EXHIBIT 10.1
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COMMERCIAL LOAN AGREEMENT
THIS AGREEMENT made this 11th day of February, 2008 by and between
CAS MEDICAL SYSTEMS, INC. (the "Debtor" or "Borrower"), being a corporation
organized and existing under the laws of the State of Delaware and having its
chief executive office and principal place of business at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and NEWALLIANCE BANK, a Connecticut banking
corporation having a place of business at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as "Lender" or "Bank").
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Bank to make a revolving
loan in the principal amount of up to Ten Million Dollars ($10,000,000.00) (the
"Loan"); and
WHEREAS, the Bank has agreed, subject to the terms and conditions of
this Agreement, to make the Loan.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1 - THE LOAN
THE LOAN
1.1 - Amount. Upon and subject to the terms and conditions set forth
in this Agreement, the Bank agrees to lend to Borrower and Borrower agrees to
borrow from the Bank, from time to time, up to the maximum sum of TEN MILLION
AND 00/100 Dollars ($10,000,000.00) (the "Loan"), which sums the Borrower may
borrow, repay and reborrow until the Maturity Date, as hereinafter defined.
1.2 - Advances. Principal will be advanced and re-advanced to
Borrower by the Bank ("Advances") in Bank's reasonable discretion, subject to
the terms hereafter set forth, and all Advances and the Loan shall be evidenced
by a Commercial Revolving Promissory Note (the "Note") in form and substance
satisfactory to Bank. The Bank will not unreasonably withhold its consent to
requests for Advances hereunder, provided that the conditions set forth in
Section 3 of this Agreement are satisfied. Bank's obligation to make any Advance
and the amount thereof are subject to the provisions of Section 3 of this
Agreement. The books and records of the Bank shall be conclusive evidence for
the purpose of determining the aggregate of all Advances outstanding from time
to time.
In addition to the forgoing, (i) whenever the outstanding principal
amount of the Loan exceeds $2,000,000.00, the outstanding principal amount of
the Loan shall not exceed the Borrowing Base (as defined in Section 3 c hereof);
and (ii) whenever the Borrower requests an Advance which, if made, would result
in the outstanding principal balance of the Loan, exceeding two million dollars
($2,000,000.00), all amounts which would be outstanding pursuant hereto, if the
new Advance were made (including amounts outstanding prior to the making of such
new Advance) shall not exceed the Borrowing Base. Nothing herein shall be
construed to require the Bank to lend up to the Borrowing Base, and nothing
shall prohibit the Bank from lending in excess of the Borrowing Base.
In the event the Borrowing Base is exceeded at any time when the
principal balance of the Loan exceeds Two Million Dollars ($2,000,000.00),
Borrower shall pay such excess amount on demand.
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1.3 - Use of Loan. The Loan will be used to provide working capital
for Borrower. No portion of the Loan will be used for the purpose of purchasing
or carrying any "margin security" or "margin stock" as such terms are used in
Regulations U and X of the Board of Governors of the Federal Reserve System, 12
C.F.R. Parts 221 and 224.
1.4 - Payments and Interest Rate. The Borrower shall pay interest on
the outstanding unpaid principal amount of the Advances at the rate and the
times set forth in the Note.
1.5 - Payments. Upon an Event of Default the Borrower hereby
authorizes the Bank, but the Bank shall not be obligated, to employ undisbursed
funds under the Loan to satisfy all payments of any nature due any Loan Document
(as hereinafter defined). Advances so made for interest payments or other
payments hereby authorized shall be credited to and debited from the Borrower's
demand deposit account at Bank.
1.6 - Maturity Date. The Loan including all amounts due hereunder
and under the Note is payable in full on MAY 1, 2009 (the "Maturity Date")
unless extended in writing in Bank's sole and absolute discretion.
1.7 - Late Charge. Without in any way affecting any other remedy
that Bank may have, in the event any payment of principal and interest due
hereunder is not received by Bank within fifteen (15) days after the same is
due, then Borrower agrees to pay Bank a "late charge" equal to the greater of
$25.00 or five percent (5.00%) of the amount of such late payment to cover the
additional expenses of Bank's handling of such late payment.
1.8 - Prepayment. The Borrower shall have the right to prepay the
Loan pursuant to the provisions of the Note. All payments shall be applied first
to late charges, costs and any reasonable attorney fees in connection with any
action taken to collect or enforce any Loan Document (whether or not suit is
commenced), then to interest and then to principal.
B. SECURITY
1.9 - Security for the Loan. The Loan is secured by a security
interest in all assets of the Borrower (the "Collateral") as defined pursuant to
a Security Agreement of even date herewith (the "Security Agreement") in form
and substance satisfactory to Bank. The Collateral is subject to no prior
security interest or lien except as disclosed in the Security Agreement. The
term "Permitted Liens" shall have the meaning set forth in the Security
Agreement.
SECTION 2 - REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Bank (which
representations and warranties will survive the delivery of the Note and the
making of the Loan) that except as set forth in SCHEDULE 2 attached hereto and
incorporated herein:
2.1 - Incorporation; Good Standing. Borrower (a) is a corporation
duly organized, validly existing and in good standing under the laws of its
state of organization, (b) has all requisite power to own its property and
conduct its business as now conducted and as presently contemplated, and (c) is
duly authorized to do business in each jurisdiction where such qualification is
necessary. The Borrower has all requisite permits, authorizations and licenses,
without unusual restrictions or limitations, to own, operate
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and lease its properties and to conduct the business in which it is presently
engaged all of which are in full force and effect.
2.2 - Authority. Borrower has all requisite power to execute,
deliver and perform this Agreement and the Loan Documents (as hereafter
defined). The execution and delivery of this Agreement and the Loan Documents,
the consummation of the transactions herein and therein contemplated, and the
fulfillment of or compliance with the terms and provisions hereof and of each of
the Loan Documents will not violate any of its constituent documents or any
provision of law or result in the breach of, or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of the Borrower other than pursuant to this Agreement, or violate the
provisions of any other agreement or instrument to which the Borrower is a
party. No approval, authorization, consent or other order of or registration or
filing with any governmental body is required in connection with the making and
performance of this Agreement, other than approvals which have been obtained.
2.3 - Financial Condition. The financial statements of the Borrower,
heretofore delivered to the Bank, were prepared in conformity with generally
accepted accounting principles and practices consistently maintained throughout
the periods involved. Said statements are correct and complete in all material
respects and fairly present the financial condition and the results of
operations of the Borrower for the periods and as of the dates thereof. The
Borrower has no direct or contingent liabilities required by generally accepted
accounting principles to be disclosed on such financial statements that are not
disclosed thereon excepting therefrom such liabilities as have been incurred in
the ordinary course of business since the date of said statement.
Since the date of the latest dated balance sheets included in said
financial statements there has occurred no materially adverse change in the
financial condition or business of the Borrower as shown on or reflected in the
consolidated balance sheet of the Borrower, or the consolidated statement of
income for the fiscal year then ended, other than changes in the ordinary course
of business that have not had any materially adverse effect either individually
or in the aggregate on the business or financial condition of the Borrower.
2.4 - Solvency. The Borrower, on a consolidated and consolidating
basis, both before and after giving effect to the transactions contemplated by
this Agreement and the other Loan Documents (a) is solvent; (b) has assets
having a fair value in excess of the amount required to pay its liabilities on
existing debts as such debts become due and payable, and (c) has, and expects to
continue to have, access to adequate capital for the conduct of their business
and the ability to pay its debts from time to time incurred in connection with
the operation of its business as such debts mature. No petition for bankruptcy,
whether voluntary or (to the best of the Borrower's knowledge) involuntary, or
assignment for the benefit of creditors, or any other action involving debtor's
and creditor's rights has been filed under the laws of the United States of
America or any state thereof, or threatened, by or against the Borrower.
2.5 - Information Complete. Subject to any limitations stated in
writing therein or in connection therewith, to the knowledge of Borrower all
information furnished or to be furnished by the Borrower to Bank is, or will be
at the time the same is furnished, accurate and complete in all material
respects necessary in order to make the information furnished, in the light of
the circumstances under which such information is furnished, not misleading.
2.6 - Statutory Compliance. Borrower is in compliance in all
material respects with all laws, ordinances, rules or regulations applicable to
it, of all federal, state or local governments or any instrumentality or agency
thereof, including, without limitation, the Employee Retirement Income Security
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Act of 1974, the United States Occupational Safety and Health Act of 1970 and
all federal, state and municipal laws, ordinances, rules and regulations
relating to the environment, as such may be amended.
The Borrower (a) has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject, (b) has paid all taxes and other governmental assessments
and charges shown or determined to be due on such returns, reports and
declarations, provided that certain state tax returns and the taxes due
thereunder, are outstanding, but Borrower represents and warrants that the same
will not have a material adverse impact its financial affairs, assets, and/or
operations or affect its ability to repay the Loan , and (c) has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Borrower know of
no basis for any such claim.
2.7 - Litigation. To the best of Borrower's knowledge there are no
outstanding judgments, decrees or orders against the Borrower and there are no
material claims, litigation or proceedings, pending or threatened against
Borrower, that if adversely determined, might, either in any case or in the
aggregate , materially adversely affect the properties, assets, financial
condition or business of the Borrower or materially impair the right of the
Borrower, considered as a whole, to carry on business substantially as now
conducted or result in any substantial liability not adequately covered by
insurance or for which adequate reserves are not maintained on the consolidated
balance sheet of the Borrower, or which question the validity of this Agreement
or any of the other Loan Documents, or any action taken or to be taken pursuant
hereto or thereto.
2.8 - No Materially Adverse Contracts, etc. Borrower is not subject
to any legal restriction, or any judgment, decree, order, rule or regulation
that has or is expected in the future to have a materially adverse effect on the
business, assets or financial condition of the Borrower. Borrower is not a party
to any contract or agreement that has or is expected, in the judgment of the
Borrower's officers, to have any materially adverse effect on the business of
the Borrower.
2.9 - Events of Default. No Event of Default specified in Section 6
hereof, and to Borrower's knowledge no event which pursuant to the provisions of
Section 6 with the lapse of time and/or notice specified therein would become
such an Event of Default, has occurred and/or is continuing. Borrower is not in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument to which
Borrower is a party, except for minor defaults which neither individually nor in
the aggregate have a materially adverse affect on the Borrower.
2.10 - Validity. The execution and delivery of this Agreement and
the other Loan Documents to which the Borrower is or is to become a party will
result in valid and legally binding obligations enforceable against it in
accordance with the respective terms and provisions hereof and thereof, except
as limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditor's rights
and (ii) general principles of equity that restrict the availability of
equitable remedies..
2.11 - Title to Collateral. Borrower owns all of the assets
reflected in its balance sheet delivered to Bank or acquired since that date
(except property and assets sold or otherwise disposed of in the ordinary course
of business since that date), subject to no rights of others, including any
mortgages, leases, conditional sales agreements, title retention agreements,
liens or other encumbrances except for the Permitted Liens.
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2.12 - Disclosure. Neither this Agreement nor any of the other Loan
Documents contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements herein or therein not
misleading. There is no fact known to the Borrower which materially adversely
affects, or which is reasonably likely in the future to materially adversely
affect, the business, assets, financial condition or prospects of the Borrower.
2.13 - Business Name. The Borrower conducts its business solely in
its own name without the use of any other trade name or the intervention of or
through any other entity of any kind. Borrower will not change its name or state
of incorporation without giving the Bank at least thirty (30) days prior notice
thereof.
2.14- Premises, Etc. To Borrower's knowledge, the Borrower's
premises, the uses made thereof and Borrower's business comply in all material
respects with all applicable restrictive covenants, zoning ordinances and
building codes, all applicable health and environmental laws and regulations,
and all other applicable laws, rules and regulations; (b) all permits, licenses
and approvals necessary to operate the Borrower's business have been issued and
are presently in effect; (c) no notice has been received from any federal, state
or municipal regulatory authority or agency in connection with any claimed
violation of any of the aforesaid.
SECTION 3 - CONDITIONS PRECEDENT
3.1 - Advances. The obligation of the Bank to make any Advance under
the Loan is subject to the following conditions precedent:
(a) Borrower shall have complied with terms and conditions
of commitment letter dated November 26, 2007 (as may be
amended) and all legal matters incident to the
transactions thereby and hereby contemplated shall be
satisfactory to Bank and counsel for the Bank.
(b) Advances will be made in the minimum amount of
$10,000.00, unless Bank otherwise agrees.
(c) Whenever the Borrower requests an Advance which, if
made, would result in the principal balance outstanding
pursuant to this Agreement, exceeding or equal to two
million dollars ($2,000,000.00), the following
requirements are to be satisfied as to all amounts which
would be outstanding hereunder if the new Advance were
made (including amounts outstanding prior to the making
of such new Advance):
i. The maximum principal amount which is
outstanding pursuant hereto shall not exceed
the lesser of (the lesser of a or b herein
called the "Borrowing Base"):
a. The sum of:
(1) Seventy-Five Percent
(75.00%) of the Borrower's
Eligible Receivables; AND
(2) the lesser of two million
five hundred dollars
($2,500,000.00) or Thirty
Percent (30.00%) of the
Borrower's Eligible Inventory;
OR
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b. Ten Million Dollars ($10,000,000.00).
As used herein, "Eligible Inventory" means that
Inventory (as defined in the Uniform Commercial Code as
in effect in Connecticut as amended from time to time)
(valued at the lesser of cost to the Borrower or market
value) which continually meets the following
requirements: a) it is in first-class condition and is
saleable through normal trade channels; b) it is new and
unused; c) it is owned by the Borrower and is not
subject to any lien or security interest whatsoever
other than that of the Bank; d) it is not in the
Borrower's possession based upon consignment, guaranteed
sale, or other terms by reason of which the payment may
be conditional; e) it at all times strictly complies
with all of Borrower's warranties and representations to
the Bank; f) it is not obsolete or unmerchantable, in
Bank's reasonable discretion; g) it meets all standards
imposed by any governmental agency or authority; h) it
is at all times subject to Bank's duly perfected, first
priority security interest; i) it is in Borrower's
possession and control situated at a location in
compliance with this Agreement; j) it is not in the
hands of any third party, including a warehouseman,
finisher, consignee, etc., k) it is not subject to any
license or other agreement that limits, conditions, or
restricts Borrower's or Bank's right to sell or
otherwise dispose of such Inventory; and l) it is not of
any class, type or category which the Bank, acting in
the Bank's reasonable discretion, shall have notified
the Borrower, is not deemed to constitute Inventory
eligible for the purposes of this Agreement. Eligible
Inventory may include work-in-process, raw materials and
finished goods Inventory.
As used herein, "Eligible Receivables" means the net
amount of those accounts (as defined in the Uniform
Commercial Code as in effect in Connecticut as amended
from time to time) which continually meet the following
requirements: a) the account is due and payable not more
than ninety (90) days from the date of the invoice
evidencing the account and is not past due; b) the
account arose from the performance of services by the
Borrower which have been fully and satisfactorily
performed or from the absolute sale of goods by the
Borrower in which the Borrower had the sole and complete
ownership and the goods have been shipped or delivered
to the account debtor evidencing which the Borrower or
the Bank has the possession of shipping and delivery
receipts; c) the account is not subject to any prior or
subsequent assignment, claim, lien or security interest
other than that of the Bank; d) the account is not
subject to setoff, counterclaim, defense, allowance or
adjustment other than discounts for prompt payment shown
on the invoice, or to dispute, objection or complaint by
the account debtor concerning his liability on the
account, and the goods, the sale of which gave rise to
the account, have not been returned, rejected, lost or
damaged; e) the account arose in the ordinary course of
Borrower's business; f) no petition or other application
for relief under the Bankruptcy Code or other insolvency
law has been filed with respect to the customer or
account debtor; and the customer or account debtor has
not made an assignment for the benefit of creditors,
become insolvent, or suspended or terminated business;
and the account debtor is generally paying its debts as
they become due; g) the account debtor is not the United
States of America or any department agency or
instrumentality thereof, unless Borrower assigns its
right to payment of such account to Bank pursuant to and
complies with the Assignment of Claims Act of 1940 as
amended (31 U.S.C. Sub-section 203 et seq.); h) the
account debtor on the account is not a subsidiary of,
related to, or affiliated with Borrower; i) any
covenant, representation or warranty contained in this
Agreement with respect to such account has not been
breached; j) the account debtor is not also Borrower's
creditor or supplier; k. the sale is to an account
debtor within the United States unless the account is
covered by receivable credit insurance or a letter of
credit which has been assigned to
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Bank, all in form and substance satisfactory to Bank, or
unless the Bank otherwise agrees; k) the sale to the
account debtor is not on a ▇▇▇▇-and-hold, sale on
approval, consignment or another repurchase or return
basis, and is not evidenced by chattel paper, unless
Bank has been advised of such goods and consented to the
account arising therefrom being an Eligible Receivable;
and l) the Bank, has not notified the Borrower that, in
the Bank's reasonable discretion, the account or account
debtor is not acceptable to the Bank.
As used in this Agreement, the term "Affiliate" shall
mean any person, corporation or entity which directly or
indirectly controls, or is controlled by, or is under
common control with the Borrower. As used herein
"control" shall mean the possession, directly or
indirectly, of the power to direct the management or
policies of any person, corporation or entity and shall
include the holder of 50% or more of any stock or other
interest in any person, corporation or entity, whether
such holding is direct or indirect.
(d) Whenever the outstanding principal amount of the Loan
exceeds $2,000,000.00, the outstanding principal amount
of the Loan shall not exceed the Borrowing Base. Nothing
herein shall be construed to require the Bank to lend up
to the Borrowing Base, and nothing shall prohibit the
Bank from lending in excess of the Borrowing Base.
(e) The Borrower shall have delivered and/or executed the
various agreements and documents described under the
heading "Loan Document" in Exhibit 1 hereto
(collectively the "Loan Documents"). The term "Loan
Documents" shall include such other agreements as are
executed and/or delivered by Borrower on this date or in
the future and any modification, supplementation or
amendment thereof from time to time. All Loan Documents
shall be in form and substance reasonably satisfactory
to Bank.
(f) As to the initial Advance, the Bank shall have received
from counsel for the Borrower, a written opinion, in
form and content reasonably satisfactory to the Bank and
its counsel.
(g) There shall not have occurred in the reasonable
commercial opinion of the Bank any material adverse
change in Borrower's business operation or financial
condition.
(h) No "Event of Default" as defined in Section 6 of this
Agreement shall have occurred and is continuing and no
event which pursuant to the provisions of Section 6 with
the lapse of time and/or notice would become an Event of
Default shall be in existence at the time such Advance
is requested or to be made.
(i) The representations and warranties contained in this
Agreement shall be true and correct in all material
respects at the time such Advance is requested or to be
made . A request for an Advance shall be deemed to be a
reaffirmation by Borrower that all representations and
warranties and covenants contained herein continue to be
true and correct in all material respects and that no
event has occurred pursuant to Section 3.1(h).
(j) The Bank is authorized to make cash Advances by
crediting the Borrower's demand deposit account with the
Bank, after receiving a written request for an Advance
from any one of the employees of the Borrower set forth
on Exhibit 2 attached hereto ("Authorized Persons")
which request shall be in form and substance
satisfactory to the Bank. A facsimile transmission of
such request shall be acceptable. In connection with any
such request, Borrower agrees to provide the Bank with
such financial, credit and operational information that
the Bank may, in its reasonable discretion, require. The
Bank shall be
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entitled, without any independent investigation to act
on the instructions of anyone identifying himself as an
Authorized Person and the Borrower shall be conclusively
bound thereby in the same manner as if the person was
actually an Authorized Person. The Borrower agrees to
notify the Bank in writing if any of the individuals
identified as an Authorized Person ceases to have that
authority and until receipt by the Bank of such written
notice, the Bank shall be entitled to act on the
authority of anyone identifying himself as an Authorized
Person. The Borrower agrees to indemnify and hold the
Bank harmless from any and all claims, damages,
liabilities, losses, costs and expenses (including
reasonable attorney's fees) which may arise or be
created by the acceptance of instructions from anyone
identifying himself as an Authorized Person.
(k) Advance requests received by 1:00 P.M. will be processed
on the day received. Thereafter, Advance requests will
be processed the following business day, unless the Bank
otherwise agrees.
(l) No Advance shall be made on or after the Maturity Date.
SECTION 4 - AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, except as set forth in
SCHEDULE 4 attached hereto and made a part hereof, from the date hereof until
payment and performance in full is made hereunder, under the Note and the Loan
Documents, and any right of Borrower to obtain or obligation of Bank to make
Advances hereunder terminates, and unless the Bank otherwise consents in
writing, the Borrower will perform and observe the following:
4.1 - Records and Accounts. The Borrower will (a) keep true and
accurate records and books of account in which full, true and correct entries
will be made in accordance with generally accepted accounting principles and (b)
maintain adequate accounts and reserves for all taxes (including income taxes),
depreciation, depletion, obsolescence and amortization of its properties,
contingencies, and other reserves.
4.2 - Borrowing Base Certificate. The Borrower will deliver to Bank,
upon Bank's request from time to time, when the amount outstanding hereunder is,
or may be, with the making of a requested Advance, two million dollars or more,
and also, on the first day of each month, regardless of the amount outstanding
and without Bank's request, a completed Borrowing Base Certificate and Report in
form attached hereto as Schedule 4.2.
4.3 - Financial Statements. The Borrower shall furnish to Bank:
(a) within ninety days following each fiscal year end of Borrower,
annual audited financial statements and tax returns of Borrower, both prepared
by an independent certified public accountant satisfactory to the Bank and in
such detail as the Bank may reasonably require;
(b) within forty-five days following the end of each fiscal quarter
of Borrower, its interim financial statements in such form and detail as the
Bank may reasonably require;
(c) Borrower's accounts receivable aging in form and detail
reasonably satisfactory to Bank, on the first day of each month whenever the
principal balance outstanding hereunder is greater than or equal to two million
dollars and also at the time of each request for an Advance, when the amount
outstanding, if such Advance is made, will exceed two million dollars;
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(d) Borrower shall, upon the Bank's written demand,
deliver to the Bank such other information about the financial
condition or operations of the Borrower or the as Bank may, from time to time,
reasonably request.
4.4 Primary Operating Account. Borrower shall maintain its primary
operating account at the Bank.
4.5 Debt Service Coverage Ratio. Borrower shall maintain a minimum
Debt Service Coverage Ratio of 1.5 to 1.0, at Borrower's fiscal year end
December 31, 2007 and each fiscal year end thereafter. Debt Service Coverage
Ratio is defined as: (Earnings Before Interest Expense, Taxes, Depreciation and
Amortization Expense) divided by (Current Maturities of Long Term Debt plus
Interest Expense) all as determined in accordance with generally accepted
accounting principles.
4.6 Debt Tangible Net Worth Ratio. Debtor shall maintain a maximum
Debt Tangible Net Worth Ratio of 2.5 to 1.0 at Borrower's fiscal year end
December 31, 2007 and each fiscal year end thereafter. Debt Tangible Net Worth
Ratio is defined as: Total Liabilities divided by (Net Worth - Intangible
Assets), all as determined in accordance with generally accepted accounting
principles.
4.7 - Generally Accepted Accounting Principles. All financial
covenants and financial statements shall be determined on a consolidated basis
in accordance with generally accepted accounting principles. All accounting
principles observed or applied in any accounting period must be comparable in
all material respects to those applied in the preceding period except as to any
changes consented to by the Bank in writing.
4.8 - Insurance. Borrower will (a) keep all Collateral insured in
accordance with the terms of the Security Agreement (b) keep any real property
insured against fire and other hazards including vandalism and malicious
mischief (so called "All Risk" coverage) in amounts and with companies
satisfactory to the Bank to the same extent and covering such risks as is
customary in the same or a similar business; (b) maintain public liability
coverage, broad form endorsement, to a limit of at least $1,000,000.00 against
claims for personal injury or death, and (c) maintain all worker's compensation,
employment or similar insurance as may be required by applicable law. Such All
Risk property insurance coverage shall provide for a minimum of thirty (30)
days' written cancellation notice to the Bank. Borrower agrees to deliver
certified copies of all of the aforesaid insurance policies to the Bank at
Bank's option and request. In the event of any material loss or damage to any
Collateral, Borrower shall give immediate written notice to the Bank and to its
insurers of such loss or damage and shall promptly file its proofs of loss with
said insurers. If Borrower fails to maintain adequate insurance as aforesaid,
Bank may, at its option, obtain policies it deems necessary and Borrower agrees
that the cost thereof may be added to the principal indebtedness arising
hereunder.
4.9 - Tax and Other Liens. Borrower will comply with all statutes
and government regulations and pay all taxes, assessments, governmental charges
or levies, or claims for labor, supplies, rent and other obligations made
against them or their property which, if unpaid, might become a lien or charge
against the Borrower or its property, except liabilities being contested in good
faith with the prior written consent of the Bank, which consent shall not be
unreasonably withheld or delayed, and against which, if requested by the Bank,
the Borrower shall set up reserves in amount and in form reasonably satisfactory
to the Bank and provided further that the Borrower will pay all such taxes,
assessments, charges, levies or claims forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security therefor.
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4.10 - Place of Business. Borrower's principal place of business and
chief executive office is the address shown above, and Debtor shall not change
its principal place of business and chief executive office from that address set
forth in the beginning of this Agreement, without giving the Bank at least
thirty (30) days prior written notice of the new address for same, provided that
such new location shall be in the United States of America. All business records
of the Borrower, including those pertaining to all accounts and contract rights,
shall be kept at the above address of Borrower, unless prior written consent of
Bank is obtained to a change of location.
4.11 - Existence; Maintenance of Properties The Borrower will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence. It (a) will cause all of its properties used in
the conduct of its business or the business to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(b) will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the reasonable judgment of the
Borrower may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times, and (c)
will continue to engage primarily in the businesses now conducted and in related
businesses.
4.12 - Litigation. Borrower will promptly advise the Bank of the
commencement of or threat of litigation or arbitration proceedings which exceeds
$15,000.00, unless the same is covered by insurance, and will promptly advise
Bank of any litigation or arbitration of any nature or of any proceedings before
any governmental agency (regardless of the insurance coverage), which might have
an material adverse effect upon the condition (financial, operating or
otherwise) of the Borrower.
4.13 - Maintenance of Existence. Borrower has not, within the last
five (5) years, changed its name or been a party to any merger or consolidation.
Borrower will continue to conduct its businesses substantially as presently
conducted and comply with all valid and applicable statutes, rules and
regulations, and maintain its properties in good repair, working order and
operating condition. The Borrower shall immediately notify the Bank of any
unusual event causing material loss or unusual devaluation in the value of its
assets and the amount of same.
4.14 - Performance. Borrower will comply with all terms and
conditions of this Agreement and the Loan Documents.
4.15 - Conflict. The execution and delivery of the Notes and all
other Loan Documents in connection with the Loan will not violate, conflict
with, constitute a default under or result in a breach of any indenture,
agreement or other instrument to which the Borrower is a part or by which it is
bound.
4.16 - Further Assurances. The Borrower will, at Bank's request,
cooperate with the Bank and execute such further instruments and documents as
the Bank shall reasonably request to carry out to its reasonable satisfaction
the transactions contemplated by this Agreement and the other Loan Document or
as may be deemed necessary by Bank in order to protect or preserve its rights.
4.17 - Operating Accounts. The Borrower will maintain its primary
operating account with Bank into which all Advances will be deposited and from
which Bank is hereby authorized to debit all payments required under the Loan
and Loan Documents.
SECTION 5 - NEGATIVE COVENANTS
The Borrower covenants and agrees that except as set forth in SCHEDULE 5
attached hereto and made a part hereof, and until payment and performance in
full is made hereunder, under the Note and the Loan
10
Documents, and any right of Borrower to obtain or obligation of Bank to make
Advances hereunder terminates, and unless the Bank otherwise consents in
writing, the Borrower shall not:
5.1 - Consolidation or Merger. Merge into or consolidate with or
into any entity; and, for the purposes of this clause 5.1, the acquisition by
the Borrower of all or substantially all of the assets, together with the
assumption of all or substantially all of the obligations and liabilities, of
any such entity or other entity shall be deemed to be a consolidation of such
entity with the Borrower.
5.2 - Change Name or Location. Change the name under which Borrower
does business without giving the Bank thirty (30) days prior written notice in
which it sets forth its new name and the date on which the new name shall first
be used, or conduct business under any trade name or style other than as herein
above set forth or as permitted by the Security Agreement or change its chief
executive offices, places of business or the present locations of its business
assets or records relating thereto, from those addresses herein above set forth,
without giving the Bank at least thirty (30) days prior written notice of the
new location (and address) of same, and provided that such new location shall be
in the United States of America..
5.3 - Manner of Business. Make a material change in the manner in
which the business of the Borrower is conducted without Bank's prior written
consent.
5.4 - Compliance with Environmental Laws. (a) Use any of its real
estate or any portion thereof for the handling, processing, storage or disposal
of Hazardous Substances, (b) cause or permit to be located on any of real estate
any underground tank or other underground storage receptacle for Hazardous
Substances, (c) generate any Hazardous Substances on any of its real estate, (d)
conduct any activity at any real estate or use any real estate in any manner so
as to cause a release (i.e. releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping) or threatened release of Hazardous Substances on, upon or into the real
estate or (e) otherwise conduct any activity at any real estate or use any real
estate, in each case in any manner that would violate any Environmental Law or
bring such real estate in violation of any Environmental Law.
(a) "Environmental Law" shall mean any judgment decree,
order, law, license, rule or regulation pertaining to
environmental matters, including without limitation,
those arising under the Resource Conservation and
Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as
amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("▇▇▇▇"), the Federal Clean
Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state or local statute,
regulation, ordinance, order or decree relating to
health, safety or the environment.
(b) "Hazardous Substance" shall mean any hazardous waste, as
defined by 42 U.S.C. ss.6903(5), any hazardous
substances as defined by 42 U.S.C. ss.9601(14), any
pollutant or contaminant as defined by 42 U.S.C.
ss.9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by
any Environmental Law.
SECTION 6 - DEFAULTS
Each of the following shall constitute an Event of Default under the
Loan Documents:
11
(i) The failure by the Debtor to comply with the terms of this Agreement or any
existing or future note, mortgage, guaranty, loan agreement or other agreement
or document from Debtor in favor of Bank; provided that Debtor shall have a
period of 15 days following notice from Bank to cure any such failure to comply
other than a payment failure, before the same shall constitute an Event of
Default hereunder (Cure Right), provided that such Cure Right shall not be
applicable to any of the other Events of Default set forth in (ii)-(xii) of this
paragraph; or (ii) the failure to pay interest or principal or any other sum
when due pursuant to the Note or hereunder; or (iii) the failure to pay taxes
including sales or excise taxes, or municipal assessments before the same become
delinquent except as otherwise permitted herein or in the Security Agreement or
(iv) failure to keep in force any insurance required herein; or (v) default
under any obligation in excess of $250,000 that Borrower has to pay anyone else
or (vi) Borrower shall cease to legally exist; or (vii) the dissolution of the
Borrower or the filing by or against the Borrower of any petition, arrangement,
reorganization, or the like under any insolvency or bankruptcy law, or the
adjudication of Borrower as bankrupt, or the making of an assignment for the
benefit of creditors, or the appointment of a receiver for any part of any of
Borrower's properties; or (viii) any material change in the structure of
Borrower's business operations which in the reasonable judgment of the Bank
materially and adversely affects the ability of the Borrower to pay or perform
under any of the Loan Documents or otherwise impairs any security of the Bank;
or (ix) any merger or consolidation of Borrower with or into another entity or
any spinoff or reorganization of the Borrower; or (x) the occurrence of a
default or an Event of Default (as defined therein and beyond the expiration of
any applicable cure or grace period) under, or demand for payment of the
Security Agreement, the Note or any other existing or future agreement from
Borrower in favor of Bank; or (xi) there is a material adverse change in the
condition or affairs (financial or otherwise) of Borrower, or a material adverse
change (financial or otherwise) in the collateral which secures the obligations
of Borrower under this Agreement or the Note, and such change causes the Bank,
in good faith, to deem itself insecure with respect to the repayment and
performance of this Agreement or the Note; or (xii) any representation or
warranty made by the Borrower herein, in any of the Loan Documents, or in any
existing or future agreement from Borrower in favor of Bank shall be incorrect
or untrue in any material respect as of the date when made, or any statement,
certificate or data furnished by the Borrower in connection with the Loan or any
said existing or future agreement shall be incorrect or untrue in any material
respect as of the date thereof or as of the date specified therein, as the case
may be.
Upon the occurrence of any such Event of Default, Bank may, at its
option, declare all indebtedness from the Borrower to Bank to be immediately due
and payable without the necessity of presentment, demand or notice of any kind,
all of which are expressly waived and Bank shall be entitled to all of the
rights and remedies set forth in this or any other Loan Documents, or otherwise
provided by law, which remedies shall be cumulative and not exclusive.
SECTION 7 - MISCELLANEOUS
7.1 - Maximum Interest Rate. All agreements between Borrower and
Bank are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness evidenced
hereby or otherwise, shall the amount paid or agreed to be paid to Bank for the
use or the forbearance of the indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law of the State of Connecticut in effect as of the date hereof
provided, however, that in the event there is a change in the law which results
in a higher permissible rate of interest, then the Loan Documents shall be
governed by such new law as of its effective date. In this regard, it is
expressly agreed that it is the intent of Borrower and Bank in the execution,
delivery and acceptance of the Note to contract in strict compliance with the
law of the State of Connecticut from time to time in effect. If, under or from
any circumstances whatsoever,
12
fulfillment of any provisions hereof or of any of the Loan Documents at the time
when performance of such provision shall be due, shall involve transcending the
limit of that prescribed by applicable law, then the obligation to be fulfilled
shall automatically be reduced to the limits of such validity, and if under or
from any circumstances whatsoever Bank should ever receive as interest an amount
which would exceed the highest lawful rate, such amount which would be excessive
interest shall be applied to the reduction of the principal balance evidenced
hereby and not to the payment of interest. This provision shall control every
other provision of all agreements between Borrower and Bank.
7.2 - Waivers.
(a) Borrower waives presentment, demand, notice, protest,
notice of acceptance of this Agreement, 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 liabilities and the Collateral securing the
Loan, Borrower assents to any extension or postponement
of the time of payment or any other indulgence, to any
substitution, exchange or release of the collateral, to
the addition or release of any party 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. The Bank
shall not be deemed to have waived any of its rights
upon or under any document or agreement relating to the
liabilities of the Borrower unless such waiver shall be
in writing and signed by the Bank. No delay or omission
on the part of the Bank in exercising any right shall
operate as a waiver of such right or any other right. A
waiver on any one occasion shall not be construed as a
bar to or waiver of any right on any future occasion.
The Bank may revoke, but not retroactively any
permission or waiver previously granted, and such
revocation shall be effective whether given orally or in
writing. All rights and remedies of the Bank with
respect to the liabilities of the Borrower, whether
evidenced hereby or by any other instrument or document,
shall be cumulative and may be exercised singularly or
concurrently.
(b) BORROWER IRREVOCABLY WAIVES AND WILL WAIVE ALL RIGHT TO
A TRIAL BY JURY IN ANY PROCEEDING HEREINAFTER INSTITUTED
BY OR AGAINST THE BORROWER IN RESPECT OF THIS AGREEMENT
OR ANY OF THE LOAN DOCUMENTS. THIS WAIVER IS MADE
KNOWINGLY AND VOLUNTARILY AFTER CONSULTATION WITH
COUNSEL.
(c) BORROWER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS
AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION, AND
HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING UNDER
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, AS
AMENDED OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL
LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH BANK OR
ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE AND FURTHER
WAIVES THE POSTING OF ANY BOND IN CONNECTION WITH ANY
PREJUDGMENT REMEDY SOUGHT. THIS WAIVER IS MADE KNOWINGLY
AND VOLUNTARILY AFTER CONSULTATION WITH COUNSEL.
7.3 - Notices. Except as may otherwise be set forth herein, all
notices, requests or demands to or upon a party to this Agreement shall be in
writing, addressed to the parties at the addresses on Page 1 of this Agreement
(or such other address as may have been furnished in writing) and sent by United
States certified mail, return receipt requested, or may be given by a nationally
recognized receipted delivery or
13
reputable overnight courier service. No other method of giving any notice,
request or demand is hereby precluded provided such shall not be deemed given
until such notice is actually received at the address of the addressee.
7.4 - Expenses. The Borrower will pay all reasonable expenses
arising out of the, administration, protection of any collateral for the Loan,
collection and/or other enforcement of this Agreement or of any Loan Documents
(including without limitation, reasonable counsels' fees whether or not suit is
instituted). In addition, Borrower will pay all reasonable costs incurred by
Bank in the preparation of the Loan Documents and closing of the Loan. The
covenants contained in this Section shall survive payment or satisfaction in
full of the Loan.
7.5 - Indemnification. The Borrower agrees to indemnify and hold
harmless the Bank and its affiliates from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and expenses of every nature and character
arising out of this Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (a) any actual
or proposed use by the Borrower of the proceeds of the Loan, ( b) any actual or
alleged infringement of any patent, copyright, trademark, service ▇▇▇▇ or
similar right of the Borrower, (c) the Borrower entering into or performing this
Agreement or any of the other Loan Documents or (d) with respect to the Borrower
and their respective properties and assets, the violation of any Environmental
Law, the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threatened release of any Hazardous Substances or any
action, suit, proceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of counsel and
allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding. In litigation, or the preparation
therefor, the Bank and its affiliates shall be entitled to select their own
counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay
promptly the reasonable fees and expenses of such counsel. If, and to the extent
that the obligations of the Borrower under this Section are unenforceable for
any reason, the Borrower hereby agrees to make the maximum contribution to the
payment in satisfaction of such obligations which is permissible under
applicable law. The covenants contained in this Section shall survive payment or
satisfaction in full of the Loan.
7.6 - Connecticut Law. This Agreement and the rights and obligations
of the parties hereunder and under the Note and all Loan Documents shall be
construed and interpreted in accordance with the laws of Connecticut. Borrower
agrees that the Courts of the State of Connecticut and/or the Federal District
Court for the State of Connecticut shall have jurisdiction over any dispute
arising out of the Note, this Agreement or the Loan Documents. Borrower consents
to any such forum Bank may choose.
7.7 - Survival of Representations. All representations, warranties,
covenants and agreements herein contained or made in writing in connection with
this Agreement shall survive the execution and delivery of the Note, shall
continue in full force and effect until all amounts payable on account of the
Note and this Agreement and the Loan Documents shall have been paid in full,
this Agreement and the Loan Documents have been fully performed and any right of
Borrower to obtain or obligation of Bank to make Advances hereunder has
terminated. This Agreement and every representation, warranty, covenant, promise
and other term herein contained shall survive until the Note and this Agreement
and the other Loan Documents have been paid and performed in full and any right
of Borrower to obtain or obligation of Bank to make Advances hereunder has
terminated terminates.
7.8 - Modifications. No modification or amendment hereof shall be
effective unless same shall be in writing and signed by the parties hereto.
14
7.9 - Remedies. In case any one or more of the Events of Default
shall have occurred, and whether or not the Bank shall have accelerated the
maturity of the Loan, the Bank, if owed any amount with respect to the Loan,
may, proceed to protect and enforce its rights by suit in equity, action at law
or other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Agreement and the other Loan Documents
or any instrument pursuant to which any obligations to the Bank are evidenced,
including as permitted by applicable law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of the Bank. No remedy herein conferred upon the Bank
is intended to be exclusive of any other remedy and each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute or any other
provision of law. To the extent any of the Loan Documents afford Bank any
additional, different or greater rights than are provided to Bank in this
Agreement or impose additional, different or greater obligations on Borrower,
then Bank shall have the benefit of such rights in addition to its rights
hereunder and Borrower shall be bound by such obligations in addition to the
obligations of Borrower hereunder.
7.10 - Invalidity. If any provision of this Agreement is invalid or
unenforceable under applicable law, such provision is and will be totally
ineffective to that extent, but the remaining provisions shall be unaffected.
7.11 - Captions. The captions for the paragraphs contained in this
Agreement have been inserted for convenience only, and form no part of this
Agreement, and shall not be deemed to affect the meaning or construction of any
of the covenants, agreements, conditions or terms hereof.
7.12 - Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the Borrower and the Bank and their respective
heirs, successors and assigns.
7.13 - Rules of Interpretation. This Agreement and the other Loan
Documents are the result of negotiation among, and have been reviewed by counsel
to, among others, the Bank and the Borrower and are the product of discussions
and negotiations among all parties. Accordingly, this Agreement and the other
Loan Documents are not intended to be construed against the Bank merely on
account of the Bank's involvement in the preparation of such documents.
7.14 - Joint and Several Obligations. The obligations and
undertakings of each Borrower (if more than one) to Bank hereunder and under all
Loan Document shall be joint and several.
7.15 - Non-Public Information. The Bank agrees to use commercially
reasonable efforts to keep non-public information provided by Borrower
confidential, provided that such information may be disclosed to the Bank's
attorneys, auditors, potential investors, participants and purchasers, and to
Bank's subsidiaries, affiliates, and parent and to governmental and regulatory
authorities and agencies, and to the extent required by law, and in the ordinary
course of Bank's business.
7.16 - Amendment and Restatement. This Agreement and the Note amend
and restate, in its entirety, Commercial Line of Credit Note and Loan Agreement
from Borrower to Bank dated October 27, 2006. Borrower acknowledges and agrees
that the principal balance of the Loan outstanding as of the date of this
Agreement is $2,012,303.85 and accrued interest thereon as of the date of this
Agreement is $3,134.77, and that Borrower has no defenses, offsets, or
counterclaims with respect thereto.
15
IN WITNESS WHEREOF, the parties hereto have caused this Commercial
Loan Agreement to be duly executed as of the day and year first above written.
Signed and Delivered
in the Presence of:
NEWALLIANCE BANK
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇ Its Vice President
------------------------
CAS MEDICAL SYSTEMS, INC.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------------
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------ Its Chief Financial Officer
STATE OF CONNECTICUT)
) ss: New Haven, February 11, 2008
COUNTY OF NEW HAVEN)
Personally appeared ▇▇▇ ▇. ▇▇▇▇▇▇, Vice President of NewAlliance
Bank, a Connecticut bank, signer and sealer of the foregoing instrument and
acknowledged the same to be her free act and deed as such officer and the free
act and deed of said Bank, before me.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Commissioner of the Superior
Court
STATE OF CONNECTICUT)
) ss: New Haven, February 11, 2008
COUNTY OF NEW HAVEN)
Personally appeared ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chief Financial Officer of CAS
MEDICAL SYSTEMS, INC., a Delaware corporation, signer and sealer of the
foregoing instrument, and acknowledged the same to be his free act and deed as
such officer and the free act and deed of said corporation, before me.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
Commissioner of the Superior
Court
16