UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2015
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________to_________
Commission File Number
000-19932
RELIV’ INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 371172197 | |
| (State or other jurisdiction of | (I.R.S. Employer Identification Number) | |
| incorporation or organization) | ||
| 136 Chesterfield Industrial Boulevard | ||
| Chesterfield, Missouri | 63005 | |
| (Address of principal executive offices) | (Zip Code) |
(636) 537-9715
(Registrant’s telephone number, including area code)
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
The number of shares outstanding of the Registrant’s common stock as of November 2, 2015 was 12,919,110 (excluding treasury shares).
INDEX
| Part I – Financial Information | ||
| Item No. 1 | Financial Statements (Unaudited) | 1 |
| Item No. 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 |
| Item No. 4 | Controls and Procedures | 17 |
| Part II – Other Information | ||
| Item No. 6 | Exhibits | 18 |
PART I -- FINANCIAL INFORMATION
Item No. 1 - Financial Statements
Reliv International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| September 30 | December 31 | |||||||
| 2015 | 2014 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 3,158,965 | $ | 4,989,392 | ||||
| Accounts receivable, less allowances of | ||||||||
| $30,200 in 2015 and $26,300 in 2014 | 84,536 | 265,530 | ||||||
| Accounts and note due from employees and distributors | 132,786 | 121,208 | ||||||
| Inventories | ||||||||
| Finished goods | 4,042,963 | 3,782,171 | ||||||
| Raw materials | 1,438,039 | 1,216,031 | ||||||
| Sales aids and promotional materials | 138,485 | 179,263 | ||||||
| Total inventories | 5,619,487 | 5,177,465 | ||||||
| Refundable income taxes | 472,157 | 257,577 | ||||||
| Prepaid expenses and other current assets | 771,657 | 661,038 | ||||||
| Deferred income taxes | 72,000 | 61,000 | ||||||
| Total current assets | 10,311,588 | 11,533,210 | ||||||
| Other assets | 272,682 | 295,929 | ||||||
| Cash surrender value of life insurance | 2,823,160 | 2,747,944 | ||||||
| Note receivable due from distributor | 1,656,449 | 1,732,982 | ||||||
| Deferred income taxes | 714,000 | 686,000 | ||||||
| Intangible assets, net | 2,723,179 | 2,925,775 | ||||||
| Property, plant and equipment: | ||||||||
| Land and land improvements | 893,735 | 883,563 | ||||||
| Building | 9,951,393 | 9,966,748 | ||||||
| Machinery & equipment | 4,350,849 | 4,355,040 | ||||||
| Office equipment | 1,223,983 | 1,235,192 | ||||||
| Computer equipment & software | 2,337,873 | 2,505,229 | ||||||
| 18,757,833 | 18,945,772 | |||||||
| Less: Accumulated depreciation | 12,183,081 | 12,019,802 | ||||||
| Net property, plant and equipment | 6,574,752 | 6,925,970 | ||||||
| Total assets | $ | 25,075,810 | $ | 26,847,810 | ||||
See notes to financial statements.
| 1 |
Reliv International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| September 30 | December 31 | |||||||
| 2015 | 2014 | |||||||
| (unaudited) | ||||||||
| Liabilities and stockholders' equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses: | ||||||||
| Trade accounts payable and other accrued expenses | $ | 2,348,308 | $ | 2,026,198 | ||||
| Distributors' commissions payable | 1,588,129 | 1,753,908 | ||||||
| Sales taxes payable | 225,884 | 292,188 | ||||||
| Payroll, payroll taxes, and incentive compensation payable | 324,539 | 1,114,763 | ||||||
| Total accounts payable and accrued expenses | 4,486,860 | 5,187,057 | ||||||
| Current portion of long-term debt | 813,560 | 697,423 | ||||||
| Total current liabilities | 5,300,420 | 5,884,480 | ||||||
| Noncurrent liabilities: | ||||||||
| Revolving line of credit | - | 500,000 | ||||||
| Long-term debt, less current portion | 3,279,589 | 3,047,267 | ||||||
| Other noncurrent liabilities | 377,825 | 418,785 | ||||||
| Total noncurrent liabilities | 3,657,414 | 3,966,052 | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, par value $.001 per share; 3,000,000 | ||||||||
| shares authorized; -0- shares issued and outstanding | ||||||||
| in 2015 and 2014 | - | - | ||||||
| Common stock, par value $.001 per share; 30,000,000 | ||||||||
| authorized; 14,773,083 shares issued and 12,919,110 | ||||||||
| shares outstanding as of 9/30/2015; 14,673,083 shares | ||||||||
| issued and 12,819,110 shares outstanding as of 12/31/2014 | 14,773 | 14,673 | ||||||
| Additional paid-in capital | 30,484,480 | 30,321,598 | ||||||
| Accumulated deficit | (8,453,145 | ) | (7,434,595 | ) | ||||
| Accumulated other comprehensive loss: | ||||||||
| Foreign currency translation adjustment | (589,572 | ) | (565,838 | ) | ||||
| Treasury stock | (5,338,560 | ) | (5,338,560 | ) | ||||
| Total stockholders' equity | 16,117,976 | 16,997,278 | ||||||
| Total liabilities and stockholders' equity | $ | 25,075,810 | $ | 26,847,810 | ||||
See notes to financial statements.
| 2 |
Reliv International, Inc. and Subsidiaries
Condensed Consolidated Statements of Net
Income (Loss) and Comprehensive Income (Loss)
| (unaudited) | Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Product sales | $ | 11,250,271 | $ | 13,206,275 | $ | 36,401,384 | $ | 39,867,425 | ||||||||
| Handling & freight income | 944,182 | 1,108,006 | 3,072,783 | 3,387,322 | ||||||||||||
| Net sales | 12,194,453 | 14,314,281 | 39,474,167 | 43,254,747 | ||||||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of products sold | 2,603,167 | 2,968,139 | 8,245,871 | 8,855,401 | ||||||||||||
| Distributor royalties and commissions | 4,308,647 | 4,985,450 | 14,048,971 | 15,425,704 | ||||||||||||
| Selling, general and administrative | 5,659,989 | 6,133,040 | 18,244,930 | 19,390,732 | ||||||||||||
| Total costs and expenses | 12,571,803 | 14,086,629 | 40,539,772 | 43,671,837 | ||||||||||||
| Income (loss) from operations | (377,350 | ) | 227,652 | (1,065,605 | ) | (417,090 | ) | |||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 28,536 | 31,736 | 88,991 | 100,008 | ||||||||||||
| Interest expense | (36,814 | ) | (26,054 | ) | (87,502 | ) | (75,689 | ) | ||||||||
| Other income / (expense) | (72,373 | ) | (60,372 | ) | (227,434 | ) | (53,983 | ) | ||||||||
| Income (loss) before income taxes | (458,001 | ) | 172,962 | (1,291,550 | ) | (446,754 | ) | |||||||||
| Provision (benefit) for income taxes | (169,000 | ) | 7,000 | (273,000 | ) | (173,000 | ) | |||||||||
| Net income (loss) | $ | (289,001 | ) | $ | 165,962 | $ | (1,018,550 | ) | $ | (273,754 | ) | |||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation adjustment | (72,673 | ) | (57,101 | ) | (23,734 | ) | (17,194 | ) | ||||||||
| Comprehensive income (loss) | $ | (361,674 | ) | $ | 108,861 | $ | (1,042,284 | ) | $ | (290,948 | ) | |||||
| Earnings (loss) per common share - Basic | $ | (0.02 | ) | $ | 0.01 | $ | (0.08 | ) | $ | (0.02 | ) | |||||
| Weighted average shares | 12,919,000 | 12,666,000 | 12,853,000 | 12,666,000 | ||||||||||||
| Earnings (loss) per common share - Diluted | $ | (0.02 | ) | $ | 0.01 | $ | (0.08 | ) | $ | (0.02 | ) | |||||
| Weighted average shares | 12,919,000 | 12,750,000 | 12,853,000 | 12,666,000 | ||||||||||||
| Cash dividends declared per common share | $ | - | $ | - | $ | - | $ | - | ||||||||
See notes to financial statements.
| 3 |
Reliv International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
| Nine months ended September 30 | ||||||||
| 2015 | 2014 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( 1,018,550 | ) | $ | ( 273,754 | ) | ||
| Adjustments to reconcile net loss to | ||||||||
| net cash used in operating activities: | ||||||||
| Depreciation and amortization | 758,564 | 725,584 | ||||||
| Stock-based compensation | 45,981 | 36,178 | ||||||
| Non-cash life insurance policy accretion | (75,216 | ) | (66,248 | ) | ||||
| Deferred income taxes | (89,000 | ) | (142,000 | ) | ||||
| Foreign currency transaction (gain)/loss | 98,172 | 56,195 | ||||||
| (Increase) decrease in accounts receivable and accounts due | ||||||||
| from employees and distributors | 163,256 | (96,078 | ) | |||||
| (Increase) decrease in inventories | (585,634 | ) | 79,760 | |||||
| (Increase) decrease in refundable income taxes | (214,378 | ) | (234,219 | ) | ||||
| (Increase) decrease in prepaid expenses | ||||||||
| and other current assets | (123,423 | ) | (190,337 | ) | ||||
| (Increase) decrease in other assets | 23,247 | (11,501 | ) | |||||
| Increase (decrease) in income taxes payable | - | (199,558 | ) | |||||
| Increase (decrease) in accounts payable & accrued expenses | ||||||||
| and other noncurrent liabilities | (86,860 | ) | (403,554 | ) | ||||
| Net cash used in operating activities | (1,103,841 | ) | (719,532 | ) | ||||
| Investing activities: | ||||||||
| Proceeds from the sale of property, plant and equipment | 7,181 | 1,200 | ||||||
| Purchase of property, plant and equipment | (224,719 | ) | (511,227 | ) | ||||
| Payments received on distributor note receivable | 72,088 | 67,900 | ||||||
| Payment of life insurance premiums | - | (252,250 | ) | |||||
| Net cash used in investing activities | (145,450 | ) | (694,377 | ) | ||||
| Financing activities: | ||||||||
| Proceeds from line of credit borrowings | - | 500,000 | ||||||
| Repayment of line of credit borrowings | (500,000 | ) | - | |||||
| Proceeds from term loan borrowings | 3,249,501 | - | ||||||
| Principal payments on long-term borrowings | (3,334,552 | ) | (508,899 | ) | ||||
| Net cash used in financing activities | (585,051 | ) | (8,899 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 3,915 | (55,391 | ) | |||||
| Increase (decrease) in cash and cash equivalents | (1,830,427 | ) | (1,478,199 | ) | ||||
| Cash and cash equivalents at beginning of period | 4,989,392 | 6,656,798 | ||||||
| Cash and cash equivalents at end of period | $ | 3,158,965 | $ | 5,178,599 | ||||
| Supplementary disclosure of cash flow information: | ||||||||
| Noncash financing transactions (Note 5): | ||||||||
| Issuance of promissory notes | $ | 424,000 | $ | - | ||||
| Issuance of company common stock | $ | 117,000 | $ | - | ||||
See notes to financial statements.
| 4 |
Reliv International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2015
| Note 1-- | Accounting Policies |
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and notes thereto have been prepared in accordance with the instructions to Form 10-Q and reflect all adjustments (which primarily include normal recurring accruals) which management believes are necessary to present fairly the financial position, results of operations and cash flows. These statements, however, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States. Interim results may not necessarily be indicative of results that may be expected for any other interim period or for the year as a whole. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the annual report on Form 10-K for the year ended December 31, 2014, filed March 24, 2015 with the Securities and Exchange Commission.
Certain reclassifications have been made to 2014 amounts within the condensed consolidated statements of cash flows in order to conform to the current year presentation.
| Note 2-- | Basic and Diluted Earnings (Loss) per Share |
Basic earnings (loss) per common share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed using the weighted average number of common shares and potential dilutive common shares that were outstanding during the period. Potential dilutive common shares consist of outstanding stock options, outstanding stock warrants, and convertible preferred stock.
The following table sets forth the computation of basic and diluted earnings (loss) per share:
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net income (loss) | $ | (289,001 | ) | $ | 165,962 | $ | (1,018,550 | ) | $ | (273,754 | ) | |||||
| Denominator: | ||||||||||||||||
| Denominator for basic earnings (loss) per | ||||||||||||||||
| share--weighted average shares | 12,919,000 | 12,666,000 | 12,853,000 | 12,666,000 | ||||||||||||
| Dilutive effect of employee stock options | ||||||||||||||||
| and other warrants | - | 84,000 | - | - | ||||||||||||
| Denominator for diluted earnings (loss) per | ||||||||||||||||
| share--adjusted weighted average shares | 12,919,000 | 12,750,000 | 12,853,000 | 12,666,000 | ||||||||||||
| Basic earnings (loss) per share | $ | (0.02 | ) | $ | 0.01 | $ | (0.08 | ) | $ | (0.02 | ) | |||||
| Diluted earnings (loss) per share | $ | (0.02 | ) | $ | 0.01 | $ | (0.08 | ) | $ | (0.02 | ) | |||||
Options and warrants to purchase 1,897,025 shares of common stock for the three months and nine months ended September 30, 2015, respectively, were not included in the denominator for diluted earnings (loss) per share because their effect would be antidilutive or because the shares were deemed contingently issuable. Options and warrants to purchase 1,087,333 shares and 1,075,565 shares of common stock for the three months and nine months ended September 30, 2014, respectively, were not included in the denominator for diluted earnings (loss) per share because their effect would be antidilutive or because the shares were deemed contingently issuable.
| 5 |
| Note 3-- | Fair Value of Financial Instruments |
Fair value can be measured using valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those levels:
| Level 1: | Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| Level 2: | Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets or similar assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs that reflect the reporting entity's own assumptions. |
The carrying amount and fair value of the Company's financial instruments are approximately as follows:
| Description | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
| September 30, 2015 | ||||||||||||||||||||
| Long-term debt | $ | 4,093,149 | $ | 4,093,149 | - | $ | 4,093,149 | - | ||||||||||||
| Note receivable | 1,757,740 | 2,020,000 | - | 2,020,000 | - | |||||||||||||||
| Marketable securities | 263,000 | 263,000 | $ | 263,000 | - | - | ||||||||||||||
| December 31, 2014 | ||||||||||||||||||||
| Long-term debt | $ | 4,244,690 | $ | 4,244,690 | - | $ | 4,244,690 | - | ||||||||||||
| Note receivable | 1,829,827 | 2,098,000 | - | 2,098,000 | - | |||||||||||||||
| Marketable securities | 284,000 | 284,000 | $ | 284,000 | - | - | ||||||||||||||
Long-term debt : The fair value of the Company's term and revolver loans approximate carrying value as these loans were incurred within the current year and have variable market-based interest rates which reset every thirty days. The fair value of the Company's obligation for the acquisition of its lunasin technology license approximates carrying value as this obligation is a zero-interest based obligation discounted utilizing an interest rate factor comparable to the Company's market-based interest rate for its term and revolver loans. The fair value of the Company's notes payable obligations approximates carrying value as these obligations were incurred within the current year and have variable market-based interest rates which reset every ninety days.
Note receivable : The Company's note receivable is a variable rate residential mortgage-based financial instrument. An average of published interest rate quotes for a fifteen-year residential jumbo mortgage, a comparable financial instrument, was used to estimate fair value of this note receivable under a discounted cash flow model.
Marketable securities : The assets (trading securities) of the Company's Supplemental Executive Retirement Plan are recorded at fair value on a recurring basis, and are presented within Other Assets in the consolidated balance sheets.
The carrying value of other financial instruments, including cash, accounts receivable and accounts payable, and accrued liabilities approximate fair value due to their short maturities or variable-rate nature of their respective balances.
| 6 |
| Note 4-- | Debt |
| September 30 | December 31 | |||||||
| 2015 | 2014 | |||||||
| Term loan | $ | 3,249,501 | $ | 3,067,442 | ||||
| Revolving line of credit | - | 500,000 | ||||||
| Notes payable | 356,787 | - | ||||||
| Obligation for acquisition of technology license, net | 486,861 | 677,248 | ||||||
| 4,093,149 | 4,244,690 | |||||||
| Less current portion | 813,560 | 697,423 | ||||||
| Total long-term debt | $ | 3,279,589 | $ | 3,547,267 | ||||
Estimated maturities of debt at September 30, 2015 are as follows:
| Twelve months ending September 30, | ||||
| 2016 | $ | 813,560 | ||
| 2017 | 680,008 | |||
| 2018 | 2,599,581 | |||
| $ | 4,093,149 |
On September 30, 2015, the Company entered into a series of lending agreements with a new primary lender which include agreements for a $3.25 million term loan and a $3.5 million revolving credit facility. These lending agreements replace similar borrowings under agreements with the Company’s former primary lender.
The new $3.25 million term loan is for a period of three years and requires monthly term loan payments, under a ten-year amortization, consisting of principal of $27,080 plus interest with a balloon payment for the outstanding balance due and payable on September 30, 2018. The term loan's interest rate is based on the 30-day LIBOR plus 2.25% and was 2.45% at September 30, 2015.
The
new $3.5 million revolving line of credit agreement accrues interest at a floating interest rate based on the 30-day LIBOR plus
2.25% and has a maturity date of September 30, 2016. As of September 30, 2015, there were no outstanding borrowings
on the revolving line of credit.
The proceeds from the new $3.25 million term loan were used to pay off the outstanding term loan and revolving line of credit balances, plus accrued interest, due under loan agreements with the Company’s former primary lender.
Borrowings under the new lending agreements are secured by all tangible and intangible assets of the Company, a whole life insurance policy on the life of the Company’s Chief Executive Officer, and by a mortgage on the real estate of the Company’s headquarters. The new lending agreements also include a covenant requiring the Company to maintain net tangible worth of not less than $9.5 million.
A description of the notes payable is presented in Note 5 -- Long-Term Incentive Compensation Plan.
| 7 |
| Note 5-- | Long-Term Incentive Compensation Plan |
In July 2010, the Company’s Reliv Europe subsidiary entered into a long-term performance-based incentive compensation agreement with the subsidiary’s senior managers. The valuation of the compensation agreement is an EBITDA-based formula derived from the subsidiary’s financial performance and vests in 20% annual increments which began in April 2011. The amount of the incentive, if any, can increase or decrease each quarter in accordance with a 24-month look-back of the subsidiary’s financial performance and the vesting provisions. Upon initial vesting, a manager may elect to exercise his/her put option to receive in cash some or all of his/her respective share of the incentive. For the three months and nine months ended September 30, 2015, compensation expense associated with this incentive plan was $-0- and $90,800, respectively. For the three months and nine months ended September 30, 2014, compensation expense associated with this incentive plan was $54,000 and $186,700, respectively. This compensation expense is presented in Selling, General and Administrative in the accompanying condensed consolidated statements of net income (loss) and comprehensive income (loss). At December 31, 2014, accrued compensation for this incentive plan was $666,000 and was presented in "Payroll, Payroll Taxes, and Incentive Compensation Payable" in the accompanying condensed consolidated balance sheets.
During the second quarter of 2015, the cumulative incentive amount of $756,800 became 100% vested, and concurrently, each of the subsidiary's senior managers exercised 100% of his/her put option. In the aggregate, the Company and the managers agreed to settle the incentive obligation whereby the Company will: issue notes payable of approximately $424,000, issue 100,000 shares of Company common stock (fair value at settlement of $117,000), and make cash payments of approximately $216,000.
The notes payable were issued by the Company to the managers in the second quarter of 2015 and range in length from one to two years with payments of principal and interest due quarterly beginning July 29, 2015. Each of the notes accrue interest at a floating interest rate based on the three-month pound LIBOR rate plus 3%. The interest rate at September 30, 2015 was 3.57906%. The aforementioned issuance of 100,000 shares of Company common stock and cash payments of approximately $216,000 occurred in the third quarter of 2015.
| Note 6-- | Taxes |
The interim financial statement provision for income taxes (benefit) is different from the amounts computed by applying the United States federal statutory income tax rate of 34%. In summary, the reasons for these differences are as follows:
| Nine months ended September 30 | ||||||||
| 2015 | 2014 | |||||||
| Income taxes (benefit) at U.S. statutory rate | $ | (439,000 | ) | $ | (152,000 | ) | ||
| State income taxes, net of federal benefit | 36,000 | 25,000 | ||||||
| Higher / (lower) effective taxes on earnings/losses | ||||||||
| in certain foreign countries | 39,000 | (6,000 | ) | |||||
| Foreign corporate income taxes | 32,000 | 8,000 | ||||||
| Other, net | 59,000 | (48,000 | ) | |||||
| $ | (273,000 | ) | $ | (173,000 | ) | |||
One of the Company's foreign subsidiaries is presently under local country audit for alleged deficiencies (totaling approximately $800,000 plus interest at 20% per annum) in value-added tax (VAT) and withholding tax for the years 2004 through 2006. The Company, in consultation with its legal counsel, believes that there are strong legal grounds that it is not liable to pay the majority of the alleged tax deficiencies. As of December 31, 2010, management estimated and reserved approximately $185,000 in taxes and interest for resolution of this matter and recorded this amount within Selling, General, and Administrative expense in the 2010 Consolidated Statement of Income. In 2011, the Company made good faith deposits to the local tax authority under the tax agency's administrative judicial resolution process. As of September 30, 2015 and December 31, 2014, management's estimated reserve (net of deposits) for this matter is approximately $136,000 and $122,000, respectively. There has been no change in this matter during the first nine months of 2015.
| Note 7-- | Recent Accounting Standard Pending Adoption |
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard is effective for fiscal years beginning after December 15, 2017. The new standard permits the use of either the retrospective or modified retrospective transition method. The Company is currently evaluating the effect, if any, that the updated standard will have on its consolidated financial statements and related disclosures, as well its planned transition method.
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern , which requires management to assess, at each annual and interim reporting period, the entity's ability to continue as a going concern within one year from the date the financial statements are issued and provide related disclosures. The new standard will be effective for the Company for the annual reporting period ending December 31, 2016, with early adoption permitted. This standard is not currently expected to have a material effect on the Company's financial statement disclosures upon adoption, though the ultimate impact will be dependent on the Company's financial condition and expected operating outlook at such time.
| 8 |
FORWARD-LOOKING STATEMENTS
This quarterly report includes both historical and “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future results. Words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or similar words are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this quarterly report on Form 10-Q. We disclaim any intent or obligation to update any forward-looking statements after the date of this annual report to conform such statements to actual results or to changes in our opinions or expectations.
Item No. 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis discusses the financial condition and results of our operations on a consolidated basis, unless otherwise indicated.
Overview
We are a developer, manufacturer and marketer of a proprietary line of nutritional supplements addressing basic nutrition, specific wellness needs, weight management and sports nutrition. We sell our products through an international network marketing system utilizing independent distributors. Sales in the United States represented approximately 78.1% of worldwide net sales for the nine months ended September 30, 2015 and 75.0% of worldwide net sales for the nine months ended September 30, 2014. Our international operations currently generate sales through distributor networks with facilities in Australia, Canada, Indonesia, Malaysia, Mexico, the Philippines, and the United Kingdom. We also operate in Ireland, France, Germany, Austria and the Netherlands from our United Kingdom distribution center, in New Zealand from our Australia office, and in Singapore from our Malaysia office.
We derive our revenues principally through product sales made by our global independent distributor base, which, as of September 30, 2015, consisted of approximately 45,890 distributors. Our sales can be affected by several factors, including our ability to attract new distributors and retain our existing distributor base, our ability to properly train and motivate our distributor base and our ability to develop new products and successfully maintain our current product line.
All of our sales to distributors outside the United States are made in the respective local currency; therefore, our earnings and cash flows are subject to fluctuations due to changes in foreign currency rates as compared to the U.S. dollar. As a result, exchange rate fluctuations may have an effect on sales and gross margins. U.S. generally accepted accounting practices require that our results from operations be converted to U.S. dollars for reporting purposes. Consequently, our reported earnings from foreign operations may be significantly affected by fluctuations in currency exchange rates, generally increasing with a weaker U.S. dollar and decreasing with a strengthening U.S. dollar. Products manufactured by us for sale to our foreign subsidiaries are transacted in U.S. dollars. From time to time, we enter into foreign exchange forward contracts to mitigate our foreign currency exchange risk.
Components of Net Sales and Expense
Product sales represent the actual product purchase price typically paid by our distributors, after giving effect to distributor allowances, which can range from 20% to 40% of suggested retail price, depending on the rank of a particular distributor. Handling and freight income represents the amounts billed to distributors for shipping costs. We record net sales and the related commission expense when the merchandise is shipped.
Our primary expenses include cost of products sold, distributor royalties and commissions and selling, general and administrative expenses.
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Cost of products sold primarily consists of expenses related to raw materials, labor, quality control and overhead directly associated with production of our products and sales materials, as well as shipping costs relating to the shipment of products to distributors, and duties and taxes associated with product exports. Cost of products sold is impacted by the cost of the ingredients used in our products, the cost of shipping distributors’ orders, along with our efficiency in managing the production of our products.
Distributor royalties and commissions are monthly payments made to distributors based on products sold in their downline organization. Based on our distributor agreements, these expenses have typically approximated 23% of sales at suggested retail. Wholesale pricing discounts on distributor orders are based on the retail value of the product. Distributor royalties and commissions are paid on an amount referred to as the business value (“BV”), which is approximately 90% of the retail price of each product. Also, we include other sales leadership bonuses, such as Ambassador bonuses, within this caption. Overall, distributor royalties and commissions remain directly related to the level of our sales and should continue at comparable levels as a percentage of net sales going forward.
Selling, general and administrative expenses include the compensation and benefits paid to our employees, except for those in manufacturing, all other selling expenses, marketing, promotional expenses, travel and other corporate administrative expenses. These other corporate administrative expenses include professional fees, non-manufacturing depreciation and amortization, occupancy costs, communication costs and other similar operating expenses. Selling, general and administrative expenses can be affected by a number of factors, including staffing levels and the cost of providing competitive salaries and benefits; the amount we decide to invest in distributor training and motivational initiatives; and the cost of regulatory compliance.
Results of Operations
Net Sales. Overall net sales decreased by 14.8% in the three months ended September 30, 2015 compared to the same period in 2014. During the third quarter of 2015 (“Q3 2015”), sales in the United States decreased by 10.8%, and international sales decreased by 27.7% over the prior-year period. International sales, when reported in U.S. dollars, were negatively impacted by a stronger U.S. dollar versus all of the currencies of the markets where we do business. Excluding the impact of currency exchange fluctuation, international sales decreased by 18.4%.
The following table summarizes net sales by geographic market for the three months ended September 30, 2015 and 2014.
| Three months ended September 30, | ||||||||||||||||||||||||
| 2015 | 2014 | Change from prior year | ||||||||||||||||||||||
| Amount |
% of Net
Sales |
Amount |
% of Net Sales |
Amount | % | |||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| United States | $ | 9,759 | 80.0 | % | $ | 10,946 | 76.5 | % | $ | (1,187 | ) | (10.8 | )% | |||||||||||
| Australia/New Zealand | 283 | 2.3 | 399 | 2.8 | (116 | ) | (29.1 | ) | ||||||||||||||||
| Canada | 260 | 2.2 | 346 | 2.4 | (86 | ) | (24.9 | ) | ||||||||||||||||
| Mexico | 136 | 1.1 | 192 | 1.3 | (56 | ) | (29.2 | ) | ||||||||||||||||
| Europe | 1,304 | 10.7 | 1,956 | 13.7 | (652 | ) | (33.3 | ) | ||||||||||||||||
| Asia | 452 | 3.7 | 475 | 3.3 | (23 | ) | (4.8 | ) | ||||||||||||||||
| Consolidated total | $ | 12,194 | 100.0 | % | $ | 14,314 | 100.0 | % | $ | (2,120 | ) | (14.8 | )% | |||||||||||
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The following table summarizes net sales by geographic market for the nine months ended September 30, 2015 and 2014.
| Nine months ended September 30, | ||||||||||||||||||||||||
| 2015 | 2014 | Change from prior year | ||||||||||||||||||||||
| Amount |
% of Net
Sales |
Amount |
% of Net Sales |
Amount | % | |||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
| United States | $ | 30,831 | 78.1 | % | $ | 32,453 | 75.0 | % | $ | (1,622 | ) | (5.0 | )% | |||||||||||
| Australia/New Zealand | 984 | 2.5 | 1,261 | 2.9 | (277 | ) | (22.0 | ) | ||||||||||||||||
| Canada | 1,028 | 2.6 | 993 | 2.3 | 35 | 3.5 | ||||||||||||||||||
| Mexico | 567 | 1.4 | 607 | 1.4 | (40 | ) | (6.6 | ) | ||||||||||||||||
| Europe | 4,651 | 11.8 | 6,529 | 15.1 | (1,878 | ) | (28.8 | ) | ||||||||||||||||
| Asia | 1,413 | 3.6 | 1,412 | 3.3 | 1 | 0.1 | ||||||||||||||||||
| Consolidated total | $ | 39,474 | 100.0 | % | $ | 43,255 | 100.0 | % | $ | (3,781 | ) | (8.7 | )% | |||||||||||
The following table sets forth, as of September 30, 2015 and 2014, the number of our active distributors and Master Affiliates and above. The total number of active distributors includes Master Affiliates and above. We define an active distributor as one that enrolls as a distributor or renews his or her distributorship during the prior twelve months. Master Affiliates and above are distributors that have attained the highest level of discount and are eligible for royalties generated by Master Affiliate groups in their downline organization. The active distributor count for Europe includes our preferred customers in France. This program began in mid-2013 and the Europe active distributor count as of September 30, 2015 and 2014 includes 3,106 and 2,822 preferred customers, respectively.
| September 30, 2015 | September 30, 2014 | % Change | ||||||||||||||||||||||
|
Active
Distributors |
Master
Affiliates and Above |
Active
Distributors |
Master
Affiliates and Above |
Active
Distributors |
Master
Affiliates and Above |
|||||||||||||||||||
| United States | 33,360 | 4,500 | 35,680 | 5,240 | (6.5 | )% | (14.1 | )% | ||||||||||||||||
| Australia/New Zealand | 1,210 | 130 | 1,290 | 150 | (6.2 | ) | (13.3 | ) | ||||||||||||||||
| Canada | 1,250 | 230 | 1,250 | 260 | — | (11.5 | ) | |||||||||||||||||
| Mexico | 1,240 | 100 | 1,140 | 140 | 8.8 | (28.6 | ) | |||||||||||||||||
| Europe | 6,390 | 630 | 8,060 | 920 | (20.7 | ) | (31.5 | ) | ||||||||||||||||
| Asia | 2,440 | 300 | 2,000 | 320 | 22.0 | (6.3 | ) | |||||||||||||||||
| Consolidated total | 45,890 | 5,890 | 49,420 | 7,030 | (7.1 | )% | (16.2 | )% | ||||||||||||||||
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The following table provides key statistics related to distributor activity by market and should be read in conjunction with the following discussion.
Distributor Activity by Market
| International | ||||||||||||||||||||||||||||
| United States | AUS/NZ | Canada | Mexico | Europe | Asia | — Total | ||||||||||||||||||||||
| Three Months Ended 9/30/15 | ||||||||||||||||||||||||||||
| Sales in Q3 2015 in USD (in 000's) | $ | 9,759 | $ | 283 | $ | 260 | $ | 136 | $ | 1,304 | $ | 452 | $ | 2,435 | ||||||||||||||
| % change in sales-Q3 2015 vs. Q3 2014: | ||||||||||||||||||||||||||||
| in USD | -10.8 | % | -29.1 | % | -24.9 | % | -29.2 | % | -33.3 | % | -4.8 | % | -27.7 | % | ||||||||||||||
| due to currency fluctuation | - | -20.3 | % | -16.8 | % | -20.1 | % | -4.9 | % | -8.3 | % | -9.3 | % | |||||||||||||||
| Sales in local currency | -10.8 | % | -8.8 | % | -8.1 | % | -9.1 | % | -28.4 | % | 3.5 | % | -18.4 | % | ||||||||||||||
| # of new distributors-Q3 2015 (1) | 2,135 | 78 | 79 | 134 | 591 | 336 | 1,218 | |||||||||||||||||||||
| # of new distributors-Q3 2014 | 2,253 | 120 | 75 | 132 | 870 | 273 | 1,470 | |||||||||||||||||||||
| % change | -5.2 | % | -35.0 | % | 5.3 | % | 1.5 | % | -32.1 | % | 23.1 | % | -17.1 | % | ||||||||||||||
| # of new Master Affiliates-Q3 2015 | 249 | 7 | 9 | 4 | 28 | 36 | 84 | |||||||||||||||||||||
| # of new Master Affiliates-Q3 2014 | 221 | 8 | 12 | 8 | 72 | 19 | 119 | |||||||||||||||||||||
| % change | 12.7 | % | -12.5 | % | -25.0 | % | -50.0 | % | -61.1 | % | 89.5 | % | -29.4 | % | ||||||||||||||
| # of Product orders-Q3 2015 | 41,888 | 2,011 | 1,141 | 924 | 5,256 | 2,991 | 12,323 | |||||||||||||||||||||
| # of Product orders-Q3 2014 | 46,018 | 2,236 | 1,148 | 931 | 5,697 | 3,303 | 13,315 | |||||||||||||||||||||
| % change | -9.0 | % | -10.1 | % | -0.6 | % | -0.8 | % | -7.7 | % | -9.4 | % | -7.5 | % | ||||||||||||||
| International | ||||||||||||||||||||||||||||
| United States | AUS/NZ | Canada | Mexico | Europe | Asia | — Total | ||||||||||||||||||||||
| Nine Months Ended 9/30/15 | ||||||||||||||||||||||||||||
| Sales in YTD 2015 in USD (in 000's) | $ | 30,831 | $ | 984 | $ | 1,028 | $ | 567 | $ | 4,651 | $ | 1,413 | $ | 8,643 | ||||||||||||||
| % change in sales-YTD 2015 vs. YTD 2014: | ||||||||||||||||||||||||||||
| in USD | -5.0 | % | -22.0 | % | 3.5 | % | -6.6 | % | -28.8 | % | 0.1 | % | -20.0 | % | ||||||||||||||
| due to currency fluctuation | - | -15.6 | % | -15.5 | % | -17.4 | % | -6.4 | % | -4.3 | % | -8.6 | % | |||||||||||||||
| Sales in local currency | -5.0 | % | -6.4 | % | 19.0 | % | 10.8 | % | -22.4 | % | 4.4 | % | -11.4 | % | ||||||||||||||
| # of new distributors-YTD 2015 (1) | 6,495 | 204 | 341 | 515 | 2,499 | 888 | 4,447 | |||||||||||||||||||||
| # of new distributors-YTD 2014 | 6,450 | 281 | 245 | 398 | 3,863 | 600 | 5,387 | |||||||||||||||||||||
| % change | 0.7 | % | -27.4 | % | 39.2 | % | 29.4 | % | -35.3 | % | 48.0 | % | -17.4 | % | ||||||||||||||
| # of new Master Affiliates-YTD 2015 | 937 | 25 | 62 | 21 | 156 | 108 | 372 | |||||||||||||||||||||
| # of new Master Affiliates-YTD 2014 | 772 | 23 | 50 | 36 | 322 | 54 | 485 | |||||||||||||||||||||
| % change | 21.4 | % | 8.7 | % | 24.0 | % | -41.7 | % | -51.6 | % | 100.0 | % | -23.3 | % | ||||||||||||||
| # of Product orders-YTD 2015 | 128,602 | 6,117 | 3,892 | 3,162 | 18,195 | 8,496 | 39,862 | |||||||||||||||||||||
| # of Product orders-YTD 2014 | 138,634 | 6,624 | 3,454 | 2,900 | 20,017 | 10,175 | 43,170 | |||||||||||||||||||||
| % change | -7.2 | % | -7.7 | % | 12.7 | % | 9.0 | % | -9.1 | % | -16.5 | % | -7.7 | % | ||||||||||||||
| (1) | The new distributor totals in Europe for Q3 2015 and Q3 2014 include 347 and 443, respectively, new preferred customers in France. The nine-month YTD totals for 2015 and 2014 include 1,563 and 1,676, respectively, new preferred customers in France. |
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United States
| · | Net sales decreased in the United States in Q3 2015 compared to the prior-year quarter as the result of declining distributor enrollments and ordering frequency, coupled by the decrease in the number of active distributors in the United States. |
| · | Flagship products in the LunaRich line, including Reliv Now® and LunaRich X™, constituted 18.9% and 15.8% of net sales in the United States, respectively, in Q3 2015 as our marketing focuses on these two products. For the nine months ended September 30, 2015, sales of Reliv Now and LunaRich X represented 19.0% and 15.4%, respectively, of net sales in the United States. |
| · | Distributor enrollments decreased by 5.2% and new Master Affiliate qualifications increased by 12.7% in Q3 2015 compared to the prior-year quarter. We continue to increase the focus on the business opportunity in 2015; however, our efforts to improve these key metrics have not taken hold at the pace expected. |
| · | Distributor retention was 71.0% in the first nine months of 2015 compared to 65.9% for all of 2014. Distributor retention is determined by the percentage of active distributors from 2014 that renewed their distributorships in 2015. |
| · | Our average order size in Q3 2015 increased by 0.3% to $323 at suggested retail value compared to the prior-year quarter; however, the number of product orders in Q3 2015 decreased by 9.0% compared to the prior-year quarter. |
International Operations
| · | The average foreign exchange rate for the U.S. dollar for the first nine months of 2015 was stronger versus the various local currencies in which we conduct business when compared with the average exchange rates for the same period in 2014, impacting sales negatively by 9.3% in Q3 2015 and by 8.6% for the nine months ended September 30, 2015. |
| · | Sales in Canada decreased by 8.1% in local currency in Q3 2015, as the average order size in Canada dropped by 8.8% compared to the prior-year quarter to C$420 at suggested retail in Q3 2015. |
| · | Sales in Mexico decreased by 9.1% in local currency in Q3 2015. Sales and the average order size in Mexico in Q3 2015 were negatively impacted subsequent to the implementation of a value added tax in Mexico on July 1, 2015. |
| · | Sales in Europe decreased by 28.4% in local currency in Q3 2015 compared to the prior-year quarter. The decline was primarily in the UK as the result of the departure of certain key distributors and a 20.7% decline in the number of active distributors in the European region overall. |
| · | Sales in Asia increased by 3.5% in local currency in Q3 2015 compared to the prior-year quarter. Minor increases in net sales in the Philippines, Singapore, and Indonesia were partially offset by a continued decline in Malaysia. Sales continue to be impaired in Malaysia as the result of a GST sales tax imposed in the country beginning April 1, 2015. |
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Costs and Expenses
The following table sets forth selected results of our operations expressed as a percentage of net sales for the three- and nine-month periods ended September 30, 2015 and 2014. Our results of operations for the periods described below are not necessarily indicative of results of operations for future periods.
Income statement data
(amounts in thousands)
| Three months ended | ||||||||||||||||
| September 30, 2015 | September 30, 2014 | |||||||||||||||
| Amount | % of net sales | Amount | % of net sales | |||||||||||||
| Net sales | $ | 12,194 | 100.0 | % | $ | 14,314 | 100.0 | % | ||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of products sold | 2,603 | 21.4 | 2,968 | 20.7 | ||||||||||||
| Distributor royalties and commissions | 4,309 | 35.3 | 4,985 | 34.8 | ||||||||||||
| Selling, general and adminstrative | 5,660 | 46.4 | 6,133 | 42.9 | ||||||||||||
| Income (loss) from operations | (378 | ) | (3.1 | ) | 228 | 1.6 | ||||||||||
| Interest income | 29 | 0.2 | 31 | 0.2 | ||||||||||||
| Interest expense | (37 | ) | (0.3 | ) | (26 | ) | (0.2 | ) | ||||||||
| Other income/(expense) | (72 | ) | (0.6 | ) | (60 | ) | (0.4 | ) | ||||||||
| Income (loss) before income taxes | (458 | ) | (3.8 | ) | 173 | 1.2 | ||||||||||
| Provision (benefit) for income taxes | (169 | ) | (1.4 | ) | 7 | - | ||||||||||
| Net income (loss) | $ | (289 | ) | (2.4 | )% | $ | 166 | 1.2 | % | |||||||
| Earnings (loss) per common share- Basic and Diluted | $ | (0.02 | ) | $ | 0.01 | |||||||||||
| Nine months ended | ||||||||||||||||
| September 30, 2015 | September 30, 2014 | |||||||||||||||
| Amount | % of net sales | Amount | % of net sales | |||||||||||||
| Net sales | $ | 39,474 | 100.0 | % | $ | 43,255 | 100.0 | % | ||||||||
| Costs and expenses: | ||||||||||||||||
| Cost of products sold | 8,246 | 20.9 | 8,855 | 20.5 | ||||||||||||
| Distributor royalties and commissions | 14,049 | 35.6 | 15,426 | 35.7 | ||||||||||||
| Selling, general and adminstrative | 18,245 | 46.2 | 19,391 | 44.8 | ||||||||||||
| Loss from operations | (1,066 | ) | (2.7 | ) | (417 | ) | (1.0 | ) | ||||||||
| Interest income | 89 | 0.2 | 100 | 0.2 | ||||||||||||
| Interest expense | (88 | ) | (0.2 | ) | (76 | ) | (0.1 | ) | ||||||||
| Other income/(expense) | (227 | ) | (0.6 | ) | (54 | ) | (0.1 | ) | ||||||||
| Loss before income taxes | (1,292 | ) | (3.3 | ) | (447 | ) | (1.0 | ) | ||||||||
| Benefit from income taxes | (273 | ) | (0.7 | ) | (173 | ) | (0.4 | ) | ||||||||
| Net loss | $ | (1,019 | ) | (2.6 | )% | $ | (274 | ) | (0.6 | )% | ||||||
| Loss per common share-Basic and Diluted | $ | (0.08 | ) | $ | (0.02 | ) | ||||||||||
| 14 |
Cost of Products Sold:
| · | The cost of products sold as a percentage of net sales in the first nine months of 2015 (“YTD 2015”) increased slightly compared to the prior-year period. The cost of shipping distributor orders in the United States increased slightly in YTD 2015 compared to the prior-year period, coupled with lower plant utilization and slightly higher production expenses in YTD 2015 versus the prior-year period. The cost of products sold as a percentage of net sales in Q3 2015 was negatively impacted by the same reasons as YTD 2015. |
Distributor Royalties and Commissions:
| · | Distributor royalties and commissions as a percentage of net sales for YTD 2015 compared to the prior-year period remained steady. The slight decrease is primarily the result of a lower payout of wholesale commissions as a percentage of net sales. The average order size of U.S. orders increased by 3.8% for YTD 2015, indicating that distributor orders were placed at a higher discount level in YTD 2015. Under our compensation plan, this results in a smaller wholesale commission payout. |
Selling, General and Administrative Expenses:
| · | Selling, general and administrative expenses declined by $473,000 in the third quarter of 2015 (“Q3 2015”) compared to the same period in 2014, and declined by $1.15 million in YTD 2015 compared to the prior-year period. |
| · | Salaries, salary-related expenses, and incentive compensation decreased in the aggregate by $452,000 in YTD 2015, compared to the prior-year period. Salaries decreased as the result of headcount reductions in the United States in the latter half of 2014 due to attrition and a voluntary retirement incentive. |
| · | Other general and administrative expenses decreased by $271,000 in YTD 2015 vs. the prior-year period. |
| o | Compensation expense recognized as part of a long-term incentive agreement with our management team in our European subsidiary decreased in YTD 2015 by $96,000 compared to the valuation in the prior-year period. During Q2 2015, this long-term incentive agreement became 100% vested and the participants exercised their put option in the agreement. This incentive agreement is described in Note 5 of the Condensed Consolidated Financial Statements. |
| o | Travel expenses decreased by $131,000 as part of an effort to reduce travel outside of sales events. |
| o | Consulting fees decreased by $55,000 in YTD 2015 compared to the prior-year period. |
Offsetting increases in other G&A expenses include:
| o | Property tax expense increased $75,000 compared to the prior year. In 2014, we received a credit on our property taxes as the result of successful appeals on our headquarters property for several prior years. |
| o | In Mexico, we recognized expense of approximately $130,000 during Q2 2015 related to the write-off of VAT credits and VAT paid on behalf of our distributors as part of an amnesty agreement related to the implementation of a new VAT arrangement in that country. |
| · | Sales and marketing expenses decreased by $352,000 in YTD 2015 versus the same period in 2014. Components of the decrease include: |
| o | $168,000 decrease in Star Director and other distributor bonuses, credit card fees, and other expenses related to the level of sales. |
| o | $198,000 decrease in promotional expenses in YTD 2015. |
Offsetting increases include:
| o | $139,000 increase in distributor conferences and meeting expenses. In YTD 2015, we held two regional distributor conferences, and we also resumed our quarterly Master Affiliate Training School program for distributors after a two year absence. Additionally, the cost of our international distributor conference, held this August in St. Louis, was more expensive than the international conference held in the prior-year third quarter. |
Other Income/Expense:
| · | The net expense in YTD 2015 is primarily the result of foreign currency exchange losses on intercompany debt denominated in U.S. dollars in certain of our subsidiaries. |
Income Taxes/Benefit:
| · | We reported an income tax benefit of $273,000 for YTD 2015, an effective benefit rate of 21.1%. |
| · | Our effective benefit rate was lower than the U.S. statutory rate of 34% due to the impact of the non-deductible operating loss in the Philippines and income taxes incurred in other foreign countries. In addition, we recognized state income tax expense due to our separate company filing status in several states. |
| 15 |
| · | See Note 6 of the Condensed Consolidated Financial Statements for additional detail regarding income taxes, including a reconciliation of the income tax benefit to the U.S. statutory rate for each period. |
Net Income:
| · | We recognized a larger net loss in the third quarter of 2015 and the nine-month period of 2015 when compared to the same periods in 2014 as the result of the decline in net sales in the United States and Europe, coupled with the expenses recognized in Mexico as part of the new VAT implementation and amnesty program. |
Financial Condition, Liquidity and Capital Resources
During the first nine months of 2015, we used $1.10 million of net cash in operating activities, $145,000 was used in investing activities, and we used $585,000 in financing activities. This compares to $720,000 of net cash used in operating activities, $694,000 used in investing activities, and $9,000 used in financing activities in the same period of 2014. Cash and cash equivalents decreased by $1.83 million to $3.16 million as of September 30, 2015 compared to $4.99 million as of December 31, 2014.
Significant changes in working capital items consisted of an increase in inventory of $586,000, an increase in prepaid expenses/other current assets of $123,000, and an increase in refundable income taxes of $214,000 in the first nine months of 2015. The increase in inventory is the result of net sales being lower than forecasted in production schedules, and the increase in prepaid expenses/other current assets represents the annual premium payments made in the first quarter on most of the corporate business insurance policies. The increase in refundable income taxes is the result of the income tax benefit generated by our year-to-date net loss for 2015.
Investing activities during the first nine months of 2015 consisted of a net investment of $218,000 for capital expenditures, offset by payments received on a distributor note receivable of $72,000. Financing activities during the first nine months of 2015 consisted of the payoff on long-term and line of credit borrowings with our prior bank of $3.83 million, offset by proceeds of $3.25 million under borrowings from our new primary lender.
Stockholders’ equity decreased to $16.12 million at September 30, 2015 compared to $17.00 million at December 31, 2014. The decrease is primarily due to our net loss during the first nine months of 2015 of $1.02 million. Our working capital balance was $5.01 million at September 30, 2015 compared to $5.65 million at December 31, 2014. The current ratio was 1.95 at September 30, 2015, compared to 1.96 at December 31, 2014. The decline in our working capital balance at September 30, 2015 is primarily the result of the decrease in our cash balance.
On September 30, 2015, we entered into series of agreements with a new primary lender which include agreements for a $3.25 million term loan and a $3.5 million revolving credit facility. These lending agreements replace similar borrowings under agreements with our former primary lender.
The new $3.25 million term loan is for a period of three years and requires monthly term loan payments, under a ten-year amortization, consisting of principal of $27,080 plus interest with a balloon payment for the outstanding balance due and payable on September 30, 2018. The term loan's interest rate is based on the 30-day LIBOR plus 2.25% and was 2.45% at September 30, 2015.
The new $3.5 million revolving line of credit agreement accrues interest at a floating interest rate based on the 30-day LIBOR plus 2.25% and has a maturity date of September 30, 2016. As of September 30, 2015, there were no outstanding borrowings on the revolving line of credit.
The proceeds from the new $3.25 million term loan were used to pay off the outstanding term loan and revolving line of credit balances, plus accrued interest, due under loan agreements with our former primary lender. Borrowings under the new lending agreements are secured by all our tangible and intangible assets, a whole life insurance policy on the life of our Chief Executive Officer, and by a mortgage on the real estate of our headquarters. The new lending agreements also include a covenant requiring us to maintain net tangible worth of not less than $9.5 million beginning in December 2015.
| 16 |
Management believes that our cash on hand, internally generated funds, and the new bank loan facilities will be sufficient to meet working capital requirements and our debt service requirements for the next twelve months.
Critical Accounting Policies
A summary of our critical accounting policies and estimates is presented on pages 26-28 of our 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 24, 2015. Our critical accounting policies remain unchanged as of September 30, 2015.
Item No. 4 - Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2015. Based on such review and evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of September 30, 2015, to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, (a) is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms and (b) is accumulated and communicated to our management, including the officers, as appropriate to allow timely decisions regarding required disclosure. There were no material changes in our internal control over financial reporting during the third quarter of 2015 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
| 17 |
| Exhibit | ||
| Number | Document | |
| 10.1 | Promissory Note (term loan) dated September 30, 2015 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (filed herewith). | |
| 10.2 | Promissory Note (revolving credit facility) dated September 30, 2015 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (filed herewith). | |
| 10.3 | Business Loan Agreement dated September 30, 2015 among Reliv International, Inc., Reliv, Inc., Reliv World Corporation, and SL Technology, Inc., as Borrowers and Enterprise Bank & Trust (filed herewith). | |
| 10.4 | Deed of Trust dated September 30, 2015 between Reliv International, Inc. as Grantor and Enterprise Bank & Trust (filed herewith). | |
| 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the | |
| Securities Exchange Act, as amended (filed herewith). | ||
| 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the | |
| Securities Exchange Act, as amended (filed herewith). | ||
| 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. | |
| 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith). | ||
| 101 | Interactive Data Files, including the following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss), (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) the Notes to Condensed Consolidated Financial Statements. |
| 18 |
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, thereunto duly authorized.
RELIV’ INTERNATIONAL, INC.
| By: | /s/ Robert L. Montgomery | |
| Robert L. Montgomery, Chairman of the Board of Directors and Chief Executive Officer |
Date: November 13, 2015
| By: | /s/ Steven D. Albright | |
| Steven D. Albright, Chief Financial Officer (and accounting officer) |
Date: November 13, 2015
| 19 |
Exhibit 10.1
PROMISSORY NOTE
| Principal | Loan Date | Maturity | Loan No | Call / Coll | Account | Officer | Initials |
| $3,249,500.74 | 09-30-2015 | 09-30-2018 | 8197231 | 1E / 59 | *** |
References in the boxes above are for Lender's use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
| Borrower: |
RELIV' INTERNATIONAL, INC.; RELIV', INC.; RELIV' WORLD CORPORATION; and SL Technology, Inc. 136 Chesterfield Industrial Boulevard Chesterfield, MO 63005 |
Lender: |
Enterprise Bank & Trust St. Peters 300 St. Peters Centre Boulevard St. Peters, MO 63376 |
| Principal Amount: $3,249,500.74 | Date of Note: September 30, 2015 |
PROMISE TO PAY. RELIV' INTERNATIONAL, INC.; RELIV', INC.; RELIV' WORLD CORPORATION; and SL Technology, Inc. ("Borrower") jointly and severally promise to pay to Enterprise Bank & Trust ("Lender"), or order, in lawful money of the United States of America, the principal amount of Three Million Two Hundred Forty-nine Thousand Five Hundred & 74/100 Dollars ($3,249,500.74), together with interest on the unpaid principal balance from September 30, 2015, until paid in full.
PAYMENT. Subject to any payment changes resulting from changes in the Index, Borrower will pay this loan in 35 principal payments of $27,080.00 each and one final principal and interest payment of $2,306,558.67. Borrower's first principal payment is due October 30, 2015, and all subsequent principal payments are due on the same day of each month after that. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning October 30, 2015, with all subsequent interest payments to be due on the same day of each month after that. Borrower's final payment due September 30, 2018, will be for all principal and all accrued interest not yet paid. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any late charges; and then to any unpaid collection costs.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the rate per annum equal to the ICE London Interbank Offered Rate in United States dollars for a thirty (30) day period as it appears in the Wall Street Journal, Money Rates Section, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation. The initial LIBOR Rate applicable hereunder shall be the LIBOR Rate in effect on the first Business Day of the calendar month in which this Note is dated. The LIBOR Rate shall be adjusted on that date which is thirty (30) days following the date of this Note, and again subsequently adjusted on every thirty (30) day anniversary period occurring thereafter until all indebtedness owing under the Note is paid in full, using the LIBOR Rate in effect on the first Business Day of the calendar month in which each LIBOR Rate adjustment occurs. As used herein "Wall Street Journal Money Rates Section" means the display page currently so designated on the Wall Street Journal Money Rates Section (or such other page or such other service as may replace Wall Street Journal Money Rates Section). Notwithstanding the foregoing, in no event shall the LIBOR Rate be deemed to be less than zero. As used herein "Business Day" shall mean any day other than a Saturday, Sunday or a legal holiday in which banks are authorized or required to be closed for the conduct of commercial banking business in St. Louis, Missouri. Lender’s internal records of applicable interest rates shall be determinative in the absence of manifest error. The independent index described herein is sometimes referred to as the index (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. The interest rate change will not occur more often than each month. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 0.201% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the "INTEREST CALCULATION METHOD" paragraph using a rate of 2.250 percentage points over the Index, resulting in an initial rate of 2.451%. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law.
INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this Note is computed using this method. This calculation method results in a higher effective interest rate than the numeric interest rate stated in this Note.
RECEIPT OF PAYMENTS. All payments must be made in U.S. dollars and must be received by Lender at:
Enterprise Bank & Trust
1281 North Warson Road
St. Louis, MO 63132.
All payments must be received by Lender consistent with any written payment instructions provided by Lender. If a payment is made consistent with Lender's payment instructions but received after 4:00 pm Central Time on a business day, Lender will credit Borrower's payment on the next business day.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. Except for the foregoing, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower's making fewer payments. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Enterprise Bank & Trust, St. Peters, 300 St. Peters Centre Boulevard, St. Peters, MO 63376.
LATE CHARGE. If a payment is more than 15 days late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or $100.00, whichever is greater.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this Note shall be increased by adding an additional 3.000 percentage point margin ("Default Rate Margin"). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note:
Payment Default. Borrower fails to make any payment when due under this Note.
Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.
Insecurity. Lender in good faith believes itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.
COLLATERAL. Borrower acknowledges this Note is secured by collateral described in a Deed of Trust and an Assignment of Rents dated September 30, 2015 on real property known as 136 Chesterfield Industrial Boulevard, Chesterfield, MO 63005, and collateral described in four (4) Commercial Security Agreements dated September 30, 2015 and an Assignment of Life Insurance Policy dated September 30, 2015. Failure to identify collateral for this Note shall not constitute a waiver of such collateral.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.
GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Missouri without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of Missouri.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower makes a payment on Borrower's loan and the check or preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph.
CHOICE OF VENUE. Borrower agrees that the sole jurisdiction of any lawsuit arising hereunder shall be the state or federal courts having jurisdiction over any county in which the Lender has an office.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Each Borrower understands and agrees that, with or without notice to Borrower, Lender may with respect to any other Borrower (a) make one or more additional secured or unsecured loans or otherwise extend additional credit; (b) alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of any indebtedness, including increases and decreases of the rate of interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any security, with or without the substitution of new collateral; (d) apply such security and direct the order or manner of sale thereof, including without limitation, any non-judicial sale permitted by the terms of the controlling security agreements, as Lender in its discretion may determine; (e) release, substitute, agree not to sue, or deal with any one or more of Borrower's sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; and (f) determine how, when and what application of payments and credits shall be made on any other indebtedness owing by such other Borrower. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.
ORAL OR UNEXECUTED AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
ILLINOIS INSURANCE NOTICE. Unless Borrower provides Lender with evidence of the insurance coverage required by Borrower's agreement with Lender, Lender may purchase insurance at Borrower's expense to protect Lender's interests in the collateral. This insurance may, but need not, protect Borrower's interests. The coverage that Lender purchases may not pay any claim that Borrower makes or any claim that is made against Borrower in connection with the collateral. Borrower may later cancel any insurance purchased by Lender, but only after providing Lender with evidence that Borrower has obtained insurance as required by their agreement. If Lender purchases insurance for the collateral, Borrower will be responsible for the costs of that insurance, including interest and any other charges Lender may impose in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to Borrower's total outstanding balance or obligation. The costs of the insurance may be more than the cost of insurance Borrower may be able to obtain on Borrower's own.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.
PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER AGREES TO THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
RELIV' INTERNATIONAL, INC.
| By: | /s/ Ryan A. Montgomery | By: | /s/ Steven D. Albright | |
| Ryan A. Montgomery, President of RELIV' INTERNATIONAL, INC. | Steven D. Albright, Chief Financal Officer of RELIV' INTERNATIONAL, INC. | |||
RELIV', INC.
| By: | /s/ Ryan A. Montgomery | By: | /s/ Steven D. Albright | |
| Ryan A. Montgomery, President of RELIV', INC. | Steven D. Albright, Chief Financial Officer of RELIV', INC. | |||
RELIV' WORLD CORPORATION
| By: | /s/ Ryan A. Montgomery | By: | /s/ Steven D. Albright | |
| Ryan A. Montgomery, President of RELIV' WORLD CORPORATION | Steven D. Albright, Chief Financial Officer of RELIV' WORLD CORPORATION | |||
SL TECHNOLOGY, INC.
| By: | /s/ Steven D. Albright | By: | /s/ Brett M. Hastings | |
| Steven D. Albright, Treasurer of SL Technology, Inc. | Brett Hastings, Secretary of SL Technology, Inc. | |||
Exhibit 10.2
PROMISSORY NOTE
| Principal | Loan Date | Maturity | Loan No | Call / Coll | Account | Officer | Initials |
| $3,500,000.00 | 09-30-2015 | 09-30-2016 | 8197223 | 1E / 59 | *** |
References in the boxes above are for Lender's use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
| Borrower: |
RELIV' INTERNATIONAL, INC.; RELIV', INC.; RELIV' WORLD CORPORATION; and SL Technology, Inc. 136 Chesterfield Industrial Boulevard Chesterfield, MO 63005 |
Lender: |
Enterprise Bank & Trust St. Peters 300 St. Peters Centre Boulevard St. Peters, MO 63376 |
| Principal Amount: $3,500,000.00 | Date of Note: September 30, 2015 |
PROMISE TO PAY. RELIV' INTERNATIONAL, INC.; RELIV', INC.; RELIV' WORLD CORPORATION; and SL Technology, Inc. ("Borrower") jointly and severally promise to pay to Enterprise Bank & Trust ("Lender"), or order, in lawful money of the United States of America, the principal amount of Three Million Five Hundred Thousand & 00/100 Dollars ($3,500,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on September 30, 2016. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning October 30, 2015, with all subsequent interest payments to be due on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any late charges; and then to any unpaid collection costs.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the As used herein "LIBOR Rate" shall mean a rate per annum equal to the ICE London Interbank Offered Rate in United States dollars for a thirty (30) day period as it appears in the Wall Street Journal, Money Rates Section, adjusted for any reserve requirement and any subsequent costs arising from a change in government regulation. The initial LIBOR Rate applicable hereunder shall be the LIBOR Rate in effect on the first Business Day of the calendar month in which this Note is dated. The LIBOR Rate shall be adjusted on that date which is thirty (30) days following the date of this Note, and again subsequently adjusted on every thirty (30) day anniversary period occurring thereafter until all indebtedness owing under the Note is paid in full, using the LIBOR Rate in effect on the first Business Day of the calendar month in which each LIBOR Rate adjustment occurs. As used herein "Wall Street Journal Money Rates Section" means the display page currently so designated on the Wall Street Journal Money Rates Section (or such other page or such other service as may replace Wall Street Journal Money Rates Section). Notwithstanding the foregoing, in no event shall the LIBOR Rate be deemed to be less than zero. As used herein "Business Day" shall mean any day other than a Saturday, Sunday or a legal holiday in which banks are authorized or required to be closed for the conduct of commercial banking business in St. Louis, Missouri. Lender’s internal records of applicable interest rates shall be determinative in the absence of manifest error. The independent index described herein is sometimes referred to as the index (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. The interest rate change will not occur more often than each month. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 0.201% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the "INTEREST CALCULATION METHOD" paragraph using a rate of 2.250 percentage points over the Index, resulting in an initial rate of 2.451%. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law.
INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this Note is computed using this method. This calculation method results in a higher effective interest rate than the numeric interest rate stated in this Note.
RECEIPT OF PAYMENTS. All payments must be made in U.S. dollars and must be received by Lender at:
Enterprise Bank & Trust
1281 North Warson Road
St. Louis, MO 63132
.
All payments must be received by Lender consistent with any written payment instructions provided by Lender. If a payment is made consistent with Lender's payment instructions but received after 4:00 pm Central Time on a business day, Lender will credit Borrower's payment on the next business day.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Enterprise Bank & Trust, St. Peters, 300 St. Peters Centre Boulevard, St. Peters, MO 63376.
LATE CHARGE. If a payment is more than 15 days late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or $100.00, whichever is greater.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this Note shall be increased by adding an additional 3.000 percentage point margin ("Default Rate Margin"). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note:
Payment Default. Borrower fails to make any payment when due under this Note.
Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.
Insecurity. Lender in good faith believes itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.
COLLATERAL. Borrower acknowledges this Note is secured by collateral described in a Deed of Trust and an Assignment of Rents dated September 30, 2015 on real property known as 136 Chesterfield Industrial Boulevard, Chesterfield, MO 63005, and collateral described in an Assignment of Life Insurance Policy dated September 30, 2015 and four (4) Commercial Security Agreements dated September 30, 2015. Failure to identify collateral for this Note shall not constitute a waiver of such collateral.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.
GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Missouri without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of Missouri.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $20.00 if Borrower makes a payment on Borrower's loan and the check or preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested either orally or in writing by Borrower or as provided in this paragraph. All oral requests shall be confirmed in writing on the day of the request, on forms acceptable to Lender. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. The following person or persons are authorized to request advances and authorize payments under the line of credit until Lender receives from Borrower, at Lender's address shown above, written notice of revocation of such authority: Ryan A. Montgomery, President of RELIV' INTERNATIONAL, INC.; Steven D. Albright, Chief Financial Officer of RELIV' INTERNATIONAL, INC.; Robert L. Montgomery, Chief Executive Officer of RELIV' INTERNATIONAL, INC.; Stephen M. Merrick, Secretary of RELIV' INTERNATIONAL, INC.; Robert L. Montgomery, Chief Executive Officer of RELIV', INC.; Ryan A. Montgomery, President of RELIV', INC.; Steven D. Albright, Chief Financial Officer of RELIV', INC.; Brett Hastings, Chief Operating Officer of RELIV', INC.; Stephen M. Merrick, Secretary of RELIV', INC.; Robert L. Montgomery, Chief Executive Officer of RELIV' WORLD CORPORATION; Ryan A. Montgomery, President of RELIV' WORLD CORPORATION; Steven D. Albright, Chief Financial Officer of RELIV' WORLD CORPORATION; Brett Hastings, Chief Operating Officer of RELIV' WORLD CORPORATION; Stephen M. Merrick, Secretary of RELIV' WORLD CORPORATION; Ryan Schmidt, President of SL Technology, Inc.; Robert L. Montgomery, Chief Executive Officer of SL Technology, Inc.; Andrew Birney, Chief Operating Officer of SL Technology, Inc.; Ryan A. Montgomery, Vice President of SL Technology, Inc.; Steven D. Albright, Treasurer of SL Technology, Inc.; and Brett Hastings, Secretary of SL Technology, Inc. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender; or (E) Lender in good faith believes itself insecure.
CHOICE OF VENUE. Borrower agrees that the sole jurisdiction of any lawsuit arising hereunder shall be the state or federal courts having jurisdiction over any county in which the Lender has an office.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Each Borrower understands and agrees that, with or without notice to Borrower, Lender may with respect to any other Borrower (a) make one or more additional secured or unsecured loans or otherwise extend additional credit; (b) alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of any indebtedness, including increases and decreases of the rate of interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any security, with or without the substitution of new collateral; (d) apply such security and direct the order or manner of sale thereof, including without limitation, any non-judicial sale permitted by the terms of the controlling security agreements, as Lender in its discretion may determine; (e) release, substitute, agree not to sue, or deal with any one or more of Borrower's sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; and (f) determine how, when and what application of payments and credits shall be made on any other indebtedness owing by such other Borrower. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.
ORAL OR UNEXECUTED AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
ILLINOIS INSURANCE NOTICE. Unless Borrower provides Lender with evidence of the insurance coverage required by Borrower's agreement with Lender, Lender may purchase insurance at Borrower's expense to protect Lender's interests in the collateral. This insurance may, but need not, protect Borrower's interests. The coverage that Lender purchases may not pay any claim that Borrower makes or any claim that is made against Borrower in connection with the collateral. Borrower may later cancel any insurance purchased by Lender, but only after providing Lender with evidence that Borrower has obtained insurance as required by their agreement. If Lender purchases insurance for the collateral, Borrower will be responsible for the costs of that insurance, including interest and any other charges Lender may impose in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to Borrower's total outstanding balance or obligation. The costs of the insurance may be more than the cost of insurance Borrower may be able to obtain on Borrower's own.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.
PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER AGREES TO THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
RELIV' INTERNATIONAL, INC.
| By: | /s/ Ryan A. Montgomery | By: | /s/ Steven D. Albright | |
| Ryan A. Montgomery, President of RELIV' INTERNATIONAL, INC. | Steven D. Albright, Chief Financial Officer of RELIV' INTERNATIONAL, INC. | |||
RELIV', INC.
| By: | /s/ Ryan A. Montgomery | By: | /s/ Steven D. Albright | |
| Ryan A. Montgomery, President of RELIV', INC. | Steven D. Albright, Chief Financial Officer of RELIV', INC. | |||
RELIV' WORLD CORPORATION
| By: | /s/ Ryan A. Montgomery | By: | /s/ Steven D. Albright | |
| Ryan A. Montgomery, President of RELIV' WORLD CORPORATION | Steven D. Albright, Chief Financial Officer of RELIV' WORLD CORPORATION | |||
SL TECHNOLOGY, INC.
| By: | /s/ Steven D. Albright | By: | /s/ Brett M. Hastings | |
| Steven D. Albright, Treasurer of SL Technology, Inc. | Brett Hastings, Secretary of SL Technology, Inc. | |||
LaserPro, Ver. 15.4.11.007 Copr. D+H USA Corporation 1997, 2015. All Rights Reserved. - MO P:\CFI\LPL\D20.FC TR-2656 PR-136 (M)
Exhibit 10.3
BUSINESS LOAN AGREEMENT
| Principal | Loan Date | Maturity | Loan No | Call / Coll | Account | Officer | Initials |
| $3,249,500.74 | 09-30-2015 | 09-30-2018 | 8197231 | 1E / 59 | *** |
References in the boxes above are for Lender's use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
| Borrower: |
RELIV' INTERNATIONAL, INC.; RELIV', INC.; RELIV' WORLD CORPORATION; and SL Technology, Inc. 136 Chesterfield Industrial Boulevard Chesterfield, MO 63005 |
Lender: |
Enterprise Bank & Trust St. Peters 300 St. Peters Centre Boulevard St. Peters, MO 63376 |
THIS BUSINESS LOAN AGREEMENT dated September 30, 2015, is made and executed between RELIV' INTERNATIONAL, INC.; RELIV', INC.; RELIV' WORLD CORPORATION; and SL Technology, Inc. ("Borrower") and Enterprise Bank & Trust ("Lender") on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower's representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender's sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of September 30, 2015, and shall continue in full force and effect until such time as all of Borrower's Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys' fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender's Security Interests; (4) evidence of insurance as required below; (5) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender's counsel.
Borrower's Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.
Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.
MULTIPLE BORROWERS. This Agreement has been executed by multiple obligors who are referred to in this Agreement individually, collectively and interchangeably as "Borrower." Unless specifically stated to the contrary, the word "Borrower" as used in this Agreement, including without limitation all representations, warranties and covenants, shall include all Borrowers. Borrower understands and agrees that, with or without notice to any one Borrower, Lender may (A) make one or more additional secured or unsecured loans or otherwise extend additional credit with respect to any other Borrower; (B) with respect to any other Borrower alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of any indebtedness, including increases and decreases of the rate of interest on the indebtedness; (C) exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any security, with or without the substitution of new collateral; (D) release, substitute, agree not to sue, or deal with any one or more of Borrower's or any other Borrower's sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) determine how, when and what application of payments and credits shall be made on any indebtedness; (F) apply such security and direct the order or manner of sale of any Collateral, including without limitation, any non-judicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) sell, transfer, assign or grant participations in all or any part of the Loan; (H) exercise or refrain from exercising any rights against Borrower or others, or otherwise act or refrain from acting; (I) settle or compromise any indebtedness; and (J) subordinate the payment of all or any part of any of Borrower's indebtedness to Lender to the payment of any liabilities which may be due Lender or others.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:
Organization. RELIV' INTERNATIONAL, INC. is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Delaware. RELIV' INTERNATIONAL, INC. is duly authorized to transact business in the State of Missouri and all other states in which RELIV' INTERNATIONAL, INC. is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which RELIV' INTERNATIONAL, INC. is doing business. Specifically, RELIV' INTERNATIONAL, INC. is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. RELIV' INTERNATIONAL, INC. has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. RELIV' INTERNATIONAL, INC. maintains an office at 136 Chesterfield Industrial Boulevard, Chesterfield, MO 63005. Unless RELIV' INTERNATIONAL, INC. has designated otherwise in writing, the principal office is the office at which RELIV' INTERNATIONAL, INC. keeps its books and records including its records concerning the Collateral. RELIV' INTERNATIONAL, INC. will notify Lender prior to any change in the location of RELIV' INTERNATIONAL, INC.'s state of organization or any change in RELIV' INTERNATIONAL, INC.'s name. RELIV' INTERNATIONAL, INC. shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to RELIV' INTERNATIONAL, INC. and RELIV' INTERNATIONAL, INC.'s business activities.
RELIV', INC. is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Illinois. RELIV', INC. is duly authorized to transact business in the State of Missouri and all other states in which RELIV', INC. is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which RELIV', INC. is doing business. Specifically, RELIV', INC. is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. RELIV', INC. has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. RELIV', INC. maintains an office at 136 Chesterfield Industrial Boulevard, Chesterfield, MO 63005. Unless RELIV', INC. has designated otherwise in writing, the principal office is the office at which RELIV', INC. keeps its books and records including its records concerning the Collateral. RELIV', INC. will notify Lender prior to any change in the location of RELIV', INC.'s state of organization or any change in RELIV', INC.'s name. RELIV', INC. shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to RELIV', INC. and RELIV', INC.'s business activities.
RELIV' WORLD CORPORATION is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Illinois. RELIV' WORLD CORPORATION is duly authorized to transact business in the State of Missouri and all other states in which RELIV' WORLD CORPORATION is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which RELIV' WORLD CORPORATION is doing business. Specifically, RELIV' WORLD CORPORATION is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. RELIV' WORLD CORPORATION has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. RELIV' WORLD CORPORATION maintains an office at 136 Chesterfield Industrial Boulevard, Chesterfield, MO 63005. Unless RELIV' WORLD CORPORATION has designated otherwise in writing, the principal office is the office at which RELIV' WORLD CORPORATION keeps its books and records including its records concerning the Collateral. RELIV' WORLD CORPORATION will notify Lender prior to any change in the location of RELIV' WORLD CORPORATION's state of organization or any change in RELIV' WORLD CORPORATION's name. RELIV' WORLD CORPORATION shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to RELIV' WORLD CORPORATION and RELIV' WORLD CORPORATION's business activities.
SL Technology, Inc. is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Missouri. SL Technology, Inc. is duly authorized to transact business in all other states in which SL Technology, Inc. is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which SL Technology, Inc. is doing business. Specifically, SL Technology, Inc. is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. SL Technology, Inc. has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. SL Technology, Inc. maintains an office at 136 Chesterfield Industrial Boulevard, Chesterfield, MO 63005. Unless SL Technology, Inc. has designated otherwise in writing, the principal office is the office at which SL Technology, Inc. keeps its books and records including its records concerning the Collateral. SL Technology, Inc. will notify Lender prior to any change in the location of SL Technology, Inc.'s state of organization or any change in SL Technology, Inc.'s name. SL Technology, Inc. shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to SL Technology, Inc. and SL Technology, Inc.'s business activities.
Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None.
Authorization. Borrower's execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower's articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower's properties.
Financial Information. Each of Borrower's financial statements supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower's financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.
Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower's ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender's acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:
Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower's financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times.
Financial Statements. Furnish Lender with the following:
Annual Statements. As soon as available, but in no event later than ninety (90) days after the end of each fiscal year, Borrower's balance sheet and income statement for the year ended, audited by a certified public accountant satisfactory to Lender.
Interim Statements. As soon as available, but in no event later than forty-five (45) days after the end of each fiscal quarter, Borrower's balance sheet and profit and loss statement for the period ended, prepared by Borrower.
All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and statements, as Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and ratios:
Tangible Net Worth Requirements. Other Net Worth requirements are as follows:
Borrower shall maintain a Minimum Tangible Net Worth plus Subordinated Debt of not less than $9,500,000.00. This covenant will be measured quarterly commencing with the fiscal quarter ending December 31, 2015.
Tangible Net Worth means the book value of the Borrower’s total assets, excluding from such assets all Intangibles, less total liabilities .
Intangibles means and includes general intangibles (as that term is defined in the Uniform Commercial Code); accounts receivable and advances due from officers, directors, employees, stockholders and affiliates; licenses; good will; prepaid expenses; escrow deposits; covenants not to compete; the excess of cost over book value of acquired assets; franchise fees; organizational costs; finance reserves held for recourse obligations; capitalized research and development costs; the capitalized cost of patents, trademarks, service marks and copyrights net of amortization; and such other similar items as EB&T may from time to time determine in the banks sole discretion.
Subordinated Debt means any and all of Borrower's Debt that is specifically ( through a written agreement) subordinated to the payment of Borrower’s liabilities to EB&T by an agreement in form and substance satisfactory to the bank.
Additional Requirements.
Compliance Certificates. Unless waived in writing by Lender, provide Lender within forty-five (45) days after the end of each fiscal quarter, with a certificate executed by Borrower's chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of certificate, no Event of Default exists under this Agreement.
Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender's loss payable or other endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower's books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.
Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement.
Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner.
Environmental Studies. Promptly conduct and complete, at Borrower's expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.
Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower's properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest.
Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower's expense.
Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower's part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower's failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender's option, will
(A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:
Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) pay any dividends on Borrower's stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of Borrower's stock, or purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary course of business.
Agreements. Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower's obligations under this Agreement or in connection herewith.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender; or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph.
DEFAULT. Each of the following shall constitute an Event of Default under this Agreement:
Payment Default. Borrower fails to make any payment when due under the Loan.
Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.
Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired.
Insecurity. Lender in good faith believes itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Borrower also shall pay all court costs and such additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.
Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Missouri without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Missouri.
Joint and Several Liability. All obligations of Borrower under this Agreement shall be joint and several, and all references to Borrower shall mean each and every Borrower. This means that each Borrower signing below is responsible for all obligations in this Agreement. Where any one or more of the parties is a corporation, partnership, limited liability company or similar entity, it is not necessary for Lender to inquire into the powers of any of the officers, directors, partners, members, or other agents acting or purporting to act on the entity's behalf, and any obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Agreement.
No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any of Borrower's or any Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower's current address. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.
Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any person or circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other person or circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.
Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used in this Agreement shall include all of Borrower's subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower's subsidiaries or affiliates.
Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower's successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower's rights under this Agreement or any interest therein, without the prior written consent of Lender.
Survival of Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.
Time is of the Essence. Time is of the essence in the performance of this Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:
Advance. The word "Advance" means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower's behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.
Agreement. The word "Agreement" means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.
Borrower. The word "Borrower" means RELIV' INTERNATIONAL, INC.; RELIV', INC.; RELIV' WORLD CORPORATION; and SL Technology, Inc. and includes all co-signers and co-makers signing the Note and all their successors and assigns.
Collateral. The word "Collateral" means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.
Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.
Event of Default. The words "Event of Default" mean any of the events of default set forth in this Agreement in the default section of this Agreement.
GAAP. The word "GAAP" means generally accepted accounting principles.
Grantor. The word "Grantor" means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.
Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Loan.
Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.
Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words "Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.
Lender. The word "Lender" means Enterprise Bank & Trust, its successors and assigns.
Loan. The word "Loan" means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.
Note. The word "Note" means the Note dated September 30, 2015 and executed by RELIV' INTERNATIONAL, INC.; RELIV', INC.; RELIV' WORLD CORPORATION; and SL Technology, Inc. in the principal amount of $3,249,500.74, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.
Permitted Liens. The words "Permitted Liens" mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets.
Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.
Security Agreement. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.
ORAL OR UNEXECUTED AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
WAIVE JURY. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED SEPTEMBER 30, 2015.
BORROWER:
RELIV' INTERNATIONAL, INC.
| By: | /s/ Ryan A. Montgomery | By: | /s/ Steven D. Albright | |
| Ryan A. Montgomery, President of RELIV' INTERNATIONAL, INC. | Steven D. Albright, Chief Financal Officer of RELIV' INTERNATIONAL, INC. | |||
| RELIV', INC. | ||||
| By: | /s/ Ryan A. Montgomery | By: | /s/ Steven D. Albright | |
| Ryan A. Montgomery, President of RELIV', INC. | Steven D. Albright, Chief Financial Officer of RELIV', INC. | |||
| By: | /s/ Brett M. Hastings | |||
| Brett Hastings, Chief Operating Officer of RELIV', INC. | ||||
| RELIV' WORLD CORPORATION | ||||
| By: | /s/ Ryan A. Montgomery | By: | /s/ Steven D. Albright | |
| Ryan A. Montgomery, President of RELIV' WORLD CORPORATION | Steven D. Albright, Chief Financial Officer of RELIV' WORLD CORPORATION | |||
| SL TECHNOLOGY, INC. | ||||
| By: | /s/ Steven D. Albright | By: | /s/ Brett M. Hastings | |
| Steven D. Albright, Treasurer of SL Technology, Inc. | Brett Hastings, Secretary of SL Technology, Inc. | |||
| LENDER: | ||||
| ENTERPRISE BANK & TRUST | ||||
| By: | |||
| Authorized Officer |
Exhibit 10.4
DEED OF TRUST
WITH FUTURE ADVANCES AND FUTURE OBLIGATIONS
GOVERNED BY SECTION 443.055 RSMO
THE TOTAL PRINCIPAL AMOUNT OF ALL OBLIGATIONS SECURED IS $6,100,000.00
MAXIMUM LIEN. The total principal amount of obligations at any one time which is secured by this Deed of Trust, in addition to any interest and any amounts advanced by Lender for the protection of the security interests granted herein, is $6,100,000.00. This Deed of Trust, including any advances as described above, shall be governed by all provisions of Section 443.055 of the Revised Statutes of Missouri in effect as of the date of this Deed of Trust.
THIS DEED OF TRUST is dated September 30, 2015, among Reliv' International Inc., a Delaware corporation, whose address is 136 Chesterfield Industrial Boulevard, Chesterfield, MO 63005 ("Grantor"); Enterprise Bank & Trust, whose address is St. Peters, 300 St. Peters Centre Boulevard, St. Peters, MO 63376 ("Grantee", referred to below sometimes as "Lender" and sometimes as "Beneficiary"); and Charford, Inc., whose address is 150 North Meramec, Clayton, MO 63105 (referred to below as "Trustee").
CONVEYANCE AND GRANT. For valuable consideration, Grantor does hereby grant, bargain, sell, convey and confirm unto the Trustee for the benefit of Lender as Beneficiary the following described real property, together with all existing or subsequently erected or affixed buildings, improvements and fixtures; all easements, rights of way, and appurtenances; all water, water rights and ditch rights (including stock in utilities with ditch or irrigation rights); all proceeds (including insurance proceeds); and all other rights, royalties, and profits relating to the real property, including without limitation all minerals, oil, gas, geothermal and similar matters, (the "Real Property") located in St. Louis County, State of Missouri:
Adjusted Lot A of the Boundary Adjustment Plat of Lots 2-A and 2-B of The Boundary Adjustment Plat of Lot 2, Lot 3 and Lot 4 of the Resubdivision of Lot 1 of Chesterfield Industrial Park, according to the plat thereof recorded in Plat Book 345 Page(s) 257 of the St. Louis County Records.
The Real Property or its address is commonly known as 136 Chesterfield Industrial Boulevard and 112 Chesterfield Industrial Boulevard, Chesterfield, MO 63005. The Real Property tax identification number is 17U 110 442 and 17U 130 187.
CROSS-COLLATERALIZATION. In addition to the Note, this Deed of Trust secures all obligations, debts and liabilities, plus interest thereon, of either Grantor or Borrower to Lender, or any one or more of them, as well as all claims by Lender against Borrower and Grantor or any one or more of them, whether now existing or hereafter arising, whether related or unrelated to the purpose of the Note, whether voluntary or otherwise, whether due or not due, direct or indirect, determined or undetermined, absolute or contingent, liquidated or unliquidated, whether Borrower or Grantor may be liable individually or jointly with others, whether obligated as guarantor, surety, accommodation party or otherwise, and whether recovery upon such amounts may be or hereafter may become barred by any statute of limitations, and whether the obligation to repay such amounts may be or hereafter may become otherwise unenforceable.
FUTURE ADVANCES. In addition to the Note, this Deed of Trust secures all future advances made by Lender to Borrower or Grantor whether or not the advances are made pursuant to a commitment. Specifically, without limitation, this Deed of Trust secures, in addition to the amounts specified in the Note, all future obligations of Borrower or Grantor to Lender and all future amounts Lender in its discretion may loan to Borrower or Grantor, together with all interest thereon; however, in no event shall such future advances and obligations (excluding interest) exceed in the aggregate $6,100,000.00.
Grantor presently assigns to Lender (also known as Beneficiary in this Deed of Trust) all of Grantor's right, title, and interest in and to all present and future leases of the Property and all Rents from the Property. In addition, Grantor grants to Lender a Uniform Commercial Code security interest in the Personal Property and Rents.
THIS DEED OF TRUST, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF THE INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THE NOTE, THE RELATED DOCUMENTS, AND THIS DEED OF TRUST. THIS DEED OF TRUST IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS:
GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor warrants that: (a) this Deed of Trust is executed at Borrower's request and not at the request of Lender; (b) Grantor has the full power, right, and authority to enter into this Deed of Trust and to hypothecate the Property; (c) the provisions of this Deed of Trust do not conflict with, or result in a default under any agreement or other instrument binding upon Grantor and do not result in a violation of any law, regulation, court decree or order applicable to Grantor; (d) Grantor has established adequate means of obtaining from Borrower on a continuing basis information about Borrower's financial condition; and (e) Lender has made no representation to Grantor about Borrower (including without limitation the creditworthiness of Borrower).
GRANTOR'S WAIVERS. Grantor waives all rights or defenses arising by reason of any "one action" or "anti-deficiency" law, or any other law which may prevent Lender from bringing any action against Grantor, including a claim for deficiency to the extent Lender is otherwise entitled to a claim for deficiency, before or after Lender's commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale.
PAYMENT AND PERFORMANCE. Except as otherwise provided in this Deed of Trust, Borrower and Grantor shall pay to Lender all Indebtedness secured by this Deed of Trust as it becomes due, and Borrower and Grantor shall strictly perform all their respective obligations under the Note, this Deed of Trust, and the Related Documents.
POSSESSION AND MAINTENANCE OF THE PROPERTY. Borrower and Grantor agree that Borrower's and Grantor's possession and use of the Property shall be governed by the following provisions:
Possession and Use. Until the occurrence of an Event of Default, Grantor may (1) remain in possession and control of the Property; (2) use, operate or manage the Property; and (3) collect the Rents from the Property.
Duty to Maintain. Grantor shall maintain the Property in tenantable condition and promptly perform all repairs, replacements, and maintenance necessary to preserve its value.
Compliance With Environmental Laws. Grantor represents and warrants to Lender that: (1) During the period of Grantor's ownership of the Property, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from the Property; (2) Grantor has no knowledge of, or reason to believe that there has been, except as previously disclosed to and acknowledged by Lender in writing, (a) any breach or violation of any Environmental Laws, (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Property by any prior owners or occupants of the Property, or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters; and (3) Except as previously disclosed to and acknowledged by Lender in writing, (a) neither Grantor nor any tenant, contractor, agent or other authorized user of the Property shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from the Property; and (b) any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations and ordinances, including without limitation all Environmental Laws. Grantor authorizes Lender and its agents to enter upon the Property to make such inspections and tests, at Grantor's expense, as Lender may deem appropriate to determine compliance of the Property with this section of the Deed of Trust. Any inspections or tests made by Lender shall be for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Grantor or to any other person. The representations and warranties contained herein are based on Grantor's due diligence in investigating the Property for Hazardous Substances. Grantor hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any such laws; and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Deed of Trust or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release occurring prior to Grantor's ownership or interest in the Property, whether or not the same was or should have been known to Grantor. The provisions of this section of the Deed of Trust, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the satisfaction and reconveyance of the lien of this Deed of Trust and shall not be affected by Lender's acquisition of any interest in the Property, whether by foreclosure or otherwise.
Nuisance, Waste. Grantor shall not cause, conduct or permit any nuisance nor commit, permit, or suffer any stripping of or waste on or to the Property or any portion of the Property. Without limiting the generality of the foregoing, Grantor will not remove, or grant to any other party the right to remove, any timber, minerals (including oil and gas), coal, clay, scoria, soil, gravel or rock products without Lender's prior written consent.
Removal of Improvements. Grantor shall not demolish or remove any Improvements from the Real Property without Lender's prior written consent. As a condition to the removal of any Improvements, Lender may require Grantor to make arrangements satisfactory to Lender to replace such Improvements with Improvements of at least equal value.
Lender's Right to Enter. Lender and Lender's agents and representatives may enter upon the Real Property at all reasonable times to attend to Lender's interests and to inspect the Real Property for purposes of Grantor's compliance with the terms and conditions of this Deed of Trust.
Compliance with Governmental Requirements. Grantor shall promptly comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the use or occupancy of the Property, including without limitation, the Americans With Disabilities Act. Grantor may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Grantor has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Property are not jeopardized. Lender may require Grantor to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest.
Duty to Protect. Grantor agrees neither to abandon or leave unattended the Property. Grantor shall do all other acts, in addition to those acts set forth above in this section, which from the character and use of the Property are reasonably necessary to protect and preserve the Property.
DUE ON SALE - CONSENT BY LENDER. Lender may, at Lender's option, declare immediately due and payable all sums secured by this Deed of Trust upon the sale or transfer, without Lender's prior written consent, of all or any part of the Real Property, or any interest in the Real Property. A "sale or transfer" means the conveyance of Real Property or any right, title or interest in the Real Property; whether legal, beneficial or equitable; whether voluntary or involuntary; whether by outright sale, deed, installment sale contract, land contract, contract for deed, leasehold interest with a term greater than three (3) years, lease-option contract, or by sale, assignment, or transfer of any beneficial interest in or to any land trust holding title to the Real Property, or by any other method of conveyance of an interest in the Real Property. If any Grantor is a corporation, partnership or limited liability company, transfer also includes any change in ownership of more than twenty-five percent (25%) of the voting stock, partnership interests or limited liability company interests, as the case may be, of such Grantor. However, this option shall not be exercised by Lender if such exercise is prohibited by federal law or by Missouri law.
TAXES AND LIENS. The following provisions relating to the taxes and liens on the Property are part of this Deed of Trust:
Payment. Grantor shall pay when due (and in all events prior to delinquency) all taxes, special taxes, assessments, charges (including water and sewer), fines and impositions levied against or on account of the Property, and shall pay when due all claims for work done on or for services rendered or material furnished to the Property. Grantor shall not further encumber the Property or permit or suffer any mechanic's, laborer's, materialman's, statutory or other lien on the Property, except for the lien of taxes and assessments not due and except as otherwise provided in this Deed of Trust.
Right to Contest. Grantor may withhold payment of any tax, assessment, or claim in connection with a good faith dispute over the obligation to pay, so long as Lender's interest in the Property is not jeopardized. If a lien arises or is filed as a result of nonpayment, Grantor shall within fifteen (15) days after the lien arises or, if a lien is filed, within fifteen (15) days after Grantor has notice of the filing, secure the discharge of the lien, or if requested by Lender, deposit with Lender cash or a sufficient corporate surety bond or other security satisfactory to Lender in an amount sufficient to discharge the lien plus any costs and attorneys' fees, or other charges that could accrue as a result of a foreclosure or sale under the lien. In any contest, Grantor shall defend itself and Lender and shall satisfy any adverse judgment before enforcement against the Property. Grantor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings.
Evidence of Payment. Grantor shall upon demand furnish to Lender satisfactory evidence of payment of the taxes or assessments and shall authorize the appropriate governmental official to deliver to Lender at any time a written statement of the taxes and assessments against the Property.
Notice of Construction. Grantor shall notify Lender at least fifteen (15) days before any work is commenced, any services are furnished, or any materials are supplied to the Property, if any mechanic's lien, materialmen's lien, or other lien could be asserted on account of the work, services, or materials and the cost exceeds $5,000.00. Grantor will upon request of Lender furnish to Lender advance assurances satisfactory to Lender that Grantor can and will pay the cost of such improvements.
PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the Property are a part of this Deed of Trust.
Maintenance of Insurance. Grantor shall procure and maintain policies of fire insurance with standard extended coverage endorsements on a replacement basis for the full insurable value covering all Improvements on the Real Property in an amount sufficient to avoid application of any coinsurance clause, and with a standard mortgagee clause in favor of Lender. Grantor shall also procure and maintain comprehensive general liability insurance in such coverage amounts as Lender may request with Trustee and Lender being named as additional insureds in such liability insurance policies. Additionally, Grantor shall maintain such other insurance, including but not limited to hazard, business interruption, and boiler insurance, as Lender may reasonably require. Policies shall be written in form, amounts, coverages and basis reasonably acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Grantor or any other person. The Real Property is or will be located in an area designated by the Administrator of the Federal Emergency Management Agency as a special flood hazard area. Grantor agrees to obtain and maintain Federal Flood Insurance, if available, for the full unpaid principal balance of the loan and any prior liens on the property securing the loan, up to the maximum policy limits set under the National Flood Insurance Program, or as otherwise required by Lender, and to maintain such insurance for the term of the loan.
Application of Proceeds. Grantor shall promptly notify Lender of any loss or damage to the Property if the estimated cost of repair or replacement exceeds $5,000.00. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. Whether or not Lender's security is impaired, Lender may, at Lender's election, receive and retain the proceeds of any insurance and apply the proceeds to the reduction of the Indebtedness, payment of any lien affecting the Property, or the restoration and repair of the Property. If Lender elects to apply the proceeds to restoration and repair, Grantor shall repair or replace the damaged or destroyed Improvements in a manner satisfactory to Lender. Lender shall, upon satisfactory proof of such expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of repair or restoration if Grantor is not in default under this Deed of Trust. Any proceeds which have not been disbursed within 180 days after their receipt and which Lender has not committed to the repair or restoration of the Property shall be used first to pay any amount owing to Lender under this Deed of Trust, then to pay accrued interest, and the remainder, if any, shall be applied to the principal balance of the Indebtedness. If Lender holds any proceeds after payment in full of the Indebtedness, such proceeds shall be paid to Grantor as Grantor's interests may appear.
Grantor's Report on Insurance. Upon request of Lender, however not more than once a year, Grantor shall furnish to Lender a report on each existing policy of insurance showing: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the property insured, the then current replacement value of such property, and the manner of determining that value; and (5) the expiration date of the policy. Grantor shall, upon request of Lender, have an independent appraiser satisfactory to Lender determine the cash value replacement cost of the Property.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Property or if Grantor fails to comply with any provision of this Deed of Trust or any Related Documents, including but not limited to Grantor's failure to discharge or pay when due any amounts Grantor is required to discharge or pay under this Deed of Trust or any Related Documents, Lender on Grantor's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Property and paying all costs for insuring, maintaining and preserving the Property. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. The Deed of Trust also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default.
WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership of the Property are a part of this Deed of Trust:
Title. Grantor warrants that: (a) Grantor holds good and marketable title of record to the Property in fee simple, free and clear of all liens and encumbrances other than those set forth in the Real Property description or in any title insurance policy, title report, or final title opinion issued in favor of, and accepted by, Lender in connection with this Deed of Trust, and (b) Grantor has the full right, power, and authority to execute and deliver this Deed of Trust to Lender.
Defense of Title. Subject to the exception in the paragraph above, Grantor warrants and will forever defend the title to the Property against the lawful claims of all persons. In the event any action or proceeding is commenced that questions Grantor's title or the interest of Trustee or Lender under this Deed of Trust, Grantor shall defend the action at Grantor's expense. Grantor may be the nominal party in such proceeding, but Lender shall be entitled to participate in the proceeding and to be represented in the proceeding by counsel of Lender's own choice, and Grantor will deliver, or cause to be delivered, to Lender such instruments as Lender may request from time to time to permit such participation.
Compliance With Laws. Grantor warrants that the Property and Grantor's use of the Property complies with all existing applicable laws, ordinances, and regulations of governmental authorities.
Survival of Representations and Warranties. All representations, warranties, and agreements made by Grantor in this Deed of Trust shall survive the execution and delivery of this Deed of Trust, shall be continuing in nature, and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full.
CONDEMNATION. The following provisions relating to condemnation proceedings are a part of this Deed of Trust:
Proceedings. If any proceeding in condemnation is filed, Grantor shall promptly notify Lender in writing, and Grantor shall promptly take such steps as may be necessary to defend the action and obtain the award. Grantor may be the nominal party in such proceeding, but Lender shall be entitled to participate in the proceeding and to be represented in the proceeding by counsel of its own choice, and Grantor will deliver or cause to be delivered to Lender such instruments and documentation as may be requested by Lender from time to time to permit such participation.
Application of Net Proceeds. If all or any part of the Property is condemned by eminent domain proceedings or by any proceeding or purchase in lieu of condemnation, Lender may at its election require that all or any portion of the net proceeds of the award be applied to the Indebtedness or the repair or restoration of the Property. The net proceeds of the award shall mean the award after payment of all reasonable costs, expenses, and attorneys' fees incurred by Trustee or Lender in connection with the condemnation.
IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The following provisions relating to governmental taxes, fees and charges are a part of this Deed of Trust:
Current Taxes, Fees and Charges. Upon request by Lender, Grantor shall execute such documents in addition to this Deed of Trust and take whatever other action is requested by Lender to perfect and continue Lender's lien on the Real Property. Grantor shall reimburse Lender for all taxes, as described below, together with all expenses incurred in recording, perfecting or continuing this Deed of Trust, including without limitation all taxes, fees, documentary stamps, and other charges for recording or registering this Deed of Trust.
Taxes. The following shall constitute taxes to which this section applies: (1) a specific tax upon this type of Deed of Trust or upon all or any part of the Indebtedness secured by this Deed of Trust; (2) a specific tax on Borrower which Borrower is authorized or required to deduct from payments on the Indebtedness secured by this type of Deed of Trust; (3) a tax on this type of Deed of Trust chargeable against the Lender or the holder of the Note; and (4) a specific tax on all or any portion of the Indebtedness or on payments of principal and interest made by Borrower.
Subsequent Taxes. If any tax to which this section applies is enacted subsequent to the date of this Deed of Trust, this event shall have the same effect as an Event of Default, and Lender may exercise any or all of its available remedies for an Event of Default as provided below unless Grantor either (1) pays the tax before it becomes delinquent, or (2) contests the tax as provided above in the Taxes and Liens section and deposits with Lender cash or a sufficient corporate surety bond or other security satisfactory to Lender.
SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to this Deed of Trust as a security agreement are a part of this Deed of Trust:
Security Agreement. This instrument shall constitute a Security Agreement to the extent any of the Property constitutes fixtures, and Lender shall have all of the rights of a secured party under the Uniform Commercial Code as amended from time to time.
Security Interest. Upon request by Lender, Grantor shall take whatever action is requested by Lender to perfect and continue Lender's security interest in the Rents and Personal Property. In addition to recording this Deed of Trust in the real property records, Lender may, at any time and without further authorization from Grantor, file executed counterparts, copies or reproductions of this Deed of Trust as a financing statement. Grantor shall reimburse Lender for all expenses incurred in perfecting or continuing this security interest. Upon default, Grantor shall not remove, sever or detach the Personal Property from the Property. Upon default, Grantor shall assemble any Personal Property not affixed to the Property in a manner and at a place reasonably convenient to Grantor and Lender and make it available to Lender within three (3) days after receipt of written demand from Lender to the extent permitted by applicable law.
Addresses. The mailing addresses of Grantor (debtor) and Lender (secured party) from which information concerning the security interest granted by this Deed of Trust may be obtained (each as required by the Uniform Commercial Code) are as stated on the first page of this Deed of Trust.
FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to further assurances and attorney-in-fact are a part of this Deed of Trust:
Further Assurances. At any time, and from time to time, upon request of Lender, Grantor will make, execute and deliver, or will cause to be made, executed or delivered, to Lender or to Lender's designee, and when requested by Lender, cause to be filed, recorded, refiled, or rerecorded, as the case may be, at such times and in such offices and places as Lender may deem appropriate, any and all such mortgages, deeds of trust, security deeds, security agreements, financing statements, continuation statements, instruments of further assurance, certificates, and other documents as may, in the sole opinion of Lender, be necessary or desirable in order to effectuate, complete, perfect, continue, or preserve (1) Borrower's and Grantor's obligations under the Note, this Deed of Trust, and the Related Documents, and (2) the liens and security interests created by this Deed of Trust as first and prior liens on the Property, whether now owned or hereafter acquired by Grantor. Unless prohibited by law or Lender agrees to the contrary in writing, Grantor shall reimburse Lender for all costs and expenses incurred in connection with the matters referred to in this paragraph.
Attorney-in-Fact. If Grantor fails to do any of the things referred to in the preceding paragraph, Lender may do so for and in the name of Grantor and at Grantor's expense. For such purposes, Grantor hereby irrevocably appoints Lender as Grantor's attorney-in-fact for the purpose of making, executing, delivering, filing, recording, and doing all other things as may be necessary or desirable, in Lender's sole opinion, to accomplish the matters referred to in the preceding paragraph.
TENANCY OF GRANTOR. By the execution and delivery of this Deed of Trust, Grantor does hereby become a tenant of the Trustee, and Trustee hereby lets to Grantor the Property until the Indebtedness is fully paid or until a sale under the provisions of the paragraph of this Deed of Trust entitled "Foreclosure," at a rental of one cent per month, payable monthly on demand. Grantor agrees to surrender peaceable possession of the Property and every part of the Property sold or conveyed by the Trustee under the terms of this Deed of Trust to the purchaser at such sale upon the day of such sale, without notice or demand.
REINSTATEMENT OF SECURITY INTEREST. If payment is made by Borrower, whether voluntarily or otherwise, or by guarantor or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment (A) to Borrower's trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, (B) by reason of any judgment, decree or order of any court or administrative body having jurisdiction over Lender or any of Lender's property, or (C) by reason of any settlement or compromise of any claim made by Lender with any claimant (including without limitation Borrower), the Indebtedness shall be considered unpaid for the purpose of enforcement of this Deed of Trust and this Deed of Trust shall continue to be effective or shall be reinstated, as the case may be, notwithstanding any cancellation of this Deed of Trust or of any note or other instrument or agreement evidencing the Indebtedness and the Property will continue to secure the amount repaid or recovered to the same extent as if that amount never had been originally received by Lender, and Grantor shall be bound by any judgment, decree, order, settlement or compromise relating to the Indebtedness or to this Deed of Trust.
EVENTS OF DEFAULT. Each of the following, at Lender's option, shall constitute an Event of Default under this Deed of Trust:
Payment Default. Borrower fails to make any payment when due under the Indebtedness.
Other Defaults. Borrower or Grantor fails to comply with or to perform any other term, obligation, covenant or condition contained in this Deed of Trust or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower or Grantor.
Compliance Default. Failure to comply with any other term, obligation, covenant or condition contained in this Deed of Trust, the Note or in any of the Related Documents.
Default on Other Payments. Failure of Grantor within the time required by this Deed of Trust to make any payment for taxes or insurance, or any other payment necessary to prevent filing of or to effect discharge of any lien.
False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or Grantor or on Borrower's or Grantor's behalf under this Deed of Trust or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
Termination of Future Advances. Grantor's exercise of Grantor's rights under Mo. Rev. Stat. Section 443.055 (or any successor provision to such statute) to terminate the operation of this Deed of Trust as security for future advances on future obligations.
Defective Collateralization. This Deed of Trust or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.
Insolvency. The dissolution or termination of Borrower's or Grantor's existence as a going business, the insolvency of Borrower or Grantor, the appointment of a receiver for any part of Borrower's or Grantor's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower or Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or Grantor or by any governmental agency against any property securing the Indebtedness. This includes a garnishment of any of Borrower's or Grantor's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower or Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower or Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.
Breach of Other Agreement. Any breach by Borrower or Grantor under the terms of any other agreement between Borrower or Grantor and Lender that is not remedied within any grace period provided therein, including without limitation any agreement concerning any indebtedness or other obligation of Borrower or Grantor to Lender, whether existing now or later.
Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the Indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.
Adverse Change. A material adverse change occurs in Borrower's or Grantor's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired.
Insecurity. Lender in good faith believes itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Deed of Trust, at any time thereafter, Trustee or Lender may exercise any one or more of the following rights and remedies:
Accelerate Indebtedness. Lender shall have the right at its option without notice to Borrower or Grantor to declare the entire Indebtedness immediately due and payable, including any prepayment penalty which Borrower would be required to pay.
Foreclosure. Lender shall have the right to direct the Trustee to proceed to sell the Property at public vendue or out-cry to the highest bidder for cash, (as to any part of the Property situated in the City of St. Louis) at the Court House located in the Civil Courts Building, 10 North Tucker Blvd., in the City of St. Louis; and/or (as to any part of the Property situated in the County of St. Louis) at the First Floor, Plaza Level, North Door of the St. Louis County Government Center Courts Building, 7900 Carondelet Avenue, in Clayton, in the County of St. Louis, State of Missouri, first giving all notices required by Missouri law, then in effect, with respect to exercising powers of sale under the deed of trust. Upon such sale, the Trustee shall execute and deliver a deed or deeds of conveyance of the Property sold to the purchasers thereof, and any statement or recital of fact in any such deed shall be prima facie evidence of the truth of such statement or recital. The Trustee shall receive the proceeds of any such sale, out of which the Trustee shall pay, first the costs and expenses of executing this trust, including compensation to the Trustee and to any attorneys employed by the Trustee, for their services, and the cost of procuring evidence of title; second, to Lender, for all moneys paid for insurance, taxes, lien claims, and other charges, together with interest thereon as provided in this Deed of Trust; third, to Lender, all remaining Indebtedness, including the Note; fourth, the remainder, if any, to the holders of any lien on the Property junior to the lien of this Deed of Trust and to the Grantor, as their interests may appear. In the event the net proceeds of such sale or sales shall not be sufficient to pay in full the Indebtedness secured by this Deed of Trust, unless prohibited by law, Borrower hereby promises and agrees to pay any deficiency thereon on demand, with interest.
UCC Remedies. With respect to all or any part of the Personal Property, Lender shall have all the rights and remedies of a secured party under the Uniform Commercial Code.
Collect Rents. Lender shall have the right, without notice to Borrower or Grantor to take possession of and manage the Property and collect the Rents, including amounts past due and unpaid, and apply the net proceeds, over and above Lender's costs, against the Indebtedness. In furtherance of this right, Lender may require any tenant or other user of the Property to make payments of rent or use fees directly to Lender. If the Rents are collected by Lender, then Grantor irrevocably designates Lender as Grantor's attorney-in-fact to endorse instruments received in payment thereof in the name of Grantor and to negotiate the same and collect the proceeds. Payments by tenants or other users to Lender in response to Lender's demand shall satisfy the obligations for which the payments are made, whether or not any proper grounds for the demand existed. Lender may exercise its rights under this subparagraph either in person, by agent, or through a receiver.
Appoint Receiver. Lender shall have the right to have a receiver appointed to take possession of all or any part of the Property, with the power to protect and preserve the Property, to operate the Property preceding foreclosure or sale, and to collect the Rents from the Property and apply the proceeds, over and above the cost of the receivership, against the Indebtedness. The receiver may serve without bond if permitted by law. Lender's right to the appointment of a receiver shall exist whether or not the apparent value of the Property exceeds the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver.
Other Remedies. Trustee or Lender shall have any other right or remedy provided in this Deed of Trust or the Note or available at law or in equity.
Election of Remedies. Except as may be prohibited by applicable law, all of Lender's rights and remedies, whether evidenced by this Deed of Trust, the Related Documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Deed of Trust, after Grantor's failure to perform, shall not affect Lender's right to declare a default and exercise its remedies.
Cumulative Remedies. All of Lender's rights and remedies, whether evidenced by this Deed of Trust, the Related Documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Deed of Trust, after Grantor's failure to perform, shall not affect Lender's right to declare a default and to exercise its remedies.
Notice of Sale. Lender shall give Grantor reasonable notice of the time and place of any public sale of the Personal Property or of the time after which any private sale or other intended disposition of the Personal Property is to be made. Reasonable notice shall mean notice given at least ten (10) days before the time of the sale or disposition. Any sale of the Personal Property may be made in conjunction with any sale of the Real Property.
Sale of the Property. To the extent permitted by applicable law, Borrower and Grantor hereby waives any and all rights to have the Property marshalled. In exercising its rights and remedies, the Trustee or Lender shall be free to sell all or any part of the Property together or separately, in one sale or by separate sales. Lender shall be entitled to bid at any public sale on all or any portion of the Property.
Attorneys' Fees; Expenses. If Lender institutes any suit or action to enforce any of the terms of this Deed of Trust, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys' fees at trial and upon any appeal. Whether or not any court action is involved, and to the extent not prohibited by law, all reasonable expenses Lender incurs that in Lender's opinion are necessary at any time for the protection of its interest or the enforcement of its rights shall become a part of the Indebtedness payable on demand and shall bear interest at the Note rate from the date of the expenditure until repaid. Expenses covered by this paragraph include, without limitation, however subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals, the cost of searching records, obtaining title reports (including foreclosure reports), surveyors' reports, and appraisal fees, title insurance, and fees for the Trustee, to the extent permitted by applicable law. Grantor also will pay any court costs, in addition to all other sums provided by law.
Rights of Trustee. Trustee shall have all of the rights and duties of Lender as set forth in this section.
POWERS AND OBLIGATIONS OF TRUSTEE. The following provisions relating to the powers and obligations of Trustee are part of this Deed of Trust:
Powers of Trustee. In addition to all powers of Trustee arising as a matter of law, Trustee shall have the power to take the following actions with respect to the Property to the extent necessary to give clear title and upon the written request of Lender and Grantor: (a) join in preparing and filing a map or plat of the Real Property, including the dedication of streets or other rights to the public; (b) join in granting any easement or creating any restriction on the Real Property; and (c) join in any subordination or other agreement affecting this Deed of Trust or the interest of Lender under this Deed of Trust.
Obligations to Notify. Trustee shall not be obligated to notify any other party of a pending sale under any other trust deed or lien, or of any action or proceeding in which Grantor, Lender, or Trustee shall be a party, unless the action or proceeding is brought by Trustee.
Trustee. Trustee shall meet all qualifications required for Trustee under applicable law. In addition to the rights and remedies set forth above, with respect to all or any part of the Property, the Trustee shall have the right to foreclose by notice and sale, and Lender shall have the right to foreclose by judicial foreclosure, in either case in accordance with and to the full extent provided by applicable law.
Successor Trustee. Lender, at Lender's option, may from time to time appoint a successor Trustee to any Trustee appointed under this Deed of Trust by an instrument executed and acknowledged by Lender and recorded in the office of the recorder of St. Louis County, State of Missouri. The instrument shall contain, in addition to all other matters required by state law, the names of the original Lender, Trustee, and Grantor, the book and page where this Deed of Trust is recorded, and the name and address of the successor trustee, and the instrument shall be executed and acknowledged by Lender or its successors in interest. The successor trustee, without conveyance of the Property, shall succeed to all the title, power, and duties conferred upon the Trustee in this Deed of Trust and by applicable law.
NOTICES. Any notice required to be given under this Deed of Trust, including without limitation any notice of default and any notice of sale shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Deed of Trust. All copies of notices of foreclosure from the holder of any lien which has priority over this Deed of Trust shall be sent to Lender's address, as shown near the beginning of this Deed of Trust. Any party may change its address for notices under this Deed of Trust by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor's current address. Unless otherwise provided or required by law, if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to all Grantors.
CHOICE OF VENUE. Borrower agrees that the sole jurisdiction of any lawsuit arising hereunder shall be the state or federal courts having jurisdiction over any county in which the Lender has an office.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Deed of Trust:
Amendments. This Deed of Trust, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Deed of Trust. No alteration of or amendment to this Deed of Trust shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
Annual Reports. If the Property is used for purposes other than Grantor's residence, Grantor shall furnish to Lender, upon request, a certified statement of net operating income received from the Property during Grantor's previous fiscal year in such form and detail as Lender shall require. "Net operating income" shall mean all cash receipts from the Property less all cash expenditures made in connection with the operation of the Property.
Caption Headings. Caption headings in this Deed of Trust are for convenience purposes only and are not to be used to interpret or define the provisions of this Deed of Trust.
Merger. There shall be no merger of the interest or estate created by this Deed of Trust with any other interest or estate in the Property at any time held by or for the benefit of Lender in any capacity, without the written consent of Lender.
Governing Law. This Deed of Trust will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Missouri without regard to its conflicts of law provisions. This Deed of Trust has been accepted by Lender in the State of Missouri.
Joint and Several Liability. All obligations of Borrower and Grantor under this Deed of Trust shall be joint and several, and all references to Grantor shall mean each and every Grantor, and all references to Borrower shall mean each and every Borrower. This means that each Grantor signing below is responsible for all obligations in this Deed of Trust. Where any one or more of the parties is a corporation, partnership, limited liability company or similar entity, it is not necessary for Lender to inquire into the powers of any of the officers, directors, partners, members, or other agents acting or purporting to act on the entity's behalf, and any obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Deed of Trust.
No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Deed of Trust unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Deed of Trust shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Deed of Trust. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Deed of Trust, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.
Severability. If a court of competent jurisdiction finds any provision of this Deed of Trust to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Deed of Trust. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Deed of Trust shall not affect the legality, validity or enforceability of any other provision of this Deed of Trust.
Successors and Assigns. Subject to any limitations stated in this Deed of Trust on transfer of Grantor's interest, this Deed of Trust shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Property becomes vested in a person other than Grantor, Lender, without notice to Grantor, may deal with Grantor's successors with reference to this Deed of Trust and the Indebtedness by way of forbearance or extension without releasing Grantor from the obligations of this Deed of Trust or liability under the Indebtedness.
Time is of the Essence. Time is of the essence in the performance of this Deed of Trust.
Waiver of Homestead Exemption. Grantor hereby releases and waives all rights and benefits of the homestead exemption laws of the State of Missouri as to all Indebtedness secured by this Deed of Trust.
DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Deed of Trust. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Deed of Trust shall have the meanings attributed to such terms in the Uniform Commercial Code:
Beneficiary. The word "Beneficiary" means Enterprise Bank & Trust, and its successors and assigns.
Borrower. The word "Borrower" means RELIV' INTERNATIONAL, INC.; RELIV', INC.; RELIV' WORLD CORPORATION; and SL Technology, Inc. and includes all co-signers and co-makers signing the Note and all their successors and assigns.
Deed of Trust. The words "Deed of Trust" mean this Deed of Trust among Grantor, Lender, and Trustee, and includes without limitation all assignment and security interest provisions relating to the Personal Property and Rents.
Default. The word "Default" means the Default set forth in this Deed of Trust in the section titled "Default".
Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.
Event of Default. The words "Event of Default" mean any of the events of default set forth in this Deed of Trust in the events of default section of this Deed of Trust.
Grantor. The word "Grantor" means RELIV' INTERNATIONAL, INC..
Guaranty. The word "Guaranty" means the guaranty from guarantor, endorser, surety, or accommodation party to Lender, including without limitation a guaranty of all or part of the Note.
Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words "Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.
Improvements. The word "Improvements" means all existing and future improvements, buildings, structures, mobile homes affixed on the Real Property, facilities, additions, replacements and other construction on the Real Property.
Indebtedness. The word "Indebtedness" means all principal, interest, and other amounts, costs and expenses payable under the Note or Related Documents, together with all renewals of, extensions of, modifications of, consolidations of and substitutions for the Note or Related Documents and any amounts expended or advanced by Lender to discharge Grantor's obligations or expenses incurred by Trustee or Lender to enforce Grantor's obligations under this Deed of Trust, together with interest on such amounts as provided in this Deed of Trust. Specifically, without limitation, Indebtedness includes the future advances set forth in the Future Advances provision, together with all interest thereon and all amounts that may be indirectly secured by the Cross-Collateralization provision of this Deed of Trust.
Lender. The word "Lender" means Enterprise Bank & Trust, its successors and assigns.
Note. The word "Note" means the promissory note dated September 30, 2015, in the original principal amount of $3,249,500.74 from Borrower to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note or agreement. NOTICE TO GRANTOR: THE NOTE CONTAINS A VARIABLE INTEREST RATE.
Personal Property. The words "Personal Property" mean all equipment, fixtures, and other articles of personal property now or hereafter owned by Grantor, and now or hereafter attached or affixed to the Real Property; together with all accessions, parts, and additions to, all replacements of, and all substitutions for, any of such property; and together with all proceeds (including without limitation all insurance proceeds and refunds of premiums) from any sale or other disposition of the Property.
Property. The word "Property" means collectively the Real Property and the Personal Property.
Real Property. The words "Real Property" mean the real property, interests and rights, as further described in this Deed of Trust.
Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.
Rents. The word "Rents" means all present and future rents, revenues, income, issues, royalties, profits, and other benefits derived from the Property.
Trustee. The word "Trustee" means Charford, Inc., whose address is 150 North Meramec, Clayton, MO 63105 and any substitute or successor trustees.
WAIVE JURY. All parties to this Deed of Trust hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against any other party.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS DEED OF TRUST, AND GRANTOR AGREES TO ITS TERMS.
| GRANTOR: | ||
| RELIV' INTERNATIONAL, INC. | ||
| By: | /s/ Ryan A. Montgomery | |
| Ryan A. Montgomery, President of RELIV' INTERNATIONAL, INC. | ||
| By: | /s/ Steven D. Albright | |
| Steven D. Albright, Chief Financal Officer of RELIV' INTERNATIONAL, INC. | ||
CORPORATE ACKNOWLEDGMENT
| STATE OF ___________________________________ | ) |
| ) SS | |
| ________________________ OF ___________________________________ | ) |
On this _____________________ day of ____________________________, 20 _______, before me appeared Ryan A. Montgomery and Steven D. Albright, to me personally known, who, being by me duly sworn, did say that they are President of RELIV' INTERNATIONAL, INC. and Chief Financal Officer of RELIV' INTERNATIONAL, INC., respectively, and that on behalf of said corporation, by authority of its board of directors, said Ryan A. Montgomery and Steven D. Albright acknowledged said Deed of Trust to be the free act and deed of said corporation and that said corporation has no corporate seal.
| Notary Public SEAL] | |||
| My Commission expires: | |||
| 1. | TITLE OF DOCUMENT: | Deed of Trust |
| 2. | DATE OF DOCUMENT: | September 30, 2015 |
| 3. | GRANTOR(S): | RELIV' INTERNATIONAL, INC. |
| 4. | GRANTEE(S): | Enterprise Bank & Trust |
| 5. | STATUTORY MAILING ADDRESS(ES): | |
| GRANTOR'S ADDRESS: | ||
| 136 Chesterfield Industrial Boulevard, Chesterfield, MO 63005 | ||
| GRANTEE'S ADDRESS: | ||
| St. Peters, 300 St. Peters Centre Boulevard, St. Peters, MO 63376 | ||
| RECORDATION REQUESTED BY: | ||
| Enterprise Bank & Trust, St. Peters, 300 St. Peters Centre Boulevard, St. Peters, MO 63376 | ||
| WHEN RECORDED MAIL TO: | ||
| Enterprise Bank & Trust, 1281 North Warson Road, St. Louis, MO 63132 | ||
| 6. | LEGAL DESCRIPTION: | |
| Legal description of the property is set out on page 1. | ||
| 7. | REFERENCE BOOK AND PAGE(S): |
Exhibit 31.1
CERTIFICATION
I, Robert L. Montgomery, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reliv International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 13, 2015
| /s/ Robert L. Montgomery | ||
| Robert L. Montgomery | ||
| Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Steven D. Albright, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Reliv International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 13, 2015
| /s/ Steven D. Albright | ||
| Steven D. Albright | ||
| Chief Financial Officer |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Reliv’ International, Inc. (the “Company”) for the quarterly period ended September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert L. Montgomery, as Chief Executive Officer of the Company, and Steven D. Albright, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Robert L. Montgomery | |
| Robert L. Montgomery | |
| Chief Executive Officer | |
| Date: November 13, 2015 | |
| /s/ Steven D. Albright | |
| Steven D. Albright | |
| Chief Financial Officer | |
| Date: November 13, 2015 |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and is not being “filed” as part of the Form 10-Q or as a separate disclosure document for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent that this Exhibit 32 is expressly and specifically incorporated by reference in any such filing.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.