EXHIBIT 4a
SUBORDINATED CAPITAL NOTE
Date: October 31, 1996 Amount $77,500.00
Final Installment Due Date: October 31, 2001
1. Promise to Pay. The undersigned promises to pay to the order of
Gary A. Herder (the "Lender"), at 5944 East Kilgore Road, Kalamazoo, Michigan
49001, the sum of Seventy-Seven Thousand Five Hundred and No/100 U.S. Dollars
($77,500.00) and to pay interest on the unpaid balance at the rate of 12% per
annum until this Note becomes due, whether by default or maturity.
Interest on the unpaid balance of this Note shall be payable in
quarter annual installments commencing January 31, 1997 and on the last day of
each April, July, October and January thereafter, until October 31, 2001 on
which date the entire unpaid balance of principal and interest shall be due
and payable in full.
The Lender may charge a late charge equal to 1 1/2% of each
installment which is received by the Lender more than ten (10) days after such
payment is due under the terms of this Note. If any payment applied by the
Lender to this Note is subsequently set aside, recovered, rescinded or
otherwise required to be returned or disgorged by the Lender for any reason
(pursuant to bankruptcy proceedings, fraudulent conveyance statutes, or
otherwise), this Note shall be deemed to have continued in existence,
notwithstanding the application, and this Note shall be enforceable as to the
amount of such payment as fully as if the Lender had not received and applied
the payment.
2. Prepayment. Except as set forth in Section 3 below, this Note
may be prepaid in whole or in part at any time, without premium or penalty,
and in the case of prepayment of less than all the outstanding principal and
interest of this Note, the prepayment shall be applied first to accrued and
unpaid interest and then to principal; provided, however, that any prepayment
of principal shall be prorated among the principal debt outstanding for all
Subordinated Notes issued by the undersigned on the date hereof in the
aggregate principal amount of $680,000.
3. Subordination and Cancellation. The indebtedness evidenced by
this Note, principal and interest, shall be subordinate and junior in right to
payment to the extent set forth in this Section 3 to all principal and
interest of all indebtedness and obligations of the undersigned PRAB, INC.
(the "Company") whether outstanding at the date hereof or created or incurred
after the date hereof, including, but not limited to, indebtedness and
obligations arising out of loans, accounts payable, and all contractual
obligations of the Company (the "Senior Debt"); provided that for purposes of
this Section 3, Senior Debt does not include the indebtedness and obligations
of the undersigned to FMB-Arcadia Bank whether such indebtedness is
outstanding at the date hereof or created or incurred after the date hereof
(the "Bank Debt"). The indebtedness evidenced by this Note has been
subordinated in right of payment to the Bank Debt pursuant to the terms of a
Subordination Agreement from the Company and the Lender to FMB-Arcadia Bank of
even date herewith. Any transferee of this Note takes this Note subject to the
provisions of such Subordination Agreement which imposes certain restrictions
on payment of this Note.
a. Interest Payments. The Lender and any subsequent holder
hereof (collectively the "Payees"), shall have the right (subject to
Sections b and j below) to enforce payment of all interest when due
under this Note; provided that the Payees hereby agree not to
accelerate payment of this Note upon occurrence of any event of
default hereunder, until all Senior Debt has been paid in full.
b. Liquidation, Etc. Upon any distribution of all or
substantially all of the Company's assets prior to payment of all
principal due under this Note in accordance with the provisions of
Section c below, whether by reason of sale, reorganization,
liquidation, dissolution, arrangement, bankruptcy, receivership,
assignment for the benefit of creditors, foreclosure or otherwise,
holders of Senior Debt (the "Senior Debt Holders") shall be entitled
to receive payment in full for the Senior Debt before any payment on
account of principal or interest is made upon this Subordinated Note.
c. Payment of Principal. Notwithstanding anything to the
contrary contained herein, the principal amount due under this Note
may be paid by the Company to the Payees (whether as a prepayment or
on and after maturity on October 31, 2001) if, and only if, at the
time of each such payment of principal, such payment could lawfully be
made by the Company as a distribution to its shareholders pursuant to
Section 345 of the Michigan Business Corporation Act (MCLA ss.
450.1345)
d. Receipt of Certain Payments. In the event the Payees shall
receive any payment with respect to this Subordinated Note that they
are not entitled to retain pursuant to Sections b and c, such payment
shall be immediately paid by the Payees to the Company and, until so
delivered, shall be held in trust by the Payees on behalf of the
Company.
e. Transfer. The Payees shall not assign this Subordinated Note
without having first delivered to the Company prior written notice of
any assignment and an acknowledgement and agreement of the assignee to
be bound by the terms and provisions of this Section 3.
f. Continuing Subordination. This Section 3 shall constitute a
continuing agreement of subordination, and any Senior Debt Holder may,
without notice to the Payees, lend monies, extend credit and make
other financial accommodations to or for the account of the Company.
g. Further Agreements with the Company. Any Senior Debt Holder,
at any time and from time to time, may enter into such agreement or
agreements with the Company as such holder may deem proper extending
the time of payment or renewing or otherwise altering the terms of all
or any Senior Debt or affecting any security or guaranty underlying
any or all of such indebtedness, or may exchange, sell or surrender or
otherwise deal with any security, or may release any balance of funds
of the Company, without notice to the Payees and without in any way
impairing of affecting the subordination provided in this Section 3.
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h. No Waiver. A Senior Debt Holder's delay in or failure to
exercise any right or remedy shall not be deemed a waiver of any
obligation of the Payees or right of such holder. This Section 3 may
be modified, or any Senior Debt Holder's rights hereunder waived, only
by agreement in writing signed by the Senior Debt Holders, the
undersigned and the Payees.
i. Benefit. This Section shall inure to the benefit of the
successors and assigns of all Senior Debt Holders and bind the
successors, heirs, legal representatives, and assigns of the Payees.
j. Cancellation of Debt. In the event any judgment, order, or
finding is issued by any federal, state, or bankruptcy court of
competent jurisdiction determining that all or any part of the
"Acquisition Transactions" (as defined below) constituted a
"Fraudulent Transfer" (as defined below), then: (i) this Note shall be
discharged, void and unenforceable; (ii) all amounts paid by the
Company to the Payees pursuant to the terms of this Note shall be
immediately returned by the Payees to the Company; and (iii) the
Company shall have no obligation to pay any amounts to the Payees
arising from the indebtedness and loans evidenced by this Note. The
term "Acquisition Transactions" means, the transactions arising out of
or relating to the purchase by the Company of stock of the Company
from the State of Michigan Retirement Systems as contemplated by a
Stock Purchase and Sale Agreement of even date herewith; the issuance
of this Note by the Company; and the indebtedness incurred by the
Company to FMB-Arcadia Bank and the granting of liens in the Company's
property to FMB-Arcadia Bank to secure such indebtedness. The term
"Fraudulent Transfer" means: a conveyance determined to be fraudulent
under the Michigan Uniform Fraudulent Conveyance Act (MCLA ss. 566.11
et seq.); any transfer which may be avoided pursuant to Section 548 of
the Bankruptcy Code (11 U.S.C. ss. 548); any other conveyance
determined to be fraudulent as to creditors of the Company under any
existing or future federal or state statute; or a "distribution"
prohibited by Section 345 of the Michigan Business Corporation Act
(MCLA ss. 450.1345).
4. Default. Occurrence of any of the following events shall be an
"Event of Default" under this Note: (a) non-payment when due of any payment
due under this Note if such non-payment continues for ten (10) days; (b)
failure of the undersigned to comply with any material term of any agreement
between the undersigned and the Lender; (c) the undersigned becomes insolvent
or unable to pay debts as they mature or makes an assignment for the benefit
of creditors or any proceeding is instituted by or against the undersigned
under any bankruptcy, insolvency or similar laws or any judgment is entered or
any writ of attachment, garnishment or execution or tax lien is issued or
levied against the undersigned or any of its properties; (d) any material
indebtedness of the undersigned becomes due by reason of default and/or
acceleration of the maturity thereof; (e) dissolution, merger, or
consolidation of the undersigned; or (f) cessation of the normal business
operations of the undersigned.
5. Remedies on Default. Upon occurrence of an Event of Default:
(a) this Note shall, at the Lender's option, be immediately due and payable
without demand or notice; and (b) the Lender may exercise any right and
remedies granted to it by this Note or otherwise available to the Lender under
applicable law. The undersigned agrees to pay all expenses of
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the Lender, including reasonable attorneys' fees incurred by the Lender, in
seeking collection of this Note (including participating or taking action in
any bankruptcy or other insolvency proceeding of the undersigned).
6. Waivers. The undersigned waives demand, presentment, notice
of dishonor and protest and consents to: (a) any extension or postponement of
the time for payment; and (b) any renewal of this Note or indulgences granted
by the Lender with respect to enforcement of its terms.
7. Miscellaneous. All persons signing this Note on behalf of a
corporation warrant to the Lender that they are duly and properly authorized
to execute this Note and that the proceeds will be used by the entity for
business purposes. Nothing in this Note shall waive or restrict any right of
the Lender granted in any other document or by law. No delay on the part of
the Lender in the exercise of any right or remedy shall operate as a waiver.
No single or partial exercise by the Lender of any right or remedy shall
preclude any other future exercise of that right or remedy or the exercise of
any other right or remedy. The terms and conditions of this Note may not be
amended, waived or modified except in a writing signed by the Lender expressly
stating that the writing constitutes an amendment, waiver, or modification of
the terms of this Note. A waiver on one occasion shall not be construed as a
waiver of that term on any future occasion. Acceptance of partial or late
payments owing on this Note at any time shall not be deemed a waiver of any
default. All rights, remedies and security granted to the Lender herein are
cumulative and in addition to other rights, remedies or security which may be
granted elsewhere or by law. Whenever possible, each provision of this Note
shall be interpreted in such manner as to be effective and valid under
applicable law. If any provision hereof shall be declared invalid or illegal
it shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of the provision or the remaining
provisions of this Note. Any reference to the Lender shall include any holder
of this Note and any holder shall succeed to the Lender's rights. This Note
shall bind the successors and assigns of the undersigned. The undersigned
agrees that any action for enforcement of this Note may be brought in any
municipal or state court in Kalamazoo County, Michigan, having jurisdiction of
the subject matter; it consents to personal jurisdiction over it by such
courts; and it consents to venue in such courts. This Note has been executed
in Michigan and is governed by Michigan law.
Borrower's Address: Borrower:
5944 East Kilgore Road PRAB, INC., a Michigan corporation
Kalamazoo, MI 49001
By: /s/ Gary A. Herder
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Gary A. Herder
Its: President
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