PREPARED BY AND WHEN
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RECORDED RETURN TO:
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Xxxxxxx X. Xxxxxxxx, Esq.
Parr, Waddoups, Xxxxx, Gee & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000-0000
telephone: (000) 000-0000
telecopier: (000) 000-0000
KANSAS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FINANCING STATEMENT
THIS MORTGAGE (this "Mortgage") is executed as of the day of April,
1999, by NACO INDUSTRIES, INC., a Utah corporation ("Mortgagor"), whose address
is 000 Xxxx 0000 Xxxxx, Xxxxx, Xxxx 00000, in favor of WEBBANK CORPORATION, a
Utah corporation ("Mortgagee"), whose address is P.O. Box 1831, 000 Xxxxx
Xxxxxx, Xxxxx 000, Xxxx Xxxx, Xxxx 00000-1831.
FOR THE SUM OF TEN DOLLARS ($10.00) and other good and valuable
consideration, and in order to secure for the benefit of Mortgagee the following
obligations (collectively, the "Obligations"): (i) the timely payment and
performance of the obligations of Mortgagor under this Mortgage, under that
certain Adjustable Rate Promissory Note (the "Note") of even date with this
Mortgage, executed by Xxxxxxxxx, as maker, in favor of Mortgagee, as payee, in
the principal amount of ONE MILLION ONE HUNDRED THOUSAND DOLLARS ($1,100,000),
payable with interest as set forth in the Note, and under any other instruments
given to further evidence or secure such obligations, as this Mortgage, the Note
or such other instruments may be extended, renewed, modified, amended or
replaced from time to time; (ii) the repayment of principal and any applicable
interest on any advances made by Mortgagee at the request of Mortgagor prior to
the release and recordation of this Mortgage; and (iii) the payment of any loans
or advances made after the date of this Mortgage for any purpose by Mortgagee to
Mortgagor, provided that the principal amount of debt secured by this Mortgage
(not including sums advanced to protect the Security of this Mortgage) shall not
exceed, at any one time, the amount of $1,100,000.
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Mortgagor CONVEYS, WARRANTS AND TRANSFERS TO MORTGAGEE, WITH POWER OF
SALE, the following (for reference purposes only, the "Real Property"):
(A) The land (the "Land") located in Xxxxxx County, Kansas, more
particularly described as follows:
Beginning at a point 60 feet North and 1,080 feet West of the Southeast
corner of Section Three (3), Township Twenty-four (24) South, Range Thirty-three
(33) West of the 6th P.M., in Xxxxxx County, Kansas, for the point of beginning;
thence West on a line parallel to and 60 feet North of the South line of said
Section 3 a distance of 420 feet; thence North at an interior angle of 89o07' a
distance of 360 feet; thence East at an interior angle of 90o53' a distance of
420 feet; and thence South at an interior angle of 89o07' a distance of 360 feet
to the point of beginning; also described as Tracts 8, 9 and 10 in the Xxxxxx
Survey of such real estate dated February 23, 1966, prepared by Xxxxxx X. Xxxxx;
P.E., and filed for record in the County Engineer's Office of Xxxxxx County,
Kansas, in Survey Book 3.
TOGETHER WITH all minerals, oil, gas and other hydrocarbon substances
located in, on or under the Land, and all air and water rights, rights-of-way,
easements, tenements, hereditaments, possessory rights, claims (including mining
claims), privileges and appurtenances belonging to, or used or enjoyed with, all
or any part of the Land, including, without limitation, all right, title and
interest of Mortgagor, now owned or acquired after the date of this Mortgage, in
and to any land lying in the bed of any street, road or avenue, open or
proposed, in front of or adjoining the Land, and in and to all sidewalks and
alleys and all strips and gores of land adjacent to or used in connection with
the Land; and
(B) All buildings, structures and other improvements on or after the
date of this Mortgage located on the Land (collectively, the "Improvements");
and
Mortgagor GRANTS TO MORTGAGEE A SECURITY INTEREST in the following (for
reference purposes only, the "Personal Property") (the terms set forth below
that are defined in the Utah Uniform Commercial Code (the "UCC") shall have the
respective meanings set forth in the UCC):
(A) All compensation granted and awards made for the taking by eminent
domain or by any proceeding or purchase in lieu of eminent domain of the whole
or any part of the Real Property, all proceeds of insurance paid as a result of
the partial or total destruction of the Improvements, and all unearned premiums
under all insurance policies now held or obtained after the date of this
Mortgage by Mortgagor relating to the Improvements;
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(B) All goods, equipment, farm products, inventory, machinery,
supplies, fixtures, furniture, furnishings, tools, appliances and other tangible
personal property now owned or acquired by Mortgagor after the date of this
Mortgage and located on or necessary for construction on or operation of the
Real Property, and any substitutions and replacements of, any attachments,
accessions and additions to, and any proceeds or products from, such property;
(C) All businesses located on the Real Property and good will
associated with such businesses, trademarks, trade names, logos and designs for
the operations located on the Real Property, contract rights, deposit, escrow
and other accounts, accounts receivable, chattel paper, instruments, documents,
general intangibles, certificates, agreements, insurance policies, business
records, plans and specifications, drawings, maps, surveys, studies, permits,
licenses, zoning, subdivision development and other applications, filings and
approvals and other intangible personal property now owned or acquired after the
date of this Mortgage by Xxxxxxxxx and used in connection with the ownership or
operation of the Real Property, and any substitutions and replacements of, and
any proceeds or products from, such property; and
(D) All water stock relating to the Land, and deposits and other
security given to utility companies or governmental or quasi-governmental
agencies in connection with the Real Property.
(The Real Property and the Personal Property are referred to in this Mortgage
collectively as the "Property," which shall mean, as applicable, all or any
portion of, and interest in, the Property.)
XXXXXXXXX AGREES WITH MORTGAGEE AS FOLLOWS:
1. Obligations; Certain Proceedings. Mortgagor shall timely pay and
perform the Obligations and all obligations under any other encumbrance or lien
on the Property. No such other encumbrance or lien shall be modified, increased
or refinanced without the prior written consent of Mortgagee. Mortgagor shall
maintain this Mortgage as a valid lien on, and security interest in, the
Property of equal priority to that created by this Mortgage, shall preserve and
protect Xxxxxxxxx's interests in the Property and the interests of Mortgagee
under this Mortgage, and shall appear in and defend any action or proceeding
which may affect the Property or the obligations of Mortgagor or the interests
of Mortgagee under this Mortgage.
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2. Maintenance and Use. Mortgagor shall (a) maintain the Property in
good condition and repair, (b) comply with all laws, ordinances, rules,
regulations, covenants, conditions and restrictions relating to the Property,
(c) not permit nuisances to exist or commit or permit waste in or on the Real
Property, (d) promptly complete in a good and workmanlike manner any
Improvements which may be constructed, and promptly restore and repair in like
manner any Improvements which may be damaged or destroyed, (e) permit Mortgagee
and its representatives to inspect the Property at any time and conduct soil and
other tests on the Property, (f) not remove any personal property or fixtures
from the Real Property unless replaced immediately with similar property of at
least equivalent value, (g) preserve and extend all rights, licenses, permits
(including, without limitation, zoning variances, special exceptions, special
permits and non-conforming uses), privileges, franchises and concessions which
are applicable to the Real Property, and (h) immediately on discovery, clean up
all hazardous substances, hazardous wastes, pollutants and contaminants located
on the Property. Mortgagor shall do or refrain from doing any act which, from
the character or use of the Property, is reasonably necessary to protect and
preserve the fair market value of the Property, any specific enumerations in
this Mortgage not limiting such general obligation. Mortgagor shall indemnify,
defend and hold harmless Mortgagee from and against all liabilities, claims,
losses, damages, costs and expenses (including, without limitation, cleanup
costs and attorneys' fees) directly or indirectly arising out of, related to or
connected with any hazardous substances, hazardous wastes, pollutants or
contaminants located on the Real Property. The liability of Mortgagor under the
indemnity set forth in the immediately preceding sentence shall arise on the
discovery of an unacceptable environmental condition and shall survive the
exercise of the power of sale, foreclosure of this Mortgage as a mortgage or any
other event. (As used in this Mortgage, the terms "hazardous substances,"
"hazardous wastes," "pollutants" and "contaminants" mean any substances, wastes,
pollutants or contaminants included within those respective terms under any law,
ordinance, rule or regulation, whether now existing or enacted or amended after
the date of this Mortgage.)
3. Development. Without Mortgagee's prior written consent, Xxxxxxxxx
shall not do any of the following: (a) make any material change to the Real
Property or to the use of the Real Property; (b) drill for on or extract from
the Land any minerals, oil, gas or other hydrocarbon substances, or permit the
same to occur; (c) initiate or support any zoning reclassification of the Real
Property, seek any variance under existing zoning ordinances applicable to the
Real Property or use or permit the use of the Real Property in a manner which
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would be a nonconforming use under applicable zoning ordinances; (d) impose any
covenants, conditions, restrictions, easements or rights-of-way on the Real
Property, execute or file any subdivision plat affecting the Real Property or
consent to the annexation of the Real Property to any municipality; or (e)
permit the Real Property to be used by any person in such manner as might make
possible a claim of adverse usage or possession or of implied dedication or
easement.
4. Payment of Certain Impositions. Mortgagor shall pay when due all
taxes, assessments and charges relating to or levied against the Property,
including, without limitation, real and personal property taxes, general and
special assessments, utility charges, mechanics' and materialmen's charges, and
charges arising from any covenants, conditions or restrictions relating to the
Real Property. Mortgagor shall also pay to Mortgagee the amount of all taxes,
assessments and charges which may be levied by any governmental authority on
this Mortgage, the Obligations or Mortgagee by reason of the interest of
Mortgagee under this Mortgage; provided, that if the same cannot legally be paid
by Xxxxxxxxx, Mortgagee may declare a default under this Mortgage. Mortgagor
shall deliver to Mortgagee official receipts of the appropriate taxing or other
authority or other proof satisfactory to Mortgagee within ten (10) days after
the date any such taxes, assessments or charges are due and payable, evidencing
the payment of such taxes, assessments or charges (excluding payment of routine
utility charges, unless directed to do so by Mortgagee). Mortgagor may contest
in good faith the validity of any mechanic's or materialman's lien, provided
that Mortgagor first deposits with Mortgagee security for such lien in form and
amount acceptable to Mortgagee, and then causes such lien to be removed.
5. Insurance. Mortgagor shall maintain insurance policies
(collectively, the "Policies") with respect to the Property, in amounts and
forms and with deductibles acceptable to Mortgagee, providing: (a) hazard
insurance with special causes of loss including theft coverage, insuring against
fire, extended coverage risks, vandalism, malicious mischief and such other
risks as Mortgagee may require, including, without limitation, the risk of
damage caused by earthquake and flooding, with replacement cost coverage and
agreed value endorsement; (b) insurance against business interruption and loss
of rental income, including full loss of rents coverage (including any
percentage rents); (c) comprehensive boiler and machinery coverage; (d)
commercial general liability insurance; (e) during any construction, restoration
or repair of the Improvements, (i) workers' compensation insurance (including
employer's liability insurance, if requested by Mortgagee), and (ii) builder's
completed value risk insurance against "all risks of physical loss," including
collapse and transit coverage; and (f) such other insurance as may from time to
time be required by Mortgagee against the same or other hazards. The hazard
insurance policy shall contain a standard lender's loss payable endorsement
(such as Form 438 BFU), in favor of and in a form acceptable to Mortgagee.
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Mortgagee shall be named as an additional insured under the liability insurance
policy, and such insurance shall be primary and non-contributing in the event of
loss with any other insurance Mortgagee may carry. The insurers concerned shall
agree that the coverage under the Policies will not be modified or canceled
unless at least thirty (30) days' advance written notice of the proposed
modification or cancellation has been given to Mortgagee. Mortgagee may review
the Policies from time to time and require that the Policies be modified so as
to protect Mortgagee's interests. Such insurance shall be carried with companies
approved by Mortgagee that are authorized to transact business in Utah and rated
Class A:XI or better in the most recent publication of Best's Key Rating Guide,
Property-Casualty, or rated similarly in another similar publication selected by
Mortgagee. Mortgagor shall deliver to Mortgagee (at the option of Mortgagee)
either the originals of the Policies or certificates duly executed by the
insurers evidencing such insurance coverage. All renewal and replacement
policies must be delivered to Mortgagee at least fifteen (15) days before the
expiration of the old policies.
6. Reserve. On written notice by Mortgagee to Mortgagor, Mortgagor
shall pay to Mortgagee on the first day of each month an amount equal to
one-twelfth (1/12) of all taxes, assessments and insurance premiums required to
be paid under this Mortgage by Xxxxxxxxx, in such manner as to provide Mortgagee
with sufficient funds to pay such taxes, assessments and premiums at least
thirty (30) days prior to their respective due dates. Such funds may be
commingled with other funds of Mortgagee, shall not bear interest and shall
periodically be used by Mortgagee for the payment of such taxes, assessments and
premiums. Nothing contained in this Mortgage shall cause Mortgagee to be deemed
a trustee of such funds or to be obligated to pay any amounts in excess of such
funds. If such funds are insufficient to pay all of such taxes, assessments and
premiums, Mortgagor shall immediately pay the deficiency to Mortgagee.
7. Condemnation or Damage. Mortgagor shall immediately give written
notice to Mortgagee of the institution of any proceedings for the taking of the
Property or of the occurrence of any damage to the Property, and Mortgagee shall
receive all compensation, awards and insurance and other proceeds (collectively,
the "Proceeds") distributed in connection with such taking or damage. Each
person concerned is authorized and directed to make payments for such taking or
damage directly to Mortgagee, instead of to Mortgagee and Mortgagor jointly.
Mortgagee may, but shall not be obligated to, commence, appear in and prosecute
in its own name any action or proceeding and make any compromise or settlement
in connection with such taking or damage. After deducting from the Proceeds all
costs and expenses (including attorneys' fees) incurred by Mortgagee in
connection with such action, proceeding, compromise or settlement, Mortgagee may
use the Proceeds to reduce the Obligations (whether or not then due) or to
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restore or repair the Property damaged. If Mortgagee determines to use the
Proceeds for restoration and repair of the Property, the Proceeds shall be made
available to Mortgagor for use in restoring or repairing the Property in
accordance with plans and specifications and construction arrangements approved
by Mortgagee. Mortgagee or its nominee shall hold the Proceeds and from time to
time shall, on compliance with such conditions or requirements as may be imposed
by Mortgagee, disburse portions of the Proceeds to Mortgagor or to those
entitled to the Proceeds as progress is made on such restoration and repair. If
any of the Proceeds remain after the entire costs of such restoration and repair
have been paid, Mortgagee may use such remaining Proceeds to reduce the
Obligations (whether or not then due) or may remit the same to Mortgagor.
8. Assignment of Rents and Possession. Mortgagor assigns to Mortgagee
all rents, deposits, and income arising at any time from the Property
(collectively referred to as "Rents"), together with all leases and other
similar documents (collectively, the "Leases") pertaining to the Property.
Xxxxxxxxx also authorizes Mortgagee or its agents at their option, upon default,
and without appointment of a receiver or other judicial intervention, to take
possession of the Property and to collect all Rents and apply them to payment of
the interest, principal, insurance premiums, taxes, assessments, repairs or
improvements necessary to keep the Property in such condition as Mortgagee deems
appropriate, or to apply them to other charges or payments provided for in this
Mortgage. All Rents received by Mortgagor after notice of default shall be held
by Xxxxxxxxx as trustee for the benefit of Mortgagee only, to be applied to the
sums secured by this Mortgage. All lessees under any such leases are hereby
authorized to make all lease payments to Mortgagee upon demand by the Mortgagee.
This right to possession and Rents assignment shall continue in force until the
Note is fully paid. The taking of possession by Mortgagee shall not prevent or
retard Mortgagee in the collection of said sums by foreclosure or otherwise.
Nothing contained in this paragraph shall be construed to bind Mortgagee to the
performance of any obligations under said leases, except for giving lessees'
proper credit for rent payments received by Mortgagee. Xxxxxxxxx represents and
warrants that Xxxxxxxxx has not executed any prior assignment of the Rents and
has not ans will not perform any act that would prevent Mortgagee from
exercising its rights under this Mortgage. Mortgagee, or Mortgagee's agent or a
judicially appointed receiver, shall not be required to enter upon, and take
control of or maintain the Property before or after giving notice of default to
Mortgagor. However, Mortgagee, or Mortgagee's agents or a judicially appointed
receiver, may do so at any time when a default occurs. Any application of Rents
shall not cure or waive any default or invalidate any other right or remedy of
Mortgagee.
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9. Leasing Requirements;Termination of Leases On Foreclosure. Without
the prior written consent of Mortgagee, Xxxxxxxxx shall not enter into, modify,
terminate or accept a surrender of any Leases, permit the assignment of any
Leases or accept payment of more than one (1) installment of rent due under any
Leases prior to its due date. Mortgagor shall timely comply with all of the
terms, covenants and conditions as landlord under the Leases. Mortgagor shall
promptly notify Mortgagee in writing of (a) the default by a lessee under any of
the Leases, (b) the commencement of any action by any lessee against Xxxxxxxxx,
or by Xxxxxxxxx against any lessee, or (c) the receipt of a written notice by
Xxxxxxxxx from any lessee claiming that Mortgagor is in default under a Lease.
Mortgagor shall promptly deliver to Mortgagee a copy of any process, pleading or
notice given or received by Mortgagor in reference to any such action or claim.
Prior to entering into any Lease, Mortgagor shall furnish a copy of the proposed
Lease to Mortgagee for its approval. If Mortgagee conditions its approval of a
Lease on certain changes being made to such Lease, Mortgagor shall make all of
such changes prior to the execution of such Lease. Immediately on the execution
of any Lease, an executed copy of such Lease shall be furnished to Mortgagee. On
foreclosure of this Mortgage (whether pursuant to the power of sale which is
available under this Mortgage or pursuant to foreclosure of this Mortgage as a
mortgage), none of the Leases shall be terminated by application of the doctrine
of merger, as a matter of law or as a result of such foreclosure, unless
Mortgagee or the purchaser at the foreclosure sale shall so elect in writing. No
act by or on behalf of Mortgagee or any such purchaser shall constitute or
result in termination of any Lease unless Mortgagee or such purchaser shall give
written notice of such termination to the lessee under such Lease.
10. Transfers and Encumbrances. Without the prior written consent of
Mortgagee, which may be withheld by Mortgagee in its sole discretion, Mortgagor
shall not, directly or indirectly, do any of the following: (a) sell, convey,
assign or transfer the Property, the Leases or the Rents, or contract to do so,
voluntarily, involuntarily or by operation of law; or (b) subject the Property,
the Leases or the Rents to any mortgage, deed of trust or other security device
(whether senior or junior to this Mortgage). Mortgagee's consent to one or more
of such transactions shall not be a waiver of the right to require such consent
with respect to any subsequent or successive transactions. Such consent of
Mortgagee may be conditioned on satisfaction of such requirements as Mortgagee
may impose.
11. Mortgagee Title Insurance. Mortgagor shall provide to Mortgagee a
policy of title insurance insuring the lien of this Mortgage, in form and
amount, and issued by a company, acceptable to Mortgagee.
12. Financial and Rental Statements; Records and Books. Within twenty
(20) days after request by Mortgagee, which request may be made from time to
time, Mortgagor shall deliver to Mortgagee an accurate and complete list of the
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Leases, setting forth, for each Lease, the names of each lessee, the space
covered, the term, the amount of any security deposit, the amount of rental
payable and such other information as Mortgagee may request. Said statements and
other information shall be prepared in a form and certified by a person
acceptable to Mortgagee. Mortgagor shall maintain adequate records and books of
account relating to the Property and its own financial affairs sufficient to
permit the preparation of such statements. Mortgagee may examine, copy and audit
such records and books of accounts from time to time on request.
13. Representations and Warranties. Mortgagor covenants with, and
represents and warrants to, Mortgagee that all of the following statements are
true as of the date of this Mortgage and will remain true: (a) NACO Industries,
Inc. is lawfully seized of indefeasible fee simple marketable title to the Real
Property; (b) this Mortgage has been duly executed by Xxxxxxxxx, and the
Property has been duly conveyed to Mortgagee under this Mortgage; (c) the
Property is free and clear of all liens, encumbrances and interests of third
parties not approved in writing by Mortgagee; (d) Xxxxxxxxx will defend title to
the Property against all claims and demands; (e) all of the Personal Property
has been paid for in full, is owned solely by Xxxxxxxxx and is not used and was
not bought for personal, family or household purposes; and (f) all obligations
incurred by Mortgagor in connection with or which relate to the Property are
current and without default.
14. Default. Mortgagor shall be in default under this Mortgage on the
occurrence of any of the following: (a) Mortgagor fails to timely pay or perform
any of the Obligations; (b) an event of default occurs under any lien or
encumbrance affecting the Property; (c) Mortgagor or any guarantor of the
Obligations (i) files a voluntary petition in bankruptcy or files a petition or
answer seeking or acquiescing in a reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future law or regulation relating to bankruptcy, insolvency or other relief for
debtors, (ii) consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of Mortgagor or such guarantor, the Property or the
Rents, (iii) makes a general assignment for the benefit of creditors, or (iv)
admits in writing its inability to pay its debts generally as they become due;
(d) a court of competent jurisdiction enters an order, judgment or decree
approving a petition filed against Mortgagor or such guarantor seeking a
reorganization, arrangement, composi tion, readjustment, liquidation,
dissolution or similar relief under any present or future law or regulation
relating to bankruptcy, insolvency or other relief for debtors; (e) a trustee,
receiver or liquidator of Mortgagor, such guarantor, the Property or the Rents
is appointed without the consent or acquiescence of Mortgagor or such guarantor;
(f) a writ of execution, attachment or similar process is issued or levied
against the Property or the Rents or a judgment involving monetary damages is
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entered against Mortgagor which becomes a lien on the Property or the Rents; (g)
any representation or warranty contained in this Mortgage or in any other
instrument executed by Xxxxxxxxx is or becomes untrue; or (h) a change occurs in
the condition or affairs (financial or otherwise) of Mortgagor or such guarantor
which materially impairs Mortgagee's security or increases its risks.
15. Remedies. On a default under this Mortgage, Mortgagee may (but is
not obligated to) do any one or more of the following: (a) without notice or
demand on Mortgagor and without releasing Mortgagor from any of the Obligations,
pay or perform a portion or all of the Obligations that Mortgagor has failed to
pay or perform, and Mortgagor shall immediately reimburse Mortgagee for all
costs and expenses (including attorneys' fees) incurred in connection with such
payment or performance, with interest on such costs and expenses at the Default
Rate (as defined in the Note), both before and after judgment; (b) declare all
of the Obligations immediately due and payable and charge interest on the
Obligations then outstanding at the Default Rate, both before and after
judgment; (c) exercise the power of sale under applicable law; (d) foreclose
this Mortgage in the manner provided by law for the foreclosure of mortgages on
real property; (e) exercise all of the rights and remedies of a secured party
under the UCC (whether now existing or created after the date of this Mortgage),
including, without limitation, the right to require Mortgagor to assemble and
make available to Mortgagee the Personal Property at a place designated by
Mortgagee; (f) take possession or appoint a receiver to take possession of and
(without liability or obligation) as a matter of right under this Mortgage and
without the necessity of any showing as to the inadequacy of the Property as
security (i) hold, occupy, operate, use, maintain, repair and conserve the value
of the Property, (ii) make, modify, enforce and terminate the Leases, (iii)
collect the Rents and (after deducting from the Rents maintenance and operating
expenses, including reasonable management fees) apply the same to the
Obligations, and (iv) exercise such other powers as may be fixed by the court;
(g) offset the Obligations against any amounts owed by Mortgagee to Mortgagor
and apply toward the Obligations all funds of Mortgagor which Mortgagee may have
in its possession or under its control; (h) if permitted by applicable law, sue
on the Obligations; or (i) exercise any other rights and remedies available at
law or in equity. A receiver appointed pursuant to this Paragraph may be
appointed without notice to Xxxxxxxxx, and without regard to whether the
Property is in danger of being lost, removed or materially injured, whether the
Property or any other security is sufficient to discharge the Obligations or
whether Mortgagee forecloses this Mortgage judicially or nonjudicially, it being
the intention of Mortgagor to authorize the appointment of a receiver when
Xxxxxxxxx is in default under this Mortgage and Mortgagee has requested the
appointment of a receiver. Xxxxxxxxx consents to the appointment of the
particular person (including an officer, director, partner or employee, as the
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case may be, of Mortgagee) designated by Mortgagee as "receiver" and waives any
right to suggest or nominate any person as receiver in opposition to the person
designated by Mortgagee. Neither the entering on and taking possession of the
Property nor the collection and application of the Rents as aforesaid shall cure
or waive any default or notice of default under this Mortgage, invalidate any
act done pursuant to such notice of default or operate to postpone or suspend
any of the Obligations. No remedy provided in this Mortgage shall be exclusive
of any other remedy at law or in equity (whether now existing or created after
the date of this Mortgage), and all remedies under this Mortgage may be
exercised concurrently, independently or successively from time to time. The
failure on the part of Mortgagee to promptly enforce any right under this
Mortgage shall not operate as a waiver of such right, and the waiver of any
default shall not constitute a waiver of any subsequent or other default.
16. Exhaustion of Security. If the sums secured by this Mortgage are
now or hereafter further secured by the liens of other mortgages, deeds of
trust, security agreements, pledges, contracts of guaranty, assignments of
leases, assignments of certificates of deposit, letters of credit, or other
security, Mortgagee may, at its option, exhaust any one or more of those
securities and the security under this Mortgage, either concurrently or
independently, and in such order as Mortgagee shall determine. In doing so,
Mortgagee will not be deemed to have made an election of remedies or waiver that
would prevent it from later exercising its remedies as to any remaining
security, nor will any such action by Mortgagee be deemed as bringing a
multiplicity of suits or splitting causes of action.
17. Security Agreement; Fixture Filing. This Mortgage constitutes a
security agreement with respect to all personal property and fixtures in which
Mortgagee is granted a security interest under this Mortgage, and Mortgagee
shall have all of the rights and remedies of a secured party under the UCC
(whether now existing or created after the date of this Mortgage), as well as
any other rights and remedies available at law or in equity. This Mortgage, with
Xxxxxxxxx, as debtor, and Mortgagee, as secured party, also constitutes a
fixture filing with respect to any part of the Property which is or may become a
fixture. The record owner of the Real Property is NACO Industries, Inc.
Mortgagee is not a seller or purchase money lender of the Personal Property.
Mortgagor shall immediately notify Mortgagee if the name or identity of
Mortgagor is changed, or if the place of business of Mortgagor is changed to an
address different from the address for Mortgagor set forth in the first
paragraph of this Mortgage. With respect to any instrument or chattel paper
covered by this Mortgage, Mortgagee need not take any steps to preserve rights
against prior parties. A carbon, photographic or other reproduction of a
financing statement is sufficient as a financing statement.
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18. Waiver. Mortgagor waives, to the fullest extent permitted by law,
any right (a) to obtain a partial release of the Property from the lien of this
Mortgage by paying less than all of the Obligations, (b) to redeem the Property
by paying less than the amount necessary to effect redemption in full, (c) to
have the Property or any other property securing the Obligations marshaled on
the foreclosure of the lien of this Mortgage, and agrees that any court having
jurisdiction to foreclose such lien may order the Property and such other
property sold as an entirety, (d) to direct the order of the sale of the
Property or any other property securing the Obligations, and agrees that
Mortgagee may exhaust the security given for the Obligations in any order, and
(e) relating to procedural or substantive limitations on the recovery of any
deficiency, including, without limitation, any requirement that Mortgagee
establish a deficiency in connection with the indebtedness secured by this
Mortgage prior to the time that all of the security given for payment of the
Obligations has been exhausted. Xxxxxxxxx further waives and relinquishes all
exemptions and homestead rights which may exist with respect to the Real
Property, and agrees not to file a declaration of homestead with respect to the
Real Property.
19. Expenses and Fees.Mortgagor shall pay all costs, expenses and fees
(including, without limitation, trustee's and attorneys' fees) which are
incurred by Mortgagee in connection with the Obligations, this Mortgage, the
servicing of the indebtedness secured by this Mortgage and the enforcement or
protection of the rights and interests of Mortgagee under this Mortgage,
including, without limitation, premiums on receiver's bonds and the monitoring
of any insolvency or bankruptcy proceedings, with interest on such costs,
expenses and fees at the Default Rate, both before and after judgment.
20. Further Assurances. Mortgagor shall at any time and from time to
time, on request of Mortgagee, take or cause to be taken any action, and
execute, acknowl edge, deliver or record any further instruments, which
Mortgagee deems necessary or appropriate to carry out the purposes of this
Mortgage and to perfect and preserve the lien and security interest intended to
be created and preserved in the Property.
21. Request for Notices. Xxxxxxxxx requests that a copy of any notice
of default and a copy of any notice of sale under this Mortgage be mailed to
Mortgagor at the address of Mortgagor set forth in the first paragraph of this
Mortgage.
22. WAIVER OF JURY TRIAL. XXXXXXXXX AND MORTGAGEE WAIVE TRIAL BY JURY
IN ANY ACTION, PROCEEDING, COUNTERCLAIM, OR CROSS-CLAIM BROUGHT BY ANY PARTY
AGAINST THE OTHER IN ANY MATTER ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSAC TION INVOLVED IN THIS MORTGAGE.
12
23. Miscellaneous. Time is of the essence of this Mortgage. This
Mortgage shall be binding on Mortgagor and shall inure to the benefit of
Mortgagee and its successors and assigns. The liability of each person executing
this Mortgage as Mortgagor shall be joint and several. The invalidity or
unenforceability of any provision of this Mortgage shall in no way affect the
validity or enforceability of any other provision. This Mortgage shall be
governed by and construed in accordance with the laws of the State of Utah
except where the laws of the State of Kansas require that the laws of the State
of Kansas apply to any matters addressed herein. Paragraph captions and defined
terms in this Mortgage are for convenience of reference only and shall not
affect the construction of any provision of this Mortgage. All pronouns shall be
deemed to refer to the masculine, feminine or neuter or singular or plural, as
the identity of the parties may require.
[Remainder of Page Intentionally Left Blank]
13
XXXXXXXXX has executed this Mortgage on the date set forth below, to be
effective as of the date first set forth above.
MORTGAGOR:
---------
NACO INDUSTRIES, INC.
a Utah corporation
By:
Its:
State of )
--------------------------
) ss.
County of )
------------------------
The foregoing instrument was acknowledged before me this day of
----------
, 1999, by , the
---------- ------------------------------------------------------
of NACO Industries, Inc..
-----------
(Seal)
----------------------
Notary Public
My Commission Expires: Residing at:
--------------------- ----------------------
14
DEPOSIT AND ESCROW AGREEMENT
----------------------------
THIS DEPOSIT AND ESCROW AGREEMENT (this "Agreement") is made as of
April ___, 1999, by and among NACO Industries, Inc., a Utah corporation (the
"Company"), WebBank Corporation (the "Lender") and WebBank Corporation, acting
solely in its capacity as escrow agent under this Agreement (the "Escrow
Agent"). The Company and the Lender are sometimes collectively referred to
herein as the "Parties" and individually as a "Party."
WHEREAS, the Parties have entered into that certain Loan Agreement
dated as of the date hereof (the "Loan Agreement") pursuant to which the Lender
has agreed to loan the Company $1,100,000 (the "Loan");
WHEREAS, the Parties have entered into that certain Security Agreement
dated as of the date hereof (the "Security Agreement") pursuant to which the
Company has granted the Lender a security interest in certain assets of the
Company including any money placed in the Escrow Account (as defined below) as
collateral for the Loan;
WHEREAS, the Company owes approximately $157,000.00 to X. Xxxx
("Xxxx"), and the Lender desires that such debt be discharged within 30 days of
the date of this Agreement; and
WHEREAS, it is a condition precedent to the Loan Agreement and the
making of the Loan that the Company enters into this Agreement and places the
Escrow Funds (as defined below) in the Escrow Account.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Escrow Deposit. Simultaneously with the execution of this Agreement,
the Company has deposited with the Escrow Agent $157,000.00 (the "Escrow
Amount") in accordance with the Loan Agreement. The Escrow Agent hereby
acknowledges receipt of $157,000.00 and agrees to hold the Escrow Amount,
together with all products and proceeds thereof (collectively, the "Escrow
Funds"), in a separate and distinct account in the name of the Lender (the
"Escrow Account"), subject to the terms and conditions of this Agreement. The
Escrow Agent shall not distribute or release the Escrow Funds except in
accordance with the express terms and conditions of this Agreement.
1
2. Release of Escrow Funds. The Company hereby consents to and
instructs the Escrow Agent that the Escrow Funds shall be distributed and
released as follows:
(a) Event of Default. The Company agrees that in the event of
an Event of Default under the Note, the Lender may instruct the Escrow Agent to
release to the Lender all of the Escrow Funds, which Escrow Funds are pledged to
the Lender as collateral for the Note pursuant to the Security Agreement.
(b) Release to Xxxx. Within 30 days from the date of this
Agreement, the Company shall instruct the Escrow Agent in writing, in a form
satisfactory to the Lender, to release to Xxxx from the Escrow Account an amount
necessary to satisfy the Company's outstanding debt owed to Xxxx (the
"Request"). Such Request shall (i) include the account number and other
identifying information of Xxxx'x account to which the funds are to be paid, and
(ii) be accompanied by a written certification to the Lender from an officer of
the Company that no Event of Default under the Loan Agreement has occurred and
that no event has occurred that but for the passage of time would constitute an
Event of Default under the Loan Agreement. The Lender shall have the right in
its sole discretion to deny any Request. In the event the Company has not made
the Request within 30 days of this Agreement, the Lender shall have the right in
its sole discretion to instruct the Escrow Agent to release to Xxxx the amount
necessary to satisfy Xxxx'x outstanding debt owed by the Company. Any amount
remaining in the Escrow Account on the 45th day following the date of this
Agreement shall be released by the Escrow Agent to the Company.
(c) No Limitation of Remedies.The Company hereby acknowledges
and agrees that the payment of Escrow Funds to the Lender pursuant to this
Agreement shall not limit or otherwise affect any right of payment or of
indemnification which the Lender may have pursuant to the Loan Agreement, Note,
Security Agreement, Mortgage or Guaranty and that the Escrow Funds do not
constitute an exclusive remedy for Lender.
3. Termination. This Agreement shall terminate when (i) all of the
Escrow Funds in the Escrow Account have been released and distributed in
accordance with Section 2, or (ii) the Note has been paid in full including any
expenses or late fees due under the Note and Loan Agreement. Upon such
termination this Agreement shall have no further force and effect, except that
the provisions of this Section 3 and Sections 4, 5 and 6 and Sections 8 through
19 below all survive such termination.
4. Conditions to Escrow. The Escrow Agent agrees to hold the Escrow
Funds and to perform in accordance with the terms and provisions of this
2
Material Contracts The Parties agree that the Escrow Agent shall not assume any
responsibility for the failure of the Parties to perform in accordance with the
Loan Agreement or this Agreement. The acceptance by the Escrow Agent of its
responsibilities hereunder is subject to the following terms and conditions
which the parties hereto agree shall govern and control with respect to the
Escrow Agent's rights, duties and liabilities hereunder:
(a) Documents. The Escrow Agent shall be protected in acting
upon any written notice, request, waiver, consent, receipt or other paper or
document furnished to it, not only as to its due execution and validity and the
effectiveness of its provisions, but also as to the truth and accuracy of any
information therein contained, which the Escrow Agent in good faith believes to
be genuine and what it purports to be. Should it be necessary for the Escrow
Agent to act upon any instructions, directions, documents or instruments issued
or signed by or on behalf of any corporation, partnership, fiduciary or
individual acting on behalf of another party hereto, it shall not be necessary
for the Escrow Agent to inquire into such corporation's, partnership's,
fiduciary's or individual's authority. The Escrow Agent is also relieved from
the necessity of satisfying itself as to the authority of the persons executing
this Agreement in a representative capacity on behalf of any of the Parties.
(b) Liability. The Escrow Agent shall not be liable for
anything which it may do or refrain from doing in connection herewith, except
for its own gross negligence, bad faith or willful misconduct.
(c) Legal Counsel. The Escrow Agent may consult with, and
obtain advice from, legal counsel in the event of any question as to any of the
provisions hereof or its duties hereunder, and it shall incur no liability and
shall be fully protected in acting in good faith in accordance with the opinion
and instructions of such counsel.
(d) Limitation of Duties. The Escrow Agent shall have no
duties except those which are expressly set forth herein and it shall not be
bound by any agreement of the other parties hereto (whether or not it has any
knowledge thereof).
(e) Resignation or Termination of Escrow Agent. The Escrow
Agent shall have the right to resign at any time by giving written notice of
such resignation to the Parties specifying the effective date of such
resignation or termination. After receiving or delivering the aforesaid notice,
as the case may be, the Lender shall have the exclusive right in its sole
discretion to appoint a successor Escrow Agent to which the Escrow Agent may
distribute the property then held hereunder, less the amount of any costs owing
to the Escrow Agent hereunder as of such date. If a successor Xxxxxx Agent has
not been appointed and has not accepted such appointment by the end of such
3
30-day period, the Escrow Agent may apply to a court of competent jurisdiction
for the appointment of a successor Xxxxxx Agent, and the costs, expenses and
reasonable attorneys' fees which are incurred in connection with any such
proceeding shall be paid by the Lender. Except as otherwise agreed to in writing
by the Parties, no Escrow Funds shall be released from the Escrow Account unless
and until a successor Xxxxxx Agent has been appointed in accordance with this
Section 4(e).
(f) Discharge of Escrow Agent. Upon delivery of all of the
Escrow Funds pursuant to the terms of Section 3 above or to a successor Escrow
Agent, the Escrow Agent shall thereafter be discharged from any further
obligations hereunder. The Escrow Agent is hereby authorized, in any and all
events, to comply with and obey any and all final judgments, orders and decrees
of any court of competent jurisdiction which may be filed, entered or issued,
and all final arbitration awards and, if it shall so comply or obey, it shall
not be liable to any other person by reason of such compliance or obedience.
5. Indemnification. The Company hereby agrees to indemnify the Escrow
Agent for and to hold it harmless against any loss, liability or reasonable
expense (including reasonable attorneys' fees and expenses) incurred without
gross negligence, willful misconduct or bad faith on the part of the Escrow
Agent arising out of or in connection with its performance under this Agreement.
6. Escrow Costs. The Escrow Agent shall be entitled to be reimbursed
for its reasonable costs and expenses incurred in connection with maintaining
the Escrow Account hereunder, which costs and expenses shall be paid by the
Company.
7. Xxxxxx's Rights to Escrow Funds. Except for the first priority
security interest of the Lender to the funds in the Escrow Account created
pursuant to the Security Agreement, none of the Parties shall have any right,
title or interest in or to, or possession of, the Escrow Account and therefore
shall not have the ability to pledge, convey, hypothecate or grant as security
all or any portion of the Escrow Funds unless and until such Escrow Funds have
been released pursuant to Section 2 above. Accordingly, the Escrow Agent shall
be in possession of the Escrow Funds and shall act as custodian of the Lender
under this Agreement for the purposes of perfecting a security interest therein,
and no other creditor of the Company shall have any right to have or to hold or
otherwise attach or seize all or any portion of the Escrow Funds as collateral
for any obligation and shall not be able to obtain a security interest in any of
the Escrow Funds unless and until such Escrow Funds have been released pursuant
to Section 2 above. Notwithstanding the foregoing, however, nothing herein shall
restrict or otherwise limit the ability of any creditor of the Company to attach
or obtain a security interest in the right of the Company to receive payments
from the Escrow Account in accordance with the terms hereof and the Loan
Agreement.
4
8. Notices.All notices,demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, one day after being sent to the recipient by reputable overnight
courier service (charges prepaid) or five days after being mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications shall be sent to the
Escrow Agent, the Lender and the Company at the addresses indicated below or to
such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.
The Company:
-----------
NACO Industries, Inc.
000 Xxxx 0000 Xxxxx
Xxxxx, XX 00000
Attention: Xxxxx X. Xxxx
The Lender:
-----------
WebBank Corporation
P.O. Box 1831
000 Xxxxx Xxxxxx, Xxx. 000
Xxxx Xxxx, XX 00000-1831
Attention: Xxxxxxx X. Xxxxx
with a copy to:
Xxxx Xxxxxxxx Brown Gee & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
The Escrow Agent:
----------------
WebBank Corporation
P.O. Box 1831
000 Xxxxx Xxxxxx, Xxx. 000
Xxxx Xxxx, XX 00000-1831
Attention: Xxxxxxx X. Xxxxx
5
9. Entire Agreement;Amendments.This Agreement, together with the Loan
Agreement and the Security Agreement, contains the entire understanding of the
parties hereto with respect to the subject matter hereof and supersedes any
prior understandings or agreements by or among the parties hereto, whether
written or oral, which may have related to the subject matter hereof in any way.
This Agreement may be amended, or any provision of this Agreement may be waived,
so long as such amendment or waiver is set forth in a writing executed by each
of the Parties (a copy of which shall be promptly provided by the Company to the
Escrow Agent); provided that if any such amendment or waiver would have the
effect of increasing or expanding the Escrow Agent's obligations or duties under
this Agreement, the written consent of the Escrow Agent shall be required in
addition to the written consent of the Parties. No course of dealing between or
among the parties hereto shall be deemed effective to modify, amend or discharge
any part of this Agreement of any rights or obligations of any party hereto
under or by reason of this Agreement.
10. Assigns and Assignment. This Agreement shall inure to the benefit
of and shall be binding upon Xxxxxx and Xxxxxx's successors and assigns. Escrow
Agent shall not be permitted to assign or delegate its obligations hereunder
except as provided in Section 4(e) above. The Company shall not have the right
to assign or otherwise transfer its rights hereunder (including, without
limitation, its rights to the funds in the Escrow Account), and any such attempt
to assign or transfer shall be void.
11. No Third-Party Beneficiaries. Nothing herein expressed or implied
is intended or shall be construed to confer upon or to give any person other
than the Escrow Agent, the Parties and their permitted assigns any rights or
remedies under or by reason of this Agreement.
12. Interpretation. The headings in this Agreement are inserted for
convenience of reference only and shall not be a part of or control or affect
the meaning hereof.
13. No Waiver. No failure or delay by a party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, and no
single or partial exercise thereof shall preclude any right of further exercise
or the exercise of any other right, power or privilege. The right of the Parties
to receive all or a portion of the Escrow Funds under the circumstances
described in Section 2 above is in addition to, and not in lieu of, any other
remedies that any such party may have against another pursuant to the Loan
Agreement in the event of a breach of the Loan Agreement.
6
14. Severability. The parties hereto agree that (a) the provisions of
this Agreement shall be severable in the event that for any reason whatsoever
the provisions hereof are invalid, void or otherwise unenforceable, (b) such
invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are as similar as possible in terms to such
invalid, void or otherwise unenforceable provisions, but are valid and
enforceable, and (c) the remaining provisions shall remain enforceable to the
fullest extent permitted by law.
15. No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
collective mutual intent, and no rule of strict construction shall be applied
against any person. The term "including" as used herein shall be by way of
example, and shall not be deemed to constitute a limitation of any term or
provision contained herein. Each defined term used in this Agreement has a
comparable meaning when used in its plural or singular form.
16. Releases on Non-Business Days. In the event that a release of
Escrow Funds hereunder is required to be made on a date that is not a business
day, such release may be made on the next succeeding business day with the same
force and effect as if made when required.
17. Governing Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by, and construed in accordance with, the laws of the State of Utah
without giving effect to any choice of law or conflict of law rules or
provisions (whether of the State of Utah or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Utah. In furtherance of the foregoing, the internal law of the State of Utah
shall control the interpretation and construction of this Agreement, even though
under that jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply.
Notwithstanding the foregoing, each of the parties hereto agrees that each of
the other parties shall have the right to being any action or proceeding for
enforcement of a judgment entered by Utah courts in any other court or
jurisdiction. Additionally, the foregoing shall not be deemed to prohibit any
party hereto or any other person or entity that may have the right to enforce or
sue under this Agreement from commencing an action in any court that may have
jurisdiction.
7
18. Counterparts. This Agreement may be executed by the parties hereto
individually or in any combination, in one or more counterparts (including by
means of telecopied signature pages), each of which shall be an original and all
of which shall together constitute one and the same agreement.
(Remainder of this page intentionally left blank)
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
NACO Industries, Inc.
By: _________________________
Its: _________________________
WebBank Corporation
By: _________________________
Its: _________________________
WebBank Corporation,
acting solely in its capacity as
Escrow Agent under this Agreement
By: _________________________
Its: _________________________
9
GUARANTY
--------
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned, Xxxxx X. Xxxx and Xxxxxxx Xxxx
(collectively "Guarantors" and each a "Guarantor"), individuals residing at 0000
Xxxxxxxx Xxxx Xxxxx, Xxxxx, Xxxx 00000, hereby guarantee the payment when due of
the Obligations (as defined below) of NACO Industries, Inc., a Utah corporation
("Parent") and NACO Composites, Inc., a Utah Corporation and a wholly owned
subsidiary of Parent ("Subsidiary" together with Parent collectively referred to
herein as "Obligor") to WebBank Corporation, a Utah corporation ("WebBank"),
whose address is P.O. Box 1831, 000 Xxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxx, Xxxx
00000.
RECITALS
--------
X. Xxxxxxxx to that certain Loan Agreement by and among
WebBank and Obligor dated as of the date hereof (the "Loan Agreement"), Obligor
has executed that certain Adjustable Rate Promissory Note dated as of the date
hereof in the original principal amount of ONE MILLION, ONE HUNDRED THOUSAND
DOLLARS (the "Note") in favor of WebBank, Parent has executed that certain
Mortgage in favor of WebBank dated as of the date hereof (the "Mortgage"), and
Xxxxxxx has executed that certain Security Agreement in favor of WebBank dated
as of the date hereof (the "Security Agreement," and together with the Loan
Agreement, the Note, the Mortgage and all other related documents the "Related
Documents").
X. Xxxxxxxxx Xxxxx X. Xxxx is an officer of Parent and owns
approximately 70% of the issued and outstanding stock of Parent. Guarantor
Xxxxxxx Xxxx is the spouse of Xxxxx X. Xxxx.
AGREEMENT
---------
NOW, THEREFORE, to induce WebBank to enter into the Loan Agreement and
accept the Note, each Guarantor has executed and delivered this Guaranty:
1. Definitions. When used in this Guaranty and not defined
herein, the capitalized terms have the meanings given to them in the Loan
Agreement.
1
2. Guaranty of Payment and Performance Obligation.
-----------------------------------------------
a. Guarantors and each of them hereby jointly
and severally and absolutely, unconditionally and irrevocably guarantee to
WebBank and its respective successors, indorsees, transferees and assigns (i)
the prompt and complete payment when due of all principal, interest and other
amounts, and all extensions, renewals, refunding, replacements and modifications
thereof under the Note and the other Related Documents, including without
limitation, payments due under the Note and the other Related Documents for any
breach under such agreements and (ii) the prompt and complete performance of all
obligations under the Note and the other Related Documents (collectively, the
"Obligations"). Guarantors jointly and severally further agree to pay any and
all expenses which may be paid or incurred by WebBank enforcing any rights under
this Guaranty, including, but not limited to, attorneys' fees. Guarantors hereby
jointly and severally guarantee that any amounts due WebBank under the
Obligations will be paid in full to WebBank, without set-off or counterclaim, in
lawful currency of the United States of America at the office of WebBank as set
forth herein.
b. No payment, payments or performance made by
Obligor or any other Person or received or collected by WebBank from Obligor or
any other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of or
in payment of the Obligations, shall be deemed to release the liability of any
Guarantor hereunder, both of whom shall, notwithstanding any such payment,
payments or performance, remain jointly and severally liable for the Obligations
until each of the Obligations is paid or performed in full.
3. Unconditional Character of Guaranty.
-----------------------------------
a. The obligations of Guarantors under this
Guaranty shall be absolute and unconditional, joint and several, and shall be a
guaranty of payment and performance and not of collection, irrespective of the
validity, regularity or enforceability of the Related Documents, or any
provisions thereof, the absence of any action to enforce the same, any waiver or
consent with respect to any provision thereof, the recovery of any judgment
against any person or entity or action to enforce the same, any failure or delay
in the enforcement of the obligations of the Obligor under the Note, or any
set-off, counterclaim, recoupment, limitation, defense or termination. Each
Guarantor hereby waives diligence, demand for payment, filing of claims with any
court, any proceeding to enforce any provision of the Related Documents, any
right to require a proceeding first against Obligor, any protest, presentment,
notice or demand whatsoever, and each Guarantor hereby covenants that this
Guaranty shall not be terminated, discharged or released except upon
satisfaction of the conditions specified in Section 2 above, and only to such
extent of any such payment and performance.
2
b. Without limiting the generality of the
foregoing, such obligations, and the rights of WebBank to enforce the same by
proceedings, whether by action at law, suit in equity or otherwise, shall not be
in any way affected by (i) any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, winding up or other
proceeding involving or affecting Obligor or any Guarantor or others, or (ii)
any change in the ownership of any of the capital stock of the Obligor, or any
of its respective affiliates.
c. Guarantors and each of them hereby waive to
the fullest extent possible under applicable law:
(1) any defense based upon the doctrine of
marshalling of assets or upon an election of remedies by WebBank, including,
without limitation, an election to proceed by nonjudicial rather than judicial
foreclosure which election destroys or otherwise impairs the subrogation rights
of any Guarantor or the right of any Guarantor to proceed against Obligor for
reimbursement, or both;
(2) any defense based upon any statute or
rule of law which provides that the obligation of a surety must be neither
larger in amount nor in other respects more burdensome than that of the
principal;
(3) any duty on the part of WebBank to
disclose to any Guarantor any facts WebBank may now or hereafter know about
Obligor regardless of whether WebBank has reason to believe that any such facts
materially increase the risk beyond that which any Guarantor intends to assume
or has reason to believe that such facts are unknown to any Guarantor or has a
reasonable opportunity to communicate such facts to any Guarantor, as each
Guarantor acknowledges that he or she is fully responsible for being and keeping
informed of the financial condition of Obligor and of all circumstances bearing
on the risk of breach of any representations, warranties, covenants or agreement
or nonpayment of any obligation caused by such breach hereby guaranteed;
(4) any defense arising because of WebBank's
election, in any proceeding instituted under the Federal Bankruptcy Code, of the
application of Section 1111(b)(2) of the Federal Bankruptcy Code, as amended or
supplemented;
(5) any claim for reimbursement,
contribution, indemnity or subrogation which any Guarantor may have or obtain
against Obligor by reason of the payment by any Guarantor of any Obligation; and
3
(6) any other event or action (excluding
Guarantors' compliance with the provisions hereof) that would result in the
discharge by operation of law or otherwise of any Guarantor from the performance
or observance of any obligation, covenant or agreement contained in this
Guaranty.
d. WebBank may deal with Obligor in the same
manner and as freely as if this Guaranty did not exist, and WebBank shall be
entitled, without notice to any Guarantor, among other things, to grant to
Obligor such extension or extensions of time to perform any act or acts as may
seem advisable to WebBank at any time and from time to time without terminating,
affecting or impairing the validity or enforceability of this Guaranty or the
obligations of Guarantors hereunder.
e. WebBank may proceed, either in its own name
or in the name of any Guarantor or both, or otherwise, to protect and enforce
any or all of its rights under this Guaranty by suit in equity, action at law or
by other appropriate proceedings, or to take any action authorized or permitted
under applicable law, and shall be entitled to require and enforce the
performance of all acts and things required to be performed hereunder by
Guarantors. Each and every remedy of WebBank shall, to the extent permitted by
law, be cumulative and shall be in addition to any other remedy given hereunder
or now or hereafter existing at law or in equity.
f. No waiver or release shall be deemed to have
been made by WebBank of any of its rights hereunder unless the same shall be in
writing and signed by or on behalf of WebBank, and any such waiver shall be a
waiver or release only with respect to the specific matter involved and shall in
no way impair the rights of WebBank or the obligations of any Guarantor under
this Guaranty in any other respect at any other time.
g. At the option of WebBank, any Guarantor or
both may be joined in any action or proceeding commenced by WebBank against
Obligor for any Obligation covered by this Guaranty in connection with or based
upon the Related Documents, or other obligation, or any other provision thereof,
and recovery may be had against any Guarantor in such action or proceeding or in
any independent action or proceeding against any Guarantor, without any
requirement that WebBank first assert, prosecute or exhaust any remedy or claim
against Obligor.
4. Subrogation. Notwithstanding any payment or payments made
by any Guarantor hereunder or any set-off or application of funds of any
Guarantor by WebBank, no Guarantor shall be entitled to be subrogated to any of
the rights of WebBank against Obligor or any collateral security or guaranty or
right of offset held by WebBank for the payment of the Obligation, nor shall any
4
Guarantor seek any reimbursement from the Obligor in respect of payments made by
any Guarantor hereunder, until all amounts owing to WebBank by Obligor for or on
account of the Obligation are paid in full.
5. Representations and Warranties. Each Guarantor makes the
following representations and warranties to WebBank, each of which shall survive
the execution, delivery and performance of this Guaranty until each of the
Obligations is fully satisfied:
a. Guarantors have delivered to WebBank the
unaudited financial statement attached hereto as Schedule 5(a) (the "Financial
Statement") which Financial Statement fairly and accurately presents the net
assets and financial position of Guarantors as of the date hereof;
b. Guarantor has made no agreements or
representations of any kind that would limit or qualify the terms of this
Guaranty;
c. This Guaranty is executed at Xxxxxxx's
request and not at the request of WebBank;
d. WebBank has made no representation to
Guarantor as to the credit worthiness of Obligor; and
e. This Guaranty constitutes the legal, valid
and binding obligation of Guarantor.
6. Covenants.Each Guarantor covenants with WebBank as
follows:
a. Except as provided in this Guaranty and the
Related Documents, Guarantor will not, without the prior written consent of
WebBank, sell, dispose of, assign, pledge, mortgage, hypothecate, or otherwise
encumber or transfer any property of any kind owned by Guarantor if such
encumbering or transfer (i) relates to property of such monetary value as to be
deemed "material" to this Guaranty, (ii) would materially and adversely affect
Guarantor's financial condition, as such financial condition is reflected by
Guarantor's current Financial Statement, or (iii) would materially impair
WebBank's ability to enforce this Guaranty; and
b. Guarantor will notify WebBank in writing in
the event there is any change in his or her Financial Statement, and shall
furnish WebBank with (i) a current Financial Statement within ninety (90) days
after the end of each calendar year and at any other time WebBank requests such
current Financial Statement and (ii) copies of each Guarantor's federal and
state tax returns within 30 days of filing such returns.
5
7. Event of Default; Remedies.
--------------------------
a. Event of Default. The occurrence of any of
the following events or existence of any of the following conditions shall
constitute an Event of Default under this Guaranty (each such occurrence an
"Event of Default"):
(1) Any Guarantor shall default in the
performance of or compliance with any covenant or agreement contained in this
Guaranty or in any document related hereto, and such default is not cured within
five (5) days;
(2) Any material representation or warranty
made by any Guarantor herein or in any statement, certificate or other document
related hereto proves to have been false or incorrect in any material respect
when made; and
(3) Any Event of Default as defined in the
Loan Agreement shall occur and shall not be cured within the applicable cure
period, if any, provided in the Loan Agreement.
b. Remedies upon Default. In the event that any
Event of Default shall occur and be continuing, WebBank shall be entitled to all
remedies set forth in this Guaranty, the Loan Agreement and the other Related
Documents, and to all remedies available at law or in equity.
8. Consent. Each Guarantor hereby consents that, without the
necessity of any reservation of rights against any Guarantor and without notice
to or further assent by any Guarantor, any demand for payment or performance of
any of the Obligations made by WebBank may be rescinded by WebBank and any of
the Obligations continued, and the Obligations, or the liability of any other
party upon or for any part thereof, or any collateral security or guaranty
therefor or right of offset with respect thereto, may, from time to time, in
whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by WebBank, as WebBank may deem
advisable from time to time, and any collateral security or guaranty or right of
offset at any time held by WebBank for the payment or performance of the
Obligations may be sold, exchanged, waived, impaired, surrendered or released,
all without the necessity of any reservation of rights against any Guarantor and
without notice to or further assent by any Guarantor who will remain bound
hereunder, notwithstanding any such renewal, extension, modification,
acceleration, compromise, amendment, supplement, termination, sale, exchange,
6
waiver, impairment, surrender or release. Except to the extent the applicable
law provides that Guarantors may not so agree, WebBank shall not have any
obligation to protect, secure, perfect or insure any collateral security
document or property subject thereto at any time held as security for the
Obligations of this Guaranty. THIS IS A GUARANTY OF PAYMENT AND PERFORMANCE, NOT
OF COLLECTION. WEBBANK MAY SEEK TO COLLECT PAYMENT OR ENFORCE PERFORMANCE OF THE
OBLIGATIONS FROM ANY GUARANTOR AS THOUGH THE OBLIGATIONS WERE THE DIRECT AND
PRIMARY OBLIGATION OF SUCH GUARANTOR AND MAY SEEK PAYMENT OR PERFORMANCE OF THE
OBLIGATIONS FROM ANY GUARANTOR WITHOUT MAKING ANY DEMAND FOR PAYMENT THEREOF
UPON OBLIGOR OR TAKING ANY OTHER ACTION TO COLLECT OR ENFORCE THE OBLIGATIONS
FROM OBLIGOR. When making any demand hereunder against any Guarantor, WebBank
may, but shall be under no obligation to, make a similar demand on Obligor, and
any failure by WebBank to make any such demand or to collect any payments from
Obligor shall not relieve any Guarantor of such Guarantor's obligations or
liabilities hereunder, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of WebBank against any Guarantor. For
the purposes hereof, "demand" shall include the commencement and continuance of
any legal proceedings.
9. Xxxxxxxxxxx.Xx lawful act of commission or omission of
any kind or at any time upon the part of WebBank in respect of any matter
whatsoever shall in any way affect or impair the rights of WebBank to enforce
any right, power or benefit under this Guaranty. Nothing in this Guaranty shall
be construed as a waiver by any Guarantor of any rights or claims he or she may
have against Obligor under this Guaranty or otherwise, but any recovery upon
such rights and claims shall be had from Obligor separately, it being the intent
of this Guaranty that each Guarantor shall be unconditionally and absolutely,
jointly and severally obligated to perform fully all of such Guarantor's
obligations, covenants and agreements hereunder for the benefit of WebBank.
10. Continuing Effect. This Guaranty shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of the Obligation is rescinded or must otherwise be restored or
returned by WebBank upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of Obligor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee, custodian or similar officer
for Obligor or any substantial part of its property, or other wise, all as
though such payments had not been made.
7
11. Miscellaneous.
-------------
a. Governing Law. This Guaranty shall be
interpreted and the rights of the parties hereunder shall be determined under
the laws of the State of Utah, without reference to conflict of laws principles.
b. Severability. If any term or provision of
this Guaranty or the application thereof to any circumstances shall, to any
extent, be invalid or unenforceable, the remainder of this Guaranty, or the
application of such term or provision to circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Guaranty shall be valid and enforceable to the
fullest extent permitted by law.
c. Notices. All notices, requests, demands and
other communications which are required or permitted to be given under this
Guaranty will be in writing and will be deemed to have been duly given if (i)
delivered in person, or (ii) mailed, first class certified, registered or
express mail, return receipt requested and postage prepaid, or (iii) sent by
recognized overnight courier, with proof of delivery requested and charges
prepaid, to:
If to Guarantors:
Xxxxx X. Xxxx and Xxxxxxx Xxxx
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx, Xxxx 00000
If to WebBank:
WebBank Corporation
P.O. Box 1831
000 Xxxxx Xxxxxx, Xxx. 000
Xxxx Xxxx, Xxxx 00000-1831
Attention: Xxxxxxx X. Xxxxx
8
with a copy to:
Xxxxxxx X. Xxxxxxxx
Xxxx Xxxxxxxx Brown Gee & Xxxxxxxx
000 Xxxxx Xxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
or to such other address as a party may specify by written notice to the other
parties.
d. Right of Offset. Each Guarantor acknowledges
the right of WebBank to offset against any obligations of such Guarantor to
WebBank under this Guaranty, any amount owing by WebBank to such Guarantor.
e. Right to Cure. Notwithstanding the
provisions of Section 7 hereof, any Guarantor shall have the right to cure an
Event of Default occurring pursuant to the Loan Agreement, provided, that such
cure is effected within the applicable period set forth in the Loan Agreement;
and provided further that such cure can be effected in compliance with the Note.
The exercise of such right to cure by any Guarantor shall not reduce or
otherwise affect the liability of any Guarantor under this Guaranty.
f. Jurisdiction. Each Guarantor hereby
expressly and irrevocably submits to the non-exclusive personal jurisdiction of
the United States Dis trict Court for the District of Utah - Central Division
and to the jurisdiction of any other competent court of the State of Utah
located in the County of Salt Lake (collectively, the "Utah Courts"),
preserving, however, all rights of removal to such federal court under 28 U.S.C.
Section 1441, in connection with all disputes arising out of or in connection
with this Agreement or the transactions contemplated hereby and agrees not to
commence any litigation relating thereto except in such courts. If the
aforementioned courts do not have subject matter jurisdiction, then the
proceeding shall be brought in any other state or federal court located in the
State of Utah, preserving, however, all rights of removal to such federal court
under 28 U.S.C. Section 1441. Each Guarantor hereby waives the right to any
other jurisdiction or venue for any litigation arising out of or in connection
with this Guaranty or the transactions contemplated hereby to which he or she
may be entitled by reason of present or future domicile. Notwithstanding the
foregoing, each Guarantor hereto agrees that WebBank shall have the right to
bring any action or proceeding for enforcement of a judgment entered by the Utah
Courts in any other court or jurisdiction, including, without limitation, the
courts of the States of Kansas and California. Additionally, the foregoing shall
9
not be deemed to prohibit any party hereto or any other person or entity that
may have the right to enforce this Guaranty from commencing an action in any
court or courts that may have jurisdiction.
g. Service of Process. Each Guarantor
irrevocably consents to the service of process outside the territorial
jurisdiction of the courts referred to in Section 11(f) hereof in any such
action or proceeding by mailing copies thereof by registered United States mail,
postage prepaid, return receipt requested, to such address as specified in or
pursuant to Section 11(c) hereof. However, the foregoing shall not limit the
right of WebBank to effect service of process on any Guarantor by any other
legally available method.
h. WAIVER OF JURY TRIAL. AS AN IMPORTANT
INDUCEMENT TO WEBBANK TO ENTER THIS AGREEMENT, EACH GUARANTOR WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN ANY WAY RELATED TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
i. Section Headings. The section headings
contained in this Guaranty are for reference purposes only and shall not affect
the meaning or interpretation of this Guaranty.
x. Xxxxx. No failure to exercise and no delay
in exercising, on the part of WebBank, any right, power or privilege shall
preclude any other or further exercise thereof, or the exercise of any other
power or right. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
k. Modification. No provision of this Guaranty
shall be waived, amended, supplemented or released except by a written
instrument executed by Guarantors and WebBank.
l. Binding Effect. This Guaranty shall be
binding upon the successors, assigns, heirs and legal representatives of each
Guarantor.
[Remainder of Page Left Blank Intentionally]
10
IN WITNESS WHEREOF, and intending to be legally bound, the undersigned
have caused this Guaranty to be duly exercised and delivered as of the day and
year first above written.
GUARANTORS
/s/Xxxxx X. Xxxx
-------------------------------
Xxxxx X. Xxxx, individually
/s/Xxxxxxx Xxxx
-------------------------------
Xxxxxxx Xxxx, individually
11
SCHEDULE 5(a)
FINANCIAL STATEMENTS OF EACH GUARANTOR
[To be provided by counsel for Obligor.]
i
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into this _____ day of April,
1999, by and between NACO Industries, Inc., a Utah corporation (the "Borrower"),
and WebBank Corporation, a Utah corporation (the "Lender").
WHEREAS, the Lender desires to make a loan to the Borrower in the amount of ONE
MILLION, ONE HUNDRED THOUSAND AND 00/100 DOLLARS ($1,100,000.00) (the "Loan")
which is eighty percent (80%) guaranteed by RBS/USDA (the "RBS/USDA Guaranty"),
in accordance with and subject to the terms and conditions of such RBS/USDA
Guaranty, all of which are incorporated herein by reference; and
WHEREAS, the Borrower desires that the Lender make the Loan to the Borrower.
NOW, THEREFORE, in consideration of the representations, warranties, and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE 1
DEFINITIONS
Unless the context otherwise requires, all capitalized terms not otherwise
specifically defined herein shall have the meanings set forth below in this
Article 1:
"Accounting Terms" are those generally accepted in accordance with GAAP.
"Affiliate" as applied to any Person shall mean any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For purposes of this definition, a Person shall be deemed to
control another Person if such first Person possesses directly or indirectly the
power to (a) vote 10% or more of the securities having ordinary voting power for
the selection of directors of such Person or (b) direct, or cause the direction
of, the management and policies of the second Person, whether through the
ownership of voting securities, by contract or otherwise. In addition, as to the
Lender, "Affiliate" shall include any partnership a majority of the partners of
which are officers, directors, employees or Affiliates of the Lender; and as to
the Borrower, "Affiliate" shall not include any Lender.
1
"Assets" shall mean all of the properties, asset rights, claims, leasehold
interests, contracts, and goodwill used in the Business or owned by the Borrower
of every kind and character, wherever located, whether real or personal,
tangible or intangible.
"Business" shall mean the business of the Borrower and all activities related
thereto, including but not limited to the activities, at any location, conducted
by the Borrower under the name "NACO Industries, Inc." or "NACO Composites,
Inc."
"Capital Expenditure" means any payment made directly or indirectly for the
purpose of acquiring or constructing fixed assets, Real Property or equipment
which in accordance with GAAP would be added as a debit to the fixed asset
account of the Person making such expenditure, including, without limitation,
amounts paid or payable under any conditional sale or other title retention
agreement or under any lease or other periodic payment arrangement which is of
such a nature that payment obligations of the lessee or obligor thereunder would
be required by GAAP to be capitalized and shown as liabilities on the balance
sheet of such lessee or obligor.
"Change of Control" shall mean:
(a) if any Person or group besides Xxxxx X. Xxxx shall
beneficially own more than 50% of the voting power of the then-outstanding
voting equity interests of Borrower; or
(b) if any shares of capital stock of Borrower which Xxxxx X. Xxxx
beneficially owns shall by any means come into the beneficial ownership of any
other Person or any group; or
(c) if Xxxxx X. Xxxx or Xxxxxxx Xxxxx shall cease to be an
executive officer of Borrower.
For purposes of this definition, the terms "beneficially own,"
"beneficial ownership" and "group" shall have the respective meanings ascribed
to them pursuant to Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"Closing" shall have the meaning specified in Article 2.
"Closing Date" shall have the meaning specified in Article 2.
"Closing Transactions" means the transactions which will occur on the Closing
Date pursuant to the Loan Documents.
2
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of any subsequent federal tax laws.
"Deposit and Escrow Agreement" means the Deposit and Escrow Agreement between
the Borrower and the Lender dated as of the date hereof.
"Environmental Complaint" shall mean any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, proceeding, judgment, letter
or other communication from any federal, state, or municipal authority or any
other Person involving a Hazardous Discharge from or on Real Property owned or
leased by the Borrower or any violation of any order, permit or Environmental
Law.
"Environmental Laws" shall mean any federal, state or local laws, common law,
ordinances, regulations or policies, as well as orders, decrees, judgments or
injunctions issued, promulgated, approved, or entered thereunder, relating to
the environment, health and safety, Hazardous Substances (including, without
limitation, the use, handling, transportation, production, disposal, discharge
or storage thereof) or to industrial hygiene or the environmental conditions on,
under or about the Real Property owned or leased by the Borrower including,
without limitation, soil, groundwater, and indoor and ambient air conditions.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and any regulations promulgated thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Borrower or is under common control (within the
meaning of Section 414(c) of the Code) with the Borrower.
"GAAP" means generally accepted accounting principles in the United States.
"Guaranty" means the Guaranty executed by Xxxxx X. Xxxx and Xxxxxxx Xxxx in
favor of the Lender as of the date hereof.
"Hazardous Discharge" shall mean any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping of Hazardous Substances from or onto Real Property owned or
leased by the Borrower.
"Hazardous Substances" shall mean any pollutant, toxic substance, hazardous
waste, compound, element or chemical that is or shall be defined as hazardous,
toxic, noxious or dangerous pursuant to Laws or regulated in any manner pursuant
to any Law.
3
"Indebtedness" means, for any Person, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, (c) all indebtedness
of such Person on which interest charges are customarily paid or accrued, (d)
all guarantees by such Person, (e) the unfunded or unreimbursed portion of all
letters of credit issued for the account of such Person, (f) any obligation of
such Person representing the deferred purchase price of property or services
purchased by such Person, (g) all obligations secured by a lien on any property
or asset owned or held by such Person regardless of whether such obligation
shall have been assumed by that Person or is nonrecourse credit of that Person
and (h) all liability of such Person as a general partner or joint venturer for
obligations of the nature described in (a) through (g) preceding.
"Law" or "Laws" shall mean any and all applicable statutes, laws, ordinances,
proclamations, regulations, published requirements, orders, decrees and rules of
any foreign, federal, state or local government, political subdivision or
governmental or regulatory authority, agency, board, bureau, commission,
instrumentality or court or quasi-governmental authority, including, without
limitation, those covering environmental, tax, energy, safety, health,
transportation, bribery, record keeping, zoning, discrimination, antitrust and
wage and hour matters, and in each case as amended and in effect from time to
time.
"Lease Obligation" shall mean any lease, sublease, license or similar
arrangement, pursuant to which a Person leases, subleases, or otherwise is
granted the right to occupy, take possession of or use property, whether, real,
personal or mixed.
"Lien" shall mean any lien, pledge, claim, charge, security interest, mortgage
or encumbrance of any nature whatsoever, other than Permitted Liens.
"Loan Documents" means this Agreement, the Note, the Security Agreement, the
Mortgage, the Guaranty, the Deposit and Escrow Agreement, the RBS/USDA Guaranty,
and all other documents executed by the parties in connection with this
transaction.
"Material Adverse Change" means a material adverse effect on the Assets or on
the financial condition, operations, or prospects of the Business.
"Mortgage" means the Mortgage executed by the Borrower in favor of the Lender as
of the date hereof.
"Multiemployer Plan" means a multiemployer plan defined as such in Section 3(37)
of ERISA to which contributions have been made by the Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
4
"Note" means the Adjustable Rate Promissory Note of the Borrower of even date
herewith in the original principal sum of $1,100,000.00, payable to the Lender
and secured by the Security Agreement and the Mortgage.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding
to all or any of its functions under ERISA.
"Permitted Liens" as to the business shall mean (a) liens securing the payment
of taxes, assessments or other governmental charges or levies which are not yet
delinquent or which are being contested in good faith and as to which reserves
have been established in accordance with GAAP; (b) materialmen's, mechanics',
carriers', workmen's, repairmen's, or other like liens incurred in the ordinary
course of business securing obligations not yet due; (c) zoning restrictions,
easements, licenses, restrictions on the use of Real Property or minor
irregularities in title thereto, which do not materially impair, alone or in the
aggregate, the use of the property affected thereby in the operation of the
Business or the value of such property for the purpose of the Business; (d)
workers' compensation, Social Security or unemployment compensation liens for
amounts not yet due; (e) liens in favors of holders of additional Indebtedness
incurred pursuant to Section 3.5(A) hereof; and (f) and contractual and
statutory liens in favor of landlords and lessors.
"Person" shall mean a corporation, an association, a partnership, a limited
liability company, a joint venture, a trust, an organization, a business, an
individual, a government or political subdivision thereof, a governmental agency
or any other legal entity.
"Plan" means any employee benefit plan established or maintained by the Borrower
or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Prohibited Transaction" means any transaction set forth in Section 406 or 407
of ERISA or Section 4975(c)(1) of the Code for which there does not exist a
statutory or administrative exemption.
"RBS/USDA" means the Rural Business-Cooperative Service, an agency of the United
States Department of Agriculture, and any successor department, agency, or
instrumentality authorized to administer the Business and Industrial Guaranteed
Loan Program.
"RBS/USDA Guaranty" shall be given the meaning set forth in the recitals above.
5
"Real Property" shall mean all real property, buildings and fixtures owned,
leased or used by a Person.
"Reportable Event" means any of the events set forth in Section 4043 of ERISA
for which the 30-day notice requirement has not been waived by the PBGC.
"Security Agreement" means the Security Agreement executed by the Borrower in
favor of the Lender as of the date hereof.
"Subsidiary" shall mean any corporation, association, partnership, limited
liability company, joint venture or other business entity of which more than 50%
of the outstanding voting stock (or equivalent interest) is at the time owned by
the Borrower or by one or more Subsidiaries or by the Borrower and one or more
Subsidiaries.
"Tax" means any federal, state, or local tax, assessment, or charge of any
nature whatsoever, including, without limitation, (i) income, franchise, sales
and use, unemployment compensation, excise, severance, property, gross receipts,
profits, and payroll taxes, and (ii) any penalties, additions, fines, and
interest assessed on or related to any of the foregoing.
"Transactions" means the transactions contemplated by this Agreement.
ARTICLE 2
THE LOAN
2.1 Amount and Term of Loan. The amount of the Loan shall be $1,100,000.00 (the
"Loan Amount"), and the Loan Amount shall be amortized over a period of fifteen
(15) years with monthly installments of principal and interest in accordance
with the terms of the Note.
2.2 Interest Rate. The Loan Amount shall bear interest as provided in the Note.
2.3 Loan Disbursement. The closing (the "Closing") of the Transactions is taking
place at the offices of Xxxx Xxxxxxxx Brown Gee & Xxxxxxxx on April ____, 1999
(the "Closing Date"). At the Closing, the Lender will deliver the full Loan
Amount in United States money to the Borrower by wire transfer as further
explained in the Wire Transfer Instructions and Receipt of Funds attached hereto
as Exhibit "2.3."
6
2.4 Prepayment Premium. The principal balance of the Loan may be prepaid
according to the terms, and subject to the prepayment penalties, set forth in
the Note.
2.5 Origination Fee; RBS/USDA Guaranty Fee. The Origination Fee shall be two
percent (2%) of the total Loan amount (in addition to any fees due RBS/USDA),
paid by the Borrower to the Lender at closing. In addition, the Borrower agrees
to pay the RBS/USDA guarantee fee of two percent (2%) of eighty percent (80%) of
the total amount of the Loan.
2.6 Collateral/Security. The collateral/security for the Loan shall consist of
the
following:
A. A first mortgage on the Borrower's real property and improvements
located at 0000 Xxxx Xxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxx 00000 as described in the
appraisal required by Section 5.12(i) hereof. Title to this property shall be
recorded in the Borrower's name.
B. A first priority security interest in the Borrower's machinery,
equipment, titled and untitled vehicles, furniture, fixtures, deposits, and all
other tangible and intangible assets (including, without limitation, patents and
patent applications), as described in the appraisal required by Section 5.12(ii)
hereof, provided, however, that the Borrower shall not grant the Lender a first
priority interest in inventory or accounts. Title to this property shall be
recorded in the Borrower's name.
C. Life insurance on Xxxxx X. Xxxx in the amount of no less than
$500,000, and life insurance on Xxxxxxx Xxxxx in the amount of no less than
$500,000, as required by Section 4.2(c) hereof.
D. A second priority security interest in the Borrower's inventory and
accounts as described in the appraisal required by Section 5.12(ii) hereof.
E. Absolute and unconditional guarantee of payment and performance of
Xxxxx X. Xxxx and Xxxxxxx Xxxx, according to the terms of the Guaranty.
F. A first priority security interest in the deposit and escrow account
established and maintained pursuant to the Deposit and Escrow Agreement.
2.7. Escrow Fund. At the option of the Lender, the Lender may require the
Borrower to establish an Escrow Fund (defined below) sufficient to discharge its
obligations for the payment of taxes, insurance premiums, and maintenance
pursuant to this Agreement. (The initial deposits together with the amounts in
7
(a), (b), and (c) below shall be called the "Escrow Fund"). Initial deposits for
taxes, premiums, and maintenance shall be made by the Borrower to the Lender in
amounts determined by the Lender in its discretion on the date hereof to be held
in the Lender's Escrow Fund. Additionally, the Borrower shall pay to the Lender
on the first day of each calendar month: (a) one-twelfth of an amount which
would be sufficient to pay the taxes payable, or estimated by the Lender to be
payable, upon the due dates established by the appropriate taxing authority
during the ensuing twelve (12) months; (b) one-twelfth of an amount which would
be sufficient to pay the insurance premiums due for the renewal of the coverage
afforded by the policies upon the expiration thereof; and (c) one-twelfth of an
amount which would be sufficient to pay all costs associated with maintenance
and upkeep of buildings, grounds, equipment, and all other property which needs
to be maintained in the ordinary course of business ("CAM"). The Borrower agrees
to notify the Lender immediately of any changes to the amounts, schedules, and
instructions for payment of taxes, insurance premiums, and CAM of which it has
obtained knowledge and authorized the Lender or its agent to obtain the bills
for taxes and other charges directly from the appropriate taxing authority. The
Escrow Fund and the payments of interest or principal, or both, payable pursuant
to the Note, shall be added together; and shall be paid as the aggregate sum by
the Borrower to the Lender. Provided there are sufficient amounts in the Escrow
Fund and no Event of Default exists, the Lender shall be obligated to pay on
behalf of the Borrower the taxes, insurance premiums, and CAM as they become due
on their respective due dates by applying the Escrow Fund to the payments of
such taxes, insurance premiums, and CAM required to be made by the Borrower
pursuant to this Agreement. If the amount of the Escrow Fund shall exceed the
amounts due for taxes, insurance, and CAM pursuant to this Agreement, the Lender
shall, at its discretion, return any excess against future payments to be made
to the Escrow Fund. In allocating such excess, the Lender may deal with the
persons shown on the records of the Lender to be the owner of the property. If
the Escrow Fund is not sufficient to pay the items set forth in (a), (b), and
(c) above, the Borrower shall promptly pay to the Lender, upon demand, an
amount, which the Lender shall reasonably estimate as sufficient to make up the
deficiency. The Escrow Fund shall not constitute a trust fund and may be
commingled with other monies held by the Lender. Unless otherwise required by
applicable law, no earnings or interest, if any, on the Escrow Fund shall be
payable to the Borrower. Xxxxxx may elect to appoint a third party to perform on
Xxxxxx's behalf the tasks associated with managing the Escrow Fund as described
in this Section 2.7, in which case Xxxxxxxx agrees to pay the costs for such
third party. In the event the Lender does not establish an Escrow Fund, the
Borrower shall make all required payments herein described in a timely manner
and shall provide evidence thereof as required by the Lender.
8
ARTICLE 3
FINANCIAL COVENANTS
3.1 Financial Statements. A current financial statement from the Borrower, less
than sixty (60) days old, is required at the Closing. An annual audited
financial statement prepared on an accrual basis by a Certified Public
Accountant in accordance with GAAP is required from the Borrower and will be
forwarded to the Lender within ninety (90) days of the Borrower's fiscal
year-end. Quarterly in-house financial statements for the Borrower also must be
submitted to the Lender within forty-five (45) days of the end of each fiscal
quarter, and such additional financial statements as may be requested by the
Lender shall be submitted in a timely manner in a form acceptable to the Lender.
The Borrower must submit to Lender year-end federal and state tax returns within
ninety (90) days of each fiscal year end. The Borrower must submit to the Lender
a copy of each Form 10K and Form 10Q concurrently with the filing of such form
with the Securities and Exchange Commission.
3.2 Certificate of No Default. Concurrently with delivery to the Lender of any
financial statement prepared pursuant to Section 3.1 (except the financial
statement delivered at the Closing), a completed compliance certificate of the
president or chief financial officer of the Borrower in the form of Exhibit
"3.2" shall be delivered to the Lender, certifying (i) compliance with each
financial covenant in Article 3 hereof, and (ii) that to the best of his or her
knowledge no default or Event of Default has occurred and is continuing, or if a
default or Event of Default has occurred and is continuing, a statement as to
the nature thereof and the action proposed to be taken with respect thereto.
3.3 Dividends. The Borrower shall not, during the life of the Loan, declare or
pay a cash dividend unless a profit was made in the fiscal year prior to the
year in which the dividend is being declared, all debts are paid current and all
Loan covenants and ratios are being met and will continue to be met on the
annual statement, and such payment would not result in a reduction of capital
below the prior fiscal year end level (determined in accordance with GAAP) after
the dividends are paid. Authorized dividend payments may not reduce retained
earnings below the amount reflected on the year-end balance sheet of the
immediately preceding fiscal year. If the Borrower operates as a Subchapter S
corporation, dividends may be distributed to the owners to pay taxes on its
profits.
9
3.4 Compensation of Officers and Owners.
A. No advances or loans from the Borrower are to be made to officers,
owners, affiliates or others during the life of the Loan without the written
approval of the Lender and RBS/USDA.
B. Salaries, compensation, and/or payments to officers and/or owners
will not be increased unless a profit was made in the preceding fiscal year, all
of the Borrower's debts are paid to a current status and the Borrower is in
compliance with all covenants of this Agreement, including without limitation,
the financial covenants and ratios (calculated after giving effect to the
contemplated increases or payments).
3.5 Fixed Asset Limitation; Sale of Assets.
A. The Borrower may incur up to $150,000 per calendar year for Capital
Expenditures, including through the incurrence of additional Indebtedness, if
the financial ratios of Article 3 would be met after incurring such expense or
such indebtedness. All such purchases are to be added to the collateral for this
Loan under the after-acquired clause and specifically described as collateral
when the Security Agreement is updated.
B. Other than in the ordinary course of business, the Borrower shall
not sell, transfer or assign any of its assets, including, without limitation,
any collateral for the Loan, without the prior written consent of the Lender,
which consent may be withheld in its sole discretion.
3.6 Consolidations, Mergers, Sale of Business. The Borrower will not merge,
consolidate, reclassify or sell the business or any of its capital stock without
the prior written approval of the Lender and RBS/USDA. The Borrower will not
purchase any Treasury stock or redeem any of its capital stock from any
shareholders without the written approval of the Lender and RBS/USDA. The
Borrower shall make no investments outside of the day to day operation of the
business.
3.7 Additional Debt.
A. Except as provided in Section 3.5, the Borrower will not incur
additional Indebtedness other than in the ordinary course of business and due
within one year, nor assume the liabilities or obligations of any other person
or entity, without the prior written consent of the Lender and RBS/USDA.
10
B. Borrower will not incur additional borrowing for working capital
purposes that will reduce the current ratio below 1 to 1 or increase the debt to
net worth ratio above 3 to 1.
C. The parties acknowledge and agree that the Lender shall not advance
to the Borrower any additional funds beyond the Loan Amount without the prior
written consent of RBS/USDA.
3.8 Debt to Equity and Other Financial Ratios.
A. The Borrower will maintain a debt-to-equity ratio of not more than 3
to 1, as shown on the annual audited financial statement and defined as total
debt divided by tangible net worth plus subordinated debt, at the end of the
Borrower's fiscal year.
B. Any and all Indebtedness to stockholders now or hereafter made will
be subordinate to the Loan.
C. The Borrower will maintain a debt service coverage ratio of not less
than 1.2 to 1 as shown on the annual audited statement financial statement.
D. The Borrower will maintain a current ratio (current assets divided
by current liabilities) of not less than 1 to 1 and shall maintain a net working
capital position of at least $10,000 as shown on the annual audited financial
statement.
E. The Borrower shall maintain a 1 to 1 loan to value ratio
(outstanding loan balance divided by collateral for loan), with collateral
discounted pursuant to RBS/USDA Form 4279-1, Part B.
F. The annual audited financial statement required by Section 3.1
hereof shall include a calculation of each financial ratio of this Article 3 and
a certification that the Borrower is in compliance with each such ratio.
3.9 Equity. At the Closing, the Borrower will provide the Lender with a
certification from an independent public accountant that the Borrower has a
tangible balance sheet equity position of a minimum of ten percent (10%). The
certification shall detail the sources that constitute such equity. The
certification will also be supported by a pro forma balance sheet of the
Company, reconciled to the most recent balance sheet of the Company (not to
exceed 90 days old), and dated as of the date hereof.
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ARTICLE 4
OTHER COVENANTS
4.1 Use of the Loan Proceeds. The proceeds of the Loan shall be utilized as
follows:
Restructure Debt $ 925,000
Working Capital (including transaction costs) 175,000
===========
Total $ 1,100,000
4.2 Insurance. The Borrower shall obtain and maintain all required insurance at
its own expense, except as modified by Section 2.7 at the Lender's option.
Grantor shall provide the Lender with originals or certified copies of all
required insurance policies (including, without limitation, renewals thereof or
replacements thereto), with copies of all renewal notices and, if requested by
the Lender, with copies of receipts for paid premiums. Required insurance shall
include, but not be limited to, the following:
A. The Borrower shall maintain a policy of general liability insurance
of not less than one million and 00/100 dollars ($1,000,000) designating the
Lender as an additional insured party, placed with an insurance company or
companies acceptable to the Lender. Further, the Borrower shall maintain hazard
insurance and general liability insurance during the entire term of the Loan
with a standard mortgage clause naming the Lender as beneficiary in an amount
which is at least the lesser, with the Lender reserving the right to require the
greater of such, of the depreciated replacement value of the Loan security or
the amount of the Loan balance and that must contain a replacement cost
guarantee. Hazard insurance includes fire, windstorm, lightning, hail,
explosion, riot, civil commotion, aircraft, vehicle, marine, smoke, builder's
risk, public liability, property damage, flood or mudslide, or other hazard
insurance that may be required to protect the collateral, placed with an
insurance company or companies acceptable to the Lender. The Borrower shall
maintain flood insurance if the collateral property is located in an area
designated as an area for special hazards under the National Flood Insurance Act
of 1968. The flood insurance must be in an amount equal to at least 100% of the
value of the insured improvements of the collateral property. All of the
foregoing insurance policies shall be in form and substance satisfactory to the
Lender and must name the Lender as a loss payee.
B. The Borrower shall maintain Worker's Compensation Insurance as
required by applicable law with respect to each of Borrower's places of business
during the period of time the Loan is unpaid, placed with an insurance company
or companies acceptable to the Lender.
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C. The Borrower shall maintain, with an insurance company or companies
acceptable to the Lender, key man life insurance policies on Xxxxx X. Xxxx and
Xxxxxxx Xxxxx in the amount of $500,000 each for the period the Loan is unpaid,
and such policies of insurance shall name the Lender as the loss Payee.
4.3 Inspections. The Borrower will permit the Lender and RBS/USDA to visit and
inspect any of the collateral securing the Loan, to conduct a periodic audit of
the number of jobs to determine program effectiveness, and access to company's
books and records for periodic examination. The Lender reserves the right to
conduct audits on an as- needed basis, as determined solely by the Lender.
4.4 Change of Control. The Borrower will not undergo a Change of Control.
4.5 Legal Existence; Compliance with Laws, etc. The Borrower will:(a) maintain
its corporate existence and business; (b) maintain all properties which are
reasonably necessary for the conduct of such business, now or hereafter owned,
in reasonable repair, working order and condition; and (c) take all actions
necessary to maintain and keep in full force and effect all rights and
franchises reasonable for the operation of the Business; and, comply in all
material respects with all applicable Laws in respect of the conduct of the
Business and the ownership of the Assets; provided that the Borrower shall not
be required by reason of this subsection to comply therewith at any time if the
Borrower shall be contesting its obligations to do so in good faith by
appropriate proceedings timely initiated and diligently conducted, and if it
shall have set aside on its books such reserves, if any, with respect thereto as
are required by GAAP and deemed adequate by the Borrower and its independent
public accountants.
4.6 Environmental Liabilities. The Borrower shall not violate any Law regarding
Hazardous Substances; and, without limiting the foregoing, the Borrower will not
dispose of any Hazardous Substance into or onto, or (except in accordance with
Law) from, any Real Property owned, leased or operated by the Borrower or in
which the Borrower holds, directly or indirectly, any legal or beneficial
interest or estate, nor allow any Lien imposed pursuant to any Law relating to
Hazardous Materials or the disposal thereof to be imposed or to remain on such
Real Property, except for Xxxxx being contested in good faith by appropriate
proceedings and for which adequate reserves have been established and are being
maintained on the books of the Borrower.
4.7 Compliance with ERISA. The Borrower will make all payments or contributions
to employee benefit plans required under the terms thereof and in accordance
with applicable minimum funding requirements of ERISA and the Code and
applicable collective bargaining agreements. The Borrower will cause all
employee benefit plans sponsored by it to be maintained in material compliance
13
with ERISA and the Code. The Borrower will not engage in any prohibited
transaction for which an exemption is not available. The Borrower will not
terminate, or cause to be terminated, any employee benefit plan or withdraw from
any multi-employer plan, in any manner which could result in material liability
of the Borrower.
4.8 Mortgages, Liens, etc. The Borrower shall not, directly or indirectly,
create, incur, assume or suffer to exist any Lien with respect to any Asset now
owned or hereafter acquired by the Borrower, except:
(a) Liens set forth on Schedule "4.8" hereof ("Permitted
Senior Indebtedness");
(b) Any Lien securing the Notes;
(c) Any Liens permitted by Section 3.7.
4.9 Creation and Acquisition of Subsidiaries. The Borrower will not create or
acquire any Subsidiaries except for wholly owned Subsidiaries created in the
ordinary course of business. Each new Subsidiary will be required to execute a
Joinder Agreement in the form of Exhibit "4.9" hereto making it a party to the
Security Agreement and the Mortgage and a guarantor of the Borrower's
obligations under this Agreement and the other Loan Documents. Each new
Subsidiary will also be required to grant a security interest in its assets as
collateral for the Loan. The Borrower will ensure that any and all subsidiaries
execute the documents necessary to comply with this Section 4.9.
4.10 Lease Obligations. The Borrower shall not enter into, or become liable as
lessee under, any new Lease Obligations.
4.11 Payment of Taxes. The Borrower will pay and discharge promptly as they
become due and payable, subject to extension, all Taxes, assessments and other
governmental charges or levies imposed upon it or its income or upon any of its
Assets, or upon any part thereof, as well as all lawful claims of any kind
(including claims for labor, materials and supplies) which, if unpaid, might by
law become a Lien (other than a Permitted Lien) or a charge upon its property;
provided that Borrower shall not be required to pay any such Tax, assessment,
charge, levy or claim if the amount, applicability or validity thereof shall
currently be contested in good faith by appropriate proceedings timely initiated
and diligently conducted and if the Borrower shall have set aside on its books
such reserves, if any, with respect thereto as are required by GAAP and deemed
appropriate by the Borrower and its independent public accountants.
14
4.12 Payment of Other Indebtedness, etc. Except as to matters being contested in
good faith and by appropriate proceedings, the Borrower will, and will cause
each Subsidiary to, pay promptly when due all other Indebtedness.
4.13 Loan, Guarantees and Investments. The Borrower shall not (i) make or permit
to remain outstanding any loan or advance to any Person, (ii) guarantee or
endorse (except as a result of endorsing negotiable instruments for deposit or
collection in the ordinary course of business) or otherwise assume or remain
liable with respect to any obligation of any Person, or (iii) make or own any
investment in, or acquire (except in the ordinary course of business) the assets
of, any Person, except:
(a) Extensions of trade credit by the Borrower in the
ordinary course of business in accordance with customary trade practices;
(b) Cash or short-term liquid investments generally
regarded as cash;
(c) Marketable direct obligations of the United States of
America or any department or agency thereof maturing not more than one year from
the date of issuance thereof;
(d) Certificates of deposit, repurchase agreements, money
market deposits or other similar types of investments maturing not more than one
year from the date of acquisition thereof and evidencing direct obligations of
any bank within the United States of America; and
(e) Capital Expenditures to the extent permitted by
Section 3.5.
4.14 Compliance with Year 2000. The Borrower shall perform all acts reasonably
necessary to ensure that the Borrower and any Subsidiary become Year 2000
Compliant in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all of the Borrower's
systems and adopting a detailed plan, with itemized budget, for the remediation,
monitoring and testing of such systems. As used in this Section 4.14, "Year 2000
Compliant" shall mean, in regard to any entity, that all software, hardware,
firmware, equipment, goods or systems utilized by or material to the business
operations or financial condition of such entity, will properly perform date
sensitive functions before, during and after the year 2000. The Borrower shall,
immediately upon request, provide to Lender such certifications or other
evidence of the Borrower's compliance with the terms of this Section 4.14 as
Lender may from time to time reasonably require.
15
4.15 Further Assurances. From time to time hereafter, the Borrower will execute
and deliver, or will cause to be executed and delivered, such additional
instruments, certificates or documents, and will take all such actions, as the
Lender may reasonably request, for the purposes of implementing or effectuating
the provisions of the Loan Documents. Upon the exercise by the Lender of any
power, right, privilege or remedy pursuant to this Agreement and the other Loan
Documents which requires any consent, approval, registration, qualification or
authorization of any governmental authority or instrumentality, the Borrower
will execute and deliver, or will cause the execution and delivery of, all
applications, certifications, instruments and other documents and papers that
the Lender may be required to obtain from the Borrower for such governmental
consent, approval, registration, qualification or authorization.
ARTICLE 5
CONDITIONS TO CLOSING
The obligation of the Lender to make the Loan is subject to the
following conditions precedent:
5.1 Government Guarantee. The Lender shall have received the RBS/USDA
Guaranty in a form satisfactory to the Lender.
5.2 The Note. The Lender shall have received the Note, duly completed,
executed, and delivered by the Borrower in the form of Exhibit "5.2" hereto.
5.3 The Guaranty. The Lender shall have received the Guaranty, duly
completed, executed, and delivered by Xxxxx X. Xxxx and Xxxxxxx Xxxx in the form
of Exhibit "5.3" hereto.
5.4 The Security Agreement. The Lender shall have received the Security
Agreement duly completed, executed, and delivered by the Borrower in the form of
Exhibit "5.4" hereto.
5.5 Opinion of the Borrower's Counsel. The Lender shall have received the
legal opinions of Xxxxxxxx, Xxxxxxxx & Xxxxx, Xxxxxxxxx Xxxxxxxx & Xxxxxx, and
Xxxxxxx, Xxxxx, Xxxxxxxx, Xxxxx & Xxxxxx, dated as of the Closing Date and duly
executed, completed, and delivered in the form of Exhibits "5.5(a)," "5.5(b)"
and "5.5(c)" hereto.
5.6 No Change. No material adverse change shall have occurred with respect
to the financial condition of Xxxxx X. Xxxx or Xxxxxxx Xxxx.
16
5.7 Third-Party Consents. The Lender shall have received the consents (and,
if necessary, waivers of defaults) of any third-parties required for the
Borrower to consumate the transactions contemplated by this Agreement.
5.8 Corporate Authorization. The Lender shall have received any corporate
documents and resolutions necessary to authorize the execution, delivery, and
performance by the Borrower of the Loan Documents to which the Borrower is or is
to be a party.
5.9 Environmental Report. The Lender shall have received from the Borrower
a certified environmental report regarding the Real Property of the Borrower
prepared in accordance with "Standard Practices for Environmental Site
Assessments : Transaction Screen Questionnaire" and "Phase I Environmental
Assessment," both published by the American Society of Testing and Materials.
5.10 Change of Control. No Change in Control shall have occurred.
5.11 Insurance. The Borrower shall have obtained the insurance policies
required by Section 4.2 hereof, and made proof of the same to Lender.
5.12 Appraisal. Lender shall have received (i) a certified appraisal of the
Real Property of Borrower meeting the requirements of Instruction 4279-B,
published by United States Department of Agriculture Rural Development and in
form and substance satisfactory to Lender, and (ii) an itemized list and
valuation of all other collateral for the Loan in form and substance
satisfactory to Lender.
5.13 Survey. Lender shall have received a current survey of the Real
Property in form acceptable to Lender and prepared by a surveyor acceptable to
Lender.
5.14 Title Insurance. Lender shall have received a title policy in favor of
Xxxxxx issued by an underwriter acceptable to Xxxxxx, (i) showing Borrower to
own fee simple title in its Real Property, (ii) insuring the Mortgage as a first
lien on the Borrower's Real Property, and (iii) not containing any exceptions
other than those approved in writing by Xxxxxx.
5.15 Flood Hazard Determination. Lender shall have received a duly completed
Form 81-93, "Standard Flood Hazard Determination," published by the Federal
Emergency Management Administration.
5.16 Mortgage. The Lender shall have received the Mortgage duly completed,
executed, and delivered by the Borrower in the form of Exhibit "5.16" hereto.
17
5.17 The Deposit and Escrow Account. The Lender shall have received the
Deposit and Escrow Agreement duly completed, executed and delivered by the
Borrower in the form of Exhibit "5.17" hereto.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower represents and warrants to the Lender, which
representations and warranties shall survive the Closing and the execution and
delivery of this Agreement, that:
6.1 Incorporation, Good Standing, and Due Qualification. The Borrower is a
corporation duly incorporated, validly existing, and having an active status
under the laws of the State of Utah; has the corporate power and authority to
own its assets and to transact the business in which it is now engaged or
proposed to be engaged; and is duly qualified as a foreign corporation and in
good standing under the Laws of each other jurisdiction in which such
qualification is required, if any.
6.2 Corporate Power and Authority. The execution, delivery, and performance
by the Borrower of the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action and do not and will not (1) require
any consent or approval of its stockholders; (2) contravene its charter or
bylaws; (3) violate any provision of any law, rule, regulation (including,
without limitation, Regulation U of the Board of Governors of the Federal
Reserve System), order, writ, judgment, injunction, decree, determination, or
award presently in effect having applicability to the Borrower; (4) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease, or instrument to which the Borrower is
a party or by which it or its properties may be bound or affected; (5) result in
or require the creation or imposition of any lien upon or with respect to any of
the properties now owned or hereafter acquired by the Borrower; and (6) cause
the Borrower to be in default under any such law, rule, regulation, order writ,
judgment, injunction, decree, determination, or award or any such indenture,
agreement, lease, or instrument.
6.3 Capitalization. The authorized capital stock of the Borrower consists
solely of 10,000,000 shares of common stock, par value $.01, 2,147,102 shares of
which are issued and outstanding, and 330,000 shares of 7% cumulative preferred
stock, par value $3.00, 165,412 of which are issued and outstanding. Schedule
"6.3" sets forth the record and beneficial ownership of the fully diluted
outstanding common stock of the Borrower held by Xxxxx X. Xxxx. Except for the
18
common stock and the preferred stock, there are no other authorized classes or
series of capital stock of the Borrower. All outstanding shares of common stock
and preferred stock of each of the Borrower are duly authorized, validly issued,
fully paid, and nonassessable and have been offered, issued, sold, and delivered
by the Borrower in compliance with applicable securities laws. Other than as set
forth on Schedule "6.3," there are no preemptive rights, rights of first refusal
or similar rights with respect to the capital stock of the Borrower. Except as
set forth on Schedule "6.3," there are no outstanding subscriptions, options,
warrants, rights, or other arrangements or commitments, whether express or
implied, obligating the Borrower to issue any shares of common stock or
securities exchangeable for or convertible into common stock. Except for the
Articles of Incorporation and Bylaws of the Borrower and the Loan Documents,
there are no outstanding agreements or documents binding on the Borrower or its
shareholders regarding the transfer, voting, pledge, optioning or gifting of any
capital stock of the Borrower. If there are any preemptive rights, rights of
first refusal, or similar rights with respect to the capital stock of the
Borrower, the Borrower has complied with all applicable corporate and statutory
procedures and requirements relating to such rights (including, without
limitation, procedures for giving the holders of such rights the opportunity to
exercise such rights).
6.4 Brokerage Fees. Except as set forth on Schedule "6.4" there are no
claims for investment bankers' fees, brokerage commissions, finders' fees or
similar compensation in connection with the Transactions based on any
arrangement or agreement made by or on behalf of the Borrower.
6.5 Environmental Compliance. Except as set forth on Schedule "6.5" there
has been no Hazardous Discharge or generation, treatment, storage or disposal of
any Hazardous Substance by the Borrower or any other Person resulting from the
operations of the Business or the ownership or use of the Assets, in a manner
which violates any applicable Environmental Law. Except as set forth on Schedule
"6.5" there are no Environmental Complaints now pending to or against the
Borrower or any other Person resulting from the operations of the Business or
the ownership or use of the Assets, and, to the best of the Borrower's
knowledge, there is no reasonable basis for believing that any such
Environmental Complaint may be asserted against the Borrower or any other
persons with respect to the Borrower's operations. Schedule "6.5" lists, for the
entire period of operations of the Borrower, any and all Environmental
Complaints resulting from the Borrower's operations or the ownership or use of
the Assets and the disposition of each such Environmental Complaint. With
respect to each such pending or prior Environmental Complaint, Schedule "6.5"
lists the date of the Environmental Complaint; the claimant or investigating
agency; the nature and a brief description of the matter; the damages claimed or
relief sought; and the status or outcome of the matter. In addition, except as
19
listed on Schedule "6.5," the Borrower is operating and has at all times
previous hereto operated the Business in compliance with all Environmental Laws.
6.6 Other Information. All information relating to the Borrower has been
disclosed to Lender which would reasonably be material to any prospective
third-party investor in the Borrower. In furtherance of the foregoing, and not
in limitation thereof, all information furnished by the Borrower to the Lender
or its representatives in connection with the Loan Documents (including, without
limitation, information contained in the Schedules and Exhibits hereto and
thereto, the instruments referred to in such Exhibits and Schedules and the
certificates and other documents to be executed or delivered pursuant hereto or
thereto by the Borrower) is not, nor at the Closing will be, false or misleading
in any material respect, or contains, or at the Closing will contain, any
misstatement of material fact, or omits, or at the Closing will omit, to state
any material fact required to be stated in order to make the statements therein
not materially misleading.
6.7 Employee Benefits Matters. The Borrower is in compliance with all
applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any Plan. No notice
of intent to terminate a Plan has been filed, nor has any Plan been terminated.
No circumstances exist which constitute grounds entitling the PBGC to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings. Neither the Borrower nor any ERISA
Affiliate has completely or partially withdrawn from a Multiemployer Plan. The
Borrower and each ERISA Affiliate have met their minimum funding requirements
under ERISA with respect to all of their Plans. The present value of all vested
benefits under each Plan do not exceed the fair market value of all Plan assets
allocable to such benefits, as determined on the most recent valuation date of
the Plan and in accordance with ERISA. Neither the Borrower nor any ERISA
Affiliate has incurred any liability to the PBGC under ERISA (other than
liability for the payment of PBGC premiums in the ordinary course of business).
6.8 Legally Enforceable Agreement. This Agreement is and each of the other
Loan Documents to which the Borrower is a party, when delivered under this
Agreement, will be legal, valid, and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency, and other similar laws affecting creditor's rights
generally and principles of equity. The Borrower represents and warrants that
neither it or any Guarantor is insolvent or contemplating filing a voluntary
petition for bankruptcy nor is the Borrower aware of any possibility or threat
of being subject to any petition for involuntary bankruptcy.
20
6.9 Financial Statements. All financial statements of the Borrower which
have been furnished to the Lender are complete and correct and fairly present
the financial condition of the Borrower and the results of the operations of the
Borrower for the periods covered by such statements, all in accordance with GAAP
consistently applied to the Borrower's statements, and there has been no
Material Adverse Change. There are no liabilities of the Borrower, fixed or
contingent, which are material but are not reflected in the financial statements
or in the notes thereto, other than liabilities arising in the ordinary course
of business of the Borrower. No information, exhibit, or report furnished by the
Borrower to the Lender in connection with the negotiation of this Agreement
contains any material misstatement of fact or omits to state a material fact or
any fact necessary to make the statement contained therein not materially
misleading.
6.10 Other Agreements. The Borrower is not a party to any indenture, loan,
or credit Agreement, or, to the Borrower's knowledge, to any lease or other
Agreement or instrument, or subject to any charter or corporate restriction
which could have a material adverse effect on the business, properties, assets,
operations, or conditions, financial or otherwise, of the Borrower or the
ability of the Borrower to carry out its obligations under the Loan Documents to
which it is a party. The Borrower is not in default in any material respect in
the performance, observance, or fulfillment of any title obligations, covenants,
or conditions contained in any Agreement or instrument material to its business
to which it is a party.
6.11 Litigation. There is no pending or, to the Borrower's knowledge,
threatened action or proceeding against or affecting the Borrower before any
court, governmental agency or arbitrator which may, in any one case or in the
aggregate, materially adversely affect the financial condition, operations,
properties, or business of the Borrower or the ability of the Borrower to
perform its obligation under the Loan Documents to which it is a party.
6.12 No Defaults on Outstanding Judgments or Orders. The Borrower has
satisfied all judgments, and the Borrower is not in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator,
or federal, state, municipal, or other governmental authority, commission,
board, bureau, agency or instrumentality, domestic or foreign.
6.13 Operation of Business. To the best of the Borrower's knowledge, it
possesses all licenses, permits, franchises, patents, copyrights, trademarks and
trade names, or rights thereto, to conduct its business substantially as now
conducted and as presently proposed to be conducted, is not in violation of any
valid rights of others with respect to any of the foregoing, and is in
compliance with all rules and regulations regarding the operation of its
business.
21
6.14 Taxes. The Borrower has filed all Tax returns (federal, state and
local) required to be filed and has paid all Taxes which are due.
6.15 Adverse Change. The Borrower certifies that by accepting the Loan, the
Borrower understands that the intent of RBS/USDA Instruction 4279-B, Section
4279.181(m), is that no adverse change has occurred during the period of time
from RBS/USDA's issuance of the Conditional Commitment to issuance of the
RBS/USDA Guaranty relating to the Borrower, regardless of the cause or causes of
the change and whether the change or cause(s) of the change were within the
Borrower's control.
Upon the issuance of the RBS/USDA Guaranty, the Borrower must certify that there
have been no unremedied adverse changes since the date of the application in the
financial or other condition of the Borrower which warranty withholding or not
making the Loan. Therefore, the Borrower does hereby represent and warrant to
the Lender that there have been no adverse changes since the date of its initial
loan application in its financial condition.
6.16 Subsidiaries. The Borrower does not own, directly or indirectly, any of
the capital stock of any other company or any equity, profit sharing,
participation or other interest in any other entity.
6.17 Patents, Trademarks and Licenses. Schedule "6.17" sets forth all
patents, patents pending, inventions (whether or not patentable), trademarks
(registered and unregistered), service marks (registered and unregistered),
trade names (registered and unregistered), brand names (registered and
unregistered) or copyrights (registered and unregistered), owned or used by or
licensed to or by the Business, together with a summary description and full
information in respect of the filing, registration or issuance or the status
thereof. All of such patents, inventions, trademarks, service marks, trade
names, brand names, copyrights, pending applications and licenses are valid and
in good standing and will not be materially adversely affected by the
Transactions; no patent application or patent used in the Business is involved
in any interference proceeding, and no trademark, service mark, trade name, or
brand name, whether or not registered, nor any application therefor, is involved
in any opposition or cancellation proceeding. No licenses, sublicenses,
covenants or agreements have been granted or entered into by the Borrower in
respect of such patents, inventions, trademarks, service marks, trade names,
brand names, copyrights, applications or licenses, except those described on
Schedule "6.17." The Borrower validly owns, is validly licensed under, or has
legal right to use all patents, patent applications, trademarks, service marks,
trade names, brand names, inventions, processes, know-how, trade secrets and
copyrights which are necessary for the conduct of the Business as now conducted,
and all such rights are valid and in good standing, and free and clear of all
22
Xxxxx and have not been challenged in any way or involved in any interference,
opposition or cancellation proceedings. With respect to the Business and the
operations of the Borrower and the use or publication by the Borrower in
connection with its patents, trademarks, service marks, trade names, brand names
and advertising, technical or other literature do not involve infringement or
claim infringement of any patent, trademark, service mark, trade name or
copyright. Except as set forth on Schedule "6.17" no director, officer,
employee, consultant or Affiliate of the Borrower owns, directly or indirectly,
in whole or in part, any inventions or patents, trademarks, service marks, trade
names, brand names, or copyrights or applications therefor which the Business is
presently using or which is necessary or useful for the Business as now
conducted or has made any invention not assigned to the Borrower which is
necessary or useful for the Business as now conducted. Except as set forth on
Schedule "6.17," no officer, director, employee, agent or Affiliates of the
Borrower has entered into any agreement regarding know-how, trade secrets,
assignment of rights in inventions, or prohibition or restriction of competition
or solicitation of customers, or any other similar restrictive agreement or
covenant relating to the Business, whether written or oral, with any Person
other than the Borrower.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Events of Default. The occurrence of one or more of the following
events or existence of one or more of the following conditions shall constitute
an Event of Default (each such occurrence or existence an "Event of Default"):
A. The Borrower shall fail to perform or observe any term, covenant, or
agreement contained in this Agreement, and such failure is not cured within 30
days after written notice to the Borrower, provided, that no cure period shall
apply if such failure to perform is a breach pursuant to Section 7.1(B) hereof.
B. The Borrower shall default in the payment of principal or interest
on the Note or any other fee, charge, tax or other payment due under any of the
Loan Documents (including, without limitation, premiums on insurance policies
required by this Agreement) when the same becomes due and payable, whether on
maturity, acceleration, or otherwise.
C. A default occurs under any document evidencing Indebtedness
(including Indebtedness incurred after the date hereof) or any related document,
and is not cured or waived within the applicable grace period.
23
D. Any representation or warranty made by the Borrower herein or in any
other Loan Document shall prove to have been false or incorrect in any material
respect when made.
E. The Borrower shall (i) discontinue its business, (ii) make an
assignment for the benefit of creditors, (iii) fail generally to pay its debts
as such debts become due, (iv) apply for or consent to the appointment of or
taking possession by a trustee, receiver or liquidator (or other similar
official) of the Borrower or any substantial part of the Assets or (v) take
action to dissolve or liquidate the Borrower.
F. If, within sixty (60) days after the commencement against the
Borrower of a case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, (i) such case shall have been consented to or shall not have
been dismissed or all orders or proceedings thereunder affecting the operations
or the business of the Borrower stayed, or (ii) if the stay of any such order or
proceeding shall thereafter be set aside or (iii) if within sixty (60) days
after the entry of a decree appointing a trustee, receiver or liquidator (or
other similar official ) of the Borrower or any substantial part of the property
of the Borrower, such appointment shall not have been vacated.
G. An uninsured final judgment which, with other outstanding uninsured
final judgments against the Borrower, exceeds $50,000 shall be rendered against
the Borrower unless such judgment has been appealed and an execution thereof
stayed pending appeal or unless, within sixty (60) days after the expiration of
any such stay, such judgment has been discharged, or if any such judgment shall
not be discharged forthwith upon the commencement of proceedings to foreclose
any Lien which may attach as security therefor and before any of the Assets
shall have been seized in satisfaction thereof.
H. A Material Adverse Change shall occur.
I. A Change in Control shall occur.
J. A defined Event of Default shall occur under any of the Loan
Documents.
7.2 Remedies Upon Default; Acceleration. In case any one or more Events of
Default shall occur and be continuing:
A. The Lender, at its sole option and discretion, may declare the
principal of and accrued interest in respect of the Note to be immediately due
24
and payable, whereupon the principal of and accrued interest in respect of the
Note shall become immediately due and payable without notice of intent to
accelerate, notice of acceleration, presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Borrower; and
B. The Lender may proceed to protect and enforce its rights by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any provision contained herein or in any other Loan
Document or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law; and
C. The Lender shall be entitled to any other remedy available at law or
under any of the Loan Documents.
ARTICLE 8
MISCELLANEOUS
8.1 Amendments, Etc. No amendment, modification, termination, or waiver of
any provision of any Loan Document to which the Borrower is a party nor consent
to any departure by the Borrower from any Loan Document to which it is a party
shall in any event be effective unless the same shall be in writing and signed
by the Lender and RBS/USDA, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
8.2 Notices, Etc. All notices and other communications provided for under
this Agreement and under the other Loan Documents to which the Borrower is a
party shall be in writing (including telefacsimile or telegraphic
communications) and faxed, mailed, telegraphed, or delivered
If to the Borrower:
NACO Industries, Inc.
000 Xxxx 0000 Xxxxx
Xxxxx, XX 00000
Attention: Xxxxx X. Xxxx
25
If to the Lender:
WebBank Corporation
P.O. Box 1831
000 Xxxxx Xxxxxx, Xxx. 000
Xxxx Xxxx, XX 00000-1831
Attention: Xxxxxxx X. Xxxxx
and
Xxxx Xxxxxxxx Brown Gee & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxx. 0000
Xxxx Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxx
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 8.2. All such notices and communications shall, when mailed or
telegraphed, be effective when deposited in the mails or delivered to the
telegraph company, respectively, addressed as aforesaid, and when faxed, when
machine confirmation of receipt is acquired, except that notices to the Lender
pursuant to the provisions of Article 3 shall not be effective until received by
the Lender.
8.3 No Waiver; Remedies. No failure on the part of the Lender to exercise
and no delay in exercising any right, power, or remedy under any Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any rights under any Loan Documents preclude any other or further exercise
thereof of any other right. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law.
8.4 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Lender and their respective successors
and assigns, except that the Borrower may not assign or transfer any of its
rights under any Loan Document to which the Borrower is a party without the
prior written consent of the Lender and RBS/USDA. Notwithstanding the foregoing,
an assumption fee equal to one percent (1%) of the outstanding principal balance
shall be paid by the Borrower to the Lender upon written consent of any
assignment.
8.5 Costs, Expense, and Taxes. The Borrower agrees to pay on demand all
costs and expenses in connection with the preparation, execution, delivery,
filing, recording, administration and termination of any of the Loan Documents
26
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Lender, with respect thereto and with respect to advising the
Lender as to its rights and responsibilities under any of the Loan Documents,
and all costs and expenses, if any, in connection with the enforcement of any of
the Loan Documents all as provided in the Loan commitment letter from the Lender
to the Borrower. In addition, the Borrower shall pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of any of the Loan Documents and the
other documents to be delivered under any such Loan Documents, and agrees to
save the Lender harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes and fees.
Notwithstanding the foregoing, the Borrower shall not be responsible for the
Lender's attorneys' fees and costs incurred in connection with the preparation
of the Loan Documents and the Closing which exceed $10,000.
8.6 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Utah, without reference to conflict of
law principles.
8.7 Severability of Provisions. Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of such Loan Documents or affecting the
validity or enforceability of such provision in any other jurisdiction.
8.8 Headings. Article and Section headings in the Loan Documents are
included in such Loan Documents for the convenience of reference only and shall
not constitute a part of the applicable Loan Documents for any other purpose.
8.9 Survive Closing. The covenants contained herein, which obligate the
Borrower to perform any covenant following closing, shall be deemed to survive
the closing.
8.10 WAIVER OF JURY TRIAL. AS AN IMPORTANT INDUCEMENT TO THE LENDER TO ENTER
THIS AGREEMENT, THE BORROWER WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION
ARISING UNDER OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS.
8.11 Indemnification. The Borrower and its successors and assigns will
indemnify and hold harmless Lender, its directors, officers, shareholders,
agents, employees, servants, partners, contractors, any person who controls the
Xxxxxx and Xxxxxx's successors and assigns (collectively, the "Indemnified
27
Persons") from and against any and all claims, suits, costs, damages, losses,
liabilities, judgments, and expenses (including, without limitation, attorney's
fees and litigation expenses) (collectively, "Losses") which are incurred by or
asserted against any Indemnified Person in connection with or arising out of any
litigation, investigation, proceeding, or subpoena involving, or act or omission
of, the Borrower or its Affiliates, Subsidiaries, directors, officers,
shareholders, agents, employees, servants, partners, contractors, invitees,
licensees, successors, or assigns. Without limiting the foregoing, the Borrower
and its successors and assigns will indemnify and hold harmless the Indemnified
Persons from and against any and all Losses connected with or arising from any
Hazardous Discharge, whether such discharge occurred before or after the
execution of this Agreement or before or after Lender exercises any of its
remedies available upon default, and from and against any and all losses
relating to any Environmental Complaint.
8.12 Jurisdiction. Each of the parties hereto hereby expressly and
irrevocably submits to the non-exclusive personal jurisdiction of the United
States District Court for the District of Utah - Central Division and to the
jurisdiction of any other competent court of the State of Utah located in the
County of Salt Lake (collectively, the "Utah Courts"), preserving, however, all
rights of removal to such federal court under 28 U.S.C. Section 1441, in
connection with all disputes arising out of or in connection with this Agreement
or the transactions contemplated hereby and agrees not to commence any
litigation relating thereto except in such courts. If the aforementioned courts
do not have subject matter jurisdiction, then the proceeding shall be brought in
any other state or federal court located in the State of Utah, preserving,
however, all rights of removal to such federal court under 28 U.S.C. Section
1441. Each party hereby waives the right to any other jurisdiction or venue for
any litigation arising out of or in connection with this Agreement or the
transactions contemplated hereby to which any of them may be entitled by reason
of its present or future domicile. Notwithstanding the foregoing, each of the
parties hereto agrees that each of the other parties shall have the right to
bring any action or proceeding for enforcement of a judgment entered by the Utah
Courts in any other court or jurisdiction, including, without limitation, the
States of Kansas and California. Additionally, the foregoing shall not be deemed
to prohibit any party hereto or any other person or entity that may have the
right to enforce or sue under this Agreement from commencing an action in any
court that may have jurisdiction.
8.13 Service of Process. Each party irrevocably consents to the service of
process outside the territorial jurisdiction of the Utah Courts referred to in
Section 8.12 hereof in any such action or proceeding by mailing copies thereof
by registered United States mail, postage prepaid, return receipt requested, to
its address as specified in or pursuant to Section 8.2 hereof. However, the
foregoing shall not limit the right of a party to effect service of process on
the other party by any other legally available method.
28
8.14 Other Certification. The Borrower shall execute such certification as
may be required by Lender and RBS/USDA from time to time.
(The remainder of this page is intentionally left blank)
29
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized as of the date first above
written.
THE BORROWER:
NACO INDUSTRIES, INC.
a Utah corporation
By: __________________________
Title: _________________________
THE LENDER:
WEBBANK CORPORATION
a Utah corporation
By: __________________________
Title: _________________________
NOTICE TO BORROWER
------------------
THIS WRITTEN LOAN AGREEMENT IS THE FINAL EXPRESSION OF THE LOAN
AGREEMENT BETWEEN BORROWER AND LENDER. THIS WRITTEN LOAN AGREEMENT MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR ORAL LOAN AGREEMENT OR OF A
CONTEMPORANEOUS ORAL LOAN AGREEMENT BETWEEN BORROWER AND LENDER.
Affirmation of No Unwritten Oral Credit Agreements. Borrower and Xxxxxx
affirm by their initials below that no unwritten, oral credit agreement exists
between them.
---------- -----------
Borrower's Lender's
Initials Initials
30
Schedule "4.8"
--------------
PERMITTED SENIOR INDEBTEDNESS
[See document attached hereto.]
i
Schedule "6.3"
--------------
CAPITALIZATION
[See document attached hereto.]
ii
Schedule "6.4"
--------------
BROKERAGE FEES
[See document attached hereto.]
iii
Schedule "6.5"
--------------
ENVIRONMENTAL COMPLIANCE
[See document attached hereto.]
iv
Schedule "6.17"
---------------
PATENTS, TRADEMARKS, AND LICENSES
[See document attached hereto.]
v
Exhibit "2.3"
-------------
WIRE TRANSFER INSTRUCTIONS AND
ACKNOWLEDGMENT OF RECEIPT OF FUNDS
[See document attached hereto.]
vi
Exhibit "3.2"
-------------
COMPLIANCE CERTIFICATE
Date: _________________________
To: WebBank Corporation, as the Lender under that certain Loan Agreement
dated as of April ____, 1999 (as extended, renewed or restated from
time to time, the "Loan Agreement"), between Lender and NACO
Industries, Inc. (the "Borrower").
Capitalized terms used herein shall be given the respective meanings
set forth in the Loan Agreement.
Enclosed herewith is a copy of the [annual] [quarterly] [other]
financial statement (the "Statement") of the Borrower required by Section 3.1 of
the Loan Agreement. The undersigned, as the [president] [chief financial
officer] of the Borrower hereby certifies, represents and warrants to the Lender
that, (i) for the period for which the Statement has been prepared, the
Statement fairly and accurately presents the financial condition and results of
operations of the Borrower and its Subsidiaries, if any, in accordance with
GAAP; (ii) for the period for which the Statement has been prepared, the
Borrower has fully complied with each financial covenant set forth in Article 3
of the Loan Agreement; and (iii) as of the date hereof, the Borrower is in full
compliance with each financial covenant set forth in Article 3 of the Loan
Agreement.
The undersigned further certifies, represents, and warrants that no
Event of Default has occurred and is continuing as of the date hereof [other
than the following: [INSERT DESCRIPTION AND STEPS, IF ANY, BEING TAKEN TO
CURE]].
NACO INDUSTRIES, INC.
By: _____________________________
Name: _____________________________
Title: _____________________________
vii
Exhibit "4.9"
-------------
JOINDER AGREEMENT
This Joinder Agreement is executed by ___________________________
("Subsidiary"), a newly created or acquired subsidiary of NACO Industries, Inc.,
a Utah corporation ("Borrower"), pursuant to the requirements of Section 4.9 of
that certain Loan Agreement entered into between Borrower and WebBank
Corporation, a Utah corporation ("Lender"), as of the ____ day of April, 1999
(the "Loan Agreement").
Subsidiary hereby agrees to guarantee the payment and performance of
Borrower under the Loan Agreement or under any other document or agreement
executed by Borrower in connection therewith, to become a party to the Loan
Agreement, and to undertake all obligations and to be bound to all covenants
that may be applicable to Subsidiary with respect to the Loan Agreement.
Subsidiary further agrees to grant a security interest in all its assets to
Lender by separate agreement.
Executed as of the ____ of ___________, _____.
By:__________________________________
Name:________________________________
Title:_________________________________
viii
Exhibit "5.2"
-------------
THE NOTE
[See document attached hereto.]
ix
Exhibit "5.3"
-------------
THE GUARANTY
[See document attached hereto.]
x
Exhibit "5.4"
-------------
THE SECURITY AGREEMENT
[See document attached hereto.]
xi
Exhibit "5.5(a)"
----------------
OPINION LETTER OF THE BORROWER'S COUNSEL
[See document attached hereto.]
xii
Exhibit "5.5(b)"
----------------
OPINION LETTER OF THE LENDER'S CALIFORNIA COUNSEL
[See document attached hereto.]
xiii
Exhibit "5.5(c)"
----------------
OPINION LETTER OF THE LENDER'S KANSAS COUNSEL
[See document attached hereto.]
xiv
Exhibit "5.16"
--------------
THE MORTGAGE
[See document attached hereto.]
xv
Exhibit "5.17"
--------------
THE DEPOSIT AND ESCROW AGREEMENT
[See document attached hereto.]
xvi
ADJUSTABLE RATE PROMISSORY NOTE
-------------------------------
$1,100,000 Dated: April ___, 1999
FOR VALUE RECEIVED, NACO INDUSTRIES, INC., a Utah corporation with an
office at 000 Xxxx 0000 Xxxxx, Xxxxx, XX 00000 ("Maker"), promises to pay to the
order of WEBBANK CORPORATION, a Utah corporation having an office at P.O. Box
1831, 000 Xxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxx, XX 00000-1831 (together with its
successors and assigns, "Payee"), at such office of Payee, or such other place
as Payee may designate from time to time in writing, the principal sum of ONE
MILLION, ONE HUNDRED THOUSAND AND NO/100s DOLLARS ($1,100,000), in lawful money
of the United States of America, together with interest thereon from the date
hereof as follows:
1. The Note.
----------
This Adjustable Rate Promissory Note (this "Note") is
being issued by Maker pursuant to a Loan Agreement dated as of the date hereof
by and between Payee and Maker (as amended, from time to time, the "Loan
Agreement"), and Xxxxx's rights and Maker's obligations hereunder are subject to
the provisions of the Loan Agreement. Capitalized terms used in this Note and
not otherwise defined shall have the meanings given those terms in the Loan
Agreement. Reference to the Loan Agreement shall in no way impair the
negotiability hereof or the absolute and unconditional obligation of Maker to
pay both principal and interest hereon as provided herein. The principal balance
of the Note which is outstanding and unpaid from time to time is referred to as
the "Principal Amount."
2. Interest Rate.
--------------
a. Note Rate; Default Rate. The Principal Amount
shall bear interest beginning on and including the date hereof at a variable
rate equal to The Wall Street Journal Prime Interest Rate plus one and one-half
percent (1.5%) ("Note Rate"), provided, however, that the Note Rate shall never
exceed 14.75% nor be less than 9.75%. The initial Note Rate is 9.75% per annum.
While an Event of Default (as defined hereinafter) has occurred and is
continuing, the Principal Amount shall immediately and without notice accrue
interest at the lesser of The Wall Street Journal Prime Interest Rate plus five
percent (5%) or the highest interest rate permitted by law (the "Default Rate").
Interest shall be calculated on the basis of a 360-day year and shall accrue for
1
the actual number of days elapsed. The term "The Wall Street Journal Prime
Interest Rate" as used herein shall mean, as of any particular date, the rate
quoted as the "Prime Rate" (or comparable reference rate) in the Money Rates
Column of the Wall Street Journal as published on such day (or, if such day is
not a business day of the Lender, as published on the most recent business day
of the Lender), but if more than one such rate is quoted on any such day then
the rate shall be the highest of such rates. In the event of the discontinuance
of such publication or such section thereof, the Wall Street Journal Prime
Interest Rate shall mean the average monthly rate as reported and published in
the Federal Reserve Bulletin published monthly by the Board of Governors of the
Federal Reserve System under the table styled "Prime Rate Charged by Banks Short
Term Business Loans." The rate of interest will be adjusted quarterly on January
1st, April 1st, July 1st, and October 1st of each year or if such date is not a
business day on the next following business day (each such date an "Adjustment
Date"), which adjustment shall be effective on the next following payment date.
b. Maximum Rate. Notwithstanding anything to the
contrary contained herein, the effective rate of interest hereunder shall not
exceed the maximum effective rate of interest permitted by applicable law or
regulation. If the amount of interest payable on any date under this Note would
exceed the maximum amount permitted by applicable law or regulation, then the
amount of interest payable on such date shall be reduced automatically to such
maximum amount. If any interest or other charge paid or payable by Maker in
connection with this Note results in charging, compensation, payment or earning
of interest in excess of the maximum allowed by applicable law or regulation as
aforesaid, then any and all such excess shall be and the same is hereby waived
by Payee, and any and all such excess previously paid shall be automatically
credited against and in reduction of the Principal Amount.
3. Payments of Principal and Interest.
----------------------------------
a. The Principal Amount and all accrued and unpaid
interest shall be payable in full on April _____, 2014 (the "Maturity Date").
Beginning on June 1, 1999, and continuing each month until the Maturity Date,
monthly payments of principal and interest shall be made on the first day of
each month, or if such date is not a business day on the next following business
day, in an amount sufficient to fully amortize the Principal Amount over the
remaining time period before the Maturity Date. The monthly payments of
principal and interest will be made according to the Payment Schedule attached
as Exhibit A hereto which shall be revised by Payee and provided to the Maker
within 15 business days after each Adjustment Date and shall be incorporated by
reference into and made a part of this Note upon receipt by Maker. Any payment
of principal or interest made more than fifteen (15) days after it is due shall
bear a late penalty of five percent (5%) of the late payment. Interest shall not
accrue on late penalties. All amounts of principal, interest, and late penalties
made hereunder shall be paid by Maker by automated bank transfer in immediately
2
available and freely transferable funds. All payments shall be credited first to
late penalties, second, to Xxxxx's costs and expenses as provided in Section 13
hereof, third, to accrued and unpaid interest, and fourth, to the Principal
Amount.
b. Funds on Deposit. In all circumstances when Maker
has funds available on deposit in the Escrow Account (as defined in the Deposit
and Escrow Agreement as defined below) maintained pursuant to that certain
Deposit and Escrow Agreement (the "Deposit and Escrow Agreement") dated as of
the date hereof among Maker, Payee, and Payee in Payee's capacity as Escrow
Agent ("Escrow Agent"), Maker agrees and acknowledges that Payee shall have the
right pursuant to Section 2(a) of the Deposit and Escrow Agreement to instruct
Escrow Agent to release funds from the Escrow Account to make payments required
under this Note.
4. Prepayment Premium. Subject to the provisions of this
Section 4, the Principal Amount may be prepaid in whole or in part upon not less
than thirty (30) days' prior written notice, provided that each and every such
prepayment, whether made voluntarily or involuntarily because of acceleration of
the payment date due to an Event of Default and whether made directly by the
Borrower or otherwise, shall be accompanied by a prepayment premium as set forth
on the following table (the "Prepayment Premium"):
================================================================================
YEAR IN WHICH
PREPAYMENT MADE PREPAYMENT PENALTY
--------------------------------------------------------------------------------
First year following closing of Loan 5% of amount prepaid
--------------------------------------------------------------------------------
Second year following closing of Loan 4% of amount prepaid
--------------------------------------------------------------------------------
Third year following closing of Loan 3% of amount prepaid
--------------------------------------------------------------------------------
Fourth year following closing of Loan 2% of amount prepaid
--------------------------------------------------------------------------------
Fifth year following closing of Loan or 1% of amount prepaid
any year thereafter
================================================================================
The Maker agrees that the Prepayment Premium has been freely bargained between
the parties to provide the Payee with compensation for the loss of the
contracted-for return on the Loan, that the Prepayment Premium is not a penalty,
and that such Prepayment Premium is reasonable. The Payee's determination of the
Prepayment Premium shall be conclusive and binding, absent manifest error.
Prepayments shall be credited first to Prepayment Premiums, second to Xxxxx's
costs and expenses as provided in Section 13 hereof, third, to accrued and
unpaid interest, and fourth, to the Principal Amount.
3
5. Events of Default. The occurrence or existence of any
one or more of the following events or conditions shall constitute an Event of
Default hereunder (each such occurrence or existence an "Event of Default"):
a. Maker shall fail to pay any principal or interest
under this Note when due.
b. A defined Event of Default shall occur under the
Loan Agreement.
6. Remedies. Upon the occurrence of and during the
continuation of any Event of Default, Payee shall have the rights, and shall be
entitled to the remedies, set forth in the Loan Agreement and the other Loan
Documents, which rights include, but are not limited to, the right to declare
the outstanding Principal Amount together with accrued interest to be due and
payable immediately.
7. Remedies Cumulative; Waiver; Jurisdiction; No Jury
Trial.
a. Remedies Cumulative. No right or remedy conferred
upon or reserved to Payee, or now or hereafter existing at law or in equity or
by statute or other legislative enactment, is intended to be exclusive of any
other right or remedy, and each and every such right or remedy shall be
cumulative and concurrent, and shall be in addition to every other such right or
remedy, and may be pursued singly, concurrently, successively, or otherwise, at
the sole discretion of Payee, and shall not be exhausted by any one exercise
thereof but may be exercised as often as occasion therefor shall occur. No act
of Payee shall be deemed or construed as an election to proceed under any one
such right or remedy to the exclusion of any other such right or remedy.
Furthermore, each such right or remedy of Payee shall be separate, distinct, and
cumulative and none shall be given effect to the exclusion of any other. The
failure to exercise or delay in exercising any such right or remedy, or the
failure to insist upon strict performance of any term of this Note shall not be
construed as a waiver or release of the same, or of any event of default
thereunder, or of any obligation or liability of Maker thereunder.
b. Waiver of Notice, etc. Maker hereby waives
presentment for payment, demand of notice of nonpayment, protest, notice of
protest, or other notice of dishonor, and any and all other notices in
connection with any default in the payment of, or any enforcement of the payment
of all amounts due under this Note. To the extent permitted by law, Maker waives
the right to any stay of execution and the benefit of all exemption laws now or
hereafter in effect.
4
c. Submission to Jurisdiction. Maker hereby agrees
that any action or proceeding against Maker to enforce this Note shall be
commenced in any court having jurisdiction in the County of Salt Lake in the
State of Utah (the "Utah Courts") and Maker waives personal service of process
and agrees that a summons and complaint commencing an action or proceeding in
any such court shall be properly served and shall confer personal jurisdiction
if served by registered or certified mail in accordance with the notice
provisions set forth herein. Notwithstanding the foregoing, each of the parties
hereto agrees that each of the other parties shall have the right to bring any
action or proceeding for enforcement of a judgment entered by the Utah Courts in
any other court or jurisdiction, including, without limitation, the courts of
the states of California and Kansas. Additionally, the foregoing shall not be
deemed to prohibit any party hereto or any other person or entity that may have
the right to enforce or sue under this Note from commencing an action in any
court that may have jurisdiction.
d. Service of Process. Maker irrevocably consents to
the service of process outside the territorial jurisdiction of the Utah Courts
in any such action or proceeding by mailing copies thereof by registered United
States mail, postage prepaid, return receipt requested, to its address as
specified in the first paragraph of this Note. However, the foregoing shall not
limit the right of a party to effect service of process on the other party by
any other legally available method.
e. Waiver of Jury Trial. AS AN IMPORTANT INDUCEMENT
TO THE PAYEE TO ENTER THIS AGREEMENT, THE MAKER WAIVES THE RIGHT TO TRIAL BY
JURY IN ANY ACTION ARISING UNDER OR IN ANY WAY RELATED TO THIS NOTE OR ANY OF
THE OTHER LOAN DOCUMENTS.
8. Guaranty; Security. Payment and performance of this
Note is guaranteed by Xxxxx X. Xxxx and Xxxxxxx Xxxx pursuant to a Guaranty
dated as of the date hereof. This Note is secured by a Security Agreement by and
between Maker and Payee and dated as of the date hereof, by a Mortgage by and
between Maker and Payee dated as of the date hereof, and by an Escrow and
Deposit Agreement by and between Maker and Payee dated as of the date hereof.
9. Severability. If for any reason one or more of the
provisions of this Note or their application to any person or circumstance shall
be held to be invalid, illegal, or unenforceable in any respect or to any
extent, such provisions shall nevertheless remain valid, legal, and enforceable
in all such other respects and to such extent as may be permissible. In
addition, any such invalidity, illegality, or unenforceability shall not affect
any other provisions of this Note, but this Note shall be construed as if such
invalid, illegal, or unenforceable provision had never been contained herein.
5
10. Successors and Assigns. This Note inures to the
benefit of Payee and binds Maker, and their respective successors and assigns,
and the words "Payee" and "Maker" whenever occurring herein shall be deemed and
construed to include such respective successors and assigns.
11. Notices. All notices required to be given to any of
the parties hereunder shall be given as provided in the Loan Agreement.
12. Captions. The captions or headings of the paragraphs
in this Note are for convenience only and shall not control or affect the
meaning or construction of any of the terms or provisions of this Note.
13. Reimbursement of Expenses. Maker shall reimburse
Payee for the reasonable costs and expenses incurred by Xxxxx (including
reasonable attorneys' fees, advisory and consulting fees, travel and
communication expenses, and reproduction costs) in connection with this Note and
all reasonable costs and expenses incurred in amending, modifying, or enforcing
this Note.
14. Governing Law. This Note shall be governed by and
construed in accordance with the internal laws of the State of Utah without
regard to conflict of law principles.
[Remainder of Page Left Blank Intentionally]
6
IN WITNESS WHEREOF, Xxxxx has executed this Note as of the day and year
first above written.
NACO INDUSTRIES, INC.
a Utah corporation
By: _____________________________
Its: _____________________________
7
Exhibit A
---------
to
ADJUSTABLE RATE PROMISSORY NOTE
-------------------------------
Payment Schedule
Initial payments under this Note will be made monthly in the amount of
$11,653.01. Payee will provide Maker an updated Payment Schedule as provided in
Section 3(a) of the Note.
8
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (the "Security Agreement") is made as of April
__, 1999, by NACO Industries, Inc. a Utah corporation, with principal offices at
000 Xxxx 0000 Xxxxx, Xxxxx, Xxxx 00000 ("Debtor"), in favor of WEBBANK
CORPORATION, a Utah corporation, with offices at 000 Xxxxx Xxxxxx, Xxx. 000,
P.O. Box 1831, Park City, Utah 84060-1831 ("Lender" or "Secured Party").
RECITALS
--------
X. Xxxxxxxx to that certain Loan Agreement of even date herewith by and
between Debtor and Lender (the "Loan Agreement") Lender has advanced a loan to
Debtor (the "Loan"), as evidenced by that certain Adjustable Rate Promissory
Note dated of even date herewith (as amended, modified or restated from time to
time, the "Note"); and
B. It is a condition to Xxxxxx's willingness to make the Loan that
Xxxxxx has entered into this Security Agreement.
AGREEMENT
---------
NOW THEREFORE, to induce Lender to make the Loan, and in consideration
of the mutual covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, Debtor and Xxxxxx hereby agree as follows:
1. Definitions. All capitalized terms not otherwise
defined herein shall have the meaning ascribed to such terms in the Loan
Agreement except as the context requires otherwise. For the purposes of this
Security Agreement, the following terms shall have the following meanings:
a. "Books and Records" means all of Debtor's books
and records, including, but not limited to, records indicating, summarizing, or
evidencing the Collateral, the Secured Obligations, and Debtor's property,
business operations, or financial condition, computer runs, invoices, disks,
cd-roms, tapes, processing software, processing contracts (such as contracts for
computer time and services) and any computer-prepared information, disks,
cd-roms, tapes, or data of every kind and description, whether in the possession
of Debtor or in the possession of third parties.
1
b. "Collateral" means all tangible and intangible
property owned by Debtor or in which Debtor has an interest, whether now owned
or hereafter acquired, including, but not limited to, Xxxxxx's interest now and
in the future in the following types or items of property:
(1) Accounts: All presently owned and
hereafter acquired accounts, accounts receivable, contract rights, bills,
acceptances, and other forms of obligations arising out of the sale, lease or
consignment of goods or the rendition of services by Xxxxxx; together with any
property evidencing or relating to the Accounts (such as guaranties, credit
insurance, Letters of Credit), any security for the Accounts, all Books and
Records relating thereto, and all Proceeds of any of the foregoing, including
returned or reclaimed inventory;
(2) Inventory: All presently owned and
hereafter acquired inventory of every nature, kind, and description, wherever
located, including, without limitation, raw materials, goods, work in process,
finished goods, parts or supplies; all goods and property held for sale or lease
or to be furnished under contracts of service; and all goods and inventory
returned, reclaimed or repossessed, together with all Proceeds of any of the
foregoing;
(3) Equipment: All presently owned and
hereafter acquired equipment, whether or not affixed to realty, including,
without limitation, machines, computers, trucks, trailers, vehicles, goods,
accessories, handling and delivery equipment, fixtures, improvements, office
machines, restaurant equipment and furniture, together with all Proceeds of any
of the foregoing, and all accessions, accessories, replacements and the rights
of the Debtor under any manufacturer's warranties relating to the foregoing;
(4) Chattel Paper: All presently owned and
hereafter acquired chattel paper, including, but not limited to, any writing or
writings which evidence both a monetary obligation and a security interest in or
a lease of specific goods, together with all Proceeds of any of the foregoing;
(5) General Intangibles:All presently owned
and hereafter acquired general intangibles, including, without limitation, any
"general intangible" as that term is defined in the Uniform Commercial Code, any
software products, any personal property, choses in action, causes of action,
designs, plans, goodwill, tax refunds, licenses, franchises, IP Collateral,
trade agreements, customer lists and all rights under license agreements for use
of the same, together with all Proceeds of any of the foregoing;
2
(6) Instruments: All presently owned and
hereafter acquired instruments, including, without limitation, bills of
exchange, notes, and all negotiable instruments, all certificated securities,
all certificates of deposit and any other writing that evidences a right to the
payment of money and is not itself a security agreement or lease and is of a
type that is in the ordinary course of business transferred by delivery with any
necessary endorsement or assignment, together with all Proceeds of any of the
foregoing;
(7) Documents: All presently owned and
hereafter acquired documents, including, but not limited to, documents of title
(as that term is defined in the Uniform Commercial Code) and any and all
receipts, including, but not limited to, receipts of the kind described in
Article 7 of the Uniform Commercial Code, together with all Proceeds of any of
the foregoing;
(8) Letters of Credit: All presently owned
and hereafter acquired letters of credit, including, but not limited to, any
written undertaking to pay money conditioned upon presentation of specified
documents, and advices of letters of credit, together with all Proceeds of any
of the foregoing; and
(9) Proceeds: All presently owned and
hereafter acquired proceeds, as that term is defined in the Uniform Commercial
Code, including, without limitation, whatever is received upon the use, lease,
sale, exchange, collection, any other utilization or any disposition of any of
the Collateral described in this section 1(b), whether cash or non-cash, all
rental or lease payments, accounts, chattel paper, instruments, documents,
contract rights, general intangibles, equipment, inventory, substitutions,
additions, accessions, replacements, products, and renewals of, for, or to such
property and all insurance therefor.
(10) The Escrow Account: All of Debtor's
interest in and to the deposit and escrow account established and maintained
pursuant to that certain Deposit and Escrow Agreement among Debtor, Lender, and
Escrow Agent dated of even date herewith.
c. "Loan Documents" means collectively, the Loan
Agreement, the Note, all credit accommodations, notes, loan agreements,
guarantees, security agreements, mortgages, instruments, pledge agreements,
assignments, acceptance agreements, commitments, facilities, reimbursement
agreements and any other agreements, documents and instruments, now or hereafter
existing, creating, evidencing, guarantying, securing or relating to any or all
of the Secured Obligations, together with all amendments, modifications,
renewals, or extensions thereof.
3
d. "Event of Default" means any Event of Default as
defined in the Loan Agreement which is not cured within the cure period, if any,
provided in the Loan Agreement or any Event of Default as defined in any of the
other Loan Documents, (ii) failure of Debtor to pay any sum due pursuant to any
of the Secured Obligations as and when due, whether by stated maturity, demand,
acceleration or otherwise, or (iii) any breach or violation of any
representation, warranty, covenant or term of this Security Agreement.
e. "IP Collateral" means any and all patents, patent
applications and related filings, trademarks (both registered and unregistered),
trademark applications and related filings, service marks (both registered and
unregistered), service mark applications and related filings, trade names,
know-how and trade secrets, copyrights, copyright registrations and related
filings, computer software, programs and technology, and all other intellectual
property and proprietary rights, and shall include without limitation all of the
Debtor's right, title and interest in and to:
(1) all of its now owned or existing or
hereafter acquired trademarks, service marks, trademark or service mark
applications, whether the foregoing are domestic (state or federal) or foreign,
including, without limitation, each mark, registration, and application listed
on Schedule A, attached hereto and made a part hereof, and (A) renewals thereof,
(B) all income, royalties, damages and payments hereafter due and/or payable
with respect thereto, including, without limitation, damages and payment for
past, present or future infringements thereof, (C) the right to sue for past,
present and future infringements thereof, (D) all rights corresponding thereto
throughout the world, (E) the Trademark License Rights, as hereinafter defined,
(F) trade dress, (G) all customer and other lists related to any of the
foregoing, (H) together in each case with the goodwill of Debtor's business
connected with the use of, and symbolized by any of the foregoing and (I)
Debtor's entire right, title and interest in, to and under all license
agreements with any person or entity, whether Debtor is licensor or licensee
under any such license agreement, including, without limitation, the licenses
listed on Schedule A (the "Trademark License Rights," and together with all
other interests described in this clause (1), the "Trademark Collateral");
(2) all of its now owned or existing, or
hereafter acquired inventions (whether patentable or not), patents and patent
applications, whether the foregoing be domestic or foreign, including without
limitation the inventions and improvements described and claimed therein, those
patents listed on Schedule B which is attached hereto and made a part hereof,
and together with (A) the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, (B) all income, royalties, damages
and payments now or hereafter due and/or payable with respect thereto, including
4
without limitation damages and payments for past, present or future
infringements thereof, (C) the right to sue for past, present and future
infringements thereof, (D) all rights corresponding thereto throughout the
world, and (E) all rights as licensor or licensee with respect to any patents,
patent applications and rights thereto and thereunder, including without
limitation the licenses listed on Schedule B (such rights as licensor or
licensee, collectively, the "Patent License Rights," and together with all other
interests described in this clause (2), the "Patent Collateral"); and
(3) all of its now owned or existing, or
hereafter acquired copyrights, copyright registrations, whether the foregoing be
domestic or foreign, including without limitation each copyright registration
listed on Schedule C which is attached hereto and made a part hereof, and
together with (A) the derivatives thereof, (B) all income, royalties, damages
and payments now or hereafter due and/or payable with respect thereto, including
without limitation damages and payments for past, present or future
infringements thereof, (C) the right to sue for past, present and future
infringements thereof, (D) all rights corresponding thereto throughout the
world, (E) all rights as licensor or licensee with respect to any copyrights,
copyright registrations and rights thereto and thereunder, including without
limitation the licenses listed on Schedule C (such rights as licensor or
licensee, collectively, the "Copyright License Rights," and together with all
other interests described in this clause (3), the "Copyright Collateral");
f. "Secured Obligations" shall mean, collectively,
the principal of and interest on the Loan, the Note, and all other amounts owing
to the Lender by Debtor under, the Loan Agreement, the Loan Documents or
hereunder; and
g. "Uniform Commercial Code" shall mean the Uniform
Commercial Code as in effect in the State of Utah from time to time.
2. Security Interest. As security for the due and
punctual payment and full and complete performance of each of the Secured
Obligations, Debtor hereby grants to Lender for the benefit of the Secured Party
a security interest in and general lien upon all of Debtor's right, title and
interest in and to all the Collateral and any part thereof.
3. Representations and Warranties. Debtor represents and
warrants to Lender for the benefit of the Secured Party, which representations
and warranties shall be continuing representations and warranties until all of
the Secured Obligations are satisfied in full, as follows:
a. Locations. The chief place of business, chief
executive offices and the office(s) where Xxxxxx's records are kept concerning
5
accounts, contract rights and other similar Collateral, and the locations where
its inventories, goods, equipment, fixtures and other similar Collateral are
kept, are as set forth on Schedule D attached hereto, and as set forth on
Schedule D, Borrower either owns such premises free and clear of any mortgage or
other liens and encumbrances, except as set forth on Schedule D, or it leases
such premises from the record owner identified on Schedule D.
b. Trade names. It conducts business under and
through its legal name as set forth on the signature page hereto, and no other
names, except as set forth on Schedule D attached hereto.
c. Authority. Debtor is duly organized and validly
existing and in good standing under the laws of the State of Utah and is
qualified and licensed to do business in those jurisdictions where the conduct
of its business or ownership of its properties requires such qualification.
Debtor has the power and authority to own the Collateral, to enter into and
perform this Security Agreement and any other documents or instruments executed
in connection herewith, and to incur the Secured Obligations.
d. Duly Authorized; Not in Violation of Law. This
Security Agreement and any other documents or instruments executed in connection
herewith have been duly authorized, executed, and delivered, and constitute the
legal, valid, and binding obligations of Debtor, enforceable against Debtor in
accordance with their respective terms. This Security Agreement and any other
documents and instruments executed in connection herewith do not and will not
violate any law, the charter, organizational documents, or by-laws of Debtor, or
any other agreement or instrument to which Debtor or any of its property may be
bound or subject.
e. No Consents Necessary.
---------------------
(1) No consent or approval of any person or
entity, including, without limitation, any debt or equity holder of Debtor, or
of any public authority, is necessary for the valid execution, delivery and
performance of this Security Agreement by Debtor, or any document or instrument
executed in connection herewith.
(2) Except for the recording of this
Security Agreement with the United States Patent and Trademark Office and the
United States Copyright Office (with respect to the Trademark Collateral, the
Patent Collateral and the Copyright Collateral) and the filing of Uniform
Commercial Code financing statements naming Debtor as "debtor" and Lender as
"secured party" in the appropriate filing offices, no authorization, consent,
approval or other action by, and no notice to or filing or recording with, any
governmental, administrative or judicial authority or regulatory body is
currently or is reasonably expected to be required either (A) for the grant by
6
Debtor of the liens and security interests granted hereby or for the execution,
delivery or performance of this Security Agreement by Xxxxxx, or (B) for the
perfection of or the exercise by Xxxxxx of its rights and remedies hereunder.
f. Rights in Collateral.
--------------------
(1) Debtor has the right to grant the
security interests created by this Security Agreement. The Collateral is not
subject to liens, claims or encumbrances, licenses or similar interests except:
(A) as otherwise disclosed on Schedule A (with respect to the Trademark
Collateral), Schedule B (with respect to Patent Collateral) and Schedule C (with
respect to the Copyright Collateral); (B) the liens and encumbrances of Lender
or as is otherwise set forth on Schedule E made a part hereto.
(2) Set forth on Schedule A, Schedule B and
Schedule C are complete and accurate lists of all Trademark License Rights and
other Trademark Collateral and Patent License Rights and other Patent Collateral
and Copyright Rights and other Copyright Collateral respectively, owned by
Debtor.
g. Regarding the IP Collateral.
---------------------------
(1) Each item of Trademark Collateral
identified on Schedule A, each item of Patent Collateral identified on Schedule
B, and each item of Copyright Collateral identified on Schedule C, is subsisting
and has not been adjudged invalid or unenforceable, in whole or in part, and
each such item is, to the best of Debtor's knowledge, validly registered or
registerable and enforceable and subject to no claims or adverse limitations.
Debtor has notified the Lender in writing of: (A) all prior uses of any material
item of Trademark Collateral of which Debtor is aware that could lead to such
items becoming invalid or unenforceable, including prior unauthorized uses by
third parties; (B) any infringement on any proprietary right or default under
any IP Collateral; and (C) prior uses or publications of any material item of IP
Collateral of which Debtor is aware which could lead to Debtor's interest in
such item becoming invalid or unenforceable, including any publication or use
which might place the work in the public domain.
(2) The Trademark License Rights and the
Patent License Rights are in full force and effect and Debtor is not in default
of any of the foregoing License Rights and no event has occurred with notice or
the passage of time, or both, might constitute a material default by Debtor
under the foregoing license rights.
7
h. Materially Misleading Statements.
---------------------------------0
No representation, warranty or statement
made herein, on any Schedule hereto or in any certificate or document furnished
or to be furnished pursuant hereto contains or will contain any untrue statement
of material fact or omits or will omit any fact necessary to make it not
misleading in any material respect.
(1) No Fictitious Names. Debtor does not
operate or issue invoices under any name other than the name(s) set forth on the
signature page hereof.
4. Further Assurances; Filing.
a. Delivery of Documents; Inspection of
Collateral. At any time and from time to time, upon the demand of Lender, Debtor
will, at Debtor's expense: (i) immediately deliver and pledge to Lender for the
benefit of the Secured Party, properly endorsed to Lender and/or accompanied by
such instruments of assignment and transfer in such form and substance as Lender
may request, any and all instruments, documents, and/or chattel paper as Lender
may specify in demand; (ii) give, execute, deliver, file, and/or record any
notice, statement, instrument, assignment, document, agreement, or other papers
that may be necessary or desirable, or that Lender may request, in order to
create, preserve, perfect, or validate any security interest granted pursuant
hereto or intended to be granted hereunder or to enable Lender to exercise or
enforce for the benefit of the Secured Party its rights hereunder or with
respect to such security interest; (iii) keep, stamp, or otherwise mark any and
all documents, Instruments, Chattel Paper, and its Books and Records relating to
the Collateral in such manner as Lender may reasonably require; and/or (iv)
permit representatives and agents of Lender access to its premises at any time
reasonably requested by Xxxxxx to inspect the Collateral and the Books and
Records and to audit and make abstracts from the Books and Records.
b. Filing of Financing Statement. At the sole
option of Lender, and without Debtor's consent, Lender may file a carbon,
photographic or other reproduction of this Security Agreement or any financing
statement executed pursuant hereto as a financing statement in any jurisdiction
so permitting or as a registration of Xxxxxx's interest as to any of the IP
Collateral in any office so permitted. Without the prior written consent of
Lender, Debtor will not file or authorize or permit to be filed in any
jurisdiction any such financing or like statement in which Lender is not named
as the sole secured party.
c. Lender Collateral Custody Duties. With
respect to the Collateral, or any part thereof, which at any time may come into
the possession, custody or under the control of Lender or any of its agents,
8
associates or correspondents, Xxxxxx hereby acknowledges and agrees that the
sole duty of Lender with respect to the custody, safekeeping and physical
preservation of such Collateral, whether pursuant to Section 9-207 of the
Uniform Commercial Code or otherwise, shall be to deal with it in the same
manner as it deals with similar property for its own account. Neither Lender,
nor any of its directors, officers, employees, affiliates, agents, associates or
correspondents shall be liable for failure to demand, collect or realize upon
any of the Collateral or for any delay in doing so.
5. Covenants. Debtor hereby covenants and agrees that
for as long as any Secured Obligations are outstanding:
a. Defense of Collateral. Debtor shall defend the
Collateral against all claims and demands of all persons or entities at any time
claiming any interest therein other than those of Lender.
b. Notice of Changes in Location of Chief Executive
Office, Residence, Books and Records, Collateral. Debtor shall provide Lender
with immediate written notice of: (i) any intended change in the chief executive
office or residence of Debtor, and/or the office where Debtor maintains its
Books and Records; (ii) the location or movement of any Collateral, excluding
movement of motor vehicles in the normal course of business to or at an address
other than Debtor's address as set forth on the signature page hereof; and (iii)
the creation or acquisition of any additional IP Collateral. If any such new
location is on leased or mortgaged premises, then Debtor will furnish Lender,
prior to the effective date of any such change, with landlord's or mortgagee's
waivers pertaining to such premises in form and substance satisfactory to Lender
in its sole discretion.
c. Prompt Payment of Taxes; Delivery to Lender of
Proof of Payment. Debtor shall promptly pay any and all taxes, assessments,
and/or governmental charges upon the Collateral on the dates such taxes,
assessments, and/or governmental charges are due and payable, except to the
extent that such taxes, assessments, and/or charges are contested in good faith
by Debtor by appropriate proceedings and for which Debtor is maintaining
adequate reserves. Upon request of Xxxxxx, Debtor shall deliver to Lender such
receipts and other proofs of payment as Lender may reasonably request.
d. Delivery of Instruments, Chattel Paper and
Documents of Title. Immediately upon receipt of any and all Instruments, Chattel
Paper, and/or documents of title (including bills of lading and warehouse
receipts), Debtor shall deliver such Collateral to Lender and shall execute any
form of assignment or endorsement reasonably requested by Xxxxxx with respect
thereto.
9
e. Notice of Adverse Changes, Events of Default,
Seizures and Institution of Litigation. Debtor shall immediately notify Lender
of: (i) the occurrence of any event or circumstance that is reasonably likely to
result in a Material Adverse Change (as defined in the Loan Agreement),
including, without limitation, any loss of or damage to any Collateral; (ii) the
occurrence of an Event of Default; (iii) any seizure of the Collateral; (iv) any
claim or alleged claim of third parties to the Collateral that, either singly or
in the aggregate, is reasonably likely to have a Material Adverse Change
(including, without limitation, any loss of or damage to any Collateral); and
(v) the institution of any litigation, arbitration, governmental investigation
or administrative proceedings against or affecting Debtor or any of the
Collateral that, if adversely determined, is reasonably likely, either singly or
in the aggregate, to result in an Event of Default or to have a Material Adverse
Change.
f. Insurance. Debtor shall maintain insurance at all
times with respect to the Collateral (including all risk-extended coverage)
against the risks of fire, theft and such other risks, including, without
limitation, liability, errors and omissions and business interruption, as Lender
may require, containing such terms, in such form and amounts, for such periods
and written by such companies as are acceptable to Lender in its reasonable
discretion. All such policies of insurance shall name Lender for the benefit of
the Lender as lender/loss payee and shall provide for not less than thirty (30)
days' prior written notice to Lender of intended cancellation or reduction in
coverage. Upon request of Xxxxxx, Debtor shall furnish Lender with certificates
or other evidence satisfactory to Lender of compliance with the foregoing
insurance provisions. Lender shall have the right (but shall be under no
obligation) to pay any of the premiums on such insurance and all such payments
made by Lender shall become part of the Secured Obligations and be considered an
advance at the highest rate of interest provided for in the Loan Documents.
Debtor expressly authorizes its insurance carriers to pay proceeds of all
insurance policies covering all or any part of the Collateral directly to
Lender.
g. Disposition of Collateral. Debtor shall not
license, sell, offer to sell, otherwise assign or permit the involuntary
transfer of, or disposition of the Collateral or any interest therein, without
the prior written consent of Lender; provided, however, that unless, following
(i) a demand for payment under the Loan Agreement or Note, or (ii) the
occurrence of an Event of Default, or (iii) Lender or any Lender notifies Debtor
otherwise, Debtor may sell its Inventory or grant nonexclusive licenses in the
ordinary course of its business.
h. Security Interests in Collateral. Debtor shall
keep the Collateral free from any lien, security interest or encumbrance except
10
(i) those set forth on Schedule E hereto and (ii) those in favor of Lender, in
good order and repair, reasonable wear and tear excepted, and will not waste or
destroy the Collateral or any part thereof. If reasonably requested by Xxxxxx,
Debtor shall give notice of Xxxxxx's security interests in the Collateral to any
third person with whom Xxxxxx has any actual or prospective contractual
relationship or other business dealings.
i. Collateral Not to Be Used in Violation of Laws.
Debtor shall not use the Collateral or any of its property in violation of any
law, statute, regulation, or ordinance.
j. Compliance with Laws. Debtor shall continue to be
in compliance with all applicable laws, statutes, rules, and regulations.
k. Maintenance, Inspection of Books and Records.
Debtor shall maintain complete and accurate Books and Records in accordance with
generally accepted accounting principles in effect in the United States from
time to time, and shall make all necessary entries therein to reflect the costs,
values and locations of its Inventory and Equipment and the transactions giving
rise to its Accounts and all payments, credits and adjustments thereto. Debtor
shall keep Lender fully informed as to the location of all such Books and
Records and shall permit Lender and its authorized agents to have full, complete
and unrestricted access thereto at all reasonable times to inspect, audit and
make copies of any and all such Books and Records, at Xxxxxx's sole expense.
Xxxxxx's rights hereunder shall be enforceable at law or in equity, and Debtor
consents to the entry of judicial orders or injunctions enforcing specific
performance of such obligations hereunder.
l. Assignment of United States Accounts. If any of
the Accounts arise out of contracts with the United States or any of its
departments, agencies or instrumentalities, Debtor shall immediately notify and
identify same to Lender, and shall promptly execute and deliver to Lender for
the benefit of the Secured Party an assignment of claims for such Accounts in a
form reasonably acceptable to Lender, and shall take all steps deemed necessary
or desirable by Lender to protect Xxxxxx's interest therein under the Federal
Assignment of Claims Act or any similar law or regulation.
m. Maintenance and Inspection of Equipment and
Inventory. With respect to Equipment and Inventory, Debtor shall: (i) keep
accurate books and records with respect thereto, including, without limitation,
maintenance records and current stock, and cost and sales records accurately
itemizing the types and quantities thereof; (ii) upon request, deliver to Lender
all evidence of ownership in such Collateral, including certificates of title
11
with Xxxxxx's interests appropriately noted on the certificate; (iii) permit
Lender and its authorized agents to inspect any or all of the Inventory and
Equipment at all reasonable times; and (iv) preserve the Inventory and Equipment
in good condition and repair, and pay the cost of all replacement parts, repairs
to and maintenance of the Inventory and Equipment.
n. Assignment of Accounts. Following (i) demand for
payment under the Loan Agreement or Note, or (ii) the occurrence of an Event of
Default, and upon request by Xxxxxx, Debtor shall promptly give Lender
assignments, in a form acceptable to Lender, of all Accounts, all original and
other documents evidencing a right to payment of Accounts, financial statements,
agings, reports, lists of account debtors, copies of purchase orders, invoices,
contracts, shipping and delivery receipts and such other data concerning the
Accounts as Lender may request. Debtor agrees that Lender and its authorized
agents shall at all times have the right to confirm orders and to verify any or
all of the Accounts in Lender's name, or in any fictitious name used by Lender
for verifications.
o. Continuing of Perfected Status of Collateral.
(1) Debtor agrees to cooperate and join, at
its expense, with Xxxxxx in taking such steps as are necessary, in the
reasonable judgment of Xxxxxx, to perfect or continue the perfected status of
the security interests granted herein, including, without limitation, the
execution and delivery of any financing statements, amendments thereto and
continuation statements, the delivery of Chattel Paper, Documents or Instruments
to Lender, the obtaining of landlords' and mortgagees' waivers required by
Xxxxxx, the notation of encumbrances in favor of Lender on certificates of
title, prompt registration of all copyrights with the United States Copyright
Office, prompt registration of all trademarks with the United States Patent and
Trademark Office, and the execution and filing of any collateral assignments and
any other Instruments requested by Lender to perfect its security interests in
any and all of Debtor's patents, trademarks, service marks, trade names,
copyrights and other General Intangibles including, without limitation, with
respect to the issuance of any patents pursuant to any now pending or future
patent applications. Lender is expressly authorized to file financing statements
without Debtor's signature.
(2) Following indefeasible payment in full
of all Secured Obligations, Xxxxxx agrees to cooperate and join, at Xxxxxx's
expense, in executing and delivering all documents and taking all actions as are
necessary to release and terminate Xxxxxx's security interests in and
assignments of the Collateral.
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p. Joinder by Subsidiaries. Xxxxxx agrees to cause
any and all subsidiaries that may be acquired at any time during the term of
this Security Agreement to sign a joinder to this Security Agreement.
6. General Authority.
a. Xxxxxx as Attorney-in-Fact. Debtor hereby
irrevocably appoints Xxxxxx (and any of its attorneys, officers, employees, or
agents) as its true and lawful attorney-in-fact, said appointment being coupled
with an interest, with full power of substitution, in the name of Xxxxxx,
Lender, or otherwise, for the sole use and benefit of Lender in its sole
discretion, but at Debtor's expense, to exercise, to the extent permitted by
law, in Xxxxxx's name or in the name of Debtor or otherwise, the powers set
forth herein, whether or not any of the Secured Obligations are due, such
powers, including, but not limited to, the powers at any time following demand
for payment under the Loan Agreement or Note, or the occurrence of an Event of
Default: (i) to endorse the name of Debtor upon any instruments of payment,
invoice, freight, or express bill, bill of lading, storage, or warehouse receipt
relating to the Collateral; (ii) to demand, collect, receive payment of, settle,
compromise or adjust all or any of the Collateral; (iii) to sign and file one or
more financing statements naming Debtor as debtor and Lender, as secured party
and indicating therein the types or describing the items of Collateral herein
specified; (iv) to correspond and negotiate directly with insurance carriers to
the extent necessary to provide Lender with the benefit of the rights granted
pursuant to Section 5(f) hereof; (v) to sign and record one or more assignments
or other instruments in favor of Lender to transfer ownership of any IP
Collateral to Lender; and (vi) to execute any notice, statement, instrument,
agreement, or other paper that Lender may require to create, preserve, perfect,
or validate any security interest granted pursuant hereto or to enable Lender to
exercise or enforce its rights hereunder or with respect to such security
interest.
b. Liability of Lender as Attorney-in-Fact. Neither
Lender nor its attorneys, officers, employees, or agents shall be liable for
acts, omissions, any error in judgment or mistake in fact in its/their capacity
as attorney-in-fact. Debtor hereby ratifies all acts of Lender as its
attorney-in-fact other than as a result of the gross negligence or willful
misconduct of Lender. This power, being coupled with an interest, is irrevocable
until the Secured Obligations have been fully satisfied. Lender shall not be
required to take any steps necessary to preserve any rights against prior
parties with respect to any of the Collateral.
c. Effect of Extensions and Modifications. Lender may
extend the time of payment, arrange for payment in installments or otherwise
13
modify the terms of, or release, any of the Collateral, without thereby
incurring responsibility to, or discharging or otherwise affecting any liability
of, Debtor.
7. Remedies.
a. Acceleration of Secured Obligations; General
Rights of Lender. Upon the occurrence of an Event of Default, at Xxxxxx's sole
option, all Secured Obligations shall immediately become due and payable in
full, all without protest, presentment, demand or further notice of any kind to
Debtor, all of which are expressly waived. Upon and following an Event of
Default, Lender may, at its option, exercise any and all rights and remedies it
has under this Security Agreement, any other Credit Document and/or applicable
law, including, without limitation, the right to charge and collect interest on
the principal portion of the Secured Obligations at a rate equal to the highest
rate allowed by law, such rate of interest to apply to the Secured Obligations,
at Xxxxxx's option, both before and after an Event of Default, maturity (whether
by acceleration or otherwise) and entry of a judgment in favor of Xxxxxx for the
benefit of the Secured Party with respect to any or all of the Secured
Obligations.
b. Right of Set-off. Upon the occurrence of an Event
of Default, Lender shall have the right, without notice to Debtor and regardless
of the adequacy of the Collateral for the Secured Obligations or other means of
obtaining repayment of the Secured Obligations, and is specifically authorized
hereby to apply toward and set-off against and apply to the then unpaid balance
of the Secured Obligations any items or funds held by Lender including, without
limitation, any and all deposits (whether general or special, time or demand,
matured or unmatured) or any other property of Debtor, including, without
limitation, securities, now or hereafter maintained by Debtor for its own
account with Xxxxxx and any other indebtedness at any time held or owing by
Lender to or for the credit or the account of Debtor, even if effecting such
set-off results in a loss or reduction of interest or the imposition of a
penalty applicable to the early withdrawal of time deposits. For such purpose,
Lender shall have, and Debtor hereby grants to Lender, a first lien on and
security interest in such deposits, property, funds and accounts and the
proceeds thereof. Such right of set- off shall exist whether or not Lender shall
have made any demand under any Credit Document, or any other document executed
in connection therewith, and whether or not the Secured Obligations are matured
or unmatured.
c. Additional Rights and Remedies. In addition to the
rights and remedies available to Lender as set forth above and any other rights
or remedies available to Lender under applicable law, upon the occurrence of an
Event of Default hereunder, or at any time thereafter, Lender may at its option,
immediately and without notice, do any or all of the following, which rights and
14
remedies are cumulative, may be exercised from time to time, and are in addition
to any rights and remedies available to Lender under any other agreement or
instrument by and between Debtor and Lender:
(1) Exercise any and all of the rights and
remedies of a secured party under the Uniform Commercial Code, including,
without limitation, the right to require Debtor to assemble the Collateral and
make it available to Lender at a place reasonably convenient to the parties;
(2) Operate, utilize, recondition and/or
refurbish any of the Collateral for the purpose of enhancing or preserving the
value thereof by any means deemed appropriate by Xxxxxx, in its reasonable
discretion, including, without limitation, converting raw materials and/or
work-in-process into finished goods;
(3) Notify the account debtors for any of
the Accounts to make payment directly to Lender, or to such post office box as
Lender may direct;
(4) Demand, sue for,collect or retrieve any
money or property at any time payable, receivable on account of or in exchange
for, or make any compromise, or settlement deemed desirable with respect to any
of the Collateral;
(5) Notify the post office authorities to
change the address for delivery of Debtor's mail to an address designated by
Lender and to receive, open, and distribute all mail addressed to Debtor,
retaining all mail relating to the Collateral and forwarding all other mail to
Debtor; and/or
(6) Upon seven (7) calendar days' prior
written notice to Debtor or one (1) day's notice by telephone with respect to
Collateral that is perishable or threatens to decline rapidly in value, which
Debtor hereby acknowledges to be sufficient, commercially reasonable and proper,
Lender may sell, lease or otherwise dispose of any or all of the Collateral at
any time and from time to time at public or private sale, with or without
advertisement thereof, and apply the proceeds of any such sale first to Lender's
expenses in preparing the Collateral for sale (including reasonable attorneys'
fees) and second to the complete satisfaction of the Secured Obligations in any
order deemed appropriate by Xxxxxx in its sole discretion. Debtor waives the
benefit of any marshaling doctrine with respect to Xxxxxx's exercise of its
rights hereunder. Lender or anyone else may be the purchaser of any or all of
the Collateral so sold and thereafter hold such Collateral absolutely, free from
any claim or right of whatsoever kind, including any equity of redemption of
Debtor any such notice, right and/or equity of redemption being hereby expressly
waived and released.
15
8. Grant of License to Use Intangibles. In addition to
the grant of a security interest in the IP Collateral hereinbefore provided, for
the purposes of enabling Lender to exercise its rights and remedies hereunder at
such time as Lender, without regard to this Section 8, shall be lawfully
entitled to exercise such rights and remedies, the Debtor hereby grants to
Lender an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Debtor, provided that the actual proceeds
received by Lender of any use or sale of Lender's rights under such license
shall be applied to the Secured Obligations) to use, assign or sublicense any of
the IP Collateral, now owned or hereafter acquired by Debtor, and wherever the
same may be located, including in such license reasonable access to all media in
which any of the licensed items may be recorded or stored, all computer software
and programs and all source code and object code relating to such computer
software and programs.
9. Miscellaneous.
a. Remedies Cumulative; No Waiver. The rights, powers
and remedies of Lender provided in this Security Agreement and any of the other
Loan Documents are cumulative and not exclusive of any right, power or remedy
provided by law or equity. No failure or delay on the part of Lender or either
of them in the exercise of any right, power or remedy shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or remedy
preclude any other or further exercise thereof, or the exercise of any other
right, power or remedy.
b. Notices. All notices, requests, demands and other
communications which are required or permitted to be given under this Agreement
will be in writing and will be deemed to have been duly given if (i) delivered
in person, or (ii) mailed, first class certified, registered or express mail,
return receipt requested and postage prepaid, or (iii) sent by recognized
overnight courier, with proof of delivery requested and charges prepaid, to:
If to Debtor:
NACO Industries, Inc.
000 Xxxx 0000 Xxxxx
Xxxxx, Xxxx 00000
16
If to Lender:
WebBank Corporation
000 Xxxxx Xxxxxx, Xxxxx 000
P.O. Box 1831
Park City, Utah 84060-1831
with a copy to:
Xxxxxxx X. Xxxxxxxx
Xxxx Xxxxxxxx Brown Gee & Xxxxxxxx
000 Xxxxx Xxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
Facsimile: (000) 000-0000
or to such other address as a party may specify by written notice to the other
parties.
c. Costs and Expenses. Whether or not the
transactions contemplated by this Security Agreement and the other Loan
Documents are fully consummated, Debtor shall promptly pay (or reimburse, as
Lender may elect) all costs and expenses that Lender may hereafter incur in
connection with the perfection and enforcement of the Loan Documents, the
collection of all amounts due under the Loan Documents, and all amendments,
modifications, consents or waivers, if any, to the Loan Documents. Such costs
and expenses shall include, without limitation, the reasonable fees and
disbursements of counsel to Lender, the costs of appraisals, searches of public
records, costs of filing and recording documents with public offices, internal
and/or external audit and/or examination fees and costs, stamp, excise and other
taxes, the reasonable fees of Lender's accountants, consultants or other
professionals, costs and expenses from any actual or attempted sale of all or
any part of the Collateral, or any exchange, enforcement, collection,
compromise, or settlement of any of the Collateral or receipt of the proceeds
thereof, and for the care and preparation for sale of the Collateral (including
insurance costs) and defending and asserting the rights and claims of Lender in
respect thereof, by litigation or otherwise. Xxxxxx's reimbursement obligations
under this Section 9 shall survive any termination of the Loan Documents.
d. Governing Law. This Security Agreement shall be
construed in accordance with and governed by the substantive laws of the State
of Utah without reference to conflict of laws principles provided that as to
Collateral located in any jurisdiction other than Utah, the Lender shall have
all the rights to which a secured party under the laws of such jurisdiction is
entitled.
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e. Integration. This Security Agreement and the other
Loan Documents constitute the sole agreement of the parties with respect to the
subject matter hereof and thereof and supersede all oral negotiations and prior
writings with respect to the subject matter hereof and thereof.
f. Amendment; Waiver. No amendment of this Security
Agreement, and no waiver of any one or more of the provisions hereof shall be
effective unless set forth in writing and signed by the parties hereto.
g. Successors and Assigns. This Security Agreement
(i) shall be binding upon Debtor and Lender and, where applicable, their
respective heirs, executors, administrators, successors and permitted assigns,
and (ii) shall inure to the benefit of Debtor and Xxxxxx and, where applicable,
their respective heirs, executors, administrators, successors and permitted
assigns; provided, however, that Debtor may not assign its rights hereunder or
any interest herein without the prior written consent of Lender, in its sole
discretion, and any such assignment or attempted assignment by Xxxxxx shall be
void and of no effect with respect to Lender.
h. Severability. The illegality or unenforceability
of any provision of this Security Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the legality or
enforceability of the remaining provisions of this Security Agreement or any
instrument or agreement required hereunder. In lieu of any illegal or
unenforceable provision in this Security Agreement, there shall be added
automatically as a part of this Security Agreement a legal and enforceable
provision as similar in terms to such illegal or unenforceable provision as may
be possible.
i. Headings. The headings of sections and paragraphs
have been included herein for convenience only and shall not be considered in
interpreting this Security Agreement.
[Remainder of Page Left Blank Intentionally]
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IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement on this date above first written.
NACO INDUSTRIES, INC.,
a Utah corporation
--------------------------------
By:
Its:
WEBBANK CORPORATION,
a Utah Corporation
--------------------------------
By:
Its:
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Schedule A
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Trademarks, Service Marks or Service Mark Applications
20
Schedule B
----------
Patents and Patent Applications
21
Schedule C
----------
Copyrights and Copyright Registrations
22
Schedule D
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Debtor Places of Business and Location of Collateral
NACO Industries, Inc.
000 Xxxx 0000 Xxxxx
Xxxxx, Xxxx 00000
NACO Industries, Inc.
0000 Xxxx Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxx 00000
NACO Industries, Inc.
0000 Xxxxxx Xxxxxx
Xxxx, Xxxxxxxxxx 00000
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Schedule E
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Liens or Encumbrances on Collateral
24
