Exhibit 10.2
BB&T
LOAN AGREEMENT
Account Number
This Loan Agreement (the "Agreement") is made
this 11 th day of February, 2009, by and between BRANCH
BANKING AND TRUST COMPANY, a North Carolina banking corporation
("Bank"), and:
Industrial Services of America, Inc., a
Florida corporation ("Borrower"), having its chief executive office
at 7100 Grade Lane in Louisville, Kentucky.
The Borrower has applied to Bank for and the
Bank has agreed to make, subject to the terms of this Agreement,
the following loan(s) (hereinafter referred to, singularly or
collectively, if more than one, as "Loan");
Line of Credit ("Line of Credit") in
the maximum principal amount not to exceed $12,000,000 for the
purpose of financing Borrower's acquisition of inventory and
equipment from Venture Metals, LLC and real estate at 3409 Camp
Ground Road, Jefferson County, Kentucky from Luca Investments, LLC,
which shall be evidenced by the Borrower's Promissory Note dated on
or after the date hereof which shall mature February 11, 2010, when
the entire unpaid principal balance then outstanding plus accrued
interest thereon shall e paid in full. Prior to maturity or
the occurrence of any event of Default hereunder and subject to any
Loan Base Report limitations, as applicable, the Borrower may
borrow under the Line of Credit through maturity. The Line of
Credit shall bear interest at the rate set forth in any such Note
evidencing all or any portion of the Line of Credit, the terms of
which are incorporated herein by reference.
Other Credit Relationship
(collectively, "Other Credit Relationship"): (a) in the
maximum principal amount not to exceed $10,000,000 outstanding at
any time pursuant to the terms and conditions of a loan agreement
between Bank and Borrower dated December 22, 2006 (the "2006
Revolver"), and (b) in the maximum principal amount not to exceed
$2,500,000 outstanding at any time pursuant to the terms and
conditions of the BB&T Bankcard Corporation Commercial Card
Plan Agreement for the purpose described in that agreement, dated
December 8, 2003, as the same has been amended from time to time,
by and between Borrower and BB&T Bankcard Corporation.
The promissory notes evidencing the Loan
and/or the Other Credit Relationship are referred to as the
"Note(s)" and shall include all extensions, renewals, modifications
and substitutions thereof. The Loan and/or the Other Credit
Relationship shall be secured by the some or all of the collateral
described in the security documents described below.
Additional terms, conditions and covenants of
this Agreement are described in Schedule DD, or other schedule
attached hereto, the terms of which are incorporated herein by
reference.
Section 1 Conditions Precedent
The Bank shall not be obligated to make any
disbursement of Loan proceeds until all of the following conditions
have been satisfied by proper evidence, execution, and/or delivery
to the Bank of the following items in addition to this Agreement,
all in force and substance satisfactory to the Bank and the Bank's
counsel in their sole discretion:
USA Patriot Act Verification
Information : Information or documentation, including but
not limited to the legal name, address, tax identification number,
driver's license, and date of birth (if the Borrower is an
individual) of the Borrower sufficient for the Bank to verify the
identity of the Borrower in accordance with the USA Patriot
Act.
Note(s) : The Note(s) evidencing
the Loan(s) duly executed by the Borrower.
Security Agreement(s): Security Agreement(s) in which
Borrower and any other owner (a "Debtor") of personal property
collateral shall grant to Bank a first priority security interest
in the personal property specified therein. (If Bank has or
will have a security interest in any collateral which is inferior
to the security interest of another creditor, Borrower must fully
disclose to Bank any and all prior security interests, and Bank
must specifically approve any such security interest which will
continue during the Loan.)
UCC Financing Statements: Acknowledged copies of UCC
Financing Statements duly filed in Borrower's or other owner's
state of incorporation, organization or residence, and in all
jurisdictions necessary, or in the opinion of the Bank desirable,
to perfect the security interests granted in the Security
Agreement(s), and certified copies of Information Requests
identifying all previous financing statements on record for the
Borrower or other owner, as appropriate from all jurisdictions
indicating that no security interest has previously been granted in
any of the collateral described in the Security Agreement(s),
unless prior approval has been given by the Bank.
Authorization and Certificate: An Authorization and
Certificate executed by each Debtor under which such Debtor
authorizes Bank to file a UCC Financing Statement describing
collateral owned by such Debtor.
Corporate Resolution : A Corporate Resolution duly
adopted by the Board of Directors of the Borrower authorizing the
execution, delivery, and performance of the Loan Documents on or in
a form provided by or acceptable to Bank.
Articles of Incorporation: A copy of the Articles of
Incorporation and all other charter documents of the Borrower, all
filed with and certified by the Secretary of State of the State of
the Borrower's incorporation.
By-Laws: A copy of the By-Laws of the Borrower,
certified by the Secretary of the Borrower as to their completeness
and accuracy.
Certificate of Incumbency: A certificate of the
Secretary of the Borrower certifying the names and true signatures
of the officers of the Borrower authorized to sign the Loan
Documents.
Certificate of Existence: A certification of the
Secretary of State (or other government authority) of the State of
the Borrower's Incorporation or Organization as to the existence or
good standing of the Borrower and its charter documents on
file.
Opinion of Counsel: An opinion of counsel for the
Borrower satisfactory to the Bank and the Bank's counsel.
Additional Documents: Receipt by the Bank of other
approvals, opinions, or documents as the Bank may reasonably
request.
Section 2 Representations and Warranties
The
Borrower and Guarantor(s) represent and warrant to Bank that:
2.01.
Financial Statements . The balance sheet of the
Borrower and its subsidiaries, if any, and the related Statements
of Income and Retained Earnings of the Borrower and its
subsidiaries, the accompanying footnotes together with the
accountant's opinion thereon, and all other financial information
previously furnished to the Bank, are true and correct and fairly
reflect the financial condition of the Borrower and its
subsidiaries as stated therein has not changed materially and
adversely since the date thereof. Each Guarantor further
represents and warrants that all financial statements provided by
such Guarantor to Bank concerning such Guarantor's financial
condition are true and correct and fairly represent such
Guarantor's financial condition as of the dates thereof.
2.02. Name,
Capacity and Standing. The Borrower's exact legal name
is correctly stated in the initial paragraph of the
Agreement. If the Borrower and/or any Guarantor is a
corporation, general partners, limited partnership, limited
liability partnership, or limited liability company, each warrants
and represents that it is duly organized and validly existing under
the laws of its respective state of incorporation or organization;
that it and/or its subsidiaries, if any, are qualified and in good
standing in every other state in which the nature of their business
shall require such qualification, and are each duly authorized by
their board of directors, general partners or member/manager(s),
respectively, to enter into and perform the obligations under the
Loan Documents.
2.03. No
Violation of Other Agreements. The execution of the Loan
Documents, and the performance by the Borrower, by any and all
pledgors (whether the Borrower or other owners of collateral
property securing payment of the Loan (hereinafter sometimes
referred to as the "Pledgor")) or by the Guarantor(s) thereunder
will not violate any provision, as applicable, of its articles of
incorporation, by-laws, articles of organization, operating
agreement, agreement of partnership, limited partnership or limited
liability partnership, or, of any law, other agreement, indenture,
note, or other instrument binding upon the Borrower, Pledgor or
Guarantor(s), or give cause for the acceleration of any of the
respective obligations of the Borrower or Guarantor(s).
2.04.
Authority. All authority from and approval by any
federal, state or local governmental body, commission or agency
necessary to the making, validity, or enforceability of this
Agreement and the other Loan Documents has been obtained.
2.05. Asset
Ownership. The Borrower and each Guarantor have good and
marketable title to all of the properties and assets reflected on
the balance sheets and financial statements furnished to the Bank,
and all such properties and assets are free and clear of mortgages,
deeds of trust, pledges, liens, and all other encumbrances except
as otherwise disclosed by such financial statements. In
addition, each other owner of collateral has good and marketable
title to such collateral, free and clear of any liens, security
interests and encumbrances, except as otherwise disclosed to
Bank.
2.06.
Discharge of Liens and Taxes. The Borrower and its
subsidiaries, if any, and each Guarantor have filed, paid, and/or
discharged all taxes or other claims which may become a lien on any
of their respective properties or assets, excepting to the extent
that such items are being appropriately contested in good faith and
for which an adequate reserve (in an amount acceptable to Bank) for
the payment thereof is being maintained.
2.07.
Regulation U. None of the Loan proceeds shall be used
directly or indirectly for the purpose of purchasing or carrying
any margin stock in violation of the provisions of Regulation U of
the Board of Governors of the Federal Reserve System.
2.08.
ERISA. Each employee benefit plan, as defined by the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained by the Borrower or by any subsidiary of the
Borrower or Guarantor(s) meets, as of the date hereof, the minimum
funding standards of Section 302 of ERISA, all application
requirements of ERISA and of the Internal Revenue Code of 1986, as
amended, and no "Reportable Event" nor "Prohibited Transaction" (as
defined by ERISA) has occurred with respect to any such plan.
2.09.
Litigation. There is no claim, action, suit or
proceeding pending, threatened or reasonably anticipated before any
court, commission, administrative agency, whether State or Federal,
or arbitration which will materially adversely affect the financial
condition, operations, properties, or business of the Borrower or
its subsidiaries, if any, or the Guarantor(s), or the ability of
the Borrower or the Guarantor(s) to perform their obligations under
the Loan Documents, except as set forth on Exhibit A attached
hereto and incorporated herein by reference.
2.10. Other
Agreements. The representations and Warranties made by
Borrower to Bank in the other Loan Documents are true and correct
in all respects on the date hereof.
2.11.
Binding and Enforceable. The Loan Documents, when
executed, shall constitute valid and binding obligations of the
Borrower and Guarantors respectively, the execution of such Loan
Documents has been duly authorized by the parties thereto, and are
enforceable in accordance with their terms, except as may be
limited by bankruptcy, insolvency, moratorium, or similar laws
affecting creditors' rights generally.
2.12.
Commercial Purpose. The Loan(s) are not "consumer
transactions", as defined in the Kentucky Uniform Commercial Code,
and none of the collateral was or will be purchased or held
primarily for personal, family or household purposes.
Section 3 Affirmative
Covenants
The Borrower covenants and agrees that from
the date hereof and until payment in full of all indebtedness and
performance of all obligations owed under the Loan Documents,
Borrower shall:
3.01.
Maintain Existence and Current Legal Form of Business.
(a) Maintain its existence and good standing in the state of
its incorporation or organization, (b) maintain its current legal
form of business indicated above, (c) as applicable, qualify and
remain qualified as a foreign corporation, general partnership,
limited partnership, limited liability partnership or limited
liability company in each jurisdiction in which such qualification
is required; (d) maintain its current management and ownership; and
(e) in the event of its merger with any other entity, be the
surviving entity.
3.02. Maintain
Records. Keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the
Borrower.
3.03.
Maintain Properties. Maintain, keep and preserve all
of its properties (tangible and intangible) including the
collateral necessary or useful in the conduct of its business in
good working order and condition, ordinary wear and tear
excepted.
3.04.
Conduct of Business. Continue to engage in an
efficient, prudent, and economical manner in a business of the same
general type as now conducted.
3.05.
Maintain Insurance. Maintain insurance with
financially sound and reputable insurance companies or associations
in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business, and business
interruption insurance if required by Bank, which insurance may
provide for reasonable deductible(s). The Bank shall be named
as loss payee (Long Form) on all policies which apply to the Bank's
collateral, and the Borrower shall deliver certificates of
insurance at closing evidencing same. All such insurance
policies shall provide, and the certificates shall state, that no
policy will be terminated without 20 days prior written notice to
Bank.
3.06. Comply
with Laws. Comply in all respects with all applicable
laws, rules, regulations, and orders, including, without
limitation, paying before the delinquency of all taxes,
assessments, and governmental charges imposed upon it or upon its
property, and all Environmental Laws.
3.07. Right
of Inspection. Permit the officers and authorized agents
of the Bank, at any reasonable time or times in the Bank's sole
discretion, to examine and make copies of the records and books of
account of, to visit the properties of the Borrower, and to discuss
such matters with any officers, directors, managers, members or
partners, limited or general of the Borrower, and the Borrower's
independent accountant as the Bank deems necessary and proper.
3.08. Reporting Requirements. Furnish to the
Bank.
Quarterly
Financial Statements: As soon as available and not more
than twenty (20) days after the end of each quarter, balance
sheets, statements of income, cash flow, and retained earnings for
the period ended and a statement of changes in the financial
position, all in reasonable detail, and all prepared in accordance
with GAAP consistently applied and certified as true and correct by
an officer, general partner or manager (or member(s)) of the
Borrower, as appropriate.
Annual Financial
Statements: As soon as available and not more than one
hundred twenty (120) days after the end of each fiscal year,
balance sheets, statements of income, and retained earnings for the
period ended and a statement of changes in the financial position,
all in reasonable detail, and all prepared in accordance with GAAP
consistently applied. The financial statements must be of the
following quality or better: Audited.
Loan Base
Report: On or before the fifteenth (15 th )
day of each month, a Loan Base Report in a form acceptable to Bank
signed by the president, chief financial officer, general partner
or manager (or member(s)) of the Borrower, as appropriate.
Notice of
Litigation: Promptly after the receipt by the Borrower,
or by any Guarantor of which Borrower has knowledge, of notice or
complaint of any action, suit, and proceedings before any court or
administrative agency of any type which, if determined adversely,
could have a material adverse effect on the financial condition,
properties or operations of the Borrower or Guarantor, as
appropriate.
Tax
Returns: As soon as available each year, complete copies
(including all schedules) of all state and federal tax returns
filed by Borrower.
Notice of
Default: Promptly upon discovery or knowledge thereof,
notice of the existence of any event of default under this
Agreement or any other Loan Documents.
USA Patriot Act
Verification Information: Information or documentation,
including but not limited to the legal name, address, tax
identification number, driver's license, and date of birth (if the
Borrower is an individual) of the Borrower sufficient for the Bank
to verify the identity of the Borrower in accordance with the USA
Patriot Act. Borrower shall notify Bank promptly of any
change in such information.
Other
Information: Such other information as the Bank may from
time to time reasonably request including, but not limited to, the
following information: annual corporate income tax returns
(including all schedules) for K&R, LLC and K&R Resources,
LLC.
3.09.
Deposit Accounts . Maintain substantially all of its
demand deposit/operating accounts with the Bank.
3.10
Affirmative Covenants from other Loan Documents. All
affirmative covenants contained in any Deed of Trust, Security
Agreement, Assignment of Leases and Rents, or other security
document executed by the Borrower which are described in paragraph
2 hereof are hereby incorporated by reference herein.
3.11
Indemnification. Borrower agrees to indemnify and
hold harmless Bank from and against any and all claims, costs,
damages, liabilities and expenses which may be incurred by or
asserted against Bank in connection with any proceeding arising out
of or related to this Loan or the Other Credit Relationship.
3.12
Filings. Borrower represents and warrants that its
standard practice, with regard to equipment owned by Borrower and
leased to its customers, is to provide public notice of the
ownership of the equipment and existence of said leases by filing
UCC Financing Statements for items so leased. Borrower agrees
to follow said practice for the term of this Agreement as to all
its equipment so leased, regardless of whether said equipment is
collateral for the Loan or any other indebtedness owing Bank by
Borrower.
Section 4 Guarantor(s) Covenants
N/A
Section 5 Financial Covenants
The Borrower covenants and agrees that from
the date hereof until payment in full of all indebtedness and the
performance of all obligations under the Loan Documents, the
Borrower shall at all times maintain the following financial
covenants and ratios all in accordance with GAAP unless otherwise
specified:
Minimum Tangible
Net Worth. A minimum tangible net worth of not less than
$6,000,000.00 as of December 31, 2005, and increasing annually by
50% of all net income, plus 100% of all new equity, minus $0 for
net losses. Tangible Net Worth is defined as net worth, plus
obligations contractually subordinated to debts owed to Bank, minus
goodwill, contract rights, and assets representing claims on
stockholders or affiliated entities.
EBITDA Ratio
. Ratio of EBITDA to the preceding twelve (12) months
interest expense plus the projected maturities of long-term debt
for the next succeeding twelve months on a rolling basis, of not
less than 1.25:1.00, to be measured annually.
Debt/Tangible Net
Worth. Maximum of 4.00:1.00, to be measured
annually.
Limitation on
Loans and Advances to Owners. Not to exceed $500,000 per
calendar year.
Section 6 Negative Covenants
The Borrower covenants and agrees that from
the date hereof and until payment in full of all indebtedness and
performance of all obligations under the Loan Documents, the
Borrower shall not, without the prior written consent of the
Bank:
6.01.
Liens. Create, incur, assume, or suffer to exist any
lien upon or with respect to any of Borrower's properties, or the
properties of any Pledgor securing payment of the Loan, now owned
or hereafter acquired, except:
(a) Liens and security interests in favor of the
Bank;
(b) Liens for taxes not yet due and payable or
otherwise being contested in good faith and for which appropriate
reserves are maintained;
(c) Other liens imposed by law not yet due and payable,
or otherwise being contested in good faith and for which
appropriate reserves are maintained;
(d) Liens securing obligations to any creditor other
than Bank not to exceed $1,000,000 per year;
(e) purchase money security interests on any property
hereafter acquired, provided that such lien shall attach only to
the property acquired.
(f) The Permitted Liens, as set forth on Exhibit B
attached hereto and incorporated herein by reference.
6.02. Debt.
Create, incur, assume, or suffer to exist additional funded
debt, except:
(a) Debt to the Bank;
(b) Debt outstanding on the date hereof and shown on
the most recent financial statements submitted to the Bank;
(c) Accounts payable to trade creditors incurred in the
ordinary course of business, not to exceed $1,000,000.
(d) Debt secured by purchase money security interests
secured only by the asset purchased, not to exceed $1,000,000.
(e) Debt to any creditor other than Bank not to exceed
$1,000,000 per year.
6.03. Change
of Legal Form of Business or management; Purchase of Assets.
Change Borrower's name or the legal form of Borrower's
business as shown above, whether by merger, consolidation,
conversion or otherwise, or change its current management, and
Borrower shall not purchase all or substantially all of the assets
or business of any Person.
6.04.
Leases . Create, incur, assume, or suffer to exist any
leases, except:
(a) Leases outstanding on the date hereof and showing
on the most recent financial statement submitted to the Bank;
(b) Operating Leases for machinery and equipment which
do not in the aggregate require payments in excess of $N/A in any
fiscal year of the Borrower.
6.05.
Dividends or Distributions; Acquisition of Capital Stock or
Other Ownership Interests. Declare or pay any dividends
or distributions of any kind, or purchase or redeem, retire, or
otherwise acquire any of Borrower's capital stock or other
ownership interests, now or hereafter outstanding, in excess of
$N/A in any fiscal year of the Borrower.
6.06.
Salaries. Salaries and any other cash compensation to
owners/officers/partners/managers shall be limited as follow:
N/A.
6.07.
Guaranties. Assume, guarantee, endorse, or otherwise be
or become directly or contingently liable for obligations of any
Person, except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary
course of business.
6.08
Loans . Loans to directors, officers, partners,
members, shareholders, subsidiaries and affiliates shall be limited
as follows: Limited to $500,000 in the aggregate per
year. All such loans to directors, officers, partners,
members, shareholders, subsidiaries and affiliates shall be
subordinated to the Loan pursuant to subordination agreements in
force and substance satisfactory to Bank.
6.09.
Disposition of Assets. Sell, lease, or otherwise
dispose of any of its assets or properties except in the ordinary
and usual course of its business.
6.10.
Transfer of Ownership. If Borrower is a corporation,
9a) issue, transfer or sell any new class of stock, or (b) issue,
transfer or sell, in the aggregate, from its treasury stock and/or
currently authorized but unissued shares of any class of stock,
more than 10% of the total number of all such issued and
outstanding shares as of the date of this Agreement. If
Borrower is a general partnership, limited partnership, limited
liability partnership or limited liability company, issue, transfer
or sell any interest in Borrower.
6.11.
Negative Covenants from other Loan Documents . All
negative covenants contained in any Mortgage, Deed of Trust,
Security Agreement, Assignment of Leases or Rents, or other
security document executed by the Borrower which are described in
paragraph 2 hereof are hereby incorporated by reference herein.
Section 7 Hazardous Materials and
Compliance with Environmental Laws
7.01.
Investigation. Borrower hereby certifies that it has
exercised due diligence to ascertain whether its real property is
or has been affected by the presence of asbestos, oil, petroleum or
other hydrocarbons, urea formaldehyde, PCBs, hazardous or nuclear
waste, toxic chemicals and substances, or other hazardous materials
(collectively, "Hazardous Materials"), as defined in applicable
Environmental Laws. Provided, however, the foregoing
certification shall not apply to the real estate to be acquired by
Borrower from Luca Investments, LLC at 3409 Camp Ground Road,
Jefferson County, Kentucky. Borrower represents and warrants
that, to Borrower's knowledge, there are no such Hazardous
Materials contaminating its real property, nor, to Borrower's
knowledge, have any such materials been released on or stored on or
improperly disposed of on its real property during its ownership,
occupancy or operation thereof. Borrower hereby agrees that,
except in strict compliance with applicable Environmental Laws, it
shall not knowingly permit any release, storage or contamination as
long as any indebtedness or obligations to Bank under the Loan
Documents remains unpaid or unfulfilled. In addition,
Borrower does not have or use any undergrounds storage tanks on any
of its real property which are not registered with the appropriate
Federal and/or State agencies and which are not properly equipped
and maintained in accordance with all Environmental Laws.
Provided, however , the foregoing representation relative to
storage tanks shall not apply to 3409 Camp Ground Road, Jefferson
County, Kentucky. If requested by Bank, Borrower shall
provide Bank with all necessary and reasonable assistance required
for purposes of determining the existe
