Exhibit 10.1
REVOLVING CREDIT
LOAN AND SECURITY AGREEMENT
THIS REVOLVING CREDIT LOAN AND SECURITY AGREEMENT (the "Loan Agreement") is
made as of this day of April, 2006, among FIFTH THIRD BANK, a Michigan
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banking corporation, having a mailing address of 000 Xxxx Xxxxxxx Xxxx., Xxxxx
0000, Xxxxx, Xxxxxxx 00000 (the "Bank"), DEER VALLEY HOMEBUILDERS, INC., an
Alabama corporation authorized to do business in the State of Florida (the
"Borrower"), having its principal place of business at 000 Xxxxxxxx Xxxxxx,
Xxxx, Xxxxxxx 00000, CYTATION CORP., a Delaware corporation, having a mailing
address of 0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000 and
DEERVALLEY ACQUISITIONS CORP., a Florida corporation, having a mailing address
of 0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000 (collectively, the
"Guarantor").
RECITALS:
WHEREAS, Borrower has applied to Bank for a revolving line of credit not to
exceed TWO MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00) (the
"Loan") to be evidenced by a revolving credit note (the "Note") and secured by
accounts receivable, inventory, equipment and all other tangible and intangible
personal property of Borrower. Guarantor has guaranteed Borrower's payment and
performance of the Loan and the Bank has agreed to make the Loan providing
certain conditions herein outlined are fully complied with.
NOW, THEREFORE, in consideration of the premises and covenants hereinafter
contained, the parties hereto agree as follows:
SECTION I. RECITALS; DEFINITIONS
1.1 RECITALS. The foregoing recitals are true and correct and
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incorporated herein by reference.
1.2 DEFINED TERMS. As used in this Loan Agreement, the following terms
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shall have the following meanings:
"Accounts Receivable" shall mean all accounts receivable, book debts,
notes, drafts, acceptances and other forms of obligations, now or hereafter
owing to the Borrower, whether arising from the sale of goods or rendition of
services (including, without limitation, any such obligation that might be
characterized as an account, contract right, or general intangible under the
Uniform Commercial Code as, from time to time, in effect in the State of Florida
or Alabama), all of the Borrower' rights in, to and under all purchase orders,
now or hereafter received by the Borrower for goods or services, and all monies
due or to become due to the Borrower under all contracts for the sale of goods
or the performance of services (whether or not yet earned by performance) or in
connection with any other transaction (including, without limitation, the right
to receive the proceeds of said purchase orders and contracts), and all
collateral security and guarantees of any kind given by any obligor with respect
to any of the foregoing.
"Advance" shall mean the amount advanced by the Bank to Borrower under
the terms of this Loan Agreement and the Note.
"Affiliate" shall mean any person, corporation, association or other
business entity which directly or indirectly controls, or is controlled by, or
is under common control with the Borrower.
"Borrowing Base" shall mean, at any date of determination thereof
(which date and determination shall be in the Bank's sole discretion) an amount
equal to the sum of (i) 80% of Eligible Accounts Receivable, plus (ii) 50% of
Eligible Inventory (based upon the lower of actual cost or market value with a
maximum Inventory Borrowing Base of $1,250,000.00). The Bank has bargained for
and Borrower agrees and acknowledges that the Collateral not included in the
Borrowing Base is a cushion of collateral value in excess of the secured
advances under the Loan.
"Borrowing Base Certificate" shall mean a certificate prepared by
Borrower in substantially the form attached hereto as EXHIBIT "A".
"Collateral" shall have the meaning provided for such term in Section
2.1(h) hereof.
"Default Rate" shall mean five percent (5%) per annum above the
contract rate as set forth in the Note, but not exceeding 18% per annum.
"Eligible Accounts Receivable" shall mean, at any date of
determination thereof, all Accounts Receivable of Borrower: (a) which are bona
fide, valid and legally enforceable obligations of the account debtors in
respect thereof, which are unconditionally owing by such account debtors, and
which do not represent sales on consignment, sales on return or other similar
understandings; (b) which, except for the security interest in the Accounts
Receivable granted to the Bank, are solely owned by the Borrower, free and clear
of any and all mortgages, liens, security interests, encumbrances, claims or
rights of others, except sellers' rights (if any) to reclaim goods under Uniform
Commercial Code Section 2-702; (c) which are not the subject of any defense,
offset, counterclaim or claim; (d) as to which no more than 60 days (or are 30
days past due) shall have elapsed from the original date of the relevant
invoice; (e) those account debtors that do not have more than 25% of their
respective Accounts Receivable aged more than 60 days; (f) Accounts Receivable
with respect to a single account debtor whose total obligations owing does not
exceed 25% of all Eligible Accounts Receivable; (g) as to which the account
debtors are (i) solvent, going concerns unaffiliated with the Borrower or any
Guarantor, and (ii) reasonably satisfactory to the Bank from a credit standpoint
(the Bank's satisfaction may be assumed unless the Bank shall at any time advise
the Borrower to the contrary).
"Eligible Inventory" shall mean, at any date of determination thereof
(which date shall be in the Bank's sole discretion), all Inventory and proceeds
therefrom, owned by Borrower, excluding all work-in-process, but including (a)
goods-in-transit, (b) Inventory used for display or demonstration purposes and
obsolete Inventory and (c) Inventory in the possession of service persons or
technicians performing service for customers of the Borrower, whether or not
such service technicians are employees or independent contractors of the
Borrower. The eligibility of Inventory shall be determined by the Bank in its
reasonable commercial discretion.
"Equipment" shall mean all of the equipment of Borrower (within the
meaning of the Uniform Commercial Code, as from time to time in effect in the
State of Florida or Alabama), now or hereafter owned or acquired, and
wheresoever located, as well as all parts, accessions, and additions thereto,
proceeds therefrom, and substitutions and replacements therefor.
"Events of Default" shall have the meaning ascribed to such term in
Section 8 hereof.
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles, in effect from time to time, applied on a
consistent basis.
"General Intangibles" shall mean all of Borrower's right, title and
interest with respect to general intangibles (including payment intangibles,
contract rights, rights to payment, rights arising under common law, statutes or
regulations, choses or things in action, goodwill, patents, trade names,
trademarks, service marks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on computer disks
or tapes, software, literature, reports, catalogs, money, deposit accounts,
insurance premium rebates, tax refunds and tax refund claims), and any and all
supporting obligations in respect thereof, and any other personal property other
than goods, Accounts Receivable, investment property, negotiable collateral and
chattel paper (within the meaning of the Uniform Commercial Code, as from time
to time in effect in the State of Florida or Alabama).
"Guarantee" shall mean a guarantee issued by each Guarantor of the
loan obligations hereunder.
"Inventory" shall mean all of the inventory of Borrower (within the
meaning of the Uniform Commercial Code, as from time to time in effect in the
State of Florida or Alabama), now or hereafter owned or acquired, and
wheresoever located, including, without limitation, all finished goods held for
sale or lease or to be furnished under a contract of service, goods that are
leased by Borrower as lessor, goods that are furnished by Borrower under a
contract of service, and raw materials, work-in-process, or materials used or
consumed in Borrower's business including all accessions, additions,
attachments, improvements, substitutions and replacements thereto and therefore.
"Investment Property" shall mean all of the investment property of
Borrower (within the meaning of the Uniform Commercial Code, as from time to
time in effect in the State of Florida or Alabama).
"Letter of Credit" shall mean any standby, documentary or trade Letter
of Credit issued by Bank hereunder as requested by Borrower for the account or
to secure obligations of Borrower in accordance with the terms of Section
2.2(a).
"Letter of Credit Fees" has the meaning set forth in Section 2.2(h).
"Letter of Credit Commitment" shall mean the commitment of Bank to
issue, in accordance with the terms hereof, and to honor payment obligations
under any Letters of Credit.
"Letter of Credit Documents" shall mean, with respect to any Letter of
Credit, such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk or (b) any collateral
security for such obligations.
"Letter of Credit Obligations" shall mean, at any time, the sum of (a)
the maximum amount that is, or at any time thereafter may become, issued by Bank
and available to be drawn under Letters of Credit then outstanding, assuming
compliance with all requirements for drawings referred to in such Letters of
Credit plus (b) the aggregate amount of all drawings under Letters of Credit
honored by Bank but not theretofore reimbursed.
"Maturity Date" shall mean, unless sooner demanded by Bank after the
occurrence of an Event of Default hereunder, 12 months from the date hereof.
"Permitted Liens" means: (a) Liens consisting of deposits or pledges
made in the ordinary course of business in connection with, or to secure payment
of utility payments, bids, tenders, contracts (other than contracts for payment
of money), obligations under workers' compensation, unemployment insurance or
similar legislation or under surety or performance bonds, in each case arising
in the ordinary course of business; (b) Liens arising out of or resulting from
any judgment or awarded, the time for the appeal or petition for rehearing of
which shall not have expired, or in respect of which the Borrower is fully
protected by insurance or in respect of which Borrower shall at any time in good
faith be prosecuting an appeal or proceeding for a review and in respect of
which a stay of execution pending such appeal or proceeding for review shall
have been secured, and as to which appropriate reserves have been established on
the books of Borrower.
"Notice of Request for Letter of Credit" shall mean a notice of
request for issuance of a Letter of Credit in form and substance satisfactory to
Bank.
SECTION 2. THE LOAN AND LETTERS OF CREDIT
2.1 REVOLVING LOAN.
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(a) ADVANCES. Subject to the Borrowing Base limitations and
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subject to Bank's receipt of a completed Borrowing Base Certificate, Bank may,
in its discretion, make Advances to Borrower in accordance with the terms and
conditions of this Loan Agreement, at any time and from time to time, on or
after the date hereof until the Maturity Date, or until the occurrence of an
event which with the giving of notice or the passage of time, or both, shall
constitute an Event of Default. Such Advances may be borrowed, re-paid and
re-borrowed, provided, however, the aggregate outstanding principal amount of
all Advances, together with the aggregate face value of all issued and
outstanding Letters of Credit as of such date, shall not exceed $2,500,000.00.
(b) INTEREST. The Bank shall make appropriate debits and credits
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to the loan account of Borrower corresponding to each Advance to reflect the
Advances to, prepayments, payments by and other disbursements for the account of
Borrower. Each such entry shall be prima facie evidence of the principal amount
of Advances hereunder at any time outstanding. Each Advance shall bear interest
from the date such Advance is made on the aggregate unpaid principal amount
thereof until such principal amount is paid or shall become due and payable
(whether at the stated maturity or by acceleration) pursuant to the terms of and
at a rate per annum as set in the Note.
(c) CALCULATION. Interest on principal outstanding from time to
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time shall be paid monthly, and shall be calculated on the basis of a 360-day
year for the actual days elapsed.
(d) REQUESTS FOR ADVANCES. Borrower shall request Advances under
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the Loan by (i) giving oral notice thereof to the Bank at above address, and
(ii) confirming such oral notice in writing, in form and substance satisfactory
to the Bank, within two business days thereafter and delivering such written
confirmation to the Bank, together with any supporting information it may
reasonably request, at the above address.
(e) COMMITMENT. The giving of oral notice as aforesaid shall
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irrevocably commit Borrower to accept the requested Advances under the Loan. In
the event of any discrepancy between any oral notice and written confirmation,
the oral notice shall govern as to any action taken by the Bank prior to receipt
of written confirmation.
(f) UNUSED LINE FEE. On the 15th day following the end of each
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calendar quarter during the term of the Loan, Borrower shall pay to Bank an
unused line fee equal to 25 basis points (0.25%) per annum times the result of:
(1) the amount of the Loan, less (2) the average daily balance of the Loan
outstanding during the immediately preceding calendar quarter.
(g) LIMITATION. In no event shall any interest charge, collected
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or reserved hereunder exceed the maximum rate then permitted by applicable law.
(h) COLLATERAL. From the date hereof as security for the payment
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and the performance of the Loan, (1) Borrower extends, sells, assigns, conveys,
mortgages, pledges, transfers, grants, and re-grants to the Bank a continuing,
first priority security interest in and to all of its respective rights, title
and interest in, to and under all (A) Accounts Receivable; (B) Equipment; (C)
Inventory; (E) General Intangibles; (F) books and records; (G) deposit accounts;
(H) cash and cash equivalents; (I) to the extent not included in the foregoing,
all other tangible and intangible personal property of Borrower (within the
meaning of the Uniform Commercial Code, as from time to time in effect in the
State of Florida or Alabama); (J) Investment Property; and (K) all other
property and money of the Borrower now or hereafter in the possession, custody
or control of the Bank; and as to each of the foregoing, the products and
proceeds thereof, replacements and accessions thereto; (2) each Guarantor shall
contemporaneously herewith execute and deliver to the Bank its Guarantee; all of
which shall constitute the "Collateral".
2.2 LETTERS OF CREDIT.
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(a) ISSUANCE. From the date hereof until the Maturity Date, subject to
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the terms and conditions hereof and of the Letter of Credit Documents, and upon
such other terms and conditions which Bank may reasonably require, Bank may
issue Letters of Credit as Borrower may from time to time request for the
benefit of Borrower. No Letter of Credit shall have an expiration date later
than the earlier of: (1) the Maturity Date, or (2) one year after the date of
issuance thereof; provided, however, that Borrower may request issuance or
renewal of a Letter of Credit with a later expiration if, at the time of such
issuance or renewal, Borrower deposits an amount equal to the face amount of
such Letter of Credit with Bank as cash collateral for such Letter of Credit.
Each Letter of Credit shall require that all draws thereon must be presented to
Bank by the expiration date therefor, regardless of whether presented prior to
such date to any other institution. Each Letter of Credit shall comply with the
related Letter of Credit Documents. The issuance date of each Letter of Credit
shall be a business day.
(b) NOTICE AND REPORTS. The request for the issuance of a Letter of
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Credit shall be submitted by Borrower to Bank at least ten (10) business days
prior to the requested date of issuance (or such shorter period as may be agreed
by Bank) pursuant to a Notice of Request for Letter of Credit, accompanied by
such applications and other related documents as may be required by Bank. If
the Notice of Request for Letter of Credit, related applications and the
requested form of such Letter of Credit is acceptable to Bank, Bank will, upon
fulfillment of the applicable conditions set forth herein, make such Letter of
Credit available to Borrower.
(c) REIMBURSEMENT. In the event of any drawing under any Letter of
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Credit, Bank will promptly notify Borrower, and Borrower shall request, or be
deemed to have requested, an Advance in the amount of such drawing, the proceeds
of which will be used to satisfy the related reimbursement obligations. Upon
the making of any such Advance, Borrower shall be required to immediately
reimburse Bank for application to the respective Letter of Credit Obligations.
Borrower's reimbursement obligations hereunder shall be absolute and
unconditional under all circumstances irrespective of any rights of setoff,
counterclaim or defense to payment Borrower may claim or have against Bank or
the beneficiary of the Letter of Credit drawn upon or any other person,
including without limitation any defense based on any failure of Borrower to
receive consideration or the legality, validity, regularity or unenforceability
of the Letter of Credit.
(d) BORROWER AS ACCOUNT PARTY. Notwithstanding anything to the
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contrary set forth in this Loan Agreement, in the event that Bank permits a
Letter of Credit issued hereunder to statement to the effect that such Letter of
Credit is issued for the account, or to secure obligations, of an Affiliate or
subsidiary of Borrower, notwithstanding such statement, Borrower shall be the
actual account party for all purposes of this Loan Agreement for such Letter of
Credit. Such statement shall not affect Borrower's reimbursement obligations
hereunder with respect to such Letter of Credit.
(e) INTERNATIONAL STANDBY PRACTICES. The Bank may issue Letters of
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Credit subject to Rules on International Standby Practices (ISP98), as adopted
as of the date of issue by the International Chamber of Commerce (the "ISP"), in
which case the ISP may be incorporated therein and deemed in all respects to be
a part thereof.
(f) LETTER OF CREDIT OBLIGATIONS ABSOLUTE. With regard to each Letter
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of Credit, the obligations of Borrower to the Bank under this Loan Agreement,
any Letter of Credit Document and any other agreement or instrument relating to
any Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Loan Agreement, such Letter of
Credit Document and such other agreement or instrument under all circumstances,
including without limitation the following circumstances:
(1) any lack of validity or enforceability of this Loan Agreement,
any Letter of Credit Document, any Letter of Credit or any other agreement or
instrument relating thereto (this Loan Agreement and all of the other foregoing
being, collectively, the "L/C Related Documents");
(2) any change in the time, manner or place of payment of, or in
any other term of, all or any of the obligations of Borrower in respect of any
L/C Related Document or any other amendment or waiver of or any consent to
departure from all or any of the L/C Related Documents;
(3) the existence of any claim, set-off, defense or other right
that Borrower may have at any time against any beneficiary or any transferee of
a Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), Bank or any other person, whether in connection with
the transactions contemplated thereby or any other unrelated transaction;
(4) any statement or any other document presented under a Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(5) payment by Bank under a Letter of Credit against presentation
of a draft or certificate that does not strictly comply with the terms of such
Letter of Credit;
(6) any exchange, release or non-perfection of any Collateral, or
any release or amendment or waiver of or consent to departure from any loan
document; or
(7) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including without limitation any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, Borrower or any Guarantor.
(g) CONFLICT WITH LETTER OF CREDIT DOCUMENTS. In the event of any
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conflict between this Loan Agreement and any Letter of Credit Document
(including any letter of credit application), the Letter of Credit Documents
shall control.
(h) LETTER OF CREDIT FEES. For each Letter of Credit issued by Bank
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hereunder, Borrower shall pay to Bank, upon issuance, a fee equal to 100 basis
points (1.00%) multiplied by the face amount of such Letter of Credit, together
with Bank's standard fees in effect during the issuance term of such Letter of
Credit (including, without limitation, any renewal or drawing fees).
SECTION 3. REPRESENTATIONS AND WARRANTIES.
From the date hereof, each of the Borrower and the Guarantor represent and
warrant to the Bank as follows:
3.1 ORGANIZATION, STANDING, CORPORATE POWERS.
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(a) DULY ORGANIZED. In respect of the Borrower, it (1) is a
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corporation duly incorporated, validly existing and in good standing under the
laws of the State of Alabama; (2) has all requisite power and authority,
corporate or otherwise, to conduct its business as now being conducted and to
own its properties and assets; and (3) is duly qualified to do business in every
jurisdiction wherein the failure to so qualify would have a material adverse
effect.
(b) POWERS. It has all requisite power and authority, corporate
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or otherwise, to execute, deliver, and to perform all of its obligations under
this Loan Agreement and under other documents or agreements relating to the
transactions contemplated herein to which it is a party.
(c) BINDING OBLIGATION. This Loan Agreement and all corporate
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notes, guarantees, assignments, security agreements and all other loan and
security agreements executed in connection therewith are legal, valid and
binding obligations of the Borrower and enforceable in accordance with their
respective terms, subject to the enforcement of remedies to bankruptcy,
insolvency and other laws affecting creditors' rights generally and to
moratorium laws, from time to time in effect, and to general equitable
principles which may limit the right to obtain the remedy of specific
performance.
3.2 AUTHORIZATION OF BORROWING. The execution, delivery and
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performance of this Loan Agreement and the borrowings hereunder: (a) have been
duly authorized by all requisite corporate action; (b) will not violate any
provision of applicable law, any govern-mental rule or regulation, any order of
any court or other agency of government to which either of such parties is
subject or the articles of incorporation or by-laws of the Borrower; or (c) do
not violate any provision of any indenture, agreement or other instrument to
which Borrower is a party or by which Borrower or its properties or assets are
bound and which is material to the conduct or operation of Borrower's business
and financial affairs, or conflict with, result in a breach of or constitute
(with due notice or lapse of time or both) a default under any provision of such
indenture, agreement or other instruments, or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon the
property or assets of the Borrower or the Guarantor, other than as provided
herein.
3.3 FINANCIAL STATEMENTS. Borrower and each Guarantor have heretofore
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furnished to the Bank the financial statements which fairly present the
financial condition and the results of operations of the Borrower and the
Guarantor as of the date and for the period indicated, show all known material
liabilities, direct or contingent, as of the respective dates thereof, and were
prepared in accordance with Generally Accepted Accounting Principles applied on
a consistent basis.
3.4 ADVERSE CHANGE, ETC. There has been no material adverse change in
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the business, properties or condition (financial or otherwise) of Borrower or
any Guarantor since the date of the most recent of the financial statements
delivered to the Bank.
3.5 LITIGATION. There are no actions, suits or proceedings pending or,
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to the knowledge of Borrower or any Guarantor, overtly threatened against or
affecting any of them, at law or in equity, or before or by any Federal, state,
municipal or other governmental court, tribunal, department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which involve any of the
transactions herein contemplated or the possibility of any judgment or liability
which would result in any material adverse change in the business, operations,
properties or assets or in the financial condition of any of them, or materially
and adversely affect the ability of any of them to perform hereunder. Neither
Borrower nor any Guarantor is in default with respect to (a) any judgment,
order, writ, injunction or decree; or (b) any rule or regulation of any court or
Federal, state, municipal or other governmental court, tribunal, department,
commission, board, bureau, agency or instrumentality, domestic or foreign which
would have a material adverse effect on its business, properties or condition
(financial or otherwise).
3.6 PAYMENTS OF TAXES. Borrower and each Guarantor have filed or
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caused to be filed all Federal, state and local tax returns that are required to
be filed and has paid or caused to be paid all taxes as shown on such returns or
on any assessment received by it, to the extent that such taxes have become due,
except taxes the validity of which is being contested in good faith by
appropriate proceedings and for which, in the exercise of reasonable business
judgment, there have been set aside adequate reserves with respect to any such
tax or assessment so contested the tax or assessment so contested shall not
materially affect its ability to perform hereunder.
3.7 PRIORITY OF SECURITY INTEREST. Subject (a) to filing and
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recordation of the appropriate instruments in the appropriate offices of the
proper jurisdiction or possession by the Bank or its agent where perfection is
based upon possession; (b) to the enforcement of remedies to bankruptcy,
insolvency, and other laws affecting creditors' rights generally and to
moratorium laws, from time to time in effect; and (c) to general equitable
principles which may limit the right to obtain the remedy of specific
performance, each of the security interests granted to the Bank as identified
under Section 2 of this Loan Agreement constitutes a valid first priority
security interest or lien in and to the property covered thereby, granting all
rights and remedies to a secured party under the Uniform Commercial Code, as in
effect in the State of Florida and Alabama, as the same may be modified or
amended from time to time, except as otherwise permitted hereunder.
3.8 ELIGIBLE ACCOUNTS RECEIVABLE AND ELIGIBLE INVENTORY. All Eligible
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Inventory included in the Borrowing Base meet the criteria for Eligible
Inventory and all Eligible Accounts Receivable included in the Borrowing Base
meet the criteria for Eligible Accounts Receivable.
3.9 LOCATION OF COLLATERAL. All of the Collateral is used or held for
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use by Borrower at the following locations: 000 Xxxxxxxx Xxxxxx, Xxxx, Xxxxxxx
00000, and 0000 Xxxxxxx 000, Xxxxxxxxx, Xxxxxxx 00000.
SECTION 4. CONDITIONS OF LENDING AND
ISSUANCE OF LETTERS OF CREDIT.
The obligation of the Bank to extend credit and issue Letters of Credit
hereunder is subject to the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. At the date of each Advance or
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issuance of any Letter of Credit, the representations and warranties set forth
in Section 3 hereof shall be true and correct on and as of such date, with the
same effect as though such representations and warranties had been made on and
as of such date, except to the extent that such representations and warranties
relate solely to an earlier date.
4.2 CERTIFICATES. On or before the date hereof, the Bank shall have
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received: (a) from the Borrower: (1) a copy of its certificate of corporate
status and Articles of Incorporation with all amendments, certified by the
Secretary of State of Florida, dated as of a recent date; (2) the certificate of
its secretary or assistant secretary, dated the date hereof and certifying that
attached thereto is a true and complete copy of its Bylaws prior to the adoption
of the resolutions by its Board of Directors authorizing the execution, delivery
and performance of this Loan Agreement; and certification that its articles of
incorporation have not been amended since the date of the last amendment
thereof, if any, indicated on the certificate of the Secretary of State; and (b)
such other documents as the Bank may reasonably request.
4.3 NO DEFAULT. At the date of each Advance or issuance of any Letter
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of Credit, no Event of Default, or event which with the giving of notice or of
the passage of time, or both, would constitute an Event of Default, shall have
occurred and be continuing, and the representations and warranties of the
Borrower and each Guarantor contained herein shall remain true and correct as of
such date, except to the extent that such representations and warranties relate
to an earlier date. Each request for an Advance shall constitute the
confirmation by Borrower and each Guarantor that at the date thereof the
condi-tions contained in this Section 4.3 shall have been satisfied.
4.4 OTHER CONDITIONS PRECEDENT. On or before the date hereof, there
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shall have been delivered to the Bank all of the financial statements, reports
and other documents required by the Loan Commitment dated March 31, 2006.
SECTION 5. CROSS-DEFAULT AND CROSS-COLLATERALIZATION.
Any Event of Default under the terms of the Loan shall constitute and
hereby is declared to be an immediate and absolute default under the terms of
all loans between Bank and Borrower. Should an event of default occur under the
terms of any of said loans, which event is subject to notice and cure periods,
if any, failure to cure such event of default within such curative period shall
constitute an immediate default under this Loan and all such other loans owed by
Borrower to Bank. Each of the foregoing loans between Bank and Borrower shall
also be cross-collateralized, whether such loans are now existing or hereafter
entered into between Bank and Borrower at any time.
SECTION 6. AFFIRMATIVE COVENANTS
From the date hereof and so long as the Loan shall be unpaid or
unperformed, the Borrower and, as specified hereinbelow, the Guarantor, as the
case may be, will:
6.1 EXISTENCE AND PROPERTIES. To the extent that the same are
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necessary for the proper and advantageous conduct of its business, do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its corporate existence, rights, licenses and permits and comply with all
laws and regulations applicable to it and conduct and operate its business in
substantially the manner in which it is presently conducted and operated.
6.2 INSURANCE.
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(a) Cause to be maintained at all times during the term of the
Loan, general liability insurance with limits reasonably satisfactory to or as
reasonably required by, Bank.
(b) Cause the Collateral to be adequately insured at all times, by
financially sound and reputable insurers, in an amount not less than the value
thereof.
(c) Cause the Bank to be a named insured to the extent of its
interest in respect the policies of insurance required by Section 6.2(a) and (b)
hereinabove.
6.3 OBLIGATIONS, TAXES AND LAWS. Pay or cause to be paid all
------------------------------
indebtedness and obligations promptly and in accordance with their respective
terms, including, without limitation, sales, use and personal property taxes as
the same may be imposed upon the Borrower from time to time, and pay and
discharge or cause to be paid and discharged promptly all taxes, assessments,
and governmental charges or levies imposed upon it or in respect of its property
before the same shall become in default, as well as all lawful claims for labor,
materials, and supplies or otherwise which, if unpaid, might become a lien or
charge upon such property or any part thereof, and timely comply with all
applicable laws and governmental rules and regulations; provided, however, that
the Borrower shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge, lien or claim, or timely comply
with the laws and governmental rules so long as the validity thereof shall be
contested by appropriate legal proceedings timely initiated and conducted in
good faith, and (a) in the case of an unpaid tax, assessment, governmental
charge or levy, lien, encumbrance, charge or claim, such proceedings shall be
effective to suspend the collection thereof from the Borrower and its property;
(b) neither such property nor any part thereof, nor any interest therein would
be in any danger of being sold, forfeited or lost; (c) in the case of a law and
governmental rule or regulation, neither the Borrower nor the Bank would be in
any danger of criminal liability for failure to comply therewith; (d) there
shall have been established such reserve or other appropriate provision, if any,
with respect thereto on the books of the entity involved, as shall be required
by Generally Accepted Accounting Principles with respect to any such tax,
assessment, charge, lien, claim, encumbrance, law, rule or regulation, so
contested.
6.4 FINANCIAL STATEMENTS AND REPORTS. Borrower and each Guarantor
-----------------------------------
shall maintain systems of accounting established and administered in accordance
with Generally Accepted Accounting Principles. The Borrower and the Guarantor,
as appropriate, will furnish to the Bank:
(a) Within 120 days after the end of each fiscal year, the
Borrower shall deliver to the Bank, audited balance sheets and statements of
income, retained earnings and changes in financial position for such year, an
audited inventory of Borrower, all of which shall be accompanied by supporting
schedules and the unqualified opinion of independent certified public
accountants of recognized standing reasonably acceptable to the Bank, together
with copies of federal corporate tax returns within thirty (30) days of the
filing thereof and upon filing, all filings required in accordance with SEC
regulations, if any.
(b) Within 30 days after the end of each month, deliver to the
Bank the following financial statements certified by the President or
Vice-President of the Borrower as accurate to the best of his knowledge upon due
inquiry and investigation: (1) the Borrowing Base Certificate; (2) an accounts
receivable aging report by customer reflecting the past due status of each
invoice; (3) an inventory certification reflecting current value of Inventory;
and (4) consolidated, interim financial statements for the Borrower; in such
form and context as Bank may require.
(c) Concurrently with the statements furnished pursuant to
paragraphs (a) and (b) of this Section 6.4, a certificate of an authorized
officer of the Borrower certifying that to the best of his knowledge, no Event
of Default hereunder, nor any event which with notice or lapse of time, or both,
would constitute such an Event of Default, has occurred or, if such Event of
Default or event has occurred, specifying the nature and extent thereof.
(d) Quarterly covenant compliance certificates signed by an
authorized officer of Borrower within 30 days after the end of each quarter.
(e) Within 120 days after the end of each fiscal year, the
Guarantor shall deliver to the Bank consolidated audited financial statements
and, upon filing, all filings required in accordance with SEC regulations, if
any.
(f) Within 30 days of filing, the Guarantors shall provide the
Bank with consolidated annual corporate tax returns.
(g) Promptly, from time to time, such other information regarding
the operation, business, affairs and financial condition of the Borrower and the
Guarantor as the Bank may reasonably request.
6.5 LITIGATION NOTICE. Give the Bank prompt written notice of any
------------------
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency, the outcome of which might materially adversely
affect the operations or financial condition of the Borrower or the Guarantor.
The Bank has been given notice by Borrower of the currently pending litigation
described in EXHIBIT "B" attached hereto.
6.6 NOTICE OF DEFAULT. Borrower and each Guarantor, as the case may
-------------------
be, shall give the Bank prompt written notice of any Event of Default hereunder,
or any event which, with the passage of time or the giving of notice or both,
would become such an Event of Default hereunder.
6.7 ACCESS TO PREMISES AND INSPECTIONS. At all reasonable times and as
----------------------------------
often as the Bank may reasonably request, permit or arrange for any authorized
representative designed by the Bank to visit and inspect the principal office
and operations of the Borrower, any of the other offices or properties of the
Borrower, including, without limitation, the Collateral, and its books, and to
make extracts from such books and to discuss the affairs, finances and accounts
of the Borrower with its chief financial officer or such other person as may be
designated by the chief executive or chief operating officer of the Borrower.
6.8 CONTINUED ASSISTANCE. Promptly, from time to time as the Bank may
---------------------
reasonably request, Borrower and each Guarantor shall perform such acts and
execute, acknowledge, deliver, file, register, deposit or record any and all
further instruments, agreements and documents whether to continue, preserve,
renew, record or perfect the Bank's interests in the Collateral, as well as the
priority thereof.
6.9 TITLE TO COLLATERAL. The Borrower shall own all of the property
---------------------
constituting the security for the Loan. All such property shall be and remain
free and clear of all mortgages, pledges, liens, charges and other encumbrances
of any nature whatsoever, except as granted to the Bank hereby or otherwise
permitted herein.
6.10 FINANCIAL COVENANTS. Until the Loan has been fully repaid to the
--------------------
Bank, Borrower shall:
(a) DEBT SERVICE COVERAGE RATIO. Maintain a Debt Service Coverage
Ratio of not less than 1.25 to 1.00, measured on a rolling 4-quarter basis. As
used herein "Debt Service Coverage Ratio" shall be defined as (1) (A) Net Income
of Borrower, plus (B) Interest Expense, plus (C) Depreciation & Amortization,
minus (D) Distributions, minus (E) Extraordinary Income/Non-Recurring Income,
divided by (2) (A) Current Portion of Long Term Debt Payments, plus (2) Interest
Expense.
(b) DEBT TO TANGIBLE NET WORTH RATIO. Maintain a Debt to Tangible
Net Worth Ratio of not more than 2.00 to 1.00. As used herein "Debt to Tangible
Net Worth Ratio" shall be defined as (1) (A) Total Liabilities of Borrower,
minus (B) Subordinated Debt, divided by (2) (A) Net Worth, plus (B) Subordinated
Debt, minus (C) Intangibles, minus (D) Related Party Receivables.
6.11 DEPOSIT ACCOUNTS. Borrower shall place on deposit with Bank all
-----------------
of its corporate deposit accounts (except for payroll accounts) making the Bank
its primary depository relationship.
SECTION 7. NEGATIVE COVENANTS
From the date hereof and so long as any of the Obligations shall be unpaid,
the Borrower and each Guarantor, as the case may be, will not:
7.1 NEGATIVE PLEDGE. Either directly or indirectly, incur, create,
----------------
assume or permit to exist any Liens with respect to any property securing the
Loan or be bound by or subject to any assessments and other similar governmental
charges or claims except as provided in Section 6.3 of this Loan Agreement or
Permitted Liens.
7.2 SALE OR DISPOSITION OF COLLATERAL. Sell, discount or otherwise
-------------------------------------
dispose of any of the property securing the Loan or any part thereof except in
the ordinary course of business, or incur additional material borrowings or
enter into material leases without the prior written consent of the Bank upon
terms and conditions satisfactory to the Bank.
7.3 ORGANIC CHANGES. Either directly or indirectly, (a) merge or
----------------
consolidate the Borrower, with or into any other corporation; (b) sell (in
bulk), lease or otherwise dispose of all or substantially all of the property of
the Borrower, unless the transferee or the lessee shall be acceptable to the
Bank, which acceptance must in writing and issued by the Bank prior to any such
sale, lease or other disposition, and such transferee shall have assumed the
Loan; or (c) without prior written consent of the Bank, sell, transfer, assign,
or otherwise dispose, or permit the sale, transfer, assignment or disposition of
the shares of the Borrower, directly or indirectly, or take any action
whatsoever, the result of which is that the interest of the Guarantor in the
Borrower, is changed to the extent that such shareholders fail to retain their
current ownership interest as existing as of the date of this Loan Agreement.
7.4 DISTRIBUTIONS. Make any distributions to shareholders, whether
-------------
dividends, debt repayment, stock re-purchase, advances or otherwise, whether
directly or indirectly, without the prior written consent of the Bank other than
stock dividends and distributions made pursuant to the Earnout Agreement dated
January 18, 2006, pursuant to which, payments may be paid to the former owners
of the Borrower, as an earnout, based upon the net income before taxes of the
Borrower.
7.5 CHANGES IN MANAGEMENT. Suffer or permit any change in the
-----------------------
management of Borrower as in effect on the date hereof, without the prior
written consent of the Bank, which consent shall not be unreasonably withheld.
7.6 ADDITIONAL INDEBTEDNESS. Incur, create, assume or permit to exist
------------------------
any additional indebtedness in excess of $100,000.00 in the aggregate, or
indebtedness secured by the Collateral pledged to secure the Loan, other than
the indebtedness to the Bank and other indebtedness incurred in the normal
course of business, without the prior written consent of Bank, except as may be
permitted hereunder.
7.7 SETTLEMENTS. Enter into any transaction that materially and
-----------
adversely affects the collateral referenced herein or the Borrower's ability to
repay the Loan other than in the normal course of business.
SECTION 8. EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT. The occurrence of any of the following events
-------------------
shall constitute an event of default (an "Event of Default") hereunder:
(a) Any representation or warranty made in this Loan Agreement or
in any report, certificate, financial statement or other instrument furnished in
connection herewith at any time shall prove to be false or misleading in any
material respect as of the time when made;
(b) In the event any payment of principal, interest or other
monetary obligation is not made within ten (10) days after the date when due
under the Loan;
(c) Default with respect to any material obligation for borrowed
money or otherwise of the Borrower if the effect of such default is to
accelerate the maturity of such indebtedness or to permit the holder or obligee
thereof (or a trustee on behalf of such holder or obligee) to cause such
indebtedness to become due prior to its stated maturity, or such material
indebtedness shall not be paid as and when due and payable (in each case, giving
effect to any applicable grace periods);
(d) Default in the due observance or performance of any covenant,
condition or agreement contained in Sections 6 and 7 of this Loan Agreement; and
such default shall not be cured within 15 days after the earlier of knowledge
thereof by an officer of the Borrower, or after written notice of the default is
delivered by the Bank, but if the default is subject to cure and the cure is
being diligently pursued by appropriate means at the end of such 15 days, then
Borrower shall have an additional 15 days thereafter to complete the cure;
(e) Default in the due observance or performance of any covenant,
condition or agreement to be observed or performed pursuant to the terms of this
Loan Agreement, and such default shall not be cured within 15 days after the
earlier of knowledge there of by an officer of the Borrower, or after written
notice of the default is delivered by the Bank, but if the default is subject to
cure and the cure is being diligently pursued by appropriate means at the end of
such 15 days, then Borrower shall have an additional 15 days thereafter to
complete the cure;
(f) The termination of its guarantee by the Guarantor or any other
guarantor of Loan; provided, however, any such termination shall not affect the
rights of the Bank and obligations of the Guarantor existing at the time of the
Bank's receipt of written notice of the termination of guaranty;
(g) The Borrower or Guarantor shall (1) make an assignment for the
benefit of creditors, file a petition in bankruptcy, petition or apply to any
tribunal for the appointment of a custodian, receiver or any trustee or shall
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or if there shall have been
filed any such petition or application, or any such proceeding shall have been
commenced against any of them in which an order for relief is entered or which
remains undismissed for a period thirty (30) days or more; the Borrower or
Guarantor, by any act or omission, shall indicate consent to, approval of or
fail to timely object to, any such petition, application or proceeding or order
for relief or for the appointment of a custodian, receiver or any trustee or
shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of thirty (30) days or more; (2) generally not pay its
debts as such debts become due or admit in writing its inability to pay its
debts as they mature; or (3) have concealed, removed, or permitted to be
concealed or removed, any part of its properties or assets, with intent to
hinder, delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law, or shall have made any transfer of its
property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid; or shall have suffered or permitted,
while solvent, any creditor to obtain a lien upon any Collateral, through legal
proceedings or distraint, which is not vacated or "bonded off" within ten (10)
days from the date thereof; or (4) be "insolvent" as such term is defined in the
Bankruptcy Code, 11 U.S.C. Sec.101(31).
8.2 DEFAULT RATE. From and after the occurrence of an Event of
-------------
Default, the Loan shall accrue interest at the Default Rate.
SECTION 9. REMEDIES
From and after the occurrence of an Event of Default:
9.1 TERMINATION OF ADVANCES AND ACCELERATION. Bank may, at its sole
-------------------------------------------
option cease making Advances under this Loan Agreement and/or declare the
principal of and interest on the Loan and all other obligations due by Borrower
hereunder to be immediately due and payable without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived, anything in
this Loan Agreement to the contrary notwithstanding, and all amounts hereunder
shall then be immediately due and payable.
9.2 COLLATERAL. With respect to the Collateral, Bank may:
----------
(a) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale. Bank shall give notice of the disposition of the
Collateral as follows:
(1) Bank shall give Borrower notice in writing of the time
and place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Collateral, the time
on or after which the private sale or other disposition is to be made; and
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 10 below, at least ten (10)
days before the earliest time of disposition set forth in the notice; no notice
needs to be given prior to the disposition of any portion of the Collateral that
is perishable or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market; provided, however, that Bank may credit
-------- -------
bid and purchase the Collateral at any public sale.
(b) Bank may seek the appointment of a receiver or keeper to take
possession and operate, as applicable all or any portion of the Collateral, and
to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(c) Bank shall have all other rights and remedies available to it
at law or in equity pursuant to any other loan documents execution in connection
herewith. The rights and remedies of Bank hereunder shall be cumulative, and
not exclusive. The exercise of one or more such remedies shall not preclude or
prevent Bank from, at the same time, or at any other time, resorting to or
exercising the same or other rights, powers, privileges or remedies herein
granted to it or to which it might otherwise legally resort.
9.3 APPLICATION OF PROCEEDS UPON DISPOSITION OF COLLATERAL. Apply, at
-------------------------------------------------------
Bank's option, the proceeds of any sale of the Collateral as well as all sums
received or collected by Bank from or on account of such Collateral and/or
additional or substitute collateral to (a) the payment of reasonable expenses
incurred or paid by Bank in connection with any sale, transfer or delivery of
the Collateral and/or such additional or substitute collateral, and (b) the
payment of the obligations or any part thereof, all in such order or manner as
Bank in its sole discretion may determine, irrespective of the date of maturity.
All acts done or to be done by Bank in conformity with the powers herein granted
are hereby ratified and confirmed by Borrower. Borrower agrees to pay to Bank
any deficiency in the event the proceeds of any foreclosure sale of the
Collateral are insufficient to satisfy the Loan obligations in full and Bank
shall have the right to xxx Borrower for such deficiency.
9.4 RIGHT TO INCOME. Unless such Event of Default is waived in writing
---------------
by Bank, Bank may, at its sole discretion, collect, receive and receipt for all
income, interest, earnings or profits (including any dividends) now or hereafter
payable upon or on account of the Collateral without any responsibility however
for its failure to do so. The sums or property so collected or received by Bank
on account of the Collateral, and pursuant to this Section 9.4, shall be held
and retained by Bank as further security for the Obligations and shall be deemed
automatically to be Collateral under this Loan Agreement.
9.5 CASH COLLATERALIZATION OF LETTERS OF CREDIT. Bank may,
------------------------------------------------
irrespective of whether it is taking any of the actions described in this
Section or otherwise, make demand upon Borrower to, and forthwith upon such
demand Borrower will, pay to Bank in same-day funds, for deposit in such account
as Bank shall specify (the "L/C Cash Collateral Account"), an amount equal to
105% of the Letter of Credit Obligations then outstanding. The L/C Cash
Collateral Account shall be in the name and under the sole dominion and control
of Bank. Bank shall have no obligation to invest any amounts on deposit in the
L/C Cash Collateral Account. Borrower grants to Bank, a lien on and security
interest in the L/C Cash Collateral Account and all amounts on deposit therein
as collateral security for the performance of its obligations under this Loan
Agreement and the other loan documents. Bank shall have all rights and remedies
available to it under applicable law with respect to the L/C Cash Collateral
Account and all amounts on deposit therein.
9.6 RIGHT TO SETOFF. In addition to any rights now or hereafter granted
---------------
under applicable law and not by way of limitation of any such rights, Bank is
hereby authorized by Borrower at any time or from time to time, after the
occurrence of an Event of Default, without notice to Borrower, or to any other
person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, time or
demand, including, but not limited to, indebtedness evidenced by certificates of
deposit, in each case whether matured or unmatured) and any other Indebtedness
at any time held or owing by Bank, its branches, subsidiaries or affiliates, for
the credit or the account of Borrower against and on account of the obligations
and liabilities of Borrower to Bank under this Loan Agreement and any other loan
document, including, but not limited to, all claims of any nature or description
arising out of or connected with this Loan Agreement or any other loan document,
irrespective of whether or not: (a) Bank shall have made any demand hereunder;
or (b) Bank shall have declared the principal of and interest on the Loan and
the Loan Agreement and other amounts due hereunder to be due and payable.
9.7 BANK'S LIABILITY FOR COLLATERAL. Borrower hereby agrees that so
----------------------------------
long as Bank complies with its obligations, if any, under the Uniform Commercial
Code as in effect from time to time in the State of Florida, Bank shall not in
any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral, (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause, (c) any diminution in the value thereof, (d) any act or
default of any carrier, warehouseman, bailee, forwarding agency, or other
persons, and all risk of loss, damage, or destruction of the Collateral shall be
borne by Borrower.
SECTION 10. NOTICES
All notices, requests, demands or other communications to or from the
parties hereto shall be deemed to have been duly given and made: (a) in the case
of a letter sent other than by mail, when the letter is delivered to the party
to whom it is addressed; (b) in the case of a telegram or facsimile document,
when the telegram or facsimile is sent; (c) in the case of a letter sent by
mail, three (3) days from the day on which the letter is deposited in a United
States post office, certified mail, return receipt requested, and addressed as
follows:
If to the Borrower
or Guarantor: DEER VALLEY HOMEBUILDERS, INC.
Attention: Xxxx Xxxxx, President
000 Xxxxxxxx Xxxxxx
Xxxx, Xxxxxxx 00000
with a copy to: XXXX XXXX, P.A.
Attention: Xxxxx X. Xxxxx
000 X. Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
If to the Bank: FIFTH THIRD BANK
Attention: Xxxx Xxxx, Vice President
000 Xxxx Xxxxxxx Xxxx., Xxxxx 0000
Xxxxx, Xxxxxxx 00000
with a copy to: XXXXXX & XXXXX, P.A.
Attention: Xxxxxxx X. Xxxxxxxx
000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xx. Xxxxxxxxxx, Xxxxxxx 00000
SECTION 11. MISCELLANEOUS
11.1 COSTS. The Borrower hereby agrees to pay to the Bank all costs
-----
and expenses of every kind and description incurred by the Bank in connection
with the enforcement and protection in any legal or equitable proceeding of the
rights of the Bank in connection with this Loan Agreement, and in connection
with any action or claim under this Loan Agreement, or in any wise related
thereto, including, without limitation, the reasonable fees and disbursements of
counsel to the Bank. In the event of litigation arising out of or related to
this agreement, the prevailing party shall be entitled to reasonable fees and
costs of its counsel.
11.2 SEVERABILITY. The provisions of this Loan Agreement are
------------
severable, and if any provision hereof shall be held by any court of competent
jurisdiction to be unenforceable, such holding shall not affect or impair any
other provision hereof.
11.1 GOVERNING LAW. THIS LOAN AGREEMENT SHALL BE CONSTRUED IN
--------------
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF FLORIDA
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS.
11.2 INDEMNITY. Borrower agrees to indemnify and hold harmless Bank
---------
and each of its affiliates, employees, representatives, officers, directors,
agents and attorneys (any of the foregoing shall be an "Indemnitee") from and
-----------
against any and all claims, liabilities, losses, damages, actions,
investigations, proceedings, attorneys' fees and expenses (as such fees and
expenses are incurred and irrespective of whether suit is brought) and demands
by any party, including the costs of investigating and defending such claims,
actions, investigations or proceedings, and the costs of answering any discovery
served in connection therewith, whether or not Borrower or the person seeking
indemnification is the prevailing party and whether or not the person seeking
indemnification is a party to any such action or proceeding (a) resulting from
any breach or alleged breach by Borrower of any representations or warranties
made hereunder, or (b) arising out of (1) the Loan or otherwise under this Loan
Agreement, including the use of the proceeds of the Loan hereunder in any
fashion by Borrower or the performance of its obligations under the loan
documents by Borrower, (2) allegations of any participation by Bank in the
affairs of Borrower, or allegations that Bank has any joint liability with
Borrower for any reason, or (3) any claims against Bank by any shareholder or
other investor in or lender to Borrower, by any brokers or finders or investment
advisers or investment bankers retained by Borrower or by any other third party,
for any reason whatsoever, or (c) in connection with taxes (other than taxes
imposed on the overall net income of the Bank), fees, and other charges payable
in connection with the Loan, or the execution, delivery, and enforcement of this
Loan Agreement, the other loan documents, and any subsequent amendments thereto
or waivers of any of the provisions thereof, unless the person seeking
indemnification under clause (a), (b) or (c) of this Section 11.2, is determined
in such case to have acted or failed to act with gross negligence or willful
misconduct by a non-appealable judicial order.
11.5 INTERPRETATION. To the extent not otherwise provided for hereby,
--------------
the course of dealing by and between the Bank and the Borrower shall control in
the determination and interpretation of the rights of the parties hereto.
Further, to the extent not otherwise provided for hereby nor by or inconsistent
with the course of dealing by and between the parties hereto, the usage of trade
in transactions substantially similar to the transactions contemplated herein
shall control in the determination and interpretation of the rights of the
parties hereto.
11.6 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
-------------------------------------------
payment of the obligations by Borrower or the transfer to Bank of any property
should for any reason subsequently be declared to be void or voidable under any
state or federal law relating to creditors' rights, including provisions of the
bankruptcy code relating to fraudulent conveyances, preferences, or other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Bank is required to repay or
-------------------
restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Bank is required or elects to repay or
restore, and as to all costs, expenses, and reasonable attorneys fees of Bank
related thereto, the liability of Borrower automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.
11.7 ATTORNEY-IN-FACT. The Borrower hereby constitute any officer of
----------------
the Bank as attorney-in-fact, with power to receive and open all mail addressed
to them; to endorse their name on any notes, acceptances, checks, drafts, money
orders or other evidences of payment or collateral that may come into the Bank's
possession; to sign their name on any invoice or xxxx of lading relating to any
Account Receivable, or on drafts against customers, to send requests for
verification of Accounts Receivable to any account debtor and, to do all other
acts and things necessary to carry out this Loan Agreement; provided, however,
the Bank agrees that it shall not exercise the powers conferred upon in this
Section 11.7 until the occurrence of an Event of Default, or an event which,
with the giving of notice or the passage of time, or both, would constitute an
Event of Default. All acts of said attorney or designee are hereby ratified and
approved by the Borrower and the Guarantor, and said attorney or designee shall
not be liable for any acts of commission or omission nor for any error of
judgment or mistake of fact or law, unless said attorney or designee is
determined in such case to have acted or failed to act with gross negligence or
willful misconduct by an non-appealable judicial order.. This power, being
coupled with an interest, is irrevocable so long as any obligations, monetary or
otherwise, remain, due to the Bank from the Borrower or the Guarantor.
11.8 HEADINGS. The name of this Loan Agreement, as well as Section
--------
headings used herein, are for conveniences of reference only and are not to
affect the construction of, or be taken into consideration in interpreting this
Loan Agreement.
11.9 TERMS. Any term used herein shall be equally applicable to both
-----
the singular and plural forms.
11.10 JURY TRIAL. BORROWER, GUARANTOR AND THE BANK HEREBY KNOWINGLY,
-----------
VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE THE RIGHT ANY OF THEM MAY HAVE
TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION, WHETHER IN CONTRACT OR TORT, AT
LAW OR IN EQUITY, BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS LOAN AGREEMENT AND ANY OTHER DOCUMENT OR INSTRUMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK ENTERING INTO THIS LOAN
AGREEMENT. FURTHER, BORROWER HEREBY CERTIFIES THAT NO REPRE-SENTATIVE OR AGENT
OF THE BANK, NOR THE BANK'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT THE BANK WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO JURY TRIAL PROVISION. NO REPRESENTATIVE OR AGENT OF THE
BANK, NOR BANK'S COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS
PROVISION.
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be executed and delivered as of the day and year first above written.
WITNESSES: "BORROWER"
DEER VALLEY HOMEBUILDERS, INC.,
an Alabama corporation
----------------------------- By:-------------------------------------
Signature of Witness Xxxx Xxxxx, as its President
----------------------------------
Print or type Name of Witness
---------------------------------- (CORPORATE SEAL)
Signature of Witness
----------------------------------
Print or type Name of Witness
"GUARANTOR"
CYTATION CORP., a Delaware corporation
------------------------------ By:--------------------------------------
Signature of Witness Xxxxxxx X. Xxxxxxx, as its President
----------------------------------
Print or type Name of Witness
---------------------------------- (CORPORATE SEAL)
Signature of Witness
----------------------------------
Print or type Name of Witness
DEERVALLEY ACQUISITIONS CORP.,
a Florida corporation
----------------------------- By:--------------------------------------
Signature of Witness Xxxxxxx X. Xxxxxxx, as its President
----------------------------------
Print or type Name of Witness
----------------------------------- (CORPORATE SEAL)
Signature of Witness
----------------------------------
Print or type Name of Witness
"BANK"
FIFTH THIRD BANK,
a Michigan banking corporation
-------------------------------- By:-------------------------------------
Signature of Witness Xxxx Xxxx, as its Vice President
----------------------------------
Print or type Name of Witness
---------------------------------- (CORPORATE SEAL)
Signature of Witness
----------------------------------
Print or type Name of Witness
STATE OF ALABAMA
COUNTY OF
----------------
The foregoing instrument was acknowledged before me this day of April,
------
2006, by Xxxx Xxxxx, as President of DEER VALLEY HOMEBUILDERS, INC., an Alabama
corporation, on behalf of the corporation.
----- Personally known ----------------------------------
----- Florida Driver's License Notary Public
----- Other Identification Produced
----------------- -------------------------------------
----------------- Print or type name of Notary
(SEAL)
STATE OF ALABAMA
COUNTY OF
----------------
The foregoing instrument was acknowledged before me this day of April,
------
2006, by Xxxxxxx X. Xxxxxxx, as President of CYTATION CORP., a Delaware
corporation, on behalf of the corporation.
---- Personally known ----------------------------------
---- Florida Driver's License Notary Public
---- Other Identification Produced
----------------- --------------------------------------
---------------- Print or type name of Notary
(SEAL)
STATE OF ALABAMA
COUNTY OF
----------------
The foregoing instrument was acknowledged before me this ____ day of April,
2006, by Xxxxxxx X. Xxxxxxx, as President of DEERVALLEY ACQUISITIONS CORP., a
Florida corporation, on behalf of the corporation.
---- Personally known --------------------------------
---- Florida Driver's License Notary Public
---- Other Identification Produced
----------------- -------------------------------------
----------------- Print or type name of Notary
(SEAL)
STATE OF ALABAMA
COUNTY OF
--------------------
The foregoing instrument was acknowledged before me this ___ day of April,
2006, by Xxxx Xxxx, as Vice President of FIFTH THIRD BANK, a Michigan banking
corporation, on behalf of the Bank.
---- Personally known ---------------------------------
---- Florida Driver's License Notary Public
---- Other Identification Produced
----------------- -------------------------------------
----------------- Print or type name of Notary
(SEAL)
ATTACHMENTS:
-----------
Exhibit "A" - Borrowing Base Certificate
Exhibit "B" - Litigation Notice
EXHIBIT "A"
BORROWING BASE CERTIFICATE
--------------------------
FIFTH THIRD BANK
000 Xxxx Xxxxxxx Xxxx., Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Pursuant to the Loan and Security Agreement, Borrower hereby certifies, as of
the above date, the following:
(A) Current Value of Inventory $
--------------
(B) Less: Ineligibles $
--------------
(C) Net Amount of Inventory (A) Less (B) $
--------------
(D) 50% of (C) Not To Exceed $1,250,000.00 $
--------------
(E) Aggregate Amount of Accounts Receivable $
--------------
(F) Less: Ineligibles
Accounts over 90 days $
------------
Accounts with Account Debtors having
in excess of 25% of total Eligible A/R $
------------
Other (if applicable) $
------------
Total Ineligible $
------------
(G) Net Amount of Eligible Accounts Receivable (E) Less (F) $
--------------
(H) 80% of (G) $
--------------
(I) CURRENT BORROWING BASE: $
(D) Plus (H) --------------
(J) The aggregate unpaid principal $
Owed to Bank is (will not exceed maximum --------------
loan limit or (I) above)
(K) Availability (I) Less (J), Less all issued and $
Outstanding Letters of Credit, --------------
Not to exceed the maximum loan limit of $ 2,500,000.00
The undersigned hereby certifies, represents, and warrants to FIFTH THIRD BANK
(the "Bank") as follows:
1. All the representations and warranties contained in the Loan and Security
Agreement or in any other related loan document are true and correct on the date
hereof.
2. No event of default has occurred, or would result from the advance made
in connection herewith, that constitutes an Event of Default under the Loan and
Security Agreement or any other related document.
3. The description of Eligible Inventory and Eligible Accounts and the
values assigned thereto are true and correct in all material respects (see
attached inventory declaration and accounts receivable aging). We are legal
owners of the inventory and the accounts receivable as identified above. We
further certify that the inventory is in good condition and that storage
conditions are safe and satisfactory for this type of inventory.
4. The aggregate unpaid principal balance of the Loan does not exceed the
lesser of the $2,500,000.00 (after taking into account issued and outstanding
Letters of Credit) Commitment or Borrowing Base.
This shall also certify that, for the month ending, 200___, DEER VALLEY
HOMEBUILDERS, INC., an Alabama corporation (the "Borrower" or "Corporation") was
in compliance with the following covenants contained in the Loan and Security
Agreement between Bank and Borrower dated April ___, 2006.
COVENANT ACTUAL COMPLIANCE
-------- ------------------------
1. Maintain a Debt Service Coverage ----------- -----------
Ratio of not less than 1.25 to 1.00
"Debt Service Coverage Ratio" is
(1) (A) Net Income of Borrower,
plus (B) Interest Expense,
plus (C) Depreciation & Amortization,
minus (D) Distributions,
minus (E) Extraordinary Income /
Non-Recurring Income,
divided by (2) (A) Current Portion of
Long Term Debt Payments,
plus (2) Interest Expense
2. Maintain a Debt to Tangible Net ----------- -----------
Worth Ratio of Not More than
2.00 to 1.00
"Debt to Tangible Net Worth Ratio" is:
(1) (A) Total Liabilities of Borrower,
minus (B) Subordinated Debt,
divided by (2) (A) Net Worth,
plus (B) Subordinated Debt,
minus (C) Intangibles,
minus (D) Related Party Receivables
By: By:
------------------------------- ----------------------------
Its: Its:
------------------------------ ---------------------------
Date: , 200 Date: , 200
------------- --- -------------- ----
EXHIBIT "B"
LITIGATION NOTICE
Xxxxx Xxx Xxxx v. Deer Valley Homebuilders, Inc., is a worker's
compensation and retaliatory discharge claim filed by an ex-employee. The
Company's worker's compensation insurance is defending the worker's compensation
portion of this lawsuit and the retaliatory discharge claim is being defended by
the Company. That issue should be resolved without any material adverse affect
on the Company
