SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996
Commission file number 0-24852
ENERGY RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
New York 06-0853042
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3 Great Pasture Road
Danbury, Connecticut 06813
(Address of principal (Zip code)
executive offices)
203-792-1640
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has
filed all documents and reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the Registrant's
Common Stock, par value $.0001, as of September 2, 1996
was 3,836,390.
<PAGE>
ENERGY RESEARCH CORPORATION
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Unaudited Consolidated Condensed
Financial Statements:
Consolidated Condensed Balance Sheets
as of July 31, 1996 and October 31, 1995 2
Consolidated Condensed Statements of
Operations for the three months ended
July 31, 1996 and July 31, 1995 3
Consolidated Condensed Statements
of Operations for the nine months
ended July 31, 1996 and July 31, 1995 4
Consolidated Condensed Statements of
Cash Flows for the nine months ended
July 31, 1996 and July 31, 1995 5
Notes to Unaudited Consolidated Condensed
Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
1
<PAGE>
Part 1 - Financial Information
Item 1. Financial Statements
<TABLE>
ENERGY RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
July 31, Oct 31,
1996 1995
------- --------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 5,472 $ 5,422
Marketable securities 3,909 3,900
Accounts receivable 2,413 3,203
Inventories 780 179
Deferred income taxes 215 215
Other current assets 251 87
------ ------
Total current assets 13,040 13,006
====== ======
Property, plant and equipment, net 6,912 7,263
Other assets, net 3,470 3,578
------ ------
Total Assets $23,422 $23,847
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Current portion of long-term debt $ 3,605 $ 717
Accounts payable 866 2,383
Income taxes payable - 71
Accrued liabilities 1,554 1,524
Current portion of deferred license
fee income 183 95
------ ------
Total current liabilities 6,208 4,790
Long Term Liabilities:
Long-term debt 4,004 6,487
Capital lease obligation 11 25
Deferred license fee income 33 83
Deferred income taxes 214 224
------ ------
Total liabilities 10,470 11,609
------ ------
Shareholders' Equity:
Convertible preferred stock, Series
C ($.01 par value); 30,000 and 60,000
shares issued and outstanding at
July 31, 1996 and October 31, 1995,
respectively 600 1,200
------ ------
Common Shareholders' Equity:
Common stock,($.0001 par value);
8,000,000 shares authorized:
3,836,390 and 3,711,270 shares issued
and outstanding at July 31, 1996
and October 31, 1995, respectively - -
Additional paid-in capital 10,270 9,263
Retained earnings 2,082 1,775
------ ------
Total common shareholders' equity 12,352 11,038
------ ------
Total shareholders' equity 12,952 12,238
------ ------
Total Liabilities and Shareholders'
Equity $23,422 $23,847
====== ======
</TABLE>
See notes to consolidated condensed financial statements.
-2-
<PAGE>
<TABLE>
ENERGY RESEARCH CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended
July 31,
1996 1995
==== ====
<S> <C> <C>
Revenues $ 7,412 $ 7,443
Costs and Expenses:
Cost of revenues 5,268 5,680
Administrative and selling expenses 1,070 1,052
Depreciation 477 441
Research and development 496 229
--------- ---------
7,311 7,402
--------- ---------
Income from operations 101 41
License fee income, net
(includes income from related parties
of $79 and $79 for the three
months ended July 31, 1996
and 1995, respectively) 89 89
Interest expense (113) (125)
Interest and other income, net 116 113
--------- ---------
Income before provision
for income taxes 193 118
Provision for income taxes 71 45
--------- ---------
Net income $ 122 $ 73
========= =========
Primary and fully diluted income
per common share $ .03 $ .02
========= =========
Weighted average common and common
equivalent shares outstanding 4,146,020 3,973,132
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
-3-
<PAGE>
<TABLE>
ENERGY RESEARCH CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Nine Months Ended
July 31,
1996 1995
==== ====
<S> <C> <C>
Revenues $ 22,194 $ 26,231
Costs and Expenses:
Cost of revenues 16,167 20,399
Administrative and selling expenses 3,343 3,314
Depreciation 1,500 1,389
Research and development 920 740
--------- ---------
21,930 25,842
--------- ---------
Income from operations 264 389
License fee income, net
(includes income from related parties
of $237 and $237 for the nine
months ended July 31, 1996
and 1995, respectively) 267 267
Interest expense (389) (323)
Interest and other income, net 341 201
--------- ---------
Income before provision
for income taxes 483 534
Provision for income taxes 176 182
--------- ---------
Net income $ 307 $ 352
========= =========
Primary and fully diluted income
per common share $ .08 $ .09
========= =========
Weighted average common and common
equivalent shares outstanding 4,053,282 3,971,663
========= =========
</TABLE>
See notes to consolidated condensed financial statements.
-4-
<PAGE>
<TABLE>
ENERGY RESEARCH CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31,
(Dollars in thousands)
(Unaudited)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net cash flows from operating activities:
Net income $ 307 $ 352
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Bad debt (recovery) - (27)
Depreciation and amortization 1,694 1,673
Deferred income taxes (10) (10)
Conversion of accrued interest
to principal on long-term debt 82 90
(Gain) loss on disposal of property 3 3
Realized loss on sale of
marketable securities - 64
Changes in operating assets and liabilities:
Accounts receivable 790 4,401
Inventories (601) (332)
Other current assets (164) (116)
Accounts payable (1,517) (1,426)
Accrued liabilities 30 597
Income taxes payable (71) 58
Deferred license fee income 38 88
Other - -
------- -------
Net cash provided by
operating activities 581 5,415
------- -------
Cash flows from investing activities:
Capital expenditures (1,152) (718)
Proceeds from sale of marketable securities - 2,341
Payments on other assets (95) (1,018)
Purchase of marketable securities - (29)
------- -------
Net cash provided by
(used in) investing activities (1,247) 576
------- -------
Cash flows from financing activities:
Repayments of long-term debt (3,588) (417)
Proceeds from long-term financing 4,113 709
Common stock issued 191 62
------- -------
Net cash provided by
financing activities 716 354
------- -------
Net increase in cash and
cash equivalents 50 6,345
Cash and cash equivalents,
beginning of period 5,422 2,038
------- -------
Cash and cash equivalents,
end of period $ 5,472 $ 8,383
======= =======
Supplemental disclosure of cash paid
during the period for:
Interest $317 $276
Income taxes $409 $203
Noncash preferred stock conversion to
common stock $600 -
</TABLE>
See notes to consolidated condensed financial statements.
-5-
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
ENERGY RESEARCH CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements
for Energy Research Corporation ("the Registrant"), have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In
the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the
financial position of the Company as of July 31, 1996 and the
results of operations for the nine months ended July 31, 1996
and 1995 and cash flows for such nine month periods have been
included.
Information included in the Consolidated Condensed Balance
Sheet as of October 31, 1995 has been derived from audited
financial statements included in the Company's Annual Report
on Form 10-KSB for the year ended October 31, 1995, but does
not include all disclosures required by generally accepted
accounting principles.
The results of operations for the nine months ended July 31,
1996 and 1995 are not necessarily indicative of the results to
be expected for the full year.
The reader should supplement the information in this document
with prior disclosures in the form of previous 10-Q's and the
1995 10-KSB.
NOTE 2: COMMITMENTS/CONTINGENCIES
Following audits performed by the State of Connecticut
Department of Revenue Services ("DRS") for the period from
July 1, 1982 through December 31, 1992, the Company has been
assessed sales and use taxes of $800,000 together with
penalties of $39,000 plus applicable interest. The Company
has filed a complaint against the Commissioner of the DRS in
the Connecticut Superior Court, Judicial District of
Hartford/New Britain at Hartford, requesting that such
assessments be set aside on the basis that taxation of
purchases of goods and materials pursuant to contracts between
the Company and the U.S. Government is prohibited by the
United States Constitution. The Company and the DRS have
agreed not to pursue the action pending resolution of the case
of United Technologies
6
<PAGE>
ENERGY RESEARCH CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
NOTE 2: COMMITMENTS/CONTINGENCIES (Continued)
Corporation v. Commissioner of Revenue Services and Noreen
Systems, Inc. v. Commissioner of Revenue Services (the "United
Technology Case") before the same Court. The United
Technology Case involves substantially similar facts and
questions of law as are being disputed in the Company's
pending action against the DRS. On May 19, 1995, the
Connecticut Superior Court, Judicial District of Hartford/New
Britain at Hartford ruled in the United Technologies Case that
use taxes assessed by the DRS were owed by the plaintiffs in
that case, with the exception of certain engineering services
which the Court held were not taxable services within the
meaning of the State of Connecticut's sales and use tax law.
On August 13, 1996, the Connecticut Supreme Court reversed the
Superior Court's decision in part, holding that United
Technologies was not liable for sales and use taxes for the
purchase and use of the tangible personal property in
question, but that it was liable for sales and use taxes on
its purchase of personal services used to fulfill its
government contracts. The Company expects that, as a result
of this favorable holding, the DRS will drop its assessment of
sales and use taxes for the Company's purchase and use of
tangible personal property in connection with its government
contracts which will result in the reversal of substantially
all of the above-described tax assessment, including penalties
and interest. While the Company will be liable for the
payment of sales and use taxes in connection with its purchase
of personal services in accordance with the Connecticut
Supreme Court's holding, in the Company's case, such services
were minimal; therefore the Company's ultimate liability for
sales and use taxes will be immaterial.
7
<PAGE>
Part I - Financial Information
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON THREE MONTHS ENDED JULY 31, 1996 AND JULY 31, 1995
Revenues were relatively unchanged at $7,412,000 in the 1996
period compared to $7,443,000 in the 1995 period. The decrease
in revenues was due primarily to the completion of the
manufacture of the fuel cell modules and the completion of the
construction of the commercial scale, two-megawatt direct fuel
cell power plant in Santa Clara, California. Revenues in the
fourth quarter of 1996 are anticipated to be similar to the
levels of the fourth quarter of 1995.
Cost of Revenues decreased 7% to $5,268,000 in the 1996 period
compared to $5,680,000 in the 1995 period. The decrease was
due substantially to the change in the contract revenues
mentioned above.
Administrative and selling expenses were relatively unchanged
at $1,070,000 in the 1996 period from $1,052,000 in the 1995
period. Depreciation increased 8% to $477,000 in the 1996
period from $441,000 in the 1995 period. The increase was due
primarily to assets placed in service at the Company's
manufacturing facility. Research and development costs
increased 117% to $496,000 in the 1996 period from $229,000 in
the 1995 period. The increase was due primarily to carbonate
fuel cell activity. The remainder of the increase was due to
increased activity in the battery area, including the
manufacture of a nickel-zinc battery for a test application in
a hybrid electric vehicle.
Income from operations increased 146% to $101,000 in the 1996
period from $41,000 in the 1995 period. The increase was due
substantially to the profitability associated with the change
in the contract revenues mentioned above.
Interest expense decreased 10% to $113,000 in the 1996 period
from $125,000 in the 1995 period. The decrease was due
substantially to the capitalization of interest associated
with assets under construction and lower interest rates.
Interest and other income, net, was relatively unchanged at
$116,000 in the 1996 period from $113,000 in the 1995 period.
8
<PAGE>
RESULTS OF OPERATIONS
COMPARISON NINE MONTHS ENDED JULY 31, 1996 AND JULY 31, 1995
Revenues decreased 15% to $22,194,000 in the 1996 period from
$26,231,000 in the 1995 period. A decrease in revenues
realized under the Company's two-megawatt power plant
contracts was offset by an increase in activity under the
Company's other contracts. The expected decrease in revenues
was partially offset by an increase in billings under the
Company's other contracts.
Cost of revenues decreased 21% to $16,167,000 in the 1996
period from $20,399,000 in the 1995 period. The decrease was
due substantially to the decreased revenues mentioned above.
Administrative and selling expenses were relatively unchanged
at $3,343,000 in the 1996 period from $3,314,000 in the 1995
period. Depreciation increased 8% to $1,500,000 in the 1996
period from $1,389,000 in the 1995 period. The increase was
due primarily to assets placed in service at the Company's
manufacturing facility. Research and development costs
increased 24% to $920,000 in the 1996 period from $740,000 in
the 1995 period. The increase was due primarily to carbonate
fuel cell activity. The remainder of the increase was due to
the manufacture of a nickel-zinc battery for a test
application in a hybrid electric vehicle.
Income from operations decreased 32% to $264,000 in the 1996
period from $389,000 in the 1995 period. The decrease was due
primarily to the decrease in revenues mentioned above,
including a reduction in activity under a fee-bearing
contract.
Interest expense increased 20% to $389,000 in the 1996 period
from $323,000 in the 1995 period. The increase was due
primarily to the full utilization of the $2,500,000 credit
facility in the 1996 period. The increase has been partially
offset by the capitalization of interest for assets under
construction and lower interest rates.
Interest and other income, net, increased 70% to $341,000 in
the 1996 period from $201,000 in the 1995 period. The
increase was due primarily to increased interest income. The
interest income has increased due to the availability of
additional cash form working capital resulting from a more
favorable payment procedure under the Company's cooperative
agreements. During the 1995 period, a final charge against
income was taken due to the reduction in value of certain
investments.
The Santa Clara Demonstration power plant, which began
operating during the second quarter, was shut down in the
third quarter. After repairing the pipe dielectrics and other
items, the power plant was restarted on August 5, 1996. At
this time, the power plant is operating at partial load. The
cost for repairs was provided from existing contract funds. As
previously reported, one of the sixteen fuel cell stacks is
not performing well. This stack is limiting the performance
of the power plant. The Company is seeking ways to bypass or
supplement this stack output, but there can be no assurance
that the power plant will return to prior
9
<PAGE>
operating power output levels.
The Company has reached an agreement with the City of Santa
Clara to provide services in an amount up to $300,000, if
needed, to cover either operating test time or reconfiguration
of the power plant. The above amount combined with funds
provided by subcontractors have been credited to reduce the
Company's engineering subsidiary's liability for unfunded
rework on the balance of plant from $1,000,000 to $500,000.
The latter warranty is backed by subcontractor and vendor
warranties for various time periods.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at July 31, 1996 was $6,832,000, including
$5,472,000 of cash and cash equivalents and $3,909,000 of
short term investments, compared to working capital of
$8,216,000 at October 31, 1995, including $5,422,000 of cash
and cash equivalents and $3,900,000 of short term investments.
During the 1996 period, $581,000 of cash was provided by the
Company's operating activities. During that period, accounts
receivable decreased $790,000 and accounts payable decreased
$1,517,000 primarily due to decreased revenues associated with
the completion of the manufacturing of the fuel cell modules
for, and the construction of, the Santa Clara power plant. Net
cash from operating activities also included the Company's net
income of $307,000 and an increase in accrued liabilities of
$30,000. These sources of cash were partially offset by a
$601,000 increase in inventory primarily attributable to
materials acquired to meet future production requirements and
unbilled costs that are expected to be billed during the
fourth quarter of 1996.
The Company's capital expenditures are incurred primarily to
support ongoing contracts and to replace existing equipment.
Capital expenditures for the 1996 period were $1,152,000. All
of these expenditures were financed from the recovery of
depreciation expense under cost-reimbursement contracts and
cooperative agreements.
The Company has entered into more favorable lending
arrangements with First Union Bank of Connecticut, a
subsidiary of First Union Corporation, which provide for (i) a
$2,250,000 five-year term loan facility, which bears interest
at a floating rate equal to 1.75 percent above London
Interbank Offered Rates (LIBOR), and (ii) a $600,000 term loan
facility to the Company's fuel cell manufacturing subsidiary,
which bears interest at a floating rate equal to 1.75% percent
above LIBOR. The credit facilities were previously with Fleet
Bank, N.A. The Company discontinued the line of credit
because it was unnecessary with the favorable payment
procedures associated with the cooperative agreements.
10
<PAGE>
During the fiscal year 1995, the Company entered into a
$2,500,000 credit facility with MetLife Capital Corporation,
an affiliate of Metropolitan Life Insurance Company. The
credit facility bears interest at the 30-day commercial paper
rate plus 2.5 percent. The Company had fully utilized the
credit facility through the 1996 period to acquire machinery
and equipment. The credit facility provides for repayment over
36-50 months commencing with the completion of the equipment
acquisition.
In fiscal year 1990, the Company borrowed $1,980,000 from MTU
Friedrichshafen GmbH (MTU) at a rate of 6% per annum. The
payment of principal and interest is deferred until November
30, 1996. The indebtedness, including deferred interest, as
of July 31, 1996 was $2,559,000. This loan is secured by the
pledge of FCMC stock and certain machinery, equipment and
leasehold improvements at the Torrington, CT, facility. The
accrued interest on the loan is payable at the Company's
option. The principal amount of the loan may be converted at
MTU's option, into the Company's common stock at a conversion
rate of $9 per share prior to November 30, 1996. During
December 1995, MTU converted $216,000 of this loan into 24,000
shares of common stock of the Company.
Full 1996 funding was finally approved for the Company's
Cooperative Agreement with DOE in June, 1996 under the 1996
budget legislation. Additionally, Defense Advanced Research
Projects Agency funds in the amount of $6,500,000 have been
transferred to DOE for release by DOE to the Company. These
funds have been received in the Company's fourth fiscal
quarter and the total federal funding of the Cooperative
Agreement with the Company has been increased from
approximately $78,000,000 to $84,500,000.
The Company obtains most of its funding for research and
development from cooperative agreements or contracts with
United States Government agencies. To continue to obtain
funding for these contracts, the Company must continue to
prove the benefits of its technologies and be successful in
its competitive bidding. Failure to obtain these contracts
could have an adverse effect upon the Company. Because the
Company receives a significant portion of its revenues from
contracts and cooperative agreements with the Department of
Energy and other government agencies, future revenues and
income of the Company could be materially affected by changes
in procurement policies, a reduction in expenditures for the
services provided by the Company, and other risks generally
associated with government contracts. In general, the
Company's government contracts may be terminated, in whole or
in part, at the convenience of the government. Future deficit
reduction measures could adversely affect the Company's
existing contract and its ability to obtain future government
contracts and grants. Reduction or delays in the Company's
government funding could have a material adverse effect on the
Company's ability to commercialize its fuel cell technology.
11
<PAGE>
The U.S. Department of Energy (DOE) Congressional budget for
1997 under the Interior and Related Agencies bill presently
contains $36,500,000 million for the carbonate fuel cell
product improvement Cooperative Agreements. The bill has not
yet been signed into law and is, therefore, still subject to
change. In the event the bill is passed in its present form,
the Company expects the DOE to allocate these funds primarily
between the two carbonate fuel cell Cooperative Agreement
contractors, one of which is the Company. Depending on DOE
allocations, the funds may or may not be sufficient to
maintain the annual funding at the required contract levels.
Delays in the 1996 funding combined with delays and costs
associated with the Santa Clara project have moved the
expected commercialization into the 2000 time frame from the
previously indicated 1999-2000 period.
12
<PAGE>
Part II - Other Information
Item 1 - Legal Proceedings
See Note 2 to the Unaudited Consolidated Condensed Financial
Statements.
Item 6 - Exhibits and Reports on Form 8
EXHIBIT INDEX
(a) EXHIBIT DESCRIPTION PAGE NO.
EXHIBIT NO.
10.43 Loan Agreements, dated June 28, 1996, 15
with First Union Bank of Connecticut
10.44 Notes, dated June 28, 1996, in favor of 39
First Union Bank of Connecticut
10.45 Security Agreements, dated June 28, 1996, 53
with First Union Bank of Connecticut
11 Computation of Earnings (Loss) Per 104
Share for the Three Months Ended
July 31, 1996 and 1995 and for the
Nine Months Ended July 31, 1996 and
1995
(b) Reports On Form 8-K
NONE
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENERGY RESEARCH CORPORATION
/s/ Louis P. Barth
__________________
Louis P. Barth
Senior Vice President, CFO
Treasurer/Corporate Secretary
Dated: September 12, 1996
14
<PAGE>
Commercial Mortgage Loan - CT
LOAN AGREEMENT
LOAN AGREEMENT dated June 28, 1996 (together with any
amendments or modifications hereto in effect from time to
time, the "Agreement"), between FIRST UNION BANK OF
CONNECTICUT ("Bank") and ENERGY RESEARCH CORPORATION
("Borrower").
Bank has agreed to make a loan to Borrower and Borrower
has agreed to accept the loan proceeds in the principal
amount of Two Million Two Hundred Fifty Thousand and 00/100
Dollars ($2,250,000.00) (the "Loan"), on the terms and
conditions set forth herein. The Loan shall be evidenced by
a Mortgage Note of even date herewith from Borrower to Bank
(the "Note").
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged,
and intending to be legally bound hereby, Bank and Borrower
agree as follows:
1. DEFINITIONS
1.1. "Affiliate" means First Union Corporation and any
of its direct and indirect affiliates and subsidiaries.
1.2. "Commitment Letter" means the commitment letter
dated April 26, 1996 pursuant to which Bank committed to
make the Loan to Borrower.
1.3. "Guarantor" means Fuel Cell Manufacturing
Corporation and Fuel Cell Engineering Corporation,
collectively.
1.4. "Liabilities" means, collectively: (i) the
repayment of all sums due under the Note (and all
extensions, renewals, replacements, substitutions,
amendments and modifications thereof) and the other Loan
Documents, including, without limitation, principal,
interest, fees, late charges and expenses, including
attorneys' fees and/or allocated fees of Bank's in-house
legal counsel; (ii) the repayment of all indebtedness
incurred or arising pursuant to the provisions of the
Mortgage; (iii) the performance of all terms, conditions and
covenants set forth in the Loan Documents; and (iv) the
repayment of all sums due or that may become due under the
Swap Agreement (as hereinafter defined).
1.5. "Loan Documents" means, collectively, this
Agreement, the Note, that certain Open-End Mortgage and
Security Agreement of even date herewith from Borrower to
Bank (the "Mortgage"), that certain Guaranty and Suretyship
Agreement (if any), of even date herewith from Guarantor to
Bank (the "Guaranty"), General Security Agreements from
Borrower and Fuel Cell Manufacturing Corporation] and any
other guaranty, document, certificate or instrument executed
by Borrower, Guarantor or any other obligated party in
connection with the Loan, together with all amendments,
modifications, renewals or extensions thereof.
1.6. "Mortgaged Premises" means the real, personal and
mixed property described in the Mortgage as the "Mortgaged
Premises" and located at 1 & 3 Great Pasture Road, Danbury,
Connecticut.
<PAGE>
2. THE LOAN
2.1. Terms of Loan. Bank agrees to make the Loan to
Borrower on the date hereof on the terms and conditions
hereinafter set forth. The Loan will bear interest at the
rate and will be repaid as set forth in the Note.
2.2. Use of Loan Proceeds. Borrower shall use the
proceeds of the Loan only for the following purpose: To
repay the existing first mortgage loan pertaining to the
Mortgaged Premises held by Fleet National Bank.
2.3. Incorporation. All of the Loan Documents are
hereby made a part of this Agreement to the extent and with
the same effect as if fully set forth herein.
3. CONDITIONS PRECEDENT. Bank's obligations hereunder are
conditioned upon the fulfillment to Bank's satisfaction of
each of the following conditions precedent:
3.1. Borrower shall have delivered or caused to be
delivered to Bank each of the Loan Documents, in form and
substance satisfactory to Bank, duly executed by Borrower or
Guarantor, as applicable;
3.2. Borrower shall have delivered or caused to be
delivered to Bank each of the other documents, certificates
and instruments required by the Commitment Letter on or
prior to the date hereof, each in form and substance
satisfactory to Bank; and
3.3. Each of the other conditions contained in the
Commitment Letter shall have been satisfied.
4. REPRESENTATIONS AND WARRANTIES Borrower represents and
warrants as of the date hereof and, unless otherwise
indicated, at all times hereafter until the Liabilities are
fully paid and performed, as follows:
4.1. Organization, Powers. Borrower (i) is a
corporation, duly organized, validly existing and in good
standing under the laws of the state of its organization,
and is authorized to do business in each other jurisdiction
wherein its ownership of property or conduct of business
legally requires such authorization; (ii) has the power and
authority to own its properties and assets and to carry on
its business as now being conducted and as now contemplated;
and (iii) has the power and authority to execute, deliver
and perform all of its obligations under each Loan Document
to which it is a party.
4.2. Execution of Loan Documents. Each of the Loan
Documents to which Borrower is a party have been duly
executed and delivered by Borrower. Execution, delivery and
performance of each of the Loan Documents to which Borrower
is a party will not: (i) violate any of its organizational
documents, provision of law, order of any court, agency or
instrumentality of government, or any provision of any
indenture, agreement or other instrument to which it is a
party or by which it or any of its properties is bound; (ii)
result in the creation or imposition of any lien, charge or
encumbrance of any nature, other than the liens created by
the Loan Documents; and (iii) require any authorization,
consent, approval, license, exemption of, or filing or
registration with, any court or governmental authority.
4.3. Obligations of Borrower. Each of the Loan
Documents to which Borrower is a party is the legal, valid
and binding obligation of Borrower, enforceable against it
in accordance with their terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other
laws or equitable principles relating to or affecting the
enforcement of creditors' rights generally. Borrower is
obtaining the Loan for commercial purposes.
<PAGE>
4.4. Litigation; Compliance with Laws. There is no
action, suit, or proceeding at law or in equity or by or
before any governmental authority, agency or other
instrumentality now pending or, to the knowledge of
Borrower, threatened against or affecting Borrower or any of
its properties or rights which, if adversely determined,
would materially impair or affect: (i) the value of any
collateral securing the Liabilities; (ii) Borrower's right
to carry on its business substantially as now conducted (and
as now contemplated); (iii) its financial condition; or (iv)
its capacity to consummate and perform its obligations under
the Loan Documents to which Borrower is a party. Borrower is
in substantial compliance with all laws, ordinances, rules,
regulations and requirements which materially affect
Borrower, its assets or the operation of its business, and
is not in violation of or in default with respect to any
order, writ, injunction, decree or demand of any court or
governmental authority.
4.5. Payment of Taxes. Borrower has filed or caused to
be filed all federal, state and local tax returns which are
required to be filed, and has paid or caused to be paid all
taxes as shown on said returns or on any assessment received
by it, to the extent that such taxes or assessments have
become due, except such that are contested in good faith by
Borrower by appropriate proceedings and for which adequate
reserves have been established. Borrower is not aware of any
material unasserted claims for prior taxes against it for
which adequate reserves satisfactory to Bank have not been
established.
4.6. No Defaults. Borrower is not in default in the
performance, observance or fulfillment of any of the
obligations, covenants or conditions contained herein or in
any material agreement or instrument to which it is a party
or by which it or any of its properties is bound. No Event
of Default or event which, with the giving of notice and/or
lapse of time, would constitute an Event of Default has
occurred and is continuing or would result from making the
Loan.
4.7. Financial Statements. All financial statements
delivered by Borrower to Bank, are true, correct and
complete in all material respects, fairly represent
Borrower's financial condition as of the date hereof and
thereof, and no information has been omitted which would
make the information previously furnished misleading or
incorrect in any material respect.
4.8. No Material Adverse Change. As of the date
hereof, there has been no material adverse change in the
financial condition, operations, affairs, prospects, or
business of Borrower from the date of the most recent
financial statements provided by Borrower to Bank.
4.9. No Untrue Statements. No Loan Document or other
document, certificate or statement furnished to Bank by or
on behalf of Borrower contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein
not misleading. It is specifically understood by Borrower
that all such statements, representations and warranties
shall be deemed to have been relied upon by Bank as an
inducement to make the Loan to Borrower.
4.10. Title to Property. Borrower has good and
marketable title to all of its properties and assets listed
in the most recent financial statements delivered to Bank on
or prior to the date hereof, except as otherwise expressly
described in said financial statements, and except those
properties and assets disposed of since the date of said
financial statements in the ordinary course of business.
4.11. ERISA. No employee benefit plan established or
maintained by the Borrower which is subject to the Employee
Retirement Income Security Act 29 U.S.C. 1001 et seq.
("ERISA") has an accumulated funding deficiency (as such
term is defined under ERISA). No material liability to the
Pension Benefit Guaranty Corporation (or any successor
thereto under ERISA) has been incurred by the Borrower with
respect to any such plan and no Reportable Event under ERISA
has occurred. The Borrower has no actual or anticipated
liability under Section 4971 of the Internal Revenue Code
("Code") (relating to tax on failure to meet the minimum
funding standard of Section 412 of the Code) with respect to
any employee benefit plan to which it contributes but which
is not maintained or established by it.
<PAGE>
5. COVENANTS
5.1. Optional Hedge. Borrower may hedge the Loan's
floating interest expense for the full term of the Loan by
maintaining either: (i) the Swap Agreement; or (ii) a
comparable interest rate swap agreement with Bank or other
counterparty acceptable to Bank in a notional amount equal
to the then principal balance of the Loan and providing for
a fixed rate sufficient to satisfy the Debt Service Coverage
Ratio requirement set forth below, and containing such other
terms and conditions as shall be reasonably acceptable to
Bank.
5.2. Mergers, Restructure. Borrower shall not merge
into, consolidate with or into, or sell, assign, lease or
otherwise dispose of (whether in one transaction or a series
of transactions) all or substantially all of its assets (now
owned or hereafter acquired) to any person or entity,
without the prior written consent of Bank.
5.3. Maintenance of Business. Borrower shall: (i)
continue to remain in and operate substantially the same
line of business presently engaged in by it; (ii) not
suspend transaction of its usual business; (iii) conduct its
business in an orderly, efficient and customary manner; (iv)
substantially comply with all material laws, ordinances,
rules, regulations and requirements and shall maintain its
business, properties and assets necessary to conduct its
business in substantial compliance with all applicable
material governmental laws, ordinances, approvals, rules,
regulations and requirements, including without limitation,
zoning, sanitary, pollution, building, environmental and
safety laws and ordinances, and the rules and regulations
promulgated thereunder; and (v) not remove, demolish,
materially alter, discontinue the use of, sell, transfer,
assign, hypothecate, pledge or otherwise dispose of any part
of its properties and assets necessary for the continuance
of its business, as presently conducted and as presently
contemplated, other than in the normal course of its
business.
5.4. Books and Records. Borrower shall keep and
maintain complete and accurate books and records in
accordance with generally accepted accounting principles
consistently applied, reflecting all of the financial
affairs of Borrower. Borrower shall permit representatives
of Bank to examine and audit Borrower's (and its parent's
and its subsidiaries') books and records, to inspect
Borrower's facilities and properties, and to discuss
Borrower's financial condition and the contents of
Borrower's financial statements with Borrower's accountants.
5.5. Financial Statements; Compliance Certificate.
5.5.1. Borrower shall furnish to Bank the
following financial information, in each instance prepared
in accordance with generally accepted accounting principles
consistently applied:
(i) Not later than ninety (90) days
after the end of each fiscal year or ten (10) days after the
filing of same with the Securities and Exchange Commission,
as applicable, either (a) audited annual consolidated and
consolidating financial statements of Borrower and Guarantor
including, without limitation, a balance sheet, profit and
loss statement and statements of income and cash flows and
any other information requested by Bank, prepared by a
certified public accountant acceptable to Bank, or (b) a
copy of Borrower's form 10-K as filed with the Securities
and Exchange Commission, together with, in either case, all
supporting schedules, including, without limitation,
accounts receivable and accounts payable aging reports in
form, scope, substance and level of detail satisfactory to
the Bank.
<PAGE>
(ii) Not later than thirty (30) days
after the end of each fiscal quarter or ten (10) days after
the filing of same with the Securities and Exchange
Commission, as applicable, copies of the Form 10-Q for
Borrower as filed with the Securities and Exchange
Commission, with all supporting schedules. The supporting
schedules shall include, without limitation, accounts
receivable and accounts payable aging reports, in form,
scope, substance and level of detail satisfactory to the
Bank.
(iii) Not later than thirty (30) days
after filing with the Internal Revenue Service or the
appropriate state taxing authority, as the case may be, a
true and complete copy of all federal and state tax returns,
including all schedules, of Borrower and Guarantor and for
any such return not timely filed, copies of all extension
requests.
(iv) Not later than fifteen (15) days
after execution, copies of all permitted new or modified
leases of the Mortgaged Premises.
(v) Such other information respecting
the operations of Borrower and/or the Mortgaged Premises as
Bank may from time to time reasonably request.
5.5.2. Borrower shall furnish to Bank, with each
set of financial statements described in Section 5.5.1.
above, a compliance certificate signed by Borrower's chief
financial officer certifying that: (i) all representations
and warranties of Borrower set forth in this Agreement or
any other Loan Document remain true and correct; (ii) none
of the covenants of Borrower contained in this Agreement or
any other Loan Document has been breached; and (iii) to its
knowledge, no event has occurred which constitutes an Event
of Default or, with the giving of notice or the passage of
time, or both, would constitute an Event of Default under
this Agreement or any other Loan Document. In addition,
Borrower shall promptly notify Bank of the occurrence of any
default, Event of Default, pending or threatened adverse
litigation or material adverse change in its financial
condition.
5.6. Taxes and Other Charges. Borrower shall prepare
and timely file all federal, state and local tax returns
required to be filed by Borrower and promptly pay and
discharge all taxes, assessments, water and sewer rents, and
other governmental charges, imposed upon Borrower or on any
of Borrower's property when due, but in no event after
interest or penalties commence to accrue thereon or become a
lien upon such property, except for those taxes,
assessments, water and sewer rents, and other governmental
charges then being contested in good faith by Borrower by
appropriate proceedings and for which Borrower has
established on its books or by deposit of cash with Bank at
the option of Bank, a reserve for the payment thereof in
such amount as Bank may require, and so long as such
contest: (i) operates to prevent collection, stay any
proceedings which may be instituted to enforce payment of
such item, and prevent a sale of Borrower's property to pay
such item; (ii) is maintained and prosecuted with due
diligence; and (iii) shall not have been terminated or
discontinued adversely to Borrower. Borrower shall submit to
Bank, upon request, an affidavit signed by Borrower
certifying that all federal, state and local income tax
returns have been filed to date and all real property taxes,
assessments and other governmental charges with respect to
Borrower's properties have been paid to date.
Notwithstanding the foregoing, the Bank agrees that no such
reserve will be required in connection with the currently
pending suit against the Department of Revenue Services
filed in the Connecticut Superior Court, Judicial District
of Hartford/New Britain at Hartford, including the pendency
of any appeals in connection therewith.
<PAGE>
5.7. Indemnification.
5.7.1. Borrower hereby indemnifies and agrees to
protect, defend and hold harmless Bank, any entity which
"controls" Bank within the meaning of Section 15 of the
Securities Act of 1933, as amended, or is under common
control with Bank, and any member, officer, director,
official, agent, employee or attorney of Bank, and their
respective heirs, administrators, executors, successors and
assigns (collectively, the "Indemnified Parties"), from and
against any and all losses, damages, expenses or liabilities
of any kind or nature and from any suits, claims or demands,
including reasonable attorneys' fees incurred in
investigating or defending such claim, suffered by any of
them and caused by, relating to, arising out of, resulting
from, or in any way connected with the Loan Documents or the
transactions contemplated therein (unless determined by a
final judgment of a court of competent jurisdiction to have
been caused solely by the gross negligence or willful
misconduct of the Indemnified Parties) including, without
limitation: (i) disputes with any architect, general
contractor, subcontractor, materialman or supplier, or on
account of any act or omission to act by Bank in connection
with the Mortgaged Premises; (ii) losses, damages (including
consequential damages), expenses or liabilities sustained by
Bank in connection with any environmental inspection,
monitoring, sampling or cleanup of the Mortgaged Premises
required or mandated by any applicable environmental law;
(iii) any untrue statement of a material fact contained in
information submitted to Bank by Borrower or the omission of
any material fact necessary to be stated therein in order to
make such statement not misleading or incomplete; (iv) the
failure of Borrower to perform any obligations herein
required to be performed by Borrower; and (v) the ownership,
construction, occupancy, operation, use or maintenance of
the Mortgaged Premises.
5.7.2. In case any action shall be brought
against Bank or any other Indemnified Party in respect to
which indemnity may be sought against Borrower, Bank or such
other Indemnified Party shall promptly notify Borrower and
Borrower shall assume the defense thereof, including the
employment of counsel selected by Borrower and satisfactory
to Bank, the payment of all costs and expenses and the right
to negotiate and consent to settlement. The failure of Bank
to so notify Borrower shall not relieve Borrower of any
liability it may have under the foregoing indemnification
provisions or from any liability which it may otherwise have
to Bank or any of the other Indemnified Parties. Bank shall
have the right, at its sole option, to employ separate
counsel in any such action and to participate in the defense
thereof, all at Borrower's sole cost and expense. Borrower
shall not be liable for any settlement of any such action
effected without its consent, but if settled with Borrower's
consent, or if there be a final judgment for the claimant in
any such action, Borrower agrees to indemnify and save
harmless Bank from and against any loss or liability by
reason of such settlement or judgment.
5.7.3. The provisions of this Section 5.7 shall
survive the repayment or other satisfaction of the
Liabilities.
5.8. Financial Covenants. Borrower shall comply with
each of the following financial covenants:
5.8.1. Borrower shall not permit Tangible Net
Worth of Borrower and Guarantor, on a consolidated basis, at
any time to be less than $8,600,000. "Tangible Net Worth" is
defined, at any date as (i) the aggregate amount at which
all assets of the Borrower and Guarantor, on a consolidated
basis, would be shown on a balance sheet at such date after
deducting capitalized research and development costs,
capitalized interest, goodwill, patents, trademarks, trade
names, copyrights, service works, franchises, licenses,
amounts owing from officers, directors, shareholders,
principals, partners or affiliates of the Borrower and any
investments in any entities owned or controlled by any of
the foregoing, and such other assets as are properly
classified as "intangible assets" less (ii) Total
Liabilities. For the fiscal year ending October 31, 1996,
Tangible Net Worth shall equal or exceed $8,950,000. For
each fiscal year thereafter, Tangible Net Worth shall
increase over the immediately preceding fiscal year by not
less than $600,000. "Total Liabilities" is defined at any
date as all liabilities of the Borrower and Guarantor, on a
consolidated basis, including capitalized leases and all
reserves for deferred taxes and other deferred sums,
<PAGE>
which would properly appear on the liabilities side of a
balance sheet in accordance with Generally Accepted
Accounting Principles ("GAAP") applied on a consistent
basis.
5.8.2. Borrower shall not permit the ratio of
Total Liabilities to Tangible Net Worth of Borrower and
Guarantor, on a consolidated basis, at any time to exceed
1.5:1.0.
5.8.3. Borrower shall at all times maintain at
the end of each fiscal quarter of Borrower a Debt Service
Coverage Ratio of Borrower and Guarantor, on a consolidated
basis, of not less than 2.5. to 1.0. Debt Service Coverage
Ratio is defined as:
EBITDA - Main Cap Ex
____________________________
CMLTD + CPCLO + interest expense
where:
EBITDA means earnings before interest, taxes, depreciation
and amortization for the one year period ending on the date
of determination;
CMLTD means current maturities of long term debt;
CPCLO means current portion of capital lease obligations;
and
Main. Cap Ex means that portion of capital expenditures for
the one year period ending on the date of determination
necessary for property, plant and equipment to maintain
existing revenue levels
5.8.4. Retained Earnings of Borrower and
Guarantor, on a consolidated basis determined in accordance
with GAAP, shall increase annually by an amount not less
than $350,000.
5.8.5. Borrower shall maintain its primary
operating accounts at Bank.
5.8.6. Borrower shall maintain a Loan to Value
Ratio of not more than 75%. Loan to Value Ratio means the
outstanding principal balance of the Loan at the time in
question divided by the then current fair market value of
the Mortgaged Premises, as determined by Bank in its
reasonable judgment.
5.8.7. Borrower and Guarantor, on a consolidated
basis, shall not make any loans or advances to any other
person or entity other than any Guarantor in excess of
$250,000 annually without the express written consent of
the Bank which shall not be unreasonably withheld.
5.8.8. Except for obligations to the Bank or any
Affiliate and except for obligations in relation to
Permitted Liens (as defined in Section 5.13), Borrower and
Guarantor, on a consolidated basis, shall not create, incur,
assume or permit to exist any indebtedness for borrowed
money, for the deferred purchase price of property or
services, for reimbursement of letters of credit issued by
others, or any other indebtedness evidenced by a note, bond
or other instrument, in excess of $250,000 annually without
the express written consent of the Bank, which shall not be
unreasonably withheld.
5.8.9. Borrower shall not assume, guarantee,
endorse or otherwise become directly or contingently liable
for the obligations of any other person or entity except for
obligations of any Guarantor, which obligations do not
violate any duty or obligation of such Guarantor to the Bank
and except by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
5.8.10. All amounts due from Borrower to
affiliates and/or shareholders of Borrower shall be fully
subordinated in writing to all obligations of Borrower to
the Bank on terms satisfactory to the Bank.
<PAGE>
5.9. Contracts. Borrower shall not cancel any of the
Borrower's contracts with the Department of Energy, for any
reason. On a quarterly basis, Borrower will provide Bank
with an updated schedule of contracts indicating face value
and percentage of completion along with a re-affirmation
that all contracts are in full force and effect in terms of
each parties' contractual obligations.
5.10. Default on Other Contracts or Obligations.
Borrower shall not default on any material contract with, or
obligations due to any third party, or default in the
performance of any material obligation to a third party
incurred for money borrowed, which default has a material
adverse effect on Borrower and its business.
5.11. Judgment Entered. Borrower shall not permit the
entry of any money judgment or the assessment against, the
filing of any tax lien against, or the issuance of any writ
of garnishment or attachment against any property of or
debts due Borrower or Guarantor except such that are
contested in good faith by Borrower by appropriate
proceedings and for which adequate reserves have been
established.
5.12. Change of Fiscal Year. Borrower shall not change
its fiscal year without the express written consent of the
Bank.
5.13. Encumbrances. Borrower shall not create any
mortgage, security deed, deed of trust, pledge, lien, charge
or other encumbrance on any of its assets, whether now owned
or hereafter acquired other than (i) security interests
required by the Loan Documents; (ii) liens for taxes
contested in good faith; (iii) liens accruing by law for
employee benefits (other than liens arising under ERISA);
(iv) existing liens listed on Schedule 5.13 attached hereto
and liens as to which the Bank has given its express prior
written consent; or (v) liens which secure obligations
permitted pursuant to 5.8.8. ("Permitted Liens").
5.14. Investments. Borrower shall not purchase or
acquire any stock, securities, or evidence of indebtedness
of any other person or entity except investments in direct
obligations of the United States Government and certificates
of deposit of United States commercial banks having a tier 1
capital ratio of not less than 6% and then in an amount not
exceeding 10% of the issuing bank's unimpaired capital and
surplus.
5.15. Notice of Certain Events. Borrower shall
promptly give written notice to the Bank of (i) the details
of any Reportable Events (as defined in ERISA) which have
occurred; (ii) the occurrence of any event which alone or
with notice, the passage of time, or both, would constitute
an Event of Default; (iii) the commencement of any
proceeding or litigation which, if adversely determined,
would adversely affect its financial condition or ability to
conduct its business; and (iv) the formation of any
subsidiary of the Borrower after the date of this Agreement,
which notice shall be accompanied by the resolution of the
Board of Directors of such subsidiary authorizing such
subsidiary to execute a guaranty of the Liabilities,
satisfactory in form and substance to the Bank, together
with such guaranty duly executed by such subsidiary.
5.16. Preservation of Property; Insurance. Borrower
shall keep and maintain, and require its subsidiaries to
keep and maintain, all of its and their property and assets
in good order and repair, maintain extended coverage,
general liability, business interruption, hazard, property
and other insurance in amounts deemed sufficient by the Bank
and as is customary for businesses similar to the Borrower's
business, and deliver to the Bank certificates of all such
insurance in effect; and cause all such policies covering
any collateral and business interruption to contain loss
payee endorsements in favor of the Bank and to be subject to
cancellation or reduction in coverage only upon 30 days
prior written notice thereof to the Bank at its address set
forth in this Agreement.
5.17. Accounts. Borrower shall not sell, assign,
transfer or dispose of any of its accounts or notes
receivable, with or without recourse, except to the Bank.
<PAGE>
5.18. Sale-Leaseback Transactions. Borrower shall not
enter into any sale-leaseback transaction or any transaction
howsoever termed which would have the same or substantially
the same result or effect as a sale-leaseback.
5.19. Prepayment of Other Indebtedness. Borrower
shall not prepay any material amounts not required to be
prepaid, except to the Bank or any Affiliate, or cause or
permit to be accelerated any material amounts on any
outstanding indebtedness now existing or hereafter arising;
6. EVENTS OF DEFAULT AND REMEDIES
6.1. Each of the following shall constitute a default
(each, an "Event of Default") hereunder:
6.1.1. Non-payment when due of any sum required
to be paid to Bank under any of the Loan Documents;
6.1.2. A breach of the covenants contained in
Sections 5.2., 5.3., 5.6., 5.8., 5.9., 5.10., 5.11., 5.12.,
5.13. or 5.14.hereof;
6.1.3. A breach by Borrower of any other term,
covenant, condition, obligation or agreement under this
Agreement, and the continuance of such breach for a period
of fifteen (15) days after written notice thereof shall have
been given to Borrower;
6.1.4. Any representation or warranty made by
Borrower or Guarantor in this Agreement or any other Loan
Document shall prove to be false, incorrect or misleading in
any material respect as of the date when made;
6.1.5. An Event of Default under any of the other
Loan Documents.
6.1.6. An Event of Default under that certain
Loan Agreement by and between Fuel Cell Manufacturing
Corporation and Bank of even date herewith or any document
related thereto or any other instrument, document or
agreement between Borrower, any Guarantor and the Bank.
6.1.7. The filing by or against Borrower or any
Guarantor of a petition seeking relief, or the granting of
relief, under the Federal Bankruptcy Code or any similar
federal or state statute; any assignment for the benefit of
creditors made by Borrower or any Guarantor; the appointment
of a custodian, receiver, liquidator or trustee for Borrower
or any Guarantor or for any of the property of Borrower or
any Guarantor, or any action by Borrower or any Guarantor to
effect any of the foregoing; or if Borrower or any Guarantor
becomes insolvent (however defined) or is not paying its
debts generally as they become due;
6.1.8. The death, dissolution, liquidation,
merger, consolidation or reorganization of Borrower or any
Guarantor, or the institution of any proceeding to effect
any of the foregoing;
6.1.9. A material deterioration in the financial
condition of Borrower or any Guarantor or the occurrence of
any event which, in the reasonable opinion of the Bank,
impairs the financial responsibility of Borrower or any
Guarantor and their ability to repay the Liabilities;
6.2. Upon or at any time after the occurrence of an
Event of Default, Bank may exercise any right, power or
remedy permitted by law or as set forth in any of the Loan
Documents including, without
<PAGE>
limitation, the right to declare the entire unpaid amount
of this Loan immediately due and payable (provided that, in
the case of an Event of Default described in 6.1.7 above,
the entire unpaid amount of the Loan shall immediately and
automatically be due and payable) without presentment,
demand, notice of any kind, protest or notice of protest,
all of which are expressly waived, notwithstanding anything
to the contrary contained in any of the Loan Documents.
7. CONTINUING ENFORCEMENT OF AGREEMENT.
If, after receipt of any payment of all or any part of
the Liabilities, Bank is compelled or agrees, for settlement
purposes, to surrender such payment to any person or entity
for any reason (including, without limitation, a
determination that such payment is void or voidable as a
preference or fraudulent conveyance, an impermissible
setoff, or a diversion of trust funds), then this Agreement
and the other Loan Documents shall continue in full force
and effect, and Borrower shall be liable for, and shall
indemnify, defend and hold harmless Bank with respect to the
full amount so surrendered. The provisions of this Section
shall survive the termination of this Agreement and the
other Loan Documents and shall remain effective
notwithstanding the payment of the Liabilities, the
cancellation of the Note or any other Loan Document, the
release of any security interest, lien or encumbrance
securing the Liabilities or any other action which Bank may
have taken in reliance upon its receipt of such payment.
Any cancellation, release or other such action by Bank shall
be deemed to have been conditioned upon any payment of the
Liabilities having become final and irrevocable.
8. MISCELLANEOUS
8.1. Integration. This Agreement and the other Loan
Documents constitute the sole agreement of the parties with
respect to the transaction contemplated hereby and supersede
all oral negotiations and prior writings with respect
thereto.
8.2. Attorneys' Fees and Expenses. Borrower shall pay
all of the Bank's attorneys' fees and other costs incurred
in connection with this transaction. If Bank retains the
services of counsel by reason of a claim of a default or an
Event of Default hereunder or under any of the other Loan
Documents, or on account of any matter involving this
Agreement, or for examination of matters subject to Bank's
approval under the Loan Documents, all costs of suit and
collection and all reasonable attorneys' fees (and/or
allocated fees of Bank's in-house legal counsel) and such
other reasonable expenses so incurred by Bank shall
forthwith, on demand, become due and payable and shall be
secured hereby.
8.3. No Implied Waiver. Bank shall not be deemed to
have modified or waived any of its rights or remedies
hereunder unless such modification or waiver is in writing
and signed by Bank, and then only to the extent specifically
set forth therein. A waiver in one event shall not be
construed as continuing or as a waiver of or bar to such
right or remedy on a subsequent event.
8.4. Partial Invalidity. The invalidity or
unenforceability of any one or more provisions of this
Agreement shall not render any other provisions herein
contained invalid or unenforceable. In lieu of any invalid
or unenforceable provision, there shall be added
automatically a valid and enforceable provision as similar
in terms to such invalid or unenforceable provision as may
be possible.
8.5. Binding Effect. The covenants, conditions,
waivers, releases and agreements contained in this Agreement
shall bind, and the benefits thereof shall inure to, the
parties hereto and their respective heirs, executors,
administrators, successors and assigns; provided, however,
that this Agreement cannot be assigned by Borrower without
the prior written consent of Bank, and any such assignment
or attempted assignment by Borrower shall be void and of no
effect with respect to Bank.
<PAGE>
8.6. Modifications. This Agreement may not be
supplemented, extended, modified or terminated except by an
agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge
is sought.
8.7. Jurisdiction. Borrower irrevocably appoints each
and every owner, partner and/or officer of Borrower as its
attorneys upon whom may be served any notice, process or
pleading in any action or proceeding against it arising out
of or in connection with this Agreement or any other Loan
Document. Borrower hereby consents that any action or
proceeding against it may be commenced and maintained in any
court within the State of Connecticut or in the United
States District Court for the District of Connecticut or, at
the option of Bank, any court in which Bank shall initiate
legal or equitable proceedings and which has subject matter
jurisdiction over the matter in controversy, and that such
action or proceeding may be commenced by service of process
on any such owner, partner and/or officer. Borrower agrees
that the courts of the State of Connecticut and the United
States District Court for the District of Connecticut shall
have jurisdiction with respect to the subject matter hereof
and the person of Borrower and all collateral securing the
obligations of Borrower. Borrower hereby further consents to
personal jurisdiction in any other court in which Bank shall
initiate legal or equitable proceedings and which has
subject matter jurisdiction over the matter in controversy.
Borrower hereby waives personal service of the summons and
complaint or other process or papers issued in any
proceeding of the type described in this Section 8.7 and
agrees that service of such summons and complaint, or other
process or papers may be made by regular or certified mail
addressed to Borrower at the address of Borrower set forth
herein. Borrower agrees not to assert any defense to any
proceeding initiated by Bank based upon improper venue or
inconvenient forum. Borrower agrees that any action brought
by Borrower shall be commenced and maintained only in a
court in the federal judicial district or county in which
Bank has a place of business in Connecticut.
8.8. Notices. All notices and communications under
this Agreement shall be in writing and shall be given by
either (a) hand-delivery, (b) first class mail (postage
prepaid), or (c) reliable overnight commercial courier
(charges prepaid) to the addresses listed in this Agreement.
Notice shall be deemed to have been given and received: (i)
if by hand delivery, upon delivery; (ii) if by mail, three
(3) calendar days after the date first deposited in the
United States mail; and (iii) if by overnight courier, on
the date scheduled for delivery. A party may change its
address by giving written notice to the other party as
specified herein.
8.9. Governing Law. This Agreement shall be governed
by and construed in accordance with the substantive laws of
the State of Connecticut without reference to conflict of
laws principles.
8.10. Waiver of Jury Trial. BORROWER AND BANK AGREE
THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT BY BANK OR BORROWER ON OR WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS
OF THE PARTIES WITH RESPECT HERETO OR THERETO, SHALL BE
TRIED ONLY BY A COURT AND NOT BY A JURY. BANK AND BORROWER
EACH HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
INTELLIGENTLY, AND WITH THE ADVICE OF THEIR RESPECTIVE
COUNSEL, WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH
SUIT, ACTION OR PROCEEDING. FURTHER, BORROWER WAIVES ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT,
ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE,
CONSEQUENTIAL OR OTHER DAMAGES OTHER THAN, OR IN ADDITION
TO, ACTUAL DAMAGES. BORROWER ACKNOWLEDGES AND AGREES THAT
THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS
AGREEMENT AND THAT BANK WOULD NOT EXTEND CREDIT TO BORROWER
IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART OF
THIS AGREEMENT.
8.11. Prejudgment Remedy Waiver. BORROWER HEREBY
REPRESENTS, COVENANTS AND AGREES THAT THE PROCEEDS OF THE
LOAN SHALL BE USED FOR GENERAL COMMERCIAL PURPOSES AND THAT
THE LOAN IS A "COMMERCIAL TRANSACTION" AS DEFINED BY THE
STATUTES OF THE STATE OF CONNECTICUT. BORROWER HEREBY WAIVES
ALL RIGHTS TO NOTICE AND PRIOR COURT
<PAGE>
HEARING OR COURT ORDER UNDER CONNECTICUT GENERAL STATUTES,
SECTIONS 52-278a et seq., AS AMENDED, OR UNDER ANY OTHER
STATE OR FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT
REMEDIES BANK MAY EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES
HEREUNDER. MORE SPECIFICALLY, BORROWER ACKNOWLEDGES THAT
BANK'S ATTORNEY MAY, PURSUANT TO CONNECTICUT GENERAL
STATUTES, SECTION 52-278f, ISSUE A WRIT FOR A PREJUDGMENT
REMEDY WITHOUT SECURING A COURT ORDER. BORROWER ACKNOWLEDGES
AND RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO
THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY BY BANK'S
ATTORNEY, AND BANK ACKNOWLEDGES BORROWER'S RIGHT TO SAID
HEARING SUBSEQUENT TO THE ISSUANCE OF SAID WRIT. BORROWER
FURTHER HEREBY WAIVES ANY REQUIREMENT OR OBLIGATION OF BANK
TO POST A BOND OR OTHER SECURITY IN CONNECTION WITH ANY
PREJUDGMENT REMEDY OBTAINED BY BANK AND WAIVES ANY
OBJECTIONS TO ANY PREJUDGMENT REMEDY OBTAINED BY BANK BASED
ON ANY OFFSETS, CLAIMS, DEFENSES OR COUNTERCLAIMS OF
BORROWER OR ANY OTHER OBLIGATED PARTY TO ANY ACTION BROUGHT
BY BANK. BORROWER ACKNOWLEDGES AND AGREES THAT ALL OF THE
WAIVERS CONTAINED IN THIS SECTION HAVE BEEN MADE KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND INTELLIGENTLY, AND WITH THE
ADVICE OF ITS COUNSEL.
IN WITNESS WHEREOF, Borrower and Bank, intending to be
legally bound, have duly executed and delivered this Loan
Agreement as of the day and year first above written.
WITNESS: BORROWER:
ENERGY RESEARCH CORPORATION
By:
Name: Name:
Title: Title:
Address: 3 Great Pasture Road
Danbury, CT 06810
BANK:
FIRST UNION BANK OF
CONNECTICUT
By:
Name: Name: Diane Chamberlain
Title: Title: Vice President
Address: 300 Main Street
P.O. Box 700
CT2007
Stamford, CT
06904-0700
Attn: Anne S. Wilson
Vice President
<PAGE>
Commercial Loan - CT
TERM LOAN AGREEMENT
LOAN AGREEMENT dated June 28, 1996 (together with any
amendments or modifications hereto in effect from time to
time, the "Agreement"), between FIRST UNION BANK OF
CONNECTICUT ("Bank") and FUEL CELL MANUFACTURING CORPORATION
("Borrower").
Bank has agreed to make a loan to Borrower and Borrower
has agreed to accept the loan proceeds in the principal
amount of Six Hundred Thousand and 00/100 Dollars
($600,000.00) (the "Loan"), on the terms and conditions set
forth herein. The Loan shall be evidenced by a Term Note of
even date herewith from Borrower to Bank (the "Note").
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged,
and intending to be legally bound hereby, Bank and Borrower
agree as follows:
1. DEFINITIONS
1.1. "Affiliate" means First Union Corporation and any
of its direct and indirect affiliates and subsidiaries.
1.2. "Commitment Letter" means the commitment letter
dated April 26, 1996 pursuant to which Bank committed to
make the Loan to Borrower.
1.3. "General Security Agreement" means that certain
General Security Agreement entered into between Borrower and
Bank, dated of even date herewith.
1.4. "Guarantor" means Energy Research Corporation and
Fuel Cell Engineering Corporation, collectively.
1.5. "Liabilities" means, collectively: (i) the
repayment of all sums due under the Note (and all
extensions, renewals, replacements, substitutions,
amendments and modifications thereof) and the other Loan
Documents, including, without limitation, principal,
interest, fees, late charges and expenses, including
attorneys' fees and/or allocated fees of Bank's in-house
legal counsel; (ii) the repayment of all indebtedness
incurred or arising pursuant to the provisions of the
Mortgage; and (iii) the performance of all terms, conditions
and covenants set forth in the Loan Documents.
1.6. "Loan Documents" means, collectively, this
Agreement, the Note, that certain Guaranty and Suretyship
Agreement (if any), of even date herewith from Guarantor to
Bank (the "Guaranty"), that certain Open-End Mortgage and
Security Agreement of even date herewith from Energy
Research Corporation to Bank (the "Mortgage"), General
Security Agreements from Borrower and Energy Research
Corporation, and any other guaranty, document, certificate
or instrument executed by Borrower, Guarantor or any other
obligated party in connection with the Loan, together with
all amendments, modifications, renewals or extensions
thereof.
1.7. "Mortgaged Premises" means the real, personal and
mixed property described in the Mortgage as the "Mortgaged
Premises" and located at 1 & 3 Great Pasture Road, Danbury,
Connecticut.
2. THE LOAN
<PAGE>
2.1. Terms of Loan. Bank agrees to make the Loan to
Borrower on the date hereof on the terms and conditions
hereinafter set forth. The Loan will bear interest at the
rate and will be repaid as set forth in the Note.
2.2. Use of Loan Proceeds. Borrower shall use the
proceeds of the Loan only for the following purpose: To
repay the existing term loan held by Fleet National Bank.
2.3. Incorporation. All of the Loan Documents are
hereby made a part of this Agreement to the extent and with
the same effect as if fully set forth herein.
3. CONDITIONS PRECEDENT. Bank's obligations hereunder
are conditioned upon the fulfillment to Bank's satisfaction
of each of the following conditions precedent:
3.1. Borrower shall have delivered or caused to be
delivered to Bank each of the Loan Documents, in form and
substance satisfactory to Bank, duly executed by Borrower or
Guarantor, as applicable;
3.2. Borrower shall have delivered or caused to be
delivered to Bank each of the other documents, certificates
and instruments required by the Commitment Letter on or
prior to the date hereof, each in form and substance
satisfactory to Bank; and
3.3. Each of the other conditions contained in the
Commitment Letter shall have been satisfied.
4. REPRESENTATIONS AND WARRANTIES Borrower represents
and warrants as of the date hereof and, unless otherwise
indicated, at all times hereafter until the Liabilities are
fully paid and performed, as follows:
4.1. Organization, Powers. Borrower (i) is a
corporation, duly organized, validly existing and in good
standing under the laws of the state of its organization,
and is authorized to do business in each other jurisdiction
wherein its ownership of property or conduct of business
legally requires such authorization; (ii) has the power and
authority to own its properties and assets and to carry on
its business as now being conducted and as now contemplated;
and (iii) has the power and authority to execute, deliver
and perform all of its obligations under each Loan Document
to which it is a party.
4.2. Execution of Loan Documents. Each of the Loan
Documents to which Borrower is a party have been duly
executed and delivered by Borrower. Execution, delivery and
performance of each of the Loan Documents to which Borrower
is a party will not: (i) violate any of its organizational
documents, provision of law, order of any court, agency or
instrumentality of government, or any provision of any
indenture, agreement or other instrument to which it is a
party or by which it or any of its properties is bound; (ii)
result in the creation or imposition of any lien, charge or
encumbrance of any nature, other than the liens created by
the Loan Documents; and (iii) require any authorization,
consent, approval, license, exemption of, or filing or
registration with, any court or governmental authority.
4.3. Obligations of Borrower. Each of the Loan
Documents to which Borrower is a party is the legal, valid
and binding obligation of Borrower, enforceable against it
in accordance with their terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other
laws or equitable principles relating to or affecting the
enforcement of creditors' rights generally. Borrower is
obtaining the Loan for commercial purposes.
4.4. Litigation; Compliance with Laws. There is no
action, suit, or proceeding at law or in equity or by or
before any governmental authority, agency or other
instrumentality now pending or, to the knowledge of
Borrower, threatened against or affecting Borrower or any of
its properties or rights which, if adversely determined,
would materially impair or affect: (i) the value of any
collateral securing the
<PAGE>
Liabilities; (ii) Borrower's right to carry on its business
substantially as now conducted (and as now contemplated);
(iii) its financial condition; or (iv) its capacity to
consummate and perform its obligations under the Loan
Documents to which Borrower is a party. Borrower is in
substantial compliance with all laws, ordinances, rules,
regulations and requirements which materially affect
Borrower, its assets or the operation of its business, and
is not in violation of or in default with respect to any
order, writ, injunction, decree or demand of any court or
governmental authority.
4.5. Payment of Taxes. Borrower has filed or caused to
be filed all federal, state and local tax returns which are
required to be filed, and has paid or caused to be paid all
taxes as shown on said returns or on any assessment received
by it, to the extent that such taxes or assessments have
become due, except such that are contested in good faith by
Borrower by appropriate proceedings and for which adequate
reserves have been established. Borrower is not aware of any
material unasserted claims for prior taxes against it for
which adequate reserves satisfactory to Bank have not been
established.
4.6. No Defaults. Borrower is not in default in the
performance, observance or fulfillment of any of the
obligations, covenants or conditions contained herein or in
any material agreement or instrument to which it is a party
or by which it or any of its properties is bound. No Event
of Default or event which, with the giving of notice and/or
lapse of time, would constitute an Event of Default has
occurred and is continuing or would result from making the
Loan.
4.7. Financial Statements. All financial statements
delivered by Borrower to Bank, are true, correct and
complete in all material respects, fairly represent
Borrower's financial condition as of the date hereof and
thereof, and no information has been omitted which would
make the information previously furnished misleading or
incorrect in any material respect.
4.8. No Material Adverse Change. As of the date
hereof, there has been no material adverse change in the
financial condition, operations, affairs, prospects, or
business of Borrower from the date of the most recent
financial statements provided by Borrower to Bank.
4.9. No Untrue Statements. No Loan Document or other
document, certificate or statement furnished to Bank by or
on behalf of Borrower contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein
not misleading. It is specifically understood by Borrower
that all such statements, representations and warranties
shall be deemed to have been relied upon by Bank as an
inducement to make the Loan to Borrower.
4.10. Title to Property. Borrower has good and
marketable title to all of its properties and assets listed
in the most recent financial statements delivered to Bank on
or prior to the date hereof, except as otherwise expressly
described in said financial statements, and except those
properties and assets disposed of since the date of said
financial statements in the ordinary course of business.
4.11. ERISA. No employee benefit plan established or
maintained by the Borrower which is subject to the Employee
Retirement Income Security Act 29 U.S.C. 1001 et seq.
("ERISA") has an accumulated funding deficiency (as such
term is defined under ERISA). No material liability to the
Pension Benefit Guaranty Corporation (or any successor
thereto under ERISA) has been incurred by the Borrower with
respect to any such plan and no Reportable Event under ERISA
has occurred. The Borrower has no actual or anticipated
liability under Section 4971 of the Internal Revenue Code
("Code") (relating to tax on failure to meet the minimum
funding standard of Section 412 of the Code) with respect to
any employee benefit plan to which it contributes but which
is not maintained or established by it.
5. COVENANTS
<PAGE>
5.1. Optional Hedge. Borrower may hedge the Loan's
floating interest expense for the full term of the Loan by
maintaining either: (i) the Swap Agreement; or (ii) a
comparable interest rate swap agreement with Bank or other
counterparty acceptable to Bank in a notional amount equal
to the then principal balance of the Loan and providing for
a fixed rate sufficient to satisfy the Debt Service Coverage
Ratio requirement set forth below, and containing such other
terms and conditions as shall be reasonably acceptable to
Bank.
5.2. Mergers, Restructure. Borrower shall not merge
into, consolidate with or into, or sell, assign, lease or
otherwise dispose of (whether in one transaction or a series
of transactions) all or substantially all of its assets (now
owned or hereafter acquired) to any person or entity,
without the prior written consent of Bank.
5.3. Maintenance of Business. Borrower shall: (i)
continue to remain in and operate substantially the same
line of business presently engaged in by it; (ii) not
suspend transaction of its usual business; (iii) conduct its
business in an orderly, efficient and customary manner; (iv)
substantially comply with all materially laws, ordinances,
rules, regulations and requirements and shall maintain its
business, properties and assets necessary to conduct its
business in substantial compliance with all applicable
material governmental laws, ordinances, approvals, rules,
regulations and requirements, including without limitation,
zoning, sanitary, pollution, building, environmental and
safety laws and ordinances, and the rules and regulations
promulgated thereunder; and (v) not remove, demolish,
materially alter, discontinue the use of, sell, transfer,
assign, hypothecate, pledge or otherwise dispose of any part
of its properties and assets necessary for the continuance
of its business, as presently conducted and as presently
contemplated, other than in the normal course of its
business.
5.4. Books and Records. Borrower shall keep and
maintain complete and accurate books and records in
accordance with generally accepted accounting principles
consistently applied, reflecting all of the financial
affairs of Borrower. Borrower shall permit representatives
of Bank to examine and audit Borrower's (and its parent's
and its subsidiaries') books and records, to inspect
Borrower's facilities and properties, and to discuss
Borrower's financial condition and the contents of
Borrower's financial statements with Borrower's accountants.
5.5. Financial Statements; Compliance Certificate.
5.5.1. Borrower shall furnish to Bank the
following financial information, in each instance prepared
in accordance with generally accepted accounting principles
consistently applied:
(i) Not later than ninety (90) days
after the end of each fiscal year or ten (10) days after the
filing of same with the Securities and Exchange Commission,
as applicable, either (a) audited annual consolidated and
consolidating financial statements of Borrower and Guarantor
including, without limitation, a balance sheet, profit and
loss statement and statements of income and cash flows and
any other information requested by Bank, prepared by a
certified public accountant acceptable to Bank, or (b) a
copy of Borrower's form 10-K as filed with the Securities
and Exchange Commission, together with, in either case, all
supporting schedules, including, without limitation,
accounts receivable and accounts payable aging reports in
form, scope, substance and level of detail satisfactory to
the Bank.
(ii) Not later than thirty (30) days
after the end of each fiscal quarter or ten (10) days after
the filing of same with the Securities and Exchange
Commission, as applicable, copies of the Form 10-Q for
Borrower as filed with the Securities and Exchange
Commission, with all supporting
<PAGE>
schedules. The supporting schedules shall include, without
limitation, accounts receivable and accounts payable aging
reports, in form, scope, substance and level of detail
satisfactory to the Bank.
(iii) Not later than thirty (30) days
after filing with the Internal Revenue Service or the
appropriate state taxing authority, as the case may be, a
true and complete copy of all federal and state tax returns,
including all schedules, of Borrower and Guarantor and for
any such return not timely filed, copies of all extension
requests.
(iv) Not later than fifteen (15) days
after execution, copies of all permitted new or modified
leases of the Mortgaged Premises.
(v) Such other information respecting
the operations of Borrower and/or the Mortgaged Premises as
Bank may from time to time reasonably request.
5.5.2. Borrower shall furnish to Bank, with each
set of financial statements described in Section 5.5.1.
above, a compliance certificate signed by Borrower's chief
financial officer certifying that: (i) all representations
and warranties of Borrower set forth in this Agreement or
any other Loan Document remain true and correct; (ii) none
of the covenants of Borrower contained in this Agreement or
any other Loan Document has been breached; and (iii) to its
knowledge, no event has occurred which constitutes an Event
of Default or, with the giving of notice or the passage of
time, or both, would constitute an Event of Default under
this Agreement or any other Loan Document. In addition,
Borrower shall promptly notify Bank of the occurrence of any
default, Event of Default, pending or threatened adverse
litigation or material adverse change in its financial
condition.
5.6. Taxes and Other Charges. Borrower shall prepare
and timely file all federal, state and local tax returns
required to be filed by Borrower and promptly pay and
discharge all taxes, assessments, water and sewer rents, and
other governmental charges, imposed upon Borrower or on any
of Borrower's property when due, but in no event after
interest or penalties commence to accrue thereon or become a
lien upon such property, except for those taxes,
assessments, water and sewer rents, and other governmental
charges then being contested in good faith by Borrower by
appropriate proceedings and for which Borrower has
established on its books or by deposit of cash with Bank at
the option of Bank, a reserve for the payment thereof in
such amount as Bank may require, and so long as such
contest: (i) operates to prevent collection, stay any
proceedings which may be instituted to enforce payment of
such item, and prevent a sale of Borrower's property to pay
such item; (ii) is maintained and prosecuted with due
diligence; and (iii) shall not have been terminated or
discontinued adversely to Borrower. Borrower shall submit to
Bank, upon request, an affidavit signed by Borrower
certifying that all federal, state and local income tax
returns have been filed to date and all real property taxes,
assessments and other governmental charges with respect to
Borrower's properties have been paid to date.
Notwithstanding the foregoing, the Bank agrees that no such
reserve will be required in connection with the currently
pending suit against the Department of Revenue Services
filed in the Connecticut Superior Court, Judicial District
of Hartford/New Britain at Hartford, including the pendency
of any appeals in connection therewith.
5.7. Indemnification.
5.7.1. Borrower hereby indemnifies and agrees to
protect, defend and hold harmless Bank, any entity which
"controls" Bank within the meaning of Section 15 of the
Securities Act of 1933, as amended, or is under common
control with Bank, and any member, officer, director,
official, agent, employee or attorney of Bank, and their
respective heirs, administrators, executors, successors and
assigns (collectively, the "Indemnified Parties"), from and
against any and all losses, damages, expenses or liabilities
of any kind or nature and from any suits, claims or demands,
including reasonable attorneys' fees incurred in
investigating or defending such claim, suffered by any of
them and caused by, relating to,
<PAGE>
arising out of, resulting from, or in any way connected
with the Loan Documents or the transactions contemplated
therein (unless determined by a final judgment of a court of
competent jurisdiction to have been caused solely by the
gross negligence or willful misconduct of the Indemnified
Parties) including, without limitation: (i) disputes with
any architect, general contractor, subcontractor,
materialman or supplier, or on account of any act or
omission to act by Bank in connection with the Mortgaged
Premises; (ii) losses, damages (including consequential
damages), expenses or liabilities sustained by Bank in
connection with any environmental inspection, monitoring,
sampling or cleanup of the Mortgaged Premises required or
mandated by any applicable environmental law; (iii) any
untrue statement of a material fact contained in information
submitted to Bank by Borrower or the omission of any
material fact necessary to be stated therein in order to
make such statement not misleading or incomplete; (iv)the
failure of Borrower to perform any obligations herein
required to be performed by Borrower; and (v) the ownership,
construction, occupancy, operation, use or maintenance of
the Mortgaged Premises.
5.7.2. In case any action shall be brought
against Bank or any other Indemnified Party in respect to
which indemnity may be sought against Borrower, Bank or such
other Indemnified Party shall promptly notify Borrower and
Borrower shall assume the defense thereof, including the
employment of counsel selected by Borrower and satisfactory
to Bank, the payment of all costs and expenses and the right
to negotiate and consent to settlement. The failure of Bank
to so notify Borrower shall not relieve Borrower of any
liability it may have under the foregoing indemnification
provisions or from any liability which it may otherwise have
to Bank or any of the other Indemnified Parties. Bank shall
have the right, at its sole option, to employ separate
counsel in any such action and to participate in the defense
thereof, all at Borrower's sole cost and expense. Borrower
shall not be liable for any settlement of any such action
effected without its consent, but if settled with Borrower's
consent, or if there be a final judgment for the claimant in
any such action, Borrower agrees to indemnify and save
harmless Bank from and against any loss or liability by
reason of such settlement or judgment.
5.7.3. The provisions of this Section 5.7 shall
survive the repayment or other satisfaction of the
Liabilities.
5.8. Financial Covenants. Borrower shall comply with
each of the following financial covenants:
5.8.1. Borrower shall not permit Tangible Net
Worth of Borrower and Guarantor, on a consolidated basis, at
any time to be less than $8,600,000. "Tangible Net Worth" is
defined, at any date as (i) the aggregate amount at which
all assets of the Borrower and Guarantor, on a consolidated
basis, would be shown on a balance sheet at such date after
deducting capitalized research and development costs,
capitalized interest, goodwill, patents, trademarks, trade
names, copyrights, service works, franchises, licenses,
amounts owing from officers, directors, shareholders,
principals, partners or affiliates of the Borrower and any
investments in any entities owned or controlled by any of
the foregoing, and such other assets as are properly
classified as "intangible assets" less (ii) Total
Liabilities. For the fiscal year ending October 31, 1996,
Tangible Net Worth shall equal or exceed $8,950,000.00. For
each fiscal year thereafter, Tangible Net Worth shall
increase over the immediately preceding fiscal year by not
less than $600,000. "Total Liabilities" is defined at any
date as all liabilities of the Borrower and Guarantor, on a
consolidated basis, including capitalized leases and all
reserves for deferred taxes and other deferred sums, which
would properly appear on the liabilities side of a balance
sheet in accordance with Generally Accepted Accounting
Principles ("GAAP") applied on a consistent basis.
5.8.2. Borrower shall not permit the ratio of
Total Liabilities to Tangible Net Worth of Borrower and
Guarantor, on a consolidated basis, at any time to exceed
1.5:1.0.
5.8.3. Borrower shall at all times maintain at
the end of each fiscal quarter of Borrower a Debt Service
Coverage Ratio of Borrower and Guarantor, on a consolidated
basis, of not less than 2.5. to 1.0. Debt Service Coverage
Ratio is defined as:
<PAGE>
EBITDA - Main Cap Ex
_______________________________
CMLTD + CPCLO + interest expense
where:
EBITDA means earnings before interest, taxes, depreciation
and amortization for the one year period ending on the date
of determination;
CMLTD means current maturities of long term debt;
CPCLO means current portion of capital lease obligations;
and
Main. Cap Ex means that portion of capital expenditures for
the one year period ending on the date of determination
necessary for property, plant and equipment to maintain
existing revenue levels
5.8.4. Retained Earnings of Borrower and
Guarantor, on a consolidated basis determined in accordance
with GAAP, shall increase annually by an amount not less
than $350,000.
5.8.5. Borrower shall maintain its primary
operating accounts at Bank.
5.8.6. Borrower shall maintain a Loan to
Liquidation Value Ratio of not more than 75%. Loan to
Liquidation Value Ratio means the outstanding principal
balance of the Loan at the time in question divided by the
then current fair market value of the machinery and
equipment included in the Collateral (as defined in the
General Security Agreement) in which the Bank has a first
priority security interest, as determined by Bank in its
reasonable business judgment.
5.8.7. Borrower and Guarantor, on a consolidated
basis, shall not make any loans or advances to any other
person or entity other than any Guarantor in excess of
$250,000 annually without the express written consent of the
Bank, which shall not be unreasonably withheld.
5.8.8. Except for obligations to the Bank or any
Affiliate and except for obligations in relation to
Permitted Liens (as defined in Section 5.13), Borrower and
Guarantor, on a consolidated basis, shall not create, incur,
assume or permit to exist any indebtedness for borrowed
money, for the deferred purchase price of property or
services, for reimbursement of letters of credit issued by
others, or any other indebtedness evidenced by a note, bond
or other instrument, in excess of $250,000 annually without
the express written consent of the Bank, which shall not be
unreasonably withheld.
5.8.9. Borrower shall not assume, guarantee,
endorse or otherwise become directly or contingently liable
for the obligations of any other person or entity except for
obligations of any Guarantor, which obligations do not
violate any duty or obligation of such Guarantor to the Bank
and except by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
5.8.10. All amounts due from Borrower to
affiliates and/or shareholders of Borrower shall be fully
subordinated in writing to all obligations of Borrower to
the Bank on terms satisfactory to the Bank.
5.9. Contracts. Borrower shall not cancel any of the
Borrower's contracts with the Department of Energy, for any
reason. On a quarterly basis, Borrower will provide Bank
with an updated schedule of contracts indicating face value
and percentage of completion along with a re-affirmation
that all contracts are in full force and effect in terms of
each parties' contractual obligations.
5.10. Default on Other Contracts or Obligations.
Borrower shall not default on any material contract with, or
obligations due to any third party, or default in the
performance of any material obligation
<PAGE>
to a third party incurred for money borrowed, which default
has a material adverse effect on Borrower and its business.
5.11. Judgment Entered. Borrower shall not permit the
entry of any money judgment or the assessment against, the
filing of any tax lien against, or the issuance of any writ
of garnishment or attachment against any property of or
debts due Borrower or Guarantor except such that are
contested in good faith by Borrower by appropriate
proceedings and for which adequate reserves have been
established.
5.12. Change of Fiscal Year. Borrower shall not change
its fiscal year without the express written consent of the
Bank.
5.13. Encumbrances. Borrower shall not create any
mortgage, security deed, deed of trust, pledge, lien, charge
or other encumbrance on any of its assets, whether now owned
or hereafter acquired other than (i) security interests
required by the Loan Documents; (ii) liens for taxes
contested in good faith; (iii) liens accruing by law for
employee benefits (other than liens arising under ERISA);
(iv) existing liens listed on Schedule 5.13 attached hereto
and liens as to which the Bank has given its express prior
written consent; or (v) liens which secure obligations
permitted pursuant to Section 5.8.8. ("Permitted Liens").
5.14. Investments. Borrower shall not purchase or
acquire any stock, securities, or evidence of indebtedness
of any other person or entity except investments in direct
obligations of the United States Government and certificates
of deposit of United States commercial banks having a tier 1
capital ratio of not less than 6% and then in an amount not
exceeding 10% of the issuing bank's unimpaired capital and
surplus.
5.15. Notice of Certain Events. Borrower shall
promptly give written notice to the Bank of (i) the details
of any Reportable Events (as defined in ERISA) which have
occurred; (ii) the occurrence of any event which alone or
with notice, the passage of time, or both, would constitute
an Event of Default; (iii) the commencement of any
proceeding or litigation which, if adversely determined,
would adversely affect its financial condition or ability to
conduct its business; and (iv) the formation of any
subsidiary of the Borrower after the date of this Agreement,
which notice shall be accompanied by the resolution of the
Board of Directors of such subsidiary authorizing such
subsidiary to execute a guaranty of the Liabilities,
satisfactory in form and substance to the Bank, together
with such guaranty duly executed by such subsidiary.
5.16. Preservation of Property; Insurance. Borrower
shall keep and maintain, and require its subsidiaries to
keep and maintain, all of its and their property and assets
in good order and repair, maintain extended coverage,
general liability, business interruption, hazard, property
and other insurance in amounts deemed sufficient by the Bank
and as is customary for businesses similar to the Borrower's
business, and deliver to the Bank certificates of all such
insurance in effect; and cause all such policies covering
any collateral and business interruption to contain loss
payee endorsements in favor of the Bank and to be subject to
cancellation or reduction in coverage only upon 30 days
prior written notice thereof to the Bank at its address set
forth in this Agreement.
5.17. Accounts. Borrower shall not sell, assign,
transfer or dispose of any of its accounts or notes
receivable, with or without recourse, except to the Bank.
5.18. Sale-Leaseback Transactions. Borrower shall not
enter into any sale-leaseback transaction or any transaction
howsoever termed which would have the same or substantially
the same result or effect as a sale-leaseback.
<PAGE>
5.19. Prepayment of Other Indebtedness. Borrower
shall not prepay any material amounts not required to be
prepaid, except to the Bank or any Affiliate, or cause or
permit to be accelerated any material amounts on any
outstanding indebtedness now existing or hereafter arising;
6. EVENTS OF DEFAULT AND REMEDIES
6.1 Each of the following shall constitute a default
(each, an "Event of Default") hereunder:
6.1.1. Non-payment when due of any sum required
to be paid to Bank under any of the Loan Documents;
6.1.2. A breach of the covenants contained in
Sections 5.2., 5.3., 5.6., 5.8., 5.9., 5.10., 5.11., 5.12.,
5.13. or 5.14.hereof;
6.1.3. A breach by Borrower of any other term,
covenant, condition, obligation or agreement under this
Agreement, and the continuance of such breach for a period
of fifteen (15) days after written notice thereof shall have
been given to Borrower;
6.1.4. Any representation or warranty made by
Borrower or Guarantor in this Agreement or any other Loan
Document shall prove to be false, incorrect or misleading in
any material respect as of the date when made;
6.1.5. An Event of Default under any of the
other Loan Documents.
6.1.6. An Event of Default under that certain
Loan Agreement by and between Energy Research Corporation
and Bank of even date herewith.
6.1.7. The filing by or against Borrower or any
Guarantor of a petition seeking relief, or the granting of
relief, under the Federal Bankruptcy Code or any similar
federal or state statute; any assignment for the benefit of
creditors made by Borrower or any Guarantor; the appointment
of a custodian, receiver, liquidator or trustee for Borrower
or any Guarantor or for any of the property of Borrower or
any Guarantor, or any action by Borrower or any Guarantor to
effect any of the foregoing; or if Borrower or any Guarantor
becomes insolvent (however defined) or is not paying its
debts generally as they become due;
6.1.8. The death, dissolution, liquidation,
merger, consolidation or reorganization of Borrower or any
Guarantor, or the institution of any proceeding to effect
any of the foregoing;
6.1.9. A material deterioration in the
financial condition of Borrower or any Guarantor or the
occurrence of any event which, in the reasonable opinion of
the Bank, impairs the financial responsibility of Borrower
or any Guarantor and their ability to repay the Liabilities;
6.2. Upon or at any time after the occurrence of an
Event of Default, Bank may exercise any right, power or
remedy permitted by law or as set forth in any of the Loan
Documents including, without limitation, the right to
declare the entire unpaid amount of this Loan immediately
due and payable (provided that, in the cae of an Event of
Default described in 6.1.7 above, the entire unpaid amount
of the Loan shall immediately and automatically be due and
payable) without presentment, demand, notice of any kind,
protest or notice of protest, all of which are expressly
waived, notwithstanding anything to the contrary contained
in any of the Loan Documents.
7. CONTINUING ENFORCEMENT OF AGREEMENT.
<PAGE>
If, after receipt of any payment of all or any part of
the Liabilities, Bank is compelled or agrees, for settlement
purposes, to surrender such payment to any person or entity
for any reason (including, without limitation, a
determination that such payment is void or voidable as a
preference or fraudulent conveyance, an impermissible
setoff, or a diversion of trust funds), then this Agreement
and the other Loan Documents shall continue in full force
and effect, and Borrower shall be liable for, and shall
indemnify, defend and hold harmless Bank with respect to the
full amount so surrendered. The provisions of this Section
shall survive the termination of this Agreement and the
other Loan Documents and shall remain effective
notwithstanding the payment of the Liabilities, the
cancellation of the Note or any other Loan Document, the
release of any security interest, lien or encumbrance
securing the Liabilities or any other action which Bank may
have taken in reliance upon its receipt of such payment.
Any cancellation, release or other such action by Bank shall
be deemed to have been conditioned upon any payment of the
Liabilities having become final and irrevocable.
8. MISCELLANEOUS
8.1. Integration. This Agreement and the other Loan
Documents constitute the sole agreement of the parties with
respect to the transaction contemplated hereby and supersede
all oral negotiations and prior writings with respect
thereto.
8.2. Attorneys' Fees and Expenses. Borrower shall pay
all of the Bank's attorneys' fees and other costs incurred
in connection with this transaction. If Bank retains the
services of counsel by reason of a claim of a default or an
Event of Default hereunder or under any of the other Loan
Documents, or on account of any matter involving this
Agreement, or for examination of matters subject to Bank's
approval under the Loan Documents, all costs of suit and
collection and all reasonable attorneys' fees (and/or
allocated fees of Bank's in-house legal counsel) and such
other reasonable expenses so incurred by Bank shall
forthwith, on demand, become due and payable and shall be
secured hereby.
8.3. No Implied Waiver. Bank shall not be deemed to
have modified or waived any of its rights or remedies
hereunder unless such modification or waiver is in writing
and signed by Bank, and then only to the extent specifically
set forth therein. A waiver in one event shall not be
construed as continuing or as a waiver of or bar to such
right or remedy on a subsequent event.
8.4. Partial Invalidity. The invalidity or
unenforceability of any one or more provisions of this
Agreement shall not render any other provisions herein
contained invalid or unenforceable. In lieu of any invalid
or unenforceable provision, there shall be added
automatically a valid and enforceable provision as similar
in terms to such invalid or unenforceable provision as may
be possible.
8.5. Binding Effect. The covenants, conditions,
waivers, releases and agreements contained in this Agreement
shall bind, and the benefits thereof shall inure to, the
parties hereto and their respective heirs, executors,
administrators, successors and assigns; provided, however,
that this Agreement cannot be assigned by Borrower without
the prior written consent of Bank, and any such assignment
or attempted assignment by Borrower shall be void and of no
effect with respect to Bank.
8.6. Modifications. This Agreement may not be
supplemented, extended, modified or terminated except by an
agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge
is sought.
8.7. Jurisdiction. Borrower irrevocably appoints each
and every owner, partner and/or officer of Borrower as its
attorneys upon whom may be served any notice, process or
pleading in any action or proceeding against it arising out
of or in connection with this Agreement or any other Loan
Document. Borrower hereby consents that any action or
proceeding against it may be commenced and maintained in any
court within the State of Connecticut or in the United
States District Court for the District of Connecticut or, at
the option of Bank, any court in which Bank shall initiate
legal or equitable proceedings
<PAGE>
and which has subject matter jurisdiction over the matter in
controversy, and that such action or proceeding may be
commenced by service of process on any such owner, partner
and/or officer. Borrower agrees that the courts of the State
of Connecticut and the United States District Court for the
District of Connecticut shall have jurisdiction with respect
to the subject matter hereof and the person of Borrower and
all collateral securing the obligations of Borrower.
Borrower hereby further consents to personal jurisdiction in
any other court in which Bank shall initiate legal or
equitable proceedings and which has subject matter
jurisdiction over the matter in controversy. Borrower hereby
waives personal service of the summons and complaint or
other process or papers issued in any proceeding of the type
described in this Section 8.7 and agrees that service of
such summons and complaint, or other process or papers may
be made by regular or certified mail addressed to Borrower
at the address of Borrower set forth herein. Borrower agrees
not to assert any defense to any proceeding initiated by
Bank based upon improper venue or inconvenient forum.
Borrower agrees that any action brought by Borrower shall be
commenced and maintained only in a court in the federal
judicial district or county in which Bank has a place of
business in Connecticut.
8.8. Notices. All notices and communications under
this Agreement shall be in writing and shall be given by
either (a) hand-delivery, (b) first class mail (postage
prepaid), or (c) reliable overnight commercial courier
(charges prepaid) to the addresses listed in this Agreement.
Notice shall be deemed to have been given and received: (i)
if by hand delivery, upon delivery; (ii) if by mail, three
(3) calendar days after the date first deposited in the
United States mail; and (iii) if by overnight courier, on
the date scheduled for delivery. A party may change its
address by giving written notice to the other party as
specified herein.
8.9. Governing Law. This Agreement shall be governed
by and construed in accordance with the substantive laws of
the State of Connecticut without reference to conflict of
laws principles.
8.10. Waiver of Jury Trial. BORROWER AND BANK AGREE
THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT BY BANK OR BORROWER ON OR WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS
OF THE PARTIES WITH RESPECT HERETO OR THERETO, SHALL BE
TRIED ONLY BY A COURT AND NOT BY A JURY. BANK AND BORROWER
EACH HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
INTELLIGENTLY, AND WITH THE ADVICE OF THEIR RESPECTIVE
COUNSEL, WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH
SUIT, ACTION OR PROCEEDING. FURTHER, BORROWER WAIVES ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT,
ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE,
CONSEQUENTIAL OR OTHER DAMAGES OTHER THAN, OR IN ADDITION
TO, ACTUAL DAMAGES. BORROWER ACKNOWLEDGES AND AGREES THAT
THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS
AGREEMENT AND THAT BANK WOULD NOT EXTEND CREDIT TO BORROWER
IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART OF
THIS AGREEMENT.
8.11. Prejudgment Remedy Waiver. BORROWER HEREBY
REPRESENTS, COVENANTS AND AGREES THAT THE PROCEEDS OF THE
LOAN SHALL BE USED FOR GENERAL COMMERCIAL PURPOSES AND THAT
THE LOAN IS A "COMMERCIAL TRANSACTION" AS DEFINED BY THE
STATUTES OF THE STATE OF CONNECTICUT. BORROWER HEREBY WAIVES
ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER
UNDER CONNECTICUT GENERAL STATUTES, SECTIONS 52-278a et
seq., AS AMENDED, OR UNDER ANY OTHER STATE OR FEDERAL LAW
WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES BANK MAY
EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE
SPECIFICALLY, BORROWER ACKNOWLEDGES THAT BANK'S ATTORNEY
MAY, PURSUANT TO CONNECTICUT GENERAL STATUTES, SECTION 52-278f,
ISSUE A WRIT FOR A PREJUDGMENT REMEDY WITHOUT SECURING
A COURT ORDER. BORROWER ACKNOWLEDGES AND RESERVES ITS RIGHT
TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT
FOR PREJUDGMENT REMEDY BY BANK'S ATTORNEY, AND BANK
ACKNOWLEDGES BORROWER'S RIGHT TO SAID HEARING SUBSEQUENT TO
THE ISSUANCE OF SAID WRIT. BORROWER FURTHER HEREBY WAIVES
ANY REQUIREMENT OR OBLIGATION OF BANK TO POST A BOND OR
OTHER SECURITY IN CONNECTION
<PAGE>
WITH ANY PREJUDGMENT REMEDY OBTAINED BY BANK AND WAIVES ANY
OBJECTIONS TO ANY PREJUDGMENT REMEDY OBTAINED BY BANK BASED
ON ANY OFFSETS, CLAIMS, DEFENSES OR COUNTERCLAIMS OF
BORROWER OR ANY OTHER OBLIGATED PARTY TO ANY ACTION BROUGHT
BY BANK. BORROWER ACKNOWLEDGES AND AGREES THAT ALL OF THE
WAIVERS CONTAINED IN THIS SECTION HAVE BEEN MADE KNOWINGLY,
VOLUNTARILY, INTENTIONALLY AND INTELLIGENTLY, AND WITH THE
ADVICE OF ITS COUNSEL.
<PAGE>
IN WITNESS WHEREOF, Borrower and Bank, intending to be
legally bound, have duly executed and delivered this Loan
Agreement as of the day and year first above written.
WITNESS: BORROWER:
FUEL CELL MANUFACTURING CORPORATION
By:
Name: Name:
Title: Title:
Address: 3 Great Pasture Road
Danbury, CT 06810
BANK:
FIRST UNION BANK OF CONNECTICUT
By:
Name: Name: Diane Chamberlain
Title: Title: Vice President
Address: 300 Main Street
P.O. Box 700
CT2007
Stamford, CT 06904-0700
Attn: Anne S. Wilson
Vice President
<PAGE>
FOR INTERNAL USE ONLY
Obligor #____________________
Obligation #_________________
Commercial Mortgage Loan - CT
LIBOR Rate
MORTGAGE NOTE
$2,250,000.00 Bridgeport, Connecticut
June 28, 1996
FOR VALUE RECEIVED, the undersigned hereby promises to pay
to the order of FIRST UNION BANK OF CONNECTICUT (the "Bank"),
the principal sum of Two Million Two Hundred Fifty Thousand and
00/100 Dollars ($2,250,000.00) (the "Loan") in United States
Dollars, together with interest thereon as hereinafter
provided.
1. INTEREST RATE. Interest shall be charged on the
outstanding principal balance from the date hereof until the
full amount of principal due hereunder has been paid at a rate
equal to LIBOR plus one hundred seventy-five (175) basis
points ("LIBOR-Based Rate"), as determined by Bank prior to the
commencement of each Interest Period. Interest shall be
calculated daily on the basis of the actual number of days
elapsed over a 360 day year. The LIBOR-Based Rate shall remain
in effect, subject to the provisions hereof, for the entire
Interest Period for which it is determined.
"LIBOR" means, with respect to each day during each
Interest Period, the rate (rounded to the next higher 1/100 of
1%) for U.S. dollar deposits of one month maturity as reported
on Telerate page 3750 as of 11:00 a.m., London time, on the
second London business day before the relevant Interest Period
begins (or if not so reported, then as determined by the Bank
from another recognized source or interbank quotation),
adjusted for reserves by dividing that rate by 1.00 minus the
LIBOR Reserve. "LIBOR Reserve" means the maximum percentage
reserve requirement (rounded to the next higher 1/100 of 1% and
expressed as a decimal) in effect for any day during the
Interest Period under the Federal Reserve Board's Regulation D
for Eurocurrency liabilities as defined therein.
"Interest Period" means, initially, the period commencing
on the date hereof and ending on the Commencement Date, and
thereafter, each period commencing on the last day of the
immediately preceding Interest Period and ending one month
thereafter, but in no event after the Maturity Date; subject,
however, to the following provisions: (i) if any Interest
Period would otherwise end on a day which is not a Business
Day, that Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the
immediately preceding Business Day; (ii) any Interest Period
that 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 Interest Period) shall
end on the last Business Day of a calendar month; and (iii) the
last Interest Period shall end on the Maturity Date.
2. PAYMENT OF PRINCIPAL AND INTEREST. Interest only on the
outstanding principal balance from the date hereof to August 1,
1996 (the "Commencement Date") shall be due and payable on the
Commencement Date. Thereafter, principal and interest shall be
due and payable on the dates set forth in the Repayment
Schedule attached hereto and made a part hereof (the "Repayment
Schedule") in consecutive monthly installments in an amount
equal to the sum of (i) all then accrued and unpaid interest,
plus (ii) a principal payment in the amount set forth in the
Repayment Schedule. The entire unpaid principal amount hereof,
together with accrued and unpaid interest thereon and all other
amounts payable hereunder shall be due and payable on June 1,
2001 (the "Maturity Date").
3. APPLICATION OF PAYMENTS. Except as otherwise specified
herein, each payment or prepayment, if any, made under this
Note shall be applied to pay late charges, accrued and unpaid
interest, principal, escrows (if any), and any other fees,
costs and expenses which the undersigned is obligated to pay
under this Note, in such order as Bank may elect from time to
time in its sole discretion.
<PAGE>
4. TENDER OF PAYMENT. All payments made hereunder shall be
made on the due date thereof, in immediately available funds
and in lawful currency of the United States of America. All
payments made hereunder shall be made to the Bank at its
offices at 300 Main Street, Stamford, Connecticut 06904 or at
such other address as the Bank shall notify the Borrower of in
writing. The Borrower agrees to maintain an account at the
Bank continuously until all amounts due hereunder are paid in
full (the "Account"). The Bank may, and the Borrower
authorizes the Bank to, debit the Account for the amount of any
payment as and when such payment becomes due hereunder as more
fully described in that certain Authorization to Charge Account
from the undersigned to Bank of even date herewith. The
foregoing rights of the Bank to debit the Borrower's accounts
shall be in addition to, and not in limitation of, any rights
of set-off which the Bank may have hereunder or under any Loan
Document nor shall the rights hereunder limit the Bank's
recourse to any particular source of funds or monies.
5. PREPAYMENT. The Loan may be prepaid, in whole or in
part, on the last day of an Interest Period. Any prepayment
shall include accrued and unpaid interest to the date of
prepayment on the principal amount prepaid and all other sums
due and payable hereunder. All payments received on this Note
may be applied in such order as the Bank in its sole discretion
shall determine. The monthly principal installment shall not
be reamortized following a partial prepayment.
6. SECURITY FOR THE NOTE.
6.1. This Note is executed and delivered in
accordance with a commercial transaction described in a Loan
Agreement dated this date between the undersigned and Bank (the
"Loan Agreement"). As security for the payment of the monies
owing under this Note, the undersigned has delivered or has
caused to be delivered to Bank the following (each a "Loan
Document" and collectively with this Note, the Loan Agreement,
and any other guaranty, document, certificate or instrument
executed by the undersigned or any other obligated party in
connection with the Loan, the "Loan Documents"):
(a) an Open-End Mortgage and Security Agreement (the
"Mortgage") on certain real property and the improvements
situated thereon in the City of Danbury, County of Fairfield
State of Connecticut, as more fully described in the Mortgage
(the "Mortgaged Premises");
(b) a General Security Agreement from the undersigned;
(c) a Guaranty and Suretyship Agreement by Fuel Cell
Manufacturing Corporation and a Guaranty and Suretyship
Agreement by Fuel Cell Engineering Corporation (collectively
the "Guaranty"); and
(d) a General Security Agreement from Fuel Cell
Manufacturing Corporation securing the Guaranty of Fuel Cell
Manufacturing Corporation.
6.2. The undersigned hereby grants to Bank a continuing
security interest in all property of the undersigned, now or
hereafter in the possession of Bank or any Affiliate (as
defined below) in any capacity whatsoever, including, but not
limited to, any balance or share of any deposit, trust or
agency account, as security for the payment of this Note and
any other liabilities of the undersigned to Bank, which
security interest shall be enforceable and subject to all the
provisions of this Note, as if such property were specifically
pledged hereunder.
7. ADDITIONAL PAYMENTS; LATE CHARGE; DEFAULT RATE.
7.1. Additional Payments. In addition to the payments
provided for in Section 2 above, the undersigned promises to
pay on demand any additional monies required to be paid or
advanced by the undersigned or by any other party obligated
under any of the Loan Documents or paid or advanced on behalf
of the undersigned or such party by Bank pursuant to the terms
of the Loan Agreement, the Mortgage or any other Loan Document,
which obligation shall be continuing and shall survive any
judgment entered with respect to this Note or a foreclosure of
the Mortgage. This Note shall evidence, and the Mortgage and
other Loan Documents shall secure the payment of, all such sums
so advanced or paid.
7.2. Late Charge. In the event that any installment of
principal or interest required to be made by the undersigned
under this Note shall not be received by Bank on or before its
due date, the undersigned shall pay to Bank, on demand, a late
charge of five percent (5%) of such delinquent payment for the
purpose of defraying the expense
<PAGE>
incident to the processing of such delinquent payment. The
foregoing right is in addition to, and not in limitation of,
any other rights which Bank may have upon the undersigned's
failure to make timely payment of any amount due hereunder.
7.3. Default Rate. Except as otherwise provided below,
from and after the occurrence of an Event of Default hereunder,
all amounts remaining unpaid or thereafter accruing hereunder,
as well as any amounts owing under Section 7.1., shall, at
Bank's option, bear interest at a default rate of four percent
(4%) per annum above the interest rate then in effect as set
forth herein, or the highest permissible rate under applicable
law, whichever is less. If the Loan is not paid when due,
whether at the Maturity Date, upon acceleration, or otherwise,
all amounts remaining unpaid or thereafter accruing hereunder
shall bear interest at a default rate equal to the Bank's Prime
Rate plus four percent (4.0%), or the highest permissible rate
under applicable law, whichever is less (such rate and the rate
specified in the immediately preceding sentence are each
hereinafter referred to as a "Default Rate"). As used herein,
"Prime Rate" means the rate of interest established by the Bank
s its reference rate in making loans, and is not tied to any
external rate of interest or index. Each change in the Prime
Rate shall be effective automatically and immediately without
notice to the Borrower. The applicable Default Rate of
interest shall be payable upon demand, but in no event later
than when scheduled interest payments are due, and shall also
be charged on the amounts owed by the undersigned to Bank
pursuant to any judgments entered in favor of Bank with respect
to this Note and shall continue to accrue after judgment until
collection.
8. INDEMNIFICATION; ADDITIONAL COSTS; UNAVAILABILITY OF
RATE.
8.1. Indemnification. The undersigned shall indemnify
Bank against Bank's loss or expense in employing deposits as a
consequence of (i) the undersigned's failure to make any
payment when due under this Note, or (ii) any prepayment of the
Loan on a date other than the last day of an Interest Period
("Indemnified Loss or Expense").
8.2. Additional Costs. If, at any time, a new, or a
revision in any existing law or interpretation or
administration (including reversals) thereof by any government
authority, central bank or comparable agency imposes, increases
or modifies any reserve or similar requirement against assets,
deposits or credit extended by Bank, or subjects Bank to any
tax, duty or other charge (except tax on Bank's net income),
and any of the foregoing increase the cost to Bank of
maintaining its commitment or reduce the amount of any sum
received or receivable by Bank under this Note, within 15 days
after demand by Bank, the undersigned agrees to pay Bank such
additional amounts as will compensate Bank for such increased
costs or reductions ("Additional Costs").
8.3. Match Funding. The amount of such (i) Indemnified
Loss or Expense, or (ii) Additional Costs outlined above shall
be determined, in Bank's sole discretion, based upon the
assumption that Bank funded 100% of that portion of the Loan to
which the LIBOR-Based Rate applies in the applicable London
interbank market.
8.4. Unavailability of Interest Rate. If, at any time,
(i) Bank shall determine that, by reason of circumstances
affecting foreign exchange and interbank markets generally,
LIBOR deposits in the applicable amounts are not being offered
to Bank; or (ii) a new, or a revision in any existing law or
interpretation or administration (including reversals) thereof
by any government authority, central bank or comparable agency
shall make it unlawful or impossible for Bank to honor its
obligations under this Note, then (A) Bank's obligation to make
or maintain a LIBOR-Based Rate shall be suspended, and (B) the
applicable LIBOR-Based Rate shall immediately be converted to
the Prime Rate for the remainder of the term of the Loan.
"Prime Rate" means the rate of interest established by Bank as
its reference rate in making loans, and is not tied to any
external rate of interest or index. The rate of interest
charged under the Note following conversion to the Prime Rate
shall change automatically and immediately as of the date of
any change in the Prime Rate without notice to the undersigned.
9. EVENTS OF DEFAULT. Each of the following shall
constitute an event of default hereunder (an "Event of
Default"): (a) the failure of the undersigned to make any
installment of principal or interest hereunder when due and
payable; or (b) the occurrence of any other default in any
term, covenant or condition hereunder or any Event of Default
under the Loan Agreement, the Mortgage or any other Loan
Document.
10. REMEDIES. If an Event of Default exists, Bank may
exercise any right, power or remedy permitted by law or as set
forth herein or in the Loan Agreement, the Mortgage or any
other Loan Document including, without limitation, the right to
declare the entire unpaid principal amount hereof and all
interest accrued hereon, and all other sums secured by the
Mortgage or any other Loan Document to be, and such principal,
interest and other sums shall thereupon become, forthwith due
and payable.
<PAGE>
11. CONTINUING ENFORCEMENT OF NOTE. If, after receipt of
any payment of all or any part of this Note, Bank is compelled
or agrees, for settlement purposes, to surrender such payment
to any person or entity for any reason (including, without
limitation, a determination that such payment is void or
voidable as a preference or fraudulent conveyance, an
impermissible setoff, or a diversion of trust funds), then this
Note and the other Loan Documents shall continue in full force
and effect or be reinstated, as the case may be, and the
undersigned shall be liable for, and shall indemnify, defend
and hold harmless Bank with respect to the full amount so
surrendered. The provisions of this Section shall survive the
cancellation or termination of this Note and shall remain
effective notwithstanding the payment of the obligations
evidenced hereby, the release of any security interest, lien or
encumbrance securing this Note or any other action which Bank
may have taken in reliance upon its receipt of such payment.
Any cancellation, release or other such action shall be deemed
to have been conditioned upon any payment of the obligations
evidenced hereby having become final and irrevocable.
12. MISCELLANEOUS.
12.1. Disclosure of Financial Information. Bank is
hereby authorized to disclose any financial or other
information about the undersigned to any regulatory body or
agency having jurisdiction over Bank or to any present, future
or prospective participant or successor in interest in any loan
or other financial accommodation made by Bank to the
undersigned. The information provided may include, without
limitation, amounts, terms, balances, payment history, return
item history and any financial or other information about the
undersigned. The undersigned agrees to indemnify, defend,
release Bank, and hold Bank harmless, at the undersigned's cost
and expense, from and against any and all lawsuits, claims,
actions, proceedings, or suits against Bank or against the
undersigned and Bank, arising out of or relating to Bank's
reporting or disclosure of such information. Such indemnity
shall survive the repayment or other satisfaction of the
obligations evidenced hereby.
12.2. Remedies Cumulative. The rights and remedies of
Bank as provided herein and in any other Loan Document shall be
cumulative and concurrent, may be pursued separately,
successively or together against the undersigned or the
Mortgaged Premises or any other collateral security for payment
of amounts due hereunder, or any guarantor thereof, at the sole
discretion of Bank, may be exercised as often as occasion
therefor shall arise, and shall be in addition to any other
rights or remedies conferred upon Bank at law or in equity.
The failure, at any one or more times, of Bank to exercise any
such right or remedy shall in no event be construed as a waiver
or release thereof. Bank shall have the right to take any
action it deems appropriate without the necessity of resorting
to any collateral securing this Note.
12.3. Integration. This Note and the other Loan
Documents constitute the sole agreement of the parties with
respect to the transaction contemplated hereby and supersede
all oral negotiations and prior writings with respect thereto.
12.4. Right of Setoff by Bank. Upon the occurrence of
an Event of Default, to the extent permitted by and in addition
to any other remedy provided by law, and regardless of the
adequacy of any collateral or other means of obtaining
repayment of the obligations evidenced hereby, Bank shall have
the right immediately and without notice or other act, and is
specifically authorized hereby, to setoff against any of the
undersigned's obligations under this Note any sum owed by Bank
or any Affiliate in any capacity to the undersigned whether due
or not, or any property of the undersigned in the possession of
Bank or any Affiliate, even if effecting such setoff results in
a loss or reduction of interest to the undersigned or the
imposition of a penalty applicable to the early withdrawal of
time deposits. Bank shall be deemed to have exercised such
right of setoff and to have made a charge against any such sum
or property immediately upon the occurrence of the Event of
Default, even though the actual book entries may be made at
some time subsequent.
12.5. Attorneys' Fees and Expenses. If Bank retains
the services of counsel by reason of a claim of a default or an
Event of Default hereunder or under any of the other Loan
Documents, or to institute and maintain an action to foreclose
the Mortgage or appoint a receiver of rents, or on account of
any matter involving this Note, or for examination of matters
subject to Bank's approval under the Loan Documents, all costs
of suit and collection and all reasonable attorneys' fees
(and/or allocated fees of Bank's in-house legal counsel) and
such other reasonable expenses so incurred by Bank shall
forthwith, on demand, become due and payable and shall be
evidenced hereby.
12.6. No Implied Waiver. Bank shall not be deemed to
have modified or waived any of its rights or remedies hereunder
unless such modification or waiver is in writing and signed by
Bank, and then only to the extent specifically set forth
therein. A waiver in one event shall not be construed as
continuing or as a waiver of or bar to such right or remedy on
a subsequent event. After any acceleration of, or the entry of
any judgment on, this Note, the acceptance by Bank of any
payments by or on behalf of the undersigned on account of the
indebtedness evidenced by this
<PAGE>
Note shall not cure or be deemed to cure any Event of Default
or reinstate or be deemed to reinstate the terms of this Note
absent an express written agreement duly executed by Bank and
the undersigned.
12.7. Waiver. The undersigned, jointly and severally,
waives demand, notice, presentment, protest, demand for
payment, notice of dishonor, notice of protest and diligence of
collection of this Note. The undersigned consents to any and
all extensions of time, renewals, waivers, or modifications
that may be granted by Bank with respect to the payment or
other provisions of this Note, and to the release of any
collateral, with or without substitution. The undersigned
agrees that makers, endorsers, guarantors and sureties may be
added or released without notice and without affecting the
undersigned's liability hereunder. The liability of the
undersigned shall not be affected by the failure of Bank to
perfect or otherwise obtain or maintain the priority or
validity of any security interest in any collateral. The
liability of the undersigned shall be absolute and
unconditional and without regard to the liability of any other
party hereto.
12.8. No Usurious Amounts. Anything herein contained to
the contrary notwithstanding, the undersigned does not agree
and shall not be obligated to pay interest hereunder at a rate
which is in excess of the maximum rate permitted by law. If by
the terms of this Note, the undersigned is at any time required
to pay interest at a rate in excess of such maximum rate, the
rate of interest under this Note shall be deemed to be
immediately reduced to such maximum legal rate and the portion
of all prior interest payments in excess of such maximum legal
rate shall be applied to and shall be deemed to have been
payments in reduction of the outstanding principal balance.
The undersigned agrees that in determining whether or not any
interest payable under this Note exceeds the highest rate
permitted by law, any non-principal payment, including without
limitation, late charges, shall be deemed to the extent
permitted by law to be an expense, fee, premium or penalty
rather than interest.
12.9. Partial Invalidity. The invalidity or
unenforceability of any one or more provisions of this Note
shall not render any other provision invalid or unenforceable.
In lieu of any invalid or unenforceable provision, there shall
be added automatically a valid and enforceable provision as
similar in terms to such invalid or unenforceable provision as
may be possible.
12.10. Binding Effect. The covenants, conditions,
waivers, releases and agreements contained in this Note shall
bind, and the benefits thereof shall inure to, the parties
hereto and their respective heirs, executors, administrators,
successors and assigns; provided, however, that this Note
cannot be assigned by the undersigned without the prior written
consent of Bank, and any such assignment or attempted
assignment by the undersigned shall be void and of no effect
with respect to Bank.
12.11. Modifications. This Note may not be
supplemented, extended, modified or terminated except by an
agreement in writing signed by the party against whom
enforcement of any such waiver, change, modification or
discharge is sought.
12.12. Sales or Participations. Bank may from time to
time sell or assign, in whole or in part, or grant
participations in the Loan, this Note and/or the obligations
evidenced thereby. The holder of any such sale, assignment or
participation, if the applicable agreement between Bank and
such holder so provides, shall be: (a) entitled to all of the
rights, obligations and benefits of Bank; and (b) deemed to
hold and may exercise the rights of setoff or banker's lien
with respect to any and all obligations of such holder to the
undersigned, in each case as fully as though the undersigned
were directly indebted to such holder. Bank may in its
discretion give notice to the undersigned of such sale,
assignment or participation; however, the failure to give such
notice shall not affect any of Bank's or such holder's rights
hereunder.
12.13. Affiliate. As used herein, "Affiliate" shall
mean First Union Corporation and any of its direct and indirect
affiliates and subsidiaries.
12.14. Jurisdiction. The undersigned irrevocably
appoints each and every owner, partner and/or officer of the
undersigned as its attorneys upon whom may be served any
notice, process or pleading in any action or proceeding against
it arising out of or in connection with this Note or any other
Loan Document. The undersigned hereby consents that any action
or proceeding against it may be commenced and maintained in any
court within the State of Connecticut or in the United States
District Court for the District of Connecticut or, at the
option of Bank, any court in which Bank shall initiate legal or
equitable proceedings and which has subject matter jurisdiction
over the matter in controversy, and that such action or
proceeding may be commenced by service of process on any such
owner, partner and/or officer. The undersigned agrees that the
courts of the State of Connecticut and the United States
District Court for the District of Connecticut shall have
jurisdiction with respect to the subject matter hereof and the
person of the undersigned. The undersigned hereby further
consents to personal jurisdiction in any other court in which
Bank shall initiate legal or
<PAGE>
equitable proceedings and which has subject matter jurisdiction
over the matter in controversy. The undersigned hereby waives
personal service of the summons and complaint or other process
or papers issued in any proceeding of the type described in
this Section 11.14 and agrees that service of such summons and
complaint, or other process or papers may be made by regular or
certified mail addressed to the undersigned at the address of
the undersigned set forth herein. The undersigned agrees not
to assert any defense to any proceeding initiated by Bank based
upon improper venue or inconvenient forum. The undersigned
agrees that any action brought by the undersigned shall be
commenced and maintained only in a court in the federal
judicial district or county in which Bank has a place of
business in Connecticut.
12.15. Notices. All notices and communications under
this Note shall be in writing and shall be given by either (a)
hand-delivery, (b) first class mail (postage prepaid), or (c)
reliable overnight commercial courier (charges prepaid), to the
addresses listed in the Loan Documents. Notice shall be deemed
to have been given and received: (i) if by hand delivery, upon
delivery; (ii) if by mail, three (3) calendar days after the
date first deposited in the United States mail; and (iii) if by
overnight courier, on the date scheduled for delivery. A party
may change its address by giving written notice to the other
party as specified herein.
12.16. Governing Law. This Note shall be governed by
and construed in accordance with the substantive laws of the
State of Connecticut without reference to conflict of laws
principles.
12.17. Waiver of Jury Trial. THE UNDERSIGNED AND BANK
AGREE THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT BY BANK OR THE UNDERSIGNED, ON OR WITH
RESPECT TO THIS NOTE OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS
OF THE PARTIES WITH RESPECT HERETO OR THERETO, SHALL BE TRIED
ONLY BY A COURT AND NOT BY A JURY. BANK AND THE UNDERSIGNED
EACH HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
INTELLIGENTLY, AND WITH THE ADVICE OF THEIR RESPECTIVE COUNSEL,
WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING. FURTHER, THE UNDERSIGNED WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR
OTHER DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
THE UNDERSIGNED ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS NOTE AND THAT BANK WOULD
NOT EXTEND CREDIT TO THE UNDERSIGNED IF THE WAIVERS SET FORTH
IN THIS SECTION WERE NOT A PART OF THIS NOTE.
12.18. Prejudgment Remedy Waiver. THE UNDERSIGNED
HEREBY REPRESENTS, COVENANTS AND AGREES THAT THE PROCEEDS OF
THE LOAN SHALL BE USED FOR GENERAL COMMERCIAL PURPOSES AND THAT
THE LOAN IS A "COMMERCIAL TRANSACTION" AS DEFINED BY THE
STATUTES OF THE STATE OF CONNECTICUT. THE UNDERSIGNED HEREBY
WAIVES ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR COURT
ORDER UNDER CONNECTICUT GENERAL STATUTES, SECTIONS 52-278a et
seq., AS AMENDED, OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH
RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES BANK MAY EMPLOY TO
ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE SPECIFICALLY,
THE UNDERSIGNED ACKNOWLEDGES THAT BANK'S ATTORNEY MAY, PURSUANT
TO CONNECTICUT GENERAL STATUTES, SECTION 52-278f, ISSUE A WRIT
FOR A PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER. THE
UNDERSIGNED ACKNOWLEDGES AND RESERVES ITS RIGHT TO NOTICE AND A
HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT
REMEDY BY BANK'S ATTORNEY, AND BANK ACKNOWLEDGES THE
UNDERSIGNED'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE
OF SAID WRIT. THE UNDERSIGNED FURTHER HEREBY WAIVES ANY
REQUIREMENT OR OBLIGATION OF BANK TO POST A BOND OR OTHER
SECURITY IN CONNECTION WITH ANY PREJUDGMENT REMEDY OBTAINED BY
BANK AND WAIVES ANY OBJECTIONS TO ANY PREJUDGMENT REMEDY
OBTAINED BY BANK BASED ON ANY OFFSETS, CLAIMS, DEFENSES OR
COUNTERCLAIMS OF THE UNDERSIGNED OR ANY OTHER OBLIGATED PARTY
TO ANY ACTION BROUGHT BY BANK. THE UNDERSIGNED ACKNOWLEDGES
AND AGREES THAT ALL OF THE WAIVERS CONTAINED IN THIS SECTION
HAVE BEEN MADE KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
INTELLIGENTLY, AND WITH THE ADVICE OF ITS COUNSEL.
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be
legally bound, has duly executed and delivered this Note as of
the day and year first above written.
WITNESS/ATTEST: ENERGY RESEARCH CORPORATION
By:
Name: Name:
Title: Title:
Address: 3 Great Pasture Road
Danbury, CT 06810
<PAGE>
FOR INTERNAL USE ONLY
Obligor #________________
Obligation #_____________
Commercial Loan - CT
LIBOR Rate
TERM NOTE
$600,000.00 Bridgeport, Connecticut
June 28, 1996
FOR VALUE RECEIVED, the undersigned hereby promises to pay
to the order of FIRST UNION BANK OF CONNECTICUT (the "Bank"),
the principal sum of Six Hundred Thousand and no/100 Dollars
(the "Loan") in United States Dollars, together with interest
thereon as hereinafter provided.
1. INTEREST RATE. Interest shall be charged on the
outstanding principal balance from the date hereof until the
full amount of principal due hereunder has been paid at a rate
equal to LIBOR plus One Hundred Seventy-Five (175) basis points
("LIBOR-Based Rate"), as determined by Bank prior to the
commencement of each Interest Period. Interest shall be
calculated daily on the basis of the actual number of days
elapsed over a 360 day year. The LIBOR-Based Rate shall remain
in effect, subject to the provisions hereof, for the entire
Interest Period for which it is determined.
"LIBOR" means, with respect to each day during each
Interest Period, the rate (rounded to the next higher 1/100 of
1%) for U.S. dollar deposits of one month maturity as reported
on Telerate page 3750 as of 11:00 a.m., London time, on the
second London business day before the relevant Interest Period
begins (or if not so reported, then as determined by the Bank
from another recognized source or interbank quotation),
adjusted for reserves by dividing that rate by 1.00 minus the
LIBOR Reserve. "LIBOR Reserve" means the maximum percentage
reserve requirement (rounded to the next higher 1/100 of 1% and
expressed as a decimal) in effect for any day during the
Interest Period under the Federal Reserve Board's Regulation D
for Eurocurrency liabilities as defined therein.
"Interest Period" means, initially, the period commencing
on the date hereof and ending on the Commencement Date, and
thereafter, each period commencing on the last day of the
immediately preceding Interest Period and ending one month
thereafter, but in no event after the Maturity Date; subject,
however, to the following provisions: (i) if any Interest
Period would otherwise end on a day which is not a Business
Day, that Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the
immediately preceding Business Day; (ii) any Interest Period
that 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 Interest Period) shall
end on the last Business Day of a calendar month; and (iii) the
last Interest Period shall end on the Maturity Date.
2. PAYMENT OF PRINCIPAL AND INTEREST. Interest only on the
outstanding principal balance from the date hereof to August 1,
1996 (the "Commencement Date") shall be due and payable on the
Commencement Date. Thereafter, principal and interest shall be
due and payable on the dates set forth in the Repayment
Schedule attached hereto and made a part hereof (the "Repayment
Schedule") in consecutive monthly installments in an amount
equal to the sum of (i) all then accrued and unpaid interest,
plus (ii) a principal payment in the amount set forth in the
Repayment Schedule. The entire unpaid principal amount hereof,
together with accrued and unpaid interest thereon and all other
amounts payable hereunder shall be due and payable on June 1,
1998 (the "Maturity Date").
3. APPLICATION OF PAYMENTS. Except as otherwise specified
herein, each payment or prepayment, if any, made under this
Note shall be applied to pay late charges, accrued and unpaid
interest,
<PAGE>
principal, escrows (if any), and any other fees, costs and
expenses which the undersigned is obligated to pay under this
Note, in such order as Bank may elect from time to time in its
sole discretion.
4. TENDER OF PAYMENT. All payments made hereunder shall be
made on the due date thereof, in immediately available funds
and in lawful currency of the United States of America. All
payments made hereunder shall be made to the Bank at its
offices at 300 Main Street, Stamford, Connecticut 06904 or at
such other address as the Bank shall notify the Borrower of in
writing. The Borrower agrees to maintain an account at the
Bank continuously until all amounts due hereunder are paid in
full (the "Account"). The Bank may, and the Borrower
authorizes the Bank to, debit the Account for the amount of any
payment as and when such payment becomes due hereunder as more
fully described in that certain Authorization to Charge Account
from the undersigned to Bank of even date herewith. The
foregoing rights of the Bank to debit the Borrower's accounts
shall be in addition to, and not in limitation of, any rights
of set-off which the Bank may have hereunder or under any Loan
Document nor shall the rights hereunder limit the Bank's
recourse to any particular source of funds or monies.
5. PREPAYMENT. The Loan may be prepaid, in whole or in
part, on the last day of an Interest Period. Any prepayment
shall include accrued and unpaid interest to the date of
prepayment on the principal amount prepaid and all other sums
due and payable hereunder. All payments received on this Note
may be applied in such order as the Bank in its sole discretion
shall determine. The monthly principal installment shall not
be reamortized following a partial prepayment.
6. SECURITY FOR THE NOTE.
6.1. This Note is executed and delivered in accordance
with a commercial transaction described in a Loan Agreement
dated this date between the undersigned and Bank (the "Loan
Agreement"). As security for the payment of the monies owing
under this Note, the undersigned has delivered or has caused to
be delivered to Bank the following (each a "Loan Document" and
collectively with this Note, the Loan Agreement, and any other
guaranty, document, certificate or instrument executed by the
undersigned or any other obligated party in connection with the
Loan, the "Loan Documents"):
(a) a General Security Agreement from the undersigned;
(b) a Guaranty and Suretyship Agreement by Fuel Cell
Engineering Corporation and a Guaranty and Suretyship Agreement
by Energy Research Corporation (collectively, the "Guaranty");
(c) an Open-End Mortgage and Security Agreement (the
"Mortgage") from Energy Research Corporation on certain real
property and the improvements situated thereon in the City of
Danbury, County of Fairfield, State of Connecticut, as more
fully described in the Mortgage (the "Mortgaged Premises")
securing the Guaranty of Energy Research Corporation; and
(d) a General Security Agreement from Energy Research
Corporation securing the Guaranty of Energy Research
Corporation.
6.2. The undersigned hereby grants to Bank a continuing
security interest in all property of the undersigned, now or
hereafter in the possession of Bank or any Affiliate (as
defined below) in any capacity whatsoever, including, but not
limited to, any balance or share of any deposit, trust or
agency account, as security for the payment of this Note and
any other liabilities of the undersigned to Bank, which
security interest shall be enforceable and subject to all the
provisions of this Note, as if such property were specifically
pledged hereunder.
7. ADDITIONAL PAYMENTS; LATE CHARGE; DEFAULT RATE.
7.1. Additional Payments. In addition to the payments
provided for in Section 2 above, the undersigned promises to
pay on demand any additional monies required to be paid or
advanced by the undersigned or by any other party obligated
under any of the Loan Documents or paid or advanced on behalf
of the undersigned or such party by Bank pursuant to the terms
of the Loan Agreement, the Mortgage or any other Loan Document,
which obligation shall be continuing and shall survive any
judgment
<PAGE>
entered with respect to this Note or a foreclosure of the
Mortgage. This Note shall evidence, and the Mortgage and other
Loan Documents shall secure the payment of, all such sums so
advanced or paid.
7.2. Late Charge. In the event that any installment of
principal or interest required to be made by the undersigned
under this Note shall not be received by Bank on or before its
due date, the undersigned shall pay to Bank, on demand, a late
charge of five percent (5%) of such delinquent payment for the
purpose of defraying the expense incident to the processing of
such delinquent payment. The foregoing right is in addition
to, and not in limitation of, any other rights which Bank may
have upon the undersigned's failure to make timely payment of
any amount due hereunder.
7.3. Default Rate. Except as otherwise provided below,
from and after the occurrence of an Event of Default hereunder,
all amounts remaining unpaid or thereafter accruing hereunder,
as well as any amounts owing under Section 7.1., shall, at
Bank's option, bear interest at a default rate of four percent
(4%) per annum above the interest rate then in effect as set
forth herein, or the highest permissible rate under applicable
law, whichever is less. If the Loan is not paid when due,
whether at the Maturity Date, upon acceleration, or otherwise,
all amounts remaining unpaid or thereafter accruing hereunder
shall bear interest at a default rate equal to the Bank's Prime
Rate plus four percent (4.0%), or the highest permissible rate
under applicable law, whichever is less (such rate and the rate
specified in the immediately preceding sentence are each
hereinafter referred to as a "Default Rate"). As used herein,
"Prime Rate" means the rate of interest established by the Bank
as its reference rate in making loans, and is not tied to any
external rate of interest or index. Each change in the Prime
Rate shall be effective automatically and immediately without
notice to the Borrower. The applicable Default Rate of
interest shall be payable upon demand, but in no event later
than when scheduled interest payments are due, and shall also
be charged on the amounts owed by the undersigned to Bank
pursuant to any judgments entered in favor of Bank with respect
to this Note and shall continue to accrue after judgment until
collection.
8. INDEMNIFICATION; ADDITIONAL COSTS; UNAVAILABILITY OF
RATE.
8.1. Indemnification. The undersigned shall indemnify
Bank against Bank's loss or expense in employing deposits as a
consequence of (i) the undersigned's failure to make any
payment when due under this Note, or (ii) any prepayment of the
Loan on a date other than the last day of an Interest Period
("Indemnified Loss or Expense").
8.2. Additional Costs. If, at any time, a new, or a
revision in any existing law or interpretation or
administration (including reversals) thereof by any government
authority, central bank or comparable agency imposes, increases
or modifies any reserve or similar requirement against assets,
deposits or credit extended by Bank, or subjects Bank to any
tax, duty or other charge (except tax on Bank's net income),
and any of the foregoing increase the cost to Bank of
maintaining its commitment or reduce the amount of any sum
received or receivable by Bank under this Note, within 15 days
after demand by Bank, the undersigned agrees to pay Bank such
additional amounts as will compensate Bank for such increased
costs or reductions ("Additional Costs").
8.3. Match Funding. The amount of such (i) Indemnified
Loss or Expense, or (ii) Additional Costs outlined above shall
be determined, in Bank's sole discretion, based upon the
assumption that Bank funded 100% of that portion of the Loan to
which the LIBOR-Based Rate applies in the applicable London
interbank market.
8.4. Unavailability of Interest Rate. If, at any time,
(i) Bank shall determine that, by reason of circumstances
affecting foreign exchange and interbank markets generally,
LIBOR deposits in the applicable amounts are not being offered
to Bank; or (ii) a new, or a revision in any existing law or
interpretation or administration (including reversals) thereof
by any government authority, central bank or comparable agency
shall make it unlawful or impossible for Bank to honor its
obligations under this Note, then (A) Bank's obligation to make
or maintain a LIBOR-Based Rate shall be suspended, and (B) the
applicable LIBOR-Based Rate shall immediately be converted to
the Prime Rate for the remainder of the term of the Loan.
"Prime Rate" means the rate of interest established by Bank as
its reference rate in making loans, and is not tied to any
external rate of interest or index. The rate of interest
charged under the Note following conversion to the Prime Rate
shall change automatically and immediately as of the date of
any change in the Prime Rate without notice to the undersigned.
<PAGE>
9. EVENTS OF DEFAULT. Each of the following shall
constitute an event of default hereunder (an "Event of
Default"): (a) the failure of the undersigned to make any
installment of principal or interest hereunder when due and
payable; or (b) the occurrence of any other default in any
term, covenant or condition hereunder or any Event of Default
under the Loan Agreement, the Mortgage or any other Loan
Document.
10. REMEDIES. If an Event of Default exists, Bank may
exercise any right, power or remedy permitted by law or as set
forth herein or in the Loan Agreement, the Mortgage or any
other Loan Document including, without limitation, the right to
declare the entire unpaid principal amount hereof and all
interest accrued hereon, and all other sums secured by the
Mortgage or any other Loan Document to be, and such principal,
interest and other sums shall thereupon become, forthwith due
and payable.
11. CONTINUING ENFORCEMENT OF NOTE. If, after receipt of any
payment of all or any part of this Note, Bank is compelled or
agrees, for settlement purposes, to surrender such payment to
any person or entity for any reason (including, without
limitation, a determination that such payment is void or
voidable as a preference or fraudulent conveyance, an
impermissible setoff, or a diversion of trust funds), then this
Note and the other Loan Documents shall continue in full force
and effect or be reinstated, as the case may be, and the
undersigned shall be liable for, and shall indemnify, defend
and hold harmless Bank with respect to the full amount so
surrendered. The provisions of this Section shall survive the
cancellation or termination of this Note and shall remain
effective notwithstanding the payment of the obligations
evidenced hereby, the release of any security interest, lien or
encumbrance securing this Note or any other action which Bank
may have taken in reliance upon its receipt of such payment.
Any cancellation, release or other such action shall be deemed
to have been conditioned upon any payment of the obligations
evidenced hereby having become final and irrevocable.
12. MISCELLANEOUS.
12.1. Disclosure of Financial Information. Bank is
hereby authorized to disclose any financial or other
information about the undersigned to any regulatory body or
agency having jurisdiction over Bank or to any present, future
or prospective participant or successor in interest in any loan
or other financial accommodation made by Bank to the
undersigned. The information provided may include, without
limitation, amounts, terms, balances, payment history, return
item history and any financial or other information about the
undersigned. The undersigned agrees to indemnify, defend,
release Bank, and hold Bank harmless, at the undersigned's cost
and expense, from and against any and all lawsuits, claims,
actions, proceedings, or suits against Bank or against the
undersigned and Bank, arising out of or relating to Bank's
reporting or disclosure of such information. Such indemnity
shall survive the repayment or other satisfaction of the
obligations evidenced hereby.
12.2. Remedies Cumulative. The rights and remedies of
Bank as provided herein and in any other Loan Document shall be
cumulative and concurrent, may be pursued separately,
successively or together against the undersigned or the
Mortgaged Premises or any other collateral security for payment
of amounts due hereunder, or any guarantor thereof, at the sole
discretion of Bank, may be exercised as often as occasion
therefor shall arise, and shall be in addition to any other
rights or remedies conferred upon Bank at law or in equity.
The failure, at any one or more times, of Bank to exercise any
such right or remedy shall in no event be construed as a waiver
or release thereof. Bank shall have the right to take any
action it deems appropriate without the necessity of resorting
to any collateral securing this Note.
12.3. Integration. This Note and the other Loan
Documents constitute the sole agreement of the parties with
respect to the transaction contemplated hereby and supersede
all oral negotiations and prior writings with respect thereto.
12.4. Right of Setoff by Bank. Upon the occurrence of
an Event of Default, to the extent permitted by and in addition
to any other remedy provided by law, and regardless of the
adequacy of any collateral or other means of obtaining
repayment of the obligations evidenced hereby, Bank shall have
the right immediately and without notice or other act, and is
specifically authorized hereby, to setoff against any of the
undersigned's obligations under this Note any sum owed by Bank
or any Affiliate in any capacity to the undersigned whether due
or not, or any property of the undersigned in the possession of
Bank or
<PAGE>
any Affiliate, even if effecting such setoff results in a loss
or reduction of interest to the undersigned or the imposition
of a penalty applicable to the early withdrawal of time
deposits. Bank shall be deemed to have exercised such right of
setoff and to have made a charge against any such sum or
property immediately upon the occurrence of the Event of
Default, even though the actual book entries may be made at
some time subsequent.
12.5. Attorneys' Fees and Expenses. If Bank retains the
services of counsel by reason of a claim of a default or an
Event of Default hereunder or under any of the other Loan
Documents, or to institute and maintain an action to foreclose
the Mortgage or appoint a receiver of rents, or on account of
any matter involving this Note, or for examination of matters
subject to Bank's approval under the Loan Documents, all costs
of suit and collection and all reasonable attorneys' fees
(and/or allocated fees of Bank's in-house legal counsel) and
such other reasonable expenses so incurred by Bank shall
forthwith, on demand, become due and payable and shall be
evidenced hereby.
12.6. No Implied Waiver. Bank shall not be deemed to
have modified or waived any of its rights or remedies hereunder
unless such modification or waiver is in writing and signed by
Bank, and then only to the extent specifically set forth
therein. A waiver in one event shall not be construed as
continuing or as a waiver of or bar to such right or remedy on
a subsequent event. After any acceleration of, or the entry of
any judgment on, this Note, the acceptance by Bank of any
payments by or on behalf of the undersigned on account of the
indebtedness evidenced by this Note shall not cure or be deemed
to cure any Event of Default or reinstate or be deemed to
reinstate the terms of this Note absent an express written
agreement duly executed by Bank and the undersigned.
12.7. Waiver. The undersigned, jointly and severally,
waives demand, notice, presentment, protest, demand for
payment, notice of dishonor, notice of protest and diligence of
collection of this Note. The undersigned consents to any and
all extensions of time, renewals, waivers, or modifications
that may be granted by Bank with respect to the payment or
other provisions of this Note, and to the release of any
collateral, with or without substitution. The undersigned
agrees that makers, endorsers, guarantors and sureties may be
added or released without notice and without affecting the
undersigned's liability hereunder. The liability of the
undersigned shall not be affected by the failure of Bank to
perfect or otherwise obtain or maintain the priority or
validity of any security interest in any collateral. The
liability of the undersigned shall be absolute and
unconditional and without regard to the liability of any other
party hereto.
12.8. No Usurious Amounts. Anything herein contained to
the contrary notwithstanding, the undersigned does not agree
and shall not be obligated to pay interest hereunder at a rate
which is in excess of the maximum rate permitted by law. If by
the terms of this Note, the undersigned is at any time required
to pay interest at a rate in excess of such maximum rate, the
rate of interest under this Note shall be deemed to be
immediately reduced to such maximum legal rate and the portion
of all prior interest payments in excess of such maximum legal
rate shall be applied to and shall be deemed to have been
payments in reduction of the outstanding principal balance.
The undersigned agrees that in determining whether or not any
interest payable under this Note exceeds the highest rate
permitted by law, any non-principal payment, including without
limitation, late charges, shall be deemed to the extent
permitted by law to be an expense, fee, premium or penalty
rather than interest.
12.9. Partial Invalidity. The invalidity or
unenforceability of any one or more provisions of this Note
shall not render any other provision invalid or unenforceable.
In lieu of any invalid or unenforceable provision, there shall
be added automatically a valid and enforceable provision as
similar in terms to such invalid or unenforceable provision as
may be possible.
12.10. Binding Effect. The covenants, conditions,
waivers, releases and agreements contained in this Note shall
bind, and the benefits thereof shall inure to, the parties
hereto and their respective heirs, executors, administrators,
successors and assigns; provided, however, that this Note
cannot be assigned by the undersigned without the prior written
consent of Bank, and any such assignment or attempted
assignment by the undersigned shall be void and of no effect
with respect to Bank.
<PAGE>
12.11. Modifications. This Note may not be supplemented,
extended, modified or terminated except by an agreement in
writing signed by the party against whom enforcement of any
such waiver, change, modification or discharge is sought.
12.12. Sales or Participations. Bank may from time to
time sell or assign, in whole or in part, or grant
participations in the Loan, this Note and/or the obligations
evidenced thereby. The holder of any such sale, assignment or
participation, if the applicable agreement between Bank and
such holder so provides, shall be: (a) entitled to all of the
rights, obligations and benefits of Bank; and (b) deemed to
hold and may exercise the rights of setoff or banker's lien
with respect to any and all obligations of such holder to the
undersigned, in each case as fully as though the undersigned
were directly indebted to such holder. Bank may in its
discretion give notice to the undersigned of such sale,
assignment or participation; however, the failure to give such
notice shall not affect any of Bank's or such holder's rights
hereunder.
12.13. Affiliate. As used herein, "Affiliate" shall mean
First Union Corporation and any of its direct and indirect
affiliates and subsidiaries.
12.14. Jurisdiction. The undersigned irrevocably
appoints each and every owner, partner and/or officer of the
undersigned as its attorneys upon whom may be served any
notice, process or pleading in any action or proceeding against
it arising out of or in connection with this Note or any other
Loan Document. The undersigned hereby consents that any action
or proceeding against it may be commenced and maintained in any
court within the State of Connecticut or in the United States
District Court for the District of Connecticut or, at the
option of Bank, any court in which Bank shall initiate legal or
equitable proceedings and which has subject matter jurisdiction
over the matter in controversy, and that such action or
proceeding may be commenced by service of process on any such
owner, partner and/or officer. The undersigned agrees that the
courts of the State of Connecticut and the United States
District Court for the District of Connecticut shall have
jurisdiction with respect to the subject matter hereof and the
person of the undersigned. The undersigned hereby further
consents to personal jurisdiction in any other court in which
Bank shall initiate legal or equitable proceedings and which
has subject matter jurisdiction over the matter in controversy.
The undersigned hereby waives personal service of the summons
and complaint or other process or papers issued in any
proceeding of the type described in this Section 11.14 and
agrees that service of such summons and complaint, or other
process or papers may be made by regular or certified mail
addressed to the undersigned at the address of the undersigned
set forth herein. The undersigned agrees not to assert any
defense to any proceeding initiated by Bank based upon improper
venue or inconvenient forum. The undersigned agrees that any
action brought by the undersigned shall be commenced and
maintained only in a court in the federal judicial district or
county in which Bank has a place of business in Connecticut.
12.15. Notices. All notices and communications under
this Note shall be in writing and shall be given by either (a)
hand-delivery, (b) first class mail (postage prepaid), or (c)
reliable overnight commercial courier (charges prepaid), to the
addresses listed in the Loan Documents. Notice shall be deemed
to have been given and received: (i) if by hand delivery, upon
delivery; (ii) if by mail, three (3) calendar days after the
date first deposited in the United States mail; and (iii) if by
overnight courier, on the date scheduled for delivery. A party
may change its address by giving written notice to the other
party as specified herein.
12.16. Governing Law. This Note shall be governed by and
construed in accordance with the substantive laws of the State
of Connecticut without reference to conflict of laws
principles.
12.17. Waiver of Jury Trial. THE UNDERSIGNED AND BANK
AGREE THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT BY BANK OR THE UNDERSIGNED, ON OR WITH
RESPECT TO THIS NOTE OR ANY OTHER LOAN DOCUMENT OR THE DEALINGS
OF THE PARTIES WITH RESPECT HERETO OR THERETO, SHALL BE TRIED
ONLY BY A COURT AND NOT BY A JURY. BANK AND THE UNDERSIGNED
EACH HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
INTELLIGENTLY, AND WITH THE ADVICE OF THEIR RESPECTIVE COUNSEL,
WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING. FURTHER, THE UNDERSIGNED WAIVES ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR
OTHER DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
THE UNDERSIGNED ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS NOTE AND THAT BANK WOULD
<PAGE>
NOT EXTEND CREDIT TO THE UNDERSIGNED IF THE WAIVERS SET FORTH
IN THIS SECTION WERE NOT A PART OF THIS NOTE.
12.18. Prejudgment Remedy Waiver. THE UNDERSIGNED HEREBY
REPRESENTS, COVENANTS AND AGREES THAT THE PROCEEDS OF THE LOAN
SHALL BE USED FOR GENERAL COMMERCIAL PURPOSES AND THAT THE LOAN
IS A "COMMERCIAL TRANSACTION" AS DEFINED BY THE STATUTES OF THE
STATE OF CONNECTICUT. THE UNDERSIGNED HEREBY WAIVES ALL RIGHTS
TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER
CONNECTICUT GENERAL STATUTES, SECTIONS 52-278a et seq., AS
AMENDED, OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT
TO ANY AND ALL PREJUDGMENT REMEDIES BANK MAY EMPLOY TO ENFORCE
ITS RIGHTS AND REMEDIES HEREUNDER. MORE SPECIFICALLY, THE
UNDERSIGNED ACKNOWLEDGES THAT BANK'S ATTORNEY MAY, PURSUANT TO
CONNECTICUT GENERAL STATUTES, SECTION 52-278f, ISSUE A WRIT FOR
A PREJUDGMENT REMEDY WITHOUT SECURING A COURT ORDER. THE
UNDERSIGNED ACKNOWLEDGES AND RESERVES ITS RIGHT TO NOTICE AND A
HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT
REMEDY BY BANK'S ATTORNEY, AND BANK ACKNOWLEDGES THE
UNDERSIGNED'S RIGHT TO SAID HEARING SUBSEQUENT TO THE ISSUANCE
OF SAID WRIT. THE UNDERSIGNED FURTHER HEREBY WAIVES ANY
REQUIREMENT OR OBLIGATION OF BANK TO POST A BOND OR OTHER
SECURITY IN CONNECTION WITH ANY PREJUDGMENT REMEDY OBTAINED BY
BANK AND WAIVES ANY OBJECTIONS TO ANY PREJUDGMENT REMEDY
OBTAINED BY BANK BASED ON ANY OFFSETS, CLAIMS, DEFENSES OR
COUNTERCLAIMS OF THE UNDERSIGNED OR ANY OTHER OBLIGATED PARTY
TO ANY ACTION BROUGHT BY BANK. THE UNDERSIGNED ACKNOWLEDGES
AND AGREES THAT ALL OF THE WAIVERS CONTAINED IN THIS SECTION
HAVE BEEN MADE KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
INTELLIGENTLY, AND WITH THE ADVICE OF ITS COUNSEL.
IN WITNESS WHEREOF, the undersigned, intending to be
legally bound, has duly executed and delivered this Note as of
the day and year first above written.
WITNESS/ATTEST: FUEL CELL MANUFACTURING CORPORATION
By:
Name: Name:
Title: Title:
Address:
General Security Agreement - Commercial (Connecticut)
June 28, 1996
In consideration of any loans, extensions of credit,
or other financial accommodations made or to be made by
FIRST UNION BANK OF CONNECTICUT (the "Bank") and/or to
secure the Liabilities of ENERGY RESEARCH CORPORATION (the
"Debtor"), and for other good and valuable consideration,
the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the Debtor
and the Bank hereby agree as follows:
A. Definitions. As used herein, the following terms
shall have the following meanings:
1. Affiliate. The Term "Affiliate" means First Union
Corporation and any of its direct and indirect affiliates
and subsidiaries.
2. Books and Records. The term "Books and Records" means
all of the Debtor's books and records, including, but not
limited to, records indicating, summarizing, or evidencing
the Collateral, the Liabilities, and the Debtor's property,
business operations, or financial condition; computer runs,
invoices, tapes, processing software, processing contracts
(such as contracts for computer time and services) and any
computer prepared information, tapes, or data of every kind
and description, whether in the possession of the Debtor or
in the possession of third parties.
3. Collateral. The term "Collateral" means the following
types or items of property of the Debtor, whether now owned
or hereafter acquired:
ACCOUNTS: All accounts, accounts receivable, contract
rights, bills, acceptances, Chattel Paper (as hereinafter
defined), General Intangibles (as hereinafter defined),
Instruments (as hereinafter defined), Letters of Credit (as
hereinafter defined), and other forms of obligations
arising out of the sale, lease or consignment of goods or
the rendition of services by the debtor (the "Accounts"),
together with any property evidencing or relating to the
Accounts (such as guaranties and credit insurance), any
security for the Accounts and all Books and Records
relating thereto.
INVENTORY: All inventory of every nature, kind, and
description, wherever located, including, without
limitation, raw materials, goods, work in process, finished
goods, parts or supplies; all goods and property held for
sale or lease or to be furnished under contracts of
service; all goods and inventory returned, reclaimed or
repossessed; all General Intangibles and any Documents (as
hereinafter defined) relating to, arising from or
evidencing any of the foregoing (the "Inventory").
EQUIPMENT: All machinery and equipment, furniture,
fixtures, whether or not affixed to realty, tools, motor
vehicles, and all accessions, accessories, replacements and
the rights of the Debtor under any manufacturer's
warranties relating to the foregoing (the "Equipment").
CHATTEL PAPER: All chattel paper, including, but not
limited to, any writing or writings which evidence both a
monetary obligation and a security interest in or a lease
of specific goods (the "Chattel Paper").
GENERAL INTANGIBLES: All general intangibles,
including, without limitation, any personal property,
choses in action, causes of action, goodwill, tax refunds,
licenses, franchises, trademarks, trade names, service
marks, copyrights, customer lists and patents, and all
rights under license agreements for use of the same (the
"General Intangibles").
INSTRUMENTS: All instruments, including, without
limitation, bills of exchange, notes, and all negotiable
and non-negotiable instruments, all certificated
securities, all certificates of deposit and any other
writing which evidences a right to the payment of money and
is not itself a security agreement or lease and is of a
type which is in the ordinary course of business
transferred by delivery with any necessary endorsement or
assignment (the "Instruments").
DOCUMENTS: All documents, including, but not limited
to, documents of title (as that term is defined in the
Uniform Commercial Code) and any and all receipts,
including, but not limited to, receipts of the kind
described in Article 7 of the Uniform Commercial Code (the
"Documents").
LETTERS OF CREDIT: All letters of credit, including, but
not limited to, any written undertaking to pay money
conditioned upon presentation of specified documents, and
advices of letters of credit (the "Letters of Credit").
THE ITEMS OR TYPES OF PROPERTY DESCRIBED IN SCHEDULE A.3
HERETO.
And all proceeds of any/or all of the foregoing and all
property which is within the definition of proceeds as it
is defined in the Uniform Commercial Code, including
without limitation, whatever is received upon the use,
lease, sale, exchange, collection, any other
<PAGE>
utilization or any disposition of any of the foregoing
property described in this section A.3., whether cash or
non-cash, all rental or lease payments, Accounts, Chattel
Paper, Instruments, Documents, contract rights, General
Intangibles, Equipment, Inventory, substitutions,
additions, accessions, replacements, products, and renewals
of, for, or to such property and all insurance therefor
(collectively, the "Proceeds").
4. Environmental Laws. The term "Environmental Laws"
means, without limitation, all legal requirements of any
governmental authority pertaining to the environment and
all laws, regulations, and executive orders, federal, state
and local, pertaining to environmental matters, as the same
may be amended, replaced or supplemented from time to time.
5. ERISA: The term "ERISA" means 29 U.S.C. 1001 et seq.,
as amended from time to time, and all rules, regulations,
orders and publications adopted or promulgated pursuant
thereto.
6. Liabilities. The term "Liabilities" means any and all
obligations and indebtedness of every kind and description
of the Debtor owing to the Bank or to any Affiliate,
whether or not under the Loan Documents, and whether such
debts or obligations are primary or secondary, direct or
indirect, absolute or contingent, sole, joint or several,
secured or unsecured, due or to become due, contractual or
tortious, arising by operation of law, by overdraft, or
otherwise, or now or hereafter existing, including, without
limitation, principal, interest, fees, late fees, expenses,
attorneys' fees and costs, and/or the allocated fees and
costs of the Bank's in-house legal counsel, that have been
or may hereafter be contracted or incurred.
7. Loan Documents. The term "Loan Documents" means all
credit accommodations, notes, loan agreements, and any
other agreements and documents, now or hereafter existing,
creating, evidencing, guarantying, securing or relating to
any or all of the Liabilities, together with all
amendments, modifications, renewals, or extensions thereof.
8. Obligor. The term "Obligor" means the Debtor and each
and every maker, endorser, guarantor, or surety of or party
obligated for any of the Liabilities.
9. Security Agreement. The term "Security Agreement"
means this General Security Agreement, together with all
schedules and exhibits hereto and all amendments and
modifications as may from time to time be in effect with
respect hereto.
10. Uniform Commercial Code. The term "Uniform
Commercial Code" means the Uniform Commercial Code, in
effect from time to time in the State of Connecticut.
Unless the context otherwise requires, all capitalized
terms not specifically defined herein which are defined in
the Uniform Commercial Code shall have the means stated
therein.
B. Security Interest. In order to secure the due and
punctual payment and performance of the liabilities, the
Debtor hereby grants to the Bank a continuing security
interest in and general lien upon its right, title and
interest in (i) the Collateral, and (ii) all property of
the Debtor now or hereafter in the actual or constructive
possession of the Bank and/or any Affiliate in any capacity
whatsoever, including but not limited to, any balance or
share of any deposit, trust or agency account. If the
Debtor has granted any security interest(s) to the Bank in
any or all of the Collateral prior to the date of this
Security Agreement, this Security Agreement shall be deemed
to be a reaffirmation of the previously granted security
interest(s) and an amendment and restatement of any
previously executed Security Agreement(s). It is the
intention of the Debtor, all Obligors and the Bank that all
existing security interests will remain continuously
perfected. The security interests granted are granted as
security only and shall not subject the Bank to, or in any
way affect or modify, any obligation or liability of the
Debtor or any other Obligor with respect to any of the
Collateral or any transaction which gave rise thereto.
C. Further Assurances; Filing; Treatment of Collateral.
1. Delivery of Documents; Power of Attorney. At any
time and from time to time, upon the demand of the Bank,
the Debtor will, at the Debtor's expense (i) immediately
give, execute, deliver, pledge, endorse, file, and/or
record any notice, statement, financing statement,
instrument, document, chattel paper, agreement, or other
papers that may be necessary or desirable, or that the Bank
may request, in order to create, preserve, perfect, or
validate any security interest granted pursuant hereto or
intended to be granted hereunder or to enable the Bank to
exercise or enforce its rights hereunder or with respect to
such security interest; and (ii) keep, stamp, or otherwise
mark any and all documents, instruments, chattel paper, and
its Books and Records relating to the Collateral in such
manner as the Bank may require. The Debtor hereby
irrevocably appoints the Bank (and any of its attorneys,
officers, employees, or agents) as its true and lawful
attorney-in-fact, said appointment being coupled with an
interest, with full power of substitution, in the name of
the Debtor, the Bank, or otherwise, for the sole use and
benefit of the Bank in its sole discretion, but at the
Debtor's expense, to exercise, to the extent permitted by
law, in its name or in the name of the Debtor or otherwise,
the powers set forth herein, upon the occurrence of an
Event of Default (i) to endorse the name of the Debtor upon
any instruments of payment, freight, or express bill, bill
of lading, storage, or warehouse receipt relating to the
Collateral and to demand, collect,
<PAGE>
receive payment of, settle, or adjust all or any of the
Collateral; (ii) to correspond and negotiate directly with
insurance carriers; and (iii) to sign and file one or more
financing statements naming the Debtor as debtor and the
Bank as secured party to execute any notice, statement,
instruments, agreement, or other paper that the Bank may
require to create, preserve, perfect, or validate any
security interest granted pursuant hereto or to enable the
Bank to exercise or enforce its rights hereunder or with
respect to such security interest. Neither the Bank nor
its attorneys, officers, employees, or agents shall be
liable for acts, omissions, any error in judgment, or
mistake in fact in its/their capacity as attorney-in-fact.
This power, being coupled with an interest is irrevocable
until the Liabilities have been fully satisfied. At the
Bank's sole option, and without the debtor's consent, the
Bank may file a carbon, photographic, or other reproduction
of this Security Agreement or any financing statement
executed pursuant hereto as a financing statement in any
jurisdiction so permitting. The Bank is expressly
authorized to file financing statements without the
Debtor's signature.
2. Bank's Rights in Collateral; Custody of Collateral.
With respect to the Collateral, or any part thereof, the
right is expressly granted to the Bank, at its sole
discretion, upon the occurrence of an Event of Default (i)
to transfer or register in the name of itself or its
nominee any of the Collateral, and whether or not so
transferred or registered, to receive the income and
dividends thereon, including stock dividends and rights to
subscribe, and to hold the same as a part of the Collateral
and/or apply the same to the Liabilities; (ii) to exchange
any of the Collateral for other property upon the
reorganization, recapitalization, or other readjustment and
in connection therewith, to deposit the Collateral or any
part thereof with any nominee or depository upon such terms
as the Bank may determine in its sole discretion; and (iii)
extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, or release,
any of the Collateral, or refrain from exercising any right
against any Collateral. With respect to the Collateral, or
any part thereof, which at any time may come into the
possession, custody, or under the control of the Bank or
any of its Affiliates, agents or correspondents, the Debtor
hereby acknowledges and agrees that the Bank's sole duty
with respect to the custody, safekeeping and physical
preservation of such Collateral, whether pursuant to
Section 9-207 of the Uniform Commercial Code or otherwise,
shall be to deal with it in the same manner as it deals
with similar property for its own account. Neither the
Bank, nor any of its directors, officers, employees,
Affiliates, agents or correspondents shall be liable for
failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so.
D. Representations and Warranties. The Debtor represents
and warrants to the Bank, which representations and
warranties shall be continuing representations and
warranties until all of the Liabilities are satisfied in
full, and covenants with the Bank as follows:
1. Security Agreement Questionnaire; Place of Business;
Locations of Collateral. All information provided by the
Debtor to the Bank and set forth on the Security Agreement
Questionnaire is true and correct as of the date hereof.
The sole place of business or chief executive office of the
Debtor (if the Debtor has more than one place of business)
or residence (if the Debtor has no place of business) and
the location where the Debtor maintains its Books and
Records is the address set forth under the Debtor's
signature in this Security Agreement or at the location(s)
hereafter disclosed to the Bank pursuant to Paragraph E.1.
hereof. All other places of business of the Debtor,
locations of Collateral, or addresses from which invoices
are sent, if any, are listed below the signature(s) of the
Debtor or at the location(s) hereafter disclosed to the
Bank pursuant to Paragraph E.1. hereof;
2. Duly Authorized; Not in Violation of Law; No Consents
Required. This Security Agreement and the other Loan
Documents have been duly authorized, executed, and
delivered, and constitute the legal, valid, and binding
obligations of the Debtor, enforceable against the Debtor
in accordance with their terms. This Security Agreement
and the other Loan Documents do not and will not violate
any law, the organizational documents, or by-laws of the
Debtor, or any other agreement or instrument to which the
Debtor or any of its property may be bound or subject.
Neither the Debtor nor the Collateral are in violation of
or subject to any existing, pending or threatened
investigation or inquiry pertaining to an alleged violation
of any Environmental Law. No consent or approval of any
person or entity, or of any public authority, is necessary
for the valid execution, delivery and performance of this
Security Agreement, or any other Loan Documents;
3. Protection of the Collateral. The Debtor is or, to the
extent that any Collateral will be required after the date
hereof, will be, the sole owner of the Collateral, holding
good and marketable title thereto, and covenants to keep
the Collateral free from any lien, security interest,
encumbrance, or claim of any person or entity other than
the liens and encumbrances of the Bank. The Debtor has the
right to grant the security interests created by this
Security Agreement. The security interests granted and
reaffirmed by this Security Agreement constitute first
priority perfected security interests in the Collateral
except as listed on Schedule D.3 hereto. The Debtor shall
keep the Collateral in good order and repair, reasonable
wear and tear excepted, and will not waste or destroy the
Collateral or any part thereof. The Debtor shall maintain
insurance at all times with respect to the Collateral
against the risks of fire, theft, and such other risks as
the Bank may require, containing such terms, in such form
and amounts, for such periods and written by such companies
as are acceptable to the Bank in its sole discretion. All
such policies of insurance shall name the Bank as loss
payee and shall provide for not less than thirty (30) days'
prior written notice to the Bank of intended cancellation
or reduction in coverage. The Debtor shall furnish the
Bank with certificates or other evidence satisfactory to
the Bank
<PAGE>
of compliance with the foregoing insurance provisions. The
Bank shall have the right (but shall be under no
obligation) to pay any of the premiums on such insurance
and all such payments shall become part of the Liabilities
and be considered an advance at the highest rate of
interest provided for in the Loan Documents. The Debtor
expressly authorizes its insurance carriers to pay proceeds
of all insurance policies covering all or any part of the
Collateral directly to the Bank. If requested by the Bank,
the Debtor shall give notice of the Bank's security
interests in the Collateral to any third person with whom
the Debtor has any actual or prospective contractual
relationship or other business dealings;
4. Materially Misleading Statements. No representation,
warranty or statement made herein, in the Security
Agreement Questionnaire, or in any certificate or document
furnished or to be furnished pursuant hereto contains or
will contain any untrue statement of fact or omits or will
omit any fact necessary to make it not misleading.
E. Covenants The Debtor hereby covenants and agrees
that for as long as any Liabilities are outstanding:
1. Changes in Location of Chief Executive Office,
Residence, Books and Records, Collateral. The Debtor shall
provide the Bank with prompt written notice of (i) any
intended change in the chief executive office or residence
of the Debtor, and/or the office where the Debtor maintains
its Books and Records; and (ii) the location or movement of
any Collateral to or at an address other than the Debtor's
address as set forth on the signature page hereof, all such
notices to be received by the Bank at least thirty (30)
days prior to the effective date of any such change. If
any such new location as set forth in subparagraphs (i) and
(ii) hereof is on leased or mortgaged premises, the Debtor
will furnish the Bank, prior to the effective date of any
such change, with landlord's or mortgagee's waivers
pertaining to such premises in form and substance
satisfactory to the Bank in its sole discretion;
2. Prompt Payment of Taxes; Delivery to Bank of Proof of
Payment. The Debtor shall promptly pay any and all taxes,
assessments, and/or governmental charges upon the
Collateral on the dates such taxes, assessments, and/or
governmental charges are due and payable, except to the
extent that such taxes, assessments, and/or charges are
contested in good faith by the Debtor by appropriate
proceedings and for which the Debtor is maintaining
adequate reserves. Upon request of the Bank, the Debtor
shall deliver to the Bank such receipts and other proofs of
payment as the Bank may request;
3. Delivery of Instruments, Chattel Paper and Documents
of Title. Immediately upon receipt of any instrument,
Chattel Paper, and/or Document (including bills of lading
and warehouse receipts), the Debtor shall deliver such
Collateral to the Bank and shall execute any form of
assignment or endorsement requested by the Bank with
respect thereto;
4. Notice of Adverse Changes, Events of Default,
Seizures and Institution of Litigation. The Debtor shall
immediately notify the Bank of (i) any adverse change in
its business, property, or financial condition, including,
without limitation, any loss of or damage to any
Collateral; (ii) the occurrence of an Event of Default
under this Security Agreement; (iii) any seizure of the
Collateral or any claims or alleged claims of third parties
to the Collateral; and (iv) the institution of any
litigation, arbitration, governmental investigation, or
administrative proceedings against or affecting the Debtor
or any of the Collateral;
5. Disposition of Collateral. The Debtor shall not
sell, offer to sell, otherwise assign, or permit the
involuntary transfer of, or disposition of the Collateral
or any interest therein, without the prior written consent
of the Bank; provided, however, that unless the Bank
notifies the Debtor otherwise, the Debtor may sell its
inventory in the ordinary course of its business;
6. Maintenance and Inspection of Books and Records,
Equipment and Inventory. The Debtor shall maintain
complete and accurate Books and Records and, if the
Collateral consists of Inventory or Equipment, the Debtor
shall make all necessary entries therein to reflect the
locations of its Inventory and Equipment. The Debtor shall
permit the Bank and its authorized agents and
representatives to have full, complete and unrestricted
access to the Books and Records at all reasonable times to
inspect, audit and make copies of any and all such Books
and Records and, if the Collateral consists of Inventory or
Equipment, the Debtor shall permit the Bank and its
authorized agents and representatives to inspect any or all
of the Inventory and Equipment at all reasonable times.
Upon submission to the Debtor of an invoice therefore, the
Debtor will reimburse the Bank for any and all fees and
costs related to any inspection and/or audit by the Bank
and its authorized agents and representatives. Upon the
request of the Bank, the Debtor shall deliver to the Bank
all evidence of ownership in the Collateral, including
certificates of title with the Bank's interest
appropriately noted on the certificate and if any of the
Collateral is located upon land which is the subject of a
lease ore mortgage, the Debtor shall deliver an agreement
of subordination from the landlord or mortgagee providing
that any lien of such party shall be subordinate to the
security interest of the Bank granted herein. The Bank's
rights hereunder shall be enforceable at law or in equity,
and the Debtor consents to the entry of judicial orders or
injunctions enforcing specific performance of such
obligations hereunder; and
7. Assignment of Accounts. With respect to Accounts
that are Collateral, the Debtor shall, upon request,
immediately give to the Bank, in a form acceptable to the
Bank, assignments of all Accounts, all original and other
documents
<PAGE>
evidencing a right to payment of Accounts, agings, lists of
account debtors, copies of purchase orders, invoices,
shipping and delivery receipts, and such other data
concerning the Accounts as the Bank may request. If any of
the Accounts that are Collateral arise out of contracts
with the United States or any of its departments, agencies,
or instrumentalities, the Debtor shall immediately notify
and identify same to the Bank, and shall promptly execute
and deliver to the Bank an assignment of claims for such
Accounts in form acceptable to the Bank, and shall take all
steps deemed necessary or desirable by the Bank to protect
the Bank's interest therein under the Federal Assignment of
Claims Act or any similar law or regulation. The Debtor
agrees that the Bank and its authorized agents and
representatives shall at all times have the right to
confirm orders and to verify any or all of the Accounts in
the Bank's name, or in any fictitious name used by the Bank
for verifications.
F. Events of Default. The occurrence of an Event of
Default under the Loan Agreement shall constitute an event
of default ("Event of Default") under this Security
Agreement.
G. Remedies.
1. Acceleration of Liabilities; General Rights of Bank.
Upon the occurrence of an Event of Default described in
Section F, at the Bank's sole option, the Bank's
commitment, if any, to make any further advances or loans
to the Debtor under any Loan Document shall terminate and
all Liabilities shall immediately become due and payable in
full, all without protest, presentment, demand or further
notice of any kind to the Debtor or any other Obligor, all
of which are expressly waived. Upon and following an Event
of Default, the Bank may, at its option, exercise any and
all rights and remedies it has under this Security
Agreement, any other Loan Document and/or applicable law.
2. Right of Set-off. If any of the Liabilities shall be
due and payable or any one or more Events of Default shall
have occurred, whether or not the Bank shall have made any
demand under any of the Loan Documents, and regardless of
the adequacy of any Collateral for the Liabilities or other
means of obtaining repayment of the Liabilities, the Bank
shall have the right, without notice to the Debtor or to
any other Obligor, and is specifically authorized hereby to
setoff against and apply to the then unpaid balance of the
Liabilities any items or funds of the Debtor and/or any
Obligor held by the Bank or any Affiliate, any and all
deposits (whether general or special, time or demand,
matured or unmatured) or any other property of the Debtor
and/or any Obligor, including, without limitation,
securities and/or certificates of deposit, now or hereafter
maintained by the Debtor and/or any Obligor for its or
their own account with the Bank or any Affiliate, and any
other indebtedness at any time held or owing by the Bank or
any Affiliate to or for the credit or the account of the
Debtor and/or any Obligor, even if effecting such set-off
results in a loss or reduction of interest or the
imposition of a penalty application to the early withdrawal
of time deposits. For such purpose, the Bank shall have,
and the Debtor hereby grants to the Bank, a first lien on
and security interest in such deposits, property, funds,
and accounts, and the proceeds thereof. The Debtor further
authorizes any Affiliate, upon and following the occurrence
of an Event of Default, at the request of the Bank, and
without notice to the Debtor, to turn over to the Bank any
property of the Debtor, including, without limitation,
funds and securities held by the Affiliate for the Debtor's
account, and to debit any deposit account maintained by the
Debtor with such Affiliate (even if such deposit account is
not then due or there results a loss or reduction of
interest or the imposition of a penalty in accordance with
law applicable to the early withdrawal of time deposits),
in the amount requested by the Bank up to the amount of the
Liabilities, and to pay or transfer such amount or property
to the Bank for application to the Liabilities.
3. Additional Rights and Remedies. In addition to the
rights and remedies available to the Bank as set forth
above, upon the occurrence of an Event of Default
hereunder, or at any time thereafter, the Bank may at its
option, immediately and without notice, do any or all of
the following, which rights and remedies are cumulative,
may be exercised from time to time, and are in addition to
any rights and remedies available to the Bank under any
other agreement or instrument by and between any Obligor
and the Bank: (i) exercise any and all of the rights and
remedies of a secured party under the Uniform Commercial
Code, including, without limitation, the right to require
the Debtor to assemble the Collateral and make it available
to the Bank at a place reasonably convenient to the
parties; (ii) operate, utilize, recondition and/or
refurbish any of the Collateral by any means deemed
appropriate by the Bank, in its sole discretion, including,
without limitation, converting raw materials and/or work-in-process
into finished goods; (iii) notify the account
debtors for any of the Accounts to make payment directly to
the Bank, or to such post office box as the Bank may direct
and/or vote the Collateral and exercise all rights with the
same force and effect as an absolute owner; (iv) demand,
sue for, collect, or retrieve any money or property at any
time payable, receivable on account of, or in exchange for,
or make any compromise, or settlement deemed desirable with
respect to any of the Collateral; (v) notify the post
office authorities to change the address for delivery of
the Debtor's mail to an address designated by the Bank and
to receive, open, and distribute all mail addressed to the
Debtor, retaining all mail relating to the Collateral and
forwarding all other mail to the Debtor; and/or (vi) upon
five (5) calendar days' prior written notice to the Debtor
(or one (1) day notice by telephone with respect to
Collateral that is perishable or threatens to decline
rapidly in value), which the Debtor hereby acknowledges to
be sufficient, commercially reasonable and proper, the Bank
may sell, lease or otherwise dispose of any or all of the
Collateral at any time and from time to time at public or
private sale, with or without advertisement thereof, and
apply the proceeds of any such sale first to the Bank's
expenses in preparing the Collateral for sale (including
reasonable
<PAGE>
attorneys' fees) and second to the complete satisfaction of
the Liabilities in any order deemed appropriate by the Bank
in its sole discretion. The Debtor waives the benefit of
any marshalling doctrine with respect to the Bank's
exercise of its rights hereunder. The Debtor grants a
royalty - free license to the Bank for all patents, service
marks, trademarks, trade names, copyrights, computer
programs and other intellectual property and proprietary
rights sufficient to permit the Bank to exercise all rights
granted to the Bank under this Section. The Bank or anyone
else may be the purchaser of any or all of the Collateral
so sold and thereafter hold such Collateral absolutely,
free from any claim or right of whatsoever kind, including
any equity of redemption of the Debtor or any other
Obligor, any such notice, right and/or equity of redemption
being hereby expressly waived and released.
4. Continuing Enforcement of the Loan Documents. If,
after receipt of any payment of all or any part of the
Liabilities or the obligations of the Debtor to the Bank,
the Bank is compelled or agrees, for settlement purposes,
to surrender such payment to any person or entity for any
reason, then this Security Agreement and the other Loan
Documents shall continue in full force and effect or be
reinstated, as the case may be. The provisions of this
Paragraph shall survive the termination of this Security
Agreement and the other Loan Documents and shall be and
remain effective notwithstanding the payment of the
Liabilities, the cancellation of the Security Agreement or
any other Loan Document, the release of any security
interest, lien or encumbrance securing the Liabilities or
any other action which the Bank may have taken in reliance
upon its receipt of such payment. The Debtor also agrees
to indemnify, defend and hold harmless the Bank with
respect to any and all claims, expenses, demands, losses,
costs, fines or liabilities of any kind (including, without
limitation, those involving death or personal injury)
arising from or in any way related to any hazardous
materials or dangerous environmental condition within, on,
from, related to or affecting any real property owned or
occupied by the Debtor.
H. Miscellaneous.
1. Remedies Cumulative; No Waiver. The rights, powers
and remedies of the Bank provided in this Security
Agreement and any of the other Loan Documents are
cumulative and concurrent, and are not exclusive of any
right, power or remedy available to the Bank. No failure
or delay on the part of the Bank in the exercise of any
right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise of any right,
power or remedy preclude any other or further exercise
thereof, or the exercise of any other right, power or
remedy.
2. Notices. Notices and communications under this
Security Agreement shall be in writing and shall be given
by (i) hand-delivery, (ii) first class mail (postage
prepaid), or (iii) reliable overnight commercial courier
(charges prepaid), to the addresses set forth in this
Security Agreement. Notice by overnight courier shall be
deemed to have been given and received on the date
scheduled for delivery. Notice by mail shall be deemed to
have been given and received three (3) calendar days after
the date first deposited in the United States Mail. Notice
by hand-delivery shall be deemed to have been given and
received upon delivery. A party may change its address by
giving written notice to the other party as specified
herein.
3. Costs, Expenses and Professional Fees. Whether or
not the transactions contemplated by this Security
Agreement or any of the other Loan Documents are fully
consummated, the Debtor shall promptly pay (or reimburse,
as the Bank may elect) all costs and expenses which the
Bank has incurred or may hereafter incur in connection with
the negotiation, preparation, reproduction, interpretation,
perfection, protection of the Collateral, administration
and enforcement of this Security Agreement or any of the
other Loan Documents, the collection of all amounts due
under the Loan Documents, and all amendments,
modifications, consents or waivers, if any, to the Loan
Documents. Such costs and expenses shall include, without
limitation, the fees and disbursements of counsel to the
Bank (including the Bank's in-house counsel), the costs of
appraisals, searches of public records, costs of filing and
recording documents with public offices, internal and/or
external audit and/or examination fees and costs, stamp,
excise and other taxes, the fees of the Bank's accountants,
consultants or other professionals, costs and expenses from
any actual or attempted sale of all or any part of the
Collateral, or any exchange, enforcement, collection,
compromise, or settlement of any of the Collateral or
receipt of the proceeds thereof, and for the care and
preparation for sale of the Collateral (including
insurance costs) and defending and asserting the rights and
claims of the Bank in respect thereof, by litigation or
otherwise. The Debtor's reimbursement obligations under
this paragraph shall survive any termination of the Loan
Documents.
4. Governing Law. This Security Agreement shall be
construed in accordance with and governed by the
substantive laws of the State of Connecticut without
reference to conflict of laws principles.
5. Integration; Amendment. This Security Agreement and
the other Loan Documents constitute the sole agreement of
the parties with respect to the subject matter hereof and
thereof and supersede all oral negotiations and prior
writings with respect to the subject matter hereof and
thereof. No amendment of this Security Agreement, and no
waiver of any one or more of the provisions hereof shall be
effective unless set forth in writing and signed by the
parties hereto.
<PAGE>
6. Successors and Assigns. This Security Agreement (i)
shall be binding upon the Debtor and the Bank and, where
applicable, their respective heirs, executors,
administrators, successors and assigns, and (ii) shall
inure to the benefit of the Debtor and the Bank and, where
applicable, their respective heirs, executors,
administrators, successors and permitted assigns; provided,
however, that the Debtor may not assign its rights or
obligations hereunder or any interest herein without the
prior written consent of the Bank, and any such assignment
or attempted assignment by the Debtor shall be void and of
no effect with respect to the Bank. The Bank may from time
to time sell or assign, in whole or in part, or grant
participations in some or all of the Loan Documents and/or
the obligations evidenced thereby. The Debtor authorizes
the Bank to provide information concerning the Debtor to
any prospective purchaser, assignee or participant.
7. Severability and Consistency. The illegality,
unenforceability or inconsistency of any provision of this
Security Agreement or any instrument or agreement required
hereunder shall not in any way affect or impair the
legality, enforceability or consistency of the remaining
provisions of this Security Agreement or any instrument or
agreement required hereunder. The Loan Documents are
intended to be consistent. However, in the event of any
inconsistencies among any of the Loan Documents, such
inconsistency shall not affect the validity or
enforceability of any Loan Document. The Debtor agrees
that in the event of any inconsistency or ambiguity in any
of the Loan Documents, the Loan Documents shall not be
construed against any one party but shall be interpreted
consistent with the Bank's policies and procedures.
8. Consent to Jurisdiction and Service of Process. The
Debtor irrevocably appoints each and every owner, partner
and/or officer of the Debtor as its attorneys upon whom may
be served any notice, process or pleading in any action or
proceeding against it arising out of or in connection with
this Security Agreement or any of the other Loan Documents.
If service of process cannot be delivered to the Debtor as
specified by statute, the Debtor agrees that, with court
approval, it may be served by regular or certified mail at
the address set forth herein. The Debtor hereby consents
that (i) any action or proceeding against it may be
commenced and maintained in any court within the State of
Connecticut or in the United States District Court for the
District of Connecticut by service of process on any such
owner, partner and/or officer; and (ii) such courts shall
have jurisdiction with respect to the subject matter hereof
and the person of the Debtor and all Collateral for the
Liabilities. The Debtor agrees that any action brought by
the Debtor shall be commenced and maintained only in a
court in the federal judicial district or county in which
the Bank has its principal place of business in
Connecticut.
9. Joint and Several Liability. In the event that the
Debtor consists of more than one person or entity, the
Liabilities of each such person or entity shall be joint
and several and the word "Debtor" means each of them, any of
them and/or all of them.
10. Judicial Proceedings; Waivers.
THE DEBTOR AND THE BANK ACKNOWLEDGE AND AGREE THAT (I) ANY
SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM,
BROUGHT OR INSTITUTED BY THE DEBTOR OR THE BANK OR ANY
SUCCESSOR OR ASSIGN OF THE DEBTOR OR THE BANK, ON OR WITH
RESPECT TO THIS SECURITY AGREEMENT, ANY OF THE OTHER LOAN
DOCUMENTS, THE COLLATERAL OR THE DEALINGS OF THE PARTIES
WITH RESPECT HERETO OR THERETO SHALL BE TRIED ONLY BY A
COURT AND NOT BY A JURY AND EACH PARTY WAIVES THE RIGHT TO
TRIAL BY JURY; (II) EACH WAIVES ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING,
ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES
OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; AND (III) THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS SECURITY AGREEMENT AND THE BANK WOULD NOT
EXTEND CREDIT IF THE WAIVERS SET FORTH IN THIS PARAGRAPH
WERE NOT A PART OF THIS SECURITY AGREEMENT.
11. Prejudgment Remedies.
The Debtor and any endorser, surety and guarantor hereby
acknowledges the transactions contemplated herein
constitute commercial transactions. Pursuant to Section
52-278f of the Connecticut General Statutes, the Debtor
hereby waives and relinquishes all rights to notice and
hearing as provided in Sections 52-278a through 52-278g of
said Connecticut General Statutes prior to the securing of
any prejudgment remedy against the Debtor in connection
with the Liabilities or any of the instruments or documents
executed in connection herewith.
IN WITNESS WHEREOF, the Debtor and the Bank have executed
this Security Agreement, on the day and year first above
written.
ENERGY RESEARCH CORPORATION
By:___________________
<PAGE>
Name:
Title:
Address:
Locations of Collateral:
(if different from
address above)
Address:
Locations of Places of
Business:
(if different from
address above)
Address:
First Union Bank of Connecticut
By:
Name:
Title:
Address:300 Main Street
Stamford, Connecticut 06904
<PAGE>
General Security Agreement - Commercial
(Connecticut)
June 28, 1996
In consideration of any loans, extensions of credit,
or other financial accommodations made or to be made by
FIRST UNION BANK OF CONNECTICUT (the "Bank") and/or to
secure the Liabilities of FUEL CELL MANUFACTURING
CORPORATION (the "Debtor"), and for other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound, the
Debtor and the Bank hereby agree as follows:
A. Definitions. As used herein, the following terms
shall have the following meanings:
1. Affiliate. The Term "Affiliate" means First Union
Corporation and any of its direct and indirect affiliates
and subsidiaries.
2. Books and Records. The term "Books and Records" means
all of the Debtor's books and records, including, but not
limited to, records indicating, summarizing, or evidencing
the Collateral, the Liabilities, and the Debtor's property,
business operations, or financial condition; computer runs,
invoices, tapes, processing software, processing contracts
(such as contracts for computer time and services) and any
computer prepared information, tapes, or data of every kind
and description, whether in the possession of the Debtor or
in the possession of third parties.
3. Collateral. The term "Collateral" means the following
types or items of property of the Debtor, whether now owned
or hereafter acquired:
ACCOUNTS: All accounts, accounts receivable, contract
rights, bills, acceptances, Chattel Paper (as hereinafter
defined), General Intangibles (as hereinafter defined),
Instruments (as hereinafter defined), Letters of Credit (as
hereinafter defined), and other forms of obligations
arising out of the sale, lease or consignment of goods or
the rendition of services by the debtor (the "Accounts"),
together with any property evidencing or relating to the
Accounts (such as guaranties and credit insurance), any
security for the Accounts and all Books and Records
relating thereto.
INVENTORY: All inventory of every nature, kind, and
description, wherever located, including, without
limitation, raw materials, goods, work in process, finished
goods, parts or supplies; all goods and property held for
sale or lease or to be furnished under contracts of
service; all goods and inventory returned, reclaimed or
repossessed; all General Intangibles and any Documents (as
hereinafter defined) relating to, arising from or
evidencing any of the foregoing (the "Inventory").
EQUIPMENT: All machinery and equipment, furniture,
fixtures, whether or not affixed to realty, tools, motor
vehicles, and all accessions, accessories, replacements and
the rights of the Debtor under any manufacturer's
warranties relating to the foregoing (the "Equipment").
CHATTEL PAPER: All chattel paper, including, but not
limited to, any writing or writings which evidence both a
monetary obligation and a security interest in or a lease
of specific goods (the "Chattel Paper").
GENERAL INTANGIBLES: All general intangibles, including,
without limitation, any personal property, choses in
action, causes of action, goodwill, tax refunds, licenses,
franchises, trademarks, trade names, service marks,
copyrights, customer lists and patents, and all rights
under license agreements for use of the same (the "General
Intangibles").
INSTRUMENTS: All instruments, including, without
limitation, bills of exchange, notes, and all negotiable
and non-negotiable instruments, all certificated
securities, all certificates of deposit and any other
writing which evidences a right to the payment of money and
is not itself a security agreement or lease and is of a
type which is in the ordinary course of business
transferred by delivery with any necessary endorsement or
assignment (the "Instruments").
DOCUMENTS: All documents, including, but not limited to,
documents of title (as that term is defined in the Uniform
Commercial Code) and any and all receipts, including, but
not limited to, receipts of the kind described in Article 7
of the Uniform Commercial Code (the "Documents").
LETTERS OF CREDIT: All letters of credit, including, but
not limited to, any written undertaking to pay money
conditioned upon presentation of specified documents, and
advices of letters of credit (the "Letters of Credit").
THE ITEMS OR TYPES OF PROPERTY DESCRIBED IN SCHEDULE A.3
HERETO.
<PAGE>
And all proceeds of any/or all of the foregoing and all
property which is within the definition of proceeds as it
is defined in the Uniform Commercial Code, including
without limitation, whatever is received upon the use,
lease, sale, exchange, collection, any other utilization or
any disposition of any of the foregoing property described
in this section A.3., whether cash or non-cash, all rental
or lease payments, Accounts, Chattel Paper, Instruments,
Documents, contract rights, General Intangibles, Equipment,
Inventory, substitutions, additions, accessions,
replacements, products, and renewals of, for, or to such
property and all insurance therefor (collectively, the
"Proceeds").
4. Environmental Laws. The term "Environmental Laws"
means, without limitation, all legal requirements of any
governmental authority pertaining to the environment and
all laws, regulations, and executive orders, federal, state
and local, pertaining to environmental matters, as the same
may be amended, replaced or supplemented from time to time.
5. ERISA: The term "ERISA" means 29 U.S.C. 1001 et seq.,
as amended from time to time, and all rules, regulations,
orders and publications adopted or promulgated pursuant
thereto.
6. Liabilities. The term "Liabilities" means any and all
obligations and indebtedness of every kind and description
of the Debtor owing to the Bank or to any Affiliate,
whether or not under the Loan Documents, and whether such
debts or obligations are primary or secondary, direct or
indirect, absolute or contingent, sole, joint or several,
secured or unsecured, due or to become due, contractual or
tortious, arising by operation of law, by overdraft, or
otherwise, or now or hereafter existing, including, without
limitation, principal, interest, fees, late fees, expenses,
attorneys' fees and costs, and/or the allocated fees and
costs of the Bank's in-house legal counsel, that have been
or may hereafter be contracted or incurred.
7. Loan Documents. The term "Loan Documents" means all
credit accommodations, notes, loan agreements, and any
other agreements and documents, now or hereafter existing,
creating, evidencing, guarantying, securing or relating to
any or all of the Liabilities, together with all
amendments, modifications, renewals, or extensions thereof.
8. Obligor. The term "Obligor" means the Debtor and each
and every maker, endorser, guarantor, or surety of or party
obligated for any of the Liabilities.
9. Security Agreement. The term "Security Agreement"
means this General Security Agreement, together with all
schedules and exhibits hereto and all amendments and
modifications as may from time to time be in effect with
respect hereto.
10. Uniform Commercial Code. The term "Uniform
Commercial Code" means the Uniform Commercial Code, in
effect from time to time in the State of Connecticut.
Unless the context otherwise requires, all capitalized
terms not specifically defined herein which are defined in
the Uniform Commercial Code shall have the means stated
therein.
B. Security Interest. In order to secure the due and
punctual payment and performance of the liabilities, the
Debtor hereby grants to the Bank a continuing security
interest in and general lien upon its right, title and
interest in (i) the Collateral, and (ii) all property of
the Debtor now or hereafter in the actual or constructive
possession of the Bank and/or any Affiliate in any capacity
whatsoever, including but not limited to, any balance or
share of any deposit, trust or agency account. If the
Debtor has granted any security interest(s) to the Bank in
any or all of the Collateral prior to the date of this
Security Agreement, this Security Agreement shall be deemed
to be a reaffirmation of the previously granted security
interest(s) and an amendment and restatement of any
previously executed Security Agreement(s). It is the
intention of the Debtor, all Obligors and the Bank that all
existing security interests will remain continuously
perfected. The security interests granted are granted as
security only and shall not subject the Bank to, or in any
way affect or modify, any obligation or liability of the
Debtor or any other Obligor with respect to any of the
Collateral or any transaction which gave rise thereto.
C. Further Assurances; Filing; Treatment of Collateral.
1. Delivery of Documents; Power of Attorney. At any
time and from time to time, upon the demand of the Bank,
the Debtor will, at the Debtor's expense (i) immediately
give, execute, deliver, pledge, endorse, file, and/or
record any notice, statement, financing statement,
instrument, document, chattel paper, agreement, or other
papers that may be necessary or desirable, or that the Bank
may request, in order to create, preserve, perfect, or
validate any security interest granted pursuant hereto or
intended to be granted hereunder or to enable the Bank to
exercise or enforce its rights hereunder or with respect to
such security interest; and (ii) keep, stamp, or otherwise
mark any and all documents, instruments, chattel paper, and
its Books and Records relating to the Collateral in such
manner as the Bank may require. The Debtor hereby
irrevocably appoints the Bank (and any of its attorneys,
officers, employees, or agents) as its true and lawful
attorney-in-fact, said appointment being coupled with an
interest, with full power of substitution, in the name of
<PAGE>
the Debtor, the Bank, or otherwise, for the sole use and
benefit of the Bank in its sole discretion, but at the
Debtor's expense, to exercise, to the extent permitted by
law, in its name or in the name of the Debtor or otherwise,
the powers set forth herein, upon the occurrence of an
Event of Default (i) to endorse the name of the Debtor upon
any instruments of payment, freight, or express bill, bill
of lading, storage, or warehouse receipt relating to the
Collateral and to demand, collect, receive payment of,
settle, or adjust all or any of the Collateral; (ii) to
correspond and negotiate directly with insurance carriers;
and (iii) to sign and file one or more financing statements
naming the Debtor as debtor and the Bank as secured party
to execute any notice, statement, instruments, agreement,
or other paper that the Bank may require to create,
preserve, perfect, or validate any security interest
granted pursuant hereto or to enable the Bank to exercise
or enforce its rights hereunder or with respect to such
security interest. Neither the Bank nor its attorneys,
officers, employees, or agents shall be liable for acts,
omissions, any error in judgment, or mistake in fact in
its/their capacity as attorney-in-fact. This power, being
coupled with an interest is irrevocable until the
Liabilities have been fully satisfied. At the Bank's sole
option, and without the debtor's consent, the Bank may file
a carbon, photographic, or other reproduction of this
Security Agreement or any financing statement executed
pursuant hereto as a financing statement in any
jurisdiction so permitting. The Bank is expressly
authorized to file financing statements without the
Debtor's signature.
2. Bank's Rights in Collateral; Custody of Collateral.
With respect to the Collateral, or any part thereof, the
right is expressly granted to the Bank, at its sole
discretion upon the occurrence of an Event of Default (i)
to transfer or register in the name of itself or its
nominee any of the Collateral, and whether or not so
transferred or registered, to receive the income and
dividends thereon, including stock dividends and rights to
subscribe, and to hold the same as a part of the Collateral
and/or apply the same to the Liabilities; (ii) to exchange
any of the Collateral for other property upon the
reorganization, recapitalization, or other readjustment and
in connection therewith, to deposit the Collateral or any
part thereof with any nominee or depository upon such terms
as the Bank may determine in its sole discretion; and (iii)
extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, or release,
any of the Collateral, or refrain from exercising any right
against any Collateral. With respect to the Collateral, or
any part thereof, which at any time may come into the
possession, custody, or under the control of the Bank or
any of its Affiliates, agents or correspondents, the Debtor
hereby acknowledges and agrees that the Bank's sole duty
with respect to the custody, safekeeping and physical
preservation of such Collateral, whether pursuant to
Section 9-207 of the Uniform Commercial Code or otherwise,
shall be to deal with it in the same manner as it deals
with similar property for its own account. Neither the
Bank, nor any of its directors, officers, employees,
Affiliates, agents or correspondents shall be liable for
failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so.
D. Representations and Warranties. The Debtor
represents and warrants to the Bank, which representations
and warranties shall be continuing representations and
warranties until all of the Liabilities are satisfied in
full, and covenants with the Bank as follows:
1. Security Agreement Questionnaire; Place of Business;
Locations of Collateral. All information provided by the
Debtor to the Bank and set forth on the Security Agreement
Questionnaire is true and correct as of the date hereof.
The sole place of business or chief executive office of the
Debtor (if the Debtor has more than one place of business)
or residence (if the Debtor has no place of business) and
the location where the Debtor maintains its Books and
Records is the address set forth under the Debtor's
signature in this Security Agreement or at the location(s)
hereafter disclosed to the Bank pursuant to Paragraph E.1.
hereof. All other places of business of the Debtor,
locations of Collateral, or addresses from which invoices
are sent, if any, are listed below the signature(s) of the
Debtor or at the location(s) hereafter disclosed to the
Bank pursuant to Paragraph E.1. hereof;
2. Duly Authorized; Not in Violation of Law; No Consents
Required. This Security Agreement and the other Loan
Documents have been duly authorized, executed, and
delivered, and constitute the legal, valid, and binding
obligations of the Debtor, enforceable against the Debtor
in accordance with their terms. This Security Agreement
and the other Loan Documents do not and will not violate
any law, the organizational documents, or by-laws of the
Debtor, or any other agreement or instrument to which the
Debtor or any of its property may be bound or subject.
Neither the Debtor nor the Collateral are in violation of
or subject to any existing, pending or threatened
investigation or inquiry pertaining to an alleged violation
of any Environmental Law. No consent or approval of any
person or entity, or of any public authority, is necessary
for the valid execution, delivery and performance of this
Security Agreement, or any other Loan Documents;
3. Protection of the Collateral. The Debtor is or, to
the extent that any Collateral will be required after the
date hereof, will be, the sole owner of the Collateral,
holding good and marketable title thereto, and covenants to
keep the Collateral free from any lien, security interest,
encumbrance, or claim of any person or entity other than
the liens and encumbrances of the Bank. The Debtor has the
right to grant the security interests created by this
Security Agreement. The security interests granted and
reaffirmed by this Security Agreement constitute first
priority perfected security interests in the Collateral
except as listed on Schedule D.3 hereto. The Debtor shall
keep the Collateral in good order and
<PAGE>
repair, reasonable wear and tear excepted, and will not
waste or destroy the Collateral or any part thereof. The
Debtor shall maintain insurance at all times with respect
to the Collateral against the risks of fire, theft, and
such other risks as the Bank may require, containing such
terms, in such form and amounts, for such periods and
written by such companies as are acceptable to the Bank in
its sole discretion. All such policies of insurance shall
name the Bank as loss payee and shall provide for not less
than thirty (30) days' prior written notice to the Bank of
intended cancellation or reduction in coverage. The Debtor
shall furnish the Bank with certificates or other evidence
satisfactory to the Bank of compliance with the foregoing
insurance provisions. The Bank shall have the right (but
shall be under no obligation) to pay any of the premiums on
such insurance and all such payments shall become part of
the Liabilities and be considered an advance at the highest
rate of interest provided for in the Loan Documents. The
Debtor expressly authorizes its insurance carriers to pay
proceeds of all insurance policies covering all or any part
of the Collateral directly to the Bank. If requested by the
Bank, the Debtor shall give notice of the Bank's security
interests in the Collateral to any third person with whom
the Debtor has any actual or prospective contractual
relationship or other business dealings;
4. Materially Misleading Statements. No representation,
warranty or statement made herein, in the Security
Agreement Questionnaire, or in any certificate or document
furnished or to be furnished pursuant hereto contains or
will contain any untrue statement of fact or omits or will
omit any fact necessary to make it not misleading.
E. Covenants The Debtor hereby covenants and agrees
that for as long as any Liabilities are outstanding:
1. Changes in Location of Chief Executive Office,
Residence, Books and Records, Collateral. The Debtor shall
provide the Bank with prompt written notice of (i) any
intended change in the chief executive office or residence
of the Debtor, and/or the office where the Debtor maintains
its Books and Records; and (ii) the location or movement of
any Collateral to or at an address other than the Debtor's
address as set forth on the signature page hereof, all such
notices to be received by the Bank at least thirty (30)
days prior to the effective date of any such change. If
any such new location as set forth in subparagraphs (i) and
(ii) hereof is on leased or mortgaged premises, the Debtor
will furnish the Bank, prior to the effective date of any
such change, with landlord's or mortgagee's waivers
pertaining to such premises in form and substance
satisfactory to the Bank in its sole discretion;
2. Prompt Payment of Taxes; Delivery to Bank of Proof of
Payment. The Debtor shall promptly pay any and all taxes,
assessments, and/or governmental charges upon the
Collateral on the dates such taxes, assessments, and/or
governmental charges are due and payable, except to the
extent that such taxes, assessments, and/or charges are
contested in good faith by the Debtor by appropriate
proceedings and for which the Debtor is maintaining
adequate reserves. Upon request of the Bank, the Debtor
shall deliver to the Bank such receipts and other proofs of
payment as the Bank may request;
3. Delivery of Instruments, Chattel Paper and Documents
of Title. Immediately upon receipt of any instrument,
Chattel Paper, and/or Document (including bills of lading
and warehouse receipts), the Debtor shall deliver such
Collateral to the Bank and shall execute any form of
assignment or endorsement requested by the Bank with
respect thereto;
4. Notice of Adverse Changes, Events of Default,
Seizures and Institution of Litigation. The Debtor shall
immediately notify the Bank of (i) any adverse change in
its business, property, or financial condition, including,
without limitation, any loss of or damage to any
Collateral; (ii) the occurrence of an Event of Default
under this Security Agreement; (iii) any seizure of the
Collateral or any claims or alleged claims of third parties
to the Collateral; and (iv) the institution of any
litigation, arbitration, governmental investigation, or
administrative proceedings against or affecting the Debtor
or any of the Collateral;
5. Disposition of Collateral. The Debtor shall not
sell, offer to sell, otherwise assign, or permit the
involuntary transfer of, or disposition of the Collateral
or any interest therein, without the prior written consent
of the Bank; provided, however, that unless the Bank
notifies the Debtor otherwise, the Debtor may sell its
inventory in the ordinary course of its business;
6. Maintenance and Inspection of Books and Records,
Equipment and Inventory. The Debtor shall maintain
complete and accurate Books and Records and, if the
Collateral consists of Inventory or Equipment, the Debtor
shall make all necessary entries therein to reflect the
locations of its Inventory and Equipment. The Debtor shall
permit the Bank and its authorized agents and
representatives to have full, complete and unrestricted
access to the Books and Records at all reasonable times to
inspect, audit and make copies of any and all such Books
and Records and, if the Collateral consists of Inventory or
Equipment, the Debtor shall permit the Bank and its
authorized agents and representatives to inspect any or all
of the Inventory and Equipment at all reasonable times.
Upon submission to the Debtor of an invoice therefore, the
Debtor will reimburse the Bank for any and all fees and
costs related to any inspection and/or audit by the Bank
and its authorized agents and representatives. Upon the
request of the Bank, the Debtor shall deliver to the Bank
all evidence of ownership in the Collateral, including
certificates of title with the Bank's interest
appropriately
<PAGE>
noted on the certificate and if any of the Collateral is
located upon land which is the subject of a lease ore
mortgage, the Debtor shall deliver an agreement of
subordination from the landlord or mortgagee providing that
any lien of such party shall be subordinate to the security
interest of the Bank granted herein. The Bank's rights
hereunder shall be enforceable at law or in equity, and the
Debtor consents to the entry of judicial orders or
injunctions enforcing specific performance of such
obligations hereunder; and
7. Assignment of Accounts. With respect to Accounts
that are Collateral, the Debtor shall, upon request,
immediately give to the Bank, in a form acceptable to the
Bank, assignments of all Accounts, all original and other
documents evidencing a right to payment of Accounts,
agings, lists of account debtors, copies of purchase
orders, invoices, shipping and delivery receipts, and such
other data concerning the Accounts as the Bank may request.
If any of the Accounts that are Collateral arise out of
contracts with the United States or any of its departments,
agencies, or instrumentalities, the Debtor shall
immediately notify and identify same to the Bank, and shall
promptly execute and deliver to the Bank an assignment of
claims for such Accounts in form acceptable to the Bank,
and shall take all steps deemed necessary or desirable by
the Bank to protect the Bank's interest therein under the
Federal Assignment of Claims Act or any similar law or
regulation. The Debtor agrees that the Bank and its
authorized agents and representatives shall at all times
have the right to confirm orders and to verify any or all
of the Accounts in the Bank's name, or in any fictitious
name used by the Bank for verifications.
F. Events of Default. The occurrence of an Event of
Default under the Loan Agreement shall constitute an event
of default ("Event of Default") under this Security
Agreement.
G. Remedies.
1. Acceleration of Liabilities; General Rights of Bank.
Upon the occurrence of an Event of Default described in
Section F, at the Bank's sole option, the Bank's
commitment, if any, to make any further advances or loans
to the Debtor under any Loan Document shall terminate and
all Liabilities shall immediately become due and payable in
full, all without protest, presentment, demand or further
notice of any kind to the Debtor or any other Obligor, all
of which are expressly waived. Upon and following an Event
of Default, the Bank may, at its option, exercise any and
all rights and remedies it has under this Security
Agreement, any other Loan Document and/or applicable law.
2. Right of Set-off. If any of the Liabilities shall be
due and payable or any one or more Events of Default shall
have occurred, whether or not the Bank shall have made any
demand under any of the Loan Documents, and regardless of
the adequacy of any Collateral for the Liabilities or other
means of obtaining repayment of the Liabilities, the Bank
shall have the right, without notice to the Debtor or to
any other Obligor, and is specifically authorized hereby to
setoff against and apply to the then unpaid balance of the
Liabilities any items or funds of the Debtor and/or any
Obligor held by the Bank or any Affiliate, any and all
deposits (whether general or special, time or demand,
matured or unmatured) or any other property of the Debtor
and/or any Obligor, including, without limitation,
securities and/or certificates of deposit, now or hereafter
maintained by the Debtor and/or any Obligor for its or
their own account with the Bank or any Affiliate, and any
other indebtedness at any time held or owing by the Bank or
any Affiliate to or for the credit or the account of the
Debtor and/or any Obligor, even if effecting such set-off
results in a loss or reduction of interest or the
imposition of a penalty application to the early withdrawal
of time deposits. For such purpose, the Bank shall have,
and the Debtor hereby grants to the Bank, a first lien on
and security interest in such deposits, property, funds,
and accounts, and the proceeds thereof. The Debtor further
authorizes any Affiliate, upon and following the occurrence
of an Event of Default, at the request of the Bank, and
without notice to the Debtor, to turn over to the Bank any
property of the Debtor, including, without limitation,
funds and securities held by the Affiliate for the Debtor's
account, and to debit any deposit account maintained by the
Debtor with such Affiliate (even if such deposit account is
not then due or there results a loss or reduction of
interest or the imposition of a penalty in accordance with
law applicable to the early withdrawal of time deposits),
in the amount requested by the Bank up to the amount of the
Liabilities, and to pay or transfer such amount or property
to the Bank for application to the Liabilities.
3. Additional Rights and Remedies. In addition to the
rights and remedies available to the Bank as set forth
above, upon the occurrence of an Event of Default
hereunder, or at any time thereafter, the Bank may at its
option, immediately and without notice, do any or all of
the following, which rights and remedies are cumulative,
may be exercised from time to time, and are in addition to
any rights and remedies available to the Bank under any
other agreement or instrument by and between any Obligor
and the Bank: (i) exercise any and all of the rights and
remedies of a secured party under the Uniform Commercial
Code, including, without limitation, the right to require
the Debtor to assemble the Collateral and make it available
to the Bank at a place reasonably convenient to the
parties; (ii) operate, utilize, recondition and/or
refurbish any of the Collateral by any means deemed
appropriate by the Bank, in its sole discretion, including,
without limitation, converting raw materials and/or work-in-process
into finished goods; (iii) notify the account
debtors for any of the Accounts to make payment directly to
the Bank, or to such post office box as the Bank may direct
and/or vote the
<PAGE>
Collateral and exercise all rights with the same force and
effect as an absolute owner; (iv) demand, sue for, collect,
or retrieve any money or property at any time payable,
receivable on account of, or in exchange for, or make any
compromise, or settlement deemed desirable with respect to
any of the Collateral; (v) notify the post office
authorities to change the address for delivery of the
Debtor's mail to an address designated by the Bank and to
receive, open, and distribute all mail addressed to the
Debtor, retaining all mail relating to the Collateral and
forwarding all other mail to the Debtor; and/or (vi) upon
five (5) calendar days' prior written notice to the Debtor
(or one (1) day notice by telephone with respect to
Collateral that is perishable or threatens to decline
rapidly in value), which the Debtor hereby acknowledges to
be sufficient, commercially reasonable and proper, the Bank
may sell, lease or otherwise dispose of any or all of the
Collateral at any time and from time to time at public or
private sale, with or without advertisement thereof, and
apply the proceeds of any such sale first to the Bank's
expenses in preparing the Collateral for sale (including
reasonable attorneys' fees) and second to the complete
satisfaction of the Liabilities in any order deemed
appropriate by the Bank in its sole discretion. The Debtor
waives the benefit of any marshalling doctrine with respect
to the Bank's exercise of its rights hereunder. The Debtor
grants a royalty - free license to the Bank for all
patents, service marks, trademarks, trade names,
copyrights, computer programs and other intellectual
property and proprietary rights sufficient to permit the
Bank to exercise all rights granted to the Bank under this
Section. The Bank or anyone else may be the purchaser of
any or all of the Collateral so sold and thereafter hold
such Collateral absolutely, free from any claim or right of
whatsoever kind, including any equity of redemption of the
Debtor or any other Obligor, any such notice, right and/or
equity of redemption being hereby expressly waived and
released.
4. Continuing Enforcement of the Loan Documents. If,
after receipt of any payment of all or any part of the
Liabilities or the obligations of the Debtor to the Bank,
the Bank is compelled or agrees, for settlement purposes,
to surrender such payment to any person or entity for any
reason, then this Security Agreement and the other Loan
Documents shall continue in full force and effect or be
reinstated, as the case may be. The provisions of this
Paragraph shall survive the termination of this Security
Agreement and the other Loan Documents and shall be and
remain effective notwithstanding the payment of the
Liabilities, the cancellation of the Security Agreement or
any other Loan Document, the release of any security
interest, lien or encumbrance securing the Liabilities or
any other action which the Bank may have taken in reliance
upon its receipt of such payment. The Debtor also agrees
to indemnify, defend and hold harmless the Bank with
respect to any and all claims, expenses, demands, losses,
costs, fines or liabilities of any kind (including, without
limitation, those involving death or personal injury)
arising from or in any way related to any hazardous
materials or dangerous environmental condition within, on,
from, related to or affecting any real property owned or
occupied by the Debtor.
H. Miscellaneous.
1. Remedies Cumulative; No Waiver. The rights, powers
and remedies of the Bank provided in this Security
Agreement and any of the other Loan Documents are
cumulative and concurrent, and are not exclusive of any
right, power or remedy available to the Bank. No failure
or delay on the part of the Bank in the exercise of any
right, power or remedy shall operate as a waiver thereof,
nor shall any single or partial exercise of any right,
power or remedy preclude any other or further exercise
thereof, or the exercise of any other right, power or
remedy.
2. Notices. Notices and communications under this
Security Agreement shall be in writing and shall be given
by (i) hand-delivery, (ii) first class mail (postage
prepaid), or (iii) reliable overnight commercial courier
(charges prepaid), to the addresses set forth in this
Security Agreement. Notice by overnight courier shall be
deemed to have been given and received on the date
scheduled for delivery. Notice by mail shall be deemed to
have been given and received three (3) calendar days after
the date first deposited in the United States Mail. Notice
by hand-delivery shall be deemed to have been given and
received upon delivery. A party may change its address by
giving written notice to the other party as specified
herein.
3. Costs, Expenses and Professional Fees. Whether or
not the transactions contemplated by this Security
Agreement or any of the other Loan Documents are fully
consummated, the Debtor shall promptly pay (or reimburse,
as the Bank may elect) all costs and expenses which the
Bank has incurred or may hereafter incur in connection with
the negotiation, preparation, reproduction, interpretation,
perfection, protection of the Collateral, administration
and enforcement of this Security Agreement or any of the
other Loan Documents, the collection of all amounts due
under the Loan Documents, and all amendments,
modifications, consents or waivers, if any, to the Loan
Documents. Such costs and expenses shall include, without
limitation, the fees and disbursements of counsel to the
Bank (including the Bank's in-house counsel), the costs of
appraisals, searches of public records, costs of filing and
recording documents with public offices, internal and/or
external audit and/or examination fees and costs, stamp,
excise and other taxes, the fees of the Bank's accountants,
consultants or other professionals, costs and expenses from
any actual or attempted sale of all or any part of the
Collateral, or any exchange, enforcement, collection,
compromise, or settlement of any of the Collateral or
receipt of the proceeds thereof, and for the care and
preparation for sale of the Collateral (including
insurance costs)
<PAGE>
and defending and asserting the rights and claims of the
Bank in respect thereof, by litigation or otherwise. The
Debtor's reimbursement obligations under this paragraph
shall survive any termination of the Loan Documents.
4. Governing Law. This Security Agreement shall be
construed in accordance with and governed by the
substantive laws of the State of Connecticut without
reference to conflict of laws principles.
5. Integration; Amendment. This Security Agreement and
the other Loan Documents constitute the sole agreement of
the parties with respect to the subject matter hereof and
thereof and supersede all oral negotiations and prior
writings with respect to the subject matter hereof and
thereof. No amendment of this Security Agreement, and no
waiver of any one or more of the provisions hereof shall be
effective unless set forth in writing and signed by the
parties hereto.
6. Successors and Assigns. This Security Agreement (i)
shall be binding upon the Debtor and the Bank and, where
applicable, their respective heirs, executors,
administrators, successors and assigns, and (ii) shall
inure to the benefit of the Debtor and the Bank and, where
applicable, their respective heirs, executors,
administrators, successors and permitted assigns; provided,
however, that the Debtor may not assign its rights or
obligations hereunder or any interest herein without the
prior written consent of the Bank, and any such assignment
or attempted assignment by the Debtor shall be void and of
no effect with respect to the Bank. The Bank may from time
to time sell or assign, in whole or in part, or grant
participations in some or all of the Loan Documents and/or
the obligations evidenced thereby. The Debtor authorizes
the Bank to provide information concerning the Debtor to
any prospective purchaser, assignee or participant.
7. Severability and Consistency. The illegality,
unenforceability or inconsistency of any provision of this
Security Agreement or any instrument or agreement required
hereunder shall not in any way affect or impair the
legality, enforceability or consistency of the remaining
provisions of this Security Agreement or any instrument or
agreement required hereunder. The Loan Documents are
intended to be consistent. However, in the event of any
inconsistencies among any of the Loan Documents, such
inconsistency shall not affect the validity or
enforceability of any Loan Document. The Debtor agrees
that in the event of any inconsistency or ambiguity in any
of the Loan Documents, the Loan Documents shall not be
construed against any one party but shall be interpreted
consistent with the Bank's policies and procedures.
8. Consent to Jurisdiction and Service of Process. The
Debtor irrevocably appoints each and every owner, partner
and/or officer of the Debtor as its attorneys upon whom may
be served any notice, process or pleading in any action or
proceeding against it arising out of or in connection with
this Security Agreement or any of the other Loan Documents.
If service of process cannot be delivered to the Debtor as
specified by statute, the Debtor agrees that, with court
approval, it may be served by regular or certified mail at
the address set forth herein. The Debtor hereby consents
that (i) any action or proceeding against it may be
commenced and maintained in any court within the State of
Connecticut or in the United States District Court for the
District of Connecticut by service of process on any such
owner, partner and/or officer; and (ii) such courts shall
have jurisdiction with respect to the subject matter hereof
and the person of the Debtor and all Collateral for the
Liabilities. The Debtor agrees that any action brought by
the Debtor shall be commenced and maintained only in a
court in the federal judicial district or county in which
the Bank has its principal place of business in
Connecticut.
9. Joint and Several Liability. In the event that the
Debtor consists of more than one person or entity, the
Liabilities of each such person or entity shall be joint
and several and the word "Debtor" means each of them, any of
them and/or all of them.
10. Judicial Proceedings; Waivers.
THE DEBTOR AND THE BANK ACKNOWLEDGE AND AGREE THAT (I) ANY
SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM,
BROUGHT OR INSTITUTED BY THE DEBTOR OR THE BANK OR ANY
SUCCESSOR OR ASSIGN OF THE DEBTOR OR THE BANK, ON OR WITH
RESPECT TO THIS SECURITY AGREEMENT, ANY OF THE OTHER LOAN
DOCUMENTS, THE COLLATERAL OR THE DEALINGS OF THE PARTIES
WITH RESPECT HERETO OR THERETO SHALL BE TRIED ONLY BY A
COURT AND NOT BY A JURY AND EACH PARTY WAIVES THE RIGHT TO
TRIAL BY JURY; (II) EACH WAIVES ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING,
ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES
OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; AND (III) THIS SECTION IS A SPECIFIC AND MATERIAL
ASPECT OF THIS SECURITY AGREEMENT AND THE BANK WOULD NOT
EXTEND CREDIT IF THE WAIVERS SET FORTH IN THIS PARAGRAPH
WERE NOT A PART OF THIS SECURITY AGREEMENT.
<PAGE>
11. Prejudgment Remedies.
The Debtor and any endorser, surety and guarantor hereby
acknowledges the transactions contemplated herein
constitute commercial transactions. Pursuant to Section
52-278f of the Connecticut General Statutes, the Debtor
hereby waives and relinquishes all rights to notice and
hearing as provided in Sections 52-278a through 52-278g of
said Connecticut General Statutes prior to the securing of
any prejudgment remedy against the Debtor in connection
with the Liabilities or any of the instruments or documents
executed in connection herewith.
IN WITNESS WHEREOF, the Debtor and the Bank have executed
this Security Agreement, on the day and year first above
written.
FUEL CELL MANUFACTURING
CORPORATION
By:
Name:
Title:
Address:
Locations of Collateral:
(if different from address
above)
Address:
Locations of Places of
Business:
(if different from address
above)
Address:
First Union Bank of Connecticut
By:
Name:
Title:
Address:300 Main Street
Stamford, Connecticut 06904
<PAGE>
Commercial Mortgage Loan - CT
OPEN-END MORTGAGE AND SECURITY AGREEMENT
Date:June 28, 1996
MORTGAGEE: FIRST UNION BANK OF CONNECTICUT
300 Main Street, Stamford, Connecticut 06904
Attention: Commercial Real Estate Department Head
MORTGAGOR: ENERGY RESEARCH CORPORATION
Type of Entity: Corporation
State of Organization:Connecticut
Mailing Address: 3 Great Pasture Road
Danbury, Connecticut 06810
MORTGAGED Street Address:1 and 3 Great Pasture Road
PREMISES: Municipality of:Danbury
County of Fairfield, State of Connecticut
Tax Map Designation: Lot No. _____ Block No._____
1. DEBT; LOAN DOCUMENTS.
Mortgagor is indebted to Mortgagee in the principal sum of
Two Million Two Hundred Fifty Thousand and 00/100 Dollars
($2,250,000.00), together with interest thereon, as
evidenced by a certain Mortgage Note of even date herewith
(the "Note"). A copy of the Note is attached hereto as
Schedule "B" and incorporated herein and made a part hereof,
which Note provides that all amounts remaining unpaid
thereon shall be finally due and payable on June 1, 2001.
This Mortgage is the Mortgage referred to in the Note. The
indebtedness evidenced by the Note has been or will be
advanced pursuant to a Loan Agreement of even date herewith
(the "Loan Agreement"). As additional security for the
payment and performance to Mortgagee of the Liabilities (as
defined below), Mortgagor has executed and delivered to
Mortgagee the other collateral documents described in or
accompanying the Loan Agreement. This Mortgage, the Loan
Agreement, the Note, the Guaranty, and all other
guarantees, documents, certificates and instruments
executed in connection therewith are sometimes hereinafter
referred to collectively as the "Loan Documents" or
individually as a "Loan Document". The terms of the Loan
Documents are hereby made a part of this Mortgage to the
same extent and with the same effect as if fully set forth
herein. Copies of the Loan Documents are on file with
Mortgagee.
2. LIABILITIES; GRANT OF MORTGAGE. To secure to
Mortgagee (i) the repayment of all sums due under this
Mortgage, the Guaranty, the Note (and all extensions,
renewals, replacements, substitutions, amendments and
modifications thereof) and the other Loan Documents,
including without limitation, principal, interest, fees,
late charges and expenses, including attorneys' fees and/or
allocated fees of Mortgagee's in-house legal counsel; (ii)
the repayment of all advancements to Borrower as described
in Section 14.15 hereof; (iii) the performance of all
terms, conditions and covenants set forth in the Loan
Documents; and (iv) ) any judgment obtained on the Note or
Guaranty (subsections 2 (i), (ii), (iii) and (iv)
collectively, the "Liabilities"), Mortgagor has given,
granted, bargained, sold and confirmed and by these
presents does hereby give, grant, bargain, sell and confirm
with MORTGAGE COVENANTS unto Mortgagee, its successors and
assigns, forever, each of the following together with and
including all of Mortgagor's right, title and interest
thereto and therein now owned or hereafter acquired
(collectively, the "Mortgaged Premises").
<PAGE>
2.1. All those certain tracts of land set forth
above as the Mortgaged Premises and more particularly
described in Schedule "A" attached hereto and made a part
hereof (the "Real Estate");
2.2. Any and all buildings and improvements now or
hereafter erected on, under or over the Real Estate (the
"Improvements");
2.3. Any and all fixtures, machinery, equipment and
other articles of real, personal or mixed property,
belonging to Mortgagor, at any time now or hereafter
installed in, attached to or situated in or upon the Real
Estate, or the buildings and improvements now or hereafter
erected thereon, or used or intended to be used in
connection with the Real Estate, or in the operation of the
buildings and improvements, plant, business or dwelling
situate thereon, whether or not such real, personal or
mixed property is or shall be affixed thereto, and all
replacements, substitutions and proceeds of the foregoing
(all of the foregoing herein called the "Service
Equipment"), including without limitation: (i) all
appliances, furniture and furnishings; all articles of
interior decoration, floor, wall and window coverings; all
office, restaurant, bar, kitchen and laundry fixtures,
utensils, appliances and equipment; all supplies, tools and
accessories; all storm and screen windows, shutters, doors,
decorations, awnings, shades, blinds, signs, trees,
shrubbery and other plantings; (ii) all building service
fixtures, machinery and equipment of any kind whatsoever;
all lighting, heating, ventilating, air conditioning,
refrigerating, sprinkling, plumbing, security, irrigating,
cleaning, incinerating, waste disposal, communications,
alarm, fire prevention and extinguishing systems, fixtures,
apparatus, machinery and equipment; all elevators,
escalators, lifts, cranes, hoists and platforms; all pipes,
conduits, pumps, boilers, tanks, motors, engines, furnaces
and compressors; all dynamos, transformers and generators;
(iii) all building materials, building machinery and
building equipment delivered on site to the Real Estate
during the course of, or in connection with any
construction or repair or renovation of the buildings and
improvements; (iv) all parts, fittings, accessories,
accessions, substitutions and replacements therefor and
thereof; and (v) all files, books, ledgers, reports and
records relating to any of the foregoing;
2.4. Any present and future leases, subleases,
tenancies, licenses, occupancy agreements or agreements to
lease all or any portion of the Real Estate, Improvements,
Service Equipment or all or any other portion of the
Mortgaged Premises and all extensions, renewals,
amendments, modifications and replacements thereof, and any
options, rights of first refusal or guarantees relating
thereto (collectively, the "Leases"); all rents, income,
receipts, revenues, security deposits, escrow accounts,
reserves, issues, profits, awards and payments of any kind
payable under the Leases or otherwise arising from the Real
Estate, Improvements, Service Equipment or all or any other
portion of the Mortgaged Premises including, without
limitation, minimum rents, additional rents, percentage
rents, parking, maintenance and deficiency rents
(collectively, the "Rents"); all of the following personal
property (collectively referred to as the "Contracts"): all
accounts, general intangibles and contract rights
(including any right to payment thereunder, whether or not
earned by performance) of any nature relating to the Real
Estate, Improvements, Service Equipment or all or any other
portion of the Mortgaged Premises or the use, occupancy,
maintenance, construction, repair or operation thereof; all
management agreements, franchise agreements, utility
agreements and deposits, building service contracts,
maintenance contracts, construction contracts and
architect's agreements; all maps, plans, surveys and
specifications; all warranties and guaranties; all permits,
licenses and approvals; and all insurance policies, books
of account and other documents, of whatever kind or
character, relating to the use, construction upon,
occupancy, leasing, sale or operation of the Real Estate,
Improvements, Service Equipment or all or any other portion
of the Mortgaged Premises;
2.5. Any and all estates, rights, tenements,
hereditament, privileges, easements, reversions, remainders
and appurtenances of any kind benefitting or appurtenant to
the Real Estate, Improvements or all or any other portion
of the Mortgaged Premises; all means of access to and from
the Real Estate, Improvements or all or any other portion
of the Mortgaged Premises, whether public or private; all
streets, alleys, passages, ways, water courses, water and
mineral rights relating to the Real Estate, Improvements or
all or any other portion of the Mortgaged Premises; all
rights of Mortgagor as declarant or unit owner under any
declaration of condominium or association applicable to the
Real Estate, Improvements or all or any other portion of
the Mortgaged Premises including, without limitation, all
development rights and special declarant rights; and all
other claims or demands of Mortgagor, either at law or in
equity, in possession or expectancy of, in, or to the Real
Estate, Improvements or all or any other portion of the
Mortgaged Premises (all of the foregoing described in this
Section 2.5 herein called the "Appurtenances"); and
<PAGE>
2.6. Any and all "proceeds" of any of the above-described
Real Estate, Improvements, Service Equipment,
Leases, Rents, Contracts and Appurtenances, which term
"proceeds" shall have the meaning given to it in the
Connecticut Uniform Commercial Code (collectively, the
"Proceeds") and shall additionally include whatever is
received upon the use, lease, sale, exchange, transfer,
collection or other utilization or any disposition or
conversion of any of the Real Estate, Improvements, Service
Equipment, Leases, Rents, Contracts and Appurtenances,
voluntary or involuntary, whether cash or non-cash,
including proceeds of insurance and condemnation awards,
rental or lease payments, accounts, chattel paper,
instruments, documents, contract rights, general
intangibles, equipment and inventory.
TO HAVE AND TO HOLD the above granted and bargained
Mortgaged Premises with the privileges and appurtenances
thereof unto it, the said Mortgagee, its successors and
assigns, forever, to its and their own proper use and
behoof.
THE CONDITION OF THIS DEED IS SUCH THAT:
WHEREAS, Mortgagor is justly indebted to Mortgagee
pursuant to the Note, and subject to the following
additional terms and conditions:
3. FUTURE ADVANCES.
This Mortgage shall secure any and all present or future
advances and readvances under the Liabilities made by
Mortgagee to or for the benefit of Mortgagor or the
Mortgaged Premises, including, without limitation: (i)
principal, interest, late charges, fees and other amounts
due under the Liabilities or this Mortgage; (ii) all
advances by Mortgagee to Mortgagor or any other person to
pay costs of erection, construction, alteration, repair,
restoration, maintenance and completion of any improvements
on the Mortgaged Premises; (iii) all advances made or costs
incurred by Mortgagee for the payment of real estate taxes,
assessments or other governmental charges, maintenance
charges, insurance premiums, appraisal charges,
environmental inspection, audit, testing or compliance
costs, and costs incurred by Mortgagee for the enforcement
and protection of the Mortgaged Premises or the lien of
this Mortgage; and (iv) all legal fees, costs and other
expenses incurred by Mortgagee by reason of any default or
otherwise in connection with the Liabilities. Mortgagor
agrees that if, at any time during the term of this
Mortgage or following a foreclosure hereof, Mortgagor fails
to perform or observe any covenant or obligation under this
Mortgage including, without limitation, payment of any of
the foregoing, Mortgagee may (but shall not be obligated
to) take such steps as are reasonably necessary to remedy
any such nonperformance or nonobservance and provide
payment thereof. All amounts advanced by Mortgagee shall
be added to the amount secured by this Mortgage and the
other Loan Documents, and shall be due and payable on
demand, together with interest at four percent (4%) per
annum above the rate of interest then in effect under the
Note, such interest to be calculated from the date of such
advance to the date of repayment thereof. Mortgagor's
obligations hereunder shall be continuing and shall survive
notwithstanding a foreclosure of this Mortgage.
4. ASSIGNMENT OF LEASES.
4.1. Mortgagor hereby assigns to Mortgagee, as
further security for the payment of the Liabilities, all
Leases and Rents. Mortgagor shall, upon demand, deliver to
Mortgagee an executed copy of each such Lease. This
assignment shall continue in effect until the Liabilities
are paid in full and this Mortgage is canceled or
discharged of record; however, so long as no Event of
Default (as defined below) exists, Mortgagor shall have a
license to collect, and may retain, use and enjoy the Rents
as they become due, but not prior to accrual, subject to
the terms and conditions set forth in the Assignment of
Leases. Such license granted to Mortgagor shall be
immediately revoked without further notice or demand upon
the occurrence of an Event of Default. Upon the
occurrence of any Event of Default, the Mortgagee may,
without notice, by agent or by a receiver appointed by a
court, and without regard to the adequacy of any security
for the liabilities, revoke and cancel the license and
authority of Mortgagor to collect Rents, and (i) enter upon
and take possession of the Mortgaged Premises, (ii) notify
tenants, subtenants and any property manager to pay Rents
to the Mortgagee or its designee, and upon receipt of such
notice such persons are authorized and directed to make
payment as specified in the notice and disregard any
contrary direction or instruction by Mortgagor, and (iii)
in its own name, sue for or otherwise collect Rents,
including those past due, and apply Rents, less costs and
expenses of operation and collection, including attorneys'
fees, to the Liabilities in such order and manner as Bank
may determine. The collection of Rents, the entering upon
and taking possession of the Property, or the application
of Rents as aforesaid, shall not cure or waive any Event of
Default or notice of any Event of Default hereunder.
<PAGE>
4.2. Mortgagor shall timely perform all of its
obligations under the Leases. Mortgagor represents and
warrants that: (i) there are no leases or agreements to
lease all or any part of the Real Estate now in effect,
except those specifically set forth in, and assigned to
Mortgagee by, the Assignment of Leases; and (ii) there is
no assignment or pledge of any rents, issues or profits of
or from the Mortgaged Premises now in effect and Mortgagor
shall not make any assignment or pledge thereof to anyone
other than Mortgagee until the satisfaction in full of the
Liabilities.
4.3. Mortgagor shall not, without the prior written
consent of Mortgagee: (i) enter into any lease of all or
any portion of the Mortgaged Premises; (ii) amend, modify,
terminate or accept a surrender of any Lease; or (iii)
collect or accept rent from any tenant of the Mortgaged
Premises for a period of more than one month in advance.
5. SECURITY AGREEMENT.
This Mortgage constitutes a security agreement under the
Connecticut Uniform Commercial Code (the "Code") and shall
also be effective as a financing statement filed as a
fixture filing in the land records of the Town in which the
Real Estate is located. Mortgagor hereby grants to
Mortgagee a security interest in the Service Equipment,
Leases, Rents, Contracts, Appurtenances, Proceeds and other
property included in the Mortgaged Premises, and all
replacements of, substitutions for, and additions to, all
of the foregoing, and the proceeds thereof, as security for
the Liabilities. Mortgagor shall, at Mortgagor's own
expense, execute, deliver, file and refile any financing or
continuation statements or other security agreements
Mortgagee may require from time to time to perfect, confirm
or maintain the lien of this Mortgage with respect to such
property. Without limiting the foregoing, Mortgagor hereby
irrevocably appoints Mortgagee attorney-in-fact for
Mortgagor to execute, deliver and file such instruments for
or on behalf of Mortgagor at Mortgagor's expense, which
appointment, being for security, is coupled with an
interest and shall be irrevocable.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1. Payment and Performance. Mortgagor shall (i)
pay to Mortgagee all sums required to be paid by Mortgagor
under the Loan Documents, in accordance with their stated
terms and conditions; (ii) perform and comply with all
terms, conditions and covenants set forth in each of the
Loan Documents by which Mortgagor is bound; and (iii)
perform and comply with all of Mortgagor's obligations and
duties as landlord under any Leases.
6.2. Seisin and Warranty. Mortgagor is seized of an
indefeasible estate in fee simple in, and warrants the
title to, the Mortgaged Premises; has good and valid title
to all rents, issues and profits therefrom, and has the
right, full power and lawful authority to grant, convey and
assign the same to Mortgagee in the manner and form set
forth herein; and this Mortgage is a valid and enforceable
first lien on the Mortgaged Premises, subject only to the
matters set forth on Schedule "C" attached hereto (the
"Permitted Encumbrances"). Mortgagor hereby covenants that
Mortgagor shall (i) preserve such title and the validity
and priority of the lien of this Mortgage and shall forever
warrant and defend the same to Mortgagee against all lawful
claims whatsoever; and (ii) execute, acknowledge and
deliver all such further documents or assurances, and cause
to be done all such further acts as may at any time
hereafter be required by Mortgagee to protect fully the
lien of this Mortgage.
6.3. Insurance. (a) Mortgagor shall obtain and
maintain at all times throughout the term of this Mortgage
the following insurance in amounts, with deductibles and
with companies satisfactory to Mortgagee from time to time:
(i) comprehensive general public liability insurance
covering all operations of Mortgagor; (ii) "All-Risk" fire
and extended coverage hazard insurance (together with
vandalism and malicious mischief, special cause of loss and
agreed amount endorsements) in an aggregate amount not less
than 100% of the full insurable replacement value of the
Mortgaged Premises, including coverage for loss of contents
owned by Mortgagor; (iii) during the course of any
construction, reconstruction, remodeling or repair of
improvements on the Mortgaged Premises, builders' all-risk
extended coverage insurance in amounts based upon the
completed replacement value of the improvements (excluding
roads, foundations, parking areas, paths, walkways and like
improvements), including coverage for loss of contents and
endorsed to provide that occupancy by any person shall not
void such coverage; (iv) if the Mortgaged Premises are
required to be insured pursuant to the Flood Disaster
Protection Act of 1973 or the National Flood Insurance Act
of 1968, and the regulations promulgated thereunder, flood
insurance in an amount at least equal to the lesser of the
outstanding principal balance of this Mortgage or the
maximum limit of coverage available; (v) insurance which
complies with the workers' compensation and
<PAGE>
employers' liability laws of all states in which Mortgagor
shall have employees; (vi) business interruption and/or
rental loss insurance sufficient to pay, for a period of
not less than six (6) months, normal operating expenses of
or gross income from the Mortgaged Premises; (vii) boiler
and machinery insurance covering pressure vessels, air
tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment in such amounts as
Mortgagee shall require from time to time, provided that
the Mortgaged Premises contains equipment of such nature;
and (viii) such other insurance as Mortgagee may reasonably
require, including without limitation, environmental
liability insurance.
(b) Each insurance policy required under this
Section 6.3. shall be written by an insurance company
authorized or licensed to do business in Connecticut having
an A.M. Best Company, Inc. rating of A or higher and a
financial size category of not less than VII, and shall be
on such forms and written by such companies as shall be
reasonably approved by Mortgagee.
(c) Each insurance policy required under this
Section 6.3. providing insurance against loss or damage to
property, business interruption or rent loss shall be
written or endorsed so as to (i) name Mortgagee as
mortgagee under a Connecticut standard mortgagee or secured
party endorsement, as the case may be, or its equivalent;
and (ii) make all losses payable directly to Mortgagee,
without contribution.
(d) Each insurance policy required under this
Section 6.3. providing public liability coverage shall be
written and endorsed so as to name Mortgagee as a
certificate holder with thirty (30) days prior written
notice of cancellation.
(e) Each insurance policy required under this
Section 6.3. shall contain a provision (i) requiring the
insurer to notify Mortgagee, in writing and at least thirty
(30) days in advance, of any cancellation or material
change in the policy; (ii) waiving all rights of setoff,
counterclaim, deduction or subrogation against Mortgagor;
and (iii) excluding Mortgagee from the operation of any
coinsurance clause.
(f) At least thirty (30) days prior to the
expiration of any insurance policy, Mortgagor shall furnish
evidence satisfactory to Mortgagee that such policy has
been renewed or replaced or is no longer required by this
Section 6.3.
(g) Mortgagor shall not take out any separate or
additional insurance with respect to the Mortgaged Premises
which is contributing in the event of loss unless approved
by Mortgagee and in conformity with the requirements of
this Section 6.3.
(h) Notwithstanding the foregoing, in the event that
Mortgagor fails to maintain insurance in accordance with
this Section 6.3., and Mortgagee elects to obtain insurance
to protect its interests hereunder, Mortgagee may obtain
insurance in any amount and of any type Mortgagee deems
appropriate to protect Mortgagee's interest only and
Mortgagee shall have no duty or obligation to Mortgagor to
maintain insurance in any greater amount or of any other
type for the benefit of Mortgagor. All insurance premiums
incurred or paid by Mortgagee shall be at Mortgagor's sole
cost and expense in accordance with Section 3 hereof.
Mortgagee's election to obtain insurance shall not be
deemed to waive any Event of Default (as hereinafter
defined) hereunder.
6.4. Taxes and Other Charges. Mortgagor shall prepare
and timely file all federal, state and local tax returns
required to be filed by Mortgagor and promptly pay and
discharge all taxes, assessments, water and sewer rents,
and other governmental charges imposed upon Mortgagor, the
Mortgaged Premises or on any of Mortgagor's other property
when due, but in no event after interest or penalties
commence to accrue thereon or become a lien upon such
property, except for those taxes, assessments, water and
sewer rents, or other governmental charges then being
contested in good faith by Mortgagor by appropriate
proceedings and for which Mortgagor has established on its
books or by deposit of cash with Mortgagee, at the option
of Mortgagee, a reserve for the payment thereof in such
amount as Mortgagee may require, and so long as such
contest: (i) operates to prevent collection, stay any
proceedings which may be instituted to enforce payment of
such item, and prevent a sale of the Mortgaged Premises to
pay such item; (ii) is maintained and prosecuted with due
diligence; and (iii) shall not have been terminated or
discontinued adversely to Mortgagor. Mortgagor shall
submit to Mortgagee, upon request, an affidavit signed by
Mortgagor certifying that all federal, state and local tax
returns have been filed to date and all taxes, assessments,
water and sewer rents, and other governmental charges with
respect to Mortgagor's properties have been paid to date.
<PAGE>
6.5. Escrows. If required by Mortgagee, Mortgagor
shall pay to Mortgagee at the time of each installment of
principal and interest due under the Note, and commencing
with the first payment due after the date of such request,
a sum equal to (a) the amount of the next installment of
taxes and assessments levied or assessed against the
Mortgaged Premises, and/or (b) the premiums which will next
become due on the insurance policies required by this
Mortgage, all in amounts as estimated by Mortgagee, less
all sums already paid therefor or deposited with Mortgagee
for the payment thereof, divided by the number of payments
to become due before one (1) month prior to the date when
such taxes and assessments and/or premiums, as applicable,
will become due, such sums to be held by Mortgagee to pay
the same when due. If such escrow funds are not sufficient
to pay such taxes and assessments and/or insurance
premiums, as applicable, as the same become due, Mortgagor
shall pay to Mortgagee, upon request, such additional
amounts as Mortgagee shall estimate to be sufficient to
make up any deficiency. No amount paid to Mortgagee
hereunder shall be deemed to be trust funds but may be
commingled with general funds of Mortgagee and no interest
shall be payable thereon. Upon the occurrence of an Event
of Default, Mortgagee shall have the right, at its sole
discretion, to apply any amounts so held against the
Liabilities. If Mortgagor is not required to pay tax
escrows pursuant to this Section 6.5., Mortgagor shall
promptly provide to Mortgagee on a semi-annual basis (if
such taxes or assessments are payable semi-annually) or on
a quarterly basis (if such taxes or assessments are payable
quarterly), copies of receipted tax bills, cancelled checks
or other evidence satisfactory to Mortgagee evidencing that
such taxes and assessments have been timely paid.
6.6. Transfer of Title. Without the prior written
consent of Mortgagee in each instance, Mortgagor shall not
cause or permit any transfer of the Mortgaged Premises or
any part thereof, whether voluntarily, involuntarily or by
operation of law, nor shall Mortgagor enter into any
agreement or transaction to transfer, or accomplish in form
or substance a transfer, of the Mortgaged Premises. A
"transfer" of the Mortgaged Premises includes: (i) the
direct or indirect sale, transfer or conveyance of the
Mortgaged Premises or any portion thereof or interest
therein; (ii) the execution of an installment sale contract
or similar instrument affecting all or any portion of the
Mortgaged Premises; (iii) if Mortgagor, or any general
partner of Mortgagor, is a corporation, partnership or
limited liability company, the transfer (whether in one
transaction or a series of transactions) of any stock,
partnership, limited liability company or other ownership
interests in such corporation, partnership or limited
liability company; (iv) if Mortgagor, or any general
partner of Mortgagor, is a corporation, the creation or
issuance of new stock by which an aggregate of more than
10% of such corporation's stock shall be vested in a party
or parties who are not now stockholders; and (v) an
agreement by Mortgagor leasing all or a substantial part of
the Mortgaged Premises for other than actual occupancy by a
space tenant thereunder or a sale, assignment or other
transfer of or the grant of a security interest in and to
any Leases.
6.7. No Encumbrances. (a) Mortgagor shall not
create or permit to exist any mortgage, pledge, lien,
security interest (including, without limitation, a
purchase money security interest), encumbrance, attachment,
levy, distraint or other judicial process on or against the
Mortgaged Premises or any part thereof (including, without
limitation, fixtures and other personalty), whether
superior or inferior to the lien of this Mortgage, without
the prior written consent of Mortgagee. If any lien or
encumbrance is filed or entered without Mortgagor's
consent, Mortgagor shall have the right to contest same, in
good faith, by appropriate proceedings so long as adequate
reserves have been established therefor.
(b) By placing or accepting a mortgage, lien or
encumbrance of any type, whether voluntary or involuntary,
against the Mortgaged Premises, the holder thereof shall be
deemed to have agreed, without any further act or
documentation being required, that its mortgage, lien or
encumbrance shall be subordinate in lien priority to this
Mortgage and to any future amendments, consolidations or
extensions hereof (including, without limitation,
amendments which increase the interest rate on the Note,
extend the term of the Liabilities, provide for future
advances secured by this Mortgage, or provide for the
release of portions of the Mortgaged Premises with or
without consideration).
(c) The holder of any subordinate mortgage or
other lien, whether or not consented to by Mortgagee,
expressly agrees by acceptance of such subordinate mortgage
or other lien that it waives and relinquishes any rights it
may have, whether under a legal theory of marshalling of
assets or any other theory at law or in equity, to restrain
Mortgagee from, or recover damages from Mortgagee as a
result of, Mortgagee exercising its various remedies
hereunder or under any other documents evidencing or
securing the Liabilities, in such order and with such
timing as Mortgagee deems appropriate in its sole
discretion.
(d) Mortgagee may, at any time or from time to
time, renew, extend or increase the amount of this
Mortgage, alter or modify the terms hereof or of the Note
in any way, waive any of the
<PAGE>
terms, covenants or conditions hereof or of the Note in
whole or in part, release any portion of the Mortgaged
Premises or any other security, and grant such extensions
and indulgences in relation to the Liabilities as Mortgagee
may determine, without the consent of any junior lienor or
encumbrancer or any obligation to give notice of any kind
thereto, and without in any manner affecting the priority
or the lien hereof on all or any part of the Mortgaged
Premises.
6.8. Removal of Fixtures. Mortgagor shall not remove
or permit to be removed from the Mortgaged Premises any
fixtures presently or in the future owned by Mortgagor as
the term "fixtures" is defined by the law in Connecticut
(unless such fixtures have been replaced with similar
fixtures of equal or greater utility and value), the
removal of which fixtures would materially impair the value
of the Mortgaged Premises.
6.9. Maintenance and Repair; Alterations.(a)
Mortgagor shall (i) abstain from and not permit the
commission of waste in or about the Mortgaged Premises;
(ii) keep the Mortgaged Premises, at Mortgagor's own cost
and expense, in good and substantial repair, working order
and condition; (iii) make or cause to be made, as and when
necessary, all material repairs and replacements, whether
or not insurance proceeds are available therefor; and (iv)
not remove, demolish, materially alter, discontinue the use
of, permit to become vacant or deserted, or otherwise
dispose of all or any material part of the Mortgaged
Premises. All alterations, replacements, renewals or
additions made pursuant to this Section 6.9. shall
automatically become a part of the Mortgaged Premises and
shall be covered by the lien of this Mortgage.
(b) Mortgagee, and any persons authorized by
Mortgagee, shall have the right, but not the obligation, to
enter upon the Mortgaged Premises at any reasonable time to
inspect and photograph its condition and state of repair.
In the event any such inspection reveals, in the sole
discretion of Mortgagee, the necessity for any repair,
alteration, replacement, clean-up or maintenance, Mortgagor
shall, at the discretion of Mortgagee, either: (i) cause
such work to be effected immediately; or (ii) promptly
establish an interest bearing reserve fund with Mortgagee
in an amount determined by Mortgagee for the purpose of
effecting such work.
6.10. Compliance with Applicable Laws. Mortgagor
agrees to substantially observe, conform and comply, and to
cause its tenants to observe, conform and comply with all
material federal, state, county, municipal and other
governmental or quasi-governmental laws, rules,
regulations, ordinances, codes, requirements, covenants,
conditions, orders, licenses, permits, approvals and
restrictions, including without limitation, the Americans
with Disabilities Act of 1990 (collectively, the "Legal
Requirements"), now or hereafter affecting all or any
material part of the Mortgaged Premises, its occupancy or
the business or operations now or hereafter conducted
thereon and the personalty contained therein, within such
time as required by such Legal Requirements. Mortgagor
represents and warrants that it has caused the Mortgaged
Premises to be designed, and the Mortgaged Premises
currently is, in substantial compliance with all material
Legal Requirements applicable to the Mortgaged Premises.
Mortgagor further represents and warrants that any funds
used to acquire the Mortgaged Premises were not obtained in
violation of any Legal Requirements, and that such funds,
including any Loan proceeds, are not being used and are not
intended to be used to facilitate any violations of any
Legal Requirements.
6.11. Damage, Destruction and Condemnation.(a) If
all or any part of the Mortgaged Premises shall be damaged
or destroyed, or if title to or the temporary use of the
whole or any part of the Mortgaged Premises shall be taken
or condemned by a competent authority for any public or
quasi-public use or purpose, there shall be no abatement or
reduction in the amounts payable by Mortgagor under the
Loan Documents and Mortgagor shall continue to be obligated
to make such payments.
(b) If all or any material part of the Mortgaged
Premises is partially or totally damaged or destroyed,
Mortgagor shall give prompt notice thereof to Mortgagee,
and Mortgagee may make proof of loss if not made promptly
by Mortgagor. Mortgagor hereby authorizes and directs any
affected insurance company to make payment under such
insurance, including return of unearned premiums, to
Mortgagee instead of to Mortgagor and Mortgagee jointly,
and Mortgagor appoints Mortgagee as Mortgagor's attorney-in-fact
to endorse any draft thereof, which appointment,
being for security, is coupled with an interest and
irrevocable. Mortgagee is hereby authorized and empowered
by Mortgagor to settle, adjust or compromise, in
consultation with Mortgagor, any claims for loss, damage or
destruction to the Mortgaged Premises. Mortgagor shall pay
all costs of collection of insurance proceeds payable on
account of such damage or destruction. Mortgagor shall
have no claim against the insurance proceeds, or be
entitled to any portion thereof, and all rights to the
insurance proceeds are hereby assigned to Mortgagee
<PAGE>
as additional security for payment of the Liabilities.
Mortgagee shall have the option, in its sole discretion, of
paying or applying all or any part of the insurance
proceeds to: (i) reduction of the Liabilities; (ii)
restoration, replacement or repair of the Mortgaged
Premises in accordance with Mortgagee's standard
construction loan disbursement conditions and requirements;
or (iii) Mortgagor.
(c) Immediately upon obtaining knowledge of the
institution of any proceeding for the condemnation of all
or any part of the Mortgaged Premises, Mortgagor shall give
notice to Mortgagee. Mortgagor shall, at its sole cost and
expense, diligently prosecute any such proceeding and shall
consult with Mortgagee, its attorneys and experts, and
shall cooperate with it in the defense of any such
proceeding. Mortgagee may participate in any such
proceeding and Mortgagor shall from time to time deliver to
Mortgagee all instruments requested by it to permit such
participation. Mortgagor shall not, without Mortgagee's
prior written consent, enter into any agreement (i) for the
taking or conveyance in lieu thereof of all or any part of
the Mortgaged Premises, or (ii) to compromise, settle or
adjust any such proceeding. If an Event of Default has
occurred Mortgagee is authorized to settle, compromise and
adjust any claim for condemnation. All awards and proceeds
of condemnation are hereby assigned to Mortgagee, and
Mortgagor, upon request by Mortgagee, agrees to make,
execute and deliver any additional assignments or documents
necessary from time to time to enable Mortgagee to collect
the same. Such awards and proceeds shall be paid or
applied by Mortgagee, in its sole discretion, to: (i)
reduction of the Liabilities; (ii) restoration, replacement
or repair of the Mortgaged Premises in accordance with
Mortgagee's standard construction loan disbursement
conditions and requirements; or (iii) Mortgagor.
(d) Nothing is this Section 6.11. shall relieve
Mortgagor of its duty to repair, restore, rebuild or
replace the Mortgaged Premises following damage or
destruction or partial condemnation if no or inadequate
insurance proceeds or condemnation awards are available to
defray the cost of repair, restoration, rebuilding or
replacement.
6.12. Required Notices. Mortgagor shall notify
Mortgagee within three (3) days of: (i) receipt of any
notice from any governmental or quasi-governmental
authority relating to the structure, use or occupancy of
the Mortgaged Premises or alleging a violation of any Legal
Requirement; (ii) a substantial change in the occupancy or
use of all or any part of the Mortgaged Premises; (iii)
receipt of any notice from the holder of any lien or
security interest in all or any part of the Mortgaged
Premises; (iv) commencement of any litigation affecting or
potentially affecting the financial ability of Mortgagor or
the value of the Mortgaged Premises; (v) a pending or
threatened condemnation of all or any part of the Mortgaged
Premises; (vi) a fire or other casualty causing damage to
all or any part of the Mortgaged Premises; (vii) receipt of
any notice with regard to any Release of Hazardous
Substances (as such terms are defined in Section 9.2.
hereof) or any other environmental matter affecting the
Mortgaged Premises or Mortgagor's interest therein; (viii)
receipt of any request for information, demand letter or
notification of potential liability from any entity
relating to potential responsibility for investigation or
clean-up of Hazardous Substances on the Mortgaged Premises
or at any other site owned or operated by Mortgagor; (ix)
receipt of any notice from any tenant of all or any part of
the Mortgaged Premises alleging a default, failure to
perform or any right to terminate its lease or to set-off
rents; or (x) receipt of any notice of the imposition of,
or of threatened or actual execution on, any lien on or
security interest in all or any part of the Mortgaged
Premises.
6.13. No Credits on Account of the Liabilities.
Mortgagor shall not claim or demand or be entitled to any
credit on account of the Liabilities for any part of the
taxes paid with respect to the Mortgaged Premises or any
part thereof and no deduction shall otherwise be made or
claimed from the taxable value of the Mortgaged Premises,
or any part thereof, by reason of this Mortgage.
6.14. Books and Records. Mortgagor shall keep and
maintain complete and accurate books and records in
accordance with generally accepted accounting principles
consistently applied, reflecting all of the financial
affairs of Mortgagor and all items of income and expense in
connection with the operation of the Mortgaged Premises.
Mortgagor shall permit representatives of Mortgagee to
examine and audit Mortgagor's (and its parent's and its
subsidiaries') books and records, to inspect Mortgagor's
facilities and properties, and to discuss Mortgagor's
financial condition and the contents of Mortgagor's
financial statements with Mortgagor's accountants.
6.15. Right to Reappraise. Mortgagee shall have the
right to conduct or have conducted by an independent
appraiser acceptable to Mortgagee appraisals of the
Mortgaged Premises in form and substance satisfactory to
Mortgagee at the sole cost and expense of Mortgagor;
provided, however, that Mortgagor shall not be obligated to
bear the expense of such appraisals so long as (i) no Event
of Default
<PAGE>
exists, and (ii) such appraisals are not required by
applicable law, rule or regulation or the interpretation or
administration thereof by any governmental authority or
comparable agency charged with the interpretation or
administration thereof. The cost of such appraisals, if
chargeable to Mortgagor as aforesaid, shall be added to the
Liabilities and shall be secured by this Mortgage in
accordance with the provisions of Section 3 hereof.
7. DECLARATION OF NO OFFSET. Mortgagor represents to
Mortgagee that Mortgagor has no knowledge of any offsets,
counterclaims or defenses to the Liabilities either at law
or in equity. Mortgagor shall, within three (3) days upon
request in person or within seven (7) days upon request by
mail, furnish to Mortgagee or Mortgagee's designee a
written statement in form satisfactory to Mortgagee stating
the amount due under the Liabilities and whether there are
offsets or defenses against the same, and if so, the nature
and extent thereof.
8. CHANGE IN LAWS.
In the event of the passage, after the date of this
Mortgage, of any law changing in any way the laws now in
force for the taxation of mortgages or debts secured
thereby, for state or local purposes, or the manner of the
operation of any such taxes, so as to affect the interest
of Mortgagee or impose upon Mortgagee the obligation to pay
the whole or any part of any taxes, assessments, charges or
liens ("Charges") herein required to be paid by Mortgagor,
then Mortgagor shall pay the full amount of the Charges;
provided that if payment by Mortgagor of any Charges would
be unlawful or usurious, Mortgagee may, at Mortgagee's
option: (i) declare the Liabilities to be immediately due
and payable; or (ii) pay that portion of the Charges as
renders the Liabilities unlawful or usurious, in which
event Mortgagor shall concurrently therewith pay the
remaining lawful and nonusurious portion of said Charges.
9. ENVIRONMENTAL MATTERS.
9.1. Definitions. For purposes of this Section 9,
"Applicable Environmental Laws" shall mean any and all
existing or future federal, state and local statutes,
ordinances, regulations, rules, executive orders, standards
and requirements, including the requirements imposed by
common law, concerning or relating to industrial hygiene
and the protection of health and the environment including,
without limitation: (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. 9601 et seq. ("CERCLA"); (ii) the
Resource Conservation and Recovery Act of 1976, as amended,
42 U.S.C. 6901 et se. ("RCRA"); (iii) the Clean Air Act, as
amended, 42 U.S.C. 7901 et seq.; (iv) the Clean Water Act,
as amended, 33 U.S.C. 1251 et seq.; (v) the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. 1801 et
seq.; and (vi) Title 22a of the Connecticut General
Statutes, as amended. Any terms mentioned in this Section
9 which are defined in any Applicable Environmental Law
shall have the meanings ascribed to such terms in said
laws; provided, however, that if any of such laws are
amended so as to broaden any term defined therein, such
broader meaning shall apply subsequent to the effective
date of such amendment.
Representations, Warranties and Covenants. Mortgagor
represents, warrants, covenants and agrees as follows:
(a) Neither Mortgagor nor the Mortgaged Premises or
any occupant thereof are in material violation of or
subject to any existing, pending or threatened
investigation or inquiry by any governmental authority
pertaining to any Applicable Environmental Law. Mortgagor
shall not cause or permit the Mortgaged Premises to be in
material violation of, or do anything which would subject
the Mortgaged Premises to any remedial obligations under,
any Applicable Environmental Law, and shall promptly notify
Mortgagee in writing of any existing, pending or threatened
investigation or inquiry by any governmental authority in
connection with any Applicable Environmental Law. In
addition, Mortgagor shall provide Mortgagee with copies of
any and all material written communications with any
governmental authority in connection with any Applicable
Environmental Law, concurrently with Mortgagor's giving or
receiving of same.
(b) There are no underground storage tanks, radon,
asbestos materials, polychlorinated biphenyls or urea
formaldehyde insulation present at or installed in the
Mortgaged Premises. Mortgagor covenants and agrees that if
any such materials are found to be present at the Mortgaged
Premises, Mortgagor shall remove or remediate the same
promptly upon discovery at its sole cost and expense.
<PAGE>
(c) Mortgagor has taken all reasonable steps
necessary to determine and has determined that there has
been no release, spill, discharge, leak, disposal or
emission (individually a "Release" and collectively,
"Releases") of any Hazardous Material, Hazardous Substance
or Hazardous Waste, including gasoline, petroleum products,
explosives, toxic substances, solid wastes and radioactive
materials (collectively, "Hazardous Substances") at, upon,
under or within the Mortgaged Premises. The use which
Mortgagor or any other occupant of the Mortgaged Premises
makes or intends to make of the Mortgaged Premises will not
result in any material Release of any Hazardous Substances
on or to the Mortgaged Premises. During the term of this
Mortgage, Mortgagor shall take all reasonable steps
necessary to determine whether there has been a Release of
any Hazardous Substances on or to the Mortgaged Premises
and if Mortgagor finds a Release has occurred, Mortgagor
shall remove or remediate the same promptly upon discovery
at its sole cost and expense.
(d) None of the real property owned and/or occupied
by Mortgagor and located in the State of Connecticut,
including without limitation, the Mortgaged Premises, has
ever been used by the present or previous owners and/or
operators or will be used in the future to refine, produce,
store, handle, transfer, process, transport, generate,
manufacture, heat, treat, recycle or dispose of Hazardous
Substances in any materially adverse manner.
(e) Mortgagor has not received any notice of
violation, request for information, summons, citation,
directive or other communication, written or oral, from the
Connecticut Department of Environmental Protection or the
United States Environmental Protection Agency concerning
any intentional or unintentional act or omission on
Mortgagor's or any occupant's part resulting in the Release
of Hazardous Substances.
(f) Except as previously disclosed to Mortgagee, the
Mortgaged Premises are not located within a "wetlands" as
defined by Connecticut General Statues 22a-38, and are not
subject to the terms of the Inland Wetlands and
Watercourses Act, as amended, Connecticut General Statues
22a-36 et seq., or the rules and regulations promulgated
thereunder.
(g) In connection with the purchase of the Mortgaged
Premises and any other real property acquired by Mortgagor
on or after October 1, 1987, Mortgagor required that the
seller of said real property, including the Mortgaged
Premises, comply with the provisions of the Connecticut
Transfer Act, as amended, Connecticut General Statutes 22a-134
et seq. (the "Connecticut Transfer Act") to the extent
the same was applicable and, if applicable, the seller did
comply therewith.
(h) Mortgagor shall not conduct or cause or permit to
be conducted on the Mortgaged Premises any activity which
constitutes or renders the Mortgaged Premises an
Establishment, as such term is defined in the Connecticut
Transfer Act, without the prior written consent of
Mortgagee. In the event that the provisions of the
Connecticut Transfer Act become applicable to the Mortgaged
Premises subsequent to the date hereof, Mortgagor shall
give prompt written notice thereof to Mortgagor and shall
take immediate requisite action to insure full compliance
therewith. Mortgagor shall deliver to Mortgagee copies of
all correspondence, notices and submissions that it sends
to or receives from the Connecticut Department of
Environmental Protection in connection with such
compliance. Mortgagor's obligation to comply with the
Connecticut Transfer Act shall, notwithstanding its general
applicability, also specifically apply to a sale, transfer,
closure or termination of operations associated with any
foreclosure action, including, without limitation, a
foreclosure action brought with respect to this Mortgage.
(i) The real property owned and/or occupied by
Mortgagor and located in the State of Connecticut,
including without limitation, the Mortgaged Premises: (i)
are being and have been operated in substantial compliance
with all material Applicable Environmental Laws, and all
permits required thereunder have been obtained and complied
with in all respects; and (ii) do not have any Hazardous
Substances present excepting small quantities of petroleum
and chemical products, in proper storage containers, as are
necessary for the construction or operation of the
commercial business of Mortgagor and its tenants, and the
usual waste products therefrom or such as are otherwise
present in the ordinary course of Mortgagor's business but
which do not cause or result in any materially adverse
condition ("Permitted Substances").
(j) Mortgagor will and will cause its tenants to
operate the Mortgaged Premises in compliance with all
Applicable Environmental Laws and, other than Permitted
Substances, will not place or permit to be placed any
Hazardous Substances on the Mortgaged Premises.
<PAGE>
(k) No lien has been attached to or threatened to be
imposed upon any revenue or any real or personal property
owned by Mortgagor, including without limitation, the
Mortgaged Premises, and there is no basis for the
imposition of any such lien based on any governmental
action under Applicable Environmental Laws. Neither
Mortgagor nor any other party has been, is or will be
involved in operations at the Mortgaged Premises which
could lead to the imposition of environmental liability on
Mortgagor, or on any subsequent or former owner of the
Mortgaged Premises, or the creation of an environmental
lien on the Mortgaged Premises. In the event that any such
lien is filed, Mortgagor shall, within (30) days from the
date that the Mortgagor is given notice of such lien (or
within such shorter period of time as is appropriate in the
event that the State of Connecticut or the United States
has commenced steps to have the Mortgaged Premises sold),
either: (i) pay the claim and remove the lien from the
Mortgaged Premises; or (ii) furnish a cash deposit, bond or
other security satisfactory in form and substance to
Mortgagee in an amount sufficient to discharge the claim
out of which the lien arises.
(l) In the event that Mortgagor shall cause or permit
to exist a material Release of Hazardous Substances without
having obtained a permit issued by the appropriate
governmental authorities, Mortgagor shall promptly clean up
such material Release in accordance with the provisions of
all Applicable Environmental Laws.
9.3. Right to Inspect and Cure. Mortgagee shall have
the right to conduct or have conducted by its agents or
contractors such environmental inspections, audits and
tests as Mortgagee shall deem necessary or advisable from
time to time at the sole cost and expense of Mortgagor;
provided, however, that Mortgagor shall not be obligated to
bear the expense of such environmental inspections, audits
and tests so long as (i) no Event of Default exists, and
(ii) Mortgagee has no cause to believe in its sole
reasonable judgment that there has been a Release or
threatened Release of Hazardous Substances at the Mortgaged
Premises or that Mortgagor or the Mortgaged Premises is in
violation of any Applicable Environmental Law. The cost of
such inspections, audits and tests, if chargeable to
Mortgagor as aforesaid, shall be added to the Liabilities
and shall be secured by this Mortgage. Mortgagor shall,
and shall cause each tenant of the Mortgaged Premises to,
cooperate with such inspection efforts; such cooperation
shall include, without limitation, supplying all
information requested concerning the operations conducted
and Hazardous Substances located at the Mortgaged Premises.
In the event that Mortgagor fails to comply with any
Applicable Environmental Law, Mortgagee may, in addition to
any of its other remedies under this Mortgage, cause the
Mortgaged Premises to be in compliance with such laws and
the cost of such compliance shall be added to the sums
secured by this Mortgage in accordance with the provisions
of Section 3 hereof.
10. INDEMNIFICATION.
10.1. Mortgagor hereby indemnifies and agrees to
protect, defend and hold harmless Mortgagee, any entity
which "controls" Mortgagee, within the meaning of Section 15
of the Securities Act of 1933, as amended, or is under
common control with Mortgagee, and any member, officer,
director, official, agent, employee or attorney of
Mortgagee, and their respective heirs, administrators,
executors, successors and assigns (collectively, the
"Indemnified Parties"), from and against any and all losses,
damages, expenses or liabilities of any kind or nature and
from any suits, claims or demands, including reasonable
attorneys' fees incurred in investigating or defending such
claim, suffered by any of them and caused by, relating to,
arising out of, resulting from, or in any way connected
with the Loan Documents or the transactions contemplated
therein (unless determined by a final judgment of a court
of competent jurisdiction to have been caused solely by the
gross negligence or willful misconduct of the Indemnified
Parties) including, without limitation: (i) disputes with
any architect, general contractor, subcontractor,
materialman or supplier, or on account of any act or
omission to act by Mortgagee in connection with the
Mortgaged Premises; (ii) losses, damages (including
consequential damages), expenses or liabilities sustained
by Mortgagee in connection with any environmental
inspection, monitoring, sampling or cleanup of the
Mortgaged Premises required or mandated by any Applicable
Environmental Law; (iii) any untrue statement of a material
fact contained in information submitted to Mortgagee by
Mortgagor or the omission of any material fact necessary to
be stated therein in order to make such statement not
misleading or incomplete; (iv) the failure of Mortgagor to
perform any obligations herein required to be performed by
Mortgagor; and (v) the ownership, construction, occupancy,
operation, use or maintenance of the Mortgaged Premises.
10.2. In case any action shall be brought against
Mortgagee or any other Indemnified Party in respect to
which indemnity may be sought against Mortgagor, Mortgagee
or such other Indemnified Party shall promptly notify
Mortgagor and Mortgagor shall assume the defense thereof,
including the employment
<PAGE>
of counsel selected by Mortgagor and satisfactory to
Mortgagee, the payment of all costs and expenses, and the
right to negotiate and consent to settlement. The failure
of Mortgagee to so notify Mortgagor shall not relieve
Mortgagor of any liability it may have under the foregoing
indemnification provisions or from any liability which it
may otherwise have to Mortgagee or any of the other
Indemnified Parties. Mortgagee shall have the right, at
its sole option, to employ separate counsel in any such
action and to participate in the defense thereof, all at
Mortgagor's sole cost and expense. Mortgagor shall not be
liable for any settlement of any such action effected
without its consent, but if settled with Mortgagor's
consent, or if there be a final judgment for the claimant
in any such action, Mortgagor agrees to indemnify and save
harmless Mortgagee from and against any loss or liability
by reason of such settlement or judgment.
10.3. The provisions of this Section 10 shall survive
the repayment of the Liabilities and the release or
discharge of this Mortgage.
11. EVENTS OF DEFAULT.
Each of the following shall constitute a default (each,
an "Event of Default") hereunder:
11.1. Non-payment when due of any sum required to be
paid to Mortgagee under any of the Loan Documents,
including without limitation, principal and interest;
11.2. A breach of any covenant contained in Sections
6.3., 6.4., 6.6., or 6.12. hereof;
11.3. A breach by Mortgagor of any other term, covenant,
condition, obligation or agreement under this Mortgage, and
the continuance of such breach for a period of fifteen (15)
days after written notice thereof shall have been given to
Mortgagor;
11.4. An Event of Default under any of the other Loan
Documents;
11.5. Any representation or warranty made by Mortgagor
or by any other person providing collateral pursuant to or
obligated to perform under any Loan Document ("Other
Obligated Party") in any Loan Document or to induce
Mortgagee to enter into the transactions contemplated
hereunder shall prove to be false, incorrect or misleading
in any material respect as of the date when made;
11.6. The filing by or against Mortgagor or any Other
Obligated Party of a petition seeking relief, or the
granting of relief, under the Federal Bankruptcy Code or
any similar federal or state statute; any assignment for
the benefit of creditors made by Mortgagor or any Other
Obligated Party; the appointment of a custodian, receiver,
liquidator or trustee for Mortgagor or any Other Obligated
Party or for any of the property of Mortgagor or such Other
Obligated Party, or any action by Mortgagor or any Other
Obligated Party to effect any of the foregoing; or if
Mortgagor or any Other Obligated Party becomes insolvent
(however defined) or is not paying its debts generally as
they become due;
11.7. The death, dissolution, liquidation, merger,
consolidation or reorganization of Mortgagor or any Other
Obligated Party, or the institution of any proceeding to
effect any of the foregoing;
11.8. A material deterioration in the financial
condition of Mortgagor or any Other Obligated Party or the
occurrence of any event which, in the reasonable opinion of
Mortgagee, impairs the financial responsibility of
Mortgagor or any Other Obligated Party and their ability to
repay the Liabilities;
12. REMEDIES.
If an Event of Default shall have occurred, Mortgagee
may take any of the following actions (without the
obligation to marshall):
12.1. Acceleration. Mortgagee may declare the entire
amount of the Liabilities immediately due and payable,
without presentment, demand, notice of any kind, protest or
notice of protest, all of which are expressly waived,
notwithstanding anything to the contrary contained in any
of the Loan Documents. Mortgagee may collect interest from
the date of default on the unpaid balance of the
Liabilities, at the Default Rate (as defined and described
in the Note). In addition, any and all accelerations of
any portion of the remaining principal balance of the
Liabilities (including, without limitation, foreclosure by
Mortgagee
<PAGE>
under this Mortgage) shall be subject to the Prepayment
Consideration (as defined and described in the Note), if
any.
12.2. Possession. Mortgagee may (i) enter upon and take
possession of the Mortgaged Premises, including the Rents,
(with or without commencing legal action or making legal
appearance in any court of competent jurisdiction) and with
the rights or powers more particularly set forth hereafter;
and (ii) without taking possession and control of the
Mortgaged Premises, immediately (and with or without
commencing legal action or making legal appearance in any
court of competent jurisdiction) collect directly all Rents
in the place and stead of Mortgagor with full rights and
powers to notify all parties liable for payments of Rent to
make said payments directly to Mortgagee or its agents and
Mortgagee and its agents shall have the further power and
authority to sue for or otherwise collect and receive all
Rents. Said rights and powers referenced in clause (i) of
this Section 12.2. shall include the right to operate,
manage and control the Mortgaged Premises and exercise all
rights and powers of Mortgagor in its name or otherwise
with respect to the same; the right to make all necessary
and proper repairs, improvements, maintenance and
replacements to the Mortgaged Premises; the right to
enforce all terms of existing contracts relating to the
Mortgaged Premises or enter into such new contracts as
Mortgagee determines to be necessary in its sole
discretion; the right to lease the Mortgaged Premises; the
right to collect from the Mortgaged Premises all Rents and,
after deducting all costs of collection and administration
expense, apply the net Rents to any one or more of the
following items in such manner and in such order of
priority as Mortgagee, in Mortgagee's sole discretion, may
elect: the payment of any sums due under any prior lien,
taxes, water and sewer rents, charges and claims, insurance
premiums and all other carrying charges, to the
maintenance, repair or restoration of the Mortgaged
Premises, to compensation, salaries, expenses and
disbursements of Mortgagee's agents, attorneys, or any
other representatives of Mortgagee, the receiver in
connection with the possession, control and/or operation of
the Mortgaged Premises and the business operations
conducted therefrom, or on account of the Liabilities.
Mortgagee is given full authority to do any act which
Mortgagor could do in connection with the management and
operation of the Mortgaged Premises. This covenant becomes
effective either with or without any action brought to
foreclose this Mortgage and without applying for a receiver
of such rents. In addition to the foregoing, upon the
occurrence of an Event of Default, Mortgagor shall pay
monthly in advance to Mortgagee or to any receiver
appointed to collect said rents the fair and reasonable
rental value for Mortgagor's use and occupation of the
Mortgaged Premises, and upon default in any such payment
Mortgagor shall vacate and surrender the possession of the
Mortgaged Premises to Mortgagee or to such receiver. If
Mortgagor does not vacate and surrender the Mortgaged
Premises then Mortgagor may be evicted by summary
proceedings or ejectment.
12.3. Foreclosure. Mortgagee may institute any one or
more actions of mortgage foreclosure (whether strict
foreclosure or foreclosure by sale) against all or any part
of the Mortgaged Premises, or take such other action
available to Mortgagee at law, in equity or by Contract for
the enforcement of this Mortgage and realization on the
security herein or elsewhere provided for, as the law may
allow, and may proceed therein to final judgment and
execution for the entire unpaid balance of the Liabilities,
together with all future advances and any other sums due by
Mortgagor in accordance with the provisions of this
Mortgage, together with interest from the date of default
at the Default Rate and all costs of suit and attorneys'
fees. The unpaid balance of any judgment shall bear
interest at the greater of (a) the statutory rate, or (b)
the Default Rate. Without limiting the foregoing,
Mortgagee may foreclose this Mortgage and exercise its
rights as a secured party for all or any portion of the
Liabilities which are then due and payable, subject to the
continuing lien of this Mortgage for the balance not then
due and payable. In case of any sale of the Mortgaged
Premises by judicial proceedings, the Mortgaged Premises
may be sold in one parcel or in such parcels, manner or
order as Mortgagee in its sole discretion may elect.
Mortgagor, for itself and anyone claiming by, through or
under it, hereby agrees that Mortgagee shall in no manner,
in law or in equity, be limited, except as herein provided,
in the exercise of its rights in the Mortgaged Premises or
in any other security hereunder or otherwise appertaining
to the Liabilities or any other obligation secured by this
Mortgage, whether by any statute, rule or precedent which
may otherwise require said security to be marshalled in any
manner and Mortgagor, for itself and others as aforesaid,
hereby expressly waives and releases any right to or
benefit thereof. The failure to make any tenant a
defendant to a foreclosure proceeding shall not be asserted
by Mortgagor as a defense in any proceeding instituted by
Mortgagee to collect the Liabilities or any deficiency
remaining unpaid after the foreclosure sale of the
Mortgaged Premises.
12.4. Appointment of Receiver. Mortgagee may make
application to a court of competent jurisdiction for and
obtain immediate ex parte appointment of a receiver
authorized to immediately enter upon and take possession
and control of the Mortgaged Premises including, without
limitation, the Rents, and with those rights and powers of
Mortgagee set forth in Section 12.2. Such appointment may
be made
<PAGE>
either before or after sale, without notice, without regard
to the solvency or insolvency of Mortgagor at the time of
application for such receiver, without regard to the then
value of the Mortgaged Premises or whether the Mortgaged
Premises shall be then occupied as a homestead or not, and
without regard to whether Mortgagor has committed waste or
allowed deterioration of the Mortgaged Premises, and
Mortgagee or any agent of Mortgagee may be appointed as
such receiver. Mortgagor hereby agrees that Mortgagee has
a special interest in the Mortgaged Premises and absent the
appointment of such receiver the Mortgaged Premises shall
suffer waste and deterioration and Mortgagor further agrees
that it shall not contest the appointment of a receiver and
hereby so stipulates to such appointment pursuant to this
paragraph. Such receiver shall have the power to perform
all of the acts permitted Mortgagee pursuant to Section
12.2. above and such other powers which may be necessary or
customary in such cases for the protection, possession,
control, management and operation of the Mortgaged Premises
during such period. The Mortgagor hereby waives to the
fullest extent permitted by law all rights to prior notice
or court hearing in connection with any action by Mortgagee
of the types set forth in Sections 12.2. and 12.4. hereof,
and Mortgagor further waives any requirement that Mortgagee
provide any bond, surety, or other security in connection
with any said action.
12.5. Rights as a Secured Party. Mortgagee shall have,
in addition to other rights and remedies available at law
or in equity, the rights and remedies of a secured party
under the Code. Mortgagee may elect to foreclose such of
the Mortgaged Premises as then comprise fixtures pursuant
either to the law applicable to foreclosure of an interest
in real estate or to that applicable to personal property
under the Code. To the extent permitted by law, Mortgagor
waives the right to any stay of execution and the benefit
of all exemption laws now or hereafter in effect.
12.6. Excess Monies. Mortgagee may apply on account of
the Liabilities any unexpended monies still retained by
Mortgagee that were paid by Mortgagor to Mortgagee: (i)
for the payment of, or as security for the payment of
taxes, assessments or other governmental charges, insurance
premiums, or any other charges; or (ii) to secure the
performance of some act by Mortgagor.
12.7. Other Remedies. Mortgagee shall have the right,
from time to time, to bring an appropriate action to
recover any sums required to be paid by Mortgagor under the
terms of this Mortgage, as they become due, without regard
to whether or not any other Liabilities shall be due, and
without prejudice to the right of Mortgagee thereafter to
bring an action of mortgage foreclosure, or any other
action, for any default by Mortgagor existing at the time
the earlier action was commenced. In addition, Mortgagee
shall have the right to set-off all or any part of any
amount due by Mortgagor to Mortgagee under any of the
Liabilities, against any indebtedness, liabilities or
obligations owing by Mortgagee or any Affiliate in any
capacity to Mortgagor, including any obligation to disburse
to Mortgagor any funds or other property on deposit with or
otherwise in the possession, control or custody of
Mortgagee.
Mortgagee, its agents, or any receiver acting pursuant
to Section 12.4. shall in no event be liable or accountable
for more monies than actually are received from the
Mortgaged Premises during the period which Mortgagee, its
agent or any receiver actually is in possession and control
of the Mortgaged Premises. Neither Mortgagee, its agents
or any receiver shall be liable or accountable in any
manner for the failure to collect Rents for any reason
whatsoever.
All costs, expenses and liabilities of every character
incurred by Mortgagee in managing, operating and
maintaining the Mortgaged Premises, not paid from the Rents
as herein provided, shall constitute an advance and shall
be added to the sums secured by this Mortgage in accordance
with the provisions of Section 3 hereof.
In the event of foreclosure, Mortgagee, its agents or
any receiver acting pursuant to Section 12.4. may remain in
possession of the Mortgaged Premises until (i) the
foreclosure sale; (ii) the redemption of the Mortgaged
Premises; or (iii) if a deficiency exists, the expiration
of any redemption period of the United States of America
extending subsequent to the foreclosure sale. Mortgagee,
its agents or any such receiver shall incur no liability
for, nor shall Mortgagor assert any claim or setoff as a
result of any action taken while Mortgagee, its agents or
any such receiver is in possession of the Mortgaged
Premises.
Mortgagee shall not be (i) compelled to release, or be
prevented from foreclosing or enforcing this Mortgage upon
all or any part of the Mortgaged Premises, unless the
entire Liabilities shall be paid; (ii) required to accept
any part or parts of the Mortgaged Premises, as
distinguished from the entire whole thereof, as payment of
or upon the Liabilities to the extent of the value of such
part or parts; (iii)
<PAGE>
compelled to accept or allow any apportionment of the
Liabilities to or among any separate parts of the Mortgaged
Premises; or (iv) prevented from selling the Mortgaged
Premises in one or more parcels or as an entirety and in
such manner and order as Mortgagee in its sole discretion
may elect.
13. CONTINUING ENFORCEMENT OF MORTGAGE.
If, after receipt of any payment of all or any part of the
Liabilities, Mortgagee is compelled or agrees, for
settlement purposes, to surrender such payment to any
person or entity for any reason (including, without
limitation, a determination that such payment is void or
voidable as a preference or fraudulent conveyance, an
impermissible setoff, or a diversion of trust funds), then
this Mortgage and the other Loan Documents shall continue
in full force and effect, and Mortgagor shall be liable
for, and shall indemnify, defend and hold harmless
Mortgagee with respect to the full amount so surrendered.
The provisions of this Section shall survive the
cancellation or discharge of this Mortgage and shall remain
effective notwithstanding the payment of the Liabilities,
the cancellation of the Note, the release of any security
interest, lien or encumbrance securing the Liabilities or
any other action which Mortgagee may have taken in reliance
upon its receipt of such payment. Any cancellation,
release or other such action by Mortgagee shall be deemed
to have been conditioned upon any payment of the
Liabilities having become final and irrevocable.
14. MISCELLANEOUS.
14.1. Remedies Cumulative. The rights and remedies of
Mortgagee as provided in this Mortgage or in any other Loan
Document shall be cumulative and concurrent, may be pursued
separately, successively or together, may be exercised as
often as occasion therefor shall arise, and shall be in
addition to any other rights or remedies conferred upon
Mortgagee at law or in equity. The failure, at any one or
more times, of Mortgagee to assert the right to declare the
Liabilities due, grant any extension of time for payment of
the Liabilities, take other or additional security for the
payment thereof, release any security, change any of the
terms of the Loan Documents, or waive or fail to exercise
any right or remedy under any Loan Document shall not in
any way affect this Mortgage or the rights of Mortgagee.
14.2. Integration. This Mortgage and the other Loan
Documents constitute the sole agreement of the parties with
respect to the transaction contemplated hereby and
supersede all oral negotiations and prior writings with
respect thereto.
14.3. Attorneys' Fees and Expenses. If Mortgagee
retains the services of counsel by reason of a claim of a
default or an Event of Default hereunder or under any of
the other Loan Documents or to institute and maintain an
action to foreclose this Mortgage or to have a receiver
appointed, or on account of any matter involving the
Liabilities or Mortgagor's title to the Mortgaged Premises
or the security interest intended to be granted hereby, or
for examination of matters subject to Mortgagee's approval
under the Loan Documents, all costs of suit and collection
and all reasonable attorneys' fees (and/or allocated fees
of Mortgagee's in-house legal counsel) and such other
reasonable expenses so incurred by Mortgagee shall
forthwith become due and payable, on demand, and shall be
secured hereby.
14.4. No Implied Waiver. Mortgagee shall not be deemed
to have modified or waived any of its rights or remedies
hereunder unless such modification or waiver is in writing
and signed by Mortgagee, and then only to the extent
specifically set forth therein. A waiver in one event
shall not be construed as continuing or as a waiver of or
bar to such right or remedy on a subsequent event.
14.5. Partial Invalidity. The invalidity or
unenforceability of any one or more provisions of this
Mortgage shall not render any other provision invalid or
unenforceable. In lieu of any invalid or unenforceable
provision, there shall be added automatically a valid and
enforceable provision as similar in terms to such invalid
or unenforceable provision as may be possible.
14.6. Binding Effect. The covenants, conditions,
waivers, releases and agreements contained in this Mortgage
shall bind, and the benefits thereof shall inure to, the
parties hereto and their respective heirs, executors,
administrators, successors and assigns and are intended and
shall be held to be real covenants running with the land;
provided, however, that this Mortgage cannot be assigned by
Mortgagor without the prior written consent of Mortgagee,
and any such assignment or attempted assignment by
Mortgagor shall be void and of no effect with respect to
Mortgagee.
<PAGE>
14.7. Modifications. This Mortgage may not be
supplemented, extended, modified or terminated except by an
agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or
discharge is sought.
14.8. Affiliate. As used herein, "Affiliate" shall mean
First Union Corporation and any of its direct and indirect
affiliates and subsidiaries.
14.9. Commercial Loan. Mortgagor represents and
warrants that the loans or other financial accommodations
included as Liabilities secured by this Mortgage were
obtained solely for the purpose of carrying on or acquiring
a business or commercial investment and not for
residential, consumer or household purposes.
14.10. Jurisdiction. Mortgagor irrevocably appoints
each and every owner, partner and/or officer of Mortgagor
as its attorneys upon whom may be served any notice,
process or pleading in any action or proceeding against it
arising out of or in connection with this Mortgage or any
other Loan Document. Mortgagor hereby consents that any
action or proceeding against it may be commenced and
maintained in any court within the State of Connecticut or
in the United States District Court for the District of
Connecticut or, at the option of Mortgagee, any court in
which Mortgagee shall initiate legal or equitable
proceedings and which has subject matter jurisdiction over
the matter in controversy, and that such action or
proceeding may be commenced by service of process on any
such owner, partner and/or officer. Mortgagor agrees that
the courts of the State of Connecticut and the United
States District Court for the District of Connecticut shall
have jurisdiction with respect to the subject matter hereof
and the person of Mortgagor and all collateral securing the
obligations of Mortgagor. Mortgagor hereby further
consents to personal jurisdiction in any other court in
which Mortgagee shall initiate legal or equitable
proceedings and which has subject matter jurisdiction over
the matter in controversy. Mortgagor hereby waives
personal service of the summons and complaint or other
process or papers issued in any proceeding of the type
described in this Section 14.10. and agrees that service of
such summons and complaint, or other process or papers may
be made by regular or certified mail addressed to Mortgagor
at the address of Mortgagor set forth herein. Mortgagor
agrees not to assert any defense to any proceeding
initiated by Mortgagor based upon improper venue or
inconvenient forum. Mortgagor agrees that any action
brought by Mortgagor shall be commenced and maintained only
in a court in the federal judicial district or county in
which Mortgagee has a place of business in Connecticut.
14.11. Notices. All notices and communications under
this Mortgage shall be in writing and shall be given by
either (a) hand-delivery, (b) first class mail (postage
prepaid), or (c) reliable overnight commercial courier
(charges prepaid), to the addresses listed in this
Mortgage. Notice shall be deemed to have been given and
received: (i) if by hand delivery, upon delivery; (ii) if
by mail, three (3) calendar days after the date first
deposited in the United States mail; and (iii) if by
overnight courier, on the date scheduled for delivery. A
party may change its address by giving written notice to
the other party as specified herein.
14.12. Governing Law. This Mortgage shall be governed
by and construed in accordance with the substantive laws of
the State of Connecticut without reference to conflict of
laws principles.
14.13. Joint and Several Liability. If Mortgagor
consists of more than one person or entity, the word
"Mortgagor" shall mean each of them and their liability
shall be joint and several.
14.14. Waiver of Jury Trial. MORTGAGOR AND MORTGAGEE
AGREE THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT BY MORTGAGEE OR MORTGAGOR ON OR WITH
RESPECT TO THIS MORTGAGE OR ANY OTHER LOAN DOCUMENT OR THE
DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO,
SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY.
MORTGAGEE AND MORTGAGOR EACH HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND INTELLIGENTLY, AND WITH THE ADVICE OF
THEIR RESPECTIVE COUNSEL, WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. FURTHER,
MORTGAGOR WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER,
IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL,
EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR OTHER DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. MORTGAGOR
ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC AND
MATERIAL ASPECT OF THIS MORTGAGE AND THAT MORTGAGEE WOULD
NOT EXTEND CREDIT TO MORTGAGOR OR BORROWER (AS APPLICABLE)
IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART OF
THIS MORTGAGE.
<PAGE>
14.15. Open-End Loan. This is an "Open-End Mortgage"
and the holder hereof shall have all of the rights, powers
and protection to which the holder of any Open-End Mortgage
is entitled under Connecticut law. Without limiting the
rights set forth in Section 3. hereof, upon request
Mortgagee may, in its discretion, make future advances to
Mortgagor. Any such future advance, and the interest
payable thereon, shall be secured by this Mortgage when
evidenced by a promissory note stating that the note is
secured hereby. At no time shall the principal amount of
the debt secured by this Mortgage exceed the original
principal amount of the Note plus any sum due under the
Swap Agreement, nor shall the maturity of any such future
advance secured hereby extend beyond the date the final
principal payment is due on the Note.
14.16. Waiver of Termination Rights. Mortgagor hereby
waives, for itself or any of its assigns who assume this
Mortgage, any rights it may have under Section 49-2(c)(7)
of the Connecticut General Statutes, as amended, or
otherwise, to terminate the right of Mortgagee to make
"optional future advances" as defined under said Statute.
14.17. Prejudgment Remedy Waiver. MORTGAGOR HEREBY
REPRESENTS, COVENANTS AND AGREES THAT THE PROCEEDS OF THE
LOAN SHALL BE USED FOR GENERAL COMMERCIAL PURPOSES AND THAT
THE TRANSACTION OF WHICH THIS MORTGAGE IS A PART IS A
"COMMERCIAL TRANSACTION" AS DEFINED BY THE STATUTES OF THE
STATE OF CONNECTICUT. MORTGAGOR HEREBY WAIVES ALL RIGHTS
TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER
CONNECTICUT GENERAL STATUTES, SECTIONS 52-278a et seq., AS
AMENDED, OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH
RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES MORTGAGEE MAY
EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE
SPECIFICALLY, MORTGAGOR ACKNOWLEDGES THAT MORTGAGEE'S
ATTORNEY MAY, PURSUANT TO CONNECTICUT GENERAL STATUTES,
SECTION 52-278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY
WITHOUT SECURING A COURT ORDER. MORTGAGOR ACKNOWLEDGES AND
RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO
THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY BY
MORTGAGEE'S ATTORNEY, AND MORTGAGEE ACKNOWLEDGES
MORTGAGOR'S RIGHT TO SAID HEARING SUBSEQUENT TO THE
ISSUANCE OF SAID WRIT. MORTGAGOR FURTHER HEREBY WAIVES ANY
REQUIREMENT OR OBLIGATION OF MORTGAGEE TO POST A BOND OR
OTHER SECURITY IN CONNECTION WITH ANY PREJUDGMENT REMEDY
OBTAINED BY MORTGAGEE AND WAIVES ANY OBJECTIONS TO ANY
PREJUDGMENT REMEDY OBTAINED BY MORTGAGEE BASED ON ANY
OFFSETS, CLAIMS, DEFENSES OR COUNTERCLAIMS OF MORTGAGOR OR
ANY OTHER OBLIGATED PARTY TO ANY ACTION BROUGHT BY
MORTGAGEE. MORTGAGOR ACKNOWLEDGES AND AGREES THAT ALL OF
THE WAIVERS CONTAINED IN THIS SECTION HAVE BEEN MADE
KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND INTELLIGENTLY,
AND WITH THE ADVICE OF ITS COUNSEL.
14.18. Non-Merger. In the event Mortgagee shall
acquire title to the Mortgaged Premises by conveyance from
Mortgagor or as a result of the foreclosure, this Mortgage
shall not merge in the fee estate of the Mortgaged Premises
but shall remain and continue as an existing and
enforceable lien for the Liabilities secured hereby until
the same shall be released of record by Mortgagee in
writing.
15. DEFEASANCE.
NOW THEREFORE, if all agreements and provisions
contained herein are fully kept and performed by Mortgagor,
and all of the Liabilities shall be fully paid in all
respects, then this Mortgage shall be void; otherwise to
remain in full force and effect.
IN WITNESS WHEREOF, Mortgagor, intending to be legally
bound, has duly executed and delivered this Mortgage and
Security Agreement as of the day and year first above
written.
WITNESS/ATTEST: ENERGY RESEARCH
CORPORATION
By:
Name: Name:
Title: Title:
Name:
Title:
STATE OF CONNECTICUT)
) SS: BRIDGEPORT
COUNTY OF FAIRFIELD)
On this the 28th day of June, 1996 before
me,_________, the
undersigned officer, personally appeared
____________________, who acknowledged him/herself to be
the ___________________ of ENERGY RESEARCH CORPORATION, a
corporation, and that he/she as such
___________________________, being authorized so to do,
executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by
him/herself as such ___________________________ and as
his/her and its free act and deed.
In witness whereof I hereunto set my hand.
___________________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:
BPT1/56457.1/TSB/114332.1
<PAGE>
Commercial Mortgage Loan- CT
OPEN-END MORTGAGE AND SECURITY AGREEMENT
Date: June 28, 1996
MORTGAGEE: FIRST UNION BANK OF CONNECTICUT
5 Research Drive, Shelton, Connecticut 06484
Attention: Commercial Real Estate Department
Head
MORTGAGOR: ENERGY RESEARCH CORPORATION
Type of Entity: Corporation
State of Organization: Connecticut
Mailing Address: 3 Great Pasture Road
Danbury, Connecticut 06810
MORTGAGED Street Address: 1 and 3 Great Pasture Road
PREMISES: Municipality of: Danbury
County of Fairfield , State of Connecticut
Tax Map Designation: Lot No. ______ Block No.______
1. DEBT; LOAN DOCUMENTS.
Mortgagor has guaranteed a loan to Fuel Cell
Manufacturing Corporation (the "Borrower") in the principal
amount of Six Hundred Thousand and 00/100 Dollars
($600,000.00), (the "Loan") together with interest thereon,
as evidenced by a certain Guaranty and Suretyship Agreement
of even date herewith from Mortgagor to Mortgagee (the
"Guaranty"). The aforesaid loan to Borrower is evidenced by
a certain Term Note of even date herewith from Borrower to
Mortgagee (the "Note"). A copy of the Note and Guaranty are
attached hereto as Schedules "B" and "D" respectively and
incorporated herein and made a part hereof.
This Mortgage is the Mortgage referred to in the Note.
The indebtedness evidenced by the Note has been or will be
advanced pursuant to a Loan Agreement of even date herewith
(the "Loan Agreement"). As additional security for the
payment and performance to Mortgagee of the Liabilities (as
defined below), Mortgagor has executed and delivered to
Mortgagee the other collateral documents described in or
accompanying the Loan Agreement. This Mortgage, the Loan
Agreement, the Note, the Guaranty, and all other
guarantees, documents, certificates and instruments
executed in connection therewith are sometimes hereinafter
referred to collectively as the "Loan Documents" or
individually as a "Loan Document". The terms of the Loan
Documents are hereby made a part of this Mortgage to the
same extent and with the same effect as if fully set forth
herein. Copies of the Loan Documents are on file with
Mortgagee.
2. LIABILITIES; GRANT OF MORTGAGE. To secure to Mortgagee
(i) the repayment of all sums due under this Mortgage, the
Guaranty, the Note (and all extensions, renewals,
replacements, substitutions, amendments and modifications
thereof) and the other Loan Documents, including without
limitation, principal, interest, fees, late charges and
expenses, including attorneys' fees and/or allocated fees
of Mortgagee's in-house legal counsel; (ii) the repayment
of all advancements to Borrower as described in Section
14.15 hereof; (iii) the performance of all terms,
conditions and covenants set forth in the Loan Documents;
and (iv) any judgment obtained on the Note or Guaranty
(subsections 2 (i), (ii), (iii) and (iv) collectively, the
"Liabilities"), Mortgagor has given, granted, bargained,
sold and confirmed and by these presents does hereby give,
grant, bargain, sell and confirm with MORTGAGE COVENANTS
unto Mortgagee, its successors and assigns, forever, each
of the following together with and including all of
Mortgagor's right, title and interest thereto and therein
now owned or hereafter acquired (collectively, the
"Mortgaged Premises").
2.1. All those certain tracts of land set forth above
as the Mortgaged Premises and more particularly described
in Schedule "A" attached hereto and made a part hereof (the
"Real Estate");
2.2. Any and all buildings and improvements now or
hereafter erected on, under or over the Real Estate (the
"Improvements");
2.3. Any and all fixtures, machinery, equipment and
other articles of real, personal or mixed property,
belonging to Mortgagor, at any time now or hereafter
installed in, attached to or situated in or upon the Real
Estate, or the buildings and improvements now or hereafter
erected thereon, or used or intended to be used in
connection with the Real Estate, or in the operation of the
buildings and improvements, plant, business or dwelling
situate thereon, whether or not such real, personal or
mixed property is or shall be affixed thereto, and all
replacements, substitutions and proceeds of the foregoing
(all of the foregoing herein called the "Service
Equipment"), including without limitation: (i) all
appliances, furniture and furnishings; all articles of
interior decoration, floor, wall and window coverings; all
office, restaurant, bar, kitchen and laundry fixtures,
utensils, appliances and equipment; all supplies, tools and
accessories; all storm and screen windows, shutters, doors,
decorations, awnings, shades, blinds, signs, trees,
shrubbery and other plantings; (ii) all building service
fixtures, machinery and equipment of any kind whatsoever;
all lighting, heating, ventilating, air conditioning,
refrigerating, sprinkling, plumbing, security, irrigating,
cleaning, incinerating, waste disposal, communications,
alarm, fire prevention and extinguishing systems, fixtures,
apparatus, machinery and equipment; all elevators,
escalators, lifts, cranes, hoists and platforms; all pipes,
conduits, pumps, boilers, tanks, motors, engines, furnaces
and compressors; all dynamos, transformers and generators;
(iii) all building materials, building machinery and
building equipment delivered on site to the Real Estate
during the course of, or in connection with any
construction or repair or renovation of the buildings and
improvements; (iv) all parts, fittings, accessories,
accessions, substitutions and replacements therefor and
thereof; and (v) all files, books, ledgers, reports and
records relating to any of the foregoing;
2.4. Any present and future leases, subleases,
tenancies, licenses, occupancy agreements or agreements to
lease all or any portion of the Real Estate, Improvements,
Service Equipment or all or any other portion of the
Mortgaged Premises and all extensions, renewals,
amendments, modifications and replacements thereof, and any
options, rights of first refusal or guarantees relating
thereto (collectively, the "Leases"); all rents, income,
receipts, revenues, security deposits, escrow accounts,
reserves, issues, profits, awards and payments of any kind
payable under the Leases or otherwise arising from the Real
Estate, Improvements, Service Equipment or all or any other
portion of the Mortgaged Premises including, without
limitation, minimum rents, additional rents, percentage
rents, parking, maintenance and deficiency rents
(collectively, the "Rents"); all of the following personal
property (collectively referred to as the "Contracts"): all
accounts, general intangibles and contract rights
(including any right to payment thereunder, whether or not
earned by performance) of any nature relating to the Real
Estate, Improvements, Service Equipment or all or any other
portion of the Mortgaged Premises or the use, occupancy,
maintenance, construction, repair or operation thereof; all
management agreements, franchise agreements, utility
agreements and deposits, building service contracts,
maintenance contracts, construction contracts and
architect's agreements; all maps, plans, surveys and
specifications; all warranties and guaranties; all permits,
licenses and approvals; and all insurance policies, books
of account and other documents, of whatever kind or
character, relating to the use, construction upon,
occupancy, leasing, sale or operation of the Real Estate,
Improvements, Service Equipment or all or any other portion
of the Mortgaged Premises;
2.5. Any and all estates, rights, tenements,
hereditament, privileges, easements, reversions, remainders
and appurtenances of any kind benefitting or appurtenant to
the Real Estate, Improvements or all or any other portion
of the Mortgaged Premises; all means of access to and from
the Real Estate, Improvements or all or any other portion
of the Mortgaged Premises, whether public or private; all
streets, alleys, passages, ways, water courses, water and
mineral rights relating to the Real Estate, Improvements or
all or any other portion of the Mortgaged Premises; all
rights of Mortgagor as declarant or unit owner under any
declaration of condominium or association applicable to the
Real Estate, Improvements or all or any other portion of
the Mortgaged Premises including, without limitation, all
development rights and special declarant rights; and all
other claims or demands of Mortgagor, either at law or in
equity, in possession or expectancy of, in, or to the Real
Estate, Improvements or all or any other portion of the
Mortgaged Premises (all of the foregoing described in this
Section 2.5 herein called the "Appurtenances"); and
<PAGE>
2.6. Any and all "proceeds" of any of the above-described
Real Estate, Improvements, Service Equipment,
Leases, Rents, Contracts and Appurtenances, which term
"proceeds" shall have the meaning given to it in the
Connecticut Uniform Commercial Code (collectively, the
"Proceeds") and shall additionally include whatever is
received upon the use, lease, sale, exchange, transfer,
collection or other utilization or any disposition or
conversion of any of the Real Estate, Improvements, Service
Equipment, Leases, Rents, Contracts and Appurtenances,
voluntary or involuntary, whether cash or non-cash,
including proceeds of insurance and condemnation awards,
rental or lease payments, accounts, chattel paper,
instruments, documents, contract rights, general
intangibles, equipment and inventory.
TO HAVE AND TO HOLD the above granted and bargained
Mortgaged Premises with the privileges and appurtenances
thereof unto it, the said Mortgagee, its successors and
assigns, forever, to its and their own proper use and
behoof.
THE CONDITION OF THIS DEED IS SUCH THAT:
WHEREAS, Mortgagor is justly indebted to Mortgagee pursuant
to [Mortgagor's Guaranty of] the Note, and subject to the
following additional terms and conditions:
3. FUTURE ADVANCES.
This Mortgage shall secure any and all present or future
advances and readvances under the Liabilities made by
Mortgagee to or for the benefit of Mortgagor or the
Mortgaged Premises, including, without limitation: (i)
principal, interest, late charges, fees and other amounts
due under the Liabilities or this Mortgage; (ii) all
advances by Mortgagee to Mortgagor or any other person to
pay costs of erection, construction, alteration, repair,
restoration, maintenance and completion of any improvements
on the Mortgaged Premises; (iii) all advances made or costs
incurred by Mortgagee for the payment of real estate taxes,
assessments or other governmental charges, maintenance
charges, insurance premiums, appraisal charges,
environmental inspection, audit, testing or compliance
costs, and costs incurred by Mortgagee for the enforcement
and protection of the Mortgaged Premises or the lien of
this Mortgage; and (iv) all legal fees, costs and other
expenses incurred by Mortgagee by reason of any default or
otherwise in connection with the Liabilities. Mortgagor
agrees that if, at any time during the term of this
Mortgage or following a foreclosure hereof, Mortgagor fails
to perform or observe any covenant or obligation under this
Mortgage including, without limitation, payment of any of
the foregoing, Mortgagee may (but shall not be obligated
to) take such steps as are reasonably necessary to remedy
any such nonperformance or nonobservance and provide
payment thereof. All amounts advanced by Mortgagee shall
be added to the amount secured by this Mortgage and the
other Loan Documents, and shall be due and payable on
demand, together with interest at four percent (4%) per
annum above the rate of interest then in effect under the
Note, such interest to be calculated from the date of such
advance to the date of repayment thereof. Mortgagor's
obligations hereunder shall be continuing and shall survive
notwithstanding a foreclosure of this Mortgage.
4. ASSIGNMENT OF LEASES.
4.1. Mortgagor hereby assigns to Mortgagee, as further
security for the payment of the Liabilities, all Leases and
Rents. Mortgagor shall, upon demand, deliver to Mortgagee
an executed copy of each such Lease. This assignment shall
continue in effect until the Liabilities are paid in full
and this Mortgage is canceled or discharged of record;
however, so long as no Event of Default (as defined below)
exists, Mortgagor shall have a license to collect, and may
retain, use and enjoy the Rents as they become due. Upon
the occurrence of any Event of Default, the Mortgagee may,
without notice, by agent or by a receiver appointed by a
court, and without regard to the adequacy of any security
for the liabilities, revoke and cancel the license and
authority of Mortgagor to collect Rents, and (i) enter upon
and take possession of the Mortgaged Premises, (ii) notify
tenants, subtenants and any property manager to pay Rents
to the Mortgagee or its designee, and upon receipt of such
notice such persons are authorized and directed to make
payment as specified in the notice and disregard any
contrary direction or instruction by Mortgagor, and (iii)
in its own name, sue for or otherwise collect Rents,
including those past due, and apply Rents, less costs and
expenses of operation and collection, including attorneys'
fees, to the Liabilities in such order and manner as Bank
may determine. The collection of Rents, the entering upon
and taking possession of the Property, or the application
of Rents as aforesaid, shall not cure or waive any Event of
Default or notice of any Event of Default hereunder.
4.2. Mortgagor shall timely perform all of its
obligations under the Leases. Mortgagor represents and
warrants that: (i) there are no leases or agreements to
lease all or any part of the Real
<PAGE>
Estate now in effect, except those specifically set forth
in, and assigned to Mortgagee by, the Assignment of Leases;
and (ii) there is no assignment or pledge of any rents,
issues or profits of or from the Mortgaged Premises now in
effect, and Mortgagor shall not make any assignment or
pledge thereof to anyone other than Mortgagee until the
satisfaction in full of the Liabilities.
4.3. Mortgagor shall not, without the prior written
consent of Mortgagee: (i) enter into any lease of all or
any portion of the Mortgaged Premises; (ii) amend, modify,
terminate or accept a surrender of any Lease; or (iii)
collect or accept rent from any tenant of the Mortgaged
Premises for a period of more than one month in advance.
5. SECURITY AGREEMENT.
This Mortgage constitutes a security agreement under the
Connecticut Uniform Commercial Code (the "Code") and shall
also be effective as a financing statement filed as a
fixture filing in the land records of the Town in which the
Real Estate is located. Mortgagor hereby grants to
Mortgagee a security interest in the Service Equipment,
Leases, Rents, Contracts, Appurtenances, Proceeds and other
property included in the Mortgaged Premises, and all
replacements of, substitutions for, and additions to, all
of the foregoing, and the proceeds thereof, as security for
the Liabilities. Mortgagor shall, at Mortgagor's own
expense, execute, deliver, file and refile any financing or
continuation statements or other security agreements
Mortgagee may require from time to time to perfect, confirm
or maintain the lien of this Mortgage with respect to such
property. Without limiting the foregoing, Mortgagor hereby
irrevocably appoints Mortgagee attorney-in-fact for
Mortgagor to execute, deliver and file such instruments for
or on behalf of Mortgagor at Mortgagor's expense, which
appointment, being for security, is coupled with an
interest and shall be irrevocable.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
6.1. Payment and Performance. Mortgagor shall (i) pay
to Mortgagee all sums required to be paid by Mortgagor
under the Loan Documents, in accordance with their stated
terms and conditions; (ii) perform and comply with all
terms, conditions and covenants set forth in each of the
Loan Documents by which Mortgagor is bound; and (iii)
perform and comply with all of Mortgagor's obligations and
duties as landlord under any Leases.
6.2. Seisin and Warranty. Mortgagor is seized of an
indefeasible estate in fee simple in, and warrants the
title to, the Mortgaged Premises; has good and valid title
to all rents, issues and profits therefrom, and has the
right, full power and lawful authority to grant, convey and
assign the same to Mortgagee in the manner and form set
forth herein; and this Mortgage is a valid and enforceable
first lien on the Mortgaged Premises, subject only to the
matters set forth on Schedule "C" attached hereto (the
"Permitted Encumbrances"). Mortgagor hereby covenants that
Mortgagor shall (i) preserve such title and the validity
and priority of the lien of this Mortgage and shall forever
warrant and defend the same to Mortgagee against all lawful
claims whatsoever; and (ii) execute, acknowledge and
deliver all such further documents or assurances, and cause
to be done all such further acts as may at any time
hereafter be required by Mortgagee to protect fully the
lien of this Mortgage.
6.3. Insurance.(a) Mortgagor shall obtain and maintain
at all times throughout the term of this Mortgage the
following insurance in amounts, with deductibles and with
companies satisfactory to Mortgagee from time to time: (i)
comprehensive general public liability insurance covering
all operations of Mortgagor; (ii) "All-Risk" fire and
extended coverage hazard insurance (together with vandalism
and malicious mischief, special cause of loss and agreed
amount endorsements) in an aggregate amount not less than
100% of the full insurable replacement value of the
Mortgaged Premises, including coverage for loss of contents
owned by Mortgagor; (iii) during the course of any
construction, reconstruction, remodeling or repair of
improvements on the Mortgaged Premises, builders' all-risk
extended coverage insurance in amounts based upon the
completed replacement value of the improvements (excluding
roads, foundations, parking areas, paths, walkways and like
improvements), including coverage for loss of contents and
endorsed to provide that occupancy by any person shall not
void such coverage; (iv) if the Mortgaged Premises are
required to be insured pursuant to the Flood Disaster
Protection Act of 1973 or the National Flood Insurance Act
of 1968, and the regulations promulgated thereunder, flood
insurance in an amount at least equal to the lesser of the
outstanding principal balance of this Mortgage or the
maximum limit of coverage available; (v) insurance which
complies with the workers' compensation and employers'
liability laws of all states in which Mortgagor shall have
employees; (vi) business interruption and/or rental loss
insurance sufficient to pay, for a period of not less than
six (6) months, normal operating
<PAGE>
expenses of or gross income from the Mortgaged Premises;
(vii) boiler and machinery insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping,
heating, air conditioning and elevator equipment in such
amounts as Mortgagee shall require from time to time,
provided that the Mortgaged Premises contains equipment of
such nature; and (viii) such other insurance as Mortgagee
may reasonably require, including without limitation,
environmental liability insurance.
(b) Each insurance policy required under this Section
6.3. shall be written by an insurance company authorized or
licensed to do business in Connecticut having an A.M. Best
Company, Inc. rating of A or higher and a financial size
category of not less than VII, and shall be on such forms
and written by such companies as shall be reasonably
approved by Mortgagee.
(c) Each insurance policy required under this Section
6.3. providing insurance against loss or damage to
property, business interruption or rent loss shall be
written or endorsed so as to (i) name Mortgagee as
mortgagee under a Connecticut standard mortgagee or secured
party endorsement, as the case may be, or its equivalent;
and (ii) make all losses payable directly to Mortgagee,
without contribution.
(d) Each insurance policy required under this Section
6.3. providing public liability coverage shall be written
and endorsed so as to name Mortgagee as a certificate
holder with thirty (30) days prior written notice of
cancellation.
(e) Each insurance policy required under this Section
6.3. shall contain a provision (i) requiring the insurer to
notify Mortgagee, in writing and at least thirty (30) days
in advance, of any cancellation or material change in the
policy; (ii) waiving all rights of setoff, counterclaim,
deduction or subrogation against Mortgagor; and (iii)
excluding Mortgagee from the operation of any coinsurance
clause.
(f) At least thirty (30) days prior to the expiration
of any insurance policy, Mortgagor shall furnish evidence
satisfactory to Mortgagee that such policy has been renewed
or replaced or is no longer required by this Section 6.3.
(g) Mortgagor shall not take out any separate or
additional insurance with respect to the Mortgaged Premises
which is contributing in the event of loss unless approved
by Mortgagee and in conformity with the requirements of
this Section 6.3.
(h) Notwithstanding the foregoing, in the event that
Mortgagor fails to maintain insurance in accordance with
this Section 6.3., and Mortgagee elects to obtain insurance
to protect its interests hereunder, Mortgagee may obtain
insurance in any amount and of any type Mortgagee deems
appropriate to protect Mortgagee's interest only and
Mortgagee shall have no duty or obligation to Mortgagor to
maintain insurance in any greater amount or of any other
type for the benefit of Mortgagor. All insurance premiums
incurred or paid by Mortgagee shall be at Mortgagor's sole
cost and expense in accordance with Section 3 hereof.
Mortgagee's election to obtain insurance shall not be
deemed to waive any Event of Default (as hereinafter
defined) hereunder.
6.4. Taxes and Other Charges. Mortgagor shall prepare
and timely file all federal, state and local tax returns
required to be filed by Mortgagor and promptly pay and
discharge all taxes, assessments, water and sewer rents,
and other governmental charges imposed upon Mortgagor, the
Mortgaged Premises or on any of Mortgagor's other property
when due, but in no event after interest or penalties
commence to accrue thereon or become a lien upon such
property, except for those taxes, assessments, water and
sewer rents, or other governmental charges then being
contested in good faith by Mortgagor by appropriate
proceedings and for which Mortgagor has established on its
books or by deposit of cash with Mortgagee, at the option
of Mortgagee, a reserve for the payment thereof in such
amount as Mortgagee may require, and so long as such
contest: (i) operates to prevent collection, stay any
proceedings which may be instituted to enforce payment of
such item, and prevent a sale of the Mortgaged Premises to
pay such item; (ii) is maintained and prosecuted with due
diligence; and (iii) shall not have been terminated or
discontinued adversely to Mortgagor. Mortgagor shall
submit to Mortgagee, upon request, an affidavit signed by
Mortgagor certifying that all federal, state and local tax
returns have been filed to date and all taxes, assessments,
water and sewer rents, and other governmental charges with
respect to Mortgagor's properties have been paid to date.
6.5 Escrows. If required by Mortgagee, Mortgagor shall
pay to Mortgagee at the time of each installment of
principal and interest due under the Note, and commencing
with the first payment due after
<PAGE>
the date of such request, a sum equal to (a) the amount of
the next installment of taxes and assessments levied or
assessed against the Mortgaged Premises, and/or (b) the
premiums which will next become due on the insurance
policies required by this Mortgage, all in amounts as
estimated by Mortgagee, less all sums already paid therefor
or deposited with Mortgagee for the payment thereof,
divided by the number of payments to become due before one
(1) month prior to the date when such taxes and assessments
and/or premiums, as applicable, will become due, such sums
to be held by Mortgagee to pay the same when due. If such
escrow funds are not sufficient to pay such taxes and
assessments and/or insurance premiums, as applicable, as
the same become due, Mortgagor shall pay to Mortgagee, upon
request, such additional amounts as Mortgagee shall
estimate to be sufficient to make up any deficiency. No
amount paid to Mortgagee hereunder shall be deemed to be
trust funds but may be commingled with general funds of
Mortgagee and no interest shall be payable thereon. Upon
the occurrence of an Event of Default, Mortgagee shall have
the right, at its sole discretion, to apply any amounts so
held against the Liabilities. If Mortgagor is not required
to pay tax escrows pursuant to this Section 6.5., Mortgagor
shall promptly provide to Mortgagee on a semi-annual basis
(if such taxes or assessments are payable semi-annually) or
on a quarterly basis (if such taxes or assessments are
payable quarterly), copies of receipted tax bills,
cancelled checks or other evidence satisfactory to
Mortgagee evidencing that such taxes and assessments have
been timely paid.
6.6. Transfer of Title. Without the prior written
consent of Mortgagee in each instance, Mortgagor shall not
cause or permit any transfer of the Mortgaged Premises or
any part thereof, whether voluntarily, involuntarily or by
operation of law, nor shall Mortgagor enter into any
agreement or transaction to transfer, or accomplish in form
or substance a transfer, of the Mortgaged Premises. A
"transfer" of the Mortgaged Premises includes: (i) the
direct or indirect sale, transfer or conveyance of the
Mortgaged Premises or any portion thereof or interest
therein; (ii) the execution of an installment sale contract
or similar instrument affecting all or any portion of the
Mortgaged Premises; (iii) if Mortgagor, or any general
partner of Mortgagor, is a corporation, partnership or
limited liability company, the transfer (whether in one
transaction or a series of transactions) of any stock,
partnership, limited liability company or other ownership
interests in such corporation, partnership or limited
liability company; (iv) if Mortgagor, or any general
partner of Mortgagor, is a corporation, the creation or
issuance of new stock by which an aggregate of more than
10% of such corporation's stock shall be vested in a party
or parties who are not now stockholders; and (v) an
agreement by Mortgagor leasing all or a substantial part of
the Mortgaged Premises for other than actual occupancy by a
space tenant thereunder or a sale, assignment or other
transfer of or the grant of a security interest in and to
any Leases.
6.7. No Encumbrances. (a) Mortgagor shall not create
or permit to exist any mortgage, pledge, lien, security
interest (including, without limitation, a purchase money
security interest), encumbrance, attachment, levy,
distraint or other judicial process on or against the
Mortgaged Premises or any part thereof (including, without
limitation, fixtures and other personalty), whether
superior or inferior to the lien of this Mortgage, without
the prior written consent of Mortgagee. If any lien or
encumbrance is filed or entered without Mortgagor's
consent, Mortgagor shall have the right to contest same, in
good faith, by appropriate proceedings so long as adequate
reserves have been established therefor.
(b) By placing or accepting a mortgage, lien or
encumbrance of any type, whether voluntary or involuntary,
against the Mortgaged Premises, the holder thereof shall be
deemed to have agreed, without any further act or
documentation being required, that its mortgage, lien or
encumbrance shall be subordinate in lien priority to this
Mortgage and to any future amendments, consolidations or
extensions hereof (including, without limitation,
amendments which increase the interest rate on the Note,
extend the term of the Liabilities, provide for future
advances secured by this Mortgage, or provide for the
release of portions of the Mortgaged Premises with or
without consideration).
(c) The holder of any subordinate mortgage or other
lien, whether or not consented to by Mortgagee, expressly
agrees by acceptance of such subordinate mortgage or other
lien that it waives and relinquishes any rights it may
have, whether under a legal theory of marshalling of assets
or any other theory at law or in equity, to restrain
Mortgagee from, or recover damages from Mortgagee as a
result of, Mortgagee exercising its various remedies
hereunder or under any other documents evidencing or
securing the Liabilities, in such order and with such
timing as Mortgagee deems appropriate in its sole
discretion.
(d) Mortgagee may, at any time or from time to time,
renew, extend or increase the amount of this Mortgage,
alter or modify the terms hereof or of the Note in any way,
waive any of the terms, covenants or conditions hereof or
of the Note in whole or in part, release any portion of the
Mortgaged Premises or any other security, and grant such
extensions and indulgences in relation to the
<PAGE>
Liabilities as Mortgagee may determine, without the consent
of any junior lienor or encumbrancer or any obligation to
give notice of any kind thereto, and without in any manner
affecting the priority or the lien hereof on all or any
part of the Mortgaged Premises.
6.8. Removal of Fixtures. Mortgagor shall not remove
or permit to be removed from the Mortgaged Premises any
fixtures presently or in the future owned by Mortgagor as
the term "fixtures" is defined by the law in Connecticut
(unless such fixtures have been replaced with similar
fixtures of equal or greater utility and value, the removal
of which fixtures would materially impair the value of the
Mortgaged Premises).
6.9. Maintenance and Repair; Alterations. (a)
Mortgagor shall (i) abstain from and not permit the
commission of waste in or about the Mortgaged Premises;
(ii) keep the Mortgaged Premises, at Mortgagor's own cost
and expense, in good and substantial repair, working order
and condition; (iii) make or cause to be made, as and when
necessary, all material repairs and replacements, whether
or not insurance proceeds are available therefor; and (iv)
not remove, demolish, materially alter, discontinue the use
of, permit to become vacant or deserted, or otherwise
dispose of all or any material part of the Mortgaged
Premises. All alterations, replacements, renewals or
additions made pursuant to this Section 6.9. shall
automatically become a part of the Mortgaged Premises and
shall be covered by the lien of this Mortgage.
(b) Mortgagee, and any persons authorized by
Mortgagee, shall have the right, but not the obligation, to
enter upon the Mortgaged Premises at any reasonable time to
inspect and photograph its condition and state of repair.
In the event any such inspection reveals, in the sole
discretion of Mortgagee, the necessity for any repair,
alteration, replacement, clean-up or maintenance, Mortgagor
shall, at the discretion of Mortgagee, either: (i) cause
such work to be effected immediately; or (ii) promptly
establish an interest bearing reserve fund with Mortgagee
in an amount determined by Mortgagee for the purpose of
effecting such work.
6.10. Compliance with Applicable Laws. Mortgagor
agrees to substantially observe, conform and comply, and to
cause its tenants to observe, conform and comply with all
material federal, state, county, municipal and other
governmental or quasi-governmental laws, rules,
regulations, ordinances, codes, requirements, covenants,
conditions, orders, licenses, permits, approvals and
restrictions, including without limitation, the Americans
with Disabilities Act of 1990 (collectively, the "Legal
Requirements"), now or hereafter affecting all or any
material part of the Mortgaged Premises, its occupancy or
the business or operations now or hereafter conducted
thereon and the personalty contained therein, within such
time as required by such Legal Requirements. Mortgagor
represents and warrants that it has caused the Mortgaged
Premises to be designed, and the Mortgaged Premises
currently is, in substantial compliance with all material
Legal Requirements applicable to the Mortgaged Premises.
Mortgagor further represents and warrants that any funds
used to acquire the Mortgaged Premises were not obtained in
violation of any Legal Requirements, and that such funds,
including any Loan proceeds, are not being used and are not
intended to be used to facilitate any violations of any
Legal Requirements.
6.11. Damage, Destruction and Condemnation.(a) If all
or any part of the Mortgaged Premises shall be damaged or
destroyed, or if title to or the temporary use of the whole
or any part of the Mortgaged Premises shall be taken or
condemned by a competent authority for any public or
quasi-public use or purpose, there shall be no abatement or
reduction in the amounts payable by Mortgagor under the
Loan Documents and Mortgagor shall continue to be obligated
to make such payments.
(b) If all or any material part of the Mortgaged
Premises is partially or totally damaged or destroyed,
Mortgagor shall give prompt notice thereof to Mortgagee,
and Mortgagee may make proof of loss if not made promptly
by Mortgagor. Mortgagor hereby authorizes and directs any
affected insurance company to make payment under such
insurance, including return of unearned premiums, to
Mortgagee instead of to Mortgagor and Mortgagee jointly,
and Mortgagor appoints Mortgagee as Mortgagor's
attorney-in-fact to endorse any draft thereof, which appointment,
being for security, is coupled with an interest and
irrevocable. Mortgagee is hereby authorized and empowered
by Mortgagor to settle, adjust or compromise, in
consultation with Mortgagor, any claims for loss, damage or
destruction to the Mortgaged Premises. Mortgagor shall pay
all costs of collection of insurance proceeds payable on
account of such damage or destruction. Mortgagor shall
have no claim against the insurance proceeds, or be
entitled to any portion thereof, and all rights to the
insurance proceeds are hereby assigned to Mortgagee as
additional security for payment of the Liabilities.
Mortgagee shall have the option, in its sole discretion, of
paying or applying all or any part of the insurance
proceeds to: (i) reduction of the Liabilities;
<PAGE>
(ii) restoration, replacement or repair of the Mortgaged
Premises in accordance with Mortgagee's standard
construction loan disbursement conditions and requirements;
or (iii) Mortgagor.
(c) Immediately upon obtaining knowledge of the
institution of any proceeding for the condemnation of all
or any part of the Mortgaged Premises, Mortgagor shall give
notice to Mortgagee. Mortgagor shall, at its sole cost and
expense, diligently prosecute any such proceeding and shall
consult with Mortgagee, its attorneys and experts, and
shall cooperate with it in the defense of any such
proceeding. Mortgagee may participate in any such
proceeding and Mortgagor shall from time to time deliver to
Mortgagee all instruments requested by it to permit such
participation. Mortgagor shall not, without Mortgagee's
prior written consent, enter into any agreement (i) for the
taking or conveyance in lieu thereof of all or any part of
the Mortgaged Premises, or (ii) to compromise, settle or
adjust any such proceeding. If an Event of Default has
occurred Mortgagee is authorized to settle, compromise and
adjust any claim for condemnation. All awards and proceeds
of condemnation are hereby assigned to Mortgagee, and
Mortgagor, upon request by Mortgagee, agrees to make,
execute and deliver any additional assignments or documents
necessary from time to time to enable Mortgagee to collect
the same. Such awards and proceeds shall be paid or
applied by Mortgagee, in its sole discretion, to: (i)
reduction of the Liabilities; (ii) restoration, replacement
or repair of the Mortgaged Premises in accordance with
Mortgagee's standard construction loan disbursement
conditions and requirements; or (iii) Mortgagor.
(d) Nothing is this Section 6.11. shall relieve
Mortgagor of its duty to repair, restore, rebuild or
replace the Mortgaged Premises following damage or
destruction or partial condemnation if no or inadequate
insurance proceeds or condemnation awards are available to
defray the cost of repair, restoration, rebuilding or
replacement.
6.12. Required Notices. Mortgagor shall notify
Mortgagee within three (3) days of: (i) receipt of any
notice from any governmental or quasi-governmental
authority relating to the structure, use or occupancy of
the Mortgaged Premises or alleging a violation of any Legal
Requirement; (ii) a substantial change in the occupancy or
use of all or any part of the Mortgaged Premises; (iii)
receipt of any notice from the holder of any lien or
security interest in all or any part of the Mortgaged
Premises; (iv) commencement of any litigation affecting or
potentially affecting the financial ability of Mortgagor or
the value of the Mortgaged Premises; (v) a pending or
threatened condemnation of all or any part of the Mortgaged
Premises; (vi) a fire or other casualty causing damage to
all or any part of the Mortgaged Premises; (vii) receipt of
any notice with regard to any Release of Hazardous
Substances (as such terms are defined in Section 9.2.
hereof) or any other environmental matter affecting the
Mortgaged Premises or Mortgagor's interest therein; (viii)
receipt of any request for information, demand letter or
notification of potential liability from any entity
relating to potential responsibility for investigation or
clean-up of Hazardous Substances on the Mortgaged Premises
or at any other site owned or operated by Mortgagor; (ix)
receipt of any notice from any tenant of all or any part of
the Mortgaged Premises alleging a default, failure to
perform or any right to terminate its lease or to set-off
rents; or (x) receipt of any notice of the imposition of,
or of threatened or actual execution on, any lien on or
security interest in all or any part of the Mortgaged
Premises.
6.13. No Credits on Account of the Liabilities.
Mortgagor shall not claim or demand or be entitled to any
credit on account of the Liabilities for any part of the
taxes paid with respect to the Mortgaged Premises or any
part thereof and no deduction shall otherwise be made or
claimed from the taxable value of the Mortgaged Premises,
or any part thereof, by reason of this Mortgage.
6.14. Books and Records. Mortgagor shall keep and
maintain complete and accurate books and records in
accordance with generally accepted accounting principles
consistently applied, reflecting all of the financial
affairs of Mortgagor and all items of income and expense in
connection with the operation of the Mortgaged Premises.
Mortgagor shall permit representatives of Mortgagee to
examine and audit Mortgagor's (and its parent's and its
subsidiaries') books and records, to inspect Mortgagor's
facilities and properties, and to discuss Mortgagor's
financial condition and the contents of Mortgagor's
financial statements with Mortgagor's accountants.
6.15. Right to Reappraise. Mortgagee shall have the
right to conduct or have conducted by an independent
appraiser acceptable to Mortgagee appraisals of the
Mortgaged Premises in form and substance satisfactory to
Mortgagee at the sole cost and expense of Mortgagor;
provided, however, that Mortgagor shall not be obligated to
bear the expense of such appraisals so long as (i) no Event
of Default exists, and (ii) such appraisals are not
required by applicable law, rule or regulation or the
interpretation or administration thereof by any
governmental authority or comparable agency charged with
the
<PAGE>
interpretation or administration thereof. The cost of such
appraisals, if chargeable to Mortgagor as aforesaid, shall
be added to the Liabilities and shall be secured by this
Mortgage in accordance with the provisions of Section 3
hereof.
7. DECLARATION OF NO OFFSET. Mortgagor represents to
Mortgagee that Mortgagor has no knowledge of any offsets,
counterclaims or defenses to the Liabilities either at law
or in equity. Mortgagor shall, within three (3) days upon
request in person or within seven (7) days upon request by
mail, furnish to Mortgagee or Mortgagee's designee a
written statement in form satisfactory to Mortgagee stating
the amount due under the Liabilities and whether there are
offsets or defenses against the same, and if so, the nature
and extent thereof.
8. CHANGE IN LAWS.
In the event of the passage, after the date of this
Mortgage, of any law changing in any way the laws now in
force for the taxation of mortgages or debts secured
thereby, for state or local purposes, or the manner of the
operation of any such taxes, so as to affect the interest
of Mortgagee or impose upon Mortgagee the obligation to pay
the whole or any part of any taxes, assessments, charges or
liens ("Charges") herein required to be paid by Mortgagor,
then Mortgagor shall pay the full amount of the Charges;
provided that if payment by Mortgagor of any Charges would
be unlawful or usurious, Mortgagee may, at Mortgagee's
option: (i) declare the Liabilities to be immediately due
and payable; or (ii) pay that portion of the Charges as
renders the Liabilities unlawful or usurious, in which
event Mortgagor shall concurrently therewith pay the
remaining lawful and nonusers portion of said Charges.
9. ENVIRONMENTAL MATTERS.
9.1. Definitions. For purposes of this Section 9,
"Applicable Environmental Laws" shall mean any and all
existing or future federal, state and local statutes,
ordinances, regulations, rules, executive orders, standards
and requirements, including the requirements imposed by
common law, concerning or relating to industrial hygiene
and the protection of health and the environment including,
without limitation: (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. 9601 et seq. ("CERCLA"); (ii) the
Resource Conservation and Recovery Act of 1976, as amended,
42 U.S.C. 6901 et seq. ("RCRA"); (iii) the Clean Air Act,
as amended, 42 U.S.C. 7901 et seq.; (iv) the Clean Water
Act, as amended, 33 U.S.C. 1251 et seq.; (v) the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. 1801 et
seq.; and (vi) Title 22a of the Connecticut General
Statutes, as amended. Any terms mentioned in this Section
9 which are defined in any Applicable Environmental Law
shall have the meanings ascribed to such terms in said
laws; provided, however, that if any of such laws are
amended so as to broaden any term defined therein, such
broader meaning shall apply subsequent to the effective
date of such amendment.
9.2. Representations, Warranties and Covenants.
Mortgagor represents, warrants, covenants and agrees as
follows:
(a) Neither Mortgagor nor the Mortgaged Premises or
any occupant thereof are in material violation of or
subject to any existing, pending or threatened
investigation or inquiry by any governmental authority
pertaining to any Applicable Environmental Law. Mortgagor
shall not cause or permit the Mortgaged Premises to be in
material violation of, or do anything which would subject
the Mortgaged Premises to any remedial obligations under,
any Applicable Environmental Law, and shall promptly notify
Mortgagee in writing of any existing, pending or threatened
investigation or inquiry by any governmental authority in
connection with any Applicable Environmental Law. In
addition, Mortgagor shall provide Mortgagee with copies of
any and all material written communications with any
governmental authority in connection with any Applicable
Environmental Law, concurrently with Mortgagor's giving or
receiving of same.
(b) There are no underground storage tanks, radon,
asbestos materials, polychlorinated biphenyls or urea
formaldehyde insulation present at or installed in the
Mortgaged Premises. Mortgagor covenants and agrees that if
any such materials are found to be present at the Mortgaged
Premises, Mortgagor shall remove or remediate the same
promptly upon discovery at its sole cost and expense.
(c) Mortgagor has taken all reasonable steps
necessary to determine and has determined that there has
been no release, spill, discharge, leak, disposal or
emission (individually a "Release" and collectively,
"Releases") of any Hazardous Material, Hazardous Substance
or Hazardous
<PAGE>
Waste, including gasoline, petroleum products, explosives,
toxic substances, solid wastes and radioactive materials
(collectively, "Hazardous Substances") at, upon, under or
within the Mortgaged Premises. The use which Mortgagor or
any other occupant of the Mortgaged Premises makes or
intends to make of the Mortgaged Premises will not result
in any material Release of any Hazardous Substances on or
to the Mortgaged Premises. During the term of this
Mortgage, Mortgagor shall take all reasonable steps
necessary to determine whether there has been a Release of
any Hazardous Substances on or to the Mortgaged Premises
and if Mortgagor finds a Release has occurred, Mortgagor
shall remove or remediate the same promptly upon discovery
at its sole cost and expense.
(d) None of the real property owned and/or occupied
by Mortgagor and located in the State of Connecticut,
including without limitation, the Mortgaged Premises, has
ever been used by the present or previous owners and/or
operators or will be used in the future to refine, produce,
store, handle, transfer, process, transport, generate,
manufacture, heat, treat, recycle or dispose of Hazardous
Substances in any materially adverse manner.
(e) Except as previously disclosed to Mortgagee,
Mortgagor has not received any notice of violation, request
for information, summons, citation, directive or other
communication, written or oral, from the Connecticut
Department of Environmental Protection or the United States
Environmental Protection Agency concerning any intentional
or unintentional act or omission on Mortgagor's or any
occupant's part resulting in the Release of Hazardous
Substances.
(f) The Mortgaged Premises are not located within a
"wetlands" as defined by Connecticut General Statues 22a-38,
and are not subject to the terms of the Inland Wetlands and
Watercourses Act, as amended, Connecticut General Statues
22a-36 et seq., or the rules and regulations promulgated
thereunder.
(g) In connection with the purchase of the Mortgaged
Premises and any other real property acquired by Mortgagor
on or after October 1, 1987, Mortgagor required that the
seller of said real property, including the Mortgaged
Premises, comply with the provisions of the Connecticut
Transfer Act, as amended, Connecticut General Statutes 22a-134
et seq. (the "Connecticut Transfer Act") to the extent
the same was applicable and, if applicable, the seller did
comply therewith.
(h) Mortgagor shall not conduct or cause or permit to
be conducted on the Mortgaged Premises any activity which
constitutes or renders the Mortgaged Premises an
Establishment, as such term is defined in the Connecticut
Transfer Act, without the prior written consent of
Mortgagee. In the event that the provisions of the
Connecticut Transfer Act become applicable to the Mortgaged
Premises subsequent to the date hereof, Mortgagor shall
give prompt written notice thereof to Mortgagor and shall
take immediate requisite action to insure full compliance
therewith. Mortgagor shall deliver to Mortgagee copies of
all correspondence, notices and submissions that it sends
to or receives from the Connecticut Department of
Environmental Protection in connection with such
compliance. Mortgagor's obligation to comply with the
Connecticut Transfer Act shall, notwithstanding its general
applicability, also specifically apply to a sale, transfer,
closure or termination of operations associated with any
foreclosure action, including, without limitation, a
foreclosure action brought with respect to this Mortgage.
(i) The real property owned and/or occupied by
Mortgagor and located in the State of Connecticut,
including without limitation, the Mortgaged Premises: (i)
are being and have been operated in substantial compliance
with all material Applicable Environmental Laws, and all
permits required thereunder have been obtained and complied
with in all respects; and (ii) do not have any Hazardous
Substances present excepting small quantities of petroleum
and chemical products, in proper storage containers, as are
necessary for the construction or operation of the
commercial business of Mortgagor and its tenants, and the
usual waste products therefrom or such as are otherwise
present in the ordinary course of Mortgagor's business but
which do not cause or result in any materially adverse
condition ("Permitted Substances").
(j) Mortgagor will and will cause its tenants to
operate the Mortgaged Premises in compliance with all
Applicable Environmental Laws and, other than Permitted
Substances, will not place or permit to be placed any
Hazardous Substances on the Mortgaged Premises.
(k) No lien has been attached to or threatened to be
imposed upon any revenue or any real or personal property
owned by Mortgagor, including without limitation, the
Mortgaged Premises, and there is no basis for the
imposition of any such lien based on any governmental
action under Applicable
<PAGE>
Environmental Laws. Neither Mortgagor nor any other party
has been, is or will be involved in operations at the
Mortgaged Premises which could lead to the imposition of
environmental liability on Mortgagor, or on any subsequent
or former owner of the Mortgaged Premises, or the creation
of an environmental lien on the Mortgaged Premises. In the
event that any such lien is filed, Mortgagor shall, within
(30) days from the date that the Mortgagor is given notice
of such lien (or within such shorter period of time as is
appropriate in the event that the State of Connecticut or
the United States has commenced steps to have the Mortgaged
Premises sold), either: (i) pay the claim and remove the
lien from the Mortgaged Premises; or (ii) furnish a cash
deposit, bond or other security satisfactory in form and
substance to Mortgagee in an amount sufficient to discharge
the claim out of which the lien arises.
(l) In the event that Mortgagor shall cause or permit
to exist a material Release of Hazardous Substances without
having obtained a permit issued by the appropriate
governmental authorities, Mortgagor shall promptly clean up
such material Release in accordance with the provisions of
all Applicable Environmental Laws.
9.3. Right to Inspect and Cure. Mortgagee shall have
the right to conduct or have conducted by its agents or
contractors such environmental inspections, audits and
tests as Mortgagee shall deem necessary or advisable from
time to time at the sole cost and expense of Mortgagor;
provided, however, that Mortgagor shall not be obligated to
bear the expense of such environmental inspections, audits
and tests so long as (i) no Event of Default exists, and
(ii) Mortgagee has no cause to believe in its sole
reasonable judgment that there has been a Release or
threatened Release of Hazardous Substances at the Mortgaged
Premises or that Mortgagor or the Mortgaged Premises is in
violation of any Applicable Environmental Law. The cost of
such inspections, audits and tests, if chargeable to
Mortgagor as aforesaid, shall be added to the Liabilities
and shall be secured by this Mortgage. Mortgagor shall,
and shall cause each tenant of the Mortgaged Premises to,
cooperate with such inspection efforts; such cooperation
shall include, without limitation, supplying all
information requested concerning the operations conducted
and Hazardous Substances located at the Mortgaged Premises.
In the event that Mortgagor fails to comply with any
Applicable Environmental Law, Mortgagee may, in addition to
any of its other remedies under this Mortgage, cause the
Mortgaged Premises to be in compliance with such laws and
the cost of such compliance shall be added to the sums
secured by this Mortgage in accordance with the provisions
of Section 3 hereof.
10. INDEMNIFICATION.
10.1. Mortgagor hereby indemnifies and agrees to
protect, defend and hold harmless Mortgagee, any entity
which "controls" Mortgagee, within the meaning of Section 15
of the Securities Act of 1933, as amended, or is under
common control with Mortgagee, and any member, officer,
director, official, agent, employee or attorney of
Mortgagee, and their respective heirs, administrators,
executors, successors and assigns (collectively, the
"Indemnified Parties"), from and against any and all losses,
damages, expenses or liabilities of any kind or nature and
from any suits, claims or demands, including reasonable
attorneys' fees incurred in investigating or defending such
claim, suffered by any of them and caused by, relating to,
arising out of, resulting from, or in any way connected
with the Loan Documents or the transactions contemplated
therein (unless determined by a final judgment of a court
of competent jurisdiction to have been caused solely by the
gross negligence or willful misconduct of the Indemnified
Parties) including, without limitation: (i) disputes with
any architect, general contractor, subcontractor,
materialman or supplier, or on account of any act or
omission to act by Mortgagee in connection with the
Mortgaged Premises; (ii) losses, damages (including
consequential damages), expenses or liabilities sustained
by Mortgagee in connection with any environmental
inspection, monitoring, sampling or cleanup of the
Mortgaged Premises required or mandated by any Applicable
Environmental Law; (iii) any untrue statement of a material
fact contained in information submitted to Mortgagee by
Mortgagor or the omission of any material fact necessary to
be stated therein in order to make such statement not
misleading or incomplete; (iv) the failure of Mortgagor to
perform any obligations herein required to be performed by
Mortgagor; and (v) the ownership, construction, occupancy,
operation, use or maintenance of the Mortgaged Premises.
10.2. In case any action shall be brought against
Mortgagee or any other Indemnified Party in respect to
which indemnity may be sought against Mortgagor, Mortgagee
or such other Indemnified Party shall promptly notify
Mortgagor and Mortgagor shall assume the defense thereof,
including the employment of counsel selected by Mortgagor
and satisfactory to Mortgagee, the payment of all costs and
expenses, and the right to negotiate and consent to
settlement. The failure of Mortgagee to so notify
Mortgagor shall not relieve Mortgagor of any liability it
may have under the foregoing indemnification provisions or
from
<PAGE>
any liability which it may otherwise have to Mortgagee or
any of the other Indemnified Parties. Mortgagee shall have
the right, at its sole option, to employ separate counsel
in any such action and to participate in the defense
thereof, all at Mortgagor's sole cost and expense.
Mortgagor shall not be liable for any settlement of any
such action effected without its consent, but if settled
with Mortgagor's consent, or if there be a final judgment
for the claimant in any such action, Mortgagor agrees to
indemnify and save harmless Mortgagee from and against any
loss or liability by reason of such settlement or judgment.
10.3. The provisions of this Section 10 shall survive
the repayment of the Liabilities and the release or
discharge of this Mortgage.
11. EVENTS OF DEFAULT.
Each of the following shall constitute a default
(each, an "Event of Default") hereunder:
11.1. Non-payment when due of any sum required to be
paid to Mortgagee under any of the Loan Documents,
including without limitation, principal and interest;
11.2. A breach of any covenant contained in Sections
6.3., 6.4., 6.6., or 6.12. hereof;
11.3. A breach by Mortgagor of any other term,
covenant, condition, obligation or agreement under this
Mortgage, and the continuance of such breach for a period
of fifteen (15) days after written notice thereof shall
have been given to Mortgagor;
11.4. An Event of Default under any of the other Loan
Documents;
11.5. Any representation or warranty made by Mortgagor
or by any other person providing collateral pursuant to or
obligated to perform under any Loan Document ("Other
Obligated Party") in any Loan Document or to induce
Mortgagee to enter into the transactions contemplated
hereunder shall prove to be false, incorrect or misleading
in any material respect as of the date when made;
11.6. The filing by or against Mortgagor or any Other
Obligated Party of a petition seeking relief, or the
granting of relief, under the Federal Bankruptcy Code or
any similar federal or state statute; any assignment for
the benefit of creditors made by Mortgagor or any Other
Obligated Party; the appointment of a custodian, receiver,
liquidator or trustee for Mortgagor or any Other Obligated
Party or for any of the property of Mortgagor or such Other
Obligated Party, or any action by Mortgagor or any Other
Obligated Party to effect any of the foregoing; or if
Mortgagor or any Other Obligated Party becomes insolvent
(however defined) or is not paying its debts generally as
they become due;
11.7. The death, dissolution, liquidation, merger,
consolidation or reorganization of Mortgagor or any Other
Obligated Party, or the institution of any proceeding to
effect any of the foregoing; or
11.8. A material deterioration in the financial
condition of Mortgagor or any Other Obligated Party or the
occurrence of any event which, in the reasonable opinion of
Mortgagee, impairs the financial responsibility of
Mortgagor or any Other Obligated Party and their ability to
repay the Liabilities.
12. REMEDIES.
If an Event of Default shall have occurred, Mortgagee
may take any of the following actions (without the
obligation to marshall):
12.1. Acceleration. Mortgagee may declare the entire
amount of the Liabilities immediately due and payable,
without presentment, demand, notice of any kind, protest or
notice of protest, all of which are expressly waived,
notwithstanding anything to the contrary contained in any
of the Loan Documents. Mortgagee may collect interest from
the date of default on the unpaid balance of the
Liabilities, at the Default Rate (as defined and described
in the Note). In addition, any and all accelerations of
any portion of the remaining principal balance of the
Liabilities (including, without limitation, foreclosure by
Mortgagee under this Mortgage) shall be subject to the
Prepayment Consideration (as defined and described in the
Note), if any.
<PAGE>
12.2. Possession. Mortgagee may (i) enter upon and
take possession of the Mortgaged Premises, including the
Rents, (with or without commencing legal action or making
legal appearance in any court of competent jurisdiction)
and with the rights or powers more particularly set forth
hereafter; and (ii) without taking possession and control
of the Mortgaged Premises, immediately (and with or without
commencing legal action or making legal appearance in any
court of competent jurisdiction) collect directly all Rents
in the place and stead of Mortgagor with full rights and
powers to notify all parties liable for payments of Rent to
make said payments directly to Mortgagee or its agents and
Mortgagee and its agents shall have the further power and
authority to sue for or otherwise collect and receive all
Rents. Said rights and powers referenced in clause (i) of
this Section 12.2. shall include the right to operate,
manage and control the Mortgaged Premises and exercise all
rights and powers of Mortgagor in its name or otherwise
with respect to the same; the right to make all necessary
and proper repairs, improvements, maintenance and
replacements to the Mortgaged Premises; the right to
enforce all terms of existing contracts relating to the
Mortgaged Premises or enter into such new contracts as
Mortgagee determines to be necessary in its sole
discretion; the right to lease the Mortgaged Premises; the
right to collect from the Mortgaged Premises all Rents and,
after deducting all costs of collection and administration
expense, apply the net Rents to any one or more of the
following items in such manner and in such order of
priority as Mortgagee, in Mortgagee's sole discretion, may
elect: the payment of any sums due under any prior lien,
taxes, water and sewer rents, charges and claims, insurance
premiums and all other carrying charges, to the
maintenance, repair or restoration of the Mortgaged
Premises, to compensation, salaries, expenses and
disbursements of Mortgagee's agents, attorneys, or any
other representatives of Mortgagee, the receiver in
connection with the possession, control and/or operation of
the Mortgaged Premises and the business operations
conducted therefrom, or on account of the Liabilities.
Mortgagee is given full authority to do any act which
Mortgagor could do in connection with the management and
operation of the Mortgaged Premises. This covenant becomes
effective either with or without any action brought to
foreclose this Mortgage and without applying for a receiver
of such rents. In addition to the foregoing, upon the
occurrence of an Event of Default, Mortgagor shall pay
monthly in advance to Mortgagee or to any receiver
appointed to collect said rents the fair and reasonable
rental value for Mortgagor's use and occupation of the
Mortgaged Premises, and upon default in any such payment
Mortgagor shall vacate and surrender the possession of the
Mortgaged Premises to Mortgagee or to such receiver. If
Mortgagor does not vacate and surrender the Mortgaged
Premises then Mortgagor may be evicted by summary
proceedings or ejectment.
12.3. Foreclosure. Mortgagee may institute any one or
more actions of mortgage foreclosure (whether strict
foreclosure or foreclosure by sale) against all or any part
of the Mortgaged Premises, or take such other action
available to Mortgagee at law, in equity or by Contract for
the enforcement of this Mortgage and realization on the
security herein or elsewhere provided for, as the law may
allow, and may proceed therein to final judgment and
execution for the entire unpaid balance of the Liabilities,
together with all future advances and any other sums due by
Mortgagor in accordance with the provisions of this
Mortgage, together with interest from the date of default
at the Default Rate and all costs of suit and attorneys'
fees. The unpaid balance of any judgment shall bear
interest at the greater of (a) the statutory rate, or (b)
the Default Rate. Without limiting the foregoing,
Mortgagee may foreclose this Mortgage and exercise its
rights as a secured party for all or any portion of the
Liabilities which are then due and payable, subject to the
continuing lien of this Mortgage for the balance not then
due and payable. In case of any sale of the Mortgaged
Premises by judicial proceedings, the Mortgaged Premises
may be sold in one parcel or in such parcels, manner or
order as Mortgagee in its sole discretion may elect.
Mortgagor, for itself and anyone claiming by, through or
under it, hereby agrees that Mortgagee shall in no manner,
in law or in equity, be limited, except as herein provided,
in the exercise of its rights in the Mortgaged Premises or
in any other security hereunder or otherwise appertaining
to the Liabilities or any other obligation secured by this
Mortgage, whether by any statute, rule or precedent which
may otherwise require said security to be marshalled in any
manner and Mortgagor, for itself and others as aforesaid,
hereby expressly waives and releases any right to or
benefit thereof. The failure to make any tenant a
defendant to a foreclosure proceeding shall not be asserted
by Mortgagor as a defense in any proceeding instituted by
Mortgagee to collect the Liabilities or any deficiency
remaining unpaid after the foreclosure sale of the
Mortgaged Premises.
12.4. Appointment of Receiver. Mortgagee may make
application to a court of competent jurisdiction for and
obtain immediate ex parte appointment of a receiver
authorized to immediately enter upon and take possession
and control of the Mortgaged Premises including, without
limitation, the Rents, and with those rights and powers of
Mortgagee set forth in Section 12.2. Such appointment may
be made either before or after sale, without notice,
without regard to
<PAGE>
the solvency or insolvency of Mortgagor at the time of
application for such receiver, without regard to the then
value of the Mortgaged Premises or whether the Mortgaged
Premises shall be then occupied as a homestead or not, and
without regard to whether Mortgagor has committed waste or
allowed deterioration of the Mortgaged Premises, and
Mortgagee or any agent of Mortgagee may be appointed as
such receiver. Mortgagor hereby agrees that Mortgagee has
a special interest in the Mortgaged Premises and absent the
appointment of such receiver the Mortgaged Premises shall
suffer waste and deterioration and Mortgagor further agrees
that it shall not contest the appointment of a receiver and
hereby so stipulates to such appointment pursuant to this
paragraph. Such receiver shall have the power to perform
all of the acts permitted Mortgagee pursuant to Section
12.2. above and such other powers which may be necessary or
customary in such cases for the protection, possession,
control, management and operation of the Mortgaged Premises
during such period. The Mortgagor hereby waives to the
fullest extent permitted by law all rights to prior notice
or court hearing in connection with any action by Mortgagee
of the types set forth in Sections 12.2. and 12.4. hereof,
and Mortgagor further waives any requirement that Mortgagee
provide any bond, surety, or other security in connection
with any said action.
12.5. Rights as a Secured Party. Mortgagee shall have,
in addition to other rights and remedies available at law
or in equity, the rights and remedies of a secured party
under the Code. Mortgagee may elect to foreclose such of
the Mortgaged Premises as then comprise fixtures pursuant
either to the law applicable to foreclosure of an interest
in real estate or to that applicable to personal property
under the Code. To the extent permitted by law, Mortgagor
waives the right to any stay of execution and the benefit
of all exemption laws now or hereafter in effect.
12.6. Excess Monies. Mortgagee may apply on account of
the Liabilities any unexpended monies still retained by
Mortgagee that were paid by Mortgagor to Mortgagee: (i)
for the payment of, or as security for the payment of
taxes, assessments or other governmental charges, insurance
premiums, or any other charges; or (ii) to secure the
performance of some act by Mortgagor.
12.7. Other Remedies. Mortgagee shall have the right,
from time to time, to bring an appropriate action to
recover any sums required to be paid by Mortgagor under the
terms of this Mortgage, as they become due, without regard
to whether or not any other Liabilities shall be due, and
without prejudice to the right of Mortgagee thereafter to
bring an action of mortgage foreclosure, or any other
action, for any default by Mortgagor existing at the time
the earlier action was commenced. In addition, Mortgagee
shall have the right to set-off all or any part of any
amount due by Mortgagor to Mortgagee under any of the
Liabilities, against any indebtedness, liabilities or
obligations owing by Mortgagee or any Affiliate in any
capacity to Mortgagor, including any obligation to disburse
to Mortgagor any funds or other property on deposit with or
otherwise in the possession, control or custody of
Mortgagee.
Mortgagee, its agents, or any receiver acting pursuant
to Section 12.4. shall in no event be liable or accountable
for more monies than actually are received from the
Mortgaged Premises during the period which Mortgagee, its
agent or any receiver actually is in possession and control
of the Mortgaged Premises. Neither Mortgagee, its agents
or any receiver shall be liable or accountable in any
manner for the failure to collect Rents for any reason
whatsoever.
All costs, expenses and liabilities of every character
incurred by Mortgagee in managing, operating and
maintaining the Mortgaged Premises, not paid from the Rents
as herein provided, shall constitute an advance and shall
be added to the sums secured by this Mortgage in accordance
with the provisions of Section 3 hereof.
In the event of foreclosure, Mortgagee, its agents or
any receiver acting pursuant to Section 12.4. may remain in
possession of the Mortgaged Premises until (i) the
foreclosure sale; (ii) the redemption of the Mortgaged
Premises; or (iii) if a deficiency exists, the expiration
of any redemption period of the United States of America
extending subsequent to the foreclosure sale. Mortgagee,
its agents or any such receiver shall incur no liability
for, nor shall Mortgagor assert any claim or setoff as a
result of any action taken while Mortgagee, its agents or
any such receiver is in possession of the Mortgaged
Premises.
Mortgagee shall not be (i) compelled to release, or be
prevented from foreclosing or enforcing this Mortgage upon
all or any part of the Mortgaged Premises, unless the
entire Liabilities shall be paid; (ii) required to accept
any part or parts of the Mortgaged Premises, as
distinguished from the entire whole thereof, as payment of
or upon the Liabilities to the extent of the value of such
part or parts; (iii) compelled to accept or allow any
apportionment of the Liabilities to or among any separate
parts of the Mortgaged Premises; or (iv) prevented from
selling the Mortgaged Premises in one or more parcels or as
an entirety and in such manner and order as Mortgagee in
its sole discretion may elect.
<PAGE>
13. CONTINUING ENFORCEMENT OF MORTGAGE.
If, after receipt of any payment of all or any part of
the Liabilities, Mortgagee is compelled or agrees, for
settlement purposes, to surrender such payment to any
person or entity for any reason (including, without
limitation, a determination that such payment is void or
voidable as a preference or fraudulent conveyance, an
impermissible setoff, or a diversion of trust funds), then
this Mortgage and the other Loan Documents shall continue
in full force and effect, and Mortgagor shall be liable
for, and shall indemnify, defend and hold harmless
Mortgagee with respect to the full amount so surrendered.
The provisions of this Section shall survive the
cancellation or discharge of this Mortgage and shall remain
effective notwithstanding the payment of the Liabilities,
the cancellation of the Note, the release of any security
interest, lien or encumbrance securing the Liabilities or
any other action which Mortgagee may have taken in reliance
upon its receipt of such payment. Any cancellation,
release or other such action by Mortgagee shall be deemed
to have been conditioned upon any payment of the
Liabilities having become final and irrevocable.
14. MISCELLANEOUS.
14.1. Remedies Cumulative. The rights and remedies of
Mortgagee as provided in this Mortgage or in any other Loan
Document shall be cumulative and concurrent, may be pursued
separately, successively or together, may be exercised as
often as occasion therefor shall arise, and shall be in
addition to any other rights or remedies conferred upon
Mortgagee at law or in equity. The failure, at any one or
more times, of Mortgagee to assert the right to declare the
Liabilities due, grant any extension of time for payment of
the Liabilities, take other or additional security for the
payment thereof, release any security, change any of the
terms of the Loan Documents, or waive or fail to exercise
any right or remedy under any Loan Document shall not in
any way affect this Mortgage or the rights of Mortgagee.
14.2. Integration. This Mortgage and the other Loan
Documents constitute the sole agreement of the parties with
respect to the transaction contemplated hereby and
supersede all oral negotiations and prior writings with
respect thereto.
14.3. Attorneys' Fees and Expenses. If Mortgagee
retains the services of counsel by reason of a claim of a
default or an Event of Default hereunder or under any of
the other Loan Documents or to institute and maintain an
action to foreclose this Mortgage or to have a receiver
appointed, or on account of any matter involving the
Liabilities or Mortgagor's title to the Mortgaged Premises
or the security interest intended to be granted hereby, or
for examination of matters subject to Mortgagee's approval
under the Loan Documents, all costs of suit and collection
and all reasonable attorneys' fees (and/or allocated fees
of Mortgagee's in-house legal counsel) and such other
reasonable expenses so incurred by Mortgagee shall
forthwith become due and payable, on demand, and shall be
secured hereby.
14.4. No Implied Waiver. Mortgagee shall not be deemed
to have modified or waived any of its rights or remedies
hereunder unless such modification or waiver is in writing
and signed by Mortgagee, and then only to the extent
specifically set forth therein. A waiver in one event
shall not be construed as continuing or as a waiver of or
bar to such right or remedy on a subsequent event.
14.5. Partial Invalidity. The invalidity or
unenforceability of any one or more provisions of this
Mortgage shall not render any other provision invalid or
unenforceable. In lieu of any invalid or unenforceable
provision, there shall be added automatically a valid and
enforceable provision as similar in terms to such invalid
or unenforceable provision as may be possible.
14.6. Binding Effect. The covenants, conditions,
waivers, releases and agreements contained in this Mortgage
shall bind, and the benefits thereof shall inure to, the
parties hereto and their respective heirs, executors,
administrators, successors and assigns and are intended and
shall be held to be real covenants running with the land;
provided, however, that this Mortgage cannot be assigned by
Mortgagor without the prior written consent of Mortgagee,
and any such assignment or attempted assignment by
Mortgagor shall be void and of no effect with respect to
Mortgagee.
14.7. Modifications. This Mortgage may not be
supplemented, extended, modified or terminated except by an
agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or
discharge is sought.
<PAGE>
14.8. Affiliate. As used herein, "Affiliate" shall mean
First Union Corporation and any of its direct and indirect
affiliates and subsidiaries.
14.9. Commercial Loan. Mortgagor represents and
warrants that the loans or other financial accommodations
included as Liabilities secured by this Mortgage were
obtained solely for the purpose of carrying on or acquiring
a business or commercial investment and not for
residential, consumer or household purposes.
14.10. Jurisdiction. Mortgagor irrevocably appoints
each and every owner, partner and/or officer of Mortgagor
as its attorneys upon whom may be served any notice,
process or pleading in any action or proceeding against it
arising out of or in connection with this Mortgage or any
other Loan Document. Mortgagor hereby consents that any
action or proceeding against it may be commenced and
maintained in any court within the State of Connecticut or
in the United States District Court for the District of
Connecticut or, at the option of Mortgagee, any court in
which Mortgagee shall initiate legal or equitable
proceedings and which has subject matter jurisdiction over
the matter in controversy, and that such action or
proceeding may be commenced by service of process on any
such owner, partner and/or officer. Mortgagor agrees that
the courts of the State of Connecticut and the United
States District Court for the District of Connecticut shall
have jurisdiction with respect to the subject matter hereof
and the person of Mortgagor and all collateral securing the
obligations of Mortgagor. Mortgagor hereby further
consents to personal jurisdiction in any other court in
which Mortgagee shall initiate legal or equitable
proceedings and which has subject matter jurisdiction over
the matter in controversy. Mortgagor hereby waives
personal service of the summons and complaint or other
process or papers issued in any proceeding of the type
described in this Section 14.10. and agrees that service of
such summons and complaint, or other process or papers may
be made by regular or certified mail addressed to Mortgagor
at the address of Mortgagor set forth herein. Mortgagor
agrees not to assert any defense to any proceeding
initiated by Mortgagor based upon improper venue or
inconvenient forum. Mortgagor agrees that any action
brought by Mortgagor shall be commenced and maintained only
in a court in the federal judicial district or county in
which Mortgagee has a place of business in Connecticut.
14.11. Notices. All notices and communications under
this Mortgage shall be in writing and shall be given by
either (a) hand-delivery, (b) first class mail (postage
prepaid), or (c) reliable overnight commercial courier
(charges prepaid), to the addresses listed in this
Mortgage. Notice shall be deemed to have been given and
received: (i) if by hand delivery, upon delivery; (ii) if
by mail, three (3) calendar days after the date first
deposited in the United States mail; and (iii) if by
overnight courier, on the date scheduled for delivery. A
party may change its address by giving written notice to
the other party as specified herein.
14.12. Governing Law. This Mortgage shall be governed
by and construed in accordance with the substantive laws of
the State of Connecticut without reference to conflict of
laws principles.
14.13. Joint and Several Liability. If Mortgagor
consists of more than one person or entity, the word
"Mortgagor" shall mean each of them and their liability
shall be joint and several.
14.14. Waiver of Jury Trial. MORTGAGOR AND MORTGAGEE
AGREE THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR
COUNTERCLAIM, BROUGHT BY MORTGAGEE OR MORTGAGOR ON OR WITH
RESPECT TO THIS MORTGAGE OR ANY OTHER LOAN DOCUMENT OR THE
DEALINGS OF THE PARTIES WITH RESPECT HERETO OR THERETO,
SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY.
MORTGAGEE AND MORTGAGOR EACH HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY AND INTELLIGENTLY, AND WITH THE ADVICE OF
THEIR RESPECTIVE COUNSEL, WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. FURTHER,
MORTGAGOR WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER,
IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL,
EXEMPLARY, PUNITIVE, CONSEQUENTIAL OR OTHER DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. MORTGAGOR
ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A SPECIFIC AND
MATERIAL ASPECT OF THIS MORTGAGE AND THAT MORTGAGEE WOULD
NOT EXTEND CREDIT TO MORTGAGOR OR BORROWER (AS APPLICABLE)
IF THE WAIVERS SET FORTH IN THIS SECTION WERE NOT A PART OF
THIS MORTGAGE.
14.15. Guaranty of Open-End Loan. This is an "Open-End
Mortgage" and the holder hereof shall have all of the
rights, powers and protection to which the holder of any
Open-End Mortgage securing a guaranty of an open-end loan
is entitled under Connecticut law. Borrower is liable for
the loan evidenced by the Note and if future open-end
advances are contemplated by such Note, such Note
specifically
<PAGE>
permits such advances. The full amount of the loan
authorized is the principal amount of the Note, and the
terms of repayment of such loan are set forth in the Note.
The date, if any on which the liability of Mortgagor as
well as the conditions, if any, which will cause Mortgagor
to pay all or part of the loan evidenced by the Note are
set forth in the Guaranty.
14.16. Waiver of Termination Rights. Mortgagor hereby
waives, for itself or any of its assigns who assume this
Mortgage, any rights it may have under Section 49-2(c)(7)
of the Connecticut General Statutes, as amended, or
otherwise, to terminate the right of Mortgagee to make
"optional future advances" as defined under said Statute.
14.17. Prejudgment Remedy Waiver. MORTGAGOR HEREBY
REPRESENTS, COVENANTS AND AGREES THAT THE PROCEEDS OF THE
LOAN SHALL BE USED FOR GENERAL COMMERCIAL PURPOSES AND THAT
THE TRANSACTION OF WHICH THIS MORTGAGE IS A PART IS A
"COMMERCIAL TRANSACTION" AS DEFINED BY THE STATUTES OF THE
STATE OF CONNECTICUT. MORTGAGOR HEREBY WAIVES ALL RIGHTS
TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER
CONNECTICUT GENERAL STATUTES, SECTIONS 52-278a et seq., AS
AMENDED, OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH
RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES MORTGAGEE MAY
EMPLOY TO ENFORCE ITS RIGHTS AND REMEDIES HEREUNDER. MORE
SPECIFICALLY, MORTGAGOR ACKNOWLEDGES THAT MORTGAGEE'S
ATTORNEY MAY, PURSUANT TO CONNECTICUT GENERAL STATUTES,
SECTION 52-278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY
WITHOUT SECURING A COURT ORDER. MORTGAGOR ACKNOWLEDGES AND
RESERVES ITS RIGHT TO NOTICE AND A HEARING SUBSEQUENT TO
THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY BY
MORTGAGEE'S ATTORNEY, AND MORTGAGEE ACKNOWLEDGES
MORTGAGOR'S RIGHT TO SAID HEARING SUBSEQUENT TO THE
ISSUANCE OF SAID WRIT. MORTGAGOR FURTHER HEREBY WAIVES ANY
REQUIREMENT OR OBLIGATION OF MORTGAGEE TO POST A BOND OR
OTHER SECURITY IN CONNECTION WITH ANY PREJUDGMENT REMEDY
OBTAINED BY MORTGAGEE AND WAIVES ANY OBJECTIONS TO ANY
PREJUDGMENT REMEDY OBTAINED BY MORTGAGEE BASED ON ANY
OFFSETS, CLAIMS, DEFENSES OR COUNTERCLAIMS OF MORTGAGOR OR
ANY OTHER OBLIGATED PARTY TO ANY ACTION BROUGHT BY
MORTGAGEE. MORTGAGOR ACKNOWLEDGES AND AGREES THAT ALL OF
THE WAIVERS CONTAINED IN THIS SECTION HAVE BEEN MADE
KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND INTELLIGENTLY,
AND WITH THE ADVICE OF ITS COUNSEL.
14.18. Non-Merger. In the event Mortgagee shall
acquire title to the Mortgaged Premises by conveyance from
Mortgagor or as a result of the foreclosure, this Mortgage
shall not merge in the fee estate of the Mortgaged Premises
but shall remain and continue as an existing and
enforceable lien for the Liabilities secured hereby until
the same shall be released of record by Mortgagee in
writing.
15. DEFEASANCE.
NOW THEREFORE, if all agreements and provisions
contained herein are fully kept and performed by Mortgagor,
and all of the Liabilities shall be fully paid in all
respects, then this Mortgage shall be void; otherwise to
remain in full force and effect.
IN WITNESS WHEREOF, Mortgagor, intending to be legally
bound, has duly executed and delivered this Mortgage and
Security Agreement as of the day and year first above
written.
WITNESS/ATTEST: ENERGY RESEARCH CORPORATION
By:
Name: Name:
Title: Title:
Name:
Title:
STATE OF CONNECTICUT)
) SS: BRIDGEPORT
COUNTY OF FAIRFIELD)
On this the 28th day of June, 1996 before me, the
undersigned officer, personally appeared _____________, who
acknowledged him/herself to be the _______________ of
ENERGY RESEARCH CORPORATION, a corporation, and that he/she
as such ____________, being authorized so to do, executed
the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by
him/herself as such ______________ and as his/her and its
free act and deed.
IN WITNESS WHEREOF, I hereunto set my hand.
_____________________
Commissioner of the Superior Court
Notary Public
My Commission Expires:
<TABLE>
EXHIBIT 11
ENERGY RESEARCH CORPORATION
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
<CAPTION>
Three Months Nine Months
Ended July 31, Ended July 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Shares outstanding,
beginning of period 3,792,873 3,717,270 3,728,914 3,699,683
Weighted average number of
shares issued, retired and
issuable share equivalents 353,147 255,862 324,368 271,980
--------- --------- --------- ---------
Weighted average number of
common and common equivalent
shares outstanding 4,146,020 3,973,132 4,053,282 3,971,663
========= ========= ========= =========
Net income $ 122,000 $ 73,000 $ 307,000 $ 352,000
========= ========= ========= =========
Net income per common share $ .03 $ .02 $ .08 $ .09
========= ========= ========= =========
FULLY DILUTED
Weighted average number of
common and common equivalent
sharesoutstanding as
adjusted for full dilution 4,342,020 4,193,132 4,249,282 4,191,663
Adjustment for interest,
net of tax, on convertible
long-term debt $ 19,000 $ 20,000 $ 57,000 $ 60,000
========= ========= ========= =========
Adjusted net income $ 141,000 $ 93,000 $ 364,000 $ 412,000
========= ========= ========= =========
Net income per
common share <F1> $ .03 $ .02 $ .09 $ .10
========= ========= ========= =========
<FN>
<F1> These calculations are submitted in accordance with SEC requirements,
although they are not in accordance with APB Opinion No. 15 because they are
anti-dilutive.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ENERGY RESEARCH CORPORATION'S FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 5,472
<SECURITIES> 3,909
<RECEIVABLES> 2,413
<ALLOWANCES> 0
<INVENTORY> 780
<CURRENT-ASSETS> 13,040
<PP&E> 16,450
<DEPRECIATION> 9,538
<TOTAL-ASSETS> 23,422
<CURRENT-LIABILITIES> 6,208
<BONDS> 0
0
0
<COMMON> 12,352
<OTHER-SE> 600
<TOTAL-LIABILITY-AND-EQUITY> 23,422
<SALES> 22,194
<TOTAL-REVENUES> 22,194
<CGS> 16,167
<TOTAL-COSTS> 21,930
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (389)
<INCOME-PRETAX> 483
<INCOME-TAX> 176
<INCOME-CONTINUING> 307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 307
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
