EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT dated as of August 31, 2006 (the
"Agreement"), is executed by and between FORTUNE INDUSTRIES, INC., an Indiana
corporation ("Borrower"), whose address is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, and FIFTH THIRD BANK (CENTRAL INDIANA) (the "Bank"), whose
address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
In consideration of the mutual agreements hereinafter set forth, the
Borrower and the Bank hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. For the purposes of this Agreement, the following
capitalized words and phrases shall have the meanings set forth below.
"Acquisitions" shall mean any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or division thereof,
whether through purchase of assets, merger or otherwise, or (ii) directly or
indirectly acquires (in one transaction or as the most recent transaction in a
series of transactions) at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election of
directors (other than securities having such power only by reason of the
happening of a contingency) or a majority (by percentage or voting power) of the
outstanding partnership interests of a partnership.
"Affiliate" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, spouse and children) of such individual
and any trust whose principal beneficiary is such individual or one or more
members of such immediate family and any Person who is controlled by any such
member or trust. As used in this definition, "control" (including, with
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interest, by contract or otherwise).
"Amortization" shall mean the total amount added to amortization
expense, as reflected on the Borrower's financial statement and determined in
accordance with GAAP.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as now
existing or hereafter amended.
"Borrowing Base Amount" shall mean an amount equal to the sum of (a)
eighty percent (80%) of the net amount (after deduction of such reserves and
allowances as the Bank deems proper and necessary) of the Eligible Accounts;
plus (b) fifty percent (50%) of the value of the Eligible Inventory located on
property either owned by Borrower or any of its Subsidiaries or leased by
Borrower or any of its Subsidiaries and with respect to which the Bank has
received a fully executed Landlord Consent and Waiver; plus (c) forty percent
(40%) of the value of all other Eligible Inventory, wherever located; plus (d)
the Fixed Asset Value.
"Business Day" shall mean any day other than a Saturday, Sunday or a
legal holiday on which banks are authorized or required to be closed for the
conduct of commercial banking business in Indianapolis, Indiana.
"Capital Expenditures" shall mean expenditures (including Capital
Lease obligations which should be capitalized under GAAP) for the acquisition of
fixed assets which are required to be capitalized under GAAP.
"Capital Lease" shall mean, as to any Person, a lease of any interest
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, by such Person as lessee that is, or should be, in accordance
with Financial Accounting Standards Board Statement No. 13, as amended from time
to time, or, if such Statement is not then in effect, such statement of GAAP as
may be applicable, recorded as a "capital lease" on the balance sheet of the
Borrower prepared in accordance with GAAP.
"Change in Control" shall have the meaning set forth in Section 11
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meaning set forth in Section 6.1.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of Borrower and its Subsidiaries after deductions for income
taxes, determined on a consolidated basis in accordance with GAAP and as shown
on the Financial Statements.
"Contingent Liability" and "Contingent Liabilities" shall mean,
respectively, each obligation and liability of the Borrower and all such
obligations and liabilities of the Borrower incurred pursuant to any agreement,
undertaking or arrangement by which the Borrower: (a) guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the indebtedness, dividend, obligation or other liability of any
other Person in any manner (other than by endorsement of instruments in
the course of collection), including without limitation, any indebtedness,
dividend or other obligation which may be issued or incurred at some future
time; (b) guarantees the payment of dividends or other distributions upon the
shares or ownership interest of any other Person; (c) undertakes or agrees
(whether contingently or otherwise): (i) to purchase, repurchase, or otherwise
acquire any indebtedness, obligation or liability of any other Person or any
property or assets constituting security therefor, (ii) to advance or provide
funds for the payment or discharge of any indebtedness, obligation or liability
of any other Person (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain solvency, assets, level of
income, working capital or other financial condition of any other Person, or
(iii) to make payment to any other Person other than for value received; (d)
agrees to lease property or to purchase securities, property or services from
such other Person with the purpose or intent of assuring the owner of such
indebtedness or obligation of the ability of such other Person to make payment
of the indebtedness or obligation; (e) to induce the issuance of, or in
connection with the issuance of, any letter of credit for the benefit of such
other Person; or (f) undertakes or agrees otherwise to assure a creditor against
loss. The amount of any Contingent Liability shall (subject to any limitation
set forth herein) be deemed to be the outstanding principal amount (or maximum
permitted principal amount, if larger) of the indebtedness, obligation or other
liability guaranteed or supported thereby.
"Default Rate" shall mean a per annum rate of interest equal to the
Loan Rate plus three percent (3%) per annum.
"Depreciation" shall mean the total amounts added to depreciation,
obsolescence, valuation and other proper reserves, as reflected on the
consolidated financial statement of the Borrower and its Subsidiaries and
determined in accordance with GAAP.
"EBITDA" means, with respect to Borrower and its subsidiaries
determined on a consolidated basis for any specified period, the sum of (a)
Consolidated Net Income, plus (b) to the extent deducted in determining
Consolidated Net Income, income taxes paid or accrued, minus (c) to the extent
included in Consolidated Net Income, extraordinary gains, plus (d) to the extent
deducted in determining Consolidated Net Income, extraordinary losses, plus (e)
Consolidated Interest Expense, plus (f) to the extent deducted in determining
Consolidated Net Income, depreciation and amortization.
"Eligible Accounts" shall mean those Accounts of the Borrower and its
Subsidiaries which:
(a) are genuine in all respects and have arisen in the ordinary course
of the Borrower's business from (i) the performance of services by the
Borrower, which services have been fully performed, acknowledged and
accepted by the Account Debtor or (ii) the sale or lease of Goods by the
Borrower, including C.O.D. sales, which Goods have been completed in
accordance with the Account Debtor's specifications (if any) and delivered
to and accepted by the Account
Debtor, and the Borrower has possession of, or has delivered to the Bank at
the Bank's request, shipping and delivery receipts evidencing such
shipment;
(b) are evidenced by an invoice delivered to the Account Debtor
thereunder, and are not more than ninety (90) days past invoice date;
(c) do not arise from a "sale on approval" or a "sale or return";
(d) have not arisen out of contracts with the United States or any
state, county, city or other governmental body, or any department, agency
or instrumentality thereof;
(e) are not due from an Account Debtor which is a Subsidiary or a
director, officer, employee, agent, parent or affiliate of the Borrower;
(f) do not arise in connection with a sale to an Account Debtor who is
not a resident or citizen of and is located within the United States of
America;
(g) do not arise in connection with a sale to an Account Debtor who is
located within a state which requires the Borrower, as a precondition to
commencing or maintaining an action in the courts of that state, either to
(i) receive a certificate of authority to do business and be in good
standing in such state, or (ii) file a notice of business activities or
similar report with such state's taxing authority, unless (A) the Borrower
has taken one of the actions described in clauses (i) or (ii), (B) the
failure to take one of the actions described in either clause (i) or (ii)
may be cured retroactively by the Borrower at its election, or (C) the
Borrower has proven to the satisfaction of the Bank that it is exempt from
any such requirements under such state's laws;
(h) do not arise out of a contract or order which, by its terms,
forbids or makes void or unenforceable the assignment by the Borrower to
the Bank of the Account arising with respect thereto and are not
unassignable to the Bank for any other reason;
(i) are the valid, legally enforceable and unconditional obligation of
the Account Debtor, are not the subject of any setoff, counterclaim,
credit, allowance or adjustment by the Account Debtor, or of any claim by
the Account Debtor denying liability thereunder in whole or in part, and
the Account Debtor has not refused to accept and/or has not returned or
offered to return any of the Goods or services which are the subject of
such Account, provided that any Account that would qualify as an Eligible
Account except for the existence of a credit with respect to such Account
shall qualify as an Eligible Account to the extent of the positive
difference between the amount of the Account and the amount of the credit
with respect to such Account;
(j) are not subject to any Lien whatsoever, other than the Lien of the
Bank;
(k) no proceedings or actions are pending or threatened against the
Account Debtor which might result in any material adverse change in its
financial condition or in its ability to pay any Account in full;
(l) do not arise in connection with the sale of an aircraft or any
other items which require a filing with the Federal Aviation Administration
in order to perfect a security interest in such item; and
(m) are otherwise not unacceptable to the Bank for any other
reasonable reason.
An Account which is an Eligible Account shall cease to be an Eligible
Account whenever it ceases to meet any one of the foregoing requirements.
If invoices representing fifty percent (50%) or more of the unpaid net
amount of all Accounts from any one Account Debtor are more than ninety (90)
days past invoice date, then all Accounts relating to such Account Debtor shall
cease to be Eligible Accounts.
"Eligible Inventory" means, on any date of determination, Borrower's
and its Subsidiaries' inventory (net of reserves) as shown on Borrower's most
recent Financial Statements and as determined in accordance with GAAP, which is
not subject to any Lien, is not stored with any bailee, warehouseman or similar
party, and is not placed on consignment with any consignee.
"Employee Plan" includes any pension, stock bonus, employee stock
ownership plan, retirement, disability, medical, dental or other health plan,
life insurance or other death benefit plan, profit sharing, deferred
compensation, stock option, bonus or other incentive plan, vacation benefit
plan, severance plan or other employee benefit plan or arrangement, including,
without limitation, those pension, profit-sharing and retirement plans of the
Borrower described from time to time in the financial statements of the Borrower
and any pension plan, welfare plan, Defined Benefit Pension Plans (as defined in
ERISA) or any multi-employer plan, maintained or administered by the Borrower or
to which the Borrower is a party or may have any liability or by which the
Borrower is bound.
"Environmental Laws" shall mean all federal, state, district, local
and foreign laws, rules, regulations, ordinances, and consent decrees relating
to health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to the Borrower's business or
facilities owned or operated by the Borrower, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes in the environment (including, without limitation,
ambient air, surface water, land surface or subsurface strata) or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" shall mean any of the events or conditions set
forth in Section 11 hereof.
"Financial Statements" shall mean, as the context may require, (a) the
consolidated and consolidating balance sheets of Borrower and its Subsidiaries
as of May 31, 2006, and their consolidated and consolidating statements of
income and retained earnings and consolidated statement of cash flows for the
periods then ended, and (b) the consolidated and consolidating financial
statements of Borrower and its Subsidiaries furnished from time to time pursuant
to Section 9.7; in all cases, together with any accompanying notes thereto, and
any other documents or data furnished in connection therewith.
"Fixed Asset Value" shall mean the answer of (i) Three Million Five
Hundred Thousand Dollars and No Cents ($3,500,000.00) minus (ii) the product of
(A) Five Hundred Thousand Dollars and No Cents ($500,000.00) times (B) the
number equal to the number of complete calendar years that have passed since the
date hereof; provided, however, that the Fixed Asset Value shall not be less
than zero.
"Fixed Charge Coverage Ratio" shall mean the ratio of (i) a Person's
EBITDA plus rent expenses, excluding any one-time gains or losses from asset
dispositions, to (ii) the sum of the amounts paid of interest expense on all
indebtedness of such Person, all currently maturing long term debt and rent
expenses.
"GAAP" shall mean generally accepted accounting principles, using the
accrual basis of accounting and consistently applied with prior periods,
provided, however, that GAAP with respect to any interim financial statements or
reports shall be deemed subject to fiscal year-end adjustments and footnotes
made in accordance with GAAP.
"Guarantor" shall mean collectively or individually, as applicable,
each Revolving Loan Guarantor and each Term Loan Guarantor.
"Hazardous Materials" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar
substances, materials or wastes that are or become regulated under any
Environmental Law (including without limitation, any that are or become
classified as hazardous or toxic under any Environmental Law).
"Indebtedness" shall mean at any time (a) all Liabilities of the
Borrower, (b) all other debt, secured or unsecured, created, issued, incurred or
assumed by the Borrower for money borrowed or for the deferred purchase price of
any fixed or capital asset, (c) indebtedness secured by any Lien existing on
property owned by the Borrower whether or not the Indebtedness secured thereby
has been assumed, and (d) all Contingent Liabilities of the Borrower whether or
not reflected on its balance sheet.
"Indemnified Party" and "Indemnified Parties" shall mean,
respectively, each of the Bank and any parent corporations, affiliated
corporations or subsidiaries of the Bank, and each of their respective officers,
directors, employees, attorneys and agents, and all of such parties and
entities.
"Interest Charges" shall mean, for any period, the sum of: (a) all
interest, charges and related expenses payable with respect to that fiscal
period to a lender in connection with borrowed money or the deferred purchase
price of assets that are treated as interest in accordance with GAAP, plus (b)
the portion of rent payable with respect to that fiscal period under Capital
Leases that should be treated as interest in accordance with GAAP, plus (c) all
charges paid or payable (without duplication) during that period with respect to
any Interest Rate Agreements.
"Interest Period" shall mean the designated periods for the Loans,
which shall be thirty (30) days (collectively, the "Interest Periods" and,
individually, "Interest Period"); provided, however, if deposits in United
States dollars for such Interest Period are not then being accepted by first
class banks in the London interbank market, such Interest Period may, at the
option of Borrower, be the next shorter or longer Interest Period.
"Interest Rate Agreements" shall mean any interest rate protection
agreement, interest rate swap or other interest rate hedge arrangement (other
than any interest rate cap or other similar agreement or arrangement pursuant to
which the Borrower has no credit exposure to the Bank) to or under which the
Borrower or any Subsidiary of the Borrower is a party or beneficiary.
"Liabilities" shall mean at all times all liabilities of the Borrower
that would be shown as such on a balance sheet of the Borrower prepared in
accordance with GAAP.
"LIBOR Rate" shall mean, with respect to a loan, the rate per annum
(rounded upwards, if necessary, to the next higher 1/16 of 1%) determined by
Bank and equal to the average rate per annum at which deposits (denominated in
United States dollars) in an amount similar to the principal amount of that loan
and with a maturity one month after the date of reference are offered to Bank at
11:00 A.M. London time (or as
soon thereafter as practicable) on the date of reference by banking institutions
in the London, United Kingdom market, as such interest rate is referenced and
reported by the British Bankers Association in the Bridge Financial Telerate
system "Page 3750" report or, if the same is unavailable, any other generally
accepted authoritative source of such interest rate as Bank may reference from
time to time, provided, that in the event the LIBOR Rate is unavailable as a
result of Lender's good faith determination of such, the LIBOR Rate shall be a
fluctuating rate equal to the prime rate. The LIBOR Rate shall be adjusted by
Bank, as necessary, at the end of each business day during the term hereof.
Lender shall not be required to notify Borrower of any adjustment in the LIBOR
Rate; however, Borrower may request a quote of the prevailing LIBOR Rate on any
business day.
"Lien" shall mean any mortgage, pledge, hypothecation, judgment lien
or similar legal process, title retention lien, or other lien or security
interest, including, without limitation, the interest of a vendor under any
conditional sale or other title retention agreement and the interest of a lessor
under a lease of any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, by such Person as lessee that is,
or should be, a capital lease on the balance sheet of the Borrower prepared in
accordance with GAAP.
"Loans" shall mean, collectively, the Revolving Loan and the Term Loan
made by the Bank to the Borrower under and pursuant to this Agreement.
"Loan Documents" shall have the meaning set forth in Section 3.1.
"Loan Rate" shall mean (a) the LIBOR Rate plus one and three-quarters
percent (1.75%) if Senior Funded Debt to EBITDA Ratio is 2.50:1.0 or more; or
(b) the LIBOR Rate plus one and one-half percent (1.50%) if Senior Funded Debt
to EBITDA Ratio is less than 2.50:1.0.
"Net Income" shall mean, with respect to any period, the amount shown
opposite the caption "Net Income" or a similar caption on the consolidated
financial statements of the Borrower and its Subsidiaries, prepared in
accordance with GAAP.
"Note" and "Notes" shall mean, respectively, each of and collectively,
the Revolving Note and Term Loan Note.
"Obligations" shall mean the Loans, as evidenced by the Notes, all
interest accrued thereon, any fees due the Bank hereunder, any expenses incurred
by the Bank hereunder and any and all other liabilities and obligations of the
Borrower and its Subsidiaries (and of any partnership in which the Borrower or
any of its Subsidiaries is or may be a partner) to the Bank, howsoever created,
arising or evidenced, and howsoever owned, held or acquired, whether now or
hereafter existing, whether now due or to become due, direct or indirect,
absolute or contingent, and whether several, joint or joint and several,
including, but not limited to, any Interest Rate Agreements.
"Obligor" shall mean the Borrower, any guarantor, accommodation
endorser, third party pledgor, or any other party liable with respect to the
Obligations.
"Person" shall mean any individual, partnership, limited liability
company, corporation, trust, joint venture, joint stock company, association,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Prime Rate" shall mean a variable per annum interest rate equal at
all times to the rate of interest established and quoted by Bank as its "prime
rate", such rate to change contemporaneously with each change in the established
and quoted rate, provided it is understood that the Prime Rate shall not
necessarily be the Bank's lowest or best rate of interest actually charged by
Bank on any loan or class of loans.
"Regulatory Change" shall mean the introduction of, or any change in
any applicable law, treaty, rule, regulation or guideline or in the
interpretation or administration thereof by any governmental authority or any
central bank or other fiscal, monetary or other authority having jurisdiction
over the Bank or its lending office.
"Revolving Loan" and "Revolving Loans" shall mean, respectively, each
direct advance and the aggregate of all such direct advances, from time to time
made by the Bank to the Borrower under and pursuant to this Agreement, as set
forth in Section 2.1 of this Agreement.
"Revolving Loan Availability" shall mean at any time, the lesser of
(a) the Revolving Loan Commitment, or (b) the Borrowing Base Amount.
"Revolving Loan Commitment" shall mean Fifteen Million Dollars and
Zero Cents ($15,000,000.00).
"Revolving Loan Guarantor" shall mean collectively or individually, as
applicable, each Subsidiary of Borrower.
"Revolving Loan Maturity Date" shall mean August 31, 2008, unless
extended by the Bank pursuant to any modification, extension or renewal note
executed by the Borrower and accepted by the Bank in its sole and absolute
discretion in substitution for the Revolving Note.
"Revolving Note" shall have the meanings set forth in Section 4.1
hereof.
"Senior Funded Debt to EBITDA Ratio" shall mean, for any period, the
ratio of (a) the amount outstanding under the Loans, including but not limited
to, principal, interest, fees and charges due hereunder, to (b) EBITDA.
"Subordinated Debt" shall mean that portion of the Liabilities of the
Borrower and its Subsidiaries which is subordinated to the Obligations in a
manner
reasonably satisfactory to the Bank, including, but not limited to, right and
time of payment of principal and interest.
"Subsidiary" and "Subsidiaries" shall mean, respectively, each and all
such corporations, partnerships, limited partnerships, limited liability
companies, limited liability partnerships or other entities of which or in which
the Borrower owns directly or indirectly fifty percent (50.00%) or more of (i)
the combined voting power of all classes of stock having general voting power
under ordinary circumstances to elect a majority of the board of directors of
such entity if a corporation, (ii) the management authority and capital interest
or profits interest of such entity, if a partnership, limited partnership,
limited liability company, limited liability partnership, joint venture or
similar entity, or (iii) the beneficial interest of such entity, if a trust,
association or other unincorporated organization.
"Tangible Assets" shall mean the total of all assets appearing on a
consolidated balance sheet of the Borrower and its Subsidiaries prepared in
accordance with GAAP (with Inventory being valued at the lower of cost or
market), after deducting all proper reserves (including reserves for
Depreciation, obsolescence and amortization) less the sum of (i) goodwill,
patents, trademarks, prepaid expenses, deposits, deferred charges and other
personal property which is classified as intangible property in accordance with
GAAP and (ii) any amounts due from shareholders, affiliates, officers or
employees of the Borrower or any of its Subsidiaries to such related entity.
"Tangible Net Worth" shall mean at any time the total of Tangible
Assets less Liabilities.
"Term Loan" shall mean the direct advance made by the Bank to the
Borrower in the form of a term loan under and pursuant to this Agreement, as set
forth in Section 2.2 of this Agreement.
"Term Loan Commitment" shall mean Twenty Million Dollars and No Cents
($20,000,000.00).
"Term Loan Guarantor" shall mean collectively or individually, as
applicable, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"Term Loan Maturity Date" shall mean August 31, 2011, unless extended
by the Bank pursuant to any modification, extension or renewal note executed by
the Borrower and accepted by the Bank in its sole and absolute discretion in
substitution for the Revolving Note.
"Term Loan Note" shall have the meaning set forth in Section 4.2
hereof.
"UCC" shall mean the Uniform Commercial Code in effect in Indiana from
time to time.
1.2 Accounting Terms. Any accounting terms used in this Agreement which are
not specifically defined herein shall have the meanings customarily given them
in accordance with GAAP. Calculations and determinations of financial and
accounting terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to the Bank pursuant hereto
shall be made and prepared, both as to classification of items and as to amount,
in accordance with GAAP as used in the preparation of the financial statements
of the Borrower on the date of this Agreement. If any changes in accounting
principles or practices from those used in the preparation of the financial
statements are hereafter occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or any
successor thereto or agencies with similar functions), which results in a
material change in the method of accounting in the financial statements required
to be furnished to the Bank hereunder or in the calculation of financial
covenants, standards or terms contained in this Agreement, the parties hereto
agree to enter into good faith negotiations to amend such provisions so as
equitably to reflect such changes to the end that the criteria for evaluating
the financial condition and performance of the Borrower will be the same after
such changes as they were before such changes; and if the parties fail to agree
on the amendment of such provisions, the Borrower will furnish financial
statements in accordance with such changes but shall provide calculations for
all financial covenants, perform all financial covenants and otherwise observe
all financial standards and terms in accordance with applicable accounting
principles and practices in effect immediately prior to such changes.
Calculations with respect to financial covenants required to be stated in
accordance with applicable accounting principles and practices in effect
immediately prior to such changes shall be reviewed and certified by the
Borrower's accountants.
1.3 Other Terms Defined in UCC. All other capitalized words and phrases
used herein and not otherwise specifically defined shall have the respective
meanings assigned to such terms in the UCC, as amended from time to time, to the
extent the same are used or defined therein.
1.4 Other Definitional Provisions; Construction. Whenever the context so
requires, the neuter gender includes the masculine and feminine, the single
number includes the plural, and vice versa, and in particular the word
"Borrower" shall be so construed. The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
references to Article, Section, Subsection, Schedule, Exhibit and like
references are references to this Agreement unless otherwise specified. An Event
of Default shall "continue" or be "continuing" until such Event of Default has
been waived in accordance with Section 13.3 hereof. References in this Agreement
to any party shall include such party's successors and permitted assigns.
References to any "Section" shall be a reference to such Section of this
Agreement unless otherwise stated. To the extent any of the provisions of the
other Loan Documents are
inconsistent with the terms of this Loan Agreement, the provisions of this Loan
Agreement shall govern.
2. COMMITMENT OF THE BANK.
2.1 Revolving Loans.
(a) Revolving Loan Commitment. Subject to the terms and conditions of
this Agreement and the other Loan Documents, and in reliance upon the
representations and warranties of the Borrower set forth herein and in the
other Loan Documents, the Bank agrees to make such Revolving Loans at such
times as the Borrower may from time to time request until, but not
including, the Revolving Loan Maturity Date, and in such amounts as the
Borrower may from time to time request, provided, however, that the
aggregate principal balance of all Revolving Loans outstanding at any time
shall not exceed the Revolving Loan Availability. Revolving Loans made by
the Bank may be repaid and, subject to the terms and conditions hereof,
borrowed again up to, but not including, the Revolving Loan Maturity Date
unless the Revolving Loans are otherwise terminated or extended as provided
in this Agreement. The Revolving Loans shall be used by the Borrower for
the purpose of working capital.
(b) Revolving Loan Interest and Payments. Except as otherwise provided
in this Section 2.1(b), the principal amount of the Revolving Loans
outstanding from time to time shall bear interest at the Loan Rate. Accrued
and unpaid interest on the unpaid principal balance of all Revolving Loans
outstanding from time to time shall be due and payable monthly, in arrears,
commencing on October 5, 2006 and continuing on the 5th day of each
calendar month thereafter, and on the Revolving Loan Maturity Date. Any
amount of principal or interest on the Revolving Loans which is not paid
when due, whether at stated maturity, by acceleration or otherwise, shall
bear interest payable on demand at the Default Rate.
(c) Revolving Loan Principal Repayments.
(i) Mandatory Principal Prepayments. All Revolving Loans
hereunder shall be repaid by the Borrower on the Revolving Loan
Maturity Date, unless payable sooner pursuant to the provisions of
this Agreement. In the event the aggregate outstanding principal
balance of all Revolving Loans hereunder exceed the Revolving Loan
Availability, the Borrower shall, without notice or demand of any
kind, immediately make such repayments of the Revolving Loans or take
such other actions as shall be necessary to eliminate such excess.
(ii) Optional Prepayments. The Borrower may from time to time
prepay the Revolving Loans, in whole or in part, without any
prepayment penalty other than those set forth herein. If, for any
reason, a
Revolving Loan is paid prior to the last Business Day of any Interest
Period, whether voluntary, involuntary, by reason of acceleration or
otherwise, each such prepayment of a Revolving Loan will be
accompanied by the amount of accrued interest on the amount prepaid
and any and all reasonable costs, expenses, penalties and charges
incurred by the Bank as a result of the early termination or breakage
of a Revolving Loan on a date other than the last Business Day of the
applicable Interest Period, plus the amount, if any, by which (i) the
additional interest which would have been payable during the Interest
Period on the Revolving Loan prepaid had it not been prepaid, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the domestic certificate of
deposit market, the eurodollar deposit market, or other appropriate
money market selected by the Bank, for a period starting on the date
on which it was prepaid and ending on the last day of the Interest
Period for such Revolving Loan. The amount of any such loss or expense
payable by the Borrower to the Bank under this section shall be
determined in the Bank's reasonable discretion based upon the
assumption that the Bank funded its loan commitment for Revolving
Loans in the London Interbank Eurodollar market and using any
reasonable attribution or averaging methods which the Bank deems
appropriate and practical, provided, however, that the Bank is not
obligated to accept a deposit in the London Interbank Eurodollar
market in order to charge interest on a Revolving Loan at the Loan
Rate.
2.2 Term Loan.
(a) Term Loan Commitment. Subject to the terms and conditions of this
Agreement and the other Loan Documents, and in reliance upon the
representations and warranties of the Borrower set forth herein and in the
other Loan Documents, the Bank agrees to make the Term Loan equal to the
Term Loan Commitment. The Term Loan shall be available to the Borrower in a
single principal advance. The Term Loan shall be used by the Borrower to
refinance existing debt and provide additional capital. The Term Loan may
be prepaid in whole or in part at any time, but shall be due in full on the
Term Loan Maturity Date, unless the credit extended under the Term Loan is
otherwise terminated or extended as provided in this Agreement.
(b) Term Loan Interest and Payments. Except as otherwise provided in
this Section 2.2(a)(ii), the principal amount of the Term Loan outstanding
from time to time shall bear interest at the Loan Rate. Principal and
accrued and unpaid interest on the unpaid principal balance of the Term
Loan outstanding from time to time, shall be due and payable monthly, in
arrears, commencing on October 5, 2006 and continuing on the fifth (5th)
day of each calendar month thereafter, in equal monthly principal
installments of One Hundred Sixty-Six Thousand Six Hundred Sixty-Seven
Dollars and No Cents ($166,667.00), together with an additional amount
representing accrued interest as set forth above, beginning on October 5,
2006, and continuing on the fifth (5th) day of each month
thereafter, with a final payment of all outstanding principal and accrued
interest due on the Term Loan Maturity Date. Principal amounts repaid on
the Term Loan Note may not be borrowed again. Any amount of principal or
interest on the Term Loan which is not paid when due, whether at stated
maturity, by acceleration or otherwise, shall bear interest payable on
demand at the Default Rate.
(c) Term Loan Principal Prepayments. The Borrower may from time to
time prepay the Term Loan, in whole or in part, without any prepayment
penalty other than those set forth herein, subject to the following
conditions: (i) each partial prepayment shall be in an amount equal to Ten
Thousand Dollars and No Cents ($10,000.00) or a higher integral multiple of
Five Thousand Dollars and No Cents ($5,000.00); and (ii) any prepayment of
the entire principal balance shall include accrued interest to date of such
prepayment and payment in full of all other Obligations then due and
payable. If, for any reason, the Term Loan is paid prior to the last
Business Day of any Interest Period, whether voluntary, involuntary, by
reason of acceleration or otherwise, each such prepayment of the Term Loan
will be accompanied by the amount of accrued interest on the amount prepaid
and any and all reasonable costs, expenses, penalties and charges incurred
by the Bank as a result of the early termination or breakage of the Term
Loan on a date other than the last Business Day of the applicable Interest
Period, plus the amount, if any, by which (i) the additional interest which
would have been payable during the Interest Period on the Term Loan prepaid
had it not been prepaid, exceeds (ii) the interest which would have been
recoverable by the Bank by placing the amount prepaid on deposit in the
domestic certificate of deposit market, the eurodollar deposit market, or
other appropriate money market selected by the Bank, for a period starting
on the date on which it was prepaid and ending on the last day of the
Interest Period for the Term Loan. The amount of any such loss or expense
payable by the Borrower to the Bank under this section shall be determined
in the Bank's reasonable discretion based upon the assumption that the Bank
funded its loan commitment for the Term Loan in the London Interbank
Eurodollar market and using any reasonable attribution or averaging methods
which the Bank deems appropriate and practical, provided, however, that the
Bank is not obligated to accept a deposit in the London Interbank
Eurodollar market in order to charge interest on the Term Loan at the Loan
Rate.
(d) Recharacterization of Payment. Notwithstanding anything to the
contrary herein, if the Bank determines, in its sole discretion, that
Borrower used all or a part of the proceeds of Revolving Loans, directly or
indirectly, to make a payment of any amounts owing under the Term Loan,
Lender may, in addition to all other remedies at law or at equity, at its
sole option, retroactively reclassify such payments as payments on amounts
owing under the Revolving Loans.
2.3 Interest and Fee Computation; Collection of Funds. Except as otherwise
set forth herein, all interest and fees shall be calculated on the basis of a
year consisting of 360 days and shall be paid for the actual number of days
elapsed. Principal payments submitted in funds not immediately available shall
continue to bear interest until
collected. If any payment to be made by the Borrower hereunder or under the
Notes shall become due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day and such extension of time shall be
included in computing any interest in respect of such payment.
3. CONDITIONS OF BORROWING.
Notwithstanding any other provision of this Agreement, the Bank shall not
be required to disburse or make all or any portion of the Loans if any of the
following conditions shall have occurred.
3.1 Loan Documents. The Borrower shall have failed to execute and deliver
to the Bank any of the following Loan Documents (together with any other
documents executed in connection with the Loans, including without limitation,
any guaranties or security agreements executed by the Guarantors or Borrower's
Subsidiaries, collectively, the "Loan Documents"), all of which must be
satisfactory to the Bank and the Bank's counsel in form, substance and
execution:
(a) Loan Agreement. Two copies of this Agreement duly executed by the
Borrower.
(b) Revolving Note. The Revolving Note duly executed by the Borrower.
(c) Term Loan Note. The Term Loan Note duly executed by the Borrower.
(d) Landlord Consent and Waiver. A Landlord Consent and Waiver duly
executed by any landlord with respect to any leased real estate of Borrower
or its Subsidiaries, in form and substance acceptable to Bank.
(e) Term Loan Guaranty. The Limited Guaranty duly executed by each
Term Loan Guarantor.
(f) Stock Pledge Agreements. The Stock Pledge Agreements duly executed
by the Borrower, Nor-Cote International, Inc., CSM, Inc, Telecom Technology
Corporation, ▇▇▇▇▇ ▇. ▇▇▇▇ Corporation and Century II Staffing, Inc.
(g) Resolutions. Resolutions of the boards of directors and/or
shareholders of the Borrower authorizing the execution of this Agreement
and the Loan Documents.
(h) Additional Documents. Such other certificates, guaranties,
financial statements, schedules, resolutions, opinions of counsel, notes
and other documents which are provided for hereunder or which the Bank
shall require.
3.2 Title. Intentionally omitted.
3.3 Survey. Intentionally omitted.
3.4 Environmental Report. Intentionally omitted.
3.5 Appraisal. Intentionally omitted.
3.6 Insurance. Borrower shall fail to furnish to Bank evidence of insurance
coverage as required by the Loan Documents.
3.7 Event of Default. Any Event of Default, or any event which, with notice
or lapse of time, or both would constitute an Event of Default, shall have
occurred and be continuing.
3.8 Adverse Changes. A material adverse change in the financial condition
or affairs of the Borrower, Guarantor, or any Subsidiary of Borrower, as
determined in the Bank's reasonable discretion, shall have occurred.
3.9 Litigation. Any litigation or governmental proceeding shall have been
instituted against the Borrower, Guarantor, any Subsidiary of Borrower, or any
of their officers or shareholders which in the discretion of the Bank,
reasonably exercised, materially adversely affects the financial condition or
continued operation of the Borrower.
3.10 Representations and Warranties. Any representation or warranty of the
Borrower contained herein or in any Loan Document shall be materially untrue or
incorrect as of the date of any Loan as though made on such date, except to the
extent such representation or warranty expressly relates to an earlier date.
3.11 Commitment Fee. The Borrower shall have failed to pay to the Bank
commitment fees in the aggregate amount of Ten Thousand Dollars and No Cents
($10,000.00), payable on or before the execution of this Agreement by the Bank.
4. NOTES EVIDENCING LOANS.
4.1 Revolving Note. The Revolving Loans shall be evidenced by a single
Revolving Line of Credit Promissory Note (together with any and all renewal,
extension, modification or replacement notes executed by the Borrower and
delivered to the Bank and given in substitution therefor, the "Revolving Note")
in form and substance acceptable to Bank, duly executed by the Borrower and
payable to the order of the Bank. At the time of the initial disbursement of a
Revolving Loan and at each time an additional Revolving Loan shall be requested
hereunder or a repayment made in whole or in part thereon, an appropriate
notation thereof shall be made on the books and records of the Bank. All amounts
recorded shall be, absent demonstrable error, conclusive and binding
evidence of (i) the principal amount of the Revolving Loans advanced hereunder,
(ii) any unpaid interest owing on the Revolving Loans, and (iii) all amounts
repaid on the Revolving Loans. The failure to record any such amount or any
error in recording such amounts shall not, however, limit or otherwise affect
the obligations of the Borrower under the Revolving Note to repay the principal
amount of the Revolving Loans, together with all interest accruing thereon.
4.2 Term Loan Note. The Term Loan shall be evidenced by a single Term Loan
Note (together with any and all renewal, extension, modification or replacement
notes executed by the Borrower and given in substitution therefor, the "Term
Loan Note") in form and substance acceptable to Bank in its sole discretion,
duly executed by the Borrower and payable to the order of the Bank. At the time
of the disbursement of the Term Loan, or a repayment made in whole or in part
thereon, an appropriate notation thereof shall be made on the books and records
of the Bank. All amounts recorded shall be, absent demonstrable error,
conclusive and binding evidence of (i) the principal amount of the Term Loan
advanced hereunder, (ii) any unpaid interest owing on the Term Loan and (iii)
all amounts repaid on the Term Loan. The failure to record any such amount or
any error in recording such amounts shall not, however, limit or otherwise
affect the obligations of the Borrower under the Term Loan Note to repay the
principal amount of the Term Loan, together with all interest accruing thereon.
5. MANNER OF BORROWING.
Each Loan shall be made available to the Borrower upon its request, by
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, or any other individual authorized in
writing by either of them unless such Person's authority to so act has been
revoked by the Borrower in writing previously received by the Bank. A request
for a Loan must be received by no later than 11:00 a.m. Indianapolis, Indiana
time, on the day it is to be funded. The proceeds of each Loan shall be made
available at the office of the Bank by credit to the account of the Borrower or
by other means requested by the Borrower and acceptable to the Bank.
The Bank is authorized to rely on any written, verbal, electronic,
telephonic or telecopy loan requests which the Bank believes in its good faith
judgment to emanate from a properly authorized representative of the Borrower,
whether or not that is in fact the case. The Borrower does hereby irrevocably
confirm, ratify and approve all such advances by the Bank and does hereby
indemnify the Bank against losses and expenses (including court costs,
attorneys' and paralegals' fees) and shall hold the Bank harmless with respect
thereto.
6. SECURITY FOR THE OBLIGATIONS.
6.1 Security for Obligations. As security for the payment of the
Obligations, the Borrower does hereby pledge, assign, transfer and deliver to
the Bank and does hereby grant to the Bank a continuing and unconditional
security interest in and to any and all property of the Borrower, of any kind or
description, tangible or intangible, whether now existing or hereafter arising
or acquired, including, but not limited to, the
following (all of which property, along with the products and proceeds
therefrom, are individually and collectively referred to as the "Collateral"):
(a) all property of, or for the account of, the Borrower now or
hereafter coming into the possession, control or custody of, or in transit
to, the Bank or any agent or bailee for the Bank or any parent, affiliate
or subsidiary of the Bank or any participant with the Bank in the Loans
(whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise), including all earnings, dividends, interest, or
other rights in connection therewith and the products and proceeds
therefrom, including the proceeds of insurance thereon; and
(b) the additional property of the Borrower, whether now existing or
hereafter arising or acquired, and wherever now or hereafter located,
together with all additions and accessions thereto, substitutions for, and
replacements, products and proceeds therefrom, and all of the Borrower's
books and records and recorded data relating thereto (regardless of the
medium of recording or storage), together with all of the Borrower's right,
title and interest in and to all computer software required to utilize,
create, maintain and process any such records or data on electronic media,
identified and set forth as follows:
(i) All Accounts and all Goods whose sale, lease or other disposition
by the Borrower has given rise to Accounts and have been returned
to, or repossessed or stopped in transit by, the Borrower, or
rejected or refused by an Account Debtor;
(ii) All Inventory, including, without limitation, raw materials,
work-in-process and finished goods;
(iii) All Goods (other than Inventory), including, without limitation,
embedded software, Equipment, vehicles, furniture and Fixtures;
(iv) All Software and computer programs;
(v) All Securities, Investment Property, Financial Assets and Deposit
Accounts;
(vi) All Chattel Paper, Electronic Chattel Paper, Instruments,
Documents, Letter of Credit Rights, all proceeds of letters of
credit, Health care insurance Receivables, Supporting
Obligations, notes secured by real estate, Commercial Tort Claims
and General Intangibles, including Payment Intangibles;
(vii) All real property; and
(viii) All insurance policies and proceeds insuring the foregoing
property or any part thereof, including unearned premiums
provided, however until an Event of Default has occurred,
Borrower may settle all claims and receive all such proceeds so
long as the value of the Collateral is not impaired..
6.2 Possession and Transfer of Collateral. Until an Event of Default has
occurred hereunder, the Borrower shall be entitled to possession or use of the
Collateral. The cancellation or surrender of the Notes, upon payment or
otherwise, shall not affect the right of the Bank to retain the Collateral for
any other of the Obligations. The Borrower shall not sell, assign (by operation
of law or otherwise), license, lease or otherwise dispose of, or grant any
option with respect to any of the Collateral except in the ordinary course of
business.
6.3 Financing Statements. The Borrower shall, at the Bank's request, at any
time and from time to time, execute and deliver to the Bank such financing
statements, amendments and other documents and do such acts as the Bank
reasonably deems necessary in order to establish and maintain valid, attached
and perfected first security interests in the Collateral in favor of the Bank,
free and clear of all Liens and claims and rights of third parties whatsoever
(except as otherwise specifically set forth in Section 8 hereof). The Borrower
hereby irrevocably authorizes the Bank at any time, and from time to time, to
file in any jurisdiction any initial financing statements and amendments thereto
that (a) indicate the Collateral (i) as all assets of the Borrower or words of
similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the Uniform Commercial Code of
the jurisdiction wherein such financing statement or amendment is filed, or (ii)
as being of an equal or lesser scope or within greater detail, and (b) contain
any other information required by Section 5 of Article 9 of the Uniform
Commercial Code of the jurisdiction wherein such financing statement or
amendment is filed regarding the sufficiency or filing office acceptance of any
financing statement or amendment, including (i) whether the Borrower is an
organization, the type of organization and any organization identification
number issued to the Borrower, and (ii) in the case of a financing statement
filed as a fixture filing or indicating Collateral as as-extracted collateral or
timber to be cut, a sufficient description of real property to which the
Collateral relates. The Borrower agrees to furnish any such information to the
Bank promptly upon request. The Borrower further ratifies and affirms its
authorization for any financing statements and/or amendments thereto, executed
and filed by the Bank in any jurisdiction prior to the date of this Agreement.
6.4 Additional Collateral. The Borrower shall deliver to the Bank
immediately upon its demand, such other collateral as the Bank may from time to
time request, should the value of the Collateral, in the Bank's sole and
absolute discretion, materially decline, deteriorate, depreciate or become
impaired, and does hereby grant to the Bank a continuing security interest in
such other collateral, which, when pledged, assigned and transferred to the Bank
shall be and become part of the Collateral. The Bank's security interests in
each of the foregoing Collateral shall be valid, complete and perfected whether
or not covered by a specific assignment.
6.5 Preservation of the Collateral. The Bank may, but is not required to,
take such action from time to time as the Bank reasonably deems appropriate to
maintain or protect the Collateral. The Bank shall have exercised reasonable
care in the custody and preservation of the Collateral if it takes such action
as the Borrower shall reasonably request in writing; provided, however, that
such request shall not be inconsistent with the Bank's status as a secured
party, and the failure of the Bank to comply with any such request shall not be
deemed a failure to exercise reasonable care. In addition, any failure of the
Bank to preserve or protect any rights with respect to any Collateral not in
Bank's possession or control against prior or third parties, or to do any act
with respect to preservation of the Collateral, not so requested by the
Borrower, shall not be deemed a failure to exercise reasonable care in the
custody or preservation of the Collateral. The Borrower shall have the sole
responsibility for taking such action as may be necessary, from time to time, to
preserve all rights of the Borrower and the Bank in any Collateral not in Bank's
possession or control against prior or third parties. Without limiting the
generality of the foregoing, where Collateral consists in whole or in part of
securities, the Borrower represents to, and covenants with, the Bank that the
Borrower has made arrangements for keeping informed of changes or potential
changes affecting the securities (including, but not limited to, rights to
convert or subscribe, payment of dividends, reorganization or other exchanges,
tender offers and voting rights), and the Borrower agrees that the Bank shall
have no responsibility or liability for informing the Borrower of any such or
other changes or potential changes or for taking any action or omitting to take
any action with respect thereto so long as such securities are not in Bank's
possession or control.
6.6 Other Actions as to any and all Collateral. The Borrower further agrees
to take any other action reasonably requested by the Bank to insure the
attachment, perfection and first priority of, and the ability of the Bank to
enforce, the Bank's security interest in any and all of the Collateral
including, without limitation, (a) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under the UCC, to
the extent, if any, that the Borrower's signature thereon is required therefor,
(b) causing the Bank's name to be noted as secured party on any certificate of
title for a titled good if such notation is a condition to attachment,
perfection or priority of, or ability of the Bank to enforce, the Bank's
security interest in such Collateral, (c) complying with any provision of any
statute, regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Bank to enforce, the Bank's security interest in
such Collateral, (d) obtaining governmental and other third party consents and
approvals, including without limitation any consent of any licensor, lessor or
other Person obligated on Collateral, (e) obtaining waivers from mortgagees and
landlords in form and substance satisfactory to the Bank, and (f) taking all
actions required by the UCC in effect from time to time or by other law, as
applicable in any relevant UCC jurisdiction, or by other law as applicable in
any foreign jurisdiction.
6.7 Collateral in the Possession of a Warehouseman or Bailee. If any of the
Collateral at any time is in the possession of a warehouseman or bailee, the
Borrower
shall promptly notify the Bank thereof, and if requested by the Bank, shall
promptly obtain an acknowledgement from the warehouseman or bailee, in form and
substance satisfactory to the Bank, that the warehouseman or bailee holds such
Collateral for the benefit of the Bank and shall act upon the instructions of
the Bank, without the further consent of the Borrower.
7. REPRESENTATIONS AND WARRANTIES.
To induce the Bank to make the Loans, the Borrower makes the following
representations and warranties to the Bank, each of which shall be true and
correct as of the date of the execution and delivery of this Agreement, and
which shall survive the execution and delivery of this Agreement:
7.1 Borrower Organization and Name. Borrower is a corporation duly
organized, existing and in good standing under the laws of the State of Indiana,
with full and adequate power to carry on and conduct its business as presently
conducted. Borrower's state issued organizational identification number is
200101900035. The Borrower is duly licensed or qualified in all foreign
jurisdictions wherein the nature of its activities require such qualification or
licensing. The exact legal name of the Borrower is as set forth in the first
paragraph of this Agreement, and the Borrower currently does not conduct, nor
has it during the last five (5) years conducted, business under any other name
or trade name, except for FDI Indiana, Inc. and Fortune Diversified Industries,
Inc.
7.2 Authorization; Validity. The Borrower has full right, power and
authority to enter into this Agreement, to make the borrowings and execute and
deliver the Loan Documents as provided herein and to perform all of its duties
and obligations under this Agreement and the Loan Documents. The execution and
delivery of this Agreement and the Loan Documents will not, nor will the
observance or performance of any of the matters and things herein or therein set
forth, violate or contravene any provision of law or of the articles of
incorporation or bylaws of the Borrower. All necessary and appropriate corporate
action has been taken on the part of the Borrower to authorize the execution and
delivery of this Agreement and the Loan Documents. This Agreement and the Loan
Documents are valid and binding agreements and contracts of the Borrower in
accordance with their respective terms.
7.3 Compliance With Laws. The nature and transaction of the Borrower's
business and operations and the use of its properties and assets, including, but
not limited to, the Collateral or any real estate owned or occupied by the
Borrower, do not and during the term of the Loans shall not, violate or conflict
with any applicable law, statute, ordinance, rule, regulation or order of any
kind or nature in any material respects, including, without limitation, the
provisions of the Fair Labor Standards Act or any zoning, land use, building,
noise abatement, occupational health and safety or other laws, any building
permit or any condition, grant, easement, covenant, condition or restriction,
whether recorded or not.
7.4 Environmental Laws and Hazardous Substances. Except as set forth in
Schedule 7.4, The Borrower represents, warrants and agrees with the Bank that
(i) the Borrower has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials above
actionable or regulated levels, on or off any of the premises of the Borrower
(whether or not owned by it) in any manner which at any time violates any
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder, (ii) the operations of the Borrower comply in all
material respects with all Environmental Laws and all licenses, permits
certificates, approvals and similar authorizations thereunder, (iii) there has
been no investigation, proceeding, complaint, order, directive, claim, citation
or notice by any governmental authority or any other Person, nor is any pending
or, to the best of the Borrower's knowledge, threatened, and the Borrower shall
immediately notify the Bank upon becoming aware of any such investigation,
proceeding, complaint, order, directive, claim, citation or notice, and shall
take prompt and appropriate actions to respond thereto, with respect to any
non-compliance with, or violation of, the requirements of any Environmental Law
by the Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Material above
actionable or regulated levels or any other environmental, health or safety
matter, which affects the Borrower or its business, operations or assets or any
properties at which the Borrower has transported, stored or disposed of any
Hazardous Materials, (iv) the Borrower has no material liability, contingent or
otherwise, in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material; and (v) without limiting the generality of the foregoing, the Borrower
shall, following determination by the Bank that there is non-compliance, or any
condition which requires any action by or on behalf of the Borrower in order to
avoid any non-compliance, with any Environmental Law, at the Borrower's sole
expense, cause an independent environmental engineer acceptable to the Bank to
conduct such tests of the relevant site as are appropriate, and prepare and
deliver a report setting forth the result of such tests, a proposed plan for
remediation and an estimate of the costs thereof.
7.5 Absence of Breach. The execution, delivery and performance of this
Agreement, the Loan Documents and any other documents or instruments to be
executed and delivered by the Borrower in connection with the Loans shall not in
any material respects: (i) violate any provisions of law or any applicable
regulation, order, writ, injunction or decree of any court or governmental
authority, or (ii) conflict with, be inconsistent with, or result in any breach
or default of any of the terms, covenants, conditions, or provisions of any
indenture, mortgage, deed of trust, instrument, document, agreement or contract
of any kind to which the Borrower is a party or by which the Borrower or any of
its property or assets may be bound.
7.6 Collateral Representations. Except as set forth on Schedule 7.6, the
Borrower and its Subsidiaries are the sole owners of the Collateral, free from
any Lien of any kind, other than the Lien of the Bank.
7.7 Financial Statements. All financial statements submitted to the Bank
have been prepared in accordance with GAAP on a basis, except as otherwise noted
therein, consistent with the previous fiscal year and truly and accurately
reflect the financial condition of the Borrower and the results of the
operations for the Borrower as of such date and for the periods indicated. Since
the date of the most recent financial statement submitted by the Borrower to the
Bank, there has been no material adverse change in the financial condition or in
the assets or liabilities of the Borrower, or any changes except those occurring
in the ordinary course of business.
7.8 Litigation and Taxes. There is no litigation, demand, charge, claim,
petition or governmental investigation or proceeding pending, or, threatened,
against the Borrower, which, if adversely determined, would result in any
material adverse change in the financial condition or properties, business or
operations of the Borrower. The Borrower has duly filed all applicable income or
other tax returns and has paid all income or other taxes when due. There is no
controversy or objection pending, or, threatened in respect of any tax returns
of the Borrower.
7.9 Event of Default. No Event of Default has occurred and is continuing,
and no event has occurred and is continuing which, with the lapse of time, the
giving of notice, or both, would constitute such an Event of Default under this
Agreement or any of the Loan Documents and the Borrower is not in default
(without regard to grace or cure periods) under any contract or agreement to
which it is a party which would result in any material change in the financial
condition of Borrower, as determined by Bank in its sole discretion.
7.10 ERISA Obligations. Any Employee Plans of the Borrower meet the minimum
funding standards of Section 302 of ERISA where applicable and each such
Employee Plan that is intended to be qualified within the meaning of Section 401
of the Internal Revenue Code of 1986 is qualified. No withdrawal liability has
been incurred under any such Employee Plans and no "Reportable Event" or
"Prohibited Transaction" (as such terms are defined in ERISA), has occurred with
respect to any such Employee Plans, unless approved by the appropriate
governmental agencies. The Borrower has promptly paid and discharged all
obligations and liabilities arising under ERISA of a character which if unpaid
or unperformed might result in the imposition of a Lien against any of its
properties or assets.
7.11 Adverse Circumstances. No condition, circumstance, event, agreement,
document, instrument, restriction, litigation or proceeding (or threatened
litigation or proceeding or basis therefor) exists which (a) could adversely
affect the validity or priority of the Liens granted to the Bank under the Loan
Documents, (b) could materially adversely affect the ability of the Borrower to
perform its obligations under the Loan Documents, (c) would constitute a default
under any of the Loan Documents, or (d) would constitute such a default with the
giving of notice or lapse of time or both.
7.12 Lending Relationship. The Borrower acknowledges and agrees that the
relationship hereby created with the Bank is and has been conducted on an open
and
arm's length basis in which no fiduciary relationship exists and that the
Borrower has not relied and is not relying on any such fiduciary relationship in
executing this Agreement and in consummating the Loans. The Bank represents that
it will receive the Notes payable to its order as evidence of a bank loan.
7.13 Business Loan. The Loans, including interest rate, fees and charges as
contemplated hereby, (i) are business loans, (ii) are an exempted transaction
under the Truth In Lending Act, 12 U.S.C. 1601 et seq., as amended from time to
time, and (iii) do not, and when disbursed shall not, violate the provisions of
the Indiana usury laws, any consumer credit laws or the usury laws of any state
which may have jurisdiction over this transaction, the Borrower or any property
securing the Loans.
7.14 Compliance with Regulation U. No portion of the proceeds of the Loans
shall be used by the Borrower, or any affiliates of the Borrower, either
directly or indirectly, for the purpose of purchasing or carrying any margin
stock, within the meaning of Regulation U as adopted by the Board of Governors
of the Federal Reserve System.
7.15 Governmental Regulation. The Borrower is not, or after giving effect
to any loan, will not be, subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940
or to any federal or state statute or regulation limiting its ability to incur
indebtedness for borrowed money.
7.16 Bank Accounts. All Deposit accounts and other bank accounts of the
Borrower and its Subsidiaries other than those set forth in Schedule 7.16
attached hereto and amended from time to time (the "Other Accounts") are held
with the Bank or its affiliates. None of the Other Accounts are the primary
account of the Borrower or any Subsidiary other than CSM, Inc., Century II ASO,
Inc., Century II Services, Inc., Century II Staffing, Inc., Century II Staffing
TN, Inc., Century II Staffing USA, Inc., Professional Staff Management, Inc.,
Professional Staff Management, Inc. II, or Pro Staff, Inc.
7.17 Place of Business. The principal place of business of the Borrower is
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and the Borrower shall
promptly notify the Bank of any change in such location. The Borrower will not
remove or permit the Collateral to be removed from such location without the
prior written consent of the Bank, except for Inventory sold in the usual and
ordinary course of the Borrower's business.
7.18 Complete Information. This Agreement and all financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials submitted to the Bank in connection with or in furtherance of this
Agreement by or on behalf of the Borrower fully and fairly state the matters
with which they purport to deal, and neither misstate any material fact nor,
separately or in the aggregate, fail to state any material fact necessary to
make the statements made not misleading.
7.19 Subsidiaries. The following is a complete list of all of the
Subsidiaries of Borrower:
▇▇▇▇▇ ▇. ▇▇▇▇ Corporation
Commercial Solutions, Inc.
Nor-Cote International, Inc.
Kingston Sales Corporation
Professional Staff Management, Inc.
Professional Staff Management, Inc. II
Telecom Technology Corporation
Magtech Services, Inc.
Cornerstone Wireless Construction Services, Inc.
Pro Staff, Inc.
Cornerstone Wireless Services, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Associates
Century II ASO, Inc.
Century II Services, Inc.
Century II Staffing, Inc.
Century II Staffing TN, Inc.
Century II Staffing USA, Inc.
Fortune Staffing, Inc.
Fortune Strategic Products, Inc.
Nor-Cote International Limited
Nor-Cote International (Mexico), Inc.
Nor-Cote International PTE Ltd
Nor-Cote (Malaysia) SDN BHD
StarQuest Wireless, Inc.
Tennessee Guardrail, Inc.
Cornerstone Engineering Services, Inc.
CW Construction Services, LLC
CSM, Inc.
Fortune Wireless, Inc.
8. NEGATIVE COVENANTS.
8.1 Indebtedness. The Borrower shall not, either directly or indirectly,
create, assume, incur or have outstanding any Indebtedness (excluding
purchase-money indebtedness), or become liable, whether as endorser, guarantor,
surety or otherwise, for any debt or obligation of any other Person, except:
(a) the Obligations;
(b) endorsement for collection or deposit of any commercial paper
secured in the ordinary course of business;
(c) obligations of the Borrower for taxes, assessments, municipal or
other governmental charges;
(d) obligations of the Borrower for accounts payable, other than for
money borrowed, incurred in the ordinary course of business; and
(e) obligations existing on the date hereof which are disclosed on the
financial statements referred to in Section 7.
8.2 Encumbrances. The Borrower shall not, either directly or indirectly,
create, assume, incur or suffer or permit to exist any Lien or charge of any
kind or character upon any asset of the Borrower, whether owned at the date
hereof or hereafter acquired except:
(a) Liens for taxes, assessments or other governmental charges not yet
due or which are being contested in good faith by appropriate proceedings
in such a manner as not to make the property forfeitable;
(b) Liens or charges incidental to the conduct of its business or the
ownership of its property and assets which were not incurred in connection
with the borrowing of money or the obtaining of an advance or credit, and
which do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the operation of
its business;
(c) Liens arising out of judgments or awards against the Borrower with
respect to which it shall concurrently therewith be prosecuting a timely
appeal or proceeding for review and with respect to which it shall have
secured a stay of execution pending such appeal or proceedings for review;
(d) pledges or deposits to secure obligations under worker's
compensation laws or similar legislation;
(e) good faith deposits in connection with lending contracts or leases
to which the Borrower is a party;
(f) deposits to secure public or statutory obligations of the
Borrower;
(g) Liens existing on the date hereof and disclosed on Schedule 7.6;
(h) Liens granted to the Bank hereunder; and
(i) Purchase-money security interests.
8.3 Investments. The Borrower shall not, either directly or indirectly,
make or have outstanding any new investments (whether through purchase of
stocks, obligations or otherwise) in, or loans or advances to, any other Person,
or acquire all or any
substantial part of the assets, business, stock or other evidence of beneficial
ownership of any other Person except investments in direct obligations of the
United States or any other investments that would not cause a default under this
Agreement, impair the Collateral or otherwise impair Borrower's financial
condition.
8.4 Transfer; Merger. The Borrower shall not, either directly or
indirectly, merge, consolidate, sell, transfer, license, lease, encumber or
otherwise dispose of all or any part of its property or business or all or any
substantial part of its assets, or sell or discount (with or without recourse)
any of its Promissory Notes, Chattel Paper, Payment Intangibles or Accounts.
8.5 Issuance of Stock. The Borrower shall not, either directly or
indirectly, issue or distribute any additional capital stock or other securities
of the Borrower without the prior written consent of Bank, which shall not be
unreasonably withheld.
8.6 Use of Proceeds. Neither the Borrower nor any of its Subsidiaries or
affiliates shall use any portion of the proceeds of the Loans, either directly
or indirectly, for the purpose of purchasing any securities underwritten by any
affiliate of the Bank. Additionally, Borrower shall not use any portion of the
proceeds of the Revolving Loans, directly or indirectly, to make any payments on
the Term Loan.
8.7 Bank Accounts. The Borrower shall not establish any new Deposit
accounts or other bank accounts, other than bank accounts established at or with
the Bank, without the prior written consent of the Bank, which consent shall not
be unreasonably withheld.
8.8 Change of Legal Status. The Borrower shall not change its name, its
organizational identification number, its type of organization, its jurisdiction
of organization or other legal structure.
8.9 Acquisitions. The Borrower shall not make any Acquisitions without the
prior written consent of Bank in Bank's sole discretion or any other
Acquisitions that would not cause a default under this Agreement, impair the
Collateral or otherwise impair Borrower's financial condition.
9. AFFIRMATIVE COVENANTS.
9.1 Compliance with Bank Regulatory Requirements. Upon demand by the Bank,
the Borrower shall reimburse the Bank for the Bank's additional costs and/or
reductions in the amount of principal or interest received or receivable by the
Bank if at any time after the date of this Agreement any law, treaty or
regulation or any change in any law, treaty or regulation or the interpretation
thereof by any governmental authority charged with the administration thereof or
any central bank or other fiscal, monetary or other authority having
jurisdiction over the Bank or the Loans, whether or not having the force of law,
shall impose, modify or deem applicable any reserve (except reserve requirements
taken into account in calculating the Loan Rate) and/or special deposit
requirement against or in respect of assets held by or deposits in or for the
account of the Loans by the Bank or impose on the Bank any other condition with
respect to this Agreement or the Loans, the result of which is to either
increase the cost to the Bank of making or maintaining the Loans or to reduce
the amount of principal or interest received or receivable by the Bank with
respect to such Loans. Said additional costs and/or reductions will be those
which directly result from the imposition of such requirement or condition on
the making or maintaining of such Loans. All Loans shall be deemed to be match
funded for the purposes of the Bank's determination in the previous sentence.
Notwithstanding the foregoing, the Borrower shall not be required to pay any
such additional costs which could be avoided by the Bank with the exercise of
reasonable conduct and diligence.
9.2 Company Existence. The Borrower shall at all times preserve and
maintain its existence, rights, franchises and privileges, and shall at all
times continue as a going concern in the business which the Borrower is
presently conducting.
9.3 Maintain Property. The Borrower shall at all times maintain, preserve
and keep its properties and Equipment, including, but not limited to, any
Collateral, in good repair, working order and condition, reasonable wear and
tear excepted, and shall from time to time make all needful and proper repairs,
renewals, replacements, and additions thereto so that at all times the
efficiency thereof shall be fully preserved and maintained. The Borrower shall
permit the Bank to examine and inspect such plant, properties and Equipment,
including, but not limited to, any Collateral, at all reasonable times.
9.4 Maintain Insurance. The Borrower shall at all times insure and keep
insured in insurance companies reasonably acceptable to the Bank, all insurable
property owned by it which is of a character usually insured by companies
similarly situated and operating like properties, against loss or damage from
fire and such other hazards or risks as are customarily insured against by
companies similarly situated and operating like properties; and shall similarly
insure employers', public and professional liability risks. Prior to the date of
the funding of the Notes, the Borrower shall deliver to the Bank a certificate
setting forth in summary form the nature and extent of the insurance maintained
by the Borrower pursuant to this Section 9. All such policies of insurance must
be reasonably satisfactory to the Bank in relation to the amount and term of the
Obligations and type and value of the Collateral and assets of the Borrower,
shall identify the Bank as lender's loss payee and as an additional insured. In
the event the Borrower either fails to provide the Bank with evidence of the
insurance coverage required by this Section or at any time hereafter shall fail
to obtain or maintain any of the policies of insurance required above, or to pay
any premium in whole or in part relating thereto, then the Bank, without waiving
or releasing any obligation or default by the Borrower hereunder, may at any
time (but shall be under no obligation to so act), obtain and maintain such
policies of insurance and pay such premium and take any other action with
respect thereto, which the Bank deems advisable. This insurance coverage (i)
may, but need not, protect the Borrower's interest in such property, including,
but not limited to the Collateral, and (ii) may not pay any claim made by, or
against, the Borrower in connection with such property, including, but not
limited to the Collateral. The
Borrower may later cancel any such insurance purchased by the Bank, but only
after providing the Bank with evidence that the Borrower has obtained the
insurance coverage required by this Section. The costs of such insurance
obtained by the Bank, through and including the effective date such insurance
coverage is canceled or expires, shall be payable on demand by the Borrower to
the Bank, together with interest at the Default Rate on such amounts until
repaid and any other charges by the Bank in connection with the placement of
such insurance. The reasonable costs of such insurance, which may be greater
than the cost of insurance which the Borrower may be able to obtain on its own,
together with interest thereon at the Default Rate and any other charges by the
Bank in connection with the placement of such insurance may be added to the
total Obligations due and owing.
9.5 Tax Liabilities. The Borrower shall at all times pay and discharge all
property and other taxes, assessments and governmental charges upon, and all
claims (including claims for labor, materials and supplies) against the Borrower
or any of its properties, Equipment or Inventory, before the same shall become
delinquent and before penalties accrue thereon.
9.6 ERISA Liabilities; Employee Plans. The Borrower shall (i) keep in full
force and effect any and all Employee Plans which are presently in existence or
may, from time to time, come into existence under ERISA, and not withdraw from
any such Employee Plans, unless such withdrawal can be effected or such Employee
Plans can be terminated without liability to the Borrower; (ii) make
contributions to all of such Employee Plans in a timely manner and in a
sufficient amount to comply with the standards of ERISA; including the minimum
funding standards of ERISA; (iii) comply with all material requirements of ERISA
which relate to such Employee Plans; (iv) notify the Bank immediately upon
receipt by the Borrower of any notice concerning the imposition of any
withdrawal liability or of the institution of any proceeding or other action
which may result in the termination of any such Employee Plans or the
appointment of a trustee to administer such Employee Plans; (v) promptly advise
the Bank of the occurrence of any "Reportable Event" or "Prohibited Transaction"
(as such terms are defined in ERISA), with respect to any such Employee Plans;
and (vi) amend any Employee Plan that is intended to be qualified within the
meaning of Section 401 of the Internal Revenue Code of 1986 to the extent
necessary to keep the Employee Plan qualified, and to cause the Employee Plan to
be administered and operated in a manner that does not cause the Employee Plan
to lose its qualified status.
9.7 Financial Statements. The Borrower shall at all times maintain a
standard and modern system of accounting, on the accrual basis of accounting and
in all respects in accordance with GAAP, and shall furnish to the Bank or its
authorized representatives such information regarding the business affairs,
operations and financial condition of the Borrower, including, but not limited
to:
(a) as soon as available, and in any event, within one hundred twenty
(120) days after the end of each calendar year, a copy of the annual
audited financial statements of Borrower, including balance sheet,
statement of income
and retained earnings, statement of cash flows for the fiscal year then
ended and such other information (including nonfinancial information) as
the Bank may request, in reasonable detail, prepared and certified by an
independent certified public accountant acceptable to the Bank, containing
an unqualified opinion;
(b) as soon as available, and in any event, within forty-five (45)
days following the end of each calendar quarter, a copy of consolidated and
consolidating financial statements of Borrower and its Subsidiaries
regarding such quarter, including balance sheet, statement of income and
retained earnings, statement of cash flows for the quarter then ended and
such other information (including nonfinancial information) as the Bank may
request, in reasonable detail, prepared and certified as accurate by the
Borrower;
(c) as soon as available, and in any event, within thirty (30) days
following the timely filing of the federal tax return for Borrower, a copy
thereof;
(d) as soon as available, and in any event, within one hundred twenty
(120) days following the end of each calendar year, a copy of the personal
financial statements, in form and substance acceptable to Bank, of each
Term Loan Guarantor; and
(e) as soon as available, and in any event, within thirty (30) days
following the end of each calendar month, a copy of the brokerage
statement(s) for ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ showing his holdings of stock in ▇▇▇
Lilly & Company or Belterra Capital Fund LLC in an amount at least equal to
Forty Million Dollars ($40,000,000.00); provided, however, that such
delivery shall be deemed made with respect to brokerage accounts filed with
the Bank.
No change with respect to such accounting principles shall be made by the
Borrower without giving prior notification to the Bank. The Borrower represents
and warrants to the Bank that the financial statements delivered to the Bank at
or prior to the execution and delivery of this Agreement and to be delivered at
all times thereafter accurately reflect and will accurately reflect the
financial condition of the Borrower in all material respects. The Bank shall
have the right at all times upon at least forty-eight (48) hours prior notice
during customary business hours to inspect the books and records of the Borrower
and make extracts therefrom. The Borrower agrees to advise the Bank immediately
of any material adverse change in the financial condition, the operations or any
other status of the Borrower.
9.8 Supplemental Financial Statements. The Borrower shall, within fifteen
(15) days of receipt thereof, provide to the Bank copies of interim and
supplemental reports if any, submitted to the Borrower by independent
accountants in connection with any interim audit or review of the books of the
Borrower.
9.9 Borrowing Base Certificate. The Borrower shall, within thirty (30) days
after the end of each month during which any amount is outstanding under the
Revolving
Loan, deliver to the Bank a Borrowing Base Certificate, in form and substance
acceptable to Bank, certified as accurate by the Borrower.
9.10 Aged Accounts Schedule. The Borrower shall, within thirty (30) days
after the end of each month during which any amount was outstanding under the
Revolving Loan, deliver to the Bank an aged schedule of the Accounts of the
Borrower, listing the name and amount due from each Account Debtor and showing
the aggregate amounts due by invoice date from (a) 0-30 days, (b) 31-60 days,
(c) 61-90 days, and (d) more than 90 days, and certified as accurate in all
material respects by the Borrower.
9.11 Field Audits. The Borrower shall allow the Bank, at the Bank's option
at any time at which any amount is outstanding under the Revolving Loan and at
the Borrower's sole expense, upon at least forty-eight (48) hours prior notice
from the Bank to the Borrower, to conduct semi-annual field examinations of the
Accounts and Inventory of the Borrower, the results of which must be
satisfactory to the Bank in the Bank's reasonable discretion.
9.12 Brokerage Account. Within sixty (60) days of the date hereof, the
Borrower shall cause ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to hold a minimum of Forty Million
Dollars and No/Cents ($40,000,000.00) in unpledged and unencumbered stock in ▇▇▇
Lilly & Company and/or Belterra Capital Fund LLC in a brokerage account with
Borrower or an affiliate thereof acceptable to Borrower in its sole discretion.
9.13 Other Reports. The Borrower shall, within such period of time as the
Bank may specify, deliver to the Bank such other schedules and reports as the
Bank may require.
9.14 Collateral Records. Borrower shall keep full and accurate books and
records relating to the Collateral and shall ▇▇▇▇ such books and records to
indicate the Bank's Lien in the Collateral.
9.15 Notice of Proceedings. The Borrower shall, immediately after knowledge
thereof shall have come to the attention of any officer of the Borrower, give
written notice to the Bank of all threatened or pending actions, suits, and
proceedings before any court or governmental department, commission, board or
other administrative agency which may have a material effect on the business,
property or operations of the Borrower.
9.16 Notice of Default. The Borrower shall, immediately after the
commencement thereof, give notice to the Bank in writing of the occurrence of an
Event of Default or of any event which, with the lapse of time, the giving of
notice or both, would constitute an Event of Default hereunder.
9.17 Banking Relationship. The Borrower covenants and agrees, within thirty
(30) days after the date of this Agreement and at all times thereafter during
the term of this Agreement, to maintain all of its deposit accounts other than
the Other Accounts with the Bank. The Borrower further covenants and agrees that
none of the Other Accounts
will be the primary account of the Borrower or any Subsidiary other than CSM,
Inc., Century II ASO, Inc., Century II Services, Inc., Century II Staffing,
Inc., Century II Staffing TN, Inc., Century II Staffing USA, Inc., Professional
Staff Management, Inc., Professional Staff Management, Inc. II, or Pro Staff,
Inc.
9.18 Subsidiaries. Within ten (10) days of the date hereof, Borrower shall
cause each of its Subsidiaries party thereto to sign the Guaranty
(Subsidiaries), the form of which is attached hereto as Exhibit A, and the
Security Agreement (Subsidiaries), the form of which is attached hereto as
Exhibit B. Borrower further covenants and agrees to cause all other Subsidiaries
of Borrower to guaranty the obligations and grant a security interest
subordinated only to purchase- money security interests in favor of Bank in all
of the assets of such Subsidiaries. Borrower further covenants and agrees to
pledge its stock or other ownership interest in its Subsidiaries to Bank as
additional security for the Loans.
10. FINANCIAL COVENANTS.
10.1 Senior Funded Debt to EBITDA Ratio. The Borrower shall maintain a
Senior Funded Debt to EBITDA Ratio, tested annually, of no less than 4.25 to
1.00.
10.2 Tangible Net Worth. Borrower shall maintain a Tangible Net Worth, to
be tested quarterly, commencing as of August 31, 2006, of One Million Dollars
and No Cents ($1,000,000.00).
10.3 Liquidity of Guarantor. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall personally hold a
minimum of Forty Million Dollars and No Cents ($40,000,000.00) in unpledged and
unencumbered stock in ▇▇▇ Lilly & Company and/or Belterra Capital Fund LLC, to
be tested monthly.
10.4 Fixed Charge Coverage Ratio. The Borrower shall maintain a Fixed
Charge Coverage ratio, tested quarterly on a rolling four quarter basis, of not
less than 1.15 to 1.00.
11. EVENTS OF DEFAULT.
The Borrower, without notice or demand of any kind, shall be in default
under this Agreement upon the occurrence of any of the following events (each an
"Event of Default").
11.1 Nonpayment of Obligations. Any amount due and owing on the Notes or
any of the Obligations, whether by its terms or as otherwise provided herein, is
not paid within ten (10) days of when due.
11.2 Misrepresentation. Any oral or written warranty, representation,
certificate or statement in this Agreement, the Loan Documents or any other
agreement with the Bank shall be false in any material respects when made or at
any time.
11.3 Nonperformance. Any material failure to perform or default in the
performance of any covenant, condition or agreement contained in this Agreement
that is not cured within thirty (30) days of receiving written notice thereof.
11.4 Default under Loan Documents. A material default under any of the
other Loan Documents after the expiration of any applicable grace or cure
periods, all of which covenants, conditions and agreements contained therein are
hereby incorporated in this Agreement by express reference, shall be and
constitute an Event of Default under this Agreement and any other of the
Obligations.
11.5 Default under Other Agreements. Any default in the payment of
principal, interest or any other sum for any other obligation beyond any period
of grace or opportunity to cure provided with respect thereto or in the
performance of any other term, condition or covenant contained in any agreement
(including, but not limited to any capital or operating lease or any agreement
in connection with the deferred purchase price of property) under which any such
obligation is created, the effect of which default is to cause or permit the
holder of such obligation (or the other party to such other agreement) to cause
such obligation to become due prior to its stated maturity or terminate such
other agreement.
11.6 Assignment for Creditors. Any Obligor makes an assignment for the
benefit of creditors, fails to pay, or admits in writing its inability to pay
its debts as they mature; or if a trustee of any substantial part of the assets
of any Obligor is applied for or appointed.
11.7 Bankruptcy. Any proceeding involving any Obligor, is commenced by or
against such Obligor under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law or statute of
the federal government or any state government.
11.8 Judgments. The entry of any material judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien against any
Obligor which is not fully covered by insurance.
11.9 Change in Control. Any sale, conveyance, assignment or other transfer,
directly or indirectly, of any ownership interest of the Borrower, which results
in any change in the identity of the individuals or entities previously in
control of the Borrower or the grant of a security interest in any ownership
interest of any Person, directly or indirectly controlling the Borrower, which
could result in a change in the identity of the individuals or entities
previously in control of the Borrower. For the purpose hereof, the terms
"control" or "controlling" shall mean the possession of the power to direct, or
cause the direction of, the management and policies of the Borrower by contract
or voting of securities.
11.10 Collateral Impairment. The entry of any judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien against, any
of the Collateral or any collateral under a separate security agreement securing
any of the Obligations, or the loss, theft, destruction, seizure or forfeiture,
or the occurrence of any deterioration or impairment of any of the Collateral or
any of the collateral under any security agreement securing any of the
Obligations, or any decline or depreciation in the value or market price thereof
(whether actual or reasonably anticipated), which causes the Collateral, in the
sole opinion of the Bank acting in good faith, to become unsatisfactory as to
value or character, or which causes the Bank to reasonably believe that it is
insecure and that the likelihood for repayment of the Obligations is or will
soon be impaired, time being of the essence. The cause of such deterioration,
impairment, decline or depreciation shall include, but is not limited to, the
failure by the Borrower to do any act deemed reasonably necessary by the Bank to
preserve and maintain the value and collectibility of the Collateral.
12. REMEDIES.
Upon the occurrence of an Event of Default, the Bank shall have all rights,
powers and remedies set forth in the Loan Documents, in any written agreement or
instrument (other than this Agreement or the Loan Documents) relating to any of
the Obligations or any security therefor, or as otherwise provided at law or in
equity. Without limiting the generality of the foregoing, the Bank may, at its
option upon the occurrence of an Event of Default, declare its commitments to
the Borrower to be terminated and all Obligations to be immediately due and
payable, provided, however, that upon the occurrence of an Event of Default
under either Section 11.6, "Assignment for Creditors", or Section 11.7,
"Bankruptcy", all commitments of the Bank to the Borrower shall immediately
terminate and all Obligations shall be automatically due and payable, all
without demand, notice or further action of any kind required on the part of the
Bank. The Borrower hereby waives any and all presentment, demand, notice of
dishonor, protest, and all other notices and demands in connection with the
enforcement of Bank's rights under the Loan Documents, and hereby consents to,
and waives notice of release, with or without consideration, of the Borrower,
any guarantor or of any Collateral, notwithstanding anything contained herein or
in the Loan Documents to the contrary. In addition to the foregoing:
12.1 Possession and Assembly of Collateral. The Bank may, without notice,
demand or legal process of any kind, take possession of any or all of the
Collateral (in addition to Collateral of which the Bank already has possession),
wherever it may be found, and for that purpose may pursue the same wherever it
may be found, and may enter into any of the Borrower's premises where any of the
Collateral may be or is supposed to be, and search for, take possession of,
remove, keep and store any of the Collateral until the same shall be sold or
otherwise disposed of and the Bank shall have the right to store the same in any
of the Borrower's premises without cost to the Bank.
At the Bank's request, the Borrower will, at the Borrower's sole expense,
assemble the Collateral and make it available to the Bank at a place or places
to be designated by the Bank which is reasonably convenient to the Bank and the
Borrower.
12.2 Sale of Collateral. The Bank may sell any or all of the Collateral at
a commercially reasonable public or private sale, upon such terms and conditions
as the Bank may reasonably deem proper, and the Bank may purchase any or all of
the Collateral at any such sale. The Bank shall apply the net proceeds, after
deducting all costs, expenses, attorneys' and paralegals' fees incurred or paid
at any time in the collection, protection and sale of the Collateral and the
Obligations, to the payment of the Notes and/or any of the other Obligations,
returning the excess proceeds, if any, to the Borrower. The Borrower shall
remain liable for any amount remaining unpaid after such application, with
interest. Any notification of intended disposition of the Collateral required by
law shall be conclusively deemed reasonably and properly given if given by the
Bank at least ten (10) calendar days before the date of such disposition. The
Borrower hereby confirms, approves and ratifies all acts and deeds of the Bank
relating to the foregoing, and each part thereof.
12.3 Standards for Exercising Remedies. To the extent that applicable law
imposes duties on the Bank to exercise remedies in a commercially reasonable
manner, the Borrower acknowledges and agrees that it is not commercially
unreasonable for the Bank (a) to fail to incur expenses reasonably deemed
significant by the Bank to prepare Collateral for disposition or otherwise to
complete raw material or work-in-process into finished goods or other finished
products for disposition, (b) to fail to obtain third party consents for access
to Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (c) to fail to
exercise collection remedies against Account Debtors or other Persons obligated
on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (d) to exercise collection remedies against Account Debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (f) to contact other
Persons, whether or not in the same business as the Borrower, for expressions of
interest in acquiring all or any portion of the Collateral, (g) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (i) to dispose of assets
in wholesale rather than retail markets, (j) to disclaim disposition warranties,
including, without limitation, any warranties of title, (k) to purchase
insurance or credit enhancements to insure the Bank against risks of loss,
collection or disposition of Collateral or to provide to the Bank a guaranteed
return from the collection or disposition of Collateral, or (l) to the extent
deemed appropriate by the Bank, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist the Bank in
the collection or disposition of any of the Collateral. The Borrower
acknowledges that the purpose of this
Section is to provide non-exhaustive indications of what actions or omissions by
the Bank would not be commercially unreasonable in the Bank's exercise of
remedies against the Collateral and that other actions or omissions by the Bank
shall not be deemed commercially unreasonable solely on account of not being
indicated in this Section. Without limitation upon the foregoing, nothing
contained in this Section shall be construed to grant any rights to the Borrower
or to impose any duties on the Bank that would not have been granted or imposed
by this Agreement or by applicable law in the absence of this Section.
12.4 UCC and Offset Rights. The Bank may exercise, from time to time, any
and all rights and remedies available to it under the UCC or under any other
applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any other agreements between any
Obligor and the Bank, and may, without demand or notice of any kind, appropriate
and apply toward the payment of such of the Obligations, whether matured or
unmatured, including costs of collection and attorneys' and paralegals' fees,
and in such order of application as the Bank may, from time to time, elect, any
indebtedness of the Bank to any Obligor, however created or arising, including,
but not limited to, balances, credits, deposits, accounts or moneys of such
Obligor in the possession, control or custody of, or in transit to the Bank. The
Borrower, on behalf of itself and each Obligor, hereby waives the benefit of any
law that would otherwise restrict or limit the Bank in the exercise of its
right, which is hereby acknowledged, to appropriate at any time hereafter any
such indebtedness owing from the Bank to any Obligor.
12.5 Additional Remedies. The Bank shall have the right and power to:
(a) instruct the Borrower, at its own expense, to notify any parties
obligated on any of the Collateral, including, but not limited to, any
Account Debtors, to make payment directly to the Bank of any amounts due or
to become due thereunder, or the Bank may directly notify such obligors of
the security interest of the Bank, and/or of the assignment to the Bank of
the Collateral and direct such obligors to make payment to the Bank of any
amounts due or to become due with respect thereto, and thereafter, collect
any such amounts due on the Collateral directly from such Persons obligated
thereon;
(b) enforce collection of any of the Collateral, including, but not
limited to, any Accounts, by suit or otherwise, or make any compromise or
settlement with respect to any of the Collateral, or surrender, release or
exchange all or any part thereof, or compromise, extend or renew for any
period (whether or not longer than the original period) any indebtedness
thereunder;
(c) take possession or control of any proceeds and products of any of
the Collateral, including the proceeds of insurance thereon;
(d) extend, renew or modify for one or more periods (whether or not
longer than the original period) the Notes, any other of the Obligations,
any
obligation of any nature of any other obligor with respect to the Notes or
any of the Obligations;
(e) grant releases, compromises or indulgences with respect to the
Notes, any of the Obligations, any extension or renewal of any of the
Obligations, any security therefor, or to any other obligor with respect to
the Notes or any of the Obligations;
(f) following delivery of notice to the Borrower, transfer the whole
or any part of securities which may constitute Collateral into the name of
the Bank or the Bank's nominee without disclosing, if the Bank so desires,
that such securities so transferred are subject to the security interest of
the Bank, and any corporation, association, or any of the managers or
trustees of any trust issuing any of said securities, or any transfer
agent, shall not be bound to inquire, in the event that the Bank or said
nominee makes any further transfer of said securities, or any portion
thereof, as to whether the Bank or such nominee has the right to make such
further transfer, and shall not be liable for transferring the same;
(g) vote the Collateral;
(h) make an election with respect to the Collateral under Section 1111
of the Bankruptcy Code or take action under Section 364 or any other
section of the Bankruptcy Code; provided, however, that any such action of
the Bank as set forth herein shall not, in any manner whatsoever, impair or
affect the liability of the Borrower hereunder, nor prejudice, waive, nor
be construed to impair, affect, prejudice or waive the Bank's rights and
remedies at law, in equity or by statute, nor release, discharge, nor be
construed to release or discharge, the Borrower, any guarantor or other
Person liable to the Bank for the Obligations; and
(i) at any time, and from time to time, accept additions to, releases,
reductions, exchanges or substitution of the Collateral, without in any way
altering, impairing, diminishing or affecting the provisions of this
Agreement, the Loan Documents, or any of the other Obligations, or the
Bank's rights hereunder, under the Notes or under any of the other
Obligations.
The Borrower hereby ratifies and confirms whatever the Bank may reasonably
do with respect to the Collateral and agrees that the Bank shall not be liable
for any good faith error of judgment or mistakes of fact or law with respect to
actions taken in connection with the Collateral so long as the Bank exercised
reasonable care in connection with same.
12.6 Attorney-in-Fact. The Borrower hereby irrevocably makes,
constitutes and appoints the Bank (and any officer of the Bank or any Person
designated by the Bank for that purpose) as the Borrower's true and lawful
proxy and attorney-in-fact (and agent-in-fact) in the Borrower's name, place
and stead, with full power of substitution, to (i) take such actions as are
permitted in this Agreement, (ii) execute such financing
statements and other documents and to do such other acts as the Bank may require
to perfect and preserve the Bank's security interest in, and to enforce such
interests in the Collateral, and (iii) carry out any remedy provided for in this
Agreement, including, without limitation, endorsing the Borrower's name to
checks, drafts, instruments and other items of payment, and proceeds of the
Collateral, executing change of address forms with the postmaster of the United
States Post Office serving the address of the Borrower, changing the address of
the Borrower to that of the Bank, opening all envelopes addressed to the
Borrower and applying any payments contained therein to the Obligations. The
Borrower hereby acknowledges that the constitution and appointment of such proxy
and attorney-in-fact are coupled with an interest and are irrevocable. The
Borrower hereby ratifies and confirms all that said attorney-in-fact may do or
cause to be done by virtue of any provision of this Agreement.
12.7 No Marshaling. The Bank shall not be required to marshal any present
or future collateral security (including but not limited to this Agreement and
the Collateral) for, or other assurances of payment of, the Obligations or any
of them or to resort to such collateral security or other assurances of payment
in any particular order. To the extent that it lawfully may, the Borrower hereby
agrees that it will not invoke any law relating to the marshaling of collateral
which might cause delay in or impede the enforcement of the Bank's rights under
this Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which any
of the Obligations is secured or payment thereof is otherwise assured, and, to
the extent that it lawfully may, the Borrower hereby irrevocably waives the
benefits of all such laws.
12.8 Application of Proceeds. The Bank will within three (3) business days
after receipt of cash or solvent credits from collection of items of payment,
proceeds of Collateral or any other source, apply the whole or any part thereof
against the Obligations secured hereby. The Bank shall further have the
exclusive right to reasonably determine, in good faith, how, when and what
application of such payments and such credits shall be made on the Obligations,
and such determination shall be conclusive upon the Borrower. Any proceeds of
any disposition by the Bank of all or any part of the Collateral may be first
applied by the Bank to the payment of expenses incurred by the Bank in
connection with the Collateral, including attorneys' fees and legal expenses as
provided for in Section 13 hereof.
12.9 No Waiver. No Event of Default shall be waived by the Bank except in
writing. No failure or delay on the part of the Bank in exercising any right,
power or remedy hereunder shall operate as a waiver of the exercise of the same
or any other right at any other time; nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. There
shall be no obligation on the part of the Bank to exercise any remedy available
to the Bank in any order. The remedies provided for herein are cumulative and
not exclusive of any remedies provided at law or in equity.
13. MISCELLANEOUS.
13.1 Obligations Absolute. None of the following shall affect the
Obligations of the Borrower to the Bank under this Agreement or the Bank's
rights with respect to the Collateral:
(a) acceptance or retention by the Bank of other property or any
interest in property as security for the Obligations;
(b) release by the Bank of the Borrower, any guarantor or of all or
any part of the Collateral or of any party liable with respect to the
Obligations;
(c) release, extension, renewal, modification or substitution by the
Bank of the Notes, or any note evidencing any of the Obligations, or the
compromise of the liability of any guarantor of the Obligations; or
(d) failure of the Bank to resort to any other security or to pursue
the Borrower or any other obligor liable for any of the Obligations before
resorting to remedies against the Collateral.
13.2 Entire Agreement. This Agreement (i) is valid, binding and enforceable
against the Borrower and the Bank in accordance with its provisions and no
conditions exist as to its legal effectiveness; (ii) together with the Loan
Documents, constitutes the entire agreement between the parties; and (iii) is
the final expression of the intentions of the Borrower and the Bank. No
promises, either expressed or implied, exist between the Borrower and the Bank,
unless contained herein or in the Loan Documents. This Agreement, together with
the Loan Documents, supersedes all negotiations, representations, warranties,
commitments, offers, contracts (of any kind or nature, whether oral or written)
prior to or contemporaneous with the execution hereof.
13.3 Amendments; Waivers. No amendment, modification, termination,
discharge or waiver of any provision of this Agreement or of the Loan Documents,
or consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only for the specific purpose for
which given.
13.4 WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO
ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL,
OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE
BANK AND THE BORROWER ARE ADVERSE PARTIES. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL
ACCOMMODATION TO THE BORROWER.
13.5 LITIGATION. TO INDUCE THE BANK TO MAKE THE LOANS, THE BORROWER
IRREVOCABLY AGREES THAT ALL ACTIONS ARISING, DIRECTLY OR INDIRECTLY, AS A RESULT
OR CONSEQUENCE OF THIS AGREEMENT, THE NOTES, ANY OTHER AGREEMENT WITH THE BANK
OR THE COLLATERAL, SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING THEIR
SITUS IN THE CITY OF INDIANAPOLIS, INDIANA. THE BORROWER HEREBY CONSENTS TO THE
EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS SITUS
IN SAID CITY, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. THE
BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, DIRECTED TO BORROWER AS SET FORTH HEREIN IN THE MANNER PROVIDED BY
APPLICABLE STATUTE, LAW, RULE OF COURT OR OTHERWISE.
13.6 Assignability. The Bank may at any time assign the Bank's rights in
this Agreement, the Notes, the Obligations, or any part thereof and transfer the
Bank's rights in any or all of the Collateral, and the Bank thereafter shall be
relieved from all liability with respect to such Collateral. In addition, the
Bank may at any time sell one or more participations in the Loans. The Borrower
may not sell or assign this Agreement, or any other agreement with the Bank or
any portion thereof, either voluntarily or by operation of law, without the
prior written consent of the Bank. This Agreement shall be binding upon the Bank
and the Borrower and their respective legal representatives and successors. All
references herein to the Borrower shall be deemed to include any successors,
whether immediate or remote. In the case of a joint venture or partnership, the
term "Borrower" shall be deemed to include all joint venturers or partners
thereof, who shall be jointly and severally liable hereunder.
13.7 Confidentiality. The Borrower and the Bank hereby agree and
acknowledge that any and all information relating to the Borrower which is (i)
furnished by the Borrower to the Bank (or to any Affiliate of the Bank), and
(ii) non-public, confidential or proprietary in nature, shall be kept
confidential by the Bank or such Affiliate in accordance with applicable law,
provided, however, that such information and other credit information relating
to the Borrower may be distributed by the Bank or such Affiliate to the Bank's
or such Affiliate's directors, officers, employees, attorneys, Affiliates,
auditors and regulators, and upon the order of a court or other governmental
agency having jurisdiction over the Bank or such Affiliate, to any other party.
The Borrower and the Bank further agree that this provision shall survive the
termination of this Agreement.
13.8 Binding Effect. This Agreement shall become effective upon execution
by the Borrower and the Bank. If this Agreement is not dated or contains any
blanks when executed by the Borrower, the Bank is hereby authorized, without
notice to the
Borrower, to date this Agreement as of the date when it was executed by the
Borrower, and to complete any such blanks according to the terms upon which this
Agreement is executed.
13.9 Governing Law. This Agreement, the Loan Documents and the Notes shall
be delivered and accepted in and shall be deemed to be contracts made under and
governed by the internal laws of the State of Indiana (but giving effect to
federal laws applicable to national banks), and for all purposes shall be
construed in accordance with the laws of such State, without giving effect to
the choice of law provisions of such State.
13.10 Enforceability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by,
unenforceable or invalid under any jurisdiction, such provision shall as to such
jurisdiction, be severable and be ineffective to the extent of such prohibition
or invalidity, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
13.11 Survival of Borrower Representations. All covenants, agreements,
representations and warranties made by the Borrower herein shall,
notwithstanding any investigation by the Bank, be deemed material and relied
upon by the Bank and shall survive the making and execution of this Agreement
and the Loan Documents and the issuance of the Notes, and shall be deemed to be
continuing representations and warranties until such time as the Borrower has
fulfilled all of its Obligations to the Bank, and the Bank has been paid in
full. The Bank, in extending financial accommodations to the Borrower, is
expressly acting and relying on the aforesaid representations and warranties.
13.12 Extensions of Bank's Commitment and Notes. This Agreement shall
secure and govern the terms of any extensions or renewals of the Bank's
commitment hereunder and the Notes pursuant to the execution of any
modification, extension or renewal note executed by the Borrower and accepted by
the Bank in its sole and absolute discretion in substitution for the Notes.
13.13 Time of Essence. Time is of the essence in making payments of all
amounts due the Bank under this Agreement and in the performance and observance
by the Borrower of each covenant, agreement, provision and term of this
Agreement.
13.14 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.
13.15 Facsimile Signatures. The Bank is hereby authorized to rely upon and
accept as an original any Loan Documents or other communication which is sent to
the Bank by facsimile, telegraphic or other electronic transmission (each, a
"Communication") which the Bank in good faith believes has been signed by
Borrower and has been delivered to the Bank by a properly authorized
representative of the Borrower, whether or not that is in fact the case.
Notwithstanding the foregoing, the Bank shall not be obligated to accept any
such Communication as an original and may in any instance require that an
original document be submitted to the Bank in lieu of, or in addition to, any
such Communication.
13.16 Notices. Except as otherwise provided herein, the Borrower waives all
notices and demands in connection with the enforcement of the Bank's rights
hereunder. All notices, requests, demands and other communications provided for
hereunder shall be in writing, sent by certified or registered mail, postage
prepaid, by facsimile, by overnight courier, telegram or delivered in person,
and addressed as follows:
If to the Borrower: Fortune Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to its Counsel: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Vornehm, LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to the Bank: Fifth Third Bank (Central Indiana)
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to its Counsel: Bose ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances.
13.17 Indemnification. The Borrower agrees to defend (with counsel
satisfactory to the Bank), protect, indemnify and hold harmless each Indemnified
Party from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and distributions
of any kind or nature (including, without limitation, the disbursements and the
reasonable fees of counsel for each Indemnified Party thereto, which shall also
include, without limitation, attorneys' fees and time charges of attorneys who
may be employees of the Bank, any parent
corporation or affiliated corporation of the Bank), which may be imposed on,
incurred by, or asserted against, any Indemnified Party (whether direct,
indirect or consequential and whether based on any federal, state or local laws
or regulations, including, without limitation, securities, Environmental Laws
and commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any of the Loan Documents, or any act, event or transaction related
or attendant thereto, the preparation, execution and delivery of this Agreement
and the Loan Documents, including, but not limited to, the making or issuance
and management of the Loans, the use or intended use of the proceeds of the
Loans, the enforcement of the Bank's rights and remedies under this Agreement,
the Loan Documents, the Notes, any other instruments and documents delivered
hereunder, or under any other agreement between the Borrower and the Bank;
provided, however, that the Borrower shall not have any obligations hereunder to
any Indemnified Party with respect to matters caused by or resulting from the
willful misconduct or gross negligence of such Indemnified Party. To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, the Borrower shall
satisfy such undertaking to the maximum extent permitted by applicable law. Any
liability, obligation, loss, damage, penalty, cost or expense covered by this
indemnity shall be paid to each Indemnified Party on demand, and, failing prompt
payment, shall, together with interest thereon at the Default Rate from the date
incurred by each Indemnified Party until paid by the Borrower, be added to the
Obligations of the Borrower and be secured by the Collateral. The provisions of
this Section 13.17 shall survive the satisfaction and payment of the other
Obligations and the termination of this Agreement.
13.18 LIBOR Indemnity. If any Regulatory Change, or compliance by the Bank
or any person controlling the Bank with any request or directive of any
governmental authority, central bank or comparable agency (whether or not having
the force of law) shall (a) impose, modify or deem applicable any assessment,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of or loans by, or any other acquisition of funds
or disbursements by, the Bank; (b) subject the Bank or any Loan to any tax,
duty, charge, stamp tax or fee or change the basis of taxation of payments to
the Bank of principal or interest due from the Borrower to the Bank hereunder
(other than a change in the taxation of the overall net income of the Bank); or
(c) impose on the Bank any other condition regarding the Loans or the Bank's
funding thereof, and the Bank shall reasonably determine that the result of the
foregoing is to increase the cost to, or to impose a cost on, the Bank or such
controlling Person of making or maintaining the Loans or to reduce the amount of
principal or interest received by the Bank hereunder, then the Borrower shall
pay to the Bank or such controlling Person, on demand, such additional amounts
as the Bank shall, from time to time, determine are sufficient to compensate and
indemnify the Bank for such increased cost or reduced amount.
13.19 LIBOR Unavailability. If the Bank determines in good faith (which
determination shall be conclusive, absent manifest error) prior to the
commencement of any Interest Period that (i) the making or maintenance of any
Loan would violate any
applicable law, rule, regulation or directive, whether or not having the force
of law, (ii) United States dollar deposits in the principal amount, and for
periods equal to the Interest Period for funding any Loan are not available in
the London Interbank Eurodollar market in the ordinary course of business, (iii)
by reason of circumstances affecting the London Interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the LIBOR Rate to be
applicable to the relevant Loan, or (iv) the LIBOR Rate does not accurately
reflect the cost to the Bank of a Loan, the Bank shall promptly notify the
Borrower thereof and, so long as the foregoing conditions continue, the Bank
shall have no obligation to make any additional advances on the Loans at the
Loan Rate thereafter.
13.20 LIBOR Regulatory Change. In addition, if, after the date hereof, a
Regulatory Change shall, in the reasonable determination of the Bank, make it
unlawful for the Bank to make or maintain the Loans, then the Bank shall
promptly notify the Borrower and none of the Loans may be advanced thereafter.
In addition, at the Borrower's option, the Loans shall be immediately (i)
converted the Loan Rate to an interest rate based on the Prime Rate on the last
Business Day of the then existing Interest Period or on such earlier date as
required by law, or (ii) due and payable on the last Business Day of the then
existing Interest Period or on such earlier date as required by law, all without
further demand, presentment, protest or notice of any kind, all of which are
hereby waived by the Borrower.
13.21 USA Patriot Act. As required by federal law and the Bank's policies
and practices, the Bank may need to obtain, verify and record certain customer
identification information and documentation in connection with opening or
maintaining accounts, or establishing or continuing to provide services.
IN WITNESS WHEREOF, the Borrower and the Bank have executed this Loan and
Security Agreement as of the date first above written.
FORTUNE INDUSTRIES, INC.,
an Indiana corporation
By:
------------------------------------
Printed:
-------------------------------
Title:
---------------------------------
Agreed and accepted:
FIFTH THIRD BANK (CENTRAL INDIANA)
By:
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Vice President
STATE OF INDIANA )
) SS:
COUNTY OF __________)
Before me, a Notary Public in and for said County and State, personally
appeared _______________, the _______________ of Fortune Industries, Inc., an
Indiana corporation, who, after having been duly sworn, acknowledged the
execution of the foregoing Loan and Security Agreement for and on behalf of such
corporation.
Witness my hand and Notarial Seal this ______ day of _______________, 2006.
________________________________________
Notary Public
________________________________________
Printed
My Commission Expires:
______________________
My County of Residence:
______________________
SCHEDULE 7.4
Environmental Laws & Hazardous Substances
Schedule 7.6
Permitted Encumbrances
SCHEDULE 7.16
Other Accounts