SAMPLE MEMORANDUM OF TERMS AND CONDITIONS FOR
Example Company

This Sample Memorandum of Terms and Conditions is not a commitment or an offer to lend and does not guaranty a lending institution will provide you similar terms. This term sheet represents expected terms from local lending institutions indicative of today's credit market and your risk metrics. This outline is only a brief description of the principal terms of suggested facilities that Bank Exchange deems possible in the market based on several factors and recent transactions.

BORROWER(S):

• Example Company ("Borrower")

LENDER:

• Banking Institution ("lending bank")

SAMPLE CREDIT FACILITIES

• Facility 1: $8,000,000 Revolving Credit Facility. Advances under the revolving credit will be limited to a Borrowing Base, to consist of 85% of eligible accounts receivable and 65% of eligible inventory availability limited to $5,000,000.


• Facility 2: $22,000,000 Term Loan


• Facility 3: $5,000,000 Equipment Line. Availability under the equipment line will be limited to no greater than 100% of the hard costs associated with the purchase of machinery and equipment.

SAMPLE PURPOSE:

• Facility 1: Provide for general corporate and ongoing working capital purposes and issuance of standby letters of credit up to an aggregate of $4,000,000.


• Facility 2: Refinance existing term facilities originally borrowed for the construction of owner occupied real estate facilities.


• Facility 3: Provide for on-going equipment acquisitions

SAMPLE AMORTIZATION:

• Facility 1: Available for borrowing, re-paying and re-borrowing until maturity, subject to the Borrowing Base.


• Facility 2: 180 equal monthly installments, on a straight-line basis, amortized over a period of 30 years with any remaining balance due at maturity.


• Facility 3: Draw-downs available for a period of up to 6 months after closing. At the end of the draw-down period, the principal drawn shall be converted into a 7 year fully amortizing term loan.

SAMPLE MATURITY:

• Facility 1: One year from closing.


• Facility 2: Fifteen years from closing.


• Facility 3: Seven years from closing.

SAMPLE INTEREST RATES:

• Facility 1: 1 month fully absorbed LIBOR Rate + 275 bps


• Facility 2: 1 month fully absorbed LIBOR Rate + 350 bps


• Facility 3: 1 month fully absorbed LIBOR Rate + 300 bps

Customary yield protection and prepayment cost recovery provisions will be included in the definitive loan documents.

SAMPLE INTEREST RATE PROTECTION:

The Borrower may be offered an opportunity to enter into and maintain an interest rate protection agreement (the "Hedge Agreement"), which conforms to ISDA standards and has terms and is with a counterparty satisfactory to the lending bank, enabling the Borrower to protect itself against fluctuations in interest rates with respect to all or a portion of the principal amount of Credit Facility (2 and 3). If the lending bank is the counterparty to the Hedge Agreement, all obligations of the Borrower to the lending bank arising pursuant thereto shall be secured by the Collateral (as described below). If the lending bank is not the counterparty, such Hedge Agreement shall be unsecured.

SAMPLE COLLATERAL:

The Credit Facilities and any Hedge Agreement with the lending bank will be secured by, except as otherwise indicated below, first priority perfected security interests in the following collateral:


• (a) all the Borrower's [and the Entity Guarantor's] personal assets, present and future and wherever located, including without limitation, accounts, securities entitlements, deposit accounts, instruments, documents, chattel paper, inventory, goods, machinery, equipment, furniture, fixtures, commercial tort claims, letter of credit rights, general intangibles, payment intangibles, software, licenses, trademarks, tradenames, patents, copyrights and other assets and supporting obligations.


• (b) real property, fixtures and improvements, owned by the Borrower and located at 123 Example Street, Columbia Maryland (the "Property"), and an assignment of all leases and rents on the Property.

The Credit Facilities will be cross-collateralized and cross-defaulted with all other present and future obligations of the Borrower [and the Guarantor] to the Bank.

SAMPLE COMMITMENT/CLOSING FEE:

• .25% of the aggregate amount of the Credit Facilities. The Commitment Fee shall be non refundable.

SAMPLE UNUSED FEE:

• .25 percent (.25%) per annum on the unused portion of the Revolving Credit Facility (facility 1). This fee shall be calculated on the basis of a 360 day year for the actual number of days elapsed and will be payable quarterly in arrears.

SAMPLE COVENANTS

Affirmative and negative covenants, including financial covenants, will be specified by the lending bank for inclusion in the Loan Documents. Covenants are expected to include but may not be limited to (a) limitation on sale of assets; (b) limitation on additional indebtedness, liens and leases; (c) prohibition on change in business; (d) prohibition on change of control; (e) prohibition on mergers and acquisitions; (f) prohibition against distributions to shareholders; and (g) limitation on loans and advances.

Financial covenants are expected to include but may not be limited to tangible net worth, leverage, fixed charge coverage, and debt service coverage, with definitions and covenant levels to be determined by the lending bank.

Typically a lending bank will select one to three covenants. Some examples of common covenants are below:

• The Borrower will maintain at all times a minimum working capital of $_________.


• The Borrower will maintain at all times a minimum Tangible Net Worth of $________.


• The Borrower will maintain at all times a minimum Tangible Net Worth of $_________, to be increased on the last day of each fiscal year of Borrower by an amount equal to ______ percent of the Borrower's net income (if a positive number) for the fiscal year then ending.


• The Borrower will maintain at all times a ratio of current assets to current liabilities of at least _.__ to 1.00.


• The Borrower will maintain at all times a ratio of total liabilities to Tangible Net Worth of less than _.__ to 1.00.


• The Borrower will maintain at all times a ratio of Funded Debt to EBITDA of less than _.__ to 1.00.


• The Borrower will maintain as of the end of each fiscal quarter, on a rolling four quarters basis, a Fixed Charge Coverage Ratio of at least _.__ to 1.00.


• The Borrower will not make capital expenditures in excess of $__________ in any one fiscal year of the Borrower.


• The Borrower will maintain as of the end of each fiscal year a Debt Service Coverage Ratio of at least _.__ to 1.00.


• Solely with respect to the operation of the Property, the Borrower will maintain as of the end of each fiscal year a ratio of: (i) Net Operating Income; to (ii) Property Debt Service; of at least _.__ to 1.00.

SAMPLE DOCUMENTATION:

• Loan Documents in form and substance satisfactory to the Bank must be executed and delivered containing representations, warranties, covenants, indemnities, conditions to lending, events of default and other provisions as are appropriate in the Bank's opinion and specified by the Bank.

SAMPLE MISCELLANEOUS:

• Waiver of jury trial. Confession of Judgment