LOAN AND SECURITY AGREEMENT
EXHIBIT 99.1
THIS LOAN AND SECURITY AGREEMENT is made this day of November 17, 2009, by and between
ENTERPRISE BANK & TRUST (“Lender”), a Missouri chartered trust company with an office at 000 X.
Xxxxxxx, Xxxxxxx, Xxxxxxxx 00000; and ALLIED HEALTHCARE PRODUCTS, INC. (“Borrower”), a Delaware
corporation with its chief executive office and principal place of business at 0000 Xxxxxxxx
Xxxxxx, Xx. Xxxxx, Xxxxxxxx 00000. Capitalized terms used in this Agreement have the meanings
assigned to them in Appendix A, General Definitions. Accounting terms not otherwise specifically
defined herein shall be construed in accordance with GAAP consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the representations and
warranties made in, this Agreement and the other Loan Documents, Lender agrees to make a revolving
credit facility of up to $7,500,000 available upon Borrower’s request therefor, as follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. Lender agrees, for so long as no Default or Event of
Default exists and for the period beginning on the date hereof and ending on November 17, 2010 (the
“Revolving Credit Termination Date”), to make Revolving Credit Loans to Borrower from time to time,
as requested by Borrower in the manner set forth in Section 3.1.1 hereof, up to a maximum principal
amount at any time outstanding equal to the lesser of (a) the Revolving Credit Commitment, or (b)
the Borrowing Base at such time.
1.1.2 Use of Proceeds. The Revolving Credit Loans shall be used solely for Borrower’s
general operating capital needs in a manner consistent with the provisions of this Agreement and
all applicable laws.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest. Interest shall accrue on the principal amount of each of the
Advances outstanding at the end of each day at a rate per annum equal to 50/100 percent (.50%)
plus the Base Rate. The rate of interest applicable to Advances shall increase or decrease
by an amount equal to any increase or decrease in the Base Rate, effective as of the opening of
business on the day that any such change in the Base Rate occurs. Notwithstanding anything herein
to the contrary, under no circumstances shall the interest rate on funds outstanding hereunder
accrue at a rate of less than four and 50/100 percent (4.50%) per annum.
2.1.2 Default Rate of Interest. Upon and after the occurrence of an Event of Default,
and during the continuation thereof, the principal amount of all Loans shall bear interest at a
rate per annum equal to four and 00/100 percent (4.00%) above the interest rate otherwise
applicable thereto (the “Default Rate”).
2.1.3 Maximum Interest. In no event whatsoever shall the aggregate of all amounts
deemed interest under the Revolving Credit Note and charged or collected pursuant to the terms of
this Agreement exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. If any provisions of this
Agreement, are in contravention of any such law, such provisions shall be deemed amended to conform
thereto.
2.2 Computation of Interest. Interest hereunder shall be calculated daily and shall
be computed on the actual number of days elapsed over a year of 360 days. For the purpose of
computing interest hereunder, all items of payment received by Lender shall be deemed applied by
Lender on account of the Obligations (subject to final payment of such items) on the date received
by Lender if received prior to 12:00 p.m. or on the next succeeding Business Day if received by
Lender after 12:00 p.m. in Lender’s account located in Clayton, Missouri.
2.3 Closing Fee. Borrower shall pay to Lender a closing fee of Twenty Thousand
Dollars ($20,000), which shall be fully earned and nonrefundable on the Closing Date and shall be
paid on the Closing Date.
2.4 Audit and Appraisal Fees. Borrower shall pay to Lender audit and appraisal fees
in accordance with Lender’s current schedule of fees in effect from time to time in connection with
audits and appraisals of Borrower’s books and records which payment shall not occur unless and
until the occurrence and continuance of an Event of Default or the outstanding balance of the
Revolving Credit Loans exceeds One Million Dollars ($1,000,000) and shall occur no more frequently
than annually if no Event of Default has occurred and is continuing, plus all reasonable
out-of-pocket expenses incurred by Lender in connection with such audits and appraisals. Audit
fees shall be payable within thirty (30) days following Borrower’s receipt of a request for payment
thereof from Lender.
2.5 Reimbursement of Expenses. If, at any time or times regardless of whether or not
an Event of Default then exists, Lender or any Participating Lender incurs legal or accounting
expenses or any other costs or out-of-pocket expenses in connection with (i) the negotiation and
preparation of this Agreement or any of the other Loan Documents, any amendment of or modification
of this Agreement or any of the other Loan Documents, or any sale or attempted sale of any interest
herein to a Participating Lender; (ii) the administration of this Agreement or any of the other
Loan Documents and the transactions contemplated hereby and thereby, including, without limitation,
field examinations pursuant to Section 8.1.1; (iii) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Lender, Borrower or any other Person) in any way
relating to the Collateral, this Agreement or any of the other Loan Documents or Borrower’s
affairs; (iv) after an Event of Default has occurred and is continuing, any attempt to enforce any
rights of Lender or any Participating Lender against Borrower or any other Person which may be
obligated to Lender by virtue of this Agreement or any of the other
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Loan Documents, including, without limitation, the Account Debtors; or (v) after an Event of
Default has occurred and is continuing, any attempt to inspect, verify, protect, preserve, restore,
collect, sell, liquidate or otherwise dispose of or realize upon the Collateral; then all such
legal and accounting expenses, other costs and out of pocket expenses of Lender shall be charged to
Borrower. All amounts chargeable to Borrower under this Section 2.5 shall be Obligations secured
by all of the Collateral, shall be payable to Lender within five (5) Business Days of Borrower
receiving written notice of the same from Lender or to such Participating Lender, as the case may
be (provided such amounts shall be payable on demand if an Event of Default has occurred and is
continuing), and shall bear interest from the date such demand is made until paid in full at the
rate applicable to Advances from time to time. Borrower shall also reimburse Lender for expenses
incurred by Lender in its administration of the Collateral to the extent and in the manner provided
in Section 6 hereof.
2.6 Bank Charges. Borrower shall pay to Lender, on demand, any and all fees, costs or
expenses which Lender or any Participating Lender pays to a bank or other similar institution
(including, without limitation, any fees paid by Lender to any Participating Lender) arising out of
or in connection with (i) the forwarding to Borrower or any other Person on behalf of Borrower, by
Lender or any Participating Lender, of proceeds of loans made by Lender to Borrower pursuant to
this Agreement and (ii) the depositing for collection, by Lender or any Participating Lender, of
any check or item of payment received or delivered to Lender or any Participating Lender on account
of the Obligations.
SECTION 3. LOAN ADMINISTRATION.
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the credit facility
established pursuant to Section 1 hereof shall be as follows:
3.1.1 Loan Requests. A request for a Revolving Credit Loan shall be made, or shall be
deemed to be made, in the following manner: (i) Borrower may give Lender notice of its intention
to borrow, in which notice Borrower shall specify the amount of the proposed borrowing and the
proposed borrowing date, no later than 11:00 a.m. St. Louis time on the proposed borrowing date,
provided, however, that no such request may be made at a time when there exists a Default
or an Event of Default; and (ii) the becoming due of any amount required to be paid under this
Agreement, whether as interest or for any other Obligation, shall be deemed irrevocably to be a
request for a Revolving Credit Loan on the due date in the amount required to pay such interest or
other Obligation. As an accommodation to Borrower, Lender may permit telephonic or electronic
requests for loans and electronic transmittal of instructions, authorizations, agreements or
reports to Lender by Borrower. Unless Borrower specifically directs Lender in writing not to
accept or act upon telephonic or electronic communications from Borrower, Lender shall have no
liability to Borrower for any loss or damage suffered by Borrower as a result of Lender’s honoring
of any requests, execution of any instructions, authorizations or agreements or reliance on any
reports communicated to it telephonically or electronically and purporting to have been sent to
Lender by Borrower and Lender shall have no duty to verify the origin of any such communication or
the authority of the person sending it.
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3.1.2 Disbursement. Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Revolving Credit Loan requested, or deemed to be requested, pursuant to this
Section 3.1.2 as follows: (i) the proceeds of each Revolving Credit Loan requested under Section
3.1.1(i) shall be disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in accordance with the terms of
the written disbursement letter from Borrower, and in the case of each subsequent borrowing, by
wire transfer to such bank account as may be agreed upon by Borrower and Lender from time to time
or elsewhere if pursuant to a written direction from Borrower; and (ii) the proceeds of each
Revolving Credit Loan requested under Section 3.1.1(ii) shall be disbursed by Lender by way of
direct payment of the relevant interest or other Obligation.
3.1.3 Authorization. Borrower hereby irrevocably authorizes Lender, in Lender’s sole
discretion, to advance to Borrower, and to charge to Borrower’s Loan Account hereunder as an
Advance, a sum sufficient to pay all interest accrued on the Obligations during the immediately
preceding month and to pay all costs, fees and expenses at any time owed by Borrower to Lender
hereunder if Borrower has not made payment of such amount to Lender when due.
3.2 Payments. Except where evidenced by notes or other instruments issued or made by
Borrower to Lender specifically containing payment provisions which are in conflict with this
Section 3.2 (in which event the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable as follows:
3.2.1 Principal. Principal payable on account of Revolving Credit Loans shall be
payable by Borrower to Lender immediately upon the earliest of (i) the Revolving Credit Termination
Date, (ii) to the extent set forth in Section 3.3.1 hereof, the receipt by Lender or Borrower of
any proceeds of any of the Collateral, (iii) the occurrence and continuance of an Event of Default
in consequence of which Lender elects to accelerate the maturity and payment of the Obligations, or
(iv) termination of this Agreement pursuant to Section 4 hereof; provided, however,
that if an Overadvance shall exist at any time, Borrower shall, on demand, repay the Overadvance.
3.2.2 Interest. Interest accrued on the Revolving Credit Loans shall be due on the
earliest of (i) the first Business Day of each month (for the immediately preceding month),
computed through the last calendar day of the preceding month, (ii) the occurrence and continuance
of an Event of Default in consequence of which Lender elects to accelerate the maturity and payment
of the Obligations or (iii) termination of this Agreement pursuant to Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable pursuant to this
Agreement shall be payable by Borrower as and when provided in Section 2 hereof, to Lender or to
any other Person designated by Lender in writing.
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3.2.4 Other Obligations. The balance of the Obligations requiring the payment of
money, if any, shall be payable by Borrower to Lender as and when provided in this Agreement, the
Other Agreements or the Security Documents, or on demand, whichever is later.
3.3 Mandatory Prepayments.
3.3.1 Collateral. If Borrower sells any of the Collateral having an aggregate value
in excess of One Hundred Thousand Dollars ($100,000) in any calendar year (other than sales of
Inventory in the ordinary course of business), or if Collateral having an aggregate value in excess
of One Hundred Thousand Dollars ($100,000) is lost or destroyed or taken by condemnation, Borrower
shall pay to Lender, unless otherwise agreed by Lender, as and when received by Borrower and as a
mandatory prepayment of the Revolving Credit Loans, a sum equal to the proceeds (including
insurance payments) received by Borrower from such sale, loss, destruction or condemnation in
excess of One Hundred Thousand Dollars ($100,000); provided however, that the foregoing mandatory
prepayment shall not apply, for so long as no Event of Default has occurred and is continuing, if
replacements are made within thirty (30) days after Borrower receives said proceeds for Collateral
that is sold, lost, destroyed or condemned with Collateral of like kind, function and value.
3.3.2 Cleandown. Notwithstanding anything to the contrary in this Agreement, prior to
the Revolving Credit Termination Date, Borrower must reduce the aggregate outstanding principal
balance of all Revolving Credit Loans to zero and maintain a zero balance for a period of not less
than thirty (30) consecutive days (the “Cleandown”). If Borrower has not completed the Cleandown
at least thirty (30) days prior to the Revolving Credit Termination Date, the Revolving Credit
Commitment shall be reduced to zero on the thirtieth (30th) day prior to the Revolving
Credit Termination Date.
3.4 Application of Payments and Collections. All items of payment received by Lender
by 12:00 noon, St. Louis time, on any Business Day shall be deemed received on that Business Day.
All items of payment received after 12:00 noon, St. Louis time, on any Business Day shall be deemed
received on the following Business Day. Borrower irrevocably waives the right to direct the
application of any and all payments and collections at any time or times hereafter received by
Lender from or on behalf of Borrower, and Borrower does hereby irrevocably agree that Lender shall
have the continuing exclusive right to apply and reapply any and all such payments and collections
received at any time or times hereafter by Lender or its agent against the Obligations, in such
manner as Lender may deem advisable, notwithstanding any entry by Lender upon any of its books and
records. If as the result of collections of Accounts as authorized by Section 6.2.5 hereof a
credit balance exists in the Loan Account, such credit balance shall not accrue interest in favor
of Borrower, but shall be available to Borrower at any time or times for so long as no Default or
Event of Default exists.
3.5 All Loans to Constitute One Obligation. The Loans shall constitute one general
Obligation of Borrower, and shall be secured by Lender’s Lien upon all of the Collateral.
3.6 Loan Account. Lender shall enter all Loans as debits to the Loan Account and
shall also record in the Loan Account all payments made by Borrower on any Obligations and all
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proceeds of Collateral which are finally paid to Lender, and may record therein, in accordance
with customary accounting practice, other debits and credits, including interest and all charges
and expenses properly chargeable to Borrower.
3.7 Statements of Account. Lender will account to Borrower monthly with a statement
of Loans, charges and payments made pursuant to this Agreement, and such account rendered by Lender
shall be deemed final, binding and conclusive upon Borrower unless Lender is notified by Borrower
in writing to the contrary within thirty (30) days of the date each accounting is mailed to
Borrower. Such notice shall only be deemed an objection to those items specifically objected to
therein.
3.8 Increased Costs. If any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of law) adopted after
the date of this Agreement and having general applicability to all banks within the jurisdiction in
which Lender operates (excluding, for the avoidance of doubt, the effect of and phasing in of
capital requirements or other regulations or guidelines passed prior to the date of this
Agreement), or any interpretation or application thereof by any governmental authority charged with
the interpretation or application thereof, or the compliance of Lender therewith, shall:
(i) (1) subject Lender to any tax with respect to this Agreement (other than any tax
based on or measured by net income or otherwise in the nature of a net income tax), or (2)
change the basis of taxation of payments to Lender of principal, fees, interest or any other
amount payable hereunder or under any Loan Documents (other than in respect of any tax based
on or measured by net income or otherwise in the nature of a net income tax;
(ii) impose, modify or hold applicable any reserve, special deposit, assessment or
similar requirement against assets held by, or deposits in or for the account of, advances
or loans by, or other credit extended by, any office of Lender, including (without
limitation) pursuant to Regulation D of the Board of Governors of the Federal Reserve
System; or
(iii) impose on Lender any other condition with respect to any Loan Document;
and the result of any of the foregoing is to increase the cost to Lender of making, renewing or
maintaining Loans hereunder by an amount that Lender deems to be material or to reduce the amount
of any payment (whether of principal, interest or otherwise) in respect of any of the Loans by an
amount that Lender deems to be material, then, in any such case, Borrower shall pay Lender, upon
demand and certification not later than sixty (60) days following its receipt of notice of the
imposition of such increased costs, such additional amount as will compensate Lender for such
additional cost or such reduction, as the case may be, to the extent Lender has not otherwise been
compensated, with respect to a particular Loan, for such increased cost as a result of an increase
in the Base Rate. An officer of Lender shall determine the amount of such additional cost or
reduced amount using reasonable averaging and attribution methods and shall certify the amount of
such additional cost or reduced amount to Borrower, which certification
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shall include a written explanation of such additional cost or reduction to Borrower. Such
certification shall be conclusive absent manifest error. If Lender claims any additional cost or
reduced amount pursuant to this Section 3.8, then Lender shall use reasonable efforts (consistent
with legal and regulatory restrictions) to designate a different lending office or to file any
certificate or document reasonably requested by Borrower if the making of such designation or
filing would avoid the need for, or reduce the amount of, any such additional cost or reduced
amount and would not, in the sole discretion of Lender, be otherwise disadvantageous to Lender.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to Lender’s right to cease making Loans to Borrower
upon or after the occurrence of any Default or Event of Default, this Agreement shall be in effect
for a period beginning the date hereof and ending on the later of (a) the indefeasible payment in
full of all Obligations; or (b) the termination of any duty of Lender to extend credit to or for
the benefit of Borrower or any other entity under the Agreement and such other Loan Documents.
4.2 Termination.
4.2.1 Termination by Lender. Lender may terminate this Agreement, without notice,
upon or after the occurrence of an Event of Default.
4.2.2 Termination by Borrower. Upon at least ninety (90) days prior written notice to
Lender, Borrower may, at its option, terminate this Agreement; provided, however,
no such termination shall be effective until Borrower has paid all of the Obligations in
immediately available funds. Any notice of termination given by Borrower shall be irrevocable
unless Lender otherwise agrees in writing, and Lender shall have no obligation to make any Loans on
or after the termination date stated in such notice. Borrower may elect to terminate this
Agreement in its entirety only. No section of this Agreement or type of Loan available hereunder
may be terminated singly.
4.2.3 Effect of Termination. All of the Obligations shall be immediately due and
payable upon the termination date stated in any notice of termination of this Agreement. All
undertakings, agreements, covenants, warranties and representations of Borrower contained in the
Loan Documents shall survive any such termination and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has paid the Obligations to Lender, in full, in immediately available
funds, together with the applicable termination charge, if any. Notwithstanding the payment in
full of the Obligations, Lender shall not be required to terminate its security interests in the
Collateral unless, with respect to any loss or damage Lender may incur as a result of dishonored
checks or other items of payment received by Lender from Borrower or any Account Debtor and applied
to the Obligations, Lender shall have received a written agreement, executed by Borrower and by any
Person whose loans or other advances to Borrower are used in whole or in part to satisfy the
Obligations, indemnifying Lender from any such loss or damage.
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SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and performance to
Lender of the Obligations, Borrower hereby grants to Lender a continuing Lien upon all of
Borrower’s assets, including all of the following Property and interests in Property of Borrower,
whether now owned or existing or hereafter created, acquired or arising and wheresoever located:
(i) Accounts;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with respect thereto, including, any and
all licenses, options, warranties, service contracts, program services, test rights, maintenance
rights, support rights, improvement rights, renewal rights and indemnifications, and any
substitutions, replacements, additions or model conversions of any of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
(vii) Documents;
(viii) Equipment;
(ix) Financial Assets;
(x) Fixtures;
(xi) General Intangibles, including Payment Intangibles and
Software;
(xii) Goods (including all of its Equipment, Fixtures and Inventory), and all accessions,
additions, attachments, improvements, substitutions and replacements thereto and therefor;
(xiii) Instruments;
(xiv) Intellectual Property;
(xv) Inventory;
(xvi) Investment Property;
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(xvii) money (of every jurisdiction whatsoever);
(xviii) Letter-of-Credit Rights;
(xix) Payment Intangibles;
(xx) Security Entitlements;
(xxi) Software;
(xxii) Supporting Obligations;
(xxiii) Uncertificated Securities;
(xxiv) Electronic Chattel Paper; and
(xxv) to the extent not included in the foregoing, all other personal property of any kind or
description;
together with all books, records, writings, data bases, information and other property relating to,
used or useful in connection with, or evidencing, embodying, incorporating or referring to any of
the foregoing, and all Proceeds, products, offspring, rents, issues, profits and returns of and
from any of the foregoing; provided that to the extent that the provisions of any lease or license
of Computer Hardware and Software or Intellectual Property expressly prohibit (which prohibition is
enforceable under applicable law) any assignment thereof, and the grant of a security interest
therein, Lender will not enforce its security interest in Borrower’s rights under such lease or
license (other than in respect of the Proceeds thereof) for so long as such prohibition continues,
it being understood that upon request of Lender, Borrower will in good faith use reasonable efforts
to obtain consent for the creation of a security interest in favor of Lender (and to Lender’s
enforcement of such security interest) in such Lender’s rights under such lease or license.
5.2 Other Collateral.
5.2.1 Commercial Tort Claims. Borrower shall promptly notify Lender in writing upon
incurring or otherwise obtaining a Commercial Tort Claim after the Closing Date against any third
party and, upon request of Lender, promptly enter into an amendment to this Agreement and do such
other acts or things reasonably deemed appropriate by Lender to give Lender a security interest in
any such Commercial Tort Claim.
5.2.2 Other Collateral. Borrower shall promptly notify Lender in writing upon
acquiring or otherwise obtaining any Collateral after the date hereof consisting of Deposit
Accounts, Investment Property, Letter-of-Credit Rights or Electronic Chattel Paper and, upon the
request of Lender, promptly execute such other documents, and do such other acts or things deemed
appropriate by Lender to deliver to Lender control with respect to such Collateral; promptly notify
Lender in writing upon acquiring or otherwise obtaining any Collateral after the
date hereof consisting of Documents or Instruments and, upon the request of Lender, will
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promptly execute such other documents, and do such other acts or things reasonably deemed
appropriate by Lender to deliver to Lender possession of such Documents which are Instruments, and,
with respect to nonnegotiable Documents, to have such nonnegotiable Documents issued in the name of
Lender; and with respect to Collateral in the possession of a third party, other than Certificated
Securities and Goods covered by a Document and obtain an acknowledgement from the third party that
it is holding the Collateral for the benefit of Lender.
5.3 Lien Perfection; Further Assurances. Borrower shall execute such other
instruments, assignments or documents as are necessary to perfect Lender’s Lien upon any of the
Collateral and shall take such other action as may be required to perfect or to continue the
perfection of Lender’s Lien upon the Collateral. Unless prohibited by applicable law, Borrower
hereby irrevocably authorizes Lender to execute and file any such financing statements, including,
without limitation, financing statements that indicate the Collateral (i) as all assets of Borrower
or words of similar effect, or (ii) as being of an equal or lesser scope, or with greater or lesser
detail, than as set forth in Section 5.1, on Borrower’s behalf. Borrower also hereby ratifies its
authorization for Lender to have filed in any jurisdiction any like financing statements or
amendments thereto if filed prior to the date hereof. The parties agree that a photographic or
other reproduction of this Agreement shall be sufficient as a financing statement and may be filed
in any appropriate office in lieu thereof. At Lender’s request, Borrower shall also promptly
execute or cause to be executed and shall deliver to Lender any and all documents, instruments and
agreements deemed necessary by Lender to give effect to or carry out the terms or intent of the
Loan Documents.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General
6.1.1 Location of Collateral. All tangible Collateral, other than Inventory in
transit and motor vehicles, will at all times be kept by Borrower and its Subsidiaries at one or
more of the business locations set forth in Exhibit C hereto and shall not, without the prior
written approval of Lender, be moved therefrom except, prior to the occurrence and during the
continuance of an Event of Default and Lender’s acceleration of the maturity of the Obligations in
consequence thereof, for (i) sales of Inventory in the ordinary course of business; and (ii)
removals in connection with dispositions of Equipment that are authorized by Section 6.4.2 hereof.
6.1.2 Insurance of Collateral. Borrower shall maintain and pay for insurance upon all
Collateral wherever located and with respect to Borrower’s business, covering casualty, hazard,
public liability and such other risks in such amounts and with such insurance companies as are
reasonably satisfactory to Lender. Prior to Lender disbursing any proceeds of the Revolving Credit
Loan, Borrower shall deliver copies of such policies to Lender with satisfactory lender’s loss
payable endorsements, naming Lender as sole loss payee, assignee or additional insured, as
appropriate. Each policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than thirty (30) days prior written notice to Lender in the event of cancellation
of the policy for any reason whatsoever and a clause specifying that the
interest of Lender shall not be impaired or invalidated by any act or neglect of Borrower or
the
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owner of the Property or by the occupation of the premises for purposes more hazardous than are
permitted by said policy. If Borrower fails to provide and pay for such insurance, Lender may, at
its option, but shall not be required to, procure the same and charge Borrower therefor. Borrower
agrees to deliver to Lender, promptly as rendered, true copies of all reports made in any reporting
forms to insurance companies. MISSOURI COLLATERAL PROTECTION INSURANCE SAFE HARBOR PROVISION:
Unless Borrower provides evidence of the insurance coverage required by this Agreement, Lender may
purchase insurance at Borrower’s expense to protect Lender’s interests in the Collateral. This
insurance may, but need not, protect Borrower’s interests. The coverage that Lender purchases may
not pay any claim that Borrower makes or any claim that is made against Borrower in connection with
the Collateral. Borrower may later cancel any insurance purchased by Lender, but only after
providing evidence that Borrower has obtained insurance as required by this Agreement. If Lender
purchases insurance for the Collateral, Borrower will be responsible for the costs of that
insurance, including the insurance premium, interest and any other charges Lender may impose in
connection with the placement of the insurance, until the effective date of the cancellation or
expiration of the insurance. The costs of the insurance may be added to the Obligations. The
costs of the insurance may be more than the cost of insurance Borrower may be able to obtain on its
own.
6.1.3 Protection of Collateral. All expenses of protecting, storing, warehousing,
insuring, handling, maintaining and shipping the Collateral, any and all excise, property, sales,
and use taxes imposed by any state, federal, or local authority on any of the Collateral or in
respect of the sale thereof shall be borne and paid by Borrower. If Borrower fails to promptly pay
any portion thereof when due, Lender may, at its option, but shall not be required to, pay the same
and charge Borrower therefor. Lender shall not be liable or responsible in any way for the
safekeeping of any of the Collateral or for any loss or damage thereto (except for reasonable care
in the custody thereof while any Collateral is in Lender’s actual possession) or for any diminution
in the value thereof, or for any act or default of any warehouseman, carrier, forwarding agency, or
other person whomsoever, but the same shall be at Borrower’s sole risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts. Borrower shall keep accurate
and complete records of its Accounts and all payments and collections thereon and shall submit to
Lender on such periodic basis as Lender shall request a sales and collections report for the
preceding period, in form satisfactory to Lender. On or before the fifteenth (15th) day
of each month from and after the date hereof, Borrower shall deliver to Lender, in form acceptable
to Lender, a detailed, aged trial balance of all Accounts existing as of the last day of the
preceding month, specifying the names, addresses, face value, dates of invoices and due dates for
each Account Debtor obligated on an Account so listed (“Schedule of Accounts"), and, upon Lender’s
request therefor, copies of proof of delivery and the original copy of all documents, including,
without limitation, repayment histories and present status reports relating to the Accounts so
scheduled and such other matters and information relating to the status of then existing Accounts
as Lender shall reasonably request. In addition, if Accounts in an aggregate face amount in excess
of $200,000 become ineligible because they fall within one of the specified categories of
ineligibility set forth in the definition of Eligible Accounts or
otherwise reasonably established by Lender, Borrower shall notify Lender of such occurrence on
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the first Business Day following such occurrence and the Borrowing Base shall thereupon be adjusted
to reflect such occurrence. If requested by Lender, Borrower shall execute and deliver to Lender
formal written assignments of all of its Accounts weekly or daily, which shall include all Accounts
that have been created since the date of the last assignment, together with copies of invoices or
invoice registers related thereto.
6.2.2 Discounts, Allowances, Disputes. If Borrower grants any material rebates
discounts, allowances or credits that are not shown on the face of the invoice for the Account
involved, Borrower shall report such rebates, discounts, allowances or credits, as the case may be,
to Lender as part of the next required Schedule of Accounts. If any amounts due and owing in
excess of $100,000 are in dispute between Borrower and any Account Debtor, Borrower shall provide
Lender with written notice thereof at the time of submission of the next Schedule of Accounts,
explaining in detail the reason for the dispute, all claims related thereto and the amount in
controversy. Upon and after the occurrence and during the continuance of an Event of Default,
Lender shall have the right to settle or adjust all disputes and claims directly with the Account
Debtor and to compromise the amount or extend the time for payment of the Accounts upon such terms
and conditions as Lender may deem advisable, and to charge the deficiencies, costs and expenses
thereof, including attorney’s fees, to Borrower.
6.2.3 Taxes. If an Account includes a charge for any tax payable to any governmental
taxing authority, Lender is authorized, in its sole discretion, to pay the amount thereof to the
proper taxing authority for the account of Borrower and to charge Borrower therefor, provided,
however that Lender shall not be liable for any taxes to any governmental taxing authority that may
be due by Borrower.
6.2.4 Account Verification. Whether or not a Default or an Event of Default has
occurred, any of Lender’s officers, employees or agents shall have the right, at any time or times
hereafter, in the name of Lender, any designee of Lender, or Borrower, to verify the validity,
amount or any other matter relating to any Accounts by mail, telephone, electronic communication or
otherwise. Borrower shall cooperate fully with Lender in an effort to facilitate and promptly
conclude any such verification process.
6.2.5 Collection of Accounts, Proceeds of Collateral. Lender retains the right at all
times after the occurrence and during the continuance of an Event of Default to notify Account
Debtors that Accounts have been assigned to Lender and to collect Accounts directly in its own
name, or in the name of Lender’s agent, and to charge the collection costs and expenses, including
attorneys’ fees to Borrower.
6.3 Administration of Inventory.
6.3.1 Records and Reports of Inventory. Borrower shall keep accurate and complete
records of its Inventory. Borrower shall furnish Lender Inventory reports in form and detail
reasonably satisfactory to Lender at such times as Lender may request, but at least once each
month, not later than the fifteenth (15th) day of such month. Borrower shall conduct a
physical inventory annually in conjunction with the end of Borrower’s fiscal year and shall
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provide to Lender a report based on each such physical inventory promptly thereafter, together
with such supporting information as Lender shall reasonably request.
6.3.2 Returns of Inventory. If at any time or times hereafter any Account Debtor
returns any Inventory to Borrower the shipment of which generated an Account on which such Account
Debtor is obligated in excess of $100,000, Borrower shall promptly notify Lender of the same,
specifying the reason for such return and the location, condition and intended disposition of the
returned Inventory.
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Borrower shall keep accurate records
itemizing and describing the kind, type, quality, quantity and value of its Equipment and all
dispositions made in accordance with Section 6.4.2 hereof, and shall furnish Lender with a current
schedule containing the foregoing information in connection with the end of the Borrower’s fiscal
year. Immediately on request therefor by Lender, Borrower shall deliver to Lender any and all
evidence of ownership, if any, of any of the Equipment.
6.4.2 Dispositions of Equipment. Borrower will not sell, lease or otherwise dispose
of or transfer any of the Equipment or any part thereof without the prior written consent of
Lender; provided, however, that the foregoing restriction shall not apply, for so
long as no Default or Event of Default has occurred and is continuing, to (i) dispositions of
Equipment which, in the aggregate during any consecutive twelve-month period, has a fair market
value or book value, whichever is less, of $50,000 or less, or (ii) replacements of Equipment that
is substantially worn, damaged or obsolete with Equipment of like kind, function and value,
provided that the replacement Equipment shall be acquired prior to or within thirty (30) days
thereafter with any disposition of the Equipment that is to be replaced, the replacement Equipment
shall be free and clear of Liens other than Permitted Liens that are not Purchase Money Liens
(except such Purchase Money Liens which are subordinate to Lender’s Liens), and Borrower shall have
given Lender at least five (5) days prior written notice of such disposition.
6.5 Payment of Charges. All amounts chargeable to Borrower under Section 6 hereof
shall be Obligations secured by all of the Collateral, shall be payable on demand and shall bear
interest from the date such advance was made until paid in full at the rate applicable to Revolving
Credit Loans from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Lender to enter into this
Agreement and to make advances hereunder, Borrower warrants, represents and covenants to Lender
that:
7.1.1 Organization and Qualification. Each of Borrower and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Each of Borrower and its Subsidiaries is duly qualified and is
authorized to do business and is in good standing as a foreign corporation in each state or
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jurisdiction listed on Exhibit D hereto and in all other states and jurisdictions in which the
failure of Borrower to be so qualified would have a Material Adverse Effect.
7.1.2 Corporate Power and Authority. Each of Borrower and its Subsidiaries is duly
authorized and empowered to enter into, execute, deliver and perform this Agreement and each of the
other Loan Documents to which it is a party. The execution, delivery and performance of this
Agreement and each of the other Loan Documents have been duly authorized by all necessary corporate
action and do not and will not (i) require any consent or approval of the shareholders (or members,
in the case of a limited liability company) of Borrower or any of its Subsidiaries; (ii) contravene
Borrower’s or any of its Subsidiaries’ charter, articles or certificate of incorporation or
by-laws; (iii) violate, or cause Borrower or any of its Subsidiaries to be in default under, any
provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or
award in effect having applicability to Borrower or any of its Subsidiaries; (iv) result in a
breach of or constitute a default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which Borrower or any of its Subsidiaries is a party or by which
it or its Properties may be bound or affected; or (v) result in, or require, the creation or
imposition of any Lien (other than Permitted Liens) upon or with respect to any of the Properties
now owned or hereafter acquired by Borrower or any of its Subsidiaries.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each of the other Loan
Documents when delivered under this Agreement will be, a legal, valid and binding obligation of
each of Borrower and its Subsidiaries enforceable against it in accordance with its respective
terms.
7.1.4 Capital Structure. Exhibit E hereto states (i) the correct name of each of the
Subsidiaries of Borrower, its jurisdiction of incorporation and the percentage of its Voting Stock
owned by Borrower, (ii) the name of each of Borrower’s corporate or joint venture Affiliates and
the nature of the affiliation, and (iii) the number of authorized, issued and treasury shares of
Borrower and each Subsidiary of Borrower. Borrower has good title to all of the shares it purports
to own of the stock of each of its Subsidiaries, free and clear in each case of any Lien other than
Permitted Liens. All such shares have been duly issued and are fully paid and non-assessable. The
beneficial ownership of Borrower’s directors and executive officers and all persons known to hold
more than five percent (5%) of the Borrower’s Stock as of September 30, 2009, are as set forth in
the Schedule 14A Proxy Statement of Borrower filed with the SEC on October 9, 2009. Except as set
forth in the immediately preceding sentence and as listed on Exhibit T hereto, there are no
outstanding options to purchase, or any rights or warrants to subscribe for, or any commitments or
agreements to issue or sell, or any Securities or obligations convertible into, or any powers of
attorney relating to, shares of the capital stock of Borrower or any of its Subsidiaries. There
are no outstanding agreements or instruments binding upon any of Borrower’s shareholders (or
members, in the case of a limited liability company) relating to the ownership of its shares of
capital stock (or member interests, in the case of a limited liability company).
7.1.5 Corporate Names, etc. Neither Borrower nor any of its Subsidiaries has been
known as or used any corporate, fictitious or trade names except those
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listed on Exhibit F hereto. Except as set forth on Exhibit F, neither Borrower nor any of its
Subsidiaries has been the surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person. Each of Borrower’s and its Subsidiaries’ state(s)
of incorporation or organization, Type of Organization and Organizational I.D. Number is set forth
on Exhibit F. The exact legal name of Borrower and each of its Subsidiaries is set forth on
Exhibit F.
7.1.6 Business Locations; Agent for Process. Each of Borrower’s and its Subsidiaries’
chief executive office and other places of business are as listed on Exhibit C hereto. During the
preceding one-year period, neither Borrower nor any of its Subsidiaries has had an office, place of
business or agent for service of process other than as listed on Exhibit C. Except as shown on
Exhibit C, no Inventory is stored with a bailee, warehouseman or similar party, nor is any
Inventory consigned to any Person.
7.1.7 Title to Properties; Priority of Liens. Each of Borrower and its Subsidiaries
has good, indefeasible and marketable title to and fee simple ownership of, or valid and subsisting
leasehold interests in, all of its real Property, and good title to all of the Collateral and all
of its other Property, in each case, free and clear of all Liens except Permitted Liens. Borrower
has paid or discharged all lawful claims which, if unpaid, might become a Lien against any of
Borrower’s Properties that is not a Permitted Lien. The Liens granted to Lender under Section 5
hereof are first-priority Liens, subject only to Permitted Liens.
7.1.8 Accounts. Lender may rely, in determining which Accounts are Eligible Accounts,
on all statements and representations made by Borrower with respect to any Account or Accounts.
Unless otherwise indicated in writing to Lender, with respect to each Account:
(i) It is genuine and in all material respects what it purports to be, and it is not
evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and delivery of goods
or rendition of services by Borrower in the ordinary course of its business and in material
compliance with the terms and conditions of all purchase orders, contracts or other
documents relating thereto and forming a part of the contract between Borrower and the
Account Debtor;
(iii) It is for a liquidated amount maturing as stated in the duplicate invoice
covering such sale or rendition of services, a copy of which has been furnished or is
available to Lender;
(iv) Such Account, and Lender’s security interest therein, is not, and will not (by
voluntary act or omission of Borrower) be in the future, subject to any offset, Lien,
deduction, recoupment, defense, dispute, counterclaim or any other adverse condition except
for disputes resulting in returned goods where the amount in controversy is deemed by Lender
to be immaterial, and each such Account is absolutely owing to Borrower and is not
contingent in any respect or for any reason;
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(v) Borrower has made no agreement with any Account Debtor thereunder for any
extension, compromise, settlement or modification of any such Account or any deduction
therefrom, except rebates from manufacturers and discounts or allowances which are granted
by Borrower in the ordinary course of its business for prompt payment and which are
reflected in the calculation of the net amount of each respective invoice related thereto
and are reflected in the Schedules of Accounts submitted to Lender pursuant to Section 6.2.1
hereof;
(vi) There are no facts, events or occurrences which in any way impair the validity or
enforceability of any Accounts or tend to reduce the amount payable thereunder from the face
amount of the invoice and statements delivered to Lender with respect thereto;
(vii) To the best of Borrower’s knowledge, the Account Debtor thereunder (1) had the
capacity to contract at the time any contract or other document giving rise to the Account
was executed and (2) such Account Debtor is Solvent; and
(viii) To the best of Borrower’s knowledge, there are no proceedings or actions which
are threatened or pending against any Account Debtor thereunder which might result in any
material adverse change in such Account Debtor’s financial condition or the collectibility
of such Account.
7.1.9 Equipment. The Equipment is in good operating condition and repair, and all
necessary replacements of and repairs thereto shall be made so that the value and operating
efficiency of the Equipment shall be maintained and preserved, reasonable wear and tear excepted.
Borrower will not permit any of the Equipment to become affixed to any real Property leased to
Borrower so that an interest arises therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has executed a landlord waiver or leasehold
mortgage in favor of and in form acceptable to Lender, and Borrower will not permit any of the
Equipment to become an accession to any personal Property other than Equipment that is subject to
first-priority (except for Permitted Liens) Liens in favor of Lender.
7.1.10 Financial Statements; Fiscal Year. The balance sheets of Borrower and such
other Persons described therein (including the accounts of all Subsidiaries of Borrower for the
respective periods during which a Subsidiary relationship existed) as of June 30, 2009, and the
related statements of income, changes in Stockholder’s equity, and changes in financial position
for the periods ended on such dates, have been prepared in accordance with GAAP, and present fairly
the financial positions of Borrower and such Persons at such dates and the results of Borrower’s
and such Persons’ operations for such periods. Since June 30, 2009, there has been no material
change in the condition, financial or otherwise, of Borrower and such other Persons as shown on the
balance sheets as of such date and no change in the aggregate value of Equipment and real Property
owned by Borrower or such other Persons, except changes in the ordinary course of business, none of
which individually or in the aggregate has been materially adverse. The fiscal year of Borrower
and each of its Subsidiaries ends on June 30 of each year.
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7.1.11 Full Disclosure. The financial statements referred to in Section 7.1.10 hereof
do not, nor does this Agreement or any other written statement of Borrower to Lender, contain any
untrue statement of a material fact or omit a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which Borrower has failed to disclose
to Lender in writing which would have a Material Adverse Effect or, so far as Borrower can now
foresee, will have a Material Adverse Effect.
7.1.12 Solvent Financial Condition. Each of Borrower and its Subsidiaries is now and,
after giving effect to the Loans to be made hereunder, at all times will be, Solvent.
7.1.13 Surety Obligations. Neither Borrower nor any of its Subsidiaries is obligated
as surety or indemnitor under any surety or similar bond or other contract, or has issued or
entered into any agreement to assure payment, performance or completion of performance of any
undertaking or obligation of any Person.
7.1.14 Taxes. Borrower’s federal tax identification number is 00-0000000. The
federal tax identification number of each of Borrower’s Subsidiaries is shown on Exhibit G hereto.
Borrower and each of its Subsidiaries has filed all federal, state and local tax returns or
appropriate extensions therefore and other reports it is required by law to file and has paid, or
made provision for the payment of, all taxes, assessments, fees, levies and other governmental
charges upon it, its income and Properties as and when such taxes, assessments, fees, levies and
charges are due and payable, unless and to the extent any thereof are being actively contested in
good faith and by appropriate proceedings and Borrower maintains reasonable reserves on its books
therefor. The provision for taxes on the books of Borrower and its Subsidiaries are adequate for
all years not closed by applicable statutes, and for its current fiscal year.
7.1.15 Brokers. There are no claims for brokerage commissions, finder’s fees or
investment banking fees in connection with the transactions contemplated by this Agreement.
7.1.16 Patents, Trademarks, Copyrights and Licenses. Each of Borrower and its
Subsidiaries owns or possesses all the patents, trademarks, service marks, tradenames, copyrights
and licenses necessary for the present and planned future conduct of its business without any known
conflict with the rights of others. All such registered patents, trademarks, service marks,
tradenames, copyrights, licenses and other similar rights, specifically excluding “shrinkwrap”
software licenses, are listed on Exhibit H hereto.
7.1.17 Governmental Consents. Each of Borrower and its Subsidiaries has, and is in
good standing with respect to, all governmental consents, approvals, licenses, authorizations,
permits, certificates, inspections and franchises necessary to continue to conduct its business as
heretofore or proposed to be conducted by it and to own or lease and operate its Properties as now
owned or leased by it except where the failure to have such
17
governmental licenses, authorizations, consents or approvals does not have a Material Adverse
Effect.
7.1.18 Compliance with Laws. Each of Borrower and its Subsidiaries has materially
complied with, and its Properties, business operations and leaseholds are in compliance in all
material respects with, the provisions of all federal, state and local laws, rules and regulations
applicable to Borrower or such Subsidiary, as applicable, its Properties or the conduct of its
business and there have been no citations, notices or orders of noncompliance issued to Borrower or
any of its Subsidiaries under any such law, rule or regulation. Each of Borrower and its
Subsidiaries has established and maintains an adequate monitoring system to insure that it remains
in compliance with all federal, state and local laws, rules and regulations applicable to it. To
the knowledge of Borrower, no Inventory has been produced in violation of the Fair Labor Standards
Act (29 U.S.C. §201 et seq.), as amended.
7.1.19 Restrictions. Neither Borrower nor any of its Subsidiaries is a party or
subject to any contract, agreement, or charter or other corporate restriction, which has a Material
Adverse Effect. Neither Borrower nor any of its Subsidiaries is a party or subject to any contract
or agreement which restricts its right or ability to incur Indebtedness, other than as set forth on
Exhibit I hereto, none of which prohibit the execution of or compliance with this Agreement or the
other Loan Documents by Borrower or any of its Subsidiaries, as applicable.
7.1.20 Litigation. Except as set forth on Exhibit J hereto, there are no actions,
suits, proceedings or investigations pending, or to the knowledge of Borrower, threatened, against
or affecting Borrower or any of its Subsidiaries, or the business, operations, Properties,
prospects, profits or condition of Borrower or any of its Subsidiaries. Neither Borrower nor any
of its Subsidiaries is in default with respect to any order, writ, injunction, judgment, decree or
rule of any court, governmental authority or arbitration board or tribunal.
7.1.21 No Defaults. No event has occurred and no condition exists which would, upon
or after the execution and delivery of this Agreement or Borrower’s performance hereunder,
constitute a Default or an Event of Default. Neither Borrower nor any of its Subsidiaries is in
default, and no event has occurred and no condition exists which constitutes, or which with the
passage of time or the giving of notice or both would constitute, a default in the payment of any
Indebtedness to any Person for Money Borrowed.
7.1.22 Leases. Exhibit K hereto is a complete listing of all capitalized leases of
Borrower and its Subsidiaries and Exhibit L hereto is a complete listing of all operating leases of
Borrower and its Subsidiaries. Each of Borrower and its Subsidiaries is in material compliance
with all of the terms of each of its respective capitalized and operating leases.
7.1.23 Pension Plans. Except as disclosed on Exhibit M hereto, neither Borrower nor
any of its Subsidiaries has any Plan. Borrower and each of its Subsidiaries is in full compliance
with the requirements of ERISA and the regulations promulgated thereunder with respect to each
Plan. No fact or situation that could result in a Material Adverse
18
Effect exists in connection with any Plan. Neither Borrower nor any of its Subsidiaries has
any withdrawal liability in connection with a Multi-employer Plan.
7.1.24 Trade Relations. There exists no actual or, to the knowledge of Borrower,
threatened termination, cancellation or limitation of, or any modification or change in, the
business relationship between Borrower or any of its Subsidiaries and any customer or any group of
customers whose purchases individually or in the aggregate are material to the business of Borrower
or any of its Subsidiaries, or with any material supplier, and there exists no present condition or
state of facts or circumstances which would have a Material Adverse Effect or prevent Borrower or
any of its Subsidiaries from conducting such business after the consummation of the transaction
contemplated by this Agreement in substantially the same manner in which it has heretofore been
conducted.
7.1.25 Labor Relations. Except as described on Exhibit N hereto, neither Borrower nor
any of its Subsidiaries is a party to any collective bargaining agreement. There are no material
grievances, disputes or controversies with any union or any other organization of Borrower’s or any
of its Subsidiaries’ employees, or threats of strikes, work stoppages or any asserted pending
demands for collective bargaining by any union or organization.
7.2 Continuous Nature of Representations and Warranties. Each representation and
warranty contained in this Agreement and the other Loan Documents shall be continuous in nature and
shall remain accurate, complete and not misleading at all times during the term of this Agreement,
except for changes in the nature of Borrower’s or its Subsidiaries’ business or operations that
would render the information in any exhibit attached hereto either inaccurate, incomplete or
misleading, so long as Lender has consented to such changes or such changes are expressly permitted
by this Agreement. Without limiting the generality of the foregoing, each loan request made
pursuant to Section 3.1.1 hereof shall constitute Borrower’s reaffirmation, as of the date of each
such loan request, of each representation, warranty or other statement made or furnished to Lender
by or on behalf of Borrower or any Subsidiary of Borrower in this Agreement, any of the other Loan
Documents, or any instrument, certificate or financial statement furnished in compliance with or in
reference thereto.
7.3 Survival of Representations and Warranties. All representations and warranties of
Borrower contained in this Agreement or any of the other Loan Documents shall survive the
execution, delivery and acceptance thereof by Lender and the parties thereto and the closing of the
transactions described therein or related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and thereafter for so
long as there are any Obligations to Lender, Borrower covenants that, unless otherwise consented to
by Lender in writing, it shall:
8.1.1 Visits and Inspections. Upon one (1) Business Day’s notice, permit
representatives of Lender, from time to time, as often as may be reasonably requested, but
19
only during normal business hours, to visit and inspect the Properties of Borrower and each of
its Subsidiaries, inspect, audit and make extracts from its books and records, and discuss with its
officers, its employees and its independent accountants, Borrower’s and each of its Subsidiaries’
business, assets, liabilities, financial condition, business prospects and results of operations;
provided, however, no such notice shall be required if an Event of Default has occurred and is
continuing. Without limiting the generality of the foregoing, at any time the aggregate
outstanding balance of the Revolving Credit Loans exceeds $1,000,000 or if an Event of Default has
occurred and is continuing, Borrower shall permit Lender or its designee to conduct, at Borrower’s
expense, a field examination of Borrower’s accounts receivable, accounts payable and Inventory.
8.1.2 Notices. Promptly notify Lender in writing of the occurrence of any event or
the existence of any fact which renders any representation or warranty in this Agreement or any of
the other Loan Documents inaccurate, incomplete or misleading.
8.1.3 Financial Statements. Keep, and cause each Subsidiary to keep, adequate records
and books of account with respect to its business activities in which proper entries are made in
accordance with GAAP reflecting all its financial transactions; and cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP applied on a
consistent basis, unless Borrower’s certified public accountants concur in any change therein and
such change is disclosed to Lender and is consistent with GAAP):
(i) not later than ninety (90) days after the close of each fiscal year of Borrower,
unqualified, audited financial statements of Borrower and its Subsidiaries as of the end of
such year, on a Consolidated and consolidating basis, certified by a firm of independent
certified public accountants of recognized standing selected by Borrower but reasonably
acceptable to Lender (except for a qualification for a change in accounting principles with
which the accountant concurs);
(ii) not later than thirty (30) days after the end of each month hereafter, including
the last month of Borrower’s fiscal year, unaudited, interim financial statements of
Borrower and its Subsidiaries as of the end of such month and of the portion of Borrower’s
financial year then elapsed, on a Consolidated and consolidating basis, certified by the
principal financial officer of Borrower as prepared in accordance with GAAP and fairly
presenting the Consolidated financial position and results of operations of Borrower and its
Subsidiaries for such month and period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;
(iii) promptly upon Lender’s request, but in any event, on or before the fifteenth
(15th) day of each month from and after the date hereof, a Borrowing Base
Certificate;
(iv) promptly after the sending or filing thereof, as the case may be, copies of any
proxy statements, financial statements or reports which Borrower has made available to its
shareholders (or members, in the case of a limited liability company) and
20
copies of any regular, periodic and special reports or registration statements which
Borrower files with the Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or any national securities exchange;
(v) promptly after the filing thereof, copies of any annual report to be filed with
ERISA in connection with each Plan; and
(vi) such other data and information (financial and otherwise) as Lender, from time to
time, may reasonably request, bearing upon or related to the Collateral or Borrower’s and
each of its Subsidiaries’ financial condition or results of operations.
Concurrently with the delivery of the financial statements described in clause (i) of this
Section 8.1.3, Borrower shall forward to Lender a copy of the accountants’ letter to Borrower’s
management that is prepared in connection with such financial statements and also shall cause to be
prepared and shall furnish to Lender a certificate of the aforesaid certified public accountants
certifying to Lender that, based upon their examination of the financial statements of Borrower and
its Subsidiaries performed in connection with their examination of said financial statements, they
are not aware of any Default or Event of Default, or, if they are aware of such Default or Event of
Default, specifying the nature thereof, and acknowledging, in a manner satisfactory to Lender, that
they are aware that Lender is relying on such financial statements in making its decisions with
respect to the Loans. Not later than thirty (30) days after the end of each fiscal quarter
hereafter, Borrower shall cause to be prepared and furnished to Lender a Compliance Certificate in
the form of Exhibit O hereto executed by the Chief Financial Officer of Borrower.
8.1.4 Landlord and Storage Agreements. Provide Lender with copies of all agreements
between Borrower or any of its Subsidiaries and any landlord or warehouseman which owns any
premises at which any Inventory may, from time to time, be kept.
8.1.5 Projections. No later than thirty (30) days prior to the end of each fiscal
year of Borrower, deliver to Lender Projections of Borrower for the forthcoming fiscal year, month
by month.
8.1.6 Operating Accounts. Borrower shall maintain one or more operating deposit
accounts with Lender (the “Operating Accounts”, whether one or more). Borrower shall maintain in
the Operating Accounts, during each Deposit Period (as defined below) an average daily balance of
Available Funds (as defined below) of no less than Five Hundred Thousand Dollars ($500,000).
“Available Funds” shall mean the average daily collected balances maintained in the Operating
Accounts during each Deposit Period. “Deposit Period” shall mean each calendar quarter (pro rata
for less than full periods) for so long as the Obligations or any portion thereof remains
outstanding or Lender has a commitment to loan funds hereunder. In the event that, in any Deposit
Period, commencing with the Deposit Period ending November 30, 2009, Borrower does not maintain the
level of Available Funds in the Operating Accounts (as agreed to above), Borrower shall pay to
Lender a deficiency fee (the
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“Deficiency Fee”) of one and 50/100 percent (1.50%) on the difference between the Available
Funds and the actual average daily balance of the Operating Accounts during the Deposit Period.
The Deficiency Fee shall be due and payable within thirty (30) days following the issuance of an
invoice or payment demand by Lender to Borrower. Borrower and Lender agree that Borrower may
maintain funds in the Operating Accounts in excess of the agreed Available Funds. Any such excess
deposit balances shall be deemed voluntary on the part of Borrower and not consideration in any
form to Lender.
8.1.7 Liens. Borrower shall use commercially reasonable efforts to remove or contest,
in good faith, any Liens (other than Permitted Liens), including, without limitation, deeds of
trust, encumbering that certain real property located at 0000 Xxxxxxxx Xxxxxx, Xx. Xxxxx, Xxxxxxxx
00000 (as legally described in Exhibit S attached hereto and incorporated by reference) within 60
days of receiving notice of any such Lien.
8.2 Negative Covenants. During the term of this Agreement, and thereafter for so long
as there are any Obligations to Lender, Borrower covenants that, unless Lender has first consented
thereto in writing, it will not:
8.2.1 Mergers; Consolidations; Acquisitions; Structural Changes. Merge or
consolidate, or permit any Subsidiary of Borrower to merge or consolidate, with any Person; nor
acquire, nor permit any of its Subsidiaries to acquire, all or any substantial part of the
Properties of any Person; nor change its or any of its Subsidiaries’ state of incorporation or
organization or Type of Organization; nor change its or any of its Subsidiaries’ legal names.
8.2.2 Loans. Make, or permit any Subsidiary of Borrower to make, any loans or other
advances of money (other than for salary, travel advances, advances against commissions and other
similar advances in the ordinary course of business) to any Person.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to exist, or permit any
Subsidiary of Borrower to create, incur or suffer to exist, any Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Subordinated Debt existing on the date of this Agreement;
(iii) Indebtedness of any Subsidiary of Borrower to Borrower;
(iv) accounts payable to trade creditors and current operating expenses (other than for
Money Borrowed) which are not aged more than one hundred twenty (120) days from billing date
or more than thirty (30) days from the due date, in each case incurred in the ordinary
course of business and paid within such time period, unless the same are being actively
contested in good faith and by appropriate and lawful proceedings; and Borrower or such
Subsidiary shall have set aside such reserves, if any, with respect thereto as are required
by GAAP and deemed adequate by Borrower or such Subsidiary and its independent accountants;
22
(v) Obligations to pay Rentals permitted by Section 8.2.13;
(vi) Permitted Purchase Money Indebtedness;
(vii) contingent liabilities arising out of endorsements of checks and other negotiable
instruments for deposit or collection in the ordinary course of business; and
(viii) Indebtedness owing to credit card companies which does not exceed at any time,
in the aggregate, the sum of $750,000.
(xi) Indebtedness not included in paragraphs (i) through (viii) above which does not
exceed at any time, in the aggregate, the sum of $250,000.
8.2.4 Affiliate Transactions. Enter into, or be a party to, or permit any Subsidiary
of Borrower to enter into or be a party to, any transaction with any Affiliate of Borrower or
Stockholder, except in the ordinary course of and pursuant to the reasonable requirements of
Borrower’s or such Subsidiary’s business and upon fair and reasonable terms which are fully
disclosed to Lender and are no less favorable to Borrower than would obtain in a comparable arm’s
length transaction with a Person not an Affiliate or Stockholder of Borrower or such Subsidiary.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit any Subsidiary of
Borrower to create or suffer to exist, any Lien upon any of its Property, income or profits,
whether now owned or hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed pursuant to any of the provisions of
ERISA) not yet due, or being contested in the manner described in Section 7.1.14 hereto, but
only if in Lender’s judgment such Lien does not adversely affect Lender’s rights or the
priority of Lender’s Lien in the Collateral;
(iii) Liens arising in the ordinary course of Borrower’s business by operation of law
or regulation, but only if payment in respect of any such Lien is not at the time required
and such Liens do not, in the aggregate, materially detract from the value of the Property
of Borrower or materially impair the use thereof in the operation of Borrower’s business;
(iv) Purchase Money Liens securing Permitted Purchase Money Indebtedness;
(v) Liens securing Indebtedness of one of Borrower’s Subsidiaries to Borrower or
another such Subsidiary;
(vi) such other Liens as appear on Exhibit P hereto;
23
(vii) Liens against leased equipment arising from precautionary UCC-1 financing
statements regarding operating leases entered into by Borrower and/or any Subsidiary in the
ordinary course of business, provided that the aggregate amount of remaining lease payments
for all such leases shall not exceed $100,000;
(viii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen and suppliers and other liens imposed by law or pursuant to customary
reservations or retentions of title arising in the ordinary course of business, provided
that such Liens secure only amounts not yet due and payable or, if due and payable, are
being contested in good faith by appropriate proceedings for which adequate reserves
determined by Lender have been established (and as to which the Property subject to any such
Lien is not yet subject to foreclosure, sale or loss on account thereof);
(ix) Liens incurred or deposits made in the ordinary course of business in connection
with workers’ compensation, unemployment insurance and other types of social security; and
(x) such other Liens as Lender may hereafter approve in writing.
8.2.6 Subordinated Debt. Make, or permit any Subsidiary of Borrower to make, any
payment of any part or all of any Subordinated Debt or take any other action or omit to take any
other action in respect of any Subordinated Debt, except in accordance with the subordination
agreement relative thereto.
8.2.7 Distributions. Declare or make, or permit any Subsidiary of Borrower to declare
or make, any Distributions.
8.2.8 Capital Expenditures. Make Capital Expenditures (including, without limitation,
by way of capitalized leases) which, in the aggregate, as to Borrower and its Subsidiaries, exceed
Two Million Five Hundred Thousand Dollars ($2,500,000) during any fiscal year of Borrower.
8.2.9 Disposition of Assets. Sell (including sale and leaseback), convey, assign,
lease or otherwise dispose of any of, or permit any Subsidiary of Borrower to sell (including sale
and leaseback), convey, assign, lease or otherwise dispose of any of, its Properties, including,
without limitation, that certain real property located at 0000 Xxxxxxxx Xxxxxx, Xx. Xxxxx, Xxxxxxxx
00000 (as legally described in Exhibit S attached hereto and incorporated by reference), to or in
favor of any Person, except (i) sales of Inventory in the ordinary course of business for so long
as no Event of Default exists hereunder, (ii) a transfer of Property to Borrower by a Subsidiary of
Borrower, (iii) dispositions of Equipment pursuant to Section 6.4.2 hereof, and (iv) dispositions
expressly authorized by this Agreement.
8.2.10 Stock of Subsidiaries. Permit any of its Subsidiaries to issue any additional
shares of its Stock except director’s qualifying shares.
24
8.2.11 Xxxx-and-Hold Sales, Etc. Make a sale to any customer on a xxxx-and-hold,
guaranteed sale, sale and return, sale on approval or consignment basis, or any sale on a
repurchase or return basis.
8.2.12 Restricted Investment. Make or have, or permit any Subsidiary of Borrower to
make or have, any Restricted Investment.
8.2.13 Leases. Become, or permit any of its Subsidiaries to become, a lessee under
any operating lease or extension thereof (other than a lease under which Borrower or any of its
Subsidiaries is lessor) of Property, other than those set forth on Exhibit L, if the aggregate
Rentals payable during any current or future period of twelve (12) consecutive months under the
lease in question and all other leases under which Borrower or any of its Subsidiaries is then
lessee would exceed $50,000. The term “Rentals” means, as of the date of determination, all
payments which the lessee is required to make by the terms of any lease.
8.2.14 Tax Consolidation. File or consent to the filing of any consolidated income
tax return with any Person other than a Subsidiary of Borrower.
8.3 Minimum Tangible Net Worth. During the term of this Agreement, and thereafter for
so long as there are any Obligations to Lender, Borrower covenants that, unless otherwise consented
to by Lender in writing, it shall not permit its Tangible Net Worth to be less than Twenty Four
Million Five Hundred Thousand Dollars ($24,500,000).
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other Loan Documents, and
without affecting in any manner the rights of Lender under the other sections of this Agreement,
Lender shall not be required to make any Loan under this Agreement unless and until each of the
following conditions has been and continues to be satisfied:
9.1 Documentation. Lender shall have received, in form and substance satisfactory to
Lender, a duly executed copy of this Agreement and the other Loan Documents, together with such
additional documents, instruments and certificates as Lender shall require in connection therewith
from time to time, including all those listed in the Closing Checklist attached hereto as Exhibit
B, all in form and substance satisfactory to Lender. Without limiting the generality of the
foregoing, Lender shall have received satisfactory evidence that all Liens with respect to Borrower
in favor of Bank of America (as successor by acquisition of LaSalle Bank National Association) have
been terminated.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Loan Documents. Each of the conditions precedent set forth in the other
Loan Documents shall have been satisfied.
9.4 No Litigation. No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court, governmental agency or
25
legislative body to enjoin, restrain or prohibit, or to obtain damages in respect of, or which
is related to or arises out of this Agreement or the consummation of the transactions contemplated
hereby.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following events shall
constitute an “Event of Default”:
10.1.1 Payment of Revolving Credit Note. Borrower shall fail to pay any installment
of principal, interest or premium, if any, owing on the Revolving Credit Note on the due date of
such installment.
10.1.2 Payment of Other Obligations. Borrower shall fail to pay any of the
Obligations that are not evidenced by the Revolving Credit Note on the due date thereof (whether
due at stated maturity, on demand, upon acceleration or otherwise).
10.1.3 Misrepresentations. Any representation, warranty or other statement made or
furnished to Lender by or on behalf of Borrower or any Subsidiary of Borrower in this Agreement,
any of the other Loan Documents or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto proves to have been false or misleading in any material
respect when made or furnished or when reaffirmed pursuant to Section 7.2 hereof.
10.1.4 Breach of Specific Covenants. Borrower shall fail or neglect to perform, keep
or observe any covenant contained in Sections 5.2, 5.3, 6.1.1, 6.1.2, 8.1, 8.2 or 8.3 hereof on the
date that Borrower is required to perform, keep or observe such covenant.
10.1.5 Breach of Other Covenants. Borrower shall fail or neglect to perform, keep or
observe any covenant contained in this Agreement (other than a covenant which is dealt with
specifically elsewhere in Section 10.1 hereof) and the breach of such other covenant is not cured
to Lender’s satisfaction within fifteen (15) days after the sooner to occur of Borrower’s receipt
of notice of such breach from Lender or the date on which such failure or neglect first becomes
known to any officer of Borrower.
10.1.6 Default Under Security Documents/Other Agreements. Any event of default shall
occur under, or Borrower shall default in the performance or observance of any term, covenant,
condition or agreement contained in, any of the Security Documents or the Other Agreements and such
default shall continue beyond any applicable grace period.
10.1.7 Other Defaults. There shall occur any default or event of default on the part
of Borrower under any agreement, document or instrument to which Borrower is a party or by which
Borrower or any of its Property is bound, creating or relating to any Indebtedness (other than the
Obligations) if the payment or maturity of such Indebtedness is
26
accelerated in consequence of such event of default or demand for payment of such Indebtedness
is made.
10.1.8 Uninsured Losses. Any material loss, theft, damage or destruction of any of
the Collateral valued at more than $250,000 in the aggregate is not fully covered (subject to such
deductibles as Lender shall have permitted) by insurance.
10.1.9 Adverse Changes. There shall occur any Material Adverse Effect with respect to
Borrower.
10.1.10 Insolvency and Related Proceedings. Borrower shall cease to be Solvent or
shall suffer the appointment of a receiver, trustee, custodian or similar fiduciary, or shall make
an assignment for the benefit of creditors, or any petition for an order for relief shall be filed
by or against Borrower under the Bankruptcy Code (if against Borrower, the continuation of such
proceeding for more than thirty (30) days), or Borrower shall make any offer of settlement,
extension or composition to their respective unsecured creditors generally.
10.1.11 Business Disruption; Condemnation. There shall occur a cessation of a
substantial part of the business of Borrower or any Subsidiary of Borrower for a period which
significantly affects Borrower’s capacity to continue its business, on a profitable basis; or
Borrower or any Subsidiary of Borrower shall suffer the loss or revocation of any license or permit
now held or hereafter acquired by Borrower which is necessary to the continued or lawful operation
of its business; or Borrower shall be enjoined, restrained or in any way prevented by court,
governmental or administrative order from conducting all or any material part of its business
affairs; or any material lease or agreement pursuant to which Borrower leases, uses or occupies any
Property shall be canceled or terminated prior to the expiration of its stated term; or any part of
the Collateral shall be taken through condemnation or the value of such Property shall be impaired
through condemnation.
10.1.12 Change of Ownership. Xxxx X. Xxxx shall cease to own and control,
beneficially and of record, 33% of the issued and outstanding capital stock of Borrower.
10.1.13 ERISA. A Reportable Event shall occur which Lender, shall determine in good
faith constitutes grounds for the termination by the Pension Benefit Guaranty Corporation of any
Plan or for the appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested or appointed, or if
Borrower or any Subsidiary of Borrower is in “default” (as defined in Section 4219(c)(5) of ERISA)
with respect to payments to a Multi-employer Plan resulting from Borrower’s or such Subsidiary’s
complete or partial withdrawal from such Plan.
10.1.14 Challenge to Agreement. Borrower or any Subsidiary of Borrower, or any
Affiliate of any of them, shall challenge or contest in any action, suit or proceeding the validity
or enforceability of this Agreement, or any of the other Loan Documents, the legality or
enforceability of any of the Obligations or the perfection or priority of any Lien granted to
Lender.
27
10.1.15 Criminal Forfeiture. Borrower or any Subsidiary of Borrower shall be
criminally indicted or convicted under any law that could lead to a forfeiture of any Property of
Borrower or any Subsidiary of Borrower.
10.1.16 Judgments. Any money judgment, writ of attachment or similar process is
filed against Borrower or any Subsidiary of Borrower, or any of their respective Property in excess
of $250,000 or that has or could result in a Material Adverse Effect and the same shall not have
been paid, vacated, discharged or stayed or bonded pending appeal within thirty (30) days from the
entry thereof.
10.2 Acceleration of the Obligations. Without in any way limiting the right of Lender
to demand payment of any portion of the Obligations payable on demand in accordance with Section
3.2 hereof, upon or at any time after the occurrence of an Event of Default, all or any portion of
the Obligations shall, at the option of Lender and without presentment, demand, protest or further
notice by Lender, become at once due and payable and Borrower shall forthwith pay to Lender, the
full amount of such Obligations, provided, that upon the occurrence of an Event of Default
specified in Section 10.1.10 hereof, all of the Obligations shall become automatically due and
payable without declaration, notice or demand by Lender.
10.3 Other Remedies. Upon and after the occurrence of an Event of Default, Lender
shall have and may exercise from time to time the following other rights and remedies:
10.3.1 All of the rights and remedies of a secured party under the UCC or under other
applicable law, and all other legal and equitable rights to which Lender may be entitled, all of
which rights and remedies shall be cumulative and shall be in addition to any other rights or
remedies contained in this Agreement or any of the other Loan Documents, and none of which shall be
exclusive.
10.3.2 The right to take immediate possession of the Collateral, and to (i) require Borrower
to assemble the Collateral, at Borrower’s expense, and make it available to Lender at a place
designated by Lender which is reasonably convenient to both parties, and (ii) enter any premises
where any of the Collateral shall be located and to keep and store the Collateral on said premises
until sold (and if said premises be the Property of Borrower, Borrower agrees not to charge Lender
for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any Collateral in its then condition,
or after any further manufacturing or processing thereof, at public or private sale or sales, with
such notice as may be required by law, in lots or in bulk, for cash or on credit, all as Lender, in
its sole discretion, may deem advisable. Lender may, at Lender’s option, disclaim any and all
warranties regarding the Collateral in connection with any such sale. Borrower agrees that ten
(10) days written notice to Borrower of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be at such locations as Lender
may designate in said notice. Lender shall have the right to conduct such sales on Borrower’s
premises, without charge therefor, and such sales may be adjourned from time to time in accordance
with applicable law. Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination
28
thereof, and Lender may purchase all or any part of the Collateral at public or, if permitted
by law, private sale and, in lieu of actual payment of such purchase price, may set off the amount
of such price against the Obligations. The proceeds realized from the sale of any Collateral may
be applied, after allowing two (2) Business Days for collection, first to the costs, expenses and
attorneys’ fees incurred by Lender in collecting the Obligations, in enforcing the rights of Lender
under the Loan Documents and in collecting, retaking, completing, protecting, removing, storing,
advertising for sale, selling and delivering any Collateral; second to the interest due upon any of
the Obligations; and third, to the principal of the Obligations. If any deficiency shall arise,
Borrower shall remain liable to Lender therefor.
10.3.4 Lender is hereby granted a license or other right to use, without charge, Borrower’s
labels, patents, copyrights, rights of use of any name, trade secrets, tradenames, trademarks and
advertising matter, or any Property of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and Borrower’s rights under all licenses and all
franchise agreements shall inure to Lender’s benefit.
10.4 Remedies Cumulative; No Waiver. All covenants, conditions, provisions,
warranties, guaranties, indemnities, and other undertakings of Borrower contained in this Agreement
and the other Loan Documents, or in any document referred to herein or contained in any agreement
supplementary hereto or in any schedule given to Lender or contained in any other agreement between
Lender and Borrower, heretofore, concurrently, or hereafter entered into, shall be deemed
cumulative to and not in derogation or substitution of any of the terms, covenants, conditions, or
agreements of Borrower herein contained. The failure or delay of Lender to require strict
performance by Borrower of any provision of this Agreement or to exercise or enforce any rights,
Liens, powers, or remedies hereunder or under any of the aforesaid agreements or other documents or
security or Collateral shall not operate as a waiver of such performance, Liens, rights, powers and
remedies, but all such requirements, Liens, rights, powers, and remedies shall continue in full
force and effect until all Loans and all other Obligations owing or to become owing from Borrower
to Lender shall have been fully satisfied. None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Agreement or any of the other Loan
Documents and no Default or Event of Default by Borrower under this Agreement or any other Loan
Documents shall be deemed to have been suspended or waived by Lender, unless such suspension or
waiver is by an instrument in writing specifying such suspension or waiver and is signed by a duly
authorized representative of Lender and directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 Power of Attorney. Borrower hereby irrevocably designates, makes, constitutes
and appoints Lender (and all Persons designated by Lender) as Borrower’s true and lawful attorney
(and agent-in-fact) and Lender, or Lender’s agent, may, without notice to Borrower and in either
Borrower’s or Lender’s name, but at the cost and expense of Borrower:
11.1.1 At such time or times upon or after the occurrence of a Default or an Event of Default
as Lender or said agent, in its sole discretion, may determine, endorse Borrower’s name on any
checks, notes, acceptances, drafts, money orders or any other evidence
29
of payment or proceeds of the Collateral which come into the possession of Lender or under
Lender’s control.
11.1.2 At such time or times upon or after the occurrence of an Event of Default as Lender or
its agent in its sole discretion may determine: (i) demand payment of the Accounts from the Account
Debtors, enforce payment of the Accounts by legal proceedings or otherwise, and generally exercise
all of Borrower’s rights and remedies with respect to the collection of the Accounts; (ii) settle,
adjust, compromise, discharge or release any of the Accounts or other Collateral or any legal
proceedings brought to collect any of the Accounts or other Collateral; (iii) sell or assign any of
the Accounts and other Collateral upon such terms, for such amounts and at such time or times as
Lender deems advisable and, at Lender’s option, with all warranties regarding the Collateral
disclaimed; (iv) take control, in any manner, of any item of payment or proceeds relating to any
Collateral; (v) prepare, file and sign Borrower’s name to a proof of claim in bankruptcy or similar
document against any Account Debtor or to any notice of lien, assignment or satisfaction of lien or
similar document in connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (vii) endorse the name of Borrower upon any of the
items of payment or proceeds relating to any Collateral and deposit the same to the account of
Lender on account of the Obligations; (viii) endorse the name of Borrower upon any chattel paper,
document, instrument, invoice, freight xxxx, xxxx of lading or similar document or agreement
relating to the Accounts, Inventory and any other Collateral; (ix) use Borrower’s stationery and
sign the name of Borrower to verifications of the Accounts and notices thereof to Account Debtors;
(x) use the information recorded on or contained in any data processing equipment and computer
hardware and software relating to the Accounts, Inventory, Equipment and any other Collateral; (xi)
make and adjust claims under policies of insurance; and (xii) do all other acts and things
necessary, in Lender’s determination, to fulfill Borrower’s obligations under this Agreement.
11.2 Indemnity. Borrower hereby agrees to indemnify Lender and hold Lender harmless
from and against any liability, loss, damage, suit, action or proceeding ever suffered or incurred
by Lender (including reasonable attorneys’ fees and legal expenses) as the result of Borrower’s
failure to observe, perform or discharge Borrower’s duties hereunder (but excluding any such
losses, liabilities, claims, damages or expenses to the extent incurred by reason of gross
negligence or willful misconduct on the part of Lender). In addition, Borrower shall defend Lender
against and save it harmless from all claims of any Person with respect to the Collateral. Without
limiting the generality of the foregoing, these indemnities shall extend to any claims asserted
against Lender by any Person under any Environmental Laws or similar laws by reason of Borrower’s
or any other Person’s failure to comply with laws applicable to solid or hazardous waste materials
or other toxic substances. Notwithstanding any contrary provision in this Agreement, the
obligation of Borrower under this Section 11.2 shall survive the payment in full of the Obligations
and the termination of this Agreement.
11.3 Modification of Agreement; Sale of Interest. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower and Lender. Borrower may
not sell, assign or transfer any interest in this Agreement, any of the other Loan Documents, or
any of the Obligations, or any portion thereof, including, without
30
limitation, Borrower’s rights, title, interests, remedies, powers, and duties hereunder or
thereunder. Borrower hereby consents to Lender’s participation, sale, assignment, transfer or
other disposition, at any time or times hereafter, of this Agreement and any of the other Loan
Documents, or of any portion hereof or thereof, including, without limitation, Lender’s rights,
title, interests, remedies, powers, and duties hereunder or thereunder. In the case of an
assignment, the assignee shall have, to the extent of such assignment, the same rights, benefits
and obligations as it would if it were “Lender” hereunder and Lender shall be relieved of all
obligations hereunder upon any such assignments. Borrower agrees that it will use its best efforts
to assist and cooperate with Lender in any manner reasonably requested by Lender to effect the sale
of participations in or assignments of any of the Loan Documents or any portion thereof or interest
therein, including, without limitation, assisting in the preparation of appropriate disclosure
documents. Borrower further agrees that Lender may disclose credit information regarding Borrower
and its Subsidiaries to any potential participant or assignee.
11.4 Severability. Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
11.5 Successors and Assigns. This Agreement, the Other Agreements and the Security
Documents shall be binding upon and inure to the benefit of the successors and assigns of Borrower
and Lender permitted under Section 11.3 hereof.
11.6 Cumulative Effect; Conflict of Terms. The provisions of the Other Agreements and
the Security Documents are hereby made cumulative with the provisions of this Agreement. Except as
otherwise provided in Section 3.2 hereof and except as otherwise provided in any of the other Loan
Documents by specific reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with, any provision in any
of the other Loan Documents, the provision contained in this Agreement shall govern and control.
11.7 Execution in Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which counterparts taken
together shall constitute but one and the same instrument.
11.8 Notice. Except as otherwise provided herein, all notices, requests and demands
to or upon a party hereto, to be effective, shall be in writing and shall be sent by certified or
registered mail, return receipt requested, by personal delivery against receipt, by overnight
courier or by facsimile and, unless otherwise expressly provided herein, shall be deemed to have
been validly served, given or delivered immediately when delivered against receipt, three (3)
Business Days after deposit in the mail, postage prepaid, or one (1) Business Day after deposit
with an overnight courier or, in the case of facsimile notice, when sent, addressed as follows:
If to Lender:
|
Enterprise Bank & Trust |
31
| 000 X. Xxxxxxx | ||
| Xxxxxxx, Xxxxxxxx 00000 | ||
| Attention: Xxxxx X. Xxxxxxx, Senior Vice President | ||
| Facsimile No.: 000-000-0000 | ||
With a copy to: |
||
| Husch Xxxxxxxxx Xxxxxxx LLP | ||
| 000 Xxxxxxxxxx Xxxxx, Xxxxx 000 | ||
| Xx. Xxxxx, Xxxxxxxx 00000 | ||
| Attention: Xxxxxx X. Xxxxxxxxx | ||
| Facsimile No.: 000-000-0000 | ||
If to Borrower:
|
Allied Healthcare Products, Inc. | |
| 0000 Xxxxxxxx Xxxxxx | ||
| Xx. Xxxxx, Xxxxxxxx 00000 | ||
| Attention: Xxxxxx Xxxx, Secretary & CFO | ||
| Facsimile No. 000-000-0000 | ||
With a copy to:
|
Xxxxxxxxxxxx, Xxxxxx & Xxxx, P.C. | |
| 00 Xxxxx Xxxxxxxx, Xxx. 0000 | ||
| Xx. Xxxxx, XX 00000 Attention: Xxx X. Xxxxx | ||
| Facsimile No. 000-000-0000 |
or to such other address as each party may designate for itself by notice given in accordance with
this Section 11.8; provided, however, that any notice, request or demand to or upon
Lender pursuant to Section 3.1.1 or 4.2.2 hereof shall not be effective until received by Lender.
11.9 Lender’s Consent. Whenever Lender’s consent is required to be obtained under
this Agreement, any of the Other Agreements or any of the Security Documents as a condition to any
action, inaction, condition or event, Lender shall be authorized to give or withhold such consent
in its sole and absolute discretion and to condition its consent upon the giving of additional
collateral security for the Obligations, the payment of money or any other matter.
11.10 Credit Inquiries. Borrower hereby authorizes and permits Lender to respond to
usual and customary credit inquiries from third parties concerning Borrower or any of its
Subsidiaries.
11.11 Time of Essence. Time is of the essence of this Agreement, the Other Agreements
and the Security Documents.
11.12 Entire Agreement. This Agreement and the other Loan Documents, together with
all other instruments, agreements and certificates executed by the parties in connection therewith
or with reference thereto, embody the entire understanding and agreement between the parties hereto
and thereto with respect to the subject matter hereof and thereof and supersede all prior
agreements, understandings and inducements, whether express or implied, oral or written.
32
11.13 Interpretation. No provision of this Agreement or any of the other Loan
Documents shall be construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having or being deemed to
have structured or dictated such provision.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN ST. LOUIS COUNTY,
MISSOURI. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MISSOURI (WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES);
PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN
ANY JURISDICTION OTHER THAN MISSOURI, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE
METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF LENDER’S LIEN UPON SUCH COLLATERAL AND
THE ENFORCEMENT OF LENDER’S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT
THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS
OF MISSOURI. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF
ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDER,
BORROWER HEREBY CONSENTS AND AGREES THAT THE CIRCUIT COURT OF ST. LOUIS COUNTY,
MISSOURI, OR, AT LENDER’S OPTION, THE UNITED STATES DISTRICT COURT FOR THE EASTERN
DISTRICT OF MISSOURI, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH
COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT
AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
BORROWER’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS,
PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT
THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR
TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR
33
ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY
(WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR
THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST,
DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF
ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL
PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE
LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD; (iii)
NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE
ANY OF LENDER’S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; (v) NOTICE OF ACCEPTANCE HEREOF; AND (VI) EXCEPT AS PROHIBITED BY LAW, ANY
RIGHT TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR
ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. BORROWER ACKNOWLEDGES THAT
THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER’S ENTERING INTO THIS
AGREEMENT AND THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS
WITH BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING
WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
11.16 MISSOURI ORAL AGREEMENTS DISCLOSURE. ORAL AGREEMENTS OR COMMITMENTS TO
LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL
THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE LOAN AGREEMENT. TO
PROTECT YOU (BORROWER) AND US (LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY
AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING AND THE OTHER
LOAN DOCUMENTS, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN
US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
34
[Remainder of Page Intentionally Left Blank]
35
IN WITNESS WHEREOF, this Agreement has been duly executed on the day and year specified at the
beginning of this Agreement.
| BORROWER: | ALLIED HEALTHCARE PRODUCTS,
INC., a Delaware corporation |
|||
| By: | /s/ Xxxxxx X. Xxxx | |||
| Name: | Xxxxxx X. Xxxx | |||
| Title: | Vice President Secretary and CFO | |||
| LENDER: | ENTERPRISE BANK & TRUST |
|||
| By: | /s/ Xxxxx Xxxxxxx | |||
| Name: | Xxxxx Xxxxxxx | |||
| Title: | Senior Vice President | |||
Signature Page to Loan and Security Agreement
APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of November 17, 2009, by and between
Enterprise Bank & Trust and Allied Healthcare Products, Inc., (a) the terms Account,
Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit
Account, Document, Electronic Chattel Paper, Equipment, Financial
Asset, Fixture, General Intangibles, Goods, Instrument,
Inventory, Investment Property, Letter-of-Credit Rights, Security,
Payment Intangibles, Proceeds, Security Entitlement Software,
Supporting Obligations, Tangible Chattel Paper and Uncertificated Security
have the respective meanings assigned thereto under the UCC (as defined below); (b) all terms
indicating Collateral having the meanings assigned thereto under the UCC or the UCC Revisions shall
be deemed to mean such Property, whether now owned or hereafter created or acquired by Borrower or
in which Borrower now has or hereafter acquires any interest; (c) capitalized terms which are not
otherwise defined have the respective meanings assigned thereto in said Loan and Security
Agreement; and (d) the following terms shall have the following meanings (terms defined in the
singular to have the same meaning when used in the plural and vice versa):
Account Debtor — any Person who is or may become obligated on or under or on
account of any Account, Contract Right, Chattel Paper or General Intangible.
Advances — any Loan bearing interest computed by reference to the Base Rate.
Affiliate — a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or is under
common control with, a Person; (ii) which beneficially owns or holds 5% or more of any class
of the Voting Stock of a Person; or (iii) 5% or more of the Voting Stock (or in the case of
a Person which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by a Person or a Subsidiary of a Person.
Agreement — the Loan and Security Agreement referred to in the first sentence
of this Appendix A, all Exhibits thereto and this Appendix A.
Available Funds — as defined in Section 8.1.6 of the Agreement.
Availability — the amount of money which Borrower is entitled to borrow from
time to time as Revolving Credit Loans, such amount being the difference derived when the
sum of the principal amount of Revolving Credit Loans then outstanding (including any
amounts which Lender may have paid for the account of Borrower pursuant to any of the Loan
Documents and which have not been reimbursed by Borrower) is subtracted from the Borrowing
Base. If the amount outstanding is equal to or greater than the Borrowing Base,
Availability is zero (0).
Signature Page to Loan and Security Agreement
Base Rate — the rate of interest announced or quoted by Lender from time to
time as its prime rate for commercial loans, whether or not such rate is the lowest rate
charged by Lender to its most preferred borrowers; and, if such prime rate for commercial
loans is discontinued by Lender as a standard, a comparable reference rate designated by
Lender as a substitute therefor shall be the Base Rate.
Borrowing Base — as at any date of determination thereof, an amount equal to
the sum of:
(a) 80% of the net amount of Eligible Accounts outstanding at such date;
PLUS
(b) an amount equal to the lesser of (i) 50% of the value of Eligible
Inventory at such date calculated on the basis of the lower of cost or market on a
first-in, first-out basis, or (ii) Five Million Dollars ($5,000,000).
For purposes hereof, the net amount of Eligible Accounts at any time shall be the face
amount of such Eligible Accounts less any and all returns, rebates, discounts (which may, at
Lender’s option, be calculated on shortest terms), credits, allowances or excise taxes of
any nature at any time issued, owing, claimed by Account Debtors, granted, outstanding or
payable in connection with such Accounts at such time.
Borrowing Base Certificate — a certificate by a responsible officer of
Borrower, substantially in the form of Exhibit Q (or another form acceptable to Lender)
setting forth the calculation of the Borrowing Base, including a calculation of each
component thereof, all in such detail as shall be reasonably satisfactory to Lender. All
calculations of the Borrowing Base in connection with the preparation of any Borrowing Base
Certificate shall originally be made by Borrower and certified to Lender; provided, that
Lender shall have the right to review and adjust, in the exercise of its reasonable credit
judgment, any such calculation after giving notice thereof to the Borrower, (1) to reflect
its reasonable estimate of declines in value of any of the Collateral described therein, and
(2) to the extent that such calculation is not in accordance with this Agreement.
Business Day — any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the State of Missouri or is a day on which banking institutions
located in such state are closed.
Capital Expenditures — expenditures made or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or additions
thereto which have a useful life of more than one year, including the total principal
portion of Capitalized Lease Obligations.
(38)
Capitalized Lease Obligation — any Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP.
Cleandown — as defined in Section 3.3.2 of the Agreement.
Closing Date — means the date hereof.
Collateral — all of the Property and interests in Property described in Section
5 of the Agreement, and all other Property and interests in Property that now or hereafter
secure the payment and performance of any of the Obligations.
Computer Hardware and Software — all of Borrower’s rights (including rights as
licensee and lessee) with respect to (i) computer and other electronic data processing
hardware, including all integrated computer systems, central processing units, memory units,
display terminals, printers, computer elements, card readers, tape drives, hard and soft
disk drives, cables, electrical supply hardware, generators, power equalizers, accessories,
peripheral devices and other related computer hardware; (ii) all Software and all software
programs designed for use on the computers and electronic data processing hardware described
in clause (i) above, including all operating system software, utilities and application
programs in any form (source code and object code in magnetic tape, disk or hard copy format
or any other listings whatsoever); (iii) any firmware associated with any of the foregoing;
and (iv) any documentation for hardware, Software and firmware described in clauses (i),
(ii) and (iii) above, including flow charts, logic diagrams, manuals, specifications,
training materials, charts and pseudo codes.
Consolidated — the consolidation in accordance with GAAP of the accounts or
other items as to which such term applies.
Contract Right — any right of Borrower to payment under a contract for the sale
or lease of goods or the rendering of services, which right is at the time not yet earned by
performance.
Current Assets — at any date means the amount at which all of the current
assets of a Person would be properly classified as current assets shown on a balance sheet
at such date in accordance with GAAP.
Default — an event or condition the occurrence of which would, with the lapse
of time or the giving of notice, or both, become an Event of Default.
Default Rate — as defined in Section 2.1.2 of the Agreement.
Deficiency Fee — as defined in Section 8.1.6 of the Agreement.
Deposit Period — as defined in Section 8.1.6 of the Agreement.
(39)
Distribution — in respect of any Person means and includes: (i) the payment of
any dividends or other distributions on capital stock of the corporation (except
distributions in such stock) and (ii) the redemption or acquisition of Securities unless
made contemporaneously from the net proceeds of the sale of Securities.
Eligible Account — an Account arising in the ordinary course of Borrower’s
business from the sale of goods or rendition of services which Lender, in its sole credit
judgment, deems to be an Eligible Account. Without limiting the generality of the
foregoing, no Account shall be an Eligible Account if:
(i) it arises out of a sale made by Borrower to a Subsidiary or an Affiliate of
Borrower or to a Person controlled by an Affiliate of Borrower; or
(ii) it is unpaid for more than sixty (60) days after the original due date
shown on the invoice; or
(iii) it is due or unpaid more than ninety (90) days after the original invoice
date; or
(iv) 50% or more of the Accounts from the Account Debtor are not deemed
Eligible Accounts hereunder; or
(v) the total unpaid Accounts of the Account Debtor exceed 20% of the net
amount of all Eligible Accounts, to the extent of such excess; or
(vi) any covenant, representation or warranty contained in the Agreement with
respect to such Account has been breached; or
(vii) the Account Debtor is also Borrower’s creditor or supplier, or the
Account Debtor has disputed liability with respect to such Account, or the Account
Debtor has made any claim with respect to any other Account due from such Account
Debtor to Borrower, or the Account otherwise is or may become subject to any right
of setoff by the Account Debtor, but only to the extent of such disputed liability
or claim; or
(viii) the Account Debtor has commenced a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or made an assignment for
the benefit of creditors, or a decree or order for relief has been entered by a
court having jurisdiction in the premises in respect of the Account Debtor in an
involuntary case under the federal bankruptcy laws, as now constituted or hereafter
amended, or any other petition or other application for relief under the federal
bankruptcy laws has been filed against the Account Debtor, or if the Account Debtor
has failed, suspended business, ceased to be Solvent, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or for all or a
significant portion of its assets or affairs; or
(40)
(ix) it arises from a sale to an Account Debtor outside the United States,
unless the sale is on letter of credit, guaranty or acceptance terms, in each case
acceptable to Lender in its sole discretion; or
(x) it arises from a sale to the Account Debtor on a xxxx-and-hold, guaranteed
sale, sale-or-return, sale-on-approval, consignment or any other repurchase or
return basis; or
(xi) the Account Debtor is the United States of America or any department,
agency or instrumentality thereof, unless Borrower assigns its right to payment of
such Account to Lender, in a manner satisfactory to Lender, so as to comply with the
Assignment of Claims Act of 1940 (31 U.S.C. §203 et seq., as
amended); or
(xii) the Account is subject to a Lien other than a Permitted Lien; or
(xiii) the goods giving rise to such Account have not been delivered to and
accepted by the Account Debtor or the services giving rise to such Account have not
been performed by Borrower and accepted by the Account Debtor or the Account
otherwise does not represent a final sale; or
(xiv) the Account is evidenced by chattel paper or an instrument of any kind,
or has been reduced to judgment; or
(xv) Borrower has made any agreement with the Account Debtor for any deduction
therefrom, except for rebates or discounts or allowances which are made in the
ordinary course of business for prompt payment and which discounts or allowances are
reflected in the calculation of the face value of each invoice related to such
Account; or
(xvi) Borrower has made an agreement with the Account Debtor to extend the time
of payment thereof.
Eligible Inventory — such Inventory of Borrower (other than packaging materials
and supplies) which Lender, in its sole credit judgment, deems to be Eligible Inventory.
Without limiting the generality of the foregoing, no Inventory shall be Eligible Inventory
if:
(i) it is not raw materials or finished goods, or work-in-process that is, in
Lender’s reasonable opinion, readily marketable in its current form; or
(ii) it is not in good, new and saleable condition; or
(iii) it is slow-moving, obsolete or unmerchantable; or
(41)
(iv) it does not meet all standards imposed by any governmental agency or
authority; or
(v) it does not conform in all material respects to the warranties and
representations set forth in the Agreement; or
(vi) it is not at all times subject to Lender’s duly perfected, first-priority
security interest and no other Lien except a Permitted Lien; or
(vii) it is not situated at a location in compliance with the Agreement or is
in transit.
Environmental Laws — all federal, state and local laws, rules, regulations,
ordinances, programs, permits, guidances, orders and consent decrees relating to health,
safety and environmental matters.
ERISA — the Employee Retirement Income Security Act of 1974, as amended, and
all rules and regulations from time to time promulgated thereunder.
Event of Default — as defined in Section 10.1 of the Agreement.
GAAP — generally accepted account principles in the United States of America in
effect from time to time.
Intangibles — means and includes General Intangibles; software (purchased or
developed in-house); accounts receivable and advances due from officers, directors,
employees, Stockholders and Affiliates; leasehold improvements net of depreciation;
licenses; good will; prepaid expenses; escrow deposits; covenants not to compete; the excess
of cost over book value of acquired assets; franchise fees; organizational costs; finance
reserves held for recourse obligations; capitalized research and development costs; the
capitalized cost of patents, trademarks, service marks and copyrights net of amortization;
and such other similar items as Lender may from time to time determine in Lender’s
reasonable discretion.
Indebtedness — as applied to a Person means, without duplication
(i) all items which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet of such Person
as at the date as of which Indebtedness is to be determined, including, without
limitation, Capitalized Lease Obligations,
(ii) all obligations of other Persons which such Person has guaranteed,
(iii) all reimbursement obligations in connection with letters of credit or
letter of credit guaranties issued for the account of such Person, and
(42)
(iv) in the case of Borrower (without duplication), the Obligations.
Intellectual Property — all past, present and future: trade secrets, know-how
and other proprietary information; trademarks, internet domain names, service marks, trade
dress, trade names, business names, designs, logos, slogans (and all translations,
adaptations, derivations and combinations of the foregoing) indicia and other source and/or
business identifiers, and the goodwill of the business relating thereto and all
registrations or applications for registrations which have heretofore been or may hereafter
be issued thereon throughout the world; copyrights (including copyrights for computer
programs) and copyright registrations or applications for registrations which have
heretofore been or may hereafter be issued throughout the world and all tangible property
embodying the copyrights, unpatented inventions (whether or not patentable); patent
applications and patents; industrial design applications and registered industrial designs;
license agreements related to any of the foregoing and income therefrom; books, records,
writings, computer tapes or disks, flow diagrams, specification sheets, computer software,
source codes, object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right to xxx for
all past, present and future infringements of any of the foregoing; all other intellectual
property; and all common law and other rights throughout the world in and to all of the
foregoing.
Lender — as defined in the preamble to this Agreement.
Lien — any interest in Property securing an obligation owed to, or a claim by,
a Person other than the owner of the Property, whether such interest is based on common law,
statute or contract. The term “Lien” shall also include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and
other title exceptions and encumbrances affecting Property. For the purpose of the
Agreement, Borrower shall be deemed to be the owner of any Property which it has acquired or
holds subject to a conditional sale agreement or other arrangement pursuant to which title
to the Property has been retained by or vested in some other Person for security purposes.
Loan Account — the loan account established on the books of Lender pursuant to
Section 3.6 of the Agreement.
Loan Documents — the Agreement, the Other Agreements and the Security
Documents.
Loans — all loans and advances of any kind made by Lender, and/or by any
affiliate of Lender, pursuant to the Agreement.
Material Adverse Effect — means (a) any material adverse effect on the
Properties, Collateral, assets, liabilities, business, operations, income or condition
(financial or otherwise) of the Borrower or its Subsidiaries taken as a whole (b) any
material impairment of the ability of the Borrower or its Subsidiaries (if applicable) to
(43)
perform its obligations under any of the Loan Documents, or (c) any impairment of the
enforceability of the rights of, or benefits available to, the Lender under this Agreement
or any other Loan Document.
Money Borrowed — means (i) Indebtedness arising from the lending of money by
any Person to Borrower; (ii) Indebtedness, whether or not in any such case arising from the
lending by any Person of money to Borrower, (A) which is represented by notes payable or
drafts accepted that evidence extensions of credit, (B) which constitutes obligations
evidenced by bonds, debentures, notes or similar instruments, or (C) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or assumed as
full or partial payment for Property; (iii) Indebtedness that constitutes a Capitalized
Lease Obligation; (iv) reimbursement obligations with respect to letters of credit or
guaranties of letters of credit and (v) Indebtedness of Borrower under any guaranty of
obligations that would constitute Indebtedness for Money Borrowed under clauses (i) through
(iii) hereof, if owed directly by Borrower.
Multi-employer Plan — has the meaning set forth in Section 4001(a)(3) of ERISA.
Obligations — all Loans and all other advances, debts, liabilities,
obligations, covenants and duties, together with all interest, fees and other charges
thereon, owing, arising, due or payable from Borrower to Lender, and/or to any affiliate of
Lender, of any kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether arising under the Agreement or any of the other Loan
Documents or otherwise whether direct or indirect (including those acquired by assignment),
absolute or contingent, primary or secondary, due or to become due, now existing or
hereafter arising and however acquired.
Operating Accounts — as defined in Section 8.1.6 of the Agreement.
Organizational I.D. Number — with respect to Borrower, the organizational
identification number assigned to Borrower by the applicable governmental unit or agency of
the jurisdiction of organization of Borrower.
Other Agreements — any and all agreements, instruments and documents (other
than the Agreement and the Security Documents), heretofore, now or hereafter executed by
Borrower, any Subsidiary of Borrower or any other third party and delivered to Lender in
respect of the transactions contemplated by the Agreement.
Overadvance — the amount, if any, by which the outstanding principal amount of
Revolving Credit Loans exceeds the Borrowing Base.
Participating Lender — each Person who shall be granted the right by Lender to
participate in any of the Loans described in the Agreement and who shall have entered into a
participation agreement in form and substance satisfactory to Lender.
(44)
Permitted Liens — any Lien of a kind specified in Section 8.2.5 of the
Agreement.
Permitted Purchase Money Indebtedness — Purchase Money Indebtedness of Borrower
incurred after the date hereof which is secured by a Purchase Money Lien and which, when
aggregated with the principal amount of all other such Indebtedness and Capitalized Lease
Obligations of Borrower at the time outstanding, does not exceed $100,000. For the purposes
of this definition, the principal amount of any Purchase Money Indebtedness consisting of
capitalized leases shall be computed as a Capitalized Lease Obligation.
Person — an individual, partnership, corporation, limited liability company,
joint stock company, land trust, business trust, or unincorporated organization, or a
government or agency or political subdivision thereof.
Plan — an employee benefit plan now or hereafter maintained for employees of
Borrower that is covered by Title IV of ERISA.
Projections — Borrower’s forecasted Consolidated and consolidating (a) balance
sheets, (b) profit and loss statements, (c) cash flow statements, and (d) capitalization
statements, all prepared on a consistent basis with Borrower’s historical financial
statements, together with appropriate supporting details and a statement of underlying
assumptions.
Property — any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
Purchase Money Indebtedness — means and includes (i) Indebtedness (other than
the Obligations) for the payment of all or any part of the purchase price of any fixed
assets, (ii) any Indebtedness (other than the Obligations) incurred at the time of or within
ten (10) days prior to or after the acquisition of any fixed assets for the purpose of
financing all or any part of the purchase price thereof, and (iii) any renewals, extensions
or refinancings thereof, but not any increases in the principal amounts thereof outstanding
at the time.
Purchase Money Lien — a Lien upon fixed assets which secures Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to the fixed
assets the purchase price of which was financed through the incurrence of the Purchase Money
Indebtedness secured by such Lien.
Rentals — as defined in Section 8.2.13 of the Agreement.
Reportable Event — any of the events set forth in Section 4043(b) of ERISA.
Restricted Investment — any investment made in cash or by delivery of Property
to any Person, whether by acquisition of stock, Indebtedness or other obligation or
(45)
Security, or by loan, advance or capital contribution, or otherwise, or in any Property
except the following:
(i) investments in one or more Subsidiaries of Borrower to the extent existing
on the Closing Date;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and services in the
ordinary course of business of Borrower and its Subsidiaries;
(iv) investments in direct obligations of the United States of America, or any
agency thereof or obligations guaranteed by the United States of America, provided
that such obligations mature within one (1) year from the date of acquisition
thereof;
(v) investments in certificates of deposit maturing within one (1) year from
the date of acquisition issued by a bank or trust company organized under the laws
of the United States or any state thereof having capital surplus and undivided
profits aggregating at least One Hundred Million Dollars ($100,000,000); and
(vi) investments in commercial paper given the highest rating by a national
credit rating agency and maturing not more than 270 days from the date of creation
thereof.
Revolving Credit Commitment — the commitment of Lender to make Revolving Credit
Loans, which aggregate commitment shall be Seven Million Five Hundred Thousand Dollars
($7,500,000) on the Closing Date, as such amount may be adjusted, if at all, from time to
time in accordance with the Agreement.
Revolving Credit Loan — a Loan made by Lender as provided in Section 1.1 of the
Agreement.
Revolving Credit Maturity Date - the first to occur of (i) the Revolving Credit
Termination Date, (ii) the occurrence of an Event of Default in consequence of which Lender
elects to accelerate the maturity and payment of the Obligations, or (iii) termination of
this Agreement pursuant to Section 4 hereof.
Revolving Credit Note — the Revolving Credit Note to be executed by Borrower on
or about the Closing Date in favor of Lender to evidence the Revolving Credit Loan, which
shall be in the form of Exhibit A to the Agreement.
Revolving Credit Termination Date — as defined in Section 1.1 of the Agreement.
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Schedule of Accounts — as defined in Section 6.2.1 of the Agreement.
SEC — the United States Securities and Exchange Commission.
Security — shall have the same meaning as in Section 2(1) of the Securities Act
of 1933, as amended.
Security Documents — All instruments and agreements now or at any time
hereafter securing the whole or any part of the Obligations.
Solvent — as to any Person, that such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person’s Indebtedness
(including contingent debts), (ii) is able to pay all of its Indebtedness as such
Indebtedness matures and (iii) has capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage.
Stock — all shares, options, warrants, general or limited partnership
interests, membership interests or other equivalents (regardless of how designated) of or in
a corporation, partnership, limited liability company or equivalent entity whether voting or
nonvoting, including common stock, preferred stock or any other “equity security” (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934).
Stockholder — with respect to any Person, each holder of Stock of such Person.
Subordinated Debt — Indebtedness of Borrower that is subordinated to the
Obligations in a manner satisfactory to Lender.
Subsidiary — any corporation of which a Person owns, directly or indirectly
through one or more intermediaries, more than 50% of the Voting Stock at the time of
determination.
Tangible Net Worth - means the book value of Borrower’s total assets less total
liabilities, excluding from such assets all Intangibles.
Type of Organization — with respect to any Person, the kind or type of entity
by which such Person is organized, such as a corporation or limited liability company.
UCC — the Uniform Commercial Code as in effect in the State of Missouri on the
date of this Agreement, as the UCC may be amended or otherwise modified.
Voting Stock — Securities of any class or classes of a corporation the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a majority of
the corporate directors (or Persons performing similar functions).
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Other Terms. All other terms contained in the Agreement shall have, when the context
so indicates, the meanings provided for by the UCC to the extent the same are used or defined
therein.
Certain Matters of Construction. The terms “herein,” “hereof” and “hereunder” and
other words of similar import refer to the Agreement as a whole and not to any particular section,
paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. The section
titles, table of contents and list of exhibits appear as a matter of convenience only and shall not
affect the interpretation of the Agreement. All references to statutes and related regulations
shall include any amendments of same and any successor statutes and regulations. All references to
any of the Loan Documents shall include any and all modifications thereto and any and all
extensions or renewals thereof.
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