December 30, 1997
Mr. Robert Bender, Vice President
Citizens Bank of Massachusetts
55 Summer Street
Boston, Massachusetts 02110
Re: Grant of Security Interest in All Assets
Dear Bob:
This will confirm that each of the undersigned, Asahi/America, Inc. and
Asahi Engineered Products, Inc. (collectively, the "Debtors"), hereby grants to
Citizens Bank of Massachusetts ("Citizens"), on behalf of itself and as agent
for any of Citizens' affiliates and any participants in any of the Credit
Arrangements described below, a security interest in all of each Debtor's
accounts, inventory, general intangibles and any other rights to the payment of
money, equipment, instruments, securities, chattel paper, books and records,
intellectual property rights, goods and any other personal property in which a
security interest may be perfected by filing a financing statement, and all
proceeds and products thereof and substitutions therefor.
This security interest will secure the prompt and punctual payment and
performance of all indebtedness and other obligations from time to time owed by
either or both of the Debtors under or in respect of (i) that certain Loan and
Security Agreement dated September 23, 1993 (as amended), (ii) that certain
Credit Agreement dated as of January 23, 1997, (iii) that certain Reimbursement
Agreement dated as of March 1, 1994 with Citizens Trust Company ("CTC"), an
affiliate of Citizens, with respect to the reimbursement obligations of the
account party in respect of a letter of credit dated March 16, 1994 issued by
CTC for the benefit of holders of those certain Massachusetts Industrial Finance
Agency Industrial Revenue Bonds Asahi/America Issue, Series 1994, and (iv) any
letters of credit issued by Citizens or
any affiliate thereof for the account of either or both of the Debtors or any
affiliate thereof; including any amendments to any of the aforementioned
agreements or other documents and any documents or instruments in any way
related thereto (the "Credit Arrangements").
Debtors represent and warrant to and agree with Citizens that: (i) the
Debtors' books and records are kept at the address set forth at the end of this
letter, such address being the location of their chief executive offices; (ii)
Debtors will not change the location of their chief executive offices or the
location where its assets and books and records are kept without 30 days' prior
written notice to Citizens; (iii) Debtors will promptly notify Citizens of all
locations of collateral; (iv) except for the security interest herein granted,
the Debtors are and shall be the owners of the collateral free from any lien,
security interest or encumbrance (except (y) liens in favor of Citizens or any
affiliate thereof, and (z) liens securing any existing or future equipment
leases or similar existing or future purchase money financing arrangements
("Permitted Financing Arrangements") with Siemens Credit corporation, Vanguard
Financial Service Corp., AT&T Systems Leasing Corporation, Mellon First United
Leasing Corp., Jules and Associates, Inc. and/or N.B.D. Equipment Finance, Inc.,
whereby only the specific items of equipment financed by such third party are
encumbered to secure payment of such acquisition debt or lease obligation), and
the Debtors shall defend the same against all claims and demands of all persons
at any time claiming the same or any interests therein adverse to Citizens, and
the Debtors shall not hereafter pledge, mortgage or create, or suffer to exist,
a security interest in the collateral in favor of any person other than Citizens
or any affiliate thereof or except pursuant to Permitted Financing Arrangements,
nor will the Debtors sell or offer to sell or otherwise transfer the collateral
or any interest therein except for sales of inventory in the ordinary course of
business and bona fide disposition of obsolete or scrap equipment or equipment
no longer needed or used.
The Debtors shall at their expense keep the collateral in reasonably good
order and repair, use the same in compliance with applicable law, and have and
maintain at all times with respect to the collateral property damage insurance
in form, amount and issued by a company satisfactory to Citizens, which
insurance shall include Citizens as a loss payee as its interest may appear at
the time of any damage to or loss of one or more items of collateral, provided,
however, that unless a default has occurred, Citizens will allow Debtors to use
insurance proceeds to apply toward the cost of repairing or replacing damaged or
destroyed property. Citizens shall be provided with evidence satisfactory to it
of the existence and terms of such insurance coverage, and the insurer shall be
obligated to provide Citizens
with not fewer than 20 days prior written notice of the reduction, expiration or
cancellation of any such coverage. In the event of failure to provide and
maintain insurance as provided above or upon the occurrence of a default (beyond
any applicable grace period) in respect of any of the Credit Arrangements,
Citizens may act as attorney for the Debtors in obtaining, adjusting, settling
and cancelling such insurance and endorsing any drafts and apply any amounts
collected or received under any such policies to any indebtedness secured hereby
in such order or preference as Citizens in its discretion may determine, or as
provided above the same may be released to the Debtors, but such application or
release shall not cure or waive any default hereunder, and no amount so released
shall be deemed a payment on any indebtedness secured hereby. Such designation
to act as attorney for the Debtors shall be deemed coupled with an interest and
irrevocable.
Citizens may inspect the collateral at reasonable times, and in the absence
of a default upon reasonable advance notice, wherever located. The Debtors will
pay promptly all taxes and assessments upon the collateral or for its use or
operation or upon this agreement prior to the time when any penalties or
interest accrue with respect thereto, unless, in any such case, the same is
being contested in good faith by appropriate proceedings and an adequate reserve
therefor has been established and is maintained in accordance with generally
accepted accounting principles.
Citizens may in its discretion discharge taxes and other encumbrances at
any time levied or placed on the collateral, pay any insurance premiums in
respect thereof and make repairs thereto and pay any necessary filing fees. The
Debtors agree to reimburse Citizens on demand for any and all expenditures so
made, and until paid the amount thereof shall be a debt secured by the
Collateral. Citizens shall have no obligation to the Debtor to make any such
expenditures, nor shall the making thereof relieve the Debtor of any default.
The Debtors hereby irrevocably authorize Citizens, or its designee, at the
Debtors' expense, to file such financing statements, with or without the
Debtor's signature, as Citizens may deem appropriate, and irrevocably appoints
Citizens as the Debtors' attorney-in-fact to execute such financing statements.
Upon the occurrence of a default (beyond any applicable grace periods) in
respect of any of the Credit Arrangements, Citizens may without notice or demand
declare this agreement to be in default, and Citizens shall thereafter have in
any jurisdiction in which enforcement hereof is sought, in addition to all other
rights and remedies, the rights and remedies of a secured party under the
Uniform Commercial Code, including
without limitation the right to take possession of the collateral, and for that
purpose Citizens may, so far as the Debtors can give authority therefor, enter
upon any premises on which the collateral may be situated and remove the same
therefrom or render the same unusable. Unless the collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Citizens shall give to the Debtors (by hand delivery,
overnight delivery service or certified mail, return receipt requested) at least
ten (10) days' prior written notice of the time and place of any public sale of
collateral or of the time after which any private sale or any other intended
disposition is to be made, and such notice shall be given in the manner and to
the address of the Debtors set forth below. To the extent permitted by law, the
Debtors hereby waive any and all rights that they may have to judicial hearing
in advance of the enforcement of any of Citizens' rights hereunder, including
without limitation its right following a default to take immediate possession of
the collateral and exercise its rights with respect thereto.
The Debtors hereby waive demand, notice, protest, notice of acceptance of
this security agreement, notice of loans made, credit extended, collateral
received or delivered or other action taken in reliance hereon and all other
demands and notices of any description. With respect to the obligations secured
hereby and the collateral, the Debtors assent to any extension or postponement
of the time of payment or any other indulgence, to any substitution, exchange or
release of collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payment thereon
and the settlement, compromising or adjusting of any thereof, all in such manner
and at such time or times as Citizens may deem advisable. Except as otherwise
provided by applicable law, Citizens shall have no duty as to the collection or
protection of the collateral or any income thereon, nor as to the preservation
of rights against prior parties, nor as to the preservation of any rights
pertaining thereto beyond the safe custody of any collateral in its actual
possession. Except as otherwise provided by applicable law which may not be
waived, Citizens may exercise its rights with respect to the collateral without
resorting or regard to other collateral or sources of reimbursement for
liability. Except as otherwise provided by applicable law, Citizens shall not be
required to marshal any present or future security for (including but not
limited to this Agreement and the collateral subject to the security interest
created hereby), or guaranties of, the obligations hereby secured or any of
them, or to resort to such security or guaranties in any particular order; and
all of Citizens' rights hereunder and in respect of the collateral and any
source of payment shall be cumulative and in addition to all other rights,
however existing or arising.
The Debtors shall pay to Citizens on demand any and all reasonable
expenses, including reasonable counsel fees, incurred or paid by Citizens in
protecting or enforcing its rights hereunder. After deducting all of said
expenses, the residue of any proceeds of collection or sale of the collateral
shall be applied to the payment of principal or interest on the obligations
hereby secured in such order as Citizens may determine, proper allowance for
interest not then due being made, and any excess shall be returned to the
Debtors, and the Debtors shall remain liable for any deficiency.
In the event any provision of this security 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 term or provision
hereof, and this agreement shall be interpreted and construed as if such
provision to the extent the same shall have been invalid, illegal or
unenforceable had never been contained herein. The parties agree that they will
negotiate in good faith to replace any provision hereof so held invalid, illegal
or unenforceable with a valid provision which is as similar as possible in
substance to the invalid, illegal or unenforceable provision.
Neither this security agreement nor any term hereof may be changed, waived,
discharged or terminated except by a written instrument expressly referring to
this agreement and to the provisions so modified or limited, and executed by the
party to be charged. This security agreement and all obligations of the Debtors
hereunder shall be binding upon the successors and assigns of the Debtors, and
shall, together with the rights and remedies of Citizens hereunder, inure to the
benefit of Citizens, its successors and assigns. The Debtors acknowledge receipt
of a copy of this security agreement. Terms used herein without definition which
are defined in the Uniform Commercial Code of Massachusetts have such defined
meanings herein, unless the context otherwise indicates or requires.
This security agreement and all rights and obligations hereunder, including
matters of construction, validity and performance, shall be governed by the
internal laws of Massachusetts, without reference to the conflict of laws rules
of any jurisdiction. This security agreement is intended to take effect as a
sealed instrument. All obligations of the Debtors hereunder shall be joint and
several.
Sincerely,
ASAHI/AMERICA, INC.
By: /s/ Leslie B. Lewis
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Title: Chairman, President
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ASAHI ENGINEERED PRODUCTS, INC.
By: /s/ Leslie B. Lewis
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Title: President
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Address: 35 Green Street
Malden, MA 02148