PROMISSORY NOTE
$1,620,000.00 Dayton, Ohio
July 21, 2000
FOR VALUE RECEIVED, ALLIANCE EDISON LLC, a Delaware limited liability
company ("Company"), promises to pay to the order of KEYBANK NATIONAL
ASSOCIATION, a national banking association ("Bank"), the principal sum of ONE
MILLION SIX HUNDRED TWENTY THOUSAND and 00/100 DOLLARS ($1,620,000.00) or, if
less, the amount of all loan advances ("Loan Advances") made by Bank to the
Company pursuant to the terms and conditions contained in a Loan Agreement
dated July 21, 2000 by and between the Company and Bank (the "Loan Agreement"),
together with interest thereon at the interest rate or rates as established by
Bank pursuant to Paragraph 1(a) and 1(b) of this Promissory Note ("Note").
This Note is the Note referred to in, is executed and delivered by the Company
pursuant to, and is entitled to the benefits of and is subject to, the Loan
Agreement. Except as otherwise defined in this Note, all defined terms in this
Note shall have the same meanings as defined in the Loan Agreement.
1. ACCRUAL OF INTEREST.
(a) Prime Rate. Interest shall accrue upon the unpaid balance of
the Loan Advances at an interest rate per annum equal to three
quarters of one percent (.75%) above Bank's Prime Rate (the
"Interest Rate"). The term "Bank's Prime Rate" shall mean that
interest rate established by Bank from time to time as Bank's
Prime Rate, whether or not such rate is publicly announced. The
Bank's Prime Rate may not be the lowest interest rate charged by
Bank for its commercial loans or other extensions of credit. The
Interest Rate shall change and become immediately effective
without notice to the Company upon each change in Bank's Prime
Rate.
(b) After-Maturity Interest Rate. After maturity of this Note,
whether or not by acceleration, interest shall accrue upon the
unpaid balance of the Loan Advances at an interest rate per
annum equal to three and three quarters percent (3.75%) above
Bank's Prime Rate (the "After-Maturity Interest Rate"). The
After-Maturity Interest Rate shall change and become
immediately effective without notice to the Company upon each
change in Bank's Prime Rate.
(c) Calculation of Interest. Interest shall be calculated on the
basis of the actual number of days elapsed divided by a year
of three hundred and sixty (360) days.
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2. PAYMENT OF ACCRUED INTEREST AND PRINCIPAL.
(a) Monthly Interest Payments. Beginning on August 15, 2000 and
continuing on the fifteenth day of each month thereafter until and
including July 15, 2002, the Company shall pay Bank a monthly interest
payment in an amount equal to all interest which has accrued upon the
unpaid balance of the Loan Advances. On or about the last day of each
month during the term of this Note, Bank shall send the Company a
statement of the estimated interest which shall be due and payable on
the fifteenth day of the following month (the "monthly interest
statement"). Each monthly interest statement shall be based upon the
unpaid balance of the Loan Advances as of the statement date and
Interest Rate in effect on the statement date. If the unpaid balance
of the Loan Advances or Interest Rate changes between the statement
date and payment date, Bank shall make an appropriate adjustment on
the next monthly interest statement.
(b) Maturity Date. On July 15, 2002 (the "Maturity Date"), the
Company shall pay Bank the entire unpaid balance of the Loan Advances
and any accrued and unpaid interest.
3. LATE PAYMENT CHARGE. If any principal or interest payment is not received
by Bank within ten (10) days of its due date, the Company shall pay Bank,
at Bank's option, (i) a late fee in the sum of $50.00, or five percent (5%)
of the overdue payment, whichever is greater, and (ii) to the extent not
prohibited by law, all costs and expenses, including reasonable attorney
fees and court costs incurred by Bank in connection with the collection of
any past due principal and/or interest payment upon this Note.
4. PREPAYMENT PREMIUM. If the Company prepays, in whole or part, the unpaid
balance of the Loan Advances, the Company shall not be required to pay Bank
a prepayment premium.
5. SECURITY. This Note is secured by the following:
(a) An Open-End Leasehold Mortgage, Assignment of Leases, Rents and
Contract Rights and Security Agreement dated July 21, 2000 (the
"Mortgage") in which the Company has mortgaged to Bank its leasehold
estate in a parcel of real estate containing approximately 5.8494
acres of land located at 1416 West Riverview Avenue, Dayton, Ohio
45407 (the "Premises"), which the Company is leasing from the Dayton
Metropolitan Housing Authority ("DMHA") pursuant to the terms and
conditions contained in a Ground Lease Agreement dated November 23,
1999 as amended by a First Amendment to Ground Lease dated as of July
21, 2000 (collectively,
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the "Ground Lease"), between DMHA, as Landlord, and Alliance Facilities
Management, Inc., an Ohio non-profit corporation ("AFM"), as Tenant. The
Ground Lease has been assigned and transferred by AFM to the Company
pursuant to the terms and conditions contained in an Assignment and
Assumption of Ground Lease and Lessor Consent dated as of July 21, 2000
(the "Ground Lease Assignment"), by and between AFM, as Assignor, the
Company, as Assignee, and DMHA, as Lessor. The Premises have been subleased
to Alliance Community Schools, Inc., and Ohio non-profit corporation
("ACS"), pursuant to the terms and conditions contained in a Sublease
Agreement dated March 10, 2000, by and between AFM, as Sublessor, and ACS,
as Sublessee, as amended by an Amended and Restated Sublease Agreement dated
as of July 21, 2000, between the Company, as Sublessor, and ACS, as
Sublessee (collectively, the "Sublease"). The Sublease has been assigned and
transferred by AFM to the Company pursuant to the terms and conditions
contained in an Assignment and Assumption of Sublease and Sublessee Consent
and Acknowledgment dated July 21, 2000 (the "Sublease Assignment"), by
and between AFM, as Assignor, the Company, as Assignee, and ACS,
as Sublessee.
(b) A Security Agreement dated July 21, 2000 (the "Security Agreement") in
which the Company has granted Bank a first lien security interest in (i) all
accounts, accounts receivable, contract rights, chattel paper, instruments,
general intangibles and all other obligations and receivables now owned or
hereafter acquired by the Company ("Receivables"), (ii) all inventory,
including, but not limited to, all goods, merchandise, raw materials, goods
in process, finished goods and other tangible personal property now owned or
hereafter acquired and held for sale or lease or to be furnished under
contracts of service or to be used or consumed in the Company's business
("Inventory"), (iii) all machinery, equipment, furniture, fixtures and
tangible personal property of every kind and description, now owned or
hereafter acquired by the Company and wherever located ("Equipment"), (iv)
all replacements of and additions to the Equipment (the "Replacements and
Additions"), and (v) all proceeds of the Receivables, Inventory and
Equipment, including, without limitation, all insurance proceeds (the
"Proceeds").
(c) A Deposit Assignment dated July 21, 2000 (the "Deposit Assignment") in
which the Company has unconditionally assigned and transferred to Bank all
of its right, title and interest in the Company's Cash Security (as this
term is defined in the Loan Agreement and Deposit Assignment).
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(d) A Security Agreement dated July 21, 2000 (the "Security Agreement") in
which AFM has granted Bank a third lien security interest in (i) all
accounts, accounts receivable, contract rights, chattel paper, instruments,
general intangibles and all other obligations and receivables now owned or
hereafter acquired by AFM ("Receivables"), (ii) all inventory, including,
but not limited to, all goods, merchandise, raw materials, goods in
process, finished goods and other tangible personal property now owned or
hereafter acquired and held for sale or lease or to be furnished under
contracts of service or to be used or consumed in AFM's business ("AFM
Inventory"), (iii) all machinery, equipment, furniture, fixtures and
tangible personal property of every kind and description, now owned or
hereafter acquired by AFM and wherever located ("AFM Equipment"), (iv) all
replacements of and additions to the AFM Equipment (the "AFM Replacements
and Additions"), and (v) all proceeds of the AFM Receivables, AFM Inventory
and AFM Equipment including, without limitation, all insurance proceeds
(the "AFM Proceeds").
(e) A Security Agreement dated July 21, 2000 (the "ACS Additional Security
Agreement") in which ACS has granted Bank a third lien security interest in
(i) all accounts, accounts receivable, contract rights, chattel paper,
instruments, general intangibles and all other obligations and receivables
now owned or hereafter acquired by ACS ("ACS Receivables"), (ii) all
inventory, including, but not limited to, all goods, merchandise, raw
materials, goods in process, finished goods and other tangible personal
property now owned or hereafter acquired and held for sale or lease or to
be furnished under contracts of service or to be used or consumed in ACS's
business ("ACS Inventory"), (iii) all machinery, equipment, furniture,
fixtures and tangible personal property of every kind and description, now
owned or hereafter acquired by ACS and wherever located ("ACS Equipment"),
(iv) all replacements of and additions to the ACS Equipment (the "ACS
Replacements and Additions"), and (v) all proceeds of the ACS Receivables,
ACS Inventory and ACS Equipment including, without limitation, all
insurance proceeds (the "ACS Proceeds").
(f) A Payment Guaranty dated as of July 21, 2000 (the "AFM Payment Guaranty")
in which AFM has unconditionally guaranteed (i) to repay Bank all
principal and interest payments which become due and payable to Bank upon
this Note, and (ii) to pay Bank all amounts, obligations and liabilities
which become due and payable to Bank upon the Loan Documents.
(g) A Payment Guaranty dated as of July 21, 2000 (the "Edison Payment
Guaranty") in which Edison Schools Inc., a Delaware corporation
("Edison"), has unconditionally guaranteed pursuant to the terms thereof
(i) to repay Bank all principal and interest payments which become due and
payable to
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Bank upon this Note, and (ii) to pay Bank all amounts, obligations and
liabilities which become due and payable to Bank upon the Loan
Documents.
(h) A Payment Guaranty dated as of July 21, 2000 (the "ACS Payment
Guaranty") in which ACS has unconditionally guaranteed (i) to repay
Bank all principal and interest payments which become due and payable
to Bank upon this Note, and (ii) to pay all amounts, obligations and
liabilities which become due and payable to Bank upon the Loan
Documents.
6. EVENTS OF DEFAULT. Each of the following occurrences shall constitute an
Event or Events of Default:
(a) The Company fails to pay Bank any principal or interest payment which
becomes due and payable upon this Note;
(b) The Company (i) shall generally not pay, or shall be unable to pay, or
shall admit in writing its inability to pay its debts as such debts
become due; or (ii) shall make an assignment for the benefit of its
creditors, or petition or apply to any tribunal for the appointment of
a custodian, receiver, or trustee for it or for a substantial part of
its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or (iv) shall have had any bankruptcy
proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made and which remains
undismissed for a period of sixty (60) days or more;
(c) The Company shall breach, or any default shall occur in the
performance of any of its covenants or agreements as contained in this
Note, the Loan Agreement, Mortgage, Security Agreement, Deposit
Assignment, Environmental Indemnity Agreement, Ground Lease or
Sublease;
(d) The Company (i) fails to pay any indebtedness (other than as evidenced
by this Note) owing by the Company when due, whether at maturity, by
acceleration or otherwise, or (ii) fails to perform any term, covenant
or agreement or instrument evidencing, securing or relating to such
indebtedness when required to be performed, or is otherwise in default
thereunder, if the effect of such failure is to accelerate, or to
permit the holder(s) of such indebtedness or the trustee(s) under any
such agreement or instrument to accelerate, the maturity of such
indebtedness unless and to the extent only that the same shall be
contested in good faith and by appropriate proceedings by the Company;
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(e) Any representation or warranty previously or hereafter made by the
Company to Bank in connection with the Loan Advances evidenced by
this Note shall prove false or misleading in any material respect
when made;
(f) AFM shall breach, or any default shall occur in the performance of
any of its covenants or agreements as contained in the AFM Security
Agreement or AFM Payment Guaranty;
(g) Edison shall breach, or any default shall occur in the performance
of any of its covenants or agreements as contained in the Edison
Payment Guaranty;
(h) ACS shall breach, or any default shall occur in the performance of
any of its covenants or agreements as contained in the ACS Security
Agreement or ACS Payment Guaranty;
(i) AFM (i) fails to pay any indebtedness owing by AFM when due, whether
at maturity, by acceleration or otherwise, or (ii) fails to perform
any term, covenant or agreement or instrument evidencing, securing
or relating to such indebtedness when required to be performed, or
is otherwise in default thereunder, if the effect of such failure is
to accelerate, or to permit the holder(s) of such indebtedness or
the trustee(s) under any such agreement or instrument to accelerate,
the maturity of such indebtedness unless and to the extent only that
the same shall be contested in good faith and by appropriate
proceedings by AFM, and such failure by AFM in (i) or (ii) has a
material adverse effect on the ability of the Company to perform its
obligations under the Loan Documents;
(j) AFM (i) shall generally not pay, or shall be unable to pay, or shall
admit in writing its inability to pay its debts as such debts become
due; or (ii) shall make an assignment for the benefit of its
creditors, or petition or apply to any tribunal for the appointment
of a custodian, receiver, or trustee for it or for a substantial part
of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or (iv) shall have had any
bankruptcy proceeding commenced against it in which an order for
relief is entered or an adjudication or appointment is made and which
remains undismissed for a period of sixty (60) days or more;
(k) Edison (i) fails to pay any indebtedness owing by Edison when due,
whether at maturity, by acceleration or otherwise, or (ii) fails to
perform any term, covenant or agreement or instrument evidencing,
securing or relating to such indebtedness when required to be
performed, or is otherwise in default
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thereunder, if the effect of such failure is to accelerate, or to
permit the holder(s) of such indebtedness or the trustee(s) under any
such agreement or instrument to accelerate, the maturity of such
indebtedness unless and to the extent only that the same shall be
contested in good faith and by appropriate proceedings by Edison, and
such failure by Edison in (i) or (ii) has a material adverse effect on
the ability of the Company to perform its obligations under the Loan
Documents;
(l) Edison (i) shall generally not pay, or shall be unable to pay, or
shall admit in writing its inability to pay its debts as such debts
become due; or (ii) shall make an assignment for the benefit of its
creditors, or petition or apply to any tribunal for the appointment of
a custodian, receiver, or trustee for it or for a substantial part of
its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or (iv) shall have had any bankruptcy
proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made and which remains
undismissed for a period of sixty (60) days or more;
(m) ACS (i) fails to pay any indebtedness owing by ACS when due, whether
at maturity, by acceleration or otherwise, or (ii) fails to perform
any term, covenant or agreement or instrument evidencing, securing or
relating to such indebtedness when required to be performed, or is
otherwise in default thereunder, if the effect of such failure is to
accelerate, or to permit the holder(s) of such indebtedness or the
trustee(s) under any such agreement or instrument to accelerate, the
maturity of such indebtedness unless and to the extent only that the
same shall be contested in good faith and by appropriate proceedings
by ACS, and such failure by ACS in (i) or (ii) has a material adverse
effect on the ability of the Company to perform its obligations under
the Loan Documents; or
(n) ACS (i) shall generally not pay, or shall be unable to pay, or shall
admit in writing its inability to pay its debts as such debts become
due; or (ii) shall make an assignment for the benefit of its
creditors, or petition or apply to any tribunal for the appointment of
a custodian, receiver, or trustee for it or for a substantial part of
its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, or (iv) shall have had any bankruptcy
proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made and which remains
undismissed for a period of sixty (60) days or more.
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7. REMEDIES UPON DEFAULT. After the occurrence of any Event or Events of
Default as defined in Paragraph 6 of this Note, except for an Event or
Events of Default as defined in Paragraph 6(b), 6(j), 6(l) or 6(n) of this
Note, Bank shall make its best efforts to provide the Company with a
written notice which shall specify the Event or Events of Default, the
action necessary to cure the Event or Events of Default, and the time
within which the Company may cure the Event or Events of Default, which
cure period shall be not less than ten (10) days for a payment default,
and not less than thirty (30) days for a non-payment default; provided,
however, if the Company has commenced the necessary action to cure the
default within the applicable cure period and the default can be cured
within a reasonable period of time, the cure period shall be extended by
Bank on the condition that the Company continues to take all necessary
action to cure the default within the extended cure period. In the event
the Company does not cure the Event or Events of Default or cause to be
cured the Event or Events of Default within the applicable cure period or,
if applicable, the extended cure period, Bank, without any further notice
to the Company, may, at its option, declare the entire indebtedness
evidenced by this Note to be due and payable in full and institute
proceedings for collection.
8. DEFINITION OF BANK. The term "Bank" as used in this Note shall mean
KeyBank National Association or any subsequent holder of this Note. All
sums which become due under the terms hereof shall be payable in lawful
money of the United States of America at Bank's office located at 34
North Main Street, Dayton, Ohio 45402, or at such other place as Bank may
designate in writing. All payments received by Bank upon this Note shall
be applied by Bank to the payment of accrued interest and late charges
due upon this Note and the repayment of the unpaid principal balance of
this Note in such order as Bank may determine in Bank's sole discretion.
9. WAIVER OF PRESENTMENT, DEMAND AND NOTICE OF PROTEST. No delay or omission
by Bank in exercising any right shall operate as a waiver of such right
or any other right under this Note; a waiver on any one occasion shall
not be construed as a bar to or waiver of any right on any future
occasion. Except as otherwise provided in Paragraph 7 of this Note, the
Company hereby waives presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note and assents to any
extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange or release of collateral and
to the addition or release of any other party primarily or secondarily
liable.
10. COGNOVIT NOTE. The Company hereby authorizes any attorney at law,
including any attorney retained by Bank, to appear in any court of
record within the State of Ohio if this Note is not paid when due,
whether or not by acceleration, to waive issuance and service of
process, to confess judgment against the Company for the
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amount of principal and interest then appearing due, together with costs of
suit, and to release all errors and right to review. The Company hereby
expressly (i) waives a conflict of interest in an attorney retained by Bank
confessing judgment against the Company upon this Note, and (ii) consents to the
attorney retained by Bank in receiving a legal fee from Bank for legal services
rendered for confessing judgment against the Company upon this Note. A copy of
this Note, certified by Bank, may be filed in each such proceeding in place of
filing the original as warrant of attorney.
WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER
FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
ALLIANCE EDISON LLC,
a Delaware limited liability company
By: ALLIANCE FACILITIES MANAGEMENT, INC.,
an Ohio non-profit corporation
Managing Member
By /s/ Sam Warwar
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Sam Warwar
Secretary
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Promissory Note - Alliance Edison LLC and KeyBank NA
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