Exhibit 10.9

 

Borrowing Base Rider   LOGO [g458840g41x37.gif]

 

THIS BORROWING BASE RIDER (“Rider”) is executed this      day of December, 2012,
by and between MISCOR GROUP, LTD. (the “Borrower”) with an address at 800 Nave
Road, Southeast, Massillon, Ohio 44646, and PNC BANK, NATIONAL ASSOCIATION (the
“Bank”), with an address at 213 Market Avenue North, Suite 250, Canton, Ohio
44702. This Rider is incorporated into and made part of that certain Loan
Agreement dated December     , 2012, and promissory note dated December     ,
2012, and also into certain other financing documents and security agreements
executed by and between the Borrower and the Bank (all such documents including
this Rider are collectively referred to as the “Loan Documents”). All initially
capitalized terms not otherwise defined in this Rider shall have the same
meanings assigned to such terms in the other Loan Documents.

Pursuant to the Loan Documents, the Bank has extended a “Facility” or “Loans”
(as defined in the Loan Documents) to the Borrower, under which the Borrower may
borrow, repay and reborrow funds at any time prior to the Expiration Date (such
Facility or Loans being referred to herein as the “Facility”). As a condition to
the Bank’s willingness to extend the Facility to the Borrower, the Bank and the
Borrower are entering into this Rider in order to set forth their agreement
regarding the maximum amount which may be outstanding under the Facility at any
time, and for the other purposes set forth below.

NOW, THEREFORE, with the foregoing background deemed incorporated by reference
and made a part hereof, the parties hereto, intending to be legally bound,
covenant and agree as follows:

1. Limitations on Borrowings Under Facility. Notwithstanding any provision to
the contrary in any of the other Loan Documents, at no time shall the aggregate
principal amount of indebtedness outstanding at any one time under the Facility
exceed the Borrowing Base (as hereinafter defined) at such time. If at any time
the aggregate principal amount of indebtedness outstanding under the Facility
exceeds the limitations set forth in this Section 1 for any reason, then the
Borrower shall immediately repay the amount of such excess to the Bank in
immediately available funds.

2. Borrowing Base Certificates. In addition to any and all provisions of the
other Loan Documents which establish conditions to the Borrower’s ability to
request and obtain any advance under the Facility, the Borrower may not request
an advance under the Facility unless a Borrowing Base Certificate (as
hereinafter defined) shall have been delivered to the Bank on or before the 15th
day of each month.

3. Certain Defined Terms. In addition to the words and terms defined elsewhere
in this Rider or in the other Loan Documents, the following words and terms, as
used in this Rider, shall have the following meanings:

“Account” shall mean an “account” or a “general intangible” as defined in the
Uniform Commercial Code as in effect in the jurisdiction whose Law governs the
perfection of the Bank’s security interest therein, whether now owned or
hereafter acquired or arising.

“Account Debtor” shall mean, with respect to any Account, each Person who is
obligated to make payments to the Borrower on such Account.

“Affiliate” of the Borrower or any Account Debtor shall mean (a) any Person who
(either alone or with a group of Persons, and either directly or indirectly
through one or more intermediaries) is in control of, is controlled by or is
under common control with the Borrower or such Account Debtor, (b) any director,
officer, partner, employee or agent of the Borrower or such Account Debtor, and
(c) any member of the immediate family of any natural person described in the
preceding clauses (a) and (b). A Person or group of Persons shall be deemed to
be in control of the Borrower or an Account Debtor when such Person or group of
Persons possesses, directly or indirectly, the power to direct or cause the
direction of the management or policies of the Borrower or such Account Debtor,
whether through the ownership of voting securities, by contract or otherwise.

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“Borrowing Base” at any time shall mean the lesser of (a) $6,500,000.00 (the
maximum principal amount of the Facility) and (b) the sum of (i) 85% of
Qualified Accounts at such time and (ii) 50% of Qualified Inventory at such
time. The value of Qualified Accounts and Qualified Inventory at any time shall
be determined by reference to the most recent Borrowing Base Certificate
delivered by the Borrower to the Bank.

“Borrowing Base Certificate” shall mean each Borrowing Base Certificate to be
delivered by the Borrower to the Bank pursuant to Section 2 of this Rider, in
substantially the form attached as Exhibit A to this Rider, executed by the
Borrower and with blanks appropriately completed, as amended, supplemented or
otherwise modified from time to time.

“Eligible Location” shall mean one of the addresses in the United States of
America at which the Borrower maintains, keeps or stores Inventory, as listed in
the Security Agreement executed and delivered by the Borrower and the Bank in
connection with the Facility, and, if such location is leased by the Borrower,
for which the Bank has received a landlord’s waiver acceptable to the Bank. The
Borrower and the Bank may agree jointly to add other addresses of the Borrower
to such list at any time by executing and delivering a substitute list of
addresses under said Security Agreement. The Bank may in its discretion at any
time determine that any address on such list shall no longer be an Eligible
Location, by giving written notice of such determination to the Borrower.

“Inventory” shall mean “inventory” as defined in the Uniform Commercial Code as
in effect in the jurisdiction whose Law governs the perfection of the Bank’s
security interest therein, whether now owned or hereafter acquired and wherever
located.

“Law” shall mean any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, order, injunction, writ, decree or award of any
Official Body.

“Lien” shall mean any mortgage, pledge, security interest, bailment,
encumbrance, claim, lien or charge of any kind, including any agreement to give
any of the foregoing, any conditional sale or other title retention agreement
and any lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code.

“Official Body” shall mean any government or political subdivision or any
agency, authority, bureau, central bank, commission, department or
instrumentality of any government or political subdivision, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.

“Person” shall mean an individual, sole proprietorship, corporation, partnership
(general or limited), trust, business trust, limited liability company,
unincorporated organization or association, joint venture, joint-stock company,
Official Body, or any other entity of whatever nature.

“Qualified Accounts” shall mean Accounts which are and at all times continue to
be acceptable to the Bank in its sole discretion. Standards of acceptability
include but are not limited to the following conditions:

(a) The Account duly complies with all applicable Laws, whether Federal, state
or local, including but not limited to usury Laws, the Federal Truth in Lending
Act, the Federal Consumer Credit Protection Act, the Fair Credit Billing Act,
and Regulation Z of the Board of Governors of the Federal Reserve System;

(b) The Account was not originated in, and is not subject to the Laws of, a
jurisdiction whose Laws would make the account or the grant of the security
interest in the Account to the Bank unlawful, invalid or unenforceable;

 

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(c) The Account was originated by the Borrower in connection with the sale of
goods or the rendering of services by the Borrower in the ordinary course of
business under an enforceable contract, and such sale has been consummated and
such goods have been delivered or such services have been rendered so that the
performance of such contract has been completed by the Borrower and by all
parties other than the Account Debtor;

(d) The Account is evidenced by a written invoice or other documentation and
arises from a contract, all of which are in form and substance satisfactory to
the Bank;

(e) The Account does not arise out of a contract with, or order from, an Account
Debtor that, by its terms, forbids or makes void or unenforceable the grant of
the security interest by the Borrower to the Bank in and to the Account arising
with respect thereto;

(f) The title of the Borrower to the Account and, except as to the Account
Debtor, to any related goods is absolute and is not subject to any Lien except
Liens in favor of the Bank;

(g) The Account provides for payment in United States Dollars by the Account
Debtor;

(h) The Account shall have amounts owing that are not less than the amounts
represented by the Borrower;

(i) The portion of the Account for which income has not yet been earned or which
constitutes unearned discount, service charges or deferred interest shall be
ineligible;

(j) The Account shall be eligible only to the extent that it is not subject to
any defense, claim of reduction, counterclaim, set-off, recoupment, or any
dispute or claim for credits, allowances or adjustments by the Account Debtor
because of returned, inferior, damaged goods or unsatisfactory services, or for
any other reason;

(k) The goods the sale of which gave rise to the Account were shipped or
delivered or provided to the Account Debtor on an absolute sale basis and not on
a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis, a
sale or return basis, or on the basis of any other similar terms making the
Account Debtor’s payment obligations conditional;

(l) The Account Debtor has not returned, rejected or refused to retain, or
otherwise notified the Borrower of any dispute concerning, or claimed
nonconformity of, any of the goods from the sale of which the Account arose;

(m) No default exists under the Account by any party thereto, and all rights and
remedies of the Borrower under the Account are freely assignable by the
Borrower;

(n) The Account has not been outstanding for more than ninety (90) days past the
invoice date and is not subject to “dating” terms;

(o) The Account shall be ineligible if 50% or more of the accounts of the
related Account Debtor and its Affiliates are more than ninety (90) days past
due from the date of original invoice therefor;

(p) The Account shall be ineligible to the extent that the aggregate amount of
all the Accounts of the Account Debtor and its Affiliates exceed 25% of all of
the Borrower’s Accounts;

(q) The Borrower has not received any note, trade acceptance, draft, chattel
paper or other instrument with respect to, or in payment of, the Account,
unless, if any such instrument has been received, the Borrower immediately
notifies the Bank and, at the Bank’s request, endorses or assigns and delivers
such instrument to the Bank;

 

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(r) The Borrower has not received any notice of (i) the death of the Account
Debtor, if an individual, or of a partner or member thereof if a partnership or
a limited liability company, (ii) the filing by or against the Account Debtor of
any proceeding in bankruptcy, receivership, insolvency, reorganization,
liquidation, conservatorship or any similar proceeding, or (iii) any assignment
by the Account Debtor for the benefit of creditors. Upon receipt by the Borrower
of any such notice, it will give the Bank prompt written notice thereof;

(s) The Account Debtor is not an Affiliate of the Borrower;

(t) The Account shall be ineligible if the related Account Debtor is domiciled
in any country other than the United States of America or the Province of
Ontario, Canada, or a Province of Canada which has adopted and has in effect the
Personal Property Security Act, unless such Account is supported by a
documentary letter of credit, duly assigned to and in the possession of the
Bank, from a financial institution acceptable to the Bank and the terms and
conditions of which are acceptable to the Bank; or is insured with a foreign
credit insurance policy acceptable to the Bank.

(u) The Account shall be ineligible if the Account Debtor is an Official Body,
unless the Borrower shall have taken all actions deemed necessary by the Bank in
order to perfect the Bank’s security interest therein, including but not limited
to any notices or filings required under the Assignment of Claims Act of 1940,
as amended, or other applicable Laws;

(v) The Bank has not deemed such Account ineligible because of uncertainty about
the creditworthiness of the Account Debtor (including, without limitation,
unsatisfactory past experiences of the Borrower or the Bank with the Account
Debtor or unsatisfactory reputation of the Account Debtor) or because the Bank
otherwise makes a determination that the collateral value of the Account to the
Bank is impaired or that the Bank’s ability to realize such value is insecure;

(w) The Account shall be eligible only to the extent that the amount owing on
the Account is not a Payment Intangible; and

(x) The Account shall comply with the additional eligibility standards, if any,
which are set forth on Exhibit B to this Rider.

Standards of acceptability shall be fixed and may be revised from time to time
solely by the Bank in its exclusive judgment. In the case of any dispute about
whether an Account is or has ceased to be a Qualified Account, the decision of
the Bank shall be final.

“Qualified Inventory” shall mean the Borrower’s Inventory of saleable raw
materials and finished goods manufactured or acquired by the Borrower in the
ordinary course of business, subject to its control or sole possession, stored
in an Eligible Location and in a manner acceptable to the Bank, valued at the
lower of cost or market value (determined on a first-in, first-out basis), which
is not subject to any Lien except Liens in favor of the Bank, which complies
with the additional eligibility standards, if any, which are set forth on
Exhibit B to this Rider, and which is and at all times continues to be
acceptable to the Bank. Standards of acceptability shall be fixed and may be
revised from time to time exclusively by the Bank in its sole discretion. In the
case of any dispute about whether Inventory is or has ceased to be Qualified
Inventory, the decision of the Bank shall be final.

“Payment Intangible” shall mean a “payment intangible” as defined in the Uniform
Commercial Code as in effect in the jurisdiction whose Law governs the
perfection of the Bank’s security interest in the Accounts.

4. Governing Law. This Rider will be interpreted and the rights and liabilities
of the parties hereto determined in accordance with the laws of the State where
the Bank’s office indicated above is located, excluding its conflicts of laws
rules.

5. Counterparts. This Rider 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

 

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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.

WITNESS the due execution hereof as a document under seal, as of the date first
written above.

 

WITNESS / ATTEST:     MISCOR GROUP, LTD.

 

    By:             (SEAL) Print Name:           Michael P. Moore Title:        
  Chief Executive Officer and President

(Include title only if an officer of entity signing to the right)

            PNC BANK, NATIONAL ASSOCIATION       By:             (SEAL)        
Joseph Luckring         Senior Vice President

 

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EXHIBIT A

TO BORROWING BASE RIDER

 

Borrowing Base Certificate    LOGO [g458840g41x37.gif]

THIS BORROWING BASE CERTIFICATE, dated as of
                                                     ,                 , is
executed and delivered by the undersigned borrower (the “Borrower”) in favor of
PNC BANK, NATIONAL ASSOCIATION (the “Bank”), pursuant to a letter agreement or
loan agreement dated as of                                         
            ,                  (including any Borrowing Base Rider executed
pursuant thereto and made a part thereof, and as amended or otherwise modified
from time to time, the “Agreement”). All initially capitalized terms used in
this Certificate shall have the meanings assigned to them in the Agreement. To
induce the Bank to make loans and other financial accommodations available to
the Borrower under the Agreement, the Borrower hereby certifies, represents and
warrants to the Bank, as of the date hereof, that (a) the person signing below
is an authorized officer or representative of the Borrower; (b) the statements
below concerning the collateral securing the Obligations are true and complete;
(c) the eligible collateral described below represents only Qualified Accounts
and Qualified Inventory; (d) the Borrower is in compliance with all of the terms
and provisions of the Agreement and the other Loan Documents; (e) all of the
Borrower’s representations and warranties in the Agreement and the other Loan
Documents are true and correct; and (f) no Event of Default has occurred and is
continuing or exists.

 

1.    Collateral Availability       

A.    Accounts Receivable

   1.    Beginning A/R Balance      $                            2.    Changes
to A/R Balance      $                            3.    Total A/R     
$                            4.    Ineligible A/R      $                        
   5.    Qualified A/R (L3 - L4)      $                            6.    Advance
Percentage                  %   

7.    A/R Borrowing Availability

       (L5 X L6)

     $                            B.    Inventory   

8.    Beginning Inventory Balance

     $                           

9.    Changes to Inventory Balance

     $                           

10.  Total Inventory

     $                           

11.  Ineligible Inventory

     $                           

12.  Qualified Inventory (L10 - L11)

     $                           

13.  Advance Percentage or Cap

           % /$               

14.  Inv. Borrowing Availability

       (lesser of L12 X L13 or cap)

     $                           

        

C.    Other Assets

  

15.  Other Collateral Value

     $                           

16.  Advance Percentage or Cap

           % / $               

17.  Other Borrowing Availability

                (L15 X L16)

     $                           

18.  Total Availability

                (Sum of L7, L14 & L17)

     $                            2.    Borrowing Availability   

19.  Maximum Line Amount

     $                           

20.  Total Availability (L18)

   $                            

21.  Maximum Borrowing Capacity (lesser of L19 and L20)

   $                            

22.  Outstanding Principal Balance

   $                            

23.  L/C’s, other items to be covered

   $                            

24.  Available to Borrow

                L21 - L22 - L23

   $                            

25.  Advance Request

   $                            

26.  New Line Balance

   $                            

27.  Collateral Coverage

   $                            

 

 

Dated:                                                                      
MISCOR GROUP, LTD. Certificate No.:                                          
                            By:           Michael P. Moore       Chief Executive
Officer and President

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EXHIBIT B

TO BORROWING BASE RIDER

The following shall constitute additional eligibility standards for Accounts, as
fully as if set forth in the definition of “Qualified Accounts” in the Rider to
which this Exhibit B is attached:

The following shall constitute additional eligibility standards for Inventory,
as fully as if set forth in the definition of “Qualified Inventory” in the Rider
to which this Exhibit B is attached:

(a) Qualified Inventory shall exclude all work in process amounts

(b) Qualified Inventory shall exclude all Slow Moving Inventory which is defined
as inventory that is in excess of a one (1) year supply.