Exhibit 10.2

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Loan Agreement

 

 

THIS LOAN AGREEMENT (the “Agreement”) is entered into as of June 19, 2014
between LSI SACO TECHNOLOGIES INC. (the “Borrower”), with an address at c/o LSI
Industries Inc., 10000 Alliance Road, Cincinnati, Ohio 45242, Attn: Chief
Financial Officer, and PNC BANK CANADA BRANCH (the “Bank”), with an address at
130 King Street West, Suite 2140, Toronto, Ontario, Canada, M5X 1E4, Attn:
Caroline Stade.

 

The Borrower and the Bank, with the intent to be legally bound, agree as
follows:

 

1.     Credit Facilities; Facility Fee; Margin.

 

1.1.     Loans. The Bank has made or may make one or more loans (collectively,
the “Loans”) to the Borrower subject to the terms and conditions and in reliance
upon the representations and warranties of the Borrower set forth in this
Agreement. The Loans shall be used by the Borrower for general corporate
purposes including acquisitions permitted hereunder. As of the date hereof, the
Loans include a revolving credit loan (the “Revolving Loan”) in the principal
amount of up to US$5,000,000. The Loans are or will be evidenced by a promissory
note or notes of the Borrower and all renewals, extensions, amendments and
restatements thereof (if one or more, collectively, the “Note”) acceptable to
the Bank, which may set forth the interest rate, repayment and other provisions,
the terms of which are incorporated into this Agreement by reference.

 

1.2.     Letters of Credit. The Borrower may request that the Bank, in lieu of
cash advances, issue trade or standby letters of credit (individually, a “Letter
of Credit” and collectively the “Letters of Credit”) under the Revolving Loan in
face amount in the aggregate at any time outstanding not to exceed US$500,000.
The availability of advances under the Revolving Loan shall be reduced by the
face amount of each Letter of Credit issued and outstanding. For purposes of
this Agreement, the “face amount” of any Letter of Credit shall include any
automatic increases in face amount under the terms of such Letter of Credit,
whether or not any such increase in face amount has become effective. Unless
otherwise consented to by the Bank in writing, each Letter of Credit shall have
an expiry date which is not later than the Expiration Date (as defined in the
Note evidencing the Revolving Loan) of the Revolving Loan (the “Final LC
Expiration Date”). Each payment by the Bank under a Letter of Credit shall
constitute an advance of principal under the Revolving Loan and shall be
evidenced by the Note evidencing the Revolving Loan. The Letters of Credit shall
be governed by the terms of this Agreement and by one or more reimbursement
agreements, in form and content satisfactory to the Bank, executed by the
Borrower in favor of the Bank (collectively, the “Reimbursement Agreement”).
Each request for the issuance of a Letter of Credit must be accompanied by the
Borrower’s execution of an application on the Bank’s standard forms (each, an
“Application”), together with all supporting documentation. Each Letter of
Credit will be issued in the Bank’s sole discretion and in a form acceptable to
the Bank. This Agreement is not a pre-advice for the issuance of a letter of
credit and is not irrevocable. The Borrower shall pay the Bank’s standard
issuance fee on the face amount of each Letter of Credit upon issuance, together
with such other customary fees and expenses therefore as shall be required by
the Bank. In addition, the Borrower shall pay to the Bank a fee (the “Letter of
Credit Commission”), calculated daily (on the basis of a year of 365 days), on
the amount available to be drawn at such time under all Letters of Credit issued
and outstanding under the Revolving Loan (including any amounts drawn thereunder
and not reimbursed, regardless of the existence or satisfaction of any
conditions or limitations on drawing) each day at a rate equal to the LIBOR
Applicable Margin per annum. The Letter of Credit Commission shall be payable
quarterly in arrears on the first day of each fiscal quarter during which any
Letter of Credit is outstanding and on the Final LC Expiration Date.
Notwithstanding the foregoing, after the occurrence and during the continuance
of an Event of Default, the Letter of Credit Commission, as calculated above,
shall be increased by three percent (3.00%) per annum.

 

1.3.     Facility Fee. If, for any calendar quarter, the sum of the average
daily outstanding balance of the Revolving Loan and the face amount of
outstanding Letters of Credit does not equal the maximum facility amount of the
Revolving Loan, then Borrower shall pay to the Bank a fee at a rate equal to
0.15% per annum on the amount by which the maximum facility amount of the
Revolving Loan exceeds such sum. Such fee shall be payable to the Bank in
arrears on the first day of each calendar quarter with respect to the previous
calendar quarter.

 

 
 

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1.4.     Applicable Margin.

 

(a)     The Borrower shall pay interest on the Loans in accordance with the
Note. As used in the Note, the “LIBOR Applicable Margin” with respect to the
Loans shall be defined and determined as follows:

 

Leverage Ratio

LIBOR

Applicable Margin

< 1.00 to 1.00

1.50%

≥ 1.00 to 1.00 and ≤ 1.50 to 1.00

1.65%

> 1.50 to 1.00

1.90%

 

(b)     The Leverage Ratio shall be calculated in the manner set forth in
Section 4.10. All adjustments to the LIBOR Applicable Margin based on the
Leverage Ratio shall be effective prospectively on the first day of the fiscal
quarter following the submission of the quarterly financial statements to the
Bank for the prior fiscal quarter in accordance herewith. No downward
adjustments shall occur if, at the time such downward adjustment would otherwise
be made, there shall exist any Event of Default, provided that such downward
adjustment shall be made on the first day of the quarter after the date on which
the applicable Event of Default shall have been waived by the Bank in writing.

 

(c)     If the quarterly financial statements are not timely delivered to the
Bank for the end of the applicable fiscal quarter in accordance with Section
4.2, the LIBOR Applicable Margin shall be conclusively presumed to equal the
highest LIBOR Applicable Margin specified in the pricing table set forth above
until the date of delivery of such quarterly financial statements and the
related compliance certificate, on which date the rate will be adjusted
prospectively based upon the Leverage Ratio reflected in such quarterly
financial statements. The application of the foregoing shall not be deemed a
waiver of any rights the Bank may have as a result of the failure by the
Borrower to deliver such financial statements or any related compliance
certificate.

 

(d)     In the event of any discrepancy between the computation of the Leverage
Ratio for a particular quarter based upon the quarterly financial statements for
such quarter and the related annual financial statements furnished pursuant to
Section 4.3, the computation based on such annual financial statements shall
govern retroactive to the date as to which such adjustment applies. In the event
of a retroactive correction in favor of the Bank, the amount of interest thereby
overdue and payable by the Borrower shall be paid to the Bank within five (5)
days after the date of such retroactive correction. In the event of a
retroactive correction of the Leverage Ratio in favor of the Borrower, the
amount of interest overpaid by the Borrower shall be applied as a credit against
any fees, charges, interest or principal payments then due hereunder or to
become due hereunder in the order determined by the Bank. The Borrower’s
calculation of the Leverage Ratio shall not be binding upon the Bank. The Bank
may, in its reasonable discretion, elect to separately calculate the Leverage
Ratio and the Bank’s calculation shall control in the event of any discrepancy.

 

1.5.     Related Line of Credit. If the $30,000,000 revolving credit facility
made available by PNC Bank, National Association to LSI Industries Inc.
terminates or expires prior to the Expiration Date specified in the Note (as
such Expiration Date may be extended in writing from time to time), the Bank’s
loan commitments hereunder will be deemed terminated and the Borrower will
prepay the Loans in full on such termination or expiration date.

 

2.     Security. The security for repayment of the Loans shall include but not
be limited to the guaranties, collateral and other security documents
heretofore, contemporaneously or hereafter executed and delivered to the Bank
(the “Security Documents”), which shall secure repayment of the Loans, the Note
and all other loans, advances, debts, liabilities, obligations, covenants and
duties owing by the Borrower to the Bank or to any other direct or indirect
subsidiary of The PNC Financial Services Group, Inc., of any kind or nature,
present or future (including any interest accruing thereon after maturity, or
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding relating to the Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect (including those acquired by assignment
or participation), absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising, whether or not (i) evidenced by any
note, guaranty or other instrument, (ii) arising under any agreement, instrument
or document, (iii) for the payment of money, (iv) arising by reason of an
extension of credit, opening of a letter of credit, loan, equipment lease or
guarantee, (v) under any interest or currency swap, future, option or other
interest rate protection or similar agreement, (vi) under or by reason of any
foreign currency transaction, forward, option or other similar transaction
providing for the purchase of one currency in exchange for the sale of another
currency, or in any other manner, or (vii) arising out of overdrafts on deposit
or other accounts or out of electronic funds transfers (whether by wire transfer
or through automated clearing houses or otherwise) or out of the return unpaid
of, or other failure of the Bank to receive final payment for, any check, item,
instrument, payment order or other deposit or credit to a deposit or other
account, or out of the Bank’s non-receipt of or inability to collect funds or
otherwise not being made whole in connection with depository or other similar
arrangements; and any amendments, extensions, renewals and increases of or to
any of the foregoing, and all reasonable costs and reasonable expenses of the
Bank incurred in the documentation, negotiation, modification, enforcement,
collection and otherwise in connection with any of the foregoing, including
reasonable attorneys’ fees of outside counsel and expenses (hereinafter referred
to collectively as the “Obligations”). Unless expressly provided to the contrary
in documentation for any other loan or loans, it is the express intent of the
Bank and the Borrower that all Obligations including those included in the Loans
be cross-collateralized and cross-defaulted, such that collateral securing any
of the Obligations shall secure repayment of all Obligations and a default under
any Obligation shall be a default under all Obligations.

 

 
 

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This Agreement, the Note, the Security Documents and all other agreements and
documents executed and/or delivered pursuant hereto, as each may be amended,
modified, extended or renewed from time to time, are collectively referred to as
the “Loan Documents.” Capitalized terms not defined herein shall have the
meanings ascribed to them in the Loan Documents.

 

3.     Representations and Warranties. The Borrower hereby makes the following
representations and warranties, which shall be continuing in nature and remain
in full force and effect until the Obligations are paid in full, and which shall
be true and correct except as otherwise set forth on the Addendum attached
hereto and incorporated herein by reference (the “Addendum”):

 

3.1.     Existence, Power and Authority. The Borrower is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the power and authority to own and operate
its assets and to conduct its business as now or as it is then carried on, and
is duly qualified, licensed and in good standing to do business in all
jurisdictions where its ownership of property or the nature of its business
requires such qualification or licensing. The Borrower is duly authorized to
execute and deliver the Loan Documents to which it is a party, all necessary
action to authorize the execution and delivery of such Loan Documents has been
properly taken, and the Borrower is and will continue to be duly authorized to
borrow under this Agreement and to perform all of the other terms and provisions
of the Loan Documents as they relate to the Borrower.

 

3.2.     Financial Statements. The most recent quarterly and annual financial
statements of LSI Industries Inc., an Ohio corporation (the “Parent”), as
delivered to the Bank, are true, complete and accurate in all material respects
and fairly present the financial condition, assets and liabilities, whether
accrued, absolute, contingent or otherwise and the results of operations of the
Parent and its subsidiaries (including the Borrower) for the period specified
therein. Such financial statements have been prepared in accordance with
generally accepted accounting principles (“GAAP”) consistently applied from
period to period, subject in the case of interim statements to normal year-end
adjustments and to any comments and notes included therein.

 

3.3.     No Material Adverse Change. Since the date of the Parent’s most recent
quarterly and annual financial statements delivered to the Bank, neither the
Borrower nor the Parent has suffered any damage, destruction or loss, and no
event or condition has occurred or exists, which has resulted or would
reasonably be expected to result in a material adverse change in the business,
assets, operations, condition (financial or otherwise) or results of operations
of the Borrower or the Parent.

 

3.4.     Binding Obligations. The Borrower has full power and authority to enter
into the transactions provided for in this Agreement and has been duly
authorized to do so by appropriate action of its Board of Directors (or
comparable governing body) or otherwise as may be required by law, charter,
other organizational documents or agreements; and the Loan Documents, when
executed and delivered by the Borrower, will constitute the legal, valid and
binding obligations of the Borrower enforceable in accordance with their terms.

 

3.5.     No Defaults or Violations. There does not exist any Event of Default
under this Agreement or any default or violation by the Borrower of or under any
of the terms, conditions or obligations of: (i) its organizational documents;
(ii) any indenture, mortgage, deed of trust, franchise, permit, contract,
agreement, or other instrument to which it is a party or by which it is bound;
or (iii) any law, ordinance, regulation, ruling, order, injunction, decree,
condition or other requirement applicable to or imposed upon it by any law, the
action of any court or any governmental authority or agency; and the
consummation of this Agreement and the transactions set forth herein will not
result in any such default or violation or Event of Default.

 

 
 

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3.6.     Title to Assets. The Borrower has good and marketable title to the
assets reflected on the most recent quarterly and annual financial statements
delivered to the Bank, free and clear of all liens and encumbrances, except for
(i) current taxes and assessments not yet due and payable, (ii) inventory sold
in the ordinary course of business, and (iii) those liens or encumbrances, if
any, expressly permitted by Section 5.2 or specified on the Addendum.

 

3.7.     Litigation. There are no actions, suits, proceedings or governmental
investigations pending or, to its knowledge, threatened against the Borrower,
which would reasonably be expected to result in a material adverse change in its
business, assets, operations, condition (financial or otherwise) or results of
operations and there is no basis known to it for any action, suit, proceeding or
investigation which would reasonably be expected to result in such a material
adverse change. All such pending and threatened litigation against it is listed
on the Addendum.

 

3.8.     Tax Returns. The Borrower has filed all returns and reports that are
required to be filed by it in connection with any federal, state or local tax,
duty or charge levied, assessed or imposed upon it or its property or withheld
by it, including income, unemployment, social security and similar taxes, and
all of such taxes have been either paid or adequate reserve or other provision
has been made therefor.

 

3.9.     Employee Benefit Plans. Each employee benefit plan as to which the
Borrower may have any liability complies in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974 (as
amended from time to time, “ERISA”), including minimum funding requirements, and
(i) no Prohibited Transaction (as defined under ERISA) has occurred with respect
to any such plan, (ii) no Reportable Event (as defined under Section 4043 of
ERISA) has occurred with respect to any such plan which would cause the Pension
Benefit Guaranty Corporation to institute proceedings under Section 4042 of
ERISA, (iii) it has not withdrawn from any such plan or initiated steps to do
so, and (iv) no steps have been taken to terminate any such plan.

 

3.10.     Environmental Matters. The Borrower is in compliance, in all material
respects, with all Environmental Laws (as defined below), including, without
limitation, all Environmental Laws in jurisdictions in which it owns or
operates, or has owned or operated, a facility or site, stores assets, arranges
or has arranged for disposal or treatment of hazardous substances, solid waste
or other waste, accepts or has accepted for transport any hazardous substances,
solid waste or other wastes or holds or has held any interest in real property
or otherwise. Except as otherwise disclosed on the Addendum, no litigation or
proceeding arising under, relating to or in connection with any Environmental
Law is pending or, to the best of its knowledge, threatened against the
Borrower, any real property which it holds or has held an interest or any past
or present operation of it. No release, threatened release or disposal of
hazardous waste, solid waste or other wastes is occurring, or to the best of its
knowledge has occurred, on, under or to any real property in which the Borrower
holds or has held any interest or performs or has performed any of its
operations, in violation of any Environmental Law. As used in this Section,
“litigation or proceeding” means any demand, claim notice, suit, suit in equity,
action, administrative action, investigation or inquiry whether brought by a
governmental authority or other Person, and “Environmental Laws” means all
provisions of laws, statutes, ordinances, rules, regulations, permits, licenses,
judgments, writs, injunctions, decrees, orders, awards and standards promulgated
by any governmental authority concerning health, safety and protection of, or
regulation of the discharge of substances into, the environment.

 

3.11.     Intellectual Property. The Borrower owns or is licensed to use all
patents, patent rights, trademarks, trade names, service marks, copyrights,
intellectual property, technology, know-how and processes necessary for the
conduct of its business as currently conducted that are material to the
condition (financial or otherwise), business or operations of it.

 

3.12.     Regulatory Matters. No part of the proceeds of any Loan will be used
for “purchasing” or “carrying” any “margin stock” within the respective meanings
of each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time in effect or for any purpose
which violates the provisions of the Regulations of such Board of Governors.

 

3.13.     Solvency. As of the date hereof and after giving effect to the
transactions contemplated by this Agreement and the related loan documents, (i)
the aggregate value of the assets the Borrower will exceed its liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities),
(ii) the Borrower will have sufficient cash flow to enable it to pay its debts
as they become due, and (iii) the Borrower will not have unreasonably small
capital for the business in which it is engaged.

 

 
 

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3.14.     Disclosure. Neither this Agreement nor any of the related Loan
Documents contains or will contain any untrue statement of material fact or
omits or will omit to state a material fact necessary in order to make the
statements contained in this Agreement or the Loan Documents not misleading.
There is no fact known to the Borrower which materially adversely affects or, so
far as it can now foresee, would reasonably be expected to materially adversely
affect the business, assets, operations, condition (financial or otherwise) or
results of operation of the Borrower.

 

3.15.     Subsidiaries and Partnerships. Each Subsidiary of the Borrower, and
each partnership or joint venture to which the Borrower is a party, is
identified on Schedule 3.15. Unless otherwise specified on Schedule 3.15, the
Borrower owns 100% of the issued and outstanding equity interests or partnership
interest (as applicable) of each Subsidiary and partnership listed on Schedule
3.15. Neither the Borrower nor any Subsidiary has any outstanding options,
warrants or contracts to issue capital stock, membership interests or
partnership interests of any kind. As used in this Agreement, “Subsidiary” means
either (i) any corporation or limited liability company more than 50% of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by the affected Person or one or more Subsidiaries or
such Person, or by the affected Person and one or more Subsidiaries, or (ii) any
other Person which is so owned or controlled. Unless otherwise specified, a
reference to a “Subsidiary” will mean a Subsidiary of the Borrower.

 

4.     Affirmative Covenants. The Borrower agrees that from the date of
execution of this Agreement until all Obligations have been paid in full and any
commitments of the Bank to the Borrower have been terminated, it will:

 

4.1.     Books and Records. Maintain books and records in accordance with GAAP
and give representatives of the Bank access thereto at all reasonable times,
including permission to examine, copy and make abstracts from any of such books
and records and such other information as the Bank may from time to time
reasonably request, and it will make available to the Bank for examination
copies of any reports, statements and returns which it may make to or file with
any federal, state or local governmental department, bureau or agency.

 

4.2.     Quarterly Financial Statements. Furnish the Bank within forty-five (45)
days after the end of each fiscal quarter internally prepared financial
statements of the Parent, with respect to such fiscal quarter, which financial
statements will: (a) be in reasonable detail and in form reasonably satisfactory
to the Bank, (b) be accompanied by a certificate as to compliance with
applicable financial covenants (including detailed calculations thereof) for the
period then ended and whether any Event of Default exists, and, if so, the
nature thereof and the corrective measures the Borrower proposes to take, (c)
include a balance sheet as of the end of such period, an income statement for
such period and a statement of cash flows for such period, (d) include prior
year comparisons and (e) be on a consolidated basis for the Parent, its
subsidiaries (including the Borrower) and any entity into which the Parent’s
financial information is consolidated in accordance with GAAP.

 

4.3.     Annual Financial Statements. Furnish the Bank within ninety (90) days
after the end of each fiscal year of the Parent annual audited financial
statements which will: (a) include a balance sheet as of the end of such fiscal
year, an income statement for such year, and a statement of cash flows for such
fiscal year; (b) be on a consolidated basis with the Parent, its subsidiaries
(including the Borrower) and any entity into which the Parent’s financial
information is consolidated in accordance with GAAP; (c) be accompanied by a
certificate as to compliance with applicable financial covenants (containing
detailed calculations of all financial covenants) for the period then ended and
whether any Event of Default exists, and, if so, the nature thereof and the
corrective measures the Borrower proposes to take, and (d) contain the
unqualified opinion of an independent certified public accountant reasonably
acceptable to the Bank and its examination will have been made in accordance
with generally accepted auditing standards.

 

4.4.     Payment of Taxes and Other Charges. Pay and discharge when due all
indebtedness and all taxes, assessments, charges, levies and other liabilities
imposed upon it, its income, profits, property or business, except those which
currently are being contested in good faith by appropriate proceedings and for
which it shall have set aside adequate reserves or made other adequate provision
with respect thereto acceptable to the Bank in its reasonable discretion.

 

4.5.     Maintenance of Existence, Operation and Assets. Do all things necessary
to (i) maintain, renew and keep in full force and effect its organizational
existence and all rights, permits and franchises necessary to enable it to
continue its business as currently conducted; (ii) continue in operation in
substantially the same manner as at present; (iii) keep its properties in good
operating condition and repair; and (iv) make all necessary and proper repairs,
renewals, replacements, additions and improvements thereto.

 

4.6.     Insurance. Maintain, with financially sound and reputable insurers
reasonably acceptable to the Bank, property and liability insurance with respect
to its business generally, and its properties against such casualties and
contingencies, of such types and in such amounts, as is customary for
established companies engaged in the same or similar business and similarly
situated, and provide evidence of such insurance to the Bank promptly upon
request. In the event of a conflict between the provisions of this Section and
the terms of any Security Documents relating to insurance, the provisions in the
Security Documents will control.

 

 
 

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4.7.     Compliance with Laws. Comply in all material respects with all laws
applicable to the Borrower and to the operation of its business (including
without limitation any statute, ordinance, rule or regulation relating to
employment practices, pension benefits or environmental, occupational and health
standards and controls).

 

4.8.     Bank Accounts; Banking Services. Establish and maintain with the Bank
substantially all of its depository, investment, operating and disbursement
accounts and its treasury management arrangements.

 

4.9.     Environmental Indemnification. The Borrower shall defend and indemnify
the Bank and hold the Bank harmless from and against all loss, liability,
damage, expense, claims, costs, fines, penalties, assessments (including
interest on any of the foregoing) and reasonable attorneys’ fees, suffered or
incurred by the Bank which arise, result from or in any way relate to a breach
or violation by the Borrower of any Environmental Law, either prior to or
subsequent to the date hereof, including the assertion or imposition of any lien
or security interest on the Borrower’s assets, or which relate to or arise out
of any claim, suit, notice, order, demand or other communication made by any
Person with respect to the Borrower relating to environmental matters, except to
the extent that the subject of indemnification is caused by or arises out of the
gross negligence or willful misconduct of the Bank or its agents or employees.
The Borrower’s obligations hereunder shall survive the termination of this
Agreement and the repayment of the Obligations.

 

4.10.     Financial Covenants; Definitions.

 

(a)     Consolidated Tangible Net Worth. The Borrower shall cause the Parent to
maintain Consolidated Tangible Net Worth greater than or equal to the sum of
$105,000,000 plus (i) an amount equal to 50% of the Parent’s Consolidated net
income (if positive) for each fiscal quarter ending after June 30, 2014 plus
(ii) one hundred percent (100%) of the proceeds of each Equity Offering
occurring after June 30, 2014 after having deducted from the gross proceeds of
such Equity Offering all costs and fees associated therewith.

 

(b)     Leverage Ratio. The Borrower shall cause the Parent to maintain a
Leverage Ratio of not more than 2.00 to 1.00 as of the end of each fiscal
quarter, on a historical rolling four quarters basis.

 

As used in this Agreement:

 

“Consolidated” means the consolidation in accordance with GAAP of the items as
to which such term applies.

 

“Consolidated EBITDA” means, for the relevant period, the sum of the Parent’s
(i) Consolidated net income, (ii) Consolidated income tax expense, (iii)
Consolidated interest expense, (iv) Consolidated depreciation and amortization
expenses and (v) other Consolidated non-cash expenses for the Parent, all
determined in accordance with GAAP; provided that there shall be excluded from
Consolidated net income any extraordinary items of gain or loss (including,
without limitation, those items created by mandated changes in GAAP).

 

“Consolidated Indebtedness” means all of the Parent’s Indebtedness determined on
a Consolidated basis.

 

“Consolidated Tangible Net Worth” means, for the relevant period, on a
Consolidated basis: (i) the sum of the amounts appearing on the balance sheet of
such entity as (a) the stated value of all outstanding stock and (b) capital,
paid-in and earned surplus; less (ii) the sum of (a) the deficit in any surplus
or capital account, including treasury stock, (b) the amount of any write-up
subsequent to 1999 in the book value of any asset owned on such date resulting
from the revaluation thereof subsequent to such date or any write up of any
asset in excess of the costs of the assets acquired, (c) any amounts by which
patents, trademarks, trade names, organizational expenses and other intangible
items of similar nature and goodwill appear on the asset side of such balance
sheet, (d) any amounts at which shares of the capital stock of the Parent appear
on the asset side of such balance sheet, all as of the last day of the month
previous to such particular time, and (e) any amounts for advances to
shareholders, directors, officers, employees or Affiliates of the Parent which
appear on the asset side of the balance sheet, except those made in the ordinary
course of business.

 

 
 

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“Equity Offering” means the public or private issuance of capital stock of the
Parent other than that: (i) pursuant to an employee or director stock option
plan, employee stock purchase plan, 401(k) plan, or other employee benefit
arrangement, or (ii) issued solely for acquiring a Person as permitted under the
Parent Loan Agreement.

 

“Indebtedness” means, without duplication: (i) all obligations (including
capitalized lease obligations) which in accordance with generally accepted
accounting principles would be shown on a balance sheet as a liability; (ii) all
obligations for borrowed money or for the deferred purchase price of property or
services; and (iii) all guarantees, reimbursement, payment or similar
obligations, absolute, contingent or otherwise, under acceptance, letter of
credit or similar facilities; provided, however, that Indebtedness shall not
include accounts payable incurred in the ordinary course of business or
accruals, made in accordance with GAAP, for liabilities for expenses incurred in
the ordinary course of business, if those accounts payable or accrued
liabilities do not constitute or represent obligations to repay borrowed money.

 

“Leverage Ratio” means, as of any date of determination, the ratio of (i) the
Parent’s Consolidated Indebtedness to (ii) the Parent’s Consolidated EBITDA for
the immediately preceding four fiscal quarters treated as a single accounting
period.

 

“Parent Loan Agreement” means the Amended and Restated Loan Agreement of even
date herewith between the Bank and the Parent, as amended, supplemented,
restated or otherwise modified from time to time.

 

“Permitted Liens” means (i) liens for taxes not yet due and payable; (ii) liens
in connection with any proceeding which is currently being contested in good
faith and for which no foreclosure proceedings, attachments or proceedings in
aid of execution have been commenced; (iii) liens in favor of the Bank or any
affiliate of the Bank; (iv) liens securing leases of personal property and
(v) liens by a bank on deposit accounts of the Borrower at such bank that arise
by operation of law.

 

“Person” means any individual, corporation, limited liability company,
partnership, trust, joint venture, unincorporated organization, association,
government (foreign or domestic), any agency or political subdivisions thereof,
or any other entity.

 

4.11.     Additional Reports. Promptly upon discovery, provide written notice to
the Bank of the occurrence of any of the following (together with a description
of the action which the Borrower proposes to take with respect thereto): (i) any
Event of Default or any condition, event, omission or act which, with the
passage of time or the giving of notice, or both, would constitute an Event of
Default (a “Default”), (ii) any litigation filed by or against the Borrower
which, if adversely determined, would reasonably be expected to result in a
material adverse change in the business, assets, operations, condition
(financial or otherwise) or results of operations of the Borrower, (iii) any
Reportable Event or Prohibited Transaction with respect to any Employee Benefit
Plan(s) (as each such term is defined in ERISA) or (iv) any other event or
circumstance which would reasonably be expected to result in a material adverse
change in the business, assets, operations, condition (financial or otherwise)
or results of operations of the Borrower.

 

5.     Negative Covenants. The Borrower covenants and agrees that from the date
of this Agreement until all Obligations have been paid in full and any
commitments of the Bank to the Borrower have been terminated, it will not:

 

5.1.     Indebtedness. Create, incur, assume or permit to exist or remain
outstanding any Indebtedness, except for:

 

(a)     Any Indebtedness owed by the Borrower to the Bank or to PNC Bank,
National Association;

 

(b)     Indebtedness of the Borrower existing on the Closing Date to remain
outstanding and unpaid after the Closing Date and listed on Schedule 5.1 and any
extensions, renewals or refinancings thereof;

 

(c)     Rental and lease payments for personal property in the ordinary course
of the Borrower’s business; and

 

(d)     Indebtedness secured by Permitted Liens.

 

 
 

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5.2.     Liens and Encumbrances; Negative Pledge. Create, assume, incur or
suffer to exist any lien, security interest or other encumbrance upon any of
their respective assets and properties, whether tangible or intangible, whether
now owned or in existence or hereafter acquired or created and wherever located,
nor acquire nor agree to acquire any assets or properties subject to a lien,
security interest or other encumbrance, except for Permitted Liens. The Borrower
shall not make or enter into any agreement (other than agreements with the Bank
or PNC Bank, National Association) for the benefit of any Person not to grant
liens or security interests.

 

5.3.     No Limitation on Dividends and Distributions. Enter into or otherwise
be bound by any agreement not to pay dividends to the Parent.

 

5.4.     Merger or Transfer of Assets. Liquidate or dissolve, or merge,
amalgamate or consolidate with or into any Person, or sell, lease, transfer or
otherwise dispose of all or a substantial part of its property, assets,
operations or business, whether now owned or hereafter acquired.

 

5.5.     Acquisitions. Make acquisitions of all or substantially all of the
property or assets of any Person without the prior written approval of the Bank
(which approval will not be unreasonably withheld).

 

5.6.     Guarantees. Guarantee, endorse or become contingently liable for the
obligations of any Person, except in connection with the endorsement and deposit
of checks for collection in the ordinary course of business.

 

5.7.     Loans or Advances. Purchase or hold beneficially any stock, other
securities or evidence of indebtedness of, or make or have outstanding, any
loans or advances to, or otherwise extend credit (other than trade credit in the
ordinary course of business) to, or make any investment or acquire any interest
whatsoever in, any other Person, except for the investments (if any) held by the
Borrower and disclosed on the financial statements of the Parent delivered to
the Bank.

 

6.     Events of Default. The occurrence of any of the following will be deemed
to be an “Event of Default”:

 

6.1.     Covenant Default. A default in the performance of any of the covenants
or agreements contained in this Agreement and the failure or inability of the
Borrower to cure such default within 30 days after the occurrence thereof;
provided that such 30 day grace period will not apply to: (a) any default which
in the Bank’s good faith determination is incapable of cure, (b) any default
that has previously occurred, (c) any default in any financial covenants or any
negative covenants, or (d) any failure to maintain insurance or to permit
inspection of the books and records of the Borrower.

 

6.2.     Breach of Warranty. Any financial statement, representation, warranty
or certificate made or furnished by to the Bank in connection with this
Agreement or the other Loan Documents shall be false, incorrect or incomplete
when made.

 

6.3.     Other Default. The occurrence of any Event of Default as defined in the
Note or any of the other Loan Documents.

 

Upon the occurrence and during the continuation of an Event of Default, the Bank
will have all rights and remedies specified in the Note and the Loan Documents
and all rights and remedies (all of which are cumulative and not exclusive)
available at law or in equity.

 

7.     Conditions. The Bank’s obligation to close and make any advance under the
Loans is subject to the conditions that as of the date of closing and each such
advance:

 

7.1.     No Event of Default. No Default or Event of Default shall have occurred
and be continuing; and

 

7.2.     Receipt of Documents. The Bank shall have received the Loan Documents
and such other instruments, agreements, and documents which the Bank may
reasonably request in connection with the transactions provided for in this
Agreement, all in form and substance acceptable to the Bank.

 

8.     Expenses. The Borrower agrees to pay the Bank (i) upon the execution of
this Agreement, and otherwise on demand, all reasonable costs and expenses
incurred by the Bank in connection with the preparation, negotiation and
delivery of this Agreement and the other Loan Documents, and (ii) all reasonable
costs and expenses incurred by the Bank in connection with any modifications
thereto, and the collection of all of the Obligations, including but not limited
to enforcement actions, relating to the Loans, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions or
proceedings arising out of or relating to this Agreement, including reasonable
fees and expenses of outside counsel, expenses for auditors, appraisers and
consultants, lien searches, recording and filing fees and taxes.

 

 
 

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9.     Increased Costs. On written demand, together with written evidence of the
justification therefor, the Borrower agrees to pay the Bank all direct costs
incurred and any losses suffered or payments made by the Bank as a consequence
of making the Loans by reason of any change in law or regulation, or the
interpretation thereof, imposing any reserve, deposit, allocation of capital or
similar requirement (including without limitation, Regulation D of the Board of
Governors of the Federal Reserve System) on the Bank, its holding company or any
of their respective assets. Notwithstanding anything herein to the contrary, (i)
the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,
rules, regulations, guidelines, interpretations or directives thereunder or
issued in connection therewith (whether or not having the force of law) and (ii)
all requests, rules, regulations, guidelines, interpretations or directives
promulgated by the Bank for International Settlements, the Basel Committee on
Banking Supervision (or any successor or similar authority) or the United States
or foreign regulatory authorities (whether or not having the force of law), in
each case pursuant to Basel III, shall in each case be deemed to be a change in
law regardless of the date enacted, adopted, issued, promulgated or implemented.

 

10.     Miscellaneous.

 

10.1.     Notices. All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder (“Notices”) must be in writing
and will be effective upon receipt. Notices may be given in any manner to which
the parties may separately agree, including electronic mail. Without limiting
the foregoing, first-class mail, facsimile transmission and commercial courier
service are hereby agreed to as acceptable methods for giving Notices.
Regardless of the manner in which provided, Notices may be sent to a party’s
address as set forth above or to such other address as any party may give to the
other for such purpose in accordance with this section.

 

10.2.     Preservation of Rights. No delay or omission on the Bank’s part to
exercise any right or power arising hereunder will impair any such right or
power or be considered a waiver of any such right or power, nor will the Bank s
action or inaction impair any such right or power. The Bank’s rights and
remedies hereunder are cumulative and not exclusive of any other rights or
remedies which the Bank may have under other agreements, at law or in equity.

 

10.3.     Illegality. If any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, it shall not affect or impair
the validity, legality and enforceability of the remaining provisions of this
Agreement.

 

10.4.     Changes in Writing. No modification, amendment or waiver of, or
consent to any departure by the Borrower from, any provision of this Agreement
will be effective unless made in a writing signed by the party to be charged,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Notwithstanding the foregoing, the Bank may
modify this Agreement or any of the other Loan Documents for the purposes of
completing missing content or correcting erroneous content, without the need for
a written amendment, provided that the Bank shall send a copy of any such
modification to the Borrower (which notice may be given by electronic mail). No
notice to or demand on the Borrower will entitle the Borrower to any other or
further notice or demand in the same, similar or other circumstance.

 

10.5.     Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.

 

10.6.     Counterparts. This Agreement may be signed in any number of
counterpart copies and by the parties hereto on separate counterparts, but all
such copies shall constitute one and the same instrument. Delivery of an
executed counterpart of a signature page to this Agreement by facsimile
transmission shall be effective as delivery of a manually executed counterpart.
Any party so executing this Agreement by facsimile transmission shall promptly
deliver a manually executed counterpart, provided that any failure to do so
shall not affect the validity of the counterpart executed by facsimile
transmission.

 

10.7.     Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the Borrower and the Bank and their respective successors and
assigns; provided, however, that the Borrower may not assign this Agreement in
whole or in part without the Bank’s prior written consent and the Bank at any
time may assign this Agreement in whole or in part.

 

 
 

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10.8.     Interpretation. In this Agreement, unless the Bank and the Borrower
otherwise agree in writing, the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; the word “or”
shall be deemed to include “and/or”, the words “including”, “includes” and
“include” shall be deemed to be followed by the words “without limitation”;
references to articles, sections (or subdivisions of sections) or exhibits are
to those of this Agreement; and references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications to such instruments, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement. Section
headings in this Agreement are included for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose. Unless
otherwise specified in this Agreement, all accounting terms shall be interpreted
and all accounting determinations shall be made in accordance with GAAP.

 

10.9.     No Consequential Damages, Etc. The Bank will not be responsible for
any damages, consequential, incidental, special, punitive or otherwise, that may
be incurred or alleged by the Borrower, any Guarantor or any other Person as a
result of this Agreement, the other Loan Documents, the transactions
contemplated hereby or thereby, or the use of the proceeds of any of the Loans.

 

10.10.     Assignments and Participations. At any time, without any notice to
the Borrower, the Bank may sell, assign, transfer, negotiate, grant
participations in, or otherwise dispose of all or any part of the Bank’s
interest in the Loans. The Borrower hereby authorizes the Bank to provide,
without any notice to the Borrower, any information concerning the Borrower,
including information pertaining to the Borrower’s financial condition, business
operations or general creditworthiness, to any Person which may succeed to or
participate in all or any part of the Bank’s interest in the Loans.

 

10.11     Governing Law and Jurisdiction. This Agreement has been delivered to
and accepted by the Bank and will be deemed to be made in the State where the
Bank’s office indicated above is located. This Agreement will be interpreted and
the rights and liabilities of the parties hereto determined in accordance with
the laws of the State of Ohio, excluding its conflict of laws rules. The
Borrower hereby irrevocably consents to the exclusive jurisdiction of any state
or federal court located in Hamilton County, Ohio; provided that nothing
contained in this Agreement will prevent the Bank from bringing any action,
enforcing any award or judgment or exercising any rights against the Borrower
individually, or against any security or property of the Borrower, within any
other county, state or other foreign or domestic jurisdiction. The Bank and the
Borrower agree that the venue provided above is the most convenient forum for
both the Bank and the Borrower. The Borrower waives any objection to venue and
any objection based on a more convenient forum in any action instituted under
this Agreement.

 

10.12.     WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK EACH IRREVOCABLY
WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS
EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN
ANY OF SUCH DOCUMENTS. THE BORROWER AND THE BANK EACH ACKNOWLEDGES THAT THE
FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

 

 

 

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The Borrower acknowledges that it has read and understood all the provisions of
this Agreement, including the waiver of jury trial, and has been advised by
counsel as necessary or appropriate.

 

IN WITNESS WHEREOF, the Borrower and the Bank have executed and delivered this
Loan Agreement as of the date first set forth above.

 

BORROWER:

 

LSI SACO TECHNOLOGIES INC.

 

 

By:     /s/ Ronald S. Stowell          

       Ronald S. Stowell

       Treasurer and Secretary

 

 

BANK:

 

PNC BANK CANADA BRANCH

 

 

By:     /s/ Bill Hines, Regional President – Canada     

       Per Caroline Stade

       Senior Vice President

 

 
 

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ADDENDUM to that certain Loan Agreement dated as of June 19, 2014 (the
“Agreement”) between LSI SACO TECHNOLOGIES INC. (the “Borrower”) and PNC BANK
CANADA BRANCH (the “Bank”). Capitalized terms used in this Addendum and not
otherwise defined shall have the meanings given them in the Agreement. Section
numbers below refer to the sections of the Agreement.

 

3.1. Existence, Power and Authority. None

 

3.2. Financial Statements. None

 

3.3. No Material Adverse Change. None

 

3.4. Binding Obligations. None

 

3.5. No Defaults or Violations. None

 

3.6. Title to Assets. None

 

3.7. Litigation. None

 

3.8. Tax Returns. None

 

3.9. Employee Benefit Plans. None

 

3.10. Environmental Matters. None

 

3.11. Intellectual Property. None

 

3.12. Regulatory Matters. None

 

3.13. Solvency. None

 

3.14. Disclosure. None

 

Schedule 3.15 - Equity Interests; Subsidiaries & Partnerships. None

 

Schedule 5.1 – Existing Indebtedness. Indebtedness to the Bank or to PNC Bank,
National Association