Exhibit 10.9.1
CITIZENS BANK NEW HAMPSHIRE
LOAN AGREEMENT
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THIS LOAN AGREEMENT (the "Agreement"), is made as of this 4th
day of October, 1996, by and between AMERICAN ELECTROMEDICS
CORP., a Delaware corporation with a principal place of business
at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"BORROWER"), and CITIZENS BANK NEW HAMPSHIRE, a guaranty savings
bank organized under the laws of the State of New Hampshire with
an address of ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "BANK").
RECITALS:
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The BORROWER has requested and the BANK has agreed to
provide certain credit facilities to the BORROWER, all upon the
terms and conditions set forth in this Agreement and the Loan
Documents (as defined hereinbelow). Each loan which BANK may from
time to time extend to BORROWER is individually referred to
herein as a "Loan" and collectively as the "Loans". All of the
Loans are, together with all other debts, liabilities and
obligations of BORROWER to the BANK, direct or indirect, absolute
or contingent, now existing or hereafter arising, hereinafter
sometimes collectively referred to as the "Obligations". Each
Loan is or shall be evidenced by a promissory note (individually
a "Note" and collectively the "Notes") and each Loan and all of
the other Obligations are secured pursuant to a Security
Agreement of even date between the BANK and the BORROWER (the
"Security Agreement") and the other Loan Documents. In
connection with the Loans, the BORROWER has and may hereafter
execute certain other documents, certificates and agreements, all
of which are, together with this Agreement, the Notes, and the
Security Agreement and as all of the same may be hereafter
amended, modified, revised, renewed, or extended, sometimes
collectively referred to herein as the "Loan Documents". Each
Loan shall be made upon and subject to the terms and conditions
set forth in the Note evidencing such Loan, the Security
Agreement, the other Loan Documents, and this Agreement. The
terms, conditions, representations, warranties, and covenants set
forth in this Agreement are in addition to, and not in limitation
of, the terms, conditions, representations, warranties, and
covenants set forth in the other Loan Documents. In the event of
any conflict between the terms, conditions, representations,
warranties, and covenants contained in the Loan Documents, the
term, condition, representation, warranty, or covenant which
confers the greatest benefit upon the BANK shall control. The
determination as to which term, condition, representation,
warranty, or covenant is more beneficial shall be made by the
BANK in its sole discretion and shall be binding upon the
BORROWER.
NOW, THEREFORE, in consideration of the BANK extending the
Loans to the BORROWER as described hereinbelow, the BANK and the
BORROWER hereby agree as follows:
I. REVOLVING LINE OF CREDIT. The BANK shall make available to
the BORROWER a revolving line of credit loan in the maximum
principal amount of up to Four Hundred Thousand Dollars
($400,000.00) (the "Revolving Line of Credit Loan"), as evidenced
by the Revolving Line of Credit Promissory Note made by the
BORROWER payable to the order of the BANK in the maximum
principal amount of up to Four Hundred Thousand Dollars
($400,000.00) of even date herewith (the "Revolving Line of
Credit Note"). The Revolving Line of Credit Loan shall be upon
and subject to the terms and conditions set forth in the
Revolving Line of Credit Note, the other Loan Documents, and this
Agreement. Upon the initial advance under the Revolving Line of
Credit Loan, the Revolving Line of Credit Loan shall replace a
prior credit facility by BANK to BORROWER in the original
principal amount of up to Three Hundred Thousand Dollars
($300,000.00) in its entirety and all indebtedness thereunder.
A. Maximum Available Amount. The maximum amount available to
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the BORROWER from time to time under the Revolving Line of Credit
Loan shall be the LESSER of (i) Four Hundred Thousand Dollars
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($400,000.00) or (ii) an amount equal to the aggregate of (a) the
applicable percentage of the sum of BORROWER's Acceptable
Accounts AND (b) the applicable percentage of the value of
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BORROWER's Acceptable Inventory, all as set forth and defined on
Schedule A attached hereto. The maximum amount available to
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BORROWER under the Revolving Line of Credit Loan as determined
from time to time under the formula set forth in clauses (ii) (a)
and (b) above is hereinafter referred to as the BORROWER's
"Borrowing Base". The BORROWER agrees that the BANK may, at any
time or times, lower the applicable percentages of Acceptable
Accounts and Acceptable Inventory for purposes of determining the
Borrowing Base to such percentages as the BANK may determine in a
commercially reasonable manner to be appropriate based upon any
material deterioration of the BORROWER's condition, financial or
otherwise, and/or of the value, condition or quality of the
Collateral (as hereinafter defined).
B. Advances. The Revolving Line of Credit Loan shall be
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disbursed, advanced, readvanced, and repaid as provided in the
Revolving Line of Credit Note and this Agreement. BORROWER may
request advances orally or in writing from time to time in
accordance with such procedures as the BANK may from time to time
specify in an amount such that the aggregate amounts outstanding
under the Revolving Line of Credit Loan do not exceed the maximum
available amount as determined under Section I. A. above. The
BANK shall be under no obligation to make any advance (automatic
or otherwise) at any time or times during which an Event of
Default has occurred or is existing under this Agreement or the
Loan Documents, or if any condition exists which, if not cured,
would with the passage of time or the giving of notice, or both,
constitute such an Event of Default. At the time of each advance
and readvance under the Revolving Line of Credit Loan, BORROWER
shall immediately become indebted to the BANK for the amount
thereof. Each such advance or readvance may be credited by the
BANK to any deposit account of BORROWER with the BANK, be paid to
BORROWER, or applied to any Obligation, as the BANK may in each
instance elect. BORROWER authorizes the BANK to charge any
account which BORROWER maintains with the BANK for any payments
which BORROWER may or must make, or customarily makes, to the
BANK from time to time.
C. Demand, Review, and Repayment. The Revolving Line of Credit
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Loan is a demand obligation of the BORROWER. Pending sooner
demand or the occurrence of an Event of Default, the Revolving
Line of Credit Loan shall be subject to review and, at the sole
option and discretion of the BANK, renewal on January 31, 1997,
and, if renewed, thereafter on each subsequent anniversary of
such date (January 31, 1997, and each anniversary thereof to
which the Revolving Line of Credit Loan is renewed, being a
"Review Date"). IF THE REVOLVING LINE OF CREDIT LOAN IS NOT
RENEWED BY THE BANK AS AFORESAID ON ANY REVIEW DATE, THE ENTIRE
AMOUNT OF OUTSTANDING PRINCIPAL, ACCRUED INTEREST AND OTHER
CHARGES PAYABLE THEREUNDER SHALL BE DUE AND PAYABLE BY BORROWER
ON SUCH REVIEW DATE. BORROWER ACKNOWLEDGES AND AGREES THAT THE
BANK HAS NO OBLIGATION OR COMMITMENT TO RENEW THE REVOLVING LINE
OF CREDIT LOAN ON ANY REVIEW DATE. NOTWITHSTANDING THE
FOREGOING, OR ANY PROVISION OF THE REVOLVING LINE OF CREDIT NOTE,
ANY OF LOAN DOCUMENTS OR HEREIN TO THE CONTRARY, THE REVOLVING
LINE OF CREDIT LOAN IS AND SHALL BE A DEMAND OBLIGATION OF
BORROWER.
D. Interest Rate. Except as provided hereinbelow, the principal
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balance outstanding from time to time under the Revolving Line of
Credit Loan, shall bear interest at a variable annual rate equal
to the Prime Rate (as hereinafter defined) plus one-half of one
percent (.5%). As used herein, the term "Prime Rate" shall mean
the rate published by The Wall Street Journal from time to time
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under the category "Prime Rate: The Base Rate of Corporate Loans
posted by at least 75% of the Nation's 30 Largest Banks" (the
lowest of the rates so published if more than one rate is
published under this category at any given time) or such other
comparable index rate selected by the BANK in its sole
discretion if The Wall Street Journal ceases to publish such
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rate. The BORROWER acknowledges that the Prime Rate is used for
reference purposes only as an index and is not necessarily the
lowest interest rate charged by the BANK on commercial loans.
Each time the Prime Rate changes the interest rate under the
Revolving Line of Credit Loan shall change contemporaneously with
such change in the Prime Rate. Interest shall be calculated and
charged daily on the basis of actual days elapsed over a three
hundred sixty (360) day banking year.
E. Purposes. Amounts advanced to BORROWER under the Revolving
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Line of Credit Loan shall be used solely initially for repayment
of BORROWER's existing bank debt and thereafter for BORROWER's
ordinary working capital requirements and general corporate
purposes.
II. TERM LOAN.
A. Maximum Principal Amount. The BANK shall extend to the
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BORROWER a term loan in the maximum principal amount of Five
Hundred Thousand Dollars ($500,000.00) (the "Term Loan"), upon
and subject to the terms and conditions set forth in the Term
Promissory Note of even date evidencing the Term Loan, the other
Loan Documents and this Agreement. The Term Loan shall be
guaranteed by the Business Finance Authority pursuant to the so-
called "BFA CAP loan program" pursuant to New Hampshire RSA
Chapter 162-A. Notwithstanding any other provisions of this Loan
Agreement or the Loan Documents to the contrary, the BANK shall
have no obligation to make an advance under the Term Loan until
such time as the BORROWER has received net proceeds in the
aggregate amount of not less than Seven Hundred Thousand Dollars
($700,000.00) from the issuance of fully subordinated debentures
in the form attached hereto as Exhibit A and/or the sale of
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capital stock of BORROWER.
B. Repayment. The Term Loan shall be repaid as provided in the
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Term Promissory Note of even date evidencing the Term Loan and in
this Agreement.
C. Interest. The interest rate applicable to principal
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outstanding from time to time under the Term Loan shall be as
follows:
Except as provided hereinbelow, the outstanding principal
balance of this Note shall bear interest at a variable rate equal
to Prime Rate (as hereinafter defined), plus one-half of one
percent (.5%) per annum. As used herein, the term "Prime Rate"
shall mean the rate published by The Wall Street Journal from
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time to time under the category "Prime Rate: The Base Rate of
Corporate Loans posted by at least 75% of the Nation's 30 Largest
Banks" (the lowest of the rates so published if more than one
rate is published under this category at any given time) or such
other comparable index rate selected by the Bank in its sole
discretion if The Wall Street Journal ceases to publish such
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rate. The Borrower acknowledges that the Prime Rate is used for
reference purposes only as an index and is not necessarily the
lowest interest rate charged by the Bank on commercial loans.
Each time the Prime Rate changes the interest rate hereunder
shall change contemporaneously with such change in the Prime
Rate. Interest shall be calculated and charged daily on the
basis of actual days elapsed over a three hundred sixty (360) day
banking year.
D. Purposes. Amounts advanced to BORROWER under the Term Loan
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shall be used solely for BORROWER's ordinary working capital
requirements and general corporate purposes.
III. FEES. In addition to such other fees as are provided in
this Agreement and in the other Loan Documents, BORROWER agrees
to pay the BANK the fees set forth on Schedule B attached hereto.
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IV. PAYMENTS. All payments made by the BORROWER of principal
and interest on the Loans, and other sums and charges payable
under the Loan Documents, shall be made to the BANK in accordance
with the terms of the respective Loan Documents in lawful United
States of America currency at its office set forth above, or by
the debiting by the BANK of the demand deposit account(s) in the
name of the BORROWER at the BANK, or in such other reasonable
manner as may be designated by the BANK in writing to the
BORROWER. The BORROWER authorizes the BANK automatically to
debit the BORROWER's demand deposit account as described above
and in accordance with the Cash Management provisions set forth
herein below.
V. SECURITY. Each of the Loans and all other Obligations of
the BORROWER to the BANK, whether now existing or hereafter
arising, shall at all times be secured by perfected first
security interests in and liens on the Collateral (as hereinafter
defined), which security interests and liens shall continue until
payment in full of all amounts outstanding under said Loans and
the other Obligations. The term "Collateral" as used herein
shall be deemed to include all property and assets of the
BORROWER secured, mortgaged, pledged, assigned, or otherwise
encumbered or covered by any of the Loan Documents, including,
but not limited to the Security Agreements. The BORROWER
covenants and agrees to take such further actions and to execute
such additional documents as may be necessary from time to time
to enable the BANK to obtain and maintain the security interests
and liens arising under the Loan Documents. If the Collateral
includes accounts and account receivables of BORROWER, then, in
addition to such other rights and remedies as are provided the
BANK under the Loan Documents, the BORROWER agrees that BANK may
communicate with account debtors in order to verify the
existence, amount, and terms of any such accounts and accounts
receivable. BANK may notify account debtors of the BANK's
security interest and require that payments on accounts and
account receivables be made directly to BANK, and upon the
request of BANK, BORROWER shall notify account debtors and
indicate on all ▇▇▇▇▇▇▇▇ that payments and returns are to be made
directly to BANK. In furtherance of the foregoing, BORROWER
hereby appoints BANK as attorney irrevocable with full power to
collect, compromise, endorse, sell, or otherwise deal with the
BORROWER's accounts and account receivables or proceeds thereof
and to perform the terms of any contract in order to create
accounts and account receivables in BANK's name or in the name of
BORROWER.
BORROWER shall maintain insurance policies in form acceptable to
BANK on the life of ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in the
respective face amounts of Five Hundred Thousand Dollars
($500,000.00) each, the proceeds of which shall be payable to
BORROWER. BORROWER shall assign said insurance policies to BANK.
VI. SUBORDINATION AND STANDBY OF DEBT. The BORROWER covenants
and agrees that all existing debt of BORROWER (i) to any officer,
director, or shareholder of BORROWER, and all future debt if
permitted hereunder of BORROWER to any officer, director, or
shareholder of BORROWER, and (ii) to the Holder pursuant to a
certain Convertible Debenture of BORROWER in the minimum
principal amount of Six Hundred Thousand Dollars ($600,000.00) in
the form attached hereto as Exhibit A (collectively, the
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"Subordinated Debt") shall be and hereby is, without need for
further writing, made subject and subordinate to the prior
payment and performance of all the Loans and other Obligations of
BORROWER. In furtherance of the foregoing, the BORROWER shall
provide such subordinations, certificates, and other documents,
and shall ▇▇▇▇ its corporate books, records, stock certificates,
and ledgers, as the BANK may reasonably request from time to
time, in form and substance satisfactory to BANK and BANK's
counsel, evidencing the subordination of all debt of BORROWER to
any officer, director, or shareholder of BORROWER, or to any
third party, including but not limited to said Holder, whether
now existing or hereafter arising, in accordance with the
covenants of BORROWER hereunder.
VII. CONTINUING REPRESENTATIONS AND WARRANTIES. BORROWER
warrants and represents to the BANK that so long as any of the
Obligations are outstanding:
A. Good Standing. BORROWER is duly organized, validly existing,
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and in good standing under the laws of its state of organization
and is qualified to do business in all other jurisdictions where
the nature of the business conducted or property owned by
BORROWER require it to be so qualified. BORROWER has the power
to own its properties and to carry on its business as now being
conducted.
B. Authority. BORROWER has full power and authority to enter
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into this Agreement and to borrow under the Loan Documents, to
execute and deliver the Loan Documents and to incur the
obligations provided for herein and in the Loan Documents, all of
which have been duly authorized by all proper and necessary
corporate or other action. The persons executing the Loan
Documents on behalf of the BORROWER have been duly authorized to
do so.
C. Binding Agreement. This Agreement and the Loan Documents
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constitute the valid and legally binding obligations of the
BORROWER, enforceable in accordance with their terms.
D. Litigation. There are no suits or proceedings of any kind or
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nature pending or, to the knowledge of the BORROWER, threatened
against or affecting the BORROWER or its assets which, if
adversely determined, would have a material adverse affect on the
financial condition or business of the BORROWER or the guarantor
and which have not been disclosed in writing to the BANK.
E. Conflicting Agreements; Consents. There is no charter,
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bylaw, preference stock, or trust provision of the BORROWER, and
no provision(s) of any existing mortgage, indenture, contract or
agreement binding on the BORROWER or affecting its property,
which would conflict with, have a material adverse affect upon,
or in any way prevent the execution, delivery, or performance of
the terms of this Agreement or the Loan Documents. BORROWER is
not required to obtain any order, consent, approval,
authorization of any person, entity, or governmental authority in
connection with or as a condition to the execution, delivery, and
performance of this Agreement or the Loan Documents or the
granting of the security interests and liens in the Collateral.
F. Financial Condition. The financial statements delivered to
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the BANK by the BORROWER have been and shall be prepared in
accordance with generally accepted accounting principles,
consistently applied, are and will be complete and correct, and
fairly present the financial condition and results of the
BORROWER. Other than those liabilities disclosed in writing to
the BANK, there are no liabilities, direct or indirect, fixed or
contingent, of the BORROWER which are not reflected in the
financial statements or in the notes thereto which would be
required to be disclosed therein and there has been no material
adverse change in the financial condition or operations of the
BORROWER since the date of such financial statements.
G. Taxes. BORROWER has filed all federal, state and local tax
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returns required to be filed by them and have paid all taxes
shown by such returns to be due and payable on or before the due
dates thereof.
H. Solvency. The present fair saleable value of the BORROWER's
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assets is greater than the amount required to pay its total
liabilities; the amount of the BORROWER's capital is adequate in
view of the type of business in which it is engaged.
I. Full Disclosure. None of the information with respect to the
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BORROWER which has been furnished to the BANK in connection with
the transactions contemplated hereby is false or misleading with
respect to any material fact, or omits to state any material fact
necessary in order to make the statements therein not misleading.
Notwithstanding the foregoing, the BANK acknowledges that the
future budgets and financial projections provided by the BORROWER
are based upon good faith assumptions and the best estimate of
the BORROWER. BORROWER cannot warrant that the same will be true
and accurate in all respects.
J. Employee Benefit Plans. To BORROWER's knowledge, all Plans
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(as hereinafter defined) which are pension plans as defined in
Section 3(2) of the Employment Retirement Income Security Act of
1974, as amended ("ERISA"), qualify under Section 401 of the
Internal Revenue Code of 1986 (as amended, the "IRC"), and all
Plans are in compliance with the provisions of the IRC and ERISA,
and have been administered in accordance with their terms. The
term "Plan" means any pension plan, as defined in Section 3(2) of
ERISA and any welfare plan, as defined in Section 3(1) of ERISA,
which is sponsored, maintained or contributed to by BORROWER or
any commonly controlled entity, or in respect of which BORROWER
or a commonly controlled entity is an "employer" as defined in
Section 3(5) of ERISA. To BORROWER's knowledge, and except with
respect to events which would not have a material adverse affect
on BORROWER's business or financial condition:
(i) Prohibited Transactions. None of the Plans has
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participated in, engaged in or been a party to any non-exempt
"prohibited transaction" as defined in ERISA or the IRC, and no
officer, director or employee of BORROWER has committed a breach
of any of the responsibilities or obligations imposed upon
fiduciaries by Title I or ERISA.
(ii) Claims. There are no contested claims, pending or
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threatened, involving any Plan which is a pension plan by a
current or former employee (or beneficiary thereof) of BORROWER,
nor is there any reasonable basis to anticipate any claims
involving any such Plan.
(iii) Reporting and Disclosure Requirements. There have
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been no violations of any reporting or disclosure requirements
with respect to any Plan and no such Plan has violated applicable
law, including but not limited to ERISA and the IRC.
(iv) "Accumulated Funding Deficiency"; Reportable
______________________________
Event. No Plan which is a defined benefit pension plan has (a)
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incurred an "accumulated funding deficiency" (within the meaning
of Section 412(a) of the IRC), whether or not waived, (b) been a
plan with respect to which a Reportable Event (to the extent that
the reporting of such events to the Pension Benefit Guaranty
Corporation (the "PBGC") within thirty (30) days of the
occurrence has not been waived) has occurred and is continuing,
or (c) been a Plan with respect to which there exists conditions
or events which have occurred presenting a risk of termination by
PBGC.
(v) Multiemployer Plan. No Plan which is a multiemployer
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pension plan (as defined in Section 414(f) of the IRC) to which
BORROWER contributes has been a plan with respect to which
BORROWER has received any notification that such Multiemployer
Plan is in reorganization or has been terminated within the
meaning of Title IV of ERISA and no such Multiemployer Plan is
reasonably expected to be in reorganization or to be terminated
within the meaning of Title IV of ERISA. BORROWER has not
withdrawn from, or incurred any withdrawal liability to, any
multiemployer plan.
(vi) COBRA. There has been no violation of the
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applicable requirements of Section 4980B of the IRC pertaining to
COBRA continuation coverage with respect to any Plan.
(vii) Employee Welfare Benefit Plans. No Plan which is
______________________________
a medical, dental, health, disability, insurance or other plan or
arrangement, whether oral or written, which constitutes an
"employee welfare benefit plan" as defined in Section 3(1) of
ERISA, has any unfunded accrued liability or provides benefits to
former employees or retirees (except as may be required by
COBRA).
K. Location of Records. All of the books and records or true
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and complete copies thereof relating to the accounts and
contracts of the BORROWER are and will be kept at BORROWER's
principal place of business located at the address first set
forth above (the "Premises").
L. Compliance with Laws. The BORROWER is in compliance in all
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material respects with all laws and governmental rules and
regulations applicable to the Collateral and to its business,
properties and assets.
M. Hazardous Waste. No Hazardous Waste (as hereinafter defined)
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has been generated, stored or treated on any of the premises
occupied by BORROWER, except in compliance with all applicable
laws. No Hazardous Waste has ever been, is being, is intended to
be, or is threatened to be spilled, released, discharged,
disposed, placed or otherwise caused to be found in the soil or
water in, under, or upon any of the premises occupied by the
BORROWER. The BORROWER agrees to indemnify and hold the BANK
harmless from and against any claims, damages, liabilities
(whether joint or several), losses and expenses (including,
without limitation, attorneys' fees) incurred by the BANK as a
result of the breach of these representations. For the purpose
of this Agreement, the term "Hazardous Waste" means "hazardous
waste", "hazardous material", "hazardous substance", and "oil"
as presently defined in the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response, Compensation and
Liability Act, the Hazardous Material Transportation Act, the
Federal Water Pollution Control Act, and corresponding state and
local statutes, ordinances, and regulations, as such statutes,
ordinances and regulations may be amended, or as defined in any
federal or state regulation adopted pursuant to such acts.
N. Title to Collateral. BORROWER has and will at all times have
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good and marketable title to the Collateral, free and clear from
any liens, security interests, mortgages, encumbrances, pledges
or other right, title or interest of any other person or entity,
except those arising under the Loan Documents or disclosed to the
BANK in the Security Agreement ("Permitted Encumbrances").
O. Employees. BORROWER has complied with all laws relating to
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the employment of labor, including any provisions thereof
relating to ERISA, wages, hours, collective bargaining, the
payment of social security and similar taxes, equal employment
opportunity, employment discrimination and occupational safety
and health, and is not liable for any arrears of wages or any
taxes or penalties for failure to comply with any of the
foregoing.
VIII. AFFIRMATIVE COVENANTS. Until payment in full of all
indebtedness under the Loans and the other Obligations, BORROWER,
agrees that, unless the BANK shall otherwise consent in writing,
they will:
A. Prompt Payment. Pay promptly, subject to any applicable cure
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or grace period, when due all amounts due and owing to the BANK.
B. Use of Proceeds. Use the proceeds of the Loans only for
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business purposes and will furnish the BANK with such evidence as
it may reasonably require with respect to such use.
C. Financial Statements. Furnish the BANK with such financial
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statements of BORROWER as are described on Schedule B attached
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hereto. All such statements shall be prepared on a consistent
basis in a format reasonably acceptable to the BANK.
D. Maintenance of Existence. Take all necessary action to
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maintain BORROWER's legal existence.
E. Maintenance of Business. Do or cause to be done all things
_______________________
necessary to maintain and preserve BORROWER's business.
F. Maintenance of Insurance. Keep all of BORROWER's properties
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(specifically including, but not limited to, the Collateral)
adequately insured against loss or damage by fire and such other
casualties and hazards as the BANK may specify from time to time;
maintain adequate ▇▇▇▇▇▇▇'▇ Compensation Insurance under
applicable laws, Comprehensive General Public Liability
Insurance, and products liability insurance; and maintain
adequate insurance covering such other risks as the BANK may
reasonably specify from time to time hereafter. All insurance
required hereunder shall be effected by valid and enforceable
policies issued by insurers of recognized responsibility
authorized to transact business within the states of New
Hampshire or Kansas, as the case may be, and shall, inter alia,
_____ ____
(1) name the BANK as an additional insured and/or loss payee, (2)
provide that no action of the BORROWER shall void any such policy
as to the BANK, and (3) provide that the BANK shall be notified
in writing of any proposed cancellation of such policy at least
thirty (30) days in advance thereof and will have the opportunity
to correct any deficiencies justifying such proposed
cancellation. For the purposes of this Paragraph, an insurance
policy shall be deemed to be "adequate" if it provides coverage
against such risks and in such amounts as is customarily carried
by owners of similar businesses and properties.
G. Inspection by the BANK. Upon prior reasonable notice (other
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than in emergencies when no notice shall be required) and during
normal business hours, permit any person designated by the BANK
to inspect any of its properties, including its books, records,
and accounts (and including the making of copies thereof and
extracts therefrom) during normal business hours.
H. Prompt Payment of Taxes. Accrue its tax liability (including
_______________________
withholdings for employee taxes and social security) in
accordance with usual accounting practice and pay or discharge
(or cause to be paid or discharged) as they become due all taxes,
assessments, and government charges upon its property,
operations, income and products (as well as all claims for labor,
materials or supplies), which, if unpaid might become a lien upon
any of its property; provided, that the BORROWER shall, prior to
payment thereof, have the right to contest such taxes,
assessments and charges in good faith by appropriate proceedings
so long as the BANK's interests are protected by bond, letter of
credit, escrowed funds or other appropriate security.
I. Notification of Default Under This and Other Loan or
____________________________________________________
Financing Arrangements. Promptly notify the BANK in writing of
______________________
the occurrence of any Event of Default under this Agreement or
any other loan or financing arrangement to which the BORROWER is
a party.
J. Notification of Litigation. Promptly notify the BANK in
__________________________
writing of any litigation that has been instituted or is pending
or threatened which might have a material adverse affect on its
continued operations or financial condition.
K. Notification of Governmental Action. Promptly notify the
___________________________________
BANK in writing of any governmental investigation or proceeding
that has been instituted or is pending or threatened, including
without limitation, matters relating to the federal or state tax
returns of the BORROWER or the guarantor, compliance with the
Occupational Safety and Health Act, or proceedings by the
Treasury Department, Labor Department, or Pension Benefit
Guaranty Corporation with respect to matters affecting employee
welfare, benefit or retirement programs.
L. Preservation of the Collateral. Take all reasonably
______________________________
necessary steps to preserve, protect and defend the Collateral
and keep it in good operating condition and repair (reasonable
wear and tear excepted) and free of unpermitted liens and give
BANK access to and permit it to inspect the Collateral during all
business hours and other reasonable times.
M. Maintenance of Records. Keep adequate records and books of
______________________
account, in which complete entries will be made in a manner
reasonably acceptable to the BANK and consistently applied,
reflecting all financial transactions of the BORROWER.
N. Compliance With Laws. Comply in all material respects with
____________________
all applicable laws, rules, regulations, and orders, such
compliance to include, without limitation, paying before the same
become delinquent all taxes, assessments, and governmental
charges imposed upon it or upon its property; provided, however,
________ _______
that BORROWER shall be entitled to contest the same in good faith
so long as such action, in the BANK's sole opinion, does not have
an adverse affect upon the BANK's rights hereunder or the
Collateral.
O. Accounts, Deposits, and Balances. BORROWER shall maintain
________________________________
its primary operating and deposit accounts with the BANK.
P. Notification of Material Adverse Changes. Promptly notify
________________________________________
the BANK in writing of any conditions or circumstances which
might have a material adverse effect on BORROWER's continued
operations or financial condition.
Q. Additional Financial and Other Covenants. Comply with the
________________________________________
additional financial and other covenants set forth on Schedule B
__________
attached hereto.
IX. NEGATIVE COVENANTS. Until payment in full of all
indebtedness under the Loans and the other Obligations, BORROWER,
jointly and severally, covenants that the BORROWER will not,
without the express prior written consent of the BANK, which
consent shall not be unreasonably withheld:
A. Nature and Scope of Business. Enter into any type of
____________________________
business other than that in which it is presently engaged, or
otherwise significantly change the scope or nature of its
business.
B. Additional Indebtedness. Incur indebtedness for borrowed
_______________________
money (or issue or sell any of its bonds, debentures, notes or
similar obligations) except: (1) borrowings under the Loans; (2)
other Obligations to the BANK; (3) borrowings used to prepay in
full the Obligations; (4) ordinary unsecured trade account
payables; (5) borrowings up to the aggregate maximum principal
amount of Two Hundred Fifty Thousand Dollars ($250,000.00) in
each fiscal year to be used by the BORROWER in the ordinary
course of its business; and, (6) the Subordinated Debt.
C. Liens and Mortgages. Incur, create, assume or suffer to
___________________
exist any mortgage, pledge, lien, attachment, charge or other
encumbrance of any nature whatsoever on any of the properties or
assets of BORROWER, including, but not limited to, the
Collateral, now or hereafter owned, other than (1) the security
interests or liens granted to the BANK pursuant to the Loan
Documents; (2) deposits under Workmen's Compensation,
Unemployment Insurance and Social Security laws; (3) liens
imposed by law, such as carriers, warehousemen's or mechanic's
liens incurred in good faith in the ordinary course of business,
and which do not in the aggregate have a material adverse effect
on the BORROWER's financial condition or the Collateral; (4) the
Permitted Encumbrances; and (5) purchase money security interests
securing only borrowings permitted under clause (5) of Paragraph
B of this Section IX above.
D. Acquisition of Stock. Purchase, redeem or otherwise acquire
---------------------
for value any of the outstanding capital stock of the BORROWER.
E. Merger. Enter into any merger or acquisition in excess of
------
the aggregate amount of Two Hundred Fifty Thousand Dollars
($250,000.00) per annum, or any consolidation, reorganization, or
liquidation.
F. Management. Change the current executive management of the
----------
BORROWER.
G. Loans. Loan money or make advances to officers to officers,
-----
stockholders, subsidiaries, or affiliates of BORROWER in excess
of Two Hundred Fifty Thousand Dollars ($250,000.00).
H. Places of Business; Location of Collateral. Maintain or
------------------------------------------
relocate to, open or close, any other place of business or move
any of the Collateral from the Premises, except upon thirty (30)
days prior written notice to the BANK.
X. CONDITIONS PRECEDENT TO MAKING OF LOANS. The obligation of
the BANK to make any Loan and make disbursements and advances of
the proceeds of the same to the BORROWER is subject to the
satisfaction by the BORROWER or its representatives of the
following conditions precedent with respect to such Loan: (1)
BORROWER has executed and delivered all of the Loan Documents
deemed appropriate and necessary by the BANK, in form and
substance satisfactory to the BANK, including, but not limited
to, the documents described on the Closing Agenda attached hereto
as Schedule C; (2) the BORROWER's warranties and representations
----------
as contained herein and in the Loan Documents shall be accurate
and complete and BANK has received satisfactory evidence of the
same, including, at BANK's option, an opinion of BORROWER's legal
counsel to that effect; and (3) the BORROWER shall not be in
default under any of the covenants, warranties, representations,
terms, or conditions contained in this Agreement or in the Loan
Documents as of the date of entering into such Loan and as of the
date of each disbursement and advance thereunder.
XI. EVENTS OF DEFAULT; ACCELERATION. The occurrence of any one
or more of the following events shall constitute a default under
this Agreement, each of the Loan Documents, and each of the
Obligations (individually, an "Event of Default", and
collectively, "Events of Default"): (1) if any statement,
representation or warranty made by the BORROWER in this Agreement
or in any of the Loan Documents, or in connection with any of the
same, or if any financial statement, report, schedule, or
certificate furnished by the BORROWER or any of its officers or
accountants to the BANK, shall prove to have been false or
misleading when made, or subsequently becomes false or
misleading, in any material respect (as determined in the BANK's
sole discretion); (2) default by the BORROWER in payment on its
due date of any principal or interest called for under any of the
Loans or the Loan Documents, or of other amounts due under any
other of the Obligations, or other event of default under the
Loan Documents or the other Obligations, provided such default is
not cured within any applicable grace period thereunder; (3)
default by the BORROWER in payment on its due date of any
principal or interest called for under any of the Subordinated
Debt; (4) default by the BORROWER in the performance or
observance of any of the provisions, terms, conditions,
warranties or covenants of this Agreement, the Loan Documents, or
any other of the Obligations; (5) the dissolution, termination of
existence, merger or consolidation of any BORROWER or a sale of
BORROWER's business or the Collateral not in the ordinary course
of business; (6) BORROWER shall (a) apply for or consent to the
appointment of a receiver, trustee or liquidator of it or any of
its property, (b) make a general assignment for the benefit of
creditors, (c) be adjudicated as bankrupt or insolvent, (d) file
a voluntary petition in bankruptcy, or a petition or an answer
seeking reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation under any law or statute, or an
answer admitting the material allegations of a petition filed
against it in any proceeding under any such law or statute, or
(e) offer or enter into any composition, extension or arrangement
seeking relief or extension of its debts; (7) proceedings shall
be commenced or an order, judgment or decree shall be entered,
without the application, approval or consent of any BORROWER, in
or by any court of competent jurisdiction, relating to the
bankruptcy, dissolution, liquidation, reorganization or the
appointment of a receiver, trustee or liquidator of BORROWER, or
of all or a substantial part of its assets, and such proceedings,
order, judgment or decree shall continue undischarged or unstayed
for a period of sixty (60) days; (8) BORROWER's inability to pay
its debts as they mature or other act of insolvency, however
defined and determined by the BANK in its sole discretion; (9) a
judgment for the payment of money shall be rendered against
BORROWER and the same shall remain undischarged for a period of
thirty (30) days, during which period execution shall not be
effectively stayed; or (9) if BANK otherwise deems itself
insecure within the meaning of New Hampshire RSA 382-A:1-208 (as
amended).
Upon the occurrence of any Event of Default, the BANK's
commitment to make further Loans under the Loan Documents or any
other agreement with the BORROWER, and to make any advances or
disbursements under any Loan, shall immediately cease and
terminate and, at the election of the BANK, all of the
Obligations of the BORROWER to the BANK, either under this
Agreement, the Loan Documents, or otherwise, will immediately
become due and payable without further demand, notice or protest,
all of which are hereby expressly waived. Thereafter, the BANK
may proceed to protect and enforce its rights, at law, in equity,
or otherwise, against the BORROWER, and any other endorser or
guarantor of the BORROWER's Obligations, either jointly or
severally, and may proceed to liquidate and realize upon any of
its Collateral in accordance with the rights of a secured party
under the Uniform Commercial Code, under any other applicable
law, under any Loan Documents, under any other agreement between
the BORROWER and the BANK, or under any agreement between any
guarantor or endorser of the BORROWER's Obligations to the BANK,
and to apply the proceeds thereof to payment of the Obligations
of the BORROWER to the BANK in such order and in such manner as
the BANK, in its sole discretion, deems appropriate.
XII. MISCELLANEOUS PROVISIONS.
A. Entire Agreement; Waivers. This Agreement, the Schedules
_________________________
hereto, and the Loan Documents together constitute the entire
agreement between the BORROWER and the BANK and no covenant,
term, condition or other provision thereof nor any default in
connection therewith may be waived except by an instrument in
writing, signed by the BANK and delivered to the BORROWER. The
BANK's failure to exercise or enforce any of its rights, powers
or privileges under this Agreement or the Loan Documents shall
not operate as a waiver thereof. In the event of any conflict
between the terms, covenants, conditions and restrictions
contained in the Loan Documents, the term, covenant, condition or
restriction which confers the greatest benefit upon the BANK
shall control. The determination as to which term, covenant,
condition or restriction is more beneficial shall be made by the
BANK in its sole discretion.
B. Remedies Cumulative. All remedies provided under this
___________________
Agreement and the Loan Documents or afforded by law shall be
cumulative and available to the BANK until all of the BORROWER's
Obligations to the BANK have been paid in full.
C. Survival of Covenants. All covenants, agreements,
_____________________
representations and warranties made in this Agreement and in the
Loan Documents shall be deemed to be material and to have been
relied on by the BANK, notwithstanding any investigation made by
the BANK or in its behalf, and shall survive the execution and
delivery of this Agreement and the Loan Documents. All such
covenants, agreements, representations and warranties shall bind
and inure to the benefit of the BORROWER's and the BANK's
successors and assigns, whether so expressed or not.
D. Governing Law; Jurisdiction. This Agreement and the Loan
___________________________
Documents shall be construed and their provisions interpreted
under and in accordance with the laws of the State of New
Hampshire. The BORROWER, to the extent they may legally do so,
hereby consents to the jurisdiction of the courts of the State of
New Hampshire and the United States District Court for the State
of New Hampshire for the purpose of any suit, action or other
proceeding arising out of any of their obligations hereunder or
with respect to the transactions contemplated hereby, and
expressly waive any and all objections they may have to venue in
any such courts.
E. Assurance of Execution and Delivery of Additional
_________________________________________________
Instruments. The BORROWER agrees to execute and deliver, or to
___________
cause to be executed and delivered, to the BANK all such further
instruments, and to do or cause to be done all such further acts
and things, as the BANK may reasonably request or as may be
necessary or desirable to effect further the purposes of this
Agreement and the Loan Documents.
F. Waivers and Assents. The BORROWER, and any guarantor or
___________________
endorser of the BORROWER's Obligations to the BANK, hereby waive,
to the fullest extent permitted by law, all rights to marshalling
of assets and all rights to demand, notice, protest, notice of
acceptance of this Agreement and the Loan Documents, notice of
Loans made, credit extended, Collateral received or delivered or
other action taken in reliance hereon and all other demands and
notices of any description with respect both to the Loan
Documents and the Collateral. The BORROWER assents to any
extension or postponement of the time of payment or any other
indulgence, to any substitution, exchange or release of
Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial
payments thereon and the settlement, compromising or adjusting of
any thereof, all in such manner and at such time or times as the
BANK may deem advisable.
G. No Duty of the BANK With Respect to the Collateral. Except
__________________________________________________
as may otherwise be specifically required under the Uniform
Commercial Code, the BANK shall have no duty as to the collection
or protection of Collateral or any income thereon, nor as to the
preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto, beyond the safe
custody thereof.
H. Election of the BANK. The BANK may exercise its rights with
____________________
respect to Collateral without resorting or regard to other
collateral or sources of reimbursement for the Obligations of
BORROWER to the BANK.
I. Assignment. If at any time, by assignment or otherwise, the
__________
BANK transfers its rights in any of the BORROWER's Obligations
and its rights in Collateral therefor, in whole or in part, such
transfer shall carry with it the powers and rights of the BANK
under this Agreement, the Loan Documents, and the Collateral so
transferred and the transferee shall become vested with such
powers and rights whether or not they are specifically referred
to in the instrument evidencing the transfer. The BANK agrees to
notify BORROWER of any such transfer by assignment or otherwise.
If, and to the extent that the BANK retains such rights and
Collateral, the BANK shall continue to have the rights and powers
herein set forth with respect thereto. This Agreement and the
Loan Documents shall be binding upon and inure to the benefit of
the BANK, the BORROWER and the guarantor, their successors,
assigns, heirs and personal representatives; provided, however,
the rights and obligations of the BORROWER are not assignable,
delegable or transferable without the consent of the BANK. All
of the rights of the BANK under this Agreement and the Loan
Documents shall inure to the benefit of any participating BANK or
BANKS and its or their successors and assigns.
J. Expenses; Proceeds of Collateral. The BORROWER covenants and
________________________________
agrees that it shall pay to the BANK, on demand, any and all
reasonable out-of-pocket expenses, including reasonable
attorneys' fees, court costs, sheriffs' fees, and other expenses
incurred or paid by the BANK in protecting and enforcing its
rights under this Agreement, the Loan Documents, and the other
Obligations, including the costs of preparation of any
amendments, modifications, consents, or waivers in respect of the
Loan Agreements or the Loan Documents, and all filing, auditing,
accounting, and appraisal fees. After deducting all of said
expenses and the reasonable expenses of retaking, holding,
preparing for sale, selling and the like, the residue of any
proceeds of collections or sale of Collateral shall be applied to
the payment of principal of or interest on Obligations of the
BORROWER to the BANK in such order or preference as the BANK may
determine, and any excess shall be returned to the BORROWER
(subject to the provisions of the Uniform Commercial Code) and
the BORROWER shall remain liable for any deficiency.
K. The BANK's Right of Offset. The BORROWER hereby grants to
__________________________
the BANK a continuing security interest in, and the right to set
off against, any deposits or other sums at any time credited or
due from the BANK to the BORROWER, and any securities or other
property of the BORROWER which at any time are in the possession
of the BANK, for the payment of any Obligations due the BANK.
The BANK may apply or set off such deposits or other sums against
the BORROWER's Obligations whether or not the Collateral is
considered by the BANK to be adequate. The BORROWER expressly
grants to the BANK the right to set off and apply such deposits
and sums without having to resort to recourse to any other
Collateral in which the BANK has a security interest.
L. Notices. All notices, requests, demands and other
_______
communications provided for hereunder shall be in writing
(including telegraphic communication) and shall be either mailed
by certified mail, return receipt requested, or delivered by
overnight courier service, to the applicable party at the
addresses set forth in this Agreement.
M. Savings Clause. Any provision of this Agreement or any of
______________
the Loan Documents which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof or
affecting the validity or enforceability of such provision in any
other jurisdiction.
N. Term of this Agreement and the Loan Documents. This
_____________________________________________
Agreement and the Loan Documents shall remain in full force and
effect until all of the Obligations have been paid in full, all
of the terms, conditions and covenants under the Loan Documents
have been performed, and all commitments of the BANK advance
funds under any of the Loans have terminated.
O. Interest Rate Provisions. The interest rate provisions of
________________________
each of the Obligations are subject to the condition that in no
event shall the amount paid or agreed to be paid to the holder of
such Obligation which is deemed interest under applicable law
exceed the maximum rate of interest on the unpaid principal
balance of such Obligation allowed by applicable law, if any,
(the "Maximum Allowable Rate"). For purposes hereof, "applicable
law" shall mean the law in effect on the date hereof, except that
if there is a change in such law which results in a higher
Maximum Allowable Rate being applicable to the Obligation subject
thereto, then such Obligation shall be governed by such amended
law from and after its effective date. In the event that
fulfillment of any provisions of any Obligation results in the
interest rate thereunder being in excess of the Maximum Allowable
Rate, then amount to be paid thereunder resulting in an excessive
interest rate shall automatically be reduced to eliminate such
excess. If notwithstanding the foregoing, the holder of such
Obligation receives an amount which under applicable law would
cause the interest rate thereunder to exceed the Maximum
Allowable Rate, the portion thereof which would be excessive
shall automatically be applied to and deemed a prepayment of the
unpaid principal balance under such Obligation and not a payment
of interest.
P. Waiver of Jury Trial. THE BORROWER WAIVES ANY RIGHTS IT MAY
____________________
HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING
TO THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS, AND AGREES THAT
ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A
JURY.
IN WITNESS WHEREOF, the BANK and the BORROWER have executed this
Agreement all as of the day and year first above written.
CITIZENS BANK NEW HAMPSHIRE
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Assistant VP
----------------------- -------------------------------------
Witness ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Assistant Vice
President
AMERICAN ELECTROMEDICS CORP.
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chief
------------------------ ----------------------------------
Witness Financial Officer
-----------------
Signature and Title/Duly Authorized
CITIZENS BANK NEW HAMPSHIRE
LOAN AGREEMENT
SCHEDULE A
__________
BORROWING BASE AND CASH MANAGEMENT PROVISIONS
I. PERCENTAGES AND DEFINITIONS FOR DETERMINATION OF BORROWER'S
REVOLVING LINE OF CREDIT BORROWING BASE UNDER SECTION I. A.
APPLICABLE PERCENTAGE OF ACCEPTABLE ACCOUNTS: 80%
APPLICABLE PERCENTAGE OF ACCEPTABLE INVENTORY: 50%
DEFINITION OF ACCEPTABLE ACCOUNTS: The term "Acceptable
Accounts" means those accounts and accounts receivable of
BORROWER as the BANK determines to be satisfactory, in the BANK's
sole discretion. Subject to the foregoing, "Acceptable Accounts"
shall be accounts of the BORROWER: (i) which arise in the
ordinary course of BORROWER's business from BORROWER's
performance of services or sale of goods which have been
performed or sold; (ii) which are not more than ninety (90) days
old from the date of the invoice (in the event that more than
fifty percent (50%) of the accounts of any one account debtor are
more than ninety (90) days old from the date of the invoice then
all accounts of such account debtor shall be excluded from
Acceptable Accounts); (iii) which are not evidenced by a
promissory note or other instrument; (iv) which are payable in
U.S. Dollars; (v) which are owed by any customer whose principal
place of business is within the United States or any foreign
accounts which are FCIA-insured or secured by a letter of credit
acceptable to the BANK; (vi) which are owed by any corporation or
other entity other than one which is related to the BORROWER, or
is of common ownership with the BORROWER, or could be treated as
a member of the same controlled group of corporations of which
the BORROWER is a member; (vii) which constitute valid, binding,
and enforceable obligations of account debtors which are not
subject to any claim, counterclaim, set off, credit, allowance,
or chargeback; (viii) as to which the BORROWER has received no
notice and has no knowledge as to whether the account debtor (or
any guarantor or endorser thereof) is bankrupt or insolvent, or
any other facts which make the collection of the account
doubtful; (ix) which are not owed by any person employed by, or
salesman of, the BORROWER; (x) which do not arise out of the sale
by the BORROWER of goods consigned or delivered to the BORROWER
on "sell or return" terms (whether or not compliance has been
made with Section 2-326 of the UCC); and (xi) which do not arise
out of any sale made on a "▇▇▇▇ and hold", dating, or delayed
shipping basis. Accounts payable by BORROWER to any account
debtor shall be netted against accounts due from such debtor.
DEFINITION OF ACCEPTABLE INVENTORY: The term "Acceptable
Inventory" shall mean inventory of BORROWER. Inventory shall be
valued at the lower of cost on a "first-in/first-out" basis or
fair market value and shall be inventory which is owned for sale
in the ordinary course of BORROWER's business as presently
conducted by it and held by BORROWER at its principal place of
business in Amherst, New Hampshire, and, in all cases, which is
subject to a valid and prior, fully perfected security interest
of BANK, free of all security interests or liens of any other
person.
The following inventory will not, in any event, constitute
----
Acceptable Inventory:
(a) inventory which is obsolete, not in good
condition, not of merchantable quality or saleable in the
ordinary course of business or which is subject to defects
which would affect its market value;
(b) work in process;
(c) supplies and packaging materials and labels;
(d) inventory which BANK, in its sole discretion
exercised in good faith, determines to be ineligible because
of age, type, category, or quantity; and
(e) inventory in the possession of any person other
than BORROWER, except to the extent that the BANK has a
valid and prior, fully perfected security interest in
inventory held by any person other than the BORROWER.
BORROWING BASE CERTIFICATE. BORROWER, shall furnish the
BANK on a monthly basis with a Borrowing Base Certificate
substantially in the form attached hereto as Exhibit A-1, which
___________
shall be accompanied by aging reports and inventory summary
reports by location and product, all in a form reasonably
acceptable to the BANK. The acceptance of or characterization by
the BANK of any account as an Acceptable Account or inventory as
Acceptable Inventory shall not be deemed a determination by the
BANK as to its actual value nor in any way obligate BANK to
accept any account arising subsequently from such debtor to be,
or to continue to deem such account to be, an Acceptable Account.
All accounts and inventory of BORROWER whether Acceptable
Accounts, Acceptable Inventory, or not, shall constitute
Collateral under the Security Agreement.
CITIZENS BANK NEW HAMPSHIRE
LOAN AGREEMENT
SCHEDULE A
EXHIBIT A-1
BORROWING BASE CERTIFICATE
The undersigned hereby certifies to Citizens Bank New
Hampshire (the "BANK) pursuant to Schedule A of the Loan
__________
Agreement (the "Agreement") dated October ___, 1996, as follows:
Calculation of Borrowing Base:
_____________________________
1. Total Accounts Receivable as of
, 199__, as per
_________________
attached Aging Report ("Certified
Accounts") $
______________
2. Disqualified Accounts:
Accounts over 90 days from
invoice due date $
_____________
Intercompany accounts $
_____________
Other non-qualifying accounts $
_____________
Total Disqualified Accounts $
_____________
3. Item 1 minus item 2 ("Acceptable
Accounts") $
______________
4. Advance Rate on Acceptable
Accounts per Agreement 80%
______________
5. Item 3 times item 4 $
______________
6. Total Acceptable Inventory as of
, 199 , as per attached
________ __
Inventory Statement $
______________
7. Advance Rate on Acceptable Inventory 50%
______________
8. Item 6 times Item 7 $
______________
AVAILABLE COMMITMENT:
9. Available Commitment under Revolving
Line of Credit (Lesser of Item 5 plus
Item 8 or $400,000.00) $
__ ______________
Based upon the foregoing calculation made as of the close of
business on the date indicated below, the undersigned hereby
requests that the BANK make advances to BORROWER under the
Revolving Line of Credit Loan in accordance with the provisions
of Section I of Schedule A of the Loan Agreement, which advances,
__________
when added to the outstanding principal amount of all other
advances under the Revolving Line of Credit Loan, do not exceed
the Available Commitment. Except as set forth in the
accompanying letter, the undersigned hereby reasserts and
restates all representations and warranties set forth in the
Agreement as of the date hereof and certifies that no Event of
Default under the Agreement, or any event which with the passage
of time or the giving of notice, or both, would constitute an
Event of Default, has occurred and is continuing. Each
capitalized term used, but not defined herein, shall have the
respective meaning set forth in the Agreement.
WITNESS the execution hereof on the day of
____
, 199 .
______________ __
AMERICAN ELECTROMEDICS CORP.
By:
____________________ ____________________________________
Witness Signature and Title/Duly Authorized
CITIZENS BANK NEW HAMPSHIRE
LOAN AGREEMENT
SCHEDULE B
__________
ADDITIONAL TERMS AND CONDITIONS
I. Fees Payable by BORROWER
________________________
A. Revolving Line of Credit Loan
Origination Fee: $2,000.00
Annual Renewal Fee: $500.00
B. Term Loan
Business Finance Authority Origination Fee: $20,000.00
II. Description of Financial Statements to be Delivered:
___________________________________________________
A. Annual financial statements of BORROWER within one hundred
twenty (120) days after the end of each fiscal year, including
balance sheets and statements of income, retained earnings and
surplus, and a statement of cash flow, together with supporting
schedules, setting forth in each case comparative figures for the
preceding fiscal year, and in each case audited by an independent
certified public accountant reasonably acceptable to Bank.
B. Quarterly financial statements of BORROWER within forty-five
(45) days after the end of each fiscal quarter, including balance
sheets and statements of income and cash flow, together with
supporting schedules, all as prepared by BORROWER.
D. United States Securities and Exchange Commission Annual
Report on Form 10K of BORROWER within one hundred twenty (120)
days after the end of each fiscal year.
E. Annual financial statements of BORROWER's affiliate, ▇▇▇▇▇,
GMBH, within one hundred twenty (120) days after the end of each
fiscal year, including balance sheets and statements of income,
retained earnings and surplus, and a statement of cash flow,
together with supporting schedules, setting forth in each case
comparative figures for the preceding fiscal year, and in each
case reviewed by an independent certified public accountant
reasonably acceptable to Bank.
F. Full accounts receivable aging reports of BORROWER to be
prepared and delivered within fifteen (15) days of the end of
each month.
III. Minimum Balance in Demand Deposit Account to be Maintained:
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Minimum Federal Reserve requirement.
IV. Description of Additional Financial and other Covenants:
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A. BORROWER shall have a Tangible Capital Base (as
hereinafter defined) (i) as at October 31, 1996 and through July
30, 1997, equal to at least One Million Six Hundred Thousand
Dollars ($1,600,000.00); and (ii) as at July 31, 1997 and as at
each July 31st thereafter, the foregoing Tangible Capital Base of
BORROWER shall be increased by an additional Two Hundred Thousand
Dollars ($200,000.00) (i.e.., $1,800,000.00 as at July 31, 1997,
$2,000,000 as at July 31, 1998, etc.). "Tangible Capital Base"
___
means total shareholders' equity less intangible assets less
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Subordinated Debt, all as determined in accordance with generally
accepted accounting principles from BORROWER'S financial
statements delivered to the BANK in accordance with the covenants
of the BORROWER hereinabove (the "Financial Statements").
B. BORROWER shall have "Debt Service Coverage" (as
hereinafter defined) of not less than 1.25:1 as at each fiscal
year end. For purposes hereof, "Debt Service Coverage" shall
mean the ratio of BORROWER'S net income for the prior twelve (12)
months ending on the date of determination, before reduction for
interest, depreciation, taxes, and amortization expense, plus
shareholders' equity injections or increases in Subordinated
Debt, less capital expenditures not financed by the BANK or third
parties, to the aggregate amount of interest and current
maturities on long term indebtedness, capital lease payments, and
other similar fixed charges payable by BORROWER for such period,
all as determined in accordance with generally accepted
accounting principals from the Financial Statements.
C. BORROWER shall have a ratio of Total Senior Debt (as
hereinafter defined) to Tangible Capital Base (i) not greater
than 1:1 as at October 31, 1996; (ii) not greater than .75:1 as
at July 31, 1997 and (iv) less than .50:1 as at July 31, 1998..
"Total Senior Debt" means total liabilities (including capital
leases), other than Subordinated Debt, all as determined in
accordance with generally accepted accounting principles from the
Financial Statements.
D. BORROWER shall report and certify to BANK compliance
with the financial covenants hereinabove within fifteen (15) days
of the end of each month on such form or forms as may from time
to time be specified by the BANK.