(e) The account represents a genuine obligation of the debtor for goods sold to and accepted bythe debtor. To the extent any credit balances exist in favor of the debtor, such creditbalances shall be deducted from the account balance.(f) The account balance does not include the amount of any finance or service charges payable bythe account debtor. To the extent any finance charges or service charges are included, suchamounts shall be deducted from the account balance.(g) The Borrower has sent an invoice to the debtor in the amount of the account.(h) The Borrower is not prohibited by the laws of the state where the account debtor is located,or if the account debtor is located in Canada, under the federal laws of Canada or theapplicable province or territory of Canada, from bringing an action in the courts of thatjurisdiction to enforce the debtor’s obligation to pay the account. The Borrower has takenall appropriate actions to ensure access to the courts of the jurisdiction where the accountdebtor is located, including, where necessary, the filing of a Notice of Business ActivitiesReport or other similar filing with the applicable agency or the qualification by the Borroweras a foreign corporation authorized to transact business in such jurisdiction.(i) The account is owned by the Borrower free of any title defects or any liens or interests ofothers except the security interest in favor of the Bank.(j) The debtor upon the account is not any of the following: (i) An employee, affiliate, parent or subsidiary of the Borrower, or an entitywhich has common officers or directors with the Borrower.  (ii) The U.S. government or any agency or department of the U.S. government unlessthe Bank agrees in writing to accept the obligation, the Borrower complies with theprocedures in the Federal Assignment of Claims Act of 1940 (41 U.S.C. §15) with respectto the obligation, and the underlying contract expressly provides that neither the U.S.government nor any agency or department thereof shall have the right of set-off againstthe Borrower.  (iii) Any nation (other than the United States), state, province, territory, county,city, town or municipality.  (iv) Any person or entity located in a foreign country (other than Canada) unlessthe account is covered by foreign credit insurance acceptable to the Bank in its solediscretion and the account is otherwise an Acceptable Receivable; and then only theamount insured is eligible for inclusion in the Borrowing Base as an AcceptableReceivable.(k) The account is not in default. An account will be considered in default if any of thefollowing occur: (i) the account is not paid within 90 days from its invoice date;  (ii) the debtor obligated upon the account suspends business, makes a generalassignment for the benefit of creditors, or fails to pay its debts generally as theycome due; or  (iii) any petition is filed by or against the debtor obligated upon the accountunder any bankruptcy law or any other law or laws for the relief of debtors.(l) The account is not the obligation of a debtor who is in default (as defined above) on 20% ormore of the accounts upon which such debtor is obligated.
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(m) The account does not arise from the sale of goods which remain in the Borrower’s possessionor under the Borrower’s control.(n) The account is not evidenced by a promissory note or chattel paper, nor is the account debtorobligated to the Borrower under any other obligation which is evidenced by a promissory note.(o) The account is otherwise acceptable to the Bank.In addition to the foregoing limitations, the dollar amount of accounts included as AcceptableReceivables which are the obligations of a single debtor shall not exceed the concentration limitestablished for that debtor. To the extent the total of such accounts exceeds a debtor’sconcentration limit, the amount of any such excess shall be excluded. The concentration limit foreach debtor shall be equal to 20% of the total amount of the Borrower’s total accounts receivableat that time1.3 “Acceptable Inventory” means inventory which satisfies the following requirements:(a) The inventory is owned by the Borrower free of any title defects or any liens or interests ofothers except the security interest in favor of the Bank. This does not prohibit anystatutory liens which may exist in favor of the growers of agricultural products which arepurchased by the Borrower.(b) The inventory is located at locations which the Borrower has disclosed to the Bank and whichare acceptable to the Bank. If the inventory is covered by a negotiable document of title(such as a warehouse receipt) that document must be delivered to the Bank. Inventory which isin transit is not acceptable.(c) The inventory is held for sale or use in the ordinary course of the Borrower’s business andis of good and merchantable quality. Display items, work-in-process, parts, samples, andpacking and shipping materials are not acceptable. Inventory which is obsolete, unsalable,damaged, defective, used, discontinued or slow-moving, or which has been returned by thebuyer, is not acceptable.(d) The inventory is covered by insurance as required in the “Covenants” section of thisAgreement.(e) The inventory has not been manufactured to the specifications of a particular account debtor.(f) The inventory is not subject to any licensing agreements which would prohibit or restrict inany way the ability of the Bank to sell the inventory to third parties.(g) The inventory has been produced in compliance with the requirements of the U.S. Fair LaborStandards Act (29 U.S.C. §§201 et seq.).(h) The inventory is not placed on consignment.(i) The inventory is otherwise acceptable to the Bank.1.4 “Credit Limit” means the amount of Two Million Five Hundred Thousand and No/100($2,500,000.00).2. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS2.1 Line of Credit Amount.(a) During the availability period described below, the Bank will provide a line of credit to theBorrower. The amount of the line of credit (the “Facility No. 1 Commitment”) is equal to thelesser of (i) the Credit Limit or (ii) the Borrowing Base.
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(b) This is a revolving line of credit. During the availability period, the Borrower may repayprincipal amounts and reborrow them.(c) The Borrower agrees not to permit the principal balance outstanding to exceed the FacilityNo. 1 Commitment. If the Borrower exceeds this limit, the Borrower will immediately pay theexcess to the Bank upon the Bank’s demand.2.2 Availability Period. The line of credit is available between the date of thisAgreement and December 8, 2011, or such earlier date as the availability may terminate as providedin this Agreement (the “Facility No. 1 Expiration Date”).2.3 Conditions to Availability of Credit. In addition to the items required to bedelivered to the Bank under the paragraph entitled “Financial Information” in the “Covenants”section of this Agreement, the Borrower will promptly deliver the following to the Bank at suchtimes as may be requested by the Bank:(a) A borrowing certificate, in form and detail satisfactory to the Bank, setting forth theAcceptable Receivables and the Acceptable Inventory on which the requested extension of creditis to be based.(b) Copies of the invoices or the record of invoices from the Borrower’s sales journal for suchAcceptable Receivables and a listing of the names and addresses of the debtors obligatedthereunder.(c) Copies of the delivery receipts, purchase orders, shipping instructions, bills of lading andother documentation pertaining to such Acceptable Receivables.(d) Copies of the cash receipts journal pertaining to the borrowing certificate.2.4 Repayment Terms.(a) The Borrower will pay interest on January 8, 2011, and then on the same day of each monththereafter until payment in full of any principal outstanding under this facility.(b) The Borrower will repay in full any principal, interest or other charges outstanding underthis facility no later than the Facility No. 1 Expiration Date.(c) The Borrower may prepay the loan in full or in part at any time. The prepayment will beapplied to the most remote payment of principal due under this Agreement.2.5 Interest Rate.(a) The interest rate is a rate per year equal to the lesser of (i) the maximum lawful rate ofinterest permitted under applicable usury laws, now or hereafter enacted ( the “MaximumRate”), or (ii) the BBA LIBOR Rate (Adjusted Periodically) plus 3.75 percentage point(s).(b) The interest rate will be adjusted on the 8th day of every month (the “Adjustment Date”) andremain fixed until the next Adjustment Date. If the Adjustment Date in any particular monthwould otherwise fall on a day that is not a banking day then, at the Bank’s option, theAdjustment Date for that particular month will be the first banking day immediately followingthereafter.(c) The BBA LIBOR Rate (Adjusted Periodically) is a rate of interest equal to the rate per annumequal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (orother commercially available source providing quotations of BBA LIBOR as selected by the Bankfrom time to time) as determined for each Adjustment Date at approximately 11:00 a.m. Londontime two (2) London Banking Days prior to the Adjustment Date, for U.S. Dollar deposits (for
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  delivery on the first day of such interest period) with a term of one month, as adjustedfrom time to time in the Bank’s sole discretion for reserve requirements, deposit insuranceassessment rates and other regulatory costs. If such rate is not available at such time forany reason, then the rate for that interest period will be determined by such alternatemethod as reasonably selected by the Bank. A “London Banking Day” is a day on which banksin London are open for business and dealing in offshore dollars.3. FACILITY NO. 2: VARIABLE RATE TERM LOAN AMOUNT AND TERMS3.1 Loan Amount. The Bank agrees to provide a term loan to the Borrower in the amount ofOne Million and No/100 Dollars ($1,000,000.00) (the “Facility No. 2 Commitment”).3.2 Availability Period. The loan is available in one disbursement from the Bank betweenthe date of this Agreement and December 15, 2010 unless the Borrower is in default.3.3 Repayment Terms.(a) The Borrower will pay interest on January 8, 2011, and then on the same day of each monththereafter until payment in full of any principal outstanding under this facility.(b) The Borrower will repay principal in equal installments of Sixteen Thousand Six Hundred SixtySix and 67/100 Dollars ($16,666.67) beginning on January 8, 2011, and on the same day of eachmonth thereafter, and ending on December 8, 2015 (the “Repayment Period”). In any event, onthe last day of the Repayment Period, the Borrower will repay the remaining principal balanceplus any interest then due.(c) The Borrower may prepay the loan in full or in part at any time. The prepayment will beapplied to the most remote payment of principal due under this Agreement.3.4 Interest Rate.(a) The interest rate is a rate per year equal to the lesser of (i) the maximum lawful rate ofinterest permitted under applicable usury laws, now or hereafter enacted ( the “MaximumRate”), or (ii) the BBA LIBOR Rate (Adjusted Periodically) plus 3.75 percentage point(s).(b) The interest rate will be adjusted on the 8th day of every month (the “Adjustment Date”) andremain fixed until the next Adjustment Date. If the Adjustment Date in any particular monthwould otherwise fall on a day that is not a banking day then, at the Bank’s option, theAdjustment Date for that particular month will be the first banking day immediately followingthereafter.(c) The BBA LIBOR Rate (Adjusted Periodically) is a rate of interest equal to the rate per annumequal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (orother commercially available source providing quotations of BBA LIBOR as selected by the Bankfrom time to time) as determined for each Adjustment Date at approximately 11:00 a.m. Londontime two (2) London Banking Days prior to the Adjustment Date, for U.S. Dollar deposits (fordelivery on the first day of such interest period) with a term of one month, as adjusted fromtime to time in the Bank’s sole discretion for reserve requirements, deposit insuranceassessment rates and other regulatory costs. If such rate is not available at such time forany reason, then the rate for that interest period will be determined by such alternate methodas reasonably selected by the Bank. A “London Banking Day” is a day on which banks in Londonare open for business and dealing in offshore dollars.
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4. FEES AND EXPENSES4.1 Fees.(a) Loan Fee. For Facility No. 1, the Borrower agrees to pay a loan fee in the amount ofTwelve Thousand Five Hundred and No/100 Dollars ($12,500.00). For Facility No. 2, theBorrower agrees to pay a loan fee in the amount of Ten Thousand and No/100 Dollars($10,000.00). These fees are due on the date of this Agreement.(b) Waiver Fee. If the Bank, at its discretion, agrees to waive or amend any terms ofthis Agreement, the Borrower will, at the Bank’s option, pay the Bank a fee for each waiver oramendment in an amount advised by the Bank at the time the Borrower requests the waiver oramendment. Nothing in this paragraph shall imply that the Bank is obligated to agree to anywaiver or amendment requested by the Borrower. The Bank may impose additional requirements asa condition to any waiver or amendment.(c) Late Fee. To the extent permitted by law, the Borrower agrees to pay a late fee inan amount not to exceed four percent (4%) of any payment that is more than fifteen (15) dayslate. The imposition and payment of a late fee shall not constitute a waiver of the Bank’srights with respect to the default.4.2 Expenses. The Borrower agrees to immediately repay the Bank for expenses that include,but are not limited to, filing, recording and search fees, appraisal fees, title report fees, anddocumentation fees.4.3 Reimbursement Costs.(a) The Borrower agrees to reimburse the Bank for any expenses it incurs in the preparation ofthis Agreement and any agreement or instrument required by this Agreement. Expenses include,but are not limited to, reasonable attorneys’ fees, including any allocated costs of theBank’s in-house counsel to the extent permitted by applicable law.(b) The Borrower agrees to reimburse the Bank for the cost of periodic field examinations of theBorrower’s books, records and collateral, and appraisals of the collateral, at such intervalsas the Bank may reasonably require. The actions described in this paragraph may be performedby employees of the Bank or by independent appraisers.4.4 No Excess Fees.Notwithstanding anything to the contrary in this Section 4, in no event shall any sum payable underthis Section 4 (to the extent, if any, constituting interest under applicable laws), together withall other amounts constituting interest under applicable laws and payable in connection with thecredit evidenced hereby, exceed the amount of interest computed at the Maximum Rate.
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5. COLLATERAL5.1 Personal Property. The personal property listed below now owned or owned in the futureby the parties listed below, will secure the Borrowers’ obligations to the Bank under thisAgreement. The collateral is further defined in security agreement(s) executed by the owners ofthe collateral. In addition, all personal property collateral owned by the Borrowers securing thisAgreement shall also secure all other present and future obligations of the Borrowers to the Bank(excluding any consumer credit covered by the federal Truth in Lending law, unless the Borrowershave otherwise agreed in writing or received written notice thereof). All personal propertycollateral securing any other present or future obligations of the Borrowers to the Bank shall alsosecure this Agreement.(a) Equipment and fixtures owned by each Borrower. (b) Inventory owned by each Borrower. (c) Receivables owned by each Borrower. (d) All instruments, notes, chattel paper, documents, certificates of deposit, securities andinvestment property of every type owned by each Borrower.  Regulation U of the Board of Governors of the Federal Reserve System places certainrestrictions on loans secured by margin stock (as defined in the Regulation). The Bank andthe Borrower shall comply with Regulation U. If any of the collateral is margin stock, theBorrower shall provide to the Bank a Form U-1 Purpose Statement.(e) Deposit accounts with the Bank owned by each Borrower. (f) Patents, trademarks and other general intangibles owned by each Borrower.(g) All such other personal property owned by a Borrower in which any such Borrower shall havegranted the Bank a security interest, including, but not limited to, accounts, contractrights, chattel paper, deposit accounts, letter of credit rights, and payment intangiblesowned by the Borrower.6.   DISBURSEMENTS, PAYMENTS AND COSTS6.1 Disbursements and Payments.(a) Each payment by the Borrower will be made in U.S. Dollars and immediately available funds bydebit to a deposit account, as described in this Agreement or otherwise authorized by theBorrower. For payments not made by direct debit, payments will be made by mail to the addressshown on the Borrower’s statement or at one of the Bank’s banking centers in the UnitedStates, or by such other method as may be permitted by the Bank.(b) The Bank may honor instructions for advances or repayments given by the Borrower (if anindividual), or by any one of the individuals authorized to sign loan agreements on behalf ofthe Borrower, or any other individual designated by any one of such authorized signers (eachan “Authorized Individual”).(c) For any payment under this Agreement made by debit to a deposit account, the Borrower willmaintain sufficient immediately available funds in the deposit account to cover each debit.If there are insufficient immediately available funds in the deposit account on the date theBank enters any such debit authorized by this Agreement, the Bank may reverse the debit.
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(d) Each disbursement by the Bank and each payment by the Borrower will be evidenced by recordskept by the Bank. In addition, the Bank may, at its discretion, require the Borrower to signone or more promissory notes.(e) Prior to the date each payment of principal and interest and any fees from the Borrowerbecomes due (the “Due Date”), the Bank will mail to the Borrower a statement of the amountsthat will be due on that Due Date (the “Billed Amount”). The calculations in the bill will bemade on the assumption that no new extensions of credit or payments will be made between thedate of the billing statement and the Due Date, and that there will be no changes in theapplicable interest rate. If the Billed Amount differs from the actual amount due on the DueDate (the “Accrued Amount”), the discrepancy will be treated as follows: (i) If the Billed Amount is less than the Accrued Amount, the Billed Amount for thefollowing Due Date will be increased by the amount of the discrepancy. The Borrowerwill not be in default by reason of any such discrepancy.  (ii) If the Billed Amount is more than the Accrued Amount, the Billed Amount for thefollowing Due Date will be decreased by the amount of the discrepancy.  Regardless of any such discrepancy, interest will continue to accrue based on the actualamount of principal outstanding without compounding. The Bank will not pay the Borrowerinterest on any overpayment.6.2 Requests for Credit; Equal Access by all Borrowers. If there is more than oneBorrower, any Borrower (or a person or persons authorized by any one of the Borrowers), actingalone, can borrow up to the full amount of credit provided under this Agreement. Each Borrowerwill be liable for all extensions of credit made under this Agreement to any other Borrower.6.3 Telephone and Telefax Authorization.(a) The Bank may honor telephone or telefax instructions for advances or repayments given, orpurported to be given, by any one of the Authorized Individuals.(b) Advances will be deposited in and repayments will be withdrawn from account number________owned by Security Systems, or such other accounts with the Bank as designated inwriting by the Borrowers.(c) The Borrowers will indemnify and hold the Bank harmless from all liability, loss, and costsin connection with any act resulting from telephone or telefax instructions the Bankreasonably believes are made by any Authorized Individual. This paragraph will survive thisAgreement’s termination, and will benefit the Bank and its officers, employees, and agents.6.4 Direct Debit.(a) The Borrowers agree that on the Due Date the Bank will debit the Billed Amount from depositaccount number ________ owned by Security Systems, or such other of the Borrowers’accounts with the Bank as designated in writing by the Borrowers (the “Designated Account”).(b) The Borrowers may terminate this direct debit arrangement at any time by sending writtennotice to the Bank at the address specified at the end of this Agreement. If the Borrowersterminate this arrangement, then the principal amount outstanding under this Agreement will atthe option of the Bank bear interest at a rate per annum which is the lesser of (i) theMaximum Rate or (ii) 0.5 percentage point(s) higher than the rate of interest otherwiseprovided under this Agreement.6.5 Banking Days. Unless otherwise provided in this Agreement, a banking day is a dayother than a Saturday, Sunday or other day on which commercial banks are authorized to close, orare in fact closed,
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in the state where the Bank’s lending office is located, and, if such day relates to amountsbearing interest at an offshore rate (if any), means any such day on which dealings in dollardeposits are conducted among banks in the offshore dollar interbank market. All payments anddisbursements which would be due on a day which is not a banking day will be due on the nextbanking day. All payments received on a day which is not a banking day will be applied to thecredit on the next banking day.6.6 Interest Calculation. Except as otherwise stated in this Agreement, all interest andfees, if any, will be computed on the basis of a 360-day year and the actual number of dayselapsed. This results in more interest or a higher fee than if a 365-day year is used.Installments of principal which are not paid when due under this Agreement shall continue to bearinterest until paid. For the purpose of the Interest Act (Canada) and disclosure thereunder to theextent that it is applicable, whenever interest to be paid hereunder is to be calculated on thebasis of a 360-day year or any other period of time that is less than a calendar year, the yearlyrate of interest to which the rate determined pursuant to such calculation is equivalent is therate so determined multiplied by the actual number of days in the calendar year in which the sameis to be ascertained and divided by either 360 days or such other period of time, as the case maybe.6.7 Default Rate. Upon the occurrence of any default or after maturity or after judgmenthas been rendered on any obligation under this Agreement, all amounts outstanding under thisAgreement, including any interest, fees, or costs which are not paid when due, will at the optionof the Bank bear interest at a rate which is the lesser of (i) the Maximum Rate or (ii) 6.0percentage point(s) higher than the rate of interest otherwise provided under this Agreement. Thismay result in compounding of interest. This will not constitute a waiver of any default.6.8 Taxes. All payments by the Borrower to the Bank hereunder shall be made to the Bank infull without set-off or counterclaim and free and clear of and exempt from and without deduction orwithholding for or on account of, any present or future taxes, levies, imposts, duties, or chargesof whatsoever nature imposed by any government or any political subdivision or taxing authoritythereof. The Borrower shall reimburse the Bank for any taxes imposed on or withheld from suchpayments (other than taxes imposed on the Bank’s income, and franchise taxes imposed on the Bank,by the jurisdiction under the laws of which the Bank is organized or any political subdivisionthereof).6.9 Overdrafts. At the Bank’s sole option in each instance, the Bank may do one of thefollowing:(a) The Bank may make advances under this Agreement to prevent or cover an overdraft on anyaccount of a Borrower with the Bank. Each such advance will accrue interest from the date ofthe advance or the date on which the account is overdrawn, whichever occurs first, at theinterest rate described in this Agreement. The Bank may make such advances even if theadvances may cause any credit limit under this Agreement to be exceeded.(b) The Bank may reduce the amount of credit otherwise available under this Agreement by theamount of any overdraft on any account of the Borrower with the Bank.This paragraph shall not be deemed to authorize the Borrower to create overdrafts on any of theBorrower’s accounts with the Bank.6.10 Payments in Kind. If the Bank requires delivery in kind of the proceeds of collectionof the Borrower’s accounts receivable, such proceeds shall be credited to interest, principal, andother sums owed to the Bank under this Agreement in the order and proportion determined by the Bankin its sole discretion. All such credits will be conditioned upon collection and any returneditems may, at the Bank’s option, be charged to the Borrower.6.11 Judgment Currency. In the event of a judgment or order being rendered by any court ortribunal for the payment of any amounts owing to the Bank under this Agreement or for the paymentof damages in respect of any breach of this Agreement or under or in respect of a judgment or orderof another court
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or tribunal for the payment of such amounts or damages, such judgment or order being expressed in acurrency (the ‘Judgment Currency”) other than the currency payable hereunder or thereunder (the“Agreed Currency”), the party against whom the judgment or order is made shall indemnify and holdthe Bank harmless against any deficiency in terms of the Agreed Currency in the amounts received bythe Bank arising or resulting from any variation as between (a) the exchange rate at which theAgreed Currency is converted into the Judgment Currency for the purposes of such judgment or order,and (b) the exchange rate at which the Bank is able to purchase the Agreed Currency with the amountof the Judgment Currency actually received by the Bank on the date of such receipt. The indemnityin this Section shall constitute a separate and independent obligation from the other obligationsof the Borrower.7. CONDITIONSBefore the Bank is required to extend any credit to the Borrower under this Agreement, it mustreceive any documents and other items it may reasonably require, in form and content acceptable tothe Bank, including any items specifically listed below.7.1 Authorizations. If the Borrower or any guarantor is anything other than a naturalperson, evidence that the execution, delivery and performance by the Borrower and/or such guarantorof this Agreement and any instrument or agreement required under this Agreement have been dulyauthorized.7.2 Governing Documents. If required by the Bank, a copy of the Borrower’s organizationaldocuments.7.3 Security Agreements. Signed original security agreements covering the personalproperty collateral which the Bank requires.7.4 Perfection and Evidence of Priority. Evidence that the security interests and liens infavor of the Bank are valid, enforceable, properly perfected in a manner acceptable to the Bank andprior to all others’ rights and interests, except those the Bank consents to in writing. All titledocuments for motor vehicles which are part of the collateral must show the Bank’s interest.7.5 Payment of Fees. Payment of all fees and other amounts due and owing to the Bank,including without limitation payment of all accrued and unpaid expenses incurred by the Bank asrequired by the paragraph entitled “Reimbursement Costs.”7.6 Repayment of Other Credit Agreement. Evidence that the existing financing agreementswith Crossroads Debt, LLC and with Gulf Coast Bank and Trust Company have been or will be repaidand cancelled on or before the first disbursement under this Agreement.7.7 Good Standing. Certificates of good standing for the Borrower from its state offormation or jurisdiction of incorporation, and from any other state, province, territory, or otherjurisdiction in which the Borrower is required to qualify to conduct its business.7.8 Landlord Agreement. For any personal property collateral located on real propertywhich is subject to a mortgage or deed of trust or which is not owned by the Borrower (or thegrantor of the security interest), an agreement from the owner of the real property and the holderof any such mortgage or deed of trust.7.9 Insurance. Evidence of insurance coverage, as required in the “Covenants” section ofthis Agreement.7.10 Appraisals. Appraisals prepared by appraisers acceptable to the Bank with respect tothe liquidation value of the Borrower’s inventory and equipment.
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7.11 Environmental Information. A completed Bank form Environmental Questionnaire.8. REPRESENTATIONS AND WARRANTIESWhen the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makesthe following representations and warranties. Each request for an extension of credit constitutesa renewal of these representations and warranties as of the date of the request:8.1 Formation. If the Borrower is anything other than a natural person, it is duly formedand existing under the laws of the state, province, territory, or other jurisdiction whereorganized.8.2 Authorization. This Agreement, and any instrument or agreement required hereunder, arewithin the Borrower’s powers, have been duly authorized, and do not conflict with any of itsorganizational papers.8.3 Enforceable Agreement. This Agreement is a legal, valid and binding agreement of theBorrower, enforceable against the Borrower in accordance with its terms, and any instrument oragreement required hereunder, when executed and delivered, will be similarly legal, valid, bindingand enforceable.8.4 Good Standing. In each state, province, territory, or other jurisdiction in which theBorrower does business, it is properly licensed, in good standing, and, where required, incompliance with fictitious name statutes.8.5 No Conflicts. This Agreement does not conflict with any law, agreement, or obligationby which the Borrower is bound.8.6 Financial Information. All financial and other information that has been or will besupplied to the Bank is sufficiently complete to give the Bank accurate knowledge of the Borrower’s(and any guarantor’s) financial condition, including all material contingent liabilities. Sincethe date of the most recent financial statement provided to the Bank, there has been no materialadverse change in the business condition (financial or otherwise), operations, properties orprospects of the Borrower (or any guarantor). If the Borrower is comprised of the trustees of atrust, the foregoing representations shall also pertain to the trustor(s) of the trust.8.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or threatenedagainst the Borrower which, if lost, would impair the Borrower’s financial condition or ability torepay the loan, except as have been disclosed in writing to the Bank.8.8 Collateral. All collateral required in this Agreement is owned by the grantor of thesecurity interest free of any title defects or any liens or interests of others, except those whichhave been approved by the Bank in writing.8.9 Permits, Franchises. The Borrower possesses all permits, memberships, franchises,contracts and licenses required and all trademark rights, trade name rights, patent rights,copyrights, and fictitious name rights necessary to enable it to conduct the business in which itis now engaged.8.10 Other Obligations. The Borrower is not in default on any obligation for borrowedmoney, any purchase money obligation or any other material lease, commitment, contract, instrumentor obligation, except as have been disclosed in writing to the Bank.8.11 Tax Matters. The Borrower has no knowledge of any pending assessments or adjustmentsof its income tax for any year and all taxes due have been paid, except as have been disclosed inwriting to the Bank.8.12 No Event of Default. There is no event which is, or with notice or lapse of time orboth would be,
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a default under this Agreement.8.13 Insurance. The Borrower has obtained, and maintained in effect, the insurancecoverage required in the “Covenants” section of this Agreement.8.14 Merchantable Inventory; Compliance with FLSA. All inventory which is included in theBorrowing Base is of good and merchantable quality and free from defects, and has been produced incompliance with the requirements of the U.S. Fair Labor Standards Act (29 U.S.C. §§201 et seq.)(“FLSA”). If any inventory has been manufactured by third party contractors, the Borrower hasmonitored the contractor’s operations for compliance with the FLSA, and, based upon thatmonitoring, the Borrower has assured itself that the inventory has been produced in compliance withthe FLSA.9. COVENANTSThe Borrower agrees, so long as credit is available under this Agreement and until the Bank isrepaid in full:9.1 Use of Proceeds.(a) To use the proceeds of Facility No. 1 only for working capital.(b) The proceeds of the credit extended under this Loan Agreement may not be used directly orindirectly to purchase or carry any “margin stock” as that term is defined in Regulation U ofthe Board of Governors of the Federal Reserve System, or extend credit to or invest in otherparties for the purpose of purchasing or carrying any such “margin stock,” or to reduce orretire any indebtedness incurred for such purpose.9.2 Financial Information. To provide the following financial information and statementsin form and content acceptable to the Bank, and such additional information as requested by theBank from time to time. The Bank reserves the right, upon written notice to the Borrower, torequire the Borrower to deliver financial information and statements to the Bank more frequentlythan otherwise provided below, and to use such additional information and statements to measure anyapplicable financial covenants in this Agreement.(a) Within 120 days of the fiscal year end, the annual financial statements of American Locker.These financial statements must be audited (with an opinion satisfactory to the Bank) by aCertified Public Accountant acceptable to the Bank. The statements shall be prepared on aconsolidated basis.(b) Within 45 days of the period’s end (including the last period in each fiscal year), quarterlyfinancial statements of American Locker, certified and dated by an authorized financialofficer. These financial statements may be company-prepared. The statements shall be preparedon a consolidated basis.(c) Promptly, upon sending or receipt, copies of any management letters and correspondencerelating to management letters, sent or received by the Borrower to or from the Borrower’sauditor. If no management letter is prepared, the Bank may, in its discretion, request aletter from such auditor stating that no deficiencies were noted that would otherwise beaddressed in a management letter.(d) Copies of the Form 10-K Annual Report, Form 10-Q Quarterly Report and Form 8-K Current Reportfor American Locker within 45 days after the date of filing with the Securities and ExchangeCommission.
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(e) Within 45 days of the end of each fiscal year and within 45 days of the end of each quarter,a compliance certificate of the Borrower, signed by an authorized financial officer andsetting forth (i) the information and computations (in sufficient detail) to establishcompliance with all financial covenants at the end of the period covered by the financialstatements then being furnished and (ii) whether there existed as of the date of suchfinancial statements and whether there exists as of the date of the certificate, any defaultunder this Agreement applicable to the party submitting the information and, if any suchdefault exists, specifying the nature thereof and the action the party is taking and proposesto take with respect thereto.(f) A detailed aging of the Borrower’s receivables by invoice or a summary aging by accountdebtor, as specified by the Bank, within fifteen (15) days after the end of each month.(g) Promptly upon the Bank’s request, such other books, records, statements, lists of propertyand accounts, budgets, forecasts or reports as to the Borrower and as to each guarantor of theBorrower’s obligations to the Bank as the Bank may request.(h) A borrowing certificate setting forth the amount of Acceptable Receivables and AcceptableInventory as of the last day of each month within fifteen (15) days after month end and, uponthe Bank’s request, copies of the invoices or the record of invoices from the Borrower’s salesjournal for such Acceptable Receivables, copies of the delivery receipts, purchase orders,shipping instructions, bills of lading and other documentation pertaining to such AcceptableReceivables, and copies of the cash receipts journal pertaining to the borrowing certificate.(i) A summary aging by vendor of accounts payable within fifteen (15) days after the end of eachmonth.(j) If the Bank requires the Borrower to deliver the proceeds of accounts receivable to the Bankupon collection by the Borrower, a schedule of the amounts so collected and delivered to theBank.(k) An inventory listing within fifteen (15) days after the end of each month. The listing mustinclude a description of the inventory, its location and cost, and such other information asthe Bank may require.(l) Promptly upon the Bank’s request, such other books, records, statements, lists of propertyand accounts, budgets, forecasts or reports as to the Borrower and as to each guarantor of theBorrower’s obligations to the Bank as the Bank may request.9.3 Funded Debt to EBITDA Ratio. With respect to American Locker, to maintain on aconsolidated basis a ratio of Funded Debt to EBITDA not exceeding the ratios indicated for eachperiod specified below:     Period RatiosFrom the date of this Agreementthrough 3/31/2011  4:1.0 From 6/30/2011 and thereafter  3.5:1.0 “Funded Debt” means all outstanding liabilities for borrowed money and other interest-bearingliabilities, including current and long term debt, less the non-current portion of SubordinatedLiabilities.“EBITDA” means net income, less income or plus loss from discontinued operations and extraordinaryitems, plus income taxes, plus interest expense, plus depreciation, depletion, and amortization,plus non-recurring and unreimbursed moving expenses up to a maximum of $300,000.00, and non-cashstock compensation expense. This ratio will be calculated at the end of each reporting period forwhich the
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Bank requires financial statements, using the results of the twelve-month period ending with thatreporting period.“Subordinated Liabilities” means liabilities subordinated to the Borrower’s obligations to the Bankin a manner acceptable to the Bank in its sole discretion.9.4 Basic Fixed Charge Coverage Ratio. With respect to American Locker, to maintain on aconsolidated basis a Basic Fixed Charge Coverage Ratio of at least 1.25:1.0.“Basic Fixed Charge Coverage Ratio” means the ratio of (a) the sum of EBITDA plus lease expense andcash paid for rent, minus cash paid for income tax, minus dividends, withdrawals, and otherdistributions, to (b) the sum of interest expense, lease expense, cash paid for rent, the currentportion of long term debt and the current portion of capitalized lease obligations.“EBITDA” means net income, less income or plus loss from discontinued operations and extraordinaryitems, plus income taxes, plus interest expense, plus depreciation, depletion, and amortization,plus non-recurring and unreimbursed moving expenses up to a maximum of $300,000.00, and non-cashstock compensation expense.This ratio will be calculated at the end of each reporting period for which the Bank requiresfinancial statements, using the results of the twelve-month period ending with that reportingperiod. The current portion of long-term liabilities will be measured as of the date twelve (12)months prior to the current financial statement.9.5 Bank as Principal Depository. To maintain the Bank or one of its affiliates as itsprincipal depository bank, including for the maintenance of business, cash management, operatingand administrative deposit accounts.9.6 Other Debts. Not to have outstanding or incur any direct or contingent liabilities orlease obligations (other than those to the Bank), or become liable for the liabilities of others,without the Bank’s written consent. This does not prohibit:(a) Acquiring goods, supplies, or merchandise on normal trade credit.(b) Endorsing negotiable instruments received in the usual course of business.(c) Obtaining surety bonds in the usual course of business.(d) Liabilities, lines of credit and leases in existence on the date of this Agreement disclosedin writing to the Bank.(e) Additional debts and lease obligations for business purposes which do not exceed a totalprincipal amount of One Hundred Thousand and No/100 Dollars ($100,000.00) outstanding at anyone time.9.7 Other Liens. Not to create, assume, or allow any security interest or lien (includingjudicial liens) on property the Borrower now or later owns, except:(a) Liens and security interests in favor of the Bank.(b) Liens for taxes not yet due.(c) Liens outstanding on the date of this Agreement disclosed in writing to the Bank.(d) Additional purchase money security interests in assets acquired after the date of thisAgreement.
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9.8 Maintenance of Assets.(a) Not to sell, assign, lease, transfer or otherwise dispose of any part of the Borrower’sbusiness or the Borrower’s assets except in the ordinary course of the Borrower’s business.(b) Not to sell, assign, lease, transfer or otherwise dispose of any assets for less than fairmarket value, or enter into any agreement to do so.(c) Not to enter into any sale and leaseback agreement covering any of its fixed assets.(d) To maintain and preserve all rights, privileges, and franchises the Borrower now has.(e) To make any repairs, renewals, or replacements to keep the Borrower’s properties in goodworking condition.9.9 Investments. Not to have any existing, or make any new, investments in any individualor entity, or make any capital contributions or other transfers of assets to any individual orentity, except for:(a) Existing investments disclosed to the Bank in writing.(b) Investments in the Borrower’s current subsidiaries.(c) Investments in any of the following: (i) certificates of deposit;  (ii) U.S. treasury bills and other obligations of the federal government;  (iii) readily marketable securities (including commercial paper, but excludingrestricted stock and stock subject to the provisions of Rule 144 of the Securities andExchange Commission).9.10 Loans. Not to make any loans, advances or other extensions of credit to anyindividual or entity, except for:(a) Existing extensions of credit disclosed to the Bank in writing.(b) Extensions of credit to the Borrower’s current subsidiaries.(c) Extensions of credit in the nature of accounts receivable or notes receivable arising fromthe sale or lease of goods or services in the ordinary course of business to non-affiliatedentities.9.11 Change of Management. Not to make any substantial change in the present executive ormanagement personnel of the Borrower.9.12 Change of Ownership. Not to cause, permit, or suffer any change in capital ownershipsuch that American Locker ceases to own and control, directly and indirectly, at least one hundredpercent (100%) of the capital ownership of Security Systems, Security Manufacturing and CanadianLocker.9.13 Additional Negative Covenants. Not to, without the Bank’s written consent:(a) Enter into any consolidation, merger, amalgamation, or other combination, or become a partnerin a partnership, a member of a joint venture, or a member of a limited liability company.(b) Acquire or purchase a business or its assets.
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(c) Engage in any business activities substantially different from the Borrower’s presentbusiness.(d) Liquidate or dissolve the Borrower’s business.(e) Voluntarily suspend its business for more than fifteen (15) days in any annual (90) dayperiod.9.14 Notices to Bank. To promptly notify the Bank in writing of:(a) Any lawsuit over Fifty Thousand and No/100 Dollars ($50,000.00) against the Borrower or anyObligor.(b) Any substantial dispute between any governmental authority and the Borrower or any Obligor.(c) Any event of default under this Agreement, or any event which, with notice or lapse of timeor both, would constitute an event of default.(d) Any material adverse change in the Borrower’s or any Obligor’s business condition (financialor otherwise), operations, properties or prospects, or ability to repay the credit.(e) Any change in the Borrower’s or any Obligor’s name, legal structure, principal residence (foran individual), state, province, territory, or other jurisdiction of registration (for aregistered entity), place of business, or chief executive office if the Borrower or anyObligor has more than one place of business.(f) Any actual contingent liabilities of the Borrower or any Obligor, and any such contingentliabilities which are reasonably foreseeable, where such liabilities are in excess of FiftyThousand and No/100 Dollars ($50,000.00) in the aggregate.For purposes of this Agreement, “Obligor” shall mean any guarantor, any party pledging collateralto the Bank, or, if the Borrower is comprised of the trustees of a trust, any trustor.9.15 Insurance.(a) General Business Insurance. To maintain insurance satisfactory to the Bank as toamount, nature and carrier covering property damage (including loss of use and occupancy) toany of the Borrower’s properties, business interruption insurance, public liability insuranceincluding coverage for contractual liability, product liability and workers’ compensation, andany other insurance which is usual for the Borrower’s business. Each policy shall provide forat least thirty (30) days prior notice to the Bank of any cancellation thereof.(b) Insurance Covering Collateral. To maintain all risk property damage insurancepolicies (including without limitation windstorm coverage, and hurricane coverage asapplicable) covering the tangible property comprising the collateral. Each insurance policymust be for the full replacement cost of the collateral and include a replacement costendorsement. The insurance must be issued by an insurance company acceptable to the Bank andmust include a lender’s loss payable endorsement in favor of the Bank in a form acceptable tothe Bank.(c) Evidence of Insurance. Upon the request of the Bank, to deliver to the Bank a copyof each insurance policy, or, if permitted by the Bank, a certificate of insurance listing allinsurance in force.9.16 Compliance with Laws. To comply with the laws (including any fictitious or trade namestatute), regulations, and orders of any government body with authority over the Borrower’sbusiness. The Bank shall have no obligation to make any advance to the Borrower except incompliance with all applicable laws and regulations and the Borrower shall fully cooperate with theBank in complying with all such
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applicable laws and regulations.9.17 ERISA Plans. Promptly during each year, to pay and cause any subsidiaries to paycontributions adequate to meet at least the minimum funding standards under ERISA with respect toeach and every Plan; file each annual report required to be filed pursuant to ERISA in connectionwith each Plan for each year; and notify the Bank within ten (10) days of the occurrence of anyReportable Event that might constitute grounds for termination of any capital Plan by the PensionBenefit Guaranty Corporation or for the appointment by the appropriate United States District Courtof a trustee to administer any Plan. “ERISA” means the Employee Retirement Income Security Act of1974, as amended from time to time. Capitalized terms in this paragraph shall have the meaningsdefined within ERISA.9.18 Canadian Pension Plans. Promptly during each year to make and cause any subsidiariesto make all contributions required to be made to the appropriate funding agency in accordance withall applicable laws and the terms of, and to fund in accordance with the terms of, each “pensionplan” or “plan” which is subject to the funding requirements of applicable pension benefitslegislation in any jurisdiction of Canada and is applicable to employees resident in Canada of theBorrower, and each pension benefit plan or similar arrangement applicable to employees of theBorrower (the “Canadian Pension Plan”).9.19 Books and Records. To maintain adequate books and records.9.20 Audits. To allow the Bank and its agents to inspect the Borrower’s properties andexamine, audit, and make copies of books and records at any reasonable time. If any of theBorrower’s properties, books or records are in the possession of a third party, the Borrowerauthorizes that third party to permit the Bank or its agents to have access to perform inspectionsor audits and to respond to the Bank’s requests for information concerning such properties, booksand records.9.21 Perfection of Liens. To help the Bank perfect and protect its security interests andliens, and reimburse it for related costs it incurs to protect its security interests and liens.9.22 Cooperation. To take any action reasonably requested by the Bank to carry out theintent of this Agreement.10. HAZARDOUS SUBSTANCES10.1 Indemnity Regarding Hazardous Substances.The Borrower will indemnify and hold harmless the Bank from any loss or liability the Bank incursin connection with or as a result of this Agreement, which directly or indirectly arises out of theuse, generation, manufacture, production, storage, release, threatened release, discharge, disposalor presence of a hazardous substance. This indemnity will apply whether the hazardous substance ison, under or about the Borrower’s property or operations or property leased to the Borrower. Theindemnity includes but is not limited to attorneys’ fees (including the reasonable estimate of theallocated cost of in-house counsel and staff). The indemnity extends to the Bank, its parent,subsidiaries and all of their directors, officers, employees, agents, successors, attorneys andassigns.10.2 Compliance Regarding Hazardous Substances.The Borrower represents and warrants that the Borrower has complied with all current and futurelaws, regulations and ordinances or other requirements of any governmental authority relating to orimposing liability or standards of conduct concerning protection of health or the environment orhazardous substances.
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10.3 Notices Regarding Hazardous Substances.Until full repayment of the loan, the Borrower will promptly notify the Bank in writing of anythreatened or pending investigation of the Borrower or its operations by any governmental agencyunder any current or future law, regulation or ordinance pertaining to any hazardous substance.10.4 Site Visits, Observations and Testing.The Bank and its agents and representatives will have the right at any reasonable time, aftergiving reasonable notice to the Borrower, to enter and visit any locations where the collateralsecuring this Agreement (the “Collateral”) is located for the purposes of observing the Collateral,taking and removing environmental samples, and conducting tests. The Borrower shall reimburse theBank on demand for the costs of any such environmental investigation and testing. The Bank willmake reasonable efforts during any site visit, observation or testing conducted pursuant thisparagraph to avoid interfering with the Borrower’s use of the Collateral. The Bank is under noduty to observe the Collateral or to conduct tests, and any such acts by the Bank will be solelyfor the purposes of protecting the Bank’s security and preserving the Bank’s rights under thisAgreement. No site visit, observation or testing or any report or findings made as a resultthereof (“Environmental Report”) (i) will result in a waiver of any default of the Borrower; (ii)impose any liability on the Bank; or (iii) be a representation or warranty of any kind regardingthe Collateral (including its condition or value or compliance with any laws) or the EnvironmentalReport (including its accuracy or completeness). In the event the Bank has a duty or obligationunder applicable laws, regulations or other requirements to disclose an Environmental Report to theBorrower or any other party, the Borrower authorizes the Bank to make such a disclosure. The Bankmay also disclose an Environmental Report to any regulatory authority, and to any other parties asnecessary or appropriate in the Bank’s judgment. The Borrower further understands and agrees thatany Environmental Report or other information regarding a site visit, observation or testing thatis disclosed to the Borrower by the Bank or its agents and representatives is to be evaluated(including any reporting or other disclosure obligations of the Borrower) by the Borrower withoutadvice or assistance from the Bank.10.5 Definition of Hazardous Substances.“Hazardous substances” means any substance, material or waste that is or becomes designated orregulated as “toxic,” “hazardous,” “pollutant,” or “contaminant” or a similar designation orregulation under any current or future federal, state, provincial, territorial, or local law(whether under common law, statute, regulation or otherwise) or judicial or administrativeinterpretation of such, including without limitation petroleum or natural gas.10.6 Continuing Obligation.The Borrower’s obligations to the Bank under this Article, except the obligation to give notices tothe Bank, shall survive termination of this Agreement and repayment of the Borrower’s obligationsto the Bank under this Agreement.11. DEFAULT AND REMEDIESIf any of the following events of default occurs, the Bank may do one or more of the following:declare the Borrower in default, stop making any additional credit available to the Borrower, andrequire the Borrower to repay its entire debt immediately and without prior notice. If an eventwhich, with notice or the passage of time, will constitute an event of default has occurred and iscontinuing, the Bank has no obligation to make advances or extend additional credit under thisAgreement. In addition, if any event of default occurs, the Bank shall have all rights, powers andremedies available under any instruments and agreements required by or executed in connection withthis Agreement, as well as all rights and remedies available at law or in equity. If an event ofdefault occurs under the paragraph entitled “Bankruptcy,” below, with respect to the Borrower, thenthe entire debt outstanding under this Agreement will automatically be due immediately.
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11.1 Failure to Pay. The Borrower fails to make a payment under this Agreement when due.11.2 Other Bank Agreements. Any default occurs under any other agreement the Borrower (orany Obligor) or any of the Borrower’s related entities or affiliates has with the Bank or anyaffiliate of the Bank. If, in the Bank’s opinion, the breach is capable of being remedied, thebreach will not be considered an event of default under this Agreement unless the default remainsuncured for a period of ten (10) days following the occurrence thereof.11.3 Cross-default. Any default occurs under any agreement in connection with any creditthe Borrower (or any Obligor) or any of the Borrower’s related entities or affiliates has obtainedfrom anyone else or which the Borrower (or any Obligor) or any of the Borrower’s related entitiesor affiliates has guaranteed if the default is not cured within ten (10) days following theoccurrence thereof.11.4 False Information. The Borrower or any Obligor has given the Bank false or misleadinginformation or representations.11.5 Bankruptcy. The Borrower, any Obligor, or any general partner of the Borrower or ofany Obligor files a bankruptcy petition, a bankruptcy petition is filed against any of theforegoing parties, or the Borrower, any Obligor, or any general partner of the Borrower or of anyObligor makes a general assignment for the benefit of creditors. The default will be deemed curedif any bankruptcy petition filed against the Borrower, any Obligor, or any general partner of theBorrower or of any Obligor is dismissed within a period of forty-five (45) days after the filing;provided, however, that such cure opportunity will be terminated upon the entry of an order forrelief in any bankruptcy case arising from such a petition.11.6 Receivers. A receiver, receiver-manager, or similar official is appointed for asubstantial portion of the Borrower’s or any Obligor’s business, or the business is terminated, or,if any Obligor is anything other than a natural person, such Obligor is liquidated or dissolved.11.7 Lien Priority. The Bank fails to have an enforceable first lien (except for any priorliens to which the Bank has consented in writing) on or security interest in any property given assecurity for this Agreement (or any guaranty).11.8 Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more trade creditorsagainst the Borrower or any Obligor in an aggregate amount of Fifty Thousand and No/100 Dollars($50,000.00) or more in excess of any insurance coverage.11.9 Judgments. Any judgments or arbitration awards are entered against the Borrower orany Obligor, or the Borrower or any Obligor enters into any settlement agreements with respect toany litigation or arbitration, in an aggregate amount of Two Hundred Fifty Thousand and No/100Dollars ($250,000.00) or more in excess of any insurance coverage.11.10 Death. If the Borrower or any Obligor is a natural person, the Borrower or suchObligor dies or becomes legally incompetent; if the Borrower or any Obligor is a trust, a trustordies or becomes legally incompetent; if the Borrower or any Obligor is a partnership, any generalpartner dies or becomes legally incompetent.11.11 Material Adverse Change. A material adverse change occurs, or is reasonably likelyto occur, in the Borrower’s (or any Obligor’s) business condition (financial or otherwise),operations, properties or prospects, or ability to repay the credit; or the Bank determines that itis insecure for any other reason.11.12 Government Action. Any government authority takes action that the Bank believesmaterially adversely affects the Borrower’s or any Obligor’s financial condition or ability torepay.11.13 Default under Related Documents. Any default occurs under any guaranty,subordination agreement, security agreement, deed of trust, mortgage, or other document required byor delivered in
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connection with this Agreement or any such document is no longer in effect, or any guarantorpurports to revoke or disavow the guaranty.11.14 ERISA Plans.Any one or more of the following events occurs with respect to a Plan of the Borrower subject toTitle IV of ERISA, provided such event or events could reasonably be expected, in the judgment ofthe Bank, to subject the Borrower to any tax, penalty or liability (or any combination of theforegoing) which, in the aggregate, could have a material adverse effect on the financial conditionof the Borrower:(a) A reportable event shall occur under Section 4043(c) of ERISA with respect to a Plan.(b) Any Plan termination (or commencement of proceedings to terminate a Plan) or the full orpartial withdrawal from a Plan by the Borrower or any ERISA Affiliate.11.15 Canadian Pension Plans. Any one or more of the following events occurs with respectto a Canadian Pension Plan of the Borrower, provided such event or events could reasonably beexpected in the judgment of the Bank, to subject the Borrower to any tax, penalty, or liability (orany combination of the foregoing) which, in the aggregate, could have a material adverse effect onthe financial condition of the Borrower:(a) A contribution failure shall occur with respect to any Canadian Pension Plan sufficient togive rise to a lien or charge under any applicable pension benefits laws of any jurisdiction.(b) A condition exists or an event or transaction occurs with respect to any Canadian PensionPlan which might result in the incurrence by the Borrower of any fine or penalty in excess of$100,000.(c) A condition exists or an event or transaction occurs with respect to any Canadian PensionPlan that has resulted or could reasonably be expected to result in any Pension Plan havingits registration revoked or refused for the purposes of any applicable pension benefits or taxlaws or being placed under the administration of any relevant pension benefits regulatoryauthority or being required to pay any taxes or penalties under any applicable pensionbenefits or tax laws.11.16 Other Breach Under Agreement. A default occurs under any other term or condition ofthis Agreement not specifically referred to in this Article. This includes any failure oranticipated failure by the Borrower (or any other party named in the Covenants section) to complywith any financial covenants set forth in this Agreement, whether such failure is evidenced byfinancial statements delivered to the Bank or is otherwise known to the Borrower or the Bank.12. ENFORCING THIS AGREEMENT; MISCELLANEOUS12.1 GAAP. Except as otherwise stated in this Agreement, all financial informationprovided to the Bank and all financial covenants will be made under generally accepted accountingprinciples, consistently applied.12.2 Governing Law.This Agreement is governed by and shall be interpreted according to federal law and the laws ofTexas. If state or local law and federal law are inconsistent, or if state or local law ispreempted by federal law, federal law governs. If the Bank has greater rights or remedies underfederal law, whether as a national bank or otherwise, this paragraph shall not be deemed to deprivethe Bank of such rights and remedies as may be available under federal law. It is the intention ofthe parties to comply with applicable usury laws. The parties agree that the total amount ofinterest contracted for, charged, collected or received by
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the Bank under this Agreement shall not exceed the Maximum Rate. To the extent, if any, thatChapter 303 of the Texas Finance Code (the “Code”) is relevant to the Bank for purposes ofdetermining the Maximum Rate, the parties elect to determine the Maximum Rate under the Codepursuant to the “weekly ceiling” from time to time in effect, as referred to and defined in §303.001-303.016 of the Code; subject, however, to any right the Bank subsequently may have underapplicable law to change the method of determining the Maximum Rate. Notwithstanding any contraryprovisions contained herein, (a) the Maximum Rate shall be calculated on the basis of the actualnumber of days elapsed over a year of 365 or 366 days, as the case may be; (b) in determiningwhether the interest hereunder exceeds interest at the Maximum Rate, the total amount of interestshall be spread throughout the entire term of this Agreement until its payment in full; (c) if atany time the interest rate chargeable under this Agreement would exceed the Maximum Rate, therebycausing the interest payable under this Agreement to be limited to the Maximum Rate, then anysubsequent reductions in the interest rate(s) shall not reduce the rate of interest charged underthis Agreement below the Maximum Rate until the total amount of interest accrued from and after thedate of this Agreement equals the amount of interest which would have accrued if the interestrate(s) had at all times been in effect; (d) if the Bank ever charges or receives anything of valuewhich is deemed to be interest under applicable Texas law, and if the occurrence of any event,including acceleration of maturity of obligations owing to the Bank, should cause such interest toexceed the maximum lawful amount, any amount which exceeds interest at the Maximum Rate shall beapplied to the reduction of the unpaid principal balance under this Agreement or any otherindebtedness owed to the Bank by the Borrower, and if this Agreement and such other indebtednessare paid in full, any remaining excess shall be paid to the Borrower; and (e) Chapter 346 of theCode shall not be applicable to this Agreement or the indebtedness outstanding hereunder.12.3 Successors and Assigns. This Agreement is binding on the Borrower’s and the Bank’ssuccessors and assignees. The Borrower agrees that it may not assign this Agreement without theBank’s prior consent. The Bank may sell participations in or assign this loan, and may exchangeinformation about the Borrower (including, without limitation, any information regarding anyhazardous substances) with actual or potential participants or. If a participation is sold or theloan is assigned, the purchaser will have the right of set-off against the Borrower.12.4 Dispute Resolution Provision.This paragraph, including the subparagraphs below, is referred to as the “Dispute ResolutionProvision.” This Dispute Resolution Provision is a material inducement for the parties enteringinto this agreement.(a) This Dispute Resolution Provision concerns the resolution of any controversies or claimsbetween the parties, whether arising in contract, tort or by statute, including but notlimited to controversies or claims that arise out of or relate to: (i) this agreement(including any renewals, extensions or modifications); or (ii) any document related to thisagreement (collectively a “Claim”). For the purposes of this Dispute Resolution Provisiononly, the term “parties” shall include any parent corporation, subsidiary or affiliate of theBank involved in the servicing, management or administration of any obligation described orevidenced by this agreement.(b) At the request of any party to this agreement, any Claim shall be resolved by bindingarbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the “Act”).The Act will apply even though this agreement provides that it is governed by the law of aspecified state.(c) Arbitration proceedings will be determined in accordance with the Act, the then-current rulesand procedures for the arbitration of financial services disputes of the American ArbitrationAssociation or any successor thereof (“AAA”), and the terms of this Dispute ResolutionProvision. In the event of any inconsistency, the terms of this Dispute Resolution Provisionshall control. If AAA is unwilling or unable to (i) serve as the provider of arbitration or(ii) enforce any provision of this arbitration clause, the Bank may designate anotherarbitration organization with similar procedures to serve as the provider of arbitration.
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(d) The arbitration shall be administered by AAA and conducted, unless otherwise required by law,in any U.S. state where real or tangible personal property collateral for this credit islocated or if there is no such collateral, in the state specified in the governing law sectionof this agreement. All Claims shall be determined by one arbitrator; however, if Claimsexceed Five Million Dollars ($5,000,000), upon the request of any party, the Claims shall bedecided by three arbitrators. All arbitration hearings shall commence within ninety (90) daysof the demand for arbitration and close within ninety (90) days of commencement and the awardof the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing.However, the arbitrator(s), upon a showing of good cause, may extend the commencement of thehearing for up to an additional sixty (60) days. The arbitrator(s) shall provide a concisewritten statement of reasons for the award. The arbitration award may be submitted to anycourt having jurisdiction to be confirmed and have judgment entered and enforced.(e) The arbitrator(s) will give effect to statutes of limitation in determining any Claim andshall dismiss the arbitration if the Claim is barred under the applicable statutes oflimitation. For purposes of the application of any statutes of limitation, the service on AAAunder applicable AAA rules of a notice of Claim is the equivalent of the filing of a lawsuit.Any dispute concerning this arbitration provision or whether a Claim is arbitrable shall bedetermined by the arbitrator(s), except as set forth at subparagraph (h) of this DisputeResolution Provision. The arbitrator(s) shall have the power to award legal fees pursuant tothe terms of this agreement.(f) This paragraph does not limit the right of any party to: (i) exercise self-help remedies,such as but not limited to, setoff; (ii) initiate judicial or non-judicial foreclosure againstany real or personal property collateral; (iii) exercise any judicial or power of sale rights,or (iv) act in a court of law to obtain an interim remedy, such as but not limited to,injunctive relief, writ of possession or appointment of a receiver, or additional orsupplementary remedies.(g) The filing of a court action is not intended to constitute a waiver of the right of anyparty, including the suing party, thereafter to require submittal of the Claim to arbitration.(h) Any arbitration or court trial (whether before a judge or jury) of any Claim will take placeon an individual basis without resort to any form of class or representative action (the“Class Action Waiver”). The Class Action Waiver precludes any party from participating in orbeing represented in any class or representative action regarding a Claim. Regardless ofanything else in this Dispute Resolution Provision, the validity and effect of the ClassAction Waiver may be determined only by a court and not by an arbitrator. The parties to thisagreement acknowledge that the Class Action Waiver is material and essential to thearbitration of any disputes between the parties and is nonseverable from the agreement toarbitrate Claims. If the Class Action Waiver is limited, voided or found unenforceable, thenthe parties’ agreement to arbitrate shall be null and void with respect to such proceeding,subject to the right to appeal the limitation or invalidation of the Class Action Waiver. **TheParties acknowledge and agree that under no circumstances will a class action be arbitrated.**(i) By agreeing to binding arbitration, the parties irrevocably and voluntarily waive any rightthey may have to a trial by jury in respect of any Claim. Furthermore, without intending inany way to limit this agreement to arbitrate, to the extent any Claim is not arbitrated, theparties irrevocably and voluntarily waive any right they may have to a trial by jury inrespect of such Claim. This waiver of jury trial shall remain in effect even if the ClassAction Waiver is limited, voided or found unenforceable. **WHETHER THE CLAIM IS DECIDED BYARBITRATION OR BY TRIAL BY A JUDGE, THE PARTIES AGREE AND UNDERSTAND THAT THE EFFECT OF THISAGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO TRIAL BY JURY TO THE EXTENT PERMITTED BYLAW.**
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12.5 Severability; Waivers. If any part of this Agreement is not enforceable, the rest ofthe Agreement may be enforced. The Bank retains all rights, even if it makes a loan after default.If the Bank waives a default, it may enforce a later default. Any consent or waiver under thisAgreement must be in writing.12.6 Attorneys’ Fees. The Borrower shall reimburse the Bank for any reasonable costs andattorneys’ fees incurred by the Bank in connection with the enforcement or preservation of anyrights or remedies under this Agreement and any other documents executed in connection with thisAgreement, and in connection with any amendment, waiver, “workout” or restructuring under thisAgreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is entitledto recover costs and reasonable attorneys’ fees incurred in connection with the lawsuit orarbitration proceeding, as determined by the court or arbitrator. In the event that any case iscommenced by or against the Borrower under the Bankruptcy Code (Title 11, United States Code), theBankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada), or anysimilar or successor statute, the Bank is entitled to recover costs and reasonable attorneys’ feesincurred by the Bank related to the preservation, protection, or enforcement of any rights of theBank in such a case. As used in this paragraph, “attorneys’ fees” includes the allocated costs ofthe Bank’s in-house counsel.12.7 Joint and Several Liability.(a) Each Borrower agrees that it is jointly and severally liable to the Bank for the payment ofall obligations arising under this Agreement, and that such liability is independent of theobligations of the other Borrower(s). Each obligation, promise, covenant, representation andwarranty in this Agreement shall be deemed to have been made by, and be binding upon, eachBorrower, unless this Agreement expressly provides otherwise. The Bank may bring an actionagainst any Borrower, whether an action is brought against the other Borrower(s).(b) Each Borrower agrees that any release which may be given by the Bank to the other Borrower(s)or any guarantor will not release such Borrower from its obligations under this Agreement.(c) Each Borrower waives any right to assert against the Bank any defense, setoff, counterclaim,or claims which such Borrower may have against the other Borrower(s) or any other party liableto the Bank for the obligations of the Borrowers under this Agreement.(d) Each Borrower waives any defense by reason of any other Borrower’s or any other person’sdefense, disability, or release from liability. The Bank can exercise its rights against eachBorrower even if any other Borrower or any other person no longer is liable because of astatute of limitations or for other reasons.(e) Each Borrower agrees that it is solely responsible for keeping itself informed as to thefinancial condition of the other Borrower(s) and of all circumstances which bear upon the riskof nonpayment. Each Borrower waives any right it may have to require the Bank to disclose tosuch Borrower any information which the Bank may now or hereafter acquire concerning thefinancial condition of the other Borrower(s).(f) Each Borrower waives all rights to notices of default or nonperformance by any other Borrowerunder this Agreement. Each Borrower further waives all rights to notices of the existence orthe creation of new indebtedness by any other Borrower and all rights to any other notices toany party liable on any of the credit extended under this Agreement.(g) The Borrowers represent and warrant to the Bank that each will derive benefit, directly andindirectly, from the collective administration and availability of credit under thisAgreement. The Borrowers agree that the Bank will not be required to inquire as to thedisposition by any Borrower of funds disbursed in accordance with the terms of this Agreement.
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(h) Until all obligations of the Borrowers to the Bank under this Agreement have been paid infull and any commitments of the Bank or facilities provided by the Bank under this Agreementhave been terminated, each Borrower (a) waives any right of subrogation, reimbursement,indemnification and contribution (contractual, statutory or otherwise), including withoutlimitation, any claim or right of subrogation under the Bankruptcy Code (Title 11, UnitedStates Code), the Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors ArrangementAct (Canada), or any successor statute, which such Borrower may now or hereafter have againstany other Borrower with respect to the indebtedness incurred under this Agreement; (b) waivesany right to enforce any remedy which the Bank now has or may hereafter have against any otherBorrower, and waives any benefit of, and any right to participate in, any security now orhereafter held by the Bank.(i) Each Borrower waives any right to require the Bank to proceed against any other Borrower orany other person; proceed against or exhaust any security; or pursue any other remedy.Further, each Borrower consents to the taking of, or failure to take, any action which mightin any manner or to any extent vary the risks of the Borrower under this Agreement or which,but for this provision, might operate as a discharge of the Borrower.12.8 Individual Liability. If the Borrower is a natural person, the Bank may proceedagainst the Borrower’s business and non-business property in enforcing this and other agreementsrelating to this loan. If the Borrower is a partnership, the Bank may proceed against the businessand non-business property of each general partner of the Borrower in enforcing this and otheragreements relating to this loan.12.9 Set-Off.(a) In addition to any rights and remedies of the Bank provided by law, upon the occurrence andduring the continuance of any event of default under this Agreement, the Bank is authorized,at any time, to set off and apply any and all Deposits of the Borrower or any Obligor held bythe Bank against any and all Obligations owing to the Bank. The set-off may be madeirrespective of whether or not the Bank shall have made demand under this Agreement or anyguaranty, and although such Obligations may be contingent or unmatured or denominated in acurrency different from that of the applicable Deposits.(b) The set-off may be made without prior notice to the Borrower or any other party, any suchnotice being waived by the Borrower (on its own behalf and on behalf of each Obligor) to thefullest extent permitted by law. The Bank agrees promptly to notify the Borrower after anysuch set-off and application; provided, however, that the failure to give suchnotice shall not affect the validity of such set-off and application.(c) For the purposes of this paragraph, “Deposits” means any deposits (general or special, timeor demand, provisional or final, individual or joint) and any instruments owned by theBorrower or any Obligor which come into the possession or custody or under the control of theBank. “Obligations” means all obligations, now or hereafter existing, of the Borrower to theBank under this Agreement and under any other agreement or instrument executed in connectionwith this Agreement, and the obligations to the Bank of any Obligor.12.10 One Agreement. This Agreement and any related security or other agreements requiredby this Agreement, collectively:(a) represent the sum of the understandings and agreements between the Bank and the Borrowerconcerning this credit;(b) replace any prior oral or written agreements between the Bank and the Borrower concerningthis credit; and
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(c) are intended by the Bank and the Borrower as the final, complete and exclusive statement ofthe terms agreed to by them.In the event of any conflict between this Agreement and any other agreements required by thisAgreement, this Agreement will prevail. Any reference in any related document to a “promissorynote” or a “note” executed by the Borrower and dated as of the date of this Agreement shall bedeemed to refer to this Agreement, as now in effect or as hereafter amended, renewed, or restated.12.11 Indemnification. The Borrower will indemnify and hold the Bank harmless from anyloss, liability, damages, judgments, and costs of any kind relating to or arising directly orindirectly out of (a) this Agreement or any document required hereunder, (b) any credit extended orcommitted by the Bank to the Borrower hereunder, (c) any claim, whether well-founded or otherwise,that there has been a failure to comply with any law regulating the Borrower’s sales or leases toor performance of services for debtors obligated upon the Borrower’s accounts receivable anddisclosures in connection therewith, and (d) any litigation or proceeding related to or arising outof this Agreement, any such document, any such credit, or any such claim. This indemnity includesbut is not limited to attorneys’ fees (including the allocated cost of in-house counsel). Thisindemnity extends to the Bank, its parent, subsidiaries and all of their directors, officers,employees, agents, successors, attorneys, and assigns. This indemnity will survive repayment ofthe Borrower’s obligations to the Bank. All sums due to the Bank hereunder shall be obligations ofthe Borrower, due and payable immediately without demand.12.12 Notices. Unless otherwise provided in this Agreement or in another agreement betweenthe Bank and the Borrower, all notices required under this Agreement shall be personally deliveredor sent by first class mail, postage prepaid, or by overnight courier, to the addresses on thesignature page of this Agreement, or sent by facsimile to the fax numbers listed on the signaturepage, or to such other addresses as the Bank and the Borrower may specify from time to time inwriting. Notices and other communications shall be effective (i) if mailed, upon the earlier ofreceipt or five (5) days after deposit in the U.S. mail, first class, postage prepaid, or seven (7)days after deposit in mail in Canada, first class, postage prepaid, (ii) if telecopied, whentransmitted, or (iii) if hand-delivered, by courier or otherwise (including telegram, lettergram ormailgram), when delivered.12.13 Headings. Article and paragraph headings are for reference only and shall not affectthe interpretation or meaning of any provisions of this Agreement.12.14 Counterparts. This Agreement may be executed in as many counterparts as necessary orconvenient, and by the different parties on separate counterparts each of which, when so executed,shall be deemed an original but all such counterparts shall constitute but one and the sameagreement.12.15 Borrower Information; Reporting to Credit Bureaus. The Borrower authorizes the Bankat any time to verify or check any information given by the Borrower to the Bank, check theBorrower’s credit references, verify employment, and obtain credit reports. The Borrower agreesthat the Bank shall have the right at all times to disclose and report to credit reporting agenciesand credit rating agencies such information pertaining to the Borrower and/or all guarantors as isconsistent with the Bank’s policies and practices from time to time in effect.12.16 Disposition of Schedules and Reports. The Bank will not be obligated to return anyschedules, invoices, statements, budgets, forecasts, reports or other papers delivered by theBorrower. The Bank will destroy or otherwise dispose of such materials at such time as the Bank,in its discretion, deems appropriate.12.17 Returned Merchandise. Until the Bank exercises its rights to collect the accountsreceivable as provided under any security agreement required under this Agreement, the Borrower maycontinue its present policies for returned merchandise and adjustments. Credit adjustments withrespect to returned merchandise shall be made immediately upon receipt of the merchandise by theBorrower or upon such other disposition of the merchandise by the debtor in accordance with theBorrower’s instructions. If a credit adjustment is made with respect to any Acceptable Receivable,the amount of such adjustment
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shall no longer be included in the amount of such Acceptable Receivable in computing the BorrowingBase.12.18 Verification of Receivables. The Bank may at any time, either orally or in writing,request confirmation from any debtor of the current amount and status of the accounts receivableupon which such debtor is obligated.12.19 Waiver of Confidentiality. The Borrower authorizes the Bank to discuss theBorrower’s financial affairs and business operations with any accountants, auditors, businessconsultants, or other professional advisors employed by the Borrower, and authorizes such partiesto disclose to the Bank such financial and business information or reports (including managementletters) concerning the Borrower as the Bank may request.12.20 Document Receipt Cut-Off Date. Unless this Agreement and any documents required bythis Agreement have been signed and returned to the Bank within ten (10) days after the date ofthis Agreement (the “Document Receipt Cut-Off Date”), the Bank shall have the right to notify theBorrower in writing that the Bank’s commitment to extend credit under this Agreement has expired.If the executed Agreement and accompanying loan documents are received after the Document ReceiptCut-Off Date, the Bank shall have a reasonable period of time after receipt of the executedAgreement and accompanying loan documents to provide such notice.**12.21****Notice of Final Agreement****.****THIS WRITTEN LOAN AGREEMENT AND THE LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THEFINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.****THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.**This Agreement is executed as of the date stated at the top of the first page.         **Bank of America, N.A.** **American Locker Group Incorporated**           By /s/ Tye McClure  By /s/ Paul Zaidins   Typed Name: Tye McClure Typed Name: Paul Zaidins  Title: Vice President Title: President and Chief Financial Officer           Address where notices tothe Bank are to be sent: Address where notices tothe Borrower are to be sent:           500 West 7th Street, 2nd Floor