Document:

Exhibit 10.2

 

Execution Version

 

NON-COMPETITION AGREEMENT

 

THIS NON-COMPETITION AGREEMENT (this “Agreement”) is entered into as of September 3, 2013 by and among C. R. Bard, Inc., a New Jersey corporation (the “Parent”), Rochester Medical Corporation, a Minnesota corporation (the “Company”), Starnorth Acquisition Corp., a Minnesota corporation and a wholly-owned subsidiary of Parent (“MergerSub”), and Philip Conway, an individual, residing at 9818 County Road 10 SE, Chatfield, MN 55923 (the “Restricted Person”).

 

RECITALS

 

WHEREAS, the Company, Parent and MergerSub intend to enter into an Agreement and Plan of Merger dated on or about the date hereof (the “Merger Agreement”) pursuant to which MergerSub will be merged with and into the Company (the “Merger”) with the Company to be the surviving entity in the Merger (the “Surviving Corporation”);

 

WHEREAS, pursuant to the terms of the Merger Agreement, all of the outstanding equity interests of the Company will be converted into the right to receive the Merger consideration;

 

WHEREAS, it is Parent’s, MergerSub’s and Company’s desire that the entire goodwill of the Company be transferred to the Surviving Corporation as part of the Merger, and Parent and MergerSub believe that the agreements and covenants in this Agreement are essential to protect the value of the Surviving Corporation;

 

WHEREAS, the Company is, and following the Merger the Surviving Corporation will be, engaged in the business of Exploiting (as defined herein) the Products (as defined herein);

 

WHEREAS, the relevant market for the Business (as defined herein) is national and international in scope, and there exists nationwide and international competition for the products of the Business;

 

WHEREAS, Restricted Person has an equity interest in the Company and is one of its key employees and, as such, Restricted Person is intimately involved in the Business and has detailed knowledge of the intellectual property and other confidential and proprietary information of the Business;

 

WHEREAS, in connection with the Merger, Restricted Person’s equity interest in the Company will be converted into the right to receive Restricted Person’s pro rata portion of the Merger consideration, and Restricted Person intends to transfer the goodwill associated with Restricted Person’s equity interest in the Company (to the extent it can be transferred by Restricted Person); and

 

WHEREAS, Restricted Person’s execution of this Agreement is both an inducement for, and a condition precedent to, Parent and MergerSub entering into the Merger Agreement and consummating the Merger.

 

NOW, THEREFORE, in consideration of the premises, covenants and representations set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which

 

 

are hereby acknowledged, Restricted Person, the Company, Parent and MergerSub hereby agree as follows:

 

ARTICLE I

 

NON-COMPETITION, NON-SOLICITATION AND NON-DISPARAGEMENT

 

1.1          Non-Competition.  As an inducement for Parent and MergerSub to enter into the Merger Agreement and consummate the Merger, and in connection with the sale of Restricted Person’s entire equity interest, including goodwill, in the Company in connection with the Merger, Restricted Person agrees that he/she shall not, directly or indirectly, own, manage, engage in, operate, control, work for, consult with, render services for, maintain any equity interest in, lend money to, or otherwise directly or indirectly participate in the ownership, management, operation or control of, any business engaged in or Exploiting any products related to urinary retention, urinary incontinence or urine drainage, including but not limited to Foley catheters, intermittent catheters, male external catheters, leg bags and drainage bags (the “Business”) (including any improvements, modifications or developments thereon, the “Restricted Business”), whether in corporate, proprietorship or partnership form or otherwise, for a period commencing on the Closing Date and continuing for five (5) years thereafter (the “Restricted Term”).  Restricted Person acknowledges that the Surviving Corporation’s Business will operate nationally and internationally, and therefore, the obligations in this Section 1.1 shall apply throughout the United States and the rest of the world.  Notwithstanding the foregoing, the Restricted Person shall not be restricted from consulting with, rendering services to or working for any entity whose business includes the Restricted Business; provided, that, the Restricted Person does not consult with, render services to or work for the Restricted Business.

 

1.2          Public Securities.  Notwithstanding the foregoing, Restricted Person or his/her controlled Affiliates may passively own, directly or indirectly, less than one percent (1%) of the outstanding capital stock of any publicly traded company engaged in a Restricted Business; provided, however, that Restricted Person is not a member of the board of directors or similar governing body of such publicly-traded company.

 

1.3          No Interference with Business; Non-Solicitation.  The Restricted Person hereby acknowledges and agrees that Restricted Person’s business relationship with any client, customer, supplier, distributor or licensor of the Surviving Corporation is based on the Confidential Information (as defined in Section 1.5 of this Agreement) which the Restricted Person has agreed not to disclose or use except as set forth in Section 1.5 of this Agreement.  The Restricted Person further acknowledges that vigilant protection of the Confidential Information is necessary to prevent competitive harm to the Surviving Corporation and its Affiliates and that the retention by the Surviving Corporation of the personnel engaged in the Business is crucial to the protection of the Confidential Information.  Accordingly, and as an inducement for Parent and MergerSub to enter into the Merger Agreement and consummate the Merger, Restricted Person agrees that, during the Restricted Term, Restricted Person shall not, directly or indirectly, (i) cause, solicit, induce or encourage any employees of Parent or the Surviving Corporation, or employees of Parent or the Surviving Corporation’s respective Affiliates, whose primary duties are related to the Restricted Business to leave such employment or (ii) hire, employ or otherwise engage any such employees, provided, however, that this Agreement shall not prohibit any general solicitation that is not specifically targeted at such persons or the solicitation of any

 

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employee of Parent or the Surviving Corporation whose employment, at the time of such solicitation, has been involuntarily terminated by the Parent or the Surviving Corporation or (iii) cause, solicit, induce or encourage any client, customer, supplier, distributor or licensor of Parent, the Surviving Corporation or their respective Affiliates, or any other person or entity who has a material business relationship with Parent, the Surviving Corporation or their respective Affiliates, to terminate or modify any such relationship.

 

1.4          Non-Disparagement.  From and after the Closing Date, Restricted Person shall not, directly or indirectly, make or publish any derogatory, unfavorable, negative, disparaging, false, damaging or deleterious written or oral statements or remarks (including without limitation, the repetition or distribution of derogatory rumors, allegations, or negative or unfavorable reports or comments) regarding Parent, the Company, MergerSub, the Surviving Corporation or any of their respective Affiliates or any current shareholder, officer, director, employee, independent contractor or agent of any of the foregoing (each, a “Representative”) or to the Restricted Person’s knowledge, any former Representative, the Business formerly conducted by the Company, the Business as conducted by the Surviving Corporation, or the Products.

 

1.5          Confidentiality.  From and after the Closing Date, Restricted Person shall not, directly or indirectly, disclose, reveal, divulge or communicate to any person or entity, other than authorized officers, directors and employees of Parent or the Surviving Corporation and their respective Affiliates, or use or otherwise Exploit for his/her own benefit or for the benefit of anyone other than Parent or the Surviving Corporation and their respective Affiliates, any Confidential Information (as defined below).  Restricted Person shall not have any obligation to keep confidential any Confidential Information if and to the extent disclosure thereof is specifically required by applicable Law; provided, however, that in the event disclosure is required by applicable Law, Restricted Person shall, to the extent reasonably possible, provide Parent and the Surviving Corporation with prompt notice of such requirement prior to making any disclosure so that Parent and the Surviving Corporation may seek an appropriate protective order.  For purposes of this Agreement, “Confidential Information” means any information with respect to Parent or the Surviving Corporation (including, for the avoidance of doubt, such information with respect to the Company) and their respective Affiliates, including methods of operation, client or customer lists (former, current or prospective) and any associated information, products, prices, fees, costs, technology, inventions, trade secrets, know-how, software, marketing methods, plans, personnel, suppliers, competitors, markets or other specialized information or proprietary matters; provided, however, that there shall be no obligation hereunder with respect to information that (i) is generally available to the public on the date of this Agreement or (ii) becomes generally available to the public other than as a result of a disclosure not otherwise permissible hereunder.

 

ARTICLE II

 

REMEDIES AND WAIVER OF TRIAL BY JURY

 

2.1          Remedies.  The parties to this Agreement agree that (a) if Restricted Person breaches Article I of this Agreement, the damage to the Surviving Corporation and Parent may be substantial, although difficult to ascertain, and money damages may not afford the Surviving Corporation and Parent an adequate remedy and (b) if Restricted Person is in breach of any

 

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provision of this Agreement, or threatens such a breach, the Surviving Corporation and Parent shall be entitled, in addition to all other rights and remedies as may be provided by applicable Law or otherwise, to seek specific performance and injunctive and other equitable relief to prevent or restrain such a breach without the necessity of proving actual damage or posting any bond whatsoever, to the maximum extent permitted by Law.  Notwithstanding anything herein to the contrary, in the event that Restricted Person is found by a court of competent jurisdiction to have violated Section 1.1 or Section 1.3, the Restricted Period shall be extended by the same time period that Restricted Person is found to have been in violation of such section of this Agreement.

 

2.2          Waiver of Trial by Jury.  IN ANY ACTION OR PROCEEDING ARISING HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO OR ITS SUCCESSORS AGAINST ANY OTHER PARTY HERETO OR ITS SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION OR PROCEEDING.

 

ARTICLE III

 

MISCELLANEOUS

 

3.1          Entire Agreement; Amendments and Waivers; Several Agreements.  This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto.  This Agreement may be amended or modified and the terms and conditions hereof may be waived, only by a written instrument signed by each of the parties or, in the case of waiver, by the party waiving compliance.  No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.  The rights and remedies provided herein are cumulative and are not exclusive of any rights or remedies that any party may otherwise have at law or in equity.

 

3.2          Representations and Warranties.  Each of the Company, MergerSub, Parent and Restricted Person represents and warrants that this Agreement is a legal, valid and binding obligation, enforceable against the Company, MergerSub, Parent and Restricted Person, respectively, in accordance with its terms to the fullest extent permitted under applicable Law subject to (i) applicable bankruptcy, insolvency, and other similar Laws affecting the rights and remedies of creditors generally and (ii) Laws governing specific performance, injunctive relief and other equitable remedies.

 

3.3          Notices.  All notices and other communications under this Agreement shall be in writing and shall be deemed given (a) when delivered personally by hand (with written confirmation of receipt), (b) when sent by facsimile (with written confirmation of transmission) or (c) one (1) Business Day following the day sent by overnight courier (with written confirmation of receipt), in each case at the following addresses and facsimile numbers (or to such other address or facsimile number as a party may have specified by written notice given to the other party pursuant to this provision):

 

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If to Parent, MergerSub
    	
 
    	
C. R. Bard, Inc.
    
	
or the Surviving 
    	
 
    	
730 Central Avenue
    
	
Corporation:  
    	
 
    	
Murray Hill, NJ 07974
    
	
 
    	
 
    	
Attention: General Counsel
    
	
 
    	
 
    	
Facsimile: (908) 277-8025
    
	
With a copy to:
    	
 
    	
 
    
	
 
    	
 
    	
Weil, Gotshal & Manges LLP
    
	
 
    	
 
    	
767 Fifth Avenue
    
	
 
    	
 
    	
New York, NY 10153-0119
    
	
 
    	
 
    	
Attention: Michael E. Lubowitz, Esq.
    
	
 
    	
 
    	
Facsimile: (212) 310-8007
    
	
 
    	
 
    	
 
    
	
If to Restricted Person:
    	
 
    	
To the address or facsimile number for notice set   forth on the signature page hereof.
    
	
 
    	
 
    

 

3.4          Governing Law and Venue.  This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota applicable to contracts made and performed in such state, without regard to any conflict of laws provisions that would require the application of the Law of any other jurisdiction.  Any suit, action or other legal proceeding arising out of or relating to this Agreement shall be brought exclusively in the state and federal courts located in Hennepin County, Minnesota.  Restricted Person agrees to submit to personal jurisdiction in the foregoing court and to venue in that court.  Restricted Person further agrees to waive all legal challenges and defenses to the propriety of a forum in Hennepin County, Minnesota, and to the application of Minnesota law therein.

 

3.5          Termination.  In the event the Merger Agreement is not entered into, the Merger is not consummated and/or the Merger Agreement is terminated for any reason in accordance with its terms, this Agreement shall automatically be null and void.

 

3.6          Severability.  To the extent any provision of this Agreement shall be determined to be unlawful or otherwise unenforceable, in whole or in part, such determination shall not affect the validity of the remainder of this Agreement, and this Agreement shall be reformed to the extent necessary to carry out its provisions to the greatest extent possible.  In the absence of such reformation, such part of such provision shall be considered deleted from this Agreement and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect.  In furtherance and not in limitation of the foregoing, should the duration or geographical extent of, or business activities covered by any provision of, this Agreement be in excess of that which is valid and enforceable under applicable Law, then such provision shall be construed to cover only that duration, extent or activities which may validly and enforceably be covered.  To the extent any provision of this Agreement shall be declared invalid or unenforceable for any reason by any governmental body in any jurisdiction, this Agreement (or provision thereof) shall remain valid and enforceable in each other jurisdiction where it applies.  Restricted Person acknowledges the uncertainty of the Law in this respect and expressly stipulates that this Agreement shall be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable Law.

 

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3.7          Successors and Assigns.  This Agreement shall be binding on and inure to the benefit of the parties and their respective successors and permitted assigns.  Parent, MergerSub and the Surviving Corporation may assign this Agreement and any or all rights or obligations hereunder to any person or entity at any time, without consent.  Neither the Company (prior to the Closing Date) nor Restricted Person shall be entitled to assign this Agreement or any of their respective obligations hereunder.

 

3.8          Independent Review and Advice.  Restricted Person represents and warrants that Restricted Person: (a) has carefully read this Agreement; (b) executes this Agreement with full knowledge of the contents of this Agreement, the legal consequences thereof, and any and all rights which each party may have with respect to one another; (c) has had the opportunity to receive independent legal advice with respect to the matters set forth in this Agreement and with respect to the rights and asserted rights arising out of such matters; (d) has been advised to, and has had the opportunity to, consult with Restricted Person’s personal attorney prior to entering into this Agreement; and (e) is entering into this Agreement of Restricted Person’s own free will.  The parties agree that this Agreement shall not be construed for or against either party in any interpretation thereof.  Restricted Person acknowledges that (i) prior to the Closing Date Dorsey & Whitney LLP (“D&W”) represents the Company and (ii) Weil, Gotshal & Manges LLP (“WGM”) represents Parent, MergerSub and the Surviving Corporation, and neither D&W nor WGM represent Restricted Person in connection with the Merger Agreement, this Agreement, or any of the transactions contemplated thereby or hereby.

 

3.9          Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to constitute one and the same agreement.  The exchange of a fully executed Agreement (in counterparts or otherwise) by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, shall be sufficient to bind the parties hereto to the terms and conditions of this Agreement.

 

3.10        Definitions.

 

“Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such entity, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities, by contract or otherwise.

 

“Business Day” means any day of the year on which national banking institutions in the United States are open to the public for conducting business and are not required or authorized to close.

 

“Closing Date” means the date of the consummation of the Merger.

 

“Exploit” or “Exploitation” means, with respect to any product, invention, intellectual property, asset or property, to disclose, manufacture, produce, import, use, operate, research, 

 

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design, develop, perform animal, clinical or other testing, perform quality assurance testing, commercialize, revise, repair, register, maintain, modify, enhance, upgrade, prepare derivative works, seek regulatory concurrences or approvals, package, label, improve, formulate, export, transport, distribute, promote, market, advertise, sell, have sold, offer for sale or license such product, invention, intellectual property, asset or property.

 

“Law” means any foreign, federal, state or local law (including common law), statute, code, ordinance, rule, regulation, order or other requirement.

 

“Products” means all products and any and all line extensions, modifications, improvements, additions, successors thereto and replacements therefor, in each case, that are owned by, used by, marketed or sold by, held for use by or licensed to (or otherwise available to) the Business.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first written above.

 

	
 
    	
ROCHESTER MEDICAL CORPORATION
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ David A. Jonas
    
	
 
    	
 
    	
Name: David A. Jonas
    
	
 
    	
 
    	
Title:   CFO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
C. R. BARD, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Christopher S. Holland
    
	
 
    	
 
    	
Name: Christopher S. Holland
    
	
 
    	
 
    	
Title:   Senior Vice President and   Chief Financial Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
STARNORTH ACQUISITION CORP.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Christopher S. Holland
    
	
 
    	
 
    	
Name: Christopher S.   Holland
    
	
 
    	
 
    	
Title:   Vice President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
RESTRICTED PERSON
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Philip Conway
    
	
 
    	
Name:    Philip Conway
    
	
 
    	
 
    
	
 
    	
Address: 9818 County Road SE 
   Chatfield, MN 55923
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Facsimile No.: (507) 533-9725Exhibit 10.1

 

BUSINESS LOAN AGREEMENT

 

	
Principal
    	
 
    	
Loan Date
   08-15-2013
    	
 
    	
Maturity
    	
 
    	
Loan No
    	
 
    	
Call / Coll
    	
 
    	
Account
   MASTER
    	
 
    	
Officer
   ***
    	
 
    	
Initials
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
References in the boxes   above are for Lender’s use only and do not limit the applicability of this   document to any particular loan or item.

Any item above containing   “***” has been omitted due to text length limitations.
    

 

 

	
Borrower: 
    	
CORGENIX MEDICAL CORPORATION
    	
Lender:
    	
BANK OF THE WEST
    
	
 
    	
11575 MAIN ST #400
    	
 
    	
SME BBC Northern Front Range #21193
    
	
 
    	
BROOMFIELD, CO 80020
    	
 
    	
12000 North Washington
    
	
 
    	
 
    	
 
    	
Thornton, CO 80241
    

 

THIS BUSINESS LOAN AGREEMENT dated August 15, 2013, is made and executed between CORGENIX MEDICAL CORPORATION (“Borrower”) and BANK OF THE WEST (“Lender”) on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement.

 

TERM. This Agreement shall be effective as of August 15, 2013, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.

 

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.

 

Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender’s Security Interests; (4) evidence of insurance as required below; (5) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender’s counsel.

 

Borrower’s Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.

 

Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.

 

Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.

 

No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.

 

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:

 

Organization. Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Nevada. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 11575 MAIN ST #400, BROOMFIELD, CO 80020. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrower’s state of organization or any change in Borrower’s name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrower’s business activities.

 

Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None.

 

Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower’s articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.

 

Financial Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.

 

Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

 

Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.

 

Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During

 

 

the period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense and for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.

 

Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.

 

Taxes. To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

 

Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests and rights in and to such Collateral.

 

Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.

 

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:

 

Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.

 

Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower’s books and records at all reasonable times.

 

Financial Statements. Furnish Lender with the following:

 

Additional Requirements. Comply with financial reporting as follows:

 

Annual Financial Statements. Not later than 45 days after the end of each Borrower’s fiscal year, a copy of the annual financial report of Borrower for such year.

 

Annual 10K Statement. Not later than 90 days after the end of the Borrower’s fiscal year, a copy of the annual 10K statement, audited by a certified public accountant.

 

Quarterly 10Q Statement. Not later than 45 days after the end of the Borrower’s fiscal quarter, a copy of the quarterly 10Q statement.

 

Accounts Receivable Agings. Not later than 45 days after the end of each quarter, an aging of accounts receivable.

 

All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.

 

Additional Information. Furnish such additional information and statements, as Lender may request from time to time. 

 

Financial Covenants and Ratios. Comply with the following covenants and ratios:

 

Working Capital Requirements. Other Working Capital requirements are as follows:

 

Quick Ratio. Maintain a ratio of its cash, Marketable Securities and accounts receivable to Current Liabilities of not less than 1.15 to 1.

 

Minimum Income and Cash flow Requirements. Other Cash Flow requirements are as follows:

 

Quarterly Losses. The Borrower shall maintain profitability by not allowing any consecutive quarterly loss(es). 

 

Tangible Net Worth Requirements. Other Net Worth requirements are as follows:

 

Debt to Effective Tangible Net Worth. Maintain a ratio of Debt to Effective Tangible Net Worth of not more than 1.00 to 1.

 

Additional Requirements. Comply with the following additional requirements:

 

Deposit Relationship. Maintain its primary business depository relationship with the Lender, including general operating and administrative deposit accounts and cash management services.

 

Notification of Default. Immediately upon becoming aware of the existence of any condition or event which constitutes an Event of Default, or any condition or event which would upon notice or lapse of time, or both, constitute an Event of Default, Borrower shall

 

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give Lender written notice thereof specifying the nature and duration thereof and the action being or proposed to be taken with respect thereto.

 

Material Notices. Give the Lender prompt written notice of any and all (1) litigation, arbitration or administrative proceedings to which the Borrower is a party or which affects the Collateral; (2) other matters which have resulted in, or might result in a material adverse change in the Collateral or the financial condition or business operations of the Borrower, and (3) any enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened against the Borrower or any of its properties.

 

Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct.

 

Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender’s loss payable or other endorsements as Lender may require.

 

Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.

 

Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

 

Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary by Lender in writing.

 

Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

 

Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement.

 

Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner.

 

Environmental Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.

 

Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender’s interest.

 

Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower’s expense.

 

Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower’s part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.

 

Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.

 

Additional Definitions. The following capitalized words and terms shall have the following meanings when used in this Agreement:

 

Cash Flow. The words “Cash Flow’ shall mean the sum of Net Income after tax and exclusive of extraordinary gains plus depreciation and amortization expense minus dividends and distributions.

 

Current Assets. The words “Current Assets” shall mean current assets as determined in accordance with GAAP, less all amounts due from

 

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affiliates, officers or employees.

 

Current Liabilities. The words “Current Liabilities” shall mean current liabilities as determined in accordance with GAAP, including any negative cash balance on the Borrower’s financial statements.

 

Current Portion of Long-Term Debt. The words “Current Portion of Long-Term Debt” shall mean, for any period, the current scheduled principal or capital lease payments required to be paid during the applicable period.

 

Debt. The words “Debt” shall mean all liabilities of the Borrowers, or any Borrower, as applicable, less Subordinated Liabilities, if any.

 

Effective Tangible Net Worth. The words “Effective Tangible Net Worth” shall mean the Borrower’s stated net worth plus Subordinated Liabilities but less all intangible assets of the Borrower (i.e. goodwill, trademarks, patents, copyrights, organization expense, covenants not to compete and other similar intangible items including, but not limited to, investments and/or advances in all amounts due from affiliates, officers or employees).

 

Equipment Value. The words “Equipment Value” mean the lesser of: the invoice cost of the equipment (including seller premiums or commissions, plus sales tax, freight, installation, and other reasonable costs.); or the book value of the equipment or the liquidation value of the equipment as determined by the Lender.

 

GAAP. “GAAP” shall mean generally accepted accounting principles in effect from time to time in the United States.

 

Liabilities. The word “Liabilities” shall mean (1) all indebtedness for borrowed money or for the deferred purchase price of property or services, and all obligations under leases which are or should be, under GAAP, recorded as capital leases, in respect of which a person is directly or contingently liable as borrower, guarantor, endorser or otherwise, or in respect of which a person otherwise assures a creditor against loss, (2) all obligations for borrowed money or for the deferred purchase price of property or services secured by (or for which the holder has an existing right, contingent or otherwise, to be secured by) any lien upon property (including without limitation accounts receivable and contract rights) owned by a person, whether or not such person has assumed or become liable for the payment thereof, and (3) all other liabilities and obligations which would be classified in accordance with GAAP as liabilities on a balance sheet or to which reference should be made in footnotes thereto.

 

Liquid Assets. The words “Liquid Assets” shall mean, as of the date of determination thereof, cash on hand, plus the value of Marketable Securities, minus the value of restricted retirement assets and minus the amount of any margined loans.

 

Marketable Securities. The words “Marketable Securities” shall mean stocks, bonds and mutual fund shares that can be readily sold for cash on stock exchanges or over-the-counter markets.

 

Net Income. The words “Net Income” shall mean, for any period, net income (or net loss, expressed as a negative number) after taxes actually paid in cash or accrued and all expenses and other charges for such period, determined in accordance with GAAP.

 

Permitted Liens. The words “Permitted Liens” shall mean: (1) liens and security interests securing Total Funded Indebtedness owed by the Borrowers to the Lender; (2) liens for taxes, assessments or similar charges not yet due; (3) liens of materialmen, mechanics, warehousemen, or carriers or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by any of the Borrowers in the ordinary course of business to secure Senior Funded Indebtedness outstanding on the date hereof or permitted to be incurred herein; (5) liens and security interests which, as of the date hereof, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of the Borrowers’ assets.

 

Senior Funded Indebtedness. The words “Senior Funded Indebtedness” shall mean, as of the date of determination thereof, all borrowed money as reflected in the most recent financial statements in the form required by this Agreement, if any, excluding all such borrowed money that has been subordinated to the satisfaction of Lender.

 

Subordinated Liabilities. The words “Subordinated Liabilities” shall mean as of the date of determination thereof, all Liabilities that have been subordinated in writing to the obligations owing to the Lender on terms and conditions acceptable to the Lender.

 

Total Funded Indebtedness. The words “Total Funded Indebtedness” shall mean, as of the date of determination thereof, all borrowed money as reflected in the most recent financial statements in the form required by this Agreement, if any.

 

Unencumbered. The words “Unencumbered” shall mean subject to no restriction, pledge, lien, claim or other encumbrance.

 

Value. The word “Value” means the lesser of the Borrower’s cost of Eligible Inventory or the book value thereof or the wholesale market value thereof in such quantities and on such terms as the Lender in its sole discretion may deem appropriate.

 

Working Capital. The words “Working Capital” shall mean the sum of Current Assets minus the sum of Current Liabilities.

 

RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law, rule, regulation or guideline, or the interpretation or application of any thereof by any court or administrative or governmental authority (including any request or policy not having the force of law) shall impose, modify or make applicable any taxes (except federal, state or local income or franchise taxes imposed on Lender), reserve requirements, capital adequacy requirements or other obligations which would (A) increase the cost to Lender for extending or maintaining the credit facilities to which this Agreement relates, (B) reduce the amounts payable to Lender under this Agreement or the Related Documents, or (C) reduce the rate of return on Lender’s capital as a consequence of Lender’s obligations with respect to the credit facilities to which this Agreement relates, then Borrower agrees to pay Lender such additional amounts as will compensate Lender therefor, within five (5) days after Lender’s written demand for such payment, which demand shall be accompanied by an explanation of such imposition or charge and a calculation in reasonable detail of the additional amounts payable by Borrower, which explanation and calculations shall be conclusive in the absence of manifest error.

 

LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower’s failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.

 

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any

 

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other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts.

 

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:

 

Payment Default. Borrower fails to make any payment when due under the Loan.

 

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

 

Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s or any Grantor’s property or Borrower’s or any Grantor’s ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.

 

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

 

Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

 

Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.

 

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

 

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.

 

Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.

 

Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired.

 

Insecurity. Lender in good faith believes itself insecure.

 

Judgment Default. A judgment or judgments for the payment of money shall be rendered against the Borrower or any guarantor of the Obligations, and any such judgment shall remain unsatisfied and in effect for any period of thirty (30) consecutive days without a stay of execution.

 

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender’s right to declare a default and to exercise its rights and remedies.

 

NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will comply with the following:

 

Limitations on Senior Funded Indebtedness. Borrower shall not after the date hereof, create, incur or assume, directly or indirectly, any additional Senior Funded Indebtedness other than Senior Funded Indebtedness owed or to be owed to Lender.

 

Liens and Encumbrances. Not create, assume or permit to exist any security interest, encumbrance, mortgage, deed of trust, or other lien (including, but not limited to, a lien of attachment, judgment or execution) affecting any of the Borrower’s properties, or execute or allow to be filed any financing statement or continuation thereof affecting any of such properties, except for Permitted Liens or as otherwise provided in this Agreement.

 

Capital Expenditures. Borrower shall not, directly or indirectly, make or commit to make capital expenditures by lease, purchase, or otherwise, except in the ordinary and usual course of business for the purpose of replacing machinery, equipment or other personal property which, as a consequence of wear, duplication or obsolescence, is no longer used or necessary in the Borrower’s business.

 

Mergers. Borrower shall not liquidate or dissolve, merge or consolidate with or into, or acquire any other business organization.

 

Loans or Advances. Borrower shall not make any loans or advances to any individual, partnership, corporation, limited liability company, trust, or other organization or person, including without limitation its officers and employees; provided, however, that Borrower may make advances to

 

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its employees, including its officers, with respect to expenses incurred or to be incurred by such employees in the ordinary course of business which expenses are reimbursable by Borrower; and provided further, however, that Borrower may extend credit in the ordinary course of business in accordance with customary trade practices.

 

Sale of Assets. Borrower shall not sell, lease or otherwise dispose of any of its assets, except in the ordinary course of business and except for the purpose of replacing machinery, equipment or other personal property which, as a consequence of wear, duplication or obsolescence, is no longer used or necessary in the Borrower’s business, provided that full, fair and reasonable consideration is received therefor; provided, however, in no event shall the Borrower sell, lease or otherwise dispose of any equipment purchased with the proceeds of any loans made by the Lender.

 

Stock Redemption/Repurchase. Not redeem or repurchase any class of the Borrower’s stock now or hereafter outstanding.

 

Investments. Borrower shall not make investments in, or advances to, any individual, partnership, corporation, limited liability company, trust or other organization or person other than as previously specifically consented to in writing by the Lender. The Borrower will not purchase or otherwise invest in or hold securities, non-operating real estate or other non-operating assets or purchase all or substantially all the assets of any entity other than as previously specifically consented to in writing by the Lender.

 

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

 

Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

 

Attorneys’ Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s reasonable costs and expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the reasonable costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court.

 

Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

 

Consent to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.

 

Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Colorado without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Colorado.

 

Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Adams County, State of Colorado.

 

No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

 

Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.

 

Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.

 

Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word “Borrower” as used in this Agreement shall include all of Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries or affiliates.

 

Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower’s rights under this Agreement or any interest therein, without the prior written consent of Lender.

 

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Survival of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to Lender of the Related Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time each Loan Advance is made, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

 

Time is of the Essence. Time is of the essence in the performance of this Agreement.

 

Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.

 

DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:

 

Advance. The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.

 

Agreement. The word “Agreement” means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.

 

Borrower. The word “Borrower” means CORGENIX MEDICAL CORPORATION and includes all co-signers and co-makers signing the Note and all their successors and assigns.

 

Collateral. The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

 

Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.

 

Event of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the default section of this Agreement.

 

GAAP. The word “GAAP” means generally accepted accounting principles.

 

Grantor. The word “Grantor” means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.

 

Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan.

 

Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

 

Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

 

Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.

 

Lender. The word “Lender” means BANK OF THE WEST, its successors and assigns.

 

Loan. The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.

 

Note. The word “Note” means and includes without limitation all of the Borrower’s promissory notes and/or credit agreements, whether now or hereafter existing, evidencing Borrower’s loan obligations in favor of Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for promissory notes and/or credit agreements.

 

Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.

 

Security Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.

 

Security Interest. The words “Security Interest” mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.

 

7

 

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED AUGUST 15, 2013.

 

BORROWER:

 

 

CORGENIX MEDICAL CORPORATION

 

	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
 
    	
DOUGLASS T SIMPSON, President & CEO of CORGENIX   MEDICAL CORPORATION
    	
 
    	
 
    	
WILLIAM H CRITCHFIELD, Senior Vice President Operations &   Finance & Chief Financial Officer of CORGENIX MEDICAL CORPORATION
    

 

LENDER:

 

 

BANK OF THE WEST

 

 

	
By:
    	
 
    	
 
    
	
 
    	
GABRIEL AREBALO, Relationship Manager
    	
 
    

 

LASER PRO Lending, Ver. 13.2.20.010 Copr. Harland Financial Solutions, Inc. 1997, 2013. All Rights Reserved. - CO P:\CFI\LPL\C40.FC TR-119383 PR-86

 

8

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