Document:

exhibit4-3.htm

EXHIBIT 4.3

 

Fourth Amendment to Loan and Security Agreement

 

This Fourth Amendment to Loan and Security Agreement (this “Fourth Amendment”), dated as of August 17, 2012, is by and between Fifth Third Bank, an Ohio banking corporation as successor by merger with Fifth Third Bank, a Michigan banking corporation, with an office located at 222 South Riverside Plaza, Chicago, Illinois 60606 (“Lender”), and Pulse Systems, LLC, a Delaware limited liability company, with its chief executive office located at 4090 Nelson Avenue, Suite J, Concord, California 94520 (“Borrower”).

 

WITNESSETH:

 

WHEREAS, prior hereto, Lender provided certain loans, extensions of credit and other financial accommodations to Borrower pursuant to (a) that certain Loan and Security Agreement dated as of March 31, 2009, as amended by that certain First Amendment to Loan and Security Agreement dated as of September 23, 2009, that certain Second Amendment to Loan and Security Agreement dated as of June 18, 2010, and that certain Third Amendment to Loan and Security Agreement dated as of June 30, 2011, each by and between Lender and Borrower (collectively the “Loan Agreement”), and (b) the other documents, agreements and instruments referenced in the Loan Agreement or executed and delivered pursuant thereto, including, without limitation, (i) that certain Revolving Note dated as of June 30, 2011, executed and delivered by Borrower to Lender in a maximum aggregate principal amount not to exceed $1,000,000, and (ii) that certain Term Note A dated as of June 30, 2011, executed and delivered by Borrower to Lender in the principal amount of $3,750,000.00;

 

WHEREAS, Borrower is in default under the Loan Agreement as a result of the Existing Defaults (hereinafter defined), and, as a result, Borrower is and continues to be in default under the terms and provisions of the Loan Documents;

 

WHEREAS, Borrower desires Lender to, among other things, (i) waive the Existing Defaults and (ii) extend the maturity date of the Revolving Note and Term Note A from June 30, 2013 to January 31, 2014 (collectively the “Additional Financial Accommodations”); and

 

WHEREAS, Lender has agreed to provide the Additional Financial Accommodations, but under the condition that certain amendments are made to the Loan Agreement and solely upon the terms and conditions set forth in this Fourth Amendment.

 

NOW, THEREFORE, in consideration of the execution and delivery of the Loan Documents, the mutual covenants and agreements hereafter set forth, and other good and valuable consideration, the parties hereto agree as follows:

 

1. Use of Defined Terms.  Except as expressly set forth in this Fourth Amendment, all terms which have an initial capital letter where not required by the rules of grammar are defined in the Loan Agreement.

  

  

  

Amended Definitions.  Effective as of the date of this Fourth Amendment, Section 1.1 of the Loan Agreement is hereby amended by deleting the definitions of “Adjusted EBITDA,” “Adjusted LIBOR Rate,” “Daily LIBOR Rate Loan,” “Fiscal Year,” “Fixed Charges,” “Index Rate Loan,” “LIBOR Contract Loan,” “Maximum Revolving Loan,” “Permitted Indebtedness,” “Permitted Liens,” “Revolving Loan Termination Date,” “Revolving Note” and “Term Note A” in their entirety and substituting therefor the following, respectively:

 

“Adjusted EBITDA”: shall mean, for any period, (1) Consolidated Net Income for such period plus, (2) to the extent deducted in determining such Consolidated Net Income, the sum of (a) Interest Expense, (b) net income tax expense, (c) depreciation and amortization, and (d) non-cash equity compensation expense, plus (3) to the extent deducted in determining such Consolidated Net Income, non-recurring expenses incurred in connection with the Third Amendment to Loan Agreement which are borne by Borrower in an aggregate amount not to exceed $25,000.00 for all periods, plus (4) for each test date from September 30, 2012 through June 30, 2013, the cash equity contribution provided by United American Healthcare to Borrower on August 16, 2012 in the amount of $370,000.00; all as determined for Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP.

 

“Adjusted LIBOR Rate”: means, with respect to any LIBOR Loan for any Interest Period, the greater of (1) an interest rate per annum (rounded upwards, if necessary to the next 1/16 of 1%) equal to (a) the LIBOR Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate, or (2) the then applicable LIBOR Floor.

 

“Daily LIBOR Rate Loan”: shall mean all or any portion of a Loan which bears interest at the Daily LIBOR Rate plus the Applicable Margin.

 

“Fiscal Year”: shall mean each twelve (12) month accounting period of Borrower which ends on June 30 of each year.

 

“Fixed Charges”:  for any period, shall mean the sum of, without duplication, (1) cash payments in satisfaction of Interest Expense, plus (2) scheduled or required payments of principal on Indebtedness other than payments required by Section 3.1(C) below, plus (3) scheduled principal payments on Capital Leases, each as paid or payable for such period and all as determined for Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP, excluding, however, payments made pursuant to the Redemption Agreement.  Notwithstanding the foregoing, for each test date from September 30, 2012, through and including June 30, 2013, Fixed Charges shall be determined as follows: (a) scheduled or required payments of principal on Indebtedness consisting of the Liabilities shall be deemed $666,666.68; and (b) cash payments in satisfaction of accrued Interest Expense shall be determined by dividing Borrowers’ aggregate accrued Interest Expense (excluding interest which Borrowers are not permitted to pay as a result of the terms of the Redemption Subordination Agreement) for the “Test

  

  

  

Period” (hereinafter defined) by the number of days in such Test Period and multiplying the result by 360.  “Test Period” shall mean the period beginning on July 1, 2012, and ending on the last day of the applicable Fixed Charge Coverage Ratio test period.”

 

“Index Rate Loan”:  shall mean all or any portion of a Loan which bears interest at the Index Rate plus the Applicable Margin.

 

“LIBOR Contract Loan”: shall mean all or any portion of a Loan subject to a single Interest Period which bears interest at the Adjusted LIBOR Rate plus the Applicable Margin.  For purposes of clarification, LIBOR Contract Loans shall not include Daily LIBOR Rate Loans.

 

“Maximum Revolving Loan”:  shall mean an amount equal to Five Hundred Thousand and no/100 ($500,000.00).

 

“Permitted Indebtedness”:  shall mean (1) existing Indebtedness set forth and described in the most recent Financials delivered to Lender, (2) trade payables arising in the ordinary course of Borrower’s business, (3) other Indebtedness of Borrower incurred in the ordinary course of Borrower’s business as presently conducted that are not (a) past due, unless such Indebtedness is being contested in good faith by appropriate proceedings, or (b) incurred through the borrowing of money or the obtaining of credit, (4) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies that is incurred in the ordinary course of Borrower’s business as presently conducted and is not past due; provided, however, Borrower shall have the right to contest in good faith, by an appropriate proceeding properly initiated and diligently conducted, the validity, amount or imposition of any such taxes, and upon such good faith contest, to delay or refuse payment thereof, if (i) Borrower establishes with Lender adequate reserves to cover such contested taxes, and (ii) either such contest will not affect the priority or value of Lender’s lien on the Collateral or Borrower otherwise takes steps reasonably acceptable to Lender to protect the priority and value of Lender’s lien on the Collateral, (5) Indebtedness in respect of judgments or awards which do not constitute an Event of Default hereunder, (6) Indebtedness in respect of employee benefit plans and programs that is incurred in the ordinary course of Borrower’s business as presently conducted and is not past due, (7) Indebtedness owing to Lender, (8) Indebtedness for Capital Leases and purchase money financing incurred to finance the acquisition of Equipment provided the aggregate outstanding principal amount of all such Capital Leases and purchase money financing does not exceed $500,000 at any time, (9) Subordinated Debt incurred to make Capital Expenditures provided that the source of such funds, in each instance, is St George Investments or United American Healthcare, and (10) Indebtedness arising under that certain Guaranty dated as of August 14, 2012 executed by Borrower in favor of St George Investments.

 

  

  

  

“Permitted Liens”: shall mean (1) liens for current taxes and duties not delinquent or for taxes being contested in good faith, by appropriate proceedings which do not involve, in the sole determination of Lender, any material danger of the sale or loss of any of the Collateral and with respect to which Borrower has provided for and are maintaining adequate reserves in accordance with GAAP, (2) liens in Lender’s favor, (3) liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other statutory obligations, provided that such obligations are not past due and owing, (4) easements, rights of way, restrictions and other similar charges or encumbrances with respect to real property not interfering in any material respect with the ordinary conduct of Borrower’s business, (5) subject to the limitation set forth in the definition of Permitted Indebtedness, liens incurred in connection with Capital Leases of Equipment and liens that constitute purchase money security interests on any Equipment securing Indebtedness incurred for the purpose of financing all or any part of the cost of acquiring such Equipment, provided that any such lien attaches to such Equipment within twenty (20) days of the acquisition thereof and attaches solely to the Equipment so acquired, (6) the security interests and liens listed on Schedule 1.1 attached hereto, and (7) the security interests and liens granted by Borrower pursuant to that certain Security Agreement dated as of August 14, 2012 executed by Borrower in favor of St George Investments, provided such liens are subordinated to Lender’s liens pursuant to written subordination satisfactory to Lender.

 

“Revolving Loan Termination Date”:  shall mean January 31, 2014.

 

“Revolving Note”:  shall mean that certain Revolving Note dated as of August 17, 2012, executed and delivered by Borrower to Lender in a maximum aggregate principal amount not to exceed Five Hundred Thousand and no/100 Dollars ($500,000.00), as amended, renewed, restated or replaced from time to time.

 

“Term Note A”: shall mean that certain Term Note A dated as of August 17, 2012, executed and delivered by Borrower to Lender in the principal amount of Two Million and no/100 Dollars ($2,000,000.00), as amended, renewed or restated from time to time.

 

2. New Definitions.  Effective as of the date of this Fourth Amendment, Section 1.1 of the Loan Agreement is hereby amended by adding “Applicable Margin,” “LIBOR Floor” and “St George Investments” as defined terms in proper alphabetical order:

 

“Applicable Margin” means, for any day, the rate per annum set forth below opposite the level (the “Applicable Margin Level”) then in effect, it being understood that the Applicable Margin for (i) Revolving Loans that are LIBOR Loans shall be the basis points set forth under the column “Revolving Loan LIBOR Margin”, (ii) Revolving Loans that are Index Rate Loans shall be the basis points set forth under the column “Revolving Loan Index Rate Margin”, (iii) those portions of the Term Loans that are LIBOR Loans shall be the basis points set forth under the column “Term Loan LIBOR Margin”, and

  

  

  

(iv) those portions of the Term Loans that are Index Rate Loans shall be the basis points set forth under the column “Term Loan Index Rate Margin”:

 

	
 

 

 

Level

	
Trailing Twelve Month EBITDA

	
Revolving Loan LIBOR Margin

	
 

Revolving Loan Index Rate Margin

	
 

Term Loan LIBOR Margin

	
 

Term Loan Index Rate Margin

	
1

	
Less than or equal to $1,525,000

	
600 bps

	
425 bps

	
625 bps

	
450 bps

	
2

	
Greater than $1,525,000 and less than or equal to $1,850,000

	
475 bps

	
325 bps

	
500 bps

	
300 bps

	
3

	
Greater than $1,850,000

	
375 bps

	
150 bps

	
400 bps

	
175 bps

 

The Applicable Margin shall be adjusted, to the extent applicable, on the fifth (5th) Business Day after Borrower provides or is required to provide quarterly financial statements and other information pursuant to Sections 9.5(A) or 9.5(C), as applicable, and the related compliance certificates pursuant to Sections 9.5(B) or 9.5(D).  Notwithstanding anything contained in this paragraph to the contrary, (a) if Borrower fails to deliver the financial statements and compliance certificate in accordance with the provisions of Section 9.5, the Applicable Margin for each Loan shall be based upon Applicable Margin Level 1 above beginning on the date such financial statements and compliance certificate were required to be delivered until the fifth (5th) Business Day after such financial statements and compliance certificate are actually delivered to Lender, whereupon the Applicable Margin shall be determined by the then current Applicable Margin Level; (b) no reduction to any Applicable Margin shall become effective at any time when an Unmatured Event of Default or an Event of Default has occurred and is continuing; and (c) the initial Applicable Margin shall be based on Applicable Margin Level 1.

 

“LIBOR Floor” means, for any day, the rate per annum equal to (i) 100 basis points when Applicable Margin Level 1 is in effect, (ii) 75 basis points when Applicable Margin Level 2 is in effect and (iii) 50 basis points when Applicable Margin Level 3 is in effect.

 

“St George Investments” means St George Investments LLC, an Illinois limited liability company.

 

3. Amendments.  Effective as of the date of this Fourth Amendment, the Loan Agreement is hereby amended as follows:

  

  

  

4. 

A. Interest Rates.  Section 2.3(A) of the Loan Agreement is hereby amended by deleting Section 2.3(A) in its entirety and substituting therefor the following:

 

“(A)           Interest Rates.

 

 

(1) Borrower hereby promises to pay interest on the unpaid principal amount of the Revolving Loan as provided in Section 3.1 below at the floating per annum rate of interest equal to the Index Rate plus the Applicable Margin for the period commencing on the date such Loan is disbursed until the date such Loan is paid in full.  Provided, however, subject to the terms of Section 2.4 below, Borrower shall have the option of borrowing all or a portion of the Revolving Loan at, or converting the interest rate for all or a portion of the Revolving Loan to, either (a) the Adjusted LIBOR Rate plus the Applicable Margin, in each case subject to an Interest Period of one month, two months or three months, as selected by Borrower, or (b) the Daily LIBOR Rate, which Daily LIBOR Rate shall adjust on a daily basis for each Business Day in which the Daily LIBOR Rate changes.  With respect to each LIBOR Loan under subsection 2.3(A)(1)(a) above, the LIBOR Rate shall remain fixed for the duration of each Interest Period.

 

 

(2) Borrower hereby promises to pay interest on the unpaid principal amount of Term Loan A as provided in Section 3.1 below at the floating per annum rate of interest equal to the Adjusted LIBOR Rate plus the Applicable Margin, in accordance with Section 2.4 below.  Each LIBOR Rate Loan for Term Loan A shall be subject to an Interest Period of one month, two months or three months, as selected by Borrower pursuant to Section 2.4 below.  If Borrower has not timely selected an Interest Period with respect to all or any portion of Term Loan A, a one month Interest Period shall be deemed selected by Borrower.  With respect to each LIBOR Loan under this subparagraph (2), the LIBOR Rate shall remain fixed for the duration of each Interest Period.

 

(3)  Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default, the unpaid principal amount of the Loans shall, at Lender’s option bear interest at the Default Rate.”

 

B. Financial Covenants.  Section 9.4 of the Loan Agreement is hereby amended by deleting Section 9.4 in its entirety and substituting therefor the following:

 

“(A)           Adjusted EBITDA.  Borrower’s Adjusted EBITDA shall not be less than (i) $340,000.00 for the period beginning July 1, 2012 and ending September 30, 2012, (ii) $750,000.00 for the period beginning July 1, 2012 and ending December 31, 2012, (iii)

 

  

  

  

$1,110,000 for the period beginning July 1, 2012 and ending March 31, 2013, (iv) $1,600,000 for the period beginning July 1, 2012 and ending June 30, 2013.  Beginning with the calendar quarter ending as of September 30, 2013 and as of the end of each calendar quarter thereafter, Borrower’s Adjusted EBITDA, calculated on a trailing twelve (12) month basis, shall not be less than $1,800,000.00.

 

(B)           Funded Debt to Adjusted EBITDA Ratio.  Borrower shall not permit its Funded Debt to Adjusted EBITDA Ratio, tested as of the last day of each calendar quarter hereafter, to exceed (i) 1.75 to 1.0 as of September 30, 2012, or (ii) 1.50 to 1.0 as of December 31, 2012, or as of the last day of any calendar quarter thereafter.

 

(C)           Fixed Charge Coverage Ratio.  Borrower shall not permit its Fixed Charge Coverage Ratio, calculated on a trailing twelve (12) month basis as of the last day of each calendar quarter hereafter, to be less than (i) 1.15 to 1.0 as of September 30, 2012, (ii) 1.20 to 1.0 as of December 31, 2012, or (iii) 1.25 to 1.0 as of March 31, 2013 or as of the last day of any calendar quarter thereafter.

 

(D)           Capital Expenditures.  Borrower’s total aggregate unfinanced Capital Expenditures from July 1, 2012 through June 30, 2013 shall not exceed $700,000.00; provided, however, that while the first $200,000.00 of such Capital Expenditures may be funded by Borrower’s available cash, the next $500,000.00 of such Capital Expenditures  must be funded by cash contributed by St George Investments or United American Healthcare to Borrower, either in the form of Subordinated Debt or a capital contribution, which loan or contribution of funds shall be undertaken pursuant to documents acceptable to Lender in its sole and absolute discretion, and, as applicable, St George Investments or United American Healthcare shall enter into a subordination agreement in form and substance satisfactory to Lender in its sole and absolute discretion. Beginning with the Fiscal Year commencing July 1, 2013, Borrower’s total aggregate unfinanced Capital Expenditures in any Fiscal Year shall not exceed $500,000.00.”

 

C. Financial Reporting.  Section 9.5 of the Loan Agreement is hereby as follows:

 

a. Section 9.5(C) of the Loan Agreement is hereby amended by deleting Section 9.5(C) in its entirety and substituting therefor the following:

 

“(C)           As soon as available but in no event later than thirty (30) days after the end of each calendar month, Borrower’s internally prepared consolidated and consolidating financial statements, including, but not limited to, (1) a balance sheet, and (2) a statement of income and retained earnings, and the year-to-date statement for that portion of Borrower’s Fiscal Year then elapsed.”

 

b. Section 9.5(E) of the Loan Agreement is hereby amended by deleting Section 9.5(E) in its entirety and substituting therefor the following:

 

  

  

  

c. “(E)           As soon as available, but in no event later than thirty (30) days after the end of each month, the following reports dated as of the last day of the immediately preceding month: (1) an accounts payable aging, and (2) a backlog report of all of Borrower’s jobs.”

 

 

d. Section 9.5(F) of the Loan Agreement is hereby amended by deleting Section 9.5(F) in its entirety and substituting therefor the following:

 

“(F)           As soon as available, but in no event later than thirty (30) days after the end of each calendar month, the following reports dated as of the last day of the immediately preceding month: (1) Accounts receivable aging, (2) Accounts receivable summary report (including a reconciliation of Borrower’s cash and Accounts to Borrower’s general ledger), and (3) a Borrowing Base Certificate.”

 

e. Section 9.5(G) of the Loan Agreement is hereby amended by deleting Section 9.5(G) in its entirety and substituting therefor the following:

 

“(G)           As soon as available, but in no event later than thirty (30) days after the end of each quarter, an Inventory Report dated as of the last day of the immediately preceding quarter.”

 

4.           Conditions Precedent.  Lender’s obligation to provide the Additional Financial Accommodations to Borrower is subject to the full and timely performance of the conditions set forth in this Section prior to or contemporaneously with the execution of this Fourth Amendment.  Contemporaneously herewith, Borrower shall execute and deliver, or cause to be executed and delivered, to Lender, the following documents, each of which shall be in form and substance acceptable to Lender:

 

(i) the Revolving Note;

 

(ii) Term Note A;

 

(iii) a Company General Certificate executed by the Secretary or Assistant Secretary of Borrower;

 

(iv) a First Amendment and Reaffirmation of Membership Interest Pledge Agreement executed by United American Healthcare;

 

(v) a Company General Certificate executed by the Secretary of United American Healthcare;

  

  

  

a Subordination Agreement executed by St George Investments;

 

(vi) a Membership Interest Pledge Agreement and related Assignment of Membership Units executed by St George Investments accompanied by the original certificates evidencing the pledged membership units;

 

(vii) a Company General Certificate executed by the Secretary of St George Investments;

 

(viii) evidence of an equity cash contribution by United American Healthcare to Borrower in the amount of $370,000.00; and

 

(ix) such other agreements, documents and instruments as Lender may reasonably request.

 

5.           Conflict.  If, and to the extent, the terms and provisions of this Fourth Amendment contradict or conflict with the terms and provisions of the Loan Agreement, the terms and provisions of this Fourth Amendment shall govern and control; provided, however, to the extent the terms and provisions of this Fourth Amendment do not contradict or conflict with the terms and provisions of the Loan Agreement, the Loan Agreement, as amended by this Fourth Amendment, shall remain in and have its intended full force and effect, and Lender and Borrower hereby affirm, confirm and ratify the same.

 

6.           Waiver of Events of Default.   Borrower hereby acknowledges and agrees that Events of Default currently exist under the Loan Agreement as a result of Borrower’s failure to comply with (a) the Adjusted EBITDA covenant set forth in Section 9.4(A) of the Loan Agreement for the periods ending December 31, 2011, March 31, 2012 and June 30, 2012, (b) the Fixed Charge Coverage Ratio covenant set forth in Section 9.4(C) of the Loan Agreement for the periods ending December 31, 2011, March 31, 2012 and June 30, 2012, and (c) the Capital Expenditures covenant set forth in Section 9.4(D) of the Loan Agreement for the period ending December 31, 2011 (collectively the “Existing Defaults”).  Borrower hereby represents and warrants to Lender that no Event of Default or Unmatured Event of Default exists as of the date of this Fourth Amendment, other than the Existing Defaults set forth above.  Provided Borrower satisfies all of the conditions precedent set forth in Section 4 above, Lender hereby waives the Existing Defaults; provided that such waiver shall not be or be deemed to be a waiver by Lender of any other Events of Default, whether now existing or hereafter arising or occurring.

 

7.           Severability.  Wherever possible, each provision of this Fourth Amendment shall be interpreted in such manner as to be valid and enforceable under applicable law, but if any provision of this Fourth Amendment is held to be invalid or unenforceable by a court of competent jurisdiction, such provision shall be severed herefrom and such invalidity or unenforceability shall not affect any other provision of this Fourth Amendment, the balance of which shall remain in and have its intended full force and effect.  Provided, however, if such provision may be modified so as to be valid and enforceable as a matter of law, such provision

  

  

  

shall be deemed to be modified so as to be valid and enforceable to the maximum extent permitted by law.

 

8.           Reaffirmation.  Borrower hereby reaffirms and remakes all of the representations, warranties, covenants, duties, obligations and liabilities contained in the Loan Documents, as amended hereby.

 

9.           Fees, Costs and Expenses.

 

A. Contemporaneously herewith, Borrower shall pay to Lender a fully-earned, non-refundable loan fee in the amount of $25,000.

 

B. Borrower agrees to pay, upon demand, all fees, costs and expenses of Lender, including, but not limited to, reasonable attorneys’ fees, in connection with the preparation, execution, delivery and administration of this Fourth Amendment and the other Loan Documents, documents and instruments executed and delivered in connection herewith or pursuant hereto.

 

10.           Choice of Law.  This Fourth Amendment has been delivered and accepted in Chicago, Illinois, and shall be governed by and construed in accordance with the laws of the State of Illinois, regardless of the laws that might otherwise govern under applicable principles of conflicts of law as to all matters, including matters of validity, construction, effect, performance and remedies.

 

11.           Waiver of Jury Trial.  BORROWER AND LENDER EACH HEREBY WAIVE THEIR RESPECTIVE RIGHT TO TRIAL BY JURY.

 

12.           Counterparts.  This Fourth Amendment may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.  A facsimile or email transmitted executed counterpart to this Fourth Amendment and the other agreements, documents and instruments executed in connection herewith will be deemed an acceptable original for purposes of consummating this Fourth Amendment and such other agreements, documents and instruments; provided, however, Borrower shall be required to deliver to Lender original executed signature pages in substitution for said facsimile or email transmitted signature pages upon Lender’s request therefor.

 

13.           Waiver and Release.  IN CONSIDERATION OF LENDER’S EXECUTION AND DELIVERY OF THIS FOURTH AMENDMENT, BORROWER HEREBY INDIVIDUALLY AND COLLECTIVELY, WAIVES, RELEASES AND FOREVER DISCHARGES LENDER, ITS PREDECESSORS, PARENTS, SUBSIDIARIES, AFFILIATES, AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, SHAREHOLDERS, ATTORNEYS, LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS, AND EACH OF THEM, OF AND FROM ANY AND ALL CLAIMS, DEMANDS, COUNTERCLAIMS, SET-OFFS, DEFENSES, DEBTS,  OBLIGATIONS, COSTS, EXPENSES, ACTIONS, CAUSES OF

  

  

  

ACTION AND DAMAGES OF EVERY KIND, NATURE AND DESCRIPTION WHATSOEVER, KNOWN OR UNKNOWN, FORESEEABLE OR UNFORESEEABLE, LIQUIDATED OR UNLIQUIDATED, AND INSURED OR UNINSURED, WHICH BORROWER HERETOFORE, NOW AND FROM TIME TO TIME HEREAFTER OWN, HOLD OR HAVE BY REASON OF ANY MATTER, CAUSE OR THING WHATSOEVER, ARISING ON OR BEFORE THE DATE OF THIS FOURTH AMENDMENT FROM, RELATING TO OR IN CONNECTION WITH THE LOAN DOCUMENTS, THE INDEBTEDNESS OR THIS FOURTH AMENDMENT.

 

 

[signature page follows]

  

  

  

 

IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be duly executed and delivered as of the date first above written.

 

	
Fifth Third Bank,

an Ohio banking corporation,

successor by merger to Fifth Third Bank,

a Michigan banking corporation

	
Pulse Systems, LLC,

a Delaware limited liability companyform8k_exh101-082212.htm

Stock Option Agreement

Employee – ISO – 5 year vesting

Stock Option

Granted by

WOLVERINE BANCORP, INC.

under the

WOLVERINE BANCORP, INC.

2012 EQUITY INCENTIVE PLAN

This stock option agreement (“Option” or “Agreement”) is and will be subject in every respect to the provisions of the 2012 Equity Incentive Plan (the “Plan”) of Wolverine Bancorp, Inc. (the “Company”) which are incorporated herein by reference and made a part hereof, subject to the provisions of this Agreement.  A copy of the Plan has been provided to each person granted a stock option pursuant to the Plan.  The holder of this Option (the “Participant”) hereby accepts this Option, subject to all the terms and provisions of the Plan and this Agreement, and agrees that all decisions under and interpretations of the Plan and this Agreement by the Committee appointed to administer the Plan (“Committee”) or the Board will be final, binding and conclusive upon the Participant and the Participant’s heirs, legal representatives, successors and permitted assigns.  Capitalized terms used herein but not defined will have the same meaning as in the Plan.

 

1.           Name of Participant:  ________________________________________________                                                                                                                              

 

2.           Date of Grant:  _________, 2012

 

	
3.

	
Total number of shares of Company common stock, $0.01 par value per share, that may be acquired pursuant to this Option:

(subject to adjustment pursuant to Section 9 hereof).

	 

	
·  

	
This is an Incentive Stock Option (“ISO”).

 

4.           Exercise price per share:     $ ____________

(subject to adjustment pursuant to Section 10 below)

5.           Expiration Date of Option:  _________, 2022.

 

	
6.

	
Vesting Schedule.  Except as otherwise provided in this Agreement, this Option first becomes exercisable, subject to the Option’s expiration date, in accordance with the vesting schedule specified herein.

 

The Options granted under this Agreement shall vest in five (5) equal annual installments, with the first installment becoming exercisable on the first anniversary of the date of grant, or _________, 2013, and succeeding installments on each anniversary thereafter, through ___________, 2017.  To the extent the Options awarded to me are not equally divisible by “5,” any excess Options shall vest on ___________, 2017.

 

  

  

  

This Option may not be exercised at any time on or after the Option’s expiration date. Vesting will automatically accelerate pursuant to Sections 2.8 and 4.1 of the Plan (in the event of death, Disability or Involuntary Termination of Employment following a Change in Control).

 

7.           Exercise Procedure.

 

	
  

	
7.1

	
Delivery of Notice of Exercise of Option.  This Option will be exercised in whole or in part by the Participant’s delivery to the Company of written notice (the “Notice of Exercise of Option” attached hereto as Exhibit A) setting forth the number of shares with respect to which this Option is to be exercised, together with payment by cash or other means acceptable to the Committee, including:

 

	
(i)  

	
by tendering shares of Common Stock valued at Fair Market Value (as defined in Section 7.2 hereof) as of the day of exercise;

 

	
(ii)  

	
by irrevocably authorizing a third party, acceptable to the Committee, to sell shares of Common Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and to remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise;

	
(iii)  

	
by a net settlement of the Option, using a portion of the shares obtained on exercise in payment of the exercise price of the Option;

	
(iv)  

	
by personal, certified or cashier’s check;

              (v)   by other property deemed acceptable by the Committee; or

 

              (vi)   by any combination thereof.

 

	
  

	
7.2

	
“Fair Market Value” shall have the meaning set forth in Section 8.1(r) of the Plan.

 

8.           Delivery of Shares.

 

              Delivery of Shares.  Delivery of shares of Common Stock upon the exercise of this Option will comply with all applicable laws (including the requirements of the Securities Act) and the applicable requirements of any securities exchange or similar entity.

9.           Adjustment Provisions.

 

	
  

	
This Option, including the number of shares subject to the Option and the exercise price, will be adjusted upon the occurrence of the events specified in, and in accordance with the provisions of Section 3.3 of the Plan.

 

  

  

  

10.           Termination of Option and Accelerated Vesting.

 

This Option will terminate upon the expiration date, except as set forth in the following  provisions:

 

	
(i) 

	
Death.  This Option will become exercisable as to all shares subject to an outstanding Award, whether or not then exercisable, in the event of the Participant’s Termination of Service by reason of the Participant’s death.  This Option may thereafter be exercised by the Participant’s legal representative or beneficiaries for a period of one (1) year from the date of death, subject to termination on the expiration date of this Option, if earlier.

 

	
(ii)  

	
Disability.  This Option will become exercisable as to all shares subject to an outstanding Award, whether or not then exercisable, in the event of the Participant’s Termination of Service by reason of the Participant’s Disability. This Option may thereafter be exercised for a period of one (1) year from the date of such Termination of Service by reason of Disability, subject to termination on the Option’s expiration date, if earlier.

	
(iii) 

	
Termination for Cause.  If the Participant’s Termination of Service is for  Cause, all Options that have not been exercised will expire and be forfeited.

	
(iv)  

	
Change in Control. In the event of the Participant’s Involuntary Termination of Employment following a Change in Control, all Options held by the Participant, whether or not exercisable at such time, will become fully exercisable, subject to the expiration provisions otherwise applicable to the Option.  A “Change in Control” will be deemed to have occurred as provided in Section 4.2 of the Plan.

	
(v)  

	
Retirement.  Vested Options may be exercised for a period of one (1) year from the date of Termination of Service by reason of Retirement, subject to termination on the Option’s expiration date, if earlier (and for purposes of clarity, non-vested options will be forfeited on the date of Termination of Service by reason of Retirement).   

	
(vi) 

	
Other Termination.  If the Participant’s Termination of Service is for any reason other than death, Disability, Retirement, for Cause or following a Change of Control, this Option may thereafter be exercised, to the extent it was exercisable at the time of such termination, for a period of three (3) months following termination, subject to termination on the Option’s expiration date, if earlier.

	
(vii)  

	
Incentive Option Treatment.  No Option will be eligible for treatment as an ISO in the event such Option is exercised more than three (3) months following Termination of Service by reason of Retirement or more than one (1) year following Termination of Service by reason of Disability.  In order to obtain ISO treatment for Options exercised by heirs or devisees of the Participant, the Participant’s death must have occurred while the Participant was employed or within three (3) months of Termination of Service.

  

  

  

	
11.

	
Post-Termination Obligations.  The Participant hereby covenants and agrees that, for a period of twelve months following the Participant’s termination of employment with Wolverine Bank (the “Bank”), the Participant shall not, without the written consent of the Bank, either directly or indirectly:

11.1                Non-Solicitation of Employees.  Solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of the Bank or the Company, or any of their respective subsidiaries or affiliates, to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any business whatsoever that competes with the business of the Bank or the Company, or any of their direct or indirect subsidiaries or affiliates or has headquarters or offices within 20 miles of the locations in which the Bank or the Company has business operations or has filed an application for regulatory approval to establish an office;

11.2                Non-Competition.  Become an officer, employee, consultant, director, independent contractor, agent, sole proprietor, joint venturer, greater than 5% equity owner or stockholder, partner or trustee of any savings bank, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker or any other entity competing with the Bank or its affiliates in the same geographic locations where the Bank or its affiliates has material business interests; provided, however, that this restriction shall not apply if the Participant’s employment is terminated following a Change in Control; or

11.3                Non-Solicitation of Customers.    Solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Bank to terminate an existing business or commercial relationship with the Bank.

12.           Miscellaneous.

	
  

	
12.1

	
No Option will confer upon the Participant any rights as a stockholder of the Company prior to the date on which the individual fulfills all conditions for receipt of such rights.

	
  

	
12.2

	
This Agreement may not be amended or otherwise modified unless evidenced in writing and signed by the Company and the Participant.

	
  

	
12.3

	
Except as otherwise provided by the Committee, ISOs under the Plan are not transferable except (1) as designated by the Participant by will or by the laws of descent and distribution, (2) to a trust established by the Participant, or (3) between spouses incident to a divorce or pursuant to a domestic relations order; provided, however, that in the case of a transfer described under (3), the Option will not qualify as an ISO as of the day of such transfer.

  

  

  

	
  

	
12.4

	
This Option will be governed by and construed in accordance with the laws of the State of Michigan.

	
  

	
12.5

	
The granting of this Option does not confer upon the Participant any right to be retained in the employ of the Company or any subsidiary.

 

[Remainder of Page Intentionally Blank]

 

  

  

  

IN WITNESS WHEREOF, the Company has caused this instrument to be executed in its name and on its behalf as of the date of grant of this Option set forth above.

 

	  	  	
WOLVERINE BANCORP, INC.

	  	  	
 

_______________________________________

By:  ____________________________________                                                                      

Its:  ____________________________________                                                                       

 

PARTICIPANT’S ACCEPTANCE

 

The undersigned hereby accepts the foregoing Option and agrees to the terms and conditions hereof, including the terms and provisions of the Company’s 2012 Equity Incentive Plan.  The undersigned hereby acknowledges receipt of a copy of the Company’s 2012 Equity Incentive Plan.

 

	  	  	
PARTICIPANT

	  	  	
 

________________________________________

  

  

  

 

EXHIBIT A

 

NOTICE OF EXERCISE OF OPTION

 

(BY EMPLOYEE)

 

I hereby exercise the stock option (the “Option”) granted to me by Wolverine Bancorp, Inc. (the “Company”) or its affiliate, subject to all the terms and provisions set forth in the Stock Option Agreement (the “Agreement”) and the Wolverine Bancorp, Inc. 2012 Equity Incentive Plan (the “Plan”) referred to therein, and notify you of my desire to purchase __________________ shares of common stock of the Company (“Common Stock”) for a purchase price of $_______ per share.

 

Enclosed please find (check one):

 

	
  

	
___

	
Cash or personal, certified or cashier’s check in the sum of $_______, in full/partial payment of the purchase price.

 

	
  

	
___

	
Stock of the Company with a fair market value of $______ in full/partial payment of the purchase price.*

 

	
  

	
___

	
My check in the sum of $_______ and stock of the Company with a fair market value of $______, in full/partial payment of the purchase price.*

 

	
  

	
___

	
Please sell ______ shares from my Option shares through a broker in full/partial payment of the purchase price.

 

I understand that after this exercise, ____________ shares of Common Stock remain subject to the Option, subject to all terms and provisions set forth in the Agreement and the Plan.

 

I hereby represent that it is my intention to acquire these shares for the following purpose:

 

___           investment

___           resale or distribution

Please note: if your intention is to resell (or distribute within the meaning of Section 2(11) of the Securities Act of 1933) the shares you acquire through this Option exercise, the Company or transfer agent may require an opinion of counsel that such resale or distribution would not violate the Securities Act of 1933 prior to your exercise of such Option.

 

	
Date: ____________, _____.

	  	____________________________________________
	  	  	  	
Participant’s signature

*           If I elect to exercise by exchanging shares I already own, I will constructively return shares that I already own to purchase the new option shares.  If my shares are in certificate form, I must attach a separate statement indicating the certificate number of the shares I am treating as having exchanged.  If the shares are held in “street name” by a registered broker, I must provide the Company with a notarized statement attesting to the number of shares owned that will be treated as having been exchanged.  I will keep the shares that I already own and treat them as if they are shares acquired by the option exercise.  In addition, I will receive additional shares equal to the difference between the shares I constructively exchange and the total new option shares that I acquire.

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