LOAN AND SECURITY AGREEMENT
EXHIBIT
10.1
REVOLVING
CREDIT
THIS
REVOLVING CREDIT LOAN AND SECURITY AGREEMENT (the "Loan Agreement") is made
as
of this ______ day of April, 2007, among FIFTH
THIRD BANK,
a
Michigan banking corporation, having a mailing address of 000 Xxxx Xxxxxxx
Xxxx., Xxxxx 0000, Xxxxx, Xxxxxxx 00000 (the "Bank"), DEER
VALLEY CORPORATION,
a
Florida corporation (the
"Borrower"), having its principal place of business at 0000 Xxxxxxxxxx
Xxxxxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000, DEER
VALLEY HOMEBUILDERS, INC.,
an
Alabama corporation authorized to do business in the State of Florida, and
___________________, having a mailing address of 000 Xxxxxxxx Xxxxxx, Xxxx,
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 incorporated herein by
reference.
1.2 Defined
Terms.
As used
in this Loan Agreement, the following terms 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),
all
of the Borrower's 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), 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).
"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), 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).
"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.
(a) Advances.
Subject
to the Borrowing Base limitations and 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 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 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 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 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 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 or reserved hereunder exceed the
maximum rate then permitted by applicable law.
(h) Collateral.
From
the date hereof as security for the payment 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.
(a) Issuance.
From
the date hereof until the Maturity Date, subject to 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 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 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 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 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 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 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 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.
(a) Duly
Organized.
In
respect of the Borrower, it (1) is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Florida; (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 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 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 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 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 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, 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 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 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 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 use by Borrower at the following location:
0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx, 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 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 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 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.
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 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.
(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 financial statements and, upon filing, all filings required in
accordance with SEC regulations, if any.
(b) Within
30
days of filing, the Borrower shall provide the Bank with annual corporate tax
returns.
(c) Within
120 days after the end of each fiscal year, the Guarantor shall deliver to
the
Bank, consolidated, audited balance sheets and statements of income, retained
earnings and changes in financial position for such year, an audited inventory
of Guarantor, 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 Guarantor 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 Guarantor; 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 Guarantor 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 Guarantor
within 30 days after the end of each quarter.
(e) 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
Guarantor 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 and Guarantor
shall:
(a) Consolidated
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 (other than stock
dividends), minus (E) Extraordinary Income/Non-Recurring Income, divided by
(2)
(A) Current Portion of Long Term Debt Payments, plus (2) Interest
Expense.
(b) Consolidated
Debt to Tangible Net Worth Ratio.
Maintain a Debt to Tangible Net Worth Ratio of not more than 2.00 to 1.00
[need
to revise ratio].
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 Guarantor, 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. §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
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.
9.6 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:
|
DEER
VALLEY CORPORATION
|
|
Attention:
Xxxxxxx X. Xxxxxxx., President
|
|
|
0000
Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
|
|
|
Xxxxx,
Xxxxxxx 00000
|
|
|
If
to 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:
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"BORROWER"
|
|
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DEER
VALLEY CORPORATION,
|
||
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a
Florida corporation
|
||
|
_____________________________
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By:___________________________________
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|
|
Signature
of Witness
|
Xxxxxxx
X. Xxxxxxx, as its President
|
|
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_____________________________
|
||
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Print
or type Name of Witness
|
||
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_____________________________
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(CORPORATE
SEAL)
|
|
|
Signature
of Witness
|
||
|
_____________________________
|
||
|
Print
or type Name of Witness
|
||
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"GUARANTOR"
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DEER
VALLEY HOMEBUILDERS, INC.,
|
||
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an
Alabama corporation
|
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_____________________________
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By:___________________________________
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|
|
Signature
of Witness
|
Xxxx
Xxxxx, as its President
|
|
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_____________________________
|
||
|
Print
or type Name of Witness
|
||
|
_____________________________
|
(CORPORATE
SEAL)
|
|
|
Signature
of Witness
|
||
|
_____________________________
|
||
|
Print
or type Name of Witness
|
||
|
"BANK"
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|
FIFTH
THIRD BANK,
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a
Michigan banking corporation
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||
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_____________________________
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By:___________________________________
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|
|
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 _______________
|
||
|
COUNTY
OF _________________
|
The
foregoing instrument was acknowledged before me this ____ day of April, 2007,
by
Xxxxxxx X. Xxxxxxx, as President of DEER VALLEY CORPORATION, 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
|
|
|
|
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(SEAL)
|
|
|
STATE
OF _____________
|
|
|
COUNTY
OF _________________
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The
foregoing instrument was acknowledged before me this ____ day of April, 2007,
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 _____________
|
|
|
COUNTY
OF _________________
|
The
foregoing instrument was acknowledged before me this ___ day of April, 2007,
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)
|
|
|
STATE
OF _____________
|
|
|
COUNTY
OF _________________
|
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 and Guarantor hereby certify,
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
