action or, if such action shall have been taken, a final order
denying such stay shall have been rendered, or (ii) enforcement proceedings
shall have been commenced by any creditor upon any such judgment or order;
provided that no final judgment shall be included in the calculation under
this subsection to the extent that the claim underlying such judgment is
covered by insurance and defense of such claim has been tendered to and
accepted by the insurer without reservation.
(h) ERISA. The occurrence of a Reportable Event that results in
or could result in liability of any Loan Party, or their respective ERISA
Affiliates to the PBGC or to any Plan in excess of $50,000 and such Reportable
Event is not corrected within thirty (30) days after the occurrence thereof;
or the occurrence of any Reportable Event which could constitute grounds for
termination of any Plan of the Company, any other Loan Party or their
respective ERISA
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Affiliates by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer any such Plan and such Reportable
Event is not corrected within thirty (30) days after the occurrence thereof;
or the filing by the Company, any other Loan Party or any of their respective
ERISA Affiliates of a notice of intent to terminate a Plan or the institution
of other proceedings to terminate a Plan; or the Company, any other Loan Party
or any of their respective ERISA Affiliates shall fail to pay when due any
liability to the PBGC or to a Plan in excess of $50,000; or the PBGC shall
have instituted proceedings to terminate, or to cause a trustee to be
appointed to administer, any Plan of the Company, any other Loan Party or
their respective ERISA Affiliates; or any person engages in a Prohibited
Transaction with respect to any Plan which results in or could result in
liability of any Loan Party, any of their respective ERISA Affiliates, any
Plan of any Loan Party or their respective ERISA Affiliates or any fiduciary
of any such Plan in excess of $50,000; or failure by any Loan Party or any of
their respective ERISA Affiliates to make a required installment or other
payment to any Plan within the meaning of Section 302(f) of ERISA or Section
412(n) of the Code that results in or could result in liability of any Loan
Party or any of their respective ERISA Affiliates to the PBGC or any Plan in
excess of $50,000; or the withdrawal of any Loan Party or any of their
respective ERISA Affiliates from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA; or any Loan
Party or any of their respective ERISA Affiliates becomes an employer with
respect to any Multiemployer Plan without the prior written consent of NBD.
(i) Insolvency, Etc. Any Loan Party: shall be dissolved or
liquidated (or any judgment, order or decree therefor shall be entered); or
shall generally not pay its debts as they become due; or shall admit in
writing its inability to pay its debts generally; or shall make a general
assignment for the benefit of creditors; or shall institute, or there shall be
instituted against any Loan Party, any proceeding or case seeking to
adjudicate it a bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief or protection of debtors or seeking the entry of an
order for relief, or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its assets,
rights, revenues or property, and, if such proceeding is instituted against
any Loan Party and is being contested by such Loan Party in good faith by
appropriate proceedings, such proceeding shall remain undismissed or unstayed
for a period of 60 days; or shall take any action (corporate or other) to
authorize or further any of the actions described above in this subsection.
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(j) Change of Control. The Company shall cease to own 100% of
each class of the outstanding voting stock of each of the other Borrowers.
(k) Enforceability of Loan Documents. This Agreement or any of
the other Loan Documents shall, at any time after their respective execution
and delivery, and for any reason, cease to be in full force and effect or
shall be declared null and void, or be revoked or terminated, or the validity
or enforceability thereof or hereof shall be contested by any Loan Party, or
any stockholder of any Loan Party, or any Loan Party shall deny that it has
any or further liability or obligation thereunder or hereunder, as the case
may be.
7.2 Remedies.
(a) Termination of Commitment; Acceleration. Upon the occurrence
and during the continuance of any Event of Default, NBD shall by notice to
Borrowers terminate the Commitment or declare the outstanding principal of,
and accrued interest on, the Note and all other Obligations to be immediately
due and payable, or both, whereupon the Commitment shall terminate forthwith
and all such amounts shall become immediately due and payable, or both;
provided, however, that, in the case of any event or condition described in
Section 7.1(i) with respect to any Borrower, the Commitment shall
automatically terminate forthwith and all such amounts shall automatically
become immediately due and payable without notice; in all cases without
demand, presentment, protest, diligence, notice of dishonor or other
formality, all of which are hereby expressly waived.
(b) Other Remedies. Upon the occurrence and during the
continuance of an Event of Default, Borrowers must post cash collateral with
NBD in an amount equal to the aggregate outstanding face amount of the L/Cs
and NBD may exercise and enforce any and all other rights and remedies
available to it, whether arising under this Agreement or any other Loan
Document or under applicable law, in any manner deemed appropriate by it,
including suit in equity, action at law, or other appropriate proceedings,
whether for the specific performance (to the extent permitted by law) of any
covenant or agreement contained in this Agreement or in any other Loan
Document or in aid of the exercise of any power granted in this Agreement or
any other Loan Document or under applicable law.
(c) Set off. Upon the occurrence and during the continuance of
any Event of Default, NBD may at any time and from time to time, without
notice to the Borrowers (any requirement for such notice being expressly
waived by the Borrowers) set off and apply against any and all of the
Obligations any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time
owing by NBD to or for the credit or the account of any Borrower and any
property of any Borrower from time to time in possession of NBD, irrespective
of whether or not NBD shall have made any demand hereunder and although such
obligations may be contingent and unmatured. The Borrowers hereby grant to NBD
a Lien on all such deposits, indebtedness and property as collateral security
for the payment and performance of the Obligations. The rights of NBD under
this
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Section 7.2(c) are in addition to other rights and remedies (including other
rights of setoff) which NBD may otherwise have.
ARTICLE VIII. MISCELLANEOUS
8.1 Amendments. No provision of this Agreement or any other Loan
Document may be modified, waived, or amended except by an instrument or
instruments signed by the Company and NBD.
8.2 Notices.
(a) General. Except as otherwise provided in Section 8.2(c), all
notices, requests, consents and other communications hereunder shall be in
writing and shall be delivered, telecopied or sent to the Borrowers or NBD at
the address set forth in the introductory paragraph hereof; or to such other
address as may be designated by the Borrowers or NBD by written notice to each
other. All notices, requests, consents and other communications shall be
deemed to have been given when received if hand delivered, if mailed by
certified or registered mail, postage prepaid, on the third (3rd) day after
such mailing, or if deposited with an expedited courier service such as
"Federal Express" or "Purolator", on the Business Day following such deposit,
or if telecopied, on the Business Day on which such telecopy is confirmed as
having been received, in all cases, addressed to the respective address set
forth on the first page hereof or as may otherwise be designated in accordance
herewith.
(b) Notices of Termination or Prepayment. Notices by the
Borrowers to NBD with respect to terminations or reductions of the Commitment
or the L/C Sublimit pursuant to Section 2.2, and notices of prepayment
pursuant to Section 4.1 shall be irrevocable and binding on the Borrowers.
(c) Telephonic Notices. Any notice to be given by the Borrowers
to NBD pursuant to Section 3.1, 3.2, 3.3 or 3.4 and any notice to be given by
NBD hereunder, may be given by telephone, to be confirmed in writing in the
manner provided in Section 8.2(a). Any such notice given by telephone shall be
deemed effective upon receipt thereof by the party to whom such notice is
given.
8.3 No Waiver By Conduct; Remedies Cumulative. No course of dealing on
the part of NBD, nor any delay or failure on the part of NBD in exercising any
right, power or privilege hereunder or under any other Loan Document shall
operate as a waiver of such right, power or privilege or otherwise prejudice
NBD's rights and remedies hereunder or under any other Loan Document; nor
shall any single or partial exercise thereof preclude any further exercise
thereof or the exercise of any other right, power or privilege. No right or
remedy conferred upon or reserved to NBD under this Agreement or under any
other Loan Document is intended to be exclusive of any other right or remedy,
and every right and remedy shall be cumulative and in addition to every other
right or remedy granted thereunder or now or hereafter existing under any
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applicable law. Every right and remedy granted by this Agreement or under any
other Loan Document or by applicable law to NBD may be exercised from time to
time and as often as may be deemed expedient by NBD and, unless contrary to
the express provisions of this Agreement or the other Loan Documents,
irrespective of the occurrence or continuance of any Default or Event of
Default.
8.4 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of the Borrowers made
herein or in any certificate, report, financial statement or other document
furnished by or on behalf of the Borrowers in connection with this Agreement
or any other Loan Document shall be deemed to be material and to have been
relied upon by NBD, notwithstanding any investigation heretofore or hereafter
made by NBD, and those covenants and agreements of the Borrowers set forth in
Article IV and Section 8.5 shall survive the repayment in full of the
Obligations and the termination of this Agreement and the Commitments.
8.5 Expenses; Indemnification. The Borrowers agree, jointly and
severally, to pay, or reimburse NBD for the payment of, on demand, (a) the
reasonable fees and expenses of counsel to NBD, including the fees and
expenses of Honigman Miller Schwartz and Cohn in connection with the
preparation, execution, delivery and administration of this Agreement and the
consummation of the transactions contemplated hereby, and in connection with
advising NBD as to its rights and responsibilities with respect thereto, and
in connection with any amendments, waivers or consents in connection
therewith, and (b) all stamp and other taxes and fees payable or determined to
be payable in connection with the execution, delivery, filing or recording of
this Agreement, the Note and the other Loan Documents and the consummation of
the transactions contemplated hereby, and any and all liabilities with respect
to or resulting from any delay in paying or omitting to pay such taxes or
fees, and (c) all reasonable costs and expenses of NBD (including reasonable
fees and expenses of counsel and whether incurred through negotiations, legal
proceedings or otherwise) in connection with any Default or Event of Default
or the enforcement of, or the exercise or preservation of any rights under,
this Agreement or any other Loan Document or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement. The Borrowers, jointly and severally, further agree to indemnify
NBD for any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever (including reasonable attorneys' fees) which may be imposed
on, incurred by or asserted against NBD in any way relating to or arising out
of its duties under this Agreement or any other Loan Documents or the
transactions contemplated hereby (excluding, unless a Default or an Event of
Default has occurred and is continuing, normal administrative costs and
expenses incident to the performance of its duties hereunder); provided,
however, that the Borrowers shall not be liable for any of the foregoing to
the extent they arise from the gross negligence or willful misconduct of NBD.
8.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that the Borrowers may not, without the prior
consent of NBD, assign its rights or obligations
38
<PAGE>
hereunder or under the Note and NBD shall not be obligated to make any Loan or
issue any L/C hereunder to or for the account of any person other than the
Borrowers.
8.7 Participation. NBD may grant participation in all or any part of its
Loans, Notes and Commitment to any bank or other institutional investor
(including any Affiliate of NBD), without the consent of the Borrowers. The
Borrowers hereby acknowledge and agree that any participant described in this
Section 8.7 shall be considered to have the same rights and remedies as NBD
hereunder (including for purposes of Section 7.2(c)) and may rely on, and
possess all rights under, any opinions, certificates, or other instruments or
documents delivered under or in connection with this Agreement or any Loan
Document.
8.8 Disclosure of Information. The Borrowers authorize NBD to disclose
to any permitted participant or assignee of NBD or to any successor of NBD
(each, a "Transferee") and any prospective Transferee any and all financial
and other information in NBD's possession concerning the Loan Parties which
has been delivered to NBD by the Loan Parties pursuant to this Agreement or
the other Loan Documents or which has been received by NBD in connection with
its credit evaluation of the Borrowers prior to entering into this Agreement.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
8.10 Governing Law.
(a) General. This Agreement is a contract made under, and shall
be governed by and construed in accordance with, the laws of the State of
Michigan applicable to contracts made and to be performed entirely within such
State and without giving effect to choice of law principles of such State. The
Company further agrees that any legal action or proceeding with respect to
this Agreement or any other Loan Document or the transactions contemplated
hereby may be brought in any court of the State of Michigan, or in any court
of the United States of America sitting in the Eastern District of Michigan
and the Borrowers hereby submit to and accept generally and unconditionally
the jurisdiction of those courts with respect to their respective persons and
properties.
(b) Suit in Other Jurisdictions. Nothing in Section 8.10(a)
shall affect the right of NBD to serve legal process in any other manner
permitted by law or affect the right of NBD to bring any action or proceeding
against the Borrowers or their respective property in the courts of any other
jurisdictions.
(c) Immunity. To the extent that such Borrower has or hereafter
may acquire any immunity from jurisdiction of any court or from any service of
process (whether from service or notice, or otherwise) with respect to itself
or its property, such Borrower hereby irrevocably waives such immunity in
respect of its obligations under this Agreement, the Note and the other Loan
Documents.
39
<PAGE>
8.11 Table of Contents and Headings. The table of contents and the
headings of the various Articles, Sections and paragraphs hereof are for the
convenience of reference only and shall in no way modify any of the terms or
provisions hereof.
8.12 Construction of Certain Provisions. If any provision of this
Agreement refers to any action to be taken by any person, or which such person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such person, whether or not
expressly specified in such provision.
8.13 Integration and Severability. This Agreement and the other Loan
Documents embody the entire agreement and understanding between the Borrowers
and NBD with respect to the revolving credit granted by NBD to the Borrowers,
and supersede all prior agreements and understandings, relating to the subject
matter hereof. In case any one or more of the obligations, of any of the
Borrowers under this Agreement or any other Loan Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining obligations of the Borrowers shall not in any
way be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality
nor enforceability of the obligations of the Borrowers under this Agreement or
any other Loan Document in any other jurisdiction.
8.14 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not
permitted by any such covenant, the fact that it would be permitted by an
exception to, or would be otherwise within the limitations of, another
covenant shall not avoid the occurrence of a Default or an Event of Default or
any event or condition which with notice or lapse of time, or both, could
become such a Default or an Event of Default if such action is taken or such
condition exists.
8.15 Joint and Several Liability. All liabilities of the Borrowers under
this Agreement and the Notes shall be joint and several.
8.16 Interest Rate Limitation. Notwithstanding any provisions of this
Agreement or any other Loan Document, in no event shall the amount of interest
paid or agreed to be paid by the Borrowers exceed an amount computed at the
highest rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Agreement or
any other Loan Document at the time performance of such provision shall be
due, shall involve exceeding the interest rate limitation validly prescribed
by law which a court of competent jurisdiction may deem applicable hereto,
then, ipso facto, the obligations to be fulfilled shall be reduced to an
amount computed at the highest rate of interest permissible under applicable
law, and if for any reason whatsoever NBD shall ever receive as interest an
amount which would be deemed unlawful under such applicable law such interest
shall be automatically applied to the payment of principal of the Loans
outstanding hereunder (whether or not then due and payable) and not to the
payment of interest, or shall be refunded to the Borrowers if such principal
and all other Obligations of the Borrowers to NBD have been paid in full.
40
<PAGE>
8.17 Limitation of Liability. Neither NBD nor any of its Affiliates,
directors, officers, agents, attorneys or employees shall be liable to the
Borrowers or any of the Borrower's Affiliates for any action taken, or omitted
to be taken, by it or them or any of them under this Agreement or any other
Loan Document or in connection herewith or therewith, except that no person
shall be relieved of any liability imposed by law for gross negligence or
willful misconduct. No claim may be made by the Borrowers or any of the
Borrowers' Affiliates against NBD, or any of its Affiliates, directors,
officers, agents, attorneys or employees, for any special, indirect,
consequential or punitive damages in respect of any breach or wrongful conduct
(whether the claim is based on contract or tort or duty imposed by law)
arising out of or related to this Agreement or any other Loan Document, or the
transactions contemplated hereby or thereby, or any act, omission or event
occurring in connection herewith or therewith. The Borrowers, on their own
behalf and on behalf of their Affiliates, hereby waive, release and agree not
to sue upon any claim for any such damages, whether or not accrued, and
whether or not known or suspected to exist in its favor.
8.18 WAIVER OF JURY TRIAL. NBD AND EACH BORROWER, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE NOTE OR ANY OTHER
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY OF THEM. NEITHER NBD NOR THE ANY OF THE BORROWERS SHALL SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A JURY
TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR
HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN
MODIFIED IN ANY RESPECT OR RELINQUISHED BY NBD OR THE BORROWERS EXCEPT BY A
WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed this 9th day of August, 1996, to be effective as of June
30,1996.
SECOM GENERAL CORPORATION
By: /s/ David Marczak
----------------------
David Marczak
Its: Secretary
(Signatures continue on next page)
41
<PAGE>
UNIFLOW CORPORATION
By: /s/ David Marczak
--------------------
David Marczak
Its: Secretary-Treasurer
MICANOL, INC.
By: /s/ David Marczak
--------------------
David Marczak
Its: Secretary-Treasurer
L & H DIE, INC.
By: /s/ David Marczak
--------------------
David Marczak
Its: Secretary-Treasurer
FORM FLOW, INC.
By: /s/ David Marczak
--------------------
David Marczak
Its: Secretary-Treasurer
NBD BANK
By: /s/ Joseph B. Kabourek
----------------------
Joseph B. Kabourek
Its: Vice President
42
<PAGE>
EXHIBIT 2.1(b)
LINE OF CREDIT NOTE
Amount: $2,000,000 Dated: as of June 30, 1996
Made at Detroit, Michigan.
FOR VALUE RECEIVED, the undersigned, jointly and severally, promise to
pay to the order of NBD BANK ("Bank"), at its offices in Detroit, Michigan or
at such other place as the holder of this note may from time to time designate
in writing, the principal sum of Two Million and 00/100 Dollars ($2,000,000),
plus all accrued but unpaid interest on the Termination Date as may be agreed
to under the Credit Agreement (defined below) as amended from time to time,
together with interest on the outstanding balance thereof as provided in the
Credit Agreement. Interest is payable as follows: monthly payments of accrued
interest commencing on August 1, 1996, and continuing on the 1st day of each
consecutive month thereafter until maturity.
The indebtedness under this Note outstanding from time to time prior to
maturity (whether by acceleration or otherwise) or the occurrence of an Event
of Default shall bear interest on the basis of a year of 360 days for the
actual number of days elapsed in each month, at the rates set forth in the
Amended and Restated Revolving Credit and Loan Agreement dated as of the date
hereof (as so amended, the "Credit Agreement"). Capitalized terms not
otherwise defined herein shall have the meanings given them in the Credit
Agreement.
After maturity, or from and after an Event of Default, the outstanding
principal balance under this Note shall bear additional interest from and
after such maturity date or the occurrence of the Event of Default, at a rate
of three (3%) percentage points per annum above the Applicable Rate until the
Note is fully paid or the Event of Default is fully cured (the "Default
Rate").
Principal of and interest on this Note shall be payable in lawful money
of the United States of America. The undersigned agrees to pay all costs of
collection and enforcement of this Note, including reasonable attorneys' fees
and court costs.
The indebtedness under this Note may be prepaid in whole or in part at
any time. In addition to the principal payments described above, additional
payments on this Note may be due and payable pursuant to the terms of the
Credit Agreement.
Bank is hereby authorized by Borrowers to record on its books and
records, the date and amount of each Revolving Loan, the Loan Period, the
applicable interest rate (including any changes therein), the amount of each
payment of principal thereon and such other information as appropriate, which
books and records shall constitute rebuttable presumptive evidence of the
information so recorded, provided, however, that any failure by Bank to record
any such information shall not relieve Borrowers of their obligation to repay
the outstanding principal amount of all Revolving Loans made by Bank, all
accrued interest thereon and any amount payable with respect thereto in
accordance with the terms of this Note and the Credit Agreement.
<PAGE>
This Note is given pursuant to the terms and conditions of the Credit
Agreement. This Note is secured by, among other collateral, the collateral
granted to Lender under the terms of the Credit Agreement and the Loan
Documents. The occurrence of any default under the Credit Agreement or any of
the Loan Documents (as such documents may have been amended by the Credit
Agreement), or any document or instrument referred to or incorporated into any
of the foregoing shall be deemed a default under this Note and shall entitle
the holder of this Note to accelerate the maturity of the debt evidenced by
this Note and to have all rights and remedies afforded by law or available
under the Credit Agreement, the Loan Documents and under all other agreements
referred to or executed in connection with any of the foregoing.
The undersigned, and all endorses and guarantors, hereby severally waive
valuation and appraisement, presentment, protest and demand, notice of
protest, demand and dishonor and nonpayment of this Note, and expressly agree
that the maturity of this Note, or any payment due under this Note, may be
extended from time to time without in any way affecting the liability of the
undersigned or such endorses or guarantors.
This Note, made and executed in the State of Michigan, shall be governed
and construed according to the internal laws of the State of Michigan.
SECOM GENERAL CORPORATION,
a Delaware corporation
By:
-----------------------
Name: David Marczak
Its: Secretary and Chief Financial
Officer
46035 Grand River Ave.
Novi, Michigan 48374
UNIFLOW CORPORATION
By:
-----------------------
David Marczak
Its: Secretary-Treasurer
26600 Heyn Drive
Novi, Michigan 48450
(Signature continue on next page)
2
<PAGE>
MICANOL, INC.
By:
-----------------------
David Marczak
Its: Secretary-Treasurer
P.O. Box 881
46001 Grand River
Novi, Michigan 48376
L&H DIE, INC.
By:
-----------------------
David Marczak
Its: Secretary-Treasurer
38200 Ecorse Road
Romulus, Michigan 48174
FORM FLOW, INC.
By:
-----------------------
David Marczak
Its: Secretary-Treasurer
6901 Cogswell
Romulus, Michigan 48174
3
<PAGE>
EXHIBIT 2.4
AMENDED AND RESTATED
TERM NOTE
Amount: $775,000 Dated: as of June 30, 1996
Due Date: December 6, 2000 Made at Detroit, Michigan.
FOR VALUE RECEIVED, the undersigned promise to pay to the order of NBD
BANK ("Bank"), at its offices in Detroit, Michigan or at such other place as
the holder of this Note may from time to time designate in writing, the
principal sum of Seven Hundred Seventy Five Thousand and 00/100 Dollars
($775,000), together with interest on the outstanding balance thereof at the
Bank's Prime Rate, payable as follows: 53 monthly installments of principal in
the amount of $5,000 plus accrued interest commencing on July 6, 1996, and
continuing on the 6th day of each consecutive month thereafter followed by a
balloon payment of all remaining principal and interest on December 6, 2000.
As used herein, the "Prime Rate" shall be the per annum rate of interest from
time to time announced by the Bank (or any successor thereto) as its prime
rate, which prime rate may not be the lowest rate of interest charged by the
Bank to any of its customers. Any change in the Prime Rate shall immediately
effect a change in the rate of interest payable hereunder.
After maturity, or from and after an Event of Default, described
below, the outstanding principal balance under this Note shall bear additional
interest from and after such maturity date or the occurrence of the Event of
Default, at a rate of three (3%) percentage points per annum above the Prime
Rate until the Note is fully paid or the Event of Default is fully cured (the
"Default Rate").
The indebtedness under this Note outstanding from time to time shall
bear interest on the basis of a year of 360 days for the actual number of days
elapsed in each month. Principal of and interest on this Note shall be payable
in lawful money of the United States of America. The undersigned agrees to pay
all costs of collection and enforcement of this Note, including reasonable
attorneys' fees and court costs.
The indebtedness under this Note may be prepaid in whole or in part at
any time.
This Note is given pursuant to the terms and conditions of the Amended
and Restated Revolving Credit and Loan Agreement dated as of the date hereof
(as amended from time to time, the "Credit Agreement"). Capitalized terms not
otherwise defined herein shall have the meanings given them in the Credit
Agreement. This Note is secured by, among other collateral, the collateral
granted to Lender under the terms of the Credit Agreement and the Loan
Documents. The occurrence of any Event of Default under the Credit Agreement
or any default under any of the Loan Documents or any document or instrument
referred to or incorporated into any of the foregoing shall be deemed an Event
of Default under this Note and shall entitle the holder of this Note to
accelerate the maturity of the debt evidenced by this Note and to have all
rights and remedies afforded by law or available under the Credit Agreement,
the Loan
<PAGE>
Documents and under all other agreements referred to or executed in connection
with any of the foregoing.
This Amended and Restated Term Note, among other things, amends,
restates and consolidates (but does not discharge) the indebtedness
outstanding under that certain Amended and Restored Installment Business Loan
Note dated as of December 6, 1995, in the original principal amount of
$800,000, that certain Installment Business Loan Note dated December 28, 1994,
in the original amount of $446,006.78, and that certain Installment Business
Loan Note, dated March 23, 1993, in the original principal amount of
$500,582.78. Any reference in any other document or instrument to the
foregoing notes shall constitute a reference to this Amended and Restated Term
Note.
The undersigned, and all endorses and guarantors, hereby severally waive
valuation and appraisement, presentment, protest and demand, notice of
protest, demand and dishonor and nonpayment of this Note, and expressly agree
that the maturity of this Note, or any payment due under this Note, may be
extended from time to time without in any way affecting the liability of the
undersigned or such endorses or guarantors.
This Note, made and executed in the State of Michigan, shall be governed
and construed according to the internal laws of the State of Michigan.
SECOM GENERAL CORPORATION,
a Delaware corporation
By:
------------------------
Name:
------------------
Title:
-----------
46035 Grand River Ave.
Novi, Michigan 48374
2
<PAGE>
EXHIBIT 3.2
Request Under Revolving Credit Agreement
(Floating or LIBOR)
The undersigned, Secom General Corporation, on behalf of itself and the
other Borrowers, hereby certifies as set forth below pursuant to the Amended
and Restated Revolving Credit and Loan Agreement, dated as of June 30, 1996,
among the Borrowers and NBD Bank (such agreement, as amended, modified or
supplemented from time to time, is referred to herein as the "Credit
Agreement"). Reference is made to the Credit Agreement for definitions of
capitalized terms not otherwise defined herein and for additional terms and
conditions for Revolving Loans.
Check applicable number(s) and complete request as appropriate.
_______1. NEW ADVANCE. Borrowers hereby request a new Revolving Loan in the
amount of $________________, with such terms as described in Section 3 below.
_______2. CONVERSION OR EXTENSIONS. Borrowers hereby request that the
following Revolving Loans be converted or extended with such new terms as
described in Section 3 below:
a. Type of Loan being converted or extended:__________________
b. Amount of such Loan: __________________
c. Due date of such Loan: __________________
3. TERMS. Terms of new, extended or converted Loan, as
applicable:
a. Type of Advance:___________________________________
(specify Floating or LIBOR)
b. Loan Period Requested:_____________________________________
(LIBOR - 1, 2, 3, 6 or 12 month only)
c. Funding Date (same as for nor due date for conversion):__________
4. CERTIFICATION. Borrowers certify that: (a) representations and
warranties in the Credit Agreement are true in all material respects as of the
date hereof (both before and after giving effect to the making of the Loan
requested herein); (b) the aggregate amount of all outstanding Revolving Loans
and Loans to be outstanding upon the making of the Loan requested herein
together with the face amount of all outstanding L/Cs and will not exceed the
Borrowing Base; and (c) no Default or Event of Default has occurred and is
continuing as of the date hereof.
5. TRANSFER REQUEST. Borrowers hereby request that, any new Loan be
credited to Acct. No.__________________ of______________ at NBD Bank.
This Request Under Revolving Credit Agreement is executed and delivered
to NBD by the undersigned authorized representative of the Borrowers on_______,
199_.
SECOM GENERAL CORPORATION
By:
----------------------
Its:
----------------
<PAGE>
EXHIBIT 3.5
Request Under Revolving Credit Agreement
(Negotiated Rate Loan)
The undersigned, Secom General Corporation, on behalf of itself and the
other Borrowers, hereby certifies as set forth below pursuant to the Amended
and Restated Revolving Credit and Loan Agreement, dated as of June 30, 1996,
among the Borrowers and NBD Bank (such agreement, as amended, modified or
supplemented from time to time, is referred to herein as the "Credit
Agreement"). Reference is made to the Credit Agreement for definitions of
capitalized terms not otherwise defined herein and for additional terms and
conditions for Negotiated Rate Loans.
Check applicable number(s) and complete request as appropriate:
_______1. RATE QUOTATION. Borrowers hereby request a quotation for a
Negotiated Rate Loan in the amount of $_______,with such terms as described in
Section 3 below.
(This sentence to be completed and returned by NBD): NBD hereby offers
to make such a Negotiated Rate Loan with such terms as described in Section 3
below and with an interest rate of___________ percent.
_______Borrowers' authorized representative to initial this sentence and
return this Request to NBD to request a Negotiated Rate Loan on the terms set
forth in this Section 1 and in Section 3 below. If Section 2 is also completed
this will be treated as a request for a conversion, otherwise it will be
deemed to be a request for a new Revolving Loan.
_______2. CONVERSION OR EXTENSIONS. Borrowers hereby request that the
following Revolving Loan be converted or extended as a Negotiated Rate Loan
with such new terms as described in Section 3 below:
a. Type of Loan being converted or extended:______________________
b. Amount of such Loan: $_____________________
c. Due date of such Loan: ______________________
3. TERMS. Terms of new, extended or converted Negotiated
Rate Loan, as applicable:
a. Advance Period Requested:_______________(1, 2, 3, 6 or 12 months)
b. Funding Date (same as former due date for conversions):__________
4. CERTIFICATION. Borrowers certify that: (a) representations and
warranties in the Credit Agreement are true in all material respects as of the
date hereof (both before and after giving effect to the making of the Loan
requested herein); (b) the aggregate amount of all outstanding Revolving Loans
and Loans to be outstanding upon the making of the Loan requested herein
together with the face amount of all outstanding L/Cs will not exceed the
Borrowing Base; and (c) no Default or Event of Default has occurred and is
continuing as of the date hereof.
5. TRANSFER REQUEST. Borrowers hereby request that, any new Loan be
credited to Acct. No._________________ of_____________ at NBD Bank.
This Request Under Revolving Credit Agreement is executed and delivered
to NBD by the undersigned authorized representative of the Borrowers on_____ ,
199_.
SECOM GENERAL CORPORATION
By:______________________
Its:_____________________
<PAGE>
AMENDED AND RESTATED
EXHIBIT 3.6(e) CONTINUING GUARANTY
NBD
GUARANTY: To induce NBD Bank (the "Bank"), of 611 Woodward Avenue, Detroit,
Michigan 48226-3497 at its option, to make loans, extend or continue credit or
some other benefit, including letters of credit and foreign exchange
contracts, present or future, direct or indirect, and whether several, joint
or joint and several (referred to collectively as "Liabilities"),
to_____________________________________________ ,
(Name of Borrower)
and its successors (the "borrower"), and because the undersigned (the
"Guarantor") has determined that executing this Guaranty is in its interest
and to its financial benefit, the Guarantor absolutely and unconditionally
guaranties to the Bank, as primary obligor and not merely a surety, that the
Liabilities will be paid when due, whether by acceleration or otherwise. The
Guarantor will not only pay the Liabilities, but will also reimburse the Bank
for accrued and unpaid interest, and any expenses, including reasonable
attorneys' fees, that the Bank may pay in collecting from the Borrower or the
Guarantor, and for liquidating any collateral.
LIMITATION: The Guarantor's obligation under this Guaranty is UNLIMITED.
CONTINUED RELIANCE: The Bank may continue to make loans or extend credit to
the Borrower based on this Guaranty until it receives written notice of
termination from the Guarantor. That notice shall be effective at the opening
of the Bank for business on the day after receipt of the notice. If
terminated, the Guarantor will continue to be liable to the Bank for any
Liabilities created, assumed or committed to at the time the termination
becomes effective, and all subsequent renewals, extensions, modifications and
amendments of the Liabilities.
SECURITY: As security for the Guaranty, the Guarantor pledges and grants to
the Bank a continuing security interest in the following described property
and all of its additions, substitutions, increments, proceeds and products,
whether now owned or later acquired ("Collateral"):
1. All securities and other property of the Guarantor in the custody,
possession or control of the Bank (other than property held by the Bank
solely in a fiduciary capacity);
2. All property or securities declared or acknowledged to constitute security
for any past, present or future liability, direct or indirect of the
Guarantor to the Bank;
3. All balances of deposit accounts of the Guaranty with the Bank;
4. The following additional property of the Guarantor: accounts, inventory,
contract rights and other property as described in the security agreements
executed in connection with the Amended and Restated Revolving Credit and
Loan Agreement, dated as of June 1, 1996 among NBD, the Borrower and the
Guarantor.
The Bank shall have the right at any time to apply its own debt or liability
to the Guarantor in whole or partial payment of this Guaranty or other present
or future liabilities, direct or indirect, without any requirement for mutual
maturity.
If the Guarantor fails to pay any amount owing under this Guaranty, the Bank
shall have all of the rights and remedies provided by law or under any other
agreement to liquidize or foreclose on and sell the Collateral, including but
not limited to the rights and remedies of a secured party under the Uniform
Commercial Code. These rights and remedies shall be cumulative and not
exclusive. If the Guarantor is entitled to notice, that requirement will be
met if the Bank sends notice at least seven (7) days prior to the date of
sale, disposition or other event which requires notice. The proceeds of any
sale shall be applied first to costs, then toward payment of the amount owing
under this Guaranty. The Bank is authorized to cause all or any part of the
Collateral to be transferred to or registered in its name or in the name of
any other person, firms or corporation, with or without designation of the
capacity of such nominee.
For purpose of the following paragraphs, "any collateral" shall include
the Guarantor's Collateral and any other collateral securing the
Liabilities.
ACTION REGARDING BORROWER: If any monies become available that the Bank can
apply to the Liabilities, the Bank may apply them in any manner it chooses,
including but not limited to applying them against liabilities which are not
covered by this Guaranty. The Bank may take any action against the Borrower,
any collateral, or any other person liable for any of the Liabilities. The
Bank may release the Borrower or anyone else from the Liabilities, either in
whole or in part, or release any collateral, and need not perfect a security
interest in any collateral. The Bank does not have to exercise any rights that
it has against the Borrower or anyone else, or make any effort to realize on
any collateral or right of set-off. If the Borrower requests more credit or
any other benefit, the Bank may grant it and the Bank may grant renewals,
extensions, modifications and amendments of the Liabilities and otherwise deal
with the Borrower or any other person as the Bank sees fit and as if this
Guaranty were not in effect. The Guarantor's obligations under this Guaranty
shall not be released or affected by (a) any act or omission of the Bank, (b)
the voluntary or involuntary liquidation, sale or other disposition of all or
substantially all of the assets of the Borrower, or any receivership,
insolvency, bankruptcy, reorganization, or other similar proceedings affecting
the Borrower or any of its assets or (c) any change in the composition or
structure of the Borrower or Guarantor, including a merger or consolidation
with any other person or entity.
NATURE OF GUARANTY: This Guaranty is a guaranty of payment and not of
collection. Therefore, the Bank may insist that the Guarantor pay immediately,
and the Bank is not required to attempt to collect first from the Borrower,
any collateral, or any other person liable for the
<PAGE>
Liabilities. The obligation of the Guarsntor shall be subject to no conditions
of any kind, and shall be absolute, regardless of the unenforceability of any
provisions of any agreement between the Borrower and the Bank, or the
existence of any defense, setoff or counterclaim which the Borrower may
assert.
OTHER GUARANTORS: If there is more than one Guarantor, the obligations under
this Guaranty shall be joint and several. In addition each Guarantor shall be
jointly and severally liable with any other guarantor of the Liabilities. If
the Bank elects to enforce its rights against less than all guarantors of the
Liabilities, that election shall not release Guarantor from its obligations
under this Guaranty. The compromise or release of any of the obligations of
any of the other guarantors or the Borrower shall not serve to waive, alter or
release the Guarantor's obligations. This Guaranty is not conditioned on
anyone else executing this or any other guaranty.
WAIVER OF SUBROGATION: The Guarantor expressly waives any and all rights of
subrogation, contribution, reimbursement, indemnity, exoneration, implied
contract, recourse to security or any other claim (including any claim, as
that term is defined in the federal Bankruptcy Code, and any amendments) which
the Guarantor may now have or later acquire against the Borrower, any other
entity directly or contingently liable for the Liabilities or against the
Collateral, arising from the existence or performance of the Guarantor's
obligations under this Guaranty.
The Guarantor further agrees that should any payments to the Bank on the
Liabilities be in whole or in part, invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy act or code, state or federal law, common
law or equitable doctrine, this Guaranty and any Collateral shall remain in
full force and effect (or be reinstated as the case may be) until payment in
full of any such amounts, which payment shall be due on demand.
WAIVERS: The Guarantor waives any right it may have to receive notice of the
following matters before the Bank enforces any of its rights: (a) the Bank's
acceptance of this Guaranty, (b) any credit that the Bank extends to the
Borrower, (c) the Borrower's default, (d) any demand, or (e) any action that
the Bank takes regarding the Borrower, anyone else, any collateral, or any
Liability, which it might be entitled to by law or under any other agreement.
Any waiver shall affect only the specific terms and time period stated in the
waiver. The Bank may waive or delay enforcing any of its rights without losing
them. No modification or waiver of this Guaranty shall be effective unless it
is in writing and signed by the party against whom it is being enforced.
SETOFF: The Bank may at any time and from time to time, without notice to
Guarantor (any requirement for such notice being expressly waived by the
Guarantor) setoff and apply against any and all Liabilities any and all
deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Bank to or for the
credit or the account of any Guarantor and any property of any Guarantor from
time to time in possession of the Bank, irrespective of whether or not the
Bank shall have made any demand hereunder and although such obligations may be
contingent and unmatured. The Guarantor hereby grants to the Bank a lien on
all such deposits, indebtedness and property as collateral security for the
payment and performance of the Liabilities. The rights of the Bank under this
provision are in addition to other rights and remedies which the Bank may
otherwise have.
REPRESENTATIONS BY GUARANTOR: The Guarantor represents that it is a
corporation duly organized, existing and in good standing under the laws of
its state in incorporation, and that the execution and delivery of this
Guaranty and the performance of the obligations it imposes are within its
corporate powers, have been duly authorized by all necessary action of its
board of directors, and do not contravene the terms of its articles of
incorporation or by-laws. Each Guarantor represents that the execution and
delivery of this Guaranty and the performance of the obligations it imposes do
not violate any law, do not conflict with any agreement by which it is bound,
do not require the consent or approval of any governmental authority or any
third party, and that this Guaranty is a valid and binding agreement,
enforceable according to its terms. Each Guarantor further represents that all
balance sheets, profit and loss statements, and other information, if any,
furnished to the Bank are accurate and fairly reflect the financial condition
of the organizations and persons to which they apply on their effect dates,
including contingent liabilities of every type, which financial condition has
not changed material and adversely since those dates.
NOTICES: Notice from one party to another relating to this Guaranty shall be
deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or telecopier number set
forth under its name by any of the following means: (a) hand delivery, (b)
registered or certified mail, postage prepaid, with return receipt requested,
(c) first class or express mail, postage prepaid, (d) Federal Express,
Purolator Courier or like overnight courier service or (e) telecopy, telex or
other wire transmission with request for assurance of receipt in a manner
typical with respect to communications of that type. Notice made in accordance
with this section shall be deemed delivered on receipt if delivered by hand or
wire transmission, on the third business day after mailing if mailed by first
class, registered or certified mail, or on the next business day after mailing
or deposit with an overnight courier service if delivered by express mail or
overnight courier. Notwithstanding the foregoing, notice of termination of
this Guaranty shall be deemed received only upon the receipt of actual written
notice by the Bank in accordance with the paragraph above labeled "Continued
Reliance."
LAW AND JUDICIAL FORUM THAT APPLY: This agreement is governed by Michigan law.
The Guarantor agrees that any legal action or proceeding against it with
respect to any of its obligations under this Guaranty may be brought in any
state or federal court located in the State of Michigan, as the Bank in its
sole discretion may elect. By the execution and delivery of this Guaranty, the
Guarantor submits to and accepts, with regard to any such action or
proceeding, for itself and in respect of its property, generally and
unconditionally, the jurisdiction of those courts. The Guarantor waives any
claim that the State of Michigan is not a convenient forum or the proper venue
for any such suit, action or proceeding.
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MISCELLANEOUS: The Guarantor's liability under this Guaranty is independent of
its liability under any other guaranty previously or subsequently executed by
the Guarantor or any one of them, singularly or together with others, as to
all or any part of the Liability, and may be enforced for the full amount of
this Guaranty regardless of the Guarantor's liability under any other
guaranty. This Guaranty is binding on Guarantor's heirs, successors and
assigns, and will operate to the benefit of the Bank and its successors and
assigns. The use of headings shall not limit the provisions of this Guaranty.
All discussions and documents arising between this Guaranty and the last
guaranty signed by the Guarantor as to the Borrower are merged into this
Guaranty.
WAIVER OF JURY TRIAL: The Bank and the Guarantor, after consulting or having
had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in
any litigation based upon or arising out of this Guaranty or any related
instrument or agreement, or any of the transactions contemplated by this
Guaranty, or any course of conduct, dealing, statement (whether oral or
written), or actions of either of them. Neither the Bank nor the Guarantor
shall seek to consolidate, by counterclaim or otherwise, any action in which a
jury trial has been waived with any other action in which a jury trial cannot
be or has not been waived. These provisions shall not be deemed to have been
modified in any respect or relinquished by either the Bank or the Guarantor
except by a written instrument executed by both of them.
Dated:_________________________1996
GUARANTOR:
Address: _________________________________
___________________________________ _________________________________
___________________________________ _________________________________
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EXHIBIT 3.6(f)
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT ("Agreement"), dated as of June
30, 1996, is made by__________________ , a________________ corporation
("Debtor"), in favor of NBD Bank, a Michigan banking corporation ("NBD").
Recitals:
A. Secom General Corporation, Uniflow Corporation, Micanol, Inc., L&H
Die, Inc., and Form Flow, Inc. (collectively, the "Borrowers") have obtained
various term loans and revolving loans from NBD.
B. The Borrowers have requested that NBD amend and consolidate the
existing credit facilities pursuant to an Amended and Restated Revolving
Credit and Loan Agreement dated as of June 30, 1996 (such agreement, as
amended, modified, restated, replaced or supplemented from time to time, is
referred to herein as the "Loan Agreement").
C. Debtor has granted NBD a security interest in its assets pursuant to
various Continuing Security Agreements and this Agreement amends and restates
that grant of security and continues, but does not replace, such prior
security interests only in the collateral specified herein.
D. It is a condition to the obligations of NBD in the Loan Agreement
that Debtor shall enter into this Agreement.
THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees with NBD as follows:
1. Defined Terms. In addition to those terms defined elsewhere in this
Agreement, terms defined in the Loan Agreement shall have their defined
meanings when used herein (unless otherwise defined herein) and the following
terms shall have the following meanings, unless the context otherwise
requires:
"Accounts" shall mean any "account" or "chattel paper", as such terms
are defined in Sections 9-106 and 9-105, respectively, of the Code, now
or hereafter owned by Debtor, and shall also mean and include (i) all
accounts receivable, contract rights, book debts, notes, drafts,
instruments, documents, acceptances, payments under leases and other
forms of obligations, now owned or hereafter received or acquired by or
belonging or owing to Debtor whether arising out of goods sold or leased
or services rendered by it or from any other transaction, whether or not
the same involves the sale of goods or services by Debtor
(including,without limitation, any such obligation which might be
characterized
<PAGE>
as an account, contract right, general intangible or chattel paper under
the Uniform Commercial Code in effect in any jurisdiction); (ii) all of
Debtor's rights in, to and under all purchase orders now owned or
hereafter received or acquired by it for goods or services, and all of
Debtor's rights to any goods represented by any of the foregoing
(including returned or repossessed goods and unpaid sellers' rights of
rescission, replevin, reclamation and stopping in transit); (iii) all
monies due to or to become due to Debtor under all contracts for the sale
or lease of goods or the performance of services by it (whether or not
yet earned by performance on the part of Debtor) now in existence or
hereafter arising, including, without limitation, the right to receive
the proceeds of such purchase orders and contracts and all collateral
security and guarantees of any kind given by any person with respect to
any of the foregoing; and (iv) all monies due or to become due to Debtor
as a result of the repayment of any loans or extensions of credit by it,
or the realization upon any security granted to Debtor with respect to
such loans or extensions of credit.
"Code" shall mean the Uniform Commercial Code as in effect on the
date hereof in the State of Michigan.
"Collateral" shall have the meaning provided in Section 3.
"Collected Proceeds" shall have the meaning provided in Section 13.
"Contract Rights" shall mean all rights of Debtor (including, without
limitation, all rights to payment) under each Contract.
"Contracts" shall mean, collectively, all contracts, instruments,
undertakings, documents or other agreements in or under which Debtor may
now or hereafter have any right, title or interest and which pertain to
the manufacture, lease, sale or other disposition by Debtor of any
Inventory, or the providing of services, as any of the same may from time
to time be amended, supplemented or otherwise modified.
"Inventory" shall mean any "inventory", as such term is defined in
Section 9-109(4) of the Code, wherever located, now owned or hereafter
acquired by Debtor or in which Debtor now has or hereafter may acquire
any right, title or interest including, without limitation, all goods and
other personal property now or hereafter owned by Debtor which are leased
or are held for sale or lease or are furnished or are to be furnished
under a contract of service or which constitute raw materials, work in
process or materials used or consumed or to be used or consumed in
Debtor's business, or in the processing, packaging or shipping of the
same, and all finished goods.
"Lien Termination Date" shall have the meaning provided in
Section 20.
"Proceeds" shall have the meaning provided it under the Code and, in
any event, shall include, but not be limited to, (i) any and all proceeds
of any insurance, indemnity,
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warranty or guaranty payable to Debtor from time to time with respect to
any of the Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to Debtor from time to time in connection with
any requisition, confiscation, condemnation, seizure or forfeiture of all
or any part of the Collateral by any governmental body, authority, bureau
or agency (or any person acting under color of governmental authority)
and (iii) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Requirement of Law" shall mean, as to any person, the charter and
By-Laws or other organizational or governing documents of such person,
and any material law, treaty, rule or regulation or determination of
arbitration or a court or other governmental authority, in each case
applicable to or binding upon such person or any of its property or to
which such person or any of its property is subject.
2. Benefit of Agreement. This Agreement is for the benefit of NBD to
secure the payment of the Obligations (as defined in the Loan Agreement), and
to secure the performance of the Debtor and the other Loan Parties of their
respective obligations to NBD under any guaranty, promissory note or other
agreement, whether now existing or arising in the future (the "Other
Obligations").
3. Grant of Security Interest.
(a) General. As collateral security for the prompt and complete
payment and performance of Debtor's obligations to NBD, whether under the Loan
Agreement or other agreement or promissory note, whether now existing or
arising in the future, the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations, and the Other Obligations and in order to induce NBD to enter
into the Loan Agreement, Debtor hereby grants in favor of NBD, a continuing
security interest (the "Security Interest") in all of the following property
now owned, or at any time hereafter acquired, by Debtor or in which Debtor now
has or at any time in the future may acquire any right, title or interest (all
of which is hereinafter collectively referred to as the "Collateral"):
(i) all existing and future Contracts (including, without
limitation, instruments and documents);
(ii) all existing and future Accounts, Contract Rights
(including, without limitation, (a) all money due and to become due
under any Contract, (b) any damages arising out of or for breach or
default in respect of any Contract or Account, (c) all other amounts
from time to time paid or payable under or in connection with any
Contract or Account, and (d) the right of Debtor to terminate any
Contract or to perform or exercise all remedies thereunder);
(iii) all existing and future Inventory; and
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(iv) to the extent not otherwise included, all Proceeds and
products of any or all of the foregoing.
(b) Business Records. In addition to the grant of the Security
Interest under Section 3(a), Debtor hereby grants for the benefit of NBD, a
lease and first Security Interest in all of Debtor's books and records
pertaining to the Collateral, including without limitation, all books of
accounts, ledgers, computer software, computer printouts and other
computerized records in which there are reflected or maintained the Collateral
in which NBD has a Security Interest, or which relate to any other Collateral
NBD may hold from Debtor and all supporting evidence and documents relating to
such security in the form of written applications, credit information, account
cards, payment records, correspondence, delivery and installation
certificates, invoice copies, delivery receipts, notes and other evidences of
indebtedness, insurance certificates and the like. For convenience, these
books, records and documents are called "Business Records". The Business
Records, presently included in this Agreement, are described as follows:
accounts receivable subsidiary ledger (including unpaid invoice file),
cash receipts journal, cash disbursements journal and filing cabinets
containing customer orders, correspondence, paid invoice files and any
other books and records, filing cabinets, or places of storage of data
and information, including all computer storage facilities, records and
software usually located at Debtor's places of business identified on
Schedule I or elsewhere.
4. Rights of NBD: Limitations on NBD's Obligations. It is expressly
agreed to by Debtor that, anything herein to the contrary notwithstanding,
nothing in this Agreement shall reduce Debtor's liability under each of the
Accounts and Contracts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise to such Account and in accordance
with the terms and provisions of each such Contract. NBD shall not have any
obligation or liability under any Account (or agreement giving rise thereto)
or under any Contract by reason of or arising out of this Agreement or the
receipt by NBD of any payment relating to any Account or Contract pursuant
hereto, nor shall NBD be required or obligated in any manner to perform or
fulfill any of the obligations of Debtor under or pursuant to any Account (or
any agreement giving rise thereto) or under or pursuant to any Contract, to
make any payment, to make any inquiry as to the nature or the sufficiency of
any payment received by it or as to the sufficiency of any performance by any
party under any Account (or any agreement giving rise thereto) or under any
Contract, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
5. Representations and Warranties. Debtor hereby represents
and warrants that:
(a) Title; No Other Security Interests. Except for the Security
Interest granted hereunder for the benefit of NBD and Permitted Liens
under the Loan Agreement, Debtor owns each item of the Collateral free
and clear of any and all security interests or claims of others.
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(b) Addresses. The Debtor's principal place of business and the
place where its records concerning the Accounts and other Collateral are kept
and the other addressees) of Debtor's business, if any, are set forth on
Schedule I hereto. The states in which Collateral is located, and Debtor's
principal place of business in each state, shall not be changed without prior
written notice to NBD, but the Collateral, wherever located, is covered by
this Agreement. Debtor shall immediately advise NBD in writing of any change
in its name, address or form of organization.
(c) Trade Names. Any and all trade names under which Debtor
transacts any part of its business, and all former names of Debtor, are those
which have been previously disclosed to NBD, as set forth on Schedule I
hereto.
(d) Accuracy of Information. All information, certificates or
statements given to NBD pursuant to this Agreement shall be true and complete
in all material respects, when given.
6. Covenants. Debtor covenants and agrees with NBD that, unless
otherwise consented to by NBD in writing, from and after the date of this
Agreement until the Obligations and Other Obligations are fully satisfied:
(a) Further Documentation. Pledge of Instruments. At any time and
from time to time, upon the written request of NBD, and at the sole expense of
Debtor, Debtor will promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as NBD may
reasonably request for the purpose of obtaining the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the
Security Interests granted hereby. A carbon, photographic or other
reproduction of this agreement shall be sufficient as a financing statement
for filing in any jurisdiction.
(b) Maintenance of Records. If requested by NBD, Debtor will mark
the Business Records pertaining to the Collateral to evidence this Agreement
and the Security Interests granted hereby.
(c) Indemnification. Debtor agrees to pay, and to hold NBD
harmless from, any and all liabilities, costs and expenses (including, without
limitation, reasonable legal fees and expenses) (i) with respect to, or
resulting from, any delay in paying any and all excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral, (ii) with respect to, or resulting from, any delay in complying
with any Requirement of Law applicable to any of the Collateral or (iii) in
connection with any of the transactions contemplated by this Agreement.
(d) Payment of Obligations. Debtor will pay promptly when due,
all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge
5
<PAGE>
need be paid if and to the extent not required to be paid pursuant to Section
6.1(b) or other provision of the Loan Agreement.
(e) Limitation on Security Interests on Collateral. Debtor will
not create, incur or permit to exist, and will defend the Collateral against,
and will take such other action as is necessary to remove, any Security
Interest or claim on or to the Collateral other than the Security Interests
created hereby, and other than Permitted Liens pursuant to the Loan Agreement,
and will defend the right, title and interest of NBD in and to any of the
Collateral against the claims and demands of all persons whomsoever. Debtor
will not sell or otherwise dispose of any type or item of Collateral except as
expressly permitted by this Agreement or as otherwise not prohibited by the
Loan Agreement.
(f) Limitations on Modifications of Contracts, Accounts; No
Waivers, Extensions. Debtor will not, other than in the ordinary course of
business, (i) amend, modify, terminate or waive any provision of any Contract
or any agreement giving rise to an Account in any manner which would
reasonably be expected to materially adversely affect the value of such
Contract or Account as Collateral, or (ii) fail to exercise promptly and
diligently each and every right which it may have under each Contract and each
agreement giving rise to an Account (other than any right of termination) in
any manner which would reasonably be expected to materially adversely affect
the value of such Contract.
(g) Limitations on Discounts, Compromises, Extension of Accounts.
Other than in the ordinary course of business, Debtor will not grant any
extension of the time of payment of any of the Accounts, compromise, compound
or settle the same for less than the full amount thereof, release, wholly or
partially, any person liable for the payment thereof or allow any credit or
discount whatsoever thereon.
(h) Maintenance of Property and Insurance. Debtor will maintain,
preserve and protect all property that is material to the conduct of its
business and keep such property in good repair, working order and condition
and from time to time make, or cause to be made all needful and proper
repairs, renewals, additions, improvements and replacements thereto necessary
in order that the business carried on in connection therewith may be properly
conducted at all times in accordance with customary and prudent business
practices for similar businesses; and maintain in full force and effect
insurance with responsible and reputable insurance companies or associations
in such amounts, on such terms and covering such risks, including fire and
other risks insured against by extended coverage, as is usually carried by
companies engaged in similar businesses and owning similar properties
similarly situated and maintain in full force and effect public liability
insurance, business interruption insurance, insurance against claims for
personal injury or death or property damage occurring in connection with any
of its activities or any of any properties owned, occupied or controlled by
it, in such amounts as it shall reasonably deem necessary, and maintain such
other insurance as may be required by Governmental Regulations or as may be
reasonably requested by NBD. NBD shall be listed as a loss payee and
additional insured with respect to the Collateral and providing 30 days notice
to NBD prior to termination or cancellation, all in form and substance
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reasonably satisfactory to NBD. Upon request, the Debtor shall deliver to NBD
copies of all or any of such insurance policies or the related certificates of
insurance.
(i) Right of Inspection. NBD shall have access to the books,
correspondence and records of Debtor during normal business hours. NBD and its
representatives shall at all times also have the right to enter into and upon
any premises where any of the records of Accounts or Inventory is located for
the purpose of inspecting the same, observing its use or otherwise protecting
its interests therein. NBD will take reasonable steps to maintain the
confidentiality of information obtained by it, except as required by law.
7. Sale and Collections.
(a) Sale of Inventory. So long as no Event of Default has
occurred and is continuing and NBD has not given written notice to Debtor
restricting such sales, Debtor may sell or otherwise dispose of Inventory in
the ordinary course of Debtor's business.
(b) Verification and Notification. If an Event of Default has
occurred and is continuing, NBD may verify Collateral in any reasonable manner
and Debtor shall assist NBD in so doing. Anything contained herein to the
contrary notwithstanding, NBD may at any time during the continuance of an
Event of Default, and Debtor shall, thereafter, upon request of NBD, notify
the account debtors on any Accounts to make payment directly to NBD, and NBD
may enforce collection of, settle, compromise, extend or renew the
indebtedness of, such account debtors. NBD may also, at any time during the
continuance of an Event of Default, notwithstanding any other provision of
this Agreement, notify the bailer of any Inventory of its Security Interest
therein.
(c) Deposit With NBD. During the continuance of an Event of
Default, NBD shall have the right, at any time, to notify and direct any
person obligated to the Debtor (an "Account Debtor") to make all payments
whatever to NBD and NBD shall have the right, at any time, to hold all amounts
acquired from any Account Debtor and any proceeds as part of the Collateral.
Also during the continuance of an Event of Default, any payment received by
the Debtor shall be held by the Debtor in trust for NBD in the same medium in
which received, shall not be commingled with any assets of the Debtor and
shall, at the request of NBD, be turned over to NBD not later than the next
business day following the day of their receipt.
(d) License. NBD is hereby granted an irrevocable royalty-free
license and right to use, without charge, Debtor's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks
and advertising matter, or any property of a similar nature, as it pertains to
the Collateral, in advertising for sale and selling any Collateral and
Debtor's rights under all licenses and all franchise agreements shall inure to
NBD's benefit, all of which may be exercised during an Event of Default.
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8. NBD's Appointment as Attorney-in-Fact.
(a) General Appointment. During the continuance of an Event of
Default, Debtor hereby irrevocably constitutes and appoints NBD, with power of
substitution to appoint any person to act on its behalf where such appointment
is required by applicable law, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of Debtor and in
the name of Debtor or in its own name, from time to time in NBD's discretion,
for the purpose of carrying out the terms of this Agreement, on behalf of
Debtor, to do the following:
(i) to ask, demand, collect, receive and give acquittance
and receipts for any and all monies due and to become due under any
Contract or Account and, in the name of Debtor or its own name or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of monies
due under any Contract or Account and to file any claim or to take any
other action or proceeding in any court of law or equity or otherwise
deemed appropriate by NBD for the purpose of collecting any and all such
monies due under any Contract or Account whenever payable;
(ii) to pay or discharge taxes, Security Interests or other
encumbrances levied or placed on or threatened against the Collateral, to
effect any repairs or any insurance called for by the terms of this
Agreement and to pay all or any part of the premiums therefor and the
costs thereof; and
(iii) (A) to direct any party liable for any payment under any
of the Collateral to make payment of any and all monies due and to become
due thereunder directly to NBD or as NBD shall direct; (B) to receive
payment of and give receipt for any and all monies, claims and other
amounts due and to become due at any time in respect of or arising out of
any Collateral; (C) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with
Accounts and other documents relating to the Collateral; (D) to commence
and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect the Collateral or any
thereof and to enforce any other right in respect of any Collateral; (E)
to defend any suit, action or proceeding brought against Debtor with
respect to any Collateral; (F) to settle, compromise or adjust any suit,
action or proceeding described above and, in connection therewith, to
give such discharges or releases as NBD may deem appropriate; and (G) to
do, at NBD's option and Debtor's expense, at any time, or from time to
time, all acts and things which NBD deems necessary or desirable to
protect, preserve or realize upon the Collateral and NBD's Security
Interest therein, in order to effect the intent of this Agreement, all as
fully and effectively as Debtor might do.
This power of attorney is a power coupled with an interest and shall be
irrevocable until the Lien Termination Date.
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(b) irrevocability The powers conferred on NBD hereunder are
solely to protect its interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. NBD shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers
and neither it nor any of its officers, directors, employees or agents shall
be responsible to Debtor for any act or failure to act, except for its own
gross negligence or willful misconduct.
9. Performance by NBD of Debtor's Obligations. If Debtor fails to
perform or comply with any of its agreements contained herein or in the Loan
Agreement and NBD, at its sole option, shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the expenses
of NBD incurred in connection with such performance or compliance shall be
payable by Debtor to NBD on demand and shall constitute Obligations secured
hereby.
10. Proceeds as Collateral. During the continuance of an Event of
Default, any and all such Proceeds received by NBD (whether from Debtor or
otherwise) may, in the sole discretion of NBD, be held by NBD as collateral
security for, or then or at any time thereafter applied in whole or in part by
NBD, against all or any part of the Obligations in the manner provided in
Section 13. Any balance of such payments held by NBD and remaining after
payment in full of all the obligations secured hereby shall be paid over to
Debtor in the manner provided in Section 20.
11. Events of Default. The occurrence of (a) an Event of Default under
the Loan Agreement or (b) an event of default or event of acceleration under
any other agreement between Debtor and NBD or any Loan Party and NBD, shall be
deemed an Event of Default hereunder.
12. Remedies.
(a) General. If an Event of Default shall occur and be
continuing, NBD may exercise in addition to all other rights and remedies
granted to it in this Agreement, the Loan Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations or
the Other Obligations, all rights and remedies of a secured party under the
Code or other applicable law. Without limiting the generality of the
foregoing, Debtor expressly agrees that in any such event NBD may forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, assign, or otherwise dispose of and
deliver such Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange or broker's board or at any of NBD's offices or elsewhere at such
prices as it may deem best for cash or on credit or for future delivery
without assumption of any credit risk. NBD shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of such Collateral so
sold, free of any right or equity of redemption in Debtor which right or
equity is hereby waived or released. Debtor further agrees that if an Event of
Default shall occur and be continuing, it will, at NBD's request, assemble the
Collateral and make it available to NBD at places which NBD shall reasonably
select, whether at Debtor's premises or elsewhere, at Debtor's sole cost and
expense. NBD shall keep the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale for application to the payment in
whole or in part of the Obligations and/or Other Obligations, as the case may
be, in the manner provided in Section 13, and only after
9
<PAGE>
payment by NBD of any other amount required by any provision of law, including
Section 9-504(1)(c) of the Code, will NBD be required to account for the
surplus, if any, to Debtor. The Debtor agrees that NBD need not give more than
ten days' notice of the time and place of any public sale or of the time after
which a private sale may take place and that such notice is reasonable
notification of such matters. Debtor shall remain liable for any deficiency if
the proceeds of any sale or disposition of the Collateral are insufficient to
pay all amounts to which NBD is entitled, Debtor also being liable for the
fees of any attorneys employed by NBD to collect such deficiency.
(b) Costs. Debtor also agrees to pay all costs of NBD,
including, without limitation, reasonable attorneys' fees and legal expenses,
incurred with respect to the collection of any of the Obligations and/or Other
Obligations and the enforcement and administration by NBD of this Agreement
and any of its respective rights hereunder.
13. Application of Proceeds.
(a) Payment of Expenses. All monies collected by NBD upon any
sale or other disposition of the Collateral, together with all other monies
received by NBD hereunder (the "Collected Proceeds"), shall be applied by NBD
as required below.
(b) Payment of Obligations. Prior to the Lien Termination Date,
the Collected Proceeds shall be applied to satisfy the obligations secured
hereby in such order as NBD shall deem appropriate, in its sole discretion.
(c) Payment to Debtor. At the Lien Termination Date, any
Collected Proceeds of the Collateral not otherwise applied pursuant to this
Section 13, shall in each case be paid over (at NBD's discretion) to a court
for distribution to any claimants of the Collected Proceeds or to Debtor
pursuant to the terms of Section 20, except as otherwise required by law.
14. Limitation on Collateral NBD's Duty in Respect of Collateral. NBD's
sole duty with respect to the custody, safekeeping and physical preservation
of the Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to deal with it in the same manner as NBD deals with
similar property for its own account. Neither NBD, nor any of its respective
directors, officers, employees or agents shall be liable for failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of Debtor or otherwise.
15. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
16. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10
<PAGE>
17. Section Headings, etc. The Section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof. All
references to Sections, Schedules and Exhibits are to Sections, Schedules and
Exhibits in or to this Agreement unless otherwise specified.
18. No Waiver; Cumulative Remedies. NBD shall not by any act (except a
written instrument pursuant to Section 19 hereof), delay, indulgence, omission
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Event of Default or in any breach of the terms and
conditions hereof. A waiver by NBD of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which NBD
would otherwise have had on any future occasion. No failure to exercise nor
any delay in exercising on the part of NBD any right, power or privilege
hereunder, shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
future exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies hereunder provided are cumulative and may
be exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by the Loan Agreement, any other Loan Documents or
applicable law.
19. Waivers and Amendments; Successors and Assigns; Governing Law. None
of the terms or provisions of this Agreement may be waived, altered, modified
or amended except by a written instrument, duly executed by Debtor and NBD.
This Agreement and all obligations of Debtor hereunder shall be binding upon
the successors and assigns of Debtor, and shall, together with the rights and
remedies of NBD hereunder, inure to the benefit of NBD and its respective
successors and assigns, provided that Debtor may not assign or transfer any of
its rights or obligations hereunder without the prior written consent of NBD.
This Agreement shall be governed by, and be construed and interpreted in
accordance with, the internal laws (and not the laws of conflict) of the State
of Michigan.
20. Termination; Release. Upon the full and complete satisfaction of all
obligations secured hereby, including without limitation the Other
Obligations, this Agreement shall terminate, and NBD, at the request and
expense of Debtor, shall promptly execute and deliver to Debtor a proper
instrument or instruments acknowledging the satisfaction and termination of
this Agreement, and will duly assign, transfer and deliver to Debtor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of NBD and which has not theretofore been sold or
otherwise applied or released pursuant to this Agreement, together with any
monies at the time held by NBD hereunder (the "Lien Termination Date").
21. Notices. Etc. Any demand, notice or communication to be made or
given hereunder shall be in writing, except as otherwise expressly permitted
or required under this Agreement, and may be made or given by personal
delivery, by courier service by registered or certified mail or by transmittal
by telex or telecopy machine addressed to the respective parties as follows:
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<PAGE>
To Debtor: ________________________________
________________________________
________________________________
________________________________
Attention:______________________
Phone:__________________________
Fax:____________________________
To NBD: NBD Bank
35011 Michigan Avenue
Wayne, Michigan 48184
Attention: Joseph B. Kabourek
Phone: (313) 326-3739
Fax: (313) 326-3746
or to such other mailing or telex or facsimile machine address as any party
may from time to time notify the others in accordance with this Section 21.
All notices, requests, consents and other communications shall be deemed to
have been given when received if hand delivered, if mailed by certified or
registered mail, postage prepaid, upon receipt of such mailing, or if
deposited with an expedited courier service such as Federal Express" or
"Purolator", upon receipt which will be presumed to be on the Business Day (as
defined in the Loan Agreement) following such deposit, or if telecopied, on
the Business Day on which such telecopy is confirmed as having been received,
in all cases, addressed to the respective address set forth on the signature
page attached hereto, or as may otherwise be designated in accordance
herewith.
22. Loan Agreement Controls. In the event of an express conflict between
the terms of this Agreement and the terms of the Loan Agreement, the terms of
the Loan Agreement shall govern and control.
23. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which together shall constitute one and the same instrument, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.
24. Prior Security Agreements. All prior security agreements given to
NBD relating to Debtor's personal property are hereby amended and restated by
this Agreement and NBD's security interests in any assets of Debtor granted by
prior security agreements but not included in the definition of Collateral
hereunder are acknowledged to be terminated.
25. Waiver of Jury Trial. THE PARTIES HERETO ACKNOWLEDGE THAT THE RIGHT
TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT THIS RIGHT MAY BE WAIVED.
NBD AND DEBTOR EACH HEREBY KNOWINGLY, VOLUNTARILY AND WITHOUT COERCION, WAIVE
ALL RIGHTS TO A TRIAL BY JURY OF ALL DISPUTES
12
<PAGE>
ARISING OUT OF OR IN RELATION TO THIS AGREEMENT OR ANY OTHER AGREEMENTS
BETWEEN THE PARTIES. NO PARTY SHALL BE DEEMED TO HAVE RELINQUISHED THE BENEFIT
OF THIS WAIVER OF JURY TRIAL UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN
INSTRUMENT SIGNED BY THE PARTY TO WHICH SUCH RELINQUISHMENT WILL BE CHARGED.
IN WITNESS WHEREOF, Debtor and NBD have caused this Agreement to be
executed by their duly authorized officers on the date first set forth above.
NBD BANK,
a Michigan banking corporation
By: /s/ Joseph B. Kabourek
----------------------------
Joseph B. Kabourek
Its: Vice President
_______________________________
a____________corporation
By:____________________________
Its:______________________
13
Exhibit 10.3
[ KeyCorp Leasing Ltd. Letterhead ]
MASTER EQUIPMENT LEASE AGREEMENT
THIS MASTER EQUIPMENT LEASE AGREEMENT dated as of May 24, 1996 is made
by and between KEYCORP LEASING LTD., a Delaware corporation with its principal
place of business at 54 State Street, Albany, New York 12207 (Lessor"), and
SECOM GENERAL CORPORATION, a Delaware corporation with its principal place of
business at 46035 Grand River Avenue, Novi, MI 48374, UNIFLOW CORPORATION, a
Michigan corporation with its principal place of business at 26600 Heyn Drive,
Novi, MI 48374, FORM FLOW, INC., a Michigan corporation with its principal
place of business at 6901 Cogswell, Romulus, MI 48174, L & H DIE, INC., a
Michigan corporation with its principal place of business at 38200 Ecorse
Road, Romulus, MI 48174 and MICANOL, INC., a Michigan corporation with its
principal place of business at 46001 Grand River Avenue, Novi MI 48374
(collectively, the "Lessee").
TERMS AND CONDITIONS OF LEASE
1. Lease. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Equipment, subject to and upon the terms and conditions set
forth herein. Each Equipment Schedule shall constitute a separate and
enforceable lease incorporating all the terms and conditions of this Master
Equipment Lease Agreement as if such terms and conditions were set forth in
full in such Equipment Schedule. In the event that any term or condition of
any Equipment Schedule conflicts with or is inconsistent with any term or
condition of this Master Equipment Lease Agreement, the terms and conditions
of the Equipment Schedule shall govern.
2. Disclaimer of Warranties. LESSOR MAKES NO (AND SHALL NOT BE DEEMED
TO HAVE MADE ANY) WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE DESIGN, OPERATION OR CONDITION OF, OR THE
QUALITY OF THE MATERIAL, EQUIPMENT OR WORKMANSHIP IN, THE EQUIPMENT, ITS
MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE STATE OF TITLE
THERETO OR ANY COMPONENT THERETO, THE ABSENCE OF LATENT OR OTHER DEFECTS
(WHETHER OR NOT DISCOVERABLE}, AND LESSOR HEREBY DISCLAIMS THE SAME; IT BEING
UNDERSTOOD THAT THE EQUIPMENT IS LEASED TO LESSEE "AS IS" AND ALL SUCH RISKS,
IF ANY, ARE TO BE BORNE BY LESSEE. NO DEFECT IN, OR UNFITNESS OF, THE
EQUIPMENT, OR ANY OF THE OTHER FOREGOING MATTERS, SHALL RELIEVE LESSEE OF THE
OBLIGATION TO PAY RENT OR OF ANY OTHER OBLIGATION HEREUNDER. LESSEE HAS MADE
THE SELECTION OF THE EQUIPMENT FROM THE SUPPLIER BASED ON ITS OWN JUDGMENT AND
EXPRESSLY DISCLAIMS ANY RELIANCE UPON ANY STATEMENTS OR REPRESENTATIONS MADE
BY LESSOR. LESSOR IS NOT RESPONSIBLE FOR ANY REPAIRS, SERVICE, MAINTENANCE OR
DEFECT IN THE EQUIPMENT OR THE OPERATION THEREOF. IN NO EVENT SHALL LESSOR BE
LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES (WHETHER UNDER THE
UCC OR OTHERWISE), INCLUDING, WITHOUT LIMITATION, ANY LOSS, COST OR DAMAGE TO
LESSEE OR OTHERS ARISING FROM ANY OF THE FOREGOING MATTERS, INCLUDING, WITHOUT
LIMITATION, DEFECTS, NEGLIGENCE, DELAYS, FAILURE OF DELIVERY OR
NON-PERFORMANCE OF THE EQUIPMENT. ANY WARRANTY BY THE SUPPLIER IS HEREBY
ASSIGNED TO LESSEE BY LESSOR WITHOUT RECOURSE. SUCH WARRANTY SHALL NOT RELEASE
LESSEE FROM ITS OBLIGATION TO LESSOR TO PAY RENT, TO PERFORM ALL OTHER
OBLIGATIONS HEREUNDER AND TO KEEP, MAINTAIN AND SURRENDER THE EQUIPMENT IN THE
CONDITION REQUIRED BY SECTIONS 12 AND 13 HEREOF. Lessee's execution and
delivery of a Certificate of Acceptance shall be conclusive evidence as
between Lessor and Lessee that the Items of Equipment described therein are in
all of the foregoing respects satisfactory to Lessee, and Lessee shall not
assert any claim of any nature whatsoever against Lessor based on any of the
foregoing matters; provided, however, that nothing contained herein shall in
any way bar, reduce or defeat any claim that Lessee may have against the
Supplier or any other person (other than Lessor).
3. Non-Cancelable Lease. THIS LEASE IS A NET LEASE AND LESSEE'S
OBLIGATION TO PAY RENT AND PERFORM ITS OBLIGATIONS HEREUNDER ARE ABSOLUTE,
IRREVOCABLE AND UNCONDITIONAL UNDER ANY AND ALL CIRCUMSTANCES WHATSOEVER AND
SHALL NOT BE SUBJECT TO ANY RIGHT OF SET OFF, COUNTERCLAIM, DEDUCTION, DEFENSE
OR OTHER RIGHT WHICH LESSEE MAY HAVE AGAINST THE SUPPLIER, LESSOR OR ANY OTHER
PARTY. LESSEE SHALL HAVE NO RIGHT TO TERMINATE (EXCEPT AS EXPRESSLY PROVIDED
HEREIN) OR CANCEL THIS LEASE OR TO BE RELEASED OR DISCHARGED FROM ITS
OBLIGATION HEREUNDER FOR ANY REASON WHATSOEVER, INCLUDING, WITHOUT LIMITATION,
DEFECTS IN, DESTRUCTION OF, DAMAGE TO OR INTERFERENCE WITH ANY USE OF THE
EQUIPMENT (FOR ANY REASON WHATSOEVER, INCLUDING, WITHOUT LIMITATION, WAR, ACT
OF GOD, STRIKE OR GOVERNMENTAL REGULATION), THE INVALIDITY, ILLEGALITY OR
UNENFORCEABILITY (OR ANY ALLEGATION THEREOF) OF THIS LEASE OR ANY PROVISION
HEREOF, OR ANY OTHER
<PAGE>
OCCURRENCE WHATSOEVER, WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING,
WHETHER FORESEEN OR UNFORESEEN.
4. Definitions. Unless the context otherwise requires, as used in this
Lease, the following terms shall have the respective meanings indicated below
and shall be equally applicable to both the singular and the plural forms
thereof:
(a) "Applicable Law" shall mean all applicable Federal, state,
local and foreign laws (including, without limitation, any Environmental Law,
industrial hygiene and occupational safety or similar laws), ordinances,
judgments, decrees, injunctions, writs and orders of any Governmental
Authority and rules, regulations, orders, licenses and permits of any
Governmental Authority.
(b) "Appraisal Procedure" shall mean the following procedure
for obtaining an appraisal of the Fair Market Sales Value or the Fair Market
Rental Value. Lessor shall provide Lessee with the names of three independent
Appraisers, two of which shall be Norm Levy & Associates of Southfield,
Michigan, and Williams & Lipton Associates, of Birmingham, Michigan. Within
ten (10) business days thereafter, Lessee shall select one of such Appraisers
to perform the appraisal. The selected Appraiser shall be instructed to
perform its appraisal based upon the assumptions specified in the definition
of Fair Market Sales Value or Fair Market Rental Value, as applicable, and
shall complete its appraisal within twenty (20) business days after such
selection. Any such appraisal shall be final, binding and conclusive on Lessee
and Lessor and shall have the legal effect of an arbitration award. Lessee
shall pay the fees and expenses of the selected Appraiser.
(c) "Appraiser" shall mean a person engaged in the business of
appraising property who has at least ten years' experience in appraising
property similar to the Equipment.
(d) "Authorized Signer" shall mean those officers of Lessee,
set forth on an incumbency certificate (in form and substance satisfactory to
Lessor) delivered by Lessee to Lessor, who are authorized and empowered to
execute this Lease, the Equipment Schedules and all other documents the
execution of which is contemplated hereby.
(e) "Certificate of Acceptance" shall mean a certificate of
acceptance, in form and substance satisfactory to Lessor, executed and
delivered by Lessee in accordance with Section 7 hereof indicating, among
other things, that the Equipment described therein has been accepted by Lessee
for all purposes of this Lease.
(f) "Default" shall mean any event or condition which, with the
passage of time or the giving of notice, or both, would constitute an Event of
Default.
(g) "Environmental Law" shall mean any federal, state, or local
statute, law, ordinance, code, rule, regulation, or order or decree
regulating, relating to or imposing liability upon a person in connection with
the use, release or disposal of any hazardous, toxic or dangerous substance,
waste, or material as same may relate to the Equipment or its operation.
(h) "Equipment" shall mean an item or items of personal
property designated from time to time by Lessee which are described on an
Equipment Schedule and which are being or will be leased by Lessee pursuant to
this Lease, together with all replacement parts, additions and accessories
incorporated therein or affixed thereto.
(i) "Equipment Group" shall consist of all Items of Equipment
listed on a particular Equipment Schedule.
(j) "Equipment Location" shall mean the location of the
Equipment, as set forth on an Equipment Schedule, or such other location
(approved by Lessor) as Lessee shall from time to time specify in writing.
Lessor approved Equipment Locations shall include Lessee's current operating
facilities listed on Exhibit A attached hereto.
(k) "Equipment Schedule" shall mean each equipment lease
schedule from time to time executed by Lessor and Lessee with respect to an
Equipment Group, pursuant to and incorporating by reference all of the terms
and conditions of this Master Equipment Lease Agreement.
(l) "Event of Default" shall have the meaning specified in
Section 22 hereof.
(m) "Fair Market Rental Value" or "Fair Market Sale Value"
shall mean the value of each Item of Equipment for lease or sale, unless
otherwise specified herein as determined between Lessor and Lessee, or, if
Lessor and Lessee are unable to agree, pursuant to the Appraisal Procedure,
which would be obtained in an arms-length transaction between an informed and
willing lessor or seller (under no compulsion to lease or sell) and an
informed and willing lessee or buyer (under no compulsion to lease or
purchase). In determining the Fair Market Rental Value or Fair Market Sale
Value of the Equipment, (a) such Fair Market Rental Value or Fair Market Sale
Value shall be calculated on the assumption that the Equipment is in the
condition and repair required by Sections 12 and 13 hereof, and (b) there
shall be excluded from the calculation thereof the value of any upgrades and
attachments made pursuant to Section 14 hereof in which the Lessor does not
own an interest; provided, however, that, unless otherwise provided in such
Section 22, for purposes of Section 22 of the Lease, Fair Market Sale Value of
the Equipment shall be determined based upon the actual facts and
circumstances then prevailing without regard to the assumptions in clause (a)
above.
(n) "Governmental Action" shall mean all authorizations,
consents, approvals, waivers, filings and declarations of any Governmental
Authority, including, without limitation, those environmental and operating
permits required for the ownership, lease, use and operation of the Equipment.
2
<PAGE>
(o) "Governmental Authority" shall mean any foreign, Federal,
state, county, municipal or other governmental authority, agency, board or
court.
(p) "Guarantor" shall mean any guarantor of Lessee's
obligations hereunder.
(q) "Item of Equipment" shall mean each item of the Equipment.
(r) "Late Payment Rate" shall mean an annual interest rate
equal to the lesser of 18% or the maximum interest rate permitted by
Applicable Law.
(s) "Lease", "hereof', "herein" and "hereunder" shall mean,
with respect to an Equipment Group, this Master Equipment Lease Agreement and
the Equipment Schedule on which such Equipment Group is described. including
all addenda attached thereto and made a part thereof.
(t) "Lien" shall mean all mortgages, pledges, security
interests, liens, encumbrances, claims or other charges of any kind
whatsoever.
(u) "Purchase Agreement" shall mean any purchase agreement or
other contract entered into between the Supplier and Lessee for the
acquisition of the Equipment to be leased hereunder.
(v) "Related Equipment Schedule" shall have the meaning set
forth in Section 27 hereof.
(w) "Renewal Notice" shall have the meaning set forth in
Section 32 hereof.
(x) "Return Notice" shall have the meaning set forth in Section
13 hereof.
(y) "Rent" shall mean the periodic rental payments due
hereunder for the leasing of the Equipment, as set forth on the Equipment
Schedules, and, where the context hereof requires, all such additional amounts
as may from time to time be payable under any provision of this Lease.
(z) "Rent Commencement Date" shall mean, with respect to an
Equipment Group, the date on which Lessor disburses funds for the purchase of
such Equipment Group, as determined by Lessor in its sole discretion.
(aa) "Rent Payment Date" with respect to an Equipment Group,
shall have the meaning set forth in the Equipment Schedule associated
therewith.
(ab) "Stipulated Loss Value" shall mean, as of any Rent Payment
Date and with respect to an Item of Equipment, the amount determined by
multiplying the Total Cost for such Item of Equipment by the percentage
specified in the applicable Stipulated Loss Value Supplement opposite such
Rent Payment Date.
(ac) "Stipulated Loss Value Supplement" with respect to an
Equipment Group, shall have the meaning set forth in the Equipment Schedule
associated therewith.
(ad) "Supplier" shall mean the manufacturer or the vendor of
the Equipment, as set forth on each Equipment Schedule.
(ae) "Term" shall mean the Initial Term, as defined in Section
8 hereof, and any Renewal Term, as defined in Section 8 hereof.
(af) "Total Cost" shall mean, with respect to an Item of
Equipment, (1) the acquisition cost of such Item of Equipment (including
Lessor's capitalized costs), as set forth on the Equipment Schedule on which
such Item of Equipment is described, or (2) if no such acquisition cost is
specified, the Supplier's invoice price for such Item of Equipment plus
Lessor's capitalized costs, or (3) if no such acquisition cost is specified
and no such invoice price is obtainable, an allocated price for such Item of
Equipment based on the Total Cost of all Items of Equipment set forth on the
Equipment Schedule on which such Item of Equipment is described, as determined
by Lessor in its sole discretion.
5. Supplier Not an Agent. LESSEE UNDERSTANDS AND AGREES THAT (i)
NEITHER THE SUPPLIER, NOR ANY SALES REPRESENTATIVE OR OTHER AGENT OF THE
SUPPLIER, IS (1) AN AGENT OF LESSOR OR (2) AUTHORIZED TO MAKE OR ALTER ANY
TERM OR CONDITION OF THIS LEASE, AND (ii) NO SUCH WAIVER OR ALTERATION SHALL
VARY THE TERMS OF THIS LEASE UNLESS EXPRESSLY SET FORTH HEREIN.
6. Ordering Equipment. Lessee has selected and ordered the Equipment
from the Supplier and, if appropriate, has entered into a Purchase Agreement
with respect thereto. Lessor shall accept an assignment from Lessee of
Lessee's rights, but none of Lessee's obligations, under any such Purchase
Agreement. Lessee shall arrange for delivery of the Equipment so that it can
be accepted in accordance with Section 7 hereof. If an Item of Equipment is
subject to an existing Purchase Agreement between Lessee and the Supplier,
Lessee warrants that such Item of Equipment has not been delivered to Lessee
as of the date of the Equipment Schedule applicable thereto. If Lessee causes
the Equipment to be modified or altered, or requests any additions thereto
prior to the Rent Commencement Date, Lessee (i) acknowledges that any such
modification, alteration or addition to an Item of Equipment may affect the
Total Cost, taxes, purchase and renewal options, if any, Stipulated Loss Value
and Rent with respect to such Item of Equipment, and (ii) hereby authorizes
Lessor to adjust such Total Cost, taxes, purchase and renewal options, if any,
Stipulated Loss Value and Rent as appropriate. Lessee hereby authorizes Lessor
to complete each Equipment Schedule with the serial numbers and other
identification data of the Equipment Group associated therewith, as such data
is received by Lessor.
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<PAGE>
7. Delivery and Acceptance. Upon acceptance For lease by Lessee of any
Equipment delivered to Lessee and described in any Equipment Schedule, Lessee
shall execute and deliver to Lessor a Certificate of Acceptance. LESSOR SHALL
HAVE NO OBLIGATION TO ADVANCE FUNDS FOR THE PURCHASE OF THE EQUIPMENT UNLESS
AND UNTIL LESSOR SHALL HAVE RECEIVED A CERTIFICATE OF ACCEPTANCE RELATING
THERETO EXECUTED BY LESSEE. Such Certificate of Acceptance shall constitute
Lessee's acknowledgment that such Equipment (a) was received by Lessee, (b) is
satisfactory to Lessee in all respects and is acceptable to Lessee for lease
hereunder, (c) is suitable for Lessee's purposes, (d) is in good order, repair
and condition, (e) has been installed and operates properly, and (f) is
subject to all of the terms and conditions of this Lease (including, without
limitation, Section 2 hereof.
8. Term; Survival. With respect to any Item of Equipment, unless
otherwise specified thereon, the initial term of this Lease (the "Initial
Term") shall commence on the date on which such Item of Equipment is delivered
to Lessee, and, unless earlier terminated as provided herein, shall expire on
the final Rent Payment Date for such Item of Equipment. With respect to an
Item of Equipment, any renewal term of this Lease (individually, a "Renewal
Term"), as contemplated hereby, shall commence immediately upon the expiration
of the Initial Term or any prior Renewal Term, as the case may be, and, unless
earlier terminated as provided herein, shall expire on the date on which the
final payment of Rent is due and paid hereunder. All obligations of Lessee
hereunder shall survive the expiration, cancellation or other termination of
the Term hereof.
9. Rent. With respect to Each Item of Equipment, Lessee shall pay the
Rent set forth on the Equipment Schedule applicable to such Item of Equipment,
commencing on the Rent Commencement Date, and, unless otherwise set forth on
such Equipment Schedule, on the same day of each payment period thereafter for
the balance of the Term. Rent shall be due whether or not Lessee has received
any notice that such payments are due. All Rent shall be paid to Lessor at its
address set forth on the Equipment Schedule, or as otherwise directed by
Lessor in writing.
10. Location; Inspection; Labels. The Equipment shall be delivered to
the Equipment Location and shall not be removed therefrom without Lessor's
prior written consent. Lessor shall have the right to enter upon the Equipment
Location and inspect the Equipment at any reasonable time. Lessor may, with
notice to Lessee, remove the Equipment if the Equipment is, in the reasonable
opinion of Lessor, being used beyond its capacity or is in any manner
improperly cared for, abused or misused. At Lessor's request, Lessee shall
affix labels stating that the Equipment is owned (or liened upon as
appropriate) by Lessor permanently in a prominent place on the Equipment and
shall keep such labels in good repair and condition.
11. Use; Alterations. Lessee shall use the Equipment lawfully and only
in the manner for which it was designed and intended and so as to subject it
only to ordinary wear and tear. Lessee shall comply with all Applicable Law.
Lessee shall immediately notify Lessor in writing of any existing, pending or
threatened investigation, inquiry, claim or action by any Governmental
Authority in connection with any Applicable Law or Governmental Action which
could adversely affect the Equipment or this Lease. Lessee, at its own
expense, shall make such alterations, additions or modifications or
improvements to the Equipment as may be required from time to time to meet the
requirements of Applicable Law or Governmental Action. Except as otherwise
permitted herein, Lessee shall not make any material alterations, additions,
modifications or improvements to the Equipment without Lessor's prior written
consent.
12. Repairs and Maintenance. Lessee, at Lessee's own cost and expense,
shall (a) keep the Equipment in good repair, good operating condition and
working order and in compliance with the manufacturer's specifications, and
(b) enter into and keep in full force and effect during the Term hereof a
maintenance agreement with the manufacturer of the Equipment, or a
manufacturer-approved maintenance organization, to maintain, service and
repair the Equipment so as to keep the Equipment in as good operating
condition and working order as it was when it first became subject to this
Lease and in compliance with the manufacturer's specifications. Upon Lessor's
request, Lessee shall furnish Lessor with an executed copy of any such
maintenance agreement. An alternate source of maintenance may be used by
Lessee with Lessor's prior written consent. Lessee, at its own cost and
expense and within a reasonable period of time, shall replace any part of any
Item of Equipment that becomes worn out, lost, stolen, destroyed, or otherwise
rendered permanently unfit or unavailable for use (whether or not such
replacement is covered by the aforesaid maintenance agreement), with a
replacement part of the same manufacture, value, remaining useful life and
utility as the replaced part immediately preceding the replacement (assuming
that such replaced part is in the condition required by this Lease). Such
replacement part shall be free and clear of all Liens. Notwithstanding the
foregoing, this paragraph shall not apply to any Loss or Damage (as defined in
Section 16 hereof) of any Item of Equipment.
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13. Return of Equipment. Upon the expiration (subject to Section 32
hereof and except as otherwise provided in an Equipment Schedule) or earlier
termination of this Lease, Lessee, at its sole expense, shall return the
Equipment to Lessor by delivering such Equipment F.A.S. or F.O.B. to such
location or such carrier (packed for shipping) as Lessor shall specify. Lessee
agrees that the Equipment, when returned, shall be in the condition required
by Section 12 hereof. All components of the Equipment shall have been properly
serviced, following the manufacturer's written operating and servicing
procedures, such that the Equipment is eligible, if available, for a
manufacturer's standard, full service maintenance contract without Lessor's
incurring any expense to repair or rehabilitate the Equipment. If, in the
reasonable opinion of Lessor, any Item of Equipment fails to meet the
standards set forth above, Lessee agrees to pay on demand all costs and
expenses incurred in connection with repairing such Item of Equipment and
restoring it so as to meet such standards, assembling and delivering such Item
of Equipment. Lessee shall give Lessor ninety (90) days written notice (the
"Return Notice") that Lessee is returning the Equipment as provided for above.
If Lessee fails to return any Item of Equipment as required hereunder, then,
all of Lessee's obligations under this Lease (including, without limitation,
Lessee's obligation to pay Rent for such Item of Equipment at the rental then
applicable under this Lease) shall continue in full force and effect until
such Item of Equipment shall have been returned in the condition required
hereunder.
14. Equipment Upgrades/Attachments. In addition to the requirements of
Section 11 hereof, Lessee, at its own expense, may from time to time add or
install upgrades or attachments to the Equipment during the Term; provided,
that such upgrades or attachments (a) are readily removable without causing
material damage to the Equipment, (b) do not materially adversely affect the
Fair Market Sale Value, the Fair Market Rental Value, residual value,
productive capacity, utility or remaining useful life of the Equipment, and
(c) do not cause such Equipment to become "limited use property" within the
meaning of Revenue Procedure 76-30, 1976-2 C.B. 647 (or such other successor
tax provision), as of the applicable delivery date or the time of such upgrade
or attachment. Any such upgrades or attachments which are not required by
Section 11 hereof and which can be removed without causing damage to or
adversely affecting the condition of the Equipment, or reducing the Fair
Market Sale Value, the Fair Market Rental Value, residual value, productive
capacity, utility or remaining useful life of the Equipment shall remain the
property of Lessee; and upon the expiration or earlier termination of this
Lease and provided that no Event of Default exists, Lessee may, at its option,
remove any such upgrades or attachments and, upon such removal, shall restore
the Equipment to the condition required hereunder.
15. Sublease and Assignment. (a) WITHOUT LESSOR'S PRIOR WRITTEN
CONSENT, LESSEE SHALL NOT (i) ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR
OTHERWISE DISPOSE OF THIS LEASE, THE EQUIPMENT OR ANY INTEREST THEREIN, OR
(ii) SUBLET OR LEND THE EQUIPMENT TO, OR PERMIT THE EQUIPMENT TO BE USED BY,
ANYONE OTHER THAN LESSEE OR LESSEE'S QUALIFIED EMPLOYEES.
(b) Lessor, at any time with or without notice to Lessee, may
sell, transfer, assign and/or grant a security interest in this Lease, any
Equipment Schedule or any Item of Equipment. In any such event, any such
purchaser, transferee, assignee or secured party shall have and may exercise
all of Lessor's rights hereunder with respect to the items to which any such
sale, transfer, assignment and/or security interest relates, and LESSEE SHALL
NOT ASSERT AGAINST ANY SUCH PURCHASER, TRANSFEREE, ASSIGNEE OR SECURED PARTY
ANY DEFENSE, COUNTERCLAIM OR OFFSET THAT LESSEE MAY HAVE AGAINST LESSOR.
Lessee acknowledges that no such sale, transfer, assignment and/or security
interest will materially change Lessee's duties hereunder or materially
increase its burdens or risks hereunder. Lessee agrees that upon written
notice to Lessee of any such sale, transfer, assignment and/or security
interest, Lessee shall acknowledge receipt thereof in writing and shall comply
with the directions of Lessor's successor or assign.
16. Loss of or Damage to Equipment. (a) Lessee shall bear the entire
risk of loss, theft, destruction, disappearance of or damage to any and all
Items of Equipment ("Loss or Damage") from any cause whatsoever during the
Term hereof until the Equipment is returned to Lessor in accordance with
Section 13 hereof. No Loss or Damage shall relieve Lessee of the obligation to
pay Rent or of any other obligation under this Lease.
(b) In the event of Loss or Damage to any Item of Equipment,
Lessee, at the option of Lessor, shall within thirty (30) days following such
Loss or Damage: (1) place such Item of Equipment in good condition and repair,
in accordance with the terms hereof; (2) replace such Item of Equipment with
replacement equipment (acceptable to Lessor) in as good condition and repair,
and with the same value, remaining useful economic life and utility, as such
replaced Item of Equipment immediately preceding the Loss or Damage (assuming
that such replaced Item of Equipment is the condition required by this Lease),
which replacement equipment shall be free and clear of all Liens; or (3) pay
to Lessor the sum of (i) all Rent due and owing hereunder with respect to such
Item of Equipment (at the time of such payment) plus (ii) the Stipulated Loss
Value as of the Rent Payment Date next following the date of such Loss or
Damage with respect to such Item of Equipment, as set forth on the Schedule
applicable thereto. Upon Lessor's receipt of the payment required under
subsection (3) above, Lessee shall be entitled to Lessor's interest in such
Item of Equipment, in its then condition and location, "as is" and "where is",
without any warranties, express or implied. If Lessee replaces the Item of
Equipment pursuant to subsection (b) above, title to such replacement
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equipment shall immediately (and without further act) vest in Lessor and
thereupon shall be deemed to constitute Items of Equipment and be fully
subject to this Lease as if originally leased hereunder. If Lessee fails to
either restore of replace the Item of Equipment pursuant to subsection (1) or
(2) above, respectively, Lessee shall make the payment under subsection (3)
above.
17. Insurance. (a) Lessee, at all times during the Term hereof (until
the Equipment shall have been returned to Lessor) and at Lessee's own cost and
expense, shall maintain (1) insurance against all risks of physical loss or
damage to the Equipment (including theft and collision for Equipment
consisting of motor vehicles) in an amount not less than the full replacement
value thereof or the Stipulated Loss Value thereof, whichever is greater, and
(2) commercial general liability insurance (including blanket contractual
liability coverage and products liability coverage) for personal and bodily
injury and property damage in an amount satisfactory to Lessor.
(b) All insurance policies required hereunder shall (1) require 30
days' prior written notice of cancellation or material change in coverage to
Lessor (any such cancellation or change, as applicable, not being effective
until the thirtieth (30th) day after the giving of such notice); (2) name
"KeyCorp and its subsidiaries and affiliated companies, including KeyCorp
Leasing Ltd." as an additional insured under the public liability policies and
name Lessor as sole loss payee under the property insurance policies; (3) not
require contributions from other policies held by Lessor; (4) waive any right
of subrogation against Lessor; (5) in respect of any liability of any of
Lessor, except for the insurers' salvage rights in the event of a Loss or
Damage, waive the right of such insurers to set-off, to counterclaim or to any
other deduction, whether by attachment or otherwise, to the extent of any
monies due Lessor under such policies; (6) not require that Lessor pay or be
liable for any premiums with respect to such insurance covered thereby; (7) be
in full force and effect throughout any geographical areas at any time
traversed by any Item of Equipment; and (8) contain breach of warranty
provisions providing that, in respect of the interests of Lessor in such
policies, the insurance shall not be invalidated by any action or inaction of
Lessee or any other person (other than Lessor) and shall insure Lessor
regardless of any breach or violation of any warranty, declaration or
condition contained in such policies by Lessee or by any other person (other
than Lessor). Prior to the first date of delivery of any Item of Equipment
hereunder, and thereafter not less than 15 days prior to the expiration dates
of the expiring policies theretofore delivered pursuant to this Section,
Lessee shall deliver to Lessor a duplicate original of all policies (or in the
case of blanket policies, certificates thereof issued by the insurers
thereunder) for the insurance maintained pursuant to this Section.
18. General Tax Indemnification. Lessee shall pay when due and shall
indemnify and hold Lessor harmless from and against (on an after-tax basis)
any and all taxes, fees, withholdings, levies, imposts, duties, assessments
and charges of any kind and nature (together with interest and penalties
thereon) (including, without limitation, sales, use, gross receipts, personal
property, ad valorem, business and occupational, franchise, value added,
leasing, leasing use, documentary, stamp or other taxes) imposed upon or
against Lessor, Lessor's assigns, Lessee or any Item of Equipment by any
Governmental Authority with respect to any Item of Equipment or the
manufacturing, ordering, sale, purchase, shipment, delivery, acceptance or
rejection, ownership, titling, registration, leasing, subleasing, possession,
use, operation, removal, return or other dispossession thereof or upon the
rents, receipts or earnings arising therefrom or upon or with respect to this
Lease, excepting only all Federal, state and local taxes on or measured by
Lessor's net income (other than income tax resulting from making any
alterations, improvements, modifications, additions, upgrades, attachments,
replacements or substitutions by Lessee). Whenever this Lease terminates as to
any Item of Equipment, Lessee shall, upon written request by Lessor, advance
to Lessor the amount determined by Lessor to be the personal property or other
taxes on said item which are not yet payable, but for which Lessee is
responsible, provided Lessor provides Lessee with copies of tax bills
supporting Lessor's request.
19. Lessor's Right to Perform for Lessee. If Lessee fails to perform
or comply with any of its obligations contained herein, Lessor may (but shall
not be obligated to do so) itself perform or comply with such obligations, and
the amount of the reasonable costs and expenses of Lessor incurred in
connection with such performance or compliance, together with interest on such
amount at the Late Payment Rate, shall be payable by Lessee to Lessor upon
demand. No such performance or compliance by Lessor shall be deemed a waiver
of the rights and remedies of Lessor or any assignee of Lessor against Lessee
hereunder or be deemed to cure the default of Lessee hereunder.
20. Delinquent Payments: Interest. If Lessee fails to pay any Rent or
other sums under this Lease within ten (10) days after the same becomes due,
Lessee shall pay to Lessor a late charge equal to five percent (5%) of such
delinquent amount. Such late charge shall be payable by Lessee upon demand by
Lessor and shall be deemed Rent hereunder. In no event shall such late charge
exceed the maximum amounts permitted under Applicable Law.
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21. Personal Property; Liens. Lessor and Lessor hereby agree that the
Equipment is, and shall at all times remain, personal property notwithstanding
the fact that any Item of Equipment may now be, or hereafter become, in any
manner affixed or attached to real property or any improvements thereon.
Lessee shall at all times keep the Equipment free and clear from all Liens.
Lessee shall (i) give Lessor immediate written notice of any such Lien, (ii)
promptly, at Lessee's sole cost and expense, take such action as may be
necessary to discharge any such Lien and (iii) indemnify and hold Lessor, on
an after-tax basis, harmless from and against any loss or damage caused by any
such Lien.
22. Events of Default; Remedies. (a) As used herein, the term "Event of
Default" shall mean any of the following events: (1) Lessee fails to pay any
Rent within ten (10) days after the same shall have become due; (2) Lessee or
any Guarantor becomes insolvent or makes an assignment for the benefit of its
creditors; (3) a receiver, trustee, conservator or liquidator of Lessee or any
Guarantor or of all or a substantial part of Lessee's or such Guarantor's
assets is appointed with or without the application or consent of Lessee or
such Guarantor, respectively; (4) a petition is filed by or against Lessee or
any Guarantor under any bankruptcy, insolvency or similar legislation; (5)
Lessee or any Guarantor violates or fails to perform any provision of either
this Lease or any other loan, lease or credit agreement or any acquisition or
purchase agreement with Lessor or any other party; (6) Lessee violates or
fails to perform any covenant or representation made by Lessee herein: (7) any
representation or warranty made herein or in any Lease, certificate, financial
statement or other statement furnished to Lessor shall prove to be false or
misleading in any material respect as of the date on which the same was made;
(8) Lessee makes a bulk transfer of furniture, furnishings, fixtures or other
equipment or inventory (other than in the ordinary course of business); or (9)
there is a material adverse change in Lessee's or any Guarantor's financial
condition since the first Rent Commencement Date of any Equipment Schedule
executed in connection herewith. An Event of Default with respect to any
Equipment Schedule hereunder shall, at Lessor's option, constitute an Event of
Default for all Equipment Schedules hereunder and any other agreements between
Lessor and Lessee. Lessee shall have forty-five (45) days in which to cure an
Event of Default declared hereunder with the exception of the failure of
Lessee to pay any Rent within ten (ten) days after the same shall have become
due.
(b) Upon the occurrence of an Event of Default, Lessor may do one
or more of the following as Lessor in its sole discretion shall elect: (1)
proceed by appropriate court action or actions, either at law or in equity, to
enforce performance by Lessee of the applicable covenants of this Lease or to
recover damages for the breach thereof; (2) sell any Item of Equipment at
public or private sale; (3) hold, keep idle or lease to others any Item of
Equipment as Lessor in its sole discretion may determine; (4) by notice in
writing to Lessee, terminate this Lease, without prejudice to any other
remedies hereunder; (5) demand that Lessee, and Lessee shall, upon written
demand of Lessor and at Lessee's expense forthwith return all Items of
Equipment to Lessor or its order in the manner and condition required by, and
otherwise in accordance with all of the provisions of this Lease, except those
provisions relating to periods of notice; (6) enter upon the premises of
Lessee or other premises where any Item of Equipment may be located and,
without notice to Lessee and with or without legal process, take possession of
and remove all or any such Items of Equipment without liability to Lessor by
reason of such entry or taking possession, and without such action
constituting a termination of this Lease unless Lessor notifies Lessee in
writing to such effect. Such action shall be exercised by Lessor in a
reasonable and prudent manner; (7) by written notice to Lessee specifying a
payment date, demand that Lessee pay to Lessor, and Lessee shall pay to
Lessor, on the payment date specified in such notice, as liquidated damages
for loss of a bargain and not as a penalty, any unpaid Rent due prior to the
payment date specified in such notice plus whichever of the following amounts
Lessor, in its sole discretion, shall specify in such notice (together with
interest on such amount at the Late Payment Rate from the payment date
specified in such notice to the date of actual payment): (i) an amount, with
respect to an Item of Equipment, equal to the Rent payable for such Item of
Equipment for the remainder of the then current Term thereof, after
discounting such Rent to present worth as of the payment date specified in
such notice on the basis of a per annum rate of discount equal to five percent
(5%) from the respective dates upon which such Rent would have been paid had
this Lease not been terminated; or (ii) the Stipulated Loss Value, computed as
of the payment date specified in such notice or, if such payment date is not a
Rent Payment Date, the Rent Payment Date next following the payment date
specified in such notice (provided, however, that, with respect to any Item of
Equipment returned to or repossessed by Lessor, the amount recoverable under
this clause (ii) shall be reduced (but not below zero) by an amount equal to
the Fair Market Sales Value (taking into account its actual condition) of such
Item of Equipment; (8) cause Lessee, at its expense, to promptly assemble any
and all Items of Equipment and return the same to Lessor at such place as
Lessor may designate in writing; and (9) exercise any other right or remedy
available to Lessor under applicable law or proceed by appropriate court
action to enforce the terms hereof or to recover damages for the breach hereof
or to rescind this Lease. In addition, Lessee shall be liable, except as
otherwise provided above, for any and all unpaid Rent due hereunder before or
during the exercise of any of the foregoing remedies, and for reasonable legal
fees and other costs and expenses incurred by reason of the occurrence of any
Event of Default or the exercise of Lessors remedies with respect thereto,
including without limitation the repayment in full of any costs and expenses
necessary to be expended in repairing any Item of Equipment in order to cause
it to be in compliance with all maintenance and regulatory standards imposed
by this Lease. If an Event of Default occurs, to the fullest extent permitted
by law, Lessee hereby waives any right to any
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defenses, rights, offsets or claims against Lessor because of the manner or
method of sale or disposition of any Items of Equipment. None of Lessor's
rights or remedies hereunder are intended to be exclusive of, but each shall
be cumulative and in addition to any other right or remedy referred to
hereunder or otherwise available to Lessor or its assigns at law or in equity.
No express or implied waiver by Lessor of any Event of Default shall
constitute a waiver of any other Event of Default or a waiver of any of
Lessor's rights. Lessor agrees to give Lessee reasonable notice of any sale or
other disposition of the Equipment after the occurrence of an Event of
Default. Lessee agrees that the requirement of reasonable notice shall be met
if such notice is personally served on or mailed, postage prepaid, to Lessee
in accordance with the notice provisions hereof at least 10 days before the
time of sale or other disposition. Lessor shall not be obligated to make any
sale or other disposition of the Equipment regardless of notice having been
given.
23. Notices. All notices and other communications hereunder shall be in
writing and shall be transmitted by hand, overnight courier or certified mail
(return receipt requested), postage prepaid. Such notices and other
communications shall be addressed to the respective party at the address set
forth above or at such other address as any party may from time to time
designate by notice duly given in accordance with this Section. Such notices
and other communications shall be effective upon receipt.
24. General Indemnification. Lessee shall pay, and shall indemnify and
hold Lessor harmless on an after-tax basis from and against, any and all
liabilities, causes of action, claims, suits, penalties, damages, losses,
costs or expenses (including attorneys' fees), obligations, liabilities,
demands and judgments, and Liens, of any nature whatsoever (collectively, a
"Liability") arising out of or in any way related to: (a) this Lease or any
other written agreement entered into in connection with the transactions
contemplated hereby and thereby (including, without limitation, a Purchase
Agreement, if any) or any amendment, waiver or modification of any of the
foregoing or the enforcement of any of the terms hereof or any of the
foregoing, (b) the manufacture, purchase, ownership, selection, acceptance,
rejection, possession, lease, sublease, operation, use, maintenance,
documenting, inspection, control, loss, damage, destruction, removal, storage,
surrender, sale, use, condition, delivery, nondelivery, return or other
disposition of or any other matter relating to any Item of Equipment or any
part or portion thereof (including, in each case and without limitation,
latent or other defects, whether or not discoverable, any claim for patent,
trademark or copyright infringement and any and all Liabilities in any way
relating to or arising out of injury to persons, properties or the environment
or any and all Liabilities based on strict liability in tort, negligence,
breach of warranties or violations of any regulatory law or requirement, (c) a
failure to comply fully with any Environmental Law with respect to the
Equipment or its operation or use, and (d) Lessee's failure to perform any
covenant, or breach of any representation or warranty, hereunder; provided,
that the foregoing indemnity shall not extend to the Liabilities to the extent
resulting solely from the gross negligence or willful misconduct of Lessor.
Lessee shall deliver promptly to Lessor (i) copies of any documents received
from the United States Environmental Protection Agency or any state, county or
municipal environmental or health agency and (ii) copies of any documents
submitted by Lessee or any of its subsidiaries to the United States
Environmental Protection Agency or any state, county or municipal
environmental or health agency concerning the Equipment or its operation.
25. Severability; Captions. Any provision of this Lease or any
Equipment Schedule which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability shall not invalidate or
render unenforceable such provision in any other jurisdiction. Captions are
intended for convenience or reference only, and shall not be construed to
define, limit or describe the scope or intent of any provisions hereof.
26. Lessor's Expense. Lessee shall pay all costs and expenses of
Lessor, including reasonable attorneys' fees and the fees of any collection
agencies, incurred by Lessor in enforcing any of the terms, conditions or
provisions hereof or in protecting Lessor's rights hereunder.
27. Related Equipment Schedules. In the event that any Item of
Equipment covered under any Equipment Schedule hereunder may become attached
or affixed to, or used in connection with, Equipment covered under another
Equipment Schedule hereunder (a "Related Equipment Schedule"), Lessee agrees
that, if Lessee elects to exercise a purchase or renewal option under any such
Equipment Schedule, or if Lessee elects to return the Equipment under any such
Equipment Schedule pursuant to Section 13 hereof, then Lessor, in its sole
discretion, may require that all Equipment leased under all Related Equipment
Schedules be similarly disposed of.
28. Financial and Other Data. During the Term hereof, Lessee shall
furnish Lessor, as soon as available and in any event within 60 days after the
end of each quarterly period (except the last) of each fiscal year, and, as
soon as available and in any event within 120 days after the last day of each
fiscal year, financial statements of Lessee and each Guarantor, in each case
certified by an independent public accountant if customarily available or
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requested. Lessee shall also furnish such other financial reports, information
or data as Lessor may reasonably request from time to time.
29. Reserved.
30. No Affiliation with the Supplier. Lessee hereby represents and
warrants to Lessor that, except as previously disclosed in writing to Lessor,
neither Lessee nor any of its officers or directors (if a corporation) or
partners (if a partnership) has, directly or indirectly, any financial
interest in the Supplier.
31. Representations and Warranties of Lessee. Lessee represents and
warrants that: (a) Lessee is a corporation duly organized and validly existing
in good standing under the laws of the state of its incorporation; (b) the
execution, delivery and performance of this Lease and all related instruments
and documents: (1) have been duly authorized by all necessary corporate action
on the part of Lessee, (2) do not require the approval of any stockholder,
partner, trustee, or holder of any obligations of Lessee except such as have
been duly obtained, and (3) do not and will not contravene any law,
governmental rule, regulation or order now binding on Lessee, or the charter
or by-laws of Lessee, or contravene the provisions of, or constitute a default
under, or result in the creation of any lien or encumbrance upon the property
of Lessee under, any indenture, mortgage, contract or other agreement to which
Lessee is a party or by which it or its property is bound; (c) this Lease and
all related instruments and documents when entered into, will constitute
legal, valid and binding obligations of Lessee enforceable against Lessee in
accordance with the terms thereof; (d) there are no pending actions or
proceedings to which Lessee is a party, and there are no other pending or
threatened actions or proceedings of which Lessee has knowledge, before any
court, arbitrator or administrative agency, which, either individually or in
the aggregate, would adversely affect the financial condition of Lessee, or
the ability of Lessee to perform its obligations hereunder; (e) Lessee is not
in default under any obligation for the payment of borrowed money, for the
deferred purchase price of property or for the payment of any rent under any
lease agreement which, either individually or in the aggregate, would have the
same such effect; (f) under the laws of the state(s) in which the Equipment is
to be located, the Equipment consists solely of personal property and not
fixtures; (g) the financial statements of Lessee (copies of which have been
furnished to Lessor) have been prepared in accordance with generally
acceptable accounting principles consistently applied ("GAAP"), and fairly
present Lessee's financial condition and the results of its operations as of
the date of and for the period covered by such statements, and since the date
of such statements there has been no material adverse change in such
conditions or operations; (h) the address stated above is the chief place of
business and chief executive office, or in the case of individuals, the
primary residence, of Lessee; (i) Lessee does not conduct business under a
trade, assumed or fictitious name other than those listed on Exhibit B
attached hereto; and (j) the Equipment is being leased hereunder solely for
business purposes and that no item of Equipment will be used for personal,
family or household purposes.
32. Renewal And Purchase Options. With respect to an Equipment
Schedule and the Equipment Group set forth thereon, so long as no Default or
Event of Default shall have occurred and is continuing, then, upon not less
than ninety (90) days prior written notice to Lessor, (the "Renewal Notice")
Lessee may (a) at the expiration of the Initial Term, or any Renewal Term,
purchase all, but not less than all, of the Equipment Group for the Fair
Market Sale Value of such Equipment Group, payable in cash to Lessor upon the
expiration of the Initial Term or any Renewal Term, as the case may be, (b) at
the expiration of the Initial Term, renew this Lease on a month to month basis
at the same Rent payable at the expiration of the Initial Term, or (c) at the
expiration of the Initial Term, renew this Lease for a minimum period of not
less than twelve (12) consecutive months at the then current Fair Market
Rental Value. If Lessee fails to give Lessor the Return Notice or the Renewal
Notice at least ninety (90) days before the expiration of the Initial Term,
Lessee shall be deemed to have chosen option (b) above. If Lessee exercises
option (a) above, Lessee shall purchase the Equipment "as is" and "where is"
and without any warranties, express or implied, by Lessor.
33. Lessee's Waivers. To the extent permitted by Applicable Law,
Lessee hereby waives (a) any and all rights and remedies which it may now have
or which at any time hereafter may be conferred upon it by statute (including,
without limitation, Article A of the Uniform Commercial Code, as applicable)
or otherwise, (1) which may limit or modify Lessor's rights or remedies
hereunder, (2) to terminate, cancel, quit, repudiate or surrender this Lease,
except as expressly provided herein; (3) to reject, revoke acceptance or
accept partial delivery of the Equipment; (4) to recover damages from Lessor
for any breach of warranty or for any other reason provided, however, that no
such waiver shall preclude Lessee from asserting any such claim against Lessor
in a separate cause of action; or (5) to setoff or deduct all or any part of
any claimed damages resulting from Lessor's default, if any, under this Lease.
34. UCC Filings. LESSEE HEREBY APPOINTS LESSOR OR ITS ASSIGNEE AS ITS
TRUE AND LAWFUL ATTORNEY IN FACT, IRREVOCABLY AND COUPLED WITH AN INTEREST, TO
EXECUTE AND FILE ON BEHALF OF LESSEE ALL UCC FINANCING STATEMENTS WHICH IN
LESSOR'S SOLE DISCRETION ARE
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NECESSARY OR PROPER TO SECURE LESSOR'S INTEREST IN THE EQUIPMENT IN ALL
APPLICABLE JURISDICTIONS; PROVIDED, HOWEVER, LESSOR SHALL NOT EXERCISE SUCH
POWER-OF-ATTORNEY UNLESS EITHER (A) LESSEE HAS FAILED OR REFUSED TO SO
EXECUTE, ENDORSE OR DELIVER, AS THE CASE MAY BE, ANY DOCUMENT, INSTRUMENT OR
AGREEMENT SO REQUESTED BY LESSOR WITHIN FIVE (5) BUSINESS DAYS AFTER LESSOR'S
WRITTEN REQUEST FOR THE SAME OR (B) AN EVENT OF DEFAULT HAS OCCURRED AND IS
CONTINUING.
35. Miscellaneous. Time is of the essence with respect to this Lease.
Any failure of Lessor to require strict performance by Lessee or any waiver by
Lessor of any provision herein shall not be construed as a consent or waiver
of any provision of this Lease. Neither this Lease nor any Equipment Schedule
may be amended except by a writing signed by Lessor and Lessee. This Lease and
each Equipment Schedule shall be binding upon, and inure to the benefit of,
the parties hereto, their permitted successors and assigns. This Lease will be
binding upon Lessor only if executed by a duly authorized officer or
representative of Lessor at Lessor's principal place of business as set forth
above. This Lease, and all other documents (the execution and delivery of
which by Lessee is contemplated hereunder), shall be executed on Lessee's
behalf by Authorized Signers of Lessee. THIS LEASE IS BEING DELIVERED IN THE
STATE OF NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH.
THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
36. Jury Trial Waiver. LESSOR AND LESSEE HEREBY WAIVE TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO WHICH LESSOR OR LESSEE MAY BE PARTIES ARISING OUT
OF OR IN ANY WAY PERTAINING TO THIS LEASE. THIS WAIVER IS MADE KNOWINGLY,
WILLINGLY AND VOLUNTARILY BY THE LESSOR AND THE LESSEE WHO EACH ACKNOWLEDGE
THAT NO REPRESENTATIONS HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER
OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT.
37. More than One Lessee. If more than one person or entity executes
this Lease, each Equipment Schedule, and all addenda or other documents
executed in connection herewith or therewith, as "Lessee," the obligations of
"Lessee" contained herein and therein shall be deemed joint and several and
all references to "Lessee" shall apply both individually and jointly.
38. Quiet Enjoyment. So long as no Event of Default has occurred and is
continuing, Lessee shall peaceably hold and quietly enjoy the Equipment
without interruption by Lessor or any person or entity claiming through
Lessor.
39. Entire Agreement. This Lease, together with all Equipment
Schedules, riders and addenda executed by Lessor and Lessee collectively
constitute the entire understanding or agreement between Lessor and Lessee
with respect to the leasing of the Equipment, and there is no understanding or
agreement, oral or written, which is not set forth herein or therein. By
initialing below, Lessee hereby further acknowledges the conditions of this
Section 39.
Lessee's Initials:___ Lessee's Initials: ___ Lessee's Initials: ___
Lessee's Initials:___ Lessee's Initials: ___
40. Execution in Counterparts. This Master Equipment Lease Agreement
may be executed in several counterparts, each of which shall be an original
and all of which shall constitute but one and the same instrument.
10
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of
this day and year first above written.
Lessee: Lessee:
SECOM GENERAL CORPORATION MICANOL, INC.
BY: /s/ Robert A. Clemente BY: /s/ Robert A. Clemente
------------------------- -------------------------
Name: Robert A. Clemente Name: Robert A. Clemente
Title: Chairman of the Board Title: Chairman of the Board
Lessee: Lessee:
UNIFLOW CORPORATION L & H DIE, INC.
BY: /s/ Robert A. Clemente BY: /s/ Robert A. Clemente
------------------------- -------------------------
Name: Robert A. Clemente Name: Robert A. Clemente
Title: Chairman of the Board Title: Chairman of the Board
Lessee:
FORM FLOW INC.
BY: /s/ Robert A. Clemente
-------------------------
Name: Robert A. Clemente
Title: Chairman of the Board
Lessor:
KEYCORP LEASING LTD.
By: /s/ Steven R. DeCarlo
----------------------
Name: Steven R. DeCarlo
Title: Vice President
11
<PAGE>
[ KeyCorp Leasing Ltd. letterhead ]
EQUIPMENT SCHEDULE NO. 01
EQUIPMENT SCHEDULE NO. 01 dated as of May 24, 1996 (this "Schedule")
between KEYCORP LEASING LTD. ("Lessor"), a Delaware corporation, and SECOM
GENERAL CORPORATION, a Delaware corporation with its principal place of
business at 46035 Grand River Avenue, Novi, MI 48374, UNIFLOW CORPORATION, a
Michigan corporation with its principal place of business at 26600 Heyn Drive,
Novi, MI 48374, FORM FLOW, INC., a Michigan corporation with its principal
place of business at 6901 Cogswell, Romulus, MI 48174, L & H DIE, INC., a
Michigan corporation with its principal place of business at 38200 Ecorse
Road, Romulus, MI 48174 and MICANOL, INC., a Michigan corporation with its
principal place of business at 46001 Grand River Avenue, Novi MI 48374
(collectively, the "Lessee").
I N T R O D U C T I O N :
Lessor and Lessee have heretofore entered into that certain Master
Equipment Lease Agreement dated as of May 24, 1996 (the "Master Lease"; the
Master Lease and this Schedule hereinafter collectively referred to as, this
"Lease"). Unless otherwise defined herein, capitalized terms used herein shall
have the meanings specified in the Master Lease. The Master Lease provides for
the execution and delivery of a Schedule substantially in the form hereof for
the purpose of confirming the acceptance and lease of the Equipment under this
Lease as and when delivered by Lessor to Lessee in accordance with the terms
thereof and hereof.
NOW, THEREFORE, in consideration of the premises and other good and
sufficient consideration, Lessor and Lessee hereby agree as follows:
1. EQUIPMENT. Pursuant to the terms and conditions of this Lease,
Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
equipment listed on Exhibit A attached hereto (the "Equipment"). The aggregate
Total Cost of such Equipment is $5,000,000.00.
2. TERM. The Initial Term of this Lease with respect to the Equipment
described on this Schedule shall commence on the date on which such Equipment
is delivered to Lessee, and, unless earlier terminated as provided herein,
shall expire on the date which is seventy-two (72) months after the Rent
Commencement Date (the "Initial Term Expiration Date').
3. RENT PAYMENT DATES; RENT. (a) The Rent set forth in Section
3(b)(2) hereof shall be adjusted (pursuant to Section 3(c) hereof) with each
change in the Actual Index (as hereinafter defined).
(b) Lessee hereby agrees to pay Rent for the Equipment as follows:
(1) On the Rent Commencement Date, an amount equal to $2,079.45 as
interim rent for the period from the Rent Commencement Date to
but excluding the first day of the month following the Rent
Commencement Date, which interim rent was calculated by Lessor
using the Assumed Rate (as hereinafter defined) and is
expressly not subject to adjustment pursuant to Section 3(c)
hereof.
(2) Throughout the Initial Term in seventy-two (72) consecutive
monthly installments payable in arrears commencing on July 1,
1996 and on the same day each month thereafter (each, a "Rent
Payment Date"). Each such installment of Rent shall be in an
amount equal to $86,657.72.
(c) Lessee and Lessor agree that each Rent payment hereunder shall
be increased or decreased (but not below zero), as the case may be, by
the Rent Differential (as hereinafter defined) as follows: if, as of
any Rent Payment Date, (i) the Rent Differential is greater than zero,
the amount of Rent due on such Rent Payment, Date shall be increased by
such Rent Differential, and (ii) the Rent Differential is less than
zero, the amount of Rent due on such Rent Payment Date shall be
decreased by such Rent Differential.
(d) As used herein, the following terms shall have the respective
meanings indicated below:
<PAGE>
(1) "Assumed Index" shall mean 5.4336%).
(2) "Actual Index" shall mean, as of any day in a calendar
month, the London interbank offered rate for deposits in United
States dollars having a maturity of one month which appears in the
"Money Rates" section of The Wall Street Journal, published on the
business day on, or immediately prior to, the 28th day of the month
immediately preceding such calendar month. If the Actual Index is
no longer available, Lessor will choose a new index which is based
upon comparable information and will give Lessee notice of such new
"Actual Index."
(3) "Current Fixed Index" shall mean the most recent Fixed
Index available as of the week preceding the week in which the
Conversion Date occurs. Lessor shall choose such Current Fixed
Index on the day before the Conversion Date (as hereinafter
defined).
(4) "Daily Equivalent" shall mean the product of the following
formula:
Daily Actual Assumed Net
Equivalent = Index - Index X Investment Balance
-----------------
365
(5) "Fixed Index" shall mean the sum of (i) the weekly average
yield on United States Treasury securities adjusted to a constant
maturity equal to the then remaining Initial Term of the Lease or,
if a constant maturity equal to the then remaining Initial Term of
the Lease is not available, the next highest constant maturity, as
made available by the Federal Reserve Board, and (ii) 240 basis
points. If the Fixed Index is no longer available, Lessor will
choose a new index which is based upon comparable information.
Lessor will give Lessee notice of such new "Fixed Index. "
(6) "Net Investment Balance" shall mean, as of any day, the
outstanding balance (initially calculated using the Assumed Index
plus 215 basis points) reflected on Lessor's lease accounting
system for the Rent Payment Date immediately preceding such day or,
if such day is a Rent Payment Date, for such Rent Payment Date.
(7) "Rent Differential" shall mean, with respect to any Rent
Payment Date, the sum of all Daily Equivalents for each day from
and including the immediately prior Rent Payment Date (or the Rent
Commencement Date for the first Rent Payment Date) to and excluding
such Rent Payment Date.
(e) If (1) on or prior to execution of this Schedule, Lessee shall
have paid to Lessor a conversion option fee equal to $17,500.00, (2)
Lessee shall have provided Lessor with such documentation as Lessor may
reasonably request to effect the conversion, and (3) no default under
the Lease has occurred and is continuing, then, at any time on or after
the twelve (12) month anniversary of the Rent Commencement Date, upon
not less than forty-five (45), and not more than sixty (60), days'
prior written notice, Lessee shall have the option (the "Conversion
Option") to convert the then current Actual Index to a fixed index,
determined pursuant to Section 3(f) hereof. The date of such conversion
(the "Conversion Date") shall be the Rent Payment Date on which the
next payment of Rent is due and payable under the Lease (after giving
effect to such notice requirement).
(f) If Lessee exercises the Conversion Option, (1) on and after
the Conversion Date, the Rent set forth in Section 3(b) hereof shall be
adjusted pursuant to Section 3(c) hereof, provided that, for the
purposes of such adjustment, the term "Actual Index" shall be replaced
by the term "Current Fixed Index," (2) effective as of the Conversion
Date, such adjusted Rent shall be the Rent for the remaining Initial
Term of the Lease, and Lessee shall pay the amount of such adjusted
Rent (based on such Current Fixed Index) for the remainder of such
Initial Term, and (3) notwithstanding anything to the contrary
contained herein, the adjustment set forth in Section 3(a) shall be of
no further force and effect.
2
<PAGE>
4. EQUIPMENT LOCATION; BILLING ADDRESS. The Equipment described on
this Schedule shall be located at, and except as otherwise provided in this
Lease, shall not be removed from, the following address: See Exhibit "A" to
Master Equipment Lease Agreement dated May 24, 1996. The billing address of
Lessee is as follows: SECOM GENERAL CORPORATION, 46035 Grand River Avenue,
Novi, MI 48374.
5. LESSEE'S PURCHASE AND RENEWAL OPTIONS. (a) With respect to the
Equipment described on this Schedule, Section 32 of the Master Lease ("Renewal
and Purchase Options") is hereby deleted in its entirety.
(b) On the Initial Term Expiration Date, Lessee shall pay to Lessor
an amount equal to $1.00. Upon payment in full by Lessee of all Rent (and all
other sums) payable to Lessor hereunder, Lessor shall release its interest in
the Equipment.
6. STIPULATED LOSS VALUE; FUTURE RENTS. There are no Stipulated Loss
Values or Stipulated Loss Value Supplements applicable to the Equipment
described on this Schedule. Notwithstanding anything to the contrary contained
herein, including Section 3 hereof, with respect to all provisions of this
Lease requiring calculation of Rent payable for an Item of Equipment for the
remainder of the Term, such Rent shall be calculated using the Assumed Rate
or, if Lessee has exercised its conversion option under Section 3(e) hereof,
the Current Fixed Index.
7. SECURITY AGREEMENT. To secure the prompt payment and performance
as and when due of all obligations and indebtedness of Lessee, now existing or
hereafter created, to Lessor pursuant to this Lease or otherwise, Lessee
hereby grants to Lessor a security interest in the Equipment and all
accessions, substitutions and replacements thereto and therefor, and proceeds
(cash and non-cash), including, without limitation, insurance proceeds thereof
(but without power of sale). In furtherance of the foregoing, Lessee shall
execute and deliver to Lessor, to be recorded at Lessee's expense, Uniform
Commercial Code financing statements, statements of amendment and statements
of continuation as reasonably may be required by Lessor to perfect and
maintain perfected the security interest granted by Lessee herein.
8. NOTIFICATION OF TAX CONSEQUENCES. Lessee recognizes that, pursuant
to Section 18 of the Master Lease, it is Lessee's responsibility to include,
if required by Applicable Law, all equipment financed under this Lease in
Lessee's personal property tax returns and, if necessary, to pay any resulting
property tax bills. Lessor and Lessee acknowledge that personal property tax
policies vary from state to state and that, where uncertainty exists as to a
particular state's policies, Lessee shall contact its attorneys or financial
advisors (who may be familiar with such state's personal property tax policy)
for advice. It is expressly acknowledged by Lessee that Lessor has made no
warranties, statements or representations as to such personal property tax
matters, and Lessee hereby disclaims any reliance on any such warranties,
statements or representations made by Lessor with respect thereto.
9. MODIFICATIONS TO MASTER LEASE. In addition to the modifications
set forth in Section 5 hereof, with respect to the Equipment described on this
Schedule, the Master Lease shall be modified as follows:
(a) The following shall be inserted as the penultimate sentence
of Section 11 of the Master Lease ("Use; Alterations"):
All such alterations, additions, modifications or improvements
immediately, and without further act, shall be deemed to
constitute Items of Equipment and be fully subject to this Lease
as if originally leased hereunder.
(b) Section 12 of the Master Lease ("Repairs and Maintenance")
is hereby deleted in its entirety and the following substituted in its place:
Lessee will keep and maintain, or cause to be kept and
maintained, the Equipment in as good operating condition as on
the date of execution hereof (or on the date on which acquired,
if such date is subsequent to the date of execution hereof),
ordinary wear and tear resulting from proper use thereof alone
excepted. In addition, if any parts or accessories forming part
of the Equipment
3
<PAGE>
shall from time to time become worn out, lost, destroyed,
damaged beyond repair or otherwise permanently rendered unfit
for use, Lessee, at its own expense, will within a reasonable
time replace such parts or accessories with replacement parts or
accessories which and have a value and utility at least equal to
the parts or accessories replaced. Such replacement part shall
be free and clear of all Liens. Notwithstanding the foregoing,
this paragraph shall not apply to any Loss or Damage (as defined
in Section 16 hereof) of any Item of Equipment. Upon
installation, attachment or incorporation in, on or into such
Item of Equipment, such replacement part immediately, and
without further act, shall be deemed to constitute an Item of
Equipment and be fully subject to this Lease as if originally
leased hereunder
(c) Section 16(b) of the Master Lease ("Loss of or Damage to
Equipment") is hereby amended to delete subsection "(3)" and substitute the
following in its place:
(3) pay to Lessor an amount, with respect to such Item of
Equipment, equal to the Rent payable for such Item of Equipment
for the remainder of the Term, after discounting such Rent to
present worth on the basis of a per annum rate of discount equal
to five percent (5%) from the respective dates upon which such
Rent would have been paid had the Loss or Damage not occurred.
In determining the Rent payable for an Item of Equipment for the
purposes of this clause (3), Lessor and Lessee agree that such
Rent shall be deemed equal to the product of (a) the total Rent
payable under this Lease for the remainder of the Term, and (b)
a fraction, the numerator of which is the value (as set forth in
the appraisal prepared at lease closing) of such Item of
Equipment and the denominator of which is the value (as set
forth in the appraisal prepared at lease closing) of all Items
of Equipment under this Lease.
(d) Section 16(b) of the Master Lease ("Loss of or Damage to
Equipment") is hereby amended to delete the second to last sentence and
substitute the following in its place:
If Lessee replaces the Item of Equipment pursuant to subsection
(b) above, such replacement equipment shall immediately (and
without further act) be deemed to constitute Items of Equipment
and be fully subject to this Lease as if originally leased
hereunder.
(e) Section 17(a) of the Master Lease ("Insurance") is hereby
amended to delete subsection "(1)" and substitute the following in its place:
(1) insurance against all risks of physical loss or damage to
the Equipment (including theft and collision for Equipment
consisting of motor vehicles) in an amount not less than the
full replacement value thereof.
(f) As used in Section 22(a) of the Master Lease ("Events of
Default"), the term "Event of Default" shall also mean the following event:
the dissolution of Lessee.
(g) Section 22(b) of the Master Lease ("Events of Default") is
hereby amended to delete subsection "(7)" and substitute the following in its
place:
(7) by written notice to Lessee specifying a payment date, may
demand that Lessee pay to Lessor, and Lessee shall pay to
Lessor, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty,
any unpaid Rent due prior to the payment date specified in such
notice plus the following amount which Lessor shall specify in
such notice (together with interest on such amount at the Late
Payment Rate from the payment date specified in such notice to
the date of actual payment): an amount, with respect to an Item
of Equipment, equal to the Rent payable for such Item of
Equipment for the remainder of the then current Term thereof,
after discounting such Rent to present worth as of the payment
date specified in such notice on the basis of a per annum rate
of discount equal to five percent (5%) from the respective dates
upon which such Rent would have been paid had this Lease not
been canceled or terminated.
4
<PAGE>
(h) Section 22(b) of the Master Lease ("Events of Default") is
hereby amended as follows: (1) with respect to Section 22(b)(4), the word
"terminate" is hereby deleted and the words "cancel or terminate" are hereby
substituted in its place; and (2) with respect to Section 22(b)(6), the word
"termination" is hereby deleted and the words "cancellation or termination"
are hereby substituted in its place.
10. GOVERNING LAW. This Schedule is being delivered in the State of
New York and shall in all respects be governed by, and construed in accordance
with, the laws of the State of New York, including all matters of
construction, validity and performance.
11. COUNTERPARTS. This Schedule may be executed in any number of
counterparts, each executed counterpart constituting an original but all
together one and the same instrument.
12. PERSONAL PROPERTY TAX. To insure Lessee's compliance with the
provisions of the Lease with respect to the payment of personal property taxes
on the Equipment described on this Schedule, Lessee hereby covenants and
agrees that, unless otherwise directed in writing by Lessor or otherwise
required by law, Lessee will list itself as owner of all Items of Equipment
for property tax purposes. Except in those jurisdictions in which Lessor is
required to list itself as owner of all such Items of Equipment, upon receipt
by Lessee of any property tax bill pertaining to such Items of Equipment from
the appropriate taxing authority, Lessee will promptly pay all such taxes when
due. In those jurisdictions in which Lessor is required to list itself as
owner of all such Items of Equipment, upon receipt by Lessee of any property
tax bill pertaining to such Items of Equipment, Lessee will promptly forward
to Lessor such property tax bill and related payment. Upon receipt by Lessor
of any such property tax bill and related payment, Lessor will pay such tax.
13. ADDITIONAL ADDENDA. In addition to the End of Lease Options
Addendum, please see the following addenda to this Schedule, attached hereto
and made a part hereof, for additional terms and conditions governing the
leasing of the Equipment described on this Schedule: End of Lease Options
Addendum.
14. MORE THAN ONE LESSEE. If more than one person or entity executes
this Schedule, and all addenda or other documents executed in connection
herewith, as "Lessee," the obligations of "Lessee" contained herein and
therein shall be deemed joint and several and all references to "Lessee" shall
apply both individually and jointly.
15. RELATIONSHIP TO MASTER LEASE; FURTHER ASSURANCES. This Schedule
shall be construed in connection with and as part of the Lease, and all terms
and conditions contained in the Master Lease are hereby incorporated herein by
reference with the same force and effect as if such terms and conditions were
fully stated herein. By execution of this Schedule, Lessee and Lessor reaffirm
all terms and conditions of the Master Lease except as they may be modified
hereby. To the extent that any of the terms and conditions of this Schedule
are contrary to or inconsistent with any terms and conditions of the Master
Lease, the terms and conditions of this Schedule shall govern. LESSEE HEREBY
CERTIFIES TO LESSOR THAT THE REPRESENTATIONS AND WARRANTIES MADE BY LESSEE IN
THE MASTER LEASE (INCLUDING, WITHOUT LIMITATION, SECTION 31 THEREOF) ARE TRUE
AND CORRECT IN ALL MATERIAL RESPECTS AS OF THE DATE OF THIS SCHEDULE WITH THE
SAME EFFECT AS THOUGH MADE ON AND AS OF SUCH DATE. Lessee shall take such
additional actions and execute and deliver such additional documents as Lessor
shall deem necessary from time to time to effectuate the terms of the Lease.
16. Prepayment. On any Rent Payment Date, Lessee may prepay, in whole
but not in part, this Lease by paying to Lessor (1) any unpaid Rent and all
other amounts due on or before such Rent Payment Date, plus (2) an amount
equal to the Rent payable for the remainder of the Initial Lease Term, after
discounting such future Rent to present worth as of such Rent Payment Date on
the basis of a per annum rate of discount equal to five (5%) percent, from the
respective dates upon which such Rent would have been paid had this Lease not
been prepaid.
17. Depreciation. Lessor shall not claim any depreciation benefits as
a result of this Lease.
5
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused this Schedule to be
duly executed and delivered on the day and year first above written.
Lessee: Lessee:
SECOM GENERAL CORPORATION MICANOL, INC.
BY: /s/ Robert A. Clemente BY: /s/ Robert A. Clemente
------------------------- -------------------------
Name: Robert A. Clemente Name: Robert A. Clemente
Title: Chairman of the Board Title: Chairman of the Board
Lessee: Lessee:
UNIFLOW CORPORATION L & H DIE, INC.
BY: /s/ Robert A. Clemente BY: /s/ Robert A. Clemente
------------------------- -------------------------
Name: Robert A. Clemente Name: Robert A. Clemente
Title: Chairman of the Board Title: Chairman of the Board
Lessee:
FORM FLOW INC.
BY: /s/ Robert A. Clemente
-------------------------
Name: Robert A. Clemente
Title: Chairman of the Board
Lessor:
KEYCORP LEASING LTD.
By: /s/ Steven R. DeCarlo
----------------------
Name: Steven R. DeCarlo
Title: Vice President
6
Exhibit 10.4
DRAFTED BY AND AFTER
RECORDING, RETURN TO:
MetLife Capital Financial Corporation
Real Estate Department
10900 N.E. 4th Street, Suite 500
Bellevue, Washington 98004
Loan Number: 2407796-001
MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS,
AND FIXTURE FILING
THIS INSTRUMENT ALSO IS A FUTURE ADVANCE
MORTGAGE UNDER APPLICABLE MICHIGAN LAW
THIS MORTGAGE (herein "Instrument") is made as of May 31 , 1996,
among the Mortgagor, SECOM GENERAL CORPORATION, a Delaware corporation, whose
address is 46035 Grand River, Novi, Michigan 48374 (herein "Borrower"), in
favor of the Mortgagee, METLIFE CAPITAL FINANCIAL CORPORATION, a Delaware
corporation, whose address is Real Estate Department, 10900 N.E.
4th Street, Suite 500, Bellevue, Washington, 98004 (herein "METLIFE").
Borrower, in consideration of the indebtedness herein recited
irrevocably MORTGAGES AND WARRANTS to METLIFE all of Borrower's right, title
and interest, now owned or hereafter acquired, including any reversion or
remainder interest, in the real property located in the City of Novi, County
of Oakland, State of Michigan described on Exhibit A attached hereto and
incorporated herein including all heretofore or hereafter vacated alleys and
streets abutting the property, and all easements, rights, appurtenances,
tenements, hereditaments, rents, royalties, mineral, oil and gas rights and
profits, water, water rights, and water stock appurtenant to the property
(collectively "Premises");
TOGETHER with all of Borrower's estate, right, title and interest,
now owned or hereafter acquired, in:
(a) all buildings, structures, improvements, parking areas,
landscaping, equipment, fixtures and articles of property now or hereafter
erected on, attached to, or used or adapted for use in the operation of the
Premises; including but without being limited to, all heating, air
conditioning and incinerating apparatus and equipment; all boilers, engines,
motors, dynamos, generating equipment, piping and plumbing fixtures, water
heaters, cooling, ventilating, sprinkling and vacuum cleaning systems, fire
extinguishing apparatus, gas and electric fixtures, carpeting, floor
coverings, underpadding, elevators, escalators, partitions, mantels, built-in
mirrors, window shades, blinds, draperies, screens, storm sash, awnings,
signs, and shrubbery and plants, and including also all interest of any owner
of the Premises in any of such items hereafter at any time acquired under
<PAGE>
conditional sale contract, chattel mortgage or other title retaining or
security instrument, all of which property mentioned in this clause (a) shall
be deemed part of the realty covered by this Instrument and not severable
wholly or in part without material injury to the freehold of the Premises (all
of the foregoing together with replacements and additions thereto are referred
to herein as "Improvements"); and
(b) all compensation, awards, damages, rights of action and proceeds,
including interest thereon and/or the proceeds of any policies of insurance
therefor, arising out of or relating to a (i) taking or damaging of the
Premises or Improvements thereon by reason of any public or private
improvement, condemnation proceeding (including change of grade), sale or
transfer in lieu of condemnation, or fire, earthquake or other casualty, or
(ii) any injury to or decrease in the value of the Premises or the
Improvements for any reason whatsoever;
(c) return premiums or other payments upon any insurance any time
provided for the benefit of or naming METLIFE, and refunds or rebates of taxes
or assessments on the Premises;
(d) all the right, title and interest of Borrower in, to and under
all written and oral leases and rental agreements (including extensions,
renewals and subleases; all of the foregoing shall be referred to collectively
herein as the "Leases") now or hereafter affecting the Premises including,
without limitation, all rents, issues, profits and other revenues and income
therefrom and from the renting, leasing or bailment of Improvements and
building equipment, all guaranties of tenants' performance under the Leases,
and all rights and claims of any kind that Borrower may have against any
tenant under the Leases or in connection with the termination or rejection of
the Leases in a bankruptcy or insolvency proceeding; and the leasehold estate
in the event this Instrument is on a leasehold;
(e) plans, specifications, contracts and agreements relating to the
design or construction of the Improvements; Borrower's rights under any
payment, performance, or other bond in connection with the design or
construction of the Improvements; all landscaping and construction materials,
supplies, and equipment used or to be used or consumed in connection with
construction of the Improvements, whether stored on the Premises or at some
other location; and contracts, agreements, and purchase orders with
contractors, subcontractors, suppliers, and materialmen incidental to the
design or construction of the Improvements;
(f) all contracts, accounts, rights, claims or causes of action
pertaining to or affecting the Premises or the Improvements, including,
without limitation, all options or contracts to acquire other property for use
in connection with operation or development of the Premises or Improvements;
all management contracts, service or supply contracts, deposits, general
intangibles (including without limitation trademarks, trade names and
symbols), permits, licenses, franchises and certificates pertaining to or
affecting the Premises or the Improvements; and all commitments or agreements,
now or hereafter in existence, intended by the obliger thereof to provide
2
<PAGE>
Borrower with proceeds to satisfy the loan evidenced hereby or improve the
Premises or Improvements, and the right to receive all proceeds due under such
commitments or agreements including refundable deposits and fees;
(g) all books, records, surveys, reports and other documents related
to the Premises, the Improvements, the Leases, or other items of collateral
described herein; and
(h) all additions, accessions, replacements, substitutions, proceeds
and products of the real and personal property, tangible and intangible,
described herein.
All of the foregoing described collateral, and any subsequent
reference thereto in this Instrument, is exclusive of (i) any furniture,
furnishings or trade fixtures owned and supplied by tenants of the Premises;
and (ii) any inventory, trade fixtures, the removal of which would not cause
damage to the Premises, cash registers, furniture, furnishings and machinery,
equipment, tooling and other items of personal property used in the operation
of Borrower's business, rather than the maintenance, repair or operation of
the Premises. The Premises, the Improvements, the Leases and all of the rest
of the foregoing property are herein referred to as the "Property."
TO SECURE TO METLIFE (a) the repayment of the indebtedness evidenced
by Borrower's note dated of even date herewith in the principal sum of Two
Million Eight Hundred Eighty-Seven Thousand Five Hundred Dollars
($2,887,500.00), with interest thereon as set forth in the note, a copy of
which is attached as Exhibit B, and all renewals, extensions and modifications
thereof (herein "Note"); (b) the repayment of any future advances, with
interest thereon, made by METLIFE to Borrower pursuant to Section 28 hereof
(herein "Future Advances"); (c) the payment of all other sums, with interest
thereon, advanced in accordance herewith to protect the security of this
Instrument or to fulfill any of Borrower's obligations hereunder or under the
other Loan Documents (as defined below); (d) the performance of the covenants
and agreements of Borrower contained herein or in the other Loan Documents;
and (e) the repayment of all sums now or hereafter owing to METLIFE by
Borrower pursuant to any instrument which recites that it is secured hereby.
The indebtedness and obligations described in clauses (a)-(e) above are
collectively referred to herein as the "Indebtedness." The Note, this
Instrument, and all other documents evidencing, securing or guarantying the
Indebtedness (except any Certificate and Indemnity Agreement Regarding
Hazardous Substances), as the same may be modified or amended from time to
time, are referred to herein as the "Loan Documents. The terms of the Note
secured hereby may provide that the interest rate or payment terms or balance
due may be indexed, adjusted, renewed, or renegotiated from time to time, and
this Instrument shall continue to secure the Note notwithstanding any such
indexing, adjustment, renewal or renegotiation.
Borrower represents and warrants that Borrower has good, marketable
and insurable title to, and has the right to mortgage an indefeasible fee
simple estate in, the Premises, Improvements, rents, and leases (or, if this
Instrument is on a leasehold, good, marketable and insurable title to, and the
right to convey the leasehold estate and that the ground lease is in full
force and effect without modification except as noted above and without
default on the part of either lessor or lessee thereunder), and the right to
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convey the other Property, that the Property is unencumbered except as
disclosed in writing to and approved by METLIFE prior to the date hereof, and
that Borrower will warrant and forever defend the title to the Property
against all claims and demands, subject only to the permitted exceptions set
forth in Schedule 1 attached hereto.
Borrower represents, warrants, covenants and agrees for the benefit
of METLIFE as follows:
1. PAYMENT OF PRINCIPAL AND INTEREST. Borrower shall promptly pay
when due the principal of and interest on the Indebtedness, any prepayment and
other charges provided in the Loan Documents and all other sums secured by
this Instrument.
2. FUNDS FOR TAXES, INSURANCE AND OTHER CHARGES. Upon the
occurrence of an Event of Default (hereinafter defined), and at METLIFE's sole
option at any time thereafter, Borrower shall pay in addition to each monthly
payment on the Note, one-twelfth of the annual real estate taxes, insurance
premiums, assessments, water and sewer rates, ground rents and other charges
(herein "Impositions") payable with respect to the Property (as estimated by
METLIFE in its sole discretion), to be held by METLIFE without interest to
Borrower, for the payment of such obligations.
If the amount of such additional payments held by METLIFE ("Funds")
at the time of the annual accounting thereof shall exceed the amount deemed
necessary by METLIFE to provide for the payment of Impositions as they fall
due, such excess shall be at Borrower's option, either repaid to Borrower or
credited to Borrower on the next monthly installment or installments of Funds
due. If at any time the amount of the Funds held by METLIFE shall be less than
the amount deemed necessary by METLIFE to pay Impositions as they fall due,
Borrower shall pay to METLIFE any amount necessary to make up the deficiency
within thirty (30) days after notice from METLIFE to Borrower requesting
payment thereof.
Upon Borrower's breach of any covenant or agreement of Borrower in
this Instrument, METLIFE may apply, in any amount and in any order as METLIFE
shall determine in METLIFE's sole discretion, any Funds held by METLIFE at the
time of application (i) to pay Impositions which are now or will hereafter
become due, or (ii) as a credit against sums secured by this Instrument. Upon
payment in full of all sums secured by this Instrument, METLIFE shall refund
to Borrower any Funds held by METLIFE.
3. APPLICATION OF PAYMENTS. Unless applicable law provides
otherwise, each complete installment payment received by METLIFE from Borrower
under the Note or this Instrument shall be applied by METLIFE first in payment
of amounts payable to METLIFE by Borrower under Section 2 hereof, then to
interest payable on the Note, then to principal of the Note, and then to
interest and principal on any Future Advances in such order as METLIFE, at
METLIFE's sole discretion, shall determine. Upon Borrower's breach of any
covenant or agreement of Borrower in this Instrument, METLIFE may apply, in
any amount and in any order as METLIFE shall determine in METLIFE's sole
discretion, any payments received by METLIFE under the Note or this
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Instrument. Any partial payment received by METLIFE shall, at METLIFE's
option, be held in a non-interest bearing account until METLIFE receives funds
sufficient to equal a complete installment payment.
4. CHARGES, LIENS. Borrower shall pay all Impositions attributable
to the Property in the manner provided under Section 2 hereof or, if not paid
in such manner, by Borrower making payment, when due, directly to the payee
thereof, or in such other manner as METLIFE may designate in writing. If
requested by METLIFE, Borrower shall promptly furnish to METLIFE all notices
of Impositions which become due, and in the event Borrower shall make payment
directly, Borrower shall promptly furnish to METLIFE receipts evidencing such
payments. Borrower shall promptly discharge any lien which has, or may have,
priority over or equality with, the lien of this Instrument, and Borrower
shall pay, when due, the claims of all persons supplying labor or materials to
or in connection with the Property. Without METLIFE's prior written
permission, Borrower shall not allow any lien inferior to this Instrument to
be perfected against the Property. If any lien inferior to this Instrument is
filed against the Property without METLIFE's prior written permission and
without the consent of Borrower, Borrower shall, within thirty (30) days after
receiving notice of the filing of such lien, cause such lien to be released of
record and deliver evidence of such release to METLIFE.
5. INSURANCE. Borrower shall obtain and maintain the following
types of insurance upon and relating to the Property:
(a) "All Risk" property and fire insurance (with extended
coverage endorsement including malicious mischief and vandalism) in
an amount not less than the full replacement value of the Property
(with a deductible not to exceed $5,000 and with co-insurance limited
to a maximum of 10% of the amount of the policy), naming METLIFE
under a lender's loss payee endorsement (form 438BFU or equivalent)
and including agreed amount, inflation guard, replacement cost and
waiver of subrogation endorsements;
(b) Comprehensive general liability insurance in an amount not
less than $2,000,000.00 insuring against personal injury, death and
property damage and naming METLIFE as additional insured;
(c) Business interruption insurance covering loss of rental or
other income (including all expenses payable by tenants) for up to
six (6) months; and
(d) Such other types of insurance or endorsements to existing
insurance as may be required from time to time by METLIFE.
Upon the request of METLIFE, Borrower shall increase the coverage
under any of the insurance policies required to be maintained hereunder or
otherwise modify such policies in accordance with METLIFE's request. All of
the insurance policies required hereunder shall be issued by corporate
insurers licensed to do business in the state in which the Property is located
and rated A:X or better by A.M. Best Company, and shall be in form acceptable
to METLIFE. If and to the extent that the Property is located within an area
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that has been or is hereafter designated or identified as an area having
special flood hazards by the Department of Housing and Urban Development or
such other official as shall from time to time be authorized by federal or
state law to make such designation pursuant to any national or state program
of flood insurance, Borrower shall carry flood insurance with respect to the
Property in amounts not less than the maximum limit of coverage then available
with respect to the Property or the amount of the Indebtedness, whichever is
less. Certificates of all insurance required to be maintained hereunder shall
be delivered to METLIFE, along with evidence of payment in full of all
premiums required thereunder, contemporaneously with Borrower's execution of
this Instrument. All such certificates shall be in form acceptable to METLIFE
and shall require the insurance company to give to METLIFE at least thirty
(30) days' prior written notice before canceling the policy for any reason or
materially amending it. Certificates evidencing all renewal and substitute
policies of insurance shall be delivered to METLIFE, along with evidence of
the payment in full of all premiums required thereunder, at least fifteen (15)
days before termination of the policies being renewed or substituted. If any
loss shall occur at any time when Borrower shall be in default hereunder,
METLIFE shall be entitled to the benefit of all insurance policies held or
maintained by Borrower, to the same extent as if same had been made payable to
METLIFE, and upon foreclosure hereunder, METLIFE shall become the owner
thereof. METLIFE shall have the right, but not the obligation, to make premium
payments, at Borrower's expense, to prevent any cancellation, endorsement,
alteration or reissuance of any policy of insurance maintained by Borrower,
and such payments shall be accepted by the insurer to prevent same.
If any act or occurrence of any kind or nature (including any
casualty for which insurance was not obtained or obtainable) shall result in
damage to or destruction of the Property (such event being called a "Loss"),
Borrower will give prompt written notice thereof to METLIFE. All insurance
proceeds paid or payable in connection with any Loss shall be paid to METLIFE.
If (i) no Event of Default has occurred and is continuing hereunder, (ii)
Borrower provides evidence satisfactory to METLIFE of its ability to pay all
amounts becoming due under the Note during the pendency of any restoration or
repairs to or replacement of the Property, (iii) the available insurance
proceeds are, in METLIFE's judgment, sufficient to fully and completely
restore, repair or replace the Property, and (iv) Borrower provides evidence
satisfactory to METLIFE that none of the tenants of the Property will
terminate their lease agreements as a result of either the Loss or the repairs
to or replacement of the Property, Borrower shall have the right to apply all
insurance proceeds received in connection with such Loss either (a) to
restore, repair, replace and rebuild the Property as nearly as possible to its
value, condition and character immediately prior to such Loss, or (b) to the
payment of the Indebtedness in such order as METLIFE may elect. If an Event of
Default has occurred and is continuing hereunder at the time of such Loss, if
METLIFE determines that Borrower will be unable to pay all amounts becoming
due under the Note during the pendency of any restoration or repairs to or
replacement of the Property, if the available insurance proceeds are
insufficient, in METLIFE's judgment, to fully and completely restore, repair
or replace the Property or if METLIFE believes that one or more tenants of the
Property will terminate their lease agreements as a result of either the Loss
or the repairs to or replacement of the Property, then all of the insurance
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proceeds payable with respect to such Loss will be applied to the payment of
the Indebtedness, or if so instructed by METLIFE, Borrower will promptly, at
Borrower's sole cost and expense and regardless of whether sufficient
insurance proceeds shall be available, commence to restore, repair, replace
and rebuild the Property as nearly as possible to its value, condition,
character immediately prior to such Loss. Borrower shall diligently prosecute
any restoration, repairs or replacement of the Property undertaken by or on
behalf of Borrower pursuant to this Section 5. All such work shall be
conducted pursuant to written contracts approved by METLIFE in writing.
Notwithstanding anything contained herein to the contrary, in the event the
insurance proceeds received by METLIFE following any Loss are insufficient in
METLIFE's judgment to fully and completely restore, repair or replace the
Property, and if Borrower has complied with all of the other conditions
described in this Section 5, Borrower may elect to restore, repair or replace
the Property if it first deposits with METLIFE such additional sums as METLIFE
determines are necessary in order to fully and completely restore, repair or
replace the Property. In the event any insurance proceeds remain following the
restoration, repair or replacement of the Property, such proceeds shall be
applied to the Indebtedness in such order as METLIFE may elect.
6. PRESERVATION AND MAINTENANCE OF PROPERTY; LEASEHOLDS. Borrower
(a) shall not commit waste or permit impairment or deterioration of the
Property, (b) shall not abandon the Property, (c) shall restore or repair
promptly and in a good and workmanlike manner all or any part of the Property
to the equivalent of its original condition, or such other condition as
METLIFE may approve in writing, in the event of any damage, injury or loss
thereto, whether or not insurance proceeds are available to cover in whole or
in part the costs of such restoration or repair, (d) shall keep the Property,
including all improvements, fixtures, equipment, machinery and appliances
thereon and secured hereby, in good repair and shall replace fixtures,
equipment, machinery and appliances on the Property when necessary to keep
such items in good repair, (e) shall comply with all laws, ordinances,
regulations and requirements of any governmental body applicable to the
Property, (f) if all or part of the Property is for rent or lease, then
METLIFE, at its option after the occurrence of an Event of Default, may
require Borrower to provide for professional management of the Property by a
property manager satisfactory to METLIFE pursuant to a contract approved by
METLIFE in writing, unless such requirement shall be waived by METLIFE in
writing, (g) shall generally operate and maintain the Property in a manner to
ensure maximum rentals, and (h) shall give notice in writing to METLIFE of
and, unless otherwise directed in writing by METLIFE, appear in and defend any
action or proceeding purporting to affect the Property, the security of this
Instrument or the rights or powers of METLIFE hereunder. Neither Borrower nor
any tenant or other person, without the written approval of METLIFE, shall
remove, demolish or alter any improvement now existing or hereafter erected on
the Property or any fixture, equipment, machinery or appliance in or on the
Property except when incident to the replacement of fixtures, equipment,
machinery and appliances with items of like kind.
Borrower represents, warrants and covenants that (i) the Property is,
to its current actual knowledge, and shall be in compliance with the Americans
with Disabilities Act of 1990 and all of the regulations promulgated
thereunder, as the same may be amended from time to time; and (ii) it shall
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secure permanent certificates of occupancy for the Property no later than
August 31, 1996.
If this Instrument is on a leasehold, Borrower (i) shall comply
with the provisions of the ground lease, (ii) shall give immediate written
notice to METLIFE of any default by lessor under the ground lease or of any
notice received by Borrower from such lessor of any default under the ground
lease by Borrower, (iii) shall exercise any option to renew or extend the
ground lease and give written confirmation thereof to METLIFE within thirty
(30) days after such option becomes exercisable, (iv) shall give immediate
written notice to METLIFE of the commencement of any remedial proceedings
under the ground lease by any party thereto and, if required by METLIFE, shall
permit METLIFE as Borrower's attorney-in-fact to control and act for Borrower
in any such remedial proceedings and (v) shall within thirty (30) days after
request by METLIFE obtain from the lessor under the ground lease and deliver
to METLIFE a lessor's estoppel certificate in form and substance acceptable to
METLIFE. Borrower hereby expressly transfers and assigns to METLIFE the
benefit of all covenants contained in the ground lease, whether or not such
covenants run with the land, but METLIFE shall have no liability with respect
to such covenants or any other covenants contained in the ground lease.
Borrower shall neither surrender the leasehold estate and interests
herein conveyed nor terminate or cancel the ground lease creating said estate
and interests, and Borrower shall not, without the express written consent of
METLIFE, alter or amend said ground lease. There shall not be a merger of the
ground lease, or of the leasehold estate created thereby, with the fee estate
covered by the ground lease by reason of said leasehold estate or said fee
estate, or any part of either, coming into common ownership, unless METLIFE
shall consent in writing to such merger; if Borrower shall acquire such fee
estate, then this Instrument shall simultaneously and without further action
be spread so as to become a lien on such fee estate.
7. USE OF PROPERTY. Unless required by applicable law or unless
METLIFE has otherwise agreed in writing, Borrower shall not allow changes in
the use for which all or any part of the Property was intended at the time
this Instrument was executed. Borrower shall not, without METLIFE's prior
written consent, (i) initiate or acquiesce in a change in the zoning
classification (including any variance under any existing zoning ordinance
applicable to the Property), (ii) permit the use of the Property to become a
non-conforming use under applicable zoning ordinances, (iii) file any
subdivision or parcel map affecting the Property, or (iv) amend, modify or
consent to any easement or covenants, conditions and restrictions pertaining
to the Property.
8. PROTECTION OF METLIFE'S SECURITY. If Borrower fails to perform
any of the covenants and agreements contained in this Instrument, or if any
action or proceeding is commenced which affects the Property or title thereto
or the interest of METLIFE therein, including, but not limited to, eminent
domain, insolvency, code enforcement, or arrangements or proceedings involving
a bankrupt or decedent, then METLIFE at METLIFE's option may make such
appearances, disburse such sums and take such action as METLIFE deems
necessary, in its sole discretion, to protect METLIFE's interest, including,
but not limited to, (i) disbursement Of attorneys' fees, (ii) entry upon the
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Property to make repairs, (iii) procurement of satisfactory insurance as
provided in Section 5 hereof, and (iv) if this Instrument is on a leasehold,
exercise of any option to renew or extend the ground lease on behalf of
Borrower and the curing of any default of Borrower in the terms and conditions
of the ground lease.
Any amounts disbursed by METLIFE pursuant to this Section 8, with
interest thereon, shall become additional Indebtedness of Borrower secured by
this Instrument. Unless Borrower and METLIFE agree to other terms of payment,
such amounts shall be immediately due and payable and shall bear interest from
the date of disbursement at the highest rate which may be collected from
Borrower under applicable law or, at METLIFE's option, the rate stated in the
Note. Borrower hereby covenants and agrees that METLIFE shall be subrogated to
the lien of any mortgage or other lien discharged, in whole or in part, by the
Indebtedness. Nothing contained in this Section 8 shall require METLIFE to
incur any expense or take any action hereunder.
9. INSPECTION. METLIFE may make or cause to be made reasonable
entries upon the Property to inspect the interior and exterior thereof.
10. FINANCIAL DATA. Borrower will furnish to METLIFE, and will cause
any guarantor of the Indebtedness to furnish METLIFE on request, within ninety
(90) days after the close of its fiscal year (i) annual balance sheet and
profit and loss statements prepared in accordance with generally accepted
accounting principles and practices consistently applied and, if METLIFE so
requires, accompanied by the annual audit report of an independent certified
public accountant reasonably acceptable to METLIFE, (ii) an annual operating
statement, together with a complete rent roll and other supporting data
reflecting all material information with respect to the operation of the
Property and Improvements, and (iii) all other financial information and
reports that METLIFE may from time to time reasonably request, including, if
METLIFE so requires, income tax returns of Borrower and any guarantor of any
portion of the Indebtedness, and financial statements of any tenants
designated by METLIFE.
11. CONDEMNATION. If the Property, or any part thereof, shall be
condemned for any reason, including without limitation fire or earthquake
damage, or otherwise taken for public or quasi-public use under the power of
eminent domain, or be transferred in lieu thereof, all damages or other
amounts awarded for the taking of, or injury to, the Property shall be paid to
METLIFE who shall have the right, in its sole and absolute discretion, to
apply the amounts so received against (a) the costs and expenses of METLIFE,
including reasonable attorneys' fees incurred in connection with collection of
such amounts, and (b) the balance against the Indebtedness; provided, however,
that if (i) no Event of Default shall have occurred and be continuing
hereunder, (ii) Borrower provides evidence satisfactory to METLIFE of its
ability to pay all amounts becoming due under the Note during the pendency of
any restoration or repairs to or replacement of the Property, (iii) METLIFE
determines, in its sole discretion, that the proceeds of such award are
sufficient to restore, repair, replace and rebuild the Property as nearly as
possible to its value, condition and character immediately prior to such
taking (or, if the proceeds of such award are insufficient for such purpose,
if Borrower provides additional sums to METLIFE's satisfaction so that the
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aggregate of such sums and the proceeds of such award will be sufficient for
such purpose), and (iv) Borrower provides evidence satisfactory to METLIFE
that none of the tenants of the Property will terminate their lease agreements
as a result of either the condemnation or taking or the repairs to or
replacement of the Property, the proceeds of such award, together with
additional sums provided by Borrower, shall be placed in a separate account
for the benefit of METLIFE and Borrower to be used to restore, repair, replace
and rebuild the Property as nearly as possible to its value, condition and
character immediately prior to such taking. All work to be performed in
connection therewith shall be pursuant to a written contract therefor, which
contract shall be subject to the prior approval of METLIFE. To the extent that
any funds remain after the Property has been so restored and repaired, the
same shall be applied against the Indebtedness in such order as METLIFE may
elect. To enforce its rights hereunder, METLIFE shall be entitled to
participate in and control any condemnation proceedings and to be represented
therein by counsel of its own choice, and Borrower will deliver, or cause to
be delivered to METLIFE such instruments as may be requested by it from time
to time to permit such participation. In the event METLIFE, as a result of any
such judgment, decree or award, believes that the payment or performance of
any of the Indebtedness is impaired, METLIFE may declare all of the
Indebtedness immediately due and payable.
12. BORROWER AND LIEN NOT RELEASED. From time to time, METLIFE may,
at METLIFE's option, without giving notice to or obtaining the consent of
Borrower, Borrower's successors or assigns or of any junior lienholder or
guarantors, without liability on METLIFE's part and notwithstanding Borrower's
breach of any covenant or agreement of Borrower in this Instrument, extend the
time for payment of the Indebtedness or any part thereof, reduce the payments
thereon, release anyone liable on any of the Indebtedness, accept an extension
or modification or renewal note or notes therefor, modify the terms and time
of payment of the Indebtedness, release from the lien of this Instrument any
part of the Property, take or release other or additional security, reconvey
any part of the Property, consent to any map or plan of the Property, consent
to the granting of any easement, join in any extension or subordination
agreement, and agree in writing with Borrower to modify the rate of interest
or period of amortization of the Note or change the amount of the monthly
installments payable thereunder. Any actions taken by METLIFE pursuant to the
terms of this Section 12 shall not affect the obligation of Borrower or
Borrower's successors or assigns to pay the sums secured by this Instrument
and to observe the covenants of Borrower contained herein, shall not affect
the guaranty of any person, corporation, partnership or other entity for
payment of the Indebtedness, and shall not affect the lien or priority of the
lien hereof on the Property. Borrower shall pay METLIFE a service charge,
together with such title insurance premiums and attorneys' fees as may be
incurred at METLIFE's option, for any such action if taken at Borrower's
request.
13. FORBEARANCE BY METLIFE NOT A WAIVER. Any forbearance by METLIFE
in exercising any right or remedy hereunder, or otherwise afforded by
applicable law, shall not be a waiver of or preclude the exercise of any other
right or remedy. The acceptance by METLIFE of payment of any sum secured by
this Instrument after the due date of such payment shall not be a waiver of
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METLIFE's right to either require prompt payment when due of all other sums so
secured or to declare a default for failure to make prompt payment. The
procurement of insurance or the payment of taxes or other liens or charges by
METLIFE shall not be a waiver of METLIFE's right to accelerate the maturity of
the Indebtedness secured by this Instrument, nor shall METLIFE's receipt of
any awards, proceeds or damages under Sections 5 and 11 hereof operate to cure
or waive Borrower's default in payment of sums secured by this Instrument.
14. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This Instrument is
intended to be a security agreement pursuant to the Uniform Commercial Code
for any of the items specified above as part of the Property which, under
applicable law, may be subject to a security interest pursuant to the Uniform
Commercial Code, and Borrower hereby grants and conveys to METLIFE a first and
prior security interest in all of the Property that constitutes personally,
whether now owned or hereafter acquired. Borrower agrees that METLIFE may file
this Instrument, or a reproduction thereof, in the real estate records or
other appropriate index, as a financing statement for any of the items
specified above as part of the Property. Any reproduction of this Instrument
or of any other security agreement or financing statement shall be sufficient
as a financing statement. In addition, Borrower agrees to execute and deliver
to METLIFE, upon METLIFE's request, any financing statements, as well as
extensions, renewals and amendments thereof, and reproductions of this
Instrument in such form as METLIFE may require to perfect a security interest
with respect to the foregoing items. Borrower shall pay all costs of filing
such financing statements and any extensions, renewals, amendments and
releases thereof, and shall pay all costs and expenses of any record searches
for financing statements METLIFE may require. Without the prior written
consent of METLIFE, Borrower shall not create or suffer to be created pursuant
to the Uniform Commercial Code any other security interest in said items,
including replacements and additions thereto. Upon Borrower's breach of any
covenant or agreement of Borrower contained in this Instrument, including the
covenants to pay when due all sums secured by this Instrument, METLIFE shall
have the remedies of a secured party under the Uniform Commercial Code, and
METLIFE may also invoke the remedies provided in Section 26 of this Instrument
as to such items. In exercising any of said remedies METLIFE may proceed
against the items of real property and any items of personal property
specified above separately or together and in any order whatsoever, without in
any way affecting the availability of METLIFE's remedies under the Uniform
Commercial Code or of the remedies provided in Section 26 of this Instrument.
Within ten (10) days following any request therefor by METLIFE, Borrower shall
prepare and deliver to METLIFE a written inventory specifically listing all of
the personal property covered by the security interest herein granted, which
inventory shall be certified by Borrower as being true, correct, and complete.
15. LEASES OF THE PROPERTY. As used in this Section 15, the word
"Lease" shall include subleases if this Instrument is on a leasehold. Borrower
shall comply with and observe Borrower's obligations as landlord under all
Leases of the Property or any part thereof. All Leases now or hereafter
entered into will be in form and substance subject to the approval of METLIFE.
All Leases of the Property shall specifically provide that such Leases are
subordinate to this Instrument; that the tenant attorns to METLIFE, such
attornment to be effective upon METLIFE's acquisition of title to the
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Property; that the tenant agrees to execute such further evidences of
attornment as METLIFE may from time to time request; that the attornment of
the tenant shall not be terminated by foreclosure; and that METLIFE may, at
METLIFE's option, accept or resect such attornments. Borrower shall not,
without METLIFE's written consent, request or consent to the subordination of
any Lease of all or any part of the Property to any lien subordinate to this
Instrument. If Borrower becomes aware that any tenant proposes to do, or is
doing, any act or thing which may give rise to any right of set-off against
rent, Borrower shall (i) take such steps as shall be reasonably calculated to
prevent the accrual of any right to a set-off against rent, (ii) immediately
notify METLIFE thereof in writing and of the amount of said set-offs, and
(iii) within ten (10) days after such accrual, reimburse the tenant who shall
have acquired such right to set-off or take such other steps as shall
effectively discharge such setoff-and as shall assure that rents thereafter
due shall continue to be payable without set-off or deduction. Upon METLIFE's
receipt of notice of the occurrence of any default or violation by Borrower of
any of its obligations under the Leases, METLIFE shall have the immediate
right, but not the duty or obligation, without prior written notice to
Borrower or to any third party, to enter upon the Property and to take such
actions as METLIFE may deem necessary to cure the default or violation by
Borrower under the Leases. The costs incurred by METLIFE in taking any such
actions pursuant to this paragraph shall become part of the Indebtedness,
shall bear interest at the rate provided in the Note, and shall be payable by
Borrower to METLIFE on demand. METLIFE shall have no liability to Borrower or
to any third party for any actions taken by METLIFE or not taken pursuant to
this paragraph.
16. REMEDIES CUMULATIVE. Each remedy provided in this Instrument is
distinct and cumulative to all other rights or remedies under this Instrument
or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
17. TRANSFERS OF THE PROPERTY OR BENEFICIAL INTERESTS IN BORROWER;
ASSUMPTION. METLIFE may, at its option, declare all sums secured by this
Instrument to be immediately due and payable, and METLIFE may invoke any
remedies permitted by Section 26 of this Instrument, if title to the Property
is changed without the prior written consent of METLIFE, which consent shall
be at METLIFE's sole discretion. Any transfer of any interest in the Property
or in the income therefrom, by sale, lease (except for leases to tenants in
the ordinary course of managing income property which are approved by METLIFE
pursuant to Section 15 of this Instrument), contract, mortgage, deed of trust,
further encumbrance or otherwise (including any such transfers as security for
additional financing of the Property), and any change in the ownership
interests in Borrower (including any change in the ownership interests of any
legal entities which comprise or control Borrower), except transfers and
changes in ownership by devise or descent, shall be considered a change of
title. METLIFE shall have the right to condition its consent to any proposed
sale or transfer described in this Section 17 upon, among other things,
METLIFE's approval of the transferee's creditworthiness and management ability
and the transferee's execution, prior to the sale or transfer, of a written
assumption agreement containing such terms as METLIFE may require, including,
if required by METLIFE, the imposition of an assumption fee of one percent
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(1%) of the then outstanding balance of the Indebtedness. Consent by METLIFE
to one transfer of the Property shall not constitute consent to subsequent
transfers or waiver of the provisions of this Section 17. No transfer by
Borrower shall relieve Borrower of liability for payment of the Indebtedness.
Notwithstanding anything herein to the contrary, the foregoing limitations on
transfer shall not apply to the sale, transfer or assignment of equity
securities in Borrower, so long as such assignments, transfers and sales of
the equity securities of Borrower do not result in the sale, transfer or
assignment of fifty percent (50%) or more of the equity securities of
Borrower within any twelve (12) month period; provided, however, the
immediately preceding restriction shall not apply to (a) transactions effected
in the ordinary course of business on any registered stock exchange; or (b)
the issuance by Borrower of additional equity securities or warrants or
options to purchase additional equity securities provided that no person or
entity acquires fifty percent (50%) or more of the voting stock of Borrower as
a result thereof.
18. NOTICE. Except for any notice required under applicable law to
be given in another manner, any and all notices, elections, demands, or
requests permitted or required to be made under this Instrument or under the
Note shall be in writing, signed by the party giving such notice, election,
demand or request, and shall be delivered personally, by telegram, or sent by
registered, certified, or Express United States mail, postage prepaid, or by
Federal Express or similar service requiring a receipt, to the other party at
the address stated above, or to such other party and at such other address
within the United States of America as any party may designate in writing as
provided herein. The date of receipt of such notice, election, demand or
request shall be the earliest of (i) the date of actual receipt, (ii) three
(3) days after the date of mailing by registered or certified mail, (iii) one
(1) day after the date of mailing by Express Mail or the delivery (for
redelivery) to Federal Express or another similar service requiring a receipt,
or (iv) the date of personal delivery (or refusal upon presentation for
delivery).
19. SUCCESSORS AND ASSIGNS BOUND; JOINT AND SEVERAL LIABILITY;
AGENTS; CAPTIONS. The covenants and agreements herein contained shall bind,
and the rights hereunder shall inure to, the respective heirs, successors and
assigns of METLIFE and Borrower, subject to the provisions of Section 17
hereof. If Borrower is comprised of more than one person or entity, whether as
individuals, partners, partnerships or corporations, each such person or
entity shall be Jointly and severally liable for Borrowers obligations
hereunder. In exercising any rights hereunder or taking any actions provided
for herein, METLIFE may act through its employees, agents or independent
contractors as authorized by METLIFE. The captions and headings of the
sections of this Instrument are for convenience only and are not to be used to
interpret or define the provisions hereof.
20. WAIVER OF STATUTE OF LIMITATIONS. Borrower hereby waives the
right to assert any statute of limitations as a bar to the enforcement of the
lien of this Instrument or to any action brought to enforce the Note or any
other obligation secured by this Instrument.
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21. WAIVER OF MARSHALLING. Notwithstanding the existence of any
other security interests in the Property held by METLIFE or by any other
party, METLIFE shall have the right to determine the order in which any or all
of the Property shall be subjected to the remedies provided herein. METLIFE
shall have the right to determine the order in which any or all portions of
the Indebtedness secured hereby are satisfied from the proceeds realized upon
the exercise of the remedies provided herein. Borrower, any party who consents
to this Instrument and any party who now or hereafter acquires a security
interest in the Property and who has actual or constructive notice hereof
hereby waives any and all right to require the marshalling of assets in
connection with the exercise of any of the remedies permitted by applicable
law or provided herein.
22. HAZARDOUS WASTE. Borrower has furnished to METLIFE a Phase I
Environmental Assessment dated January 16, 1996, as supplemented by that Phase
II Environmental Assessment dated May 21, 1996 and those certain letters to
Ms. Roberta L. Greenway dated May 23, 1996 and May 30, 1996 and prepared by
Clayton Environmental Consultants, that certain Phase II Environmental
Assessment dated March 1, 1996 and prepared by Missaukee Surveying &
Engineering, Inc. and an Environmental Questionnaire dated May 20, 1996
(collectively, the "Report"). Except as disclosed to METLIFE in the Report,
Borrower has received no notification of any kind suggesting that the Property
or any adjacent property is or may be contaminated with any hazardous waste or
materials or is or may be required to be cleaned up in accordance with any
applicable law or regulation; and Borrower further represents and warrants
that, except as previously disclosed to METLIFE in writing, to the best of its
knowledge as of the date hereof after due and diligent inquiry, there are no
hazardous waste or materials located in, on or under the Property or any
adjacent property, or incorporated in any Improvements, nor has the Property
or any adjacent property ever been used as a landfill or a waste disposal
site, or a manufacturing, handling, storage, distribution or disposal facility
for hazardous waste or materials. As used herein, the term "hazardous waste or
materials" includes any substance or material defined in or designated as
hazardous or toxic wastes, hazardous or toxic material, a hazardous, toxic or
radioactive substance, or other similar term, by any federal, state or local
statute, regulation or ordinance now or hereafter in effect. Borrower shall
promptly comply with all statutes, regulations and ordinances, and with all
orders, decrees or Judgments of governmental authorities or courts having
jurisdiction, relating to the use, collection, treatment, disposal, storage,
control, removal or cleanup of hazardous waste or materials in, on or under
the Property or any adjacent property, or incorporated in any Improvements, at
Borrower's expense. In the event that METLIFE at any time believes that the
Property is not free of all hazardous waste or materials or that Borrower has
violated any applicable environmental law with respect to the Property, then
immediately upon request by METLIEE, Borrower shall obtain and furnish to
METLIFE, at Borrowers sole cost and expense, an environmental audit and
inspection of the Property from an expert satisfactory to METLIFE. In the
event that Borrower fails to immediately obtain such audit or inspection,
METLIFE or its agents may perform or obtain such audit or inspection at
Borrower's sole cost and expense. METLIFE may, but is not obligated to, enter
upon the Property and take such actions and incur such costs and expenses to
effect such compliance as it deems advisable to protect its interest in the
Property; and whether or not Borrower has actual knowledge of the existence of
hazardous waste or materials on the Property or any adjacent property as of
the date hereof, Borrower shall reimburse METLIFE as provided in Section 23
below for the full amount of all
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costs and expenses incurred by METLIFE prior to METLIFE acquiring title to the
Property through foreclosure or acceptance of a deed in lieu of foreclosure,
in connection with such compliance activities. Neither this provision nor any
of the other Loan Documents shall operate to put METLIFE in the position of an
owner of the Property prior to any acquisition of the Property by METLIFE. The
rights granted to METLIFE herein and in the other Loan Documents are granted
solely for the protection of METLIFE's lien and security interest covering the
Property, and do not grant to METLIFE the right to control Borrower's
actions, decisions or policies regarding hazardous waste or materials.
23. ADVANCES, COSTS AND EXPENSES. Borrower shall pay within ten (10)
days after written demand from METLIFE all sums advanced by METLIFE and all
costs and expenses incurred by METLIFE in taking any actions pursuant to the
Loan Documents including attorneys' fees and disbursements, accountants' fees,
appraisal and inspection fees and the costs for title reports and guaranties,
together with interest thereon at the rate applicable under the Note after an
Event of Default from the date such costs were advanced or incurred. All such
costs and expenses incurred by METLIFE, and advances made, shall constitute
advances under this Instrument to protect the Property and shall be secured by
and have the same priority as the lien of this Instrument. If Borrower fails
to pay any such advances, costs and expenses and interest thereon, METLIFE may
apply any undisbursed loan proceeds to pay the same, and, without foreclosing
the lien of this Instrument, may at its option commence an independent action
against Borrower for the recovery of the costs, expenses and/or advances, with
interest, together with costs of suit, costs of title reports and guaranty of
title, disbursements of counsel and reasonable attorneys' fees incurred
therein or in any appeal therefrom.
24. ASSIGNMENT OF LEASES AND RENTS. Borrower, for good and valuable
consideration, the receipt of which is hereby acknowledged, to secure the
Indebtedness, does hereby absolutely and unconditionally grant, bargain, sell,
transfer, assign, convey, set over and deliver unto METLIFE all right, title
and interest of Borrower in, to and under the Leases of the Property, whether
now in existence or hereafter entered into, and all guaranties, amendments,
extensions and renewals of said Leases and any of them, and all rents, income
and profits which may now or hereafter be or become due or owing under the
Leases, and any of them, or on account of the use of the Property.
Borrower represents, warrants, covenants and agrees with METLIFE as
follows:
(a) The sole ownership of the entire lessor's interest in the
Leases is vested in Borrower, and Borrower has not, and shall not,
perform any acts or execute any other instruments which might
prevent METLIFE from fully exercising its rights with respect to the
Leases under any of the terms, covenants and conditions of this
Instrument.
(b) The Leases are and shall be valid and enforceable in
accordance with their terms and have not been and shall not be
altered, modified, amended, terminated, canceled, renewed or
surrendered except as approved in writing by METLIFE. The terms and
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conditions of the Leases have not been and shall not be waived in
any manner whatsoever except as approved in writing by METLIFE.
(c) Borrower shall not materially alter the term or the amount
of rent payable under any Lease without prior written notice to
METLIFE and METLIFE's consent, which shall not be unreasonably
withheld.
(d) To the best of Borrower's knowledge, there are no defaults
now existing under any of the Leases and there exists no state of
facts which, with the giving of notice or lapse of time or both,
would constitute a default under any of the Leases.
(e) Borrower shall give prompt written notice to METLIFE of
any notice received by Borrower claiming that a default has occurred
under any of the Leases on the part of Borrower, together with a
complete copy of any such notice.
(f) Each of the Leases shall remain in full force and effect
irrespective of any merger of the interest of lessor and any lessee
under any of the leases.
(g) Borrower will not permit any Lease to become subordinate
to any lien other than the lien of this Instrument.
This assignment is absolute, is effective immediately, and is
irrevocable by Borrower so long as the Indebtedness remains outstanding.
Notwithstanding the foregoing, until a Notice is sent to Borrower in writing
that an Event of Default has occurred (which notice is hereafter called a
"Notice"), Borrower may receive, collect and enjoy the rents, income and
profits accruing from the Property.
Upon the occurrence of an Event of Default hereunder, METLIFE may, at
its option, after service of a Notice, receive and collect all such rents,
income and profits from the Property as they become due. METLIFE shall
thereafter continue to receive and collect all such rents, income and profits,
as long as such default or defaults shall exist, and during the pendency of
any foreclosure proceedings.
Borrower hereby irrevocably appoints METLIFE its true and lawful
attorney with power of substitution and with full power for METLIFE in its own
name and capacity or in the name and capacity of Borrower, from and after
service of a Notice, to demand, collect, receive and give complete
acquittances for any and all rents, income and profits accruing from the
Property, either in its own name or in the name of Borrower or otherwise,
which METLIFE may deem necessary or desirable in order to collect and enforce
the payment of the rents, income and profits of and from the Property. Lessees
of the Property are hereby expressly authorized and directed, following
receipt of a Notice from METLIFE, to pay any and all amounts due Borrower
pursuant to the Leases to METLIFE or such nominee as METLIFE may designate in
a writing delivered to and received by such lessees, and the lessees of the
Property are expressly relieved of any and all duty, liability or obligation
to Borrower in respect of all payments so made.
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Upon the occurrence of any Event of Default, from and after service
of a Notice, METLIFE is hereby vested with full power to use all measures,
legal and equitable, deemed by it to be necessary or proper to enforce this
Section 24 and to collect the rents, income and profits assigned hereunder,
including the right of METLIFE or its designee, to enter upon the Property, or
any part thereof, and take possession of all or any part of the Property
together with all personal property, fixtures, documents, books, records,
papers and accounts of Borrower relating thereto, and METLIFE may exclude
Borrower, its agents and servants, wholly therefrom. Borrower hereby grants
full power and authority to METLIFE to exercise all rights, privileges and
powers herein granted at any and all times after service of a Notice, with
full power to use and apply all of the rents and other income herein assigned
to the payment of the costs of managing and operating the Property and of any
indebtedness or liability of Borrower to METLIFE, including but not limited to
the payment of taxes, special assessments, insurance premiums, damage claims,
the costs of maintaining, repairing, rebuilding and restoring the improvements
on the Property or of making the same rentable, reasonable attorneys' fees
incurred in connection with the enforcement of this Instrument, and of
principal and interest payments due from Borrower to METLIFE on the Note and
this Instrument, all in such order as METLIFE may determine. METLIFE shall be
under no obligation to exercise or prosecute any of the rights or claims
assigned to it hereunder or to perform or carry out any of the obligations of
the lessor under any of the Leases and does not assume any of the liabilities
in connection with or arising or growing out of the covenants and agreements
of Borrower in the Leases. It is further understood that the assignment set
forth in this Section 24 shall not operate to place responsibility for the
control, care, management or repair of the Property, or parts thereof, upon
METLIFE, nor shall it operate to make METLIFE liable for the performance of
any of the terms and conditions of any of the Leases, or for any waste of the
Property by any lessee under any of the Leases, or any other person, or for
any dangerous or defective condition of the Property or for any negligence in
the management, upkeep, repair or control of the Property resulting in loss or
injury or death to any lessee, licensee, employee or stranger.
25. DEFAULT. The following shall each constitute an event of default
("Event of Default"):
(a) Failure of or refusal by Borrower to pay any portion of
the sums secured by this Instrument when due, and such failure or
refusal shall continue for a period of ten (10) days after written
notice is given to Borrower by METLIFE specifying such failure; or
(b) Failure of Borrower within the time required by this
Instrument to make any payment for taxes, insurance or for reserves
for such payments, or any other payment necessary to prevent filing
of or discharge of any lien, and such failure shall continue for a
period of ten (10) days after written notice is given to Borrower by
METLIFE specifying such failure; or
(c) Failure by Borrower to observe or perform any obligations
of Borrower to METLIFE on or with respect to any transactions,
debts,
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undertakings or agreements other than the transaction evidenced by
the Note; or
(d) Failure of Borrower to make any payment or perform any
obligation under any superior liens or encumbrances on the Property,
within the time required thereunder, or commencement of any suit or
other action to foreclose any superior liens or encumbrances; or
(e) Failure by Borrower to observe or perform any of its
obligations under any of the Leases; or
(f) The Property is transferred or any agreement to transfer
any part or interest in the Property in any manner whatsoever is
made or entered into without the prior written consent of METLIFE,
except as specifically allowed under this Instrument, including
without limitation creating or allowing any liens on the Property or
leasing any portion of the Property; or
(g) Filing by Borrower of a voluntary petition in bankruptcy
or filing by Borrower of any petition or answer seeking or
acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, or similar relief for itself under any
present or future federal, state or other statute, law or regulation
relating to bankruptcy, insolvency or other relief for debtors, or
the seeking, consenting to, or acquiescing by Borrower in the
appointment of any trustee, receiver, custodian, conservator or
liquidator for Borrower, any part of the Property, or any of the
income or rents of the Property, or the making by Borrower of any
general assignment for the benefit of creditors, or the inability of
or failure by Borrower to pay its debts generally as they become
due, or the insolvency on a balance sheet basis or business failure
of Borrower, or the making or suffering of a preference within the
meaning of federal bankruptcy law or the making of a fraudulent
transfer under applicable federal or state law, or concealment by
Borrower of any of its property in fraud of creditors, or the
imposition of a lien upon any of the property of Borrower which is
not discharged in the manner permitted by Section 4 of this
Instrument, or the giving of notice by Borrower to any governmental
body of insolvency or suspension of operations; or
(h) Filing of a petition against Borrower seeking any
reorganization, arrangement, composition, readjustment, liquidation,
or similar relief under any present or future federal, state or
other law or regulation relating to bankruptcy, insolvency or other
relief for debts, or the appointment of any trustee, receiver,
custodian, conservator or liquidator of Borrower, of any part of the
Property or of any of the income or rents of the Property, unless
such petition shall be dismissed within sixty (60) days after such
filing, but in any event prior to the entry of an order, judgment or
decree approving such petition; or
(i) The institution of any proceeding for the dissolution or
termination of Borrower voluntarily, involuntarily, or by operation
of law, or the death of Borrower; or
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(j) A material adverse change occurs in the assets,
liabilities or net worth of Borrower from the assets, liabilities or
net worth of Borrower previously disclosed to METLIFE; or
(k) Any warranty, representation or statement furnished to
METLIFE by or on behalf of Borrower under the Note, this Instrument,
any of the other Loan Documents or the Certificate and Indemnity
Agreement Regarding Hazardous Substances, shall prove to have been
false or misleading in any material respect; or
(l) Failure of Borrower to observe or perform any other
covenant or condition contained in the Note and such default shall
continue for thirty (30)-days after notice is given to Borrower
specifying the nature of the failure. No notice of default and no
opportunity to cure shall be required if during the prior twelve
(12) months METLIFE has already sent a notice to Borrower concerning
default in performance of the same obligation; or
(m) Failure of Borrower to observe or perform any other
obligation under this Instrument, any other Loan Document or the
Certificate and Indemnity Regarding Hazardous Substances when such
observance or performance is due, and such failure shall continue
beyond the applicable cure period set forth in such Loan Document,
or if the default cannot be cured within such applicable cure
period, Borrower fails within such time to commence and pursue
curative action with reasonable diligence or fails at any time after
expiration of such applicable cure period to continue with
reasonable diligence all necessary curative actions. No notice of
default and no opportunity to cure shall be required if during the
prior twelve (12) months METLIFE has already sent a notice to
Borrower concerning default in performance of the same obligation;
or
(n) Any of the foregoing events occur with respect to any
tenant of the Property, or with respect to any guarantor of any
tenant's obligations relating to the Property.
26. RIGHTS AND REMEDIES ON DEFAULT.
26.1 Remedies. Upon the occurrence of any Event of Default and at any
time thereafter, METLIFE may exercise any one or more of the following rights
and remedies:
(a) METLIFE may declare all sums secured by this Instrument
immediately due and payable, including any prepayment premium which
Borrower would be required to pay.
(b) METLIFE shall have the right to foreclose this Instrument
in accordance with applicable law.
The commencement by METLIFE of foreclosure proceedings by
advertisement or in equity shall be deemed an exercise by METLIFE of
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its option to accelerate the due date of all sums secured hereby.
Borrower hereby grants power to METLIFE, in the event of the
occurrence of an Event of Default, to grant, bargain, sell, release
and convey the Premises at public auction or vendue, and upon such
sale to execute and deliver to the purchaser(s) instruments of
conveyance pursuant to the terms hereof and to the applicable laws.
Borrower acknowledges that the foregoing sentence confers a power
of sale upon METLIFE, and that upon an Event of Default this
Mortgage may be foreclosed by advertisement as described below and
in the applicable Michigan statutes. Borrower understands that upon
an Event of Default, METLIFE is hereby authorized and empowered to
sell the Premises, or cause the same to be sold and to convey the
same to the purchaser in any lawful manner, including but not
limited to that provided by Chapter 32 of the Revised Judicature
Act of Michigan, entitled "Foreclosure of Mortgage by
Advertisement", which permits METLIFE to sell the Premises without
affording Borrower a hearing, or giving Borrower actual personal
notice. The only notice required under such Chapter 32 is to
publish notice in a local newspaper and to post a copy of the
notice on the Premises.
(c) In the event of any foreclosure, to the extent permitted
by applicable law, METLIFE will be entitled to a judgment which will
provide that if the foreclosure sale proceeds are insufficient to
satisfy the judgment, execution may issue for any amount by which
the unpaid balance of the obligations secured by this Instrument
exceeds the net sale proceeds payable to METLIFE.
(d) With respect to all or any part of the Property that
constitutes personally, METLIFE shall have all rights and remedies
of secured party under the Uniform Commercial Code.
(e) METLIFE shall have the right to have a receiver appointed
to take possession of any or all of the Property, with the power to
protect and preserve the Property, to operate the Property preceding
foreclosure or sale, to collect all the rents and revenues from the
Property and apply the proceeds, over and above cost of the
receivership, against the sums due under this Instrument, and to
exercise all of the rights with respect to the Property described in
Section 24 above. The receiver may serve without bond if permitted
by law. METLIFE's right to the appointment of a receiver shall exist
whether or not apparent value of the Property exceeds the sums due
under this Instrument by a substantial amount. Employment by METLIFE
shall not disqualify a person from serving as a receiver.
(f) In the event Borrower remains in possession of the
Property after the Property is sold as provided above or METLIFE
otherwise becomes entitled to possession of the Property upon
default of Borrower, Borrower shall become a tenant at will of
METLIFE or the purchaser of the Property and shall pay a reasonable
rental for use of the Property while in Borrower's possession.
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(g) METLIFE shall have any other right or remedy provided in
this Instrument, the Note, or any other Loan Document or instrument
delivered by Borrower in connection therewith, or available at law,
in equity or otherwise.
(h) METLIFE shall have all the rights and remedies set forth
in Sections 23 and 24.
26.2 Sale of the Property. In exercising its rights and remedies,
METLIFE may, at METLIFE's sole discretion, cause all or any part of the
Property to be sold as a whole or in parcels, and certain portions of the
Property may be sold without selling other portions. METLIFE may bid at any
public sale on all or any portion of the Property.
26.3 Notice of Sale. METLIFE shall give Borrower reasonable notice of
the time and place of any public sale of any personal property or of the time
after which any private sale or other intended disposition of the personal
property is to be made. Reasonable notice shall mean notice given in
accordance with applicable law, including notices given in the manner and at
the times required for notices in a nonjudicial foreclosure.
26.4 Waiver; Election of Remedies. A waiver by either party of a
breach of a provision of this Instrument shall not constitute a waiver of or
prejudice the party's right otherwise to demand strict compliance with that
provision or any other provision. Election by METLIFE to pursue any remedy
shall not exclude pursuit of any other remedy, and all remedies of METLIFE
under this Instrument are cumulative and not exclusive. An election to make
expenditures or take action to perform an obligation of Borrower shall not
affect METLIFE's right to declare a default and exercise its remedies under
this Instrument.
27. SATISFACTION OF MORTGAGE. Upon payment of all sums secured by
this Instrument, METLIFE shall execute a satisfaction of this Instrument and
shall surrender this Instrument and all notes evidencing Indebtedness secured
by this Instrument to the person or persons legally entitled thereto. Such
person or persons shall pay METLIFE's costs incurred in connection with
satisfaction of this Instrument.
28. FUTURE ADVANCES. Upon request of Borrower, METLIFE, at METLIFE's
option so long as this Instrument secures Indebtedness held by METLIFE, may
make Future Advances to Borrower. Such Future Advances, with interest thereon,
shall be secured by this Instrument when evidenced by promissory notes stating
that said notes are secured hereby.
29. IMPOSITION OF TAX BY STATE.
29.1 State Taxes Covered. The following constitute state taxes to
which this Section applies:
(a) A specific tax upon mortgages or upon all or any part of
the indebtedness secured by a mortgage.
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(b) A specific tax on a mortgagor which the taxpayer is
authorized or required to deduct from payments on the indebtedness
secured by a mortgage.
(c) A tax on a mortgage chargeable against the mortgagee or
the holder of the note secured.
(d) A specific tax on all or any portion of the indebtedness
or on payments of principal and interest made by a mortgagor.
29.2 Remedies. If any state tax to which this Section applies is
enacted subsequent to the date of this Instrument, this shall have the same
effect as an Event of Default, and METLIFE may exercise any or all of the
remedies available to it unless the following conditions are met:
(a) Borrower may lawfully pay the tax or charge imposed by
state tax, and
(b) Borrower pays the tax or charge within thirty (30) days
after notice from METLIFE that the tax law has been enacted.
30. ATTORNEYS' FEES. In the event suit or action is instituted to
enforce or interpret any of the terms of this Instrument (including without
limitation efforts to modify or vacate any automatic stay or injunction), the
prevailing party shall be entitled to recover all expenses reasonably incurred
at, before and after trial and on appeal whether or not taxable as costs, or
in any bankruptcy proceeding including, without limitation, attorneys' fees,
witness fees (expert and otherwise), deposition costs, copying charges and
other expenses. Whether or not any court action is involved, all reasonable
expenses, including but not limited to the costs of searching records,
obtaining title reports, surveyor reports, and title insurance, incurred by
METLIFE that are necessary at any time in METLIFE's opinion for the protection
of its interest or enforcement of its rights shall become a part of the
Indebtedness payable on demand and shall bear interest from the date of
expenditure until repaid at the interest rate as provided in the Note. The
term "attorneys' fees" as used in the Loan Documents shall be deemed to mean
such fees as are reasonable and are actually incurred.
31. GOVERNING LAW; SEVERABILITY. This Instrument shall be governed by
the law of the State of Michigan applicable to contracts made and to be
performed therein (excluding choice-of-law principles). In the event that any
provision or clause of this Instrument or the Note conflicts with applicable
law, such conflict shall not affect other provisions of this Instrument or the
Note which can be given effect without the conflicting provision, and to this
end the provisions of this Instrument and the Note are declared to be
severable.
32. TIME OF ESSENCE. Time is of the essence of this Instrument.
33. CHANGES IN WRITING. This Instrument and any of its terms may
only be changed, waived, discharged or terminated by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
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or termination is sought. Any agreement subsequently made by Borrower or
METLIFE relating to this Instrument shall be superior to the rights of the
holder of any intervening lien or encumbrance.
34. NO OFFSET. Borrower's obligation to make payments and perform all
obligations, covenants and warranties under this Instrument and under the Note
shall be absolute and unconditional and shall not be affected by any
circumstance, including without limitation any setoff, counterclaim,
abatement, suspension, recoupment, deduction, defense or other right that
Borrower or any guarantor may have or claim against METLIFE or any entity
participating in making the loan secured hereby. The foregoing provisions of
this section, however, do not constitute a waiver of any claim or demand which
Borrower or any guarantor may have in damages or otherwise against METLIFE or
any other person, or preclude Borrower from maintaining a separate action
thereon; provided, however, that Borrower waives any right it may have at law
or in equity to consolidate such separate action with any action or proceeding
brought by METLIFE.
35. AUTHORIZATION TO INSERT. Borrower authorizes METLIFE or its agent
to insert in the spaces provided herein the amount of the Note, the
mortgagee's loan policy number, the title company issuing such policy, the
total amounts of the obligations secured, and the last payment due dates, if
any of the foregoing information is not typed in on this document.
36. MAXIMUM INTEREST CHARGES. Notwithstanding anything contained
herein or in any of the Loan Documents to the contrary, in no event shall
METLIFE be entitled to receive interest on the loan secured by this Instrument
(the "Loan") in amounts which, when added to all of the other interest
charged, paid to or received by METLIFE on the Loan, causes the rate of
interest on the Loan to exceed the highest lawful rate. Borrower and METLIFE
intend to comply with the applicable law governing the highest lawful rate and
the maximum amount of interest payable on or in connection with the Loan. If
the applicable law is ever judicially interpreted so as to render usurious any
amount called for under the Loan Documents, or contracted for, charged, taken,
reserved or received with respect to the Loan, or if acceleration of the final
maturity date of the Loan or if any prepayment by Borrower results in Borrower
having paid or demand having been made on Borrower to pay, any interest in
excess of the amount permitted by applicable law, then all excess amounts
theretofore collected by METLIFE shall be credited on the principal balance of
the Note (or, if the Note has been or would thereby be paid in full, such
excess amounts shall be refunded to Borrower), and the provisions of the Note,
this Instrument and any demand on Borrower shall immediately be deemed
reformed and the amounts thereafter collectible thereunder and hereunder shall
be reduced, without the necessity of the execution of any new document, so as
to comply with the applicable law, but so as to permit the recovery of the
fullest amount otherwise called for thereunder and hereunder. The right to
accelerate the final maturity date of the Loan does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and METLIFE does not intend to collect any unearned interest in
the event of acceleration. All sums paid or agreed to be paid to METLIFE for
the use, forbearance or detention of the Loan shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread through the
23
<PAGE>
full term of the Loan until payment in full so that the rate or amount of
interest on account of the Loan does not exceed the applicable usury ceiling.
By execution of this Instrument, Borrower acknowledges that it believes the
Loan to be nonusurious and agreed that if, at any time, Borrower should have
reason to believe that the Loan is in fact usurious, it will give METLIFE
written notice of its belief and the reasons why Borrower believes the Loan to
be usurious, and Borrower agrees that METLIFE shall have ninety (90) days
following its receipt of such written notice in which to make appropriate
refund or other adjustment in order to correct such condition if it in fact
exists.
IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD
BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ABE ENFORCEABLE. NO
OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE
LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER
WRITTEN AGREEMENT.
IN WITNESS WHEREOF, Borrower has executed this Instrument or has
caused the same to be executed by its representatives whereunto duly
authorized.
WITNESSES: BORROWER:
/s/ Sean M. Carty SECOM GENERAL CORPORATION,
- -------------------------- a Delaware of corporation
Print Name: Sean M. Carty
/s/ Michael A. Lesha By: /s/ David J. Marczak
- -------------------------- ----------------------------
Print Name: Micheal A. Lesha Print Name: David J. Morczak
Its: Chief Financial Officer
--------------------------
STATE OF MICHIGAN
) ss.
COUNTY OF WAYNE
The foregoing instrument was acknowledged before me this 24th day of
May, 1996, by /s/ David J. Marczak, the Chief Financial Officer of SECOM
GENERAL CORPORATION, a Delaware corporation, on behalf of said entity.
/s/ Michael A. Lesha
--------------------------
Notary Public
______________County,_____
My Commission Expires:____
MICHAEL A. LESHA
Notary Public, Wayne County, MI
My Commission Expires Sept. 23, 1999
24
EXHIBIT 10.5
LOAN AGREEMENT
Among
GE CAPITAL PUBLIC FINANCE, INC.,
as Lender,
and
MICHIGAN STRATEGIC FUND,
as Issuer,
and
SECOM GENERAL CORPORATION,
as Borrower
Dated as of June 1, 1996
---------
This instrument constitutes a security agreement
under the Michigan Uniform Commercial Code
---------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.01. Definitions ........................................ 2
Section 1.02. Exhibits ........................................... 5
Section 1.03. Rules of Construction............................... 6
ARTICLE II
FINANCING OF EQUIPMENT AND TERMS OF LOAN
Section 2.01. Acquisition of Equipment............................ 6
Section 2.02. Loan................................................ 6
Section 2.03. Interest............................................ 6
Section 2.04. Payments............................................ 6
Section 2.05. Payment on Non-Business Days........................ 7
Section 2.06. Loan Payments To Be Unconditional................... 7
Section 2.07. Prepayments......................................... 7
Section 2.08. Execution, Authentication and Delivery of the Bond.. 8
Section 2.09. Mutilated, Lost, Stolen or Destroyed Bond .......... 8
ARTICLE III
CONDITIONS PRECEDENT............................................... 8
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER................ 11
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.............. 13
ARTICLE VI
TITLE TO EQUIPMENT; SECURITY INTEREST
Section 6.01. Title to the Equipment.............................. 20
Section 6.02. Security Interest in Equipment...................... 20
<PAGE>
Section 6.03. Change in Name or Corporate Structure of Borrower;
Change in Location of Borrower's Principal Place
of Business......................................... 21
Section 6.04. Liens and Encumbrances to Title..................... 21
Section 6.05. Personal Property................................... 21
Section 6.06. Assignment of Insurance............................. 21
Section 6.07. Occupancy........................................... 22
Section 6.08. Agreement as Financing Statement.................... 22
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
Section 7.01. Reporting Requirements.............................. 22
Section 7.02. Books and Records; Inspection and Examination....... 24
Section 7.03. Compliance With Laws; Environmental Indemnity....... 24
Section 7.04. Payment of Taxes and Other Claims................... 24
Section 7.05. Maintenance of Equipment............................ 24
Section 7.06. Insurance; Indemnification.......................... 25
Section 7.07. Preservation of Corporate Existence................. 27
Section 7.08. Performance by Lender............................... 27
Section 7.09. Covenant as to Nonimpairment of Tax-exempt Status... 27
Section 7.10. Financial Covenants................................. 28
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
Section 8.01. Lein................................................ 29
Section 8.02. Sale of Assets...................................... 29
Section 8.03. Consolidation and Merger............................ 29
Section 8.04. Accounting.......................................... 30
Section 8.05. Transfers........................................... 30
Section 8.06. Other Defaults...................................... 30
Section 8.07. Place of Business................................... 30
Section 8.08. Modification and Substitutions...................... 30
Section 8.09. Use of the Equipment................................ 30
ARTICLE IX
DAMAGE AND DESTRUCTION;............................................ 31
ARTICLE X
ASSIGNMENT, SUBLEASING AND SELLING
Section 10.01. Assignment by Lender................................ 31
Section 10.02. No Sale or Assignment by Borrower................... 32
ii
<PAGE>
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
Section 11.01. Events of Default................................... 32
Section 11.02. Remedies on Default................................. 33
Section 11.03. Return of Equipment................................. 34
Section 11.04. No Remedy Exclusive................................. 35
Section 11.05. Late Charge......................................... 35
ARTICLE XII
MISCELLANEOUS
Section 12.01. Costs and Expenses of Lender and Issuer............. 35
Section 12.02. Disclaimer of Warranties............................ 36
Section 12.03. Notices............................................. 36
Section 12.04. Further Assurance and Corrective Instruments........ 36
Section 12.05. Binding Effect; Time of the Essence................. 36
Section 12.06. Severability........................................ 36
Section 12.07. Amendments.......................................... 36
Section 12.08. Execution in Counterparts........................... 37
Section 12.09. Applicable Law...................................... 37
Section 12.10. Captions............................................ 37
Section 12.11. Entire Agreement.................................... 37
Section 12.12. Usury............................................... 37
Section 12.13. Waiver of Jury Trial................................ 37
Section 12.14. Governmental Functions.............................. 37
iii
<PAGE>
LOAN AGREEMENT
Lender: GE Capital Public Finance, Inc.
Suite 470
8400 Normandale Lake Blvd.
Minneapolis, MN 55437
Telephone: (800) 346-3164
Telecopier: (612) 897-5601
Issuer: Michigan Strategic Fund
Attn: President
525 West Ottawa, 5th floor
Lansing, MI 48933
Telephone: (517) 335-4417
Telecopier: (517) 335-3059
Borrower: Secom General Corporation
46035 Grand River Avenue
Novi, MI 48374
Telephone: (805) 305-9410
Telecopier: (805) 305-9599
THIS LOAN AGREEMENT dated as of June 1, 1996 (this "Agreement") among GE
Capital Public Finance, Inc., a Delaware corporation, as lender (with its
successors and assigns, "Lender"), Michigan Strategic Fund, a public body
corporate and politic duly organized and validly existing under the laws of
the state of Michigan (the "State"), as issuer ("Issuer"), and Secom General
Corporation, a Delaware corporation, as borrower ("Borrower").
WHEREAS, Issuer is authorized and empowered under the laws of the State,
including 1984 PA270, as amended (the "Act"), to assist any person, firm or
corporation in the financing of certain projects and facilities, through the
issuance of its limited obligation revenue bonds; and
WHEREAS, in furtherance of the purposes of the Act, Issuer proposes to
finance all or a portion of the acquisition and installation of the Equipment
(as hereinafter defined) by Borrower pursuant to this Agreement by obtaining a
loan from Lender, issuing the Bond (as defined herein) and lending the
proceeds thereof to Borrower; and
WHEREAS, Borrower proposes the acquisition and installation of the
Equipment and as an inducement therefor has requested Issuer to assist in the
financing of the Equipment and certain other expenses incidental thereto, as
provided in the Act; and
WHEREAS, Borrower shall make Loan Payments (as hereinafter defined)
directly to Lender as assignee of Issuer, and
<PAGE>
WHEREAS, the Bond and the interest obligation thereon shall never
constitute any obligation of the State or a general obligation of Issuer
within the meaning of any constitutional or statutory limitation and shall
never constitute nor give rise to a change against the general credit or
taxing powers of the State, but shall be a limited obligation of Issuer
payable solely from the Loan Payments payable hereunder by Borrower to Lender
as assignee of Issuer;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and in consideration of the premises contained in this
Agreement, Lender, Issuer and Borrower agree as follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.01. Definitions. The following terms used herein will have the
meanings indicated below unless the context clearly requires otherwise:
"Acquisition Costs" means the contract price paid or to be paid to the
Vendors for any portion of the Equipment upon Borrower's acceptance thereof as
set forth on Exhibit A hereto.
"Agreement" means this Agreement, including all exhibits hereto, as any
of the same may be supplemented or amended from time to time in accordance
with the terms hereof.
"Bond" means Issuer's $3,000,000.00 Limited Obligation Revenue Bond
(Secom General Corporation Project), Series 1996A, in the form attached hereto
as Exhibit E.
"Bond Counsel" means an attorney or firm of attorneys nationally
recognized in the field of municipal finance and acceptable to Lender and
Issuer.
"Borrower" means Secom General Corporation, a Delaware corporation.
"Business Day" means a day other than a Saturday or Sunday on which
banks are generally open for business in New York, New York.
"Capital Expenditures" means expenditures:
(a) properly chargeable to the capital account of any person
without regard to any rule of the Code which permits such expenditures
to be treated as current expenses;
(b) financed from sources other than the Loan Proceeds; and
(c) which resulted in property used in connection with facilities
located in the City of Novi, Oakland County, Michigan, or located in any
adjacent political subdivision and integrated with or contiguous to such
facilities, the "principal user" of which is Borrower or any Related
Person or any other Principal User of the Equipment or Related Person
to such Principal User, except capital expenditures exempted under
Section 144(a)(4)(C) of the Code.
2
<PAGE>
"Certificate of Acceptance" means a Certificate of Acceptance, in
substantially the form set forth as Exhibit B hereto, whereby Borrower
acknowledges receipt in good condition of particular items of Equipment
identified therein and confirms the date of delivery thereof and certain other
matters.
"Code" means the Internal Revenue Code of 1986, as amended, and United
States Treasury regulations promulgated thereunder.
"Default" means an event that, with giving of notice or passage of time
or both, would constitute an Event of Default as provided in Article XI
hereof.
"Determination of Taxability" means any determination, decision or
decree by the Commissioner of Internal Revenue, or any District Director of
Internal Revenue or any court of competent jurisdiction, or an opinion of Bond
Counsel that an Event of Taxability shall have occurred. A Determination of
Taxability also shall be deemed to have occurred on the first to occur of the
following:
(a) the date when Borrower files any statement, supplemental
statement, or other tax schedule, return or document, which discloses
that an Event of Taxability shall have occurred; or
(b) the effective date of any federal legislation enacted after
the due of this Agreement or promulgation of any income tax regulation
or ruling by the Internal Revenue Service that causes an Event of
Taxability after the date of this Agreement.
"Equipment" means the personal property identified in Exhibit A hereto
to be used in connection with Borrower's operations (including, to the extent
permitted pursuant to the Code without jeopardizing the tax-exempt status of
the Interest, certain items originally financed through internal advances of
Borrower in anticipation of obtaining permanent financing through Issuer),
together with all replacement parts, additions, repairs, accessions and
accessories incorporated therein and/or affixed to such personal property.
"Escrow Agent" means National City Bank of Minneapolis, as escrow agent
under the Escrow Agreement, and its successors and assigns permitted under the
Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of June 1, 1996
among Lender, Issuer, Borrower and Escrow Agent.
"Escrow Fund" means the fund established and held by Escrow Agent
pursuant to the Escrow Agreement.
"Event of Taxability" means if as the result of any act, failure to act
or use of the proceeds of the Loan, a change in use of the Equipment or any
misrepresentation or inaccuracy in any of the representations, warranties or
covenants contained in this Agreement or the Tax Compliance Certificate by
Issuer or Borrower or the enactment of any federal legislation after the date
of this Agreement or the promulgation of any income tax regulation or ruling
by the Internal Revenue Service
3
<PAGE>
after the date of this Agreement, the interest on the Bond is or becomes
includable in the recipient's gross income.
"Guarantors" means Unifiow Corporation, Form Flow, Inc., L&H Die, Inc.,
and Micanol, Inc.
"Guaranty Agreements" means the four Guaranty Agreements dated as of
June 1, 1996 executed on behalf of Guarantors.
"Indemnity Agreement" means the Indemnity Agreement dated as of June 1,
1996 executed on behalf of Borrower for the benefit of Lender.
"Interest" means the portion of any payment from Issuer to Lender under
the Bond designated as and comprising interest as shown in Exhibit A hereto.
"Issuance Costs" means items of expense payable or reimbursable directly
or indirectly by Issuer or Borrower and related to the authorization, sale and
issuance of the Bond and authorization and execution of this Agreement, which
items of expense shall include, but not be limited to, application fees and
expenses, publication costs, printing costs, costs of reproducing documents,
filing and recording fees, bond counsel and counsel fees, costs of credit
ratings, charges for execution, transportation and safekeeping of the Bond and
related documents, and other costs, charges and fees in connection with the
foregoing.
"Issuer" means the Michigan Strategic Fund, acting as issuer under this
Agreement.
"Lender" means (i) GE Capital Public Finance, Inc., acting as lender
under this Agreement and holder of the Bond, (ii) any surviving, resulting or
transferee corporation of GE Capital Public Finance, Inc. (who is also holder
of the Bond) and (iii) except where the context requires otherwise, any
assignee(s) of Lender (who shall also be holder of the Bond).
"Loan" means the loan from Issuer to Borrower pursuant to this
Agreement.
"Loan Payments" means the loan payments payable by Borrower pursuant to
the provisions of this Agreement as specifically set forth in Exhibit A
hereto. As provided in Article II hereof, Loan Payments shall be payable by
Borrower directly to Lender, as assignee of Issuer, in the amounts and at the
times as set forth in Exhibit A hereto.
"Loan Proceeds" means the total amount of money to be deposited pursuant
to Section 2.02 hereof with Escrow Agent for deposit and application in
accordance with the Escrow Agreement. The Loan Proceeds consist of the
proceeds of the Bond.
"Prepayment Amount" means the amount which Borrower may from time to
time, in its discretion, pay or cause to be paid to Lender as assignee of
Issuer in order to prepay the Loan and the Bond, as provided in Section 2.07
hereof, such amounts being set forth in Exhibit A hereto.
"Principal" means the portion of any Loan Payment designated as
principal in Exhibit A hereto.
4
<PAGE>
"Principal User" means a principal user of the Equipment as such term is
used in Section 144(a) of the Code.
"Purchase Agreements" means Borrower's purchase agreements with Vendors
of the Equipment.
"Related Person" with reference to any Substantial User, means a
"related person" within the meaning of Section 147(a) of the Code, and, with
reference to any Principal User, means a "related person" within the meaning
of Section 144(a)(3) of the Code.
"Reserved Rights" means those certain rights of Issuer under this
Agreement to indemnification, liability insurance proceeds and reimbursement
for certain costs and expenses pursuant to Sections 7.06, 7.03 and 12.01(b)
hereof, to receive notice pursuant to Section 12.03 hereof and to inspect
Borrower's books and records pursuant to Section 7.02 hereof.
"State" means the State of Michigan.
"Subsequent Loan Agreement" means the loan agreement, if any, to be
entered into among Lender, Issuer and Borrower to provide financing for
purchases of equipment other than the Equipment to be purchased with the Loan
Proceeds.
"Substantial User" means, with respect to any "facilities" (as the term
"facilities" is used in Section 147(a) of the Code), a "substantial user" of
such "facilities" within the meaning of Section 147(a) of the Code.
"Tax Compliance Certificate" means, collectively, the Non-Arbitrage
Certificate and the Tax Compliance Certificate, each died as of the date
hereof, executed by Borrower in connection with the issuance of the Bond.
"UCC" means the Uniform Commercial Code as adopted and in effect in the
State.
"Vendor" means the manufacturer or vendor of an item of Equipment, as
well as the agents or dealers of the manufacturer, from whom Borrower has
purchased or is purchasing items of Equipment.
Section 1.02. Exhibits. The following exhibits are attached hereto and
made a part hereof:
Exhibit A: Form of Schedule of Equipment and Loan Payments describing
the Equipment and setting forth the Loan Payments and Prepayment Amounts.
Issuer hereby authorizes Lender to insert in Exhibit A the serial or other
identifying numbers relating to the Equipment when available.
Exhibit B: Form of Certificate of Acceptance.
Exhibit C: Form of opinion of counsel to Borrower and Guarantors.
Exhibit D: Form of opinion of Bond Counsel.
Exhibit E: Form of Bond.
5
<PAGE>
Section 1.03. Rules of Construction. (a) The singular form of any word
used herein, including the terms defined in Section 1.01 hereof, shall include
the plural, and vice versa. The use herein of a word of any gender shall
include correlative words of all genders.
(b) Unless otherwise specified, references to Articles, Sections and
other subdivisions of this Agreement are to the designed Articles, Sections
and other subdivision of this Agreement as originally executed. The words
"hereof," "herein," "hereunder" and words of similar import refer to this
Agreement as a whole.
(c) The headings or titles of the several articles and sections shall be
solely for convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.
ARTICLE II
FINANCING OF EQUIPMENT AND TERMS OF LOANS
Section 2.01. Acquisition of Equipment. Borrower either has ordered or
shall order the Equipment pursuant to one or more Purchase Agreements from one
or more Vendors. Borrower shall remain liable to the Vendor or Vendors in
respect of its duties and obligations in accordance with each Purchase
Agreement and shall bear the risk of loss with respect to any loss or claim
relating to any item of Equipment covered by any Purchase Agreement, and
neither Lender nor Issuer shall assume any such liability or risk of loss.
Section 2.02. Loan. Lender hereby agrees, subject to the terms and
conditions of this Agreement, to make a loan to Issuer pursuant to the terms
hereof and through the purchase of the Bond in the amount of $3,000,000.00;
Issuer hereby agrees, subject to the terms and conditions of this Agreement
and the Bond, to sell the Bond to Lender and to lend the Loan Proceeds to
Borrower; and Borrower hereby agrees to borrow such amount from Issuer. Upon
fulfillment of the conditions set forth in Article III hereof, Lender shall
deposit the Loan Proceeds (consisting of the proceeds of the Bond) in the
Escrow Fund to be held, invested and disbursed as provided in the Escrow
Agreement. Issuer's obligation to make payments on the Bond, and Borrower's
obligation to repay the Loan, shall commence, and interest shall begin to
accrue, on the due on which Loan Proceeds are deposited in the Escrow Fund
(which shall be the date on which the Bond is issued).
Section 2.03. Interest. The principal amount of the Bond and the Loan
hereunder outstanding from time to time shall bear interest (computed on the
basis of actual days elapsed in a 360-day year) at the rate of six and
fifteen-hundredths percent (6.15%). Interest accruing on the principal balance
of such loans outstanding from time to time shall be payable as provided in
Exhibit A and the Bond and upon earlier demand in accordance with the terms
hereof or prepayment in accordance with the terms of the Bond and Section 2.07
hereof
Section 2.04. Payments. Issuer shall pay the principal of, premium, if
any in accordance with Section 2.07 hereof and interest on the Bond, but only
out of the amounts paid by Borrower pursuant to this Agreement. Borrower shall
pay to Lender, as assignee of Issuer and holder of the Bond, Loan Payments, in
the amounts and on the dates set forth in Exhibit A hereto. As security for
its obligation to pay the principal of, premium, if any in accordance with
Section 2.07 hereof, and interest on the
6
<PAGE>
Bond, Issuer assigns to Lender all of Issuer's right to receive Loan Payments
from Borrower hereunder, all of Issuer's rights hereunder (except Reserved
Rights) and all of Issuer's right, title and interest in and to the Equipment,
and Issuer irrevocably constitutes and appoints Lender and any present or
future officer or agent of Lender as its lawful attorney, with full power of
substitution and resubstitution, and in the name of Issuer or otherwise, to
collect the Loan Payments and any other payments due hereunder and under the
Bond and to sue in any court for such Loan Payments or other payments, to
exercise all rights hereunder with respect to the Equipment and to withdraw or
settle any claims, suits or proceedings pertaining to or arising out of this
Agreement upon any teams. Such Loan Payments and other payments shall be made
by Borrower directly to Lender, as Issuer's assignee, and shall be credited
against Issuer's payment obligations hereunder and under the Bond. No
provision, covenant or agreement contained in this Agreement or any obligation
herein imposed on Issuer, or the breach thereof, shall constitute or give rise
to or impose upon Issuer or the State a pecuniary liability, a charge upon its
general credit or taxing powers or a pledge of its general revenues but shall
be a limited obligation as described herein. Issuer has no taxing power. All
amounts required to be paid by Borrower hereunder shall be paid in lawful
money of the United States of America in immediately available funds. No
recourse shall be had by Lender or Borrower for any claim based on this
Agreement or the Bond against any member, director, officer, employee or agent
of Issuer alleging personal liability on the part of such person.
Section 2.05 Payment on Non-Business Days. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Business Day,
such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of
interest or the fees hereunder, as the case may be.
Section 2.06. Loan Payments To Be Unconditional. The obligations of
Borrower to make payment of the Loan Payments required under this Article II
and to make other payments hereunder and to perform and observe the covenants
and agreements contained herein shall be absolute and unconditional in all
events, without abatement, diminution, deduction, setoff or defense for any
reason, including (without limitation) any failure of the Equipment to be
delivered or installed, any defects, malfunctions, breakdowns or infirmities
in the Equipment or any accident, condemnation, destruction or unforeseen
circumstances. Notwithstanding any dispute between Borrower and any of Issuer,
Lender, any Vendor or any other person, Borrower shall make all Loan Payments
when due and shall not withhold any Loan Payments pending final resolution of
such dispute, nor shall Borrower assert any right of set-off or counterclaim
against its obligation to make such payments required under this Agreement.
Section 2.07. Prepayments. (a) Borrower may, in its discretion, prepay
the Loan and the Bond in whole a any time after the third anniversary of the
date hereof by paying the applicable Prepayment Amount.
(b) Borrower shall prepay the Loan and the Bond in whole or in part at
any time pursuant to Article IX hereof by paying the applicable Prepayment
Amount.
(c) Borrower shall prepay the Loan and the Bond in full immediately upon
demand of Lender after the occurrence of an Event of Default by paying the
applicable Prepayment Amount.
7
<PAGE>
(d) Borrower shall prepay the Loan and the Bond in full immediately upon
demand of Lender after the occurrence of a Determination of Taxability;
provided, however, that Lender, in its sole discretion, may waive the
requirement that the Loan and the Bond be prepaid pursuant to this Section
2.07(d).
(e) The Loan and the Bond shall be repaid in part with funds remaining
in the Escrow Fund upon termination of the Escrow Agreement as provided in
Sections 2.03 or 2.04 of the Escrow Agreement. Such prepayment shall be
without prepayment premium or penalty as long as such funds are not in an
amount greater than $150,000.00. In the event that such funds are in an amount
equal to or greater than $150,000.00, any such prepayment shall be subject to
a 2% prepayment premium and shall not occur unless Borrower provides an
opinion of counsel that such prepayment win not result in a Default or Event
of Default and an opinion of Bond Counsel that such prepayment will not result
in a Determinaion of Taxability.
Upon any prepayment in part of the Loan and the Bond, the prepayment
shall be applied to the Principal portion of prepayments in inverse order of
maturity.
Section 2.08. Execution, Authentication and Delivery of the Bond. The
Bond shall be executed on behalf of Issuer by the manual signature of a member
or an authorized officer of Issuer and shall have impressed or printed thereon
the official seal of Issuer.
Section 2.09 Mutilated, Lost, Stolen or Destroyed Bond. Subject to Act
354, Michigan Public Acts, 1972, as amended, and any other applicable law, in
the event the Bond is mutilated, lost, stolen or destroyed, Issuer may
authorize the execution and delivery of a new bond of like tenor as that
mutilated, lost, stolen or destroyed; provided, however, that in the case of
any mutilated Bond, such mutilated Bond shall first be surrendered to Issuer
and in the case of any lost, stolen or destroyed Bond, there shall first be
furnished to Issuer evidence of the ownership thereof and of such loss, theft
or destruction satisfactory to Issuer together, in each case, with a bond of
indemnity satisfactory to Issuer. Issuer may charge the holder or owner of
such Bond with any amounts provided by the aforesaid Act 354 and any other
applicable law.
ARTICLE III
CONDITIONS PRECEDENT
Lender's agreement to purchase the Bond, to make the loan to Issuer
hereunder and to deposit the Loan Proceeds with Escrow Agent shall be subject
to the condition precedent that Lender shall have received all of the
following, each in form and substance satisfactory to Lender:
(a) This Agreement, properly executed on behalf of Issuer and
Borrower, and each of the Exhibits hereto properly completed.
(b) The Bond, in the form Attached hereto as Exhibit E, properly
executed on behalf of Issuer.
(c) The Tax Compliance Certificate, properly executed on behalf of
Borrower, in form and substance acceptable to Lender.
8
<PAGE>
(d) The Escrow Agreement, properly executed on behalf of Issuer,
Borrower and Escrow Agent.
(e) The Indemnity Agreement, properly executed on behalf of
Borrower, in form and substance acceptable to Lender.
(f) A certificate of the Secretary or an Assistant Secretary of
Borrower, certifying as to (i) the resolutions of the board of directors
and, if required, the shareholders of Borrower, authorizing the
execution, delivery and performance of this Agreement, the Escrow
Agreement and the Tax Compliance Certificate and any related documents,
(ii) the bylaws of Borrower, and (iii) the signatures of the officers
or agents of Borrower authorized to execute and deliver this Agreement,
the Escrow Agreement and the Tax Compliance Certificate and other
instruments, agreements and certificates on behalf of Borrower.
(g) Currently certified copies of the Articles of Incorporation of
Borrower.
(h) A Certificate of Good Standing issued as to Borrower by the
Secretary of State of the state of Borrower's incorporation and by the
Michigan Department of Consumer and Industry Services not more than 10
days prior to the date hereof.
(i) Certificates of the insurance required hereunder, containing a
lender's loss payable clause or endorsement in favor of Lender.
(j) A completed and executed Form 8038 or evidence of filing
thereof with the Secretary of Treasury.
(k) A resolution or evidence of other official action taken by or
on behalf of Issuer to authorize the transactions contemplated hereby.
(1) Evidence that the financing of the Equipment has been approved
by the "applicable elected representative" of Issuer after a public
hearing held upon reasonable notice.
(m) A true and correct copy of any and all leases pursuant to
which Borrower is leasing the property where the Equipment will be
located, together with a landlord's disclaimer and consent with respect
to each such lease.
(n) A true and correct copy of any and all mortgages, deeds of
trust or similar agreements (whether or not Borrower is a party to any
such agreement) relating to the property where the Equipment will be
located, together with a mortgagee's waiver with respect to each such
mortgage, deed of trust or similar agreement.
(o) As applicable, financing statements, including fixture filings
if necessary, executed by Borrower, as debtor, and naming Issuer, as
secured party, and Lender, as assignee, and/or the original certificate
of title or manufacturer's certificate of origin and title application
if any of the Equipment is subject to certificate of title laws.
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(p) Financing statements, including fixture filings if necessary,
executed by Issuer, as debtor, and naming Lender, as secured party.
(q) Current searches of appropriate filing offices showing that
(i) no state or federal tax liens have been filed and remain in effect
against Borrower, (ii) no financing statements have been filed and
remain in effect against Borrower relating to the Equipment except those
financing statements filed by Lender, (iii) Lender has duly filed all
financing statements necessary to perfect the security interest created
pursuant to this Agreement and (iv) Lender has duly filed all financing
statements necessary to perfect the transfer of Issuer's interest in
this Agreement and the Loan Payments.
(r) A Guaranty Agreement in form and substance acceptable to
Lender executed on behalf of each Guarantor.
(s) An opinion of counsel to Borrower, addressed to Lender and
Issuer, in the form attached hereto as Exhibit C.
(t) An opinion of Bond Counsel, addressed to Lender and Issuer, in
the form attached hereto as Exhibit D.
(u) Payment of Lender's fees, commissions and expenses required by
Section 12.01 hereof.
(v) Payment of Issuer's fees incurred in connection with this
Agreement and the transactions contemplated hereby.
(w) Any other documents or items required by Lender.
(x) A mortgagee's waiver with respect to the Equipment in form and
substance acceptable to Lender executed on behalf of MetLife Capital
Financial Corporation and security interest subordination agreement(s)
or release(s) in form and substance acceptable to Lender with respect to
the Equipment executed on behalf of KeyCorp Leasing, Ltd., NBD Bank and
such other persons requested by Lender in form and substance acceptable
to Lender.
(y) Approval and completion of a refinancing by KeyCorp Leasing,
Ltd., in form and substance acceptable to Lender, in the amount of
$5,000,000.00.
(z) Approval and completion of a refinancing by MetLife Capital
Financial Corporation, in form and substance acceptable to Lender, of
Borrower's existing real estate debt.
Lender's agreement to consider approval of any disbursement from the
Escrow Fund shall be subject to the further conditions precedent that on the
date thereof:
(aa) Lender shall have received each of the items required for a
disbursement pursuant to the Escrow Agreement;
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(bb) Lender shall have received in form and substance satisfactory
to Lender Vendor invoice(s) and/or bill(s) of sale relating to the
Equipment and, if such invoices have been paid by Borrower, evidence of
payment thereof and, if applicable, evidence of official intent to
reimburse such payment as required by the Code;
(cc) the representations and warranties contained in Articles IV
and V hereof are correct on and as of the date of such disbursement as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date; and
(dd) no event has occurred and is continuing or would result from
such disbursement, which constitutes a Default, an Event of Default or a
Determination of Taxability.
(ee) Lender shall have received evidence satisfactory to Lender
that Lender has a first priority perfected security interest in the
Equipment, including (without Limitation) current searches of
appropriate filing offices showing that (i) no state or federal tax
liens or judgment liens have been filed and remain in effect against
Borrower and (ii) no financing statements have been filed and remain in
effect against Borrower relating to the Equipment except those financing
statements filed by or on behalf of Borrower.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER
Issuer represents, warrants and covenants for the benefit of Lender and
Borrower, as follows:
(a) Issuer is a public body corporate and politic duly created and
validly existing under the Constitution and laws of the State.
(b) Issuer is authorized under the Act to issue the Bond and to
enter into this Agreement, the Escrow Agreement and the transactions
contemplated hereby and to perform all of its obligations hereunder.
(c) Issuer has duly authorized the issuance of the Bond and the
execution and delivery of this Agreement and the Escrow Agreement under
the terms and provisions of the resolution of its governing body, and
further represents, covenants and warrants that all requirements have
been met and procedures have occurred in order to ensure the
enforceability of this Agreement and the Escrow Agreement against
Issuer, and Issuer has complied with such public bidding requirements
(if any) as may be applicable to this Agreement. Issuer has taken all
necessary action and has complied with all provisions of the Act
required to make this Agreement and the Escrow Agreement the valid and
binding obligations of Issuer.
(d) The officer of Issuer executing this Agreement and any related
documents has been duly authorized to execute and deliver this Agreement
and the Escrow Agreement and such related documents under the terms and
provisions of a resolution of Issuer's governing body, or by other
appropriate official action.
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(e) This Agreement and the Escrow Agreement are legal, valid and
binding obligations of Issuer, enforceable in accordance with their
respective tarns, except to the extent limited by bankruptcy,
reorganization or other laws of general application relating to
effecting the enforcement of creditors' rights.
(f) All of the proceedings approving this Agreement, the Escrow
Agreement and the Bond were conducted by Issuer at meetings which
complied with Act 267, Michigan Public Acts, 1976, as amended.
(g) No member of the Board of Directors of Issuer is directly or
indirectly a party to or in any manner whatsoever interested in this
Agreement, the Escrow Agreement, the Bond or the proceedings related
thereto.
(h) Issuer has assigned to Lender all of Issuer's rights in the
Equipment and this Agreement (except Reserved Rights) including the
assignment of all rights in the security interest granted to Issuer by
Borrower.
(i) Issuer will not pledge, mortgage or assign this Agreement to
any person, firm or corporation, except as provided under the terms
hereof.
(j) None of the execution and delivery of this Agreement or the
Escrow Agreement, the consummation of the transactions contemplated
hereby or the fulfillment of or compliance with the terms and conditions
of this Agreement or the Escrow Agreement violates any law, rule,
regulation or order, conflicts with or results in a breach of any of the
terms, conditions or provisions of any restriction or any agreement or
instrument to which Issuer is now a party or by which it is bound or
constitutes a default under any of the foregoing or results in the
creation or imposition of any prohibited lien, charge or encumbrance of
any nature whatsoever upon any of the property or assets of Issuer under
the terms of any instrument or agreement.
(k) There is no action, suit, proceeding, claim, inquiry or
investigation, at law or in equity, before or by any court, regulatory
agency, public board or body which has been served upon Issuer or, to
the best of Issuer's knowledge, is threatened against or affecting
Issuer, challenging Issuer's authority to enter into this Agreement or
the Escrow Agreement or any other action wherein an unfavorable ruling
or finding would adversely affect the enforceability of this Agreement
or the Escrow Agreement or any other transaction of Issuer which is
similar hereto, or the exclusion of the interest on the Bond from gross
income for federal tax purposes under the Code, or would materially and
adversely affect any of the transactions contemplated by this Agreement.
(l) Issuer will submit or cause to be submitted to the Secretary
of the Treasury a Form 8038 at the time and in the form required by the
Code.
(m) The financing of the Equipment has been approved by the
"applicable elected representative" (as defined in Section 147(f) of the
Code) of Issuer after a public hearing held upon reasonable notice.
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<PAGE>
(n) Issuer will take no action that would cause the Interest to
become includable in gross income for federal income tax purposes under
the Code.
(o) Issuer covenants that it will promptly pay or cause to be paid
to Lender the Loan Payments payable by Borrower hereunder and under the
Bond to the extent actually received from Borrower at the place, on the
dates and in the manner set forth herein and in the Bond.
(p) Issuer recognizes that investment of the Loan Proceeds will be
at the written direction of Borrower, but agrees that it would commit no
act that would cause the Bond to be an "arbitrage bond" within the
meaning of Section 148(a) of the Code.
ARTICLE V
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BORROWER
Borrower represents warrants and covenants for the benefit of Lender and
Issuer, as follows:
(a) Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware, has power to
enter into this Agreement and the Escrow Agreement and by proper
corporate action has duly authorized the execution and delivery of this
Agreement, the Escrow Agreement and the Tax Compliance Certificate.
Borrower is in good standing and is duly licensed or qualified to
transact business in the State and in all jurisdictions where the
character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary.
(b) Borrower has been fully authorized to execute and deliver this
Agreement, the Escrow Agreement and the Tax Compliance Certificate under
the terms and provisions of the resolution of its board of directors, or
by other appropriate official approval, and further represents,
covenants and warrants that all requirements have been met, and
procedures have occurred in order to ensure the enforceability of this
Agreement, the Escrow Agreement and the Tax Compliance Certificate and
this Agreement, the Escrow Agreement and the Tax Compliance Certificate
have been duly authorized executed and delivered.
(c) The officer of Borrower executing this Agreement, the Escrow
Agreement and the Tax Compliance Certificate and any related documents
has been duly authorized to execute and deliver this Agreement, the
Escrow Agreement and the Tax Compliance Certificate and such related
documents under the terms and provisions of a resolution of Borrower's
board of directors.
(d) This Agreement, the Escrow Agreement and the Tax Compliance
Certificate constitute valid and legally binding obligations of
Borrower, enforceable against Borrower in accordance with their
respective terms, except to the extent limited by bankruptcy,
reorganization or other laws of general application relating to
effecting the enforcement of creditors' rights.
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(e) The execution and delivery of this Agreement, the Escrow
Agreement and the Tax Compliance Certificate, the consummation of the
transactions contemplated hereby and the fulfillment of the terms and
conditions hereof do not and will not violate any law, rule, regulation
or order, conflict with or result in a breach of any of the terms or
conditions of the articles of incorporation or bylaws of Borrower or of
any corporate restriction or of any agreement or instrument to which
Borrower is now a party and do not and will not constitute a default
under any of the foregoing or result in the creation or imposition of
any liens, charges or encumbrances of any nature upon any of the
property or assets of Borrower contrary to the terms of any instrument
or agreement to which Borrower is a party or by which it is bound.
(f) The authorization, execution, delivery and performance of this
Agreement by Borrower do not require submission to, approval of, or
other action by any governmental authority or agency, which action with
respect to this Agreement has not been taken and which is final and
nonappealable.
(g) There is no action, suit, proceeding, claim, inquiry or
investigation, at law or in equity, before or by any court, regulatory
agency, public board or body pending or, to the best of Borrower's
knowledge, threatened against or affecting Borrower, challenging
Borrower's authority to enter into this Agreement, the Escrow Agreement
or the Tax Compliance Certificate or any other action wherein an
unfavorable ruling or finding would adversely affect the enforceability
of this Agreement, the Escrow Agreement or the Tax Compliance
Certificate or any other transaction of Borrower which is similar
hereto, or the exclusion of the Interest from gross income for federal
tax purposes under the Code, or would materially and adversely affect
any of the transactions contemplated by this Agreement.
(h) The property a which the Equipment is located is properly
zoned for its current and anticipated use and the use of the Equipment
will not violate any applicable zoning, land use, environmental or
similar law or restriction. Borrower has all licenses and permits to use
the Equipment. Borrower has obtained all permits, licenses and other
authorizations which are required under federal, state and local laws
relating to emissions, discharges, releases of pollutants, contaminants,
hazardous or toxic materials, or wastes into ambient air, surface water,
ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants or hazardous or toxic materials
or wastes ("Environmental Laws") at Borrower's facilities or in
connection with the operation of its facilities. Except as previously
disclosed to Lender in writing, Borrower and all activities of Borrower
at its facilities comply with all Environmental Laws and with all terms
and conditions of any required permits, licenses and authorizations
applicable to Borrower with respect thereto. Except as previously
disclosed to Lender in writing, Borrower is also in compliance with all
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
Environmental Laws or contained in any plan, order, decree, judgment or
notice of which Borrower is aware. Except as previously disclosed to
Lender in writing, Borrower is not aware of, nor has Borrower received
notice of, any events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent
continued compliance with, or which may give rise to any liability
under, any Environmental Laws.
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<PAGE>
(i) The Equipment is of the type authorized and permitted to be
financed by the Act.
(j) Borrower owns or will own the Equipment and intends to operate
the Equipment, or cause the Equipment to be operated, as a "project,"
within the meaning of the Act, until the date on which all of the Loan
Payments have been fully paid or the applicable Prepayment Amount has
been fully paid.
(k) Borrower will not take any action that would cause the
Interest to become includable in gross income of the recipient for
federal income tax purposes under the Code, and Borrower will take and
will cause its officers, employees and agents to take all affirmative
actions legally within its power necessary to ensure that the Interest
does not become includable in gross income of the recipient for federal
income tax purposes under the Code (including, without limitation, the
calculation and payment of any rebate required to preserve such
exclusion).
(l) Borrower has heretofore furnished to Lender the audited
financial statement of Borrower for its fiscal year ended September 30,
1995 and the unaudited financial statement of Borrower for the months
ended December 31, 1995, and those statements fairly present the
financial condition of Borrower on the dates thereof and the results of
its operations and cash flows for the periods then ended and were
prepared in accordance with generally accepted accounting principles.
Since the due of the most recent financial statements, there has been no
material adverse change in the business, properties or condition
(financial or otherwise) of Borrower.
(m) Borrower has paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be
withheld by it. Borrower has filed all federal, state and local tax
returns which are required to be filed, and Borrower has paid or caused
to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by it to the extent such
taxes have become due.
(n) Borrower has or will have good and absolute title to all
Equipment and all proceeds thereof, free and clear of all mortgages,
security interests, liens and encumbrances except for the security
interest created pursuant to this Agreement.
(o) All financial and other information provided to Lender by or
on behalf of Borrower and each Guarantor in connection with Borrower's
request for the Loan contemplated hereby is true and correct in all
material respects and, as to projections, valuations or pro forma
financial statements, present a good faith opinion as to such
projections, valuations and pro forma condition and results.
(p) Borrower has provided to Lender signed financing statements
sufficient when filed to perfect the security interest created pursuant
to this Agreement. When such financing statements are filed in the
offices noted therein, Lender, as assignee of Issuer, will have a valid
and perfected security interest in the Equipment, subject to no other
security interest, assignment, lien or encumbrance. Borrower intends the
Equipment to be and remain personal
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<PAGE>
property rather than a fixture on real estate. Borrower owns the real
property where the Equipment will be located subject to no liens or
encumbrances of any kind except a mortgage interest held by MetLife
Capital Financial Corporation.
(q) Upon delivery and installation of the Equipment, Borrower will
provide to Lender a completed and executed copy of the Certificate of
Acceptance attached hereto as Exhibit B.
(r) All representations and warranties of Borrower set forth in
the Tax Compliance Certificate are true and correct as of the date
hereof. Borrower will comply fully at all times with the Tax Compliance
Certificate, and Borrower will not take any action, or omit to take any
action, which, if taken or omitted, respectfully, would violate the Tax
Compliance Certificate.
(s) Expenses for work done by officers or employees of Borrower in
connection with the Equipment will be included as an Acquisition Cost,
if at all, only to the extent (i) such persons were specifically
employed for such particular purpose, (ii) the expenses do not exceed
the actual cost thereof and (iii) such expenses are treated or capable
of being treated (whether or not so treated) on the books of Borrower as
a capital expenditure in conformity with generally accepted accounting
principles applied on a consistent basis.
(t) Any costs incurred with respect to that part of the Equipment
paid from the Loan Proceeds shall be treated or capable of being treated
on the books of Borrower as capital expenditures in conformity with
generally accepted accounting principles applied on a consistent basis.
(u) No part of the Loan Proceeds will be used to finance inventory
or rolling stock or will be used for working capital or to finance any
other cost (other than Issuance Costs not exceeding $60,000) not
constituting an Acquisition Cost.
(v) No person other than Borrower and Unifiow Corporation
(Borrower's wholly-owned subsidiary) is in occupancy or possession of
any portion of the real property where the Equipment is located.
(w) The Equipment is property of the character subject to the
allowance for depreciation under Section 167 of the Code.
(x) The completion of the acquisition of the Equipment will not
have the effect of transferring more than 20 full-time employees from
one municipality of the State to another and is expected to create
approximately 25 jobs in the City of Novi and thereby promote the
development of present business enterprises in Michigan.
(y) None of the Loan Proceeds shall be applied to any costs of the
acquisition or installation of the Equipment which were paid (within the
meaning of Section 103 of the Code) prior to the date 60 days before the
date (March 27, 1996) on which the inducement resolution was adopted by
Issuer with respect to the Equipment. Issuer adopted a resolution
declaring official intent to finance the costs of the Equipment pursuant
to Treas. Reg. 1.150-2 not more
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than 60 days after the date on which the acquisition and installation of
the Equipment commenced.
(z) No member, director or officer of Issuer has any interest of
any kind in Borrower which would result, as a result of the Loan and the
issuance of the Bond, in a substantial financial benefit to such persons
other than as a member of the general public of the State.
(aa) There are no outstanding bonds as described in Section
144(a)(2) of the Code that have been issued by any state, political
subdivision, district, public body, agency, authority, commission or
instrumentality, the proceeds of which have been or will be used with
respect to facilities located within the City of Novi, Oakland County,
Michigan, the Principal User of which is Borrower or a Related Person as
defined in Section 144(a)(3) of the Code or a Principal User of the
Equipment or any Related Person to any such Principal User.
(bb) All property which is to be financed by the net Loan Proceeds
is to be owned by Borrower.
(cc) All reimbursements to Borrower for Acquisition Costs from
Loan Proceeds shall be made in compliance with Treasury Regulation
1.150-2 (the "Reimbursement Regulations").
(dd) The amount of Issuance Costs financed from the proceeds of
the sale of the Bond shall not exceed 2% of the Loan Proceeds.
(ee) Borrower has heretofore supplied Lender and Issuer estimates
of the costs of the Equipment, the completion date and periods of
usefulness of the Equipment. Borrower hereby warrants that such
estimates were made in good faith and are fair, reasonable and
realistic.
(ff) Borrower shall complete the acquisition of the Equipment as
required by the Act as promptly as practicable, and shall cause to be
paid all costs of the Equipment in excess of the moneys available
therefor in the Escrow Fund in compliance with the terms of the Escrow
Agreement.
(gg) Borrower expects to complete acquisition and installation of
the Equipment by January 1, 1997.
(hh) There are no other bonds described in Section 144(a) of the
Code which have been issued, or are contemplated to be issued, pursuant
to Section 144(a) of the Code (or its predecessor provision), for the
benefit of Borrower, any Principal User, or any Related Person to
Borrower and which (i) were or are to be sold at substantially the same
time as the Bond; (ii) were or are to be sold pursuant to a common plan
of marketing as the marketing plan for the Bond; (iii) were or are to be
sold at substantially the same rate of interest as the interest rate on
the Bond; and (iv) are payable directly or indirectly by Borrower or
from the source from which the Bond is payable.
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(ii) Not less than 95% of the net Loan Proceeds (including
investment proceeds) will be expended for the acquisition, construction,
reconstruction or improvement of land or property of a character subject
to the allowance for depreciation within the meaning of Section
144(a)(1) of the Code paid in compliance with the Reimbursement
Regulations and not less than 100% of the Loan Proceeds will be used to
pay costs as permitted by the Act.
(jj) The information furnished by Borrower and used by Issuer in
preparing the Form 8038, Information Retun for Tax-Exempt Private
Activity Bond Issues, to be filed by or on behalf of Issuer with the
Internal Revenue Service in Philadelphia, Pennsylvania pursuant to
Section 149(e) of the Code, was true and complete as of the date of
completion of said Form 8038.
(kk) The average maturity of the Bond does not exceed 120% of the
average reasonably expected economic life of the Equipment, as
determined pursuant to Section 147(b) of the Code.
(11) No more than 25% of the net Loan Proceeds 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 Loan Proceeds 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 skating), racquet spots facility (including any
handball or racquetball court), hot tub facility, suntan facility,
racetrack, airplane, skybox or other private luxury box, health club
facility, facility primarily used for gambling, store the principal
business of which is the sale of alcoholic beverages for off premises
consumption or residential real property for family units.
(mm) Less than 25% of the net Loan Proceeds will be used to
acquire land. No portion of the Loan Proceeds will be used to acquire
land (or an interest therein) to be used for farming purposes.
(nn) No portion of the net Loan Proceeds will be used for the
acquisition of any property (or an interest therein) unless the first
use of such property is pursuant to such acquisition.
(oo) The sum of the authorized face amount of the Bond allocable
to each test-period beneficiary (as defined in Section 144(a)(10)(D) of
the Code) plus the respective aggregate face amount of all tax-exempt
facility related bonds presently outstanding which are allocable to each
such test-period beneficiary does not exceed $40,000,000. During a three
(3) year period commencing on the later of the date of the issuance of
the Bond or the date the Equipment is placed in service, Borrower shall
not sell a portion of the Equipment or lease or allow the sublease of a
portion of the Equipment 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.
(pp) The Equipment does not consist of a portion of a single
building, enclosed shopping mall or strip of offices, stores or
warehouses using substantial common facilities with
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any other portion or portions of such property (of which the Equipment
is a part) and where any such other portions are or will be financed
with qualified bonds the interest on which is excluded from gross income
for federal income tax purposes under Section 103(a) of the Code.
(qq) The payment of principal or interest with respect to the Bond
is not guaranteed in whole or in part by the United States or any agency
or instrumentality thereof. The Bond is 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 or interest on
the Bond 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.
(rr) Borrower will comply with the provisions of Section 148 of
the Code. Borrower covenants, for the benefit of itself, Issuer and
Lender, that it will not cause or permit any Loan Proceeds 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 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
Issuer, all of amounts required to be so paid by Section 148 of the
Code).
(ss) No event has occurred and no condition exists with respect to
Borrower that would constitute an "Event of Default" under this
Agreement or that, with the lapse of time or the giving of notice or
both, would become an "Event of Default" under this Agreement.
(tt) At least 95% of the net Loan Proceeds will be used to finance
a "manufacturing facility" within the meaning of Section 144(a)(12)(C)
of the Code, and no more than 2S% of the net Loan Proceeds will be used
to finance facilities that are "directly related and ancillary" thereto
within the meaning of Section 144(a)(12)(C) of the Code. For this
purpose, the term "manufacturing facility" means any facility which is
used in the manufacturing or production of tangible personal property
(including the processing resulting in a change in the condition of such
property). Manufacturing facilities do not include an office unless such
office is located on the premises of the manufacturing facility and not
more than a de minimus (5%) portion of the functions to be performed at
such office is not directly related to the day-to-day operations at such
facility. Manufacturing facilities do not include storage facilities for
raw materials, work in process, finished goods or other materials unless
such storage facilities are located on the premises of the manufacturing
facility and are directly related to a manufacturing activity conducted
at such facility as opposed to a warehousing, distributing, wholesaling,
retailing or other non-manufacturing activity.
(uu) No Loan Proceeds will be allocated to the reimbursement of an
expenditure for costs of the Equipment unless such reimbursement
allocation is made not later than 18 months aver the later of:
(i) the date the original expenditure is paid; or
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(ii) the date the Equipment is placed in service or
abandoned, but in no event more than 3 years after the original
expenditure is paid.
(vv) No person that was a Substantial User of the Equipment at any
time during the five (5) year period before the date on which the Bond
was issued or any Related Person to that user (x) will receive (directly
or indirectly) 5% or more of the Loan Proceeds for such person's
interest in the Equipment, and (y) will be a Substantial User of the
Equipment at any time during the five (5) year period after the date on
which the Bond was issued.
(ww) Borrower will not permit the sum of (i) the face amount of
the Bond, plus (ii) Capital Expenditures made during the period of six
(6) years beginning three (3) years prior to the issuance of the Bond
and extending three (3) years thereafter, plus (iii) the outstanding
principal amount of any prior industrial development bond issues issued
to finance facilities of Borrower or any Related Person in the City of
Novi, Michigan, to exceed $10,000,000.
(xx) Notwithstanding any other provisions of this Agreement or any
other agreement or any rights of Borrower under this Agreement or any
other agreement, Borrower shall not take or permit to be taken by its
agents or assigns any action which, or fail to take any reasonable
action the omission of which would (i) impair the exclusion of interest
on the Bond from the gross income of the recipient under the Code or
(ii) affect the validity of the Bond under the Act.
ARTICLE VI
TITLE TO EQUIPMENT; SECURITY INTEREST
Section 6.01. Title to the Equipment. Legal title to the Equipment and
any and all repairs, replacements, substitutions and modifications to such
Equipment shall be in Borrower. Borrower will at all times protect and defend,
at its own cost and expense, its title from and against all claims, liens and
legal processes of creditors of Borrower, and keep all Equipment free and
clear of all such claims, liens and processes.
Section 6.02. Security Interest in Equipment. This Agreement is intended
to constitute a security agreement within the meaning of the UCC. As security
for Borrower's payment to Lender, as assignee of Issuer, of Loan Payments and
all other amounts payable to Lender hereunder, under the Indemnity Agreement
and under the Subsequent Loan Agreement and as security for any other
obligations (whether direct or indirect) of Borrower to Lender, Borrower
hereby grants to Issuer, and Issuer hereby assigns to Lender, a security
interest constituting a first lien on the Equipment, all repairs,
replacements, substitutions and modifications thereto or thereof and all
proceeds of the foregoing. Issuer and Borrower agree to execute such
additional documents, including financing statements (including fixture
filings if necessary), assignments, affidavits, notices and similar
instruments, in form satisfactory to Lender, and to take such other actions
that Lender deems necessary or appropriate to establish and maintain the
security interest created by this Section, and Borrower hereby designates and
appoints Lender as its agent, and grants to Lender a power of attorney (which
is coupled with an interest), to execute on behalf of Borrower, such
additional documents and to take such other actions. If requested by Lender,
Borrower shall obtain a landlord and/or mortgagee's consent and waiver with
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respect to the property where the Equipment is located. If requested by
Lender, Borrower shall conspicuously mark the Equipment with appropriate
lettering, labels or tags, and maintain such markings, so as clearly to
disclose Lender's security interest in the Equipment.
Section 6.03. Change in Name or Corporate Structure of Borrower; Change
in Location of Borrower's Principal Place of Business. Borrower's chief
executive office is located at the address set forth above, and all of
Borrower's records relating to its business and the Equipment are kept at such
location. Borrower hereby agrees to provide written notice to Lender and
Issuer of any change or proposed change in its name, corporate structure,
place of business or chief executive office or change or proposed change in
the location of the Equipment; provided, however, that no change or proposed
change in the location of the Equipment shall be (i) made without the prior
written consent of Lender and Issuer, together with a written opinion of Bond
Counsel to the effect that such relocation will not result in a Determination
of Taxability, or (ii) to a location outside the State. Such notice shall be
provided 30 days in advance of the date that such change or proposed change is
planned to take effect. Borrower does business, and has done business, only
under its own name and the trade names, if any, set forth on the execution
page hereof.
Section 6.04. Liens and Encumbrances to Title. Borrower shall not,
directly or indirectly, create, incur, assume or suffer to exist any mortgage,
pledge, lien, charge, encumbrance or claim on or with respect to the Equipment
(together, "Liens") other than the respective rights of Lender and Issuer as
herein provided. Borrower shall promptly, at its own expense, take such action
as may be necessary duly to discharge or remove any such Lien. Borrower shall
reimburse Lender for any expenses incurred by Lender to discharge or remove
any Lien.
Section 6.05. Personal Properly The parties hereby intend that the
Equipment be, and during the period this Agreement is in force remain,
personal property and, when subjected to use by Borrower hereunder, not be or
become fixtures; provided, however, that if contrary to the parties' intent
the Equipment is or may be deemed to be a fixture, Borrower shall cause
filings to be made with the applicable government officials or filing offices
to create and preserve for Lender as assignee of Issuer a perfected first
priority security interest in the Equipment.
Section 6.06. Assignment of Insurance. As additional security for the
payment and performance of Borrower's obligations hereunder, Borrower hereby
assigns to Lender, as assignee of Issuer, any and all moneys (including,
without limitation, proceeds of insurance and refunds of unearned premiums)
due or to become due under, and all other rights of Borrower with respect to,
any and all policies of insurance now or at any time hereafter covering the
Equipment or any evidence thereof or any business records or valuable papers
pertaining thereto, and Borrower hereby directs the issuer of any such policy
to pay all such moneys directly to Lender. Borrower hereby assigns to Lender,
as assignee of Issuer, any and all moneys due or to become due with respect to
any condemnation proceeding affecting the Equipment. At any time, whether
before or after the occurrence of any Event of Default, Lender may (but need
not), in Lender's name or in Borrower's name, execute and deliver proof of
claim, receive all such moneys, endorse checks and other instruments
representing payment of such moneys, and adjust, litigate, compromise or
release any claim against the issuer of any such policy or party in any
condemnation proceeding.
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Section 6.07. Occupancy. (a) Borrower hereby irrevocably grants to
Lender the right to occupy the property where the Equipment is located (the
"Premises") at any time after the occurrence and during the continuance of an
Event of Default.
(b) Lender may occupy the Premises only to hold, sell, store, liquidate,
realize upon or otherwise dispose of the Equipment and for other purposes that
Lender may in good faith deem to be related or incidental purposes.
(c) The right of Lender to occupy the Premises shall cease and terminate
upon the earlier of (1) payment in full and discharge of all obligations of
Borrower and Issuer hereunder, and (2) final sale or disposition of all of the
Equipment and delivery of all such Equipment to purchasers.
(d) Lender shall not be obligated to pay or account for any rent or
other compensation for the occupancy of the Premises. Borrower will pay, or
reimburse Lender for, all taxes, fees, duties, levies, charges and expenses at
any time incurred by or imposed upon Lender by reason of the execution,
delivery, existence, recordation, performance or enforcement of this Section.
Section 6.08. Agreement as Financing Statement. To the extent permitted
by applicable law, a carbon, photographic or other reproduction of this
Agreement or of any financing statements signed by Borrower is sufficient as a
financing statement in any state to perfect the security interests granted in
this Agreement.
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
So long as the Loan and the Bond shall remain unpaid, Borrower will
comply with the following requirements, unless Lender shall otherwise consent
in writing:
Section 7.01. Reporting Requirements. Borrower will deliver, or cause to
be delivered, to Lender each of the following, which shall be in form and
detail acceptable to Lender:
(a) as soon as available, and in any event within 120 days after
the end of each fiscal year of Borrower, audited financial statements of
Borrower with the unqualified opinion of independent certified public
accountants selected by Borrower and acceptable to Lender, which annual
financial statements shall include the balance sheet of Borrower as at
the end of such fiscal year and the related statements of income,
retained earnings and cash flows of Borrower for the fiscal year then
ended, all in reasonable detail and prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with the accounting practices applied in the financial statements
referred to in Article V hereof, together with (i) a report signed by
such accountants stating that in making the investigations necessary for
said opinion they obtained no knowledge, except as specifically stated,
of any Default or Event of Default hereunder and all relevant facts in
reasonable detail to evidence, and the computations as to, whether or
not Borrower is in compliance with the requirements set forth in Section
7.10 hereof; and (ii) a certificate of the chief financial officer of
Borrower stating that such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with the accounting practices reflected in the annual
financial
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statements referred to in Article V hereof and whether or not such
officer has knowledge of the occurrence of any Default or Event of
Default hereunder and, if so, stating in reasonable detail the facts
with respect thereto;
(b) as soon as available and in any event within 90 days after the
end of each fiscal quarter of Borrower, an unaudited internal balance
sheet and statements of income and retained earnings of Borrower as at
the end of and for such month and for the year to date period then
ended, in reasonable detail and stating in comparative form the figures
for the corresponding date and periods in the previous year, all
prepared in accordance with generally accepted accounting principles
applied on a basis consistent with the accounting practices reflected in
the financial statements referred to in Article V hereof and certified
by the chief financial officer of Borrower, subject to year-end audit
adjustments; and accompanied by a certificate of that officer stating
(i) that such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with the accounting practices reflected in the financial statements
referred to in Article V hereof, (ii) whether or not such officer has
knowledge of the occurrence of any Default or Event of Default hereunder
not theretofore reported and remedied and, if so, stating in reasonable
detail the facts with respect thereto, and (iii) all relevant facts in
reasonable detail to evidence, and the computations as to, whether or
not Borrower is in compliance with the requirements set forth in Section
7.10 hereof;
(c) immediately after the commencement thereof, notice in writing
of all litigation and of all proceedings before any governmental or
regulatory agency affecting Borrower of the type described in Article V
hereof or which seek a monetary recovery against Borrower in excess of
$250,000.00;
(d) as promptly as practicable (but in any event not later than
five Business Days) after an officer of Borrower obtains knowledge of
the occurrence of any event that constitutes a Default or an Event of
Default hereunder, notice of such occurrence, together with a detailed
statement by a responsible officer of Borrower of the steps being taken
by Borrower to cure the effect of such Default or Event of Default;
(e) promptly upon knowledge thereof, notice of any loss or
destruction of or damage to any Equipment or of any material adverse
change in any Equipment;
(f) promptly upon their distribution, copies of all financial
statements, reports and proxy statements that Borrower shall have sent
to its stockholders;
(g) promptly after the amending thereof, copies of any and all
amendments to its certificate of incorporation, articles of
incorporation or bylaws;
(h) promptly upon knowledge thereof, notice of the violation by
Borrower of any law, rule or regulation,
(i) promptly upon knowledge thereof, notice of any material
adverse change in the financial or operating condition of Borrower.
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Section 7.02. Books and Records; Inspection and Examinaton. Borrower
will keep accurate books of record and account for itself pertaining to the
Equipment and pertaining to Borrower's business and financial condition and
such other matters as Lender may from time to time request in which true and
complete entries will be made in accordance with generally accepted accounting
principles consistently applied and, upon request of Lender or Issuer, will
permit any officer, employee, attorney or accountant for Lender or Issuer to
audit, review, make extracts from, or copy any and all corporate and financial
books, records and properties of Borrower at all times during ordinary
business hours, and to discuss the affairs of Borrower with any of its
directors, officers, employees or agents. Borrower will permit Lender, Issuer
or any of their employees, accountants, attorneys or agents, to examine and
copy any or all of its records and to examine and inspect the Equipment at any
time during Borrower's business hours.
Section 7.03. Compliance With Laws; Environmental Indemnity. Borrower
will (a) comply with the requirements of applicable laws and regulations, the
noncompliance with which would materially and adversely affect its business or
its financial condition, (b) comply with all applicable Environmental Laws and
obtain any permits, licenses or similar approvals required by any such
Environmental Laws and (c) use and keep the Equipment, and will require that
others use and keep the Equipment, only for lawful purposes, without violation
of any federal, state or local law, statute or ordinance. Borrower shall
secure all permits and licenses, if any, necessary for the installation and
operation of the Equipment. Borrower shall comply in all respects (including,
without limitation, with respect to the use, maintenance and operation of each
item of the Equipment) with all laws of the jurisdictions in which its
operations involving any component of Equipment may extend and of any
legislative, executive, administrative or judicial body exercising any power
or jurisdiction over the items of the Equipment or its interest or rights
under this Agreement. Borrower will indemnify, defend and hold Lender or Issuer
harmless from and against any claims, loss or damage to which Lender or Issuer
may be subjected as a result of any past, present or future existence, use,
handling, storage, transportation or disposal of any hazardous waste or
substance or toxic substance by Borrower or on property owned, leased or
controlled by Borrower. This indemnification shall survive the termination of
this Agreement and payment of the indebtedness hereunder and under the Bond.
Section 7.04. Payment of Taxes and Other Claims. Borrower will pay or
discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including, without limitation, the Equipment) or upon or
against the creation, perfection or continuance of the security interest
created pursuant to this Agreement, prior to the date on which penalties
attach thereto, (b) all federal, state and local taxes required to be withheld
by it, and (c) all lawful claims for labor, materials and supplies which if
unpaid, might by law become a lien or charge upon any properties of Borrower,
provided, that Borrower shall not be required to pay any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings. Borrower will pay, as the same
respectively come due, all taxes and governrnental charges of any kind
whatsoever that may at any time be lawfully assessed or levied against or with
respect to the Equipment, as well as all gas, water, steam, electricity, heat,
power, telephone, utility and other charges incurred in the operation,
maintenance, use, occupancy and upkeep of the Equipment.
Section 7.05. Maintenance of Equipment. (a) Borrower shall, at its own
expense, maintain, preserve and keep the Equipment in good repair, working
order and condition, and shall from time to
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time make all repairs and replacements necessary to keep the Equipment in such
condition, and in compliance with state and federal laws, ordinary wear and
tear excepted. Borrower shall maintain the Equipment in a condition suitable
for certification by the manufacturer thereof (if certification is available)
and in conformance with all manufacturer's recommended maintenance
requirements. In the event that any parts or accessories forming part of any
item or items of Equipment become worn out, lost, destroyed, damaged beyond
repair or otherwise rendered unfit for use, Borrower, at its own expense and
expeditiously, will replace or cause the replacement of such parts or
accessories by replacement parts or accessories free and clear of all liens
and encumbrances and with a value and utility at least equal to that of the
parts or accessories being replaced (assuming that such replaced parts and
accessories were otherwise in good working order and repair). All such
replacement parts and accessories shall be deemed to be incorporated
immediately into and to constitute an integral portion of the Equipment and,
as such, shall be subject to the terms of this Agreement. Neither Lender nor
Issuer shall have any responsibility in any of these matters, or for the
making of improvements or additions to the Equipment.
(b) Borrower will defend the Equipment against all claims or demands of
all persons (other than Lender) claiming the Equipment or any interest
therein.
(c) Borrower will keep the Equipment free and clear of all security
interests, liens and encumbrances except the security interest created
pursuant to this Agreement.
Section 7.06. Insurance; Indemnification. (a) Borrower shall at its own
expense, procure and maintain continuously in effect: (i) public liability
insurance for personal injuries, death or damage to or loss of property
arising out of or in any way relating to the Equipment sufficient to protect
Lender and Issuer from liability in all events, with a coverage limit of not
less than $1,000,000 per occurrence unless a different coverage minimum with
respect to particular Equipment is required by Lender, and (ii) insurance
against such hazards as Lender may require, including, but not limited to,
all-risk casualty and property insurance, in an amount equal to the greater of
the full replacement cost of the Equipment with new equipment having
substantially similar specifications or the applicable Prepayment Amount.
(b) If required by State law, Borrower shall carry workers' compensation
insurance covering all employees on, in, near or about the Equipment, and upon
request, shall furnish to Lender certificates evidencing such coverage.
(c) All insurance policies required by this Article shall be taken out
and maintained with insurance companies acceptable to Lender, and shall
contain a provision that the insurer shall not cancel or revise coverage
thereunder without giving written notice to the insured parties at least
thirty (30) days before the cancellation or revision becomes effective. No
insurance shall be subject to any co-insurance clause. Each insurance policy
required by this Article shall name Lender and Issuer, as applicable, as an
additional insured party and loss payee without regard to any breach of
warranty or other act or omission of Borrower and shall include a lender's
loss payable endorsement for the benefit of Lender. Prior to the delivery of
Equipment, Borrower shall deposit with Lender evidence satisfactory to Lender
of such insurance and, prior to the expiration thereof, shall provide Lender
evidence of all renewals or replacements thereof
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(d) As among Lender, Borrower and Issuer, Borrower assumes all risks and
liabilities from any cause whatsoever, whether or not covered by insurance,
for loss or damage to any Equipment and for injury to or depth of any person
or damage to any property, whether such injury or death be with respect to
agents or employees of Borrower or of third parties, and whether such property
damage be to Borrower's property or the property of others. Whether or not
covered by insurance, Borrower hereby assumes responsibility for and agrees to
reimburse Lender for and will indemnify, defend and hold Lender harmless from
and against all liabilities, obligations, losses, damages, penalties, claims,
actions, costs and expenses (including reasonable attorneys' fees) of
whatsoever kind and nature, imposed on, incurred by or asserted against Lender
that in any way relate to or arise out of this Agreement, the Bond, the
transactions contemplated hereby and the Equipment, including but not limited
to, (i) the selection, manufacture, purchase, acceptance or rejection of
Equipment or the ownership of the Equipment, (ii) the delivery, lease,
possession, maintenance, use, condition, return or operation of the Equipment,
(iii) the condition of the Equipment sold or otherwise disposed of after
possession by Borrower, (iv) any patent or copyright infringement, (v) the
conduct of Borrower, its officers, employees and agents, (vi) a breach of
Borrower of any of its covenants or obligations hereunder and (vii) any claim,
loss, cost or expense involving alleged damage to the environment relating to
the Equipment, including, but not limited to investigation, removal, cleanup
and remedial costs. All amounts payable by Borrower pursuant to the
immediately preceding sentence shall be paid immediately upon demand of
Lender. This provision shall survive the termination of this Agreement.
(e) Issuer and its members, officers, agents and employees (the
"Indemnified Persons") shall not be liable to Borrower for any reason.
Borrower shall indemnify and hold Issuer and the Indemnified Persons harmless
from any loss, expenses (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
(i) the financing, installation, operation, use, or maintenance of the
Equipment, (ii) any act, failure to act, or misrepresentation by any person,
firm, corporation or governmental agency, including Issuer, in connection with
the Loan, (iii) any act, failure to act, or misrepresentation by Issuer in
connection with this Agreement or any other document involving Issuer in this
matter, or (iv) the selection and appointment of firms providing services to
the transactions contemplated by this Agreement. If any suit, action or
proceeding is brought against Issuer or any Indemnified Person, that action or
proceeding shall be defended by counsel to Issuer or Borrower, as Issuer shall
determine. If the defense is by counsel to Issuer, which is the Attorney
General of Michigan or may, in some instances by private, retained counsel,
Borrower shall indemnify Issuer and Indemnified Persons for the reasonable
cost of that defense, including reasonable counsel fees. If Issuer determines
that Borrower shall defend Issuer or Indemnified Persons, Borrower shall
immediately assume the defense at its own cost. Borrower shall not be liable
for any settlement of any proceeding made without its consent (which consent
shall not be unreasonably withheld).
Borrower shall also indemnify Issuer for all reasonable costs and
expenses, including reasonable counsel fees incurred in: (i) enforcing any
obligation of Borrower under this Agreement or any related agreement, (ii)
taking any action requested by Borrower, (iii) taking any action required by
this Agreement or any related agreement, or (iv) taking any action considered
necessary by Issuer and which is authorized by this Agreement or any related
agreement.
Borrower shall not be obligated to indemnify Issuer or any Indemnified
Person if a court with competent jurisdiction finds that the liability in
question was caused by the willful misconduct or sole
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gross negligence of 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, Issuer or the Indemnified Person(s) is (are)
fairly and reasonably entitled to indemnity for the expenses which the court
considers proper.
The obligations of Borrower under this Section 7.06(e) shall survive any
assignment or termination of this Agreement.
Section 7.07. Preservation of Corporate Existence. Borrower will
preserve and maintain its corporate existence and all of its rights,
privileges and franchises necessary or desirable in the normal conduct of its
business; and shall conduct its business in an orderly, efficient and regular
manner.
Section 7.08. Performance by Lender. If Borrower at any time fails to
perform or observe any of the covenants or agreements contained in this
Agreement, and if such failure shall continue for a period of ten calendar
days after Lender gives Borrower written notice thereof (or in the case of the
agreements contained in Sections 7.05 and 7.06 hereof, immediately upon the
occurrence of such failure, without notice or lapse of time), Lender may, but
need not, perform or observe such covenant on behalf and in the name, place
and stead of Borrower (or, at Lender's option, in Lender's name) and may, but
need not, take any and all other actions which Lender may reasonably deem
necessary to cure or correct such failure (including, without limitation, the
payment of taxes, the satisfaction of security interests, liens or
encumbrances, the performance of obligations owed to account debtors or other
obligers, the procurement and maintenance of insurance, the execution of
assignments, security agreements and financing statements, and the endorsement
of instruments); and Borrower shall thereupon pay to Lender on demand the
amount of all moneys expended and all costs and expenses (including reasonable
attorneys' fees and legal expenses) incurred by Lender in connection with or
as a result of the performance or observance of such agreements or the taking
of such action by Lender, together with interest thereon from the date
expended or incurred at the rate publicly announced by Citibank, N.A. at its
principal office in New York, New York as its prime rate (any change in such
prime rate of interest to be effective on the date on which such change is
announced by Citibank, N.A.) plus 5%, but not in excess of the maximum rate
permitted by law. To facilitate the performance or observance by Lender of
such covenants of Borrower, Borrower hereby irrevocably appoints Lender, or
the delegate of Lender, acting alone, as the attorney in fact of Borrower with
the right (but not the duty) from time to time to create, prepare, complete,
execute, deliver, endorse or file in the name and on behalf of Borrower any
and all instruments, documents, assignments, security agreements, financing
statements, applications for insurance and other agreements and writings
required to be obtained, executed, delivered or endorsed by Borrower under
this Agreement.
Section 7.09. Covenant as to Nonimpairment of Tax-exempt Status.
Borrower covenants that, notwithstanding any provision of this Agreement or
the rights of Borrower hereunder, it will not take, or permit to be taken on
its behalf, any action that would impair the exclusion of Interest from gross
income for federal income tax purposes and that it will take such reasonable
action for itself and on behalf of Issuer as may be necessary to continue such
exclusion, including, without limitation, the preparation and filing of any
statements required to be filed by it in order to maintain such exclusion.
Borrower will not cause or permit any Loan Proceeds to be invested in a
manner contrary to the provisions of Section 148 of the Code and will assure
compliance with such requirements on behalf
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of Issuer. Borrower shall calculate and timely pay to the United States of
America, for the account of Issuer, all amounts required to be so paid in
accordance with Section 148 of the Code and shall maintain, on behalf of
Issuer, all records required to be maintained pursuant to Section 148(f) of
the Code. At least once every five years, commencing with the end of the fifth
Bond Year (as defined in the Income Tax Regulations promulgated under Section
148(f) of the Code, and not later than 60 days after payment in full of the
Loan and the Bond, Borrower will furnish to each of Issuer and Lender a
certificate showing compliance with the applicable provisions of said Section
148(f), which certificate shall be accompanied by an opinion of counsel or
certificate of accountants supporting the matters set forth in such
certificate.
In addition to the foregoing covenants, Borrower further covenants that
(i) it will requisition, apply and spend the moneys in the Escrow Fund in a
manner so that as of any date at least 95% of the total amount theretofore
requisitioned from the Escrow Fund will be applied to finance costs (paid on
or after January 28, 1996) for the acquisition, construction, rehabilitation
or improvement of land and other property which is of a character subject to
an allowance for depreciation under Section 167 of the Code; (ii) it will not
permit moneys in the Escrow Fund to be invested in such a manner as to cause
the Bond to be an "arbitrage bond" under Section 148(a) of the Code; (iii) it
will promptly notify Lender if, at any time, Borrower proposes to take any
action, or any action is to be taken by or on behalf of any Principal User of
the Project or any Related Person, the effect of which could be to cause
Interest to become includable in the gross income of owners thereof for
federal income tax purposes by reason of the $10,000,000 capital expenditure
limitation imposed by Section 144(a)(4) of the Code being exceeded or the
$40,000,000 limitation imposed by Section 144(a)(10) of the Code being
exceeded; (iv) it will not requisition from the Escrow Fund more than $60,000
to pay Issuance Costs; and (v) no portion of the net Loan Proceeds will be
used for the acquisition of any property (or an interest therein) unless the
first use of such property is pursuant to such acquisition.
Borrower acknowledges that a failure to abide by the foregoing covenants
may result in a Determination of Taxability.
Section 7.10. Financial Covenants. (a) Borrower and Guarantors will
maintain a ratio of Total Funded Debt (as defined below) to EBITDA (as defined
below) at no more than 4.75 to 1.0 (determined for the four most recently
ended fiscal quarters).
(b) Borrower and Guarantors will maintain Tangible Capital Funds (as
defined below) at the end of each fiscal quarter equal to at least
$10,000,000.
(c) Borrower and Guarantors will maintain a ratio (calculated on a
consolidated basis) of (i) total liabilities minus deferred tax liabilities at
the end of each fiscal quarter, as shown on the consolidated balance sheet of
Borrower and Guarantors and as determined and prepared in accordance with
generally accepted accounting principles consistently applied to (ii) Tangible
Capital Funds, at no more than 3.0 to 1.0.
(d) Borrower and Guarantors will maintain a ratio (calculated on a
consolidated basis) of current assets to current liabilities, as determined in
accordance with generally accepted accounting principles, of at least 1.25 to
1.0.
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As used in this Section 7.10, the following terms have the following
meanings:
"Total Funded Debt" means total liabilities of Borrower and Guarantors
minus (i) cash on hand, (ii) accounts payable, (iii) deferred tax liabilities,
and (iv) other deferred liabilities, as shown on the consolidated balance
sheet of Borrower and Guarantors and as determined and prepared in accordance
with generally accepted accounting principles consistently applied.
"EBITDA" means consolidated earnings of Borrower and Guarantors net of
interest payments and accruals, federal income taxes, depreciation and
amortization, as shown on the consolidated balance sheet of Borrower and
Guarantors and as determined and prepared in accordance with generally
accepted accounting principles consistently applied.
"Tangible Capital Funds" means Tangible Net Worth plus deferred tax
liabilities.
"Tangible Net Worth" means (i) the amount of all assets excluding
deferred tax liabilities which, under generally accepted accounting principles
consistently applied, would appear on the consolidated balance sheet of
Borrower and Guarantors, but excluding intangible items such as deferred tax
assets, goodwill, treasury shares, reserves, patents, trademarks, research and
development expenses and the like, and excluding any write-up in the book
value of such assets resulting from a reevaluation thereof; less (ii) the
amount of all liabilities which, under generally accepted accounting
principles consistently applied, would appear on the consolidated balance
sheet of Borrower and Guarantors (including all lease obligations payable
within the succeeding 12-month period).
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
So long as the Loan and the Bond shall remain unpaid, Borrower agrees
that:
Section 8.01. Lien. Borrower will not create, incur or suffer to exist
any mortgage, deed of trust, pledge, lien, security interest, assignment or
transfer upon or of any of the Equipment except for the security interest
created pursuant to this Agreement.
Section 8.02. Sale of Assets. Borrower will not sell, lease, assign,
transfer or otherwise dispose of all or a substantial part of its assets or of
any of the Equipment or any interest therein (whether in one transaction or in
a series of transactions) without the prior written consent of Lender (which
consent Lender may withhold in its sole discretion) and, with respect to the
Equipment, without providing an opinion of counsel that such action will not
result in a Default or Event of Default and an opinion of Bond Counsel that
such action will not result in a Determination of Taxability.
Section 8.03. Consolidation and Merger. Borrower will not consolidate
with or merge into any person, or permit any other person to merge into it, or
acquire (in a transaction analogous in purpose or effect to a consolidation or
merger) all or substantially all the assets of any other person unless: (i)
Lender provides its prior written consent thereto (which consent Lender may
withhold in its sole discretion), (ii) written notice of such merger or
consolidation is provided to Issuer and (iii) the
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surviving entity is qualified to do business in the State and agrees in
writing to assume Borrower's obligations hereunder, under the Escrow Agreement
and under the Tax Compliance Certificate.
Section 8.04. Accounting. Borrower will not adopt, permit or consent to
any material change in accounting principles other than as required by
generally accepted accounting principles without the prior written consent of
Lender (which consent Lender may withhold in its sole discretion). Borrower
will not adopt, permit or consent to any change in its fiscal year without the
prior written consent of Lender (which consent Lender may withhold in its sole
discretion).
Section 8.05. Transfers. Borrower will not in any manner transfer any
property without prior or present receipt of full and adequate consideration.
Section 8.06. Other Defaults. Borrower will not permit any breach,
default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon Borrower or any judgment, decree, order or
determination applicable to Borrower.
Section 8.07. Place of Business. Borrower will not permit any of the
Equipment or any records pertaining to the Equipment to be located outside the
State or in any location where, in the event of such location, a financing
statement covering such Equipment would be required to be, but has not in fact
been, filed in order to perfect the security interest created pursuant to this
Agreement.
Section 8.08. Modifications and Substitutions. (a) Borrower will not
make any material alterations, modifications or additions to the Equipment
which cannot be removed without materially damaging the functional
capabilities or economic value of the Equipment. Upon transfer of the
Equipment to Lender and at the request of Lender, Borrower, at its sole cost
and expense, will remove all alterations, modifications and additions and
repair the Equipment as necessary to return the Equipment to the condition in
which it was furnished, ordinary wear and tear and permitted modifications
excepted.
(b) Notwithstanding the provisions of subparagraph (a) of this section,
Borrower may, with the prior written consent of Lender, substitute for parts,
elements, portions or all of the Equipment, other parts, elements, portions,
equipment or facilities of similar function and value, provided, however, that
any substitutions made pursuant to Borrower's obligations to make repairs
referenced under any provision of this Agreement shall not require such prior
written consent. Borrower shall provide such documents or assurances as Lender
may reasonably request to maintain or confirm the security interest assigned
to Lender in the Equipment as so modified or substituted.
Section 8.09. Use of the Equipment. Borrower will not install, use,
operate or maintain the Equipment improperly, carelessly, in violation of any
applicable law or in a manner contrary to that contemplated by this Agreement.
30
<PAGE>
ARTICLE IX
DAMAGE AND DESTRUCTION;
USE OF NET PROCEEDS
Borrower shall provide a complete written report to Lender immediately
upon any loss, theft, damage or destruction of any Equipment and of any
accident involving any Equipment. If all or any part of the Equipment is lost,
stolen, destroyed or damaged beyond repair ("Damaged Equipment"), Borrower
shall as soon as practicable after such event either: (a) replace the same at
Borrower's sole cost and expense with equipment having substantially similar
specifications and of equal or greater value to the Damaged Equipment
immediately prior to the time of the loss occurrence, such replacement
equipment to be subject to Lender's approval, whereupon such replacement
equipment shall be substituted in this Agreement and the other related
documents by appropriate endorsement or amendment; or (b) pay the applicable
Prepayment Amount of the Damaged Equipment. Borrower shall notify Lender of
which course of action it will take within fifteen (15) calendar days after
the loss occurrence. If within forty-five (45) calendar days of the loss
occurrence, (a) Borrower fails to notify Lender, (b) Borrower and Lender fail
to execute an amendment to this Agreement to delete the Damaged Equipment and
add the replacement equipment or (c) Borrower fails to pay the applicable
Prepayment Amount, then Lender may, at its sole discretion, declare the
applicable Prepayment Amount to be immediately due and payable, and Borrower
is required to pay the same. The Net Proceeds of insurance with respect to the
Damaged Equipment shall be made available by Lender to be applied to discharge
Borrower's obligation under this Article. The payment of the Prepayment Amount
and the termination of Lender's interest in the Damaged Equipment is subject
to the terms of Section 2.07 hereof For purposes of this Article, the term
"Net Proceeds" shall mean the amount remaining from the gross proceeds of any
insurance claim or condemnation award after deducting all expenses (including
reasonable attorneys' fees) incurred in the collection of such claim or award.
ARTICLE X
ASSIGNMENT, SUBLEASING AND SELLING
Section 10.01. Assignment by Lender. This Agreement, the Bond and the
obligations of Borrower to make payments hereunder and under the Bond may be
assigned in whole but not in part to an assignee by Lender at any time,
without the necessity of obtaining the consent of Issuer or Borrower,
provided, however, that no such assignment or any reassignment shall be
effective unless and until Issuer and Borrower shall have received (i) notice
of the assignment disclosing the name and address of the assignee, which
notice Issuer shall maintain as evidence of the registration and ownership of
the Bond, (ii) a properly completed assignment of the Bond and (iii) an
investment letter substantially in the form delivered at closing. Upon receipt
of notice of assignment, Borrower shall agree to make all payments to the
assignee designated in the notice of assignment, notwithstanding any claim,
defense, setoff or counterclaim whatsoever (whether arising from a breach of
this Agreement or otherwise) that Issuer and Borrower may from time to time
have against Lender or the assignee. Issuer and Borrower agree to execute all
documents, including notices of assignment and chattel
31
<PAGE>
mortgages or financing statements, which may be reasonably requested by Lender
or its assignee to protect their interest in the Equipment and in this
Agreement.
Section 10.02. No Sale or Assignment by Borrower. This Agreement and the
interest of Borrower in the Equipment may not be sold, assumed, assigned or
encumbered by Borrower without the prior written consent of Lender (which
consent Lender may withhold in its sole discretion) and without providing to
Issuer: (i) 30 days' notice of such sale, assumption, assignment or
encumbrance and (ii) evidence that Borrower's obligations hereunder, under the
Escrow Agreement and under the Tax Compliance Certificate have been properly
assumed.
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
Section 11.01. Events of Dealt. The following constitute "Events of
Default" under this Agreement:
(a) failure by Borrower to pay to Lender, as assignee of Issuer,
when due any Loan Payment or to pay any other payment required to be
paid hereunder or under the Indemnity Agreement and the continuation of
such failure for a period of ten (10) days;
(b) failure by Borrower to maintain insurance on the Equipment in
accordance with Section 7.06 hereof;
(c) failure by Borrower or Issuer to observe and perform any other
covenant, condition or agreement contained herein, in the Escrow
Agreement, in the Tax Compliance Certificate, in the Indemnity Agreement
or in any other document or agreement executed in connection herewith on
its part to be observed or performed for a period of 30 days after
written notice is given to Borrower or Issuer, as the case may be,
specifying such failure and requesting that it be remedied; provided,
however, that, if the failure stated in such notice cannot be corrected
within such 30-day period, Lender will not unreasonably withhold its
consent to an extension of such time if corrective action is instituted
by Borrower or Issuer, as the case may be, within the applicable period
and diligently pursued until the default is corrected;
(d) initiation by Issuer of a proceeding under any federal or
state bankruptcy or insolvency law seeking relief under such laws
concerning the indebtedness of Issuer;
(e) Borrower or any Guarantor shall be or become insolvent, or
admit in writing its inability to pay its debts as they mature, or make
an assignment for the benefit of creditors; or Borrower or any Guarantor
shall apply for or consent to the appointment of any receiver, trustee
or similar officer for it or for all or any substantial part of its
properly or such receiver, trustee or similar officer shall be appointed
without the application or consent of Borrower or any Guarantor, as the
case may be; or Borrower or any Guarantor shall institute (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution,
liquidation or similar proceeding relating to it under the laws of any
jurisdiction; or any such proceeding shall be instituted (by petition,
32
<PAGE>
application or otherwise) against Borrower or any Guarantor; or any
judgment, writ, warrant of attachment or execution or similar process
shall be issued or levied against a substantial part of the property of
Borrower or any Guarantor;
(f) determination by Lender that any representation or warranty
made by Borrower, Issuer or any Guarantor herein, in the Tax Compliance
Certificate or in any other document executed in collection herewith was
untrue in any material respect when made;
(g) an Event of Taxability shall occur;
(h) the occurrence of a default or an event of default under any
instrument, agreement or other document evidencing or relating to any
indebtedness or other monetary obligation of Borrower in an amount
greater than $2S0,000.00;
(i) any Guarantor shall repudiate, purport to revoke or fail to
perform such Guarantor's obligations under a Guaranty Agreement; or
(j) the percentage share of ownership of the stock of Borrower
held by Borrower's officers and directors and by Manubusiness
Opportunities, Inc. on the date on which the Bond is issued is reduced
during the period that the Loan and the Bond are outstanding without the
prior written consent of Lender (Borrower hereby acknowledges that
Lender has made its decision to enter into the transactions contemplated
hereby based upon the management expertise of the current stockholders
and their ownership of the stock of Borrower); or
(k) the occurrence of a default or an event of default under the
Subsequent Loan Agreement or any other obligation (whether direct or
indirect) of Borrower to Lender or any of its affiliates.
Section 11.02. Remedies on Default. Whenever any Event of Default shall
have occurred and be continuing, Lender, as assignee of Issuer, shall have the
right, at its sole option without any further demand or notice, to take any
one or any combination of the following remedial steps insofar as the same are
available to secured parties under Article 9 of the UCC in effect in the State
from time to time and which are otherwise accorded to Lender, as assignee of
Issuer, by applicable law:
(a) by notice to Issuer and Borrower, declare the entire unpaid
principal amount of the Loan and the Bond then outstanding, all interest
accrued and unpaid thereon and all amounts payable under this Agreement
to be forthwith due and payable, whereupon the Loan, the Bond, all such
accrued interest and all such amounts shall become and be forthwith due
and payable, without presentment, notice of dishonor, protest or further
notice of any kind, all of which are hereby expressly waived by
Borrower;
(b) take possession of the Equipment wherever situated, without
any court order or other process of law and without liability for
entering the premises, and lease, sublease or make other disposition of
the Equipment for use over a term in a commercially reasonable manner,
all for the account of Lender, provided that Borrower shall remain
directly liable for the deficiency, if any, between the rent or other
amounts paid by a lessee or sublessee of the
33
<PAGE>
Equipment pursuant to such lease or sublease during the same period of
time, after deducting all costs and expenses, including reasonable
attorneys' fees and expenses, incurred with respect to the recovery,
repair and storage of the Equipment during such period of time;
(c) take possession of the Equipment wherever situated, without
any court order or other process of law and without liability for
entering the premises, and sell the Equipment in a commercially
reasonable manner. All proceeds from such sale shall be applied in the
following manner:
FIRST, to pay all proper and reasonable costs and expenses
associated with the recovery, repair, storage and sale of the
Equipment, including reasonable attorneys' fees and expenses;
SECOND, to pay (i) Lender the amount of all unpaid Loan
Payments or other obligations owed to Lender under the Subsequent
Loan Agreement which are then due and owing, together with
interest and late charges thereon and (ii) Lender the then
applicable Prepayment Amount (taking into account the payment of
past-due Loan Payments as aforesaid), plus a pro rata allocation
of interest, at the rate utilized to calculate the Loan Payments,
from the next preceding due date of a Loan Payment until the date
of payment by the buyer;
THIRD, to pay Issuer and/or Lender any other amounts due
hereunder, including indemnity payments, taxes, charges,
reimbursement of any advances and other amounts payable to Lender
or Issuer hereunder;
FOURTH, to pay the remainder of the sale proceeds, purchase
moneys or other amounts paid by a buyer of the Equipment to
Borrower;
(c) proceed by appropriate court action to enforce specific
performance by Issuer or Borrower of the applicable covenants of this
Agreement or to recover for the breach thereof, including the payment of
all amounts due from Borrower. Borrower shall pay or repay to Lender or
Issuer all costs of such action or court action, including, without
limitation, reasonable attorneys' fees; and
(d) take whoever action at law or in equity may appear necessary
or desirable to enforce its rights with respect to the Equipment.
Borrower shall pay or repay to Lender or Issuer all costs of such action
or court action, including, without limitation, reasonable attorneys'
fees.
Notwithstanding any other remedy exercised hereunder, Borrower shall
remain obligated to pay to Lender any unpaid portion of the Prepayment Amount.
Section 11.03. Return of Equipment. Upon an Event of Default, Borrower
shall within ten (10) calendar days after notice from Lender, at its own cost
and expense: (a) perform any testing and repairs required to place the
Equipment in the condition required by Article VII; (b) if deinstallation,
disassembly or crating is required, cause the Equipment to be deinstalled,
disassembled and crated by an authorized manufacturer's representative or such
other service person as is satisfactory to Lender;
34
<PAGE>
and (c) deliver the Equipment to a location specified by Lender, freight and
insurance prepaid by Borrower. If Borrower refuses to deliver the Equipment in
the manner designated, Lender may enter upon Borrower's premises where the
Equipment is kept and take possession of the Equipment and charge to Borrower
the costs of such taking. Borrower hereby expressly waives any damages
occasioned by such taking.
Section 11.04. No Remedy Exclusive. No remedy herein conferred upon or
reserved to Lender or Issuer is intended to be exclusive and every such remedy
shall be cumulative and shall be in addition to every other remedy given under
this Agreement or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right or power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle Lender or Issuer to
exercise any remedy reserved to it in this Article, it shall not be necessary
to give any notice other than such notice as may be required by this Article.
All remedies herein conferred upon or reserved to Lender or Issuer shall
survive the termination of this Agreement.
Section 11.05. Late Charge. Any Loan Payment not paid by Borrower on the
due date thereof shall, to the extent permissible by law, bear a late charge
equal to the lesser of five cents ($.05) per dollar of the delinquent amount
or the lawful maximum, and Borrower shall be obligated to pay the same
immediately upon receipt of Lender's written invoice therefor.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Costs and Expenses of Lender and Issuer. (a) Borrower
shall pay to Lender, in addition to the Loan Payments payable by Borrower
hereunder, such amounts in each year as shall be required by Lender in payment
of any reasonable costs and expenses incurred by Lender in connection with the
execution, performance or enforcement of this Agreement, including but not
limited to payment of all reasonable fees, costs and expenses and all
administrative costs of Lender in connection with the Equipment, expenses
(including, without limitation, attorneys' fees and disbursements), fees of
auditors or attorneys, insurance premiums not otherwise paid hereunder and all
other direct and necessary administrative costs of Lender or charges required
to be paid by it in order to comply with the terms of, or to enforce its
rights under, this Agreement. Such costs and expenses shall be billed to
Borrower by Lender from time to time, together with a statement certifying
that the amount so billed has been paid by Lender for one or more of the items
above described, or that such amount is then payable by Lender for such items.
Amounts so billed shall be due and payable by Borrower within 30 days after
receipt of the bill by Borrower. Issuer shall have no liability for any fees
or expenses of Lender.
(b) Borrower hereby further expressly agrees to pay upon written
request, the fees and expenses of Issuer (including the fees and expenses of
its bond counsel) related to the transactions contemplated by this Agreement
which are not otherwise required to be paid by Borrower under the terms of
this Agreement. In particular, but without limiting the generality of the
foregoing, Borrower shall pay a one-time issuance fee of $7,500.00 to Issuer
prior to or contemporaneously with the making of the Loan. In addition,
Borrower shall pay, within ten (10) days of demand therefor: (i) all out-of-
35
<PAGE>
pocket costs and expenses of Issuer incidental to the making of the Loan and
(ii) the reasonable out-of-pocket expenses of Issuer (including, without
limitation, reasonable attorneys' fees) relied to the transactions
contemplated by this Agreement or incurred by Issuer in enforcing the
provisions of this Agreement.
Section 12.02. Disclaimer of Warranties. LENDER AND ISSUER MAKE NO
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
DESIGN, CONDITION, MERCHANTABILlTY OR FITNESS FOR A PARTICULAR PURPOSE OR
FITNESS FOR USE OF THE EQUIPMENT, OR ANY OTHER WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, WITH RESPECT THERETO. In no event shall Lender or Issuer
be liable for any loss or damage in connection with or arising out of this
Agreement, the Equipment or the existence, furnishing, functioning or
Borrower's use of any item or products or services provided for in this
Agreement.
Section 12.03. Notices. All notices, certificates, requests, demands and
other communications provided for hereunder or under the Escrow Agreement
shall be in writing and shall be (a) personally delivered, (b) sent by
first-class United States mail, (c) sent by overnight courier of national
reputation, or (d) transmitted by telecopy, in each case addressed to the
party to whom notice is being given at its address as set forth above and, if
telecopied, transmitted to that party at its telecopier number set forth above
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be determined to have been
given on (a) the due received if personality delivered, (b) when deposited in
the mail if delivered by mail, (c) the date sent if sent by overnight courier,
or (d) the date of transmission if delivered by telecopy. If notice to
Borrower of any intended disposition of the Equipment or any other intended
action is required by law in a particular instance, such notice shall be
deemed commercially reasonable if given (in the manner specified in this
Section) at least ten (10) calendar days prior to the date of intended
disposition or other action.
Section 12.04. Further Assurance and Corrective Instruments. Issuer and
Borrower hereby agree that they will, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such further
acts, instruments, conveyances, transfers and assurances, as Lender reasonably
deems necessary or advisable for the implementation, correction, confirmation
or perfection of this Agreement or the Escrow Agreement and any rights of
Lender hereunder or thereunder.
Section 12.05. Binding Effect; Time of the Essence. This Agreement shall
inure to the benefit of and shall be binding upon Lender, Issuer, Borrower and
their respective successors and assigns. Time is of the essence.
Section 12.06. Severability. In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
Section 12.07. Amendments. To the extent permitted by law, the terms of
this Agreement shall not be waived, altered, modified, supplemented or amended
in any manner whatsoever except by
36
<PAGE>
written instrument signed by the parties hereto, and then such waiver,
consent, modification or change shall be effective only in the specific
instance and for the specific purpose given.
Section 12.08. Execution in Counterparts. This Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute one and the same instrument, and any of the parties hereto
may execute this Agreement by signing any such counterpart, provided that only
the original marked "Original: 1 of 6" on the execution page thereof shall
constitute chattel paper under the Uniform Commercial Code.
Section 12.09. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State.
Section 12.10. Captions. The captions or headings in this Agreement are
for convenience only and in no way define, limit or describe the scope or
intent of any provisions or sections of this Agreement.
Section 12.11. Entire Agreement. This Agreement, the Escrow Agreement
and the exhibits hereto and thereto constitute the entire agreement among
Lender, Issuer, Borrower and Escrow Agent. There are no understandings,
agreements, representations or warranties, express or implied, not specified
herein or in such documents regarding this Agreement or the Equipment financed
hereby.
Section 12.12. Usury. It is the intention of the parties hereto to
comply with any applicable usury laws; accordingly, it is agreed that,
notwithstanding any provisions to the contrary in this Agreement, in no event
shall this Agreement require the payment or permit the collection of interest
or any amount in the nature of interest or fees in excess of the maximum
permitted by applicable law.
Section 12.13. Waiver of Jury Trial. LENDER, ISSUER AND BORROWER HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF
THE RELATED DOCUMENTS, ANY DEALINGS AMONG LENDER, ISSUER OR BORROWER RELATING
TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED
AMONG LENDER, ISSUER AND BORROWER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT
(INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY RELATED DOCUMENTS, OR TO
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY RELATED TRANSACTIONS. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Section 12.14. Governmental Functions The State is not assigning any of
its governmental functions in this Agreement. The State shall not be precluded
from taking such actions as shall be necessary in order for it to perform its
governmental functions. Issuer shall, however, be bound by its undertakings
herein and in the Escrow Agreement.
37
<PAGE>
[REMAINDER OF PAGE INTENTIONALLY BLANK; EXECUTION PAGE FOLLOWS.]
38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
their respective corporate names by their duly authorized officers, all as of
the date first written above.
Lender: GE CAPITAL PUBLIC FINANCE, INC.
By /s/ authorized officer
-----------------------------
Title
--------------------------
Issuer: MICHIGAN STRATEGIC FUND
By /s/ James M. Storey
-----------------------------
Title Member
--------------------------
By
-----------------------------
Title Authorized Officer
--------------------------
Borrower: SECOM GENERAL CORPORATION
By /s/ David J. Marczak
-----------------------------
Title Chief Financial Officer
--------------------------
Trade Names of Borrower, if any:
- --------------------------------
NONE
- --------------------------------
- --------------------------------
ORIGINAL: 4 OF 6
[EXECUTION PAGE OF LOAN AGREEMENT]
EXHIBIT 10.6
LOAN AGREEMENT
Among
GE CAPITAL PUBLIC FINANCE, INC.,
as Lender,
and
MICHIGAN STRATEGIC FUND,
as Issuer,
and
SECOM GENERAL CORPORATION,
as Borrower
Dated as of September 1, 1996
---------
This instrument constitutes a security agreement
under the Michigan Uniform Commercial Code
---------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.01. Definitions ........................................ 2
Section 1.02. Exhibits ........................................... 5
Section 1.03. Rules of Construction............................... 6
ARTICLE II
FINANCING OF EQUIPMENT AND TERMS OF LOAN
Section 2.01. Acquisition of Equipment............................ 6
Section 2.02. Loan................................................ 6
Section 2.03. Interest............................................ 6
Section 2.04. Payments............................................ 7
Section 2.05. Payment on Non-Business Days........................ 7
Section 2.06. Loan Payments To Be Unconditional................... 7
Section 2.07. Prepayments......................................... 7
Section 2.08. Execution, Authentication and Delivery of the Bond.. 8
Section 2.09. Mutilated, Lost, Stolen or Destroyed Bond .......... 8
ARTICLE III
CONDITIONS PRECEDENT............................................... 8
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER................ 11
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.............. 13
ARTICLE VI
TITLE TO EQUIPMENT, SECURITY INTEREST
Section 6.01. Title to the Equipment.............................. 21
Section 6.02. Security Interest in Equipment...................... 21
<PAGE>
Section 6.03. Change in Name or Corporate Structure of Borrower,
Change in Location of Borrower's Principal Place
of Business......................................... 21
Section 6.04. Liens and Encumbrances to Title..................... 22
Section 6.05. Personal Property................................... 22
Section 6.06. Assignment of Insurance............................. 22
Section 6.07. Occupancy........................................... 22
Section 6.08. Agreement as Financing Statement.................... 23
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
Section 7.01. Reporting Requirements.............................. 23
Section 7.02. Books and Records; Inspection and Examination....... 24
Section 7.03. Compliance With Laws; Environmental Indemnity....... 25
Section 7.04. Payment of Taxes and Other Claims................... 25
Section 7.05. Maintenance of Equipment............................ 25
Section 7.06. Insurance; Indemnification.......................... 26
Section 7.07. Preservation of Corporate Existence................. 28
Section 7.08. Performance by Lender............................... 28
Section 7.09. Covenant as to Nonimpairment of Tax-Exempt Status... 28
Section 7.10. Financial Covenants................................. 29
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
Section 8.01. Lein................................................ 30
Section 8.02. Sale of Assets...................................... 30
Section 8.03. Consolidation and Merger............................ 31
Section 8.04. Accounting.......................................... 31
Section 8.05. Transfers........................................... 31
Section 8.06. Other Defaults...................................... 31
Section 8.07. Place of Business................................... 31
Section 8.08. Modification and Substitutions...................... 31
Section 8.09. Use of the Equipment................................ 32
ARTICLE IX
DAMAGE AND DESTRUCTION;............................................ 32
ARTICLE X
ASSIGNMENT, SUBLEASING AND SELLING
Section 10.01. Assignment by Lender................................ 32
Section 10.02. No Sale or Assignment by Borrower................... 33
ii
<PAGE>
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
Section 11.01. Events of Default................................... 33
Section 11.02. Remedies on Default................................. 34
Section 11.03. Return of Equipment................................. 36
Section 11.04. No Remedy Exclusive................................. 36
Section 11.05. Late Charge......................................... 36
ARTICLE XII
MISCELLANEOUS
Section 12.01. Costs and Expenses of Lender and Issuer............. 37
Section 12.02. Disclaimer of Warranties............................ 37
Section 12.03. Notices............................................. 37
Section 12.04. Further Assurance and Corrective Instruments........ 38
Section 12.05. Binding Effect; Time of the Essence................. 38
Section 12.06. Severability........................................ 38
Section 12.07. Amendments.......................................... 38
Section 12.08. Execution in Counterparts........................... 38
Section 12.09. Applicable Law...................................... 38
Section 12.10. Captions............................................ 38
Section 12.11. Entire Agreement.................................... 38
Section 12.12. Usury............................................... 39
Section 12.13. Waiver of Jury Trial................................ 39
Section 12.14. Governmental Functions.............................. 39
iii
<PAGE>
LOAN AGREEMENT
Lender: GE Capital Public Finance, Inc.
Suite 470
8400 Normandale Lake Blvd.
Minneapolis, MN 55437
Telephone: (800) 346-3164
Telecopier: (612) 897-5601
Issuer: Michigan Strategic Fund
Attn: President
525 West Ottawa, 5th floor
Lansing, MI 48933
Telephone: (517) 335-4417
Telecopier: (517) 335-3059
Borrower: Secom General Corporation
46035 Grand River Avenue
Novi, Ml 48374
Telephone: (805) 305-9410
Telecopier: (805) 305-9599
THIS LOAN AGREEMENT dated as of September 1, 1996 (this "Agreement")
among GE Capital Public Finance, Inc., a Delaware corporation, as lender (with
its successors and assigns, "Lender"), Michigan Strategic Fund, a public body
corporate and politic duly organized and validly existing under the laws of
the state of Michigan (the "State"), as issuer ("Issuer"), and Secom General
Corporation, a Delaware corporation, as borrower ("Borrower").
WHEREAS, Issuer is authorized and empowered under the laws of the State,
including 1984 PA270, as amended (the "Act"), to assist any person, firm or
corporation in the financing of certain projects and facilities, through the
issuance of its limited obligation revenue bonds; and
WHEREAS, in furtherance of the purposes of the Act, Issuer proposes to
finance all or a portion of the acquisition and installation of the Equipment
(as hereinafter defined) by Borrower pursuant to this Agreement by obtaining a
loan from Lender, issuing the Bond (as defined herein) and lending the
proceeds thereof to Borrower; and
WHEREAS, Borrower proposes the acquisition and installation of the
Equipment and as an inducement therefor has requested Issuer to assist in the
financing of the Equipment and certain other expenses incidental thereto, as
provided in the Act; and
WHEREAS, Borrower shall make Loan Payments (as hereinafter defined)
directly to Lender as assignee of Issuer; and
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WHEREAS, the Bond and the interest obligation thereon shall never
constitute any obligation of the State or a general obligation of Issuer
within the meaning of any constitutional or statutory limitation and shall
never constitute nor give rise to a charge against the general credit or
taxing powers or the State, but shall be a limited obligation of Issuer
payable solely from the Loan Payments payable hereunder by Borrower to Lender
as assignee of Issuer;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledge and in consideration of the premises contained in this
Agreement, Lender, Issuer and Borrower agree as follows:
ARTICLE I
DEFINITIONS AND EXHIBITS
Section 1.01 Definitions. The following terms used herein will have the
meanings indicated unless the context clearly requires otherwise:
"Acquisition Costs" means the contract price paid or to be paid to the
Vendors for any portion of the Equipment upon Borrower's acceptance thereof as
set forth on Exhibit A hereto.
"Agreement" means this Agreement, including all exhibits hereto, as any
of the same may be supplemented or amended from time to time in accordance
with the terms hereof.
"Bond" means Issuer's $4,000,000.00 Limited Obligation Revenue Bond
(Secom General Corporation Project), Series 1996B, in the form attached
hereto as Exhibit E.
"Bond Counsel" means an attorney or firm of attorneys nationally
recognized in the field of municipal finance and acceptable to Lender and
Issuer.
"Borrower" means Secom General Corporation, a Delaware corporation.
"Business Day" means a day other than a Saturday or Sunday on which
banks are generally open for business in New York, New York.
"Capital Expenditures" means expenditures:
(a) properly chargeable to the capital account of any person
without regard to any rule of the Code which permits such expenditures
to be treated as current expenses;
(b) financed from sources other than the Loan Proceeds; and
(c) which resulted in property used in connection with facilities
located in the City of Novi, Oakland County, Michigan, or located in any
adjacent political subdivision and integrated with or contiguous to such
facilities, the "principal user" of which is Borrower or any Related
Person or any other Principal User of the Equipment or Related Person to
such Principal User, except capital expenditures exempted under Section
144(a)(4)(C) of the Code.
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"Certificate of Acceptance" means a Certificate of Acceptance, in
substantially the form set forth as Exhibit B hereto, whereby Borrower
acknowledges receipt in good condition of particular items of Equipment
identified therein and confirms the date of delivery thereof and certain other
matters.
"Code" means the Internal Revenue Code of 1986, as amended,
and United States Treasury regulations promulgated thereunder.
"Default" means an event that, with giving of notice or passage of time
or both, would constitute an Event of Default as provided in Article XI hereof.
"Determination of Taxability" means any determination, decision or
decree by the Commissioner of Internal Revenue, or any District Director of
Internal Revenue or any court of competent jurisdiction, or an opinion of Bond
Counsel that an Event of Taxability shall have occurred. A Determination of
Taxability also shall be deemed to have occurred on the first to occur of the
following:
(a) the date when Borrower files any statement, supplemental
statement, or other tax schedule, return or document, which discloses
that an Event of Taxability shall have occurred; or
(b) the effective date of any federal legislation enacted after
the date of this Agreement or promulgation of any income tax regulation
or ruling by the Internal Revenue Service that causes an Event of
Taxability after the date of this Agreement.
"Equipment" means the personal property identified in Exhibit A hereto
to be used in connection with Borrower's operations (including, to the extent
permitted pursuant to the Code without jeopardizing the tax-exempt status of
the Interest, certain items originally financed through internal advances of
Borrower in anticipation of obtaining permanent financing through Issuer),
together with all replacement parts, additions, repairs, accessions and
accessories incorporated therein and/or affixed to such personal property.
"Escrow Agent" means National City Bank of Minneapolis, as escrow agent
under the Escrow Agreement and its successors and assigns permitted under the
Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of September 1,
1996 among Lender, Issuer, Borrower and Escrow Agent.
"Escrow Fund" means the fund established and held by Escrow Agent
pursuant to the Escrow Agreement.
"Event of Taxability" means if as the result of any act, failure to act
or use of the proceeds of the Loan, a change in use of the Equipment or any
misrepresentation or inaccuracy in any of the representations, warranties or
covenants contained in this Agreement or the Tax Compliance Certificate by
Issuer or Borrower or the enactment of any federal legislation after the date
of this
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Agreement or the promulgation of any income tax regulation or ruling by the
Internal Revenue Service after the date of this Agreement, the interest on the
Bond is or becomes includable in the recipient's gross income.
"Guarantors" means Uniflow Corporation, Form Flow, Inc., L&H Die, Inc.,
and Micanol, Inc.
"Guaranty Agreements" means the four Guaranty Agreements dated as of
September 1, 1996 executed on behalf of Guarantors.
"Indemnity Agreement" means the Indemnity Agreement dated as of
September 1, 1996 executed on behalf of Borrower for the benefit of Lender.
"Interest" means the portion of any payment from Issuer to Lender under
the Bond designated as and comprising interest as shown in Exhibit A hereto.
"Insurance Costs" means items of expense payable or reimbursable
directly or indirectly by Issuer or Borrower and related to the authorization,
sale and issuance of the Bond and authorization and execution of this
Agreement, which items of expense shall include, but not be limited to,
application fees and expenses, publication costs, printing costs, costs of
reproducing documents, filing and recording fees, bond counsel and counsel
fees, costs of credit ratings, charges for execution, transportation and
safekeeping of the Bond and related documents, and other costs, charges and
fees in connection with the foregoing.
"Issuer" means the Michigan Strategic Fund, acting as issuer under this
Agreement.
"Lender" means (i) GE Capital Public Finance, Inc., acting as lender
under this Agreement and holder of the Bond, (ii) any surviving, resulting or
transferee corporation of GE Capital Public Finance, Inc (who is also holder
of the Bond) and (iii) except where the context requires otherwise, any
assignee(s) of Lender (who shall also be holder of the Bond).
"Loans" means the loan from Issuer to Borrower pursuant to this
Agreement.
"Loan Payments" means the loan payments payable by Borrower pursuant to
the provisions of this Agreement as specifically set forth in Exhibit A
hereto. As provided in Article II hereof, Loan Payments shall be payable by
Borrower directly to Lender, as assignee of Issuer, in the amounts and at the
times as set forth in Exhibit A hereto.
"Loans Proceeds" means the total amount of money to be deposited
pursuant to Section 2.02 hereof with Escrow Agent for deposit and application
in accordance with the Escrow Agreement. The Loan Proceeds consist of the
proceeds of the Bond.
"Prepayment Amount" means the amount which Borrower may from time to
time, in its discretion, pay or cause to be paid to Lender as assignee of
Issuer in order to prepay the Loan and the Bond, as provided in Section 2.07
hereof, such amounts being set forth in Exhibit A hereto.
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"Principal" means the portion of any Loan Payment designated as
principal in Exhibit A hereto.
"Principal User" means a principal user of the Equipment as such term is
used in Section 144(a) of the Code.
"Prior Loan Agreement" means the Loan Agreement dated as of June 1, 1996
among Lender, Issuer and Borrower.
"Purchase Agreement" means Borrower's purchase agreements with Vendors
of the equipment.
"Related Person" with reference to any Substantial User, means a
"related person" within the meaning of Section 147(a) of the Code, and, with
reference to any "Principal User, means a "related person" within the meaning
of Section 144(a)(3) of the Code.
"Reserved Rights" means those certain rights of Issuer under this
Agreement to indemnification, liability insurance proceeds and reimbursement
for certain costs and expenses pursuant Sections 7.06, 7.03 and 12.01(b)
hereof, to receive notice pursuant to Section 12.03 hereof and to inspect
Borrower's books and records pursuant to Section 7.02 hereof.
"State" means the State of Michigan.
"Substantial User" means, with respect to any "facilities" (as the term
"facilities' is used in section 147(a) of the Code), a "substantial user" of
such "facilities" within the meaning of Section 147(a)of the Code.
"Tax Compliance Certificate" means, collectively, the Non-Arbitrage
Certificate and the Tax Compliance Certificate, each dated as of the date
hereof, executed by Borrower in connection with the Issuance of the Bond.
"UCC" means the Uniform Commercial Code as adopted and in effect in the
State.
"Vendor" means the manufacturer or vendor of an item of Equipment, as
well as the agents or dealers of the manufacturer, from whom Borrower has
purchased or is purchasing items of Equipment.
Section 1.02. Exhibits. The following exhibits are attached hereto and
made a part hereof:
Exhibit A: Form of Schedule of Equipment and Loan Payments describing
the Equipment and setting forth the Loan Payments and Prepayment Amounts.
Issuer hereby authorizes Lender to insert in Exhibit A the serial or other
identifying numbers relating to the Equipment when available.
Exhibit B: Form of Certificate of Acceptance.
Exhibit C: Form of opinion of counsel to Borrower and Guarantors.
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Exhibit D: Form of opinion of Bond Counsel.
Exhibit E: Form of Bond.
Section 1.03. Rules of Construction. (a) The singular form of any word
used herein, including the terms defined in Section 1.01 hereof, shall include
the plural, and vice versa. The use herein of a word of any gender shall
include correlative words of all genders.
(b) Unless otherwise specified, references to Articles, Sections and
other subdivisions of this Agreement are to the designated Articles, Sections
and other subdivision of this Agreement as originally executed. The words
"hereof," "herein," "hereunder" and words of similar import refer to this
Agreement as a whole.
(c) The headings or titles of the several articles and sections shall
be solely for convenience of reference and shall not affect the meaning,
construction or effect of the provisions hereof.
ARTICLE II
FINANCING OF EQUIPMENT AND TERMS OF LOANS
Section 2.01. Acquisition of Equipment. Borrower either has ordered or
shall order the Equipment pursuant to one or more Purchase Agreements from one
or more Vendors. Borrower shall remain liable to the Vendor or Vendors in
respect of its duties and obligations in accordance with each Purchase
Agreement and shall bear the risk of loss with respect to any loss or claim
relating to any item of Equipment covered by any Purchase Agreement, and
neither Lender nor Issuer shall assume any such liability or risk of loss.
Section 2.02. Loan. Lender hereby agrees, subject to the terms and
conditions of this Agreement, to make a loan to Issuer pursuant to the terms
hereof and through the purchase of the Bond in the amount of $4,000,000.00;
Issuer hereby agrees, subject to the terms and conditions of this Agreement
and the Bond, to sell the Bond to Lender and to lend the Loan Proceeds to
Borrower; and Borrower hereby agrees to borrow such amount from Issuer. Upon
fulfillment of the conditions set forth in Article III hereof, Lender shall
deposit the Loan Proceeds (consisting of the proceeds of the Bond) in the
Escrow Fund to be held, invested and disbursed as provided in the Escrow
Agreement. Issuer's obligation to make payments on the Bond, and Borrower's
obligation to repay the Loan, shall commence, and interest shall begin to
accrue, on the date on which Loan Proceeds are deposited in the Escrow Fund
(which shall be the date on which the Bond is issued).
Section 2.03. Interest. The principal amount of the Bond and the Loan
hereunder outstanding from time to time shall bear interest (computed on the
basis of actual days elapsed in a 360-day year) at the rate of five and
ninety-nine hundredths percent (5.99%). Interest accruing on the principal
balance of such loans outstanding from time to time shall be payable as
provided in Exhibit A and the Bond and upon earlier demand in accordance with
the terms hereof or prepayment in accordance with the terms of the Bond and
Section 2.07 hereof.
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Section 2.04. Payments. Issuer shall pay the principal of, premium, if
any in accordance with Section 2.07 hereof and interest on the Bond, but only
out of the amounts paid by Borrower pursuant to this Agreement. Borrower shall
pay to Lender, as assignee of Issuer and holder of the Bond, Loan Payments, in
the amounts and on the dates set forth in Exhibit A hereto. As security for
its obligation to pay the principal of, premium, if any in accordance with
Section 2.07 hereof, and interest on the Bond, Issuer assigns to Lender all of
Issuer's right to receive Loan Payments from Borrower hereunder, all of
Issuer's rights hereunder (except Reserved Rights) and all of Issuer's right,
title and interest in and to the Equipment, and Issuer irrevocably constitutes
and appoints Lender and any present or future officer or agent of Lender as
its lawful attorney, with full power of substitution and resubstitution, and
in the name of Issuer or otherwise, to collect the Loan Payments and any other
payments due hereunder and under the Bond and to sue in any court for such
Loan Payments or other payments, to exercise all rights hereunder with respect
to the Equipment and to withdraw or settle any claims, suits or proceedings
pertaining to or arising out of this Agreement upon any terms. Such Loan
Payments and other payments shall be made by Borrower directly to Lender, as
Issuer's assignee, and shall be credited against Issuer's payment obligations
hereunder and under the Bond. No provision, covenant or agreement contained in
this Agreement or any obligation herein imposed on Issuer, or the breach
thereof, shall constitute or give rise to or impose upon Issuer or the State a
pecuniary liability, a charge upon its general credit or taxing powers or a
pledge of its general revenues but shall be a limited obligation as described
herein. Issuer has no taxing power. All amounts required to be paid by
Borrower hereunder shall be paid in lawful money of the United States of
America in immediately available funds. No recourse shall be had by Lender or
Borrower for any claim based on this Agreement or the Bond against any member,
director, officer, employee or agent of Issuer alleging personal liability on
the part of such person.
Section 2.05 Payment on Non-Business Days. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Business Day,
such payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of
interest or the fees hereunder, as the case may be.
Section 2.06. Loan Payments To Be Unconditional. The obligations of
Borrower to make payment of the Loan Payments required under this Article II
and to make other payments hereunder and to perform and observe the covenants
and agreements contained herein shall be absolute and unconditional in all
events, without abatement, diminution, deduction, setoff or defense for any
reason, including (without limitation) any failure of the Equipment to be
delivered or installed, any defects, malfunctions, breakdowns or infirmities
in the Equipment or any accident, condemnation, destruction or unforeseen
circumstances. Notwithstanding any dispute between Borrower and any of Issuer,
Lender, any Vendor or any other person, Borrower shall make all Loan Payments
when due and shall not withhold any Loan Payments pending final resolution of
such dispute, nor shall Borrower assert any right of set-off or counterclaim
against its obligation to make such payments required under this Agreement.
Section 2.07. Prepayments. (a) Borrower may, in its discretion, prepay
the Loan and the Bond in whole at any time after the third anniversary of the
date hereof by paying the applicable Prepayment Amount.
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(b) Borrower shall prepay the Loan and the Bond in whole or in part at
any time pursuant to Article IX hereof by paying the applicable Prepayment
Amount.
(c) Borrower shall prepay the Loan and the Bond in full immediately upon
demand of Lender after the occurrence of an Event of Default by paying the
applicable Prepayment Amount.
(d) Borrower shall prepay the Loan and the Bond in full immediately upon
demand of Lender after the occurrence of a Determination of Taxability;
provided, however, that Lender, in its sole discretion may waive the
requirement that the Loan and the Bond be prepaid pursuant to this Section
2.07(d).
(e) The Loan and the Bond shall be repaid in part with funds remaining in
the Escrow Fund upon termination of the Escrow Agreement as provided in
Sections 2.03 or 2.04 of the Escrow Agreement. Such prepayment shall be without
prepayment premium or penalty as long as such funds are not in an amount
greater than $150,000.00. In the event that such funds are in an amount equal
to or greater than $150,000 00, any such prepayment shall be subject to a 2%
prepayment premium and shall not occur unless Borrower provides an opinion of
counsel that such prepayment will not result in a Default or Event of Default
and an opinion of Bond Counsel that such prepayment will not result in a
Determination of Taxability.
Upon any prepayment in part of the Loan and the Bond, the prepayment
shall be applied to the Principal portion of prepayments in inverse order of
maturity.
Section 2.08. Execution, Authentication and Delivery of the Bond.
The Bond shall be executed on behalf of Issuer by the manual signature of a
member or an authorized officer of Issuer and shall have impressed or printed
thereon the official seal of Issuer.
Section 2.09 Mutilated, Lost, Stolen or Destroyed Bond. Subject to
Act 354, Michigan Public Acts, 1972, as amended, and any other applicable law,
in the event the Bond is mutilated, lost, stolen or destroyed, Issuer may
authorize the execution and delivery of a new bond of like tenor as that
mutilated, lost, stolen or destroyed; provided, however, that in the case of
any mutilated Bond, such mutilated Bond shall first be surrendered to Issuer
and in the case of any lost, stolen or destroyed Bond, there shall first be
furnished to Issuer evidence of the ownership thereof and of such loss, theft
or destruction satisfactory to Issuer together, in each case, with a bond of
indemnity satisfactory to Issuer. Issuer may charge the holder or owner of
such Bond with any amounts provided by the aforesaid Act 354 and any other
applicable law.
ARTICLE III
CONDITIONS PRECEDENT
Lender's agreement to purchase the Bond, to make the loan to Issuer
hereunder and to deposit the Loan Proceeds with Escrow Agent shall be subject
to the condition precedent that Lender shall have received all of the
following, each in form and substance satisfactory to Lender:
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(a) This Agreement, properly executed on behalf of Issuer and
Borrower, and each of the Exhibits hereto properly completed.
(b) The Bond, in the form attached hereto as Exhibit E, properly
executed on behalf of Issuer.
(c) The Tax Compliance Certificate, properly executed on behalf of
Borrower, in form and substance acceptable to Lender.
(d) The Escrow Agreement, properly executed on behalf of Issuer,
Borrower and Escrow Agent.
(e) The Indemnity Agreement, properly executed on behalf of
Borrower, in form and substance acceptable to Lender.
(f) A certificate of the Secretary or an Assistant Secretary of
Borrower, certifying as to (i) the resolutions of the board of directors
and, if required, the shareholders of Borrower, authorizing the
execution, delivery and performance of this Agreement, the Escrow
Agreement and the Tax Compliance Certificate and any related documents,
(ii) the bylaws of Borrower, and (iii) the signatures of the officers or
agents of Borrower authorized to execute and deliver this Agreement, the
Escrow Agreement and the Tax Compliance Certificate and other
instruments, agreements and certificates on behalf of Borrower.
(g) Currently certified copies of the Articles of Incorporation of
Borrower.
(h) A Certificate of Good Standing issued as to Borrower by the
Secretary of State of the state of Borrower's incorporation and by the
Michigan Department of Consumer and Industry Services not more than 10
days prior to the date hereof.
(i) Certificates of the insurance required hereunder, containing a
lender's loss payable clause or endorsement in favor of Lender.
(j) A completed and executed Form 8038 or evidence of filing
thereof with the Secretary of Treasury.
(k) A resolution or evidence of other official action taken by or
on behalf of Issuer to authorize the transactions contemplated hereby.
(i) Evidence that the financing of the Equipment has been approved
by the "applicable elected representative" of Issuer after a public
hearing held upon reasonable notice.
(m) A true and correct copy of any and all leases pursuant to which
Borrower is leasing the property where the Equipment will be located,
together with a landlord's disclaimer and consent with respect to each
such lease.
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(n) A true and correct copy of any and all mortgages, deeds of
trust or similar agreements (whether or not Borrower is a party to any
such agreement) relating to the property where the Equipment will be
located, together with a mortgagee's waiver with respect to each such
mortgage, deed of trust or similar agreement.
(o) As applicable, financing statements, including fixture filings
if necessary, executed by Borrower, as debtor, and naming Issuer, as
secured party, and Lender, as assignee, and/or the original certificate
of title or manufacturer's certificate of origin and title application
if any of the Equipment is subject to certificate of title laws.
(p) Financing statements, including fixture filings if necessary,
executed by Issuer, as debtor, and naming Lender, as secured party.
(q) Current searches of appropriate filing offices showing that (i)
no state or federal tax liens have been filed and remain in effect
against Borrower, (ii) no financing statements have been filed and
remain in effect against Borrower relating to the Equipment except those
financing statements filed by Lender, (iii) Lender has duly filed all
financing statements necessary to perfect the security interest created
pursuant to this Agreement and (iv) Lender has duly filed all financing
statements necessary to perfect the transfer of Issuer's interest in
this Agreement and the Loan Payments.
(r) A Guaranty Agreement in form and substance acceptable to Lender
executed on behalf of each Guarantor.
(s) An opinion of counsel to Borrower, addressed to Lender and
Issuer, in the form attached hereto as Exhibit C.
(t) An opinion of Bond Counsel, addressed to Lender and Issuer, in
the form attached hereto as Exhibit D.
(u) Payment of Lender's fees, commissions and expenses required by
Section 12.01 hereof.
(v) Payment of Issuer's fees incurred in connection with this
Agreement and the transactions contemplated hereby.
(w) Any other documents or items required by Lender.
(x) A mortgagee's waiver with respect to the Equipment in form and
substance acceptable to Lender executed on behalf of MetLife Capital
Financial Corporation and security interest subordination agreement(s)
or release(s) in form and substance acceptable to Lender with respect to
the Equipment executed by such persons as Lender may request in form and
substance acceptable to Lender.
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Lender's agreement to consider approval of any disbursement from the
Escrow Fund shall be subject to the further conditions precedent that on the
date thereof:
(y) Lender shall have received each of the items required for a
disbursement pursuant to the Escrow Agreement;
(z) Lender shall have received in form and substance satisfactory
to Lender Vendor invoice(s) and/or bill(s) of sale relating to the
Equipment and, if such invoices have been paid by Borrower, evidence of
payment thereof and, if applicable, evidence of official intent to
reimburse such payment as required by the Code;
(a) the representations and warranties contained in Articles IV and
V hereof are correct on and as of the date of such disbursement as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier due; and
(b) no event has occurred and is continuing, or would result from
such disbursement, which constitutes a Default, an Event of Default or a
Determination of Taxability.
(c) Lender shall have received evidence satisfactory to Lender that
Lender has a first priority perfected security interest in the
Equipment, including (without limitation) current searches of
appropriate filing offices showing that (i) no state or federal tax
liens or judgment liens have been filed and remain in effect against
Borrower and (ii) no financing statements have been filed and remain in
effect against Borrower relating to the Equipment except those financing
statements filed by or on behalf of Lender.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISSUER
Issuer represents, warrants and covenants for the benefit of Lender and
Borrower, as follows:
(a) Issuer is a public body corporate and politic duly created and
validly existing under the Constitution and laws of the State.
(b) Issuer is authorized under the Act to issue the Bond and to
enter into this Agreement, the Escrow Agreement and the transactions
contemplated hereby and to perform all of its obligations hereunder.
(c) Issuer has duly authorized the issuance of the Bond and the
execution and delivery of this Agreement and the Escrow Agreement under
the terms and provisions of the resolution of its governing body, and
further represents, covenants and warrants that all requirements have
been met and procedures have occurred in order to ensure the
enforceability of this Agreement and the Escrow Agreement against
Issuer, and Issuer has complied with such public bidding requirements
(if any) as may be applicable to this Agreement. Issuer has
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taken all necessary action and has complied with all provisions of
the Act required to make this Agreement and the Escrow Agreement the
valid and binding obligations of Issuer.
(d) The officer of Issuer executing this Agreement and any related
documents has been duly authorized to execute and deliver this Agreement
and the Escrow Agreement and such related documents under the terms and
provisions of a resolution of Issuer's governing body, or by other
appropriate official action.
(e) This Agreement and the Escrow Agreement are legal, valid and
binding Obligations of Issuer, enforceable in accordance with their
respective terms, except to the extent limited by bankruptcy,
reorganization or other laws of general application relating to
effecting the enforcement of creditors' rights.
(f) All of the proceedings approving this Agreement, the Escrow
Agreement and the Bond were conducted by Issuer at meetings which
complied with Act 267, Michigan Public Acts, 1976, as amended.
(g) No member of the Board of Directors of Issuer is directly or
indirectly a party to or in any manner whatsoever interested in this
Agreement, the Escrow Agreement, the Bond or the proceedings related
thereto.
(h) Issuer has assigned to Lender all of Issuer's rights in the
Equipment and this Agreement (except Reserved Rights) including the
assignment of all rights in the security interest granted to Issuer by
Borrower.
(i) Issuer will not pledge, mortgage or assign this Agreement to
any person, firm or corporation, except as provided under the terms
hereof.
(j) None of the execution and delivery of this Agreement or the
Escrow Agreement, the consummation of the transactions contemplated
hereby or the fulfillment of or compliance with the terms and conditions
of this Agreement or the Escrow Agreement violates any law, rule,
regulation or order, conflicts with or results in a breach of any of the
terms, conditions or provisions of any restriction or any agreement or
instrument to which Issuer is now a party or by which it is bound or
constitutes a default under any of the foregoing or results in the
creation or imposition of any prohibited lien, charge or encumbrance of
any nature whatsoever upon any of the property or assets of Issuer under
the terms of any instrument or agreement.
(k) There is no action, suit, proceeding, claim, inquiry or
investigation, at law or in equity, before or by any court, regulatory
agency, public board or body which has been served upon Issuer or, to
the best of Issuer's knowledge, is threatened against or affecting
Issuer, challenging Issuer's authority to enter into this Agreement or
the Escrow Agreement or any other action wherein an unfavorable ruling
or finding would adversely affect the enforceability of this Agreement
or the Escrow Agreement or any other transaction of Issuer which is
similar hereto, or the exclusion of the interest on the Bond from gross
income for federal tax purposes
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under the Code, or would materially and adversely affect any of the
transactions contemplated by this Agreement.
(l) Issuer will submit or cause to be submitted to the Secretary of
the Treasury a Form 8038 at the time and in the form required by the
Code.
(m) The financing of the Equipment has been approved by the
"applicable elected representative" (as defined in Section 147(f) of the
Code) of Issuer after a public hearing held upon reasonable notice.
(n) Issuer will take no action that would cause the Interest to
become includable in gross income for federal income tax purposes under
the Code.
(o) Issuer covenants that it will promptly pay or cause to be paid
to Lender the Loan Payments payable by Borrower hereunder and under the
Bond to the extent actually received from Borrower at the place, on the
dates and in the manner set forth herein and in the Bond.
(p) Issuer recognizes that investment of the Loan Proceeds will be
at the written direction of Borrower, but agrees that it will commit no
act that would cause the Bond to be an "arbitrage bond" within the
meaning of Section 148(a) of the Code.
ARTICLE V
REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BORROWER
Borrower represents, warrants and covenants for the benefit of Lender and
Issuer, as follows:
(a) Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the state of Delaware, has power to
enter into this Agreement and the Escrow Agreement and by proper
corporate action has duly authorized the execution and delivery of this
Agreement, the Escrow Agreement and the Tax Compliance Certificate.
Borrower is in good standing and is duly licensed or qualified to
transact business in the State and in all jurisdictions where the
character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary.
(b) Borrower has been fully authorized to execute and deliver this
Agreement, the Escrow Agreement and the Tax Compliance Certificate under
the terms and provisions of the resolution of its board of directors, or
by other appropriate official approval, and further represents,
covenants and warrants that all requirements have been met, and
procedures have occurred in order to ensure the enforceability of this
Agreement, the Escrow Agreement and the Tax Compliance Certificate and
this Agreement, the Escrow Agreement and the Tax Compliance Certificate
have been duly authorized, executed and delivered.
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(c) The officer of Borrower executing this Agreement, the Escrow
Agreement and the Tax Compliance Certificate and any related documents
has been duly authorized to execute and deliver this Agreement, the
Escrow Agreement and the Tax Compliance Certificate and such related
documents under the terms and provisions of a resolution of Borrower's
board of directors.
(d) This Agreement, the Escrow Agreement and the Tax Compliance
Certificate constitute valid and legally binding obligations of
Borrower, enforceable against Borrower in accordance with their
respective terms, except to the extent limited by bankruptcy,
reorganization or other laws of general application relating to
effecting the enforcement of creditors' rights.
(e) The execution and delivery of this Agreement, the Escrow
Agreement and the Tax Compliance Certificate, the consummation of the
transactions contemplated hereby and the fulfillment of the terms and
conditions hereof do not and will not violate any law, rule, regulation
or order, conflict with or result in a breach of any of the terms or
conditions of the articles of incorporation or bylaws of Borrower or of
any corporate restriction or of any agreement or instrument to which
Borrower is now a party and do not and will not constitute a default
under any of the foregoing or result in the creation or imposition of
any liens, charges or encumbrances of any nature upon any of the
property or assets of Borrower contrary to the teens of any instrument
or agreement to which Borrower is a party or by which it is bound.
(f) The authorization, execution, delivery and performance of this
Agreement by Borrower do not require submission to, approval of, or
other action by any governmental authority or agency, which action with
respect to this Agreement has not been taken and which is final and
nonappealable.
(g) There is no action, suit, proceeding, claim, inquiry or
investigation, at law or in equity, before or by any court, regulatory
agency, public board or body pending or, to the best of Borrower's
knowledge, threatened against or affecting Borrower, challenging
Borrower's authority to enter into this Agreement, the Escrow Agreement
or the Tax Compliance Certificate or any other action wherein an
unfavorable ruling or finding would adversely affect the enforceability
of this Agreement, the Escrow Agreement or the Tax Compliance
Certificate or any other transaction of Borrower which is similar
hereto, or the exclusion of the Interest from gross income for federal
tax purposes under the Code, or would materially and adversely affect
any of the transactions contemplated by this Agreement.
(h) The property at which the Equipment is located is properly
zoned for its current and anticipated use and the use of the Equipment
will not violate any applicable zoning, land use, environmental or
similar law or restriction. Borrower has all licenses and permits to use
the Equipment. Borrower has obtained all permits, licenses and other
authorizations which are required under federal, state and local laws
relating to emissions, discharges, releases of pollutants, contaminants,
hazardous or toxic materials, or wastes into ambient air, surface water,
ground water or land, or otherwise relating to the manufacture,
processing, distribution,
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use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or wastes
("Environmental Laws") at Borrower's facilities or in connection
with the operation of its facilities. Except as previously disclosed
to Lender in writing, Borrower and all activities of Borrower at its
facilities comply with all Environmental Laws and with all terms and
conditions of any required permits, licenses and authorizations
applicable to Borrower with respect thereto. Except as previously
disclosed to Lender in writing, Borrower is also in compliance with
all limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
Environmental Laws or contained in any plan, order, decree, judgment
or notice of which Borrower is aware. Except as previously disclosed
to Lender in writing, Borrower is not aware of, nor has Borrower
received notice of, any events, conditions, circumstances,
activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance with, or which may
give rise to any liability under, any Environmental Laws.
(i) The Equipment is of the type authorized and permitted to be
financed by the Act.
(j) Borrower owns or will own the Equipment and intends to operate
the Equipment, or cause the Equipment to be operated, as a "project,"
within the meaning of the Act, until the date on which all of the Loan
Payments have been fully paid or the applicable Prepayment Amount has
been fully paid.
(k) Borrower will not take any action that would cause the Interest
to become includable in gross income of the recipient for federal income
tax purposes under the Code, and Borrower will take and will cause its
officers, employees and agents to take all affirmative actions legally
within its power necessary to ensure that the Interest does not become
includable in gross income of the recipient for federal income tax
purposes under the Code (including, without limitation, the calculation
and payment of any rebate required to preserve such exclusion).
(l) Borrower has heretofore furnished to Lender the audited
financial statement of Borrower for its fiscal year ended September 30,
1995 and the unaudited financial statement of Borrower for the months
ended March 31, 1996, and those statements fairly present the financial
condition of Borrower on the dates thereof and the results of its
operations and cash flows for the periods then ended and were prepared
in accordance with generally accepted accounting principles. Since the
date of the most recent financial statements, there has been no material
adverse change in the business, properties or condition (financial or
otherwise) of Borrower.
(m) Borrower has paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be
withheld by it. Borrower has filed all federal, state and local tax
returns which are required to be filed, and Borrower has paid or caused
to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by it to the extent such
taxes have become due.
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(n) Borrower has or will have good and absolute title to all
Equipment and all proceeds thereof, free and clear of all mortgages,
security interests, liens and encumbrances except for the security
interest created pursuant to this Agreement.
(o) All financial and other information provided to Lender by or on
behalf of Borrower and each Guarantor in connection with Borrower's
request for the Loan contemplated hereby is true and correct in all
material respects and, as to projections, valuations or pro forma
financial statements, present a good faith opinion as to such
projections, valuations and pro forma condition and results.
(p) Borrower has provided to Lender signed financing statements
sufficient when filed to perfect the security interest created pursuant
to this Agreement. When such financing Statements are filed in the
offices noted therein, Lender, as assignee of Issuer, will have a valid
and perfected security interest in the Equipment, subject to no other
security interest, Assignment, Lien or encumbrance. Borrower intends the
Equipment to be and remain personal property rather than a fixture on
real estate. Borrower owns the real property where the Equipment will be
located subject to no liens or encumbrances of any kind except a
mortgage interest held by MetLife Capital Financial Corporation.
(q) Upon delivery and installation of the Equipment, Borrower will
provide to lender a completed and executed copy of the Certificate of
Acceptance attached hereto as Exhibit B.
(r) All representations and warranties of Borrower set forth in the
Tax Compliance Certificate are true and correct as of the date hereof.
Borrower will comply fully at all times with the Tax Compliance
Certificate, and Borrower will not take any action, or omit to take any
action which, if taken or omitted, respectively, would violate the Tax
Compliance Certificate.
(s) Expenses for work done by officers or employees of Borrower in
connection with the Equipment will be included as an Acquisition Cost,
if at all, only to the extent (i) such persons were specifically
employed for such particular purpose, (ii) the expenses do not exceed
the actual cost thereof and (iii) such expenses are treated or capable
of being treated (whether or not so treated) on the books of Borrower as
a capital expenditure in conformity with generally accepted accounting
principles applied on a consistent basis.
(t) Any costs incurred with respect to that part of the Equipment
paid from the Loan proceeds shall be treated or capable of being treated
on the books of Borrower as capital expenditures in conformity with
generally accepted accounting principles applied on a consistent basis.
(u) No part of the Loan Proceeds will be used to finance inventory
or rolling stock or will be used for working capital or to finance any
other cost (other than Issuance Costs not exceeding $80,000) not
constituting an Acquisition Cost.
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(v) No person other than Borrower and Uniflow Corporation
(Borrower's wholly-owned subsidiary) is in occupancy or possession of
any portion of the real property where the Equipment is located.
(w) The Equipment is property of the character subject to the
allowance for depreciation under Section 167 of the Code.
(x) The completion of the acquisition of the Equipment will not
have the effect of transferring more than 20 full-time employees from
one municipality of the State to another and is expected to create
approximately 25 jobs in the City of Novi and thereby promote the
development of present business enterprises in Michigan.
(y) None of the Loan Proceeds shall be applied to any costs of the
acquisition or installation of the Equipment which were paid (within the
meaning of Section 103 of the Code) prior to the date 60 days before the
date (March 27, 1996) on which the inducement resolution was adopted by
Issuer with respect to the Equipment. Issuer adopted a resolution
declaring official intent to finance the costs of the Equipment pursuant
to Treas. Reg. 1.150-2 not more than 60 days after the date on which the
acquisition and installation of the Equipment commenced.
(z) No member, director or officer of Issuer has any interest of
any kind in Borrower which would result, as a result of the Loan and the
issuance of the Bond, in a substantial financial benefit to such persons
other than as a member of the general public of the State.
(aa) Other than Issuer's $3,000,000 Limited Obligation Revenue Bond
(Secom General Corporation Project), Series 1996A, there are no
outstanding bonds as described in Section 144(a)(2) of the Code that
have been issued by any state, political subdivision, district, public
body, agency, authority, commission or instrumentality, the proceeds of
which have been or will be used with respect to facilities located
within the City of Novi, Oakland County, Michigan, the Principal User of
which is Borrower or a Related Person as defined in Section 144(a)(3) of
the Code or a Principal User of the Equipment or any Related Person to
any such Principal User.
(bb) All property which is to be financed by the net Loan Proceeds
is to be owned by Borrower.
(cc) All reimbursements to Borrower for Acquisition Costs from Loan
Proceeds shall be made in compliance with Treasury Regulation 1.150-2
(the "Reimbursement Regulations").
(dd) The amount of Issuance Costs financed from the proceeds of the
sale of the Bond shall not exceed 2% of the Loan Proceeds.
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(ee) Borrower has heretofore supplied Lender and Issuer estimates of
the costs of the Equipment, the completion date and periods of
usefulness of the Equipment. Borrower hereby warrants that such
estimates were made in good faith and are fair, reasonable and
realistic.
(ff) Borrower shall complete the acquisition of the Equipment as
required by the Act as promptly as practicable, and shall cause to be
paid all costs of the Equipment in excess of the moneys available
therefor in the Escrow Fund in compliance with the terms of the Escrow
Agreement.
(gg) Borrower expects to complete acquisition and installation of
the Equipment by June 1, 1997.
(hh) There are no other bonds described in Section 144(a) of the
Code which have been issued, or are contemplated to be issued, pursuant
to Section 144(a) of the Code (or its predecessor provision), for the
benefit of Borrower, any Principal User, or any Related Person to
Borrower and which (i) were or are to be sold at substantially the same
time as the Bond; (ii) were or are to be sold pursuant to a common plan
of marketing as the marketing plan for the Bond; (iii) were or are to be
sold at substantially the same rate of interest as the interest rate on
the Bond; and (iv) are payable directly or indirectly by Borrower or
from the source from which the Bond is payable.
(ii) Not less than 95% of the net Loan Proceeds (including
investment proceeds) will be expended for the acquisition, construction,
reconstruction or improvement of land or property of a character subject
to the allowance for depreciation within the meaning of Section
144(a)(1) of the Code paid in compliance with the Reimbursement
Regulations and not less than 100% of the Loan Proceeds will be used to
pay costs as permitted by the Act.
(jj) The information furnished by Borrower and used by Issuer in
preparing the Form 8038, Information Return for Tax-Exempt Private
Activity Bond Issues, to be filed by or on behalf of Issuer with the
Internal Revenue Service in Philadelphia, Pennsylvania pursuant to
Section 149(e) of the Code, was true and complete as of the date of
completion of said Form 8038.
(kk) The average maturity of the Bond does not exceed 120% of the
average reasonably expected economic life of the Equipment, as
determined pursuant to Section 147(b) of the Code.
(ll) No more than 25% of the net Loan Proceeds 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 Loan Proceeds 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 skating), racquet sports facility (including any
handball or racquetball court), hot tub facility, suntan facility,
racetrack, airplane,
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skybox or other private luxury box, health club facility, facility
primarily used for gambling, store the principal business of which
is the sale of alcoholic beverages for off premises consumption or
residential real property for family units.
(mm) Less than 25% of the net Loan Proceeds will be used to acquire
land. No portion of the Loan Proceeds will be used to acquire land (or
an interest therein) to be used for farming purposes.
(nn) No portion of the net Loan Proceeds will be used for the
acquisition of any property (or an interest therein) unless the first
use of such property is pursuant to such acquisition.
(oo) The sum of the authorized face amount of the Bond allocable to
each test-period beneficiary (as defined in Section 144(a)(10)(D) of the
Code) plus the respective aggregate face amount of all tax-exempt
facility related bonds presently outstanding which are allocable to each
such test-period beneficiary does not exceed $40,000,000. During a three
(3) year period commencing on the later of the date of the issuance of
the Bond or the date the Equipment is placed in service, Borrower shall
not sell a portion of the Equipment or lease or allow the sublease of a
portion of the Equipment 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.
(pp) The Equipment does not consist of a portion of a single
building, enclosed shopping mall or strip of offices, stores or
warehouses using substantial common facilities with any other portion or
portions of such property (of which the Equipment is a part) and where
any such other portions are or will be financed with qualified bonds the
interest on which is excluded from gross income for federal income tax
purposes under Section 103(a) of the Code.
(qq) The payment of principal or interest with respect to the Bond
is not guaranteed In whole or in part by the United States or any agency
or instrumentality thereof. The Bond is 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 or interest on
the Bond 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.
(rr) Borrower will comply with the provisions of Section 148 of the
Code. Borrower covenants, for the benefit of itself, Issuer and Lender,
that it will not cause or permit any Loan Proceeds 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 Issuer
(including, without limitation, performing required calculations, the
keeping of proper records and the
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timely payment to the Department of the Treasury of the United
States, in the name of Issuer, all of amounts required to be so paid
by Section 148 of the Code).
(ss) No event has occurred and no condition exists with respect to
Borrower that would constitute an "Event of Default" under this
Agreement or that, with the lapse of time or the giving of notice or
both, would become an "Event of Default" under this Agreement.
(tt) At least 95% of the net Loan Proceeds will be used to finance a
"manufacturing facility' within the meaning of Section 144(a)(12)(C) of
the Code, and no more than 25% of the net Loan Proceeds will be used to
finance facilities that are "directly related and ancillary" thereto
within the meaning of Section 144(a)(12)(C) of the Code. For this
purpose, the term "manufacturing facility" means any facility which is
used in the manufacturing or production of tangible personal property
(including the processing resulting in a change in the condition of such
property). Manufacturing facilities do not include an office unless such
office is located on the premises of the manufacturing facility and not
more than a de minimus (5%) portion of the functions to be performed at
such office is not directly related to the day-to-day operations at such
facility. Manufacturing facilities do not include storage facilities for
raw materials, work in process, finished goods or other materials unless
such storage facilities are located on the premises of the manufacturing
facility and are directly related to a manufacturing activity conducted
at such facility as opposed to a warehousing, distributing, wholesaling,
retailing or other non-manufacturing activity.
(uu) No Loan Proceeds will be allocated to the reimbursement of an
expenditure for costs of the Equipment unless such reimbursement
allocation is made not later than 18 months after the later of:
(i) the date the original expenditure is paid; or
(ii) the date the Equipment is placed in service or abandoned, but
in no event more than 3 years after the original expenditure
is paid.
(vv) No person that was a Substantial User of the Equipment at any
time during the five (5) year period before the date on which the Bond
was issued or any Related Person to that user (x) will receive (directly
or indirectly) 5% or more of the Loan Proceeds for such person's
interest in the Equipment, and (y) will be a Substantial User of the
Equipment at any time during the five (5) year period after the date on
which the Bond was issued.
(ww) Borrower will not permit the sum of (i) the face amount of the
Bond, plus (ii) Capital Expenditures made during the period of six (6)
years beginning three (3) years prior to the issuance of the Bond and
extending three (3) years thereafter, plus (iii) the outstanding
principal amount of any prior industrial development bond issues issued
to finance facilities of Borrower or any Related Person in the City of
Novi, Michigan, to exceed $10,000,000.
(xx) Notwithstanding any other provisions of this Agreement or any
other agreement or any rights of Borrower under this Agreement or any
other agreement, Borrower
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shall not take or permit to be taken by its agents or assigns any
action which, or fail to take any reasonable action the omission of
which would (i) impair the exclusion of interest on the Bond from
the gross income of the recipient under the Code or (ii) affect the
validity of the Bond under the Act.
ARTICLE VI
TITLE TO EQUIPMENT; SECURITY INTEREST
Section 6.01. Title to the Equipment. Legal title to the Equipment and
any and all repairs, replacements, substitutions and modifications to such
Equipment shall be in Borrower. Borrower will at all times protect and defend,
at its own cost and expense, its title from and against all claims, liens and
legal processes of creditors of Borrower, and keep all Equipment free and
clear of all such claims, liens and processes.
Section 6.02. Security Interest in Equipment. This Agreement is
intended to constitute a security agreement within the meaning of the UCC. As
security for Borrower's payment to Lender, as assignee of Issuer, of Loan
Payments and all other amounts payable to Lender hereunder, under the
Indemnity Agreement and under the Prior Loan Agreement and as security for any
other obligations (whether direct or indirect) of Borrower to Lender, Borrower
hereby grants to Issuer, and Issuer hereby assigns to Lender, a security
interest constituting a first lien on the Equipment, all repairs,
replacements, substitutions and modifications thereto or thereof and all
proceeds of the foregoing. Issuer and Borrower agree to execute such
additional documents, including financing statements (including fixture
filings if necessary), assignments, affidavits, notices and similar
instruments, in form satisfactory to Lender, and to take such other actions
that Lender deems necessary or appropriate to establish and maintain the
security interest created by this Sections and Borrower hereby designates and
appoints Lender as its agent, and grants to Lender a power of attorney (which
is coupled with an interest), to execute on behalf of Borrower, such
additional documents and to take such other actions. If requested by Lender,
Borrower shall obtain a landlord and/or mortgagee's consent and waiver with
respect to the property where the Equipment is located. If requested by Lender,
Borrower shall conspicuously mark the Equipment with appropriate lettering,
labels or tags, and maintain such markings, so as clearly to disclose Lender's
security interest in the Equipment.
Section 6.03. Change in Name or Corporate Structure of Borrower;
Change in Location on of Borrower's Principal Place of Business. Borrower's
chief executive office is located at the address set forth above, and all of
Borrower's records relating to its business and the Equipment are kept at such
location. Borrower hereby agrees to provide written notice to Lender and
Issuer of any change or proposed change in its name, corporate structure,
place of business or chief executive office or change or proposed change in
the location of the Equipment; provided, however, that no change or proposed
change in the location of the Equipment shall be (i) made without the prior
written consent of Lender and Issuer, together with a written opinion of Bond
Counsel to the effect that such relocation will not result in a Determination
of Taxability, or (ii) to a location outside the State. Such notice shall be
provided 30 days in advance of the date that such change or proposed change is
planned to take
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effect. Borrower does business, and has done business, only under its own name
and the trade names, if any, set forth on the execution page hereof.
Section 6.04. Liens and Encumbrances to Title. Borrower shall not,
directly or indirectly, create, incur, assume or suffer to exist any mortgage,
pledge, lien, charge, encumbrance or claim on or With respect to the Equipment
(together, "Liens") other than the respective rights of Lender and Issuer as
herein provided. Borrower shall promptly, at its own expense, take such action
as may be necessary duly to discharge or remove any such Lien. Borrower shall
reimburse Lender for any expenses incurred by Lender to discharge or remove
any Lien.
Section 6.05. Personal Property. The parties hereby intend that the
Equipment be, and during the period this Agreement is in force remain,
personal property and, when subjected to use by Borrower hereunder, not be or
become fixtures; provided, however, that if contrary to the parties' intent
the Equipment is or may be deemed to be a fixture, Borrower shall cause
filings to be made with the applicable government officials or filing offices
to create and preserve for Lender as assignee of Issuer a perfected first
priority security interest in the Equipment.
Section 6.06 Assignment of Insurance. As additional security for the
payment and performance of Borrowers obligations hereunder, Borrower hereby
assigns to Lender, as assignee of Issuer, any and all moneys (including,
without limitation, proceeds of insurance and refunds of unearned premiums)
due or to become due under, and all other rights of Borrower with respect to,
any and all policies of insurance now or at any time hereafter covering the
Equipment or any evidence thereof or any business records or valuable papers
pertaining thereto, and Borrower hereby directs the issuer of any such policy
to pay all such moneys directly to Lender. Borrower hereby assigns to Lender,
as assignee of Issuer, any and all moneys due or to become due with respect to
any condemnation proceeding affecting the Equipment. At any time, whether
before or after the occurrence of any Event of Default, Lender may (but need
not), in Lender's name or in Borrower's name, execute and deliver proof of
claim, receive all such moneys, endorse checks and other instruments
representing payment of such moneys, and adjust, litigate, compromise or
release any claim against the issuer of any such policy or party in any
condemnation proceeding.
Section 6.07. Occupancy. (a) Borrower hereby irrevocably grants to
Lender the right to occupy the property where the Equipment is located (the
"Premises") at any time after the occurrence and during the continuance of an
Event of Default.
(b) Lender may occupy the Premises only to hold, sell, store, liquidate,
realize upon or otherwise dispose of the Equipment and for other purposes that
Lender may in good faith deem to be related or incidental purposes.
(c) The right of Lender to occupy the Premises shall cease and terminate
upon the earlier of (1) payment in full and discharge of all obligations of
Borrower and Issuer hereunder, and (2) final sale or disposition of all of the
Equipment and delivery of all such Equipment to purchasers.
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(d) Lender shall not be obligated to pay or account for any rent or
other compensation for the occupancy of the Premises. Borrower will pay, or
reimburse Lender for, all taxes, fees, duties, levies, charges and expenses at
any time incurred by or imposed upon Lender by reason of the execution,
delivery, existence, recordation, performance or enforcement of this Section.
Section 6.08. Agreement as Financing Statement. To the extent permitted
by applicable law, a carbon, photographic or other reproduction of this
Agreement or of any financing statements signed by Borrower is sufficient as a
financing statement in any state to perfect the security interests granted in
this Agreement.
ARTICLE VII
AFFIRMATIVE COVENANTS OF BORROWER
So long as the Loan and the Bond shall remain unpaid, Borrower will
comply with the following requirements, unless Lender shall otherwise consent
in writing:
Section 7.01. Reporting Requirements. Borrower will deliver, or cause
to be delivered, to Lender each of the following, which shall be in form and
detail acceptable to Lender:
(a) as soon as available, and in any event within 120 days after
the end of each fiscal year of Borrower, audited financial statements of
Borrower with the unqualified opinion of independent certified public
accountants selected by Borrower and acceptable to Lender, which annual
financial statements shall include the balance sheet of Borrower as at
the end of such fiscal year and the related statements of income,
retained earnings and cash flows of Borrower for the fiscal year then
ended, ally in reasonable detail and prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with the accounting practices applied in the financial statements
referred to in Article V hereof, together with (i) a report signed by
such accountants stating that in making the investigations necessary for
said opinion they obtained no knowledge, except as specifically stated,
of any Default or Event of Default hereunder and all relevant facts in
reasonable detail to evidence, and the computations as to, whether or
not Borrower is in compliance with the requirements set forth in Section
7.10 hereof; and (ii) a certificate of the chief financial officer of
Borrower stating that such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a
basis consistent with the accounting practices reflected in the annual
financial statements referred to in Article V hereof and whether or not
such of officer has knowledge of the occurrence of any Default or Event
of Default hereunder and, if so, stating in reasonable detail the facts
with respect thereto;
(b) as soon as available and in any event within 90 days after the
end of each fiscal quarter of Borrower, an unaudited internal balance
sheet and statements of income and retained earnings of Borrower as at
the end of and for such month and for the year to date period then
ended, in reasonable detail and stating in comparative form the figures
for the corresponding date and periods in the previous year, all
prepared in accordance with generally
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accepted accounting principles applied on a basis consistent with
the accounting practices reflected in the financial statements
referred to in Article V hereof and certified by the chief financial
officer of Borrower, subject to year-end audit adjustments; and
accompanied by a certificate of that officer stating (i) that such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with
the accounting practices reflected in the financial statements
referred to in Article V hereof, (ii) whether or not such officer
has knowledge of the occurrence of any Default or Event of Default
hereunder not theretofore reported and remedied and, if so, stating
in reasonable detail the facts with respect thereto, and (iii) all
relevant facts in reasonable detail to evidence, and the
computations as to, whether or not Borrower is in compliance with
the requirements set forth in Section 7.10 hereof;
(c) immediately after the commencement thereof, notice in writing
of all litigation and of all proceedings before any governmental or
regulatory agency affecting Borrower of the type described in Article V
hereof or which seek a monetary recovery against Borrower in excess of
$250,000.00;
(d) as promptly as practicable (but in any event not later than
five Business Days) after an officer of Borrower obtains knowledge of
the occurrence of any event that constitutes a Default or an Event of
Default hereunder, notice of such occurrence, together with a detailed
statement by a responsible officer of Borrower of the steps being taken
by Borrower to cure the effect of such Default or Event of Default;
(e) promptly upon knowledge thereof, notice of any loss or
destruction of or damage to any Equipment or of any material adverse
change in any Equipment;
(f) promptly upon their distribution, copies of all financial
statements, reports and proxy statements that Borrower shall have sent
to its stockholders;
(g) promptly after the amending thereof, copies of any and all
amendments to its certificate of incorporation, articles of
incorporation or bylaws;
(h) promptly upon knowledge thereof, notice of the violation by
Borrower of any law, rule or regulation;
(i) promptly upon knowledge thereof, notice of any material adverse
change in the financial or operating condition of Borrower.
Section 7.02. Books and Records; Inspection and Examination. Borrower
will keep accurate books of record and account for itself pertaining to the
Equipment and pertaining to Borrower's business and financial condition and
such other matters as Lender may from time to time request in which true and
complete entries will be made in accordance with generally accepted accounting
principles consistently applied and, upon request of Lender or Issuer, will
permit any officer, employee, attorney or accountant for Lender or Issuer to
audit, review, make extracts from, or copy any and all corporate and financial
books, records and properties of Borrower at all times during
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ordinary business hours, and to discuss the affairs of Borrower with any of
its directors, officers, employees or agents. Borrower will permit Lender,
Issuer or any of their employees, accountants, attorneys or agents, to examine
and copy any or all of its records and to examine and inspect the Equipment at
any time during Borrower's business hours.
Section 7.03. Compliance With Laws; Environmental Indemnity. Borrower
will (a) comply with the requirements of applicable laws and regulations, the
noncompliance with which would materially and adversely affect its business or
its financial condition, (b) comply with all applicable Environmental Laws and
obtain any permits, licenses or similar approvals required by any such
Environmental Laws and (c) use and keep the Equipment, and will require that
others use and keep the Equipment only for lawful purposes, without violation
of any federal, state or local law, statute or ordinance. Borrower shall secure
all permits and licenses, if any, necessary for the installation and operation
of the Equipment. Borrower shall comply in all respects (including, without
limitation, with respect to the use, maintenance and operation of each item of
the Equipment) with all laws of the jurisdictions in which its operations
involving any component of Equipment may extend and of any legislative,
executive, administrative or judicial body exercising any power or
jurisdiction over the items at the Equipment or its interest or rights under
this Agreement. Borrower will indemnify, defend and hold Lender or Issuer
harmless from and against any claims, loss or damage to which Lender or Issuer
may be subjected as a result of any past, present or future existence, use,
handling, storage, transportation or disposal of any hazardous waste or
substance or toxic substance by Borrower or on property owned, leased or
controlled by Borrower. This indemnification shall survive the termination of
this Agreement and payment of the indebtedness hereunder and under the Bond.
Section 7.04. Payment of Taxes and Other Claims. Borrower will pay or
discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including, without limitation, the Equipment) or upon or
against the creation, perfection or continuance of the security interest
created pursuant to this Agreement, prior to the date on which penalties
attach thereto, (b) all federal, state and local taxes required to be withheld
by it, and (c) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien or charge upon any properties of Borrower;
provided, that Borrower shall not be required to pay any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings. Borrower will pay, as the same
respectively come due, all taxes and governmental charges of any kind
whosoever that may at any time be lawfully assessed or levied against or with
respect to the Equipment, as well as all gas, water, steam, electricity, heat,
power, telephone, utility and other charges incurred in the operation,
maintenance, use, occupancy and upkeep of the Equipment.
Section 7.05. Maintenance of Equipment. (a) Borrower shall, at its own
expense, maintain, preserve and keep the Equipment in good repair, working
order and condition, and shall from time to time make all repairs and
replacements necessary to keep the Equipment in such condition, and in
compliance with state and federal laws, ordinary wear and tear excepted.
Borrower shall maintain the Equipment in a condition suitable for
certification by the manufacturer thereof (if certification is available) and
in conformance with all manufacturers recommended maintenance requirements. In
the event that any parts or accessories forming part of any item or items of
Equipment become worn out,
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lost, destroyed, damaged beyond repair or otherwise rendered unfit for use,
Borrower, at its own expense and expeditiously, will replace or cause the
replacement of such parts or accessories by replacement parts or accessories
free and clear of all liens and encumbrances and with a value and utility at
least equal to that of the parts or accessories being replaced (assuring that
such replaced parts and accessories were otherwise in good working order and
repair). All such replacement parts and accessories shall be deemed to be
incorporated immediately into and to constitute an integral portion of the
Equipment and, as such, shall be subject to the terms of this Agreement.
Neither Lender nor Issuer shall have any responsibility in any of these
matters, or for the making of improvements or additions to the Equipment.
(b) Borrower will defend the Equipment against all claims or demands of
all persons (other than Lender) claiming the Equipment or any interest
therein.
(c) Borrower will keep the Equipment free and clear of all security
interests, liens and encumbrances except the security interest created
pursuant to this Agreement.
Section 7.06. Insurance; Indemnification. (a) Borrower shall, at its own
expense, procure and maintain continuously in effect: (i) public liability
insurance for personal injuries, death or damage to or loss of property
arising out of or in any way relating to the Equipment sufficient to protect
Lender and Issuer from liability in all events, with a coverage limit of not
less than $1,000,000 per occurrence unless a different coverage minimum with
respect to particular Equipment is required by Lender, and (ii) insurance
against such hazards as Lender may require, including, but not limited to,
all-risk casualty and property insurance, in an amount equal to the greater of
the full replacement cost of the Equipment with new equipment having
substantially similar specifications or the applicable Prepayment Amount.
(b) If required by State law, Borrower shall carry workers' compensation
insurance covering all employees on, in, near or about the Equipment, and upon
request, shall furnish to Lender certificates evidencing such coverage.
(c) All insurance policies required by this Article shall be taken out
and maintained with insurance companies acceptable to Lender; and shall
contain a provision that the insurer shall not cancel or revise coverage
thereunder without giving written notice to the insured parties at least thirty
(30) days before the cancellation or revision becomes effective. No insurance
shall be subject to any co-insurance clause. Each insurance policy required by
this Article shall name Lender and Issuer, as applicable, as an additional
insured party and loss payee without regard to any breach of warranty or other
act or omission of Borrower and shall include a lender's loss payable
endorsement for the benefit of Lender. Prior to the delivery of Equipment,
Borrower shall deposit with Lender evidence satisfactory to Lender of such
insurance and, prior to the expiration thereof, shall provide Lender evidence
of all renewals or replacements thereof.
(d) As among Lender, Borrower and Issuer, Borrower assumes all risks and
liabilities from any cause whatsoever, whether or not covered by insurance,
for loss or damage to any Equipment and for injury to or death of any person
or damage to any property, whether such injury or death be with respect to
agents or employees of Borrower or of third parties, and whether such property
damage be
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to Borrower's property or the property of others. Whether or not covered by
insurance, Borrower hereby assumes responsibility for and agrees to reimburse
Lender for and will indemnify, defend and hold Lender harmless from and
against all liabilities, obligations, losses, damages, penalties, claims,
actions, costs and expenses (including reasonable attorneys' fees) of
whatsoever kind and nature, imposed on, incurred by or asserted against Lender
that in any way relate to or arise out of this Agreement, the Bond, the
transactions contemplated hereby and the Equipment, including but not limited
to, (i) the selection, manufacture, purchase, acceptance or rejection of
Equipment or the ownership of the Equipment, (ii) the delivery, lease,
possession, maintenance, use, condition, return or operation of the Equipment,
(iii) the condition of the Equipment sold or otherwise disposed of after
possession by Borrower, (iv) any patent or copyright infringement, (v) the
conduct of Borrower, its officers, employees and agents, (vi) a breach of
Borrower of any of its covenants or obligations hereunder and (vii) any claim,
loss, cost or expense involving alleged damage to the environment relating to
the Equipment, including, but not limited to investigation, removal, cleanup
and remedial costs. All amounts payable by Borrower pursuant to the
immediately preceding sentence shall be paid immediately upon demand of
Lender. This provision shall survive the termination of this Agreement.
(e) Issuer and its members, officers, agents and employees (the
"Indemnified Persons") shall not be liable to Borrower for any reason.
Borrower shall indemnify and hold Issuer and the indemnified Persons harmless
from any loss, expenses (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
(i) the financing, installation, operation, use, or maintenance of the
Equipment, (ii) any act, failure to act, or misrepresentation by any person,
firm, corporation or governmental agency, including Issuer, in connection with
the Loan, (iii) any act, failure to act, or misrepresentation by Issuer in
connection with this Agreement or any other document involving Issuer in this
matter, or (iv) the selection and appointment of firms providing services to
the transactions contemplated by this Agreement. If any suit, action or
proceeding is brought against Issuer or any Indemnified Person, that action or
proceeding shall be defended by counsel to Issuer or Borrower as Issuer shall
determine. If the defense is by counsel to Issuer, which is the Attorney
General of Michigan or may, in some instances by private, retained counsel,
Borrower shall indemnify Issuer and Indemnified Persons for the reasonable
cost of that defense, including reasonable counsel fees. If Issuer determines
that Borrower shall defend Issuer or Indemnified Persons, Borrower shall
immediately assume the defense at its own cost. Borrower shall not be liable
for any settlement of any proceeding made without its consent (which consent
shall not be unreasonably withheld).
Borrower shall also indemnify Issuer for all reasonable costs and
expenses, including reasonable counsel fees incurred in: (i) enforcing any
obligation of Borrower under this Agreement or any related agreement, (ii)
taking any action requested by Borrower, (iii) taking any action required by
this Agreement or any related agreement, or (iv) taking any action considered
necessary by Issuer and which is authorized by this Agreement or any related
agreement.
Borrower shall not be obligated to indemnify Issuer or any Indemnified
Person if a court with competent jurisdiction finds that the liability in
question was caused by the willful misconduct or sole gross negligence of
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, Issuer or the Indemnified
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Person(s) is (are) fairly and reasonably entitled to indemnity for the
expenses which the court considers proper.
The obligations of Borrower under this Section 7.06(e) shall survive any
assignment or termination of this Agreement.
Section 7.07. Preservation of Corporate Existence. Borrower will
preserve and maintain its corporate existence and all of its rights,
privileges and franchises necessary or desirable in the normal conduct of its
business; and shall conduct its business in an orderly, efficient and regular
manner.
Section 7.08. Performance by Lender. If Borrower at any time fails to
perform or observe any of the covenants or agreements contained in this
Agreement, and if such failure shall continue for a period of ten calendar
days after Lender gives Borrower written notice thereof (or in the case of the
agreements contained in Sections 7.05 and 7.06 hereof, immediately upon the
occurrence of such failure, without notice or lapse of time), Lender may, but
need not, perform or observe such covenant on behalf and in the name, place
and stead of Borrower (or, at Lender's option, in Lender's name) and may, but
need not, take any and all other actions which Lender may reasonably deem
necessary to cure or correct such failure (including, without limitation, the
payment of taxes, the satisfaction of security interests, liens or
encumbrances, the performance of obligations owed to account debtors or other
obligors, the procurement and maintenance of insurance, the execution of
assignments, security agreements and financing statements, and the endorsement
of instruments), and Borrower shall thereupon pay to Lender on demand the
amount of all moneys expended and all costs and expenses (including reasonable
attorney's fees and legal expenses) incurred by Lender in connection with or
as a result of the performance or observance of such agreements or the taking
of such action by Lender, together with interest thereon from the date
expended or incurred at the rate publicly announced by Citibank, N.A. at its
principal office in New York, New York as its prime rate (any change in such
prime rate of interest to be effective on the date on which such change is
announced by Citibank, N.A.) plus 5%, but not in excess of the maximum rate
permitted by law. To facilitate the performance or observance by Lender of
such covenants of Borrower, Borrower hereby irrevocably appoints Lender, or
the delegate of Lender, acting alone, as the attorney in fact of Borrower with
the right (but not the duty) from time to time to create, prepare, complete,
execute, deliver, endorse or file in the name and on behalf of Borrower any
and all instruments, documents, assignments, security agreements, financing
statements, applications for insurance and other agreements and writings
required to be obtained, executed, delivered or endorsed by Borrower under
this Agreement.
Section 7.09. Covenant as to Nonimpairment of Tax-exempt Status.
Borrower covenants that, notwithstanding any provision of this Agreement or
the rights of Borrower hereunder, it will not take, or permit to be taken on
its behalf, any action that would impair the exclusion of Interest from gross
income for federal income tax purposes and that it will take such reasonable
action for itself and on behalf of Issuer as may be necessary to continue such
exclusion, including, without limitation, the preparation and filing of any
statements required to be filed by it in order to maintain such exclusion.
Borrower will not cause or permit any Loan Proceeds to be invested in a
manner contrary to the provisions of Section 148 of the Code and will assure
compliance with such requirements on behalf
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of Issuer. Borrower shall calculate and timely pay to the United States of
America, for the account of Issuer, all amounts required to be so paid in
accordance with Section 148 of the Code and shall maintain on behalf of
Issuer, all records required to be maintained pursuant to Section 148(f) of
the Code. At least once every five years, commencing with the end of the fifth
Bond Year (as defined in the Income Tax Regulations promulgated under Section
148(f) of the Code, and not later than 60 days after payment in full of the
Loan and the Bond, Borrower will furnish to each of Issuer and Lender a
certificate showing compliance with the applicable provisions of said Section
148(f), which certificate shall be accompanied by an opinion of counsel or
certificate of accountants supporting the matters set forth in such
certificate.
In addition to the foregoing covenants, Borrower further covenants that
(i) it will requisition, apply and spend the moneys in the Escrow Fund in a
manner so that as of any date at least 95% of the total amount theretofore
requisitioned from the Escrow Fund will be applied to finance costs (paid on
or after January 28, 1996) for the acquisition, construction, rehabilitation
or improvement of land and other property which is of a character subject to
an allowance for depreciation under Section 167 of the Code; (ii) it will not
permit moneys in the Escrow Fund to be invested in such a manner as to cause
the Bond to be an "arbitrage bond" under Section 148(a) of the Code, (iii) it
will promptly notify Lender if, at any time, Borrower proposes to take any
action, or any action is to be taken by or on behalf of any Principal User of
the Project or any Related Person, the effect of which could be to cause
interest to become includable in the gross income of owners thereof for
federal income tax purposes by reason of the $10,000,000 capital expenditure
limitation imposed by Section 144(a)(4) of the Code being exceeded or the
$40,000,000 limitation imposed by Section 144(a)(10) of the Code being
exceeded; (iv) it will not requisition from the Escrow Fund more than $80,000
to pay Issuance Costs; and (v) no portion of the net Loan Proceeds will be
used for the acquisition of any property (or an interest therein) unless the
first use of such property is pursuant to such acquisition.
Borrower acknowledges that a failure to abide by the foregoing covenants
may result in a Determination of Taxability.
Section 7.10. Financial Covenants. (a) Borrower and Guarantors will
maintain a ratio of Total Funded Debt (as defined below) to EBITDA (as defined
below) at no more than 4.75 to 1.0 (determined for the four most recently
ended fiscal quarters).
(b) Borrower and Guarantors will maintain Tangible Capital Funds (as
defined below) at the end of each fiscal quarter equal to at least
$10,000,000.
(c) Borrower and Guarantors will maintain a ratio (calculated on a
consolidated basis) of (i) total liabilities minus deferred tax liabilities at
the end of each fiscal quarter, as shown on the consolidated balance sheet of
Borrower and Guarantors and as determined and prepared in accordance with
generally accepted accounting principles consistently applied to (ii) Tangible
Capital Funds, at no more than 3.0 to 1.0.
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(d) Borrower and Guarantors will maintain a ratio (calculated on a
consolidated basis) of current assets to current liabilities, as determined in
accordance with generally accepted accounting principles, of at least 1.25 to
1.0.
As used in this Section 7.10, the following terms have the following
meanings:
"Total Funded Debt" means total liabilities of Borrower and Guarantors
minus (i) cash on hand, (ii) accounts payable, (iii) deferred tax liabilities,
and (iv) other deferred liabilities, as shown on the consolidated balance
sheet of Borrower and Guarantors and as determined and prepared in accordance
with generally accepted accounting principles consistently applied.
"EBITDA" means consolidated earnings of Borrower and Guarantors net of
interest payments and accruals, federal income taxes, depreciation and
amortization, as shown on the consolidated balance sheet of Borrower and
Guarantors and as determined and prepared in accordance with generally
accepted accounting principles consistently applied.
"Tangible Capital Funds" means Tangible Net Worth plus deferred tax
liabilities.
"Tangible Net Worth" means (i) the amount of all assets excluding
deferred tax liabilities which, under generally accepted accounting principles
consistently applied, would appear on the consolidated balance sheet of
Borrower and Guarantors, but excluding intangible items such as deferred tax
assets, goodwill, treasury shares, reserves, patents, trademarks, research and
development expenses and the like, and excluding any write-up in the book
value of such assets resulting from a reevaluation thereof, less (ii) the
amount of all liabilities which, under generally accepted accounting
principles consistently applied, would appear on the consolidated balance
sheet of Borrower and Guarantors (including all lease obligations payable
within the succeeding 12-month period).
ARTICLE VIII
NEGATIVE COVENANTS OF BORROWER
So long as the Loan and the Bond shall remain unpaid, Borrower agrees
that:
Section 8.01. Lien. Borrower will not create, incur or suffer to exist
any mortgage, deed of trust, pledge, lien, security interest, assignment or
transfer upon or of any of the Equipment except for the security interest
created pursuant to this Agreement.
Section 8.02. Sale of Assets. Borrower will not sell, lease, assign,
transfer or otherwise dispose of all or a substantial part of its assets or of
any of the Equipment or any interest therein (whether in one transaction or in
a series of transactions) without the prior written consent of Lender (which
consent Lender may withhold in its sole discretion) and, with respect to the
Equipment, without providing an opinion of counsel that such action will not
result in a Default or Event of Default and an opinion of Bond Counsel that
such action will not result in a Determination of Taxability.
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Section 8.03. Consolidation and Merger. Borrower will not consolidate
with or merge into any person or permit any other person to merge into it, or
acquire (in a transaction analogous in purpose or effect to a consolidation or
merger) all or substantially all the assets of any other person unless: (i)
Lender provides its prior written consent thereto (which consent Lender may
withhold in its sole discretion), (ii) written notice of such merger or
consolidation is provided to Issuer and (iii) the surviving entity is
qualified to do business in the State and agrees in writing to assume
Borrower's obligations hereunder, under the Escrow Agreement and under the Tax
Compliance Certificate.
Section 8.04. Accounting. Borrower will not adopt, permit or consent to
any material change in accounting principles other than as required by
generally accepted accounting principles without the prior written consent of
Lender (which consent Lender may withhold in its sole discretion). Borrower
will not adopt, permit or consent to any change in its fiscal year without the
prior written consent of Lender (which consent Lender may withhold in its sole
discretion).
Section 8.05. Transfers. Borrower will not in any manner transfer any
property without prior or present receipt of full and adequate consideration.
Section 8.06. Other Defaults. Borrower will not permit any breach,
default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon Borrower or any judgment, decree, order or
determination applicable to Borrower.
Section 8.07. Place of Business. Borrower will not permit any of the
Equipment or any records pertaining to the Equipment to be located outside the
State or in any location where, in the event of such location, a financing
statement covering such Equipment would be required to be, but has not in fact
been, filed in order to perfect the security interest created pursuant to this
Agreement.
Section 8.08. Modifications and Substitutions. (a) Borrower will not
make any material alterations, modifications or additions to the Equipment
which cannot be removed without materially damaging the functional
capabilities or economic value of the Equipment. Upon transfer of the
Equipment to Lender and at the request of Lender, Borrower, at its sole cost
and expense, will remove all alterations, modifications and additions and
repair the Equipment as necessary to return the Equipment to the condition in
which it was furnished, ordinary wear and tear and permitted modifications
excepted.
(b) Notwithstanding the provisions of subparagraph (a) of this section,
Borrower may, with the prior written consent of Lender, substitute for parts,
elements, portions or all of the Equipment, other parts, elements, portions,
equipment or facilities of similar function and value; provided, however, that
any substitutions made pursuant to Borrower's obligations to make repairs
referenced under any provision of this Agreement shall not require such prior
written consent. Borrower shall provide such documents or assurances as Lender
may reasonably request to maintain or confirm the security interest assigned
to Lender in the Equipment as so modified or substituted.
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Section 8.09. Use of the Equipment. Borrower will not install, use,
operate or maintain the Equipment improperly, carelessly, in violation of any
applicable law or in a manner contrary to that contemplated by this Agreement.
ARTICLE IX
DAMAGE AND DESTRUCTION;
USE OF NET PROCEEDS
Borrower shall provide a complete written report to Lender immediately
upon any loss, theft, damage or destruction of any Equipment and of any
accident involving any Equipment. If all or any part of the Equipment is lost,
stolen, destroyed or damaged beyond repair ("Damaged Equipment"), Borrower
shall as soon as practicable after such event either: (a) replace the same at
Borrower's sole cost and expense with equipment having substantially similar
specifications and of equal or greater value to the Damaged Equipment
immediately prior to the time of the loss occurrence, such replacement
equipment to be subject to Lender's approval, whereupon such replacement
equipment shall be substituted in this Agreement and the other related
documents by appropriate endorsement or amendment; or (b) pay the applicable
Prepayment Amount of the Damaged Equipment. Borrower shall notify Lender of
which course of action it will take within fifteen (15) calendar days after
the loss occurrence. If, within forty-five (45) calendar days of the loss
occurrence, (a) Borrower fails to notify Lender; (b) Borrower and Lender fail
to execute an amendment to this Agreement to delete the Damaged Equipment and
add the replacement equipment or (c) Borrower fails to pay the applicable
Prepayment Amount, then Lender may, at its sole discretion, declare the
applicable Prepayment Amount to be immediately due and payable, and Borrower
is required to pay the same. The Net Proceeds of insurance with respect to the
Damaged Equipment shall be made available by Lender to be applied to discharge
Borrower's obligation under this Article. The payment of the Prepayment Amount
and the termination of Lender's interest in the Damaged Equipment is subject
to the terms of Section 2.07 hereof. For purposes of this Article, the term
"Net Proceeds" shall mean the amount remaining from the gross proceeds of any
insurance claim or condemnation award after deducting all expenses (including
reasonable attorneys' fees) incurred in the collection of such claim or award.
ARTICLE X
ASSIGNMENT, SUBLEASING AND SELLING
Section 10.01. Assignment by Lender. This Agreement, the Bond and the
obligations of Borrower to make payments hereunder and under the Bond may be
assigned in whole but not in part to an assignee by Lender at any time,
without the necessity of obtaining the consent of Issuer or Borrower;
provided, however, that no such assignment or any reassignment shall be
effective unless and until Issuer and Borrower shall have received (i) notice
of the assignment disclosing the name and address of the assignee, which
notice Issuer shall maintain as evidence of the registration and ownership of
the Bond, (ii) a properly completed assignment of the Bond and (iii) an
investment letter
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substantially in the form delivered at closing. Upon receipt of notice of
assignment, Borrower shall agree to make all payments to the assignee designed
in the notice of assignment, notwithstanding any claim, defense, setoff or
counterclaim whatsoever (whether arising from a breach of this Agreement or
otherwise) that Issuer and Borrower may from time to time have against Lender
or the assignee. Issuer and Borrower agree to execute all documents, including
notices of assignment and chattel mortgages or financing statements, which may
be reasonably requested by Lender or its assignee to protect their interest in
the Equipment and in this Agreement.
Section 10.02. No Sale or Assignment by Borrower. This Agreement and
the interest of Borrower in the Equipment may not be sold, assumed, assigned
or encumbered by Borrower without the prior written consent of Lender (which
consent Lender may withhold in its sole discretion) and without providing to
Issuer: (i) 30 days' notice of such sale, assumption, assignment or
encumbrance and (ii) evidence that Borrower's obligations hereunder, under the
Escrow Agreement and under the Tax Compliance Certificate have been properly
assumed.
ARTICLE XI
EVENTS OF DEFAULT AND REMEDIES
Section 11.01. Events of Default. The following constitute "Events of
Default" under this Agreement:
(a) failure by Borrower to pay to Lender, as assignee of Issuer,
when due any Loan Payment or to pay any other payment required to be paid
hereunder or under the Indemnity Agreement and the continuation of such
failure for a period of ten (10) days;
(b) failure by Borrower to maintain insurance on the Equipment in
accordance with Section 7.06 hereof;
(c) failure by Borrower or Issuer to observe and perform any other
covenant, condition or agreement contained herein, in the Escrow
Agreement, in the Tax Compliance Certificate, in the Indemnity Agreement
or in any other document or agreement executed in connection herewith on
its part to be observed or performed for a period of 30 days after
written notice is given to Borrower or Issuer, as the case may be,
specifying such failure and requesting that it be remedied; provided,
however, that, if the failure stated in such notice cannot be corrected
within such 30-day period, Lender will not unreasonably withhold its
consent to an extension of such time if corrective action is instituted
by Borrower or Issuer, as the case may be, within the applicable period
and diligently pursued until the default is corrected;
(d) initiation by Issuer of a proceeding under any federal or state
bankruptcy or insolvency law seeking relief under such laws concerning
the indebtedness of Issuer;
(e) Borrower or any Guarantor shall be or become insolvent, or
admit in writing its inability to pay its debts as they mature, or make
an assignment for the benefit of creditors; or
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Borrower or any Guarantor shall apply for or consent to the appointment
of any receiver, trustee or similar officer for it or for all or any
substantial part of its property; or such receiver, trustee or similar
officer shall be appointed without the application or consent of Borrower
or any Guarantor, as the case may be; or Borrower or any Guarantor shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it under
the laws of any jurisdiction; or any such proceeding shall be instituted
(by petition, application or otherwise) against Borrower or any
Guarantor; or any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a substantial part of
the property of Borrower or any Guarantor;
(f) determination by Lender that any representation or warranty
made by Borrower, Issuer or any Guarantor herein, in the Tax Compliance
Certificate or in any other document executed in connection herewith was
untrue in any material respect when made;
(g) an Event of Taxability shall occur;
(h) the occurrence of a default or an event of default under any
instrument, agreement or other document evidencing or relating to any
indebtedness or other monetary obligation of Borrower in an amount
greater than $250,000.00;
(i) any Guarantor shall repudiate, purport to revoke or fail to
perform such Guarantor's obligations under a Guaranty Agreement; or
(j) the percentage share of ownership of the stock of Borrower held
by Borrower's officers and directors and by Manubusiness Opportunities,
Inc. on the date on which the Bond is issued is reduced during the period
that the Loan and the Bond are outstanding without the prior written
consent of Lender (Borrower hereby acknowledges that Lender has made its
decision to enter into the transactions contemplated hereby based upon
the management expertise of the current stockholders and their ownership
of the stock of Borrower); or
(k) the occurrence of a default or an event of default under the
Prior Loan Agreement or any other obligation (whether direct or indirect)
of Borrower to Lender or any of its affiliates.
Section 11.02. Remedies on Default. Whenever any Event of Default shall
have occurred and be continuing, Lender, as assignee of Issuer, shall have the
right, at its sole option without any further demand or notice, to take any one
or any combination of the following remedial steps insofar as the same are
available to secured parties under Article 9 of the UCC in effect in the State
from time to time and which are otherwise accorded to Lender, as assignee of
Issuer, by applicable law:
(a) by notice to Issuer and Borrower, declare the entire unpaid
principal amount of the Loan and the Bond then outstanding, all interest
accrued and unpaid thereon and all amounts payable under this Agreement
to be forthwith due and payable, whereupon the Loan,
34
<PAGE>
the Bond, all such accrued interest and all such amounts shall become and
be forthwith due and payable, without presentment, notice of dishonor,
protest or further notice of any kind, all of which are hereby expressly
waived by Borrower;
(b) take possession of the Equipment wherever situated, without any
court order or other process of law and without liability for entering
the premises, and lease, sublease or make other disposition of the
Equipment for use over a term in a commercially reasonable manner, all
for the account of Lender, provided that Borrower shall remain directly
liable for the deficiency, if any, between the rent or other amounts paid
by a lessee or sublessee of the Equipment pursuant to such lease or
sublease during the same period of time, after deducting all costs and
expenses, including reasonable attorneys' fees and expenses, incurred
with respect to the recovery, repair and storage of the Equipment during
such period of time;
(c) take possession of the Equipment wherever situated, without any
court order or other process of law and without liability for entering
the premises, and sell the Equipment in a commercially reasonable manner.
All proceeds from such sale shall be applied in the following manner:
FIRST, to pay all proper and reasonable costs and expenses
associated with the recovery, repair, storage and sale of the
Equipment, including reasonable attorneys' fees and expenses;
SECOND, to pay (i) Lender the amount of all unpaid Loan Payments
or other obligations owed to Lender under the Prior Loan Agreement
which are then due and owing, together with interest and late charges
thereon and (ii) Lender the then applicable Prepayment Amount (taking
into account the payment of past-due Loan Payments as aforesaid),
plus a pro rata allocation of interest, at the rate utilized to
calculate the Loan Payments, from the next preceding due date of a
Loan Payment until the date of payment by the buyer;
THIRD, to pay Issuer and/or Lender any other amounts due
hereunder, including indemnity payments, taxes, charges,
reimbursement of any advances and other amounts payable to Lender or
Issuer hereunder;
FOURTH, to pay the remainder of the sale proceeds, purchase
moneys or other amounts paid by a buyer of the Equipment to Borrower;
(c) proceed by appropriate court action to enforce specific
performance by Issuer or Borrower of the applicable covenants of this
Agreement or to recover for the breach thereof, including the payment of
all amounts due from Borrower. Borrower shall pay or repay to Lender or
Issuer all costs of such action or court action, including, without
limitation, reasonable attorneys' fees; and
(d) take whatever action at law or in equity may appear necessary or
desirable to enforce its rights with respect to the Equipment. Borrower
shall pay or repay to Lender or
35
<PAGE>
Issuer all costs of such action or court action, including, without
limitation, reasonable attorneys' fees.
Notwithstanding any other remedy exercised hereunder, Borrower shall
remain obligated to pay to Lender any unpaid portion of the Prepayment Amount.
Section 11.03. Return of Equipment. Upon an Event of Default, Borrower
shall within ten (10) calendar days after notice from Lender, at its own cost
and expense: (a) perform any testing and repairs required to place the
Equipment in the condition required by Article VII; (b) if deinstallation,
disassembly or crating is required, cause the Equipment to be deinstalled,
disassembled and crated by an authorized manufacturer's representative or such
other service person as is satisfactory to Lender; and (c) deliver the
Equipment to a location specified by Lender, freight and insurance prepaid by
Borrower. If Borrower refuses to deliver the Equipment in the manner designed,
Lender may enter upon Borrower's premises where the Equipment is kept and take
possession of the Equipment and charge to Borrower the costs of such taking.
Borrower hereby expressly waives any damages occasioned by such taking.
Section 11.04. No Remedy Exclusive. No remedy herein conferred upon or
reserved to Lender or Issuer is intended to be exclusive and every such remedy
shall be cumulative and shall be in addition to every other remedy given under
this Agreement or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any Event of Default
shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right or power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle Lender or Issuer to
exercise any remedy reserved to it in this Article, it shall not be necessary
to give any notice other than such notice as may be required by this Article.
All remedies herein conferred upon or reserved to Lender or Issuer shall
survive the termination of this Agreement.
Section 11.05. Late Charge. Any Loan Payment not paid by Borrower on the
due date thereof shall, to the extent permissible by law, bear a late charge
equal to the lesser of five cents ($.05) per dollar of the delinquent amount
or the lawful maximum, and Borrower shall be obligated to pay the same
immediately upon receipt of Lender's written invoice therefor.
36
<PAGE>
ARTICLE XII
MISCELLANEOUS
Section 12.01. Costs and Expenses of Lender and Issuer. (a) Borrower
shall pay to Lender, in addition to the Loan Payments payable by Borrower
hereunder, such amounts in each year as shall be required by Lender in payment
of any reasonable costs and expenses incurred by Lender in connection with the
execution, performance or enforcement of this Agreement, including but not
limited to payment of all reasonable fees, costs and expenses and all
administrative costs of Lender in connection with the Equipment, expenses
(including, without limitation, attorneys' fees and disbursements), fees of
auditors or attorneys, insurance premiums not otherwise paid hereunder and all
other direct and necessary administrative costs of Lender or charges required
to be paid by it in order to comply with the terms of, or to enforce its
rights under, this Agreement. Such costs and expenses shall be billed to
Borrower by Lender from time to time, together with a statement certifying
that the amount so billed has been paid by Lender for one or more of the items
above described, or that such amount is then payable by Lender for such items.
Amounts so billed shall be due and payable by Borrower within 30 days after
receipt of the bill by Borrower. Issuer shall have no liability for any fees
or expenses of Lender.
(b) Borrower hereby further expressly agrees to pay upon written
request, the fees and expenses of Issuer (including the fees and expenses of
its bond counsel) related to the transactions contemplated by this Agreement
which are not otherwise required to be paid by Borrower under the terms of
this Agreement. In particular, but without limiting the generality of the
foregoing, Borrower shall pay a one-time issuance fee of $10,000.00 to Issuer
prior to or contemporaneously with the making of the Loan. In addition,
Borrower shall pay, within ten (10) days of demand therefor: (i) all
out-of-pocket costs and expenses of Issuer incidental to the making of the
Loan and (ii) the reasonable out-of-pocket expenses of Issuer (including,
without limitation, reasonable attorneys' fees) related to the transactions
contemplated by this Agreement or incurred by Issuer in enforcing the
provisions of this Agreement.
Section 12.02. Disclaimer of Warranties. LENDER AND ISSUER MAKE NO
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
FITNESS FOR USE OF THE EQUIPMENT, OR ANY OTHER WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, WITH RESPECT THERETO. In no event shall Lender or Issuer
be liable for any loss or damage in connection with or arising out of this
Agreement, the Equipment or the existence, furnishing, functioning or
Borrowers use of any item or products or services provided for in this
Agreement.
Section 12.03. Notices. All notices, certificates, requests, demands and
other communications provided for hereunder or under the Escrow Agreement
shall be in writing and shall be (a) personally delivered, (b) sent by
first-class United States mail, (c) sent by overnight courier of national
reputation, or (d) transmitted by telecopy, in each case addressed to the
party to whom notice is being given at its address as set forth above and, if
telecopied, transmitted to that party at its telecopier number set forth
37
<PAGE>
above or, as to each party, at such other address or telecopier number as may
hereafter be designed by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given
on (a) the date received if personally delivered, (b) when deposited in the
mail if delivered by mail, (c) the date sent if sent by overnight courier, or
(d) the date of transmission if delivered by telecopy. If notice to Borrower
of any intended disposition of the Equipment or any other intended action is
required by law in a particular instance, such notice shall be deemed
commercially reasonable if given (in the manner specified in this Section) at
least ten (10) calendar days prior to the date of intended disposition or
other action.
Section 12.04. Further Assurance and Corrective Instruments. Issuer and
Borrower hereby agree that they will, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such further
acts, instruments, conveyances, transfers and assurances, as Lender reasonably
deems necessary or advisable for the implementation, correction, confirmation
or perfection of this Agreement or the Escrow Agreement and any rights of
Lender hereunder or thereunder.
Section 12.05. Binding Effect; Time of the Essence. This Agreement shall
inure to the benefit of and shall be binding upon Lender, Issuer, Borrower and
their respective successors and assigns. Time is of the essence.
Section 12.06. Severability. In the event any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
Section 12.07. Amendments. To the extent permitted by law, the terms of
this Agreement shall not be waived, altered, modified, supplemented or amended
in any manner whatsoever except by written instrument signed by the parties
hereto, and then such waiver, consent, modification or change shall be
effective only in the specific instance and for the specific purpose given.
Section 12.08. Execution in Counterparts. This Agreement may be executed
in several counterparts, each of which shall be an original and all of which
shall constitute one and the same instruments and any of the parties hereto
may execute this Agreement by signing any such counterpart. provided that only
the original marked "Original: 1 of 6" on the execution page thereof shall
constitute chattel paper under the Uniform Commercial Code.
Section 12.09. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State.
Section 12.10. Captions. The captions or headings in this Agreement are
for convenience only and in no way define, limit or describe the scope or
intent of any provisions or sections of this Agreement.
Section 12.11. Entire Agreement. This Agreement, the Escrow Agreement
and the exhibits hereto and thereto constitute the entire agreement among
Lender, Issuer, Borrower and Escrow
38
<PAGE>
Agent. There are no understandings, agreements, representations or warranties,
express or implied, not specified herein or in such documents regarding this
Agreement or the Equipment financed hereby.
Section 12.12. Usury. It is the intention of the parties hereto to
comply with any applicable usury laws; accordingly, it is agreed that,
notwithstanding any provisions to the contrary in this Agreement, in no event
shall this Agreement require the payment or permit the collection of interest
or any amount in the nature of interest or fees in excess of the maximum
permitted by applicable law.
Section 12.13. Waiver of Jury Trial. LENDER, ISSUER AND BORROWER HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF
THE RELATED DOCUMENTS, ANY DEALINGS AMONG LENDER, ISSUER OR BORROWER RELATING
TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR
ANY RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED
AMONG LENDER, ISSUER AND BORROWER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL ENCOMPASSING OF ANY-AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT
(INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED) EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, ANY RELATED DOCUMENTS, OR TO
ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY RELATED TRANSACTIONS. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
Section 12.l4. Governmental Functions. The State is not assigning any of
its governmental functions in this Agreement. The State shall not be precluded
from taking such actions as shall be necessary in order for it to perform its
governmental functions. Issuer shall, however, be bound by its undertakings
herein and in the Escrow Agreement
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
their respective corporate names by their duly authorized officers, all as of
the date first written above.
GE CAPITAL PUBLIC FINANCE, INC.
Lender:
By__________________________
Title V. P.
----------------------
MICHIGAN STRATEGIC FUND
Issuer:
By__________________________
Title_______________________
By__________________________
Title_______________________
Borrower:
SECOM GENERAL CORPORATION
By__________________________
Title_______________________
Trade Names of Borrower, if any
__________________
NONE
__________________
__________________
ORIGINAL: 4 OF 6
[EXECUTION PAGE OF LOAN AGREEMENT]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
their respective corporate names by their duly authorized officers, all as of
the date first written above.
GE CAPITAL PUBLIC FINANCE, INC.
Lender:
By__________________________
Title_______________________
MICHIGAN STRATEGIC FUND
Issuer:
By__________________________
Title Member
-----------------------
By__________________________
Title Authorized Officer
------------------
Borrower:
SECOM GENERAL CORPORATION
By /s/ David J. Marczak
--------------------------
Title Secretary-Treasurer
-----------------------
Trade Names of Borrower, if any
__________________
NONE
__________________
__________________
ORIGINAL: 4 OF 6
[EXECUTION PAGE OF LOAN AGREEMENT]
Exhibit 22
Subsidiaries of the Registrant:
Form Flow, Inc.
L&H Die, Inc.
Micanol, Inc.
Milford Manufacturing Corporation
Uniflow Corporation
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
Secom General Corporation:
We consent to the incorporation by reference in Registration Statements
No. 33-45177 and 33-43557 of Secom General Corporation on Form S-8 of our
report dated December 23, 1996, appearing in this Annual Report on Form 10-K
of Secom General Corporation for the year ended September 30, 1996.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Detroit, Michigan
December 23, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> $ 319,600
<SECURITIES> 0
<RECEIVABLES> 4,151,700
<ALLOWANCES> (21,000)
<INVENTORY> 5,170,500
<CURRENT-ASSETS> 10,771,200
<PP&E> 25,309,000
<DEPRECIATION> (7,550,400)
<TOTAL-ASSETS> 34,954,500
<CURRENT-LIABILITIES> 5,863,000
<BONDS> 0
<COMMON> 534,200
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 34,954,500
<SALES> 30,877,100
<TOTAL-REVENUES> 30,877,100
<CGS> 25,064,900
<TOTAL-COSTS> 29,985,600
<OTHER-EXPENSES> (14,600)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 847,600
<INCOME-PRETAX> 58,500
<INCOME-TAX> 17,900
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,600
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.00
</TABLE>
