SRTS Sensus Healthcare Inc

 

BUNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 11, 2023

 

SENSUS HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		001-37714		27-1647271
(State of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

851 Broken Sound Pkwy., NW # 215, Boca Raton, Florida		33487
(Address of principal executive offices)		(Zip Code)

 

Registrant's telephone number, including area code: (561) 922-5808

 

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.01 per share		SRTS		Nasdaq Stock Market, LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

SENSUS HEALTHCARE, INC.

 

FORM 8-K

CURRENT REPORT

 

Item 1.01 Entry into a Material Definitive Agreement.

 

On September 11, 2023, Sensus Healthcare, Inc. (the “Company”) entered into a Credit Agreement (the “Credit Agreement”) with Comerica Bank (“Comerica”) pursuant to which Comerica has made a revolving credit facility (the “Credit Facility”) available to the Company, evidenced by a Master Revolving Note, dated September 11, 2023 (the “Note”), made by the Company in favor of Comerica. The Credit Facility provides the Company with a working capital line of credit with borrowing capacity of up to $10,000,000. Pursuant to the terms of the Note, advances made under the Credit Facility would bear interest at the Secured Overnight Financing Rate plus 2.5% per annum and would be due upon demand by Comerica. Pursuant to a Security Agreement, dated as of September 11, 2023, made by the Company in favor of Comerica, the Credit Facility is secured by a security interest in all of the Company’s assets (the “Collateral”). The Credit Facility may be terminated by the Company or Comerica at any time.

 

Under the Credit Agreement, the Company must obtain Comerica’s prior written consent in order to take any of the following actions: (a) sell, lease, transfer or otherwise dispose of its assets outside the ordinary course of its business; (b) incur, create, assume or permit to exist any other indebtedness (subject to certain exceptions); (c) acquire substantially all of the properties or assets of another party; (d) make any investments or acquire any interests in any other party (subject to certain exceptions); or (e) create, incur, assume or suffer to exist any lien on any of its assets other than liens in favor of Comerica and certain other permitted liens. The Credit Agreement contains a financial covenant requiring that the Company maintain unencumbered liquid assets having a minimum value of $3,500,000 in a Comerica account. The Credit Agreement also contains customary representations and warranties and customary events of default, upon the occurrence of which, after any applicable grace period, Comerica would have the ability to accelerate all outstanding advances, terminate the Credit Facility, and exercise remedies with respect to the Collateral.

 

This description of the Credit Agreement, Note, and Security Agreement is qualified in its entirety by reference to the Credit Agreement, Note, and Security Agreement, which are attached as Exhibit 10.1, Exhibit 10.2, and Exhibit 10.3, respectively.

 

Item 1.02 Termination of a Material Definitive Agreement.

 

In connection with entering into the Credit Agreement, the Company voluntarily terminated the revolving credit facility between the Company and Silicon Valley Bridge Bank, N.A. that provided for maximum borrowings equal to the lesser of (a) the $15 million commitment amount or (b) the borrowing base plus a $7.5 million non-formula sublimit.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits.

 

Exhibit Number		Description
10.1		Credit Agreement, dated as of September 11, 2023, by and between the Company and Comerica
10.2		Master Revolving Note, dated as of September 11, 2023, made by the Company in favor of Comerica
10.3		Security Agreement, dated as of September 11, 2023, by and between the Company and Comerica
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	SENSUS HEALTHCARE, INC.
Date: September 14, 2023	By:	/s/ Javier Rampolla
		Javier Rampolla
		Chief Financial Officer

 

 

EXHIBIT INDEX

 

Exhibit Number		Description
10.1		Credit Agreement, dated as of September 11, 2023, by and between the Company and Comerica
10.2		Master Revolving Note, dated as of September 11, 2023, made by the Company in favor of Comerica
10.3		Security Agreement, dated as of September 11, 2023, made by the Company in favor of Comerica
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

3

 

 

Exhibit 10.1

 

 

CREDIT AGREEMENT

 

This Agreement is entered into as of September 11, 2023, by and between Comerica Bank (“Bank”) and Sensus Healthcare, Inc., a Delaware corporation (singularly and collectively, if more than one party, “Borrower”).

 

In consideration of all present and future loans and credit from time to time made available by Bank to or in favor of Borrower, and in consideration of all present and future Indebtedness (as herein defined) of Borrower to Bank, Borrower represents, warrants, covenants and agrees as follows:

 

SECTION 1 DEFINITIONS.

 

(a) Defined Terms. As used in this Agreement, the following terms shall have the respective meanings set forth below:

 

“Advance Formula” shall have the respective meaning ascribed to such term in the Advance Formula Agreement (if any).

 

“Advance Formula Agreement” shall mean an Advance Formula Agreement (if any) executed and delivered by Borrower unto Bank, as the same may be amended, restated, substituted and/or replaced from time to time.

 

“Affiliate” or “Affiliates” shall mean, when used with respect to any Person, any other Person which, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), with respect to any Person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement” shall mean this Credit Agreement, as the same may be amended from time to time.

 

“Applicable State” shall mean Texas.

 

“Authorized Officer” shall mean the chief executive officer, the president or the chief financial officer, or in his/her absence, another responsible senior officer, of Borrower or any other Loan Party, or the general partner of, or the partner or one of the partners required to bind, Borrower or any other Loan Party, as applicable.

 

“CPA” shall mean independent certified public accountants of recognized standing selected by Borrower or another Loan Party, as applicable, and acceptable to Bank.

 

“Collateral” shall mean all property, assets and rights in which a Lien or other encumbrance in favor of or for the benefit of Bank is or has been granted or arises or has arisen, or may hereafter be granted or arise, under or in connection with any Loan Document, or otherwise, to secure the payment or performance of any portion of the Indebtedness.

 

“Compliance Certificate” shall mean a Compliance Certificate in such form and detail as may be required by or otherwise satisfactory to Bank, certified by an Authorized Officer of Borrower, certifying that, as of the date thereof, to the best of such Authorized Officer’s knowledge, no Default or Event of Default shall have occurred and be continuing or exist, or if any Default or Event of Default shall have occurred and be continuing or exist, specifying, in detail, the nature and period of existence thereof and any action taken or proposed to be taken by Borrower and/or any other Loan Party in respect thereof, and also certifying as to whether Borrower and/or any other Loan Party, as applicable, is/are in compliance with any financial covenant(s) contained in this Agreement and as more particularly described in said Compliance Certificate (which Compliance Certificate shall set forth, in reasonable detail, the calculations and the resultant ratios or financial tests of the Borrower and/or such Loan Party, as applicable, determined thereunder).

 

“Debt” shall mean, as of any applicable date of determination, the total liabilities of a Person at such time, as determined in accordance with GAAP. In the case of Borrower, the term “Debt” shall include, without limitation, the Indebtedness.

 

“Default” shall mean any condition or event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default.

 

“Distributions” shall mean, in respect of any applicable Person(s), dividends on, or other payments or distributions on account of, or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, any Equity Interest of such Person(s) or of any warrants, options or other rights to acquire the same.

 

“Eligible Account” and/or “Eligible Inventory” shall have the respective meanings ascribed to such terms in the Advance Formula Agreement (if any).

 

 

“Environmental Laws” shall mean all laws, statutes, codes, ordinances, rules, regulations, orders, decrees and directives issued by any federal, state, local, foreign or other governmental or quasi-governmental authority or body (or any agency, instrumentality or political subdivision thereof) relating to the environment or pertaining to Hazardous Materials; any so-called “superfund” or “superlien” law pertaining to Hazardous Materials on or about any Property at any time owned, leased or otherwise used by Borrower or any of its Subsidiaries (if applicable), or any portion thereof, including, without limitation, those relating to soil, surface, subsurface groundwater conditions and the condition of the ambient air; and any other federal, state, foreign or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any Hazardous Material, as now or at any time hereafter in effect.

 

“Equity Interest” shall mean, with respect to any Person, (i) all of the shares of capital stock of (or other ownership or profit interests in) such Person, (ii) all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, (iii) all of the securities convertible into or exchangeable for shares of capital stock (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and (iv) all of the other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, or any successor act or code.

 

“Event of Default” shall mean the occurrence or existence of any of the conditions or events set forth in Section 6 of this Agreement.

 

“GAAP” shall mean generally accepted accounting principles consistently applied.

 

“Guarantor” or “Guarantors” shall mean, as the context dictates, any Person(s) (other than Borrower) who shall, at any time, guarantee or otherwise be or become obligated for the repayment of all or any part of the Indebtedness.

 

“Hazardous Materials” shall mean all of the following: any asbestos, petroleum, petroleum by-products, flammable explosives, radioactive materials, and any hazardous or toxic materials, as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601 et seq.), or in any other Environmental Law.

 

“Indebtedness” shall mean any and all present and future indebtedness, obligations or liabilities of the Borrower and/or any other Loan Party to the Bank, howsoever arising, evidenced or incurred, whether absolute or contingent, direct or indirect, voluntary or involuntary, liquidated or unliquidated, joint or several, now or hereafter existing or arising, due or to become due, whether known or unknown, and whether originally payable to the Bank or to a third party and subsequently acquired by the Bank, including, without limitation, (a) any and all direct indebtedness of the Borrower and/or any other Loan Party to the Bank, including indebtedness evidenced by any and all promissory notes; (b) any and all indebtedness, obligations or liabilities of the Borrower and/or any other Loan Party to the Bank arising under any guaranty where the Borrower and/or any other Loan Party has guaranteed the payment of indebtedness owing to the Bank from a third party; (c) any and all indebtedness, obligations or liabilities of the Borrower and/or any other Loan Party to the Bank arising from applications or agreements for the issuance of letters of credit; (d) late charges, loan fees or charges and overdraft indebtedness; (e) any agreement to indemnify the Bank for environmental liability or to clean up hazardous waste; (f) any and all indebtedness, obligations or liabilities for which the Borrower and/or any other Loan Party would otherwise be liable to the Bank were it not for the invalidity, irregularity or unenforceability of them by reason of any bankruptcy, insolvency or other law or order of any kind, or for any other reason, including, without limit, liability for interest and attorneys’ fees on, or in connection with, any of the Indebtedness from and after the filing by or against the Borrower and/or any other Loan Party of a bankruptcy petition, whether an involuntary or voluntary bankruptcy case, including, without limitation, all attorneys’ fees and costs incurred in connection with motions for relief from stay, cash collateral motions, nondischargeability motions, preference liability motions, fraudulent conveyance liability motions, fraudulent transfer liability motions and all other motions brought by the Borrower, any other Loan Party, the Bank or third parties in any way relating to the Bank’s rights with respect to Borrower, any other Loan Party or third party and/or affecting any collateral securing any obligation owed to Bank by the Borrower, any other Loan Party or any third party, probate proceedings, on appeal or otherwise; (g) any and all amendments, modifications, restatements, renewals and/or extensions of any of the above, including, without limit, amendments, modifications, restatements, renewals and/or extensions which are evidenced by new or additional instruments, documents or agreements; (h) all costs incurred by Bank in establishing, determining, continuing, or defending the validity or priority of its security interest, or in pursuing its rights and remedies under this Agreement, the other Loan Documents or under any other agreement between Bank and the Borrower and/or any other Loan Party or in connection with any proceeding involving Bank as a result of any financial accommodation to Borrower and/or any other Loan Party; and (i) all costs of collecting Indebtedness, including, without limit, attorneys’ fees and costs.

 

 

“Leased Property” shall mean any real Property of Borrower or any of its Subsidiaries (if applicable) which constitutes Collateral and which is subject to a lease under which Borrower or such Subsidiary, to the extent applicable, is the lessor or landlord.

 

“Lien” shall mean any mortgage, pledge, encumbrance, security interest, assignment, lien or charge or other interest of any kind upon any property or assets, whether real, personal or mixed, to secure any indebtedness, obligation or liability owed to or claimed by any Person, whether arising under or based upon contract, law or otherwise.

 

“Liquid Assets” shall mean, in respect of any applicable Person(s) and as of any applicable date of determination, the sum of unrestricted cash, unrestricted marketable securities, FDIC insured accounts and United States government securities of such Person(s) at such time, but excluding any assets held in a “401K” account, individual retirement account (IRA), pension or other type of retirement account or annuity, Rule 144 securities, securities pledged to secure any debt whether or not the debt is currently outstanding, securities not fully transferable until conditions are met, and assets held in joint accounts with any party who is not a Borrower or Guarantor.

 

“Loan(s)” shall mean each loan, advance or other extension of credit made by Bank to or otherwise in favor of Borrower.

 

“Loan Documents” shall mean this Agreement and any and all notes, instruments, documents, guarantees and agreements at any time evidencing, governing, securing or otherwise relating to any Loan(s) and/or any of the Indebtedness.

 

“Loan Party” shall mean each Borrower, each Guarantor and each other Person who shall, at any time, be liable for the payment of all or any part of the Indebtedness or who shall own any property that is, at any time, subject to a Lien which secures all or any part of the Indebtedness.

 

“Material Adverse Effect” shall mean any act, event, condition or circumstance which has had or could have a material and adverse effect on (i) the business, operations, condition (financial or otherwise), performance, prospects, assets or liabilities of any Loan Party, (ii) the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party or by which it is bound, or the enforceability of any of the Indebtedness or any Loan Document or any rights or remedies of Bank thereunder, or (iii) any Loan Party’s interest in, or the value, perfection or priority of Bank’s security interest or lien in any material portion of the Collateral or the ability of Bank to realize on any material portion of the Collateral.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation, or any successor thereto.

 

“Person” or “person” shall mean any individual, corporation, partnership, joint venture, limited liability company, association, trust, unincorporated association, joint stock company, government, municipality, political subdivision or agency, or other entity.

 

“Property” shall mean any real or personal property now or at any time owned, occupied or operated by Borrower and/or any of its Subsidiaries (if applicable).

 

“Subordinated Debt” shall mean any Debt of Borrower which has been subordinated to the Indebtedness pursuant to a subordination agreement in form and content satisfactory to Bank.

 

“Subsidiary” or “Subsidiaries” shall mean as to any particular parent entity, any corporation, partnership, limited liability company or other entity (whether now existing or hereafter organized or acquired) in which more than fifty percent (50%) of the outstanding equity ownership interests having voting rights as of any applicable date of determination, shall be owned directly, or indirectly through one or more Subsidiaries, by such parent entity.

 

“Tax Distributions” shall mean, in respect of any applicable Person, dividend payments and other Distributions made by such Person to its respective shareholders, members or other Person(s) holding Equity Interests therein, as applicable, in an amount not to exceed the income tax liability, if any, of such shareholders, members or other Person(s) arising or incurred directly as a result of the pass-through of income items to such shareholders, members or other Person(s) as a result of such Person’s status as a Subchapter S corporation under the United States Internal Revenue Code, as amended, or as a limited liability company, as applicable.

 

 

“Unencumbered” shall mean, in respect of any property or asset of any Person(s), such property or asset is free and clear of all Liens (other than Liens to or in favor of Bank), and no Lien of any nature whatsoever (other than Liens to or in favor of Bank) shall be placed or exist upon or in respect of any such property or asset.

 

“Uniform Commercial Code” shall mean the Uniform Commercial Code (or other similarly named statute if not specifically referred to as the Uniform Commercial Code) of the Applicable State, as amended, supplemented, revised or replaced from time to time.

 

(b) Accounting Principles. Unless expressly provided to the contrary, all accounting and financial terms and calculations hereunder or pursuant hereto shall be defined and determined in accordance with GAAP.

 

(c) Section Headings and References. Section headings and numbers have been set forth herein for convenience only; unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement.

 

(d) Construction and Interpretation. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, and the term “including” is not limiting. The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Bank or Borrower, whether under any rule of construction or otherwise; on the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

 

SECTION 2 LOAN DOCUMENTS. Each Loan shall be evidenced by a promissory note or other agreement or evidence of indebtedness acceptable to Bank, in each case, executed and delivered by Borrower unto Bank; and each Loan shall be subject to the terms, covenants and conditions of each such promissory note or other agreement or evidence of indebtedness, together with this Agreement and the other Loan Documents. The funding, disbursement and extension of any Loan to or in favor of Borrower shall be subject to the execution and/or delivery unto Bank of such Loan Documents as Bank may reasonably require, and shall be further subject to the satisfaction of such other conditions and requirements as Bank may from time to time require.

 

SECTION 3 REPRESENTATIONS AND WARRANTIES. Borrower, for and on behalf of itself, hereby represents and warrants, and such representations and warranties shall be deemed to be continuing representations and warranties during the entire life of this Agreement, and thereafter, so long as any Indebtedness (other than contingent Indebtedness with respect to indemnity and reimbursement of expenses as to which no claim has been asserted) remains unpaid and outstanding:

 

(a) Authority. It is duly organized, validly existing and in good standing under the laws of the State of its incorporation or organization, as applicable; it is duly qualified and authorized to do business in each jurisdiction where the character of its assets or the nature of its activities makes such qualification necessary, and it has the legal power and authority to own its properties and assets and to carry out its business as now being conducted in each such jurisdiction wherein such qualification is necessary; execution, delivery and performance of this Agreement, and any and all other Loan Documents to which Borrower is a party or by which it is otherwise bound, are within Borrower’s respective powers and authorities, have been duly authorized by all requisite corporate or other necessary or appropriate action, and are not in contravention or violation of law or the terms of Borrower’s organizational or other governing documents, and do not require the consent or approval of any governmental body, agency or authority.

 

(b) Enforceability of Agreement and Loan Documents. This Agreement, and any other Loan Documents contemplated hereby, when executed, issued and/or delivered by Borrower, or by which Borrower is otherwise bound, will be valid and binding and legally enforceable against Borrower in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

 

(c) Non-Contravention. The execution, delivery and performance of this Agreement, and any other Loan Documents required under or contemplated by this Agreement to which Borrower is a party or by which it is otherwise bound, and the issuance of this Agreement and any such other Loan Documents by Borrower, and the borrowings and other transactions contemplated hereby and thereby, are not in contravention or violation of the unwaived terms of any indenture, agreement or undertaking to which Borrower is a party or by which it or any of its property or assets is bound, and will not result in the creation or imposition of any Lien of any nature whatsoever upon any of the property or assets of Borrower, except to or in favor of Bank.

 

 

(d) Litigation or Proceedings. No litigation or other proceeding before any court or administrative agency is pending, or, to the knowledge of Borrower or any of its officers, is threatened against Borrower, the outcome of which could reasonably be expected to result in a Material Adverse Effect.

 

(e) No Liens. There are no Liens on any of Borrower’s Property or assets, except Permitted Encumbrances (as hereinafter defined).

 

(f) No Defaults. There exists no Default or Event of Default under any of the Indebtedness.

 

(g) Financial Statements; No Material Adverse Change. The most recent financial statements with respect to Borrower delivered to Bank fairly present the financial condition of Borrower as of the date thereof and for the period(s) covered thereby in accordance with GAAP, and since the date of such financial statements, there has been no material adverse change in the condition (financial or otherwise) of Borrower.

 

(h) Subsidiaries. As of the date of this Agreement, Borrower has no Subsidiaries, except those, if any, disclosed on the Schedule of Subsidiaries attached to this Agreement, which Schedule sets forth the name, place of incorporation, and percentage of ownership of Borrower in each such Subsidiary.

 

(i) Regulation U or T; Margin Stock. Borrower is not engaged principally, or as one of its important activities, in the business of extending credit to others for the purpose of purchasing or carrying “margin stock” or “margin securities” within the meanings of Regulation U or Regulation T of the Board of Governors of the Federal Reserve System, or any regulations, interpretations or rulings thereunder.

 

(j) Legal Name. Borrower’s true and correct legal name is that set forth on the signature page to this Agreement. Except as disclosed in writing to Bank on or before the date of this Agreement, Borrower has not conducted business under any name other than that set forth on the signature page to this Agreement.

 

(k) Solvency. Borrower is solvent and is able to pay its debts (including, without limit, trade debts) as they mature.

 

(l) Taxes. All taxes, assessments and other similar imposts and charges levied, assessed or imposed upon Borrower and/or any of its property or assets have been paid, except to the extent being diligently contested in good faith.

 

(m) Hazardous Materials. Borrower has not used Hazardous Materials on, in, under or otherwise affecting any Property now or at any time owned, occupied or operated by Borrower or upon which Borrower has a place of business in any manner which violates any Environmental Law(s), to the extent that any such violation could result in a Material Adverse Effect. Borrower has never received any notice of any violation of any Environmental Law(s), and to the best of Borrower’s knowledge, there have been no actions commenced or threatened by any party against Borrower or any of the Property for non-compliance with any Environmental Law(s), which, in any case, could result in a Material Adverse Effect.

 

(n) Leases. All leases covering any Leased Property, if any, are in full force and effect, there are no defaults under any of the provisions thereof, and all conditions to the effectiveness or continuing effectiveness thereof required to be satisfied as of the date hereof have been satisfied.

 

 

SECTION 4 AFFIRMATIVE COVENANTS. So long as Bank shall have any commitment or obligation, if any, to make or extend any Loans to or in favor of Borrower, and/or so long as any Indebtedness (other than contingent Indebtedness with respect to indemnity and reimbursement of expenses as to which no claim has been asserted) remains unpaid and outstanding, Borrower covenants and agrees that it shall:

 

(a) Financial Statements; Reporting Requirements. Provide to Bank, or cause to be provided to Bank, the following, each of which shall be prepared in accordance with GAAP, and shall be in form and detail acceptable to Bank:

 

(i)

As soon as available, and in any event within ninety (90) days after and as of the end of each fiscal year of Borrower, annual CPA audited financial statements of Borrower for and as of the end of each such fiscal year, containing the balance sheet of Borrower as of the close of each such fiscal year, statements of income and retained earnings and a statement of cash flows of Borrower for each such fiscal year, and such other comments and financial details as are usually included in similar reports or as may be requested by Bank, certified by an Authorized Officer of Borrower.

 

(ii)

As soon as available, and in any event within forty five (45) days after and as of the end of each fiscal quarter of Borrower, internally prepared financial statements of Borrower, containing the balance sheet of Borrower as of the end of each such period, statements of income and retained earnings and a statement of cash flows for Borrower for such period and for the portion of the fiscal year of Borrower through the end of the period then ending, and such other comments and financial details as are usually included in similar reports or as may be requested by Bank, certified by an Authorized Officer of Borrower.

 

(iii)

Simultaneous with the delivery to Bank of the respective financial statements required above, a Compliance Certificate.

 

(iv)

Within thirty (30) days after and as of the end of each calendar month, accounts payable agings of Borrower as of such time, certified by an Authorized Officer of Borrower.

 

(v)

Within thirty (30) days after and as of the end of each calendar month accounts receivable agings of Borrower as of such time, certified by an Authorized Officer of Borrower.

 

(vi)

Within thirty (30) days after and as of the end of each calendar month, inventory reports of Borrower as of such time, certified by an Authorized Officer of Borrower.

 

(vii)

Within thirty (30) days after and as of the end of each calendar month, borrowing base reports of Borrower as of such time, which borrowing base reports shall include a schedule identifying each Eligible Account at such time, and such other matters and information relating to the Eligible Accounts as Bank may reasonably request (in each case, to the extent Eligible Accounts are included under the applicable Advance Formula Agreement), reports as to the amount of Eligible Inventory, including, without limitation, designations as to the types of Eligible Inventory, the additions and subtractions thereto, and such other matters and information relating to the Eligible Inventory as Bank may reasonably request (in each case, to the extent Eligible Inventory is included under the applicable Advance Formula Agreement), together with a certificate setting forth Borrower’s calculation of the Advance Formula as of the date of such borrowing base report. In addition, if, pursuant to the terms of this Agreement or any Advance Formula Agreement, Borrower is required to deliver to Bank accounts receivable agings, accounts payable agings or inventory reports (each, a “Reporting Item”) on a date on which Borrower is not required to also deliver a borrowing base certificate, on the date that Borrower delivers any such Reporting Item to Bank, Borrower shall also deliver to Bank a borrowing base certificate as of such date. Each borrowing base certificate so delivered to Bank shall be certified by an Authorized Officer of Borrower.

 

(viii)

Promptly after becoming aware of the occurrence or existence of any Default or Event of Default, or of any other condition, occurrence or event which has had or could reasonably be expected to have a Material Adverse Effect, a written statement of an Authorized Officer of Borrower setting forth the details of such Default or Event of Default, or such other condition or occurrence, and the action which Borrower has taken or caused to be taken, or proposes to take or cause to be taken, with respect thereto.

 

(ix)

Such other information concerning Borrower, any Loan Party and/or any Guarantor as Bank shall reasonably request from time to time.

 

(b) Keeping of Books and Records; Inspections and Audits. Keep proper books of record and account in which full and correct entries in all material respects shall be made of all of its financial transactions and its assets and businesses so as to permit the presentation of financial statements (including, without limitation, any financial statements required to be delivered to Bank pursuant to this Agreement) prepared in accordance with GAAP; permit Bank, or its representatives, at reasonable times (during normal business hours) and intervals and upon Borrower’s receipt of reasonable prior written notice, to visit all of Borrower’s offices and to make inquiries as to Borrower’s respective financial matters with its respective directors, officers, employees, and independent certified public accountants (in the presence of an officer of Borrower); and permit Bank, through Bank’s authorized attorneys, accountants and representatives, to inspect, audit and examine Borrower’s books, accounts, records, ledgers and assets and properties of every kind and description, wherever located, at all reasonable times during normal business hours and upon Borrower’s receipt of reasonable prior written notice, including, without limit, audits of Borrower’s accounts receivable, inventory and other Collateral to be conducted not more frequently than annually (unless during the continuance of an Event of Default or as otherwise required by Bank to fulfill its regulatory and compliance requirements, standards and processes), within sixty (60) days after and as of the end of each fiscal year of Borrower. Borrower shall reimburse Bank for all reasonable costs and expenses incurred by Bank in connection with such inspections, examinations and audits, and to pay to Bank such fees as Bank may reasonably charge in respect of such inspections, examinations and audits, or as otherwise mutually agreed upon by Borrower and Bank.

 

 

(c) Maintain Insurance. Keep its insurable properties (including, without limitation, any Collateral at any time securing all or any part of the Indebtedness) adequately insured and maintain (i) insurance against fire and other risks customarily insured against under an “all-risk” policy and such additional risks customarily insured against by companies engaged in the same or a similar business to that of Borrower, (ii) necessary workers’ compensation insurance, (iii) public liability and product liability insurance, and (iv) such other insurance as may be required by law or as may be reasonably required in writing by Bank, all of which insurance shall be in such amounts, contain such terms, be in such form, be for such purposes, prepaid for such time periods, and written by such companies as may be reasonably satisfactory to Bank. All such policies shall contain a provision whereby they may not be canceled or materially amended except upon thirty (30) days’ prior written notice to Bank. Borrower will promptly deliver to Bank, at Bank’s request, evidence satisfactory to Bank that such insurance has been so procured and, with respect to casualty insurance, made payable to Bank. If Borrower fails to maintain satisfactory insurance as herein provided, Bank shall have the option (but not the obligation) to do so, and Borrower agrees to repay Bank, upon demand, with interest at the highest rate of interest applicable to any of the Indebtedness, all amounts so reasonably expended by Bank.

 

(d) Pay Taxes. Pay promptly and within the time that they can be paid without late charge, penalty or interest, all taxes, assessments and similar imposts and charges of every kind and nature lawfully levied, assessed or imposed upon Borrower and/or its property or assets, except to the extent being diligently contested in good faith and, if requested by Bank, bonded in an amount and manner satisfactory to Bank. If Borrower fails to pay such taxes and assessments within the time they can be paid without penalty, late charge or interest, Bank shall have the option (but not the obligation) to do so, and Borrower agrees to repay Bank, upon demand, with interest at the highest rate of interest applicable to any of the Indebtedness, all amounts so expended by Bank.

 

(e) Maintain Existence. Do or cause to be done all things necessary to preserve and keep in full force and effect Borrower’s corporate or other applicable existence, rights and franchises and comply with all applicable laws, ordinances and government rules and regulations to which it is subject; continue to conduct and operate its business substantially as conducted and operated during the present and preceding calendar year; at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property and keep the same in good repair, working order and condition; maintain all permits, licenses, approvals and agreements which it is required to maintain or comply with, where the failure to do so could result in a Material Adverse Effect; maintain Borrower’s same place(s) of business, chief executive office or residence, as applicable, as currently exists, and not relocate said address(es) without giving Bank ninety (90) days’ prior written notice of such proposed change, but the giving of such notice shall not cure or remedy any Default or Event of Default caused by such change; and from time to time make, or cause to be made, all needed and proper repairs, renewals, replacements, betterments and improvements to Borrower’s property so that the business carried on in connection therewith may be properly and advantageously conducted at all times.

 

(f) Environmental Laws. Comply, and cause each of its Subsidiaries (to the extent applicable) to comply, in all material respects with all applicable Environmental Laws, and maintain all material permits, licenses and approvals required under applicable Environmental Laws, where the failure to do so could result in a Material Adverse Effect; and promptly provide to Bank, immediately upon receipt thereof, copies of any material correspondence, notice, pleading, citation, indictment, complaint, order, decree, or other document from any source asserting or alleging a violation of any Environmental Laws by Borrower and/or any of its Subsidiaries, or of any circumstance or condition which requires or may require a financial contribution by Borrower and/or any of its Subsidiaries, or a clean-up, removal, remedial action or other response by or on behalf of Borrower and/or any of its Subsidiaries under applicable Environmental Law(s), or which seeks damages or civil, criminal, or punitive penalties from Borrower and/or any of its Subsidiaries for any violation or alleged violation of any Environmental Law(s) by Borrower and/or any of its Subsidiaries. Borrower hereby indemnifies, saves and holds Bank, and any of Bank’s past, present and future officers, directors, shareholders, employees, representatives and consultants, harmless from and against any and all losses, damages, suits, penalties, costs, liabilities and expenses (including, without limitation, reasonable legal expenses and attorneys’ fees) incurred or arising out of any claim, loss or damage of any property, injuries to or death of any persons, contamination of or adverse effects on the environment, or other violation or asserted violation of any applicable Environmental Law(s); provided, however, that the foregoing indemnification shall not be applicable, and Borrower shall not be liable for any such losses, damages, suits, penalties, costs, liabilities or expenses, to the extent (but only to the extent) the same arise or result from any gross negligence or willful misconduct of Bank or any of its agents or employees. The provisions of this Section shall survive repayment of the Indebtedness and satisfaction of all obligations of Borrower to Bank and termination of this Agreement.

 

 

(g) Maintain Bank Accounts. Maintain all of Borrower’s principal bank accounts (other than securities accounts holding investments of Borrower) with Bank and notify Bank immediately in writing of the establishment or existence of any other bank account, deposit account or other account into which money may be deposited (other than with Bank); provided, however, providing any such notice to Bank shall not waive the occurrence or existence of any Default or Event of Default arising or existing as a result of the establishment or existence of any account(s) in violation of this Section.

 

(h) [Reserved].

 

(i) ERISA Compliance. At all times meet, and cause each of its Subsidiaries to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA; promptly after Borrower knows or has reason to know of the occurrence of any event, which would constitute a reportable event or prohibited transaction under ERISA, or that the PBGC or Borrower has instituted or will institute proceedings to terminate an employee pension plan, deliver to Bank a certificate of an Authorized Officer of Borrower setting forth details as to such event or proceedings and the action which Borrower proposes to take with respect thereto, together with a copy of any notice of such event which may be required to be filed with the PBGC; and upon the request of Bank, furnish to Bank (or cause the plan administrator to furnish Bank) a copy of the annual return (including all schedules and attachments) for each plan covered by ERISA, and filed with the Internal Revenue Service by Borrower or any of its Subsidiaries not later than ten (10) days after such report has been so filed. Borrower shall be permitted to voluntarily terminate employee pension or benefit plans, so long as any such voluntary termination is done in accordance with ERISA and does not result in a material liability or obligation to such Borrower and does not result in a Material Adverse Effect.

 

(j) Liquid Assets. At all times, be and remain the owner of Unencumbered Liquid Assets having a value of not less than Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00), which must be maintained in an account with Bank, and subject to a security interest in favor of Bank.

 

(k) Loan Fee. Deliver to Bank an annual loan facility fee in the amount of $50,000.00, payable in quarterly installments in the amount of $12,500.00 each, due at the end of each calendar quarter. The first quarterly payment in the amount of $12,500.00 will be paid to Bank on the date of this Agreement. Payment of the loan facility fee when due is a precondition to the Bank’s funding of the Loan.

 

SECTION 5 NEGATIVE COVENANTS. So long as Bank shall have any commitment or obligation, if any, to make or extend any Loans to or in favor of Borrower, and/or so long as any Indebtedness (other than contingent Indebtedness with respect to indemnity and reimbursement of expenses as to which no claim has been asserted) remains unpaid and outstanding, Borrower covenants and agrees that it shall not, without the prior written consent of Bank:

 

(a) Dividends. Declare or pay any dividends on, or make any other Distribution (whether by reduction of capital or otherwise), except (i) dividends payable solely in capital stock of Borrower, (ii) purchases or redemptions of capital stock of Borrower permitted under Section 5(b), and (iii) so long as no Default or Event of Default shall have occurred and be continuing or exist, or would arise, occur or exist after giving effect thereto, Tax Distributions.

 

(b) Redeem Stock. Purchase, redeem, retire or otherwise acquire any of the shares of its capital stock, or make any commitment to do so, except, so long as no Default or Event of Default shall have occurred and be continuing or exist, or would arise, occur or exist after giving effect thereto, Borrower may (i) redeem shares of its capital stock pursuant to any share repurchase program authorized by Borrower’s board of directors and (ii) upon the election of any employee of Borrower and the vesting of such employee’s ownership of shares of Borrower, Borrower may redeem such shares, or any portion thereof, for purposes of enabling Borrower to pay payroll taxes on behalf of such employee.

 

(c) Liens. Create, incur, assume or suffer to exist any Lien of any kind upon any of its property or assets, whether now owned or hereafter acquired, other than the following (collectively, “Permitted Encumbrances”):

 

(i)

Liens to or in favor of Bank;

 

 

(ii)

Liens for taxes, assessments or other governmental charges incurred in the ordinary course of business and for which no interest, late charge or penalty is attaching or which is being contested in good faith by appropriate proceedings diligently pursued (provided the period of time for such contestation does not exceed thirty (30) days and, if requested by Bank, bonded in an amount and manner satisfactory to Bank;

 

(iii)

Liens, not delinquent, created by statute in connection with workers’ compensation, unemployment insurance, social security, old age pensions (subject to the applicable provisions of this Agreement) and similar statutory obligations;

 

(iv)

Liens in favor of mechanics, materialmen, carriers, warehousemen or other like statutory or common law Liens securing obligations incurred in good faith in the ordinary course of business that are not yet due and payable; and

 

(v)

other Liens (if any) existing as of the date hereof and described in the Schedule of Permitted Liens attached hereto to secure Debt existing and outstanding as of the date hereof, but no other Debt.

 

(d) Debt. Incur, create, assume or permit to exist any Debt of any kind or nature whatsoever, except (without duplication) for (i) the Indebtedness, (ii) Subordinated Debt, (iii) existing indebtedness (if any) to the extent set forth in the Schedule of Debt attached hereto or in the most recent financial statements of Borrower delivered to Bank prior to the date of this Agreement, and (iv) unsecured trade indebtedness, utility indebtedness and non-extraordinary accounts payable incurred and paid in the ordinary course of business.

 

(e) Loans and Advances. Make loans, advances or extensions of credit to any Person, except sales on open account in the ordinary course of business.

 

(f) Guaranties. Guarantee or otherwise, directly or indirectly, in any way be or become responsible for obligations of any other Person, except (i) guaranties in favor of Bank; and (ii) the endorsement of negotiable instruments in the ordinary course of business for deposit or collection.

 

(g) Subordinate Indebtedness. Subordinate any indebtedness due to it from any Person to indebtedness of other creditors of such Person.

 

(h) Asset Dispositions; Dissolution; Mergers; Capital Structure; Business Purpose. (i) Sell, lease (as lessor), transfer or otherwise dispose of any of its properties or assets, except as to the sale of inventory in the ordinary course of business, which shall not require Borrower to deliver prior written notice to Bank; (ii) change its name, its corporate identity or structure, its form of organization or the state in which it has been formed or organized; (iii) dissolve or liquidate or consolidate with or merge into any other Person, or permit any other Person to merge into it; (iv) acquire all or substantially all the properties or assets of any other Person; (v) enter into any reorganization or recapitalization, or reclassify its capital stock; (vi) enter into any sale-leaseback transaction; (vii) permit any levy, attachment or restraint to be made affecting any of Borrower’s assets; (viii) permit any judicial officer or assignee to be appointed or to take possession of any or all of Borrower’s assets; or (ix) make any other change in Borrower’s financial structure or in any of its business objects, purposes or operations which, in the opinion of Bank, could result in a Material Adverse Effect; (x) enter into any transaction not in the ordinary course of Borrower’s business; or (xi) make any payment on account of any Subordinated Debt in violation of the provisions of any subordination agreement between Bank and the applicable subordinated debt holder, or otherwise fail to comply with the terms and conditions set forth in any such subordination agreement.

 

(i) Investments. Purchase or hold beneficially any stock or other securities of, or make any investment or acquire any interest whatsoever in, any other Person, except for (i) the common stock of any Subsidiaries owned by Borrower on the date of this Agreement, as more particularly described in the Schedule of Subsidiaries attached hereto, (ii) certificates of deposit or time deposits with Bank, and (iii) direct obligations of the United States of America, or any agency thereof, maturing within one (1) year from the date of acquisition thereof, in each case, which shall not require Borrower to deliver prior written notice of such purchase, investment or acquisition.

 

 

(j) Apply Proceeds to Purchase or Carry Margin Stock. Apply any of the proceeds of any loan, advance or other extension of credit by Bank to or in favor of Borrower, directly or indirectly to the purchase or carrying of any “margin stock” or “margin securities” within the meanings of Regulation U or Regulation T of the Board of Governors of the Federal Reserve System, or any regulations, interpretations or rulings thereunder; or extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock or margin securities.

 

(k) Pension Plans; PBGC. Allow any fact, condition or event to occur or exist with respect to any employee pension or profit sharing plan established or maintained by it which might constitute grounds for termination of any such plan or for the court appointment of a trustee to administer any such plan; or permit any such plan to be the subject of termination proceedings (whether voluntary or involuntary) from which termination proceedings there may result in a liability of Borrower to the PBGC which, in the opinion of Bank, will result in a Material Adverse Effect.

 

SECTION 6 EVENTS OF DEFAULT. An “Event of Default” shall be deemed to have occurred or exist under this Agreement upon the occurrence and/or existence of any of the following conditions or events:

 

(a) Borrower and/or any other Loan Party shall fail to pay the principal of or interest on or shall otherwise fail to pay any other amount owing by Borrower and/or such Loan Party to Bank when due, whether under any of the Indebtedness or otherwise, and such default in payment shall continue unremedied or uncured beyond any applicable period of grace provided with respect thereto, if any, in the relevant Loan Document(s), and if no such grace period is provided, within five (5) days after the date due;

 

(b) any representation, warranty, certification or statement made or deemed to have been made by Borrower and/or any other Loan Party herein, or in any certificate, financial statement or other document or agreement delivered by or on behalf of Borrower and/or any such Loan Party in connection with the Indebtedness or any of the Loan Documents shall prove to be untrue or incomplete in any material respect;

 

(c) Borrower shall fail to observe or perform any condition, covenant or agreement set forth herein for a period of thirty (30) days after the earlier of (i) the date on which written notice of such default has been delivered to Borrower or (ii) the date on which an officer of Borrower knew of the occurrence or existence of such default;

 

(d) Borrower and/or any other Loan Party shall fail to observe or perform any condition, covenant or agreement of Borrower and/or any such Loan Party set forth in any other Loan Document (other than as provided in subparagraphs (a) and (c) above) or any other agreement between any such Person(s) and Bank, and such default shall remain unremedied or uncured beyond any applicable period of grace or cure, if any, provided with respect thereto in the relevant Loan Document(s) or other agreement and if no such grace period is provided, for a period of thirty (30) days after the earlier of (i) the date on which written notice of such default has been delivered to Borrower or (ii) the date on which an officer of Borrower knew of the occurrence or existence of such default;

 

(e) if there shall be any change, for any reason whatsoever, in the management, ownership or control of Borrower or any other Loan Party which, in the sole discretion of Bank, could result in a Material Adverse Effect;

 

(f) if (i) any party subordinating its claims to that of Bank’s terminates, rescinds, revokes or violates the terms of its subordination, or (ii) any Loan Party (other than Borrower) dies or terminates, rescinds, revokes or violates the terms of any guaranty, pledge, collateral assignment, subordination agreement or other document, instrument or agreement entered into by such Loan Party in favor of Bank, including, without limitation, any document evidencing the pledge by such Loan Party of property that is subject to a Lien which secures all or any part of the Indebtedness;

 

(g) Borrower and/or any other Loan Party shall (i) fail to pay when due any of its Debt (other than to Bank), or shall fail to observe or perform any material term, condition, covenant or agreement of Borrower and/or any such Loan Party set forth in any document, instrument or agreement evidencing, securing or relating to such Debt, and such failure shall remain unremedied or uncured beyond any applicable period of grace or cure, if any, provided with respect thereto so as to permit the holder(s) of such Debt to accelerate the maturity or payment of such Debt, or (ii) or shall fail to observe or perform any material term, condition, covenant or agreement of Borrower and/or any such Loan Party set forth in any material agreement, contract, indenture, instrument or undertaking to which Borrower and/or any such Loan Party is a party with any one or more third parties (other than Bank) or by which it may be otherwise bound, and such failure could result in the acceleration of the maturity or payment of Borrower’s indebtedness to others, whether under any such agreement, contract, indenture, instrument or undertaking or otherwise, or which failure could result in a Material Adverse Effect;

 

 

(h) if Borrower and/or any other Loan Party (i) become(s) insolvent or the subject of a voluntary or involuntary proceeding in bankruptcy, or a reorganization, arrangement or creditor composition proceeding, (ii) cease(s) doing business as a going concern or sells or otherwise disposes of any substantial portion of its assets or property, (iii) is enjoined restrained or in any way prevented by court order or other legal or administrative action or proceedings from continuing to conduct all or any material part of its business affairs, (iv) is the subject of a dissolution, merger or consolidation, or (v) has any of its property or assets attached, seized, subject to a writ or distress warrant, or come into the possession of any trustee, receiver, controller, custodian, assignee for the benefit of creditors or any other person or entity having powers or duties like or similar to the powers and duties of trustee, receiver, controller, custodian or assignee for the benefit of creditors, and the same are not released, discharged or bonded against within thirty (30) days thereafter;

 

(i) if any reportable event, which the Bank determines constitutes grounds for the termination of any deferred compensation plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer any such plan, shall have occurred and be continuing thirty (30) days after written notice of such determination shall have been given to Borrower by Bank, or any such plan shall be terminated within the meaning of Title IV of ERISA, or a trustee shall be appointed by the appropriate United States District Court to administer any such plan, or the PBGC shall institute proceedings to terminate any plan;

 

(j) if (i) there shall be rendered against Borrower and/or any other Loan Party one or more judgments for the payment of money which has or have become non-appealable and shall remain undischarged, unsatisfied by insurance and unstayed for more than thirty (30) days, whether or not consecutive; or (ii) a levy, lien, writ of attachment or garnishment against any of the property or assets of Borrower and/or any other Loan Party shall be issued and levied in any action(s) and not released or appealed and bonded in an amount and manner satisfactory to Bank within thirty (30) days after such issuance and levy, (iii) a settlement, or a series of related settlements, is agreed upon by Borrower and/or any other Loan Party for the payment or money or the delivery of goods or services by Borrower and/or such Loan Party; or (iv) any loss, theft, substantial damage or destruction to or of any Collateral;

 

(k) if (i) Bank, in its commercially reasonable discretion, deems itself insecure, believing that the prospect of payment or performance of any of the Indebtedness is impaired or shall fear deterioration, removal or waste of any of the Collateral; or (ii) in the opinion of Bank, a Material Adverse Effect has resulted or occurred or could reasonably be expected to result or occur; or

 

(l) the occurrence or existence of any “Default” or “Event of Default”, as the case may be, set forth in any other Loan Document.

 

SECTION 7 REMEDIES. Upon the occurrence and at any time during the continuance or existence of any Event of Default, Bank may, with or without notice to Borrower, declare all outstanding Indebtedness to be due and payable, whereupon all such Indebtedness then outstanding shall immediately become due and payable, without further notice or demand, and any commitment or obligation, if any, on the part of Bank to make or extend Loans shall immediately terminate. Further, upon the occurrence or at any time during the continuance or existence of any Event of Default hereunder, Bank may collect, deal with and dispose of all or any part of any Collateral in any manner permitted or authorized by the Uniform Commercial Code or other applicable law (including public or private sale), and after deducting expenses (including, without limitation, reasonable attorneys’ fees and expenses), Bank may apply the proceeds thereof in part or full payment of any of the Indebtedness, whether due or not, in any manner or order Bank elects. In addition to the foregoing, upon the occurrence and at any time during the continuance or existence of any Event of Default hereunder, Bank may exercise any and all rights and remedies available to it as a result thereof, whether under this Agreement or other Loan Documents, at law (including, without limit, the Uniform Commercial Code), or otherwise. Notwithstanding anything to the contrary set forth in any other Loan Document, Bank shall not be obligated to make or extend any Loans or advances to any Borrower(s) during the existence of any Default or Event of Default.

 

SECTION 8 DEMAND BASIS LOANS. Borrower hereby acknowledges and agrees that in the event that any of the Indebtedness shall at any time be on a demand basis, Borrower’s compliance with the terms and conditions set forth herein, and the absence of any Event of Default hereunder, shall not, in any way whatsoever, limit, restrict or otherwise affect or impair Bank’s right or ability to make demand for payment of any or all of such Indebtedness which may be on a demand basis at any such time, in Bank’s sole and absolute discretion, with or without reason or cause, and the existence of any Event of Default hereunder shall not be the sole reason or basis for enabling Bank to make demand for payment of all or any part of such Indebtedness.

 

 

SECTION 9 WAIVERS OF DEFAULTS; NO FORBEARANCE. No Event of Default shall be waived by Bank except in writing and a waiver of any Event of Default shall not be a waiver of any other default or of the same default on a future occasion. No forbearance on the part of the Bank in enforcing any of its rights or remedies under this Agreement or any other Loan Document, nor any renewal, extension or rearrangement of any payment or covenant to be made or performed by Borrower hereunder or any such other Loan Document, shall constitute a waiver of any of the terms of this Agreement or such Loan Document or of any such right or remedy. No single or partial exercise of any right, power or privilege hereunder, or any delay in the exercise hereof, shall preclude other or further exercise of the rights of the parties under this Agreement and/or the other Loan Documents.

 

SECTION 10 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the Applicable State.

 

SECTION 11 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that Borrower shall not assign or transfer any of its respective rights or obligations hereunder or otherwise in respect of any of the Indebtedness without the prior written consent of Bank.

 

SECTION 12 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall constitute an original instrument, but when taken together shall constitute one and the same instrument.

 

SECTION 13 NOTICES. Unless otherwise provided in this Agreement, all notices and other communications by any party to the other party(ies) relating to this Agreement shall be in writing and shall be given by personal delivery, by United States mail, postage prepaid, by reputable overnight courier or by facsimile, and addressed or delivered to the respective party(ies) at the addresses stated below, or to such other addresses as such party(ies) may from time to time specify to the other(s) in writing. Requests for information made to Borrower by Bank from time to time hereunder may be made orally or in writing, at Bank’s discretion.

 

Borrower Address:

 

851 Broken Sound Parkway NW #215

Boca Raton, Florida 33487

Attention: Joseph C. Sardino, Chief Executive Officer

 

Bank Address:

 

Comerica Bank

2401 PGA Boulevard, Suite 198

MC 5178

Palm Beach Gardens, Florida 33410

Attention: Indira Rachel Maharaj – Doorgasingh

 

SECTION 14 COSTS AND EXPENSES. Borrower shall pay or reimburse Bank for (a) all reasonable costs, expenses, fees and charges paid or incurred by Bank (including, without limitation, Bank’s attorneys’ reasonable fees and costs and/or fees, transfer charges and reasonable costs of Bank’s in-house counsel) in connection with the preparation, closing and consummation of this Agreement and/or the other Loan Documents and/or the Loans or transactions contemplated hereby or thereby, or in connection with the administration or enforcement of this Agreement or any of the other Loan Document, and (b) all stamp and other taxes and duties (except for taxes on the overall net income of Bank imposed by the jurisdiction in which Bank’s principal executive office is located) payable or determined to be payable in connection with the execution, delivery, filing or recording of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby, and any and all liabilities with respect to or resulting from any delay in paying or omitting to pay such taxes or duties. In addition, Borrower shall immediately and without demand reimburse Bank for all sums expended by Bank in connection with any action brought by Bank in respect of any Default or Event of Default or to enforce any provision of this Agreement or the other Loan Documents and/or to exercise or enforce any rights or remedies of Bank. Borrower authorizes and approves all advances and payments by Bank for items described in this Section as Indebtedness secured by the Collateral.

 

SECTION 15 INDEMNIFICATION AND HOLD HARMLESS. WITHOUT LIMITING ANY OTHER PROVISIONS OF THIS AGREEMENT, BORROWER AGREES TO INDEMNIFY AND HOLD BANK HARMLESS FROM AND AGAINST ALL LOSSES, COSTS, DAMAGES, LIABILITIES AND EXPENSES, INCLUDING, WITHOUT LIMITATION, IN-HOUSE AND OUTSIDE ATTORNEYS’ FEES AND DISBURSEMENTS, INCURRED BY BANK IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY LOANS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR BY REASON OF ANY DEFAULT OR EVENT OF DEFAULT, OR ENFORCING THE OBLIGATIONS OF BORROWER OR ANY LOAN PARTY UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AS APPLICABLE, OR IN EXERCISING ANY RIGHTS OR REMEDIES OF BANK OR IN THE PROSECUTION OR DEFENSE OF ANY ACTION OR PROCEEDING CONCERNING ANY MATTER GROWING OUT OF OR CONNECTED WITH THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS; PROVIDED, HOWEVER, THAT THE FOREGOING SHALL NOT BE APPLICABLE, AND THE BORROWER SHALL NOT BE LIABLE FOR ANY SUCH LOSSES, COSTS, DAMAGES, LIABILITIES OR EXPENSES, TO THE EXTENT (BUT ONLY TO THE EXTENT) THE SAME ARISE OR RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF BANK OR ANY OF ITS AGENTS OR EMPLOYEES. THE PROVISIONS OF THIS SECTION SHALL SURVIVE REPAYMENT OF THE INDEBTEDNESS AND SATISFACTION OF ALL OBLIGATIONS OF BORROWER TO BANK AND TERMINATION OF THIS AGREEMENT.

 

 

SECTION 16 AMENDMENTS AND WAIVERS. All amendments to or waivers or terminations of this Agreement or the other Loan Documents must be in writing. All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement and the other Loan Documents, if any, are hereby superseded and merged into this Agreement and the Loan Documents. Time is of the essence for the performance of all obligations set forth in this Agreement. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. Borrower acknowledges that Bank may provide information regarding Borrower and the Loans to Bank’s parent, Subsidiaries, Affiliates and service providers.

 

SECTION 17 MULTIPLE BORROWERS. If there is more than one Borrower under this Agreement, unless otherwise expressly provided herein, each and every reference to the term “Borrower” in this Agreement shall mean and refer to each such Borrower, and all undertakings, agreements, warranties, covenants, liabilities and obligations of each Borrower, and all rights, powers and authorities given to or conferred upon Bank hereunder, shall apply to each Borrower severally and to all of them jointly.

 

SECTION 18 REINSTATEMENT; SEVERABILITY. Bank’s rights under this Agreement and the other Loan Documents shall be reinstated and revived, and the enforceability of this Agreement and the other Loan Documents shall continue, with respect to any amount at any time paid on account of the Indebtedness which thereafter shall be required to be restored or returned by Bank, all as though such amount had not been paid. The rights of Bank created or granted herein and the enforceability of this Agreement and the other Loan Documents at all times shall remain effective to cover the full amount of all the Indebtedness even though the Indebtedness, including any part thereof or any other security or guaranty therefor, may be or hereafter may become invalid or otherwise unenforceable as against Borrower.

 

SECTION 19 WAIVER OF JURY TRIAL. BORROWER AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVE ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.

 

SECTION 20 ORAL AGREEMENTS INEFFECTIVE. THIS WRITTEN LOAN AGREEMENT (AS DEFINED BY SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

[Signatures Appear on the Following Page(s)]

 

 

[Signature Page to Credit Agreement]

 

This Agreement is effective as of the day and year first set forth above.

 

	BORROWER:
	SENSUS HEALTHCARE, INC., a Delaware corporation
	By:	/s/ Michael Sardano
	Name:	Michael Sardano
	Title:	President
	COMERICA BANK
	By:	/s/ Indira Rachel Maharaj – Doorgasingh
	Name:	Indira Rachel Maharaj – Doorgasingh
	Title:	Senior Vice President

 

 

SCHEDULE OF SUBSIDIARIES

 

NONE

 

 

SCHEDULE OF DEBT

 

NONE

 

 

SCHEDULE OF PERMITTED LIENS

 

NONE

 

17

 

Exhibit 10.2

 

 

Master Revolving Note

Daily Adjusting Term Secured Overnight Financing Rate (SOFR)

Demand - Obligatory Advances (Business and Commercial Loans Only)

 

AMOUNT   $10,000,000.00

NOTE DATE   September 11, 2023

MATURITY DATE   ON DEMAND

 

1. Promise to Pay. ON DEMAND (or as otherwise provided in this Note), FOR VALUE RECEIVED, SENSUS HEALTHCARE, INC., a Delaware corporation (singularly and collectively, if more than one party, “Borrower”), promises to pay to the order of COMERICA BANK (herein called “Bank”), at any office of Bank in the Applicable State, the principal sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00), or so much of said sum as has been advanced and is then outstanding under this Note, together with all accrued and unpaid interest thereon and all other amounts due Bank hereunder.

 

2. Payments; Interest.

 

2.1. Payment Date; Computation Period. Unless sooner demanded, accrued and unpaid interest on the unpaid principal balance of each outstanding Advance hereunder shall be payable monthly, in arrears, on the first Business Day of each month, from the date made until the same is paid in full (whether in accordance with the terms hereof, by acceleration, or otherwise). Interest accruing hereunder shall be computed on the basis of a 360-day year and shall be assessed for the actual number of days elapsed, and in such computation, effect shall be given to any change in the Applicable Interest Rate as a result of any change in the interest rate on the date of each such change.

 

2.2. Interest Rate. Subject to the terms and conditions of this Note, the unpaid principal balance of all Indebtedness outstanding under this Note from time to time shall bear interest at the Applicable Interest Rate. No interest shall accrue under this Note until the date of the first Advance made by Bank; after that, interest on all Advances shall accrue and be computed on the principal balance outstanding from time to time under this Note in accordance with the terms hereof until the same is paid in full.

 

2.3. Default Rate; Late Payments. Upon demand and from and after the occurrence of any Default hereunder, and so long as any such Default remains unremedied or uncured thereafter, the Indebtedness outstanding under this Note shall bear interest at a per annum rate of three percent (3%) above the otherwise Applicable Interest Rate, which interest shall be payable upon demand. In addition to the foregoing, a late payment charge equal to five percent (5%) of each late payment hereunder may be charged on any payment not received by Bank within ten (10) calendar days after the payment due date therefor, but acceptance of payment of any such charge shall not constitute a waiver of any Default hereunder.

 

2.4. Business Day. In the event that any payment under this Note becomes due and payable on any day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and, to the extent applicable, interest shall continue to accrue and be payable thereon during such extension at the rates set forth in this Note.

 

2.5. Legal Tender. All payments to be made by Borrower to Bank under or pursuant to this Note shall be in immediately available funds in United States dollars, without condition or deduction for any counterclaim, defense, recoupment or setoff, and in the event that any payments submitted hereunder are in funds not available until collected, said payments shall continue to bear interest until collected.

 

2.6. Maximum Interest Rate. In no event shall the per annum interest payable under this Note at any time exceed the Maximum Rate (as defined below).

 

2.7. No Responsibility for Changes to the Daily Adjusting Term SOFR Rate. Borrower acknowledges that (i) the methods of calculation, publication schedule, rate revision practices, or availability of the Daily Adjusting Term SOFR Rate at any time may change without notice, and (ii) the Daily Adjusting Term SOFR Rate may be withdrawn, modified, or amended without notice. Bank does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission, or any other matter related to the Daily Adjusting Term SOFR Rate. Each determination by Bank of the Daily Adjusting Term SOFR Rate shall be conclusive and binding for all purposes, absent manifest error.

 

2.8. Rate Conforming Changes. Notwithstanding anything to the contrary herein or in any other Loan Document, Bank shall have the right to make Rate Conforming Changes from time to time and, any amendments or modifications to any Loan Document implementing or evidencing such Rate Conforming Changes will become effective without any further action or consent of Borrower.

 

8.5. Collection Costs. Borrower agree(s) to pay or reimburse to Bank, or any other holder or owner of this Note, on demand, any and all reasonable costs and expenses of Bank (including, without limit, court costs, legal expenses and reasonable attorneys’ fees, whether inside or outside counsel is used, whether or not suit is instituted, and, if suit is instituted, whether at the trial court level, appellate level, in a bankruptcy, probate or administrative proceeding or otherwise) incurred in connection with the preparation, execution, delivery, amendment, administration, and performance of this Note and the other Loan Documents, or incurred in collecting or attempting to collect, or enforcing, this Note, the other Loan Documents, or the Indebtedness, or incurred in any other matter or proceeding relating to this Note, the other Loan Documents, or the Indebtedness.

“Applicable State” means the State of Texas.

 

“Applicable Time” means 11:00 a.m. (Detroit, Michigan time).

 

“Change in Law” means the occurrence, after the date hereof, of any of the following: (i) the adoption or introduction of, or any change in any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect and whether or not applicable to Bank on such date, or (ii) any change in interpretation, administration, application or implementation of any such law, treaty, rule or regulation by any Governmental Authority, or (iii) the issuance, making or implementation by any Governmental Authority of any interpretation, administration, request, rule, regulation, guideline, or directive (whether or not having the force of law), including, without limitation, any risk-based capital guidelines or any interpretation, administration, request, regulation, guideline, or directive relating to liquidity. For purposes of this definition, (x) a change in law, treaty, rule, regulation, interpretation, administration, application or implementation shall include, without limitation, any change made or which becomes effective on the basis of a law, treaty, rule, regulation, interpretation administration, application or implementation then in force, the effective date of which change is delayed by the terms of such law, treaty, rule, regulation, interpretation, administration, application or implementation, and (y) the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203, H.R. 4173) and all requests, rules, regulations, guidelines, interpretations or directives promulgated thereunder or issued in connection therewith shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or promulgated, whether before or after the date hereof, and (z) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall each be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.

 

“Collateral” means, collectively, all items deposited in any account of any of Borrower with Bank and all proceeds of such items (cash or otherwise), all account balances of any of Borrower from time to time with Bank, all property of any of Borrower from time to time in the possession of Bank and any other collateral, rights and properties described in each and every deed of trust, mortgage, security agreement, pledge, assignment and other security or collateral agreement which has been, or will at any time(s) later be, executed by any (or all) of Borrower or any other loan party in connection with this Note to or for the benefit of Bank.

 

“Daily Adjusting Term SOFR Rate” means, for any day, the rate per annum equal to the Term SOFR Screen Rate at or about 8:00 a.m. (Detroit, Michigan time) (or as soon thereafter as practical) on such day with a term of one (1) month, plus one-tenth of one percent (.10%); provided that, except for a determination by Bank pursuant to Section 5.2 or Section 5.3 herein, if such rate is not published on such determination date then the rate will be the Term SOFR Screen Rate on the first Business Day immediately prior thereto; provided, however, and notwithstanding anything to the contrary set forth in this Note, if at any time the Daily Adjusting Term SOFR Rate would otherwise be less than zero percent (0%) per annum, then the Daily Adjusting Term SOFR Rate shall be deemed to be zero percent (0%) per annum for all purposes of this Note.

 

“Daily Adjusting Term SOFR Rate-based Advance” means an Advance which bears interest at the Daily Adjusting Term SOFR Rate plus the Applicable Margin, subject to the terms of this Note.

 

“Default” has the same meaning as the term “Event of Default” as set forth in the Loan Agreement.

 

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including, without limitation, any supranational bodies such as the European Union or the European Central Bank).

 

“Rate Conforming Changes” means, with respect to the Daily Adjusting Term SOFR Rate, any technical, administrative or operational changes (including, without limitation and as applicable, changes to the definition of the “Applicable Interest Rate,” the definition of “Business Day,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability and terms of breakage provisions and other technical, administrative or operational matters) that Bank decides may be appropriate to reflect the adoption and implementation of the Daily Adjusting Term SOFR Rate and to permit the administration thereof by Bank in a manner substantially consistent with market practice (or, if Bank decides that adoption of any portion of such market practice is not administratively feasible or if Bank determines that no market practice for the administration of the Daily Adjusting Term SOFR Rate exists, in such other manner of administration as Bank decides is reasonably necessary in connection with the administration of this Note and the other Loan Documents).

 

“Request” means a request for an Advance hereunder either (i) upon the delivery to Bank of a written request in the form annexed to this Note as Exhibit “A” duly completed and executed by Borrower (as herein provided), or (ii) to the extent applicable, pursuant to a request submitted through Bank’s loan management system.

 

“Term SOFR Administrator” means the CME Group Benchmark Administration Limited (or a successor administrator of the term secured overnight financing rate).

 

“Term SOFR Administrator’s Website” means the website of the Term SOFR Administrator, currently at https://www.cmegroup.com/market-data/cme-group-benchmark-administration/term-sofr.html, or any successor source for the secured overnight financing rate identified as such by the Term SOFR Administrator from time to time.

 

“Term SOFR Screen Rate” means the CME Term SOFR Reference Rates, as administered by the Term SOFR Administrator and published on the applicable screen page (or such other commercially available source providing such rate or quotations as may be designated by Bank from time to time) on the Term SOFR Administrator’s Website.

 

[The remainder of this page was intentionally left blank.]

 

 

 

[Signature Page to Master Revolving Note]

 

This Note is dated and shall be effective as of the date set forth above.

 

BORROWER:

 

SENSUS HEALTHCARE, INC., a Delaware corporation

 

By:	/s/ Michael Sardano
Name:	Michael Sardano
Title:	President

 

851 Broken Sound Parkway NW #215		Boca Raton		Florida		United States		33487
Street Address		City		State		Country		Zip Code

 

For Bank Use Only
LOAN OFFICER INITIALS	LOAN GROUP NAME	OBLIGOR NAME Sensus Healthcare, Inc., a Delaware corporation
LOAN OFFICER I.D. NO.	LOAN GROUP NO.	OBLIGOR NO.	NOTE NO.	AMOUNT $10,000,000.00

 

 

EXHIBIT “A”

REQUEST FOR ADVANCE

 

Subject to the terms and conditions of the Note (as defined below), Borrower hereby request(s) COMERICA BANK (“Bank”) to make an Advance to Borrower on __________ (which must be a Business Day), in the amount of ______________________ Dollars ($ _________ ) under the Master Revolving Note dated as of September 11, 2023, issued by Borrower to said Bank in the face amount of Ten Million and No/100 Dollars ($10,000,000.00) (the “Note”). Capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Note.

 

Borrower represents, warrants and certifies that no Default, or any condition or event which, with the giving of notice or the running of time, or both, would constitute a Default, has occurred and is continuing under the Note, and none will exist upon the making of the Advance requested hereunder. Borrower further certifies that upon advancing the sum requested hereunder, the aggregate principal amount outstanding under the Note will not exceed the face amount thereof. If the amount advanced to Borrower under the Note shall at any time exceed the face amount thereof, Borrower will immediately pay such excess amount, without any necessity of notice or demand.

 

Borrower hereby authorizes Bank to disburse the proceeds of the Advance being requested by this Request for Advance by crediting the account of Borrower with Bank separately designated by Borrower (or, if no such account has been separately designated by Borrower, any account of Borrower maintained with Bank).

 

Dated this __________ day of ___________________.

  

BORROWER:

 

SENSUS HEALTHCARE, INC., a Delaware corporation

 

By:
Name:
Title:

 

 

-10-

Exhibit 10.3

 

 

SECURITY AGREEMENT

 

 

As of September 11, 2023, for value received, the undersigned (“Pledgor” or “Borrower”) pledges, assigns and grants to Comerica Bank (“Bank”), a continuing security interest and lien (any pledge, assignment, security interest or other lien arising hereunder is sometimes referred to herein as a “security interest”) in the Collateral (as defined below) to secure payment when due, whether by stated maturity, demand, acceleration or otherwise, of all existing and future Indebtedness (as hereinafter defined) of Pledgor to Bank. “Indebtedness” shall mean any and all indebtedness, obligations or liabilities of Borrower and/or Pledgor to Bank, howsoever arising, evidenced or incurred, whether absolute or contingent, direct or indirect, voluntary or involuntary, liquidated or unliquidated, joint or several, and whether known or unknown, and whether originally payable to Bank or to a third party and subsequently acquired by Bank, including, without limitation: (a) any and all direct indebtedness of Borrower and/or Pledgor to Bank, including indebtedness evidenced by any and all promissory notes; (b) any and all obligations or liabilities of Borrower and/or Pledgor to Bank arising under any guaranty where Borrower and/or Pledgor has guaranteed the payment of indebtedness owing to Bank from a third party; (c) any and all obligations or liabilities of Borrower and/or Pledgor to Bank arising from applications or agreements for the issuance of letters of credit; (d) any and all obligations or liabilities of Borrower and/or Pledgor to Bank arising from corporate/commercial credit cards; (e) late charges, loan fees or charges and overdraft indebtedness; (f) any agreement to indemnify Bank for environmental liability or to clean up hazardous waste; (g) any and all indebtedness, obligations or liabilities for which Borrower and/or Pledgor would otherwise be liable to Bank were it not for the invalidity, irregularity or unenforceability of them by reason of any bankruptcy, insolvency or other law or order of any kind, or for any other reason, including, without limit, liability for interest and attorneys’ fees on, or in connection with, any of the Indebtedness from and after the filing by or against Borrower and/or Pledgor of a bankruptcy petition, whether an involuntary or voluntary bankruptcy case, including, without limitation, all attorneys’ fees and costs incurred in connection with motions for relief from stay, cash collateral motions, nondischargeability motions, preference liability motions, fraudulent conveyance liability motions, fraudulent transfer liability motions and all other motions brought by Borrower, Pledgor, Bank or third parties in any way relating to Bank’s rights with respect to Borrower, Pledgor or third party and/or affecting any collateral securing any obligation owed to Bank by Borrower, Pledgor or any third party, probate proceedings, on appeal or otherwise; (h) any and all amendments, modifications, renewals and/or extensions of any of the above, including, without limit, amendments, modifications, renewals and/or extensions which are evidenced by new or additional instruments, documents or agreements; (i) all costs incurred by Bank in establishing, determining, continuing, or defending the validity or priority of its security interest, or in pursuing its rights and remedies under this Security Agreement (this “Agreement”) or under any other agreement between Bank and Borrower and/or Pledgor or in connection with any proceeding involving Bank as a result of any financial accommodation to Borrower, and/or Pledgor; and (j) all costs of collecting Indebtedness, including, without limit, attorneys’ fees and costs. Any reference in this Agreement to attorneys’ fees shall be deemed a reference to reasonable fees, charges, costs and expenses of counsel and paralegals, whether inside or outside counsel is used, and whether or not a suit or action is instituted, and to court costs if a suit or action is instituted, and whether attorneys’ fees or court costs are incurred at the trial court level, on appeal, in a bankruptcy, administrative or probate proceeding or otherwise. All costs and expenses shall be payable immediately by the Pledgor when incurred by Bank, immediately upon demand, and until paid shall bear interest at the highest per annum rate applicable to any of the Indebtedness, but not in excess of the maximum rate permitted by law.

 

Pledgor further covenants, agrees, represents and warrants as follows:

 

1. Collateral. Collateral shall mean all personal property of Pledgor including, without limitation, all of the following property Pledgor now or later owns or has an interest in, wherever located:

 

all Accounts Receivable (for purposes of this Agreement, “Accounts Receivable” consists of all accounts, general intangibles (including, without limit, payment intangibles and software), chattel paper (including, without limit, electronic chattel paper and tangible chattel paper), contract rights, deposit accounts, documents (including, without limit, negotiable documents), instruments (including, without limit, promissory notes) and rights to payment evidenced by chattel paper, documents or instruments, health care insurance receivables, commercial tort claims, letters of credit, letter of credit rights, supporting obligations, money and rights to payment for money or funds advanced or sold),

 

all Inventory (including, without limit, returns and repossessions),

 

all investment property (including, without limit, securities, securities entitlements, and financial assets), all securities accounts and all investment property contained therein, including, without limitation, all securities and securities entitlements, financial assets, instruments or other property contained in such securities accounts, and all other investment property, financial assets, instruments or other property at any time held or maintained in such securities accounts, together with all investment property, financial assets, instruments or other property at any time substituted for all or for any part of the foregoing, and all interest, dividends, increases, profits, new investment property, financial assets, instruments or other property and or other increments, distributions or rights of any kind received on account of any of the foregoing, and all other income received in connection therewith,

 

 

all Equipment and Fixtures,

 

specific items listed below and/or on attached Exhibit A, if any:

  

Account No. 1811-20578-8 maintained with Bank in the name of Pledgor,

 

all Software (for purposes of this Agreement “Software” consists of all (i) computer programs and supporting information provided in connection with a transaction relating to the program, and (ii) computer programs embedded in goods and any supporting information provided in connection with a transaction relating to the program whether or not the program is associated with the goods in such a manner that it customarily is considered part of the goods, and whether or not, by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods, and whether or not the program is embedded in goods that consist solely of the medium in which the program is embedded),

 

all general intangibles (including, without limit, software) acquired or used in connection with any of the Collateral,

 

all goods, instruments (including, without limit, promissory notes), documents (including, without limit, negotiable documents), policies and certificates of insurance, deposit accounts, deposits, money, investment property or other property (except real property which is not a fixture) which are now or later in possession or control of Bank, or as to which Bank now or later controls possession by documents or otherwise,

 

all additions, attachments, accessions, parts, replacements, substitutions, renewals, interest, dividends, distributions, rights of any kind (including, but not limited to, stock splits, stock rights, voting and preferential rights), products, and all cash and non-cash proceeds of or pertaining to the above, including, without limit, insurance and condemnation proceeds, and cash or other property which were proceeds and are recovered by a bankruptcy trustee or otherwise as a preferential transfer by Pledgor, and

 

all of Pledgor’s Books and records with respect to any of the foregoing (including, without limit, computer software and the computers and equipment containing said books and records).

 

In the definition of Collateral, a reference to a type of collateral shall not be limited by a separate reference to a more specific or narrower type of that collateral.

 

2. Warranties, Covenants and Agreements. Pledgor warrants, covenants and agrees as follows:

 

2.1

Pledgor shall furnish to Bank, in form and at intervals as Bank may request, any information Bank may reasonably request and allow Bank to examine, inspect, and copy any of Pledgor’s books and records. Pledgor shall, at the request of Bank, mark its records and the Collateral to clearly indicate the security interest of Bank under this Agreement.

 

2.2

At the time any Collateral becomes, or is represented to be, subject to a security interest in favor of Bank, Pledgor shall be deemed to have warranted that: (a) Pledgor is the lawful owner of the Collateral and has the right and authority to subject it to a security interest granted to Bank; (b) none of the Collateral is subject to any security interest other than that in favor of Bank and other Permitted Encumbrances (as defined in that certain Credit Agreement, dated as of the date hereof between Pledgor and Bank (the “Credit Agreement”)); (c) there are no financing statements on file in respect of any of the Collateral, other than in favor of Bank; (d) no person, other than Bank, has possession or control (as defined in the Uniform Commercial Code) of any Collateral of such nature that perfection of a security interest may be accomplished by control; and (e) Pledgor acquired its rights in the Collateral in the ordinary course of its business.

 

2.3

Pledgor will keep the Collateral free at all times from all claims, liens, security interests and encumbrances other than those in favor of Bank and other Permitted Encumbrances. Pledgor will not, without the prior written consent of Bank, sell, transfer or lease, or permit to be sold, transferred or leased, any or all of the Collateral, except for Inventory sold in the ordinary course of its business and will not return any Inventory to its supplier. Pledgor hereby acknowledges and agrees that Bank may place a “hold” on, and completely restrict Pledgor’s access to, any account of Pledgor at Bank that constitutes Collateral hereunder. Bank or its representatives may, at all reasonable times, inspect the Collateral and may enter upon all premises where the Collateral is kept or might be located. Pledgor shall reimburse Bank for all reasonable costs and expenses incurred by Bank in connection with such inspections.

 

 

2.4

Pledgor will do all acts and will execute and/or deliver or cause to be executed and/or delivered all writings requested by Bank to establish, maintain and continue an exclusive, perfected and first security interest of Bank in the Collateral. By executing this Agreement and becoming bound by the terms hereof, Pledgor expressly authorizes the filing of financing statements and any amendments thereto covering the Collateral, and authorizes Bank or its representatives to take such other actions as may be necessary or appropriate to perfect and maintain Bank’s security interest in the Collateral. Pledgor acknowledges and agrees that Bank has no obligation to acquire or perfect any lien on or security interest in any asset(s), whether realty or personalty, to secure payment of the Indebtedness, and Pledgor is not relying upon assets in which Bank has or may have a lien or security interest for payment of the Indebtedness. In the event that any Collateral, or any of Pledgor’s books or records relating to any Collateral, is at any time located or stored at or upon leased premises or with a bailee, warehouseman or other third party, Pledgor shall promptly provide written notice thereof to Bank and, upon Bank’s request, cause such lessor, bailee, warehouseman or other third party to execute and deliver unto Bank such documents, instruments or agreements as Bank may reasonably require, in each case in form and substance acceptable to Bank, pursuant to which such lessor, bailee, warehouseman or other third party acknowledges Bank’s security interest in such Collateral and that it is holding such Collateral for the benefit of Bank and permits Bank access to and possession of such Collateral.

 

2.5

Pledgor will pay, within the time that they can be paid without interest or penalty, all taxes, assessments and similar charges which at any time are or may become a lien, charge, or encumbrance upon any Collateral, except to the extent contested in good faith and bonded in a manner satisfactory to Bank. If Pledgor fails to pay any of these taxes, assessments, or other charges in the time provided above, Bank has the option (but not the obligation) to do so and Pledgor agrees to repay all amounts so expended by Bank immediately upon demand, together with interest at the highest lawful default rate which could be charged by Bank on any Indebtedness. Any such payments made by bank shall not constitute (a) any agreement by Bank to make similar payments in the future, or (b) a waiver by Bank of any Event of Default under this Agreement. Bank need not inquire as to, or contest the validity of, any such taxes, assessments and similar charges, and the usual official notice of such taxes, assessments and similar charges shall be conclusive evidence that the same are validly due and owing. Such payments shall constitute Indebtedness secured by this Agreement.

 

2.6

Pledgor will keep the Collateral in good condition and will protect it from loss, damage, or deterioration from any cause. Pledgor has and will maintain at all times (a) with respect to the Collateral, insurance under an “all risk” policy against fire and other risks customarily insured against, and (b) public liability insurance and other insurance as may be required by law or reasonably required by Bank. All of such insurance policies shall be in amount, form and content, and written by companies as may be satisfactory to Bank, and shall contain a lender’s loss payable endorsement in favor of and acceptable to Bank. All such policies shall contain a provision whereby they may not be canceled or materially amended except upon thirty (30) days’ prior written notice to Bank. Pledgor will promptly deliver to Bank, at Bank’s request, evidence satisfactory to Bank that such insurance has been so procured and, with respect to casualty insurance, made payable to Bank. Pledgor hereby appoints Bank, or any employee or agent of Bank, as Pledgor’s attorney-in-fact, which appointment is coupled with an interest and irrevocable, and authorizes Bank, or any employee or agent of Bank, on behalf of Pledgor, to adjust and compromise any loss under said insurance and to endorse any check or draft payable to Pledgor in connection with returned or unearned premiums on said insurance or the proceeds of said insurance, and any amount so collected may be applied toward satisfaction of the Indebtedness; provided, however, that Bank shall not be required hereunder so to act. If Pledgor fails to maintain satisfactory insurance, Bank has the option (but not the obligation) to do so and Pledgor agrees to repay all amounts so expended to Bank immediately upon demand, together with interest at the highest lawful default rate which could be charged by Bank on any Indebtedness. Such amounts so expended by Bank shall constitute Indebtedness secured by this Agreement. TEXAS FINANCE CODE § 307.052 COLLATERAL PROTECTION INSURANCE NOTICE : (A) PLEDGOR IS REQUIRED TO: (i) KEEP THE COLLATERAL INSURED AGAINST DAMAGE IN THE AMOUNT EQUAL TO THE INDEBTEDNESS TO BANK; (ii) PURCHASE THE INSURANCE FROM AN INSURER THAT IS AUTHORIZED TO DO BUSINESS IN THE STATE OF TEXAS OR AN ELIGIBLE SURPLUS LINES INSURER; AND (iii) NAME BANK AS THE PERSON TO BE PAID UNDER THE POLICY IN THE EVENT OF LOSS; (B) PLEDGOR MUST, IF REQUIRED BY BANK, DELIVER TO BANK A COPY OF THE POLICY AND PROOF OF THE PAYMENT OF PREMIUMS; AND (C) IF PLEDGOR FAILS TO MEET ANY REQUIREMENT LISTED IN CLAUSE (A) OR (B) ABOVE, BANK MAY OBTAIN COLLATERAL PROTECTION INSURANCE ON BEHALF OF THE PLEDGOR AT THE PLEDGOR’S EXPENSE.

 

 

2.7

On each occasion on which Pledgor evidences to Bank the account balances on and the nature and extent of the Accounts Receivable, Pledgor shall be deemed to have warranted that, except as otherwise indicated: (a) each of those Accounts Receivable is valid and enforceable without performance by Pledgor of any act; (b) each of those account balances are in fact owing; (c) there are no setoffs, recoupments, credits, contra accounts, counterclaims or defenses against any of those Accounts Receivable; (d) as to any Accounts Receivable represented by a note, trade acceptance, draft or other instrument or by any chattel paper or document, the same has/have been endorsed and/or delivered by Pledgor to Bank; (e) Pledgor has not received with respect to any Account Receivable, any notice of the death of the related account debtor, nor of the dissolution, liquidation, termination of existence, insolvency, business failure, appointment of a receiver for, assignment for the benefit of creditors by, or filing of a petition in bankruptcy by or against, the account debtor; and (f) as to each Account Receivable, except as may be expressly permitted by Bank to the contrary in another document, the account debtor is not an affiliate of Pledgor, the United States of America or any department, agency or instrumentality of it, or a citizen or resident of any jurisdiction outside of the United States. Pledgor will do all acts and will execute all writings requested by Bank to perform, enforce performance of, and collect all Accounts Receivable. Pledgor will deliver to Bank such documents, instruments and other writings evidencing or otherwise relating to the Accounts Receivable as Bank may reasonably request from time to time. Pledgor shall neither make nor permit any modification, compromise or substitution for any Account Receivable without the prior written consent of Bank. Bank may at any time and from time to time verify Accounts Receivable directly with account debtors or by other methods acceptable to Bank without notifying Pledgor. Pledgor agrees, at Bank’s request, to arrange or cooperate with Bank in arranging for verification of Accounts Receivable.

 

2.8

Pledgor at all times shall be in strict compliance with all applicable laws, including, without limit, any laws, ordinances, directives, orders, statutes, or regulations an object of which is to regulate or improve health, safety, or the environment (“Environmental Laws”).

 

2.9

If Bank, acting in its sole discretion, redelivers Collateral to Pledgor or Pledgor’s designee for the purpose of: (a) the ultimate sale or exchange thereof; or (b) presentation, collection, renewal, or registration of transfer thereof; or (c) loading, unloading, storing, shipping, transshipping, manufacturing, processing or otherwise dealing with it preliminary to sale or exchange; such redelivery shall be in trust for the benefit of Bank and shall not constitute a release of Bank’s security interest in it or in the proceeds or products of it, unless Bank specifically so agrees in writing. If Pledgor requests any such redelivery, Pledgor expressly authorizes Bank to file a financing statement in form and substance satisfactory to Bank in respect of such Collateral. Any proceeds of Collateral coming into Pledgor’s possession as a result of any such redelivery shall be held in trust for Bank and immediately delivered to Bank for application on the Indebtedness. Bank may (in its sole discretion) deliver any or all of the Collateral to Pledgor, and such delivery by Bank shall discharge Bank from all liability or responsibility for such Collateral. Bank, at its option, may require delivery of any Collateral to Bank at any time with such endorsements or assignments of the Collateral as Bank may request.

 

2.10

At any time and without notice, Bank may, as to any Collateral: (a) cause any or all of such Collateral to be transferred to its name or to the name of its nominees; (b) receive or collect, by legal proceedings or otherwise, all dividends, interest, principal payments and other sums and all other distributions at any time payable or receivable on account of such Collateral, and hold the same as Collateral, or apply the same to the Indebtedness, the manner and distribution of the application to be in the sole discretion of Bank; (c) enter into any extension, subordination, reorganization, deposit, merger or consolidation agreement or any other agreement relating to or affecting such Collateral, and deposit or surrender control of such Collateral, and accept other property in exchange for such Collateral and hold or apply the property or money so received pursuant to this Agreement; and (d) take such actions in its own name or in Pledgor’s name as Bank, in its sole discretion, deems necessary or appropriate to establish exclusive control (as defined in the Uniform Commercial Code) over any Collateral of such nature that perfection of Bank’s security interest may be accomplished by control.

 

2.11

Bank may assign any of the Indebtedness and deliver any or all of the Collateral to its assignee, who then shall have with respect to Collateral so delivered all the rights and powers of Bank under this Agreement, and after that Bank shall be fully discharged from all liability and responsibility with respect to Collateral so delivered.

 

2.12

Pledgor agrees that no security or guarantee now or later held by Bank for the payment of any indebtedness, whether from Borrower, any guarantor or otherwise, and whether in the nature of a security interest, pledge, lien, assignment, setoff, suretyship, guaranty, indemnity, insurance or otherwise, shall affect in any manner the security interests or other rights or interests of Bank under this Agreement or any of the obligations of Pledgor under this Agreement, and Bank, in its sole discretion, without notice to Pledgor, may release, exchange, modify, enforce and otherwise deal with any security or guaranty without affecting in any manner the unconditional pledge of Pledgor under this Agreement.

 

 

2.13

Pledgor shall defend, indemnify and hold harmless Bank, its employees, agents, shareholders, affiliates, officers, and directors from and against any and all claims, damages, fines, expenses, liabilities or causes of action of whatever kind, including, without limit, consultant fees, legal expenses, and attorneys’ fees, suffered by any of them as a direct or indirect result of any actual or asserted violation of any law, including, without limit, Environmental Laws, or of any remediation relating to any property required by any law, including, without limit, Environmental Laws, INCLUDING ANY CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF ACTION OF WHATEVER KIND RESULTING FROM BANK’S OWN NEGLIGENCE, except and to the extent (but only to the extent) caused by Bank’s gross negligence or willful misconduct. The obligations contained in this Section shall survive termination of this Agreement.

 

2.14

[Reserved].

 

2.15

Pledgor agrees that no security or guarantee now or later held by Bank for the payment of any Indebtedness, whether from Borrower, any guarantor, or otherwise, and whether in the nature of a security interest, pledge, lien, assignment, setoff, suretyship, guaranty, indemnity, insurance or otherwise, shall affect in any manner the security interests or other interests granted by Pledgor to or in favor of Bank under this Agreement, or any obligations of Pledgor hereunder or pursuant hereto, and Bank, in its sole discretion, without notice to Pledgor, may release, exchange, modify, enforce and otherwise deal with any security or guaranty without affecting in any manner such security interests or other interests of Bank or any such obligations of Pledgor under this Agreement. Pledgor acknowledges and agrees that Bank has no obligation to acquire or perfect any lien on or security interest in any assets, whether realty or personalty, or to obtain any guaranty to secure payment of the Indebtedness, and Pledgor is not relying upon any guaranty which Bank has or may have or assets in which Bank has or may have a lien or security interest for payment of the Indebtedness.

 

2.16

Pledgor absolutely, unconditionally, knowingly, and expressly waives: notice of acceptance hereof; any defense arising by reason of or deriving from (i) any claim or defense based upon an election of remedies by Bank; or (ii) any election by Bank under the Bankruptcy Code Section 1111(b) to limit the amount of, or any collateral securing, its claim against Pledgor.

 

2.17

[Reserved].

 

2.18

Bank shall have all of the rights to seek recourse against Pledgor to the fullest extent provided for herein. No election by Bank to proceed in one form of action or proceeding, or against any party, or on any obligation, shall constitute a waiver of Bank’s right to proceed in any other form of action or proceeding or against other parties, unless Bank has expressly waived such right in writing. Specifically, but without limiting the generality of the foregoing, no action or proceeding by Bank under any document or instrument evidencing the Indebtedness shall serve to diminish the liability of the Pledgor under this Agreement, except to the extent that Bank finally and unconditionally shall have realized indefeasible payment by such action or proceeding.

 

3. Collection of Proceeds.

 

3.1

Pledgor agrees to collect and enforce payment of all Collateral until Bank shall direct Pledgor to the contrary. Immediately upon notice to Pledgor by Bank following the occurrence and during the continuation of an Event of Default, Pledgor agrees to fully and promptly cooperate and assist Bank in the collection and enforcement of all Collateral and to hold in trust for Bank all payments received in connection with Collateral and from the sale, lease or other disposition of any Collateral, all rights by way of suretyship or guaranty and all rights in the nature of a lien or security interest which Pledgor now or later has regarding Collateral. Immediately upon and after such notice and following the occurrence and during the continuation of an Event of Default, Pledgor agrees to (a) endorse to Bank and immediately deliver to Bank all payments received on Collateral or from the sale, lease or other disposition of any Collateral or arising from any other rights or interests of Pledgor in the Collateral, in the form received by Pledgor without commingling with any other funds, and (b) immediately deliver to Bank all property in Pledgor’s possession or later coming into Pledgor’s possession through enforcement of Pledgor’s rights or interests in the Collateral. Pledgor irrevocably authorizes Bank or any Bank employee or agent to, following the occurrence and during the continuation of an Event of Default, endorse the name of Pledgor upon any checks or other items which are received in payment for any Collateral, and to do any and all things necessary in order to reduce these items to money. Bank shall have no duty as to the collection or protection of Collateral or the proceeds of it, nor as to the preservation of any related rights, beyond the use of reasonable care in the custody and preservation of Collateral in the possession of Bank. Pledgor agrees to take all steps necessary to preserve rights against prior parties with respect to the Collateral. Nothing in this Section 3.1 shall be deemed a consent by Bank to any sale, lease or other disposition of any Collateral.

 

 

3.2

Pledgor agrees that immediately upon Bank’s request (whether or not any Event of Default exists), the Indebtedness shall be on a “remittance basis” in accordance with the following. In connection therewith, Pledgor shall at its sole expense establish and maintain (and Bank, at Bank’s option, may establish and maintain at Pledgor’s expense):

 

(a)

A United States Post Office lock box (the “Lock Box”), to which Bank shall have exclusive access and control. Pledgor expressly authorizes Bank, from time to time, to remove contents from the Lock Box, for disposition in accordance with this Agreement. Pledgor agrees to notify all account debtors and other parties obligated to Pledgor that all payments made to Pledgor (other than payments by electronic funds transfer) shall be remitted, for the credit of Pledgor, to the Lock Box, and Pledgor shall include a like statement on all invoices; and

 

(b)

A non-interest bearing deposit account with Bank which shall be titled as designated by Bank (the “Cash Collateral Account”) to which Bank shall have exclusive access and control. Pledgor agrees to notify all account debtors and other parties obligated to Pledgor that all payments made to Pledgor by electronic funds transfer shall be remitted to the Cash Collateral Account, and Pledgor, at Bank’s request, shall include a like statement on all invoices. Pledgor shall execute all documents and authorizations as required by Bank to establish and maintain the Lock Box and the Cash Collateral Account.

 

3.3

All items or amounts which are remitted to the Lock Box, to the Cash Collateral Account, or otherwise delivered by or for the benefit of Pledgor to Bank on account of partial or full payment of, or with respect to, any Collateral shall, at Bank’s option, (a) be applied to the payment of the Indebtedness, whether then due or not, in such order or at such time of application as Bank may determine in its sole discretion, or (b) be deposited to the Cash Collateral Account. Pledgor agrees that Bank shall not be liable for any loss or damage which Pledgor may suffer as a result of Bank’s processing of items or its exercise of any other rights or remedies under this Agreement, including without limitation indirect, special or consequential damages, loss of revenues or profits, or any claim, demand or action by any third party arising out of or in connection with the processing of items or the exercise of any other rights or remedies under this Agreement. Pledgor agrees to indemnify and hold Bank harmless from and against all such third party claims, demands or actions, and all related expenses or liabilities, including, without limitation, attorneys’ fees, INCLUDING CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF ACTION OF WHATEVER KIND RESULTING FROM BANK’S OWN NEGLIGENCE, except to the extent (but only to the extent) caused by Bank’s gross negligence or willful misconduct.

 

4.

Defaults, Enforcement and Application of Proceeds.

 

4.1

The occurrence or existence of any Event of Default as defined in the Credit Agreement shall constitute an “Event of Default” under this Agreement.

 

4.2

Upon the occurrence and at any time during the continuance or existence of any Event of Default, Bank may at its discretion and without prior notice to Pledgor declare any or all of the Indebtedness to be immediately due and payable, and shall have and may exercise any right or remedy available to it including, without limitation, any one or more of the following rights and remedies:

 

(a)

Exercise all the rights and remedies upon default, in foreclosure and otherwise, available to secured parties under the provisions of the Uniform Commercial Code and other applicable law;

 

(b)

Institute legal proceedings to foreclose upon the lien and security interest granted by this Agreement, to recover judgment for all amounts then due and owing as Indebtedness, and to collect the same out of any Collateral or the proceeds of any sale of it;

 

(c)

Institute legal proceedings for the sale, under the judgment or decree of any court of competent jurisdiction, of any or all Collateral; and/or

 

 

(d)

Personally or by agents, attorneys, or appointment of a receiver, enter upon any premises where Collateral may then be located, and take possession of all or any of it and/or render it unusable; and without being responsible for loss or damage to such Collateral, hold, operate, sell, ship, reclaim, recover, store, finish, maintain, repair, lease, or dispose of all or any Collateral at one or more public or private sales, leasings or other dispositions, at places (including, without limit, Pledgor’s premises) and times and on terms and conditions as Bank may deem fit, without any previous demand or advertisement; and except as provided in this Agreement, all notice of sale, lease or other disposition, and advertisement, and other notice or demand, any right or equity of redemption, and any obligation of a prospective purchaser or lessee to inquire as to the power and authority of Bank to sell, lease, or otherwise dispose of the Collateral or as to the application by Bank of the proceeds of sale or otherwise, which would otherwise be required by, or available to Pledgor under, applicable law are expressly waived by Pledgor to the fullest extent permitted.

 

At any sale pursuant to this Section 4.2, whether under the power of sale, by virtue of judicial proceedings or otherwise, it shall not be necessary for Bank or a public officer under order of a court to have present physical or constructive possession of Collateral to be sold. The recitals contained in any conveyances and receipts made and given by Bank or the public officer to any purchaser at any sale made pursuant to this Agreement shall, to the extent permitted by applicable law, conclusively establish the truth and accuracy of the matters stated (including, without limit, as to the amounts of the principal of and interest on the Indebtedness, the accrual and nonpayment of it and advertisement and conduct of the sale); and all prerequisites to the sale shall be presumed to have been satisfied and performed. Upon any sale of any Collateral, the receipt of the officer making the sale under judicial proceedings or of Bank shall be sufficient discharge to the purchaser for the purchase money, and the purchaser shall not be obligated to see to the application of the money. Any sale of any Collateral under this Agreement shall be a perpetual bar against Pledgor with respect to that Collateral. At any sale or other disposition of the Collateral pursuant to this Section 4.2, Bank disclaims all warranties which would otherwise be given under the Uniform Commercial Code, including, without limit, a disclaimer of any warranty relating to title, possession, quiet enjoyment or the like, and Bank may communicate these disclaimers to a purchaser at such disposition. This disclaimer of warranties will not render the sale commercially unreasonable. Bank may, in its discretion, bid and purchase any of the Collateral at any sale pursuant to this Section 4.2.

 

4.3

Pledgor shall at the request of Bank, notify the account debtors or obligors of Bank’s security interest in the Collateral and direct payment of it to Bank. Bank may, itself, upon the occurrence and at any time during the continuance or existence of any Event of Default, so notify the account debtors or obligors of Bank’s security interest in the Collateral and direct such account debtors or obligors to make payments directly to Bank. At the request of Bank, whether or not an Event of Default shall have occurred, Pledgor shall immediately take such actions as Bank shall request to establish exclusive control (as defined in the Uniform Commercial Code) by Bank over any Collateral which is of such a nature that perfection of a security interest may be accomplished by control.

 

4.4

The proceeds of any sale or other disposition of Collateral authorized by this Agreement shall be applied by Bank first upon all expenses authorized by the Uniform Commercial Code and all reasonable attorney fees and legal expenses incurred by Bank; the balance of the proceeds of the sale or other disposition shall be applied in the payment of the Indebtedness, first to interest, then to principal, then to remaining Indebtedness and the surplus, if any, shall be paid over to Pledgor or to such other person(s) as may be entitled to it under applicable law. Pledgor shall remain liable for any deficiency, which it shall pay to Bank immediately upon demand. Pledgor agrees that Bank shall be under no obligation to accept any noncash proceeds in connection with any sale or disposition of Collateral unless failure to do so would be commercially unreasonable. If Bank agrees in its sole discretion to accept noncash proceeds (unless the failure to do so would be commercially unreasonable), Bank may ascribe any commercially reasonable value to such proceeds. Without limiting the foregoing, Bank may apply any discount factor in determining the present value of proceeds to be received in the future or may elect to apply proceeds to be received in the future only as and when such proceeds are actually received in cash by Bank.

 

 

4.5

Nothing in this Agreement is intended, nor shall it be construed, to preclude Bank from pursuing any other right or remedy provided by law or in equity for the collection of the Indebtedness or for the recovery of any other sum to which Bank may be entitled for the breach of this Agreement by Pledgor. Nothing in this Agreement shall reduce or release in any way any rights or security interests of Bank contained in any existing agreement between Borrower, Pledgor or any Guarantor and Bank.

 

4.6

No waiver of default or consent to any act by Pledgor shall be effective unless in writing and signed by an authorized officer of Bank. No waiver of any default or forbearance on the part of Bank in enforcing any of its rights under this Agreement shall operate as a waiver of any other default or of the same default on a future occasion or of any rights.

 

4.7

Pledgor (a) irrevocably appoints Bank or any agent of Bank (which appointment is coupled with an interest) the true and lawful attorney-in-fact of Pledgor (with full power of substitution) in the name, place and stead of, and at the expense of, Pledgor and (b) authorizes Bank or any agent of Bank, in its own name, at Pledgor’s expense, to do any of the following, as Bank, in its sole discretion, deems appropriate:

 

(i)

upon the occurrence and at any time during the continuance or existence of any Event of Default, to demand, receive, sue for, and give receipts or acquittances for any moneys due or to become due on any Collateral and to endorse any item representing any payment on or proceeds of the Collateral;

 

(ii)

to execute and/or file in the name of and on behalf of Pledgor all financing statements or other filings deemed necessary or desirable by Bank to evidence, perfect, or continue the security interests granted in this Agreement; and

 

(iii)

upon the occurrence and at any time during the continuance or existence of any Event of Default, to do and perform any act on behalf of Pledgor permitted or required under this Agreement.

 

4.8

Upon the occurrence and at any time during the continuance or existence of an Event of Default, Pledgor also agrees, upon request of Bank, to assemble the Collateral and make it available to Bank at any place designated by Bank which is reasonably convenient to Bank and Pledgor. Bank may take any and all actions that it deems necessary or appropriate to protect the Collateral and its security interest in the Collateral, and all costs and expenses for the same shall be added to the Indebtedness and shall be payable upon demand. All risks of loss, damage or destruction to the Collateral shall be borne by Pledgor.

 

4.9

The following shall be the basis for any finder of fact’s determination of the value of any Collateral which is the subject matter of a disposition giving rise to a calculation of any surplus or deficiency under the Uniform Commercial Code: (a) the Collateral which is the subject matter of the disposition shall be valued in an “as is” condition as of the date of the disposition, without any assumption or expectation that such Collateral will be repaired or improved in any manner; (b) the valuation shall be based upon an assumption that the transferee of such Collateral desires a resale of the Collateral for cash promptly (but no later than 30 days) following the disposition; (c) all reasonable closing costs customarily borne by the seller in commercial sales transactions relating to property similar to such Collateral shall be deducted, including, without limitation, brokerage commissions, tax prorations, attorneys’ fees, whether inside or outside counsel is used, and marketing costs; (d) the value of the Collateral which is the subject matter of the disposition shall be further discounted to account for any estimated holding costs associated with maintaining such Collateral pending sale (to the extent not accounted for in (c) above), and other maintenance, operational and ownership expenses; and (e) any expert opinion testimony given or considered in connection with a determination of the value of such Collateral must be given by persons having at least 5years experience in appraising property similar to the Collateral and who have conducted and prepared a complete written appraisal of such Collateral taking into consideration the factors set forth above. The “value” of any such Collateral shall be a factor in determining the amount of proceeds which would have been realized in a disposition to a transferee other than a secured party, a person related to a secured party or a secondary obligor under the Uniform Commercial Code.

 

 

5.

Miscellaneous.

 

5.1

Until Bank is advised in writing by Pledgor to the contrary, all notices, requests and demands required under this Agreement or by law shall be given to, or made upon, Pledgor at the following address:

 

	851 Broken Sound Parkway NW #215
	STREET ADDRESS

 

	Boca Raton		Florida		33487		Palm Beach
	CITY		STATE		ZIP CODE		COUNTY

  

5.2

Pledgor will give Bank not less than ninety (90) days’ prior written notice of all contemplated changes in Pledgor’s name, location, chief executive office, principal place of business, and/or location of any Collateral, but the giving of this notice shall not cure any Event of Default caused by this change.

 

5.3

Bank assumes no duty of performance or other responsibility under any contracts contained within the Collateral.

 

5.4

Bank has the right to sell, assign, transfer, negotiate or grant participations or any interest in, any or all of the Indebtedness and any related obligations, including without limit this Agreement. In connection with the above, but without limiting its ability to make other disclosures to the full extent allowable, Bank may disclose all documents and information which Bank now or later has relating to Pledgor, the Indebtedness or this Agreement, however obtained. Pledgor further agrees that Bank may provide information relating to this Agreement or relating to Pledgor or the Indebtedness to Bank’s parent, affiliates, subsidiaries, and service providers.

 

5.5

In addition to Bank’s other rights, any indebtedness owing from Bank to Pledgor (including, without limitation, amounts maintained by Pledgor as deposit accounts (as such term is defined in the Uniform Commercial Code) with Bank) can be set off and applied by Bank on any Indebtedness at any time(s) either before or after maturity or demand without notice to anyone. Any such action shall not constitute (a) acceptance of collateral in discharge of any portion of the Indebtedness, (b) a retention of collateral in satisfaction of an obligation within the meaning of the Uniform Commercial Code, or (c) if the Indebtedness is secured by California real estate, an action under California Code of Civil Procedure 726.

 

5.6

Pledgor, to the extent not expressly prohibited by applicable law, waives any right to require Bank to: (a) proceed against any person or property; (b) give notice of the terms, time and place of any public or private sale of personal property security held from Borrower or any other person, or otherwise comply with the provisions of the Uniform Commercial Code; or (c) pursue any other remedy in Bank’s power. Pledgor waives notice of acceptance of this Agreement and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment of any Indebtedness, any and all other notices to which the Pledgor might otherwise be entitled, and diligence in collecting any Indebtedness, and agrees that any modification to the terms of the Indebtedness will not affect in any manner the unconditional obligation of Pledgor under this Agreement. Pledgor unconditionally and irrevocably waives each and every defense and setoff of any nature which, under principles of guaranty or otherwise, would operate to impair or diminish in any way the obligation of Pledgor under this Agreement, and acknowledges that such waiver is by this reference incorporated into each security agreement, collateral assignment, pledge and/or other document from Pledgor now or later securing the Indebtedness, and acknowledges that as of the date of this Agreement no such defense or setoff exists. Pledgor ratifies and approves all acts of Bank acting in its capacity as Pledgor’s attorney-in-fact under this Agreement. Neither Bank nor its attorney-in-fact will be liable for any acts or omissions or for any error of judgment or mistake of fact or law.

 

5.7

Pledgor hereby absolutely, unconditionally, knowingly, and expressly waives any and all rights (whether by subrogation, indemnity, reimbursement, or otherwise) to recover from any other person any amounts paid or the value of any Collateral given by Pledgor pursuant to this Agreement until such time as all of the Indebtedness has been fully paid.

 

 

5.8

In the event that applicable law shall obligate Bank to give prior notice to Pledgor of any action to be taken under this Agreement, Pledgor agrees that a written notice given to Pledgor at least ten (10) days before the date of the act shall be reasonable notice of the act and, specifically, reasonable notification of the time and place of any public sale or of the time after which any private sale, lease, or other disposition is to be made, unless a shorter notice period is reasonable under the circumstances (including, without limitation, if the Collateral, or any portion thereof, is perishable or threatens to decline speedily in value). A notice shall be deemed to be given under this Agreement when delivered to Pledgor or when placed in an envelope addressed to Pledgor and deposited, with postage prepaid, in a post office or official depository under the exclusive care and custody of the United States Postal Service or delivered to an overnight courier. The mailing shall be by overnight courier, certified, or first class mail.

 

5.9

Notwithstanding any prior revocation, termination, surrender, or discharge of this Agreement in whole or in part, the effectiveness of this Agreement shall automatically continue or be reinstated, as the case may be, in the event that any payment received or credit given by Bank in respect of the Indebtedness is returned, disgorged, or rescinded under any applicable law, including, without limitation, bankruptcy or insolvency laws, in which case this Agreement, shall be enforceable against Pledgor as if the returned, disgorged, or rescinded payment or credit had not been received or given by Bank, and whether or not Bank relied upon this payment or credit or changed its position as a consequence of it. In the event of continuation or reinstatement of this Agreement, Pledgor agrees upon demand by Bank to execute and deliver to Bank those documents which Bank determines are appropriate to further evidence (in the public records or otherwise) this continuation or reinstatement, although the failure of Pledgor to do so shall not affect in any way the reinstatement or continuation.

 

5.10

This Agreement and all the rights and remedies of Bank under this Agreement shall inure to the benefit of Bank’s successors and assigns and to any other holder who derives from Bank title to or an interest in the Indebtedness or any portion of it, and shall bind Pledgor and the heirs, legal representatives, successors, and assigns of Pledgor. Nothing in this Section 5.10 is deemed a consent by Bank to any assignment by Pledgor.

 

5.11

If there is more than one Pledgor, each Pledgor agrees that all undertakings, warranties and covenants made by Pledgor and all rights, powers and authorities given to or conferred upon Bank are made or given jointly and severally, and each reference to the term Pledgor shall mean each and every Pledgor a party hereto, individually and collectively, jointly and severally.

 

5.12

Except as otherwise expressly provided in this Agreement, all terms in this Agreement which are defined in the Uniform Commercial Code shall have the meanings assigned to them in the applicable Division/Section of the Uniform Commercial Code, as those meanings may be amended, supplemented, revised or replaced from time to time. “Uniform Commercial Code” means the Uniform Commercial Code (or other similarly named statute if not specifically referred to as the Uniform Commercial Code) of the Applicable State, as amended, supplemented, revised or replaced from time to time. Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the Uniform Commercial Code have, at all times, the broadest and most inclusive meanings possible. Accordingly, if the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the Uniform Commercial Code in effect on the date of this Agreement, then such term, as used herein, shall be given such broadened meaning. If the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, than the Uniform Commercial Code in effect on the date of this Agreement, such amendment or holding shall be disregarded in defining terms used in this Agreement. The term “Applicable State”, as used herein, shall mean Texas.

 

5.13

No single or partial exercise, or delay in the exercise, of any right or power under this Agreement, shall preclude other or further exercise of the rights and powers under this Agreement. The unenforceability of any provision of this Agreement shall not affect the enforceability of the remainder of this Agreement. This Agreement constitutes the entire agreement of Pledgor and Bank with respect to the subject matter of this Agreement. No amendment or modification of this Agreement shall be effective unless the same shall be in writing and signed by Pledgor and an authorized officer of Bank

 

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE APPLICABLE STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

 

 

5.14

To the extent that any of the Indebtedness is payable upon demand, nothing contained in this Agreement shall modify the terms and conditions of that Indebtedness nor shall anything contained in this Agreement prevent Bank from making demand, without notice and with or without reason, for immediate payment of any or all of that Indebtedness at any time(s), whether or not an Event of Default has occurred.

 

5.15

Pledgor represents and warrants that Pledgor’s exact name is the name set forth in this Agreement. Pledgor further represents and warrants the following and agrees that Pledgor is, and at all times shall be, located in the following place:

 

Pledgor is a registered organization which is organized under the laws of one of the states comprising the United States (e.g. corporation, limited partnership, registered limited liability partnership or limited liability company), and Pledgor is located (as determined pursuant to the Uniform Commercial Code) in the state under the laws of which it was organized, which is (state): Delaware.

 

The Collateral, and Pledgor’s books and records pertaining to the Collateral, is located at and shall be maintained at the following location(s) and/or the location(s) identified on an Exhibit attached hereto (if any):

 

	851 Broken Sound Parkway NW #215
	STREET ADDRESS

 

	Boca Raton		Florida		33487		Palm Beach
	CITY		STATE		ZIP CODE		COUNTY

 

5.16

A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement under the Uniform Commercial Code and may be filed by Bank in any filing office.

 

5.17

This Agreement shall be terminated only by the filing of a termination statement in accordance with the applicable provisions of the Uniform Commercial Code.

 

5.18

Pledgor agrees to reimburse Bank upon demand for any and all costs and expenses (including, without limit, court costs, legal expenses and reasonable attorneys’ fees, whether inside or outside counsel is used, whether or not suit is instituted and, if suit is instituted, whether at the trial court level, appellate level, in a bankruptcy, probate or administrative proceeding or otherwise) incurred in enforcing or attempting to enforce this Agreement or any of the duties or obligations of Pledgor under this Agreement or in establishing, determining, continuing or defending the validity or priority of Bank’s security interest under this Agreement or in exercising or attempting to exercise any right or remedy under this Agreement or incurred in any other matter or proceeding relating to this Agreement.

 

5.19

All payments to be made hereunder by Pledgor shall be made in lawful money of the United States of America at the time of payment, shall be made in immediately available funds, and shall be made without deduction (whether for taxes or otherwise) or offset.

 

5.20

No right or remedy under this Agreement is intended to be exclusive of any other remedy, but each and every right and remedy shall be cumulative and in addition to any and every other right or remedy given under this Agreement, under any other agreement(s) and those provided by law or in equity. No exercise by Bank of one right or remedy shall be deemed to be an election. No delay or omission by Bank to exercise any right under this Agreement shall impair any such right nor be construed to be a waiver thereof. No failure on the part of Bank to exercise, and no delay in exercising, any right hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.

 

5.21

Pledgor hereby acknowledges and agrees that the references to Borrower set forth herein shall be applicable to the extent that Pledgor and Borrower are not the same person or entity.

 

6.

PLEDGOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.

 

7.

THIS WRITTEN LOAN AGREEMENT (AS DEFINED BY SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

[Signature Appears on the Following Page]

 

 

[Signature Page to Security Agreement]

 

IN WITNESS WHEREOF, Pledgor has executed this Agreement as of the day and year first above written.

 

	PLEDGOR:
	SENSUS HEALTHCARE, INC., a Delaware corporation
	By:	/s/ Michael Sardano
	Name:	Michael Sardano
	Title:	President

 

FOR BANK USE ONLY:

 

Borrower(s):

 

SENSUS HEALTHCARE, INC., a Delaware corporation

Dynamic Security Agreement

 

 

12

 

v3.23.2

Cover	Sep. 11, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Sep. 11, 2023
Entity File Number	001-37714
Entity Registrant Name	SENSUS HEALTHCARE, INC.
Entity Central Index Key	0001494891
Entity Tax Identification Number	27-1647271
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	851 Broken Sound Pkwy.
Entity Address, Address Line Two	NW # 215
Entity Address, City or Town	Boca Raton
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33487
City Area Code	561
Local Phone Number	922-5808
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	SRTS
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

---