Document:

exv10w22

 

Exhibit 10.22

SECURITY AGREEMENT

     This SECURITY AGREEMENT (as the same may from time to time be amended, restated
or otherwise modified, this “Agreement”) is made as of the 31st day of
August, 2006, by DATATRAK INTERNATIONAL, INC., an Ohio corporation (“Borrower”), in
favor of KEYBANK NATIONAL ASSOCIATION (“Lender”).

     1. Recitals.

     Concurrently herewith Lender is establishing a Line of Credit, as hereinafter
defined, pursuant to which Borrower may from time to time request loans, as
hereinafter defined. Borrower desires that Lender grant the financial accommodations
to Borrower pursuant to the Line of Credit. Borrower deems it to be in the direct
pecuniary and business interests of Borrower that Borrower obtain from Lender the
financial accommodations provided for under the Line of Credit.

     Borrower understands that Lender is willing to grant the financial accommodations
provided for under the Line of Credit only upon certain terms and conditions, one of
which is that Borrower grant to Lender a security interest in and a collateral
assignment of the Collateral, as hereinafter defined, and this Agreement is being
executed and delivered in consideration of each financial accommodation, if any,
granted to Borrower by Lender and for other valuable consideration.

     2. Definitions. Except as specifically defined herein, terms that are defined
in the U.C.C. are used herein as so defined. As used in this Agreement, the following
terms shall have the following meanings:

     “Account” shall mean all of Borrower’s accounts, as defined in the U.C.C.

     “Account Debtor” shall mean any Person obligated to pay all or any part of any
Account in any manner and includes (without limitation) any guarantor thereof or other
accommodation party therefor.

     “Advances” means, collectively, all loan advances made by Lender to Borrower, at
the sole discretion and option of Lender, Borrower acknowledging that the Line of
Credit relating to this Note is purely discretionary and Lender may, without prior
notice to Borrower, refuse to honor any request by Borrower for borrowing hereunder;
“Advance” means any of the Advances.

     “Cash Collateral Account” shall mean a commercial Deposit Account (if any)
designated “cash collateral account” and maintained by Borrower with Lender, without
liability by Lender to pay interest thereon, from which account Lender shall have the
exclusive right to withdraw funds until all of the Obligations are paid in full.

 

 

     “Cash Security” shall mean all cash, instruments, Deposit Accounts, and other cash
equivalents, whether matured or unmatured, whether collected or in the process of
collection, upon which Borrower presently has or may hereafter have any claim, wherever
located (including but not limited to any of the foregoing that are presently or may
hereafter be existing or maintained with, issued by, drawn upon, or in the possession
of Lender).

     “Collateral” shall mean all of Borrower’s existing and future (a) Accounts, (b)
instruments, chattel paper and documents relating to Accounts, (c) letter-of-credit
rights supporting Accounts, (d) general intangibles relating to Accounts, (e) funds now
or hereafter on deposit in the Cash Collateral Account, if any, Cash Security, and (f)
Proceeds of any of the foregoing.

     “Default Rate” means that floating rate per annum equal to two percent (2%) in
excess of the Prime Rate from time to time in effect, which rate shall be immediately
adjusted to correspond with each change in the Prime Rate.

     “Deposit Account” shall mean (a) a deposit account, as defined in the U.C.C., (b)
any other deposit account, and (c) any demand, time, checking, savings, passbook or
similar account maintained with a bank, savings and loan association, credit union, or
similar organization, in each case into which proceeds of Collateral are deposited.

     “Event of Default” shall mean an event or condition that constitutes an Event of
Default, as defined in Section 13.1 hereof.

     “Hedge Agreement” shall mean any currency swap or hedge agreement, interest rate
swap, cap, collar or floor agreement, or other interest rate management device entered
into by Borrower with Lender.

     “Line of Credit” shall mean the discretionary line of credit established by Lender
for Borrower concurrently herewith, as such line of credit may from time to time be
renewed, extended or increased, pursuant to which Borrower may request such Loans as
Lender may be willing to grant.

     “Loan” shall mean any Advance, as defined in the Note.

     “Note” shall mean that certain Demand Master Promissory Note executed by Borrower
evidencing Borrower’s obligations to repay the Loans, as such note may from time to
time be amended, restated or otherwise modified or replaced, and any replacement or
other promissory note executed in connection with the Line of Credit.

     “Obligations” shall mean, collectively, (a) all Advances, indebtedness and other
obligations now owing or hereafter incurred by Borrower to Lender pursuant to the Line
of Credit and the Note executed in connection therewith; (b) each renewal, extension,
consolidation or refinancing of any of the foregoing, in whole or in part; (c) all
interest from time to time accruing on any of the foregoing, and all fees and other
amounts payable to Lender pursuant to the Line of Credit or the Note; (d) all
obligations and liabilities of Borrower now existing or

2

 

hereafter incurred to Lender (or any affiliate of Lender) under, arising out of, or in
connection with any Hedge Agreement; (e) every other liability, now or hereafter owing
to Lender (or any affiliate of Lender) by Borrower or Borrower, and includes, without
limitation, every liability, whether owing by only Borrower or Borrower or by Borrower
or Borrower with one or more others in a several, joint or joint and several capacity,
whether owing absolutely or contingently, whether created by note, overdraft, guaranty
of payment or other contract or by quasi-contract, tort, statute or other operation of
law, whether incurred directly to Lender (or any affiliate thereof) or acquired by
Lender (or any affiliate thereof) by purchase, pledge or otherwise and whether
participated to or from Lender (or any affiliate thereof) in whole or in part; and (f)
all Related Expenses.

     “Prime Rate” means that interest rate established from time to time by Lender as
Lender’s Prime Rate, whether or not such rate is publicly announced; the Prime Rate
may not be the lowest interest rate charged by Lender for commercial or other
extensions of credit. Each change in the Prime Rate shall be effective immediately
from and after such change.

     “Proceeds” shall mean (a) proceeds, as defined in the U.C.C. and (b) whatever is
received upon the sale, exchange, collection or other disposition of Collateral or
proceeds, whether cash or non-cash. Cash proceeds include, without limitation, moneys,
checks, and Deposit Accounts. Proceeds include, without limitation, any Account
arising when the right to payment is earned under a contract right, any insurance
payable by reason of loss or damage to the Collateral, and any return or unearned
premium upon any cancellation of insurance. Except as expressly authorized in this
Agreement or the Note, the right of Lender to Proceeds specifically set forth herein,
or indicated in any financing statement, shall never constitute an express or implied
authorization on the part of Lender to Borrower’s sale, exchange, collection, or other
disposition of any or all of the Collateral.

     “Related Expenses” shall mean any and all costs, liabilities and expenses
(including, without limitation, losses, damages, penalties, claims, actions, reasonable
attorneys’ fees, legal expenses, judgments, suits and disbursements) (a) incurred by
Lender or imposed upon or asserted against Lender, in any attempt by Lender to (i)
obtain, preserve, perfect or enforce any security interest evidenced by this Agreement
or the Note; (ii) obtain payment, performance or observance of any and all of the
Obligations; or (iii) maintain, insure, audit, collect, preserve, repossess or dispose
of any of the Collateral or any other collateral securing the Obligations, including,
without limitation, costs and expenses for appraisals, assessments and audits of
Borrower or any such collateral; or (b) incidental or related to (a) above, including,
without limitation, interest thereupon, which shall bear interest until paid at the
Default Rate, commencing ten days after an invoice has been provided to Borrower.

     “U.C.C.” shall mean the Uniform Commercial Code, as in effect from time to time
in Ohio.

     “U.C.C. Financing Statement” shall mean a financing statement filed or to be
filed in accordance with the Uniform Commercial Code, as in effect from time to time
in the relevant state or states.

3

 

     3. Security Interest. In consideration of and as security for the full and
complete payment of all of the Obligations, Borrower hereby grants to Lender a security
interest in and a collateral assignment of the Collateral.

     4. Representations and Warranties. Borrower hereby represents and warrants
to Lender as follows:

     4.1. Borrower is a corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation and is duly qualified to do business in each
state in which a failure to so qualify would have a material adverse effect on Borrower.

     4.2. Borrower has full power, authority and legal right to pledge the Collateral, to
execute and deliver this Agreement, and to perform and observe the provisions hereof. The
officers acting on Borrower’s behalf have been duly authorized to execute and deliver this
Agreement. This Agreement is valid and binding upon Borrower in accordance with the terms
hereof, subject to applicable bankruptcy, insolvency, avoidance, bulk transfer,
reorganization, moratorium or similar laws affecting the rights of creditors, the Lender
generally, including any statutory or other laws regarding fraudulent conveyances or
transfers and preferential transfers or bulk transfers and general principles of equity
(regardless of whether considered in a proceeding in equity or at law).

     4.3. Neither the execution and delivery of this Agreement, nor the performance and
observance of the provisions hereof, by Borrower will conflict with, or constitute a
violation or default under, any provision of any applicable law or of any contract
(including, without limitation, Borrower’s articles of incorporation and bylaws or of any
other writing binding upon Borrower in any manner which conflict would reasonably be
expected to have a material adverse effect on Borrower.

     4.4. Borrower is organized solely under the laws of the State of Ohio and has not
continued existence from any other jurisdiction. Borrower has not changed its name during
the last five years and has not conducted business under a trade or assumed name.
Borrower’s chief executive office is set forth on Schedule 4.4 hereto. Borrower
has places of business or maintains Collateral and its other assets at the locations set
forth on Schedule 4.4 hereto.

     4.5. Borrower has furnished its most recent financial statements to Lender and such
financial statements are true and complete in all material respects, have been prepared in
accordance with generally accepted accounting principles, in a manner consistent with that
used for the immediately preceding fiscal period, and fairly present Borrower’s financial
condition as of the date of such financial statements and the results of Borrower’s
operations for the period then ending. Since such date, there has been no material adverse
change in Borrower’s financial condition, business and properties other than such changes,
if any, as have been specifically disclosed to Lender in writing.

     4.6. At the execution and delivery hereof, (a) there is no U.C.C. Financing Statement
outstanding covering the Collateral, or any part thereof, or any inventory of Borrower;
(b) none of the Collateral or inventory of Borrower is subject to any security interest or
lien of any kind;

4

 

(c) the Internal Revenue Service has not alleged the nonpayment or underpayment of any
tax by Borrower or threatened in writing to make any assessment in respect thereof;
(d) upon execution of this Agreement and the filing of the U.C.C. Financing Statements
in connection herewith, Lender will have a valid and enforceable first security
interest in the Collateral (to the extent perfection can be accomplished by such
filing or action) that is the type in which a security interest may be created under
the U.C.C. by the execution of a security agreement and perfected by the filing of a
U.C.C. Financing Statement; and (e) Borrower has not entered into any contract or
agreement that would prohibit Lender from acquiring a security interest, mortgage or
other lien on, or a collateral assignment of, any of the property or assets of
Borrower.

     4.7. Borrower has received consideration that is the reasonably equivalent value of
the obligations and liabilities that Borrower has incurred to Lender. Borrower is not
insolvent, as defined in any applicable state or federal statute, nor will Borrower be
rendered insolvent by the execution and delivery of this Agreement to Lender or any other
documents executed and delivered to Lender in connection herewith. Borrower has not
engaged, nor is Borrower about to engage, in any business or transaction for which the
assets retained by it are or will be an unreasonably small amount of capital, taking into
consideration the obligations to Lender incurred hereunder. Borrower does not intend to,
nor does it believe that it will, incur debts beyond its ability to pay such debts as they
mature.

     4.8. At the execution and delivery hereof, no Event of Default will exist.

     5. Taxes and Other Borrower Obligations. Borrower shall pay in full (a) prior
in each case to the date when penalties would attach, all taxes, assessments and
governmental charges and levies (except only those so long as and to the extent that the
same shall be contested in good faith by appropriate and timely proceedings and for which
adequate reserves have been established in accordance with generally accepted accounting
principles) for which Borrower may be or become liable or to which any or all of
Borrower’s properties may be or become subject; (b) all of Borrower’s wage obligations to
Borrower’s employees in compliance with the Fair Labor Standards Act (29 U.S.C. 206-207)
or any comparable provisions; and (c) all of Borrower’s material obligations calling for
the payment of money (except only those so long as and to the extent that the same shall
be contested in good faith and for which adequate reserves have been established in
accordance with generally accepted accounting principles) before such payment becomes over
due.

     6. Corporate Names and Location of Collateral. Borrower shall not (a) change
its name, or (b) change its jurisdiction or form of organization or extend or continue its
existence in or to any other jurisdiction (other than its jurisdiction of organization at
the date of this Agreement) without giving Lender at least thirty (30) days prior written
notice. Borrower shall also provide Lender with prior written notification of any change
in Borrower’s chief executive office. In the event of any of the foregoing or if otherwise
deemed appropriate by Lender, Lender is hereby authorized to file new U.C.C. Financing
Statements describing the Collateral and otherwise in form and substance sufficient for
recordation wherever necessary or appropriate, as determined in Lender’s sole discretion,
to perfect or continue perfected the security interest of Lender in the Collateral.
Borrower shall pay all filing and recording fees and taxes in connection with the filing
or recordation of such U.C.C. Financing Statements and shall

5

 

promptly reimburse Lender therefor if Lender pays the same. Such amounts not so paid or
reimbursed shall be Related Expenses hereunder.

     7. Notice. Borrower shall give Lender prompt written notice if any Event of
Default shall occur hereunder or if the Internal Revenue Service shall allege in writing
the nonpayment or underpayment of any material tax by Borrower or threaten in writing to
make any assessment in respect thereof.

     8. Financial Records. Borrower shall (a) maintain at all times true and
complete financial records and books of accounts in accordance with generally accepted
accounting principles consistently applied and, without limiting the generality of the
foregoing, prepare authentic invoices, for all of the Accounts; (b) render to Lender,
forthwith upon each request of Lender, such financial statements of Borrower’s financial
condition and operations, including but not limited to any reports filed by
Borrower with the United States Securities and Exchange Commission, and such reports of
the Accounts, as Lender may from time to time reasonably request; (c) give Lender prompt
written notice whenever any Account Debtor shall become in default in any material manner
or assert any material defense or offset (other than the ordinary course of business) and
whenever any other event, omission, condition or thing having a material adverse effect on
any material Account shall occur or arise; and (d) forward to Lender, upon reasonable
request of Lender upon and during the continuance of an Event of Default, whenever made,
(i) invoices, sales journals or other documents satisfactory to Lender that summarize the
Accounts, certified by an officer of Borrower, (ii) within the time specified by Lender,
an aging report of the Accounts then outstanding setting forth, in such form and detail
and with such representations and warranties as Lender may from time to time reasonably
require, the unpaid balances of all invoices billed respectively during that period and
during each of the three next preceding periods, and certified by an officer of Borrower,
and (iii) with respect to any other Collateral, such reports and other documents mat are
reasonably satisfactory to Lender.

     9. Transfers, Liens and Modifications Regarding Collateral. Borrower shall
not, without Lender’s prior written consent, (a) sell, assign, transfer or otherwise
dispose of, or grant any option with respect to, or create, incur, or permit to exist any
pledge, lien, mortgage, hypothecation, security interest, charge, option or any other
encumbrance with respect to any of the Collateral, or any interest therein, or Proceeds,
except for the lien and security interest provided for by this Agreement and any security
agreement securing only Lender; or (b) enter into or assent to any amendment, compromise,
extension, release or other modification of any kind of, or substitution for, any of the
Accounts except, in each case, in the ordinary course of business of
Borrower.

     10. Collateral. Borrower shall:

     (a) at all reasonable times during normal business hours and upon prior written
notice, allow Lender by or through any of its officers, agents, employees, attorneys or
accountants to (i) examine, inspect and make extracts from Borrower’s books and other
records, including, without limitation, the tax returns of Borrower, and (ii) upon and
during the continuance of an Event of Default, arrange for verification of the
Accounts, under reasonable procedures, directly with Account Debtors or by other
methods;

6

 

     (b) promptly furnish to Lender, upon request, (i) additional statements and
information with respect to the Collateral, and all writings and information relating to
or evidencing any of the Accounts (including, without limitation, computer printouts or
typewritten reports listing the mailing addresses of all present Account Debtors), and
(ii) any other writings and information as Lender may request;

     (c) notify Lender in writing promptly upon the creation of any Accounts with respect
to which the Account Debtor is the United States of America or any state, county, city or
other governmental authority or any department, agency or instrumentality of any of them,
or any foreign government or instrumentality thereof;

     (d) promptly notify Lender in writing of any information that Borrower has or may
receive with respect to the Collateral that would reasonably be expected to materially and
adversely affect the value thereof or the rights of Lender with respect thereto taken as a
whole;

     (e) upon request of Lender, execute and deliver with a financial institution that
holds deposits in the name of Borrower, a control agreement over such Deposit Account in
favor of Lender, in form and substance satisfactory to Lender; and

     (f) upon request of Lender, promptly take such action and promptly make, execute, and
deliver all such additional and further items, deeds, assurances, instruments and any
other writings as Lender may from time to time reasonably deem necessary, including,
without limitation, chattel paper, to carry into effect the intention of this Agreement or
so as to completely vest in and ensure to Lender its rights hereunder and in or to the
Collateral.

     11. Collections and Receipt of Proceeds. Upon written notice to Borrower
from Lender upon the occurrence and during the continuation of an Event of Default, a
Cash Collateral Account shall be opened by Borrower at the main office of Lender and
all such lawful collections of the Accounts and such Proceeds of the Accounts shall be
remitted daily by Borrower to Lender in the form in which they are received by
Borrower, either by mailing or by delivering such Proceeds to Lender, appropriately
endorsed for deposit in the Cash Collateral Account. In the event that such notice is
given to Borrower from Lender, Borrower shall not commingle such Proceeds with any of
Borrower’s other funds or property, but shall hold such Proceeds separate and apart
therefrom upon an express trust for Lender. In such case, Lender may, in its sole
discretion, at any time and from time to time after the occurrence of an Event of
Default, apply all or any portion of the account balance in the Cash Collateral
Account as a credit against the Obligations. If any remittance shall be dishonored, or
if, upon final payment, any claim with respect thereto shall be made against Lender on
its warranties of collection, Lender may charge the amount of such item against the
Cash Collateral Account or any other Deposit Account maintained by Borrower with
Lender, and, in any event, retain the same and Borrower’s interest therein as
additional security for the Obligations. Lender may, in its sole discretion, at any
time and from time to time, release funds from the Cash Collateral Account to Borrower
for use in Borrower’s business. The balance in the Cash Collateral Account may be
withdrawn by Borrower upon termination of this Agreement and payment in full of all of
the Obligations. At Lender’s request upon and during the continuance of an Event of
Default, Borrower shall cause

7

 

all remittances representing Proceeds of Collateral to be mailed to a lock box at a
location acceptable to Lender, to which Lender shall have access for the processing of
such items in accordance with the provisions, terms, and conditions of Lender’s
customary lock box agreement.

     12. Collections and Receipt of Proceeds by Lender. Lender shall, at all
times, have the right, but not the duty, upon and during the continuation of an Event
of Default, to collect and enforce any or all of the Accounts as Lender may reasonably
deem advisable and, if Lender shall at any time or times elect to do so in whole or in
part, Lender shall not be liable to Borrower except for willful misconduct or gross
negligence, if any. Borrower hereby constitutes and appoints Lender, or Lender’s
designated agent, as Borrower’s attorney-in-fact to exercise, at any time upon the
occurrence and during the continuation of an Event of Default, all or any of the
following powers which, being coupled with an interest, shall be irrevocable until the
complete and full payment of all of the Obligations:

     (a) to receive, retain, acquire, take, endorse, assign, deliver, accept and deposit,
in Lender’s name or Borrower’s name, any and all of Borrower’s cash, instruments, chattel
paper, documents, Proceeds of Accounts, collection of Accounts, and any other writings
relating to any of the Collateral. Borrower hereby waives presentment, demand, notice of
dishonor, protest, notice of protest and any and all other similar notices with respect
thereto, regardless of the form of any endorsement thereof. Lender shall not be bound or
obligated to take any action to preserve any rights therein against prior parties thereto;

     (b) to transmit to Account Debtors, on any or all of the Accounts, notice of
assignment to Lender thereof and the security interest of Lender and to request from such
Account Debtors at any time, in the name of Lender or Borrower, information concerning the
Accounts and the amounts owing thereon;

     (c) to notify and require Account Debtors on the Accounts to make payment of their
indebtedness directly to Lender;

     (d) to enter into or assent to such amendment, compromise, extension, release or
other modification of any kind of, or substitution for, the Accounts, or any thereof, as
Lender, in its reasonable discretion, may reasonably deem to be advisable;

     (f) to enforce the Accounts or any thereof, or any other Collateral, by suit or
otherwise, to maintain any such suit or other proceeding in Lender’s own name or in
Borrower’s name, and to withdraw any such suit or other proceeding. Borrower agrees to
lend every assistance reasonably requested by Lender in respect of the foregoing, all
at no cost or expense to Lender and including, without limitation, the furnishing of
such witnesses and of such records and other writings as Lender may reasonably require
in connection with making legal proof of any Account. Borrower agrees to reimburse
Lender in full for all court costs and reasonable attorneys’ fees and every other
reasonable cost, expense or liability, if any, incurred or paid by Lender in connection
with the foregoing, which obligation of Borrower shall constitute Obligations, shall be
secured by the Collateral and shall bear interest, until paid, at the Default Rate; and

8

 

     (g) to accept all collections in any form relating to the Collateral, including
remittances that may reflect deductions, and to deposit the same, into the Cash
Collateral Account or, at the option of Lender, to apply them as a payment on the
Obligations.

     13. Default and Remedies.

     13.1. Any of the following shall constitute an Event of Default under this Agreement:
(a) an Event of Default, as defined in the Note, shall occur under the Note; (b) any
representation, warranty or statement made by Borrower in or pursuant to this Agreement or
in any other writing received by Lender in connection with the Obligations shall be false
or erroneous in any material respect; or (c) Borrower shall fail or omit to perform or
observe any agreement made by Borrower in or pursuant to this Agreement or in any other
writing received by Lender pursuant hereto and such failure to continue for fifteen (15)
days after notice from Lender of such default.

     13.2. Lender shall at all times have the rights and remedies of a secured party under
the U.C.C. and the Ohio Revised Code as in effect from time to time, in addition to the
rights and remedies of a secured party provided elsewhere within this Agreement or in the
Note or otherwise provided in law or equity. Upon the occurrence of an Event of Default
and at all times during the continuance thereof, Lender may require Borrower to assemble
the Collateral, which Borrower agrees to do, and make it available to Lender at a
reasonably convenient place to be designated by Lender. Lender may, with or without notice
to or demand upon Borrower and with or without the aid of legal process, make use of such
force as may be necessary to enter any premises where the Collateral, or any thereof, may
be found and to take possession thereof (including anything found in or on the Collateral
that is not specifically described in this Agreement, each of which findings shall be
considered to be an accession to and a part of the Collateral) and for that purpose may
pursue the Collateral wherever the same may be found, without liability for trespass or
damage caused thereby to Borrower. After any delivery or taking of possession of the
Collateral, or any thereof, pursuant to this Agreement, then, with or without resort to
Borrower or any other Person or property, all of which Borrower hereby waives, and upon
such terms and in such manner as Lender may deem advisable, Lender, in its discretion, may
sell, assign, transfer and deliver any of the Collateral at any time, or from time to
time. No prior notice need be given to Borrower or to any other Person in the case of any
sale of Collateral that Lender determines to be perishable or to be declining speedily in
value or that is customarily sold in any recognized market, but in any other case Lender
shall give Borrower no fewer than ten days prior notice of either the time and place of
any public sale of the Collateral or of the time after which any private sale or other
intended disposition thereof is to be made. Borrower waives advertisement of any such sale
and (except to the extent specifically required by the preceding sentence) waives notice
of any kind in respect of any such sale. At any such public sale, Lender may purchase the
Collateral, or any part thereof, free from any right of redemption, all of which rights
Borrower hereby waives and releases. After deducting all Related Expenses, and after
paying all claims, if any, secured by liens having precedence over this Agreement, Lender
may apply the net proceeds of each such sale to or toward the payment of the Obligations,
whether or not then due, in such order and by such division as Lender, in its sole
discretion, may deem advisable. Any excess, to the extent permitted by law, shall be paid
to

9

 

Borrower, and the obligors on the Obligations shall remain liable for any deficiency.
In addition, Lender shall at all times have the right to obtain new appraisals of
Borrower or the Collateral, the cost of which shall be paid by Borrower.

     14. Interpretation. Each right, power or privilege specified or referred to
in this Agreement is cumulative and in addition to and not in limitation of any other
rights, powers and privileges that Lender may otherwise have or acquire by operation of
law, by contract or otherwise. No course of dealing by Lender in respect of, nor any
omission or delay by Lender in the exercise of, any right, power or privilege shall
operate as a waiver thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude any other or further exercise thereof or of any other right,
power or privilege, as Lender may exercise each such right, power or privilege either
independently or concurrently with others and as often and in such order as Lender may
deem expedient. No waiver, consent or other agreement shall be deemed to have been made by
Lender or be binding upon Lender in any case unless specifically granted by Lender in
writing, and each such writing shall be strictly construed. The captions to sections
herein are inserted for convenience only and shall be ignored in interpreting the
provisions of this Agreement.

     15. Notice. All notices, requests, demands and other communications provided
for hereunder shall be in writing and, if to Borrower, mailed or delivered to it,
addressed to it at the address specified on the signature page of this Agreement, and, if
to Lender, mailed or delivered to it, addressed to the address of Lender specified on the
signature pages of the Credit Agreement. All notices, statements, requests, demands and
other communications provided for hereunder shall be deemed to be given or made when
delivered or two Business Days after being deposited in the mails with postage prepaid by
registered or certified mail, addressed as aforesaid, or sent by facsimile with telephonic
confirmation of receipt, except that notices pursuant to any of the provisions hereof
shall not be effective until received.

     16. Successors and Assigns. This Agreement shall be binding upon Borrower
and Borrower’s successors and assigns and shall inure to the benefit of and be
enforceable and exercisable by Lender and its successors and assigns.

     17. Severability. If, at any time, one or more provisions of this Agreement
is or becomes invalid, illegal or unenforceable in whole or in part, the validity,
legality and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

     18. Termination. At such time as the Obligations shall have been paid in full
and the Line of Credit terminated and not replaced by any other credit facility with
Lender, Borrower shall have the right to terminate this Agreement. Upon written request of
Borrower, Lender shall promptly file appropriate termination statements, cancel all
control agreements and return all physically pledged Collateral, and Borrower will
indemnify Lender in all respects for all reasonable costs incurred by Lender in connection
with such termination.

     19. Entire Agreement. This Agreement integrates all of the terms and
conditions with respect to the Collateral and supersedes all oral representations and
negotiations and prior writings, if any, with respect to the subject matter hereof.

10

 

     20. Governing Law; Submission to Jurisdiction, The provisions of this
Agreement and the respective rights and duties of Borrower and Lender hereunder shall
be governed by and construed in accordance with Ohio law, without regard to principles
of conflicts of laws. Borrower hereby irrevocably submits to the non-exclusive
jurisdiction of any Ohio state or federal court sitting in Cleveland, Ohio, over any
such action or proceeding arising out of or relating to this Agreement, the Note or
any other document executed in connection therewith, and Borrower hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such Ohio state or federal court. Borrower hereby irrevocably waives, to
the fullest extent permitted by law, any objection it may now or hereafter have to the
laying of venue in any action or proceeding in any such court as well as any right it
may now or hereafter have to remove such action or proceeding, once commenced, to
another court on the grounds of FORUM NON CONVENIENS or otherwise. Borrower agrees
that a final, nonappealable judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.

[Remainder of page intentionally left blank.]

11

 

     21. JURY TRIAL WAIVER. BORROWER, TO THE EXTENT PERMITTED BY LAW, HEREBY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, AMONG BORROWER, BORROWER AND LENDER, OR ANY THEREOF,
ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT,
AMEND OR MODIFY THE ABILITY OF LENDER TO PURSUE REMEDIES PURSUANT TO ANY CONFESSION OF
JUDGMENT OR COGNOVIT PROVISION CONTAINED IN ANY NOTE, OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT AMONG BORROWER, BORROWER AND LENDER, OR ANY THEREOF.

     IN WITNESS WHEREOF, the undersigned has executed and delivered this Security
Agreement as of the date first written above.

	 	 	 	 	 	 	 
	Address:	 	6150 Parkland Boulevard	 	DATATRAK INTERNATIONAL, INC.
	 

	 	 	 	 	 	 
	 

	 	Mayfield Heights, OH 44124	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Terry C. Black
	 

	 	 
	 	 	 	 
	 

	 	 	 	Name:
	 	Terry C. Black
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	V.P. — CFO
	 

	 	 	 	 	 	 

Signature Page to

Security Agreement

 

 

SCHEDULE 4.4

Chief executive office:

6150 Parkland Boulevard

Mayfield Heights, Ohio 44124

Other office locations:

100 North Main St.

Bryan, TX 77803

Rochusstr.65

53123 Bonn

Germany

 

 

DEMAND MASTER PROMISSORY NOTE

			
	$2,000,000
	 	August 31, 2006

Cleveland, Ohio

ON DEMAND, FOR VALUE RECEIVED, the undersigned, DATATRAK INTERNATIONAL, INC., an Ohio
corporation (“Borrower”), promises to pay to the order of KEYBANK NATIONAL ASSOCIATION
(“Lender”) at its main office at 127 Public Square, Cleveland, Ohio 44114, or at such
other place as Lender shall designate, the principal sum of TWO MILLION DOLLARS
($2,000,000), or the aggregate unpaid principal amount of all Advances made by Lender
to Borrower hereunder, whichever is less, in lawful money of the United States of
America, on the earlier of DEMAND or the Facility Termination Date.

Advances may be requested hereunder as Prime Rate Advances or Eurodollar Advances
pursuant to the Line of Credit. Borrower promises to pay interest (based on a year
having three hundred sixty (360) days and calculated for the actual number of days
elapsed) on the principal balance of each Advance at a rate per annum equal to the
Interest Rate applicable to such Advance, with such interest to be due and payable (a)
with respect to any Prime Rate Advance on the last day of each calendar month
commencing September 30, 2006 and continuing on the last day of each calendar month
thereafter and on the Facility Termination Date; and (b) with respect to any
Eurodollar Advance, on the last day of the Interest Period applicable to such Advance.
The principal balance of each Advance that remains outstanding after the Facility
Termination Date shall bear interest at a rate per annum equal to the Default Rate.
Any Prime Rate Advance may be prepaid at any time. No Eurodollar Advance may be
prepaid prior to the last day of the Interest Period applicable thereto; provided that
each Advance must be paid upon the Facility Termination Date and any prepayment of a
Eurodollar Advance resulting therefrom shall be subject to the reimbursement
provisions set forth below.

This Note shall serve as a master note to evidence all Advances; provided that the
aggregate unpaid principal amount of all Advances shall not at any time outstanding
exceed the Maximum Amount. Borrower shall make a prompt prepayment on this Note in the
event that the aggregate unpaid principal amount of all Advances shall at any time
exceed the Maximum Amount and such prepayment shall be subject to the reimbursement
provisions set forth below. Lender shall record (a) the principal amount of each
Advance, the Interest Period, if any, and the Interest Rate applicable thereto, and (b)
the amount of any principal, interest or other payment and the applicable dates with
respect thereto, by such method as Lender may generally employ; provided that failure
to make any such entry shall in no way detract from Borrower’s obligations under this
Note. The foregoing information with respect to the Advances set forth on the records
of Lender shall be rebuttably presumptive evidence of the principal and interest owing
and unpaid on this Note.

Borrower shall provide notice to Lender of a requested Eurodollar Advance no fewer
than three Business Days (before 11:00 A.M. Eastern time) prior to the proposed date
of borrowing.

 

 

Borrower may only borrow Eurodollar Advances on the first day and the fifteenth day of
each calendar month. Borrower may request same day borrowings with respect to Prime
Rate Advances provided that the request for such Advance is made before 3:00 P.M.
(Eastern time). Whenever any payment to be made under this Note shall be due on a day
that is not a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall in each case be included in the computation of
the interest payable hereunder; provided, however, that, with respect to any Eurodollar
Advance, if the next succeeding Business Day falls in the succeeding calendar month,
such payment shall be made on the preceding Business Day and the relevant Interest
Period shall be adjusted accordingly. Borrower shall not request any Advance if any
Event of Default shall have occurred or if an event has occurred, which with the giving
of notice or the lapse of time, or both, would constitute an Event of Default. Borrower
waives presentment, demand, notice, protest and all other demands and notices in
connection with delivery, acceptance, performance, default or enforcement of this Note.

If any Eurodollar Advance becomes due and payable or is prepaid prior to the Facility
Termination Date applicable thereto, Borrower also promises to reimburse Lender on
demand for any resulting loss, cost or expense incurred by Lender as a result thereof,
including, without limitation, any loss incurred in obtaining, liquidating or employing
deposits from third parties (including loss of margin for the period after any such
payment). If, because of the introduction of or any change in, or because of any
judicial, administrative or other governmental interpretation of any law or regulation,
there shall be any increase in the cost to Lender of making, funding, maintaining or
allocating capital to any Eurodollar Advance, then Borrower shall, from time to time
upon demand by Lender, pay to Lender additional amounts sufficient to compensate Lender
for such increased cost until such Eurodollar Advance is converted to a Prime Rate
Advance. If, because of the introduction of or any change in, or because of any
judicial, administrative or other governmental interpretation of, any law or
regulation, it becomes unlawful for Lender to make, fund or maintain any Eurodollar
Advance, then Lender’s obligation to make, fund or maintain such Eurodollar Advance
shall terminate and such Eurodollar Advance shall be converted to a Prime Rate Advance
on the earlier of (a) the last day of the Interest Period applicable thereto, or (b)
the date the making, funding or maintaining of such Advance becomes unlawful.

Borrower agrees to provide to Lender (a) within sixty (60) days after the end of each of
the first three quarter periods of each of Borrower’s fiscal years, Borrower’s balance
sheet and accounts receivable aging report as of the end of that period and its
cash-flow statement and profit and loss statement for that period, all prepared on a
consolidated and consolidating basis and certified by a financial officer of Borrower;
(b) within one hundred twenty (120) days after the end of each of Borrower’s fiscal
years, a complete annual audit report of Borrower for that year prepared on a
consolidated and consolidating basis and certified by an independent public accountant
reasonably satisfactory to Lender; and (c) within twenty (20) days of Lender’s written
request, such other information about the financial condition, properties and operations
of Borrower as Lender may from time to time reasonably request. All statements delivered
pursuant to this paragraph shall be prepared in accordance with GAAP (using the accrual
basis of accounting) and shall be in form and detail reasonably satisfactory to Lender.
Borrower shall be deemed to be in compliance with its delivery obligations pursuant to
subparts (a) and (b) above

2

 

to the extent Borrower delivers to Lender a copy of its 10-Q or 10-K report for the
relevant period, promptly after it is filed with the Securities and Exchange
Commission (but no later than the time periods specified in subparts (a) and (b)
above).

Borrower shall use the Line of Credit for short-term working capital purposes. This
Note and the other Obligations shall be secured pursuant to the Security Documents.
Until payment in full of the Obligations, Borrower shall maintain its primary treasury
management, banking and depository relationship with Lender.

On the date of execution of this Note, Borrower shall pay to Lender an origination fee
in the amount of Three Thousand Dollars ($3,000). Borrower agrees to pay on demand all
reasonable costs and expenses of Lender, including, but not limited to, reasonable
attorneys’ fees and expenses, in connection with the preparation, negotiation and
closing of this Note, the Security Documents and the Line of Credit and the collection
of the Obligations.

Borrower agrees to defend, indemnify and hold harmless Lender (and its affiliates,
officers, directors, attorneys, agents and employees) from and against any and all
liabilities, damages, penalties, actions, judgments, suits, costs or expenses
(including reasonable attorneys’ fees) that may be imposed on, incurred by or asserted
against Lender in connection with any investigative, administrative or judicial
proceeding (whether or not Lender shall be designated a party thereto) or any other
claim by any Person relating to or arising out of this Note or the Line of Credit;
provided that Lender shall not have the right to be indemnified under this paragraph as
a result of Lender’s gross negligence or willful misconduct.

Upon the occurrence of an Event of Default and at all times thereafter, at the option
of Lender (but automatically with respect to Events of Default (e) through (h)), all
Obligations shall become immediately due and payable, Lender may terminate the Line of
Credit and no further Advance may be requested by Borrower. In addition, Lender may
apply or setoff any Deposit Account against all Obligations, all without any notice to
or demand upon Borrower, in addition to any other rights and remedies Lender may have
pursuant to law or equity, this Note, the Security Documents or any other instruments
or agreements, which rights and remedies shall be cumulative.

This Note shall bind Borrower and Borrower’s successors and assigns and shall inure to
the benefit of Lender and Lender’s successors and assigns. Borrower may not assign or
otherwise transfer any of its rights under this Note without the express written
consent of Lender. All provisions hereof shall be subject to, governed by, and
construed in accordance with Ohio law, without regard to principles of conflicts of
laws. Unenforceability of any provision hereof or any application of any provision
hereof shall not affect the enforceability or application of any other provision. This
Note constitutes a final written expression of all of the terms of this instrument, is
a complete and exclusive statement of those terms and supersedes all oral
representations, negotiations and prior writings, if any, with respect to the subject
matter hereof. The relationship between Borrower and Lender with respect to this Note
is and shall be solely that of debtor and creditor, respectively, and Lender shall have
no fiduciary obligation toward Borrower with respect to this Note or the transactions
contemplated hereby. Any amendment or waiver hereof or any waiver of any right or
remedy otherwise available must be in writing and signed by the

3

 

party against whom enforcement of the amendment or waiver is sought. This Note may be
executed by facsimile signature, and when so executed, the facsimile copy shall be
effective as an original.

For the purposes of this Note, the following terms shall have the following meanings:

     “Advances” means, collectively, all loan advances made by Lender to Borrower, at
the sole discretion and option of Lender, Borrower acknowledging that the Line of
Credit relating to this Note is purely discretionary and Lender may, without prior
notice to Borrower, refuse to honor any request by Borrower for borrowing hereunder;
“Advance” means any of the Advances.

     “Business Day” means (a) if the applicable Business Day relates to a Prime Rate
Advance, any day that is not a Saturday, Sunday or other day on which national banks
are authorized or required to close in Cleveland, Ohio, or (b) if the applicable
Business Day relates to a Eurodollar Advance, a day of the year on which dealings are
carried on in the London interbank eurodollar market.

     “Default Rate” means that floating rate per annum equal to two percent (2%) in
excess of the Prime Rate from time to time in effect, which rate shall be immediately
adjusted to correspond with each change in the Prime Rate.

     “Deposit Account” means any demand, time, statement, savings, passbook or similar
account or balance (including, without limitation, any certificate of deposit)
presently or at any time hereafter maintained with Lender at any of its foreign or
domestic offices either by Borrower or by Borrower with one or more others in a
several, joint or joint and several capacity.

     “Dollar” or the sign $ means lawful money of the United States of America.

     “Eurocurrency Liabilities” shall have the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in effect from
time to time.

     “Eurodollar Advance” means an Advance that bears interest determined with
reference to the Eurodollar Rate.

     “Eurodollar Rate” means, with respect to a Eurodollar Advance, for any Interest
Period, a rate per annum equal to the quotient obtained (rounded upwards, if necessary,
to the nearest 1/16th of 1%) by dividing (a) the rate of interest, determined
by Lender in accordance with its usual procedures (which determination shall be
conclusive absent manifest error) as of approximately 11:00 A.M. (London time) two
Business Days prior to the beginning of such Interest Period pertaining to such
Eurodollar Advance, as listed on British Bankers Association Interest Rate LIBOR 01 or
02 as provided by Reuters (or, if for any reason such rate is unavailable from Reuters,
from any other similar company or service that provides rate quotations comparable to
those currently provided by Reuters) as the rate in the London interbank market for
Dollar deposits in immediately available funds with a maturity comparable to such
Interest Period, provided that, in the event that such rate quotation is not available
for any

4

 

reason, then the Eurodollar Rate shall be the average (rounded upward to the nearest
1/16th of 1%) of the per annum rates at which deposits in immediately available funds
in Dollars for the relevant Interest Period and in the amount of the Eurodollar Advance
to be disbursed or to remain outstanding during such Interest Period, as the case may
be, are offered to Lender (or an affiliate of Lender, in Lender’s discretion) by prime
banks in any Eurodollar market reasonably selected by Lender, determined as of 11:00
A.M. (London time) (or as soon thereafter as practicable), two Business Days prior to
the beginning of the relevant Interest Period pertaining to such Eurodollar Advance
hereunder; by (b) 1.00 minus the Reserve Percentage.

     “Event of Default” means the occurrence of any of the following events: (a) the
failure of Borrower to pay any principal or interest hereunder or perform any
Obligation when it becomes due and payable and such failure continues for three
Business Days; (b) Lender shall determine that any statement, representation or
certification contained in any financial statement, loan request or other document
given by Borrower to Lender in connection with this Note, the Line of Credit or any
Advance shall be untrue or incorrect in any material respect; (c) any condition or
event that Lender determines has or is reasonably likely to have a material adverse
effect on the business, prospects, operations or financial condition of Borrower, or on
the rights and remedies of Lender under this Note or under the Security Documents, or
on the ability of Borrower to perform its obligations hereunder or under the Security
Documents; (d) breach by Borrower of any provision, agreement, representation, warranty
or covenant set forth in this Note or any of the Security Documents, or in any other
instrument, document or agreement evidencing or relating to any Obligation and such
failure shall continue for fifteen (15) days after notice thereof from Lender to
Borrower; (e) dissolution, termination of existence, insolvency, business failure or
appointment of a receiver of Borrower or any part of the property of Borrower; (f)
assignment for the benefit of creditors by Borrower; (g) failure or inability of
Borrower to pay its debts as they come due; (h) the commencement of any proceedings
under any bankruptcy or insolvency laws by or against Borrower; or (i) any judgment,
attachment, execution, or similar process in excess of One Hundred Thousand Dollars
($100,000) is rendered, issued, or levied against Borrower or any material amount of
its property and is not fully satisfied, released, vacated, or bonded within thirty
(30) days after its rendering, issue or levy.

     “Facility Termination Date” means April 30, 2007 (unless demand is made earlier).

     “GAAP”
shall mean generally accepted accounting principles in the United States as
then in effect, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, applied on a basis consistent with the past
accounting practices and procedures
of Borrower.

     “Interest Period” means, with respect to any Eurodollar Advance, the period
commencing on the date such Advance is made and ending on the last day of such period
as selected by Borrower pursuant to the provisions hereof and, thereafter, each
subsequent period commencing on the last day of the immediately
preceding Interest Period
and ending on the last day of such period as selected by Borrower pursuant to the
provisions hereof. The duration of each Interest Period for any Eurodollar Advance
shall be one month. Borrower shall not request that Eurodollar Advances be outstanding
for more than three different Interest Periods at any time.

5

 

     “Interest Rate” means (a) as to any Prime Rate Advance, that rate per annum equal
to the Prime Rate from time to time in effect, minus one hundred (100) basis points;
and (b) as to any Eurodollar Advance, that rate per annum equal to the Eurodollar Rate
from time to time in effect, plus one hundred twenty-five (125) basis points.

     “Line of Credit” means the uncommitted line of credit established by Lender for
Borrower, pursuant to which Borrower may request such Advances as Lender may be willing
to grant, up to the Maximum Amount, as such Line of Credit may be from time to time
modified, replaced or renewed.

     “Maximum Amount” means Two Million Dollars ($2,000,000).

     “Note” means this Demand Master Promissory Note.

     “Obligation” means any present or future obligation, indebtedness or liability of
Borrower owed to Lender, of whatever kind and however evidenced, together with all
extensions, renewals, amendments, restatements and substitutions thereof or therefor
(including, without limitation, each payment of principal or interest on each Advance
or any fee or other amount payable under this Note or pursuant to the Line of Credit or
the Security Documents).

     “Person” means an individual, sole proprietorship, partnership, joint venture,
unincorporated organization, corporation, limited liability company, institution,
trust, estate, government or other political subdivision thereof or any other entity.

     “Prime Rate” means that interest rate established from time to time by Lender as
Lender’s Prime Rate, whether or not such rate is publicly announced; the Prime Rate may
not be the lowest interest rate charged by Lender for commercial or other extensions of
credit. Each change in the Prime Rate shall be effective immediately from and after
such change.

     “Prime Rate Advance” means an Advance that bears interest determined with
reference to the Prime Rate.

     “Reserve Percentage” means for any day that percentage (expressed as a decimal)
that is in effect on such day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve requirement
(including, without limitation, all basic, supplemental, marginal and other reserves
and taking into account any transitional adjustments or other scheduled changes in
reserve requirements) for a member bank of the Federal Reserve System in Cleveland,
Ohio, in respect of Eurocurrency Liabilities. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve Percentage.

     “Security Documents” means the Security Agreement executed in connection herewith,
the Uniform Commercial Code financing statements filed in connection therewith, and any
other document pursuant to which a security interest or lien is granted to Lender as
security for the Obligations.

6

 

     Borrower authorizes any attorney at law at any time or times after the maturity
hereof (whether maturity occurs by lapse of time or by acceleration) to appear in any
state or federal court of record in the United States of America, to waive the issuance
and service of process, to admit the maturity of this Note and the nonpayment thereof
when due, to confess judgment against Borrower in favor of the holder of this Note for
the amount then appearing due, together with interest and costs of suit, and thereupon
to release all errors and to waive all rights of appeal and stay of execution. The
foregoing warrant of attorney shall survive any judgment, and if any judgment is
vacated for any reason, the holder hereof nevertheless may thereafter use the foregoing
warrant of attorney to obtain an additional judgment or judgments against Borrower.
Borrower agrees that Lender’s attorney may confess judgment pursuant to the foregoing
warrant of attorney. Borrower further agrees that the attorney confessing judgment
pursuant to the foregoing warrant of attorney may receive a legal fee or other
compensation from Lender.

7

 

     Jury Trial Waiver. Borrower, to the extent permitted by law, hereby waives
any right to have a jury participate in resolving any dispute, whether sounding in
contract, tort or otherwise, between Borrower and Lender arising out of, in connection
with, related to, or incidental to the relationship established between them in
connection with this Note or any other instrument, document or agreement executed or
delivered in connection herewith or the transactions related thereto. This waiver shall
not in any way affect, waive, limit, amend or modify Lender’s ability to pursue
remedies pursuant to any confession of judgment or cognovit provision contained in this
Note, any other note or any guaranty of payment, agreement, instrument or document
related thereto.

	 	 	 	 	 	 	 	 	 
	Address:	 	6150 Parkland Boulevard	 	DATATRAK INTERNATIONAL, INC.
	 	 	 	 	 	 	 
	 	 	Mayfield Heights, OH 44124	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Terry C. Black
	 	 	 	 	 	 	 
	 

	 	Attention:
	 	Terry C. Black
	 	Name:
	 	Terry C. Black
	 

	 	 	 	 
	 	 	 	 
	 

	 	 	 	 	 	Title:
	 	V.P. — CFO
	 

	 	 	 	 	 	 	 	 

“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.”

8EX-10.55

 

Exhibit 10.55

Form of Registered Global Floating Rate Senior Secured Note, Series B, due 2011

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC,
TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE, AND TRANSFERS OF PORTIONS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

THIS SECURITY WAS ISSUED WITH “ORIGINAL ISSUE DISCOUNT” AS DEFINED IN SECTION 1273 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED. YOU MAY OBTAIN INFORMATION REGARDING THE AMOUNT OF ORIGINAL
ISSUE DISCOUNT, THE ISSUE PRICE, THE ISSUE DATE AND THE YIELD TO MATURITY BY CONTACTING THE CHIEF
FINANCIAL OFFICER OF LIBBEY GLASS INC. AT 300 MADISON AVENUE, P.O. BOX 10060, TOLEDO, OHIO
43699-0060, OR AT (419) 325-2100.

 

 

	 	 	 
	No. 1

	 	Principal Amount $306,000,000, as

revised by the Schedule of Increases and

Decreases in Global Security attached hereto

CUSIP No. 52989LAC3

ISIN: US52989LAC37

LIBBEY GLASS INC.

Floating Rate Senior Secured Note, Series B, due 2011

          Libbey Glass Inc., a Delaware corporation, promises to pay to Cede & Co., or its registered
assigns, the principal sum of THREE HUNDRED AND SIX MILLION DOLLARS, as revised by the Schedule of
Increases and Decreases in Global Security attached hereto, on June 1, 2011.

     Interest Payment Dates: June 1 and December 1 commencing on December 1, 2006

     Record Dates: May 15 and November 15

          Additional provisions of this Security are set forth on the other side of this Security.

 

 

	 	 	 	 	 
	 	LIBBEY GLASS INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Scott Sellick 	 
	 	 	Title:  	Vice President and
Chief Financial Officer 	 
	 
	 	Date: February 21, 2007

 	 
	 	 	 
	 	 	 
	 	 	 

 

 

	 	 	 	 	 

TRUSTEE’S CERTIFICATE OF

AUTHENTICATION

THE BANK OF NEW YORK TRUST COMPANY, N.A.

as Trustee, certifies

that this is one of

the Securities referred

to in the withinmentioned Indenture.

	 	 	 	 	 
	By:  	 	 	 
	 	Authorized Signatory 	 	 
	 	 	 	 
	Date: February 21, 2007

 	 	 
	 	 	 
	 	 	 
	 	 	 

 

 

	 	 	 	 	 

REVERSE SIDE OF SERIES B NOTE

LIBBEY GLASS INC.

Floating Rate Senior Secured Note, Series B, due 2011

1.    Interest

          Libbey Glass Inc., a Delaware corporation (such corporation, and its successors and assigns
under the Indenture hereinafter referred to, being herein called the “Company”), promises
to pay interest on the principal amount of this Security at a rate per annum, reset semi-annually,
equal to LIBOR (as defined below) plus 7.0% as determined by the calculation agent (the
“Calculation Agent”), which shall initially be the Trustee, commencing June 16, 2006 until
maturity and shall pay additional interest, if any, payable pursuant to Section 2(d) of the
Registration Rights Agreement referred to below. The Company shall make each interest payment in
cash semi-annually in arrears on June 1 and December 1 of each year commencing December 1, 2006, or
if any such day is not a Business Day, on the next succeeding Business Day (each an “Interest
Payment Date”). Notwithstanding the foregoing, if any such Interest Payment Date (other than an
Interest Payment Date at maturity) would otherwise be a day that is not a Business Day, then the
interest payment will be postponed to the next succeeding Business Day (except if that Business Day
falls in the next succeeding calendar month, then interest will be paid on the immediately
preceding Business Day). If the maturity date of the Securities is a day that is not a Business
Day, all payments to be made on such day will be made on the next succeeding Business Day, with the
same force and effect as if made on the maturity date, and no additional interest will be payable
as a result of such delay in payment. The interest rate for each Interest Period (as defined
below), other than the Interest Period commencing June 16, 2006 and continuing until November 30,
2006, for which the interest rate shall be 12.43563%, shall be adjusted with effect from the
Interest Payment Date on which such Interest Period begins. Interest on this Security will accrue
from the most recent date to which interest has been paid or, if no interest has been paid, from
June 16, 2006; provided, that the first Interest Payment Date shall be December 1, 2006. The
Company shall pay interest on overdue principal, and on overdue premium, if any (plus interest on
such interest to the extent lawful), at the rate borne by the Securities to the extent lawful.
Interest on the Securities will be computed on the basis of the actual number of days in an
Interest Period and a 360-day year.

          The amount of interest for each day that this Security is outstanding (the “Daily Interest
Amount”) shall be calculated by dividing the interest rate in effect for such day by 360 and
multiplying the result by the principal amount of the Securities. The amount of interest to be
paid on the Securities for each Interest Period will be calculated by adding the Daily Interest
Amounts for each day in the Interest Period. All percentages resulting from any of the above
calculations shall be rounded, if necessary, to the nearest one hundredth thousandth of a
percentage point, with five one-millionths of a percentage point being rounded upwards (e.g.,
9.876545% (or 0.09876545) being rounded to 9.87655% (or 0.0987655)) and all dollar amounts used in
or resulting from such calculations shall be rounded to the nearest cent (with one-half cent being
rounded upwards).

          “Determination Date,” with respect to an Interest Period, will be the second London
Banking Day preceding the first day of the Interest Period.

          “Interest Period” means the period commencing on and including an Interest Payment
Date and ending on and including the day immediately preceding the next succeeding Interest Payment
Date; provided that the first Interest Period shall commence on and include June 16, 2006, and end
on and include November 30, 2006.

          “LIBOR” with respect to an Interest Period will be the rate (expressed as a
percentage per annum) for deposits in U.S. dollars for six-month periods beginning on the first day
of such Interest Period that appears on Telerate Page 3750 as of 11:00 a.m., London time, on the
Determination Date. If Telerate Page 3750 does not include such a rate or is unavailable on a
Determination Date, the Calculation Agent will request the principal London office of each of four
major banks in the London interbank market, as selected by the Calculation Agent, to provide such
bank’s offered quotation (expressed as a percentage per annum), as of approximately 11:00 a.m.,
London time, on such Determination Date, to prime banks in the London interbank market for deposits
in a Representative Amount in U. S. dollars for a six-month period beginning on the first day of
such Interest Period. If at least two such offered quotations are so provided, LIBOR for the
Interest Period will be the arithmetic mean of such quotations. If fewer than two such quotations
are so provided, the Calculation Agent will request each of three major banks in New York City, as
selected by the Calculation Agent, to provide such bank’s rate (expressed as a percentage per
annum), as of approximately 11:00 a.m., New York City time, on such Determination Date, for loans
in a Representative Amount in United States dollars to leading

C-1

 

European banks for a six-month period beginning on the first day of such Interest Period. If
at least two such rates are so provided, LIBOR for the Interest Period will be the arithmetic mean
of such rates. If fewer than two such rates are so provided, then LIBOR for the Interest Period
will be LIBOR in effect with respect to the immediately preceding Interest Period.

          “London Banking Day” is any day in which dealings in U.S. dollars are transacted or,
with respect to any future date, are expected to be transacted in the London interbank market.

          “Representative Amount” means a principal amount of not less than $1,000,000 for a
single transaction in the relevant market at the relevant time.

          The interest rate on the Securities will in no event be higher than the maximum rate permitted
by applicable law. The Calculation Agent will, upon the request of the holder of any Securities,
provide the interest rate then in effect with respect to the Securities. All calculations made by
the Calculation Agent in the absence of manifest error will be conclusive for all purposes and
binding on the Company, the Note Guarantors and the holders of the Securities.

2.    Method of Payment

          By no later than 10:00 a.m. (New York City time) on the date on which any principal of,
premium, if any, or interest on any Security is due and payable, the Company shall irrevocably
deposit with the Trustee or the Paying Agent money sufficient to pay such principal, premium, if
any, and/or interest. The Company will pay interest (except Defaulted Interest) to the Persons who
are registered Holders of Securities at the close of business on the May 15 or November 15 next
preceding the interest payment date even if Securities are cancelled, repurchased or redeemed after
the record date and on or before the interest payment date. Holders must surrender Securities to a
Paying Agent to collect principal payments. The Company will pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of Securities represented by a Global Security
(including principal, premium, if any, and interest) will be made by the transfer of immediately
available funds to the accounts specified by The Depository Trust Company or any successor
depository. The Company will make all payments in respect of a Definitive Security (including
principal, premium, if any, and interest) by mailing a check to the registered address of each
Holder thereof; provided, however, that payments on the Securities may also be made, in the case of
a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a
U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects
payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect
designating such account no later than 15 days immediately preceding the relevant due date for
payment (or such other date as the Trustee may accept in its discretion).

3.    Paying Agent and Registrar

          Initially, The Bank of New York Trust Company, N.A. (the “Trustee”) will act as
Trustee, Paying Agent and Registrar. The Company may appoint and change any Paying Agent,
Registrar or co-registrar without notice to any Holder. Any of the domestically organized
Restricted Subsidiaries may act as Paying Agent, Registrar or co-registrar.

4.    Indenture

          The Company issued the Securities under an Indenture dated as of June 16, 2006 (as it may be
amended or supplemented from time to time in accordance with the terms thereof, the
“Indenture”), among the Company and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture
Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb) as in effect on the date of the Indenture (the
“Act”). Capitalized terms used herein and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all terms and provisions of the Indenture,
and Holders are referred to the Indenture and the Act for a statement of those terms.

          The Securities are general senior secured obligations of the Company. The aggregate principal
amount of securities that may be authenticated and delivered under the Indenture is unlimited.
This Security is one of the Floating Rate Senior Secured Notes, Series B, due 2011 referred to in
the Indenture. The Securities include (i) $306,000,000 aggregate principal amount of the Company’s
Floating Rate Senior Secured Notes, Series A, due 2011 issued under the Indenture on June 16, 2006
(herein called “Initial Securities”), (ii) if and when issued, additional Floating Rate
Senior Secured Notes, Series A, due 2011 or Floating Rate Senior Secured Notes, Series B, due 2011
of the Company that may be issued from time to time under the Indenture subsequent to June 16, 2006
(herein called

C-1

 

“Additional Securities”) and (iii) if and when issued, the Company’s Floating Rate
Senior Secured Notes, Series B, due 2011 that may be issued from time to time under the Indenture
in exchange for Initial Securities or Additional Securities in an offer registered under the
Securities Act as provided in the Registration Rights Agreement (herein called “Exchange
Securities”). The Initial Securities, Additional Securities and Exchange Securities are
treated as a single class of securities under the Indenture. The Indenture imposes certain
limitations on the incurrence of indebtedness, the making of restricted payments, the sale of
assets and subsidiary stock, the incurrence of certain liens, affiliate transactions, the sale of
capital stock of restricted subsidiaries, the making of payments for consents, the entering into of
agreements that restrict distributions from restricted subsidiaries and the consummation of mergers
and consolidations. The Indenture also imposes requirements with respect to the provision of
financial information and the provision of guarantees of the Securities by certain subsidiaries.

          To guarantee the due and punctual payment of the principal, premium, if any, and interest
(including post-filing or post-petition interest) on the Securities and all other amounts payable
by the Company under the Indenture and the Securities when and as the same shall be due and
payable, whether at maturity, by acceleration or otherwise, according to the terms of the
Securities and the Indenture, the Note Guarantors have fully, unconditionally and irrevocably
Guaranteed (and future guarantors, together with the Note Guarantors, will fully, unconditionally
and irrevocably Guarantee), jointly and severally, to each Holder of the Securities and the Trustee
the Guarantor Obligations pursuant to Article X of the Indenture on a senior basis.

5.    Redemption

          Except as set forth below, the Securities will not be redeemable at the option of the Company
prior to June 1, 2008. On and after such date, the Securities will be redeemable, at the Company’s
option, in whole or in part, at any time from time to time, upon not less than 30 nor more than 60
days’ prior notice, at the following redemption prices (expressed in percentages of principal
amount), plus accrued and unpaid interest, if any, to the applicable redemption date (subject to
the right of Holders of record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on June 1 of the years
set forth below:

	 	 	 	 	 
	Period	 	PERCENTAGE
	2008
	 	 	107.500	%
	2009
	 	 	102.500	%
	2010 and thereafter
	 	 	100.000	%

          In addition, at any time and from time to time prior to June 1, 2008, the Company may redeem
in the aggregate up to 35% of the original principal amount of the Securities (after giving effect
to any future issuance of Additional Securities) with the Net Cash Proceeds of one or more Equity
Offerings at a redemption price (expressed as a percentage of principal amount) of 100% of the
principal amount thereof plus a premium equal to the interest rate per annum on the Securities
applicable on the date on which notice of redemption is given, plus accrued and unpaid interest, if
any, to the redemption date (subject to the right of Holders of record on the relevant record date
to receive interest due on the relevant interest payment date); provided, however, that at least
65% of the original principal amount of the Securities (after giving effect to any future issuance
of Additional Securities) must remain outstanding after each such redemption; provided further,
that each such redemption occurs within 90 days of the date of closing of such Equity Offering.

          If the optional redemption date is on or after an interest record date and on or before the
related interest payment date, the accrued and unpaid interest, if any, will be paid to the Person
in whose name the Security is registered at the close of business on such record date, and no
additional interest will be payable to Holders whose Securities will be subject to redemption by
the Company.

          In the case of any partial redemption, selection of the Securities for redemption will be made
by the Trustee in compliance with the requirements of the principal national securities exchange,
if any, on which the Securities are listed or, if the Securities are not listed, then on a pro rata
basis, by lot or by such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate, although no Securities of $1,000 in original principal amount or less will be
redeemed in part. Any such notice to the Trustee may be cancelled at any time prior to notice of
such redemption being mailed to any Holder and shall thereby be void and of no effect. If any
Security is to be redeemed in part only, the notice of redemption relating to such Security shall
state the portion of the principal amount thereof to be redeemed. A new Security in principal
amount equal to the unredeemed portion thereof will be issued in

C-1

 

the name of the Holder thereof upon cancellation of the original Security. On and after the
redemption date, interest will cease to accrue on Securities or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the
applicable redemption price pursuant to the Indenture.

6.    Repurchase Provisions

          If a Change of Control occurs, unless the Company has exercised its right to redeem all of the
Securities as described under paragraph 5 of the Securities, then such Change of Control shall
constitute a triggering event which shall trigger the obligation of the Company to offer to
repurchase from each Holder all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder’s Securities at a purchase price in cash equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of
Holders of record on the relevant record date to receive interest due on the relevant interest
payment date) as provided in, and subject to the terms of, the Indenture.

7.    Denominations; Transfer; Exchange

          The Securities are in registered form without coupons in denominations of principal amount of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance
with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay a sum sufficient to cover any transfer tax or other
governmental taxes and fees required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange of any Security for a period beginning 15 days before the
mailing of a notice of an offer to repurchase or redeem Securities and ending at the close of
business on the day of such mailing. The Registrar shall not be required to register the transfer
of or exchange of any Security selected for redemption.

8.    Persons Deemed Owners

          The registered Holder of this Security may be treated as the owner of it for all purposes.

9.    Unclaimed Money

          Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay
to the Company upon request any money held by them for the payment of principal of or premium, if
any, or interest on the Securities that remains unclaimed by the Holders thereof for two years,
and, thereafter, Holders entitled to the money must look to the Company for payment as unsecured
general creditors.

10.    Defeasance

          Subject to certain exceptions and conditions set forth in the Indenture, the Company at any
time may terminate some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the payment of
principal, premium, if any, and interest on the Securities to redemption or maturity, as the case
may be.

11.    Amendment, Supplement, Waiver

          Subject to certain exceptions set forth in the Indenture, (i) the Indenture, the Securities,
the Collateral Documents, the Intercreditor Agreement and any Note Guarantee may be amended or
supplemented by the Company, the Note Guarantors and the Trustee with the written consent of the
Holders of at least a majority in principal amount of the then outstanding Securities and (ii) any
default (other than with respect to nonpayment (except in accordance with Section 6.4 of
the Indenture)) or noncompliance with any provision may be waived with the written consent of the
Holders of a majority in principal amount of the then outstanding Securities and except as
otherwise set forth in the Indenture, in each case other than in respect of a provision that cannot
be amended without the written consent of each Holder affected. Subject to certain exceptions set
forth in the Indenture, without the consent of any Holder, the Company, the Note Guarantors and the
Trustee may amend or supplement the Indenture or the Securities cure any ambiguity, omission,
defect or inconsistency; provide for the assumption by a successor corporation of the obligations
of the Company or any Note Guarantor under the Indenture; provide for uncertificated Securities in
addition to or in place of certificated Securities (provided that the uncertificated Securities are
issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Securities are described in Section 163(f) (2) (B) of the Code); add Guarantees with
respect to the Securities or release a Subsidiary Guarantor upon its designation as an Unrestricted
Subsidiary; provided, however, that the designation is in accordance with the applicable provisions
of

C-1

 

the Indenture; secure the Securities with additional Collateral; add to the covenants of the
Company and the Restricted Subsidiaries for the benefit of the Holders or surrender any right or
power conferred upon the Company or any Restricted Subsidiary; make any change that does not
adversely affect the rights of any Holder; comply with any requirement of the SEC in connection
with the qualification of the Indenture under the TIA; release a Note Guarantor from its
obligations under its Note Guarantee or the Indenture in accordance with the applicable provisions
of the Indenture; provide for the appointment of a successor trustee, provided that the successor
trustee is otherwise qualified and eligible to act as such under the terms of the Indenture;
release Liens in favor of the Collateral Agent in the Collateral, as provided under Section 11.7 or
otherwise in accordance with this Indenture, the Collateral Documents or the Intercreditor
Agreement; provide for the issuance of Exchange Securities that shall have terms substantially
identical in all respects to the Securities (except that the transfer restrictions contained in the
Securities shall be modified or eliminated as appropriate) and that shall be treated, together with
any outstanding Securities, as a single class of securities; or conform the text of the Indenture,
the Securities or the Guarantees to any provision of the “Description of senior secured notes”
section of the Offering Memorandum to the extent that such provision in the “Description of senior
secured notes” was intended to be a verbatim recitation of a provision of the Indenture, the
Securities or the Note Guarantees.

12.    Defaults and Remedies

          Under the Indenture, Events of Default include (each of which are more specifically described
in the Indenture) (i) default in any payment of interest or additional interest (as required by the
Registration Rights Agreement) on any Security when due, continued for 30 days; (ii) default in the
payment of principal of or premium, if any, on any Security when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise; (iii) failure by the
Company or any Note Guarantor to comply with its obligations under Section 4.1 of the
Indenture; (iv) failure by the Company or any Note Guarantor to comply for 30 days after notice
with any of its obligations under Article III of the Indenture (in each case, other than a
failure to purchase Securities which will constitute an Event of Default under clause (ii) and a
failure to comply with Section 4.1 of the Indenture, which will constitute an Event of
Default under clause (iii)); (v) failure by the Company or any Note Guarantor to comply for 60 days
after notice as provided below with its other agreements contained in the Indenture; (vi) default
under any mortgage, indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries), other than Indebtedness owed to the Company or a Restricted Subsidiary, whether such
Indebtedness or guarantee now exists, or is created after the Issue Date, which default (1) is
caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior
to the expiration of the grace period provided in such Indebtedness or (2) results in the
acceleration of such Indebtedness prior to its maturity, and, in each case, the principal amount of
any such Indebtedness, together with the principal amount of any other such Indebtedness under
which there has been a payment default or the maturity of which has been so accelerated, aggregates
$15.0 million or more; (vii) certain events set forth in Section 6.1(7) of the Indenture of
bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary or group of
Restricted Subsidiaries that, taken together (as of the latest audited consolidated financial
statements for the Company and its Restricted Subsidiaries), would constitute a Significant
Subsidiary, pursuant to or within the meaning of any Bankruptcy Law; (viii) failure by the Company
or any Significant Subsidiary or group of Restricted Subsidiaries that, taken together (as of the
latest audited consolidated financial statements for the Company and its Restricted Subsidiaries)
would constitute a Significant Subsidiary to pay final judgments aggregating in excess of $15.0
million (net of any amounts that a reputable and creditworthy insurance company has acknowledged
liability for in writing), which judgments are not paid, discharged or stayed for a period of 60
days; (ix) any Subsidiary Guarantee, Collateral Document or obligation under the Intercreditor
Agreement of a Significant Subsidiary or group of Restricted Subsidiaries that taken together as of
the latest audited consolidated financial statements for the Company and its Restricted
Subsidiaries would constitute a Significant Subsidiary ceases to be in full force and effect
(except as contemplated by the terms of the Indenture) or is declared null and void in a judicial
proceeding or any Subsidiary Guarantor that is a Significant Subsidiary or group of Subsidiary
Guarantors that taken together as of the latest audited consolidated financial statements of the
Company and its Restricted Subsidiaries would constitute a Significant Subsidiary denies or
disaffirms its obligations under the Indenture, its Subsidiary Guarantee, any Collateral Document
or the Intercreditor Agreement; or (x) with respect to any Collateral having a fair market value in
excess of $15.0 million, individually or in the aggregate, (A) the security interest under the
Collateral Documents, at any time, ceases to be in full force and effect for any reason other than
in accordance with their terms and the terms of this Indenture and other than the satisfaction in
full of all obligations under this Indenture and discharge of this Indenture, (B) any security
interest created thereunder or under this Indenture is declared invalid or unenforceable or (C) the
Company or any Note Guarantor asserts, in any pleading in any court of competent jurisdiction, that
any such security interest is invalid or unenforceable. However, a default under clauses (iv) and
(v) will not constitute an Event of Default until the Trustee or the Holders of 25% in principal
amount of the

C-1

 

outstanding Securities notify the Company of the default and the Company does not cure such
default within the time specified in clauses (iv) and (v) hereof after receipt of such notice.

          If an Event of Default (other than an Event of Default described in (vii) hereof) occurs and
is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal
amount of the outstanding Securities by notice to the Company and the Trustee, may, and the Trustee
at the request of such Holders shall, declare the principal of, premium, if any, and accrued and
unpaid interest, if any, on all the Securities to be due and payable. If an Event of Default
described in (vii) hereof occurs and is continuing, the principal of, premium, if any, and accrued
and unpaid interest on all the Securities will become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holders.

          Holders may not enforce the Indenture or the Securities except as provided in the Indenture.
The Trustee may refuse to enforce the Indenture or the Securities unless it receives indemnity or
security reasonably satisfactory to it. Subject to certain limitations, Holders of a majority in
principal amount of the Securities may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except
a Default or Event of Default in payment of principal, premium, if any, or interest) if it
determines in good faith that withholding notice is in their interest.

13.    Trustee Dealings with the Company

          Subject to certain limitations set forth in the Indenture, the Trustee under the Indenture, in
its individual or any other capacity, may become the owner or pledgee of Securities and may
otherwise deal with and collect obligations owed to it by the Company, the Subsidiary Guarantors or
their Affiliates and may otherwise deal with the Company, the Subsidiary Guarantors or their
Affiliates with the same rights it would have if it were not Trustee.

14.    No Recourse Against Others

          No director, officer, employee, incorporator or stockholder of the Parent, the Company or any
of the Subsidiary Guarantors, as such, shall have any liability for any obligations of the Company
under the Securities, the Indenture or any Guarantee or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of Securities by accepting a Security
waives and releases all such liability. The waiver and release are part of the consideration for
issuance of the Securities. Such waiver may not be effective to waive liabilities under the federal
securities laws, and it is the view of the SEC that such a waiver is against public policy.

15.    Authentication

          This Security shall not be valid until an authorized signatory of the Trustee (or an
authenticating agent acting on its behalf) manually signs the certificate of authentication on the
other side of this Security.

16.    Abbreviations

          Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=
tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with rights of
survivorship and not as tenants in common), CUST (= custodian) and U/G/M/A (= Uniform Gift to
Minors Act).

17.    CUSIP, Common Code and ISIN Numbers

          The Company has caused CUSIP, Common Code or ISIN numbers, if applicable, to be printed on the
Securities and has directed the Trustee to use CUSIP, Common Code or ISIN numbers, if applicable,
in notices of redemption as a convenience to Holders. No representation is made as to the accuracy
of such numbers either as printed on the Securities or as contained in any notice of redemption,
and reliance may be placed only on the other identification numbers placed thereon.

18.    Governing Law

          This Security shall be governed by, and construed in accordance with, the laws of the State of
New York.

C-1

 

          The Company will furnish to any Holder upon written request and without charge to the Holder a
copy of the Indenture. Requests may be made to:

Libbey Inc.

300 Madison Ave.

P.O. Box 10060

Toledo, Ohio 43699-0060

Attention: Treasurer

C-1

 

ASSIGNMENT FORM

          To assign this Security, fill in the form below:

          I or we assign and transfer this Security to:

           

(Print or type assignee’s name, address and zip code)

 

(Insert assignee’s social security or tax I.D. No.)

and irrevocably appoint                      agent to transfer this Security on the books of the Company.
The agent may substitute another to act for him.

 

	 	 	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	Your Signature:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 

	 	 	 	 	 
	Signature Guarantee:
	 	 
	 	 
	 

	 	(Signature must be guaranteed)	 	 
	 

	 	 

	 	 

 

Sign exactly as your name appears on the other side of this Security.

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers,
savings and loan associations and credit unions with membership in an approved signature guarantee
medallion program), pursuant to SEC Rule 17Ad-15.

C-1

 

SCHEDULE OF INCREASES AND DECREASES IN GLOBAL SECURITY

          The following increases and decreases in this Global Security have been made:

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Signature of	 	 	 
	 	 	 	 	 	 	Principal Amount of	 	authorized	 	 	 
	 	 	Amount of decrease	 	Amount of increase	 	this Global	 	signatory of	 	 	 
	Date of	 	in Principal Amount	 	in Principal Amount	 	Security following	 	Trustee or	 	 	 
	Decrease or	 	of this Global	 	of this Global	 	such decrease or	 	Securities	 	 	 
	Increase	 	Security	 	Security	 	increase	 	Custodian	 	 	 

C-1

 

OPTION OF HOLDER TO ELECT PURCHASE

          If you elect to have this Security purchased by the Company pursuant to Section 3.5 or
3.11 of the Indenture, check either box:

o          o

3.5          3.11

          If you want to elect to have only part of this Security purchased by the Company pursuant to
Section 3.5 or Section 3.11 of the Indenture, state the amount in principal amount
(must be integral multiple of $1,000): $                                                                      

	 	 	 	 	 	 	 	 	 
	Date:

	 	 	 	Your Signature:	 	 	 	 
	 
	 	 

	 	 	 	 

	 	 
	 	 	 	 	(Sign exactly as your name appears on the other side of the Security)	 	 
	 
	Signature Guarantee:
	 	 

	 	 

	 	(Signature must be guaranteed)	 
	 

	 	 

	 	 

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers,
savings and loan associations and credit unions with membership in an approved signature guarantee
medallion program), pursuant to SEC Rule 17Ad-15.

C-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00119-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00119-of-00352.parquet"}]]