U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
Commission file number 0-5460
____________________________________________
STOCKER & YALE, INC.
(Name of small business issuer in its charter)
Massachusetts 04-2114473
(State or other jurisdiction of incorporation or organization)
(I.R.S. employer identification no.)
32 Hampshire Road
Salem, New Hampshire 03079
(Address of principal executive offices) (Zip Code)
(603) 893-8778
(Issuer's telephone number)
________________________________________________________________________
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
As of August 18, 1998 there were 3,364,340 shares of the issuer's common
stock outstanding.
Transitional Small Business Disclosure Format (check one): _______Yes
____X___No
Page 1 of 9
<PAGE>
PART I FINANCIAL STATEMENTS
Item 1.1 CONSOLIDATED BALANCE SHEETS
STOCKER & YALE, INC.
<TABLE>
<S> <C> <C>
Assets June 30, 1998 December 31,1997
(unaudited) (audited)
Current assets:
Cash $ 176,021 $ 73,520
Accounts receivable 2,262,624 1,860,624
Prepaid taxes 491,479 579,332
Inventory 6,134,765 4,957,095
Prepaid expenses 321,289 117,354
Total current assets 9,386,178 7,587,925
Property, plant and 4,258,868 3,857,504
equipment, net
Note receivable - 1,000,000
Goodwill, net of 2,602,272 8,453,000
accumulated amortization
Other intangible assets 3,038,248 -
Other assets 95,175 92,322
Total assets $19,380,741 $20,990,751
Liabilities and Stockholders' Investment
Current liabilities:
Current portion of long-term $ 215,912 $ 443,334
debt
Short term debt 750,000 -
Accounts payable 2,986,313 1,858,936
Accrued expenses 872,430 541,668
Withheld taxes 36,248 -
Accrued taxes 10,573 -
Current lease obligations 197,061 89,771
Total current liabilities 5,068,537 2,933,709
Long-term debt 5,222,253 3,809,658
Long-term lease obligations 691,106 223,575
Other long-term liabilities 564,688 564,688
Subordinated notes 1,350,000 1,350,000
Deferred income taxes 1,858,270 876,904
Stockholders' investment
Common stock, par value $0.001
Authorized--10,000,000
Issued and outstanding-
3,364,430 shares at June 30,
1998 and 2,567,894 shares at
December 31, 1997 3,364 2,568
Cumulative translation
adjustment (26,028) -
Paid in capital 13,688,913 10,822,705
Retained earnings/
(accumulated deficit) (9,040,362) 406,944
Total stockholders' investment 4,625,887 11,232,217
Total liabilities and
stockholders' investment $19,380,741 $20,990,751
</TABLE>
<PAGE>
PART I FINANCIAL STATEMENTS
Item 1.2 CONSOLIDATED STATEMENTS OF OPERATIONS
STOCKER & YALE, INC.
(UNAUDITED)
<TABLE>
<S> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Net sales $3,057,442 $2,804,280 $5,492,783 $5,537,942
Cost of sales 1,899,813 1,614,438 3,549,839 3,256,883
Gross profit 1,157,629 1,189,842 1,942,944 2,281,059
Selling expenses 419,297 410,447 765,809 839,357
General and admin-
istrative expenses 959,304 467,458 1,513,031 852,243
Research and
development 196,746 157,241 386,491 331,525
Goodwill Impairment 7,365,662 - 7,365,662 -
Acquired in process
research and
development 1,087,914 - 1,087,914 -
Operating income (8,871,294) 154,696 (9,175,963) 257,934
/(loss)
Interest expense (136,080) (86,871) (250,752) (164,304)
Income/(loss) before
income taxes (9,007,374) 67,825 (9,426,715) 93,630
Income tax expense 160,591 54,500 20,591 92,000
Net income/(loss) (9,167,965) 13,325 (9,447,306) 1,630
Per share information
(1): Basic net income
/(loss) per common
share $ (3.06) $0.01 $ (3.39) $0.00
Weighted-average
number of common shares
outstanding 2,997,812 2,567,894 2,784,790 2,567,894
(2): Diluted net income
/(loss) per common
and dilutive potential
common shares
outstanding $ (3.06) $0.01 $ (3.39) $0.00
Weighted-average number
of common and dilutive
potential common shares
outstanding 2,997,812 2,567,894 2,784,790 2,567,894
</TABLE>
<PAGE>
PART I FINANCIAL STATEMENTS
Item 1.3 CONSOLIDATED STATEMENTS OF CASH FLOWS
STOCKER & YALE, INC.
<TABLE>
<S> <C> <C>
Six Months Ended
June 30
1998 1997
Cash flows from operating activities:
Net income/(loss) (9,447,306) 1,630
Adjustments to reconcile net cash
used in operating activities
Acquired in process research and
development 1,087,914 -
Goodwill impairment 7,365,662 -
Depreciation and amortization 372,499 278,151
Deferred income taxes (272,666) (100,000)
Other changes in assets and
liabilities-
Accounts receivable, net 272,244 (462,899)
Inventories (374,058) (907,371)
Prepaid expenses (195,555) (133,459)
Prepaid taxes 212,758 -
Accounts payable 630,510 40,675
Accrued expenses 207,901 (66,060)
Other assets - (52,166)
Accrued and refundable taxes 10,573 -
Net cash used in
operating activities (129,524) (1,401,499)
Cash flows from investing activities:
Purchases of property, plant and
Equipment (388,099) (323,602)
Acquisition of Lasiris (3,815,234) ______-
Net cash used in investing activities (4,203,333) (323,602)
Cash flows from financing activities:
Line of credit advances 522,000 1,307,053
Danvers Savings Bank financing 750,000 -
Toronto Dominion financing 798,675 -
Proceeds equipment lease financing 503,365 215,450
Payments of bank debt (247,491) (855,457)
Issuance of common stock 10,121 -
Private placement of common stock 1,124,716 -
Receipt of Beverly Hospital
note receivable 1,000,000 -
Net cash provided by financing 4,461,386 667,046
activities
Effect of exchange rate on changes
in cash (26,028) -
Net increase/(decrease) in cash and
cash equivalents 102,501 (1,058,055)
Cash and cash equivalents, beginning
of period 73,520 1,244,418
Cash and cash equivalents, end of period 176,021 186,363
Supplemental disclosure of non-cash
activities
Cash paid for Interest 254,144 184,749
Cash paid for Taxes 5,335 84,200
In connection with the acquisition of Lasiris, the Company issued
444,146 shares of common stock to the selling shareholders of
Lasiris.
</TABLE>
<PAGE>
<PAGE>
PART 1. FINANCIAL STATEMENTS
Notes to Financial Statements
Note 1.
General
The interim consolidated financial statements presented
have been prepared by Stocker & Yale, Inc. (the "Company")
without audit and, in the opinion of the management,
reflect all adjustments of a normal recurring nature
necessary for a fair statement of (a) the results of
operations for the three month and six month periods ended
June 30,1998 and June 30,1997 (b) the financial position at
June 30,1998 and (c) the cash flows for the six month
periods ended June 30,1998 and June 30,1997. Interim
results are not necessarily indicative of results for a
full year.
The consolidated balance sheet presented as of December
31,1997 has been derived from the consolidated financial
statements that have been audited by the Company's
independent public accountants. The consolidated financial
statements and notes are condensed as permitted by Form 10-
QSB and do not contain certain information included in the
annual financial statements and notes of the Company. The
consolidated financial statements and notes included herein
should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form
10-KSB.
Note 2. Acquisition of Lasiris and Purchase Price
Allocation
Overview
On May 13, 1998, Stocker & Yale, Inc. (the "Company")
acquired Lasiris, Inc. ("Lasiris"), a Canadian
manufacturer of industrial lasers for the machine vision
and industrial inspection industries. The Company acquired
Lasiris through Lasiris Holdings, Inc., a newly formed New
Brunswick corporation and a subsidiary of the Company
("LHI"). Lasiris will be operated as a wholly-owned
Canadian subsidiary.
In connection with the acquisition, the stockholders of
Lasiris received an aggregate of approximately $3.2 million
in cash and 444,146 shares of LHI's capital stock which are
exchangeable for shares of the Company's common stock on a
one for one basis. The Company financed the cash portion
of the consideration through (i) a private placement of
350,000 shares of the Company's common stock at a price of
$3.50 per share; (ii) a loan in the amount of $750,000 from
a bank which is secured by a second mortgage interest in
the Company's headquarters; (iii) a loan of approximately
$800,000 pursuant to a credit agreement between the Toronto
Dominion Bank and Lasiris; and (iv) cash in the amount of
$950,000 received pursuant to the prepayment of a note
receivable due to the Company.
Allocation of Purchase Price
The acquisition was accounted for as a purchase, and
accordingly, the initial purchase price and acquisition
costs aggregating approximately $5.5 million have
preliminarily been allocated to the assets acquired, which
consist of approximately $4.0 million in identifiable
assets, approximately $0.4 million in goodwill, and
approximately $1.1 million of in-process research and
development which was charged to operations in the second
quarter of 1998. The purchase price allocations
represent the fair values determined by an independent
appraisal.
The following outlines the allocation of purchase price for
the acquisition of Lasiris.
<TABLE>
<S> <C>
Purchased in-process research and
development $1,087,914
Developed Patented Technology 2,364,122
Trademarks/Tradenames 470,732
Assembled workforce 240,596
Goodwill and Deferred Taxes 1,669,530
---------
5,832,894
Net book value of assets acquired 944,686
---------
6,777,580
Less deferred taxes (1,230,180)
----------
5,547,400
</TABLE>
Further information about the acquisition of Lasiris may be
found in the Company's Form 8-K, which was filed with the
Securities and Exchange Commission (the "SEC") on May 27,
1998., and amended on Form 8-K/A, filed with the SEC on
July 27, 1998.
Note 3. Proforma Financial Information
The following proforma financial information assumes that
the acquisition of Lasiris took place at the beginning of
each respective period, including the related expense
adjustments.
<TABLE>
<S> <C> <C>
Six month periods ended June 30,
1998 1997
Net Revenues $ 7,063,051 $ 7,351,748
Net Income (9,571,952) (156,674)
Earnings per Share $ (3.08) $ (0.05)
Average shares
outstanding 3,108,697 3,012,041
</TABLE>
Note 4. Write Down of Goodwill
In accordance with the provisions of Statement of Financial
Standards (SFAS) No. 121 - "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", the Company periodically assesses the
realizability of its long-lived assets. In addition to
this periodic review, the Company is obliged to initiate
such an assessment in the event of a change in the
Company's assets or in the valuation of its assets. Based
on its most recent assessment, the Company has recorded a
non-recurring, non-cash charge of $7.4 million during the
three months ended June 30, 1998, to write down the carrying
value of its goodwill to its estimated fair value.
On July 14, 1998, the Company announced that it had signed
a non-binding letter of intent to sell its Stilson Division
("Stilson"). As of June 30, 1998 the carrying value of the
Stilson's net assets was $2.0 million plus a portion of the
goodwill recorded in 1989 when Stocker & Yale (the
"Company"), including Stilson, was acquired. This proposed
sale of Stilson required the Company to assess the
realizability of goodwill. There was no allocation of
goodwill to the individual divisions of the Company at the
time of the acquisition in 1989. Accordingly, management
of the Company has evaluated the cash flow generated by
Stilson for the five years preceding and the five years
following the acquisition relative to the cash flow of the
entire Company. Management has also reviewed their
expectations, at the time of the 1989 acquisition, of the
future cash flow of Stilson. Based on this assessment
management has allocated approximately 60% of the goodwill
resulting from the 1989 acquisition to Stilson, $4.9
million net of amortization at June 30, 1998. Therefore
the net assets of Stilson at June 30, 1998 inclusive of
goodwill was approximately $6.9 million. The purchase
price for the net assets of Stilson set forth in the letter of
intent is $3.0 million. Accordingly, at June 30, 1998 the
Company has written down the carrying value of the net
assets of Stilson to $3.0 million and recorded a charge of
$3.9 million which is included in the goodwill impairment
in the three-month period ended June 30, 1998.
After allocating the portion of the goodwill associated
with Stilson, the Company assessed the realizability of the
remaining goodwill from the 1989 acquisition, $3.5 million,
net of amortization as of June 30, 1998. Based upon the
changes in the Company since 1989 and the recent history of
losses, the Company has concluded that the realizability of
the remaining goodwill is uncertain and that the carrying
value should be written down to zero. As a result of this
assessment the Company has recorded a charge of $3.5
million which is included in the goodwill impairment in the
three months ended June 30, 1998 to write down the remaining
goodwill from the 1989 acquisition not allocated to
Stilson.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND OPERATING RESULTS
This Quarterly Report on Form 10-QSB contains forward-
looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could
differ materially from those set forth in the forward-
looking statements.
Results of Operations
The following discussion should be read in conjunction with
the attached consolidated financial statements and notes
thereto and with the Company's audited financial statements
and notes thereto for the fiscal year ended December 31,
1997
Three-month periods ended June 30, 1998 and 1997
On May 13, 1998, the Company completed its purchase of all
of the outstanding stock of Lasiris, Inc., a Canadian
manufacturer of industrial lasers for the machine vision
and industrial inspection industries. The Company acquired
Lasiris through Lasiris Holdings, Inc., a newly formed New
Brunswick corporation and a subsidiary of the Company
("LHI"). The acquisition was accounted for as a purchase,
and the purchase price was allocated pursuant to an
independent appraisal. The three month results include
the effects of increased goodwill amortization totaling
$20,196, increased depreciation of acquired assets totaling
$37,202, as well as the results of Lasiris operations for
the period since the acquisition date. In addition,
$1,087,914 of in-process research & development projects of
Lasiris was charged against income. This portion of the
assets acquired were identified as projects that had not
yet reached technological feasibility and that, until
completion of the development, have no alternative future
use.
In connection with the acquisition, the stockholders of
Lasiris received an aggregate of approximately $3.2 million
in cash and 444,146 shares of LHI's capital stock which are
exchangeable for shares of the Company's common stock on a
one for one basis. The Company financed the cash portion
of the consideration through (i) a private placement of
350,000 shares of the Company's common stock at a price of
$3.50 per share; (ii) a loan in the amount of $750,000 from
a bank which is secured by a second mortgage interest in
the Company's headquarters; (iii) a loan of approximately
$800,000 pursuant to a credit agreement with the Toronto
Dominion Bank and Lasiris; and (iv) cash received of
$950,000 pursuant to the prepayment of a note receivable
due to the Company. The acquisition was accounted for as a
purchase, and accordingly, the initial purchase price and
acquisition costs aggregating approximately $5.5 million
have preliminarily been allocated to the assets acquired,
which consist of approximately $4.0 million in identifiable
assets, approximately $0.4 million in goodwill, and
approximately $1.1 million of in-process research and
development which was charged to operations in the second
quarter of 1998. The purchase price allocations represent
the fair values determined by an independent appraisal.
The following outlines the allocation of purchase price for
the acquisition of Lasiris.
<TABLE>
<S> <C>
Purchased in-process research and
development $ 1,087,914
Developed Patented Technology 2,364,122
Trademarks/Tradenames 470,732
Assembled workforce 240,596
Goodwill and Deferred Taxes 1,669,530
---------
5,832,894
Net book value of assets acquired 944,686
---------
6,777,580
Less deferred taxes (1,230,180)
-----------
5,547,400
</TABLE>
Consolidated net revenues increased 9% from $2,804,280 in
the second quarter of 1997 to $3,057,442 in the second
quarter of 1998. Despite significantly reduced sales to
Southeast Asia, Lighting Products revenues increased 72%
from $1,003,846 to $1,726,119 due to the addition of
$676,995 in laser lighting revenues contributed by Lasiris
and $123,214 in microscope lighting revenues contributed by
the Singapore subsidiary. Lighting Products revenue
further benefited from fiber optic lighting sales which
increased from $81,762 to $187,240. Sales of the Company's
Military Products decreased overall from $460,923 in the
second quarter of 1997 to $109,111 in the second quarter of
1998. Civilian sales of Military Products decreased
$148,987 from $236,693 to $87,706 reflecting the absence in
the current year of a large contract with a direct mail
marketing firm which favorably impacted 1997, and also
reflecting the closing in December, 1997 of the Company's
Hong Kong subsidiary which sold such products. Sales of
Military Products to the U.S. Government decreased $112,531
from $133,936 in the second quarter 1997 to $21,405 in the
second quarter 1998, as peacetime demand for military
supplies continues to diminish. Sales of Machine Tool and
Accessories decreased from $1,000,193 in the second quarter
of 1997, to $833,739 in the second quarter of 1998, due to
a slowdown in distributor orders. Sales of Printer and
Recorder Products increased from $339,318 in the second
quarter of 1997, to $388,473 in the second quarter of 1998.
Gross profit decreased $32,213 from $1,189,842 in the
second quarter of 1997 to $1,157,629 in the second quarter
of 1998, as personnel costs increased and the Company
experienced reduced revenues at the Company's Stilson and
Salem Divisions. Selling Expenses increased $28,850, with
Lasiris selling expenses of $101,252 offsetting $72,402 in
reduced costs of sales personnel in other divisions.
Research and Development Expenses increased by $39,505
primarily reflecting the amount of such expenses at
Lasiris. General and Administrative costs increased
$491,844 from $467,458 in the second quarter of 1997 to
$959,304 in the second quarter of 1998. $321,335 of this
increase is attributable to expenses reported by the
Company's new Singapore and Lasiris subsidiaries and
associated corporate expenses, with the balance due largely
to increased personnel costs, legal expenses and bank
charges. Interest expense increased $49,209 as a result of
the Company's increased indebtedness.
In accordance with the provisions of Statement of Financial
Standards (SFAS) No. 121 - "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", the Company periodically assesses the
realizability of its long-lived assets. In addition to
this periodic review, the Company is obliged to initiate
such an assessment in the event of a change in the
Company's assets or in the valuation of its assets. Based
on its most recent assessment, the Company has recorded a
non-recurring, non-cash charge of $7.4 million during the
three months ended June 30, 1998, to write down the carrying
value of its goodwill to its estimated fair value.
On July 14, 1998, the Company announced that it had signed
a non-binding letter of intent to sell its Stilson Division
("Stilson"). As of June 30, 1998 the carrying value of the
Stilson's net assets was $2.0 million plus a portion of the
goodwill recorded in 1989 when Stocker & Yale (the
Company), including Stilson, was acquired. This proposed
sale of Stilson required the Company to assess the
realizability of goodwill. There was no allocation of
goodwill to the individual divisions of the Company at the
time of the acquisition in 1989. Accordingly, management
of the Company has evaluated the cash flow generated by
Stilson for the five years preceding and the five years
following the acquisition relative to the cash flow of the
entire Company. Management has also reviewed their
expectations, at the time of the 1989 acquisition, of the
future cash flow of Stilson. Based on this assessment
management has allocated approximately 60% of the goodwill
resulting from the 1989 acquisition to Stilson, $4.9
million net of amortization at June 30, 1998. Therefore
the net assets of Stilson at June 30, 1998 inclusive of
goodwill was approximately $6.9 million. The purchase
price for the net assets of Stilson set forth in the letter of
intent is $3.0 million. Accordingly, at June 30, 1998 the
Company has written down the carrying value of the net
assets of Stilson to $3.0 million and recorded a charge of
$3.9 million which is included in the goodwill impairment
in the three-month period ended June 30, 1998.
After allocating the portion of the goodwill associated
with Stilson, the Company assessed the realizability of the
remaining goodwill from the 1989 acquisition, $3.5 million,
net of amortization as of June 30, 1998. Based upon the
changes in the Company since 1989 and the recent history of
losses, the Company has concluded that the realizability of
the remaining goodwill is uncertain and that the carrying
value should be written down to zero. As a result of this
assessment the Company has recorded a charge of $3.5
million which is included in the goodwill impairment in the
three months ended June 30, 1998 to write down the remaining
goodwill from the 1989 acquisition not allocated to
Stilson.
Six-month Periods Ended June 30, 1998 and 1997
On May 13, 1998, the Company completed its purchase of all
of the outstanding stock of Lasiris, Inc., a Canadian
manufacturer of industrial lasers for the machine vision
and industrial inspection industries. The Company acquired
Lasiris through Lasiris Holdings, Inc., a newly formed New
Brunswick corporation and a subsidiary of the Company
("LHI"). The acquisition was accounted for as a purchase,
and the purchase price was allocated pursuant to an independent
appraisal. The six month results include the effects of
increased goodwill amortization totaling $20,196, increased
depreciation of acquired assets totaling $37,202, as well as
the results of Lasiris' operations for the period since the
acquisition date. In addition, $1,087,914 of in-process research &
development projects of Lasiris was charged against income.
This portion of the assets acquired were identified as
projects that had not yet reached technological feasibility
and that, until completion of the development, have no
alternative future use.
Consolidated net revenues decreased from $5,537,942 in the
second quarter of 1997 to $5,492,783 in the second quarter
of 1998. Despite significantly reduced sales to Southeast
Asia, Lighting Products revenues increased 38% from
$1,966,070 to $2,714,491 due to the addition of $676,995 in
laser lighting revenues contributed by Lasiris and $123,214
in microscope lighting revenues contributed by the
Singapore subsidiary. Lighting Products revenue further
benefited from fiber optic lighting sales which increased
from $129,995 to 371,950. Sales of the Company's Military
Products decreased overall from $832,564 in 1997 to
$206,681 in 1998. Civilian sales of Military products
decreased $511,627 from $676,067 in second quarter 1997 to
$164,440 in the second quarter 1998, reflecting the absence
in the current year of a large contract with a direct mail
marketing firm which favorably impacted 1997, and also
reflecting the closing in December, 1997 of the Company's
Hong Kong subsidiary which sold such products. Sales of
Military Products to the U.S. government decreased $114,256
from $156,497 in the second quarter 1997 to $42,241 in the
second quarter 1998, as peacetime demand for military
supplies continues to diminish. Sales of Machine Tool and
Accessories decreased from $1,996,717 in the second quarter
of 1997 to $1,822,307 in the second quarter of 1998 due to
a slowdown in distributor orders. Sales of Printer and
Recorder Products increased from $742,591 in the second
quarter of 1997 to $749,304 in the second quarter of 1998.
Gross profit decreased $338,115 from $2,281,059 in the
second quarter of 1997 to $1,942,944 in the second quarter
of 1998, as personnel costs increased against reduced
revenues at the Company's Stilson and Salem Divisions.
Selling Expenses decreased $73,548, as a result of reduced
selling costs at the Salem and Stilson Divisions, a portion
of which reduction was offset by the addition of Lasiris
selling expenses totaling $101,252. Research and
Development Expenses increased $54,966 of which $37,216
resulted from the addition of such expenses at Lasiris.
General and Administrative costs increased $660,788 from
$852,243 in the second quarter of 1997 to $1,513,031 in the
second quarter of 1998. $321,335 of this increase is
attributable to expenses reported by the Company's new
Singapore and Lasiris subsidiaries and associated corporate
expenses, with the balance due largely to increased
personnel costs of $199,194, increased legal and audit
expenses of $143,128, a $50,000 discount granted for the
prepayment of a note due to the Company, and increased bank
charges of $42,495. Interest expense increased $86,448 as
a result of the Company's increased indebtedness.
Liquidity and Capital Resources
The Company finances its operations primarily through third
party credit facilities and cash from operations. Net cash
used in operations was ($129,524) for the six months ended
June 30, 1998 and ($1,401,499) for the six months ended
June 30, 1997.
The Company's primary third party financing relationship is
with Fleet National Bank of Massachusetts, N.A. (the
"Bank"). The initial Credit Agreement between the Company
and the Bank, dated March 6, 1995 (the "Credit Agreement"),
provided for a Revolving Line of Credit Loan (the
"Revolving Loan") and a Long Term Loan (the "Term Loan")
both due March 31, 1998. The Short Term Loan was paid as
agreed in August 1995. As of April 1, 1998, the Company and
the Bank entered into an agreement to extend the maturity
dates of its Revolving Loan and Term, Loan to January 2,
1999. The Revolving Loan and the Long Term Loan bear
interest at the Bank's base rate plus 1% through June 30,
1998 and at the Bank's base rate plus 2% from July 1, 1998
through the maturity date. At June 30, 1998 there was a
total of $2,884,454 borrowed under the Credit Agreement, of
which $1,789,029 pertained to the Revolving Loan. The
available credit on the revolving loan as of June 30, 1998
was $292,156.65. The Company is exploring financing
alternatives and intends to refinance before maturity.
Under the terms of the Credit Agreement, the Company is
required to comply with a quarterly minimum net income
covenant. As of June 30, 1998 the Company was not in
compliance with this covenant, and on July 21, 1998 the
Bank granted a waiver of the net income covenant for the
quarter ended June 30, 1998.
In connection with the Lasiris acquisition, the
stockholders of Lasiris received 444,146 shares of capital
stock of Lasiris Holdings, Inc., a newly formed New
Brunswick corporation and a subsidiary of the Company,
which are exchangeable for shares of the Company's common
stock on a one for one basis and cash in an aggregate
amount of approximately 3.3 million. The aggregate value
of the shares was deemed to be $1,732,167 as of May 13,
1998. The Company financed a portion of the cash
consideration paid for Lasiris through a private placement
of 350,000 shares of the Company's common stock at a price
of $3.50 per share, which generated net proceeds to the
Company of $1,124,716 after offering expenses of $100,284.
On May 13, 1998, the Company entered into a $750,000 second
mortgage loan with Danvers Savings Bank (the "Danvers
Loan"). This loan bears interest at a rate of 11%,
requires monthly payments of interest only, and matures on
May 13, 1999. The Danvers Loan generated net proceeds
after expenses of $731,196, which were used to finance a
portion of the Lasiris acquisition.
Also on May 13, 1998, Lasiris entered into a credit
agreement with Toronto Dominion Bank ("TD Bank"). The
credit agreement provides for (i) a $1,000,000 CDN
Operating Line of Credit (the "TD Line of Credit"); (ii) a
$1,000,000 CDN Term Loan (the "TD 4 Year Term Loan"); (iii)
a $83,333 CDN Term Loan (the "TD Two Year Term Loan"); and
(iv) a $4,461 CDN Letter of Guarantee of (the "Letter of
Guarantee"). The TD Line of Credit bears interest at 1%
over the TD Bank prime rate, requires monthly payments of
interest only, and is payable on demand. As of June 30,
1998, there were no borrowings on the TD Line of Credit.
The TD 4 Year Term Loan bears interest at 2% over the TD
Bank prime rate, matures on May 13, 2002, and requires
monthly principal payments of $20,833CDN (approximately
$14,500US) plus interest. As of June 30, 1998, the
outstanding balance on the TD 4-Year Term Loan was
$979,966CDN ($667,650 US). The TD Two Year Term Loan
bears interest at 2% over the TD Bank prime rate, matures
on May 13, 2000, and requires monthly principal payments of
$4,167 CDN (approximately $2,900US) plus interest. As of
June 30, 1998, the outstanding balance on the TD 2-Year
Term Loan was $79,167CDN ($53,936 US).
On May 7, 1998, Beverly Hospital Corporation prepaid its
$1,000,000 Note Receivable due to the Company, less a
$50,000 discount for early payment. The proceeds were used
to finance a portion of the Lasiris acquisition.
On May 20, 1997, the Company entered into a one-year
equipment line of credit agreement with Granite State Bank
to finance capital equipment related to new product
development. Under the terms of this agreement, advances
under the line will be converted quarterly into a series of
five year notes, not to exceed $500,000 in the aggregate,
which will bear interest at the prime rate plus 0.75%. As
of June 30, 1998, the Company had outstanding debt of
$346,929 under this line of credit.
Accounts payable increased $1,110,010 from December 31,
1997 to June 30, 1998 of which $698,902 results from the
Lasiris acquisition and the balance is attributable to
increased payment cycles. Company expenditures for capital
equipment were $388,099 in the first six months of 1998 as
compared to $323,602 in the first six months of 1997. The
majority of the 1998 expenditures related to the purchase
of new CNC machinery at the Company's Stilson Division.
On July 14, 1998, the Company announced that it had signed
a non-binding letter of intent to sell its Stilson Division
to De-Sta-Co Industries. Subject to the execution of a
definitive purchase and sale agreement and a due diligence
review of the Stilson Division, De-Sta-Co will acquire the
assets of Stilson for $3 million cash, assumption of
approximately $1 million of operating liabilities and semi-
annual payments of 2% of future Stilson product line
revenues for three years. Although the parties anticipate
consummating the sale on or before September 30, 1998,
there can be no assurance as to when such a transaction
would close, if at all, or as to the definitive terms of
such a transaction.
The Company contemplates that it may seek to raise
additional capital by the issuance of equity the proceeds
of which may be used among other things in connection with
refinancing its senior credit facility. The Company's
existing Credit Agreement with the Bank will expire on
January 1, 1999 by its terms. While the Company is
currently exploring establishing a replacement credit
facility with various commercial lenders, the Company can
give no assurance as to whether such a replacement credit
facility will be established or as to the terms of such
credit facility. Assuming the continued availability of
the Company's Credit Agreement with the Bank or a
replacement credit facility, the Company believes that its
available financial resources are adequate to meet its
foreseeable working capital, debt service and capital
expenditure requirements.
Year 2000 Issues
The Company has undertaken a plan to address the potential
impact to its business of "year 2000 issues" (i.e., issues
that may arise as a result of computer programs that use
only the last two, rather than all four, digits of the
year). The plan addresses Internal Matters, which are
under the Company's operation and over which the Company
exercises some control, and External Matters, which are
outside the Company's control and influence. The Company
has elected first to address Internal Matters, in the
belief that most other companies and institutions are
similarly working to resolve their own mission-critical
issues and that as a result an early assessment of External
Matters would be premature.
The Company has completed a review of its products and
product components, its information systems, and its
ancillary systems (such as test equipment, communication
equipment, and security systems) in order to identify areas
of exposure to year 2000 issues. The review concluded that
the Company's products and product components are
substantially free from year 2000 risks. The Company's
Engineering department is working with the suppliers of
several product components to ascertain whether identified
potential risks have been addressed and when they will be
compliant.
The Company's information systems rely upon commercial
computer software provided by independent software vendors.
The Company's primary information system software, which
consists of computer operating system, an integrated
manufacturing system and a payroll package, was upgraded in
1997 so that it would function with the Company's upgraded
computer system hardware. The cost for the new software
was approximately $80,000. The providers of these primary
information system software packages have represented that
these systems are fully Year 2000 compliant. The Company
also utilizes a number of personal computers which are
operated independently (i.e.,not linked by a network).
These computers use a wide variety of different software
packages and are of various ages. The Company has compiled
an inventory of these personal computers, their hardware,
as well as their operating systems and installed
application software packages. This information will be
assessed initially to determine if suppliers represent
that they are year 2000 compliant. The Company estimates
that it has completed approximately 75 % of this
assessment. Following the assessment phase, the Company
will undertake to upgrade or replace software and, if
necessary, will replace personal computers so that all
equipment and software is represented compliant by the
providers. The Company estimates that the cost for such
upgrades and replacements will not exceed $30,000.
Subsequent phases will include obtaining written
certification of year 2000 testing by providers followed by
our own in-house year 2000 tests.
The Company's ancillary systems are largely provided by
third parties, most of which have not yet completed their
own assessments of year 2000 exposure. The Company will
continue to solicit such information from these third
parties. Due to the incompleteness of this information,
contingency plans have not yet been finalized.
The Company estimates that it has completed approximately
45% of its year 2000 Plan regarding Internal Matters and
estimates that it has completed approximately 20% of its
overall year 2000 plan.
<PAGE>
PART II
ITEM 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Stocker & Yale, Inc.
was held on Tuesday, May 5, 1998, for the purpose of (i)
electing the directors of the Company to serve until the
next Annual Meeting of Shareholders, (ii) increasing by
150,000 shares the number of shares of common stock of the
Company authorized and available for issuance under the
Stocker & Yale 1996 Stock Option and Incentive Plan, and
(iii) appointing Arthur Andersen LLP as the Company's
independent public accountants. The following table
describes the results of the shareholder votes.
Election of the following directors to serve until the next
Annual Meeting.
Votes in Favor Votes Withheld
Mark W. Blodgett 1,989,200.2 0
James Bickman 1,989,200.2 0
Alex W. Blodgett 1,989,200.2 0
Clifford L. Abbey 1,989,200.2 0
Steven E. Karol 1,989,200.2 0
John M. Nelson 1,989,200.2 0
Increase by 150,000 the number of shares of the Company's
common stock authorized and available for issuance under
the Stocker & Yale 1996 Stock Option and Incentive Plan.
Votes in Favor Votes Against Votes Abstaining
1,300,935.2 0 560
Appointment of Arthur Andersen LLP as the Company's
independent public accountants.
Votes in Favor Votes Against Votes Abstaining
1,988,520.2 60 620
ITEM. 5 OTHER INFORMATION
Recent Events
On July 14, 1998, the Company announced that it had signed
a non-binding letter of intent to sell its Stilson Division
to De-Sta-Co Industries. Subject to the execution of a
definitive purchase and sale agreement and a due diligence
review of the Stilson Division, De-Sta-Co will acquire the
assets of Stilson for $3 million cash, assumption of
approximately $1 million of operating liabilities and semi-
annual payments of 2% of future Stilson product line
revenues for three years. Although the parties anticipate
consummating the sale on or before September 30, 1998,
there can be no assurance as to when such a transaction
would close, if at all, or as to the definitive terms of
such a transaction.
ITEM. 6 EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) The following is a complete list of Exhibits filed as
part of this Form 10-QSB:
Exhibit
Number
Description
* 2.1 Offer of Purchase and Sale by and among
Stocker & Yale, Inc., Lasiris, Inc., the stockholders of
Lasiris, Inc. and certain other parties named therein,
dated March 14, 1998.
10.1 (k) Amended and Restated Revolving Loan Agreement,
dated April 1, 1998, by and between Stocker & Yale, Inc.
and Fleet National Bank
10.1 (l) Modification and Extension Agreement, dated April
1, 1998 by and between Stocker & Yale, Inc. and Fleet
National Bank
10.1 (m) Third Party Pledge Agreement, dated April 1,
1998, by and between Stocker & Yale and Fleet National Bank
10.1 (n) Waiver of Certain Provisions of the Credit
Agreement dated July 21, 1998.
10.1 (o) Consent Letter dated May 11, 1998 relating to
Lasiris Transaction.
10.15(a) Promissory Note, due May 13, 1999, issued by the
Company to Danvers Savings Bank
10.15(b) Mortgage Assignment of Leases and Rents &
Security Agreement, dated May 13, 1998 granted by the
Company to Danvers Savings Bank
* 10.16(a) Voting, Support and Exchange Agreement
between Lasiris Holding, Inc., Stocker & Yale, Inc. and the
stockholders of Lasiris, Inc. and certain other parties
named therein, dated as of May 13, 1998.
* 10.16(b) Employment Agreement by and among Lasiris,
Inc., Stocker & Yale, Inc. and Alain Beauregard, dated as
of May 13, 1998.
* 10.16(c) Employment Agreement by and among Lasiris,
Inc., Stocker & Yale, Inc. and Luc Many, dated as of May
13, 1998.
* 10.16(d) Lasiris, Inc. Executive Incentive
Compensation Plan
27.1 Financial Data Schedule
(b) The Company's Form 8-K relating to the acquisition of
Lasiris, Inc. was filed with the Securities and Exchange
Commission on May 27, 1998.
* Incorporated by reference to the Company's Form 8K
filed May 27, 1998.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act,
the registrant caused this report to be signed on its
behalf by the undersigned, thereto duly authorized.
Stocker & Yale, Inc.
August 18, 1998
/s/ Mark W. Blodgett
Mark W. Blodgett, Chairman and Chief Executive Officer
August 18, 1998
/s/ Susan A.H. Sundell
Susan A.H. Sundell, Senior Vice President-Finance and
Treasurer
<PAGE>
Exhibit 10.1 (k)
AMENDED AND RESTATED
REVOLVING TERM NOTE
$2,500,000 As of April 1, 1998
Boston, Massachusetts
For value received, the undersigned (the "Borrower )
promises to pay to Fleet National Bank ("Bank"), or order,
the principal amount of Two Million Five Hundred Thousand
Dollars and Zero Cents ($2,500,000) on or before January 2,
1999, with interest from the date hereof on the said
principal balance from time to time outstanding. The
aggregate principal balance outstanding shall bear interest
thereon at a per annum rate equal to one percent (1%) above
the rate from time to time established and made effective
by the Bank as its Prime Rate (as hereinafter defined)
through June 30, 1998 and two percent (2%) above such Prime
Rate thereafter, payable monthly in arrears on the first
day of each month, commencing May 1, 1998.
Prime Rate means the rate per annum from time to
time established by Bank as the Prime Rate and made
available by the Bank at its main office or, in the
discretion of the Bank, the base, reference or other rate
then designated by Bank for general commercial loan
reference purposes, it being understood that such rate is a
reference rate, not necessarily the lowest, established
from time to time, which serves as the basis upon which
effective interest rates are calculated for loans making
reference thereto. The effective interest rate applicable
to undersigned's loans shall change on the date of each
change in the Prime Rate.
This Note is an amendment and restatement of that
certain Revolving Note, dated March 6, 1995 (the "Original
Note"), by the undersigned in favor of the Bank and shall
be secured to the same extent and with the same priority as
the Original Note.
Principal and interest shall be payable at the
Bank's main office in lawful money of the United States of
America without set-off, deduction or counterclaim.
Interest shall be calculated on the basis of actual number
of days elapsed and a 360-day year.
This Note is a revolving note and subject to the
foregoing the Borrower may, at its option, at any time
prior to demand borrow, pay, prepay and reborrow hereunder,
all in accordance with the provisions hereof and of any and
all other agreements between the Borrower and the Bank
related hereto; provided, however, that the principal
balance outstanding shall at no time exceed the face amount
of the Note.
At the option of the holder, this Note shall
become immediately due and payable without notice or demand
upon the occurrence at any time of any Event of Default
under the Credit Agreement dated March 5, 1995, executed by
Borrower in favor of Bank and hereby incorporated, with all
of its amendments, by reference.
Any payments received by the Bank on account of
this Note prior to demand shall be applied first, to any
costs, expenses or charges then owed to the Bank by the
Borrower, second, to accrued and unpaid interest; and
third, to the unpaid principal balance hereof. Any payments
so received after demand shall be applied in such manner as
the Bank may determine. The Borrower hereby authorizes the
Bank to charge any deposit account which the Borrower may
maintain with the Bank for any payment required hereunder.
The Borrower represents to the Bank that the
proceeds of this Note will not be used for personal, family
or household purposes.
Any and all deposits or other sums at any time
credited by or due to the undersigned or any endorser or
guarantor hereof from the Bank or any of its banking or
lending affiliates, or any bank acting as a participant
under any loan arrangement between the Bank and the
Borrower, any endorser or guarantor
<PAGE>
__
hereof, and any cash, securities, instruments or other
property of the undersigned in the possession of the Bank
or any of its banking or lending affiliates, or any bank
acting as a participant under any loan arrangement between
the Bank and the Borrower, any endorser or guarantor
hereof, whether for safekeeping or otherwise, or in transit
to or from the Bank or any of its banking or lending
affiliates or any such participant, or in the possession of
any third party acting on the Bank's behalf (regardless of
the reason the Bank had received same or whether the Bank
has conditionally released the same) shall at all times
constitute security for all of the liabilities and
obligations of the undersigned and any endorser and
guarantor hereof to the Bank and may be applied or set off
against such liabilities and obligations of the undersigned
or any endorser or guarantor hereof to the Bank at any
time, whether or not such are then due, whether or not
demand has been made and whether or not other collateral is
then available to the Bank.
No delay or omission on the part of the holder in
exercising any right hereunder shall operate as a waiver of
such right or of any other right of such holder, nor shall
any delay, omission or waiver on any one occasion be deemed
a bar to or waiver of the same or any other right on any
future occasion. The Borrower and every other maker and
every endorser or guarantor of this Note, regardless of the
time, order or place of signing, waives presentment,
demand, protest and notices of every kind and assents to
any extension or postponement of the time of payment or any
other indulgence, to any substitution, exchange or release
of collateral, and to the addition or release of any other
party or person primarily or secondarily liable. The
Borrower and each endorser and guarantor of this Note waive
any rights to any homestead exemptions on record as of the
date of this Note respecting any premises under the
provisions of Chapter 188, Section 1, of the General Laws
of Massachusetts.
The Borrower and each endorser and guarantor of
this Note shall indemnify, defend and hold the Bank and its
directors, officers, employees, agents and attorneys
harmless against any claim brought or threatened against
the Bank by the Borrower, by any endorser or guarantor, or
by any other person (as well as from attorneys' reasonable
fees and expenses in connection therewith) on account of
the Bank's relationship with the Borrower or any endorser
or guarantor hereof (each of which may be defended,
compromised, settled or pursued by the Bank with counsel of
the Bank's selection, but at the expense of the Borrower
and any endorser and/or guarantor), except for any claim
arising out of the gross negligence or willful misconduct
of the Bank.
The Borrower and each endorser and guarantor of
this Note agree to pay, upon demand, costs of collection of
the principal of and interest on this Note, including
without limitation reasonable attorneys' fees. Upon the
occurrence of an Event of Default, interest shall accrue at
a rate per annum equal to the aggregate of eighteen percent
(18%) plus the rate provided for herein.
This Note shall be binding upon the Borrower and
each endorser and guarantor hereof and upon their
respective heirs, successors, assigns and legal
representatives, and shall inure to the benefit of the Bank
and its successors, endorsees and assigns.
The liabilities of the Borrower and any endorser
or guarantor of this Note are joint and several; provided,
however, the release by the Bank of the Borrower or any one
or more endorser or guarantor shall not release any other
person obligated on account of this Note. Any and all
present and future debts of the Borrower to any endorser or
guarantor of this Note are subordinated to the full payment
and performance of all present and future debts and
obligations of the Borrower to the Bank. Each reference in
this Note to the Borrower, any endorser, and any guarantor,
is to such person individually and also to all such persons
jointly. No person obligated on account of this Note may
seek contribution from any other person also obligated,
unless and until all liabilities, obligations and
indebtedness to the Bank of the person from whom
contribution is sought have been satisfied in full. The
release or compromise by the Bank of any collateral shall
not release any person obligated on account of this Note.
The Borrower and each endorser and guarantor
hereof each authorizes the Bank to complete this Note if
delivered incomplete in any respect. A photographic or
other reproduction of this Note may be made by the Bank,
and any such reproduction shall be admissible in evidence
with the same effect of the original itself in any judicial
or administrative proceeding, whether or not the original
is in existence.
This Note is delivered to the Bank at one of its
offices in Massachusetts, shall be governed by the
<PAGE>
laws of the Commonwealth of Massachusetts, and shall take
effect as a sealed instrument.
The Borrower and each endorser and guarantor of
this Note each irrevocably submits to the nonexclusive
jurisdiction of any federal or state court sitting in
Massachusetts, over any suit, action or proceeding arising
out of or relating to this Note. Each Borrower, endorser or
guarantor irrevocably waives, to the fullest extent it may
effectively do so under applicable law, any objection it
may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court
and any claim that the same has been brought in an
inconvenient forum. Each Borrower, endorser or guarantor
irrevocably appoints the Secretary of State of the
Commonwealth of Massachusetts as its authorized agent to
accept and acknowledge on its behalf any and all process
which may be served in any such suit, action or proceeding,
consents to such process being served (i) by mailing a copy
thereof by registered or certified mail, postage prepaid,
return receipt requested, to such Borrower's, endorser's or
guarantor's address shown below or as notified to the Bank
and (ii) by serving the same upon such agent, and agrees
that such service shall in every respect be deemed
effective service upon such Borrower, endorser or
guarantor.
EACH BORROWER, ENDORSER AND GUARANTOR AND BANK
EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND
AFTER AN OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, WAIVE
ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING IN CONNECTION WITH THIS NOTE, ALL OF THE
OBLIGATIONS OF EACH BORROWER TO THE BANK, AND ALL MATTERS
CONTEMPLATED HEREBY AND DOCUMENTS EXECUTED IN CONNECTION
HEREWITH. EACH BORROWER, ENDORSER AND GUARANTOR CERTIFIES
THAT NEITHER THE BANK NOR ANY OF ITS REPRESENTATIVES,
AGENTS OR COUNSEL HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE BANK WOULD NOT IN THE EVENT OF ANY SUCH PROCEEDING
SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
Executed as an instrument under seal as of April
1, 1998.
Witness Borrower:
Stocker & Yale, Inc.
By:/s/ Doreen Shane By:/s/ Susan Sundell
Susan Hojer Sundell
Chief Financial Officer
32 Hampshire Road
Salem, New Hampshire
03079
<PAGE>
Exhibit 10.1(l)
MODIFICATION AND EXTENSION AGREEMENT
This MODIFICATION AND EXTENSION AGREEMENT entered
into at Boston, Massachusetts, as of April 1, 1998, between
Stocker & Yale, Inc., a Massachusetts corporation, with an
address of 32 Hampshire Road, Salem, New Hampshire 03079
(the "Borrower") and Fleet National Bank, a national
banking association with an address of One Federal Street,
Boston, Massachusetts 02211, as successor in interest to
Shawmut Bank, N.A., (collectively, the term "Bank" shall
refer to Shawmut Bank, N.A. and its successor in interest,
Fleet National Bank).
WHEREAS, the Bank established a revolving line of
credit (the "Revolving Loan") for Borrower which matures on
March 31, 1998 (the "Maturity Date") respecting which Bank
agreed to Lend to Borrower upon Borrower's request, but
subject to the terms and conditions set forth in various
loan documents, up to Four Million and Zero Cents
($4,000,000) (the "Revolving Loan Amount"). The Revolving
Loan is evidenced by that certain Revolving Note, dated
March 6, 1995 (the "Revolving Note"), by the Borrower in
favor of the Bank in the face amount of the Revolving Loan
Amount.
WHEREAS, the Bank has made a term loan to the
Borrower in the original principal amount of $2,767,000
(the "Term Loan") evidenced by that certain Term Note,
dated March 6, 1995 (the "Term Note"), by the Borrower in
favor of the Bank in the original principal amount of
$2,767,000 which matures on March 1, 2000 (the "Term Loan
Maturity Date").
WHEREAS, in connection with the Revolving Loan
and the Term Loan, the Borrower executed and delivered to
the Bank, including without limitation, that certain Credit
Agreement between Borrower and Bank, dated as of March 6,
1995 and as amended thereafter (the "Credit Agreement"),
that certain Security Agreement executed by Borrower in
favor of Bank, dated as of March 6, 1995 (the "Security
Agreement"), that certain Patent Assignment executed by
Borrower in favor of Bank, dated as of March 6, 1995 (the
"Patent Assignment"), that certain Trademark Assignment
executed by Borrower in favor of Bank, dated as of March 6,
1995 (the "Trademark Assignment"), that certain Michigan
Mortgage granted by Borrower in favor of Bank, dated as of
March 6, 1995 (the "Michigan Mortgage"), and that certain
Michigan Assignment of Rents and Leases granted by Borrower
in favor of Bank, dated as of March 6, 1995 (the "Michigan
Assignment of Rents and Leases"; and collectively, along
with the Revolving Note, the Term Note, the Credit
Agreement, the Security Agreement, the Patent Assignment,
the Trademark Assignment, the Michigan Mortgage, the
Michigan Assignment of Rents and Leases and any and all
other documents, agreements, instruments, certificates,
amendments or renewals executed and delivered to the Bank
in connection with the Revolving Loan and/or the Term Loan
referred to hereinafter as the "Loan Documents."
WHEREAS, to secure the Borrower's obligations to
the Bank, including without limitation, under the Revolving
Note, the Term Note and the other Loan Documents, the
Borrower pledged to and granted in favor of the Bank a
security interest, assignment, and/or mortgage in any and
all goods, assets and properties of the Borrower, including
without limitation, (a) all accounts receivable; (b) all
goods, including without limitation, inventory, machinery
and equipment (subject to rights of certain equipment
financiers); (c) all general intangibles; (d) all patents;
(e) all trademarks; and (f) certain real property located
at 34775 Commerce Road, Fraser, Michigan (collectively,
along with any other collateral securing the Borrower's
obligations to the Bank, the "Collateral )
WHEREAS, the Borrower has requested that the Bank
modify the terms of the Term Note and the Revolving Note as
set forth herein and extend the Revolving Loan Maturity
Date until January 2, 1999 (the New Revolving Loan Maturity
Date").
<PAGE>
WHEREAS, the Bank is willing to modify the terms
of the Term Note and Revolving Note as set forth herein and
extend the Revolving Loan Maturity Date until the New
Revolving Loan Maturity Rate, but only upon the terms and
conditions set forth in this Agreement.
NOW THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the Bank and the Borrower mutually
agree as follows:
1. Ratification. All of the terms, covenants,
provisions, representations, warranties, and conditions of
the Loan Documents, as amended or modified hereby, are
ratified, acknowledged, confirmed, and continued in full
force and effect as if fully restated herein.
2. Collateral. The Borrower confirms and
ratifies its continuing mortgage, pledge, assignment,
and/or grant of security interest in the Collateral to and
in favor of the Bank as set forth in the Loan Documents.
3. Principal Balance. The Borrower acknowledges
and agrees that as of the date hereof the current
outstanding principal balance respecting the Amended
Revolving Note is $1,773,284.97 and that the current
outstanding principal balance respecting the Term Note is
$1,122,265.00.
4. Revolving Loan Maturity Date. The Bank hereby
agrees to extend the Maturity Date of the Revolving Note
until the New Revolving Loan Maturity Date and accordingly,
the Bank shall continue to make advances respecting the
Revolving Loan, subject to the terms and conditions of the
Loan Documents, as amended or modified hereby, until the
New Revolving Loan Maturity Date after which date there
shall be no further advances respecting the Revolving Note.
The Borrower hereby agrees to pay to the Bank all payments
due prior to the New Revolving Loan Maturity Date in
accordance with the terms of the Amended Revolving Note,
and that any failure to make any such payments in
accordance with the terms of the Amended Revolving Note
shall be a default under this Agreement, the Amended
Revolving Note and each of the Loan Documents. Unless due
earlier, on or before the New Revolving Loan Maturity Date,
the Borrower agrees to pay to the Bank the entire principal
balance of the Amended Revolving Note then outstanding,
plus all unpaid interest accrued thereon, and all other
amounts outstanding in connection therewith, without
further notice or demand from the Bank.
5. Modification to Revolving Note. The Borrower
and the Bank hereby agree: (i) to reduce the maximum
principal amount of the Revolving Note to $2,500,000 and
(ii) to modify the terms of the Note in accordance with an
amended and restated note (the "Amended Revolving Note") in
the form attached hereto as Exhibit A. The Amended
Revolving Note shall be secured by the Collateral to the
same extent and with the same priority as the Revolving
Note.
6. Interest Rate on Amended Revolving Note and
Modification to Interest Rate on Term Note. The Borrower
and Bank agree that, notwithstanding anything to the
contrary in the Loan Documents, as of the effective date of
this Agreement, the outstanding principal amounts
outstanding respecting each of the Term Note and Amended
Revolving Note, shall bear interest at a per annum rate
equal to one percent (1%) above the rate from time to time
established and made effective by the Bank as its Prime
Rate through June 30, 1998 and two percent (2%) above its
Prime Rate thereafter.
7. Index. Prime Rate means the rate per annum
from time to time established by Bank as the Prime Rate and
made available by the Bank at its main office or, in the
discretion of the Bank, the base, reference or other rate
then designated by Bank for general commercial loan
reference purposes, it being understood that such rate is a
reference rate, not necessarily the lowest, established
from time to time which serves as the basis upon which
effective interest rates are calculated for loans making
reference thereto. The effective rate applicable to the
undersigned's loans shall change on the date of
each change in the Prime Rate.
8. Release of Bank. By execution of this
Agreement, the Borrower hereby acknowledges and confirms
that it does not have any offsets, defenses or claims
against Bank, its parents, subsidiaries affiliates, or any
officers, agents, directors or employees whether asserted
or unasserted. To the extent that they may have such
offsets, defenses or claims, Borrower and its respective
successors, assigns,
<PAGE>
predecessors, employees, agents, heirs, executors, as
applicable releases and forever discharges Bank, its
parents, subsidiaries, affiliates, and officers, directors,
employees, agents, attorneys, successors and assigns, both
present and former (collectively the "Bank Affiliates") of
and from any and all manner of action and actions, cause
and causes of action, suits, debts, controversies, damages,
judgments, executions, claims and demands whatsoever,
asserted or unasserted, in law or in equity which against
Bank and/or Bank Affiliates it ever had, now has or which
any of Borrower's successors, assigns, parents,
subsidiaries, affiliates, predecessors, employees, agents,
heirs, executors, as applicable, both present and former
ever had or now has, upon or by reason of any manner,
cause, causes or timing whatsoever, including, without
limitation, any presently existing claim or defense whether
or not presently suspected, contemplated or anticipated.
9. Indemnification of Bank. Borrower agrees to
indemnify and hold Bank, its parents, subsidiaries,
affiliates, and directors, officers, employees, agents and
attorneys harmless against all obligations, demands and
liabilities, by whomsoever asserted, and against all losses
in any way suffered, incurred or paid as a result of or in
any way arising out of or following or consequential to
transactions with the Borrower, except for any claim
arising out of the gross negligence or willful misconduct
of the Bank.
10. Amendments to Credit Agreement. The Credit
Agreement is hereby amended as follows:
A. Definitions.
(1) Section 1.01 of the Credit
Agreement is amended to read as
follows:
"Notes" - Any and all promissory notes
of the Company payable to the Bank as
amended, renewed or otherwise modified
from time to time."
(2) Section 1.01 of the Credit
Agreement is amended to read as
follows:
"Borrowing Base" - an amount equal to
(A) lesser of
(i) the Committed Revolver
Amount or
(ii) (a) 80% of the net outstanding
amount of Eligible Receivables
from time to time, plus
(b) the lesser of
(I) $1,300,000 or
(II) 32% of Eligible
Inventory from
Time to time.
(B) less Outstanding letters of
Credit.
(3) Section 1.01 of the Credit
Agreement is amended to read as
follows:
"Committed Revolver Amount" - Two
Million Five Hundred Thousand
Dollars ($2,500,000)
B. Deletion of Debt Service Coverage
Ratio. Notwithstanding
anything to the contrary in the Credit
Agreement, effective the date of this
Agreement, the Borrower shall not be
required to maintain a minimum Debt
Service Ratio under the Loan Documents.
C. Modification of Consolidated Cash
Expenditures. Section 6.01(p) of the
Credit Agreement as amended by a letter
agreement between Bank and Borrower
dated November 12, 1997 is further
amended to read as follows: "(p) The
Borrower and its subsidiaries will not
make Capital Expenditures, as such term
is defined in the Credit Agreement, in
fiscal year 1998 in excess of
$500,000."
<PAGE>
10. New Financial Covenants. In addition to all existing
financial covenants contained in the Loan Documents, as
affected hereby, the Borrower shall at all times comply
with the following additional financial covenants:
A. Pretax Profit. The Borrower will not
fail to have positive net earnings, as
such term is defined in accordance
with generally accepted accounting
principles, consistently applied,
prior to any tax liability, for the
month of March 1998 and for each
fiscal quarter thereafter.
B. Limit on Monthly Pretax Losses. The
Borrower will not incur a net loss in
excess of $50,000, as such term is
defined in accordance with generally
accepted accounting principles
consistently applied, prior to any tax
liability, in any calendar month.
11. Fees. In addition to all other amounts due
and payable respecting the Revolving Loan and the Term
Loan, the Borrower hereby agrees to pay the Bank
modification and extension fees due and payable as follows
(on each "Due Date"): $10,000 at the time of the execution
and delivery of this agreement, $20,000 on June 30, 1998,
$7,000 on July 31, 1998, $7,000 on August 31, 1998, $7,000
on September 30, 1998, $10,000 on October 31, 1998, $10,000
on November 30, 1998, and $10,000 on December 31, 1998.
Failure to pay any such amounts when due shall be an event
of default under this Agreement and under each of the Loan
Documents. In the event that Borrower should pay in full
all amounts due and payable respecting the Revolving Loan
and the Term Loan prior to any of the foregoing Due Dates,
Bank shall waive those modification and extension fees due
and payable on subsequent Due Dates.
12. Year 2000. No modifications are required to
any of the Borrower's computer systems or computer software
to assure that such systems and software contain no
deficiencies relating to formatting for entering dates
(commonly referred to and referred herein as the 'Year 2000
Problem"). The Borrower's computer systems and software are
susceptible to all necessary modification and the Borrower
has adequate personnel or consultants under contract to
timely modify (or, as applicable, replace and/or upgrade)
its own computer systems and software. The Borrower is not
aware of any inability on the part of any of its customers,
insurance providers or vendors to timely address the Year
2000 Problem that will in any manner adversely affect
borrowers business operations. In addition the Borrower
will take any and all actions to ensure that its computer
systems and computer software shall at all times contain no
deficiencies relating to the Year 2000 Problem; and the
Borrower hereby indemnifies and holds the Bank harmless
from any losses the Bank may suffer resulting from any
deficiencies in the Borrower's computer systems or computer
software relating to the Year 2000 Problem.
13. Set-Off. Regardless of the adequacy of any
Collateral, any deposits, balances or other sums credited
by or due from the Bank or any of its affiliates to
Borrower may, at any time, whether or not an event of
default has occurred or demand has been made, without
notice to Borrower, or compliance with any other condition
precedent now or hereafter imposed by statute, rule of law
or otherwise (all of which are hereby expressly waived), be
set off, appropriated and applied by Bank against any and
all of the obligations of Borrower to the Bank in such
manner as the Bank in its sole discretion may determine.
14. Counsel Fees and Expenses. Borrower agrees
to pay Bank on demand any and all costs, expenses, losses,
claims, damages, liabilities, penalties, suits, judgments
or disbursements of any nature (including without
limitation expenses and fees for counsel, appraisals,
consultants, accountants, field examiners, environmental
engineers) which may be incurred by, imposed on or asserted
against Bank, as it deems in its sole discretion, in
connection with: preparation of this Agreement and
documents relating hereto, or amendments, modifications,
waivers or the interpretation hereof, any exercise of
Bank's rights as set forth herein or in the Loan Documents;
any enforcement, collection or other proceeding resulting
therefrom or from any negotiations or other measures to
preserve or enforce Bank's rights hereunder or under the
Loan Documents; any investigative, administrative or
judicial proceeding (whether or not Bank is designated as
party thereto) relating to or arising out of this
Agreement, or the Loan documents; or any bankruptcy,
insolvency, or other similar proceedings relating to
Borrowers, or
<PAGE>
any collateral securing their obligations to the Bank.
Borrower specifically authorizes the Bank to pay all such
fees and expenses and charge the same to any of its loan or
deposit accounts with the Bank.
15. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be an
original, but all of which shall constitute but one
agreement.
16. Binding Effect of Agreement. All covenants,
agreements, representations and warranties contained herein
shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto, whether
expressed or not; provided that Borrower may not assign or
transfer its rights hereunder.
17. Further Assurances. Borrower will from time
to time execute and deliver to the Bank, and take or cause
to be taken, all such other further action as the Bank may
request in order to effect and confirm or vest more
securely in the Bank all rights contemplated hereunder.
18. Amendments and Waivers. This Agreement may
be amended and Borrower may take any action herein
prohibited, or omit to perform any act herein required to
be performed by it, if Borrower shall obtain the Bank's
prior written consent to each such amendment, action or
omission to act. No delay or omission on the part of Bank
in exercising any right hereunder shall operate as a waiver
of such right or any other right and waiver on any one or
more occasions shall not be construed as a bar to or waiver
of any right or remedy of Bank on any future occasion.
19. Terms of Agreement. This Agreement shall
continue in force and effect so long as any obligation of
Borrower to Bank shall be outstanding and is supplementary
to each and every other agreement between Borrower and Bank
and shall not be so construed as to limit or otherwise
derogate from any of the rights or remedies of Bank or any
of the liabilities, obligations or undertakings of Borrower
under any such agreement, nor shall any contemporaneous or
subsequent agreement between Borrower and the Bank be
construed to limit or otherwise derogate from any of the
rights or remedies of Bank or any of the liabilities,
obligations or undertakings of Borrower hereunder, unless
such other agreement specifically refers to this Agreement
and expressly so provides.
20. Notices. Any notices under or pursuant to
this Agreement shall be deemed duly received by the
Borrower and Bank and effective if delivered in hand to any
officer or agent of the Borrower or Bank or if mailed by
registered or certified mail, return receipt requested,
addressed to the Borrower or Bank at the address set forth
above or as any party shall provide by written notice to
the other party.
21. Massachusetts Law. This Agreement is intended
to take effect as a sealed instrument and has been executed
or completed and is to be performed in Massachusetts, and
it and all transactions thereunder or pursuant thereto
shall be governed as to interpretation, validity, effect,
rights, duties and remedies of the parties thereunder and
in all other respects by the domestic laws of
Massachusetts.
22. Reproductions. This Agreement and all
documents which have been or may be hereinafter furnished
by Borrower to the Bank may be reproduced by the Bank by
any photographic, photostatic, microfilm, xerographic or
similar process, and any such reproduction shall be
admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the
original is in existence and whether or not such
reproduction was made in the regular course of business).
23. Venue. Borrower irrevocably submits to the
nonexclusive jurisdiction of any federal or state court
sitting in Massachusetts, over any suit, action or
proceeding arising out of or relating to this
Agreement. Borrower irrevocably waives to the fullest
extent it may effectively do so under applicable law, any
objection it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in any
such court and any claim that the same has been brought in
an inconvenient forum. Borrower irrevocably appoints the
Secretary of State of the Commonwealth of Massachusetts as
its authorized agent to accept and acknowledge on its
behalf any and all process which may be served in any such
suit, action or proceeding, consents to such process being
served (i) by mailing a copy thereof by registered or
certified mail, postage prepaid, return receipt requested,
to Borrower's address shown above or as notified to the
Bank and (ii) by serving the same upon such agent, and
agrees that such service shall in every respect be deemed
effective service upon Borrower.
<PAGE>
24. JURY WAIVER. THE BORROWER AND BANK EACH HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND AFTER AN
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, WAIVE ANY AND
ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
IN CONNECTION WITH THIS AGREEMENT, THE OBLIGATIONS, ALL
MATTERS CONTEMPLATED HEREBY AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH. THE BORROWER CERTIFIES THAT NEITHER
THE BANK NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK
WOULD NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY JURY.
Executed under seal as of the date written above.
Witness Borrower:
Stocker & Yale, Inc.
By:/s/ Doreen Shane By: /s/ Susan Sundell
Susan Hojer Sundell
Chief Financial Officer
Accepted: Fleet National Bank
By:
Name: H. Ellery Perkinson
Title: Assistant Vice President
<PAGE>
Exhibit 10.1 (m)
THIRD PARTY PLEDGE AGREEMENT
This AGREEMENT entered into at Boston,
Massachusetts, as of April 1, 1998, between Mark W,
Blodgett, an individual with an address of 37 Chestnut
Street, Salem, Massachusetts 01970 (the "Pledgor") and
Fleet National Bank, a national banking association with an
address of One Federal Street, Boston, Massachusetts 02211
(the "Bank").
1. Pledge. In consideration of the Bank's extending
credit and other financial accommodations to the Pledgor
and/or Stocker & Yale, Inc. (hereinafter called the
"Borrower"), whether evidenced by notes or not, the Pledgor
hereby grants to the Bank a security interest in
(including, without limitation, a lien on and pledge,
assignment and delivery of) all of the Pledgor's Collateral
(as hereinafter defined). The security interest granted by
this Agreement is given to and shall be held by the Bank as
security for the payment and performance of all Obligations
(as hereinafter defined). The Bank shall have the
unrestricted right from time to time to apply (or to change
any application already made of) the proceeds of any of the
Collateral to any of the Obligations, as the Bank in its
sole discretion may determine.
2. Definitions. The following definitions shall apply:
(a) "Collateral" shall mean all the Pledgor's present and
future right, title and interest in and to any and all
of the property listed on Schedule A, attached hereto,
whether such property is now existing or hereafter
created, and all products, proceeds, substitutions,
additions, interest, dividends, and other
distributions (including, without limitation, stock
splits and stock dividends) in respect thereto, and
all books, records, and paper relating to the
foregoing (all of which is referred to hereinafter as
the "Collateral").
(b) "Obligation(s)" shall mean all Pledgor's obligations
to the Bank respecting that certain Limited Guaranty
executed of even date herewith by Mark W. Blodgett in
favor of the Bank. Said term shall also include all
interest and other charges chargeable to the Borrower
or Pledgor or due from the Borrower or Pledgor to the
Bank from time to time and all costs and expenses
referred to in this Agreement.
(c) "Person" or "party" shall include individuals, firms,
corporations and all other entities.
(d) "Event of Default" shall mean the occurrence of any
one or more of the following events:
(i) default of any liability, obligation or
undertaking of the Borrower or Pledgor to
the Bank, hereunder or otherwise, including
failure to pay in full and when due any
installment of principal or interest;
(ii) failure of the Borrower or Pledgor to
maintain aggregate collateral security value
satisfactory to the Bank;
(iii) default of any material liability,
obligation or undertaking of the Borrower or
Pledgor to any other party;
<PAGE>
(iv) if any statement, representation or
warranty heretofore, now or hereafter made
in connection with this Agreement or in any
supporting financial statement of the
Borrower or Pledgor shall be determined by
Bank to have been false in any material
respect when made;
(v) if the Borrower or Pledgor or any
guarantor is a corporation , trust or
partnership, the liquidation, termination or
dissolution of any such organization, or the
merger or consolidation of such organization
into another entity, or its ceasing to carry
on actively its present business or the
appointment of a receiver for its property;
(vi) the death of the Borrower or Pledgor or
of any guarantor of the Obligations and,
if any of the Borrower or Pledgor or any
guarantor of the Obligations is a
partnership, the death of any partner;
(vii) the institution by or against the
Borrower or Pledgor or any guarantor of the
Obligations of any proceedings under the
Bankruptcy Code, 11 USC $101 et seq. or any
other law in which the Borrower or Pledgor
or any guarantor of the Obligations is
alleged to be insolvent or unable to pay
their respective debts as they mature, or
the making by the Borrower or Pledgor or any
guarantor of the Obligations of an
assignment for the benefit of creditors or
the granting by the Borrower or Pledgor or
any guarantor of the Obligations of a trust
mortgage for the benefit of creditors;
(viii) the service upon the Bank hereof of a
writ in which the Bank is named as trustee
of the Borrower or Pledgor or of any
guarantor of the Obligations;
(ix) a judgment or judgments for the payment
of money shall be rendered against the
Pledgor or Borrower or guarantor hereof, and
any such judgment shall remain unsatisfied
and in effect for any period of thirty (30)
consecutive days without a stay of
execution;
(x) any levy, seizure, attachment, execution
or similar process shall be issued or levied
on any of the property of the Pledgor or
Borrower or guarantor hereof;
(xi) the termination of any guaranty of the
Obligations; or
(xii) the occurrence of such a change in the
condition or affairs (financial or
otherwise) of the Borrower or Pledgor or any
guarantor or other surety for any of the
Obligations or the occurrence of any event
or circumstance such that the Bank, in its
sole discretion, deems that it is insecure
or that the prospects for timely or full
payment or performance of any of the
Obligations has been or may be impaired.
All words and terms used in this Agreement other
than those specifically defined herein shall have the
meanings accorded to them in the Massachusetts Uniform
Commercial Code (General Law, Chapter 106), as amended from
time to time (herein the "Code").
3. Costs and Expenses. The Pledgor shall pay to the Bank
any and all costs and expenses (including, without
limitation, reasonable attorneys' fees, court costs,
litigation and other expenses) incurred or paid by
the Bank in establishing, maintaining, protecting or
enforcing any of the Bank's rights or the
Obligations, including, without limitation, any and
all such costs and expenses incurred or paid by the
Bank in defending the Bank's security interest in,
title or right to the Collateral or in collecting or
attempting to collect or enforcing or attempting to
enforce payment of the Collateral.
4. Title. The Pledgor represents that the Collateral is
held and owned by the Pledgor free and clear of all liens,
encumbrances, attachments, security interests, pledges and
charges, and, if the Collateral is
<PAGE>
securities, is fully paid for and nonassessable.
5. Affirmative Covenants. The Pledgor shall:
(a) execute all such instruments, documents and papers, and
will do ail such acts as the Bank may request from time to
time to carry into effect the provisions and intent of this
Agreement, including without limitation, the execution of
stock transfer orders, stock powers, notifications to
obligors on the Collateral, the providing of notification
in connection with book entry securities or general
intangibles and the providing of instructions to the
issuers of uncertificated securities or financial
intermediaries, and will do all such other acts as the Bank
may request with respect to the perfection and protection
of the security interest granted herein and the assignment
effected hereby;
(b) keep the Collateral free and clear of all liens,
encumbrances, attachments, security interests, pledges and
charges;
(c) deliver to the Bank, if and when received by the
Pledgor, any item representing or constituting any of the
Collateral, including, without limitation, all cash
dividends and all stock certificates whether now existing
or hereafter received as a result of any stock dividends,
stock splits or otherwise;
(d) upon the request of the Bank, cause the issuer of any
uncertificated securities comprising any of the Collateral
to issue certificates with respect thereto;
(e) upon the request of the Bank, cause certificated
securities comprising any of the Collateral to be issued in
the name of the Bank, as pledgee;
(f) not cause or permit any of the Collateral presently
evidenced by a written certificate to be converted to
uncertificated securities;
(g) not exercise any right with respect to the Collateral
which would dilute or adversely affect the Bank's rights in
the Collateral;
(h) not file any affidavit for replacement of lost stock
certificate or bonds; and
(i) not vote the Collateral in favor of or consent to any
resolution which might:
(i) impose any restrictions upon the sale,
transfer or disposition of the
Collateral; or
(ii) result in the issuance of any
additional shares of stock of any
class; or
(iii)vest additional powers, privileges,
preferences or priorities to any other
class of stock.
6. Power of Attorney. The Pledgor hereby irrevocably
constitutes and appoints the Bank as the Pledgor's true and
lawful attorney, with full power of substitution at the
sole cost and expense of the Pledgor but for the sole
benefit of the Bank, to endorse in favor of the Bank any of
the Collateral; cause the transfer of any of the Collateral
in such name as the Bank may, from time to time, determine;
cause the issuance of certificates for book entry and/or
uncertificated securities; provide notification in
connection with book entry securities or general
intangibles and/or provide instructions to the issuers of
uncertificated securities or financial intermediaries, as
necessary; to renew, extend or roll over any Collateral;
and make demand and initiate actions to enforce any of the
Collateral. The Bank may take such action with respect to
the Collateral as the Bank may reasonably determine to be
necessary to protect and preserve its interests in the
Collateral. The Bank shall also have and may exercise at
any time
<PAGE>
all rights, remedies, powers, privileges and discretions of
the Pledgor with respect to and under the Collateral,
provided, however, the Bank shall have no right until an
Event of Default has occurred to exercise any voting rights
available to the Pledgor at any time the Collateral is held
by the Bank solely as pledgee hereunder. Except as limited
above, all the rights, remedies, powers, privileges and
discretions included in this Paragraph may be exercised by
the Bank whether or not any of the Obligations are then due
and whether or not an Event of Default has occurred. The
within designation, being coupled with an interest, is
irrevocable until the within Agreement is terminated by a
written instrument executed by a duly authorized officer of
the Bank. The power of attorney shall not be affected by
subsequent disability or incapacity of the Pledgor. The
Bank shall not be liable for any act or omission to act
pursuant to this Paragraph except for any act or omission
to act which is in actual bad faith.
7. Default. If an Event of Default shall occur, at the
election of the Bank, all Obligations shall become
immediately due and payable without notice or demand,
except with respect to Obligations payable on demand, which
shall be due and payable on demand, whether or not an Event
of Default has occurred.
The Bank is hereby authorized, at its election,
after an Event of Default or after demand, without any
further demand or notice except to such extent as notice
may be required by applicable law, to sell or otherwise
dispose of all or any of the Collateral at public or
private sale and/or enforce and collect the Collateral
(including, without limitation, the liquidation of debt
instruments or securities and the exercise of conversion
rights with respect to convertible securities, whether or
not such instruments or securities have matured and whether
or not any penalties or other charges are imposed on
account of such action); and the Bank may also exercise any
and all other rights and remedies of a secured party under
the Code or which are otherwise accorded to it by
applicable law, all as the Bank may determine. If notice of
a sale or other action by the Bank is required by
applicable law, the Pledgor agrees that five (5) days'
written notice to the Pledgor, or the shortest period of
written notice permitted by law, whichever is larger, shall
be sufficient notice; and that to the extent permitted by
law, the Bank, its officers, attorneys and agents may bid
and become purchasers at any such sale, if public, and may
purchase at any private sale any of the Collateral that is
of a type customarily sold on a recognized market or which
is the subject of widely distributed standard price
quotations. Any sale (public or private) shall be free from
any right of redemption, which the Pledgor hereby waives
and releases. No purchaser at any sale (public or private)
shall be responsible for the application of the purchase
money. Any balance of the net proceeds of sale remaining
after paying all Obligations of the Pledgor to the Bank
shall be returned to the Pledgor or to such other party as
may be legally entitled thereto; and if there is a
deficiency, the Pledgor shall be responsible for the same,
with interest. The Pledgor acknowledges that any exercise
by the Bank of the Bank's rights upon default may be
subject to compliance by the Bank with any statute,
regulation, ordinance, directive or order of any federal,
state, municipal or other governmental authority and may
impose, without limitation, any of the foregoing
restricting the sale of securities. The Bank, in its sole
discretion at any such sale, may restrict the prospective
bidders or purchasers as to their number, nature of
business and investment intentions, and may impose, without
limitation, a requirement that the persons making such
purchases represent and agree, to the satisfaction of the
Bank, that they are purchasing the Collateral for their own
account, for investment, and not with a view to the
distribution or resale thereof. The proceeds of any
collection or of any sale or disposition of the Collateral
held pursuant to this Agreement shall be applied towards
the Obligations in such order and manner as the Bank
determines in its sole discretion, any statute, custom or
usage to the contrary notwithstanding.
8. Safe Custody and Exclusivity. The Bank shall have no
duty as to the Collateral or protection of the Collateral
or any income or distribution thereon, beyond the safe
custody of such of the Collateral as may come into the
possession of the Bank, and shall have no duty as to the
preservation of rights against prior parties or any other
rights pertaining thereto. The Bank's Rights and Remedies
(as defined herein) may be exercised without resort or
regard to any other source of satisfaction of the
Obligations.
9. Indemnification. The Pledgor shall indemnify, defend and
hold the Bank harmless of and from any claim brought or
threatened against the Bank by the Pledgor, Borrower or any
guarantor or endorser of
<PAGE>
the Obligations, or any other person (as well as from
attorneys' reasonable fees and expenses in connection
therewith) on account of the Bank's relationship with the
Pledgor, Borrower or any guarantor or endorser of the
Obligations (each of which may be defended, compromised,
settled or pursued by the Bank with counsel of the Bank's
election, but at the expense of the Pledgor), except for
any claim arising out of the gross negligence or willful
misconduct of the Bank. The within indemnification shall
survive payment of the Obligations, and/or any termination,
release or discharge executed by the Bank in favor of the
Pledgor.
10. Waivers. The Pledgor waives notice of nonpayment,
demand, presentment, protest or notice of protest of the
Collateral, and all other notices, consents to any renewals
or extensions of time of payment thereof, and generally
waives any and all suretyship defenses and defenses in the
nature thereof. No delay or omission of the Bank in
exercising or enforcing any of its rights, powers,
privileges, remedies, immunities or discretions (all of
which are hereinafter collectively referred to as "the
Bank's Rights and Remedies") hereunder shall constitute a
waiver thereof; and no waiver by the Bank of any default of
the Pledgor hereunder or of any demand hereunder shall
operate as a waiver of any other default hereunder or any
other demand hereunder. No term or provision hereof shall
be waived, altered or modified except with the prior
written consent of the Bank, which consent makes explicit
reference to this Agreement. Except as provided in the
preceding sentence, no other agreement or transaction, of
whatsoever nature, entered into between the Bank and the
Pledgor at any time (whether before, during or after the
effective date or term of this Agreement) shall be
construed in any particular as a waiver, modification or
limitation of any of the Bank's Rights and Remedies under
this Agreement (nor shall anything in this Agreement be
construed as a waiver, modification or limitation of any of
the Bank's Rights and Remedies under any such other
agreement or transaction) but all the Bank's Rights and
Remedies not only under the provisions of this Agreement
but also under any such other agreement or transaction
shall be cumulative and not alternative or exclusive, and
may be exercised by the Bank at such time or times and in
such order of preference as the Bank in its sole discretion
may determine.
11. Severability. If any provision of this Agreement or
portion of such provision or the application thereof to any
person or circumstance shall to any extent be held invalid
or unenforceable, the remainder of this Agreement (or the
remainder of such provision) and the application thereof to
other persons or circumstances shall not be affected
thereby.
12. Binding Effect of Agreement. This Agreement shall be
binding upon and inure to the benefit of the respective
heirs, executors, administrators, legal representatives,
successors and assigns of the parties hereto, and shall
remain in full force and effect (and the Bank shall be
entitled to rely thereon) until terminated as to future
transactions by written notice from either party to the
other party of the termination hereof; provided that any
such termination shall not release or affect any Collateral
in which the Bank already has a security interest or any
Obligations incurred or rights accrued hereunder prior to
the effective date of such notice (as hereinafter defined)
of such termination. Notwithstanding any such termination,
the Bank shall have a security interest in all Collateral
to secure the payment and performance of Obligations
arising after such termination as a result of commitments
or undertakings made or entered into by the Bank prior to
such termination. The Bank may transfer and assign this
Agreement and deliver the Collateral to the assignee, who
shall thereupon have all of the Bank's Rights and Remedies;
and the Bank shall then be relieved and discharged of any
any responsibility or liability with respect to this
Agreement and the Collateral.
13. Notices. Any notices under or pursuant to this
Agreement shall be deemed duly received and effective if
delivered in hand to any officer or agent of the Pledgor or
Bank, or if mailed by registered or certified mail, return
receipt requested, addressed to the Pledgor or Bank at
address set forth in this Agreement or as any party may
from time to time designate by written notice to the other
party.
14. Reproductions. This Agreement and all documents
which have been or may be hereinafter furnished by Pledgor
to the Bank may be reproduced by the Bank by any
photographic, photostatic,
<PAGE>
microfilm, xerographic or similar process, and any such
reproduction shall be admissible in evidence as the
original itself in any judicial or administrative
proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the regular
course of business).
15. Massachusetts Law. This Agreement is intended to take
effect as a sealed instrument and has been executed or
completed and is to be performed in Massachusetts, and it
and all transactions thereunder or pursuant thereto shall
be governed as to interpretation, validity, effect, rights,
duties and remedies of the parties thereunder and in all
other respects by the domestic laws of Massachusetts.
16. Jurisdiction and Venue. Pledgor irrevocably submits to
the nonexclusive jurisdiction of any federal or state court
sitting in Massachusetts, over any suit, action or
proceeding arising out of or relating to this Agreement.
Pledgor irrevocably waives, to the fullest extent it may
effectively do so under applicable law, any objection it
may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court
and any claim that the same has been brought in an
inconvenient forum. Pledgor irrevocably appoints the
Secretary of State of the Commonwealth of Massachusetts as
its authorized agent to accept and acknowledge on its
behalf any and all process which may be served in any such
suit, action or proceeding, consents to such process being
served (i) by mailing a copy thereof by registered or
certified mail, postage prepaid, return receipt requested,
to Pledgor's address shown in this Agreement or as notified
to the Bank and (ii) by serving the same upon such agent,
and agrees that such service shall in every respect be
deemed effective service upon Pledgor.
17. JURY WAIVER. THE PLEDGOR AND BANK EACH HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY, AND AFTER AN
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, WAIVE ANY AND
ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
IN CONNECTION WITH THIS AGREEMENT, THE OBLIGATIONS, ALL
MATTERS CONTEMPLATED HEREBY AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH. THE PLEDGOR CERTIFIES THAT NEITHER THE
BANK NOR ANY OF ITS REPRESENTATIVES, AGENTS OR COUNSEL HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE BANK WOULD
NOT IN THE EVENT OF ANY SUCH PROCEEDING SEEK TO ENFORCE
THIS WAIVER OF RIGHT TO TRIAL BY JURY.
Executed under seal and dated as of April 1, 1998.
Witness Pledgor:
By:/s/ Susan Sundell By:/s/ Mark W. Blodgett
Mark W. Blodgett
Accepted: Fleet National Bank
By:
Name: H. Ellery Perkinson
Title: Assistant Vice President
<PAGE>
SCHEDULE A
Pledged Collateral
Two Hundred Twenty Eight Thousand Thirty-Seven
(228,037) shares of the Common Stock of the Stocker & Yale,
Inc. registered in the name of Mark W. Blodgett and
represented by Certificate Nos.: 18, 20, 34, 83, 394.
<PAGE>
[Stock Power]
FOR VALUE RECEIVED,
Mark W. Blodgett hereby sells, assigns and transfers unto
Fleet National Bank Two Hundred Twenty Eight Thousand
Thirty-Seven (228,037) shares of the Common Stock of the
Stocker & Yale, Inc. (the "Corporation") registered in the
name of Mark W. Blodgett and represented by Certificate
Nos.: 18, 20, 34, 83, 394, and do hereby irrevocably
constitute and appoint Fleet National Bank as its attorney
to transfer the said stock on the books of the Corporation
with full power of substitution.
Dated as of April 1, 1998.
Witness Pledgor:
By:/s/ Susan Sundell By:/s/ Mark W. Blodgett
Mark W. Blodgett
<PAGE>
Exhibit 10.1(n)
WAIVER OF CERTAIN PROVISIONS OF THE CREDIT AGREEMENT
DATED JULY 21, 1998
Andrew J. Maidman
Vice President
Managed Assets Division
Fleet Corporate Administration
Mail Stop: CT MO H21A
777 Main Street
Hartford, CT 06115
July 21, 1998 860-986-4572
Fax 860-986-2435
Stocker & Yale, Inc. (the "Company")
32 Hampshire Road
Salem, NH 03079
Attn.: Susan Sundell
RE: Credit Arrangements with Fleet National Bank
Dear Mr. Blodgett:
Reference is hereby made to that certain Credit
Agreement, dated as of March 6, 1995 (the "Credit
Agreement") by the Company in favor of Fleet National Bank,
as successor to Shawmut Bank, N.A. (collectively, the
"Bank"), as amended by that certain Modification and
Extension Agreement, dated as of April 1, 1998 (the
"Modification Agreement"), between the Company and the
Bank.
The Company has requested that the Bank agree to waive
compliance with Section 10(B) of the Modification Agreement
for the quarter ending June 30, 1998. Subject to the terms
of this letter and the Company's acknowledgment below
indicating the Company's agreement with such terms, and the
satisfaction of the following conditions, the Bank agrees
to waive compliance with Section 10(B) of the Modification
Agreement but only for the quarter ending June 30, 1998,
and for the months of May and June 1998:
1. payment of $25,000 to the Bank upon execution and
delivery of this letter agreement as a waiver fee
which shall be in addition to all amounts due, owing
and payable pursuant to the Credit Agreement and shall
not be applied to any amounts currently outstanding;
2. reimbursement of all of the Bank's legal expenses
in connection with the preparation of this letter
agreement.
By execution of this letter agreement the Company
hereby acknowledges and confirms that it does not have any
offsets, defenses or claims against the Bank, its parents,
subsidiaries, affiliates, or any officers, agents directors
or employees whether asserted or unasserted. To the extent
that they may have such offsets, defenses or claims, the
Company and its respective successors, assigns,
predecessors, employees, agents, heirs, executors, as
applicable releases and forever discharges Bank, its
parents, subsidiaries, affiliates, and officers, directors,
employees, agents attorneys, successors and assigns, both
present and former (collectively the "Bank Affiliates") of
and from any and all manner of action and actions, cause
and causes of action, suits, debts, controversies, damages,
judgments, executions, claims and demands whatsoever,
asserted or unasserted, in law or in equity which against
Bank and/or Bank Affiliates it ever had, now has or which
any of Company's successors, assigns, parents,
subsidiaries, affiliates, predecessors, employees, agents,
heirs, executors, as applicable, both present and former
ever has or now has, upon or by reason of any manner,
cause, causes or thing whatsoever, including, without
limitation, any presently existing claim or defense whether
or not presently suspected, contemplated or anticipated.
By execution of this letter agreement and except as
otherwise modified or agreed herein, the Company (I) hereby
affirms and ratifies all of the terms, covenants,
provisions, conditions agreements, warranties and
representations contained in the Credit Agreement and
Modification Agreement and all loan documents executed in
connection therewith; (ii) hereby agrees to make all
payments due and payable and to perform all of its
obligations pursuant to the Credit Agreement and
Modification and this letter agreement; (iii) hereby agrees
to indemnify and hold the Bank harmless from any costs,
expenses,
<PAGE>
claims, losses as a result of the agreements contained
herein; (iv) hereby agrees that in addition to the events
of default specified in the Credit Agreement and
Modification Agreement, failure to comply with its
obligations respecting this letter agreement shall
constitute an event of default under the Credit Agreement
and Modification Agreement; (v) hereby agrees that the
Credit Agreement and Modification Agreement and this letter
agreement are fully enforceable against it and, except as
modified hereby, the Credit Agreement and Modification
Agreement and all loan documents delivered in connection
with either the Credit Agreement or Modification Agreement
remain in full force and effect; (vi) hereby confirms that
all collateral granted to or assigned to the Bank with
respect to payment, performance and observance of all
liabilities, obligations and covenants on the Company's
part to be performed or observed pursuant to the Credit
Agreement and Modification Agreement and this letter
agreement; (vii) hereby represents and warrants that no
event has occurred which is, or with the passage of time or
with the giving of notice or both would be an event of
default under the Credit Agreement and Modification
Agreement, as affected by this letter agreement; and (viii)
hereby agrees that the Bank has no obligation to extend
further credit to it except as specifically provided under
the terms of the Credit Agreement and Modification
Agreement or this letter agreement.
If the foregoing is acceptable to you, please
acknowledge your acceptance by signing the space provided
below.
Very truly yours,
FLEET NATIONAL BANK
By:/s/Andy Maidman
Agreed and Accepted:
STOCKER & YALE, INC.
By:
Its:
Acknowledgment by Guarantor
Mark W. Blodgett, individually
<PAGE>
Exhibit 10.1(o)
CONSENT LETTER DATED MAY 11, 1998 RELATING TO LASIRIS
TRANSACTION
May 11, 1998
Mark W. Blodgett
Chairman and Executive Officer
Stocker & Yale, Inc. (the "Company")
32 Hampshire Road
Salem, New Hampshire 03079
RE: Credit Arrangements with Fleet National Bank, N.A.
(the "Bank")
Dear Mr. Blodgett,
Reference is hereby made to that certain Credit
Agreement between the Company and the Bank, dated as of
March 6, 1995, as modified and extended by that certain
Modification and Extension Agreement, dated as of April 1,
1998 (as modified and extended, the "Credit Agreement").
The Credit Agreement provides, without limitation, that the
Company shall not incur additional Indebtedness (as defined
in the Credit Agreement) or grant junior security interests
or second mortgages on any of its property without the
express prior written consent of the Bank. Capitalized
terms used herein and not defined herein shall have the
meanings set forth in the Credit Agreement.
I. BACKGROUND
The Company has entered into an agreement (the
"Purchase Agreement") pursuant to which the Company will
(i) cause the formation of a new subsidiary, Lasiris
Holding Corp. ("Holding"), formed under the laws of New
Brunswick, Canada and (ii) Holding will acquire all of the
issued and outstanding capital stock of Lasiris, Inc., a
Canadian corporation ("Lasiris"). In connection with the
financing of such acquisition, the Company will consummate
the private placement of 350,000 shares of the Company's
common stock, par value $0.001 per share (the "Common
Stock"), will cause the prepayment of certain amounts owed
to it by Beverly Hospital Corporation (the "Beverly
Hospital Debt") at a five percent (5%) discount to the
aggregate outstanding principal amount of such indebtedness
and will incur indebtedness (the "Danvers Loan") to Danvers
Savings Bank ("Danvers") in a principal amount of $750,000
which will be secured by a second mortgage interest in the
Company's headquarters facility located at 32 Hampshire
Road, Salem, New Hampshire (the "New Hampshire Facility")
to be granted to Danvers by the Company. In addition,
Lasiris will enter into a credit agreement (the "Lasiris
Credit Agreement") with the Toronto-Dominion Bank ("TDB")
which will provide aggregate availability of $2,000,000
(CDN) of which up to $1,400,000 (CDN) may be used in
connection with the acquisition of Lasiris and the
remaining amounts available thereunder are to be used for
general working capital purposes of Lasiris (such loans,
the "Lasiris Loans"). The Lasiris Loans will be secured by
a blanket lien on Lasiris' assets in favor of TDB and
guaranteed by the Company. The transaction contemplated in
the Purchase Agreement and respecting the Danvers Loan as a
giving loan shall be hereafter referred to as the "Lasiris
Transaction." You have
<PAGE>
requested our consent to the Lasiris Transaction and you
will understand that we are willing to grant the consents
set forth below subject to the terms and conditions of this
letter.
TERMS OF CONSENT: The Bank is willing to consent to
the Lasiris Transaction herein, but only upon your
agreement with and satisfaction of, each of the following
terms and conditions:
A. Amendments to Credit Agreement: The Credit
Agreement is hereby amended as follows:
(1) Section 1.01 of the Credit Agreement
Regarding Eligible Inventory is amended to
read as follows:
""Eligible Inventory"-All raw material of
the Company, but excluding (i) raw material
located outside the United States, (ii) any
raw material in which the bank does not have
a fully perfected first priority security
interest, (iii) any used material, (iv) raw
material not located at the Premises, (v)
and samples, returnables, damaged items,
overstock items, obsolete items, items
against which the Company had established
reserves, defective items, or any other
items designated as unsatisfactory by the
Bank from time to time."
(2) Section 1.01 of the Credit Agreement
Regarding Borrowing Base is amended to read as
Follows:
""Borrowing Base"-an amount equal to
(A) lesser of
(i) the Committed Revolver Amount or
(ii) (a) 80% of the net
outstanding amount of Eligible
Receivables from time to time,
plus
(b) the lesser of
(i) $1,150,000 or
(ii) 32% of Eligible
Inventory from
time to time.
(B) less outstanding Letters of Credit."
B. Ratification and Confirmation: Except as hereby
modified and amended, the Company ratifies and
confirms the validity and effect of the Credit
Agreement and Loan Documents.
<PAGE>
Guaranty by Mark W. Blodgett: Mark W. Blodgett
shall Execute and deliver simultaneously with the
execution and delivery of this letter an Unlimited
Guaranty in the form attached hereto as Exhibit A
which shall replace that certain Limited Guaranty by
Mark W. Blodgett in favor of the Bank, dated as of
April 1, 1998.
D. Amended and Restated Third Part Pledge Agreement:
Mark W. Blodgett shall execute and deliver
simultaneously with the execution and delivery of this
letter an Amended and Restated Third Party Pledge
Agreement in the form attached hereto as Exhibit B
which shall amend and restate that certain Third Party
Pledge Agreement by Mark W. Blodgett in favor of the
Bank, dated as of April 1, 1998. The obligations
secured by assets pledged pursuant to the Amended and
Restated Third Party Pledge shall be limited to one
million dollars ($1,000,000( as provided in such
pledge agreement.
E. Legal Fees: The Company shall have paid all of
the
Bank's legal fees and expenses incurred in issuing
this letter agreement and the transactions
contemplated hereby.
Release of Bank: The Company hereby acknowledges
and confirms that it does not have any offsets,
defenses or claims against the Bank, its parents,
subsidiaries, affiliates, or any officers, agents
directors or employees (collectively, the "Bank
Affiliates") whether asserted or unasserted. To the
extent that they may have such offsets, defenses or
claims, Company and any of its respective successors,
assigns, predecessors, employees, agents, heirs,
executors, as applicable releases and forever
discharges Bank and the Bank Affiliates of and from
any and all manner of action and actions, cause and
causes of action, suit, debts, controversies, damages,
judgements, executions, claims and demands whatsoever,
asserted or unasserted, in law or equity which against
Bank and/or Bank Affiliates it ever had, now has or
which any of Company's successors, assigns,
predecessors, employees, agents, heirs, executors, as
applicable, both present and former ever had or now
has, upon or by reason of any manner, cause, causes or
thing whatsoever, including without limitation, any
presently existing claim or defense whether or not
presently suspected, contemplated or anticipated.
Execution and Delivery: The Company's execution
and delivery of this letter agreement indicates the
agreement of the Company with all of the terms and
conditions of this letter agreement.
Massachusetts Law Governs: This letter, with its
Exhibits, is intended to take effect as a sealed
instrument and had been executed or completed and is
to be performed in Massachusetts, and it and all
transactions thereunder or pursuant thereto shall be
governed as to interpretation, validity, effect,
rights, duties and remedies of the parties thereunder
and in all other respects by the domestic laws of
Massachusetts.
<PAGE>
III. CONSENT
The Bank hereby consents to the Lasiris Transaction,
including the following specific consents respecting
the Credit Agreement:
A. Consent under Section 6.02(a) of the Credit
Agreement to your incurring Indebtedness pursuant
to the Danvers Loan in an amount not exceeding
$750,000;
B. Consent under Section 6.02(a) of the Credit
Agreement to Holding's incurring Indebtedness
pursuant to its execution and delivery of the
Lasiris Credit Agreement;
C. Consent under Section 6.02(a) of the Credit
Agreement to Lasiris' incurring Indebtedness
pursuant to the Lasiris Credit Agreement;
D. Consent under Section 6.02(b) of the Credit
Agreement and under any negative pledge pursuant
to which the Company has agreed not to convey any
interest in its real property to our granting to
Danvers a second mortgage interest in the New
Hampshire Facility to secure the Danvers Loan;
E. Consent under Section 6.02(b) of the Credit
Agreement to Lasiris's granting to TDB a blanket
security interest in its assets to secure the
Lasiris Loans;
F. Consent under Section 6.02(c) of the Credit
Agreement to your intervening in the Lasiris
Credit Agreement and guaranteeing the payment by
Lasiris of all borrowing thereunder;
G. Consent under Section 6.02(e) of the Credit
Agreement to the prepayment of the Beverly
Hospital Debt and the use of the amounts received
from Beverly Hospital Corporation in respect
thereof in connection with the acquisition of
Lasiris;
H. Consent under Section 6.02(f) of the Credit
Agreement to the acquisition of all of the issued
and outstanding capital stock of Lasiris;
I. Consent under Section 6.02(l) of the Credit
Agreement to the formation of Holding under the
laws of the Province of New Brunswick, Canada and
the issuance of shares of Holding's Class B
Common Stock or its Class C Common Stock to the
holders of the capital stock of Lasiris;and
J. Consent under Section 6.02(m) of the Credit
Agreement in connection with writing up the value
of certain assets of Lasiris following
consummation of the acquisition.
Except as for the consents specifically set forth in
this letter, nothing herein shall constitute an agreement
by the Bank to waive any of the terms and conditions of the
Credit Agreement.
<PAGE>
IV. REPRESENTATION AND WARRANTIES
The Company hereby represents and warrants that except
As previously disclosed to the Bank (a) no Default or Event
of Default has occurred and is continuing, (b) each of its
representations and warranties in the Credit Agreement are
true and correct, (c) the liens granted to it under the
Security Agreement are valid and (d) this Consent
constitutes its legal, valid and binding obligation,
enforceable in accordance with its terms.
V. OTHER PROVISIONS STILL EFFECTIVE
All other provisions of the Credit Agreement and each
other agreement, document or instrument executed in
connection therewith (as any of the foregoing may have
been amended as of the date hereof) shall remain in
full force and effect.
Very Truly Yours,
FLEET NATIONAL BANK, N.A.
By:/s/ Thomas J. Gardiner
Its: Senior Vice President
MS CT MO H21A
777 Main Street
Hartford, CT 06115
Agreed to:
STOCKER & YALE, INC.
By:
Its:
Dated:
<PAGE>
10.15 (a)
DS2.338050.1
2001579-0002
PROMISSORY NOTE
$750,000.00 Boston, Massachusetts
May 13,1998
FOR VALUE RECEIVED, the undersigned (the "Maker"),
hereby promises to pay to the order of DANVERS SAVINGS
BANK, at its office One Conant Street, Danvers,
Massachusetts (the "Lender"), the sum of SEVEN HUNDRED
FIFTY THOUSAND and xx/100 DOLLARS ($750,000.00), or the
aggregate principal amount outstanding on the date this
Note becomes due and payable in full provided herein,
together with interest on the unpaid principal amount from
time to time outstanding prior to maturity at a fixed rate
per annum equal to Eleven Percent (11%) (the "Interest
Rate"). Interest shall be payable in arrears on the first
day of each month commencing on June 1, 1998 and on the
date the principal amount of this note becomes due and
payable in full. Once repaid, amounts borrowed hereunder
may not be reborrowed. The entire balance of principal,
accrued interest and other fees and charges shall be due
and payable on the earlier of (a) acceleration by the
Lender hereunder, or (b) May 13, 1999. In addition, if the
entire balance of principal, accrued interest and other
fees and charges is not paid in full on or before September
30, 1998, on October 1, 1998 the Maker shall also pay the
Lender an additional fee of Six Thousand Two Hundred Fifty
Dollars ($6,250.00) (the "Fee").
After maturity (whether by acceleration or
otherwise), interest shall be payable on the unpaid
principal balance from time to time outstanding at a rate
per annum equal to the Sixteen Percent (16%) (the "Default
Rate"), until fully paid. Any payment hereunder not paid
within fifteen (15) days after the date such payment is due
shall be subject to a late fee equal to five percent (5%)
of the amount overdue.
Interest and fees shall be calculated on the basis
of a 360-day year times the actual number of days elapsed.
All payments will be applied first to any charges, costs,
expenses or late fees then owed by the Maker to the Lender,
next to unpaid accrued interest, with any balance applied
to principal. In no event shall interest payable hereunder
exceed the highest rate permitted by applicable law. To the
extent any interest received by the Lender exceeds the
maximum amount permitted, such payment shall be credited to
principal, and any excess remaining after full payment of
principal shall be refunded to the Maker. The Maker may
prepay principal in whole or in part, without penalty or
premium.
Upon the occurrence of any one or more of the
following events (each, an "Event of Default") the
obligations under this Note shall become immediately due
and payable without further notice or demand: (i) the
Maker's failure to (x) make any payment when due of the
Fee or any principal or interest on this Note or any part
thereof when such payment is due
<PAGE>
any principal or interest on this Note or any part thereof
when such payment is due hereunder or (y) to pay or perform
any other obligation, now existing or hereafter arising, to
the Lender which continues for ten (10) days there after;
(ii) the Maker's failure to pay any indebtedness to any
others when due or any default under the obligations of the
Maker to any other creditor; (iii) if any representation,
warranty, statement or certificate made to the Lender by
the Maker is determined by the Lender to have been or
becomes untrue in any material respect when made; (iv) the
death, termination of existence or dissolution of the
Maker; (v) with respect to the Maker, the commencement,
whether voluntary or involuntary, of a case under the
United States bankruptcy Code or any other proceeding or
action seeking reorganization, liquidation, dissolution or
other relief under federal or state bankruptcy or
insolvency statutes or similar laws, or seeking the
appointment of a receiver, trustee or custodian for the
Maker or all or a part of its assets, and if involuntary,
which is not dismissed within sixty (60) days; (vi) if the
Maker makes an assignment for the benefit of creditors, or
is unable to pay its debts as they mature; (vii) the entry
of any judgment against the Maker, which judgment is not
satisfied or appealed from (with execution or similar
process stayed) within thirty (30) days of entry; (viii)
the service of any process upon the Lender seeking to
attach any funds of the Maker on deposit with the Lender;
(ix) or if there shall occur any other breach (i.e., not
otherwise addressed in the Note under any of the other
documents and/or agreements delivered to the Lender at the
time of or in connection with this Note and all
replacements, renewals and extensions thereof, which is not
cured within twenty (20) days after written notice thereof
from the Lender is received or deemed received; provided,
however, that such twenty (20) day period shall, if such
default is not susceptible of cure within such twenty (20)
day period, be extended for such additional number of days,
not to exceed sixty (60), as may be required to cure the
same if the Maker commences such cure within the initial
twenty (20) day period and thereafter diligently pursues
the same to completion; or (x) any of the foregoing events
occur with respect to any guarantor or endorser hereof.
As additional security for the payment and
performance of the Maker's obligations or the obligations
of any guarantor or endorser hereof to the Lender, now
existing or hereafter arising, the Lender is hereby granted
a lien and security interest in and to any and all deposits
or other sums at any time credited by or due from the
Lender to the Maker or any guarantor or endorser, whether
in regular or special depository accounts or otherwise, and
all moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by the Lender,
whether for safekeeping, custody, pledge, collection or
otherwise. Upon the occurrence of an Event of Default, in
addition to and not in limitation of any and all rights and
remedies of the Lender, hereunder or otherwise, all of such
rights and remedies being cumulative, the Lender may set
off any such deposits, other sums, moneys, securities and
other property and the proceeds thereof against any or all
of the obligations of the Maker, guarantors or endorsers to
the Lender, without prior notice or demand, and regardless
of whether or not such obligations are secured by any other
collateral, and regardless of the adequacy of any such
other collateral.
The Maker agrees to pay all costs and expenses,
including, without limitation, reasonable attorneys' fees
and expenses incurred, or which may be incurred, by the
Lender in connection
<PAGE>
with the negotiation, documentation, administration,
enforcement and collection of this Note and any other
agreements, instruments and documents executed in
connection herewith.
The Maker and all guarantors and endorsers hereby
waive presentment, demand, notice, protest, and all other
demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note, and
assent to extensions of the time of payment or forbearance
or other indulgence without notice. No delay or omission of
the Lender in exercising any right or remedy hereunder
shall constitute a waiver of any such right or remedy.
Acceptance by the Lender of any payment after demand shall
not be deemed a waiver of such demand. A waiver on one
occasion shall not operate as a bar to or waiver of any
such right or remedy on any future occasion.
The liabilities of the Maker and any endorser or
guarantor of this Note are joint and several; provided,
however, the release by the Lender of the Maker or any
endorser or guarantor shall not release any other party
obligated on account of this Note. No party obligated on
account of this Note may seek contribution from any other
party also obligated unless and until all liabilities to
the Lender of the party from whom contribution is sought
have been satisfied in full.
This Note is delivered to the Lender at its office
in the Commonwealth of Massachusetts, and shall be governed
by Massachusetts law. For purposes of any action or
proceeding involving this note, the Maker hereby expressly
submits to the jurisdiction of all federal and state courts
located in the Commonwealth of Massachusetts. THE MAKER AND
THE LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE
LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING UNDER OR RELATING TO THIS NOTE AND AGREES
THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING
WITHOUT A JURY.
Executed as an instrument under seal as of the date
first above written.
WITNESS: MAKER:
STOCKER & YALE, INC., a
Massachusetts corporation
By:/s/ John Evan Jones By:/s/ Mark W. Blodgett
<PAGE>
Exhibit 10.15 (b)
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT
AND FINANCING STATEMENT
THIS MORTGAGE, SECURITY AGREEMENT AND FINANCING STATEMENT
(this "Mortgage" or this "Agreement") is made as of May 13,
1998 by STOCKER & YALE, INC., Massachusetts corporation
("Mortgagor"), having an address at 32 Hampshire Road,
Salem, New Hampshire to DANVERS SAVINGS BANK, a
Massachusetts banking corporation, ("Mortgagee") having its
principal office a One Conant Street, Danvers,
Massachusetts.
WITNESSETH
WHEREAS, Mortgagor has executed and delivered to
Mortgagee a Promissory Note (the "Note") of even date
herewith made payable to the order of Mortgagee in the
original principal sum of SEVEN HUNDRED FIFTY THOUSAND
DOLLARS ($750,000.00), bearing interest and payable as set
forth therein;
NOW, THEREFORE, to secure the payment of the
principal indebtedness under the Note and interest and fees
thereon (and all replacements, renewals and extensions
thereof, in whole or in part) according to its tenor and
elect, and to secure the payment of all other sums which
may be at any time due and owing or required to be paid
under the Note, this Mortgage, any of the other documents
evidencing, creating and/or securing the loan transaction
of which the Note is a part (collectively the "Loan
Documents"), and all replacements, renewals and extensions
thereof, in whole or in part; and to secure the performance
and observance of all the covenants, agreements and
provisions contained in this Mortgage, the Note, and the
other Loan Documents, and to charge the properties,
interests and rights hereinafter described with such
payment, performance and observance (the foregoing
collectively, the "Indebtedness Hereby Secured"), and for
other valuable consideration, the receipt and sufficiency
whereof are hereby acknowledged, Mortgagor DOES HEREBY
GRANT, REMISE, RELEASE, LIEN, MORTGAGE AND CONVEY unto
Mortgagee, its successors and assigns forever, with
MORTGAGE COVENANTS, the Land (as hereinafter defined)
together with the following described property, rights and
interests all of which are hereby pledged primarily and on
a parity with the Land and not secondarily (and are,
together with the Land, the "Mortgaged Premises"):
THE PARCEL OF LAND locally known as 32 Hampshire
Road, Salem, New Hampshire as more particularly described
on EXHIBIT A attached hereto and made a part hereof (herein
collectively as well as respectively, the "Land") (As used
herein, references to the "Land" shall be construed to mean
and be to the "Land and/or any portion thereof," as the
context may admit);
TOGETHER WITH all buildings, structures and
improvements of every nature whatsoever now or hereafter
situated on the Land (including but not limited to any and
all underground and other parking facilities located in or
on the Land, all landscaped areas, and
<PAGE>
areas utilized for recreational activities) and all
fixtures, machinery, appliances, equipment, furniture, and
personal property of every nature whatsoever now or
hereafter owned by Mortgagor and located in or on, or
attached to, or used or intended to be used in connection
with or with the operation of, the Land, buildings,
structures or other improvements, or in connection with any
construction which may be conducted thereon, including all
extensions, additions, improvements, betterments, renewals,
substitutions, and replacements to and proceeds of any of
the foregoing and all of the right, title and interest of
Mortgagor in and to any such personal property or fixtures
together with the benefit of any deposits or payments now
or hereafter made on such personal property or fixtures by
Mortgagor or on its behalf (the "Improvements");
TOGETHER WITH all easements, rights of way, strips,
gores of land, streets, ways, alleys, passages, sewer
rights, waters, water courses, water rights and powers, and
all estates, rights, titles, interests, privileges,
liberties, tenements, hereditaments and appurtenances
whatsoever, in any way belonging, relating or appertaining
to the Land, or which hereafter shall in any way belong,
relate or be appurtenant thereto, whether now owned or
hereafter acquired by Mortgagor, and the reversion and
reversions, remainder and remainders, rents, issues and
profits thereof, and all the estate, right, title,
interest, property, possession, claim and demand
whatsoever, at law as well as in equity, of Mortgagor of,
in and to the same;
TOGETHER WITH all rents, royalties, issues, profits,
revenue, income and other benefits from the Mortgaged
Premises to be applied against the Indebtedness Hereby
Secured, provided, however, that permission is hereby given
to Mortgagor so long as no Event of Default (as hereinafter
defined) has occurred to collect, receive, take, use and
enjoy such rents, royalties, issues, profits, revenue,
income and other benefits as they become due and payable,
but not more than one (1) month in advance thereof;
TOGETHER WITH all right, title and interest of
Mortgagor in and to any and all leases now or hereafter on
or affecting the Mortgaged Premises or any part thereof
whether written or oral and all agreements for use of the
Mortgaged Premises or any part thereof (the "Leases"),
together with all security therefor and all monies payable
thereunder, subject, however, to the conditional permission
hereinabove given to Mortgagor to collect the rentals under
any such Lease;
TOGETHER WITH all fixtures and articles of personal
property now or hereafter owned by Mortgagor and forming a
part of or used in connection with the Land or the
Improvements of the operation thereof (except that this
Mortgage shall not create a lien on any items of personal
property which (i) are owned by tenants who are in
possession pursuant to a Lease and (ii) may be removed by
such tenants at the expiration or termination of such
Lease), including, but without limitation, any and all air
conditioners, antennae, appliances, apparatus, awnings,
basins, bathtubs, bidets, boilers, bookcases, cabinets,
carpets, coolers, curtains, dehumidifiers, disposals,
doors, drapes, dryers, ducts, dynamos, elevators, engines,
equipment, escalators, fans, fittings, floor coverings,
furnaces, furnishings, furniture, hardware, heaters,
humidifiers, incinerators, lighting, machinery, motor
vehicles, motors, ovens, pipes, plumbing, pumps, radiators,
ranges, recreational facilities, refrigerators, screens,
security systems, shades, shelving, sinks, sprinklers,
stokers, stoves, toilets, ventilators, wall coverings,
washers, windows, window coverings, wiring, and all
renewals, replacements or proceeds thereof or articles in
substitution therefor, whether or
<PAGE>
not the same are or shall be attached to the Land or the
Improvements in any manner; it being mutually agreed that
all of the aforesaid property owned by Mortgagor and placed
on the Land or the Improvements shall, so far as permitted
by law, be deemed to be fixtures, a part of the realty, and
security for the Indebtedness Hereby Secured;
notwithstanding the agreement and declaration hereinabove
expressed that certain articles of property form a part of
the realty covered by this Mortgage and be appropriated to
its use and deemed to be realty, to the extent that such
agreement and declaration may not be effective and that any
of said articles may constitute goods (as said term is used
in the Uniform Commercial Code of The State of New
Hampshire), this instrument shall constitute a security
agreement, creating a security interest in such goods, as
collateral, in Mortgagee as a secured party and Mortgagor
as debtor, all in accordance with said Uniform Commercial
Code as more particularly set forth in Paragraph 16 hereof;
TOGETHER WITH all proceeds of the foregoing
including without limitation all judgments, awards of
damages and settlements hereafter made resulting from
condemnation proceeds or the taking of the Mortgaged
Premises and/or the Improvements or any portion thereof
under the power of eminent domain, any proceeds of any
policies of insurance maintained with respect to the
Mortgaged Premises and/or the Improvements or proceeds of
any sale, option or contract to sell the Mortgaged Premises
and/or the Improvements or any portion thereof or any
franchise agreement relating thereto; and Mortgagor hereby
authorizes, directs and empowers Mortgagee, at its option,
on behalf of Mortgagor, or the successors or assigns of
Mortgagor, to adjust, compromise, claim, collect and
receive such proceeds, to give proper receipts and
acquittances therefor, and, after deducting expenses of
collection, to apply the net proceeds as a credit upon any
portion, as selected by Mortgagee, of the Indebtedness
Hereby Secured, notwithstanding the fact that the same may
not then be due and payable or that the Indebtedness Hereby
Secured is otherwise adequately secured; and
TOGETHER WITH all right, title, and interest of
Mortgagor in and to all executory contracts affecting the
ownership, possession, operation, control and services
furnished to the Mortgaged Premises or any part thereof
(collectively, the "Contracts"), provided, however, that
permission is hereby given to Mortgagor so long as no Event
of Default has occurred to exercise the rights and powers
under the Contracts and to enjoy the benefits thereunder;
TO HAVE AND TO HOLD the same, unto Mortgagee, its
successors and assigns, forever, for the purposes and upon
the uses herein set forth, together with all right to
possession of the Mortgaged Premises after the occurrence
of any Event of Default;
PROVIDED, NEVERTHELESS, that if Mortgagor shall pay
in full when due the Indebtedness Hereby Secured and shall
duly and timely perform and observe all of the terms,
provisions, covenants and agreements herein and in the Note
and the other Loan Documents provided to be performed and
observed by Mortgagor, then the Mortgage and the estate,
right and interest of Mortgagee in the Mortgaged Premises
shall cease and become void and of no effect.
<PAGE>
MORTGAGOR FURTHER COVENANTS AND AGREES AS FOLLOWS:
1. Payment of Indebtedness and Performance of
Covenants. Mortgagor shall (a) pay when due the
Indebtedness Hereby Secured; and (b) duly and punctually
perform and observe all of the terms, provisions,
conditions, covenants and agreements on Mortgagor's part to
be performed or observed as provided in the Note, this
Mortgage, and the other Loan Documents.
2. Representation of Title. At the time of the
delivery of these presents, Mortgagor owns record, fee
simple absolute title to the portion of the Mortgaged
Premises which constitutes real property and Mortgagor owns
good title to the portion of the Mortgaged Premises which
constitutes personal property, subject only to the prior
mortgage from the Mortgagor to Primary Bank dated as of
August 29, 1996 to secure the payment of One Million Five
Hundred Thousand Dollars ($1,500,000.00) and recorded in
the Rockingham Registry of Deeds in Book 3174, Page 188
(the "Prior Mortgage") and to matters set forth in EXHIBIT
B attached hereto and hereby made a part hereof and any
additional matters approved in writing by Mortgagee; and
has good right, full power and lawful authority to convey
and mortgage and grant a security interest in the same, in
the manner and form aforesaid; that, except as set forth on
EXHIBIT B hereto or consented to in writing by Mortgagee,
the same is free and clear of all liens, charges,
easements, covenants, conditions, restrictions and
encumbrances whatsoever, including, as to the personal
property and fixtures, security agreements, conditional
sales contracts and anything of a similar nature; and that
Mortgagor shall and will warrant and forever defend the
title to the Mortgaged Premises against the claims of all
persons whatsoever claiming by, through or under Mortgagor.
3. Maintenance, Repair, Compliance with Law, Use.
Mortgagor shall (a) promptly repair, restore, replace or
rebuild (pursuant to plans and specifications approved by
Mortgagee) any portion of the Improvements which may become
damaged or be destroyed to be of at least equal value and
of substantially the same character as prior to such damage
or destruction (whether or not proceeds of insurance are
available or sufficient for that purpose, unless the reason
any such proceeds are not available is that Mortgagee has
applied such proceeds to reduce the Indebtedness Hereby
Secured, as contemplated by subparagraph 10(b)(i) hereof,
and in such event Mortgagor shall be relieved of its
restoration obligation to the extent of the restoration of
that part of the Improvements damaged by the hazard with
respect to which insurance proceeds are received and
applied by Mortgagee as aforesaid, except to the extent
required to provide adequate safety and security to the
remaining portions of the Improvements); (b) keep the
Mortgaged Premises in good condition and repair, free from
waste; (c) pay all operating costs of the Mortgaged
Premises; (d) complete, within a reasonable time, any
building or buildings or other Improvements now or at any
time in the process of erection upon the Mortgaged
Premises; (e) comply with all requirements of statutes,
ordinances, rules, regulations, orders, decrees and
other requirements of law relating to the Mortgaged
Premises or any part thereof by any federal, state or local
authority; (f) refrain from any action and correct any
condition which would increase the risk of fire or other
hazard to the Improvements or any portion thereof; (g)
comply with any restrictions and covenants of record with
respect to the Mortgaged Premises and the use thereof, and
observe and comply with any conditions and requirements
necessary to preserve and extend any and all rights,
licenses, permits (including without limitation zoning
variances,
<PAGE>
special exceptions and nonconforming uses), privileges,
franchises and concessions that are applicable to the
Mortgaged Premises or its use and occupancy; and (h) cause
the Mortgaged premises to be managed in a competent and
professional manner. Without the prior written consent of
Mortgagee, Mortgagor shall not cause, or effect (t) any
material alterations of the mortgaged Premises or the
Improvements (including without limitation, landscaped and
recreation areas and underground on-site paved parking
areas and parking pavilion and/or structures) except as
required by law or ordinance or except as permitted or
required to be made by the terms of any Leases approved by
Mortgagee; (u) any change in the intended use or occupancy
of the Mortgaged Premises for which the Improvements have
been constructed including, without limitation, any change
which would increase any fire or other hazard; (v) any
zoning reclassification with respect to the Mortgaged
Premises; (w) any unlawful use of, or nuisance to exist
upon, the Mortgaged Premises; (x) any granting of any
easements, licenses, covenants, conditions or declarations
of use against the Mortgaged Premises, other than use
restrictions contained or provided for in Leases approved
by Mortgagee; or (y) any buildings or additions to any
existing buildings or other structures to be erected on the
Mortgaged Premises.
4. Liens.
A. Prohibition. Subject to the provisions of
Paragraph 5 hereof respecting Taxes (as hereinafter
defined), Mortgagor shall not create or suffer or permit
any mortgage, lien, charge or encumbrance to attach to or
be filed against the Mortgaged Premises, whether such lien
or encumbrance is inferior, at parity with or superior to
the lien of this Mortgage, including mechanic's liens,
materialmen's liens, or other claims for lien made by
parties claiming to have provided labor or material with
respect to the Mortgaged Premises (collectively,
"Mechanic's Liens") and excepting only the lien of real
estate taxes and assessments not due or delinquent, the
liens and encumbrances set forth on EXHIBIT B hereto and
any liens and encumbrances of Mortgagee pursuant to this
Mortgage and the other Loan Documents.
B. Contest of Mechanic's Liens Claims.
Notwithstanding the foregoing prohibition against
Mechanic's Liens, Mortgagor, or any party obligated to
Mortgagor to do so, may in good faith and with due
diligence contest the validity or amount of any Mechanic's
Lien and defer payment and discharge thereof during the
pendency of such contest, provided that: (i) such contest
shall have the effect of preventing the sale or forfeiture
of the Mortgaged Premises or any part thereof, or any
interest therein, to satisfy such Mechanic's Lien; (ii)
within ten (10) days after Mortgagor has been notified of
the filing of such Mechanic's Lien, Mortgagor shall have
notified Mortgagee in writing of Mortgagor's intention to
contest such Mechanic's Lien or to cause such other party
to contest such Mechanic's Lien; and (iii) Mortgagor either
shall have obtained a title insurance endorsement over such
Mechanic's Liens insuring Mortgagee against loss or damage
by reason of the existence of such Mechanic's Liens or, at
the option of Mortgagee, Mortgagor shall have deposited or
caused to be deposited with Mortgagee at such place as
Mortgagee may from time to time in writing appoint, and in
the absence of such appointment, then at the place of
payment designated in the Note, a sum of money which shall
be sufficient in the reasonable judgment of Mortgagee to
pay in full such Mechanic's Lien and all interest which
might become due thereon, and shall keep on deposit an
amount so sufficient at all
<PAGE>
times, increasing such amount to cover additional interest
whenever, in the judgment of Mortgagee, such increase is
advisable. Such deposits are to be held without any
allowance of interest. If Mortgagor shall fail to maintain
or cause to be maintained sufficient funds on deposit as
hereinabove provided, shall fail to prosecute such contest
or cause such contest to be prosecuted with due diligence
or shall fail to pay or cause to be paid the amount of the
Mechanic's Lien plus any interest finally determined to be
due upon the conclusion of such contest, to the extent such
amount exceeds the amount on deposit with Mortgagee,
Mortgagee may, at its option, apply the money as deposited
in payment of or on account of such Mechanic's Lien, or
that part thereof then unpaid, together with all interest
thereon. If the amount of money so deposited shall be
insufficient for the payment in full of such Mechanic's
Lien, together with all interest thereon, Mortgagor shall
forthwith, upon demand, deposit with Mortgagee a sum which,
when added to the funds then on deposit, shall be
sufficient to make such payment in full. If the contest of
the Mechanic's Lien claim is ultimately resolved in favor
of the claimant, Mortgagee shall apply the money so
deposited in full payment of such Mechanic's Lien or that
part thereof then unpaid, together with all interest
thereon (provided Mortgagor is not then in default
hereunder) when furnished with evidence satisfactory to
Mortgagee of the amount of payment to be made. Any surplus
remaining in the control of Mortgagee shall be paid to
Mortgagor, provided Mortgagor is not then in default
hereunder.
5. Taxes.
A. Payment. Mortgagor shall pay or cause to be paid
when due and before any penalty attaches, all general and
special taxes, assessments, water charges, sewer charges,
and other fees, taxes, charges and assessments of every
kind and nature whatsoever levied or assessed against the
Mortgaged Premises or any part thereof or any interest
therein or any obligation or instrument secured hereby, and
all installments thereof (collectively, "Taxes"), whether
or not assessed against Mortgagor, and, upon request,
Mortgagor shall furnish to Mortgagee receipts therefor as
soon as reasonably possible, but in any event within thirty
(30) days after the date the same are due; and shall
discharge any claim or lien relating to Taxes upon the
Mortgaged Premises, other than matters expressly permitted
by the terms hereof. Mortgagor hereby covenants and agrees
that no owner of the Mortgaged Premises shall be entitled
to any credit by reason of the payment of any Taxes
thereon. In no event shall Mortgagor be considered in
default of this Section 5.A. if Mortgagor has timely made
all Required Deposits under subsection 9(a) hereof and is
at such time entitled to have the Taxes paid pursuant to
the first sentence of subsection 9(b) hereof.
B. Contest. Mortgagor may, in good faith and with due
diligence, contest or cause to be contested the validity or
amount of any such Taxes, provided that:
(a) such contest shall have the effect of
preventing the collection of the Taxes so contested and the
sale or forfeiture of the Mortgaged Premises or any part
thereof or interest therein to satisfy the same;
<PAGE>
(b) Mortgagor has notified Mortgagee in writing
of the intention of Mortgagor to contest the same or to
cause the same to be contested before any Tax has been
increased by any interest, penalties, or costs; and
(c) Mortgagor has deposited or caused to be
deposited with Mortgagee, at such place as Mortgagee may
from time to time in writing designate, a sum of money (or
other security acceptable to Mortgagee) that, when added to
the monies or other security, if any, deposited with
Mortgagee pursuant to Paragraph 9 hereof, is sufficient, in
Mortgagee's reasonable judgment, to pay in full, or provide
for payment in full of, such contested Tax and all
penalties and interest that might become due thereon, and
shall keep on deposit an amount or other security
sufficient, in Mortgagee's reasonable judgment, to pay in
full, or provide for payment in full of, such contested
Tax, increasing such amount or other security to cover
additional penalties and interest whenever, in Mortgagee's
judgment, such increase is advisable.
If Mortgagor fails to prosecute such contest with due
diligence or fails to maintain sufficient funds or security
on deposit as hereinabove provided, Mortgagee may, at its.
option, within ten (10) days following Mortgagee's written
notice to Mortgagor (or such shorter period of time
necessary in Mortgagee's reasonable opinion to prevent the
collection of Taxes or the sale or forfeiture of the
Mortgaged Premises or any part thereof or interest
therein), apply the monies and liquidate any securities
deposited with Mortgagee, in payment of, or on account of,
such Taxes, or any portion thereof then unpaid, including
all penalties and interest thereon. If the amount of the
money and any such security so deposited is insufficient
for the payment in full of such Taxes, together with all
penalties and interest therein, Mortgagor shall forthwith,
upon demand, either deposit with Mortgagee a sum that, when
added to such funds then on deposit, is sufficient to make
such payment in full, or, if Mortgagee has applied funds on
deposit on account of such Taxes, restore such deposit to
an amount satisfactory to Mortgagee. Provided that if an
Event of Default has not occurred, Mortgagee shall, if so
requested in writing by Mortgagor, after final disposition
of such contest and upon Mortgagor's delivery to Mortgagee
of an official bill for such Taxes, apply the money or
security so deposited in full payment of such Taxes or that
part thereof then unpaid, together with all penalties and
interest thereon and return any excess to Mortgagor, unless
Mortgagor has paid all such Taxes, together with all
penalties and interest thereon, and has provided Mortgagee
with evidence reasonably satisfactory to Mortgagee of such
payment, in which event Mortgagee shall return such money
or security to Mortgagor. All money held by Mortgagee
pursuant to this Paragraph 5.B. shall be held without any
allowance of interest thereon.
6. Prior Mortgage. This Mortgage is a second mortgage
subject and subordinate to only the Prior Mortgage but not
to any modification, extension, replacement, or renewal
thereof and only to the amounts from time to time remaining
unpaid thereon.
The Mortgagor hereby represents, warrants, covenants
and agrees that:
<PAGE>
(a) This Mortgage is lawfully executed and delivered in
conformity with the Prior Mortgage.
(b) The Mortgagor will promptly pay, when due and
payable, the interest, installments of principal,
and all other sums and charges mentioned in and
made payable by the Prior Mortgage.
(c) The Mortgagor will promptly perform and observe
all of the terms, covenants, and conditions
required to be performed and observed by the
Mortgagor under the Prior Mortgage, within the
periods (exclusive of grace periods) provided in
the Prior Mortgage, and will do all things
necessary to preserve and to keep the Prior
Mortgage free from default.
(d) The Mortgagor will promptly notify the Mortgagee
in writing of any default by the Mortgagor in the
performance or observance of any of the terms,
covenants or conditions on the part of the
Mortgagor to be performed under the Prior
Mortgage.
(e) The Mortgagor will (i) promptly notify the
Mortgagee in writing of the receipt by
the Mortgagor of any notice (other than notices
customarily sent on a regular periodic basis)
from the Mortgagee under the Prior Mortgage and
of any notice claiming default by the Mortgagor
in the performance or observance of any of the
terms, covenants or conditions on the part of the
Mortgagor to be performed or observed under the
Prior Mortgage, and (ii) promptly cause a copy of
each such notice received by the Mortgagor from
the Mortgagee under the Prior Mortgage to be
delivered to the Mortgagee.
(f) The Mortgagor will not, without the prior written
consent of the Mortgagee, enter into any
agreement or accept the benefit of any
arrangement whereby the holder of the Prior
Mortgage waives, postpones, extends, reduces or
modifies the payment of any installment of
principal or interest or any other item or amount
now required to be paid under the terms of the
Prior Mortgage or modifies any provision thereof.
(g) The Mortgagor will, within ten (10) days after
written demand from the Mortgagee, use its best
efforts to obtain from the Mortgagee under the
Prior Mortgage and deliver to the Mortgagee a
certificate stating that such Prior Mortgage is
in full force and effect, is unmodified, that no
notice of default thereunder has been served on
the Mortgagor thereunder and stating whether or
not there are any defaults thereunder, and
specifying the nature of such defaults, if any.
<PAGE>
(h) The Mortgagor will furnish to the Mortgagee,
upon demand, proof of payment-of all items
which are required to be paid by the Mortgagor
pursuant to the Prior Mortgage and proof of
payment of which is required to be given to the
Mortgagee under the Prior Mortgage.
(i) The Mortgagor shall execute and deliver, on
request of the Mortgagee, such instruments as
the Mortgagee may deem useful or required to
permit the Mortgagee to cure any default under
the Prior Mortgage or permit the Mortgagee to
take such other action as the Mortgagee
considers desirable to cure or remedy the
matter in default and preserve the interest of
the Mortgagee in the Mortgage Property.
(j) If Mortgagor shall default in making any
required payment required under the
Prior Mortgage including, without limitation,
payments of principal and/or interest,
Mortgagor shall have the right to advance the
funds necessary to cure such default and all
funds so advanced by Mortgagee together with
interest thereon at the Default Rate shall be
due together with the interest and principal,
due under the Note secured by this Mortgage.
(k) At the request of the Mortgagee, Mortgagor
agrees to pay Mortgagee any sums required to be
paid to the holder of the Prior Mortgage at
least ten (10) days prior to the last day under
the Prior Mortgage that such payments may be
made without constituting a default thereunder
and Mortgagee agrees to promptly remit such
sums so paid to Mortgagee by Mortgagor to the
holder of the Prior Mortgage in payment of such
sums due under such mortgage.
(l) It shall be deemed an Event of Default under
this Mortgage if the Mortgagor fails to make
any payment due under the Prior Mortgage
including, without limitation, any installment
of principal or interest due under the Prior
Mortgage, when due, or if the Mortgagor fails
to keep, observe, or perform any of the other
covenants, conditions or agreements contained
in the Prior Mortgage or if the Mortgagor fails
to repay to the Mortgagee on demand any amount
which the Mortgagee may have paid on the Prior
Mortgage with interest thereon; or any suit to
foreclose the Prior Mortgage should be
commenced.
To the extent the particular obligations imposed
upon the Mortgagor by section 9 are also required of
Mortgagor under the Prior Mortgage, these obligations shall
be deemed fulfilled so long as Mortgagor compiles with the
requirements of the Prior Mortgage.
7. Insurance Coverage.
A. Mortgagor will insure the Mortgaged Premises
against such perils and hazards, and in such amounts and
with such limits, as Mortgagee may from time to time
require, and in any
<PAGE>
event will continuously maintain the following described
policies of insurance without cost to Mortgagee (the
"Insurance Policies"):
i. property insurance against loss and damage
by risk of physical loss or damage,
including fire, lightening, sprinkler
leakage, windstorm, hail, explosion,
aircraft, vandalism and other risks
covered by the so-called extended coverage
endorsement covering the Mortgaged
Premises at the replacement cost of the
Improvements thereon provided that such
amount must be sufficient to prevent
Mortgagor from becoming a co-insurer under
such policies and naming Mortgagee as loss
payee;
ii. commercial general liability insurance
against any loss, liability or damage on,
about, or relating to the Mortgaged
Premises including death or injury subject
to combined single limits per occurrence
of not less than One Million Dollars
($1,000,000) including a waiver of
subrogation clause, with a broad form
coverage endorsement and naming the
Mortgagee, its successors and assigns, as
their interests may appear as
additional insured;
iii. insurance of the type necessary to insure
such other risks and in such other amounts
as Mortgagee may reasonably require; and
iv. such other types and amounts of coverage as
are customarily (x) maintained by owners
or operators of like properties, or (y)
reasonably required by sophisticated
institutional lenders in like
transactions.
B. In addition to the Insurance Policies, in the
event that Mortgagor has not paid on or before September
30, 1998 the Indebtedness Hereby Secured in full, Mortgagor
shall deliver to Mortgagee no later than. 5:00 P.M. on
September 30, 1998, an environmental impairment or risk
insurance policy (the "Environmental Insurance") in form
acceptable to the Mortgagee in the exercise of its sole
discretion, but which at a minimum shall:
i. be issued by an insurer rated A+ or higher by
Best's and which has a financial class of 15
Higher;
ii. name Mortgagee as an insured under a secured
creditor or provide equivalent coverage
protecting Mortgagee as a secured lender, and
which insures against losses associated with
all known and unknown conditions existing at
the Mortgaged Premises on or after September
30, 1998;
iii. have total aggregate coverage of at least Two
Million Dollars ($2,000,000), a term of no
Less than five (5) years, and a deductible no
Greater then Fifty Thousand Dollars ($50,000);
and
<PAGE>
iv. be effective as of September 30, 1998.
From and after September 30, 1998, the Environmental
Insurance shall be included within the definition of
Insurance Policies above. Notwithstanding anything else in
this Mortgage or the Note to the contrary, the failure of
the Mortgagor to comply with the obligations of this
Section 7(B) shall constitute an immediate Event of
Default, without any grace period or notice. In addition,
Mortgagor shall be entitled to exercise all of its other
rights and remedies under the Note, this Mortgage and the
other Loan Documents, including without limitation, its
rights under Section 8 hereof.
8. Insurance Policies. All Insurance Policies shall
be in form, companies and amounts satisfactory to Mortgagee
from time to time. Unless otherwise expressly agreed to by
Mortgagee, an insurance company shall not be satisfactory
unless such insurance company is licensed in the State of
New Hampshire and has actively been in business for at
least five (5) years; (c) if it is a mutual company, is a
nonassessable company; and (d) does not provide insurance
on any one building in excess of Ten Percent (10%) of its
policyholders' surplus (including capital). All Insurance
Policies insuring against casualty and other appropriate
policies shall include non-contributing mortgagee
endorsements in favor of and with loss payable to
Mortgagee, and all Insurance Policies insuring against
liability shall name the Mortgagee as additional insured
thereunder; all Insurance Policies shall include, as well,
standard waiver of subrogation endorsements, and shall
provide that the coverage shall not be terminated or
materially modified, nor a risk materially changed without
twenty (20) days' advance written notice to Mortgagee and
shall provide that no claims shall be paid thereunder
without ten (10) days' advance written notice to Mortgagee.
If a blanket policy is issued, a certified copy of said
policy shall be furnished, together with a certificate
indicating that Mortgagee is an additional insured under
such policy in the designated amount. Mortgagor will
deliver all Insurance Policies to Mortgagee and, in case of
Insurance Policies about to expire, Mortgagor will deliver
renewal or replacement policies not less than thirty (30)
days prior to the date of expiration. The requirements of
the preceding sentence shall apply to any separate policies
of insurance taken out by Mortgagor concurrent in form or
contributing in the event of loss with the Insurance
Policies. If any such insurance policy is not so delivered
to Mortgagee, or in the event any such insurance policy is
canceled, whether or not Mortgagee has the policy in its
possession, and no reinstatement or replacement policy is
received prior to termination of insurance, Mortgagee,
without notice to or demand upon Mortgagor, may (but shall
not be obligated to) obtain such insurance with such
company as Mortgagee may deem satisfactory, and pay the
premium therefor, and the amount of any premium so paid
shall be charged to and promptly paid by Mortgagor or at
the option of the Mortgagee, may be added to the
Indebtedness Hereby Secured.
9. Deposits for Taxes and Insurance Premiums. Upon
and during the occurrence and continuation of an Event of
Default, in order to assure the payment of Taxes and
Premiums payable with respect total Insurance Policies
("Premiums") as and when the same shall become due and
payable:
<PAGE>
(a) Mortgagor shall deposit with Mortgagee on the
first business day of each and every month, an amount equal
to one-twelfth (1/12) of the Taxes and, if required by
Mortgagee, Premiums, (to become due) upon the Mortgaged
Premises between one and thirteen months after the date of
such deposit; provided that in the case of the first such
deposit, there shall be deposited in addition an amount
which, when added to the aggregate amount of monthly
deposits to be made hereunder with respect to Taxes, and if
required by Mortgagee, Premiums, to become due and payable
within thirteen months after such first deposit, will
provide (without interest) a sufficient fund to pay such
amounts, one month prior to the date when they are due and
payable. The amounts of such deposits (herein generally
called "Required Deposits") shall be based upon Mortgagee's
estimate as to the amount of Taxes and, if required to be
so collected, Premiums. Mortgagor shall promptly, upon the
demand of Mortgagee, make additional Required Deposits as
Mortgagee may from time to time require due to (i) failure
of Mortgagee to require, or failure of Mortgagor to make,
Required Deposits in previous months, (ii) underestimation
of the amounts of Taxes and/or Premiums (if so required),
(iii) the particular due dates and amounts of Taxes and/or
Premiums (if so required), or (iv) application of the
Required Deposits pursuant to Paragraph 9(c) hereof. The
preceding sentence is not intended and shall not be
construed to constitute a waiver of an Event of Default
occurring by virtue of Mortgagor's breach of its
obligations to fund Required Deposits set forth above in
this subparagraph 9(a). All Required Deposits shall be held
in one or more interest-bearing accounts, with interest
thereon being paid to Mortgagor annually on the anniversary
date hereof, provided that there does not then exist any
Event of Default (or circumstances which whether with the
giving of notice, the passage of time, or both, might ripen
into an Event of Default).
(b) Subject to the succeeding clause (c),
Mortgagee will, out of the Required Deposits, upon the
presentation to Mortgagee by Mortgagor of the bills
therefor, pay the Taxes and, if amounts for Premiums have
been collected, the Premiums. If the total Required
Deposits on hand shall not be sufficient to pay all of the
Taxes and Premiums, if such Premiums are to be paid from
the Deposits, when the same shall become due, then
Mortgagor shall pay to Mortgagee on demand the amount
necessary to make up the deficiency.
(c) Upon the occurrence of an Event of Default,
Mortgagee may, at its option, without being required to do
so, apply any Required Deposits on hand to any of the
Indebtedness Hereby Secured, in such order and manner as
Mortgagee may elect. When the Indebtedness Hereby Secured
has been fully paid, any remaining Required Deposits
shall be paid to Mortgagor or to the party legally entitled
thereto. All Required Deposits are hereby pledged as
additional security for the Indebtedness Hereby Secured,
and shall be held by Mortgagee irrevocably to be applied
for the purposes for which made as herein provided, and
shall not be subject to the direction or control of
Mortgagor.
(d) Notwithstanding anything herein to the contrary,
Mortgagee, or its successors and assigns, shall not be
liable for any failure to apply the Required Deposits
<PAGE>
unless Mortgagor, while there exists no Event of Default
(or circumstances which, whether with the giving of notice,
the passage of time, or otherwise, would constitute an
Event of Default), shall have requested Mortgagee in
writing to make application of such Required Deposits on
hand to the payment of the Taxes or, if amounts for
Premiums have been collected, the Premiums, for the payment
of which such Required Deposits were made, accompanied by
the bills therefor.
(e) The provisions of this Mortgage are for the
benefit of Mortgagor and Mortgagee alone. No provision of
this Mortgage shall be construed as creating in any party
other than the Mortgagor and Mortgagee, any rights in and
to the Required Deposits or any rights to have the Required
Deposits applied to payment of Taxes and Premiums.
Mortgagee shall have no obligation or duty to any third
party to collect Required Deposits.
10. Proceeds of Insurance. Mortgagor will give
Mortgagee prompt notice of any loss or damage to the
Mortgaged Premises, and;
(a) In case of loss or damage in excess of
Twenty-Five Thousand Dollars ($25,000.00) covered by any of
the Insurance Policies, Mortgagee (or, after entry of
decree of foreclosure, the purchaser at the foreclosure
sale or decree creditor, as the case may be) is hereby
authorized at its option either (i) to settle and adjust
any claim under such Insurance Policies without the consent
of Mortgagor or (ii) allow Mortgagor to settle and adjust
such claim without the consent of Mortgagee; provided that
in either case Mortgagee shall, and is hereby authorized
to, collect and receipt for any such insurance proceeds;
and the expenses incurred by Mortgagee in the adjustment
and collection of insurance proceeds shall be so much
additional Indebtedness Hereby Secured, and shall be
reimbursed to Mortgagee upon demand or, in the event and to
the extent sufficient proceeds are available, shall be
deducted by Mortgagee from said insurance proceeds prior to
any other application thereof. Each insurance company
which has issued an Insurance Policy is hereby authorized
and directed to make payment for all losses covered by an
Insurance Policy to Mortgagee alone, and not to Mortgagee
and Mortgagor jointly;
(b) Mortgagee shall have the option (which,
subject to the provisions of Paragraph 11 below, shall be
exercisable by Mortgagee in its sole discretion) to apply
the proceeds of Insurance Policies consequent upon any
casualty in excess of Twenty-Five Thousand Dollars
($25,000.00) either (i) to reduce the Indebtedness Hereby
Secured; or (ii) to reimburse Mortgagor for the cost of
restoring, repairing, replacing or rebuilding the loss or
damage of the casualty, subject to such conditions as
Mortgagee may reasonably impose (which, in any event, and
without limitation will include the provisions and
conditions set forth in Paragraph 11 hereof). If Mortgagee
elects to apply the proceeds of Insurance Policies to the
Indebtedness Hereby Secured and such proceeds do not
discharge that indebtedness in full at Mortgagee's option,
the entire Indebtedness Hereby
<PAGE>
Secured shall become immediately due and payable with
interest thereon at the Default Rate (as defined in the
Note).
(c) Whether or not insurance proceeds are
available or sufficient for such purpose (unless the reason
any such proceeds are not available is that Mortgagee has
applied such proceeds to reduce the Indebtedness Hereby
Secured, as contemplated by subparagraph 10(b)(i), or the
proceeds have been applied to reduce the indebtedness
secured by the Prior Mortgage and in such event Mortgagor
shall be relieved of its restoration obligation to the
extent of restoration of that part of the Improvements
damaged by the hazard with respect to which insurance
proceeds are received and applied by Mortgagee as
aforesaid, except to the extent required to provide
adequate safety and security to the remaining portions of
the Improvements), Mortgagor hereby covenants to restore,
repair, replace or rebuild the Improvements, to be of at
least equal value, and of substantially the same character
as prior to such loss or damage (herein, "Restoring"), all
to be effected in accordance with plans, specifications and
procedures to be first submitted to and approved by
Mortgagee, and Mortgagor shall pay all costs of such
restoring, repairing, replacing or rebuilding.
(d) Any portion of the insurance proceeds
remaining after payment in full of the Indebtedness Hereby
Secured shall be paid to Mortgagor or as ordered by a court
of competent jurisdiction.
(e) No interest shall be payable by Mortgagee on
account of any insurance proceeds at any time held by
Mortgagee.
(f) In the event of foreclosure of the Mortgage
or other transfer or title to the Mortgaged Premises in
extinguishment of the Indebtedness Hereby Secured, all
right, title and interest of Mortgagor in and to any
insurance policies then in force shall pass to the
purchaser of the Mortgaged Premises in foreclosure or the
grantee of a deed in lieu of foreclosure, and Mortgagor
hereby appoints Mortgagee its attorney-in-fact, in
Mortgagor's name, to assign and transfer all such policies
and proceeds to such purchaser or grantee.
11. Non-Exclusive Conditions to Disbursement of
Insurance Proceeds. A. In the event Mortgagee shall elect
to make the proceeds of hazard insurance available for
restoration of the Improvements, or that part thereof,
damaged by fire or other casualty with respect to which
insurance is paid, the following non-exclusive conditions
shall apply:
(i) the insurance proceeds must be sufficient,
in the reasonable judgment of Mortgagee, to
pay for the repair or restoration of the
damaged portion of the Improvements (or if
determined to be insufficient, Mortgagor
must deposit with Mortgagee an amount that
is, in Mortgagee's reasonable judgment,
sufficient) and any such repair or
restoration may be effected in compliance
with applicable laws and regulations
(including, without
<PAGE>
limitation, zoning and similar laws and
regulations respecting dimensional
and use requirements);
(ii) Mortgagor establishes to the reasonable
satisfaction of Mortgagee, on the basis of
certifications from engineers and
architects acceptable to Mortgagee, that
repair and restoration can be completed
prior to the Maturity Date;
(iii) at all times there shall exist no Event of
Default;
(iv) all Leases shall be and remain in full
force and effect upon and following
the occurrence of such casualty, and the
Mortgagor shall not be in default under the
terms thereof;
(v) following the Mortgagee's request, the
Mortgagor shall execute and deliver to
Mortgagee such instruments as Mortgagee
reasonably deems necessary and appropriate
in respect of the restoration and repair of
the Improvements within ten (10) days
following Mortgagee's request for same;
(vi) the Mortgagor shall complete the restoration
and repair of the Improvements to the
Mortgagee's satisfaction, not later than one
(1) year from the date of the occurrence of
such damage or destruction; and
(vii) Mortgagor shall establish to the reasonable
satisfaction of Mortgagee that, upon full
performance and completion of such
restoration and repair, the Improvements
shall be restored to an architectural unit
comparable to and not less valuable than
that which existed prior to such fire or
other casualty.
B. In the event Mortgagor shall elect to make
available the proceeds of Insurance Policies consequent
upon any casualty to the cost of Restoring as aforesaid,
such insurance proceeds held by Mortgagee for Restoring of
the Mortgaged Premises shall be disbursed from time to time
upon Mortgagee being furnished with (i) evidence reasonably
satisfactory to it of the estimated cost of completion of
the Restoring, (ii) funds (or assurance satisfactory to
Mortgagee that such funds are available) sufficient in
addition to the proceeds of insurance, to complete and
fully pay for the completion of the Restoring, and (iii)
such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance
endorsements, plats of survey and such other evidences of
cost, payment and performance as Mortgagee may reasonably
require and approve; and Mortgagee, in any event, may
require that all plans and specifications for such
Restoring be submitted to and approved by Mortgagee prior
to commencement of work. No payment made prior to the final
completion of the Restoring shall exceed ninety percent
(90%) of the value of the work performed from time to time,
as such value shall be determined by Mortgagee in its sole
and exclusive judgment; funds other than proceeds of
insurance shall be
<PAGE>
disbursed prior to disbursement of such proceeds, except as
may otherwise be provided herein; and at all times the
undisbursed balance of such proceeds remaining in the hands
of Mortgagee, together with funds deposited or irrevocably
committed to the satisfaction of Mortgagee by or on behalf
of Mortgagor to pay the cost of completion of the
Restoring, shall be at least sufficient in the reasonable
judgment of Mortgagee to pay the entire unpaid cost of the
completion of the Restoring, free and clear of all liens or
claims for lien. Disbursements of proceeds shall be made on
a construction loan basis, and shall be upon such
additional conditions as Mortgagee may reasonably impose.
Subject to the next succeeding sentence, any surplus which
may remain out of insurance proceeds held by Mortgagee
after payment of such costs of Restoring shall be paid to
Mortgagor. If there is or has occurred an Event of Default
while Mortgagee is holding funds for Restoring, Mortgagee
may at its sole option apply such funds against the
Indebtedness Hereby Secured, in such order of manner as
Mortgagee may elect. No interest shall be allowed to
Mortgagor on account of any proceeds of insurance or other
funds held by Mortgagee.
C. Mortgagee agrees that upon the conditions that:
(i) so long as no Event of Default has occurred, and no
facts or circumstances exist that with the passage of time
or the giving of notice, or both, would constitute an Event
of Default, and (ii) the cost of restoring shall not
exceed, in the aggregate, Twenty-Five Thousand Dollars
($25,000.00), Mortgagee agrees to make the proceeds
available for restoration in accordance with the terms and
conditions set forth above. Specification in this Paragraph
11 of the non-exclusive conditions which Mortgagee may
impose in connection with disbursement of proceeds is not
intended, and shall not be construed, to derogate from the
parties' agreement (set forth in subparagraph 10(b) hereof)
that, except as expressly set forth in this Paragraph 11.C,
Mortgagee shall in its sole discretion have the right to
determine whether to proceed under 10(b)(i) hereof as
opposed to 10(b)(ii) hereof.
12. Condemnation and Eminent Domain. Any and all
awards (the "Awards") heretofore or hereafter made or to be
made to the present, or any subsequent, owner of the
Mortgaged Premises, by any governmental or other lawful
authority for the taking by condemnation or eminent domain,
of all or any part of the Mortgaged Premises (including any
award from the United States government at any time after
the allowance of a claim therefor, the ascertainment of the
amount thereto, and the issuance of a warrant for payment
thereof), or the proceeds from a sale in lieu of such
condemnation or eminent domain are hereby assigned by
Mortgagor to Mortgagee, which Awards Mortgagee is hereby
authorized to collect and receive from the condemnation
authorities, and Mortgagee is hereby authorized to give
appropriate receipts and acquittances therefor. Mortgagor
shall give Mortgagee immediate notice of the actual or
threatened commencement of any condemnation or eminent
domain proceedings affecting all or any part of the
Mortgaged Premises and shall deliver to Mortgagee copies of
any and all papers served in connection with any such
proceedings. Mortgagor further agrees to make, execute, and
deliver to Mortgagee, at any time upon request, free, clear
and discharged of any encumbrance of any kind whatsoever,
any and all further assignments and other instruments
deemed reasonably necessary by Mortgagee for the purpose of
validly and sufficiently assigning all Awards and other
compensation heretofore and hereafter made to Mortgagor for
any taking, either permanent or temporary, under any such
proceeding. If any portion of or interest in the Mortgaged
Premises is taken by condemnation or eminent domain, either
temporarily or
<PAGE>
permanently, and the remaining portion of the Mortgaged
Premises is not, in the reasonable judgment of Mortgagee,
an architectural and economic unit of the same character
and not less valuable than the same was prior to the
taking, then, at the option of Mortgagee, the entire
Indebtedness Hereby Secured shall immediately become due
and payable. After deducting from the Award for such taking
all of its expenses incurred in the collection and
administration of the Award, including reasonable
attorney's fees, Mortgagee shall be entitled to apply the
net proceeds toward repayment of such portion of the
Indebtedness Hereby Secured as it deems appropriate without
affecting the lien of this Mortgage. In the event of any
partial taking of the Mortgaged Premises or any interest in
the Mortgaged Premises which in the judgment of Mortgagee
leaves the Mortgaged Premises as an architectural and
economic unit of the same character and not less valuable
than the same was prior to the taking, and provided no
Event of Default has occurred, the Award shall be applied
to reimburse Mortgagor for the cost of restoration and
rebuilding the Mortgaged Premises in accordance with plans,
specifications and procedures which must be submitted to
and approved by Mortgagee, and such Award shall be
disbursed in the same manner as is provided in Paragraph
11.B hereof for the application of insurance proceeds,
provided that any surplus after payment of such costs shall
be applied on account of the Indebtedness Hereby Secured.
If the Award is not applied for reimbursement of such
restoration costs, the Award shall be applied against the
Indebtedness Hereby Secured, in such order or manner as
Mortgagee shall elect.
13. Assignment of Leases and Rents.
A. Mortgagor hereby absolutely and presently sells,
assigns and transfers unto Mortgagee all of the rents,
royalties, issues, profits, revenue, income and other
benefits from the Mortgaged Premises (collectively the
"Revenues") and all of the rents, leases, issues and
profits now due and which may hereafter become due under or
by virtue of any Leases which may have been heretofore or
may be hereafter made or agreed to by Mortgagor or the
agents of the Mortgagor or which may be made or agreed to
by Mortgagee under the powers herein granted, it being the
intention hereby to establish an absolute transfer and
assignment of all such Revenues and Leases to Mortgagee and
not merely the granting of a security interest. Subject to
the foregoing and to the remaining provisions of this
Paragraph 13, Mortgagee hereby grants to Mortgagor a
revocable license to collect and retain the Revenues. In
any event, upon the occurrence of an Event of Default, the
license to Mortgagor from Mortgagee contemplated by this
Agreement shall terminate automatically and thereafter
Mortgagee shall be entitled to take possession of the
Mortgaged Premises, and subject to the effect of any
Leases, remove all persons therefrom and rent the Mortgaged
Premises for Mortgagor's account and employ such agents and
attorneys as may be necessary with respect thereto.
Likewise, upon the occurrence of an Event of Default, and
without any requirement that notice first be given to
Mortgagor, Mortgagee shall be entitled to the immediate
appointment of a receiver of the Mortgaged Premises,
without regard to the value of the Mortgaged Premises or
the solvency of any person or persons primarily or
contingently liable for the payment of the Indebtedness
Hereby Secured, whether or not Mortgagee has an adequate
remedy at law and whether or not Mortgagor has committed
fraud or waste; and upon any such Event of Default, whether
or not a receiver has been sought or appointed, Mortgagee
may collect all Revenues, and apply the Revenues so
<PAGE>
collected in their entirety to the extent of the
Indebtedness Secured Hereby, after deducting Mortgagee's
costs and expenses of collection of such Revenues
(including, without limitation, attorneys' fees and the
costs and expenses of litigation). Upon payment in full and
satisfaction of the Indebtedness Hereby Secured, this
assignment of Revenues shall terminate automatically.
Mortgagor hereby irrevocably appoints Mortgagee its agent
in its name and stead (with or without taking possession of
the Mortgaged Premises as provided in Paragraph 20 hereof)
to rent, lease or let all or any portion of the Mortgaged
Premises to any party or parties at such rental and upon
such terms as Mortgagee shall, in its reasonable
discretion, determine, and to collect all of said revenues
arising from or accruing at any time hereafter, and all now
due or that may hereafter become due under each and every
of the Leases, written or oral, or other tenancy existing,
or which may hereafter exist on the Mortgaged Premises,
with the rights and powers and subject to the same
immunities, exoneration of liability and rights of recourse
and indemnity as Mortgagee would have upon taking
possession pursuant to the provisions of Paragraph 20
hereof; provided, however, that Mortgagee shall not act
pursuant to such appointment prior to the occurrence of an
Event of Default. Mortgagor represents and agrees that no
rent has been or will be paid by any person in possession
of any portion of the Mortgaged Premises for more than one
installment in advance (other than security deposits) and
that the payment of none of the rents to accrue for any
portion of said Mortgaged Premises has been or will be
waived, released, reduced, discounted or otherwise
discharged or compromised by Mortgagor unless a tenant is
in default and the discharge or compromise is made in
connection with a lease termination by Mortgagor. From and
after the date hereof, Mortgagor will not assign any of the
rents or profits of the Mortgaged Premises except to
Mortgagee. Nothing herein contained shall be construed as
constituting Mortgagee a "mortgagee-in-possession" in the
absence of the taking of actual possession of the Mortgaged
Premises by Mortgagee pursuant to Paragraph 20 hereof.
Possession by a court-appointed receiver shall not be
considered possession by Mortgagee. In the exercise of the
powers herein granted Mortgagee, no liability shall be
asserted or enforced against Mortgagee, all such liability
being expressly waived and released by Mortgagor (other
than liability for extraordinary negligence or willful
misconduct). Mortgagor further agrees to assign and
transfer to Mortgagee all future Leases upon all or any
part of the Mortgaged Premises and to execute and deliver,
at the request of Mortgagee, all such further assurances
and assignments in the Mortgaged Premises as Mortgagee
shall from time to time require. From time to time,
following Mortgagee's written request therefor, Mortgagor
will furnish Mortgagee with executed copies of each of the
Leases and with estoppel letters from each tenant under
each of the Leases, which estoppel letters shall be in a
form reasonably satisfactory to Mortgagee.
B. Mortgagor shall submit to the Mortgagee for
Mortgagee's examination and approval any and all Leases
(and amendments thereto) prior to the execution, delivery
and commencement thereof. Mortgagee's approval rights are
for the sole benefit of Mortgagee and shall in no way be
construed to impose upon Mortgagee any obligation with
respect to the leases to be reviewed, including the value
of any lease or credit-worthiness of any tenant or
occupant. Any such leases, tenancies and occupancies not so
approved, shall not be valid; and Mortgagor at its cost and
expense, upon request of Mortgagee, shall cause any parties
in possession of the Mortgages Premises under any such
leases, tenancies and occupancies, not so approved, to
vacate the Mortgaged Premises immediately; and Mortgagor
acknowledges that Mortgagee may
<PAGE>
from time to time at its option enter upon the Mortgaged
Premises and take any other action in court or otherwise to
cause such parties to vacate the Mortgaged Premises; the
costs and expenses of Mortgagee in so doing shall be paid
by Mortgagor to Mortgagee on demand thereof and shall be
part of the indebtedness secured by this Mortgage; such
rights of Mortgagee shall be in addition to all its other
rights as Mortgagee, including the right of foreclosure.
Mortgagor agrees to provide a true and complete copy of
each lease, or other agreement for tenancy or occupancy, to
Mortgagee within ten (10) business days after the execution
and delivery thereof.
14. Observance of Leases Assigned. Mortgagor expressly
covenants and agrees that if Mortgagor, as lessor under any
of the Leases hereby assigned to Mortgagee, shall fail to
perform and fulfill any term, covenant, condition or
provision in said Lease, on its part to be performed or
fulfilled at the times and in the manner in said Lease
provided (giving effect to any applicable grace or cure
periods contained therein) or if Mortgagor shall cancel,
terminate, amend, modify or void any of the Leases without
Mortgagee's prior written consent (which consent shall not
be unreasonably withheld or delayed), then and in any such
event, such action shall constitute an Event of Default
hereunder and at the option of Mortgagee, the Indebtedness
Secured Hereby shall become due and payable as in the case
of other Events of Default.
15. Mortgagee's Performance of Mortgagor's
Obligations. In case of an Event of Default, Mortgagee,
either before or after acceleration of the Indebtedness
Hereby Secured or the foreclosure of the lien hereof or
foreclosure sale, may, but shall not be required to, make
any payment or perform any act herein required of Mortgagor
(whether or not Mortgagor is personally liable therefor) in
any form and manner deemed expedient by Mortgagee. Upon any
such payment or performance of any such act, Mortgagee
shall as soon as reasonably possible provide notice thereof
to Mortgagor but its failure to do so shall not affect the
rights of Mortgagee and the obligation of Mortgagor
hereunder. Mortgagee may, but shall not be required to,
complete construction, furnishing and equipping of the
Improvements and rents, operate and manage the Mortgaged
Premises and such Improvements and pay operating costs and
expenses, including management fees, of every kind and
nature in connection therewith, so that the Mortgaged
Premises shall be operational and usable for their intended
purposes. All monies paid, and all expenses paid or
incurred in connection therewith, including attorneys' fees
and other monies advanced by Mortgagee to protect the
Mortgaged Premises and the lien hereof, or to complete
construction, furnishing and equipping or to rent, operate
and manage the Mortgaged Premises or to pay any such
operating costs and expenses thereof or to keep the
Mortgaged Premises operational and usable for their
intended purpose shall be so much additional Indebtedness
Hereby Secured, whether or not the Indebtedness Hereby
Secured, as a result thereof, shall exceed the face amount
of the Note, and shall become immediately due and payable
in demand, and with interest thereon at the Default Rate.
Inaction of Mortgagee shall never be considered as a waiver
of any right accruing to it on account of any Event of
Default nor shall the provisions of this Paragraph or any
exercise by Mortgagee of its rights hereunder prevent any
breach from constituting an Event of Default. Mortgagee, in
making any payment hereby authorized (a) relating to Taxes,
may do so according to any bill, statement or estimate,
without inquiry into the validity of any tax, assessment,
sale, forfeiture, tax lien or title or claim thereof; (b)
for the purchase, discharge, compromise or settlement of
any lien, may do so without
<PAGE>
inquiry as to the validity or amount of any claim for lien
which may be asserted; or (c) in connection with the
completion of construction, furnishing or equipping of the
Mortgaged Premises or rental, operation, or management of
the Mortgaged Premises or the payment of operating costs
and expenses thereof, may do so in such amounts and to such
persons as Mortgagee may deem appropriate. Nothing
contained herein shall be construed to require Mortgagee to
advance or expand monies for any purpose mentioned herein,
or for any other purpose.
16. Security Agreement. Mortgagee and Mortgagor agree
that this Mortgage shall constitute a Security Agreement
within the meaning of the New Hampshire Uniform Commercial
Code (hereinafter the "Code") with respect to (i) any and
all sums at any time on deposit for the benefit of
Mortgagee or held by Mortgagee (whether deposited by or on
behalf of Mortgagor or anyone else) pursuant to any of the
provisions of the Mortgage and (ii) with respect to any
personal property included in the granting clauses of this
Mortgage and EXHIBIT C hereto, which personal property may
not be deemed to be affixed to the Mortgaged Premises
or may not constitute a "fixture" (as such term is defined
in the Code), (which property is hereinafter referred to as
"Personal Property") and all replacements of such Personal
Property, substitutions for such Personal Property,
additions to such Personal Property, and the proceeds
thereof (all of said Personal Property and the
replacements, substitutions and additions thereto and the
proceeds thereof being sometimes hereinafter collectively
referred to as the "Collateral"), and that a security
interest in and to the Collateral is hereby granted to
Mortgagee, and the Collateral and all of Mortgagor's right,
title and interest therein are hereby assigned to
Mortgagee, all to secure payment of the Indebtedness Hereby
Secured. All of the terms, provisions, conditions and
agreements contained in this Mortgage pertain and apply to
the Collateral as fully and to the same extent as to any
other property comprising the Mortgaged Premises; and the
following provisions of this Paragraph shall not limit the
applicability of any other provisions of this Mortgage but
shall be in addition thereto:
(a) Mortgagor (being the Debtor as that term is
used in the Code) is and will be the true and
lawful owner of the Collateral, subject to no
liens, charges or encumbrances other than the
lien hereof, other liens and encumbrances
benefiting Mortgagee and no other party, and
liens and encumbrances, if any, expressly
permitted by this Mortgage (including, without
limitation, those certain liens and
encumbrances, if any, set forth on EXHIBIT B
hereto) or otherwise expressly consented to in
writing by Mortgagee.
(b) The Collateral is to be used by Mortgagor
solely for business purposes.
(c) The Collateral will be kept at the Mortgaged
Premises, and, except for Obsolete Collateral
(as hereinafter defined), will not be removed
therefrom without the consent of Mortgagee
(being the Secured Party as that term is used in
the Code). The Collateral may be affixed to the
Mortgaged Premises but will not be affixed to
any other real estate.
<PAGE>
(d) The only persons having any interest in the
Collateral are Mortgagor, Mortgagee and holders
of interests, if any, expressly permitted hereby
or otherwise expressly consented to in writing by
Mortgagee.
(e) No Financing Statement (other than Financing
Statements showing Mortgagee as the sole secured
party, or with respect to liens or encumbrances,
if any, expressly permitted by this Mortgage or
otherwise expressly consented to in writing by
Mortgagee) covering any of the Collateral or any
proceeds thereof is on file in any public office
except pursuant hereto or as set forth on EXHIBIT
B; and Mortgagor will at its own cost and
expense, upon demand, furnish to Mortgagee such
further information and will execute and deliver
to Mortgagee such financing statements and other
documents in form satisfactory to Mortgagee and
will do all such acts and things as Mortgagee may
at any time or from time to time request or as
may be necessary or appropriate to establish and
maintain a perfected security interest in the
Collateral as security for the Indebtedness
Hereby Secured, subject to no other liens or
encumbrances, other than liens or encumbrances
benefiting Mortgagee and no other party and liens
and encumbrances (if any) expressly permitted by
this Mortgage; and Mortgagor will pay the cost of
filing or recording such financing statements or
other documents, and this instrument, in all
public offices wherever filing or recording is
deemed by Mortgagee to be necessary or desirable.
(f) Upon an Event of Default, Mortgagee shall
have the remedies of a secured party under the
Code, including without limitation, the right to
take immediate and exclusive possession of the
Collateral, or any part thereof, and for that
purpose may, so far as Mortgagor can give
authority therefor, with or without judicial
process, enter (if this can be done without
breach of the peace), upon any place which the
Collateral or any part thereof may be situated
and remove the same therefrom (provided that if
the Collateral is affixed to real estate, such
removal shall be subject to the conditions stated
in the Code); and Mortgagee shall be entitled to
hold, maintain, preserve and prepare the
Collateral for sale, until disposed of, or may
propose to retain the Collateral subject to
Mortgagor's right of redemption in satisfaction
of Mortgagor's obligations, as provided in the
Code. Mortgagee may render the Collateral
unusable without removal and may dispose of the
Collateral on the Mortgaged Premises. Mortgagee
may require Mortgagor to assemble the Collateral
and make it available to Mortgagee for its
possession at a place to be designated by
Mortgagee. Mortgagee will give Mortgagor
reasonable notice of the time and place of any
public sale of the Collateral or of the time
after which any private sale or any other
intended disposition thereof is to be made. The
requirements of reasonable notice shall be met if
such notice is mailed, by certified United States
mail or equivalent, postage prepaid, to the
address of Mortgagor hereinafter set forth at
least ten (10) days before the time of the sale
or disposition. Mortgagee may buy at any public
sale and, if the Collateral is of a type
customarily sold in a recognized market or is of
a type which is the subject of widely distributed
standard price quotations, Mortgagee may buy at
private sale. Any such sale may be held as part
of and in conjunction with any foreclosure sale
of the Mortgaged Premises, the Mortgaged Premises
including the Collateral to be sold as one lot if
Mortgagee so elects. The net proceeds realized
upon
<PAGE>
A. For purposes of this Mortgage: the term "Event of
Default" shall have the meaning ascribed to such term in
the Note; and the term "default," as used in the STATUTORY
POWER OF SALE, shall mean an Event of Default as defined in
the Note.
B. Upon occurrence of an Event of Default, Mortgagee
is hereby authorized and empowered, at its option and
without affecting the lien hereby created or the priority
of said lien or any other right of Mortgagee hereunder, to
declare, without further notice, all Indebtedness Hereby
Secured to be immediately due and payable with interest
thereafter at the Default Rate, and Mortgagee may
immediately proceed to foreclose this Mortgage and/or to
exercise any right, power or remedy provided by this
Mortgage, the Note, or any of the other Loan Documents or
by law or in equity or any other document or instrument
regulating, evidencing, securing or guarantying any of the
Indebtedness Hereby Secured. This Mortgage is upon the
STATUTORY CONDITIONS and upon the further condition that
all covenants and agreements on the part of Mortgagor
contained herein or in any of the other Loan Documents
shall be kept and performed, for any breach of which
Mortgagee shall have the STATUTORY POWER OF SALE, as well
as all other rights and remedies provided hereunder, under
any of the other Loan Documents, or otherwise available at
law or in equity.
19. Foreclosure. When the Indebtedness Hereby
Secured, or any part thereof, shall become due, whether by
acceleration or otherwise, Mortgagee shall have the right
to foreclose the lien hereof in accordance with the laws of
the state in which the Premises are located including,
without limitation, the STATUTORY POWER OF SALE, and to
exercise any other remedies of Mortgagee provided in the
Note, this Mortgage, or any of the other Loan Documents, or
which Mortgagee may have at law, at equity or otherwise. In
any suit to foreclose the lien hereof, there shall be
allowed and included as additional Indebtedness Hereby
Secured in the decree of sale, all expenditures and
expenses which may be paid or incurred by or on behalf of
Mortgagee for attorneys' fees, appraiser's fees, outlays
for documentary and expert evidence, stenographer's
charges, publication costs, and costs (which may be
estimated as to item to be expended after entry of the
decree) of procuring all such abstracts of title, title
searches and examinations, title insurance policies, and
similar data and assurances with respect to title as
Mortgagee may deem necessary either to prosecute such suit
or to evidence to bidders at sales which may be had
pursuant to such decree the true conditions of the title to
or the value of the Mortgaged Premises. All expenditures
and expenses of the nature mentioned in this Paragraph, and
such other expenses and fees as may be incurred in the
protection of the Mortgaged Premises and rents and income
therefrom and the maintenance of the lien of this Mortgage,
including the fees of any attorney employed by Mortgagee in
any litigation or proceedings affecting this Mortgage, the
Note, the other Loan Documents or the Mortgaged Premises,
including probate and bankruptcy proceedings, or in
preparation of the commencement or defense of any
proceedings or threatened suit or proceeding, or otherwise
in dealing specifically therewith, shall be so much
additional Indebtedness Hereby Secured and shall be
immediately due and payable by Mortgagor, with interest
thereon at the Default Rate until paid.
20. Right of Possession. When the Indebtedness Hereby
Secured shall become due, whether by acceleration or
otherwise, or in any case in which, under the provisions of
this
<PAGE>
Mortgage, Mortgagee has a right to institute foreclosure
proceedings, Mortgagor shall, forthwith upon demand of
Mortgagee, surrender to Mortgagee and Mortgagee shall be
entitled to take actual possession of, the Mortgaged
Premises or any part thereof, personally, by its agent or
attorneys or be placed in possession pursuant to court
order as mortgagee in possession or receiver, and
Mortgagee, in its discretion, personally, by its agents or
attorneys or pursuant to court order as mortgagee in
possession or receiver, may enter upon and take and
maintain possession of all or any part of the Mortgaged
Premises, together with all documents, books, records,
papers, and accounts of Mortgagor or the then owner of the
Mortgaged Premises relating thereto, and may exclude
Mortgagor, such owner, and any agents and servants thereof
wholly therefrom and may, on behalf of Mortgagor or such
owner, or in its own name as Mortgagee and under the powers
herein granted:
(a) hold, operate, manage, and control all or
any part of the Mortgaged Premises and conduct
the business, if any, thereof, either personally
or by its agents, with full power to use such
measures, legal or equitable, as in its
discretion may be deemed proper or necessary to
enforce the payment or security of the rents,
issues, deposits, profits, and avails of the
Mortgaged Premises, including without limitation
actions for recovery of rent, actions in forcible
detainer, and actions in distress for rent, all
without notice to Mortgagor;
(b) cancel or terminate any Lease or sublease of
all or any part of the Mortgaged Premises for any
cause or on any ground that would entitle
mortgagor to cancel the same;
(c) elect to disaffirm any Lease or sublease of
all or any part of the Mortgaged Premises made
subsequent to this Mortgage without Mortgagee's
prior written consent;
(d) extend or modify any then existing Leases,
and make new Leases of all or any part of the
Mortgaged Premises, which extensions,
modifications, and new Leases may provide for
terms to expire, or for options to lessees to
extend or renew terms to expire, beyond the
maturity date of the loan evidenced by the Note
and the issuance of a deed or deeds to a
purchaser or purchasers at a foreclosure sale, it
being understood agreed that any such Leases, and
the options or other such provisions to be
contained therein, shall be binding upon
Mortgagor as to its interest in the Mortgaged
Premises, all persons whose interests in the
Mortgaged Premises are subject to the lien
hereof, and the purchaser or purchasers at any
foreclosure sale, notwithstanding any redemption,
reinstatement, discharge of the Indebtedness
Hereby Secured, satisfaction of any foreclosure
decree, or issuance of any certificate of sale or
deed to any such purchaser;
(e) make all necessary or proper repairs,
decoration renewals, replacements, alterations,
additions, betterments, and improvements in
connection with the Mortgaged Premises as may
seem judicious to Mortgagee, to insure and
reinsure the Mortgaged Premises and all risks
incidental to Mortgagee's possession, operation,
and management thereof, and to receive all rents,
issues, deposits, profits, and avails therefrom;
and
<PAGE>
(f) apply the net income, after allowing a
reasonable fee for the collection thereof and for
the management of the Mortgaged Premises, to the
payment of Taxes, Insurance Premiums and other
charges applicable to the Mortgaged Premises, or
in reduction of the Indebtedness Hereby Secured
in such order and manner as Mortgagee shall
select.
Nothing herein contained shall be construed as
constituting Mortgagee a mortgagee in possession in the
absence of the actual taking of possession of the Mortgaged
Premises.
21. Receiver. Without limiting and in addition to
Mortgagee's other rights set forth herein or available at
law or in equity to petition for a receiver, upon the
filing of a complaint to foreclose this Mortgage or at any
time thereafter, the court in which such complaint is filed
may appoint upon petition of Mortgagee, and at Mortgagee's
sole option, a receiver of the Mortgaged Premises: Such
appointment may be made either before or after sale,
without notice, without regard to the solvency or
insolvency of Mortgagor at the time of application for such
receiver, and without regard to the then value of the
Mortgaged Premises or without regard to whether fraud or
waste has occurred; and Mortgagee hereunder or any employee
or agent thereof may be appointed as such receiver. Such
receiver shall have all powers and duties prescribed by
law, including the power to make leases to be binding upon
all parties, including Mortgagor as to its interest in the
Mortgaged Premises, the purchaser at a sale pursuant to a
judgment of foreclosure and any person acquiring an
interest in the Mortgaged Premises after entry of a
judgment of foreclosure. In addition, such receiver shall
also have the power to extend or modify any then existing
Leases, which extensions and modifications may provide for
terms to expire, or for options to lessees to extend or
renew terms to expire, beyond the maturity date of the Note
and beyond the date the issuance of a deed or deeds to a
purchaser or purchasers at a foreclosure sale, it being
understood and agreed that any such leases, and the options
or other provisions to be contained therein, shall be
binding upon Mortgagor and all the persons whose interest
in the Mortgaged Premises are subject to the lien hereof
and upon the purchaser or purchasers at any foreclosure
sale, notwithstanding any redemption, reinstatement,
discharge of the Indebtedness Hereby Secured, satisfaction
of any foreclosure judgment, or issuance of any certificate
of sale or deed to any purchaser. In addition, such
receiver shall have the power to collect the rents, issues
and profits of the Mortgaged Premises during the pendency
of such foreclosure suit end, in case of a sale and
deficiency, during the full statutory period of redemption,
if any, whether there be a redemption or not, as well as
during any further times when Mortgagor, except for the
intervention of such receiver, would be entitled to
collection of such rents, issues and profits, and such
receiver shall have all other powers which may be necessary
or are usual, in such, cases for the protection,
possession, control, management and operation of the
Mortgaged Premises during the whole of said period. The
court may, from time to time, authorize the receiver to
apply the net income from the Mortgaged Premises in payment
in whole or in part of: (a) the Indebtedness Hereby Secured
or the Indebtedness secured by a decree foreclosing this
Mortgage, or any tax, special assessment, or other lien
which may be or become superior to the lien hereof or of
such decree, provided such application is made prior to the
foreclosure sale; or (b) the deficiency in case of a sale
and deficiency.
<PAGE>
22. Statutory Condition; Statutory Power of Sale. This
Mortgage is upon the STATUTORY CONDITIONS and upon the
further condition that all covenants and agreements on the
part of Mortgagor herein undertaken shall be kept and fully
and seasonably performed and that no breach of any other of
the conditions specified herein shall be permitted, for any
breach of which covenants or conditions, Mortgagee shall
have the STATUTORY POWER OF SALE.
23. Insurance During Foreclosure. In case of an
insured loss after foreclosure proceedings have been
instituted, the proceeds of any Insurance Policy, if not
applied in rebuilding or restoring the Improvements, as
aforesaid, shall be used to pay the amount due in
accordance with any decree of foreclosure that may be
entered in any such proceedings, and the balance, if any,
shall be paid as the court may direct. In the case of
foreclosure of this Mortgage, the court, in its decree, may
provide that the mortgagee's clause attached to each of the
casualty Insurance Policies may be canceled and that the
decree creditor may cause a new loss clause to be attached
to each of said casualty Insurance Policies making the loss
thereunder payable to said decree creditor. In the event of
foreclosure sale, provided such Insurance Policies are
assignable, Mortgagee is hereby authorized, without the
consent of Mortgagor, to assign any and all Insurance
Policies to the purchaser at the sale, provided such
Insurance Policies are assignable, or to take such other
steps as Mortgagee may deem advisable to cause the interest
of such purchaser to be protected by any of the Insurance
Polices without credit or allowance to Mortgagor for
prepaid premiums thereon.
24. Waiver of Right of Redemption and Other Rights. To
the full extent permitted by law, Mortgagor hereby
covenants and agrees that it will not at any time insist
upon or plead, or in any manner whatsoever claim or take
any advantage of, any stay, exemption or extension law
or any so-called "Moratorium Law" now or at any time
hereafter in force, nor claim, take or insist upon any
benefit or advantage of or from any law now or hereafter in
force providing for the valuation or appraisement of the
Mortgaged Premises, or any part thereof, prior to any sale
or sales thereof to be made pursuant to any provisions
herein contained or to any decree, judgment or order of any
court of competent jurisdiction; or claim or exercise any
rights under any statute now or hereafter in force to
redeem the property, or any part thereof, or relating to
the marshalling thereof, upon foreclosure sale or other
enforcement hereof. To the full extent permitted by law,
Mortgagor hereby expressly waives any and all rights to
reinstatement and redemption, on its own behalf, on behalf
of all persons claiming or having an interest (direct or
indirect) by, through or under Mortgagor and on behalf of
each and every person acquiring any interest in or title to
the Mortgaged Premises subsequent to the date hereof, it
being the intent hereof that any and all such rights of
reinstatement and redemption (except the right to repay the
Note in full by paying the entire Indebtedness Hereby
Secured prior to any foreclosure sale or conveyance in lieu
thereof and thereby obtain a release of this Mortgage) of
Mortgagor and such other persons, are and shall be deemed
to be hereby waived to the full extent permitted by
applicable law. To the full extent permitted by law,
Mortgagor agrees that it will not, by invoking or utilizing
any applicable law or laws or otherwise, hinder, delay or
impede the exercise of any right, power or remedy herein or
otherwise granted or delegated to Mortgagee, but will
suffer and permit the exercise of every such right, power
and remedy as though no such law or laws have been or will
have been made or enacted, To the full extent permitted by
law,
<PAGE>
Mortgagor hereby agrees that no action for the enforcement
of the lien or any provision hereof shall be subject to any
defense which would not be good and valid in an action at
law upon the Note.
25. Rights Cumulative. Each right, power and remedy
herein conferred upon Mortgagee herein or in any of the
other Loan Documents is cumulative and in addition to every
other right, power or remedy, express or implied, now or
hereafter provided by law or in equity, and each and every
right, power and remedy herein set forth or otherwise so
existing may be exercised from time to time as often and in
such order as may be deemed expedient to Mortgagee. The
exercise of one right, power or remedy shall not be a
waiver of the right to exercise at the same time or
thereafter any other right, power or remedy; and no delay
or omission of Mortgagee in the exercise of any right,
power or remedy accruing hereunder or arising otherwise
shall impair any such right, power or remedy, or be
construed to be a wavier of any default or acquiescence
therein. Except as otherwise specifically required herein,
notice of the exercise of any right, remedy or power
granted to Mortgagee by this Mortgage is not required to be
given.
26. Successors and Assigns.
A. Holder of the Note. This Mortgage and each and
every covenant, agreement and other provision hereof shall
be binding upon Mortgagor and its successors and assigns
(including, without limitation, each and every record owner
from time to time of the Mortgaged Premises or any other
person having an interest therein), and shall inure to the
benefit of Mortgagee and its successors and assigns.
Wherever herein Mortgagee is referred to, such reference
shall be deemed to include the holder from time to time of
the Note, whether so expressed or not; and each such holder
from time to time of the Note shall have and enjoy all of
the rights, privileges, powers, options and benefits
afforded hereby and hereunder, and may enforce all and
every of the terms and provisions hereof, as fully and to
the same extent and with the same effect as if such holder
of the Note from time to time were herein by name
specifically granted such rights, privileges, powers,
options and benefits and was herein by name designated
Mortgagee.
B. Covenants Run With Land; Successor Owners. All of
the covenants of this Mortgage shall run with the land and
be binding on any successor owners of the Mortgaged
Premises. If the ownership of the Mortgaged Premises or any
portion thereof becomes vested in a person or persons other
than Mortgagor, Mortgagee may, without notice to Mortgagor,
deal with such successor or successors in interest of
Mortgagor with reference to this Mortgage and the
Indebtedness Hereby Secured in the same manner as with
Mortgagor without in any way releasing or discharging
Mortgagor from its obligations hereunder. Mortgagor will
give immediate written notice to Mortgagee of any
conveyance, transfer or change of ownership of the
Mortgaged Premises, but nothing in this Paragraph shall
vary or negate the effect of the provisions of Paragraph 17
hereof.
<PAGE>
27. Effect of Extensions and Amendments. If the
payment of the Indebtedness Hereby Secured, or any part
thereof, be extended or varied, or if any part of the
security or guaranties therefor be released, all persons
now or at any time hereafter liable therefor, or interested
in the Mortgaged Premises, shall be held to assent to such
extension, variation or release, and their liability, and
the lien, and all provisions hereof, shall continue in full
force and effect; the right of recourse against all such
persons being expressly reserved by Mortgagee,
notwithstanding any such extension, variation or release.
Any person, firm or corporation taking a junior mortgage,
or other lien upon the Mortgaged Premises or any part
thereof or any interest therein, shall take the said lien
subject to the rights of Mortgagee to amend, modify, extend
or release the Note, this Mortgage, or any other document
or instrument evidencing, securing or guarantying the
Indebtedness Hereby Secured, in each and every case without
obtaining the consent of the holder of such junior lien and
without the lien of this Mortgage losing its priority over
the rights of any such junior lien except as otherwise
expressly provided in any separate subordination agreement
by and between Mortgagee and the holder of such junior
lien.
28. Future Advances. At all times this Mortgage
secures as part of the Indebtedness Hereby Secured the
payment of any and all service charges, damages, attorneys'
fees, expenses and advances due to or incurred by Mortgagee
in connection with the Indebtedness Hereby Secured, all in
accordance with the Note, this Mortgage and the other Loan
Documents.
29. Execution of Separate Security Agreements,
Financing Statements, Etc. Mortgagor will do, execute,
acknowledge and deliver or cause to be done, executed,
acknowledged and delivered all such further acts,
conveyances, notes, mortgages, security agreements,
financing statements and assurances as Mortgagee shall
reasonably require for the better assuring, conveying,
mortgaging, assigning and confirming unto Mortgagee all
property mortgaged or conveyed hereby or property intended
so to be, whether now owned by Mortgagor or hereafter
acquired. Without limitation of the foregoing, Mortgagor
will assign to Mortgagee, upon request, as further security
for the Indebtedness Secured Hereby, its interests in all
agreements, contracts, licenses and permits affecting the
Mortgaged Premises, such assignments to be made by
instruments reasonably satisfactory to Mortgagee, but no
such assignment shall be construed as a consent by
Mortgagee to any agreement, contract, license or permit or
to impose upon Mortgagee any obligations with respect
thereto. From time to time, Mortgagor will furnish within
five (5) days after Mortgagee's request a written and duly
acknowledged statement of the Indebtedness Hereby Secured
and whether any alleged offsets or defenses exist against
the Indebtedness Hereby Secured.
30. Financial Statements: Other Indebtedness. The
financial statements heretofore furnished to the Mortgagee
are, as of the dates specified therein, complete and
correct and fairly present the financial condition of the
Mortgage and are prepared in acceptance with generally
accepted accounting principles. The Mortgagor does not have
any contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that
are known to the Mortgagor and are reasonably likely to
have a material adverse effect on the Mortgagor or
Mortgaged Premises. Since the date of such financial
statements there has been no materially adverse change in
the financial
<PAGE>
condition, operation or business of the Mortgagor from that
set forth in said financial statements. The Mortgagor shall
maintain full and accurate books of accounts and other
records reflecting the results of its operations and shall
furnish to the Mortgagee within forty five (45) days after
the end of each calendar quarter, quarterly and year to
date financial statements prepared for such calendar month
certified by the Mortgagor to be true and correct. Within
ninety (90) days following the end of the Mortgagor's
fiscal year, Mortgagor shall furnish Mortgagee with
statements of its financial affairs and condition including
a balance sheet and statement of profit and loss and
setting forth the financial conditions of the Mortgagor for
the immediately preceding calendar year prepared by a
certified public accountant. At any time and from time to
time the Mortgagor shall deliver to the Mortgagee such
financial data as Mortgagee or its agents shall reasonably
request with respect to the Mortgagor. The Mortgagor
represents that it is in compliance with all of the terms
and conditions of any and all existing indebtedness owed to
any other creditors as of the date hereof.
31. Option to Subordinate. At the option of
Mortgagee, this Mortgage shall become subject and
subordinate, in whole or in part (but not with respect to
priority of entitlement to insurance proceeds or any award
in condemnation) to any and all Leases of all or any part
of the Mortgaged Premises upon the execution by Mortgagee
and recording, thereof, at any time hereafter, in the
Registry District in and for the county wherein the
Mortgaged Premises are situated, of a unilateral
declaration to that effect.
32. Governing Law. This Mortgage shall in all
respects be governed, construed, applied and enforced in
accordance with the internal laws of the Commonwealth of
Massachusetts (being the state in which this Mortgage, the
Note and the other Loan Documents were executed and
delivered) without regard to principles of conflicts of
law. Notwithstanding the foregoing choice of law:
(a) the procedures governing the creation,
perfection and priority of the lien pertaining to real
property and tangible personal property created by this
Mortgage and the enforcement by this Mortgagee of its
foreclosure and other remedies against the Mortgagor under
the Loan Documents with respect to the Mortgaged Premises,
including by way of illustration, but not in limitation,
actions for foreclosure, for injunctive relief or for the
appointment of a receiver shall be governed by the laws of
the state where such Mortgaged Premises is located; and
(b) the Mortgagee shall comply with applicable law
in the state where the Mortgaged Premises is located to the
extent required by the law of such jurisdiction in
connection with the foreclosure of the liens created under
the Loan Documents with respect to the Mortgaged Premises.
Nothing contained herein or in any provisions of the other
Loan Documents shall be construed to provide that the
substantive law of the state of where the Mortgage Premises
is located shall apply to any parties' rights and
obligations under any of the Loan Documents,
<PAGE>
which, except as expressly provided in clauses (a) and (b)
above, are and shall continue to be governed by the
substantive law of the Commonwealth of Massachusetts. In
addition, the fact that portions of the Loan Documents may
include provisions drafted to confirm to the law of the
State where the Mortgaged Premises is located is not
intended, nor shall it be deemed, in any way, to derogate
the parties' choice of law as set forth or referred to in
the Loan Documents. The parties further agree that the
Mortgagee may enforce its rights under the Loan Documents
including, but not limited to, its rights to sue the
Mortgagor or to collect any outstanding indebtedness in
accordance with applicable law.
Each party hereto hereby consents to personal
jurisdiction in any state or Federal court located within
the Commonwealth of Massachusetts, as well as to the
jurisdiction of all courts from which an appeal may be
taken from the aforesaid courts, for the purposes of any
suite, action or other proceeding arising out of, or with
respect to any of the Loan Documents and expressly waives
any and all objections it may have as to venue in any of
such courts.
This Mortgage shall be construed and enforced
according to the laws of the Commonwealth of Massachusetts
(being the state in which this Mortgage, the Note and the
other Loan Documents were executed and delivered) without
reference to the conflicts of law principles of the
Commonwealth of Massachusetts, except that the laws of the
state in which the Mortgaged Premises are located, if other
than the Commonwealth of Massachusetts, shall govern this
Mortgage to the extent necessary for Mortgage to perfect,
protect, or enforce the rights and remedies granted to it
hereunder.
33. Inspection of Premises and Records. Mortgagee
and its representatives and agents shall have the right to
inspect the Mortgaged Premises upon reasonable prior notice
(provided that such inspection shall be conducted so as to
minimize unreasonable disruption to the business operations
of tenants under approved Leases), and inspect and make
copies of all books, records, and documents relating
thereto upon five (5) days prior written notice, at all
reasonable times, and access shall be permitted for that
purpose. Mortgagor shall keep and maintain full and correct
books and records showing in detail the income and expenses
of the Mortgaged Premises, and shall permit Mortgagee or
its agents to examine such books, income tax returns and
records and all supporting vouchers and data upon five (5)
days prior written notice, at any time and from time to
time on request at its offices at the address hereinafter
identified or at such other location as may be mutually
agreed upon.
34. Time of the Essence. Time is of the essence of
the Note, this Mortgage, and any other document or,
instrument evidencing or securing the Indebtedness Hereby
Secured.
35. Captions and Pronouns. The captions and headings
of the various sections of this Mortgage are for
Convenience only, and are not to be construed as confining
or limiting in any way the scope or intent of the
provisions hereof. Whenever the context requires or
permits, the singular shall include the plural, the plural
shall include the singular, and the masculine, feminine and
neuter shall be freely interchangeable.
<PAGE>
36. Notices. All notices, demands, requests and
other communications required pursuant to the provisions of
this Agreement shall be in writing, and shall be deemed to
have been received, on the date of receipted delivery (or
the first business day thereafter if such day of receipted
delivery is not a business day), if hand delivered or sent
by commercial courier, or two (2) business days after
depositing the same in the United States Mails, if sent by
United States Registered or Certified Mail-Return Receipt
Requested, postage prepaid, to the respective addresses as
follows:
(i) if to the Mortgagor Stocker & Yale, Inc.
then to it at: 32 Hampshire Road
Salem, New Hampshire
Attn: Mark Blodgett
with a courtesy Stuart Cable, Esq.
copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
(ii) if to the Lender, Danvers Savings Bank
then to it at: One Conant Street
Danvers, Massachusetts 01923
Attn: Kevin Bottomley
and a courtesy Anne R. Jackowitz, P.C.
copy to: Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Any of the parties may designate a change of
address by notice in writing to the other parties. In no
event shall the failure of any party to furnish courtesy
copies of any notice to legal counsel of the other party as
specified above render ineffective any such notice
otherwise given in the manner hereinabove provided.
37. Environmental Matters. Mortgagor covenants and agrees
that it shall not locate, produce, treat, transport,
incorporate, discharge, emit, release, deposit or dispose
of any Hazardous Substance in violation of any
environmental Regulation in, upon, under, over or from
the Mortgaged Premises, shall not permit any Hazardous
Substances to be located, produced, treated, transported,
incorporated, discharged, emitted, released, deposited,
disposed of or to escape therein, thereupon, thereunder,
thereover or therefrom in violation of any Environmental
<PAGE>
Regulation, and shall comply with all Environmental
Regulations which are applicable to the Mortgaged Premises.
At any time, and from time to time if Mortgagee so
requests, Mortgagee shall have the right (and Mortgagor
shall provide appropriate access to the Mortgaged Premises)
to commission one or more environmental reviews, audits,
assessments and/or reports relating to the Mortgaged
Premises, at Mortgagee's sole cost and expense, by an
engineer or scientist acceptable to Mortgagee, and in any
case the scope and extent of the same will be no less than
that reasonably required by Mortgagee. Mortgagor shall
defend and indemnify Mortgagee against, shall hold
Mortgagee harmless from, and shall reimburse Mortgagee for,
any and all claims, demands, judgments, penalties, fines,
liabilities, costs, damages and expenses, including court
costs and attorneys' fees incurred by Mortgagee (prior to
trial, at trial and on appeal) in any action against or
involving Mortgagee, resulting (A) from any breach of the
foregoing covenants, (B) from the untruthfulness of any
covenant or representation set forth in this Paragraph 37,
or (C) from the discovery of any Hazardous Substance in,
upon, under or over, or emanating from, the Mortgaged
Premises (provided, however, that Mortgagor shall have no
such indemnification obligation pursuant to this clause (C)
in the context of a Hazardous Substance which first affects
the Mortgaged Premises prior to the date of this Mortgage
or subsequent to any foreclosure of this Mortgage or any
deed-in-lieu of such foreclosure), it being the intent of
Mortgagor and Mortgagee that Mortgagee shall have no
liability or responsibility for damage or injury to human
health, the environment or natural resources caused by, for
abatement and/or clean-up of, or otherwise with respect to,
Hazardous Substances by virtue of the interest of Mortgagee
in the Mortgaged Premises created hereby or as the result
of Mortgagee exercising any of its rights or remedies with
respect thereto hereunder, including but not limited to,
becoming the owner thereof by foreclosure or conveyance in
lieu of foreclosure and which was not caused by the act or
omission of Mortgagor or any affiliate thereof. The
foregoing representations and covenants of this Paragraph
37 shall be deemed continuing covenants and representations
for the benefit of Mortgagee, and any participants or
purchasers of the indebtedness evidenced by the Note, and
any affiliate of Mortgagee who or which either purchases at
a foreclosure of this Mortgage or takes title to the
Mortgaged Premises in connection with a deed-in-lieu of
such foreclosure, but not to any other purchasers and/or
subsequent owners of the Mortgaged Premises, and shall
survive the satisfaction or release of this Mortgage, any
foreclosure of this Mortgage and/or any acquisition of
title to the Mortgaged Premises or any part thereof by
Mortgagee, or anyone claiming by, through or under
Mortgagee, by deed in lieu of foreclosure or otherwise. Any
amounts covered by the foregoing indemnification shall be
so much additional Indebtedness Hereby Secured and shall
bear interest from the date incurred at the Default Rate,
shall be payable on demand, and shall be secured hereby.
Mortgagor shall give prompt written notice to
Mortgagee of:
(i) any proceeding or inquiry by any
governmental authority with respect to
the presence of any Hazardous Substance
on the Mortgaged Premises or the
migration thereof from or to other
property;
<PAGE>
(ii) all claims made or threatened by any third
party against Mortgagor or the Mortgaged
Premises relating to any loss or injury
resulting from any Hazardous Substance;
and
(iii) Mortgagor's discovery of any occurrence or
condition on any real property adjoining or
in the vicinity of the Mortgaged Premises
that could cause the Mortgaged Premises or
any part thereof to be subject to any
restrictions on the ownership, occupancy,
transferability or use of the Mortgaged
Premises under any Environmental Regulation
or to be otherwise subject to any
restrictions on the ownership, occupancy,
transferability or use of the Mortgaged
Premises under any Environmental
Regulation.
As used herein, "Environmental Regulations" shall mean all
present or future federal, state or local laws, rules,
codes or regulations, or any judicial or administrative
interpretation thereof, including, without limitation, all
orders, decrees, judgments and rulings imposed through any
public or private enforcement proceedings, relating to
Hazardous Materials or the existence, use, discharge,
release, containment, transportation or disposal thereof,
or otherwise regulating or providing for the protection of
the environment in respect of or against any Hazardous
Materials, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, and as the same be further
amended ("CERCLA"), and Massachusetts General Laws
Chapter 21E, as amended ("21E"), and the New Hampshire RSA
146-A, RSA 146-C, RSA 147- A, and RSA 147-B, and "Hazardous
Substance" shall mean and include asbestos, flammable
materials, explosives, radioactive substances,
polychlorinated biphenyls, other carcinogens, oil and other
petroleum products, pollutants, contaminants, and any other
hazardous or toxic materials, wastes and substances which
are defined, determined or identified as such in or
pursuant to any Hazardous Materials Legal Requirements.
38. Mortgagee Not A Joint Venture. Any provision
hereof to the contrary notwithstanding, Mortgagee, by
virtue of its acceptance of this Mortgage and the making of
the loan secured hereby and entering into the Note or any
other Loan Documents, or any action taken pursuant hereto
or thereto, or contemplated hereby or thereby, shall not be
deemed to be by such action or ownership a partner or joint
venture with Mortgagor or any guarantor or any other
parties. Mortgagor shall indemnify Mortgagee against, shall
hold Mortgagee harmless from, and shall reimburse Mortgagee
for, any and all claims, demands, judgments, penalties,
fines, liabilities, costs, damages and expenses, including
court costs and attorneys' fees incurred by Mortgagee
(prior to trial, at trial and on appeal) in any action
against or involving Mortgagee resulting from such a
construction of the parties and their relationship or any
allegations thereof. Any inspection of the Mortgaged
Premises, any review of any plans, contracts, subcontracts,
(including, without limitation, environmental reviews,
audits, assessments and/or reports relating to the
Mortgaged Premises), or any analysis of the Mortgaged
Premises made by Mortgagee or any of its agents, architects
or consultants is intended solely for the benefit of
Mortgagee and shall not be deemed to create or form the
basis of any warranty, representation, covenant,
<PAGE>
implied promise or liability to Mortgagor or any of its
employees or agents, any guest or invitee upon the
Mortgaged Premises, or any other person.
39. Report of Real Estate Transaction. Mortgagor has
made or provided for making, on a timely basis, any reports
or returns required under Section 6045(e) of the Internal
Revenue Code of 1986 (and any similar reports or returns
required by state or local law) relating to the Mortgaged
Premises, notwithstanding the fact that the primary
reporting responsibility may fall on Mortgagee, counsel for
Mortgagee, or any other party. Mortgagor's obligations
under this Paragraph will be deemed to be satisfied if
proper and timely reports and returns required under this
paragraph are filed by a title company or real estate
broker involved in the real estate transaction relating to
the Mortgaged Premises, but nothing contained herein shall
be construed to require such returns or reports to be filed
by Mortgagee or counsel for Mortgagee.
40. Expenses: Mortgagor agrees to pay all reasonable
recording and filing fees, transfer taxes, title insurance
premiums, escrow and other title company charges,
attorneys' fees, appraisal and survey fees, environmental
engineer and consultant fees, consulting architect fees,
if any, financial consultant fees, fees of other engineers
and consultants, insurance costs and a11 other expenses in
connection with the making of the loan evidenced by the
Note. Mortgagee shall have the right, at its option, to pay
any such expenses and upon such payment such expenses shall
be deemed to be a part of the Indebtedness Hereby Secured
and shall be payable on demand with interest at the Default
Rate.
41. Consent Required of Mortgagee. Any consent by
Mortgagee in any single instance shall not be deemed or
construed to be Mortgagee's consent in any like matter
arising at a subsequent date and the failure of Mortgagee
to promptly exercise any right, power, remedy, consent or
approval provided herein or at law or in equity shall not
constitute or be construed as a waiver of the same nor
shall Mortgagee be stopped from exercising such right,
power, remedy, consent or approval at a later date. Any
consent or approval requested of and granted by Mortgagee
pursuant hereto shall be narrowly construed to be
applicable only to Mortgagor and the matter identified in
such consent or approval and no third party shall claim any
benefit by reason thereof, and any such consent or approval
shall not be deemed to constitute Mortgagee a venturer or
partner with Mortgagor nor shall privity of contract be
presumed to have been established with any such third
party. If Mortgagee deems it to be in its best interest to
retain the assistance of persons, firms or corporations
(including, but not limited to, attorneys, appraisers,
engineers, consultants and surveyors) with respect to a
request for consent or approval, Mortgagor shall reimburse
Mortgagee for all costs incurred in connection with the
employment of such persons, firms or corporations.
42. Counterparts. This Mortgage may be executed in
any number of counterparts, all of which taken together
shall constitute one and the same original, and execution
of separate counterparts by the parties hereto shall bind
such parties as if they had each executed the same
counterpart.
<PAGE>
43. Waiver of Homestead. Mortgagor does hereby
release, discharge and waive all such rights of exemption
from attachment and levy or sale on execution, and such
other rights whatsoever in the Mortgaged Premises,
including Family Homestead, as are reserved or secured
under and by virtue of any of the Laws of the State of New
Hampshire, or any other exemption law.
NOTICE IS HEREBY GIVEN that for purposes of RSA 479:3
that this Mortgage secures a maximum amount equal to the
principal sum of the aforesaid Note, plus advances, if any,
to protect the security of this Mortgage, plus foreclosure
costs and expenses, including attorneys fees, if any, plus
any other costs and expenses authorized by this Mortgage,
the Note, or the other Loan Documents.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, Mortgagor has signed, sealed and
delivered this Mortgage the day and year first above
written, to take effect as a Massachusetts instrument under
seal.
WITNESSSES: MORTGAGOR:
STOCKER & YALE, INC., a
Massachusetts corporation
(Signature illegible) By:/s/ Mark W. Blodgett
Mark Blodgett, its duly
authorized Chairman of
the Board
COMMONWEALTH OF MASSACHUSETTS
County of Suffolk, ss May 13, 1998
Before me personally appeared Mark Blodgett, the
Chairman of the Board of Stocker & Yale, Inc. and
acknowledged that he executed the foregoing instrument as
his free act and deed in said capacity, and as the free act
and deed of said corporation.
By:/s/ John Evan Jones
Notary Public
My Commission Expires:
October 8, 2001
Print Name: John Evan Jones
<PAGE>
EXHIBIT A
Legal Description of Insured Premises
A certain parcel of land, with the buildings thereon,
situated in Salem. Rockingham County, State of New
Hampshire and Methuen. Essex County, Commonwealth of
Massachusetts, as shown on "Plan of Land in Salem, Hew
Hampshire for M & D Realty Trust prepared by Kimball
Chase Company. Inc. and dated March 15. 1983. recorded in
the Rockingham County Registry of Deeds on even date
herewith, and more particularly described as follows:
Beginning at the southwesterly corner of the granted
premises by the intersection of Garabedian Drive, a public
way, and Hampshire Road, a public way, at an iron pipe set
in the ground on the northerly aide of said Hampshire Road
as shown on said plan: thence running S 84 deg. 19' 15" E,
58.24 feet, along the northerly side of Hampshire Road to
an iron pipe sat in the ground on the northerly side of
Hampshire Road; thence running S 73deg. 45' 25" E, 265.76
feet. along the northerly side of Hampshire Road to an iron
pipe set in the ground on the northerly side of Hampshire
Road; thence running on an arc with & radius of 830 feet
chord bearing S 49deg. 05' 04" E. 219.70 feet along the
northerly side of Hampshire Road to an iron pipe set in the
ground at the intersection of the northerly side of
Hampshire Road and the Massachusetts - New Hampshire
boundary line as shown on said plans; thence running S 58
deg. 35' 27" E, 27.33 feet by the northerly side of said
Hampshire Road to the point where the northerly side of
Hampshire Road intersects with the center line of the ditch
as shown on said plan thence turning and running N 11 deg.
28' 00" E. 82.10 feet along the center of the ditch to a
point shown on said plan; thence running N 8 deg. 22' 55"
E, 762.90 feet along the center of the ditch to a point
shown on the said plan at the northeasterly corner of the
granted premises; thence turning and running N 81 deg. 27'
22 W, 503.90 feet, along land now or formerly of
Construction Industries, Inc. to an iron pipe set in the
ground by a fire hydrant on the easterly aide of Garabedian
Drive as shown on said plan; thence running on an arc with
a radius of 750 feet, chord bearing S 34 deg. 50' 33" W,
for a distance of 261.32 feet, along the easterly side of
the said Garabedian Drive, to an iron pipe set in the
ground on the easterly side of Garabedian Drive: thence
proceeding along the easterly side of Garabedian Drive, S
27 deg. 44' 05" W, 100.26 feet to a nail set in the ground
on the easterly side of Garabedian Drive; thence proceeding
on an arc with a radius of 700 feet, chord bearing S 33
deg. 47' 47" W, 269.46 feet, along the easterly side of
Garabedian Drive to an iron pipe set in the ground on the
easterly side of Garabedian Drive; thence running along the
easterly side of Garabedian Drive. S 05 deg. 40' 45" W
80.09 feet to an iron pipe met in the ground on the
easterly side of Garabedian Drive, thence running on an arc
with a radius of 50 feet, chord bearing S 39 deg. 19' 15"
E, 78.54 feet to point of beginning.
<PAGE>
EXHIBIT C
TO
FIRST MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT, AND FINANCING STATEMENT
Description of Collateral
All buildings, structures and improvements of every nature
whatsoever now or hereafter situated on the property known
as and located at 32 Hampshire Road, Salem, New Hampshire
as more particularly described on Schedule A attached
hereto (hereinafter the "Premises") (including but not
limited to any and all underground and other parking
facilities located in or on the Premises, all landscaped
areas, and areas utilized for recreational activities) and
all fixtures, machinery, appliances, equipment, furniture,
and personal property of every nature whatsoever now or
hereafter owned by Debtor and located in or on, or attached
to, or used or intended to be used in connection with or
with the operation of, the Premises, buildings, structures
or other improvements, or in connection with any
construction which may be conducted thereon, including all
extensions, additions, improvements, betterments, renewals,
substitutions, and replacements to and proceeds of any of
the foregoing and all of the right, title and interest of
Debtor in and to any such personal property or fixtures
together with the benefit of any deposits or payments now
or hereafter made on such personal property or fixtures by
Debtor or on its behalf (the "Improvements");
TOGETHER WITH all easements, rights of way, strips,
gores of land, streets, ways, alleys, passages, sewer
rights, waters, water courses, water rights and powers, and
all estates, rights, titles, interests, privileges,
liberties, tenements, hereditaments and appurtenances
whatsoever, in any way belonging, relating or appertaining
to the Premises, or which hereafter shall in any way
belong, relate or be appurtenant thereto, whether now owned
or hereafter acquired by Debtor, and the reversion and
reversions, remainder and remainders, rents, issues and
profits thereof, and all the estate, right, title,
interest, property, possession, claim and demand
whatsoever, at law as well as in equity, of Debtor of, in
and to the same;
TOGETHER WITH all rents, royalties, issues, profits,
revenue, income and other benefits from the Premises;
TOGETHER WITH all right, title and interest of Debtor
in and to any and all leases now or hereafter on or
affecting the Mortgaged Premises or any part thereof
whether written or oral and all agreements for use of the
Mortgaged Premises or any part thereof (the "Leases"),
together with all security therefor and all monies payable
thereunder;
TOGETHER WITH all fixtures and articles of personal
property now or hereafter owned by Debtor and forming a
part of or used in connection with the Premises or the
Improvements of the operation thereof (except that this
UCC-1 Financing Statement shall not create a lien on any
items of personal property which (i) are owned by tenants
who are in possession pursuant to a
<PAGE>
Lease and (ii) may be removed by such tenants at the
expiration or termination of such Lease), including, but
without limitation, any and all air conditioners, antennae,
appliances, apparatus, awnings, basins, bathtubs, bidets,
boilers, bookcases, cabinets, carpets, coolers, curtains,
dehumidifiers, disposals, doors, drapes, dryers, ducts,
dynamos, elevators, engines, equipment, escalators, fans,
fittings, floor coverings, furnaces, furnishings,
furniture, hardware, heaters, humidifiers, incinerators,
lighting, machinery, motor vehicles, motors, ovens, pipes,
plumbing, pumps, radiators, ranges, recreational
facilities, refrigerators, screens, security systems,
shades, shelving, sinks, sprinklers, stokers, stoves,
toilets, ventilators, wall coverings, washers, windows,
window coverings, wiring, and all renewals, replacements or
proceeds thereof or articles in substitution therefor,
whether or not the same are or shall be attached to the
Premises or the Improvements in any manner;
TOGETHER WITH all proceeds of the foregoing,
including without limitation all judgments, awards of
damages and settlements hereafter made resulting from
condemnation proceeds or the taking of the Mortgaged
Premises and/or the Improvements or any portion thereof
under the power of eminent domain, any proceeds of any
policies of insurance maintained with respect to the
Mortgaged Premises and/or the Improvements or proceeds of
any sale, option or contract to sell the Mortgaged Premises
and/or the Improvements or any portion thereof or any
franchise agreement relating thereto; and
TOGETHER WITH all right, title, and interest of
Debtor in and to all executory contracts affecting the
ownership, possession, operation, control and services
furnished to the Mortgaged Premises or any part thereof
(collectively, the "Contracts").
<PAGE>
DS2.338058.1
2001579-0002
ASSIGNMENT OF RENTS AND LEASES
This Assignment is made this 13th day of May, 1998,
between STOCKER & YALE, INC., a Massachusetts corporation,
whose address is 32 Hampshire Road, Salem, New Hampshire
(herein called the "Assignor") and DANVERS SAVINGS BANK, a
Massachusetts banking corporation with an address at One
Conant Street, Danvers, Massachusetts (herein called the
"Assignee").
Recitals
The Assignor has executed and delivered to the
Assignee its note of even date herewith in the original
principal amount of $750,000.00 together with all future
amendments, modification, renewals, and supplements (herein
called the "Note").
To secure payment of the Note, the Assignor has
executed and delivered to the Assignee a Mortgage of even
date herewith (herein, together with all future amendments,
modifications and supplements thereto, called the
"Mortgage"), covering certain property (herein called the
"Mortgaged Property") which, among other things, includes
the real estate described in Exhibit A attached hereto and
the buildings, improvements, fixtures and personal property
now or hereafter located thereon.
The Assignee, as a condition to making the loan
evidenced by the Note, has required the execution of this
Assignment.
ACCORDINGLY, in consideration of the premises and in
further consideration of the sum of One Dollar paid by the
Assignee to the Assignor, the receipt of which is hereby
acknowledged, the Assignor does hereby grant, transfer and
assign to the Assignee all of the right, title and interest
of the Assignor in and to (i) any and all present or future
leases or tenancies, whether written or oral, covering or
affecting any or all of the Mortgaged Property (all of
which, together with any and all extensions, modifications
and renewals thereof, are hereinafter collectively referred
to as the "Leases" and each of which is referred to as a
"Lease"), (ii) all security deposits, rents, profits and
other income or payments of any kind due or payable or to
become due or payable to the Assignor as the result of any
use, possession or occupancy of all or any portion of the
Mortgaged Property or as the result of the use of or lease
of any personal property constituting a part of the
Mortgaged Property (all of which are hereinafter
collectively referred to as "Rents"), whether the Rents
accrue before or after foreclosure of the Mortgage or
during the periods of redemption thereof, all for the
purpose of securing:
(a) Payment of all indebtedness evidenced by
the Note and all other sums secured by the
Mortgage or this Assignment; and
(b) Performance and discharge of each and
every obligation, covenant and agreement of the
Assignor contained herein and in the Mortgage.
<PAGE>
THE ASSIGNOR WARRANTS AND COVENANTS that it is and
will remain the absolute owner of the Rents and Leases free
and clear of all liens and encumbrances other than the lien
granted herein; that it has not heretofore assigned or
otherwise encumbered its interest in any of the Rents or
Leases to any person; that it has the right under
applicable law, under the Leases, under its organizational
documents and otherwise to execute and deliver this
Assignment and keep and perform all of its obligations
hereunder; that there are no existing defaults under
the provisions thereof on the part of any party to the
Leases; that no Rents have been waived, anticipated,
discounted, compromised or released, except as may be
stated in the Leases; and that tenants have no defenses,
setoffs, or counterclaims against Assignor; that it will
warrant and defend the Leases and Rents against all adverse
claims, whether now existing or hereafter arising.
The Assignor further covenants and agrees with the
Assignee as follows:
1. Performance of Leases. The Assignor will
faithfully abide by, perform and discharge each and every
obligation, covenant and agreement which it is now or
hereafter becomes liable to observe or perform under any
present or future Lease, and, at its sole cost and expense,
enforce or secure the performance of each and every
obligation, covenant, condition and agreement to be
performed by the tenant under each and every Lease. The
Assignor will observe and comply with all provisions of law
applicable to the operation and ownership of the Mortgaged
Property. The Assignor will give prompt written notice to
the Assignee of any notice of default on the part of the
Assignor with respect to any Lease received from the tenant
thereunder, and will also at its sole cost and expense,
appear in and defend any action or proceeding arising
under, growing out of or in any manner connected with any
Lease or the obligations, duties or liabilities of the
Assignor or any tenant thereunder. The Assignor will not
lease or otherwise permit the use of all or any portion of
the Mortgaged Property for rent that is below the fair
market rent for such property. Assignor further agrees not
to cancel, terminate or consent to or acquiesce in any
surrender or abandonment of any of the Leases without the
prior written consent of Assignee; not to commence any
action of ejectment or any summary proceedings for
dispossession of the tenant under any of the Leases, nor
exercise any right of recovery of leased property provided
in any Leases; not to modify or in any way alter the
covenants, agreements, terms, conditions or obligations of
any Leases; not to lease any part of the Premises, nor
renew or extend the term of any Leases of the Premises
unless an option therefor was originally so reserved by
tenants in the Leases for a fixed and definite rental; and,
not to relocate any said tenant within the Premises, nor
consent to any modification of the express purposes for
which the Premises have been leased, nor consent to any
subletting of the Premises or any part thereof or to any
assignment of the Leases by any tenant thereunder or to any
further or other assignment or subletting of any sublease,
without the prior written consent of the Assignee,
notwithstanding any previous consent of Assignee.
2. Collection of Rents. The Assignor will not
collect or accept any Rents for the use or occupancy of the
Mortgaged Property for more than one month in advance.
Security deposits shall not be deemed Rents for purposes of
this paragraph.
<PAGE>
3. Protecting the Security of This Assignment.
Should the Assignor fail to perform or observe any covenant
or agreement contained in this Assignment, then the
Assignee, but without obligation to do so and without
releasing the Assignor from any obligation hereunder, may
make or do the same in such manner and to such extent as
the Assignee may deem appropriate to protect the security
hereof, including, specifically, without limiting its
general powers, the right to appear in and defend any
action or proceeding purporting to affect the security
hereof or the rights or powers of the Assignee, and also
the right to perform and discharge each and every
obligation, covenant and agreement of the Assignor
contained in the Leases and in exercising any such powers
to pay necessary costs and expenses, employ counsel and pay
reasonable attorneys' fees. The Assignor will pay
immediately upon demand all sums expended by the Assignee
under the authority of this Agreement, together with
interest thereon at the Default Rate stated in the Note,
and the same shall be added to said indebtedness and shall
be secured hereby and by the Mortgage.
4. Present Assignment. This Assignment shall
constitute a perfected, absolute and present assignment,
provided that the Assignor shall have the right to collect,
but not prior to accrual (except as permitted by paragraph
2 above), all of the Rents, and to retain, use and enjoy
the same unless and until an Event of Default shall occur
under the Mortgage or the Assignor shall have breached any
warranty or covenant in this Assignment. Any security
deposits received by Assignor prior to an Event of Default
shall be assigned and paid over to Assignor immediately
upon the occurrence of the Event of Default. Any Rents
which accrue prior to an Event of Default under the
Mortgage but are paid thereafter shall be paid to the
Assignee.
5. Survival of Obligation to Comply with Mortgage
and This Assignment. This Assignment is given as security
in addition to the Mortgage. The Assignor covenants and
agrees to observe and comply with all terms and conditions
contained in the Mortgage and in this Assignment and to
prevent any Event of Default from occurring under the
Mortgage. All of the Assignor's obligations under the
Mortgage and this Assignment shall survive foreclosure of
the Mortgage and the Assignor covenants and agrees to
observe and comply with all terms and conditions of the
Mortgage and this Assignment and to prevent any Event of
Default from occurring under the Mortgage throughout any
period of redemption after foreclosure of the Mortgage.
6. Default; Remedies. Upon the occurrence of any
Event of Default specified in the Mortgage or upon the
breach of any warranty or covenant in this Assignment, the
Assignee may, at its option, at any time:
(a) in the name, place and stead of the
Assignor and without becoming a mortgagee in
possession (i) enter upon, manage and operate the
Mortgaged Property or retain the services of one
or more independent contractors to manage and
operate all or any part of the Mortgaged
Property; (ii) make, enforce, modify and accept
surrender of the Leases; (iii) obtain or evict
tenants, collect, sue for, fix or modify the
Rents and enforce all rights of the Assignor
under the Leases; and (iv) perform any and all
other acts that may be necessary or proper to
protect the security of this Assignment.
<PAGE>
(b) with or without exercising the rights set
forth in subparagraph (a) above, give or require
the Assignor to give, notice to any or all
tenants under the Leases authorizing and
directing the tenants to pay all Rents under the
Leases directly to the Assignee.
(c) without regard to waste, adequacy of the
security or solvency of the Assignor, apply for,
and the Assignor hereby consents to, the
appointment of a receiver of the Mortgaged
Property, whether or not foreclosure proceedings
have been commenced under the Mortgage, and if
such proceedings have been commenced, whether or
not a foreclosure sale has occurred.
The exercise of any of the foregoing rights or remedies and
the application of the rents, profits and income pursuant-
to Paragraph 7, shall not cure or waive any Event of
Default (or notice of default) under the Mortgage or
invalidate any act done pursuant to such notice.
7. Application of Rents, Profits and Income. All
Rents collected by the Assignee or the receiver each month
shall be applied to or on account of any one or more of the
following items, the Assignee, in its sole and absolute
discretion shall elect:
(a) to payment of all reasonable fees of the
receiver approved by the court;
(b) to payment of all tenant security deposits
then owing to tenants under any of the Leases;
(c) to payment of all prior or current real
estate taxes and special assessments with respect
to the Mortgaged Property, or if the mortgage
requires periodic escrow payments for such taxes
and assessments, to the escrow payments then due;
(d) to payment of all premiums then due for the
insurance required by the provisions of the
Mortgage, or if the Mortgage requires periodic
escrow payments for such premiums, to the escrow
payments then due;
(e) to payment of expenses incurred for normal
maintenance of the Mortgaged Property;
(f) if received prior to any foreclosure sale
of the Mortgaged Property, to the Assignee for
payment of the indebtedness secured by the
Mortgage or this Assignment, but no such payment
made after acceleration of the indebtedness shall
affect such acceleration;
(g) if received during or with respect to the
period of redemption after a foreclosure sale of
the Mortgaged Property:
(1) if the purchaser at the
foreclosure sale is not the Assignee,
first to the Assignee to the extent of
any deficiency of the sale proceeds to
<PAGE>
repay the indebtedness secured by the
Mortgage or this Assignment, second
to the purchaser as a credit to the
redemption price, but if the Mortgaged
Property is not redeemed, then to the
purchaser of the Mortgaged Property;
(2) if the purchaser at the
foreclosure sale is the Assignee, to
the Assignee to the extent of any
deficiency of the sale proceeds to
repay the indebtedness secured by the
Mortgage or this Assignment and the
balance to be retained by the Assignee
as a credit to the redemption price,
but if the Mortgaged Property is not
redeemed, then to the Assignee, whether
or not any such deficiency exists.
The rights and powers of the Assignee under this Assignment
and the application of Rents under this paragraph 7 shall
continue until expiration of the redemption period from any
foreclosure sale, whether or not any deficiency remains
after a foreclosure sale.
8. No Liability for Assignee. The Assignee shall not
be obligated to perform or discharge, nor does it hereby
undertake to perform or discharge, any obligation, duty or
liability of the Assignor under the Leases. This Assignment
shall not operate to place upon the Assignee responsibility
for the control, care, management or repair of the
Mortgaged Property or for the carrying out of any of the
terms and conditions of the Leases. The Assignee shall not
be responsible or liable for any waste committed on the
Mortgaged Property, for any dangerous or defective
condition of the Mortgaged Property, for any negligence in
the management, upkeep, repair or control of said Mortgaged
Property or for failure to collect the Rents.
9. Assignor's Indemnification. The Assignor shall
and does hereby agree to indemnify and to hold the Assignee
harmless of and from any and all claims, demands,
liability, loss or damage (including all costs, expenses,
and reasonable attorney's fees in the defense thereof)
asserted against, imposed on or incurred by the Assignee in
connection with or as a result of this Assignment or the
exercise of any rights or remedies under this Assignment or
under the Leases or by reason of any alleged obligations or
undertakings of the Assignee to perform or discharge any of
the terms, covenants or agreements contained in the Leases.
Should the Assignee incur any such liability, the amount
thereof, together with interest thereon at the rate stated
in the Note, shall be secured hereby and by the Mortgage
and the Assignor shall reimburse the Assignee therefor
immediately upon demand.
10. Authorization to Tenant. Upon notice from the
Assignee that it is exercising the remedy set forth in
paragraph 6(b) of this Assignment, the tenants under the
Leases are hereby irrevocably authorized and directed to
pay to the Assignee all sums due under the Leases, and
the Assignor hereby consents and directs that said sums
shall be paid to the Assignee without the necessity for a
judicial determination that a default has occurred
hereunder or under the Mortgage or that the Assignee is
entitled to exercise its rights hereunder, and to the
extent such sums are paid to the Assignee, the Assignor
agrees that the tenant shall have no further liability to
the
Assignor for the same. The signature of the Assignee
alone shall be sufficient for the exercise of any rights
under this Assignment and the receipt of the Assignee alone
for any sums received shall be a full discharge and release
therefor to any such tenant or occupant of the Mortgaged
<PAGE>
Property. Checks for all or any part of the Rents collected
under this Assignment shall upon notice from the Assignee
be drawn to the exclusive order of the Assignee.
11. Satisfaction. Upon the payment in full of all
indebtedness secured hereby as evidenced by a recorded
satisfaction of the Mortgage executed by the Assignee, this
Assignment shall, without the need for any further
satisfaction or release, become null and void and be of no
further effect.
12. Assignee an Attorney-In-Fact. The Assignor
hereby irrevocably appoints the Assignee, and its
successors and assigns, as its agent and attorney-in-fact,
which appointment is coupled with an interest, with the
right but not the duty to exercise any rights or remedies
hereunder and to execute and deliver during the term of
this Assignment such instruments as the Assignee may deem-
appropriate to make this Assignment and any further
assignment effective, including without limiting the
generality of the foregoing, the right to endorse on behalf
and in the name of the Assignor all checks frown tenants in
payment of Rents that are made payable to the Assignor.
13. Assignee Not a Mortgagee in Possession. Nothing
herein contained and no actions taken pursuant to this
Assignment shall be construed as constituting the Assignee
a mortgagee in possession.
14. Specific Assignment of Leases. Until the
Indebtedness Secured Hereby shall have been paid in full,
Assignor will deliver to the Assignee executed copies of
any and all other and future leases upon all or any part of
the mortgaged property. The Assignor will transfer and
assign to the Assignee, upon written notice by the
Assignee, any and all specific Leases that the Assignee
requests. Such transfer or assignment by the Assignor shall
be upon the same or substantially the same terms and
conditions as are herein contained, and the Assignor will
properly file or record such assignments, at the Assignor's
expense, if requested by the Assignee.
15. Unenforceable Provisions Severable. All rights,
powers and remedies provided herein may be exercised only
to the extent that the exercise thereof does not violate
any applicable law, and are intended to be limited to the
extent necessary so that they will not render this
Assignment invalid, unenforceable or not entitled to be
recorded, registered or filed under any applicable law. If
any term of this Assignment shall be held to be invalid,
illegal or unenforceable, the validity of other terms
hereof shall in no way be affected thereby. It is the
intention of the parties hereto, however, that this
Assignment shall confer upon the Assignee the fullest
rights, remedies and benefits available pursuant to law.
16. Successors and Assigns. The covenants and
agreements herein contained shall bind, and the rights
hereunder shall inure to the respective successors and
assigns of the Assignor and the Assignee, including any
purchaser at a foreclosure sale.
17. Captions; Amendments; Notices. The captions and
headings of the paragraphs of this Assignment are for
convenience only and shall not be used to interpret or
define the provisions of this Assignment. This Assignment
can be amended only in writing signed by the
<PAGE>
Assignor and the Assignee. Any notice from the Assignee to
the Assignor under this Assignment shall be deemed to have
been given when given by the Assignee in accordance with
the requirements for notice by the Mortgagee under the
Mortgage.
18. Counterparts. This Assignment may be executed in
any number of counterparts, each of which shall be an
original but all of which shall constitute one instrument.
19. Notices. Any notice which any party hereto may
desire or may be required to give to any other party shall
be given in the manner and to the addresses as provided for
in the Mortgage.
20. Governing Law. Except as may be otherwise
expressly provided in the Mortgage and in the Note, all
claims relating, in any way, to the foregoing shall in all
respects be governed, construed, applied and enforced in
accordance with the internal laws of the Commonwealth of
Massachusetts without regard to principles of conflicts of
law. The Mortgage and the Note together with all other
documents executed in connection with the foregoing are
referred to as the "Loan Documents". Notwithstanding the
foregoing choice of law:
(a) the procedures governing the creation,
perfection and priority of the lien pertaining to real
property and tangible personal property created by this
Assignment and the enforcement by this Assignee of its
foreclosure and other remedies against the Assignor under
the Loan Documents with respect to the Mortgaged Property,
including by way of illustration, but not in limitation,
actions for foreclosure, for injunctive relief or for the
appointment of a receiver shall be governed by the laws of
the state where such Mortgaged Property is located; and
(b) the Assignee shall comply with applicable
law in the state where the Mortgaged Property is located to
the extent required by the law of such jurisdiction in
connection with the foreclosure of the liens created under
the Loan Documents with respect to the Mortgaged Property.
Nothing contained herein or in any provisions of the
other Loan Documents shall be construed to provide that the
substantive law of the state of where the Mortgaged
Property is located shall apply to any parties' rights and
obligations under any of the Loan Documents, which, except
as expressly provided in clauses (a) and (b) above, are and
shall continue to be governed by the substantive law of the
Commonwealth of Massachusetts. In addition, the fact that
portions of the Loan Documents may include provisions
drafted to conform to the law of the State where the
Mortgaged Property is located is not intended, nor shall it
be deemed, in any way, to derogate the parties' choice of
law as set forth or referred to in the Loan Documents. The
parties further agree that the Assignee may enforce its
rights under the Loan Documents including, but not limited
to, its rights to sue the Assignor or to collect any
outstanding indebtedness in accordance with applicable law.
Each party hereto hereby consents to personal
jurisdiction in any state or Federal court located within
the Commonwealth of Massachusetts, as well as to the
jurisdiction of all courts from which an appeal may be
taken from the aforesaid courts, for the purposes of any
suit,
<PAGE>
IN WITNESS WHEREOF the Assignor has executed this
Assignment as of the day and year first-above written.
STOCKER YALE, INC.
By: /s/ Mark W. Blodgett
Mark Blodgett,
Chairman of the Board
COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. May 13, 1998
Then personally appeared the above-named Mark
Blodgett, who acknowledged himself to be the Chairman of
the Board of Stocker & Yale, Inc., a Massachusetts
corporation and acknowledged the foregoing instrument to be
his free act and deed and the free act and deed of said
corporation,
By:/s/ John Evan Jones
Notary Public
My
commission expires: October 8, 2004
<PAGE>
EXHIBIT A
Legal Description of Insured Premises
A certain parcel of land, with the buildings thereon,
situated in Salem. Rockingham County. State of New
Hampshire and Methuen. Essex County, Commonwealth of
Massachusetts, as shown on "Plan of Land in Salem, Hew
Hampshire for M & D Realty Trust prepared by Kimball
Chase Company. Inc. and dated March 15. 1983. recorded in
the Rockingham County Registry of Deeds on even date
herewith, and more particularly described as follows:
Beginning at the southwesterly corner of the granted
premises by the intersection of Garabedian Drive, a public
way, and Hampshire Road, a public way, at an iron pipe set
in the ground on the northerly aide of said Hampshire Road
as shown on said plan: thence running S 84 deg. 19' 15" E,
58.24 feet, along the northerly side of Hampshire Road to
an iron pipe sat in the ground on the northerly side of
Hampshire Road; thence running S 73 deg. 45' 25" E, 265.76
feet. along the northerly side of Hampshire Road to an iron
pipe set in the ground on the northerly side of Hampshire
Road; thence running on an arc with & radius of 830 feet
chord bearing S 49 deg. 05' 04" E. 219.70 feet along the
northerly side of Hampshire Road to an iron pipe set in the
ground at the intersection of the northerly side of
Hampshire Road and the Massachusetts - New Hampshire
boundary line as shown on said plans; thence running S 58
deg. 35' 27" E, 27.33 feet by the northerly side of said
Hampshire Road to the point where the northerly side of
Hampshire Road intersects with the center line of the ditch
as shown on said plan thence turning and running N 11 deg.
28' 00" E. 82.10 feet along the center of the ditch to a
point shown on said plan; thence running N 8 deg. 22' 55"
E, 762.90 feet along the center of the ditch to a point
shown on the said plan at the northeasterly corner of the y
anted premises; thence turning and running N 81 deg. 27' 22
W, 503.90 feet, along land now or formerly of Construction
Industries, Inc. to an iron pipe set in the ground by a
fire hydrant on the easterly aide of Garabedian Drive as
shown on said plan; thence running on an arc with a radius
of 750 feet, chord bearing S 34 deg. 50' 33" W, for a
distance of 261.32 feet, along the easterly side of the
said Garabedian Drive, to an iron pipe set in the ground on
the easterly side of Garabedian Drive: thence proceeding
along the easterly side of Garabedian Drive, S 27 deg. 44'
05" W, 100.26 feet to a nail set in the mound on the
easterly side of Garabedian Drive; thence proceeding on an
arc with a radius of 700 feet, chord bearing S 33 deg. 47'
47" W, 269.46 feet, along the easterly side of Garabedian
Drive to an iron pipe set in the ground on the easterly
side of Garabedian Drive; thence running along the easterly
side of Garabedian Drive. S 05 deg. 40' 45" W 80.09 feet to
an iron pipe met in the ground on the easterly side of
Garabedian Drive, thence running on an arc with a radius of
50 feet, chord bearing S 39 deg. 19' 15" E, 78.54 feet to
point of beginning.
<PAGE>
2001579-0002
ds2-337847
ENVIRONMENTAL INDEMNITY AGREEMENT
Reference is here made to that certain Note dated
May 13 1998 (as the same may be amended, modified or
supplemented from time to time, herein the "Note") made
payable by Stocker A Yale, Inc. (the "Indemnitor") to the
order of Danvers Savings Bank (the "Lender") in the
original principal amount of Seven Hundred and Fifty
Thousand Dollars ($750,000.00).
The Indemnitor is executing and delivering this
Environmental Indemnity Agreement (this "Agreement") to
induce the Lender to enter into the Note, without which
Agreement the Lender would not have entered into the Note
and the transactions contemplated thereby.
For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
Indemnitor hereby covenants, warrants, and agrees as
follows:
1. Definition of Terms.
1.1 Certain Definitions. As used in this Agreement,
the terms set forth below shall have the following
meanings:
(a) "Environmental Problem" shall mean any of the
following:
(i) the presence, suspected presence, or
alleged presence of any Hazardous Materials on,
in, under, or above all or any portion of the
Premises;
(ii) the release, suspected release,
threatened release, or alleged release of any
Hazardous Materials from or onto the Premises;
(iii) the violation, suspected violation,
threatened violation, or alleged violation of any
Hazardous Materials Legal Requirements with
respect to the Premises; and
(iv) the failure, suspected failure,
threatened failure, or alleged failure to
obtain or to abide by the terms or conditions of
any permit or approval required under any
Hazardous Materials Legal Requirements with
respect to the Premises.
A condition described above in this clause (a) shall
constitute an "Environmental Problem" for purposes of this
Agreement regardless of whether or not any federal, state,
or local governmental authority or agency, or any private
party, has taken any action in connection with such Problem
or with the condition, suspected condition, threatened
condition, or alleged condition said to give rise to such
Environmental Problem.
<PAGE>
(b) "Environmental Report" shall mean a report
prepared by a person or entity with expertise in
identifying and analyzing Environmental Problems which
details or describes, based in whole or in part on an
assessment performed by or on behalf of that person or
entity, Environmental Problems that are or may be in
existence with respect to the Premises.
(c) "Hazardous Materials" shall mean products,
wastes and substances which, because of their quantitative
concentration, chemical, radioactive, infectious or other
characteristics, constitute or may reasonably be expected
to constitute or contribute to a danger or hazard to public
health, safety, welfare, or to the environment, including
asbestos (whether or not friable), flammable materials,
explosives, radioactive substances, polychlorinated
biphenyls, other carcinogens, oil and other petroleum
products, pollutants, solvents and chlorinated oils,
pesticides, herbicides, radon gas, reactive metals and
compounds, contaminants, and any other hazardous or toxic
materials, chemical, biological, radioactive, or other
wastes and substances which are defined, determined or
identified as such in or pursuant to any Hazardous
Materials Legal Requirements.
(d) "Hazardous Materials Legal Requirements" shall
mean any and all applicable, federal, state or municipal
laws, ordinances, rules and regulations now in force or
subsequently enacted, modified, or amended pertaining to
the protection of the environment or to health or
safety risks arising therefrom, including, but not limited
to, control of air pollution, water pollution, groundwater
pollution, and the generation, manufacture, management,
handling, use, sale, transportation, delivery, discharge,
release, emission, treatment, storage, disposal or release
or threatened release of Hazardous Materials. To the extent
applicable, such laws include, but are not limited to: (a)
the Clean Air Act, 42 U.S.C. Section 7401, et seq; (b) the
Clean Water Act, 33 U.S.C. Section 1251, et seq; (c) the
Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq;
(d) the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq; (e) the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section
9601, et seq ("CERCLA"); (f) the Toxic Substances Control
Act, 15 U.S.C. Section 2601, et seq; (g) Title III of the
Superfund Amendments and Reauthorization Act ("SARA"), also
known as the Emergency Planning and Community Right-to-Know
Act, 42 U.S.C. Section 11001; (h) the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq; (i)
federal regulations promulgated pursuant to any of the
foregoing statutes; (j) Massachusetts and New Hampshire
laws and regulations enacted in order to implement federal
environmental statutes and regulations; (k) the
Massachusetts Hazardous Waste Management Act, M.G.L. c.
21C; (l) the Massachusetts Oil and Hazardous Materials
Release Prevention and Response Act, M.G.L. c. 21E ("21E");
(m) the Hazardous Substances Disclosure by Employers Act,
M.G.L. c. 111F; (n) New Hampshire RSA 146-A, RSA 146-C, RSA
147-A and RSA 147-B; (o) Massachusetts and New Hampshire
regulations promulgated pursuant to the authority of
applicable state environmental laws; and (p) local
ordinances and regulations including those adopted by local
emergency planning districts
pursuant to Title III of SARA and implementing state
legislation.
(e) "Indemnified Expenses" shall have the meaning
specified in section 2 hereof.
(f) "Indemnified Parties" shall have the meaning
specified in section 2 hereof.
<PAGE>
(g) "Mortgage" shall mean that certain Mortgage,
Assignment of Leases and Rents, Security Agreement and
Fixture Filing of even date granted by the Indemnitor to
the Lender recorded with the Rockingham County Registry of
Deeds.
(h) "Obligations" shall mean all of the obligations
of the Indemnitor under the Note, the Mortgage and other
Loan Documents.
(i) "Loan Documents" shall mean the Loan Documents
described and defined in the Mortgage.
(j) "Person" shall mean an individual, a
corporation, an association, a joint-stock company, a
business trust or similar organization, a partnership, a
joint venture, a trust, an unincorporated organization, or
a government or any agency, instrumentality or political
subdivision thereof.
(k) "Premises" shall mean the "Mortgaged Premises"
described and defined in the Mortgage.
(l) "Subject Obligations" shall mean the
obligations of the Indemnitor under this
Agreement.
1.2. Other Capitalized Terms, Certain Usages and
Gender. Other capitalized terms used herein without
definition shall have the meanings ascribed to them in the
Mortgage. The terms "include" and "including" shall be
construed as if followed by the phrase "without
limitation." All terms contained herein shall be construed,
whenever the context of this Assignment so requires, so
that the singular number shall include the plural, and the
plural the singular, and the use of any gender shall
include all genders.
2. Indemnity and Hold Harmless.
(a) The Indemnitor hereby irrevocably and
unconditionally warrants, covenants, and agrees that the
Indemnitor shall, at the sole cost and expense of the
Indemnitor, indemnify, defend, protect, and hold harmless
the Lender and it officers, trustees, directors,
shareholders, policyholders, employees, and agents
(collectively, the "Indemnified Parties" or the
"Indemnitees") against and from any and all damages,
losses, liabilities, obligations, penalties, claims, sums
paid in settlement of claims, litigation, demands,
defenses, judgments, suits, proceedings, costs,
disbursements, fines, encumbrances, liens, and expenses of
any kind or of any nature whatsoever (collectively, the
"Indemnified Expenses") that may at any time (including,
without limitation, after the repayment of the Obligations
or after foreclosure of the Mortgage or, subject to
subsection 2(d) below, conveyance of the Premises in lieu
of foreclosure) be imposed upon, incurred or suffered by,
or asserted or awarded against any of the
<PAGE>
Indemnified Parties, which arise directly or indirectly
from or out of any Environmental Problem, without regard to
whether that Environmental Problem arises before or after
the date hereof or before or after any repayment and
performance of the Obligations or any conveyance of the
Premises by foreclosure of the Mortgage, or conveyance in
lieu of foreclosure, and without regard to whether or not
(i) the Environmental Problem was disclosed in any
Environmental Report performed for, or on behalf of, or
otherwise received by the Lender or any other Indemnitee;
or (ii) the Lender or any other Indemnitee was otherwise
aware of the Environmental Problem.
(b) Indemnified Expenses shall include, without
limitation, all of the following: (i) costs incurred in the
removal of Hazardous Materials, costs incurred in
investigation, monitoring, clean-up, and containment of
Hazardous Materials, costs incurred to mitigate damages,
closure costs, costs incurred for remediation and
restoration, and other response costs, in any event to the
extent necessary or appropriate to comply with Hazardous
Materials Legal Requirements; (ii) costs incurred to cure
any violations of Hazardous Materials Legal Requirements;
(iii) damages for personal injury or death, property loss,
or other loss in connection with an Environmental Problem;
(iv) civil and criminal fines and penalties in connection
with an Environmental Problem; (v) costs incurred to remove
any liens imposed by law in favor of the federal or any
state or local government or governmental agency or
authority in connection with an Environmental Problem; (vi)
attorneys', accountants, consultants', and experts' fees
and disbursements, administrative costs, and other out-of-
pocket expenses (including without limitation any such
fees, disbursements, costs, and expenses incurred as a
result of groundless, false, or fraudulent claims or
proceedings and/or in connection with investigating or
evaluating any claim or proceeding) in connection with an
Environmental Problem; (vii) sums paid to tenants and other
third parties for indemnification pursuant to leases
or other agreements wherein such tenants or other third
parties are entitled to indemnification or payment on
account of Environmental Problems; (viii) sums paid and any
other liability to the federal government, any state or
local government, any federal, state or local governmental
authority, or any other person or entity for any costs
described above; (ix) costs incurred under or by virtue of
the Landlord Indemnity Agreement; (x) sums paid in
satisfaction of judgments in connection with an
Environmental Problem; (xi) costs and expenses (including
attorney's fees) incurred as a result of any allegation by
any person or entity that, by virtue of exercising any of
its rights and remedies under any of this Agreement, the
Note, the Mortgage, or any other Loan Document, the Lender
(or any other Indemnified Party) became an owner or
operator of the Premises or otherwise engaged in control of
the business of the Indemnitor, so as to make the Lender or
any such other Indemnified Party liable or responsible
under any Hazardous Materials Legal Requirements; (xii)
costs to enforce or interpret the obligations of the
Indemnitor under this Agreement; and (xiii) settlement
costs in connection with an Environmental Problem.
(c) Without limiting the obligations of the
Indemnitor hereunder but subject to the provisions of
section 8 hereof, the Lender may, in the exercise of its
reasonable discretion: (i) by notice to the Indemnitor,
advise the Indemnitor to correct or ameliorate the
Environmental Problem in a manner consistent with Hazardous
Materials Legal Requirements, in which event the Indemnitor
shall take such action at the expense of the Indemnitor;
and (ii) in the event the
<PAGE>
Indemnitor does not diligently pursue to completion any
corrective or ameliorative action contemplated by the
preceding clause (i), the Lender may (but shall not be
obligated to) itself cause to be taken appropriate action
to correct or ameliorate the Environmental Problem in a
manner consistent with Hazardous Materials Legal
Requirements, to the extent not prohibited under the law,
in which event the Indemnitor shall cooperate with the
Lender and shall indemnify the Lender and the other
Indemnified Parties for the costs incurred in taking such
action in accordance with this Indemnity; but none of the
Lender or any of the other Indemnified Parties shall have
any obligation to do any of the foregoing.
(d) If the Premises are conveyed by foreclosure of
the Mortgage, or conveyance to the Lender or its designee
in lieu of foreclosure, then the indemnity provided for
under this instrument shall not apply to an Environmental
Problem where the condition, suspected condition,
threatened condition, or alleged condition said to give
rise to such Problem (as distinct from the Trustee's
gaining of knowledge of such condition) first arises solely
after and not on or before the date of such conveyance,
unless the Indemnitor, or any person or entity under the
control of the Indemnitor, caused, contributed to, or was
negligent with respect to such condition, suspected
condition, threatened condition, or alleged condition, and
in such latter circumstances the indemnity provided for
under this instrument shall continue to apply
notwithstanding any such conveyance. In any event the
indemnity provided for under this instrument shall continue
to apply to Indemnified Expenses for which the Indemnitor
is liable hereunder incurred after the date of any such
conveyance which arise from or relate to any condition,
suspected condition, threatened condition, or alleged
condition (said to give rise to an Environmental Problem)
in existence on or before the date of the conveyance or any
Environmental Problem otherwise not excluded from coverage
under the immediately preceding sentence, even if such
condition, suspected condition, threatened condition, or
alleged condition is not discovered until after the date of
such conveyance.
The Indemnitor hereby agrees that the Indemnitor's
liability hereunder is joint and several with any other
Person(s) (the "Other Indemnitors") who or which may
provide an indemnity as to the Subject Obligations.
This Agreement is an absolute, primary,
unconditional, irrevocable, present and continuing
agreement of indemnity, is not subject to any counterclaim,
setoff, deduction, withholding, diminution, abatement,
recoupment, suspension, deferment, reduction or defense
and is in no way conditioned or contingent upon any attempt
to collect from the Indemnitor or from any Other Indemnitor
or upon any other condition or contingency. Payments by the
Indemnitor hereunder shall be made in lawful money of the
United States of America and may be required by any holder
of the Notes on any number of occasions.
This Agreement shall remain in full force and
effect without regard to, and the obligations of the
Indemnitor hereunder shall not be affected or impaired by:
(a) any amendment or modification of or supplement to any
of the Loan Documents, including, without limitation, any
amendment, modification and/or supplement which changes the
timing
<PAGE>
or amount of any payment (or prepayment) of the principal
of or premium, if any, or interest on, or any other terms
of payment of, any of the Obligations; (b) any extension,
indulgence or other action or inaction in respect of any of
the Loan Documents; (c) any default by the Indemnitor or
any Other Indemnitor under, or any invalidity or
unenforceability of, or any irregularity or other defect
in, any of the Loan Documents; (d) any exercise or non-
exercise of any right, remedy, power or privilege in
respect of any of the Loan Documents; (e) any transfer of
the assets of the Indemnitor or any Other Indemnitor to, or
any consolidation or merger of the Indemnitor or any Other
Indemnitor with or into, any other Person; (f) any
bankruptcy, insolvency, reorganization or similar
proceeding involving or affecting the Indemnitor or any
Other Indemnitor; (g) any change in or addition to or
partial or complete release of any collateral securing the
Obligations or any partial or complete release of any
Other Indemnitor or other Person primarily or secondarily
liable for the Obligations or the Subject Obligations; (h)
any change of circumstances, whether or not foreseen or
foreseeable, or any impossibility of performance, whether
through acts of God, action of any governmental authority
or agency, change of law, other force majeure or otherwise,
whether or not beyond the control of the Indemnitor, any
Other Indemnitor or any other Person; (i) any attachment,
claim, demand, charge, lien, order, process, encumbrance or
any other happening or event or reason, or any withholding
or diminution at the source, by reason of any taxes,
assessments, expenses, obligations or liabilities of any
character, foreseen or unforeseen, and whether or not
valid, incurred-by or against any Person, or any claims,
demands, charges or liens of any nature, foreseen or
unforeseen, incurred by any Person, or against any sums
payable under any of the Loan Documents, so that such sums
would be rendered inadequate or would be unavailable to
make the payments therein provided; (j) the failure of the
Indemnitor to receive any benefit or consideration from or
as a result of its execution, delivery and performance of
this Agreement; or (k) any other circumstance or cause,
whether similar or dissimilar to any of the foregoing, that
might constitute a legal or equitable discharge or defense
of the Indemnitor and whether or not the Indemnitor shall
have had notice or knowledge thereof, it being agreed by
the Indemnitor that for the purposes hereof, the Subject
Obligations shall be due and payable and performable when
and as the Subject Obligations shall be due and payable and
performable in accordance with the terms hereof
notwithstanding that collection or enforcement of any of
the Obligations may be stayed or enjoined under any law or
may otherwise be impossible and notwithstanding that any
Obligation may then be or have become invalid, void or
voidable for any reason.
3. Indemnification Procedures.
(a) If any action shall be brought against any
Indemnitee based upon any of the matters for which the
Indemnitee is indemnified hereunder, the Indemnitee shall
notify the Indemnitor in writing thereof and the Indemnitor
shall promptly assume the defense thereof, including,
without limitation, the employment of counsel acceptable to
the Indemnitee(s) and the negotiation of any settlement;
provided, however, that any failure of the Indemnitee(s) to
notify the Indemnitor of such matter shall not impair or
reduce the obligations of the Indemnitor hereunder. In the
event the Indemnitor shall fail to discharge or undertake
to defend the
<PAGE>
Indemnitee(s) against any claim, loss or liability for
which the Indemnitee is indemnified hereunder, the
Indemnitee may, at its sole option and election, defend or
settle such claim, loss or liability. The liability of the
Indemnitor hereunder to the Indemnitee(s) shall be
conclusively established by such settlement, provided such
settlement is made in good faith, the amount of such
liability to include both the settlement consideration and
the costs and expenses, including, without limitation,
attorneys' fees and disbursements, incurred by the
Indemnitee in effecting such settlement. In such event,
such settlement consideration, costs and expenses shall be
included in Indemnified Expenses and the Indemnitor shall
pay the same as hereinafter provided. The good faith of the
Indemnitee in any such settlement shall be conclusively
established if the settlement is made on the advice of
independent legal counsel for the Indemnitee.
(b) The Indemnitor shall not, without the prior
written consent of each affected Indemnitee(s): (i) settle
or compromise any action, suit, proceeding or claim or
consent to the entry of any judgment that does not include
as an unconditional term thereof the delivery by the
claimant or plaintiff to the Indemnitee(s) of a full and
complete written release of the Indemnitee(s) (in form,
scope and substance satisfactory to the Indemnitee in its
sole discretion) from all liability in respect of such
action, suit, proceeding or claim and a dismissal with
prejudice of such action, suit, proceeding or claim; or
(ii) settle or compromise any action, suit, proceeding or
claim in any manner that may adversely affect the
Indemnitee(s) or obligate the Indemnitee(s) to pay any sum
or perform any obligation as determined by the
Indemnitee(s) in its sole discretion.
(c) All Indemnified Expenses shall be immediately
reimbursable to the Indemnitee when and as incurred and, in
the event of any litigation, claim or other proceeding,
without any requirement of waiting for the ultimate outcome
of such litigation, claim or other proceeding, and
Indemnitor shall pay to each Indemnified Party any and all
Indemnified Expenses within ten (10) days after written
notice from such Party itemizing the amounts thereof
incurred to the date of such notice. In addition to any
other remedy available for the failure of Indemnitor to
periodically pay such Indemnified Expenses, such
Indemnified Expenses, if not paid within said ten-day
period, shall bear interest at the Default Rate (defined in
the Note).
4. Reinstatement of Obligations. If at any time all or
any part of any payment made by the Indemnitor or received
by any Indemnitee from the Indemnitor under or with respect
to this Agreement is or must be rescinded or returned for
any reason whatsoever (including, but not limited to, the
insolvency, bankruptcy or reorganization of the
Indemnitor), then the obligations of the Indemnitor
hereunder shall, to the extent of the payment rescinded or
returned, be deemed to have continued in existence,
notwithstanding such previous payment made by the
Indemnitor, or receipt of payment by the holder(s), and the
obligations of the Indemnitor hereunder shall continue to
be effective or be reinstated, as the case may be, as to
such payment, all as though such previous payment by the
Indemnitor had never been made.
5. Waivers by Indemnitor. The Indemnitor hereby waives:
(a) presentment, demand for payment, and protest of non-
payment; (b) notice of acceptance of this Agreement and of
(PAGE)
presentment, demand, and intent to accelerate and protest;
(c) notice of any default under any of the Loan Documents
or any other agreement relating thereto; (d) demand for
performance or observance of, and any enforcement of any
provisions of, or any pursuit or exhaustion of rights or
remedies against the Indemnitor, any other Indemnitor or
any other Person under any of the Loan Documents and any
requirements of diligence or promptness on the part of any
holder of the Obligations or the Subject Obligations in
connection therewith; and (e) to the extent the Indemnitor
lawfully may do so, any and all other demands and notices
of every kind and description with respect to the foregoing
or which may be required to be given by any statute, or
rule of law and any defense of any kind (other than the
defense of payment) which the Indemnitor may now or
hereafter have with respect to any of the Loan Documents or
any other agreement relating thereto. Without limiting the
generality of the foregoing, no Person who is entitled to
the benefits of this Agreement shall be required to make
any demand upon, or to pursue or exhaust any of its rights
or remedies against, the Indemnitor or any Other Indemnitor
or any other Person or any collateral or other security,
prior to exercising any right hereunder, and no delay or
omission on the part of any such Person in exercising any
right under any of the Loan Documents or any other
agreement relating thereto shall operate as a waiver or
relinquishment of such right.
The Indemnitor hereby irrevocably grants the Lender
the full power in the sole discretion of the Lender,
without notice to the Indemnitor and without in any way
affecting the liability of the Indemnitor under this
Agreement: (a) to waive compliance with and any default
under, and to consent to any amendment or consent to any
change of any terms of any of the Loan Documents and any
other agreement relating thereto, including, without
limitation, any change in the timing or amount of any
payment (or prepayment) of the principal of or premium, if
any, or interest on, or any other terms of payment of, any
of the Obligations or the Subject Obligations; and (b) to
grant extensions or renewals thereof and other indulgences
with respect thereto, and to effect releases, compromises
or settlements with respect thereto.
6. Representations and Warranties. The Indemnitor hereby
represents and warrants the following to and for the
benefit of each of the Indemnified Parties:
6.1. Organization, Standing, Qualification, etc. The
Indemnitor is a corporation duly organized and validly
existing under the laws of the Commonwealth of
Massachusetts, and has all requisite power and authority to
own, lease and operate its properties, to carry on its
business as now conducted and now proposed to be conducted,
to execute and deliver this Agreement, and to perform its
obligations and undertakings hereunder. The Indemnitor is
duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the character of the
properties owned or leased or the nature of the activities
conducted makes such qualification or licensing necessary.
6.2. Litigation, etc. There is no action, proceeding
or investigation pending or threatened (or any basis
therefor known to the Indemnitor) which questions the
validity of this
<PAGE>
Agreement or any action taken or to be taken pursuant
hereto. There is no outstanding judgment, decree or order
affecting the Indemnitor.
6.3. Valid and Binding Obligations; Compliance with
Other Instruments, etc. This Agreement has been duly
authorized by the Indemnitor and constitutes the valid and
legally binding obligation of the Indemnitor, enforceable
against the Indemnitor in accordance with its terms. The
Indemnitor is not in violation of or in default under any
term of its charter, by-laws or other organizational
document, or of any agreement, document, instrument,
judgment, decree, order, law, statute, rule or regulation
applicable to the Indemnitor or any of its properties and
assets. The execution, delivery and performance of and the
consummation of the transactions contemplated by this
Agreement will not violate or constitute a default under,
or permit any Person to accelerate or to require the
prepayment of any indebtedness of the Indemnitor pursuant
to, or result in the creation of any lien upon any of the
properties or assets of the Indemnitor pursuant to, any
term of the charter, by-laws or other organizational
document of the Indemnitor, or any agreement, document,
instrument, judgment, decree, order, law, statute, rule or
regulation applicable to the Indemnitor or any of its
properties and assets. The Indemnitor is not a party to
or bound by or subject to any charter, by-law or other
organizational document, or any agreement, document,
instrument, judgment, decree, order, law, statute, rule or
regulation, other than laws, statutes, rules and
regulations applicable to business organizations generally
under the terms of or pursuant to which its obligation to
pay all amounts due from it and/or to perform all
obligations imposed on it and/or to comply with the terms
applicable to it under this Agreement is in any way
restricted.
6.4. Consents, etc. No consent or filing with, or
other action by, any Person (including, without limitation,
any creditor of or lender to the Indemnitor) is required as
a condition precedent to the valid execution, delivery and
performance by the Indemnitor of this Agreement or the
transactions contemplated by this Agreement.
7. General Provisions.
7.1. No amendment or waiver of any provision of this
Agreement or consent to any default under, breach of or,
departure from this Agreement by the Indemnitor shall in
any event be effective unless the same shall be in writing
and signed by the Indemnitor and the Lender at the time
outstanding and then such waiver or consent shall be
effective only in the specific instance and for the
specific purpose for which given.
7.2. All notices, demands, requests and other
communications required pursuant to the provisions of this
Agreement shall be in writing, and shall be deemed to have
been received, on the date of receipted delivery (or the
first business day thereafter if such day of receipted
delivery is not a business day), if hand delivered or sent
by commercial courier, or two (2) business days after
depositing the same in the United States Mails, if sent by
United States Registered or Certified Mail-Return Receipt
Requested, postage prepaid, to the respective addresses as
follows:
<PAGE>
(i) if to the Indemnitor Stocker & Yale, Inc.
then to it at 32 Hampshire Road
Salem, New Hampshire
Attn.: Mark Blodgett
with a courtesy Stuart Cable, Esq.
copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
(ii)if to the Lender, Danvers Savings Bank
then to it at: One Conant Street
Danvers, Massachusetts 01923
Attn.: Kevin Bottomley
and a courtesy Anne R. Jackowitz, P.C.
copy to: Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Any of the parties may designate a change of
address by notice in writing to the other parties. In no
event shall the failure of any party to furnish courtesy
copies of any notice to legal counsel of the other party as
specified above render ineffective any such notice
otherwise given in the manner hereinabove provided.
7.3. This Agreement, including the validity hereof and
the rights and obligations arising hereunder, and all
amendments and supplements hereof and all waivers and
consents hereunder (which amendments, supplements, waivers
and consents, in any event, shall have no efficacy except
and unless in writing) shall be construed in accordance
with and governed by the domestic substantive laws of The
Commonwealth of Massachusetts without giving effect to any
choice of law or conflicts of law provision or rule that
would cause the application of the domestic substantive
laws of any other jurisdiction. The Indemnitor, to the
extent that the Indemnitor may lawfully do so, hereby
consents to service of process, and to be sued, in The
Commonwealth of Massachusetts and consents to the
jurisdiction of the courts of The Commonwealth of
Massachusetts and the United States District Court for the
District of Massachusetts, as well as to the jurisdiction
of all courts to which an appeal may be taken from
<PAGE>
any such courts, for the purpose of any suit, action or
other proceeding arising out of any of the Indemnitor's
obligations hereunder, and expressly waives any and all
objections the Indemnitor may have as to venue in any such
courts. The Indemnitor further agrees that a summons and
complaint commencing an action or proceeding in any of such
courts shall be properly served and shall confer personal
jurisdiction if served personally or by certified mail to
the Indemnitor or as otherwise provided under the laws of
The Commonwealth of Massachusetts. Notwithstanding the
foregoing, the Indemnitor agrees that nothing contained
herein shall preclude the institution of any such suit,
action or other proceeding in any jurisdiction other than
The Commonwealth of Massachusetts.
7.4. The obligations of the Indemnitor are independent of
the obligations of any of the other Indemnitors under any
of the other Loan Documents. A separate action or actions
may be brought and prosecuted against the Indemnitor
hereunder, whether or not an action is brought against the
Indemnitor or any other Person under any of the other Loan
Documents.
7.5. This instrument shall bind the successors and assigns
of Indemnitor and inure to the benefit of the respective
heirs, successors and assigns of the Lender and the other
Indemnified Parties.
7.6. THE INDEMNITOR IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL
BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED
BY OR AGAINST THE INDEMNITOR IN RESPECT OF THE INDEMNITOR'S
OBLIGATIONS HEREUNDER.
7.7. This Agreement (together with the other Loan
Documents) embodies the entire agreement and understanding
between the Indemnitor (on the one hand) and the Lender (on
the other) and supersedes all prior agreements and
understandings relating to the subject matter hereof. In
case any provision in this Agreement or any of the other
Loan Documents shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining
provisions hereof and thereof shall not in any way be
affected or impaired thereby.
7.8. All or any of the rights hereunder of the Lender may
be transferred or assigned at any time and shall be
transferred and assigned upon the transfer of any interest
in the Note, whether with or without the consent of or
notice to the Indemnitor.
7.9. The rights of the Indemnified Parties specifically
granted by this Agreement shall be in addition to any other
rights and remedies available against the Indemnitor under
any other document or instrument now or hereafter executed
by the Indemnitor, or at law or in equity (including,
without limitation, any right of reimbursement or
contribution pursuant to CERCLA, Chapter 21E, or any other
Hazardous Materials Legal Requirements), and shall not in
any way be deemed a waiver or release of any of such
rights.
<PAGE>
IN WITNESS WHEREOF, the Indemnitor has executed this
Agreement as of the day and year first written above, to
take effect as a Massachusetts instrument under seal.
Witness:
By:/s/ John Evan Jones
STOCKER & YALE, INC.,
a Massachusetts corporation
By:/s/ Mark W. Blodgett
Mark Blodgett
Chairman of the Board
<PAGE>
DS2.337714.1
2001579-0002
SETTLEMENT STATEMENT
LENDER: Danvers Savings Bank
MAKER: Stocker & Yale, Inc.
LOAN TYPE: Second Mortgage Loan of $750,000.00
(the "Loan")
CLOSING: As of May 13, 1998
Choate, Hall & Stewart
Exchange Place, 53 State Street
Boston, MA 02109
In connection with the Loan, the undersigned
hereby authorizes you to disburse the Loan proceeds as
follows:
LOAN AMOUNT $750,000.00
Payee:
Danvers Savings Bank (fee) ($3,750.00)
Title Insurance Premium and
Recording Costs ($2042.32)
Choate, Hall' & Stewart - Legal Services (13,030.00)
(including disbursements)
____________
Balance of Loan Proceeds to be
distributed for acquisition of
Lasiris, Inc. ($731,195.68)
By wire to:
See Schedule A
STOCKER YALE, INC.
By:/s/ Mark W. Blodgett
<PAGE>
BOSTON SAFE DEPOSIT WIRE INSTRUCTIONS
The following are wire instructions to Boston Safe
Deposit & Trust
Boston Safe Deposit & Trust
One Boston Place
Boston MA 02108
ABA #011-001-234
Acct Name. Goodwin, Procter A Hoar
Acct Officer: Brian Gregory 617/722-7509
Acct #13-041-9
Attention Stocker & Yale - Evan Jones
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 176,021
<SECURITIES> 0
<RECEIVABLES> 2,519,220
<ALLOWANCES> (256,596)
<INVENTORY> 6,134,765
<CURRENT-ASSETS> 9,386,178
<PP&E> 9,346,573
<DEPRECIATION> (5,087,705)
<TOTAL-ASSETS> 19,380,741
<CURRENT-LIABILITIES> 5,068,537
<BONDS> 0
0
0
<COMMON> 3,364
<OTHER-SE> 4,622,523
<TOTAL-LIABILITY-AND-EQUITY> 19,380,741
<SALES> 5,492,783
<TOTAL-REVENUES> 5,492,783
<CGS> 3,549,839
<TOTAL-COSTS> 11,118,907
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 250,752
<INCOME-PRETAX> (9,426,715)
<INCOME-TAX> 20,591
<INCOME-CONTINUING> (9,447,306)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (9,447,306)
<EPS-PRIMARY> (3.39)
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