Document:

Ex-4.2 Revolving Credit Agreement

 

RENEWAL AND FUTURE ADVANCE

REVOLVING LINE OF CREDIT PROMISSORY NOTE

			
	$35,000,000.00 
	 	August 11, 2005

Tampa, Florida

     1. Agreement to Pay. FOR VALUE RECEIVED, SUN HYDRAULICS CORPORATION, a Florida
corporation (“Borrower”), hereby promises to pay to the order of FIFTH THIRD BANK, a Michigan
banking corporation, its successors and assigns (“Lender”), the principal sum of Thirty-Five
Million Dollars ($35,000,000.00) (“Loan”), or so much thereof as may be advanced pursuant to that
certain Credit and Security Agreement dated on or about even date herewith, between Borrower and
Lender (“Loan Agreement”) at the place and in the manner hereinafter provided, together with
interest thereon at the rate or rates described below, and any and all other amounts which may be
due and payable hereunder from time to time. The outstanding principal balance plus all accrued
interest thereon shall be due and payable, if not sooner paid, on August 1, 2011 (the “Maturity
Date”).

     2. Interest Rate. 

2.1
Interest Prior to Default.

     (a) Interest shall accrue on the outstanding principal balance of this Note
advanced from time to time to Borrower’s operating account maintained with Lender
(the “Operating Account Advances”), at an annual interest rate (the “Operating
Account Rate”) equal to the Base Rate (as hereafter defined), adjusted daily.

     (b) Interest shall accrue on the outstanding principal balance of this Loan
other than the amounts advanced from time to time to Borrower’s operating account
maintained with Lender (the “Balance of the Loan”), at an annual interest rate (the
“Balance Rate”) equal to the Base Rate. Borrower may request, upon not less than
one business day’s prior written notice to Lender, a conversion of the Balance Rate
to the 30-day LIBOR Rate (as hereafter defined) plus the applicable LIBOR Margin set
forth in the following pricing matrix.

Pricing Matrix

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Leverage Ratio	 	 	 	 	 	 
	Funded Debt/EBITDA	 	LIBOR Margin	 	Base Rate Margin	 	Facility Fee
	<2.25:1.0

	 	 	1.50	%	 	 	0.00	%	 	 	0.00	%	 
	>=2.25:1.0

	 	 	2.00	%	 	 	0.00	%	 	 	0.150	%

     Notwithstanding the foregoing, from the date hereof through August 11,
2006, interest shall accrue on the Balance of the Loan at a rate equal to the 30-day
LIBOR Rate plus one and one-half percent (1.50%).

     (c) Provided no Event of Default (as hereafter defined) exists, Borrower shall
have the option at any time after August 11, 2006, and upon not

 

 

less than fifteen (15) days’ prior written notice to Lender and payment of any
applicable fees and costs, to convert the Balance Rate, applicable to all or a
portion of the Balance of the Loan, in increments of $1,000,000.00, to a fixed rate
of interest (the “Fixed Rate Option”) (to be determined at the time of such
conversion in Lender’s discretion based upon such factors, including but not limited
to Bank’s then current underwriting standards, as may then be applicable) under an
interest rate swap agreement.

     (d) “Base Rate” means the rate of interest most recently announced by Lender as
its prime or base rate. A certificate made by an officer of Lender stating the Base
Rate in effect on any given day, for the purposes hereof, shall be conclusive
evidence of the Base Rate in effect on such day. The “Base Rate” is a base
reference rate of interest adopted by Lender as a general benchmark from which
Lender determines the floating interest rates chargeable on various loans to
borrowers with varying degrees of creditworthiness and Borrower acknowledges and
agrees that Lender has made no representations whatsoever that the “Base Rate” is
the interest rate actually offered by Lender to borrowers of any particular
creditworthiness. Changes in the rate of interest to be charged hereunder based on
the Base Rate shall take effect immediately upon the occurrence of any change in the
Base Rate.

     (e) “30-day LIBOR Rate” means the variable rate of interest per annum equal to
interest rate per annum published by The Wall Street Journal as “London
Interbank Offered Rates” for U.S. Dollar deposits having a maturity of 30 days, as
of the 11th day of August, 2005, and as of the first business day of each
and every calendar month thereafter through the Maturity Date. Changes in the rate
of interest to be charged hereunder based on the 30-day LIBOR Rate shall take effect
immediately upon the occurrence of any change in the 30-day LIBOR Rate.

     In the event that: (i) the Lender shall have determined (which determination
shall be conclusive and binding upon the Borrower absent demonstrable error) that
adequate and reasonable means do not exist for ascertaining the 30-day LIBOR Rate,
or (ii) any law, regulation, treaty or directive or any change therein or the
interpretation thereof shall make it unlawful for Lender to maintain the Loan at a
rate based on the 30-day LIBOR Rate, and, in either situation, Lender is generally
refusing to make loans bearing interest at rates based upon the 30-day LIBOR Rate as
a result of such circumstances, Lender shall forthwith give written notice of such
determination to Borrower and as long as the circumstances described in clauses (i)
or (ii) shall continue, the Loan shall bear interest during such period at a rate
equal to a rate of interest selected by Lender based on comparable information.
Lender shall forthwith notify Borrower in writing when the circumstances described
in clauses (i) or (ii), as applicable, shall cease.

     2.2 Interest After Default. From and after the Maturity Date or upon the occurrence
and during the continuance of an Event of Default, interest shall accrue on the

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balance of principal remaining unpaid during any such period at an annual rate
(“Default Rate”) equal to five percent (5%) plus the Base Rate; provided, however, in no
event shall the Default Rate exceed the maximum rate permitted by law. The interest
accruing under this paragraph shall be immediately due and payable by Borrower to the holder
of this Note upon demand and shall be additional indebtedness evidenced by this Note.

     2.3 Interest Calculation. Interest on this Note shall be calculated on the basis of a
360-day year and the actual number of days elapsed in any portion of a month in which
interest is due.

     3. Payment Terms. 

     3.1
Principal and Interest. Payments of principal and interest due under this Note, if
not sooner declared to be due in accordance with the provisions hereof, shall be made as
follows:

     (a) Commencing on August 11, 2005, and on each Business Day thereafter through
and including the Maturity Date, interest accrued on the Operating Account Advances
shall be due and payable.

     (b) Commencing on September 1, 2005 and on the first Business Day of each month
thereafter through and including the month in which the Maturity Date occurs,
interest accrued on the Balance of the Loan shall be due and payable.

     (c) The unpaid principal balance of this Note, if not sooner paid or declared
to be due in accordance with the terms hereof, together with all accrued and unpaid
interest thereon and any other amounts due and payable hereunder or under any other
Loan Document (as hereinafter defined), shall be due and payable in full on the
Maturity Date.

     (d) Provided no Event of Default exists, any portion of the principal balance
of this Note which is repaid may be reborrowed by Borrower prior to the Maturity
Date provided that in no event shall the outstanding principal balance of this Note
at any time exceed Thirty-Five Million Dollars ($35,000,000.00).

     3.2
Application of Payments. Prior to the occurrence of an Event of Default, all
payments and prepayments on account of the indebtedness evidenced by this Note shall be
applied as follows: (a) first, to fees, expenses, costs and other similar amounts then due
and payable to Lender, including, without limitation any prepayment premium, exit fee or
late charges due hereunder, (b) second, to accrued and unpaid interest on the principal
balance of this Note, (c) third, to the payment of principal due in the month in which the
payment or prepayment is made, (d) fourth, to any escrows, impounds or other amounts which
may then be due and payable under the Loan Documents (as hereinafter defined), (e) fifth, to
any other amounts then due Lender hereunder or under any of the Loan Documents, and (f)
last, to the unpaid principal balance of this Note in the inverse order of maturity. Any
prepayment on account of the indebtedness evidenced by this Note shall not extend or
postpone the due date or reduce the amount of any subsequent monthly payment of principal
and interest due hereunder. After an Event of Default has

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occurred and is continuing, payments may be applied by Lender to amounts owed hereunder
and under the Loan Documents in such order as Lender shall determine, in its sole
discretion.

     3.3
Method of Payments. All payments of principal and interest hereunder shall be paid
by automatic debit, wire transfer, check or in coin or currency which, at the time or times
of payment, is the legal tender for public and private debts in the United States of America
and shall be made at such place as Lender or the legal holder or holders of this Note may
from time to time appoint in the payment invoice or otherwise in writing, and in the absence
of such appointment, then at the offices of Lender at 4401 W. Kennedy Blvd., Suite 300,
Tampa, Florida 33609. Payment made by check shall be deemed paid on the date Lender
receives such check; provided, however, that if such check is subsequently returned to
Lender unpaid due to insufficient funds or otherwise, the payment shall not be deemed to
have been made and shall continue to bear interest until collected. Notwithstanding the
foregoing, the final payment due under this Note must be made by wire transfer or other
final funds. Interest, principal payments and any fees and expenses owed Lender from time to
time will be deducted by Lender automatically on the due date from Borrower’s account with
Lender, as designated in writing by Borrower. Borrower will maintain sufficient funds in
the account on the dates Lender enters debits authorized by this Note. If there are
insufficient funds in the account on the date Lender enters any debit authorized by this
Note, the debit will be reversed. Borrower may terminate this direct debt arrangement at
any time by sending written notice to Lender at the address specified above.

     3.4 Late Charge. If any payment of interest or principal due hereunder is not made
within five days after such payment is due in accordance with the terms hereof, then, in
addition to the payment of the amount so due, Borrower shall pay to Lender a “late charge”
of five cents for each whole dollar so overdue to defray part of the cost of collection and
handling such late payment. Borrower agrees that the damages to be sustained by the holder
hereof for the detriment caused by any late payment are extremely difficult and impractical
to ascertain, and that the amount of five cents for each one dollar due is a reasonable
estimate of such damages, does not constitute interest, and is not a penalty.

     3.5 Prepayment. The Operating Account Advances bearing interest at the Operating
Account Rate may be prepaid, either in whole or in part, without penalty or premium, at any
time and from time to time without prior notice to Lender. The portion of this Note bearing
interest at the Balance Rate may be prepaid, either in whole or in part, without penalty or
premium, at any time and from time to time upon two (2) business days’ prior notice to
Lender. The portion of this Note bearing interest at the Fixed Rate Option may be prepaid,
either in whole or in part, provided that Borrower pays, in addition to payment of the
outstanding principal balance, accrued interest and other sums due hereunder, all costs,
including but not limited to yield maintenance premiums, required to “make whole” Lender,
and provides not less than one (1) business day’s prior notice to Lender.

     3.6 Loan Fees. In consideration of Lender’s agreement to make the loan, Borrower shall
pay to Lender a non-refundable fee in the amount of Fifty-Two Thousand

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Five Hundred and 00/100 Dollars ($52,500.00), which shall be due and payable
simultaneously with execution of this Note.

     4. Security. This Note is secured by, among other things, a Renewed, Amended and
Restated Mortgage and Security Agreement dated of even date herewith (the “Mortgage”) made by
Borrower to Lender creating a first mortgage lien on certain real property (“Premises”) legally
described in Exhibit “A” attached to the Mortgage, an Assignment of Lessor’s Interest in
Lease (“Assignment”) dated of even date herewith from Borrower to Lender, an Environmental
Indemnity Agreement (“Indemnity Agreement”) dated of even date herewith from Borrower to Lender,
and a Credit and Security Agreement dated of even date herewith from Borrower to Lender (the “Loan
Agreement”) (the Mortgage, the Assignment, the Indemnity Agreement, the Loan Agreement and any
other document previously, currently or hereafter given to evidence or secure payment of this Note
or delivered to induce Lender to disburse the proceeds of the Loan, as such documents may hereafter
be amended, restated or replaced from time to time, are hereinafter collectively referred to as the
“Loan Documents”). Reference is hereby made to the Loan Documents (which are incorporated herein
by reference as fully and with the same effect as if set forth herein at length) for a statement of
the covenants and agreements contained therein, a statement of the rights, remedies, and security
afforded thereby, and all matters therein contained.

     5. Events of Default. The occurrence of any one or more of the following events shall
constitute an “Event of Default” under this Note:

     5.1 the failure by Borrower to pay (i) any installment of principal or interest payable
pursuant to this Note on the date when due, or (ii) any other amount payable to Lender under
this Note, the Mortgage or any of the other Loan Documents within five (5) days after the
date when any such payment is due in accordance with the terms hereof or thereof; or

     5.2 the occurrence of any “Event of Default” under the Mortgage or any of the other
Loan Documents.

     6. Remedies. At the election of the holder hereof, and without notice, the principal
balance remaining unpaid under this Note, and all unpaid interest accrued thereon and any other
amounts due hereunder, shall be and become immediately due and payable in full upon the occurrence
of any Event of Default. Failure to exercise this option shall not constitute a waiver of the
right to exercise same in the event of any subsequent Event of Default. No holder hereof shall, by
any act of omission or commission, be deemed to waive any of its rights, remedies or powers
hereunder or otherwise unless such waiver is in writing and signed by the holder hereof, and then
only to the extent specifically set forth therein. The rights, remedies and powers of the holder
hereof, as provided in this Note, the Mortgage and in all of the other Loan Documents are
cumulative and concurrent, and may be pursued singly, successively or together against Borrower,
the Guarantors hereof, the Premises and any other security given at any time to secure the
repayment hereof, all at the sole discretion of the holder hereof. If any suit or action is
instituted or attorneys are employed to collect this Note or any part hereof, Borrower promises and
agrees to pay all costs of collection, including reasonable attorneys’ fees and court costs.

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     7. Covenants and Waivers. Borrower and all others who now or may at any time become
liable for all or any part of the obligations evidenced hereby, expressly agree hereby to be
jointly and severally bound, and jointly and severally: (i) waive and renounce any and all
homestead, redemption and exemption rights and the benefit of all valuation and appraisement
privileges against the indebtedness evidenced by this Note or by any extension or renewal hereof;
(ii) waive presentment and demand for payment, notices of nonpayment and of dishonor, protest of
dishonor, and notice of protest; (iii) except as expressly provided in the Loan Documents, waive
any and all notices in connection with the delivery and acceptance hereof and all other notices in
connection with the performance, default, or enforcement of the payment hereof or hereunder; (iv)
waive any and all lack of diligence and delays in the enforcement of the payment hereof; (v) agree
that the liability of each Borrower, guarantor, endorser or obligor shall be unconditional and
without regard to the liability of any other person or entity for the payment hereof, and shall not
in any manner be affected by any indulgence or forbearance granted or consented to by Lender to any
of them with respect hereto; (vi) consent to any and all extensions of time, renewals, waivers, or
modifications that may be granted by Lender with respect to the payment or other provisions hereof,
and to the release of any security at any time given for the payment hereof, or any part thereof,
with or without substitution, and to the release of any person or entity liable for the payment
hereof; and (vii) consent to the addition of any and all other makers, endorsers, guarantors, and
other obligors for the payment hereof, and to the acceptance of any and all other security for the
payment hereof, and agree that the addition of any such makers, endorsers, guarantors or other
obligors, or security shall not affect the liability of Borrower, any guarantor and all others now
liable for all or any part of the obligations evidenced hereby. This provision is a material
inducement for Lender making the Loan to Borrower.

     8. Other General Agreements.

     8.1 Time is of the essence hereof.

     8.2 This Note is governed and controlled as to validity, enforcement, interpretation,
construction, effect and in all other respects by the statutes, laws and decisions of the
State of Florida. This Note may not be changed or amended orally but only by an instrument
in writing signed by the party against whom enforcement of the change or amendment is
sought.

     8.3 Lender shall not be construed for any purpose to be a partner, joint venturer,
agent or associate of Borrower or of any lessee, operator, concessionaire or licensee of
Borrower in the conduct of its business, and by the execution of this Note, Borrower agrees
to indemnify, defend, and hold Lender harmless from and against any and all damages, costs,
expenses and liability that may be incurred by Lender as a result of a claim that Lender is
such partner, joint venturer, agent or associate.

     8.4 This Note has been made and delivered at Tampa, Florida and all funds disbursed to
or for the benefit of Borrower will be disbursed in Tampa, Florida.

     8.5 If this Note is executed by more than one party, the obligations and liabilities of
each Borrower under this Note shall be joint and several and shall be binding upon and
enforceable against each Borrower and their respective successors and assigns.

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This Note shall inure to the benefit of and may be enforced by Lender and its
successors and assigns.

     8.6 If any provision of this Note is deemed to be invalid by reason of the operation of
law, or by reason of the interpretation placed thereon by any administrative agency or any
court, Borrower and Lender shall negotiate an equitable adjustment in the provisions of the
same in order to effect, to the maximum extent permitted by law, the purpose of this and the
validity and enforceability of the remaining provisions, or portions or applications
thereof, shall not be affected thereby and shall remain in full force and effect.

     8.7 If the interest provisions herein or in any of the Loan Documents shall result, at
any time during the Loan, in an effective rate of interest which, for any month, exceeds the
limit of usury or other laws applicable to the Loan, all sums in excess of those lawfully
collectible as interest of the period in question shall, without further agreement or notice
between or by any party hereto, be applied upon principal immediately upon receipt of such
monies by Lender, with the same force and effect as though the payer has specifically
designated such extra sums to be so applied to principal and Lender had agreed to accept
such extra payment(s) as a premium-free prepayment. Notwithstanding the foregoing, however,
Lender may at any time and from time to time elect by notice in writing to Borrower to
reduce or limit the collection to such sums which, when added to the said first-stated
interest, shall not result in any payments toward principal in accordance with the
requirements of the preceding sentence. In no event shall any agreed to or actual exaction
as consideration for this Loan transcend the limits imposed or provided by the law
applicable to this transaction or the makers hereof in the jurisdiction in which the
Premises are located for the use or detention of money or for forbearance in seeking its
collection.

     8.8 Lender may at any time assign its rights in this Note and the Loan Documents, or
any part thereof and transfer its rights in any or all of the collateral, and Lender
thereafter shall be relieved from all liability with respect to such collateral. In
addition, Lender may at any time sell one or more participations in the Note. Borrower may
not assign its interest in this Note, or any other agreement with Lender or any portion
thereof, either voluntarily or by operation of law, without the prior written consent of
Lender.

     9. Notices. All notices required under this Note will be in writing and will be
transmitted in the manner and to the addresses or facsimile numbers required by the Mortgage, or to
such other addresses or facsimile numbers as Lender and Borrower may specify from time to time in
writing.

     10. Patriot Act. Lender hereby notifies Borrower that pursuant to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the “Act”),
and Lender’s policies and practices, Lender is required to obtain, verify and record certain
information and documentation that identifies Borrower, which information includes the name and
address of Borrower and such other information that will allow Lender to identify Borrower in
accordance with the Act. In addition, Borrower shall (a) ensure that no person who owns a
controlling interest in or otherwise controls Borrower or any subsidiary of Borrower is or shall

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be listed on the Specially Designated Nationals and Blocked Person List or other similar lists
maintained by the Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or
included in any Executive Orders, (b) not use or permit the use of the proceeds of the Loan to
violate any of the foreign asset control regulations of OFAC or any enabling statute or Executive
Order relating thereto, and (c) comply, and cause any of its subsidiaries to comply, with all
applicable Bank Secrecy Act (“BSA”) laws and regulations, as amended.

     11. Consent to Jurisdiction. TO INDUCE LENDER TO ACCEPT THIS NOTE, BORROWER
IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS
IN ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE WILL BE LITIGATED IN COURTS HAVING SITUS IN
HILLSBOROUGH COUNTY, FLORIDA. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY COURT
LOCATED WITHIN HILLSBOROUGH COUNTY, FLORIDA, WAIVES PERSONAL SERVICE OF PROCESS UPON BORROWER, AND
AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL DIRECTED TO BORROWER AT THE
ADDRESS STATED IN THE MORTGAGE AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED UPON ACTUAL
RECEIPT.

     12. Waiver of Jury Trial. BORROWER AND LENDER (BY ACCEPTANCE OF THIS NOTE), HAVING
BEEN REPRESENTED BY COUNSEL, EACH KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS NOTE OR ANY RELATED
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION WITH THIS NOTE OR (b) ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS NOTE, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING WILL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY. BORROWER AGREES THAT IT WILL NOT ASSERT ANY CLAIM AGAINST
LENDER ON ANY THEORY OF LIABILITY FOR SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE
DAMAGES.

     13. THIS RENEWAL AND FUTURE ADVANCE REVOLVING LINE OF CREDIT PROMISSORY NOTE (THIS “NOTE”)
RENEWS (I) THE CURRENT OUTSTANDING PRINCIPAL BALANCE OF $9,899,273.38 DUE UNDER THAT CERTAIN TERM
NOTE (THE “ORIGINAL TERM NOTE”) DATED JULY 23, 2003, IN THE ORIGINAL PRINCIPAL AMOUNT OF
$11,000,000.00 MADE BY SUN HYDRAULICS CORPORATION, A FLORIDA CORPORATION (“BORROWER”), SUN
HYDRAULIK HOLDINGS LIMITED, AND SUN HYDRAULICS LIMITED, IN FAVOR OF SOUTHTRUST BANK (“ORIGINAL
LENDER”), AS AMENDED AND RESTATED BY THAT CERTAIN AMENDED AND RESTATED TERM NOTE (THE “AMENDED TERM
NOTE”) DATED AS OF JULY 23, 2003, IN THE ORIGINAL PRINCIPAL AMOUNT OF $11,000,000.00 MADE BY
BORROWER IN FAVOR OF ORIGINAL LENDER, AND (II) THE CURRENT OUTSTANDING PRINCIPAL BALANCE OF $0.00
DUE UNDER THAT CERTAIN REVOLVING NOTE (THE “ORIGINAL REVOLVING NOTE”) DATED JULY 23, 2003, IN THE
ORIGINAL PRINCIPAL AMOUNT OF $12,000,000.00 MADE BY BORROWER, SUN HYDRAULIK HOLDINGS LIMITED, AND
SUN HYDRAULICS LIMITED, IN FAVOR OF

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ORIGINAL LENDER, AS AMENDED AND RESTED BY THAT CERTAIN AMENDED AND RESTATED REVOLVING NOTE
(THE “AMENDED REVOLVING NOTE”) DATED AS OF JULY 23, 2003, IN THE ORIGINAL PRINCIPAL AMOUNT OF
$12,000,000.00 MADE BY BORROWER IN FAVOR OF ORIGINAL LENDER. THE ORIGINALS OF THE ORIGINAL TERM
NOTE, AMENDED TERM NOTE, ORIGINAL REVOLVING NOTE, AND AMENDED REVOLVING NOTE ARE ATTACHED HERETO.
THIS NOTE ALSO EVIDENCES A FUTURE ADVANCE OF $13,100,726.62 TO BORROWER. ALL DOCUMENTARY STAMP TAX
AND NON-RECURRING INTANGIBLE TAX DUE ON THE ORIGINAL TERM NOTE AND AMENDED TERM NOTE WERE PAID UPON
RECORDATION OF THAT CERTAIN MORTGAGE DATED JULY 23, 2003, RECORDED IN OR BOOK 1849, PAGE 741, OF
THE PUBLIC RECORDS OF MANATEE COUNTY, FLORIDA, AND IN OR INSTRUMENT NO. 2003148401, OF THE PUBLIC
RECORDS OF SARASOTA COUNTY, FLORIDA (THE “PUBLIC RECORDS”). DOCUMENTARY STAMP TAX IN THE AMOUNT OF
$14,352.80 AND NON-RECURRING INTANGIBLE TAX IN THE AMOUNT OF $8,201.45 ARE DUE IN CONNECTION WITH A
PORTION OF THE FUTURE ADVANCE MADE HEREUNDER AND ARE BEING PAID UPON RECORDATION OF THAT CERTAIN
RENEWED, AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT, DATED ON OR ABOUT EVEN DATE
HEREWITH, SECURING A MAXIMUM PRINCIPAL INDEBTEDNESS OF $14,000,000, TO BE RECORDED IN THE PUBLIC
RECORDS. THERE ARE NO NEW OBLIGORS.

(Remainder of page intentionally left blank)

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     IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the day and year first
written above.

	 	 	 	 	 
	 	 	BORROWER:
	 
	 	 	 	 
	 	 	SUN HYDRAULICS CORPORATION,

a Florida corporation
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Tricia Fulton
	 

	 	 	 	 
	 

	 	Name:
	 	Tricia Fulton
	 

	 	 	 	 
	 

	 	Title:
	 	Corp. Finance
	 

	 	 	 	 

10Ex-4.3 Amended Mortgage & Security Agreement

 

PREPARED BY AND RETURN TO:

DLA Piper Rudnick Gray Cary US LLP

101 E. Kennedy Boulevard, Suite 2000

Tampa, Florida 33602

Attention: Scott P. Andrew, Esquire

RENEWED, AMENDED AND RESTATED

MORTGAGE AND SECURITY AGREEMENT

     THIS RENEWED, AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT (“Mortgage”), is executed
and delivered as of August 11, 2005, by and between SUN HYDRAULICS CORPORATION, a Florida
corporation, having an address at 1500 West University Parkway, Sarasota, Florida 34243
(“Mortgagor”), and FIFTH THIRD BANK, a Michigan banking corporation, having an office at 4401 W.
Kennedy Boulevard, Suite 300, Tampa, Florida 33609 (“Mortgagee”).

W I T N E S S E T H:

NOTICE TO CLERK: NOTWITHSTANDING THE AMOUNT OF THE LOAN, THE TOTAL PRINCIPAL AMOUNT OF OBLIGATIONS SECURED BY FLORIDA PROPERTY UNDER THIS MORTGAGE IS $14,000,000.00.

NOTICE TO CLERK: THIS RENEWED, AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT ENCUMBERS REAL PROPERTY LOCATED IN MANATEE COUNTY, FLORIDA AND, TOGETHER WITH A RENEWED, AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT RECORDED IN SARASOTA COUNTY, FLORIDA, IS SECURITY FOR A LOAN IN THE AMOUNT OF $35,000,000.00, (THE “LOAN”) EVIDENCED BY THAT CERTAIN RENEWAL AND FUTURE ADVANCE REVOLVING LINE OF CREDIT PROMISSORY NOTE OF EVEN DATE HEREWITH. THIS RENEWAL AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT RENEWS, RESTATES AND AMENDS IN ITS ENTIRETY THAT CERTAIN MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF RENTS AND LEASES (THE “PRIOR MORTGAGE”) DATED JULY 23, 2003, RECORDED IN OFFICIAL RECORDS BOOK 1849, PAGE 741, OF THE PUBLIC RECORDS OF MANATEE COUNTY, FLORIDA (THE “MANATEE PUBLIC RECORDS”), AND RECORDED IN OFFICIAL INSTRUMENT NO. 2003148402, OF THE PUBLIC RECORDS OF SARASOTA COUNTY, FLORIDA. THE PRIOR MORTGAGE SECURED TOTAL PRINCIPAL OBLIGATIONS OF $11,000,000.00. FLORIDA DOCUMENTARY STAMP TAX AND NON-RECURRING INTANGIBLE TAX WERE PAID ON THE OBLIGATIONS SECURED BY THE PRIOR MORTGAGE UPON RECORDATION OF SUCH PRIOR MORTGAGE IN THE MANATEE PUBLIC RECORDS. FLORIDA DOCUMENTARY STAMP TAX IN THE AMOUNT OF $14,352.80 AND NON-RECURRING INTANGIBLE TAX IN THE AMOUNT OF $8,201.45 IN CONNECTION WITH THE LOAN, ARE BEING PAID ON THE ADDITIONAL OBLIGATIONS SECURED HEREBY UPON RECORDATION OF THIS MORTGAGE IN THE MANATEE PUBLIC RECORDS.

 

 

     That in consideration of the premises and in order to secure the payment of both the principal
of and interest, and any other sums payable, on the Note (as hereinafter defined), and this
Mortgage and the performance and observance of all of the provisions hereof and of said Note,
Mortgagor hereby grants, sells, warrants, aliens, remises, releases, conveys, assigns, transfers,
mortgages and sets over and confirms unto Mortgagee, all of Mortgagor’s estate, right, title and
interest in, to and under all that certain real property (the “Property”) situated in Manatee
County, Florida and Sarasota County, Florida, more particularly described on Exhibit “A”
attached hereto and by this reference incorporated herein.

     TOGETHER WITH all improvements now or hereafter located on said Property and all fixtures,
appliances, apparatus, equipment, heating and air conditioning equipment, machinery and articles of
personal property and replacements thereof (other than those owned by any lessees of said Property)
now or hereafter affixed to, attached to, placed upon, or used in any way in connection with the
complete and comfortable use, occupancy, or operation of said Property, all licenses and permits
used or required in connection with the use of said Property, all leases of said Property now or
hereafter entered into and all right, title and interest of Mortgagor thereunder, including without
limitation, cash or securities deposited thereunder pursuant to said leases, and all rents, issues,
proceeds, and profits accruing from said Property and together with all proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash or liquidated claims, including without
limitation, proceeds of insurance and condemnation awards (the foregoing said Property, tangible
and intangible personal property hereinafter referred to as the “Mortgaged Property”). Mortgagor
hereby grants to Mortgagee a security interest in the foregoing described tangible and intangible
personal property.

     TO HAVE AND TO HOLD the Mortgaged Property, together with all and singular the tenements,
hereditaments and appurtenances thereunto belonging or in anywise appertaining and the reversion
and reversions thereof and all the estate, right, title, interest, homestead, dower and right of
dower, separate estate, possession, claim and demand whatsoever, in law and in equity, of Mortgagor
and unto the same, and every part thereof, with the appurtenances of Mortgagor in and to the same,
and every part and parcel thereof unto Mortgagee.

     Mortgagor warrants that Mortgagor has a good and marketable title to an indefeasible fee
estate in the Mortgaged Property subject to no lien, charge or encumbrance except such as Mortgagee
has agreed to accept in writing and Mortgagor covenants that this Mortgage is and will remain a
valid and enforceable first mortgage on the Mortgaged Property subject only to the exceptions
herein provided. Mortgagor has full power and lawful authority to mortgage the Mortgaged Property
in the manner and form herein done or intended to be done or intended hereafter to be done.
Mortgagor will preserve such title and will forever warrant and defend the same to Mortgagee and
will forever warrant and defend the validity and priority of the lien hereof against the claims of
all persons and parties whomsoever.

     Mortgagor will, at the cost of Mortgagor, and without expense to Mortgagee, do, execute,
acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignment, transfers and assurances as Mortgagee shall from time to

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time require in order to preserve the priority of the lien of this Mortgage or to facilitate
the performance of the terms hereof.

     PROVIDED, HOWEVER, that if Mortgagor shall pay to Mortgagee and satisfy: (i) the indebtedness
in the principal sum of $35,000,000.00 as evidenced by that certain Renewal and Future Advance
Revolving Line of Credit Promissory Note of even date herewith, or any renewal or replacement
thereof (the “Note”), executed by Mortgagor and payable to the order of Mortgagee, with interest
and upon the terms as provided therein; and (ii) all other sums advanced by Mortgagee to or on
behalf of Mortgagor pursuant to the Note or this Mortgage, which Note contains provisions for
payment of costs of collection including attorneys’ fees, in the Event of Default, as described
herein, waives presentment for payment, notice of nonpayment, protest and notice of protest, and
consents to the extension from time to time of the time of payment without notice, and all of the
terms of which Note are hereby incorporated by reference and made a part hereof, and of any
renewal, extension or modification, thereof and of this Mortgage, then this Mortgage and the estate
hereby created shall cease and terminate.

     Mortgagor further covenants and agrees with Mortgagee as follows:

     1. To pay all sums, including interest secured hereby when due, as provided for in the Note
and any renewal, extension or modification thereof and in this Mortgage, all such sums to be
payable in lawful money of the United States of America at Mortgagee’s aforesaid office, or at such
other place as Mortgagee may designate in writing.

     2. To pay when due, and without requiring any notice from Mortgagee, all taxes, assessments of
any type or nature and other charges levied or assessed against the Mortgaged Property or this
Mortgage and produce receipts therefor upon demand. To immediately pay and discharge any claim,
lien or encumbrance against the Mortgaged Property which may be or become superior to this Mortgage
and to permit no Event of Default or delinquency on any other lien, encumbrance or charge against
the Mortgaged Property.

     3. If required by Mortgagee, to also make monthly deposits with Mortgagee, in a non-interest
bearing account, together with and in addition to interest and principal, of a sum equal to
one-twelfth of the yearly taxes and assessments which may be levied against the Mortgaged Property,
and (if so required) one-twelfth of the yearly premiums for insurance thereon. The amount of such
taxes, assessments and premiums, when unknown, shall be estimated by Mortgagee. Such deposits
shall be used by Mortgagee to pay such taxes, assessments and premiums when due. Any insufficiency
of such account to pay such charges when due shall be paid by Mortgagor to Mortgagee on demand.
If, by reason of any default by Mortgagor under any provision of this Mortgage, Mortgagee declares
all sums secured hereby to be due and payable, Mortgagee may then apply any funds in said account
against the entire indebtedness secured hereby. The enforceability of the covenants, relating to
taxes, assessments and insurance premiums herein otherwise provided shall not be affected except
insofar as those obligations have been met by compliance with this paragraph. Mortgagee may from
time to time at its option waive, and after any such waiver reinstate, any of all provisions hereof
requiring such deposits, by notice to Mortgagor in writing. While any such waiver is in effect,
Mortgagor shall pay taxes, assessments and insurance premiums as herein elsewhere provided.

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     4. To promptly pay all taxes and assessments assessed or levied under and by virtue of any
state, federal, or municipal law or regulation hereafter passed, against Mortgagee upon this
Mortgage or the debt hereby secured, or upon its interest under this Mortgage, provided however,
that the total amount so paid for any such taxes pursuant to this paragraph together with the
interest payable on said indebtedness shall not exceed the highest lawful rate of interest in
Florida and provided further that in the event of the passage of any such law or regulation
imposing a tax or assessment against Mortgagee upon this Mortgage or the debt secured hereby, that
the entire indebtedness secured by this Mortgage shall thereupon become immediately due and payable
at the option of Mortgagee.

     5. To keep the Mortgaged Property insured against loss or damage by fire, and all perils
insured against by an extended coverage endorsement, and such other risks and perils as Mortgagee
in its reasonable discretion may require. The policy or policies of such insurance shall be in the
form in general use from time to time in the locality in which the Mortgaged Property is situated,
shall be in such amount as Mortgagee may reasonably require, shall be issued by a company or
companies approved by Mortgagee, and shall contain a standard mortgagee clause with loss payable to
Mortgagee. Whenever required by Mortgagee, such policies shall be delivered immediately to and
held by Mortgagee. Upon exercise of the power of sale given in this Mortgage or other acquisition
of the Mortgaged Property or any part thereof by Mortgagee, such policies shall become the absolute
property of Mortgagee.

     6. To first obtain the written consent of Mortgagee, such consent not to be unreasonably
withheld, before (a) removing or demolishing any building now or hereafter erected on the premises,
(b) altering the arrangement, design or structural character thereof, (c) making any repairs which
involve the removal of structural parts or the exposure of the interior of such building to the
elements, (d) cutting or removing or permitting the cutting and removal of any trees or timber on
the Mortgaged Property, if such cutting or removal requires a permit or license under applicable
laws, regulations or ordinances, (e) removing or exchanging any tangible personal property which is
part of the Mortgaged Property except in the ordinary course of business, or (f) entering into or
modifying any leases of the Mortgaged Property, except in the ordinary course of business, or (g)
encumbering, selling or otherwise disposing of the Mortgaged Property or any substantial part
thereof.

     7. To maintain the Mortgaged Property in good condition and repair, including but not limited
to the making of such repairs as Mortgagee may from time to time determine to be necessary for the
preservation of the Mortgaged Property and to not commit or permit any material waste thereof, and
Mortgagee shall have the right to inspect the Mortgaged Property on reasonable notice to Mortgagor.

     8. To comply with all laws, ordinances, regulations, covenants, conditions and restrictions
affecting the Mortgaged Property, and not to suffer or permit any violation thereof.

     9. If Mortgagor fails to pay or discharge any claim, lien or encumbrance which is superior to
this Mortgage, or when due, any tax or assessment or insurance premium, or to keep the Mortgaged
Property in repair, or shall commit or permit material waste, or if there be commenced any action
or proceeding affecting the Mortgaged Property or the title thereto, or the interest of Mortgagee
therein, including, but not limited to, eminent domain and bankruptcy or

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reorganization proceedings, then Mortgagee, at its option, may pay said claim, lien, encumbrance,
tax, assessment or premium, with right of subrogation thereunder, may make such repairs and take
such steps as it deems advisable to prevent or cure such material waste, and may appear in any such
action or proceeding and retain counsel therein, and take such action therein as Mortgagee deems
advisable, and for any of such purposes Mortgagee may advance such sums of money, including all
costs, reasonable attorneys’ fees and other items of expense as it deems necessary. Mortgagee
shall be the sole judge of the legality, validity and priority of any such claim, lien,
encumbrance, tax, assessment and premium and of the amount necessary to be paid in satisfaction
thereof. Mortgagee shall not be held accountable for any delay in making any such payment, which
delay may result in any additional interest, costs, charges, expenses or otherwise. All sums which
may be advanced by Mortgagee pursuant to this paragraph shall be secured by the lien of this
Mortgage and shall bear interest at the rate provided herein.

     10. Mortgagor will pay to Mortgagee, immediately and without demand, all sums of money
advanced by Mortgagee to protect the security hereof pursuant to this Mortgage, including all
costs, reasonable attorney’s fees and other items of expense, together with interest on each such
advancement at the default rate of interest set forth in the Note, and all such sums and interest
thereon shall be secured hereby.

     11. If an Event of Default shall occur in payment of any installment of principal or interest
of the Note or any part thereof when due, subject to any applicable grace period, or in payment,
when due, or any other sum secured hereby, or in performance of any of Mortgagor’s obligations,
covenants or agreements hereunder, subject to any applicable grace period, all of the indebtedness
secured hereby shall become and be immediately due and payable at the option of Mortgagee, without
notice or demand which are hereby expressly waived, in which event Mortgagee may avail itself of
all rights and remedies, at law or in equity, and this Mortgage may be foreclosed with all rights
and remedies afforded by the laws of Florida and Mortgagor shall pay all costs, charges and
expenses thereof, including a reasonable attorney’s fee, including all such costs, expenses and
attorney’s fees for any retrial, rehearing or appeals. The indebtedness secured hereby shall bear
interest at the default rate set forth in the Note from and after the date of any such Event of
Default of Mortgagor. If the Note provides for installment payments, the Mortgagee may, at its
option, collect a late charge as may be provided for in the Note, to reimburse the Mortgagee for
expenses in collecting and servicing such installment payments.

     12. If an Event of Default shall occur in payment, when due, of any indebtedness secured
hereby, or in performance of any of Mortgagor’s obligations, covenants or agreement hereunder and
provided that no law is broken and subject to the right of the tenant under the Lease:

          (a) Mortgagee is authorized at any time, without notice, in its sole discretion to enter upon
and take possession of the Mortgaged Property or any part thereof, to perform any acts Mortgagee
deems necessary or proper to conserve the security and to collect and receive all rents, issues and
profits thereof, including those past due as well as those accruing thereafter; and

          (b) Mortgagee shall be entitled, as a matter of strict right, without notice and ex parte, and
without regard to the value or occupancy of the security, or the solvency of Mortgagor, or the
adequacy of the Mortgaged Property as security for the Note, to have a

5

 

receiver appointed to enter upon and take possession of the Mortgaged Property, collect the rents
and profits therefrom and apply the same as the court may direct, such receiver to have all the
rights and powers permitted under the laws of Florida.

     In either such case, Mortgagee or the receiver may also take possession of, and for these
purposes use, any and all personal property which is a part of the Mortgaged Property and used by
Mortgagor in the rental or leasing thereof or any part thereof. The expense (including receiver’s
fees, counsel fees, costs and agent’s compensation) incurred pursuant to the powers herein
contained shall be secured hereby. Mortgagee shall (after payment of all costs and expenses
incurred) apply such rents, issues and profits received by it on the indebtedness secured hereby in
such order as Mortgagee determines. The right to enter and take possession of the Mortgaged
Property, to manage and operate the same, and to collect the rents, issues and profits thereof,
whether by a receiver or otherwise, shall be cumulative to any other right or remedy hereunder or
afforded by law, and may be exercised concurrently therewith or independently thereof. Mortgagee
shall be liable to account only for such rents, issues and profits actually received by Mortgagee.

     13. If the indebtedness secured hereby is now or hereafter further secured by chattel
mortgages, security interests, financing statements, pledges, contracts of guaranty, assignments of
leases, or other securities, or if the Mortgaged Property hereby encumbered consists of more than
one parcel of real property, Mortgagee may at its option exhaust any one or more of said securities
and security hereunder, or such parcels of the security hereunder, either concurrently or
independently, and in such order as it-may determine.

     14. This Mortgage shall secure not only existing indebtedness, but also such future advances,
whether such advances are obligatory or to be made at the option of Mortgagee, or otherwise, as are
made within twenty (20) years from the date hereof, to the same extent as if such future advances
were made on the date of the execution of this Mortgage, but such secured indebtedness shall not
exceed at any time the maximum principal amount of two times the amount of the Note, plus interest,
and any disbursements made for the payment of taxes, levies or insurance, on the Mortgaged
Property, with interest on such disbursements. Any such future advances, whether obligatory or to
be made at the option of the Mortgagee, or otherwise, may be made either prior to or after the due
date of the Note or any other notes secured by this Mortgage. This Mortgage is given for the
specific purpose of securing any and all indebtedness by the Mortgagor to Mortgagee (but in no
event shall the secured indebtedness exceed at any time the maximum principal amount set forth in
this paragraph) in whatever manner this indebtedness may be evidenced or represented, until this
Mortgage is satisfied of record. All covenants and agreements contained in this Mortgage shall be
applicable to all further advances made by Mortgagee to Mortgagor under this future advance clause.

     15. No delay by Mortgagee in exercising any right or remedy hereunder, or otherwise afforded
by law, shall operate as a waiver thereof or preclude the exercise thereof during the continuance
of any Event of Default hereunder. No waiver by Mortgagee of any Event of Default shall constitute
a waiver of or consent to subsequent Events of Defaults. No failure of Mortgagee to exercise any
option herein given to accelerate maturity of the debt hereby secured, no forbearance by Mortgagee
before or after the exercise of such option and no withdrawal or

6

 

abandonment of foreclosure proceedings by Mortgagee shall be taken or construed as a waiver of
its right to exercise such option or to accelerate the maturity of the debt hereby secured by
reason of any past, present or future Event of Default on the part of Mortgagor; and, in like
manner, the procurement of insurance or the payment of taxes or other liens or charges by Mortgagee
shall not be taken or construed as a waiver of its right to accelerate the maturity of the debt
hereby secured.

     16. Without affecting the liability of Mortgagor or any other person (except any person
expressly released in writing) for payment of any indebtedness secured hereby or for performance of
any obligation contained herein, and without affecting the rights of Mortgagee with respect to any
security not expressly released in writing, Mortgagee may, at any time and from time to time,
either before or after the maturity of said note, and without notice or consent:

          (a) Release any person liable for payment of all or any part of the indebtedness or for
performance of any obligation.

          (b) Make any agreement extending the time or otherwise altering the terms of payment of all or
any part of the indebtedness, or modifying or waiving any obligation, or subordinating, modifying
or otherwise dealing with the lien or charge hereof.

          (c) Exercise or refrain from exercising or waive any right Mortgagee may have.

          (d) Accept additional security of any kind.

          (e) Release or otherwise deal with any property, real or personal, securing the indebtedness,
including all or any part of the Mortgaged Property.

     17. Any agreement herewith made by Mortgagor and Mortgagee pursuant to this Mortgage shall be
superior to the rights of the holder of any intervening lien or encumbrance.

     18. If the Mortgaged Property or any material part thereof is damaged or destroyed by fire, by
condemnation, or any other cause, Mortgagor will give immediate written notice of the same to
Mortgagee. In the event that any portion or portions of the Mortgaged Property are damaged or
destroyed by fire or by any other casualty or are taken through any condemnation proceeding, and
such damage, destruction or taking results in the need for repair, rebuilding, or restoration work
to be performed on the Mortgaged Property (such repair, rebuilding, or restoration is referred to
herein as the “Work”), Mortgagee shall allow Mortgagor to use the amount by which the proceeds of
all insurance policies or condemnation awards collected with respect to such damage or destruction
(except such amounts as are attributable to a loss of rents) exceed the cost, if any, to Mortgagee
for the recovery of such proceeds (said net amount is defined herein as the “Reconstruction
Funds”), to perform the Work, so long as the following conditions have been met:

7

 

          (a) No default exists hereunder, under the Note, or under the documents given as security for
the Note (the “Loan Documents”) which remains uncured after the expiration of any applicable grace
periods;

          (b) Mortgagor shall have delivered evidence satisfactory to Mortgagee that the improvements
may be reconstructed in accordance with all applicable zoning and building codes, and all rules,
regulations, and ordinances of all applicable governmental authorities and that, upon completion of
the Work, the condition of the improvements will be at least equal in value and general utility to
that which existed immediately prior to such casualty or condemnation;

          (c) Mortgagor shall have delivered evidence satisfactory to Mortgagee that sufficient funds,
including the Reconstruction Funds, are available to perform the Work and that the Work is capable
of completion prior to the then effective maturity date of the Note;

          (d) Mortgagor shall have delivered evidence satisfactory to Mortgagee that business
interruption or income insurance proceeds payable to Mortgagor as a result of the damage or
destruction or income from the Mortgaged Property, or that sources other than the Reconstruction
Funds are sufficient to cover payments of debt service, costs, and expenses on the Note during the
period the Work is to be performed; and

          (e) Mortgagee shall be satisfied that it will not incur any liability to Mortgagor as a result
of such use or release of insurance proceeds.

          In the event that the conditions set forth above are satisfied, Mortgagee shall make the
Reconstruction Funds available to Mortgagor for the Work only under the following procedures,
terms, and conditions:

          (a) Mortgagor shall execute and deliver to Mortgagee a copy of a contract with a licensed
contractor acceptable to Mortgagee setting forth a fixed price for the Work and a completion date
acceptable to Mortgagee.

          (b) Mortgagor shall demonstrate to Mortgagee that the Reconstruction Funds are at least equal
to the fixed price of the Work as set forth in said contract or shall deposit with Mortgagee funds
in the amount by which such fixed price exceeds the Reconstruction Funds;

          (c) The Work shall be supervised by an architect or engineer and performed in accordance with
plans and specifications prepared by such architect or engineer and approved by Mortgagee.

          (d) The Reconstruction Funds, plus any additional funds deposited by Mortgagor, shall be
received and held by Mortgagee and disbursed in accordance with terms and conditions used by Bank
in connection with the Mortgagee’s customary practice in disbursing construction loan proceeds, and
Mortgagor shall reimburse Mortgagee for costs and expenses incurred in connection with such
disbursements;

8

 

          (e) Upon completion of and final payment for the Work, any remaining Reconstruction Funds
shall, at the option of Mortgagee, be applied to the Note in such order as Mortgagee shall elect or
paid over to Mortgagor; provided, however, that in either event any remaining additional funds
deposited by Mortgagor for excess costs shall be refunded to Mortgagor; and

          (f) Mortgagor shall otherwise comply with the terms and conditions of this Mortgage and the
Loan Documents.

     In the event any one or more of the conditions set forth above are not satisfied, Mortgagee
may elect, in its sole discretion, to apply the Reconstruction Funds against the balance of the
Note, whether or not due, in such manner as Mortgagee shall elect.

     If a default shall occur hereunder which is not cured within any applicable cure period, or if
Mortgagor shall fail diligently to pursue and complete the Work, Mortgagee may, in its sole
discretion, apply any undisbursed Reconstruction Funds against the balance due under the Note,
whether or not due, in such manner as Mortgagor shall elect. Any Reconstruction Funds applied to
reduce the principal balance on the Note shall not be considered a prepayment entitling Mortgagee
to prepayment compensation.

     19. In the event of any condemnation proceedings related to any of the Mortgaged Property,
Mortgagee shall be under no obligation to question the amount of any such award or compensation and
may accept the sale in the amount in which the same shall be paid. In any such condemnation
proceedings, Mortgagee may be represented by counsel selected by Mortgagee.

     20. Mortgagor represents and warrants that if a corporation, it is duly organized and validly
existing, in good standing under the laws of the state of its incorporation, has stock outstanding
which has been duly and validly issued, and is qualified to do business and is in good standing in
the State of Florida, with full power and authority to consummate the loan contemplated hereby;
and, if a partnership, it is formed and validly existing, and is fully qualified to do business in
the State of Florida; with full power and authority to consummate the loan contemplated hereby.

     21. In the event any one or more of the provisions contained in this Mortgage or in the Note
shall for any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall, at the option of the Mortgagee, not affect any
other provisions of this Mortgage, but this Mortgage shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein or therein. The total interest payable
pursuant to the Note or this Mortgage shall not in any one year exceed the highest lawful rate of
interest provided by law.

     22. The covenants and agreements herein contained shall bind and the benefits and advantages
shall inure to the respective successors and assigns of the parties hereto. Wherever used, the
singular number shall include the plural, the plural the singular, and the use of any

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gender shall be applicable to all genders. All covenants, agreements and undertakings shall
be joint and several.

     23. The loan represented by this Mortgage and the Note is personal to the Mortgagor and the
Mortgagee made the loan to the Mortgagor based upon the credit of the Mortgagor and the Mortgagee’s
judgment of the ability of the Mortgagor to repay all sums due under this Mortgage, and therefore
this Mortgage may not be assumed by any subsequent holder of an interest in the Mortgaged Property.
If all or any part of the Property or any legal or equitable interest therein is sold, transferred
or conveyed other than leases in normal course of business, by Mortgagor without the Mortgagee’s
prior written consent, all sums secured by this Mortgage shall be immediately due and payable and
Mortgagee may exercise all of the rights and remedies provided in this Mortgage and the Note
secured hereby. The sale, transfer or conveyance of any part of the Property or any legal or
equitable interest therein shall be conclusively and irrefutably presumed to jeopardize the
security and collateral of Mortgagee and as consideration for the making of the loan secured by
this Mortgage, Mortgagor agrees that in any court proceeding brought to enforce the provisions of
this paragraph Mortgagor shall waive any legal or equitable defenses that would preclude
enforcement of this paragraph, including but without limitation, that the transfer of the Property
has not resulted in an impairment to Mortgagee’s security or that this paragraph constitutes an
unreasonable restraint or alienation.

     24. The Mortgagor agrees to have no second mortgage or secondary or supplementary financing
and no other lien, charge, or security interest upon or affecting any of the Mortgaged Property
(real or personal, tangible or intangible) in which Mortgagee has a security interest.

     25. It is agreed that if any of the Property herein mortgaged is of a nature so that a
security interest therein can be perfected under the Uniform Commercial Code, this instrument shall
constitute a Security Agreement and Mortgagor agrees to join with the Mortgagee in the execution of
any financing statements and to execute any other instruments that may be required for the
perfection or renewal of such security interest under the Uniform Commercial Code.

     26. Mortgagor represents and warrants to Mortgagee, and Mortgagee specifically relies on such
representations and warranties as follows:

          (a) Environmental condition of Property; Indemnification. Mortgagor warrants and represents
to the best of its knowledge to Mortgagee after appropriate inquiry and investigation that: i)
while the Mortgagee has any interest in or lien on the Property, the Property described herein is
and at all times hereafter will continue to be in compliance, in all material respects, with all
federal, state and local environmental laws and regulations, including but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), Public Law
No. 96-510, 94 Stat. 2767, 42 USC 9601 et sea, and the Superfund Amendments and
Reauthorization Act of 1986 (SARA), Public Law No. 99-499, 100 Stat. 1613, and ii) (1) as of the
date hereof there are no hazardous materials, substances, wastes or other environmentally regulated
substances (including without limitation, any materials containing asbestos) located on, in or
under the Property or used in connection therewith, or (2) Mortgagor has fully disclosed to
Mortgagee in writing, in the Material Disclosure Safety Sheets previously provided to Mortgagee,
the existence, extent and nature of any such hazardous

10

 

materials, substances, wastes or other environmentally regulated substances, which Mortgagor
is legally authorized and empowered to maintain on, in or under the Property or use in connection
therewith, and Mortgagor has obtained and will maintain all licenses, permits and approvals
required with respect thereto, and is in full compliance with all of the terms, conditions and
requirements of such licenses, permits and approvals. Mortgagor further warrants and represents
that it will promptly notify Mortgagee of any change in the nature or extent of any hazardous
materials, substances or wastes maintained on, in or under the Property or used in connection
therewith, and will transmit to Mortgagee copies of any citations, orders, notices or other
material governmental or other communication received with respect to any other hazardous
materials, substances, wastes or other environmentally regulated substances affecting the Property.

          Mortgagor shall indemnify and hold Mortgagee harmless from and against any and all damages,
penalties, fines, claims, liens, suits, liabilities, costs (including clean-up costs), judgments
and expenses (including attorneys’, consultants’ or experts’ fees and expenses) of every kind and
nature suffered by or asserted against Mortgagee as a direct or indirect result of any warranty or
representation made by Mortgagor in the preceding paragraph being false or untrue in any material
respect or any requirement under any law, regulation or ordinance, local, state or federal, which
requires the elimination or removal of any hazardous materials, substances, wastes or other
environmentally regulated substances.

          Mortgagor’s obligations hereunder shall not be limited to any extent by the term of the Note
secured hereby, and, as to any act or occurrence prior to payment in full and satisfaction of said
Note which gives rise to liability hereunder, shall continue, survive and remain in full force and
effect notwithstanding payment in full and satisfaction of said Note and this Mortgage or
foreclosure under this Mortgage, or delivery of a deed in lieu of foreclosure.

          (b) Mortgagor has duly executed and delivered this Mortgage and each other document required
to be delivered by it pursuant hereto and this Mortgage and each such other document constitutes a
valid and binding obligation of Mortgagor enforceable in accordance with its terms.

          (c) There is no action, suit, proceeding or investigation pending or, to its knowledge,
threatened against or affecting Mortgagor at law or in equity or before or by any governmental
department, commission, board or agency which might have any materially adverse effect on its
ability to carry on its operations as presently conducted or to perform its obligations under this
Mortgage, any of the other documents required to be delivered hereunder, any Agreement to which it
is a party or by which it is bound.

          (d) Mortgagor is not a party to any agreement or instrument or subject to any corporate
restriction or any judgment, order, writ, injunction, decree, award, rule or regulation which
materially and adversely affects or in the future may materially and adversely affect its business,
operations, prospects, properties or assets or condition, financial or otherwise, or its ability to
perform its obligations under this Mortgage or any other document required to be delivered in
connection herewith or any agreement to which it is a party or by which it is bound.

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          (e) No consent, waiver or authorization of or filing with any person is required to be
obtained or made by it in connection with the execution, delivery and performance of this Mortgage
or any other document required to be delivered in connection herewith. Neither the execution nor
the delivery of this Mortgage or such documents nor the consummation of the transactions herein and
therein contemplated nor compliance with the terms, conditions and provisions hereof and thereof
will conflict with or result in a breach of or constitute an Event of Default under any of the
terms, conditions or provisions of its charter documents or bylaws or of any agreement or
instrument to which it is a party or by which it is bound or result in the creation or imposition
of any mortgage lien, charge or encumbrance of any nature whatsoever upon its undertaking, property
or assets.

          (f) No representation or warranty made by Mortgagor in this Mortgage or any other document
furnished to the Mortgagee from time to time in connection herewith contains or will contain any
untrue statement of a material fact or omits or will omit to state any material fact necessary to
make the statements herein or therein in light of the circumstances under which they are made not
misleading. Except as previously disclosed in writing to the Mortgagee, there is no fact known to
Mortgagor on the date of this Mortgage which materially adversely affects or which has any
reasonable likelihood of materially adversely affecting the ability of Mortgagor to carry on its
obligations as presently conducted or to perform its obligations under this Mortgage or any
documents required to be delivered by it hereunder.

     27. In this Mortgage, an Event of Default means:

          (a) If Mortgagor fails to pay when due after any applicable grace period any amount of
principal or interest due hereunder or under the Note.

          (b) If Mortgagor fails to pay when due after any applicable grace period any other amount
payable under the Note or Mortgage.

          (c) If any Event of Default occurs under the Note or the Mortgage.

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     28. In addition to and without limiting any other rights or remedies of the Mortgagee under
the Note and the Mortgage, the Mortgagee may, from time to time, when an Event of Default has
occurred or an event has occurred and is continued which after notice or lapse of time or both
would become an Event of Default, refuse to grant any further advances or accommodation to
Mortgagor under the indebtedness. Any Event of Default under this Mortgage shall constitute an
Event of Default under the Note and this Mortgage, and entitle Mortgagee to immediately enforce all
rights and remedies thereunder. Upon the occurrence of any one or more Events of Default, all
indebtedness of Mortgagor shall at the option of the Mortgagee immediately become due and payable
without presentation, demand, protest or other notice of any kind, all of which are expressly
waived; all collateral and securities shall become enforceable by the Mortgagee or its duly
authorized agent; and the Mortgagee may appropriate any monies received by it from any person in or
towards payment of such of the respective indebtedness and liability of Mortgagor to the Mortgagee
as the Mortgagee may see fit and no Mortgagor shall have any right to require any inconsistent
appropriation. The rights and remedies of the Mortgagee under this Mortgage and the Note, and in
connection herewith and therewith are cumulative, may be exercised as often as the Mortgagee
considers appropriate and are in addition to its rights and remedies under the general law.

     29. This Mortgage shall inure to the benefit of the Mortgagee and its successors and assigns
but, except as specifically provided herein, neither this Mortgage nor the benefit hereof may be
assigned by Mortgagor. The rights of the Mortgagee under or in respect of this Mortgage may be
assigned by the Mortgagee from time to time in whole or in part to one or more persons with notice
to Mortgagor but without the consent of, Mortgagor or any other person.

     30. All agreements, representations, warranties and covenants made by or on behalf of
Mortgagor herein and in the Note, and in any transactions contemplated hereby or thereby are
material, shall be considered to have been relied upon by the Mortgagee notwithstanding any
investigation made at any time by or on behalf of the Mortgagee and shall survive execution and
delivery of this Mortgage and the granting of accommodation hereunder and shall expire when the
indebtedness and all amounts outstanding under this Mortgage have been repaid in full.

     31. Mortgagor will do, execute and deliver, or will cause to be done, executed and delivered
all such further acts, documents (including certificates, declarations, affidavits, reports and
opinions) and things as the Mortgagee may reasonably request for the purpose of giving effect to
this Mortgage or for the purpose of establishing compliance with the representations, warranties
and conditions of this Mortgage.

     32. The taking of a judgment or judgments for any other action or dealing whatsoever by the
Mortgagee in respect of any security given by any person or entity to the Mortgagee shall not
operate as a merger of any indebtedness or any liability of the Mortgagor to the Mortgagee or in
any way suspend payment or affect or prejudice the rights, remedies and powers legal or equitable
which the Mortgagee may have in connection with such indebtedness or liability or the foreclosure,
surrender, cancellation or any other dealing with any security for such indebtedness or liability
shall not release or affect the liability of the Mortgagor or any security held by the Mortgagee.

13

 

     33. The Mortgagor hereby affirms, warrants and represents that all of the warranties and
representations made in the above described Note and this Mortgage, and in any other documents or
instruments executed with respect thereto directly or indirectly, are true and correct as of the
date hereto, and that Mortgagor is not aware of any Event of Default as to any of the foregoing,
and that Mortgagor has no defense or right of off set with respect to any indebtedness to
Mortgagee. Mortgagor jointly and severally hereby release Mortgagee from any cause of action
against it existing as of the date of execution hereof.

     34. A default in the terms and conditions of any obligations of the Mortgagor or any guarantor
to the Mortgagee of whatever nature or kind, including but not exclusive of this obligation, shall
constitute a default in the terms and conditions of the Note. Likewise, any default in the terms
and conditions of the Note shall be and constitute a default under the terms and conditions of any
other obligations owed by the Mortgagor or any guarantor to the Mortgagee. Upon such default any
of the Mortgagor’s checking and savings monies deposited with the Mortgagee shall be immediately
and irrevocably assigned to the Mortgagee to apply to the obligations in any manner the Mortgagee
deems necessary.

     35. Any notice shall be given by mailing such notice by certified mail, return receipt
requested, addressed as follows:

     As to Mortgagor:

SUN HYDRAULICS CORPORATION

1500 West University Parkway

Sarasota, Florida 34243

     As to Mortgagee:

FIFTH THIRD BANK

4401 W. Kennedy Boulevard

Suite 300

Tampa, Florida 33609

or at such other address as Mortgagor or Mortgagee may have designated by notice to the other.

     36. WAIVER OF JURY TRIAL. MORTGAGEE AND MORTGAGOR HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS MORTGAGE AND ANY AGREEMENTS
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF EITHER PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR MORTGAGEE’S ACCEPTANCE OF THIS AGREEMENT FROM MORTGAGOR.

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     IN WITNESS WHEREOF, Mortgagor has duly executed this Mortgage as of the date first above
written.

Signed, Sealed and Delivered

in the Presence of:

	 	 	 	 	 	 	 
	 	 	 	 	SUN HYDRAULICS CORPORATION
	WITNESSES:	 	 	 	a Florida corporation
	 
	 	 	 	 	 	 
	/s/ Lisa R. Cook

	 	 	 	By:
	 	/s/ Tricia Fulton
	 

	 	 	 	 	 	 
	(Witness 1 — Signature)

	 	 	 	Name:
	 	Tricia Fulton
	 

	 	 	 	 	 	 
	 

	 	 	 	Its:
	 	Corp Finance
	Lisa R. Cook

	 	 	 	 
	 	 
	 

	 	 	 	 	 	 
	(Witness 1 — Printed Name)
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Gregory C. Yadley
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	(Witness 2 — Signature)
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Gregory C. Yadley
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	(Witness 2 — Printed Name)
	 	 	 	 	 	 

	 	 	 	 	 
	STATE OF FLORIDA

	)	 	 	 
	COUNTY OF HILLSBOROUGH

	)	 	 	 

     The
foregoing instrument was acknowledged before me on August 11, 2005, by
Tricia Fulton, as Corp. finance of SUN HYDRAULICS CORPORATION, a Florida
corporation, on behalf of the corporation, ___who is
personally known to me or x who has
provided a driver’s license as identification (check one).

	 	 	 
	 

	 	/s/ Marilyn D. Holmes
	 

	 	 
	 

	 	(Signature)
	 
	 

	 	Marilyn D. Holmes
	 

	 	 
	 

	 	(Type or Print Name)
	 
	 

	 	My Commission Expires:
	 
	 

	 	My Commission Number is:

15

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