form10qexh101_121409.htm


     

    EXHIBIT
10.1

    
 

    SECURED
LOAN AGREEMENT

     

    This
SECURED LOAN AGREEMENT dated as of October 30, 2009 (the “Date”), is entered
into by and between Elecsys Corporation, a Kansas corporation (“Borrower”) and
UMB Bank, N.A., a national banking association (“Lender”).

     

    RECITALS

     

    WHEREAS,
the City of Olathe has issued certain industrial revenue bonds to finance
Borrower’s real estate property in Olathe, and Bank Midwest currently holds the
bonds entitled Tax Exempt Industrial Revenue Bonds (DCI, Inc. Project) Series
2006A in the original principal amount of $3,680,000 (the “Series A
Bonds”).

     

    WHEREAS,
DCI, Inc. currently holds the bonds entitled Tax Exempt Industrial Revenue Bonds
(DCI, Inc. Project) Series 2006D in the original amount of $820,000 (the “Series
D Bonds”);

     

    WHEREAS,
the Borrower has requested the Lender to extend revolving credit in the amount
of Six Million Dollars ($6,000,000) for working capital and other general
business purposes; and

     

    WHEREAS,
the Lender is willing to extend such credit facility to the Borrower on the
terms and conditions contained herein;

     

    NOW,
THEREFORE, in consideration of the mutual agreements herein set forth, the
Borrower and the Lender hereby agree as follows:

     

    ARTICLE
I

    DEFINITIONS

     

     1.01.           Definitions.  For
all purposes of this Agreement, unless the context otherwise requires, the terms
defined below shall have the respective meanings hereinafter
specified.

     

    “Accounts” means and
includes all of the Borrower’s now owned or hereafter acquired accounts as
defined in the UCC and (whether included in such definition) accounts
receivable, and proceeds and all rights, securities, and guarantees with respect
to the foregoing.

     

    “Account Debtor” means
the person or entity obligated on an Account, chattel paper or general
intangible.

     

    “Acquisition” means
any transaction or series of related transactions, consummated on or after the
date of this Agreement, by which Borrower directly or indirectly (a) acquires
all or substantially all of the assets comprising one or more business units of
any other person or entity, whether through purchase of assets, merger or
otherwise or (b) acquires (in one transaction or as the most recent transaction
in a series of transactions) at least (i) a majority (in number of votes) of the
stock and/or other securities of a corporation having ordinary voting power for
the election of directors (other than stock and/or other securities having such
power only by reason of the happening of a contingency), (ii) a majority (by
percentage of voting power) of the outstanding partnership interests of a
partnership, (iii) a majority (by percentage of voting power) of the outstanding
membership interests of a limited liability company or (iv) a majority of the
ownership interests in any organization or entity other than a corporation,
partnership or limited liability company.

     

    “Agreement” and such
terms as “herein,” “hereof,” “hereto,” “hereby,” and “hereunder” and the like,
means and refers to this Secured Loan Agreement, together with any and all
schedules and exhibits attached hereto, and any and all supplements,
modifications and amendments hereof.

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    “Authorized Officer”
means any officer or officers of Borrower the authority of whom to perform acts
to be performed only by an Authorized Officer under this Agreement is evidenced
to the Lender by a certified copy of an appropriate resolution of the governing
body of Borrower.

     

    “Bond Pledge
Agreement” has the meaning set forth in Section 3.01 hereof.

     

    “Borrower” means
Elecsys Corporation.

     

    “Borrowing Base”
means, as determined by the Lender from time to time, for the Borrower, the sum
of (i) 80% of the aggregate amount of Qualified Accounts, plus (ii) fifty
percent (50%) of the aggregate amount of Qualified Inventory up to Three Million
Dollars ($3,000,000).

     

    “Borrowing Base
Certificate” means a certificate in the form of Exhibit B attached
hereto.

     

    “Business Day” means a
day other than a Saturday, a Sunday, or a day on which commercial banks in
Missouri are required or authorized to close.

     

    “Capital Asset” means
any property of a kind subject to an allowance for depreciation or amortization
under the Code or which is otherwise considered a Capital Asset
GAAP.

     

    “Capital Expenditures”
means, for any period, all payments and expenditures during such period for the
acquisition, purchase, alteration or improvement of any Capital Asset and shall
include, without limitation, all Capital Expenditures determined in accordance
with GAAP.

     

    “Closing Date” means
the date set forth in the Preamble hereof.

     

    “Code” means the
Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder.

     

    “Collateral” means all
business assets of the Borrower, now owned or hereafter acquired by the
Borrower, including without limitation, Accounts and Inventory.

     

    “Compliance
Certificate” means a certificate in the form of Exhibit A attached
hereto.

     

    “Debt” means all
indebtedness of any and every kind or nature whatsoever, as determined in
accordance with GAAP, whether heretofore or hereafter owing, arising, due or
payable by a Person to any other Person or entity and however evidenced,
created, incurred, acquired or owing.

     

    “Default” means any
event specified in Article VIII hereof
which is not initially an Event of Default but which would, if uncured, become
an Event of Default with the giving of notice or the passage of time or
both.

     

    “EBITDA” of the
Borrower for any period means the pre-tax income of the Borrower for such
period, plus Interest Expense, depreciation and amortization.

     

    “Environmental Laws”
means any and all federal, state and local laws (whether under common law,
statute, rule, regulation or otherwise), requirements under permits or other
authorizations issued with respect thereto, and other orders, decrees,
judgments, directives or other requirements of any governmental authority
relating to or imposing liability or standards of conduct (including disclosure
or notification) concerning protection of human health or the environment or
Hazardous Materials or any activity involving Hazardous Materials, all as
previously and in the future may be amended.

     

    “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended.

     


    
      
         


      

      
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    “Event of Default” has
the meaning set forth in Article VIII
hereof.

     

    “GAAP” means generally
accepted accounting principles in the United States, consistently
applied.

     

    “Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, any agency, body, commission, court or department
thereof, whether federal, state, local or foreign.

     

    “Hazardous Materials”
means, but is not limited to, any substance, chemical, material or waste (a) the
presence of which causes a nuisance or trespass of any kind; (b) which is
regulated by any federal, state or local governmental authority because of its
toxic, flammable, corrosive, reactive, carcinogenic, mutagenic, infectious,
radioactive, or other hazardous property or because of its effect on the
environment, natural resources or human health and safety, including, but not
limited to, petroleum and petroleum products, asbestos-containing materials,
polychlorinated biphenyls, lead and lead-based paint, radon, radioactive
materials, flammables and explosives; or (c) which is designated, classified, or
regulated as being a hazardous or toxic substance, material, pollutant, waste
(or a similar such designation) under any federal, state or local law,
regulation or ordinance, including under any Environmental Law such as the
Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C.
§9601 et seq.), the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. §11001 et seq.), the Hazardous
Substances Transportation Act (49 U.S.C. §1801 et seq.), or the Clean Air
Act (42 U.S.C. §7401 et
seq.).

     

    “Interest Expense” of
any Person for any period means the aggregate amount of interest accrued during
the period in question by such Person on all indebtedness for borrowed money, as
determined and in accordance with GAAP.

     

    “Inventory” means and
includes all of the Borrower’s now owned and hereafter acquired inventory (as
defined in the UCC), including, without limitation, raw materials, raw material
packaging, sub-assemblies, work in process and finished goods, and all returned
or repossessed goods now, or hereafter, in the possession or under the control
of the Borrower, and all documents of title or documents representing the
same.

     

    “Lender” means UMB
Bank, N.A., and any successors and assigns thereof.

     

    “Lien” means any lien,
mortgage, pledge, security interest, charge encumbrance or governmental levy or
assessment of any kind whether voluntary or involuntary (including any
conditional sale or other title retention agreement and any lease in the nature
thereof), and any agreement to give any lien, mortgage, pledge, security, charge
or encumbrance.

     

    “Loan Documents” means
this Agreement, the Note, the Security Agreement and any other documents or
instruments now, previously or hereafter executed and delivered by or on behalf
of Borrower to Lender as required by Lender to further evidence, govern or
secure the Obligations, and shall be deemed to include all modifications and
amendments thereof, if any.

     

    “Loans” means all
Revolving Credit Loans.

     

    “Multi-Employer Plan”
means a “multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is
maintained for employees of Borrower or any ERISA affiliate or to which Borrower
or any ERISA affiliate has contributed in the past or currently
contributes.

     

    “Net Income” of any
Person for any period means the net income of such Person for such period after
deducting from its revenues all operating expenses, provisions for taxes and
reserves and

     


    
      
         


      

      
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    all other
proper deductions, all determined in accordance with GAAP; provided, however, that in
computing such net income (or deficit), there shall be excluded therefrom (a)
any write-up of any asset; and (b) aggregate net gain or loss during such period
arising from extraordinary or nonrecurring transactions.

     

    “Note(s)” means the
Secured Revolving Credit Note dated the date hereof and all extensions, renewals
and modifications thereof and replacements therefore.

     

    “Obligations” means
(i) all obligations of Borrower to Lender of every type and description, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, hereunder or on account of the Revolving Credit Loans,
including without limitation, the Note, as now in effect or hereafter modified
or amended; (ii) all other obligations arising under the Loan Documents
including without limitation, performance of all terms and provisions of the
Loan Documents and all costs of collection and enforcement of any and all of the
Loan Documents, including (to the extent permitted by applicable law),
reasonable attorneys’ fees and expenses (including the allocable expenses and
fees of attorneys employed by Lender); and (iii) all other obligations and
liabilities of Borrower to Lender, whether now existing or hereafter arising, of
any type or nature, whether direct or indirect, absolute or contingent, due or
to become due.

     

    “Pension Plan” means
any employee pension benefit plan within the meaning of Section 3(2) of ERISA
covering any officers or employees of the Borrower.

     

    “Permitted Lien” has
the meaning set forth in Section 6.01 hereof.

     

    “Person” means and
includes an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an unincorporated organization or any other legal
entity or organization, including a Governmental Authority.

     

    “Prime Rate” means the
per annum rate of interest published from time to time as the U.S. Prime Rate in
the U.S. edition of The Wall
Street Journal.

     

    “Qualified Accounts”
means all of the Borrower’s Accounts which contain selling terms and conditions
reasonably acceptable to Lender.  The net amount of any Eligible
Account against which Borrower may borrow shall exclude all returns, discounts,
credits and offsets of any nature.  Unless otherwise agreed to by
Lender in writing, Qualified Accounts do not include:

     

    (1)           Accounts
with respect to which the Account Debtor is a subsidiary of, or affiliated with,
the Borrower or its equity owners, officers or directors;

     

    (2)           Accounts
with respect to which goods are placed on consignment, guaranteed sale, or other
terms by reason of which the payment by the Account Debtor may be
conditional;

     

    (3)           Accounts
which are subject to dispute, counterclaim or setoff;

     

    (4)           Accounts
with respect to which the goods have not been shipped or delivered, or the
services have not been rendered, to the Account Debtor;

     

    (5)           Accounts
with respect to which Lender, in its reasonable discretion, deems
creditworthiness or financial condition of the Account Debtor to be
unsatisfactory;

     

    (6)           Accounts
of any Account Debtor who has filed or has had filed against it a petition in
bankruptcy or an application for relief under any provision of any state or
federal bankruptcy, insolvency, or debtor-in-relief acts; or who has a trustee,
custodian, or receiver

     


    
      
         


      

      
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    for the
assets of such Account Debtor; or who has made an assignment for the benefit of
creditors or has become insolvent or fails generally to pay its debts (including
is payrolls) as such debts become due; or

     

    (7)           Accounts
which have not been paid in full within ninety (90) days from the invoice
date.

     

    “Qualified Inventory”
means all of the Borrower’s Inventory of raw materials and finished goods,
EXCEPT:

     

    (1)           Any
such Inventory owned by the Borrower which is not free and clear of all security
interests, liens, encumbrances and claims of third parties except liens, the
priority of which is subordinated to the priority of Lender’s liens in the
Inventory; and

     

    (2)           Any
such Inventory which Lender in its reasonable discretion, deems to be obsolete,
unsaleable, damaged, defective or unfit for further processing.

     

    “Revolving Credit
Commitment” means $6,000,000.

     

    “Revolving Credit
Loan” means each loan made or established pursuant to Section 2.01
hereof.

     

    “Revolving Credit Maturity
Date” means October 30, 2011.

     

    “Security Agreement”
means the Security Agreement dated the date hereof in favor of
Lender.

     

    “Series A Bonds” means
the bonds set forth in the Recitals hereof.

     

    “Series D Bonds” means
the bonds set forth in the Recitals hereof.

     

    “Tangible Net Worth”
means with respect to any Person at any date, such Person’s equity ownership
minus the aggregate of any treasury stock or similar equity, any intangible
assets and goodwill and any obligations due from stockholders, members,
employees and/or affiliates.

     

    “UCC” means the
Uniform Commercial Code in effect in Missouri from time to time.

     

    “Welfare Plan” means a
“welfare plan” as such term is defined in Section 3(1) of ERISA, which is
established or maintained by Borrower, any subsidiary or any ERISA affiliate,
other than a Multi-Employer Plan.

     

     1.02.           Accounting Terms and
Determinations.  Except as otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made and all financial
statements required to be delivered under this Agreement shall be prepared in
accordance with GAAP as in effect from time to time, applied on a basis
consistent (except for changes approved by Lender and by Borrower’s independent
certified public accountants) with the most recent audited financial statements
of Borrower delivered to Lender.  If at any time any change in GAAP
would affect the computation of any financial ratio or requirement set forth in
any Loan Document, Borrower and Lender shall negotiate in good faith to amend
such ratio or requirement to preserve the original intent thereof in light of
such change in GAAP; provided, that, until so amended, (i) such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such
change therein and (ii) the Borrower shall provide to Lender financial
statements and other documents required hereunder

     

     


    
      
         


      

      
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    setting
forth a reconciliation between calculations of such ratio or requirement before
and after giving effect to such change in GAAP.

     

    ARTICLE
II

    THE LOANS

     

     2.01.           The Revolving Credit
Loans.  Subject to all terms and conditions hereof, the Lender
agrees to lend to the Borrower during the period of time beginning on the date
hereof and ending on the Revolving Credit Maturity Date, such amount or amounts
as the Borrower may from time to time request to borrow up to and including, but
not exceeding at any time, Lender’s Revolving Credit Commitment for an
outstanding aggregate principal amount owing to it of up to Six Million Dollars
($6,000,000), as the same may be decreased pursuant to the terms hereof (the
“Revolving Credit”).  The Borrower may prepay all or any part of the
Obligations outstanding under the Revolving Credit at any time, without notice
and without penalty.  Any prepayment of the full amount of such
Obligations shall include accrued interest thereon.  Upon any payment
prior to the Revolving Credit Maturity Date of the Obligations under the
Revolving Credit, Lender agrees to loan the Borrower from time to time during
the period beginning upon the execution of this Agreement and ending on the
Revolving Credit Maturity Date, an aggregate principal amount not to exceed the
difference between (i) the then outstanding aggregate principal amount of the
Borrower’s aggregate Obligations under the Revolving Credit, and (ii) the
Revolving Credit Commitment; provided, however, that
Lender shall have no obligation to make any Revolving Credit Loan under the
Revolving Credit if a Default or an Event of Default has occurred and is then
continuing.

     

    At the
time of execution hereof, any Authorized Officer of the Borrower shall execute a
Note in the original principal amount of Six Million Dollars
($6,000,000).  The Note shall be due and payable in full on the
Revolving Credit Maturity Date.  As the Borrower desires to obtain
Loans pursuant to the Revolving Credit hereunder, an Authorized Officer of
Borrower shall give Lender notice of the Borrower’s intention to borrow pursuant
to the Revolving Credit as early as possible on or before the proposed date of
borrowing.  Lender shall make disbursements upon the verbal request of
the Borrower made telephonically or by electronic communication made by an
Authorized Officer or an employee designated in writing by an Authorized
Officer.  Lender may rely on any such verbal or electronic request
received by it from a Person reasonably and in good faith believed by Lender to
be an Authorized Officer or an employee designated by an Authorized
Officer.  All borrowings and reborrowings shall be in amounts of not
less than $50,000.  Repayments may be in any amount except for
mandatory prepayments of Loans under the Revolving Credit as required by Section
2.03.  Upon compliance with all conditions of lending stated in this
Agreement applicable to the Revolving Credit, Lender shall disburse the amount
of the requested Loan under the Revolving Credit to the Borrower by depositing
the same in Borrower’s primary deposit account at Lender, and the Borrower
hereby authorizes the disbursement of Loans under the Revolving Credit in such
manner.  All Loans made by Lender under the Revolving Credit and
payments thereon made by the Borrower shall be recorded by Lender on its books
and records, and the principal amount outstanding from time to time, plus
interest payable thereon, shall be determined by reference to the books and
records of Lender.  Such books and records shall be rebuttably
presumed to be correct as to such matters.  All Obligations of the
Borrower under the Revolving Credit shall be reduced by the Borrower to zero on
the Revolving Credit Maturity Date.

     

    Notwithstanding
stated herein to the contrary, at no time shall the outstanding principal amount
of all Revolving Credit Loans exceed (i)eighty percent (80%) of the total
Qualified Accounts of the Borrower, plus (ii) fifty percent (50%) of the
Borrower’s Qualified Inventory up to a maximum of $3,000,000, all as reported on
the most recent Borrower’s Certificate delivered to the Lender as required
herein.

     


    
      
         


      

      
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    Interest
on the Loans.

     

    (a)           Rates.

     

    (i)           Revolving Credit Loans Rate
of Interest.  Subject to all of the terms and conditions
hereof, prior to the commencement of an Event of Default, the Revolving Credit
Loans shall bear interest at a rate per annum equal to the rate set forth below,
adjusted daily, but in no event less than three and one-half percent
(3.5%).

     

    
      	
              Pricing Level

            	
              Debt/Tangible Net Worth

            	
              Rate

            
	
              1

            	
              2.50:1,
      or higher

            	
              Prime
      Rate + 1⁄2%

            
	
              2

            	
              1.51
      to 2.49:1

            	
              Prime
      Rate

            
	
              3

            	
              1.50:1,
      or less

            	
              Prime
      Rate – 1⁄2%

            


    

    


    (ii)           The
Borrower’s Debt to Tangible Net Worth shall be determined on a quarterly basis
based on the Compliance Certificate delivered with respect to the immediately
preceding fiscal quarter; provided, that if a
Compliance Certificate is not delivered when due, Pricing Level 1 shall apply as
of the first (1st)
Business Day of the month following the date such Compliance Certificate was
required to have been delivered (unless delivered prior thereto) and shall
remain in effect until the date on which such Compliance Certificate is
delivered.  Any change in the applicable rate shall be effective
immediately upon delivery of such Compliance Certificate.

     

    (iii)           Default Interest
Rate.  The Loans will bear interest after and during the
continuation of any Event of Default by adding two percent (2%) to the interest
rate otherwise applicable thereto.

     

    (b)           Calculation of
Interest.  Interest shall be calculated by applying the ratio
of the interest rate over a year of 360 days, multiplied by the outstanding
balance, multiplied by the actual number of days the principal balance is
outstanding.

     

    (c)           Determination of Interest
Rates.  All determinations of interest rates applicable to
Loans under this Agreement shall be determined by Lender and absent manifest
error, be binding on the Borrower.

     

    (d)           Interest Rate
Limitation.  Notwithstanding the provisions of this Agreement
or the other Loan Documents, in no event shall the amount of interest paid or
agreed to be paid by Borrower exceed an amount computed at the highest rate of
interest permissible under applicable law.  If, from any circumstances
whatsoever, fulfillment of any provision of this Agreement, the Note or any
other Loan Document, at the time performance of such provision shall be due,
shall involve exceeding the interest rate limitation validly prescribed by law
which a court of competent jurisdiction may deem applicable hereto, then the
obligations to be fulfilled shall be reduced to an amount computed at the
highest rate of interest permissible under applicable law, and if for any reason
whatsoever Lender shall ever receive as interest an amount which would be deemed
unlawful under such applicable law, such interest shall be automatically applied
to the payment of principal of the amounts outstanding hereunder (whether or not
then due and payable) and not to the payment of interest, or shall be refunded
to Borrower if such principal and all other obligations of Borrower to Lender
have been paid in full.

     

     


    
      
         


      

      
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    Payments.

     

    (e)           Principal.   In
the event that the maximum principal amount of Revolving Credit Loans which is
outstanding under the Revolving Credit is at any time greater than the maximum
amount which is then authorized to be outstanding thereunder, the Borrower will
immediately, upon written notice from the Lender, pay to the Lender the
difference between the outstanding principal amount and the principal amount
then authorized to be outstanding thereunder plus all accrued interest
thereon.  All outstanding principal is due and payable in full on the
Revolving Credit Maturity Date.

     

    (f)           Interest.  Interest
on all the Revolving Credit Loans shall be payable monthly on the fifth (5th) day
of each calendar month.  Any unpaid accrued interest is due and
payable in full on the Revolving Credit Maturity Date.

     

    (g)           Method of
Payment.  All payments by the Borrower hereunder shall be made
to Lender at its office at 1010 Grand Boulevard, Kansas City, Missouri 64106 and
in immediately available funds, prior to 2:00 p.m. Kansas City time on the date
of such payment.  All such payments shall be made without setoff or
counterclaim and without reduction for, and free from, any and all present and
future levies, imposts, duties, fees, charges, deductions withholdings,
restrictions or conditions of any nature, including taxes imposed on the income
of Lender imposed by any government or any political subdivision or taxing
authority thereof.  Any payments received after 2:00 p.m. Kansas City
time shall be deemed received upon the following Business Day.

     

    (h)           Business
Day.  If any payment of principal or interest on any Loan
becomes due and payable on a day other than a Business Day, the maturity of such
payment shall be extended to the next Business Day and interest shall be payable
during such extension of maturity.

     

     2.02.           The Series A
Bonds.  Subject to all terms and conditions hereof, the Lender
shall purchase the Series A Bonds from Bank Midwest for the purchase price equal
to the outstanding principal balance of $3,333,997.52 plus accrued, unpaid interest
thereon through the Closing Date; provided, however, that the Lender shall have
received written confirmation from the City of Olathe, the bond trustee and
their counsel that all requirements for the transfer of the Series A Bonds to
the Lender have been complied with and that the Lender shall hold good title to
the Series A Bonds free and clear of all encumbrances or
restrictions.  The purchase price for the Series A Bonds to be paid by
the Lender must be less than 80% of the appraised value of the real estate
securing the Series A Bonds.

     

    ARTICLE
III

    CONDITIONS
PRECEDENT

     

    Lender’s
obligation to Borrower to make any Loan pursuant to this Agreement shall be
subject to compliance by Borrower with all of its obligations hereunder and to
the following specific conditions:

     

     3.01.           Pledge of the Series D
Bonds.  The holder of the Series D Bonds shall have executed an
agreement for the benefit of Lender whereby such holder pledges the Series D
Bonds to Lender as collateral security for the Loans (the “Bond Pledge
Agreement”), in such form and substance satisfactory to Lender.

     

     3.02.           No Adverse Change in
Business.  Except for items disclosed in writing to the Lender
on or before the date hereof, Borrower shall not have experienced any material
adverse change in its

     


    
      
         


      

      
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    business,
operations, financial condition or otherwise and no material litigation has been
filed or threatened against it and no other material adverse event has occurred
since the date hereof.

     

     3.03.           Representations.  The
covenants, representations and warranties made herein shall be true and accurate
as of the date hereof (except to the extent any representations or warranties as
to the financial condition of Borrower relate solely to an earlier specified
date).

     

     3.04.           Required Approvals and
Consents.  All approvals required by the governing body, as the
case may be, of Borrower for the execution of this Agreement, the borrowings
contemplated hereunder and the execution of all Loan Documents to be executed
hereunder have been obtained and shall be in full force and effect.

     

     3.05.           No
Defaults.  Borrower shall be in compliance with all of the
terms and conditions hereof, and no Default or Event of Default shall have
occurred.

     

     3.06.           Other.  In
addition to compliance with Sections 3.01 through 3.05 hereof, prior to the
making of the first Loan, Borrower shall deliver to Lender:

     

    (a)           Duly
authorized and executed originals of this Agreement, the Security Agreement, the
Note and the Bond Pledge Agreement, all in form and substance satisfactory to
Lender;

     

    (b)           Certified
copies of Borrower’s organizational documents;

     

    (c)           A
certificate of good standing issued by the Secretary of State for the state of
organization of Borrower within thirty (30) days of the Closing
Date;

     

    (d)           Certificates
of good standing issued by the Secretary of State or equivalent public official
or each other state or jurisdiction in which Borrower does business or owns any
property, certifying as to its due qualification or registration and good
standing under the laws of such state or jurisdiction; and

     

    (e)           A
certified or executed resolution of the governing body of Borrower duly
authorizing the borrowing contemplated hereunder and the execution, delivery and
performance of the Loan Documents and designating the Authorized
Representative(s) by name and title and providing for each a specimen signature,
in a form acceptable to Lender.

     

    ARTICLE
IV

    REPRESENTATIONS AND
WARRANTIES

     

    Borrower
represents and warrants to Lender (which representations and warranties shall
survive delivery of the Note and shall continue so long as any sums or other
obligations remain outstanding under the Note or this Agreement)
that:

     

     4.01.           Existence.  Borrower
is a corporation duly organized, validly existing, and in good standing under
the laws of the state of its respective organization.  Borrower is
duly qualified and in good standing as a foreign legal entity, and authorized to
do business, in all states and jurisdictions wherein the character of the
properties owned or held by it or the business being transacted by it makes such
qualification necessary except to the extent the failure to so qualify would not
create a material adverse effect on the business or financial condition of
Borrower.

     

     4.02.           Legal Power; Binding
Effect.  Borrower has full legal power to carry on its business
as now conducted, to make the borrowings herein provided for, to execute and
deliver this

     


    
      
         


      

      
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    Agreement
and the Note and to perform its obligations hereunder and
thereunder.  Borrower has full legal power to execute and deliver all
other documents and instruments referred to or mentioned herein and to perform
its obligations thereunder.  This Agreement, the Note and other Loan
Documents do, or when executed and delivered by Borrower will, constitute the
legal, valid and binding obligations of the Borrower enforceable in accordance
with their respective terms, except as enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforceability of creditors’ rights generally and by general
principles of equity.

     

     4.03.           Authorization and
Consents.  The borrowings herein provided for and the execution
and delivery of this Agreement, the Note and all other Loan Documents and the
performance of the obligations hereunder and thereunder, have been duly
authorized and will not contravene any provisions of law or conflict with or
breach or constitute a default under any indenture, agreement or security
agreement to which Borrower is a party or by which Borrower is bound, or require
the consent, approval or authorization of any Governmental Agency or third
party.  No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except as have been
obtained or made prior to the date hereof and except for filings or recordings
of UCC financing statements with respect to the Collateral), or exemption by,
any Governmental Authority is required in connection with the execution,
delivery and performance by Borrower of this Agreement or any of the other Loan
Documents.

     

     4.04.           Financial
Statements.  The financial statements delivered to Lender,
fairly present the financial condition of Borrower at such date and the results
of Borrower’s operations for such period, and, except as previously disclosed to
the Lender in writing, no material adverse change in the financial condition of
Borrower has occurred since the date of such financial statements.

     

     4.05.           Litigation and Contingent
Obligations.  Except as set forth on Schedule 4.05 hereto,
there are no actions, suits or proceedings pending or threatened against
Borrower at law or in equity, in any court or before any governmental department
or agency.  None of the actions, suits or proceedings described in
Schedule 4.05,
individually or in the aggregate are reasonably likely to result in any material
adverse change in the properties, assets, business or condition, financial or
otherwise, of Borrower, or on the ability of Borrower to perform its obligations
under this Agreement, the Note and the other Loan Documents.

     

     4.06.           Accuracy of
Information.  All factual information heretofore or
contemporaneously furnished by or on behalf of Borrower to Lender for purposes
of or in connection with this Agreement or any transaction contemplated hereby
is and all other such factual information hereafter furnished by or on behalf of
Borrower to Lender will be true and accurate in every material respect on the
date as of which such information is dated or certified and as of the date
hereof, and such information is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to make such
information not misleading.

     

     4.07.           Tax Returns and
Payment.  Borrower has filed all required federal, state and
local tax returns and has paid all taxes as shown on such returns as they have
become due.  There is no ongoing audit or other governmental
investigation of the tax liability of Borrower and there is no unresolved claim
by a taxing authority concerning it for any period for which returns have been
filed or were due.

     

     4.08.           Title to
Property.  Borrower has good and marketable title to all of its
respective properties, and such properties are free and clear of all Liens,
except Permitted Liens.

     

     4.09.           Licenses, Permits,
etc.  Borrower owns, possesses or has the right to use all
copyrights, licenses, trademarks, service marks, trade names, permits and other
rights, necessary to operate its business and to carry on its businesses as
presently conducted or as presently planned to

     


    
      
         


      

      
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    be
conducted.  Each of the foregoing is in full force and effect, and
Borrower is in compliance in all material respects with all the terms and
conditions of each of the foregoing, with no known conflict with the rights of
others.  To the best of Borrower’s knowledge and belief, no event has
occurred which permits, or after the giving of notice or the lapse of time, or
both, would permit, the revocation or termination of any patents, copyrights,
licenses, trademarks, service marks, trade names, permits or other rights so as
to have a material adverse effect on the financial condition or business of
Borrower.

     

     4.10.           Insurance.  Borrower
is adequately insured for its benefit under policies issued by insurers of
nationally recognized responsibility.  No notice of any pending or
threatened cancellation or premium increase has been received by Borrower with
respect to any of such insurance policies.  Borrower is in substantial
compliance with all conditions contained in such insurance
policies.

     

     4.11.           No
Violation.  Borrower is not in violation of any term of its
organizational documents or any term of any agreement, instrument, judgment,
decree or order applicable to it, or in violation of any term of any statute,
rule or governmental regulation applicable to it the violation of which might
materially affect its business in an adverse manner.

     

     4.12.           Regulation
U.  No part of the borrowings hereunder will be used to
purchase or carry any margin stock in violation of Regulation U of the
Board of Governors of the Federal Reserve System or to extend credit for the
purpose of purchasing or carrying any margin stock in violation of
Regulation U of the Board of Governors of the Federal Reserve
System.  Neither the making of any borrowing hereunder, nor the use or
the proceeds, will violate or be inconsistent with Regulations T, U or X of the
Board of Governors of the Federal Reserve System.

     

     4.13.           Environmental
Matters.  The business, operations and property, real and
personal, of the Borrower complies in all respects with Environmental Laws,
except where the failure to so comply would not (individually or in the
aggregate) have a material adverse effect on the property, business or
operations of Borrower.

     

     4.14.           No
Default.  No condition, circumstance, event, agreement,
document, instrument, restriction, litigation or proceeding (or threatened
litigation or proceeding or basis therefor) exists which could (i) adversely
affect the validity or priority of the Liens granted in the Collateral under the
Loan Documents; (ii)  materially and adversely affect the ability of
Borrower to perform its obligations under the Loan Documents; (iv) constitute an
Event of Default under any of the Loan Documents or an event which, with the
giving of notice, passage of time, or both, would constitute such an Event of
Default.

     

     4.15.           Pension and Welfare
Plans.  Each Pension Plan and Welfare Plan of Borrower complies
in all material respects with ERISA and all other applicable statutes and
governmental and regulatory rules and regulations; no Reportable Event (as
defined in Section 4043 of ERISA) has occurred and is continuing with respect to
any Pension Plan; neither Borrower nor any ERISA affiliate has withdrawn from
any Multi-Employer Plan in a “complete withdrawal” or a “partial withdrawal” as
defined in Sections 4203 or 4205 of ERISA respectively; neither Borrower nor any
ERISA affiliate has entered into an agreement pursuant to Section 4204 of ERISA;
neither Borrower nor any ERISA affiliate has in the past contributed to or
currently contributes to a Multi-Employer Plan; neither Borrower nor any ERISA
affiliate has any withdrawal liability with respect to a Multi-Employer Plan; no
steps have been instituted by Borrower or any ERISA affiliate to terminate any
Pension Plan; no condition exists or event or transaction has occurred in
connection with any Pension Plan, Multi-Employer Plan or Welfare Plan which
could result in the incurrence by Borrower or any ERISA affiliate of any
material liability, fine or penalty; and neither Borrower nor any ERISA
affiliate is a “contributing sponsor” as defined in Section 4001(a)(13) of ERISA
of a “single-employer plan” as defined in Section 4001(a)(15) of ERISA which has
two or more contributing sponsors at least two of whom are not under common
control.  Except as disclosed on

     


    
      
         


      

      
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    the
financial statements delivered by Borrower to Lender, neither Borrower nor any
ERISA affiliate has any liability with respect to any Welfare Plan.

     

     4.16.           Labor
Matters.  Borrower is not a party to any labor dispute which
could reasonably be expected to have a material adverse effect on the
properties, assets, business or condition, financial or otherwise, of
Borrower.  There are no strikes or walkouts relating to any labor
contract to which Borrower is subject.  Hours worked and payments made
to the employees of Borrower have not been in violation of (a) the Fair Labor
Standards Act or (b) any other applicable law dealing with such matters,
the violation of which could reasonably be expected to have a material adverse
effect on the properties, assets, business or condition, financial or otherwise,
of the Borrower.  All payments due from Borrower in respect of wages,
employee health and welfare insurance and/or other benefits have been paid or
accrued as a liability on its respective books.

     

     4.17.           OFAC.  Borrower
shall (i) ensure that no person or entity that owns a controlling interest in or
otherwise controls Borrower is or shall be listed on the Specially Designated
Nationals and Blocked Person List or other similar lists maintained by the
Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or
included in any Executive Orders, (ii) not use or permit the use of any Loan
proceeds to violate any of the foreign asset control regulations of OFAC or any
enabling statute or Executive Order relating thereto, and (iii) comply with
all applicable Bank Secrecy Act (“BSA”) laws and regulations, as
amended.

     

     4.18.           Business
Loan.  The Loans, including interest rate, fees and charges as
contemplated hereby, are business loans; the Revolving Credit Loans are exempted
transactions under the Truth In Lending Act, 12 U.S.C. §1601 et seq.; and the Loans do
not, and when disbursed will not, violate the provisions of the usury laws of
any state which may have jurisdiction over this transaction, Borrower or any
property securing the Loans.

     

    ARTICLE
V

    AFFIRMATIVE
COVENANTS

     

    Borrower
covenants and agrees that from the date hereof and until payment in full of all
of Borrower’s Obligations under this Agreement, it will comply with each of the
following provisions:

     

     5.01.           Organizational
Existence/Compliance with Laws.  Borrower will do or cause to
be done, all things necessary or appropriate to preserve and keep in full force
and effect and in good standing its organizational existence, authority to
continue to do business and conduct its operations and its rights now or
hereafter possessed.  Borrower will comply with all applicable
statutes, laws, ordinances, rules, regulations and orders of, and all applicable
restrictions imposed by, all Governmental Authorities.

     

     5.02.           Financial and Business
Information.

     

    (a)           Annual
Report.  Borrower will furnish to Lender as soon as reasonably
available after the end of each fiscal year beginning with the fiscal year
ending April 30, 2010, (which year is being adopted by the Borrower), but in no
event later than one hundred twenty (120) days following the end of its fiscal
year, its respective financial statements including, at a minimum, a balance
sheet, statements of income and owner’s equity and a statement of cash flows for
such fiscal year, all of which shall have been audited by independent certified
public accountants selected by Borrower and reasonably acceptable to Lender and
prepared in conformity with GAAP.

     

    (b)           Quarterly
Reports.  Borrower will furnish to Lender as soon as reasonably
available, but in no event later than thirty (30) days after the end of each
calendar quarter

     


    
      
         


      

      
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    commencing
with October 31, 2009, copies of the unaudited balance sheet of Borrower and the
related statement of operations for such quarter and year to date.

     

    (c)           Other Financial
Information.  Borrower further agrees to at all times keep
accurate and complete records of its financial condition and of its assets, and
it agrees that it will furnish to Lender, at Borrower’s expense, from time to
time such other and further information regarding its financial condition as
Lender may reasonably request, including upon such request by Lender, an
opportunity or opportunities for employees or representatives of Lender to
inspect, audit, check, examine and copy books and records of Borrower as well as
to inspect all collateral and meet with representatives of Borrower to discuss
the business and financial condition of Borrower.

     

    (d)           Quarterly Compliance
Certificates.  Within thirty (30) days after the end of each
calendar quarter commencing with the quarter ending October 31, 2009, Borrower
will furnish to Lender a Compliance Certificate of an Authorized Officer of
Borrower in the form of Exhibit A attached hereto (i) setting forth in
reasonable detail the calculations required to establish whether Borrower is in
compliance with the requirements of Sections 5.11 and 6.07 on the last day of
the calendar quarter to which such financial statements apply; and
(ii) stating, to the best of his or her knowledge and belief after due
inquiry and review of Borrower’s books and records, whether there exists on the
date of such certificate any Default or Event of Default and, if any Default or
Event of Default exists, setting forth the details thereof and the action which
Borrower is taking or proposes to take with respect thereto.

     

    (e)           Monthly Borrowing Base
Certificates.  The Borrower will furnish to Lender a Borrowing
Base Certificate within twenty (20) days after the end of each month commencing
with November 30, 2009, in the form of Exhibit B attached hereto showing the
Borrowing Base as of the last day of such month, such Borrowing Base Certificate
to include a listing and aging of accounts receivable and a listing of
inventory.

     

    (f)           Notice of Material Adverse
Events.  Borrower shall promptly give written notice to Lender
of the occurrence of any and all Material Adverse Events.  For
purposes hereof, “Material Adverse Event” means an event or condition which
makes the payment of Borrower’s Obligations to Lender, when due, materially less
likely.

     

     5.03.           Maintenance of
Property.  Borrower shall:

     

    (a)           Keep,
preserve and maintain, its property and assets used or useful in the conduct of
its businesses and cause the same to be kept in good repair, working order and
condition (ordinary wear and tear excepted), and to make from time to time such
repairs, renewals, replacements, additions and improvements thereto as
management deems necessary and appropriate; and

     

    (b)           Comply
at all times in all material respects with the provisions of any and all
material agreements to which it is a party, and shall suffer no loss,
forfeiture, amendment or modification thereof or thereunder except for a loss,
forfeiture, amendment or modification which would not have a material adverse
effect of its business or financial condition.

     

     5.04.           Taxes, Debt and
Claims.  Borrower will pay and discharge all taxes,
assessments, governmental charges or levies invoked upon it or its income or
profits or its property or assets and all Debt payable by it before the same
shall be deemed in default, as well as all lawful claims for labor, materials
and supplies which, if unpaid, might become a Lien or charge upon such property
or assets or any part thereof, provided, however, that
Borrower shall not be required to pay and discharge any such tax, assessment,
charge, levy, claim or indebtedness so long as the validity

     


    
      
         


      

      
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    thereof
shall be contested in good faith by an appropriate proceeding, and the Borrower
shall have set aside on its books adequate reserves to cover the contested
item.  Borrower shall also faithfully perform, observe and discharge
all covenants, conditions and obligations which are imposed upon it by any and
all other agreements securing or evidencing any Debt or pursuant to which such
Debt was created or issued.

     

     5.05.           Location of
Records.  The location of Borrower’s books and records shall be
located at its address listed in the notice provisions of Section 9.01
hereof.  Such location shall not be changed by Borrower without giving
written notice of the address of the new location to Lender at least thirty (30)
days prior to such a change.

     

     5.06.           Use of
Proceeds.  The proceeds of the Revolving Credit Loans shall be
used by the Borrower for working capital and other general business
purposes.

     

     5.07.           ERISA.  Borrower
shall promptly pay and discharge all obligations and liabilities arising under
ERISA of a character which if unpaid or unperformed might result in the
imposition of a Lien against any of their properties or assets, and will
promptly notify Lender of the occurrence of any reportable event (as defined in
Section 4043 of ERISA) which might result in the termination of any Pension Plan
or appointment of a trustee therefore.  Borrower shall also notify
Lender of their intention to terminate any Pension Plan or withdraw therefrom
unless it shall be in compliance with all terms and conditions of this Agreement
after giving effect to any liability resulting from such termination or
withdrawal.

     

     5.08.           Securities
Restrictions.  Borrower shall comply with all restrictions
regarding securities acquired with loan proceeds imposed by the Code and United
States Treasury Regulations, including, without limitation, restrictions
concerning subjection of the securities to a put, call or other option of
buy-sell or similar arrangement.

     

     5.09.           Operating
Accounts.  Borrower shall establish its primary operating
accounts with Lender, and Borrower shall maintain its primary operating accounts
with Lender until the Obligations are paid in full.

     

     5.10.           Listed on
NASDAQ.  Borrower shall remain listed on the NASDAQ stock
exchange or other like exchange and Borrower shall remain in strict compliance
with all requirements for a publicly traded company.

     

     5.11.           Minimum Tangible Net
Worth.  Borrower will maintain a minimum Tangible Net Worth of
at least Five Million Dollars ($5,000,000), tested as of the end of each fiscal
quarter through April 30, 2010, and thereafter the Borrower will maintain
a  minimum Tangible Net Worth, tested as of the end of each fiscal
quarter, of at least Five Million Five Hundred Thousand Dollars
($5,500,000).

     

    ARTICLE
VI

    NEGATIVE
COVENANTS

     

    Borrower
covenants and agrees that from the date hereof and until payment in full of all
Borrower’s Obligations under this Agreement, it will comply with each of the
following provisions:

     

     6.01.           Liens.  Except
as otherwise provided herein, Borrower will not:

     

    (a)           create
or incur or suffer to be created or incurred or to exist any encumbrance,
mortgage, pledge, hypothecation, Lien (statutory or other), charge, assignment,
deposit arrangement, claim, security interests or other priority or preferential
arrangement of any

     


    
      
         


      

      
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    kind upon
any of the Collateral, whether now owned or hereafter acquired, or upon the
income or profits therefrom.

     

    (b)           enter
into or permit to exist any arrangement or charges or other security interests
with respect to the Collateral, except to the extent any such prohibition is
imposed by applicable law or a regulatory agency;

     

    (c)           transfer
any of the Collateral for the purpose of subjecting the same to any obligation
in priority to payment of the Lender;

     

    (d)           sell,
assign, pledge or otherwise transfer for security any of its Accounts or
Inventory, contract rights, general intangibles or chattel paper with or without
recourse; provided,
however, that it may create or incur or suffer to be created or incurred
or to exist the following (collectively, “Permitted Liens”):

     

    (i)           Liens
in favor of Lender;

     

    (ii)           Liens
to secure taxes, assessments and other governmental charges or claims for labor,
material or supplies to the extent that payment thereof shall not at the time be
required to be made in accordance with Section 5.04; and

     

    (iii)           Liens
arising in the ordinary course of business for sums not due or sums being
contested in good faith and by appropriate proceedings and not involving any
deposits or advances or borrowed money or the deferred purchase price of
property or services.

     

     6.02.           Fundamental
Changes.  Without Lender’s prior written consent, which will
not be unreasonably withheld, Borrower will not amend its organizational
documents; wind up, liquidate, or dissolve itself; reorganize, merge or
consolidate with or into or sell, transfer, convey or lease all or any material
part of its property, to another person or entity; sell or assign any accounts
receivable; change its fiscal year; purchase or otherwise acquire all or
substantially all of the assets of any corporation, partnership, or other entity
or any shares or similar interest in any other entity; or make any material
change in its senior executive management.

     

     6.03.           Conduct of
Business.  Borrower will not materially alter the character in
which it conducts business or the locations of such business or the nature of
such business conducted at the date hereof.

     

     6.04.           Asset Disposition,
etc.  Borrower will not sell, assign, lease, transfer,
contribute, convey or otherwise dispose of, or grant options, warrants or other
rights with respect to, any of its assets to any Person, unless such sale,
assignment, transfer, lease, contribution, conveyance or other disposition is in
the ordinary course of its business without permission of Lender, which
permission shall not be unreasonably withheld.

     

     6.05.           Other
Agreements.  Borrower will not enter into any agreement
containing any provision which would be violated or breached by the performance
of its obligations hereunder or under any other documents or instruments
executed in connection herewith.

     

     6.06.           Acquisitions.  Borrower
will not make any Acquisitions in an initial amount in excess of Two Million
Dollars ($2,000,000) without the prior written consent of Lender and shall make
no Acquisitions if an Event of Default exists hereunder.  Borrower
will notify Lender of any Acquisition with an initial amount less than Two
Million Dollars ($2,000,000).

     

    
      
         

      

      
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     6.07.   Capital
Expenditures.  Borrower shall not make Capital Expenditures,
excluding Capital Expenditures for Acquisitions, in any fiscal year in excess of
Five Hundred Thousand Dollars ($500,000) in the aggregate.  Borrower
is approved for annual capital expenditures of Five Hundred Thousand Dollars
($500,000) or less.

     

    ARTICLE
VII

    THE
COLLATERAL

     

    The
Obligations of Borrower to Lender shall be secured by the liens and security
interests granted by Borrower to Lender in the Collateral under the Security
Agreement any other documents executed by Borrower now or at any time hereafter
in favor of and delivered to Lender for the purposes of securing Borrower’s
Obligations.  The Obligations of Borrower to Lender also shall be
secured by the Bond Pledge Agreement executed by the holder of the Series 2006D
Bonds.

     

    ARTICLE
VIII

    DEFAULT

     

     8.01.           Events of
Default.  The occurrence of one or more of the following events
(“Events of Default”) shall constitute an Event of Default by the Borrower
hereunder:

     

    (a)           Nonpayment
of interest or principal or any other amounts due hereunder when payment is due
as herein provided; or

     

    (b)           Any
representation or warranty made by Borrower herein or in any writing furnished
in connection with or pursuant to this Agreement or the other Loan Documents
shall prove to be false in any material respect as of the date on which it is
made; or

     

    (c)           A
breach by Borrower in the performance or observance of any agreement, term,
covenant or condition contained herein or in any other Loan Document (other than
in (a) above), and such breach shall not have been remedied within thirty (30)
days after written notice thereof shall have been given by Lender to the
Borrower; or

     

    (d)           Any
report, certificate, financial statement or other instrument furnished in
connection with this Agreement shall prove to be false or misleading in any
material respect; or

     

    (e)           Default
in the performance of the obligations of Borrower on any other note, agreement
(including but not limited to security agreements), or obligations owed to
Lender which is not remedied within thirty (30) days after written notice
thereof shall have been given by the Lender to the Borrower; or

     

    (f)           Any
material default by Borrower under any other contract for borrowed money which
entitles the obligee to accelerate the maturity thereof, or any failure by
Borrower to pay any indebtedness when due, whether by acceleration or otherwise
in each case subject to any cure period contained in the document evidencing the
obligation; or

     

    (g)           Commencement
by Borrower of a voluntary case under the Bankruptcy Act or similar law, federal
or state, whether now or hereafter existing; or a trustee or receiver shall be
appointed for Borrower or all or a substantial part of its properties in any
involuntary proceeding, or any court shall have taken any jurisdiction of all or
a substantial part of the properties of Borrower in any involuntary proceeding
for the reorganization, dissolution, liquidation or winding up of the business
of Borrower and such trustee or receiver shall not be discharged or such
jurisdiction relinquished or vacated or stayed on appeal or otherwise within
sixty (60) days; or Borrower shall file a petition or answer consenting to
or

     


    
      
         


      

      
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    acquiescing
in a petition against the Borrower in bankruptcy or under any chapter of the
Bankruptcy Act or any similar law, state or federal, whether now or hereafter
existing, or such petition filed against the Borrower shall be approved and not
vacated or stayed within sixty (60) days; or Borrower shall become insolvent, or
shall make an assignment of the benefit of creditors or shall admit in writing
its inability to pay its debts generally as they become due, or shall consent to
the appointment of a receiver or trustee or liquidator of all its properties or
a substantial part thereof, or shall have failed within thirty (30) days to pay
a bond or otherwise discharge any judgment or attachment which is not stayed on
appeal or otherwise being contested in good faith; or

     

    (h)           Borrower
suffers any judgment, writ of attachment or execution or similar process to be
issued or levied against all or a significant part of its property and which is
not released, stayed, bonded or vacated within thirty (30) days; or

     

    (i)           One
or more final judgments or decrees shall be entered against Borrower involving,
in the aggregate, a liability (not covered by collectible insurance) of $100,000
or more and all such judgments or decrees shall not have been vacated,
satisfied, discharged or stayed or bonded pending appeal within thirty (30)
consecutive days from the entry thereof.

     

     8.02.           Remedies.  Upon
an Event of Default, Lender may accelerate the maturity of the Loans, with or
without notice, and Lender may resort to any and all security and to any remedy
existing at law or in equity for the collection of the Loans according to its
tenor and enforcement of the covenants and provisions hereof, and Lender’s
resort to any remedy shall not prevent the concurrent or subsequent employment
of any other remedy.  In addition to the remedies provided herein, in
the event the Loans, or any portion thereof, are due and payable, or upon an
Event of Default, Lender shall have the right of setoff, without demand or
notice to anyone, against the funds of Borrower on deposit with it.

     

     8.03.           Expenses of
Collection.  All out-of-pocket costs, expenses and liabilities
incurred by Lender in collecting or attempting to collect on the Loans,
including costs and expenses incurred in proposing or selling or otherwise
deriving upon any security, and all reasonable attorneys’ fees in connection
with such matters, shall constitute a demand obligation of Borrower and shall
bear interest from the date of expenditure until paid at the per annum rate of
two percent (2%) in excess of the Prime Rate.

     

     8.04.           Waiver.  Any
waiver of an Event of Default by Lender shall not extend to or affect any
subsequent Event of Default.

     

    ARTICLE
IX

    MISCELLANEOUS

     

     9.01.           Notices.  All
notices hereunder shall be deemed to be received upon receipt by hand delivery,
by courier or three (3) days after being deposited in the U.S. Mail addressed to
any party hereto at the following mailing addresses or by confirmed telefax
electronically to the following telefax numbers or such other address or telefax
number as, from time to time, any party identifies in a written notice to the
others given pursuant to this Section 9.01 at least thirty (30) days prior to
the effective date of such new address:

     

    If to
Lender:

    UMB Bank,
N.A.

    1010
Grand Boulevard

    Kansas
City, Missouri 64106

    Attention:  Scott
Heady

    Fax
No.:  (816) 860-7143

     


    
      
         


      

      
        17

        
          

        

      

      
         


      

    


    With a
copy to:

    Elizabeth
Fast, Esq.

    Spencer
Fane Britt & Browne LLP

    1000
Walnut Street, Suite 1400

    Kansas
City, Missouri 64106-2140

    Fax
No.:  (816) 474-3216

     

    If to
Borrower:

    Elecsys
Corporation

    846 N.
Mart-Way Court

    Olathe,
Kansas  66061

    Attention:  Todd
Daniels

    Fax
No.:   (913) 982-5766

     

    With a
copy to:

    Husch
Blackwell Sanders, LLP

    4801 Main
Street, Suite 1000

    Kansas
City, Missouri  64112

    Attention:  Steve
Carman

    Fax
No.:  (816) 983-8080

     

    No notice
sent by telefax shall be deemed to be received until confirmation of its receipt
is received.

     

     9.02.           No
Waivers.  No failure or delay by Lender in exercising any
right, power or privilege hereunder shall operate as a waiver thereof; nor shall
any single or partial modification or waiver of any provision of this Agreement
or of the Note executed hereunder or a single or partial exercise of any such
right, power or privilege preclude any other or further exercise of such or of
any other right, power or privilege.

     

     9.03.           Offsets.  Borrower
specifically agrees that upon the occurrence of an Event of Default, and if such
Event of Default is continuing, Lender shall be entitled to exercise any right
of setoff or banker’s lien at any time, irrespective of the stated maturity of
the Note executed hereunder evidencing the Obligations of Borrower to Lender,
and irrespective of the fact that Lender has not given any notice with respect
thereto.

     

     9.04.           Missouri
Law.  This Agreement, the Note and each Loan Document issued
hereunder shall be deemed to be contracts made under and shall be construed in
accordance with the laws of the state of Missouri (“Governing
Law”).

     

     9.05.           Severability.  In
the event any one or more of the provisions of this Agreement or of the Note
executed and delivered hereunder shall be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

     

     9.06.           Counterparts/Facsimile
Signatures.  This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but when taken together
shall constitute but one agreement.  The exchange of copies of this
Agreement, the Note, and the other Loan Documents and of the signature pages to
each by facsimile transmission shall constitute effective execution and delivery
of this Agreement, the Note and the other Loan Documents as to the parties and
may be used in lieu of the originals thereof for all
purposes.  Signatures of the parties transmitted by facsimile shall be
deemed to be their original signatures for all purposes.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     9.07.   Titles and
Headings.  All titles and headings which are used in this
Agreement are used solely for the convenience of the parties hereto and are not
part of the agreement of the parties.

     

     9.08.           Assignment.  This
Agreement and all provisions hereof shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns; provided, however, that
neither Borrower nor Lender may assign any rights hereunder without the prior
written consent of the other; and provided further that Borrower acknowledges
and agrees that Lender may, without notice, grant one or more participation
interests in any of the obligations of Borrower hereunder to any other
lender.

     

     9.09.           Expenses.  Borrower
agrees to pay all out of pocket expenses, including attorneys fees, incurred by
Lender in connection with the preparation and amendment of this Agreement and
the enforcement of the rights of Lender in connection with this Agreement, the
Note executed and delivered pursuant hereto and in connection with any
amendment, extension or renewal thereof, or waivers thereunder.

     

     9.10.           Waiver of Jury
Trial.  IN THE EVENT OF ANY DISPUTE BETWEEN BORROWER AND LENDER
RELATED IN ANY WAY TO THIS AGREEMENT WHICH BECOMES THE SUBJECT OF ANY JUDICIAL
PROCEEDING IN ANY COURT OF LAW, BORROWER AND LENDER HEREBY EACH WAIVE ANY RIGHT
WHICH THEY MAY RESPECTIVELY HAVE TO A TRIAL BY JURY.

     

     9.11.           Incorporation by Reference /
Conflicts Between Documents.  The Note and the other Loan
Documents are hereby made subject to all of the terms, covenants, conditions,
obligations, stipulations and agreements contained in this Agreement to the same
extent and effect as if fully set forth therein, and this Agreement is hereby
made subject to all of the terms, covenants, conditions, obligations,
stipulations and agreements contained in the Note and the other Loan Documents
to the same extent and effect as if fully set forth herein.  All
Exhibits and Schedules hereto are incorporated herein by
reference.  To the extent of any conflict between the provisions of
the Note or any other Loan Document and any of the provisions hereof, the
provisions of this Agreement shall control.

     

     9.12.           Prior Agreements
Superseded/Complete Agreement/Statutory Statements.  This
Agreement and all documents referred to herein contain the entire agreement of
the parties hereto with respect to the subject matter hereof.

     

     9.13.           STATUTORY
STATEMENT.   MO. REV. STAT. SECTION
432.047.  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 ON
WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THIS SECURED LOAN
AGREEMENT.  TO PROTECT THE BORROWER AND LENDER FROM MISUNDERSTANDING
OR DISAPPOINTMENT, ANY AGREEMENTS THE BORROWER AND LENDER REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN THE BORROWER AND LENDER EXCEPT AS THE
BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY IT.

     

     9.14.           U.S.A. PATRIOT ACT
NOTICE.  Lender hereby notifies the Borrower that pursuant to
the requirements of the U.S.A. Patriot Act (Title III of Pub. L 107-56 signed
into law October 26, 2001 (the “Act”)), it is required to obtain, verify, and
record information that identifies the Borrower which information includes the
name and address of Borrower and other information that will allow the Lender to
identify Borrower in accordance with the Act.

     

    [SIGNATURE
PAGE TO FOLLOW]

     


    
      
         


      

      
        19

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year first stated above.

     

    
      	
              UMB
      BANK, N.A.

              By: 
      _____________________________                                                                

              Name: 
      ___________________________                                                                

              Title: 
      ____________________________                                                                

            	
              ELECSYS
      CORPORATION

                    
                By: 
      _____________________________                                                                

                Name: 
      ___________________________                                                                

                Title: 
      ____________________________                                                                


               

            


    

    


    


    



    
      
         


      

      
        20

        
          

        

      

      
         


      

    


    EXHIBIT
A

     

    Compliance
Certificate

    _____________________,
20___

     

    UMB Bank,
N.A.

    1010
Grand Boulevard

    Kansas
City, Missouri  64106

    Attention:  Scott
Heady

    


    Ladies
and Gentlemen:

    


    Reference
is hereby made to that certain Secured Loan Agreement dated as of October 30,
2009, by and between you and the undersigned, as the same may from time to time
amended, modified, extended, renewed or restated (the “Loan
Agreement”).  All capitalized terms used and not otherwise defined
herein shall have the respective meanings ascribed to them in the Loan
Agreement.

     

    The
Borrower hereby certifies to Lender that as of the date hereof:

     

    (a)           except
as set forth below, all of the representations and warranties made by Borrower
in the Loan Agreement and/or in any other Loan Document are true and correct in
all material respects on and as of the date hereof as if made on and as of the
date hereof:

    
    

     

    
      	 	 Exceptions:	 
	 	 


    

     

    (b)           except
as set forth below, no Default or Event of Default under or within the meaning
of the Loan Agreement has occurred and is continuing:

     

    
      	
            	 Exceptions:	 
	 	 


       

    

    (c)           the
financial statements of Borrower delivered to you with this letter are true,
correct and complete and have been prepared on a financial basis consistently
applied (subject, in the case of any interim financial statements, to normal
year-end adjustments and absence of footnote disclosures).

     

    Attached
hereto as Schedule 1 is a calculation of the financial covenants contained in
the Loan Agreement calculated as of the end of the immediately preceding fiscal
quarter.

     

    
      	 
      	
              Very
      truly yours,

              ELECSYS
      CORPORATION

              By: 
      _______________________________                                                                

              Name:  _____________________________         

              Title: 
      ______________________________       

            


    


    
      
         


      

      
        A-1

        
          

        

      

      
         


      

    


    SCHEDULE
1

     

    TO
COMPLIANCE CERTIFICATE

     

    


     

    


     

    As of
_______________, 20___:

     

    1.           Borrower’s
Tangible Net Worth is $________________.   (Section
5.11)

     

    2.           During
Borrower’s 20___ fiscal year, Borrower’s aggregate Capital Expenditures equal
$_______________.  (Section 6.07)

     

    


     

    


     

    



    
      
         


      

      
        A-2

        
          

        

      

      
         


      

    


    


    EXHIBIT
B

     

    INVENTORY
AND ACCOUNTS SECURITY AGREEMENT

     

    BORROWING
BASE CERTIFICATE

     

    Date:                                                      

    UMB Bank,
N.A.

    


    Ladies
and Gentlemen:

     

    Pursuant
to the Secured Loan Agreement dated October 30, 2009, between the undersigned
Borrower and UMB Bank, N.A. (the “Bank”) and all amendments thereto, if any (the
“Agreement”), Borrower hereby certifies as to the following as of the above
date:

     

    
      	
              1.

            	
              The
      Bank has a perfected, first security interest in all of Borrower’s
      Inventory and Accounts, including but not limited to the Qualified
      Accounts, and in all other items of collateral and in Borrower’s Records
      as provided by the Agreement.  Borrower’s accounts are evidenced
      by invoices or by schedule delivered to the Bank concurrently herewith,
      together with an aging analysis of the accounts.  If invoices
      evidencing accounts have previously been delivered to the Bank, such
      invoices are deemed redelivered herewith and the accounts evidenced
      thereby fully subject to all matters certified herein.  The
      unpaid face amount of all of Borrower’s accounts evidenced either by
      schedules or by invoices physically delivered to the Bank concurrently
      herewith is

            	
               

               

               

               

               

              $____________

            
	
              2.

            	
              The
      lower of cost or market value of all of Borrower’s Inventory
      is:

            	
              $____________

            	 
      
	
              3.

            	
              The
      lower of cost or market value, of all of the Borrower’s Qualified
      Inventory is

            	
               

              $____________

            	 
      
	
              4.

            	
              a.

            	
              The
      unpaid face amount of all Borrower’s Accounts
      is                                                                                         

            	
              $____________

            	 
      
	 
      	
              b.

            	
              The
      unpaid face amount of accounts classified as unqualified
is

            	
              $____________

            	 
      
	 
      	
              c.

            	
              The
      unpaid face amount of Borrower’s Qualified Accounts is

            	
              $____________

            	 
      
	
              5.

            	
              The
      total of 50% of Borrower’s Qualified Inventory up to $3,000,000 at the
      lower of cost or market value and 80% of the unpaid face amount of
      Borrower’s Qualified Accounts is

            	
               

              $____________

            
	
              6.

            	
              Borrower
      is not in default under the Agreement, or on any of the Loans made
      thereunder, or on any other liability to the
  bank.

            


    

    As used
herein, all terms have the same meanings provided in the Agreement.

     

    
      	 
      	
              Yours
      truly,

               

              ELECSYS
      CORPORATION

                    
                By: 
      _______________________________                                                                

                Name:  _____________________________         

                Title: 
      ______________________________                                                                          

              

               

            


    

    



    
      
         


      

      
        B-1