Loan and Security Agreement by and between TRANSCEND SERVICES, INC. and MEDICAL

Exhibit 10.1

 

Loan and Security Agreement

by and between

TRANSCEND SERVICES, INC. and MEDICAL

DICTATION SERVICES, INC.

each individually and collectively as the “Borrower”

and

REGIONS BANK

as the “Lender”

August 31, 2009

 

TABLE OF CONTENTS

 

 

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TABLE OF CONTENTS

(continued)

 

 

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TABLE OF CONTENTS

(continued)

 

 

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EXHIBITS AND SCHEDULES

EXHIBITS:

 

 

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (the “ Agreement ”), dated as of August 31, 2009, by and between TRANSCEND SERVICES, INC., a Delaware corporation (“ Transcend ”), MEDICAL DICTATION SERVICES, INC., a Maryland corporation (“ MDS ”; Transcend and MDS shall be referred to herein, both collectively and each individually, as “ Borrower ”), and REGIONS BANK, an Alabama bank (together with its successors and assigns, “ Lender ”).

W I T N E S S E T H :

In consideration of the premises and of the mutual covenants herein contained and to induce Lender to extend credit to Borrower, the parties agree as follows:

1. DEFINITIONS; RELATED TERMS.

1.1. Certain UCC Terms . Any term used in this Agreement or in any financing statement filed in connection herewith which is defined in the UCC and not otherwise defined in this Agreement or in any other Loan Document shall have the meaning given to the term in the UCC, including, without limitation, Accession, Account Debtor, Chattel Paper, Account, Commercial Tort Claim, Deposit Account, Document, Electronic Chattel Paper, Equipment, Fixture, Instrument, Inventory, Investment Property, Letter-of-Credit Right, Proceeds, Supporting Obligation, and Tangible Chattel Paper.

1.2. Defined Terms . Capitalized terms that are not otherwise defined herein shall have the meanings set forth in this Section 1.2. Certain terms relating to financial covenants are set forth in Section 8.

“ Accounts Payable Report ” has the meaning given such term in Section 6.6(a).

“ Accounts Receivable Report ” has the meaning given such term in Section 6.6(a).

“ Affiliate ” means, with respect to any Person, (a) any other Person directly or indirectly owning 5% or more of the Equity Interests of such Person or of which such Person owns 5% or more of such Equity Interests; (b) any other Person controlling, controlled by, or under common control with such Person; (c) any officer, director, or employee of such Person or any Affiliate of such Person; and (d) any family member or Affiliate of such Person.

“ Applicable Margin ” means an amount determined as follows:

(a) For the period commencing on the Closing Date and ending on (and including) December 31, 2009, as to (i) any Revolving Loan, or portion thereof, that is a LIR Loan, 2.75%; and (ii) any portion of the Term Loan that is a LIR Loan, 2.50%.

(b) Thereafter, an amount determined from time to time on each Determination Date (as defined below and commencing with the first Determination Date occurring after December 31, 2009) by reference to the following table and corresponding to the Leverage Ratio for the most recently ended Fiscal Quarter:

 

(c) If any Loans are converted to Base Rate Loans because of Section 2.3(g), then the Applicable Margin for such Base Rate Loans shall be 0.50% for Revolving Loans and 0.50% for Term Loans

The Applicable Margin shall be subject to reduction or increase, as applicable and as set forth in the table above, on a quarterly basis as of each Determination Date (as defined below), according to the performance of the Borrower as measured by the Leverage Ratio as determined in the manner provided in Section 8 and reported in accordance with Section 6.6(d). Except as otherwise provided in this paragraph, any increase or reduction in the Applicable Margin provided for herein shall be effective on each Determination Date. Without limiting Lender’s rights to invoke the Default Rate, if (i) the financial statements and the compliance certificate of the Borrower setting forth the Leverage Ratio are not received by Lender within 5 days after the date required pursuant to Section 6.6(b) and (d), as applicable, or (ii) an Event of Default occurs and Lender so elects, then, in each case, the Applicable Margin shall be at Level I until such time as such financial statements and compliance certificate are received and any Event of Default (whether resulting from a failure to timely deliver such financial statements or compliance certificate or otherwise) is waived in writing by Lender. As used herein, “ Determination Date ” means the first day of the first calendar month after the date on which Borrower provides the quarterly compliance certificate and financial statements under Section 6.6(b) and (d), as applicable, for March, June, September, and December of each year.

In the event that any financial statement or certificate required by Section 6.6(b), (c), or (d) is shown to be inaccurate (regardless of whether this Agreement or the Commitment is in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period (an “ Applicable Period ”) than the Applicable Margin applied for such Applicable Period, then (i) Borrower shall immediately deliver to Lender a correct certificate for such Applicable Period, (ii) the Applicable Margin for such Applicable Period shall be determined by reference to such certificate, and (iii) Borrower shall promptly pay Lender, ON DEMAND , the accrued additional interest owing as a result of such increased Applicable Margin for such Applicable Period, which payment shall be promptly applied by Lender in accordance with the terms hereof.

“ Average Excess Availability ” means, for any period, an amount equal to the sum of the amount of Excess Availability on each day during such period, as determined by Lender, divided by the number of days in such period.

“ Bank Products ” means all bank, banking, financial, and other similar or related products and services, including, without limitation, (a) merchant card services, credit or stored value cards, and corporate purchasing cards; (b) cash management or related services, including, without limitation, the automated clearinghouse transfers of funds and any other ACH services, remote deposit capture services, account reconciliation services, lockbox services, depository and checking services, Deposit Accounts, securities accounts, controlled disbursement services, and wire transfer services; (c) bankers’ acceptances, drafts, Letters of Credit or letters of credit (and the issuance, amendment, renewal, or extension thereof), documentary services, foreign currency exchange services; (d) Hedge Agreements; and (e) leasing products.

“ Base Rate ” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest whole multiple of  ¹ / 100 of 1%) equal to the greater of (a) the Federal Funds Rate in effect on such day plus  ¹ / 2 of 1% and (b) the Prime Rate in effect on such day. If for any reason Lender shall have determined (which determination shall be conclusive absent manifest error) that it is unable, after due inquiry, to ascertain the Federal Funds Rate for any reason, including the inability or failure of Lender to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to clause (a) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or the Federal Funds Rate, respectively.

“ Base Rate Loan ” means a Loan, or portion thereof, during any period in which it bears interest at a rate based on the Base Rate. No Loan shall be a Base Rate Loan unless required or permitted by Section 2.3(g).

“ Borrowing Base ” means, on any date of determination, an amount equal to:

(a) up to 80% (or such lesser percentage as Lender may determine from time to time in its sole and absolute discretion) of the total amount of Eligible Accounts, minus

 

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(b) any Reserves.

“ Borrowing Base Certificate ” has the meaning set forth in Section 6.6(a).

“ Business Day ” means any weekday on which Lender is open for business in Birmingham, Alabama, and Atlanta, Georgia.

“ Capital Expenditures ” means, for any period, the aggregate cost of all capital assets acquired by Borrower and its Subsidiaries during such period (including gross leases to be capitalized under GAAP and leasehold improvements), as determined in accordance with GAAP.

“ Cash Flow Leverage Ratio ” has the meaning given such term in Section 8.1.

“ Closing Date ” means the earliest date on which all of the conditions precedent in Section 4 of this Agreement are satisfied (or waived by Lender in accordance with the terms of this Agreement) and the initial extensions of credit are made under this Agreement.

“ Collateral ” means all property of Borrower, wherever located and whether now owned by Borrower or hereafter acquired, including but not limited to (a) all Inventory; (b) all General Intangibles; (c) all Accounts; (d) all Chattel Paper; (e) all Instruments and Documents and any other instrument or intangible representing payment for goods or services; (f) all Equipment; (g) all Investment Property; (h) all Commercial Tort Claims; (i) all Letter-of-Credit Rights; (j) all Deposit Accounts and funds on deposit therein, including but not limited to any Funding Account, Collections Account, and funds otherwise on deposit with or under the Control of Lender or its agents or correspondents; (k) all Goods; (l) all Fixtures; and (m) all parts, replacements, substitutions, profits, products, Accessions, cash and non-cash Proceeds, and Supporting Obligations of any of the foregoing (including, but not limited to, insurance proceeds) in any form and wherever located. Collateral also includes (x) all written or electronically recorded books and records relating to any such Collateral and other rights relating thereto and (y) any other real or personal property as to which Lender, at any time of determination, has a Lien to secure the Obligations.

“ Collateral Disclosure Certificate ” means each certificate substantially in the form of Exhibit C , attached hereto and made a part hereof, executed and delivered by a Credit Party to Lender in accordance with or pursuant to the terms of this Agreement, as the same may be amended, restated, supplemented, or otherwise modified from time to time to the extent permitted or required herein.

“ Collections Account ” means any Deposit Account maintained by Borrower with Lender to which collections, deposits, and other payments on or with respect to Collateral may be made pursuant to the terms hereof and to which only Lender shall have access to withdraw or otherwise direct the disposition of funds on deposit therein.

“ Commitments ” means each of the (a) the Revolving Loan Commitment and (b) the Term Loan Commitment.

“ Control ” means, with respect to any asset, right, or property with respect to which a security interest therein is perfected by a secured party’s having “control” thereof (whether pursuant to the terms of an agreement or through the existence of certain facts and circumstances), that Lender has “control” of such asset, right, or property in accordance with the terms of Article 9 of the UCC.

“ Credit Party ” means the Borrower, each Guarantor, and each other Person obligated to Lender under any Loan Document.

“ Debt ” means, without duplication, all liabilities of a Person as determined under GAAP and all obligations which such Person has guaranteed or endorsed or is otherwise secondarily or jointly liable for, and shall include, without limitation, (a) all obligations for borrowed money or purchased assets; (b) obligations secured by assets whether or not any personal liability exists; (c) the capitalized amount of any capital or finance lease obligations; (d) obligations as a general partner; (e) contingent obligations pursuant to guaranties, endorsements, letters of credit and other secondary liabilities; (f) obligations for deposits; and (g) obligations under Hedge Agreements.

 

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“ Default ” means any event or circumstance which, upon satisfaction of any requirement for the giving of notice or the lapse of time, or the happening of any further condition, event, or act, would constitute an Event of Default.

“ Default Rate ” means, as of any date, a rate per annum that is equal to (a) in the case of each Loan outstanding on such date, 2.00% in excess of the rate otherwise applicable to such Loan on such date; (b) in the case of fees payable with respect to Letters of Credit, 2.00% in excess of the fees otherwise applicable to Letters of Credit; and (c) in the case of any other Obligations outstanding on such date, the Base Rate, plus 2.00%; provided , however , that Obligations arising under any Hedge Agreement between Borrower and Lender or any of its Affiliates shall bear interest at the rates and on the terms set forth in such Hedge Agreement.

“ EBITDA ” has the meaning given such term in Section 8.1.

“ Eligible Accounts ” means all of Borrower’s Accounts (valued at the face amount of such invoice, minus the maximum discounts, credits, and allowances which may be taken by Account Debtors on such Accounts, and net of any sales tax, finance charges, or late payment charges included in the amount invoiced) created or acquired by Borrower and arising from the sale of Inventory or, to the extent approved by Lender, the rendering of services, in each case, in Borrower’s ordinary course of business, but excluding (without duplication), Accounts:

(a) which are not denominated in U.S. dollars;

(b) which are not evidenced by a paper invoice or an electronic equivalent acceptable to Lender;

(c) over which Lender does not have a duly perfected, first-priority (and only) Lien or which, by contract, subrogation, mechanics’ lien laws, or otherwise, are subject to claims by Borrower’s creditors or other third parties or which are owed by Account Debtors as to whom any creditor of Borrower (including any bonding company) has lien or retainage rights;

(d) as to which any representation, warranty, or covenant herein relating thereto shall be untrue, misleading, or in default;

(e) outstanding for longer than 90 days from original invoice date;

(f) owed by any Account Debtor if more than 50% of the Accounts owed by such Account Debtor to Borrower are deemed ineligible pursuant to clause (e);

(g) owed by any of Borrower’s Affiliates;

(h) owed by any of Borrower’s creditors, but only to the extent of Borrower’s Debt to such creditors;

(i) which the Account Debtor disputes the liability therefor or are otherwise in dispute or are subject to any counterclaim, contra-account, volume rebate, cooperative advertising accrual, deposit, or offset, but only to the extent thereof;

(j) owing by any Account Debtor (and such Account Debtor’s Affiliates) whose aggregate Accounts exceed 20% of the total of Borrower’s Accounts, but only in each case to the extent of such excess;

(k) owing by any Account Debtor which is not Solvent or which is subject to any proceeding of the types described in Section 9.1(h) or (i);

(l) arising from a sale on a bill-and-hold, progress billing, guaranteed sale, sale-or-return, sale-on-approval, consignment, or similar basis or due from any credit or charge card company or any credit or charge card processor, servicer, or administrator;

(m) owed by an Account Debtor which (i) is a Sanctioned Person or (ii) is located outside of the United States of America;

(n) owed by the United States of America or any other Governmental Entity unless Borrower shall have complied with all applicable Federal and state assignment of claims laws as required by Lender;

 

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(o) (i) as to which the goods or services giving rise to such Account (A) have not been delivered or provided to, and accepted by, the Account Debtor, (B) are subject to repurchase or have been returned, rejected, repossessed, lost, or damaged, or (C) have not been completely performed, as applicable, or (ii) which do not represent a final sale;

(p) evidenced by a note or other Instrument or Chattel Paper or which have been reduced to judgment;

(q) as to which Borrower or Lender, in its sole and absolute discretion, shall have determined the validity, collectability, or amount thereof to be doubtful;

(r) owed by an Account Debtor which is located in a jurisdiction where Borrower is required to qualify to transact business or to file reports, unless Borrower has so qualified or filed; and

(s) which Lender deems, in its sole and reasonable discretion, to be ineligible.

To the extent applicable, “Eligible Accounts” shall not include aged credit balances outstanding for longer than 90 days.

“ Environmental Laws ” means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980; the Superfund Amendments and Reauthorization Act of 1986; the Resource Conservation and Recovery Act; the Toxic Substances Act; the Clean Water Act; the Clean Air Act; the Oil Pollution and Hazardous Substances Control Act of 1978; and any other “Superfund” or “Superlien” law or any other Federal, state, or local statute, law, ordinance, code, rule, regulation, order, or decree relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance, or material, as now or at any time hereafter in effect, in each case, as the same may be amended from time to time.

“ Equity Interest ” means, with respect to any Person, any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interest in (however designated) equity of such Person, including, without limitation, any common stock, preferred stock, limited or general partnership interests, and limited liability company membership interests, whether voting or non-voting.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ ERISA Termination Event ” means a “reportable event” as defined in Section 4043(b) of ERISA, or the filing of a notice of intent to terminate under Section 4041 of ERISA.

“ Event of Default ” has the meaning given such term in Section 9.1.

“ Excess Availability ” means, at any time of determination, the amount by which (a) the lesser of (i) the Borrowing Base and (ii) the Revolving Loan Commitment exceeds (b) the Working Capital Obligations.

“ Federal Funds Rate ” means, for any period, a fluctuating interest rate per annum equal, for each day during such period, to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations at approximately 10:00 a.m. (Birmingham, Alabama, time) for such day on such transactions received by Lender from 3 Federal Funds brokers of recognized standing selected by it in its discretion.

“ Fiscal Month ,” “ Fiscal Quarter ,” and “ Fiscal Year ” means each of Borrower’s fiscal months, quarters, or years, as applicable.

“ Fixed Charge Coverage Ratio ” has the meaning given such term in Section 8.1.

“ Funded Debt ” has the meaning given such term in Section 8.1.

“ Funding Account ” means any Deposit Account maintained by Borrower with Lender for the purpose of depositing the proceeds of Loans.

 

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

“ General Intangibles ” has the meaning set forth in the UCC, and includes, without limitation, general intangibles of Borrower, whether now owned or hereafter created or acquired by Borrower, including all choses in action, causes of action, company or other business records, inventions, blueprints, designs, patents, patent applications, trademarks, trademark applications, trade names, trade secrets, service marks, goodwill, brand names, copyrights, registrations, licenses, franchises, customer lists, permits, tax refund claims, computer programs, operational manuals, internet addresses and domain names, insurance refunds and premium rebates, all claims under guaranties, security interests or other security held by or granted to Borrower to secure payment of any of any of Borrower’s Accounts by an Account Debtor, all rights to indemnification and all other intangible property of Borrower of every kind and nature (other than Accounts).

“ Governmental Entity ” means any (a) court (whether in law or at equity or trial or appellate), tribunal, or arbitrator or arbitration proceeding and (b) any local, city, state, Federal, municipal or quasi-municipal, foreign, or international government or any subdivision, agency, authority, commission, bureau, branch, regulatory body, or other body thereof.

“ Guarantor ” means any Person now or hereafter guaranteeing, endorsing, acting as surety of, or otherwise becoming liable for any Obligations.

“ Guaranty ” means any guaranty of all or any Obligations now or hereafter executed and delivered by any Guarantor to Lender, as the same may be amended, restated, supplemented, or otherwise modified from time to time.

“ Healthcare Laws ” means, collectively, any and all federal, state or local laws, rules, regulations, codes, ordinances and administrative manuals, orders, decrees, judgments, injunctions, guidelines and requirements issued under or in connection with Medicare, Medicaid, any other government payment program or any law governing the licensing or regulation of healthcare providers, professionals, facilities or payors or otherwise governing or regulating the provision of, or payment for, medical services or the sale of medical supplies, including HIPAA.

“ HIPAA ” means the Health Insurance Portability and Accountability Act of 1996.

“ Hedge Agreement ” has the meaning for swap agreement as defined in 11 U.S.C. § 101, as in effect from time to time, or any successor statute, and includes, without limitation, any rate swap agreement, forward rate agreement, commodity swap, commodity option, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement, rate floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option and any other similar agreement.

“ Item ” means any “item” as defined in Section 4-104 of the UCC, and shall also mean and include checks, drafts, money orders or other media of payment.

“ Jurisdiction ” means the State of Georgia.

“ LC Obligations ” means, at any time of determination, the aggregate undrawn and unreimbursed amounts under all Letters of Credit.

“ Letter of Credit ” means a letter of credit issued by Lender for the account of Borrower as provided in Section 2.1(a) and 2.10.

“ Leverage Ratio ” has the meaning given such term in Section 8.1.

“ LIBOR ” means the per annum rate equal to the rate per annum offered by prime banks in the London interbank Eurodollar market for deposits in United States dollars in an amount comparable to the Loan for which such rate is being determined and for a period equal to the interest period applicable thereto, all as determined by Lender with reference to the financial information reporting service used by Lender at the time of such determination. Each calculation by Lender of LIBOR shall be conclusive and binding for all purposes, absent manifest error.

 

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“ LIBOR Index Rate ” means, for any LIR Loan and at any time of determination, a per annum rate equal to LIBOR determined with respect to an interest period of one month. The LIBOR Index Rate shall be determined monthly on the first Business Day of each calendar month and shall be increased or decreased, as applicable, automatically and without notice to any Person on the date of each such determination. Upon Borrower’s request from time to time, Lender will quote the current LIBOR Index Rate to Borrower.

“ LIBOR Reserve Requirements ” means the maximum reserves (whether basic, supplemental, marginal, emergency, or otherwise) prescribed from time to time by the Board of Governors of the Federal Reserve System (or any successor) with respect to liabilities or assets consisting of or including “Eurocurrency liabilities” (as defined in Regulation D of the Board of Governors of the Federal Reserve System).

“ LIR Loan ” means a Loan, or portion thereof, during any period in which it bears interest at a rate based on the LIBOR Index Rate.

“ Lien ” means any lien (statutory or otherwise), mortgage, deed of trust, deed to secure debt, pledge, hypothecation, security interest, trust arrangement, security deed, financing lease, collateral assignment, encumbrance, conditional sale or title retention agreement, or any other interest in property designed to secure the repayment or performance of any obligation, whether arising by agreement or under any statute or law or otherwise.

“ Loans ” means the Revolving Loans and the Term Loan.

“ Loan Documents ” means this Agreement and each other now existing or hereafter arising document, agreement, or instrument evidencing, describing, guaranteeing, or securing the Obligations or delivered in connection with this Agreement (but excluding any Hedge Agreement between Borrower and Lender or any of its Affiliates), including, without limitation, each Security Agreement, Note, Guaranty, Notice of Borrowing, Collateral Disclosure Certificate, Borrowing Base Certificate, and UCC financing statement, as the same may be amended, restated, supplemented, or otherwise modified from time to time.

“ Loss ” has the meaning given such term in Section 6.3.

“ Material Adverse Effect ” means any (a) material adverse effect upon the validity, performance, or enforceability of any of the Loan Documents or any of the transactions contemplated hereby or thereby; (b) material adverse effect upon the properties, operations, business, or condition (financial or otherwise) of the Credit Parties taken as a whole; (c) material adverse effect upon the ability of any Credit Party to fulfill any obligation under any of the Loan Documents; or (d) material adverse effect on the Collateral.

“ Material Agreement ” means an agreement to which any Credit Party is a party (other than the Loan Documents) and for which breach, termination, cancellation, nonperformance, or failure to renew could reasonably be expected to have a Material Adverse Effect.

“ Medicaid ” means, collectively, the healthcare assistance program established by Title XIX of the Social Security Act (42 U.S.C. §§1396 et seq.) and all laws applicable to such program and plans for medical assistance enacted in connection with such program.

“ Medicare ” means, the health insurance program for the aged and disabled established by Title XVIII of the Social Security Act (42 U.S.C. §§1395 et seq.) and all laws applicable to such program.

“ MDS Acquisition ” means the acquisition by Transcend of all of the capital stock of MDS.

“ Net Proceeds ” means, with respect to the disposition of any property, (a) the proceeds (including cash receivable (when received) by way of deferred payment) received by Borrower in cash from the sale, lease, transfer, or other disposition of such property, including insurance proceeds and awards of compensation received with

 

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respect to any Loss affecting all or part of such property, minus (b) (i) the reasonable and customary costs and expenses of such sale, lease, transfer, or other disposition (including legal fees and sales commissions) not to exceed 5% of the total purchase price; (ii) amounts applied to repayment of Debt for borrowed money (other than the Obligations) secured by a Permitted Lien on such property which is senior to Lender’s Liens; and (iii) in connection with any sale of such property, a reasonable reserve (not to exceed 5% of the total purchase price) for post-closing adjustments to the purchase price ( provided that upon the expiration of 90 days after the sale, any remaining reserve balance shall constitute Net Proceeds).

“ Notes ” shall mean the Revolving Note and the Term Note and any other promissory note now or hereafter evidencing any Obligations, as the same may be amended, restated, supplemented, or otherwise modified from time to time.

“ Notice of Borrowing ” means each written request for a Revolving Loan substantially in the form of Exhibit B , attached hereto and made a part hereof.

“ OFAC ” means the United States Department of the Treasury’s Office of Foreign Assets Control or any successor thereto.

“ Obligations ” means all obligations and covenants now or hereafter from time to time owed to Lender or any Affiliate of Lender by Borrower, related to the Loans, this Agreement, or the Loan Documents, including, without limitation or duplication, (a) the Loans; (b) the LC Obligations; (c) all fees, charges, interest, commissions, expenses, obligations, and liabilities arising from, related to, or on account of any Bank Products issued to, accepted for or on behalf of, used by, or provided to or on behalf of Borrower or any of its Subsidiaries by Lender or any Affiliate of Lender, including, without limitation, (i) all existing and future obligations under any Letters of Credit and (ii) all existing and future obligations under any Hedge Agreements between Borrower and Lender or any of its Affiliates whenever executed (including, without limitation, obligations under Hedge Agreements entered into prior to any transfer or sale of Lender’s or such Affiliate’s interests hereunder if Lender or such Affiliate ceases to be a party hereto); and (d) all other amounts now owed or hereafter from time to time owed under the terms of this Agreement and the other Loan Documents, or arising out of the transactions described herein or therein, including, without limitation, principal, interest, commissions, fees (including, without limitation, attorneys’ fees actually incurred), charges, costs, expenses, and all amounts due or from time to time becoming due under the indemnification and reimbursement provisions of this Agreement and the other Loan Documents (including, without limitation, Section 10.3), together, in each of the foregoing cases in this definition, with all interest accruing thereon, including any interest on pre-petition Debt accruing after bankruptcy (whether or not allowable in such bankruptcy), and whether any of the foregoing amounts are now due or from time to time hereafter become due, are direct or indirect, or are certain or contingent, and whether such amounts due are from time to time reduced or entirely extinguished and thereafter re-incurred.

“ Operating Account ” means, collectively, Deposit Account number 0095399623 maintained by Borrower with Lender and any other Deposit Account maintained with Lender as an “operating account” of Borrower.

“ Permitted Acquisition ” means the acquisition by Borrower of all or a portion of the capital stock or assets of a Person organized under the laws of the United States of America or any state thereof so long as each of the following conditions is satisfied:

(a) such acquired Person is engaged in one or more businesses in which Borrower is engaged or incidental thereto;

(b) any Person whose stock is directly or indirectly purchased shall be, after giving effect to such purchase, a direct or an indirect wholly-owned Subsidiary of Borrower organized in the United States;

(c) with respect to any Person that is or becomes a direct or indirect Subsidiary, such Person (i) executes and delivers to Lender a joinder agreement to this Agreement to add such Person as an additional Borrower or, at Lender’s request, as a Guarantor, and (ii) takes all actions deemed necessary by Lender to cause the Lien created by this Agreement to be a duly perfected, first priority Lien against the assets of such Person, including the filing of financing statements in such jurisdictions as may be requested by Lender;

 

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(d) Borrower has made available to Lender, not later than 15 days prior to the proposed dated of such acquisition, copies of lien search results and copies of the acquisition documents (including a copy of the purchase and sale agreement with all schedules and exhibits thereto), organizational documents (if applicable), and other due diligence information as reasonably requested by Lender, which Lender shall have reviewed promptly and found reasonably acceptable in all respects;

(e) Borrower shall have executed and delivered such amendments or supplements to this Agreement or the other Security Agreements or such other documents as Lender deems necessary to grant Lender a first priority lien on all of the acquired assets;

(f) at the time of such acquisition and immediately after giving effect thereto, (i) Excess Availability is at least $2,000,000, (ii) Average Excess Availability for the immediately preceding 30 days is at least $2,000,000, and (iii) no Default or Event of Default exists; and

(g) Lender consents in writing to such acquisition prior to the consummation thereof.

“ Permitted Debt ” has the meaning set forth in Section 7.1 hereof.

“ Permitted Liens ” has the meaning set forth in Section 7.2 hereof.

“ Permitted Location ” means (a) any location described on Schedule 2 or Schedule 8 of each Collateral Disclosure Certificate and (b) any location as to which Borrower shall have provided written notice to Lender and Lender shall have consented in writing to such location’s being a “Permitted Location.”

“ Permitted Seller Debt ” means Debt owing by Transcend to Seller evidenced by that certain Unsecured Promissory Note dated on or about the Closing Date, in an original principal amount of $2,000,000, as in existence on the date of such note.

“ Person ” means any natural person, corporation, unincorporated organization, trust, joint-stock company, joint venture, association, company, limited or general partnership, limited liability company, any government or any agency or political subdivision of any government, or any other entity or organization.

“ Plan ” means any employee benefit plan or other plan maintained for employees of Borrower or any Subsidiary and covered by Title IV of ERISA.

“ Prime Rate ” means that rate announced by Lender from time to time as its prime rate and is one of several interest rate bases used by Lender. Lender lends at rates both above and below its prime rate, and Borrower acknowledges that Lender’s prime rate is not represented or intended to be the lowest or most favorable rate of interest offered by Lender.

“ Projections ” means, for any period and as to such period, Borrower’s and its Subsidiaries’ forecasted consolidated (a) balance sheets, (b) profit and loss statements, (c) cash flow statements, and (d) Borrowing Base availability calculations, all prepared on a month-by-month basis and on a basis consistent with Borrower’s and its Subsidiaries’ historical financial statements, together with appropriate supporting details and a statement of underlying assumptions.

“ Properly Contested ” means, in the case of any Debt of any Credit Party (including any taxes) which is not paid when due or payable by reason of such Credit Party’s bona fide dispute over its liability therefor or the amount thereof, (a) such Debt is being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (b) such Credit Party has established appropriate reserves in accordance with GAAP; (c) the non-payment of such Debt will not have a Material Adverse Effect and will not result in a forfeiture or sale of any of such Credit Party’s assets; (d) no Lien is imposed upon any of such Credit Party’s assets with respect to such Debt

 

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unless such Lien is at all times subordinate in priority to the Liens in favor of Lender (except only with respect to property taxes that have priority as a matter of applicable law) and enforcement of such Lien is stayed pending the final resolution or disposition of such dispute; (e) if the Debt results from, or is determined by the entry, rendition, or issuance against such Credit Party or any of its assets of a judgment, writ, order, or decree, enforcement of such judgment, writ, order, or decree is stayed pending a timely appeal or other judicial review; and (f) if such contest is abandoned, settled, or determined adversely (in whole or in part) to such Credit Party, such Credit Party forthwith pays such Debt and all penalties, interest, and other amounts due in connection therewith. Only that portion of the Debt which is in dispute may be Properly Contested.

“ Regulated Materials ” means any hazardous, toxic, or dangerous waste, substance, or material, the generation, handling, storage, disposal, treatment, or emission of which is subject to any Environmental Law.

“ Rent Reserves ” means, on any date, an amount equal to 2 months rent or other charges with respect to Borrower’s leased business premises located at One Glenlake Parkway, Fulton County, Atlanta, Georgia 30328.

“ Reserves ” means the Rent Reserve and such other amounts as may be required by Lender at any time and from time to time in Lender’s sole and absolute discretion.

“ Restricted Payment ” means (a) any cash dividend or other cash distribution, direct or indirect, on account of any Equity Interests issued by the Borrower or any of its Subsidiaries, as the case may be, now or hereafter outstanding, (b) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any Equity Interests issued by the Borrower or any of its Subsidiaries now or hereafter outstanding by the Borrower or any of its Subsidiaries, as the case may be, except for any redemption, retirement, sinking funds or similar payment payable solely in such other shares or units of the same class of Equity Interests or any class of Equity Interests which are junior to that class of Equity Interests, or (c) any cash payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any Equity Interests issued by the Borrower or any of its Subsidiaries now or hereafter outstanding.

“ Revolving Loan Commitment ” means the commitment of Lender, subject to the terms and conditions herein, to make Revolving Loans and issue Letters of Credit in accordance with the provisions of Section 2 in an aggregate amount not to exceed $5,000,000 at any one time.

“ Revolving Loan Commitment Increase ” has the meaning set forth in Section 2.1(c).

“ Revolving Loan Term ” means the period from and including the Closing Date to but not including the Revolving Loan Termination Date.

“ Revolving Loan Termination Date ” means the earliest to occur of (a) August 31, 2010; (b) the date on which Borrower terminates the Revolving Loan Commitment pursuant to Section 2.13; and (c) the date on which Lender terminates its Revolving Loan Commitment pursuant to Section 9.2(a) hereof.

“ Revolving Loan ” means a loan made by Lender pursuant to Section 2.1(a).

“ Revolving Note ” has the meaning set forth in Section 2.2(a).

“ Sanctioned Country ” means a country subject to the sanctions programs identified on the list maintained by OFAC and available at the following website or as otherwise published from time to time: http://www.treas.gov/offices/enforcement/ofac/programs/ .

“ Sanctioned Person ” means (a) any Person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treas.gov/offices/eotffc/ofac/sdn/index.html or as otherwise published from time to time, (b) any agency, authority, or subdivision of the government of a Sanctioned Country, (c) any Person or organization controlled by a Sanctioned Country, or (d) any Person resident in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC.

 

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“ Security Agreement ” means this Agreement as it relates to a security interest in the Collateral, and any other mortgage instrument, deed of trust, pledge agreement, life insurance assignment, security agreement, or similar agreement or instrument now or hereafter executed by any Credit Party or other Person granting Lender a Lien in any property to secure the Obligations.

“ Seller ” means Dorothy K. Fitzgerald, an individual resident of the State of Maryland.

“ Senior Officer ” means, as to any Credit Party, the chairman of the board of directors, the chief executive officer, chief financial officer, chief legal officer, manager (with respect to any manager-managed limited liability company), or president of such Credit Party.

“ Solvent ” means, as to any Person, that such Person has capital sufficient to carry on its business and transactions in which it is currently engaged and all business and transactions in which it is about to engage, is able to pay its Debts as they mature, and has assets having a value greater than its liabilities, at fair valuation.

“ Subordinated Debt ” means any Debt (other than trade Debt incurred in the ordinary course of business) payable by Borrower or a Subsidiary which is subordinate in right of payment and Lien priority to the Obligations and Lender’s Lien on the Collateral pursuant to a subordination agreement in form and substance satisfactory to Lender.

“ Subsidiary ” means, as to any Person, (a) any other Person of which more than 50% of the Equity Interests issued by such other Person are directly or indirectly owned or effectively controlled by such Person or (b) any other Person of which such Person is a general partner. Any unqualified reference to “Subsidiary” shall be deemed a reference to the Borrower’s Subsidiaries (if any), unless the context requires otherwise.

“ Telephone Instruction Letter ” means a telephone instruction letter substantially in the form of Exhibit T , attached hereto and made a part hereof.

“ Term Loan ” means the term loan made by Lender to Borrower pursuant to Section 2.1(b) and any portion of such term loan bearing interest at the same rate.

“ Term Loan Commitment ” means the commitment of Lender to make the Term Loan pursuant to Section 2.1(b).

“ Term Loan Maturity Date ” means August 31, 2013.

“ Term Note ” has the meaning set forth in Section 2.2(b).

“ Third Party ” means (a) any lessor, mortgagee, mechanic or repairman, warehouse operator, processor, packager, consignee, or other third party which may have possession of any Collateral or lienholders’ enforcement rights against any Collateral or (b) any licensor whose rights in or with respect to any intellectual property or Collateral limit or restrict or may, in Lender’s determination, limit or restrict Borrower’s or Lender’s right to sell or otherwise dispose of such Collateral.

“ Third Party Agreement ” means an agreement in form and substance satisfactory to Lender pursuant to which a Third Party, as applicable and as reasonably required by Lender, (i) waives or subordinates in favor of Lender any Liens such Third Party may have in and to any Collateral; (ii) grants Lender access to Collateral which may be located on such Third Party’s premises or in the custody, care, or possession of such Third Party for purposes of allowing Lender to inspect, repossess, sell, or otherwise exercise its rights under the Loan Documents with respect to such Collateral; (iii) authorizes Lender to complete the manufacture of work-in-process (if the manufacturing of such Goods requires the use or exploitation of a Third Party’s intellectual property); (iv) authorizes Lender to dispose of Collateral bearing or consisting of, in whole or in part, such Third Party’s intellectual property; or (v) agrees to terms regarding Collateral held on consignment by such Third Party, in each case containing terms reasonably acceptable to Lender and as the same may be amended, restated, supplemented, or otherwise modified from time to time.

 

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“ Trigger Event ” means (a) (i) the existence of an Event of Default or (ii) Excess Availability is less than $2,000,000 and (b) Lender has notified Borrower in writing of Lender’s election to exercise its rights under Sections 2.7(b), 2.9(a) or 2.9(b), or all of them.

“ Type ” means, with respect to a Loan, whether such Loan is a LIR Loan or, if required or permitted by Section 2.3(g), a Base Rate Loan.

“ UCC ” means the Uniform Commercial Code (or any successor statute), as adopted and in force in the Jurisdiction or, when the laws of any other state govern the method or manner of the perfection or enforcement of any Lien in any of the Collateral, the Uniform Commercial Code (or any successor statute) of such other state.

“ U.S. ” means the United States of America.

“ USA Patriot Act ” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, as the same may be amended, restated, supplemented, or otherwise modified from time to time.

“ Working Capital Obligations ” means the aggregate principal amount of all Revolving Loans.

1.3. Financial Terms. All financial terms used herein shall have the meanings assigned to them under GAAP unless another meaning shall be specified. When determining the amount of any Debt for purposes of this Agreement, any election by the Borrower or any other Credit Party to measure an item of Debt using fair value (as permitted by Statement of Financial Accounting Standards No. 159 or any similar accounting standard) shall be disregarded and such determination shall be made as if such election had not been made.

1.4. Rules of Construction. The terms “herein”, “hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph , or subdivision. Any pronoun used shall be deemed to cover all genders. In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.” The section titles, table of contents, and list of exhibits appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All references to (a) statutes and related regulations shall include all related rules and implementing regulations and any amendments of same and any successor statutes, rules, and regulations; (b) any agreement, instrument, or other documents (including any of the Loan Documents) shall include any and all modifications and supplements thereto and any and all restatements, extensions, or renewals thereof to the extent such modifications, supplements, restatements, extensions, or renewals of any such documents are permitted by the terms thereof; (c) any Person (including Borrower or Lender) shall mean and include the successors and permitted assigns of such Person; (d) “Borrower” in the singular shall be deemed to be a reference to each of Transcend, MDS and any other Person joined as a borrower hereunder at any time; (e) “applicable law” shall be deemed to include Healthcare Laws to the extent applicable in a particular context; (f) “including” and “include” shall be understood to mean “including, without limitation,” regardless of whether the “without limitation” is included in some instances and not in others (and, for purposes of each Loan Document, the parties agree that the rule of ejusdem generis shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters to matters similar to the matters specifically mentioned); or (g) the “discretion” of Lender shall mean the sole and absolute discretion of Lender. A Default or an Event of Default shall be deemed to exist at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing by Lender pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided in this Agreement. An Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by Lender. Whenever the phrase “to Borrowers’ knowledge” or words of similar import relating to the knowledge or the awareness of Borrower are used in this Agreement or other Loan Documents, such phrase shall mean and refer to (i) the actual knowledge of a Senior Officer of Borrower or (ii) the knowledge that a Senior Officer of Borrower would have obtained if he had engaged in good faith and diligent performance of his or her duties.

 

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2. THE CREDIT FACILITY.

2.1. The Commitments .

(a) Revolving Loan Commitment . Subject to the terms and conditions of this Agreement, Lender agrees to make Revolving Loans to Borrower and issue Letters of Credit on Borrower’s account from time to time during the Term. Lender shall have no obligation to make any Revolving Loan or issue any Letter of Credit if doing so would, after giving effect thereto, cause the Working Capital Obligations to exceed the lesser of (i) the Revolving Loan Commitment and (ii) the Borrowing Base. Within the foregoing limit and subject to the terms and conditions of this Agreement, Borrower may borrow, repay, and reborrow the principal amount of the Revolving Loans at any time during the Revolving Loan Term. Borrower shall use the proceeds of the Revolving Loans only for its working capital and general corporate purposes and for Permitted Acquisitions.

(b) Term Loan Commitment . Subject to the terms and conditions of this Agreement, Lender agrees to make a Term Loan to Borrower in the principal amount not to exceed $7,000,000. Lender shall fund the Term Loan in a single draw on the Closing Date. The Term Loan Commitment shall automatically terminate upon the making of the Term Loan. Borrower may not reborrow any repaid principal of the Term Loan. Borrower shall use the proceeds of the Term Loan only to fund the costs and expenses of and, to the extent necessary, a portion of the cash purchase price for the MDS Acquisition and for no other purpose.

(c) Increase of Revolving Loan Commitment . During the period from the Closing Date through the Revolving Loan Termination Date, the Revolving Loan Commitment may, if requested by Borrower and approved by Lender in Lender’s sole and absolute discretion, be increased by $3,000,000 (the “ Revolving Loan Commitment Increase ”) to $8,000,000, provided that : (a) Borrower’s request for such increase must be in writing; (b) Borrower must execute a new Revolving Note reflecting the increase in the Revolving Loan Commitment and any additional documents, instruments or agreements Lender deems necessary in connection therewith, including any amendments to the other Loan Documents that Lender deems necessary; and (c) no Event of Default exists as of the date of such request for the Revolving Loan Commitment Increase or as of the date on which such Revolving Loan Commitment Increase is to occur. After such increase, all of the terms and conditions of the Loan Documents shall apply to the increased amount of the Revolving Loan Commitment.

2.2. The Notes .

(a) Revolving Note . On the Closing Date, Borrower shall execute and deliver to Lender a promissory note in the form of Exhibit A-1 , attached hereto and made a part hereof (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the “ Revolving Note ”), which Revolving Note, together with Lender’s records, shall evidence the Revolving Loans and interest accruing thereon.

(b) Term Note . On the Closing Date, Borrower shall execute and deliver to Lender a promissory note substantially in the form of Exhibit A-2 , attached hereto and made a part hereof (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the “ Term Note ”), which Term Note, together with Lender’s records, shall evidence the Term Loan and interest accruing thereon.

2.3. Interest.

(a) Types of Loans . No Loan shall be a Base Rate Loan unless required by the terms of Section 2.3(g). Subject to the terms and conditions of this Agreement, (i) the Revolving Loans may be LIR Loans, and (ii) the Term Loan may be a LIR Loan.

(b) Agreement to Pay Interest . Borrower agrees to pay interest on all unpaid principal amounts of the Loans from the respective date each such Loan is made until such Loan is paid (whether at stated maturity, upon acceleration, or otherwise) at the rates of interest and at the times set forth in this Agreement.

(c) Interest Rate . All LIR Loans shall bear interest at a rate per annum equal to the greater of (i) 3.75% and (ii) the sum of the LIBOR Index Rate plus the Applicable Margin. If any Loan is converted into a Base Rate Loan because of Section 2.3(g), such Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate, plus the Applicable Margin.

 

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(d) All interest on any Loan and on all other Obligations shall be calculated on the presumed basis of a year of 360 days, for the actual number of days elapsed.

(e) Adjustment of Interest Rate . The rate of interest on any LIR Loan shall be adjusted as provided in the definition of “LIBOR Index Rate,” subject to Section 2.3(g). If any Loan is converted into a Base Rate Loan because of Section 2.3(g), the rate of interest on such Base Rate Loan shall be adjusted automatically and without notice on and as of the date of any change in the Base Rate.

(f) Default Rate . At Lender’s option, during the existence of any Event of Default, the principal amount of all Obligations (other than Obligations arising under Hedge Agreements between Borrower and Lender or any of its Affiliates) shall bear interest at the Default Rate. In any event, the Default Rate shall automatically and without notice to any Person apply from the time the Obligations have become due and payable under Section 9.2 (whether because of Lender’s exercising its right to accelerate the Obligations under Section 9.2 or because the Obligations have automatically become due and payable under Section 9.2) until the Obligations or any judgment thereon are paid in full.

(g) Automatic Conversion to Base Rate . Any provision of this Agreement to the contrary notwithstanding, if Lender should at any time determine that (i) it is not reasonably possible to determine the LIBOR Index Rate, (ii) that the LIBOR Index Rate is no longer available, (iii) it is no longer lawful for Lender to make Loans at any rate based on the LIBOR Index Rate, or (iv) a Default or Event of Default exists and Lender shall so elect, then, in each case, (A) all affected LIR Loans shall automatically and without notice be converted into Base Rate Loans and (B) all obligations of Lender to make LIR Loans shall cease until such time as Lender shall have determined that it is able to determine the LIBOR Index Rate, such illegality shall be reversed, or such Event of Default shall have been waived or cured, as applicable.

(h) Opening LIBOR Index Rate . The LIBOR Index Rate on the date hereof is 0.26125% per annum and, therefore, the rate of interest in effect hereunder on the date hereof, expressed in simple interest terms (but on a 360-day basis), is, subject to Section 2.3(c), (i) 3.01125% per annum with respect to any portion of the Revolving Loans bearing interest as a LIR Loan; and (ii) 2.76125% per annum with respect to any portion of the Term Loan bearing interest as a LIR Loan.

2.4. Requesting New Loans.

(a) Revolving Loans . Revolving Loans shall be deemed requested pursuant to the following clauses (i) and (ii) or requested pursuant to the following clause (iii).

(i) Subject to Subsections 2.4(b) and 2.8(a), the becoming due of any Obligation (whether as principal, accrued interest, fees, or other charges owed to Lender or any Affiliate of Lender) shall in all respects constitute Borrower’s irrevocable request for a Revolving Loan in an amount equal to such Obligations, and Lender may make such Revolving Loan and apply the proceeds thereof to the payment of such Obligations.

(ii) Subject to Subsection 2.4(b) and 2.8(a), the presentment for payment of any instrument drawn on, or request for any wire or other transfer from, a Funding Account at a time when there are insufficient funds in such account to cover such instrument shall in all respects constitute Borrower’s irrevocable request for a Revolving Loan in an amount equal to the amount payable on such instrument to be made by Lender, and Lender may make such Revolving Loan and apply the proceeds thereof to such Funding Account for payment of such instrument or transfer.

(iii) For all other Revolving Loans, Borrower shall provide Lender a request in accordance with Section 2.5.

 

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(b) Provisions Regarding Deemed Requests for Revolving Loans . Lender shall have no obligation to honor any deemed request for a Revolving Loan under Sections 2.4(a)(i) or (ii), if (i) such request is deemed made after the Revolving Loan Termination Date, (ii) doing so would cause the Working Capital Obligations to exceed the lesser of the Revolving Loan Commitment and the Borrowing Base, or (iii) Lender determines that any condition precedent in Section 4.2 hereof or any other condition precedent to the making of such Loan is not then satisfied or will not be satisfied when such Loan is to be made; provided , Lender may make such Revolving Loan in its sole and absolute discretion and without regard to the existence of, and without being deemed to have waived, any Default or Event of Default which may then exist or arise from the making of such Revolving Loan. Subject to Subsection 2.8(a), Lender may make Revolving Loans under Sections 2.4(a)(i) and (ii) without Borrower’s having submitted a request (whether telephonic or in writing) therefor. Subject to Section 2.3(g), all Revolving Loans made pursuant to Sections 2.4(a)(i) and (ii) shall be made as LIR Loans.

2.5. Requests for Borrowings .

(a) Making Requests for New Loans . Each request for the making of a new Revolving Loan may be made telephonically; provided , however , that Lender, in its sole and absolute discretion, may from time to time require each such request to be in writing. If Lender requires Borrower to make a request for a new Revolving Loan in writing, Borrower shall submit a Notice of Borrowing therefor. Each request (whether telephonic or in writing) shall specify (i) the date for the making of the applicable Loan, which date must be a Business Day; (ii) the principal amount of the applicable Loan to be made; (iii) for any new Loan, lawful instructions for the disbursement of the proceeds of such Loan ( provided that, if such instructions are not included, the proceeds will be deposited into a Funding Account); (iv) if requested by Lender, a written calculation of the Borrowing Base and a reconciliation of such Borrowing Base to the previous Borrowing Base; and (vi) such other information Lender may require from time to time.

(b) Timing and Acceptance of Requests . Requests made under this Section 2.5 (whether telephonic or in writing) are irrevocable. Requests under this Section 2.5 which Lender receives after 11:00 a.m. (Birmingham, Alabama, time) shall be deemed received on the next Business Day. Lender’s acceptance of a request for the making of a new Loan under this Section 2.5 shall be indicated by its making the Loan requested. With respect to Revolving Loans which are to be LIR Loans or, if required or permitted under Section 2.3(g), Base Rate Loans, Lender shall make such Revolving Loans in immediately available funds on the same Business Day it receives or is deemed to have received the request therefor.

2.6. Excess Outstandings . Any provision of this Agreement to the contrary notwithstanding, Lender may, in its sole and absolute discretion, make or permit to remain outstanding Revolving Loans which are causing or would cause the Working Capital Obligations to exceed the Revolving Loan Commitment or the Borrowing Base, and all such excess amounts shall (i) be part of the Obligations evidenced by the Revolving Note, (ii) bear interest as provided herein, (iii) be payable ON DEMAND , (iv) be secured by the Collateral, and (v) be entitled to all rights and security as provided under the Loan Documents.

2.7. Repayment of Loans.

(a) Repayment of Obligations Generally . Borrower shall pay all outstanding principal amounts and accrued interest under any Note in accordance with the terms of such Note and this Agreement.

(b) Repayment of Revolving Loans .

(i) Upon the occurrence of a Trigger Event, Borrower shall thereafter (unless and until otherwise notified by Lender) promptly repay the principal amount of the Revolving Loans with (and to the extent of) the proceeds of any Collateral of the type included in the Borrowing Base received by Borrower from time to time; provided , however , that, to the extent Lender receives and applies such proceeds in the manner described in, and in accordance with, Section 2.9, Borrower’s payment obligation under this Section 2.7(b)(i) shall be satisfied with respect to such proceeds. All payments made pursuant to this subsection shall be applied in the manner set forth in Section 2.9. All outstanding principal of the Revolving Loans shall be due and payable on the Revolving Loan Termination Date.

 

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(ii) Interest accrued on the Revolving Loans shall be due and payable, in arrears, on (A) the first day of each month (for the immediately preceding month), computed through the last calendar day of the preceding month whether a Base Rate Loan or a LIR Loan; and (B) on the Revolving Loan Termination Date.

(c) Repayment of Term Loan .

(i) Borrower shall repay the principal amount of the Term Loan in consecutive monthly installments, each in an amount equal to $155,555.55 and each due and payable on the first day of each calendar month, commencing on December 1, 2009. If not sooner paid, all outstanding principal and interest on the Term Loan shall be due and payable in full on the Term Loan Maturity Date.

(ii) Interest accrued on the Term Loan shall be due and payable, in arrears, on (A) the first calendar day of each month for the immediately preceding month, (B) on the date of any mandatory or optional prepayment of principal of the Term Loan, and (D) the Term Loan Maturity Date.

(d) Optional Prepayments of Term Loan . From time to time, Borrower may prepay the principal amount of the Term Loan, in whole or in part, on one Business Days’ written notice for prepayment of that portion of the Term Loan which constitutes a Base Rate Loan or a LIR Loan. Each such notice shall be irrevocable and must be in writing or made telephonically promptly followed by a confirming writing. Each prepayment of any portion of the Term Loan which constitutes a Base Rate or LIR Loan shall be in a minimum amount of $100,000. Lender shall apply each prepayment on the Term Loan first to accrued but unpaid interest thereon and then to installments of principal in the inverse order of their maturities. That portion of any prepayment to be applied to principal shall be applied first to Base Rate Loans, then to LIR Loans.

(e) Mandatory Prepayments of Term Loan . Borrower shall prepay the principal balance of the Term Loan promptly upon receipt of, and in an amount equal to, the Net Proceeds in excess of $100,000 received with respect to any real property or Equipment, except to the extent otherwise permitted under Section 6.3(b) or Section 7.13(d). Nothing in this subsection constitutes Lender’s consent to any disposition of any Equipment or real property. Lender shall apply any payments made under this subsection to any accrued interest on the Term Loans and then to principal of the Term Loans as determined by Lender but in the inverse order of the maturities thereof or in such other order determined by Lender.

2.8. Additional Payment Provisions . Borrower shall pay Lender the amount owing in respect of any Obligations under the Loan Documents on the terms set forth in the Loan Documents, or, if no date of payment is otherwise specified in the Loan Documents, ON DEMAND .

(a) Authorization to Debit . Lender may, without notice to, or the consent of, Borrower, debit the Operating Account and apply such amounts to the payment of Obligations which are then due and payable. If at any time there are insufficient funds in the Operating Account to cover all or any portion of Obligations which are due and payable, Lender shall have the right at such time, without notice to, or the consent of, Borrower to (i) make a deemed Revolving Loan under Section 2.4(a), (ii) debit any Funding Account, Collections Account, other Deposit Account, or other account over which Lender has Control and apply such amounts to the payment of Obligations which are then due and payable, or (iii) both.

(b) Time and Location of Payment . Except for payments made pursuant to Section 2.9 and 2.4(a)(i), Borrower shall make each payment of principal of and interest and other Obligations which are due and payable not later than 12:00 noon (Birmingham, Alabama, time) on the date due, without set-off, counterclaim, or other deduction, in immediately available funds to Lender at its address referred to in Section 10.4. If any payment of any Obligations shall be due on a day which is not a Business Day, such payment shall be due and payable the next Business Day, and interest shall accrue during such time.

(c) Excess Over Borrowing Base . At any time the Working Capital Obligations exceed the Borrowing Base, Borrower shall immediately pay the amount of such excess to Lender.

(d) Hedge Agreements Are Independent . Prepayment of any Loans shall not affect Borrower’s obligation to continue making payments under any Hedge Agreement between Borrower and Lender or any of its Affiliates, which shall remain in full force and effect notwithstanding such prepayment, subject to the terms of such Hedge Agreement.

 

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(e) Capital Requirements; Increased Costs . If (i) the introduction of, or any change in, or in the interpretation of, any applicable law or (ii) compliance with any guideline or request from any central bank or comparable agency or other governmental authority (whether or not having the force of law), has or would have the effect of reducing the rate of return on the capital of, or has affected or would affect the amount of capital required to be maintained by Lender or any Person controlling Lender as a consequence of, or with reference to, the Revolving Loan Commitment, the Term Loan Commitment, and other commitments of this type, below the rate which Lender or such other Person could have achieved but for such introduction, change, or compliance, then within 5 Business Days after Lender’s written demand therefor, Borrower shall pay Lender from time to time as specified by Lender additional amounts sufficient to compensate Lender or such other Person for such reduction. Lender’s accounting of such amounts submitted in writing to Borrower shall be presumed conclusive absent manifest error. If there is any change in the LIBOR Reserve Requirements, then Borrower shall, from time to time upon demand by Lender, pay to Lender such additional amounts as Lender may deem necessary to compensate Lender for any increased costs resulting from such change. Borrower agrees that Lender’s determination of such additional amounts and increased costs will be made in Lender’s sole and absolute discretion and shall be conclusive absent manifest error.

2.9. Lockboxes; Collections Accounts .

(a) Establishment of Lockboxes . Upon the occurrence of a Trigger Event, Borrower shall (i) promptly establish and thereafter maintain one or more lockboxes under Lender’s control and (ii) contemporaneously therewith, direct all of its Account Debtors to make payments to such lockboxes (or, if made by wire or other transfer, to a Collections Account).

(b) Collections Accounts . Upon the occurrence of a Trigger Event, all Items or funds received by Borrower in respect of Accounts or the sale of Inventory or as Net Proceeds of other Collateral shall be held by Borrower in trust for Lender, shall not be commingled with Borrower’s funds, and shall be deposited promptly by Borrower into a Collections Account or forwarded to Lender in the form received. All such Items and funds shall be the exclusive property of Lender upon the earlier of the receipt thereof by Lender or by Borrower. Lender shall promptly process all Items received pursuant to this Section 2.9(b) into each lockbox and deposit such Items into a Collections Account. Subject to Section 2.9(c), Lender shall apply available balances from any Item or funds deposited into a Collections Account pursuant to this Section 2.9(b) to the payment of Obligations in whatever order Lender shall determine.

(c) Chargebacks . No payment item received by Lender shall constitute payment to Lender until such item is actually collected by Lender and credited to the Collections Account; provided , however , that Lender shall have the right to charge back to the Collections Account (or any other account of Borrower maintained with Lender) an Item which is returned for inability to collect, plus accrued interest during the period of Lender’s provisional credit for such item prior to receiving notice of dishonor.

(d) Power of Attorney; Security Interest; Applicable Fees . Borrower hereby irrevocably appoints Lender (and any Person designated by Lender) as Borrower’s attorney-in-fact to indorse Borrower’s name on any Items which come into Lender’s possession or control, this power being coupled with an interest is irrevocable so long as any of the Obligations remain outstanding. Such indorsement by Lender under such power of attorney shall, for all purposes, be deemed to have been made by Borrower (prior to any subsequent indorsement by Lender) in negotiation of the Item. In addition to the security interest granted Lender in Section 3, Borrower hereby grants Lender a security interest in and to all Items, funds, and balances held in any lockbox, any Funding Account, and any Collections Account, in each case as Collateral for the Obligations. Borrower shall pay all of Lender’s standard fees and charges in connection with any lockboxes, Funding Accounts, and Collections Accounts and the processing of Items and other transactions relating thereto, as such fees and charges may change from time to time.

 

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2.10. Letters of Credit.

(a) Issuance of Letters of Credit . Subject to the terms and conditions of this Agreement, Lender shall from time to time issue, extend, or renew Letters of Credit for the account of Borrower and its Subsidiaries; provided that (i) Borrower shall have given Lender not less than 5 Business Days’ written notice thereof; (ii) Lender shall have no obligation to issue any Letter of Credit, if (A) doing so would cause (1) the Working Capital Obligations to exceed the lesser of the Borrowing Base and the Revolving Loan Commitment or (2) the LC Obligations to exceed $0 or (B) the expiration date of such requested Letter of Credit would occur after the date specified in clause (a) of the definition of Revolving Loan Termination Date; and (iii) all other conditions precedent to the issuance of each such Letter or Credit set forth in this Agreement shall have been satisfied or waived in writing by Lender. All payments made by Lender under any Letter of Credit (whether or not Borrower is the account party) and all fees, commissions, discounts, and other amounts owed or to be owed to Lender in connection therewith, shall be paid ON DEMAND , unless (x) Borrower instructs Lender to make a Revolving Loan to pay such amount, (y) Lender agrees to do so, and (z) sufficient Excess Availability exists to make such Revolving Loan. All LC Obligations shall be secured by the Collateral. Borrower shall complete and sign such applications and supplemental agreements and provide such other documentation as Lender may require in respect to the issuance and administration of the Letters of Credit. The form and substance of all Letters of Credit shall be subject to Lender’s approval. Lender may charge certain fees or commissions for the issuance, handling, renewal or extension of a Letter of Credit, in addition to the fees payable pursuant to Section 2.11. Borrower unconditionally guarantees the payment and performance of all obligations of any Subsidiary with respect to Letters of Credit issued for the account of such Subsidiary. Upon Lender’s request during the existence of an Event of Default, Borrower shall immediately deliver to Lender immediately available funds in an amount equal to 105% of the LC Obligations, which Lender shall hold as cash collateral for the payment of Obligations related to the Letters of Credit.

(b) Law Governing Letter of Credit . Each Letter of Credit issued hereunder shall be governed, as applicable, by (i) the Uniform Customs and Practice for Documentary Credits International Chamber of Commerce (“ICC”), Publication 500, or any subsequent revision or restatement thereof adopted by the ICC and in use by Lender or (ii) the International Standby Practices, ICC Publication No. 590, or any subsequent revision or restatement thereof adopted by the ICC and in use by Lender, except to the extent that the terms of such publication would limit or diminish rights granted to Lender hereunder or in any other Loan Document.

2.11. Fees.

(a) Closing Fee . On the Closing Date, Borrower shall pay Lender a non-refundable, fully earned closing fee with respect to the Revolving Loan Commitment in the amount of $20,000.

(b) Reserved.

(c) Reserved .

(d) Letter of Credit Fees . Borrower shall pay to Lender, at such times as Lender shall require, Lender’s standard fees, commissions, and charges in connection with Letters of Credit (including, without limitation, with respect to the initial issuance thereof and any amendments, extensions, or modifications with respect thereto), as in effect from time to time, and with respect to standby and commercial Letters of Credit, at the time of issuance of each Letter of Credit, a fee equal to the Applicable Margin for LIR Loans on the face amount of the Letter of Credit for the period of time the Letter of Credit will be outstanding. Borrower agrees that, in all instances in which Lender has invoked the Default Rate in accordance with Section 2.3(f), Borrower shall pay Lender an additional issuance fee for each Letter of Credit for the period of time during which the Default Rate is in effect and such additional issuance fee shall be payable ON DEMAND .

(e) Field Examinations . Borrower shall pay for all field examinations to the extent required by Section 6.5.

(f) Reserved .

(g) Method of Calculation; Fees Fully Earned . Unless otherwise expressly provided, all fees payable hereunder or with respect to any Obligations shall be calculated on the presumed basis of a year of 360

 

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days, for the actual number of days elapsed. Unless otherwise expressly stated herein, all fees payable to Lender pursuant to this Agreement or the other Loan Documents shall be deemed fully earned when they become due and payable and, once paid, shall be deemed non-refundable, in whole or in part.

2.12. Statement of Account. If Lender provides Borrower with a statement of account on a periodic basis, each such statement will be binding on Borrower unless, within 45 days of its receipt, Borrower objects in writing and with specificity to such statement.

2.13. Termination. Borrower may terminate the Revolving Loan Commitment before the Revolving Loan Termination Date, in whole but not in part, by giving Lender 10 days prior written notice; provided , however , no termination by Borrower shall be effective until (a) Lender shall have received cash collateral or an irrevocable direct-pay letter of credit naming Lender as beneficiary, which letter of credit shall be in form and substance satisfactory to Lender, be issued by a bank satisfactory to Lender, and be in an original face amount equal to 105% of all Obligations which remain contingent (e.g., LC Obligations and pending indemnification payments) and (b) all other Obligations have been fully and finally paid and performed. Any notice of termination shall be irrevocable. Lender may terminate the Revolving Loan Commitment at any time, without notice, during the existence of an Event of Default.

2.14. USA Patriot Act Notice. To help fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each Person who opens an account. For purposes of this section, account shall be understood to include loan accounts.

3. SECURITY AGREEMENT.

3.1. Security Interest.

(a) As security for the full and final payment and performance of the Obligations, Borrower hereby grants to Lender (for itself a