EXHIBIT 10.47
AMENDMENT AND FORBEARANCE AGREEMENT
Amendment and Forbearance Agreement dated June __, 2001 among Standard
Federal Bank ("Standard Federal" or "Lender"), McClain Industries, Inc.
("Industries"), McClain E-Z Pack, Inc. ("E-Z Pack"), McClain Galion, Inc.
("Galion"), Shelby Steel Processing Company ("Shelby"), McClain Tube Company
d/b/a Quality Tube ("Tube"), McClain International FSC ("International"),
McClain Southland Co. ("Southland"), and McClain Group Leasing, Inc.
("Leasing"). Industries, E-Z Pack, Galion, Shelby, Tube, International,
Southland and Leasing are identified collectively as the "Borrowers" and
individually as a "Borrower"; Industries, in its capacity as guarantor, is
identified as the "Guarantor"; and (3) the Borrowers and the Guarantor are
identified collectively as the "Obligated Parties" and individually as an
"Obligated Party".
RECITALS
THE INDEBTEDNESS
A. Lender provided loans to Borrowers (collectively, the "Loans").
B. In connection with the Loans, each Borrower and, as applicable, the
Guarantor executed and delivered to Lender certain notes, agreements, mortgages,
guaranties and other documents executed in connection with or in furtherance of
any of the foregoing, including all documents referenced herein or executed in
connection herewith, as amended and as may be amended from time to time,
including as amended by this Agreement, but exclusive of all present or future
oral agreements between Lender and any one of the Obligated Parties, are
identified collectively as the "Loan Documents".
C. Capitalized terms used but not defined in this Agreement have the
same meanings given to those terms in the Loan Documents.
D. As of June 15, 2001 amounts due from Borrowers to Lender include:
BORROWER LOAN PRINCIPAL INTEREST
-------- ---- --------- --------
Borrowers $30,000,000 Line of Credit $26,364,921.00 $58,450.86
(all except Leasing)
Borrowers $20,000,000 Term Loan $13,880,000.00 $29,687.78
(all except Leasing)
Leasing $20,000,000 Line of Credit $18,378,000.00 $39,815.81
plus in each case accrued but unpaid interest, costs and expenses
(including attorneys' fees) called for by the Loan Documents plus reimbursement
obligations of the Obligated Parties in connection with Letters of Credit issued
by Standard Federal upon application of an Obligated Party (all such obligations
together with all other principal and interest due or becoming due to Lender,
together with the payment of all other sums, indebtedness and liabilities of any
and every kind now or hereafter owing and to become due from Borrowers to
Lender, however
1
created, however incurred, evidenced, acquired or arising, and whether direct or
indirect, primary, secondary, fixed or contingent, matured or unmatured, joint,
several, or joint and several, and whether for principal, interest,
reimbursement obligations, indemnity obligations, obligations under guaranty
agreements, fees, costs, expenses, or otherwise, all of Borrowers' obligations
under this Agreement, together with all other present and future obligations of
Borrower to Lender, are identified as the "Obligations").
E. The Obligations of Leasing are guaranteed by Industries. The
Guaranty, as amended, and all other documents and agreements executed in support
of the Guaranty by the Guarantor, in its capacity as guarantor, are identified
collectively as the "Guarantor Loan Documents" and individually as a "Guarantor
Loan Document".
F. Each of the Obligated Parties, jointly and severally, acknowledge
and agree that the Obligations, each Guarantor's obligations under the Guarantor
Loan Documents, and all other obligations of any one or more of the Obligated
Parties to Standard Federal are immediately due and owing to Standard Federal
without setoff, recoupment, defense or counterclaim, in law or in equity, of any
nature or kind.
G. All collateral granted to Lender by any one or more of the Obligated
Parties described in the Loan Documents and all collateral heretofore,
simultaneously herewith or hereafter granted to Standard Federal by any one or
more of the Obligated Parties to secure any of the Obligations or any other
obligations to Standard Federal, is identified collectively as the "Collateral".
H. Each Obligated Party reaffirms, ratifies, confirms and approves its
obligations and duties under the Loan Documents (including the Guarantor Loan
Documents) as modified by this Agreement. Without limiting the generality of the
immediately preceding sentence, the Guarantor, jointly and severally, hereby
reaffirms, ratifies, confirms and approves its obligations and duties under the
Loan Documents (including the Guarantor Loan Documents) and the provisions
herein, and acknowledges and agrees that the Guarantor Loan Documents extend to
and cover all of the Obligations. Each Obligated Party, jointly and severally,
reaffirms, ratifies and confirms the liens, assignments and security interests
granted to Standard Federal in the Collateral under the Loan Documents or
otherwise.
DEFAULT AND REQUEST FOR FORBEARANCE
I. Each Obligated Party is in default under the Loan Documents (the
"Specified Defaults") as set forth on Exhibit 1.
J. Each Obligated Party represents and warrants, after due inquiry and
investigation, that it is not aware of any other Events of Default or defaults,
or of any event that, with the passage of time, notice, or both, would become an
Event of Default or a default under the Loan Documents or this Agreement.
K. Each Obligated Party also acknowledges that based on the Specified
Defaults, Standard Federal has the right, without further notice, to enforce its
rights under the Loan Documents (including the Guarantor Loan Documents) and
applicable law. Further, if Standard Federal took such action, each Obligated
Party acknowledges that Standard Federal's actions
2
would be within Standard Federal's rights under the Loan Documents and
applicable law, and would be reasonable and appropriate under the circumstances.
L. Each Obligated Party acknowledges and agrees that (i) Standard
Federal has fully performed all of its obligations under the Loan Documents;
(ii) Standard Federal has no obligation to continue to lend to Borrowers; (iii)
Standard Federal has no obligation to forbear from enforcing its rights and
remedies other than as set forth in this Agreement; (iv) any loans made after
the date of this Agreement will continue to be made in Standard Federal's sole
discretion; (v) Standard Federal has made no representations of any nature or
kind that funding in any amount will continue; and (vi) Standard Federal has
made no representations of any nature or kind that the Forbearance Period
(defined below) will be extended beyond its schedule expiration.
M. Each Obligated Party further acknowledges and agrees that the
actions taken by Standard Federal to date in furtherance of the Loan Documents
are reasonable and appropriate under the circumstances and are within Standard
Federal's rights under the Loan Documents and applicable law.
N. Each Obligated Party represents and warrants to Standard Federal
that it received direct and substantial economic benefit from all of the
Obligations and that it will continue to receive direct and substantial economic
benefit from the Obligations, and from any other loans made or that may be made
in the future.
O. In order to allow the Obligated Parties time to stabilize their
financial situation and refinance or otherwise satisfy the Obligations in full,
the Obligated Parties have requested that Standard Federal forbear from
exercising its rights and remedies under the Loan Documents and applicable law
in connection with the Specified Defaults until August 31, 2001.
P. Subject to the terms and conditions of this Agreement, and in
reliance on the Obligated Parties' agreements, acknowledgments, representations,
and warranties in this Agreement, Standard Federal has agreed to amend the Loan
Documents, and, to forbear from enforcing its rights and remedies on account of
the Specified Defaults under the Loan Documents as set forth below.
AGREEMENT
Based on the foregoing Recitals (which are incorporated herein as
agreements, representations, warranties, and covenants of the Obligated
Parties), Standard Federal and each Obligated Party agree as follows:
1. Forbearance. Subject to the condition that Standard Federal
receives, on or before June 20, 2001, a fully executed copy of this Agreement,
acknowledged by each of the Obligated Parties as provided below, together with
fully executed copies of all Exhibits hereto that require signature, and there
being no default under this Agreement, Standard Federal agrees to forbear from
enforcing its rights and remedies based on the Specified Defaults through August
31, 2001 (the "Forbearance Period").
3
2. Line of Credit Cap. Effective immediately, the Line of Credit Cap
under the Amended and Restated Loan Agreement dated July 9, 1999, as amended,
among Borrowers (all except Leasing) and Lender, is $28,000,000.
3. Field Examination. The Obligated Parties acknowledge and agree that
Lender may immediately conduct a field examination and that they will cause the
Borrowers to fully cooperate with the field examination so that same may be
completed by July 31, 2001. Furthermore, the Obligated Parties are liable for
all of Lender's costs and expenses incurred in connection with such field
examination.
4. Fees. Borrowers must pay Lender a $95,000 fee simultaneously with
the execution of this Agreement (allocated $20,000 to Leasing and $75,000 to all
other Borrowers).
5. [RESERVED]
6. Bank Accounts. All of each Borrower's bank, checking, investment,
and other financial accounts of any type or nature must be at Standard Federal
provided, however, that Borrowers may maintain existing accounts at out of state
banks as identified in Exhibit 2.
7. Amended and Restated Leasing Agreement. Leasing shall execute and
deliver to Lender an amended and restated loan agreement in the form attached as
Exhibit 3.
8. Interest. Notwithstanding Standard Federal's demand and acceleration
of the Loans, each Obligated Party must timely make all monthly principal,
interest and other payments due Standard Federal. Effective as of June 20, 2001,
interest shall accrue on the Loans at Lender's prime rate from time to time in
effect plus one-half percentage points (1/2%). In the event of default by
Borrowers under this Agreement, any document executed under this Agreement, or
the Loan Documents, interest on the Loans shall accrue at the rate otherwise
provided in this paragraph plus two percentage points (2.0%).
Pricing for standby letters of credit under the IRB facility shall
increase to 1 1/2% (from 1%) for the year commencing April 15, 2001 and ending
April 15, 2002.
9. No Further Forbearance Implied. Each Obligated Party acknowledges
that Standard Federal has no obligation to continue making loans; extend the
term of the Forbearance Period; or forbear from enforcing its rights and
remedies after the Forbearance Period, and nothing contained herein or otherwise
is intended to be or is a promise or agreement to continue making loans; or
extend the term of the Forbearance Period beyond the expiration thereof.
Furthermore, no future agreement by Standard Federal to continue making loans;
or to extend the term of the Forbearance Period beyond the expiration thereof,
or any other agreement, is valid or enforceable unless it is contained in a
written agreement signed by Standard Federal.
10. Additional Reporting. In addition to any reports or information
required by the Loan Documents (which must be provided timely), or that Standard
Federal may hereafter request, each Obligated Party must provide Standard
Federal with:
(a) Within three business days of receipt, copies of
written notices of default received from other
creditors.
4
(b) Within one day of gaining knowledge thereof, any
adverse information regarding any Obligated Party.
Further, Borrowers (all except Leasing) must:
(c) Furnish to Standard Federal as soon as available and,
in any event, within 30 days after the end of each
month detailed financial statements of the Borrowers
as of the close of such month containing a
consolidated balance sheet of the Borrowers and its
subsidiaries, if any, and statements of income of the
Borrowers and its subsidiaries, if any, for such
fiscal period and for the portion of the fiscal year
ending with such period in reasonable detail and form
acceptable to Standard Federal and certified by the
chief financial officers of the Borrowers as being
true and correct and as having been prepared in
accordance with generally accepted accounting
principles consistently applied, subject to year-end
adjustments, if any.
(d) Furnish to Standard Federal, within a reasonable time
not to exceed 15 days after the end of each calendar
month, (i) a statement of accounts receivable, in a
form acceptable to Standard Federal, certified as
correct by Borrowers or a principal officer of
Borrowers showing the agings thereof and the payment,
write-off or other disposition of former accounts
receivable the disposition of which has not
previously been reported to Standard Federal, and
such other information and data as Standard Federal
may reasonably require, (ii) a statement of accounts
payable, in form acceptable to Standard Federal,
certified as correct by Borrowers showing the agings
thereof and (iii) a report of Borrowers' inventory,
in form acceptable to Standard Federal, certified as
correct by Borrowers showing the agings thereof.
Borrowers will further specifically disclose any
facts known to Borrowers which facts would tend to
render doubtful the collectibility of any account
receivable disclosed in such statements or which
would indicate that the existence or amount of such
account is disputed by the debtor thereon.
(e) Furnish to Standard Federal on Wednesday of each
week, a borrowing base report as of the last day of
the preceding week, in form acceptable to Standard
Federal and certified as correct by the Borrowers.
Further, Leasing must:
(f) Furnish to Standard Federal as soon as available and,
in any event, within 30 days after the close of each
month detailed financial statements of Leasing as of
the close of such month containing a consolidated
balance sheet of Leasing and its subsidiaries, if
any, and statements of income of Leasing and its
subsidiaries, if any, for such fiscal period and for
the portion of the fiscal year ending with such
period in reasonable detail and form acceptable to
Standard Federal and certified by the president of
Leasing as being true and correct and as having been
prepared in
5
accordance with generally accepted accounting
principles consistently applied, subject to year-end
adjustments, if any.
(g) Furnish to Standard Federal, within a reasonable time
not to exceed 15 days after the end of each calendar
month, statements of Eligible Lease Receivables and
Eligible Leases, in form acceptable to Standard
Federal, certified as correct by Leasing or a
principal officer of Leasing showing the agings
thereof and the payment, write-off or other
disposition of former lease receivables or leases,
the disposition of which has not previously been
reported to Standard Federal, and such other
information and data as Standard Federal may
reasonably require. Leasing will further specifically
disclose any facts known to Leasing which facts would
tend to render doubtful the collectibility of any
lease receivable or leases disclosed in such
statements or which would indicate that the existence
or amount of such receivable or lease is disputed by
the lessee thereon.
(h) Furnish to Standard Federal as soon as available and,
in any event, within 30 days after the close of each
quarter of each fiscal year, and in each case in form
acceptable to Standard Federal, (i) a listing of
conditional sales contracts and TRAC leases with any
payments that are more than 180 days past due, (ii) a
listing of all lease accounts (TRAC and conditional
sales contracts) that were re-written, modified,
assumed, extended or consolidated with other lease
schedules during the applicable fiscal quarter, (iii)
a doubtful accounts reserve schedule indicating the
reserve balance as of quarter end and a summary of
non-accrual and charged-off accounts certified by the
president of Leasing as being true and correct and as
having been prepared in accordance with generally
accepted accounting principles consistently applied,
subject to year-end adjustments, if any.
11. Supplemental Negative Covenants. In addition to any Negative
Covenants in the Loan Documents, the following negative covenants shall apply to
Borrowers (all except Leasing):
From the date hereof until all amounts owing under the Line of
Credit, the Swing Line of Credit and the Term Loan are paid in full and
all obligations under the Line of Credit Note, the Swing Line of Credit
Note and the Term Note, this Loan Agreement and all other documents
executed in connection with the Line of Credit, the Swing Line of
Credit and the Term Loan are fully paid, performed and satisfied and so
long as Standard Federal has any commitment to make advances hereunder,
the Borrowers covenant and agree that they will not do and will not
permit any subsidiary, if any, to do any of the following without the
prior written approval of Standard Federal:
(a) Create, incur, assume or permit to exist (i) any
mortgage, pledge, security interest, lien or charge
of any kind upon any of their property or assets
whether now owned or hereafter acquired other than in
favor of Standard Federal, except as required or
permitted by Standard Federal, or (ii) any
indebtedness or liability for borrowed money, except
indebtedness to
6
Standard Federal or indebtedness subordinated to the
prior payment in full of the Borrowers' indebtedness
to Standard Federal which is approved in writing by
Standard Federal, except as otherwise required or
permitted in writing by Standard Federal. The
existing TRAC financing arrangements with Bank One
are permitted under this paragraph.
(b) Make loans, advances or extensions of credit to any
Entity (which in this Loan Agreement means any
individual, partnership, corporation or other legal
entity), other than a parent or subsidiary of the
Borrowers, in excess of $100,000.00 in principal
amount, except for sales on open account and in
ordinary course of business; or guarantee or in any
way become responsible for obligations of any other
Entity except by endorsement of negotiable
instruments for deposit or collection in the ordinary
course of business; or subordinate any indebtedness
due it from an Entity to indebtedness of any other
creditor of such Entity.
(c) Sell, lease or transfer, during any fiscal year,
except inventory in the ordinary course of business,
any substantial portion of its assets; or consolidate
with or merge into any other Entity, or permit
another to merge into it; or acquire by lease or
purchase all or substantially all the business or
assets of any Entity; or enter into any lease-back
arrangement with any Entity.
(d) Permit the aggregate amount of all Capital
Expenditures made by the Borrowers during any fiscal
year ending after the date hereof to exceed
$3,000,000.00. "Capital Expenditures" shall mean any
expenditure for an asset which will be used in a year
or years subsequent to the year in which the
expenditure is made and which asset is properly
classifiable in relevant financial statements as
property, equipment or improvements, fixed assets, or
a similar type of capitalized assets in accordance
with generally accepted accounting principles.
(e) Repurchase or redeem or agree to repurchase or redeem
any shares of their stock.
(f) Purchase or otherwise acquire or become obligated for
the purchase of all or substantially all of the
assets or business interests of any person, firm or
corporation or any shares of stock of any
corporation, trusteeship or association or in any
other manner effectuate or attempt to effectuate an
expansion of present business by acquisition.
(g) Enter into any Interest Rate Protection Agreement
unless entered into for risk management purposes and
not speculative purposes.
12. Appraisal. On or before July 31, 2001, Borrowers (all except
Leasing) shall deliver to Lender a current appraisal of fair market value and
forced sale value of all of their equipment, in form acceptable to Lender by an
appraiser acceptable to Lender. Borrowers have
7
advised Lender that they have retained Dovebid/Norman Levy Associates to conduct
this appraisal, whom Lender acknowledges is acceptable.
13. Leasing Guaranty. Concurrently with execution and delivery of this
Agreement, Leasing shall execute and deliver to Lender its guaranty of the
Obligations of all of the other Borrowers, in the form attached as Exhibit 4.
14. Macon, Georgia Mortgage. On or before July 3, 2001, Industries
shall execute and deliver to Lender a mortgage/security deed pledging its real
property in Macon, Georgia to secure a portion of the Obligations, substantially
in the form attached as Exhibit 5, junior only to existing mortgages to Trust
Company Bank of Middle Georgia, N.A. Industries represents and warrants to
Lender that the outstanding principal amount due Trust Company Bank secured by
the existing mortgages is approximately $380,000 and that Industries shall not
borrow any further funds from such Bank which would be secured by those
mortgages without the prior written consent of Lender.
15. Assignment of Life Insurance. Concurrently with execution and
delivery of this Agreement, Borrowers shall pledge or cause to be pledged to
Lender a life insurance policy in the amount of not less than $2,000,000 on the
life of Kenneth McClain issued by an insurance company acceptable to Lender to
secure the Obligations, under an assignment agreement in the form attached as
Exhibit 6.
16. Consultant. The Borrowers or its counsel, Jaffe Raitt Heuer &
Weiss, P.C., shall select and retain a business consultant (which must be
agreeable to Standard Federal in the exercise of its reasonable judgment) on or
before June 20, 2001. The terms of the engagement will include a provision that
the consultant's report of its review of the business of the Borrowers will be
made available to the Borrowers and Standard Federal not later than July 31,
2001. The consultant will be required as a part of its engagement, among other
activities as requested by the Borrowers, to perform the following activities
and to report regarding its conclusions and recommendations:
(a) Prepare a business plan which shows the Borrowers'
ability to operate profitably and meet their current
debt service requirements for the fourth quarter
ending September 30, 2001 and for the fiscal year
ending September 30, 2002.
(b) Implement cash management procedures, cash flow
projections, expenditure reviews and profit/loss
analysis for the Borrowers as a whole and for each
business unit.
(c) Review the sufficiency of the existing and projected
working capital and cash flow based on the developed
projections and if the projections cannot be met, to
recommend a reasonable alternative operating
strategy.
(d) Review existing inventory control procedures and make
recommendations regarding improvements if deemed
necessary or desirable.
(e) Review the existing management structure of the
Borrowers.
8
The Borrowers have advised Standard Federal that its counsel has
retained Stout Risious Ross, which is agreeable to Standard Federal.
17. No Out-of-Formula Amounts. Borrowers must manage their financial
affairs such that their line of credit loans remain in formula at all times.
18. No Overdrafts. Notwithstanding that Standard Federal may have
honored overdrafts in the past, each Obligated Party acknowledges that neither
Standard Federal nor its affiliates will, under any circumstances, honor any
checks or other items presented to Standard Federal or its affiliates for
payment for which there are insufficient available funds in such Borrower's
account, and Standard Federal or its affiliates may return any such items.
19. Authorization to Debit Accounts. If any payment called for by the
Loan Documents, this Agreement (or any agreement referred to or incorporated
herein), or any other present or future agreements between Standard Federal or
any of its affiliates on the one hand, or any one or more of the Obligated
Parties on the other hand, is not paid when and as called for in the terms of
such agreement, then Standard Federal or any of its affiliates may debit any one
or more of the Obligated Parties' accounts at Standard Federal or any of its
affiliates for such amount. The fact that Standard Federal or any of its
affiliates has debited any such account will in no way waive or diminish any
default for failure to make such payment when and as due.
20. Expenses, Fees and Costs: Indemnification.
(a) Each Obligated Party, jointly and severally, is
responsible for the payment of all fees and
out-of-pocket disbursements incurred by Standard
Federal, including fees of counsel and court costs,
in any way arising from or in connection with this
Agreement, any Collateral, any Loan Document, any
Obligations, or the business relationship between
Standard Federal, on the one hand, and any one or
more of the Obligated Parties, on the other hand,
including, without limitation: (1) Audit Fees (as
defined below); (2) all fees and expenses (including
recording fees and insurance policy fees) of Standard
Federal and its counsel for the preparation,
examination, approval, negotiation, execution and
delivery of, or the closing of any of the
transactions contemplated by, this Agreement or any
of the Loan Documents; (3) all fees and out-of-pocket
disbursements incurred by Standard Federal, including
attorneys' fees, in any way arising from or in
connection with any action taken by Standard Federal
to monitor, advise, administer, enforce, or collect
any of the Obligations (including under this
Agreement, the Guarantor Loan Documents, any other
Loan Document, or otherwise) or any other obligations
of any one or more of the Obligated Parties, whether
joint, joint and several, or several, under this
Agreement, any Loan Document, any other existing or
future document or agreement, or arising from or
relating to the business relationship between
Standard Federal, on the one hand, and any one or
more of the Obligated Parties, on the other hand, or
otherwise securing any of the Obligations, including
any actions to lift the automatic stay or to
otherwise in any way monitor or participate in any
bankruptcy, reorganization or insolvency proceeding
of
9
any one or more of the Obligated Parties; (4) all
expenses and fees (including attorneys' fees)
incurred in relation to, in connection with, in
defense of or in prosecution of any litigation
instituted by any one or more of the Obligated
Parties, Standard Federal, or any third party,
against or involving Standard Federal arising from,
relating to, or in connection with any of the
Obligations, or any one or more of the Obligated
Parties' other obligations, this Agreement, any
Collateral, any Loan Document, or the business
relationship between Standard Federal, on the one
hand, and any one or more of the Obligated Parties,
on the other hand, including any so-called "lender
liability" action, any claim and delivery or other
action for possession of, or foreclosure on, any of
the Collateral, post-judgment enforcement of any
rights or remedies including enforcement of any
judgments, and prosecution of any appeals (whether
discretionary or as of right and whether in
connection with pre-judgment or post-judgment
matters); (5) all costs, expenses, and fees incurred
by Standard Federal or its agents in connection with
appraisals and reappraisals of all or any of the
Collateral (and each Obligated Party must fully
cooperate with such appraisers and make their
property available for appraisal in connection with
as many appraisals as Standard Federal may request);
and (6) all costs, expenses, and fees incurred by
Standard Federal or its counsel in connection with
consultants, expert witnesses, or other professionals
retained by Standard Federal or its counsel, to
assist, advise, or give testimony with respect to any
matter relating to the Collateral, the Obligations,
the Loan Documents, or the business relationship
between Standard Federal, on the one hand, and any
one or more of the Obligated Parties, on the other
hand (and each Obligated Party must fully cooperate
with such consultant, expert witness or other
professional and must make their premises, books and
records, accounting systems, computer systems and
other media for the recordation of information
available to such persons). Each Obligated Party's
agreement, jointly and severally, to be responsible
for Standard Federal's attorneys' fees and costs
applies regardless of whether or not Standard Federal
prevails in whole or in part in any action,
proceeding, litigation, or otherwise, and regardless
of the nature of any action or litigation or the
theories or bases of recovery or defense. Each
Obligated Party, jointly and severally, agrees to
indemnify Standard Federal for all Claims (as
hereinafter defined) that may be imposed on, incurred
by, or asserted against Standard Federal in
connection with this Agreement, any Loan Document, or
the transactions contemplated hereby or thereby, or
the business relationship between Standard Federal,
on the one hand, and any one or more of the Obligated
Parties, on the other hand. All of each Obligated
Party's obligations under this paragraph, including
all indemnification obligations, survive repayment of
the Obligations, termination of the Loan Documents,
or both.
10
(b) All of the foregoing costs, expenses, reimbursement
obligations, and indemnification obligations are part
of the Obligations and are secured by all of the
Collateral.
(c) "Claims" means any demand, claim, action or cause of
action, damage, liability, loss, cost, debt, expense,
obligation, tax, assessment, charge, lawsuit,
contract, agreement, undertaking or deficiency, of
any kind or nature, whether known or unknown, fixed,
actual, accrued or contingent, liquidated or
unliquidated (including interest, penalties,
attorneys' fees and other costs and expenses incident
to proceedings or investigations relating to any of
the foregoing or the defense of any of the
foregoing), whether or not litigation has commenced.
21. Verification of Accounts/Audits. Each Obligated Party agrees that
Standard Federal, through its employees or authorized agents, is permitted to
send a letter to and otherwise contact each Borrower's account debtors to verify
account receivable balances and other matters. In addition, Standard Federal is
permitted full and complete access to each Borrower's facilities, and books and
records to conduct audits as often as Standard Federal reasonably desires. The
cost of such audits is part of the Obligations, is secured by all Collateral,
and must be paid by each Borrower within ten (10) days of receipt of an invoice
therefor (the "Audit Fees"). The Audit Fees are in addition to all other
interest, fees, costs, and expenses provided for in the Loan Documents or this
Agreement.
22. Other Documents. Each Obligated Party must execute any documents
reasonably requested by Standard Federal to carry out the intent of or to
implement this Agreement, the Guarantor Loan Documents or any other Loan
Document. Without limitation, concurrently with execution and delivery of this
Agreement, each Obligated Party shall execute and deliver to Lender Amended and
Restated Security Agreements and updated borrowing resolutions and support
resolutions.
23. Defaults. In addition to any other events of default or defaults
provided for in the Loan Documents, and without waiver of the demand and
discretionary provisions of the Loan Documents, the occurrence of any of the
following constitutes an Event of Default, an event of default, and a default
under this Agreement (and each Loan Document):
(a) If any Obligated Party fails to comply with any term
or condition in this Agreement (or any agreement
referred to or incorporated herein) or the Loan
Documents (other than the Specified Defaults), or any
other document or agreement between any Obligated
Party and Standard Federal.
(b) If any material adverse change occurs in any
Obligated Party's financial condition or business
prospects.
(c) If any Obligated Party discontinues its respective
business operations.
(d) If any lender, supplier, creditor, lessor, bond
holder or representative thereof (collectively,
"Creditor") of any Obligated Party (i) obtains a
11
judgment against any Obligated Party in excess of
$100,000 or (ii) receives from Borrower any
prepayments of obligations.
(e) If any Obligated Party makes a general assignment for
the benefit of a Creditor.
(f) If any Obligated Party applies for, consents to, or
is subject to, the appointment of a receiver.
(g) If any Obligated Party has an order for relief
entered under the Bankruptcy Code, or an involuntary
petition under the Bankruptcy Code is filed against
any Obligated Party and is not dismissed within 60
days.
(h) If any representation or warranty made by any
Obligated Party in this Agreement or in connection
with the negotiation hereof is untrue when made or
hereafter becomes untrue.
(i) If any party attaches by way of seizure, levy, lien
or otherwise any assets of any one or more of the
Obligated Parties.
(j) If any government, department or agency files any
notice of lien, levy or assessment against any one or
more of the Obligated Parties, or if any taxes or
debts that are owing become a lien or encumbrance
upon any assets of any one or more of the Obligated
Parties.
24. Default Remedies. Immediately upon the occurrence of an Event of
Default or a default under this Agreement or any Loan Document (or any document
executed in connection herewith or referenced herein, other than the Specified
Defaults), and without notice or an opportunity to cure such event of default or
default, Standard Federal may exercise any remedies provided in this Agreement,
the Loan Documents (including the Guarantor Loan Documents), and under
applicable law with respect to the Specified Defaults as well as with respect to
any new event of default or default, and, at Standard Federal's election and
without further notice, the Forbearance Period automatically expires, and all of
each Obligated Party's obligations to Standard Federal (including the
Obligations and the Guarantor's obligations under each Guarantor Loan Document)
will be immediately due and payable. Without limiting the discretionary nature
of any loans that Standard Federal may make, on and after the date that any
event of default or default occurs under this Agreement (or any agreement
referred to or incorporated herein) or under any Loan Document (other than the
Specified Defaults), Standard Federal may immediately cease making any loans or
other financial accommodations available to any Obligated Party. In any event,
after the earlier of expiration of the Forbearance Period or the occurrence of
an event of default or a default under this Agreement or any Loan Document
(other than the Specified Defaults), Standard Federal may immediately without
notice take action to enforce its rights and remedies under the Loan Documents
(including enforcement action on account of the Specified Defaults), the
Guarantor Loan Documents, this Agreement, or applicable law, including
collecting the Obligations and foreclosing on the Collateral. All Collateral
granted to Standard Federal by any Obligated Party secures all of that Obligated
Party's Obligations to Standard Federal. Each Obligated Party, on its own behalf
and on behalf
12
of its successors and assigns, expressly waives all rights, if any, to require a
marshaling of Collateral or other assets by Lender, or to require that Lender
first resort to some or any portion of any Collateral securing the Obligations
before foreclosing upon, selling, or otherwise realizing on any other portion
thereof
25. Receivership. Without notice to the Obligated Parties and without
reference to the value of its assets or to the solvency or insolvency of them,
each of the Obligated Parties consents, upon the occurrence of an Event of
Default under this Agreement and subject to the Bankruptcy Code, to the
immediate appointment, whether by Lender or under order of any court, of a
receiver for all or any of the Collateral, and further agrees to take all
necessary steps to immediately, completely, and effectively transfer all of its
respective right, title, and interest in and to the Collateral to any such
receiver, including, without limitation, to transfer or assign all personal
property, lists, accounts, intangibles, any licenses or franchises, and deeds
for all real property. The appointment of a receiver shall be for the benefit of
Lender and such receiver shall be vested with the power to take immediate
possession of the Collateral, to manage the Borrowers' assets and businesses,
and to collect any and all rents, issues, profits, accounts, and proceeds of the
Collateral, and any and all such rents, issues, profits, accounts, and proceeds,
when collected, may be applied toward the payment of the Indebtedness, and the
costs, attorneys fees, taxes, insurance, or other items necessary for the
protection and preservation of the Collateral, including the expenses of such
receivership. Such receiver shall be directed to sell the Collateral as promptly
as is commercially reasonable and shall apply the proceeds of sale against the
Indebtedness.
26. Loan Documents and Guaranties Continue. Except as expressly
modified and amended by the terms of this Agreement, all other terms and
conditions of the Loan Documents (including the Guarantor Loan Documents) remain
in full force and effect and are ratified, confirmed, and approved. If there is
an express conflict between the terms of this Agreement and the terms of the
Loan Documents, including the Loan Documents executed in connection herewith,
the terms of this Agreement govern and control. Guarantor (a) acknowledges and
agrees to the modification of the Loans as described above, and to all other
terms and conditions of this Agreement, and (b) reaffirms its obligations under
its written guaranties as continuing in full force and effect with respect to
the Loans and the Obligated Parties' obligations to Standard Federal.
27. Reservation of Rights/No Waivers.
(a) This Agreement grants a limited forbearance until the
expiration of the Forbearance Period on the terms and
conditions set forth in this Agreement. Except for
such forbearance through the expiration of the
Forbearance Period, all of Standard Federal's rights
and remedies against each Obligated Party and the
Collateral are expressly reserved, including all
rights and remedies resulting from, or arising in
connection with, the Specified Defaults. Likewise,
nothing herein is a waiver of any Specified Defaults
existing as of the date hereof, an agreement to
consent to further worsening of such Specified
Defaults, or new events of default or defaults, or in
any way prejudices Standard Federal's rights and
remedies under the Loan Documents (including the
Guarantor Loan Documents) or applicable
13
law. Standard Federal has the right to waive any
term, provision, or condition in this Agreement or
the Loan Documents, in its sole discretion, and any
such waiver does not prejudice, waive, or reduce any
other right or remedy that Standard Federal may have
against any one or more of the Obligated Parties. No
waiver of rights or any condition of this Agreement,
the Loan Documents, or any other agreement by
Standard Federal is effective unless contained in a
writing signed by an authorized agent of Standard
Federal.
(b) ANYTHING CONTAINED IN THIS AGREEMENT OR IN ANY OTHER
AGREEMENT TO THE CONTRARY NOTWITHSTANDING, NOTHING
CONTAINED IN THIS AGREEMENT OR IN ANY OTHER AGREEMENT
RESTRICTS OR PROHIBITS STANDARD FEDERAL'S RIGHT TO
BLOCK, STOP OR PROHIBIT PAYMENTS TO ANY SUBORDINATED
CREDITOR(S) ON ACCOUNT OF THE EXISTING DEFAULTS,
DEFAULTS, OR OTHERWISE.
28. Credit Inquiries. If customers, buyers, investors, potential
alternative financing sources, or other parties ask Standard Federal about the
current lending relationship among Standard Federal and any one or more of the
Obligated Parties, each Obligated Party agrees that Standard Federal may refer
such inquiries to any Obligated Party.
29. Entire Agreement, Etc.
(a) This Agreement and the Exhibits hereto constitute the
Obligated Parties' and Standard Federal's entire
understanding with respect to the subject matter
hereof Modifications or amendments to this Agreement
must be in writing and signed by the party to be
charged in order to be effective. This Agreement is
governed by the internal laws of the State of
Michigan (without regard to conflicts of law
principles). This Agreement is binding on each
Obligated Party and their respective successors,
assigns, heirs, and personal representatives and
inures to Standard Federal's benefit and the benefit
of its successors and assigns. If any provision of
this Agreement conflicts with any applicable statute
or law, or is otherwise unenforceable, such offending
provision is null and void only to the extent of such
conflict or unenforceability, and is deemed separate
from and does not invalidate any other provision of
this Agreement.
(b) This Agreement is being entered into among competent
persons, who are experienced in business and
represented by counsel (or who have had the
opportunity to be represented by counsel), and has
been reviewed by the Obligated Parties and their
counsel, if any. Therefore, any ambiguous language in
this Agreement will not necessarily be construed
against any particular party as the drafter of such
language.
(c) This Agreement may be executed in any number of
counterparts with the same effect as if all
signatories had signed the same document. All
counterparts must be construed together to constitute
one instrument.
14
Facsimile copies of signatures are treated as
original signatures for all purposes.
(d) References in the Loan Documents and all other
documents executed in connection with the Loan
Documents (as each of the foregoing is amended
hereby) to the Loan Documents mean the Loan Documents
as amended by this Agreement.
(e) The term "including" means including, without
limitation, and the term "includes" means includes,
without limitation.
(f) All headings are inserted for convenience only and do
not affect the construction or interpretation of this
Agreement.
30. Additional Representations. Each Obligated Party represents and
warrants to Standard Federal that:
(a) (i) Each Borrower's execution, delivery, and
performance of this Agreement and all agreements and
documents delivered in connection herewith by
Borrowers have been duly authorized by all necessary
corporate action and does not and will not require
any consent or approval of its stockholders, violate
any provision of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or
award presently in effect having applicability to it
or of its articles of incorporation or bylaws, or
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 either
Borrower is a party or by which it or its properties
may be bound or affected; (ii) no authorization,
consent, approval, license, exemption of or filing a
registration with any court or governmental
department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be
necessary to the valid execution, delivery or
performance: by Borrowers of this Agreement and all
agreements and documents delivered in connection with
this Agreement; and (iii) this Agreement and all
agreements and documents delivered pursuant hereto by
any one or more of the Obligated Parties are the
legal, valid and binding obligations of each such
Obligated Party enforceable against each such
Obligated Party in accordance with the terms thereof
(b) After giving effect to the amendments contained
herein and effected in accordance herewith, all
representations and warranties contained in the Loan
Documents are true and correct on and as of the date
hereof with the same force and effect as if made on
and as of the date hereof
(c) Except for the Specified Defaults, each Obligated
Party has duly and properly performed, complied with
and observed each of its covenants, agreements, and
obligations contained in the Loan Documents.
15
(d) No Obligated Party or any one or more of them has
assigned any claim, set off or defense to any
individual or entity.
(e) This Agreement and all of the Exhibits and other
written material delivered by any one or more of the
Obligated Parties to Standard Federal in connection
with the transactions contemplated hereby do not
contain any statement that is false or misleading
with respect to any material fact. and do not omit to
state a material fact necessary in order to make the
statements therein not false or misleading. There is
no additional fact of which any Obligated Party is
aware that has not been disclosed in writing to
Standard Federal that materially affects adversely
or, so far as each Obligated Party can reasonably
foresee, will materially affect adversely any
Obligated Party's financial condition, business
prospects, or any Collateral.
(f) All Obligated Parties executing this Agreement in a
representative capacity warrant that they have
authority to execute this Agreement and legally bind
the entity they represent.
(g) 1. Industries' chief executive office and principal
place of business is located at Sterling Heights,
Michigan; 2. E-Z Pack's chief executive office and
principal place of business is located at Galion,
Ohio; 3. Galion's chief executive office and
principal place of business is located at Galion,
Ohio; 4. Shelby's chief executive office and
principal place of business is located at Sterling
Heights/River Rouge, Michigan; 5. Tube's chief
executive office and principal place of business is
located at Sterling Heights/Kalamazoo, Michigan; 6.
International's chief executive office and principal
place of business is located at Sterling Heights,
Michigan; 7. Southland's chief executive office and
principal place of business is located at Sterling
Heights, Michigan/Bartow, Florida; and 8. Leasing's
chief executive office and principal place of
business is located at Sterling Heights, Michigan.
(h) 1. All of Industries' business records are kept
either at Sterling Heights, Michigan or Galion, Ohio;
2. all of E-Z Pack's business records are kept either
at Galion, Ohio, Macon, Georgia or Demopolis,
Alabama; 3. all of Galion's business records are kept
at Galion, Ohio; 4. all of Shelby's business records
are kept either at Galion, Ohio or River Rouge,
Michigan; 5. all of Tube's business records are kept
either at Galion, Ohio or Kalamazoo, Michigan; 6. all
of International's business records are kept at
Galion, Ohio; 7. all of Southland's business records
are kept either at Galion, Ohio or Bartow, Florida;
and 8. all of Leasing's business records are kept
either at Galion, Ohio or Sterling Heights, Michigan.
(i) Each Borrowers' corporate name is exactly as set
forth on the signature page of this Agreement and no
Borrower has changed its corporate name
16
since the date of its incorporation, nor has it or
does it use any tradenames or tradestyles except as
set forth on Exhibit 7.
(j) Exhibit 8 is a correct and complete list of all
locations of all of the Collateral and Exhibit 9
correctly identifies any of such facilities and
locations that are not owned by Borrowers and sets
forth the names of the owners and lessors of, and to
the best of the Obligated Parties' knowledge, the
holders of any mortgages on such facilities and
locations.
(k) No liens or encumbrances, other than those in favor
of Lender, attach to any Borrowers' property except
as described on Exhibit 10, and (a) Borrowers do not
own any assets other than the personal property
included in the definition of Collateral (the
"Personal Property"), except as described on Exhibit
11, and (b) Borrowers do not own any real property
other than the real property included in Exhibit 12
(the "Real Property").
(l) With respect to the Real Property and all other real
property pledged to Lender to secure the Obligations,
except as provided on Exhibit 12A, there are no: (a)
toxic or hazardous waste, substances, or materials,
nor any petroleum based products or compounds, nor
any other waste covered by any applicable
environmental or similar laws of any kind or nature
which are or have been stored, disposed of, or
located in, on, or about the Property; (b) asbestos
or asbestos-containing materials, nor any
polychlorinated biphenyls, located in, on, or about
the Property; (c) gas wells or other wells, whether
capped or uncapped, on or about the Property; (d)
underground tanks of any type located at the
Property; (e) surface or subsurface conditions on or
about the Property which constitute, or which, with
the passage of time may constitute, a public or
private nuisance; (f) so-called "wetlands" or
similarly-protected area under any applicable
environmental or similar laws at the Property; (g)
clean-up or other remediation activity which has
occurred or is in process at the Property; (h)
notice, citation, or other action by any federal,
state, or local environmental or other agency, which
is pending or threatened against the Property; (i)
notice, report, or corrective action plan which has
been filed with any federal, state, or local
environmental or other agency with respect to the
Property; or (j) permit which is required or which
has been issued by any federal, state, or local
environmental agency for the use or maintenance of
any improvement or facility in, on, or about the
Property.
(m) None of the Obligated Parties is a party to any
litigation or lawsuit, except as described on Exhibit
13.
(n) Except as stated on Exhibit 14, the Obligated Parties
have promptly paid when due all taxes, assessments,
and governmental charges of every kind and nature
that have been lawfully levied, assessed, or imposed
upon them or their respective properties (including
the use thereof), and any obligations which, if
unpaid, would become liens against their respective
17
assets, including, without limitation, all sums due
and owing to any taxing authority for income and
other taxes withheld from the wages and salaries of
their respective employees.
(o) Borrower has not, during the past five years, been a
party to any merger or consolidation, or acquired all
or substantially all of the assets of any person or
entity, or acquired any of its property or assets out
of the ordinary course of business except as
described in Exhibit 15.
(p) Each Borrower owns or possesses adequate licenses or
other rights to use all patents, processes,
trademarks, trade names, copyrights, and other
intellectual property necessary to conduct its
business as now conducted or presently intended to be
conducted Borrowers have no reason to believe that
any such rights conflict or will conflict with the
rights of others. A list of all patents, trademarks,
copyright filings or registrations, and other
intellectual property that Borrowers have any
interest in must be provided by Borrowers by July 3,
2001 and may be attached to this Agreement as Exhibit
16.
(q) Obligated Parties are conducting and have conducted
their respective business operations without
interference from Lender, Lender has not controlled,
directed, or otherwise interfered with such business
operations, and Borrower Obligated Parties have made
all decisions concerning payments to their respective
creditors, including Lender.
31. Survival: Reliance. All agreements, representations and warranties
made in this Agreement (and all agreements referred to or incorporated herein)
survive the execution of this Agreement (and all documents and agreements
referred to or incorporated herein). Notwithstanding anything in this Agreement
(or any documents or agreements referred to or incorporated herein) to the
contrary, no investigation or inquiry by Standard Federal (including by its
agents) with respect to any matter that is the subject of any representation,
warranty, covenant or other agreement set forth herein or therein is intended,
nor is it to be interpreted, to limit, diminish, or otherwise affect the full
scope and effect of any such representation, warranty, covenant or other
agreement. All terms, covenants, agreements, representations and warranties of
each Obligated Party made herein (or in any documents or agreements referred to
or incorporated herein), or in any certificate or other document delivered or to
be delivered pursuant hereto, are deemed to be material and to have been relied
upon by Standard Federal, notwithstanding any investigation heretofore or
hereafter made by Standard Federal or its agents.
32. Notices. Any notice or other communication required or permitted to
be given under this Agreement or any of the Loan Documents must be in writing
and delivered personally, telegraphed, telecopied, or telexed, or mailed (by
certified or registered mail or by recognized overnight courier), postage
prepaid, and is deemed given when so delivered personally, telegraphed or
telexed, or if mailed, two days after the date of mailing, addressed as follows
(or to any another address as to which any party so advises the other parties in
writing):
18
(a) If to Borrowers and/or Guarantors:
c/o Kenneth McClain
6200 Elmridge
Sterling Heights, Michigan 48313
with a copy to:
Louis P. Rochkind
Jaffe Raitt Heuer & Weiss, P.C.
One Woodward Avenue, Suite 2400
Detroit, MI 48226
Facsimile: (313) 961-7917
(b) If to Standard Federal:
Dennis J. Harder
Standard Federal Bank
2600 West Big Beaver Road
Troy, MI 48084
Facsimile: (248) 816-4860
With a copy to:
Marc M. Bakst
Bodman, Longley & Dahling LLP
100 Renaissance Center, 34th Floor
Detroit, MI 48243-1001
Facsimile: (313) 393-7579
Defaults have occurred under the Loan Documents and each Obligated
Party, to the fullest extent allowed under applicable law, waives all notices
that Standard Federal might be required to give but for this waiver, including
notices under Sections 9-504, 9-505, and 9-506 of the Uniform Commercial Code as
enacted in the State of Michigan or the relevant state concerning the applicable
Collateral. Furthermore, each Obligated Party waives all rights to redeem any of
the Collateral, including any right to redeem any of the Collateral under
Section 9-506 of the Uniform Commercial Code.
33. Discretionary Loans: Demand Obligations. Notwithstanding any
provisions of this Agreement, it is understood and agreed that Standard Federal
is at no time obligated to make any loan, despite compliance with any express
conditions precedent thereto, and Standard Federal may at any time make demand
for payment of the Obligations, notwithstanding that there may then exist no
Event of Default or default.
34. Impairment of Collateral. The execution and delivery of this
Agreement (and all agreements and documents referred to herein) does not impair
or affect any other security (by
19
endorsement or otherwise) for the Obligations, or any one or more of the
Obligated Parties' other obligations to Standard Federal. No security taken
before or after as security for the Obligations impairs or affects this
Agreement (or any agreement or document referred to herein). All present and
future additional security is cumulative security.
35. Time Is of the Essence. Time is of the essence as to each and every
term and provision of this Agreement and each Loan Document.
36. Adverse Events. Promptly upon gaining knowledge thereof or at such
time as any Obligated Party should have known thereof, each Obligated Party must
inform Standard Federal of the occurrence of any Event of Default, or default,
or any event that with the lapse of time, service of notice, or both, would
constitute an Event of Default or default under this Agreement or any of the
Loan Documents, or of any other occurrence that has or could reasonably be
expected to have a material adverse effect on any Obligated Party's business,
properties, Collateral, or financial condition or upon any Obligated Party's
ability to comply with its obligations under this Agreement or the Loan
Documents (including the Guarantor Loan Documents).
37. Non-Waiver. No failure or delay on Standard Federal's part in the
exercise of any power or right, and no course of dealing between any one or more
of the Obligated Parties and Standard Federal, operates as a waiver of such
power or right, nor does any single or partial exercise of any power or right
preclude other or further exercise thereof or the exercise of any other power or
right. The remedies provided for herein are cumulative and not exclusive of any
remedies that are available to Standard Federal at law or in equity. No notice
to or demand on any Obligated Party not required hereunder or under the Loan
Documents entitles any such Obligated Party to any other or further notice or
demand in similar or other circumstances, or waives Standard Federal's right to
any other or further action in an, circumstances without notice or demand. Any
waiver of any provision of this Agreement or the Loan Documents and any consent
to any departure by any one or more of the Obligated Parties from the terms of
any provision of this Agreement or the Loan Documents, is effective only if in
writing signed by an authorized officer of Standard Federal, and only in the
specific instance and for the specific purpose for which given.
38. No Other Promises or Inducements. There are no promises or
inducements that have been made to any signatory hereto to cause such signatory
to enter into this Agreement other than those that are set forth in this
Agreement.
39. Communications Inadmissible as Evidence. The parties to this
Agreement acknowledge that the purpose of this Agreement is to facilitate the
resolution of the Specified Defaults and that, consistent with that purpose, no
part of any oral or written communications between the Obligated Parties and
Standard Federal through the date of this Agreement regarding the transactions
contemplated in this Agreement, exclusive of this written Agreement itself
(collectively, "Communications"), shall be utilized or deemed to be admissible
as evidence in any litigation involving any of the Obligated Parties or Standard
Federal. Communications shall be deemed to constitute compromise negotiations,
and not to constitute evidence that is discoverable, as those phrases are used
in the Federal Rules of Evidence and any applicable state
20
rules of evidence, and no Communications shall be deemed to constitute evidence
that is otherwise admissible for any other purpose.
40. No Outstanding Offers. As of the date of this Agreement, there are
no offers outstanding from Standard Federal to the Obligated Parties. Any prior
offer by Standard Federal, whether oral or written is rescinded in full.
41. Legal Rate Adjustment. This Agreement and all security agreements,
mortgages, notes, and other Loan Documents between any one or more of the
Obligated Parties and Standard Federal are expressly limited so that in no event
whatsoever will the amount of interest paid or agreed to be paid to Standard
Federal exceed the highest rate of interest permissible under applicable law.
If, from any circumstances, fulfillment of any provision of this Agreement or
any other Loan Document at the time performance of such provisions is due,
involves exceeding the interest limitation validly prescribed by law which a
court of competent jurisdiction may deem applicable to this Agreement and the
Obligations, then the obligation to be fulfilled is reduced to an amount
computed at the highest rate of interest permissible under applicable law, and
if, for any reason whatsoever, Standard Federal ever receives as interest an
amount that would be deemed unlawful under applicable law, such interest will be
automatically applied to the payment of the principal amount of the Obligations
(whether or not then due and payable), and not to the payment of interest, or
will be refunded to the applicable Obligated Party, if such principal has been
paid in full.
42. Bankruptcy-Related Acknowledgments. (a) Absent the execution and
delivery of this Agreement, the Loans would be past due and owing, would accrue
interest at a default rate, and, unless the Obligated Parties commenced cases
under title 11 of the United States Code (the "Bankruptcy Code"), Lender would
be entitled to exercise all of its rights and remedies under the Loan Documents
and applicable law with respect to the Obligated Parties and the Collateral; (b)
the commencement of cases under the Bankruptcy Code may have a materially
adverse effect on the Borrowers' respective businesses; and (c) the forbearance
granted by Lender in this Agreement will provide the Obligated Parties with
relief similar to that which they would otherwise obtain under the automatic
stay provisions of section 362(a) of the Bankruptcy Code (the "Automatic Stay").
As of the date of this Agreement, the Obligated Parties (x) are solvent, and
will not become insolvent after giving effect to the transactions contemplated
by this Agreement, and (y) after giving effect to the transactions contemplated
by this Agreement, Borrowers will have adequate capital to conduct their
respective businesses as presently conducted and as contemplated by this
Agreement.
43. Waiver of the Automatic Stay. In consideration of Standard Federal
agreeing to forbear from exercising its various rights and remedies under the
Loan Documents and applicable law in response to the Specified Defaults, and in
consideration of the other mutual agreements contained in this Agreement, and
for other good and valuable consideration, each of the Obligated Parties agrees
that if it (a) has an order for relief entered, or has an involuntary petition
filed against it, in a case under the Bankruptcy Code, (b) files or is the
subject of any petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under the Bankruptcy
Code or any other applicable federal or state law relating to bankruptcy,
insolvency, or other debtor relief, or (c) seeks or consents to the appointment
of any trustee, receiver, conservator, or liquidator, then Standard Federal
shall
21
immediately and absolutely be entitled to, and each of the Obligated Parties
consents to, the immediate termination of the Automatic Stay to enable Standard
Federal to exercise any and all of its rights and remedies under the Loan
Documents, this Agreement and applicable law, and none of the Parties shall
assert, or request or cause any other party to assert, that the Automatic Stay
operates to stay, condition, reduce, or inhibit such right of Standard Federal.
Upon the filing of any motion or other pleading or the taking of any other
action by Standard Federal in any bankruptcy case of any of the Parties for
relief from the Automatic Stay or for a modification or lifting of the Automatic
Stay or any stay otherwise provided by any applicable law as it relates to
Standard Federal and affects Standard Federal's rights and remedies against the
Parties or the Collateral, none of the Parties shall in any manner whatsoever
oppose or object to, and shall not request or cause any other party to oppose or
object to, such motion or pleading or other action taken by Standard Federal,
but, rather, irrevocably consents thereto. Upon the commencement of any
voluntary or involuntary bankruptcy case by or against any of the Parties, each
of them irrevocably waives and agrees not to seek a supplemental stay or other
relief, whether injunctive or otherwise, pursuant to section 105 of the
Bankruptcy Code or otherwise, to stay, condition, reduce, or inhibit Standard
Federal's ability to enforce any rights it has under the Loan Documents or this
Agreement. Standard Federal, but for this section, would not enter into this
Agreement.
44. Benefit of Successors. This Agreement and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Parties, Standard Federal and their respective successors and assigns. The
Parties may not assign their respective rights or obligations arising under this
Agreement without Standard Federal's prior written consent.
45. No Third Party Beneficiaries. All of the terms and conditions of
this Agreement are for the sole and exclusive benefit of the parties to this
Agreement and their respective successors and assigns. No other person or entity
shall obtain any interest in this Agreement or require the satisfaction of such
terms and conditions according to the terms of this Agreement or be entitled to
assume that any of the parties to this Agreement will enforce such terms and
conditions, and no other person or entity shall, under any circumstances, be a
beneficiary of such terms or conditions.
46. Severability. If one or more or the provisions of this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provision of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provisions had not been contained in this
Agreement.
47. No Duress. Parties acknowledge that they have reviewed (or have had
the opportunity to review) this Agreement with counsel of their choice and have
executed this Agreement of their own free will and accord and without duress or
coercion of any kind by Standard Federal or any other person or entity.
48. STATUTE OF FRAUDS. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. ALL PRIOR AND
CONTEMPORANEOUS ORAL AGREEMENTS, IF ANY, BETWEEN STANDARD FEDERAL, ON THE ONE
22
HAND, AND ANY ONE OR MORE OF THE PARTIES, ON THE OTHER HAND, ARE MERGED INTO
THIS AGREEMENT AND DO NOT SURVIVE THE EXECUTION OF THIS AGREEMENT.
49. RELEASE. AS OF THE DATE HEREOF EACH OBLIGATED PARTY REPRESENTS AND
WARRANTS THAT THEY ARE AWARE OF, AND POSSESS, NO CLAIMS OR CAUSES OF ACTION
AGAINST STANDARD FEDERAL, NATIONAL BANK OF CANADA ("NBC"), FIFTH THIRD BANK,
SUCCESSOR TO OLD KENT BANK BY REASON OF MERGER, ("FIFTH THIRD"), OR NATIONAL
CITY BANK OF MICHIGAN/ILLINOIS ("NCB") (NBC, FIFTH THIRD AND NCB TOGETHER, THE
"PARTICIPANTS") ALL OF WHICH ARE PARTICIPATING BANKS IN THE LOANS TO THE
OBLIGATED PARTIES. NOTWITHSTANDING THIS REPRESENTATION AND AS FURTHER
CONSIDERATION FOR THE AGREEMENTS AND UNDERSTANDINGS HEREIN, EACH OBLIGATED PARTY
INDIVIDUALLY, JOINTLY, SEVERALLY, AND JOINTLY AND SEVERALLY, IN EVERY CAPACITY,
INCLUDING BUT NOT LIMITED TO, AS SHAREHOLDERS, OFFICERS, PARTNERS, DIRECTORS,
INVESTORS, OR CREDITORS OF ANY ONE OR MORE OF THE OBLIGATED PARTIES, EACH OF ITS
EMPLOYEES, AGENTS, EXECUTORS, SUCCESSORS AND ASSIGNS, HEREBY RELEASES STANDARD
FEDERAL, NBC, FIFTH THIRD AND NCB AND THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS, AFFILIATES, SUBSIDIARIES, SUCCESSORS AND ASSIGNS
FROM ANY LIABILITY, CLAIM, RIGHT OR CAUSE OF ACTION THAT NOW EXISTS, OR
HEREAFTER ARISES, WHETHER KNOWN OR UNKNOWN, ARISING FROM OR IN ANY WAY RELATED
TO FACTS IN EXISTENCE AS OF THE DATE HEREOF. BY WAY OF EXAMPLE AND NOT
LIMITATION, THE FORGOING INCLUDES ANY CLAIMS IN ANY WAY RELATED TO ACTIONS TAKEN
OR OMITTED TO BE TAKEN BY STANDARD FEDERAL, NBC , FIFTH THIRD, NCB, OR ANY OR
ALL OF THEM, UNDER THE LOAN DOCUMENTS, THE GUARANTOR LOAN DOCUMENTS, THE
BUSINESS RELATIONSHIP WITH STANDARD FEDERAL, NBC, FIFTH THIRD, NCB OR ANY OR ALL
OF THEM AND ALL OTHER OBLIGATIONS OF ANY NATURE OR KIND OF ANY ONE OR MORE OF
THE PARTIES, ANY ORAL AGREEMENTS OR UNDERSTANDINGS (ACTUAL OR ALLEGED), ANY
BANKING RELATIONSHIPS THAT ANY ONE OR MORE OF THE PARTIES HAS OR MAY HAVE HAD
WITH STANDARD FEDERAL, NBC, FIFTH THIRD, NCB OR ANY OR ALL OF THEM AT ANY TIME
AND FOR ANY REASON INCLUDING, BUT NOT LIMITED TO, DEMAND DEPOSIT ACCOUNTS, OR
OTHERWISE.
50. Waiver of jury trial and bond; submission to jurisdiction: and
acknowledgment.
(A) 1. Any judicial proceeding against any Obligated Party
brought by lender with respect to any term or condition of this
agreement, or any other present or future agreement between any
Obligated Party and Lender and/or any other matter of any kind
whatsoever may be brought by Lender in a court of competent
jurisdiction in the State of Michigan, United States of America, and
the parties each hereby irrevocably consents and submits itself to
jurisdiction in any such court; and, by execution and delivery of this
Agreement, each of the parties and Lender accept for themselves and in
connection with their respective properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts,
and irrevocably agree to be bound by any final judgment rendered
thereby in connection with this agreement, or any other present and
future agreement between any of the, Obligated Parties and Lender
and/or any other matter of any kind whatsoever.
2. Each of the parties waives personal service of any and all process
upon it, and consents that all such service of process may be made by
first-class mail or messenger directed to it at its address set forth
in this agreement. Each of the parties waives any
23
bond or surety or security upon such bond or surety that might, but for
this waiver, be required of Lender.
3. Nothing contained in this section affects or limits the right of
Lender to serve legal process in any other manner permitted by law or
affects Lender's right to bring any action or proceeding against any
Obligated Party or their property in the courts of any other
jurisdiction selected by lender in its sole and absolute discretion.
4. Any judicial proceeding by any Obligated Party against Lender and/or
any person or entity related to or affiliated with Lender involving,
directly or indirectly, any matter or claim in any way arising out of,
related to or connected with this agreement or any present or future
agreement between any Obligated Party and Lender and/or any other
matter of any kind whatsoever, may be brought only in a court located
in the state of Michigan, county of Oakland (which court shall have
sole and exclusive jurisdiction to hear such matters).
5. Each of the Obligated Parties waives any objection to jurisdiction
and venue of any action instituted hereunder or in connection herewith
and may not assert any defense based in any way on lack of jurisdiction
or venue or based upon forum non conveniens.
(B) each Obligated Party acknowledges that (1) it has fully
read all of this Agreement and has been given the opportunity to
consult with counsel and other advisors of its choice, and after
consulting with such counsel or advisors (or having had the opportunity
to do so), knowingly, voluntarily and without duress, coercion,
unlawful restraint, intimidation or compulsion, enter into this
Agreement, based upon such advice and counsel (if any) and in the
exercise of its business judgment, (2) this Agreement has been entered
into in exchange for good and valuable consideration, receipt of which
the Obligated Party hereto acknowledges, (3) it has carefully and
completely read all of the terms and provisions of this agreement and
is not relying on the opinions or advice of lender or its agents or
representatives in entering into this Agreement.
(C) the Obligated Parties and Lender acknowledge that the
right to a trial by jury is a constitutional right, but that the right
may be waived. Each of the Obligated Parties and Lender each knowingly,
voluntarily, irrevocably, and after the opportunity to consult with
their respective counsel, without coercion, waive any and all rights to
trial by jury of all disputes between them including, without
limitation, any claims and/or defenses asserted in any judicial
proceeding described herein. Neither Lender nor any of the Obligated
Parties will be deemed to have given up this waiver of jury trial
unless the Obligated Party claiming that this waiver has been
relinquished has a written instrument signed by the other Obligated
Parties and Lender stating that this waiver has been given up.
(D) the Obligated Parties or Lender may file an original
counterpart or a copy of this Agreement with any court as written
evidence of the waivers and consents contained herein.
24
51. Standard Federal executes this Agreement with the consent of all
Participants.
STANDARD FEDERAL BANK
By:________________________________
Its:_______________________________
McCLAIN INDUSTRIES, INC. McCLAIN E-Z PACK, INC.
By:________________________________ By:_________________________________
Its:_______________________________ Its:________________________________
McCLAIN GALION, INC. SHELBY STEEL PROCESSING
COMPANY
By:________________________________ By:_________________________________
Its:_______________________________ Its:________________________________
McCLAIN TUBE COMPANY McCLAIN INTERNATIONAL FSC
d/b/a Quality Tube
By:________________________________ By:_________________________________
Its:_______________________________ Its:________________________________
McCLAIN SOUTHLAND CO. McCLAIN GROUP LEASING, INC.
By:________________________________ By:_________________________________
Its:_______________________________ Its:________________________________
25