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Exhibit 10.1
FIRST AMENDMENT TO LOAN AND SECURITY
AGREEMENT
THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"
First Amendment "
) is made as of the 18 th
day
of October, 2007, by and between FORTUNE INDUSTRIES, INC.
( "
Borrower "
); FIFTH THIRD BANK (FORMERLY
KNOWN AS FIFTH THIRD BANK (CENTRAL INDIANA))
( "
Bank "
); and FIRST INDIANA BANK,
N.A., as a Participant under that certain Participation
Agreement made as of August 31, 2006, (including its successors and
assigns, "First Indiana");
WITNESSETH:
WHEREAS, as of August 31, 2006, the parties hereto entered
into a certain Loan and Security Agreement (the
"Agreement");
WHEREAS, the parties desire to amend the Agreement to, among
other things, add certain personal guarantors; add certain new
covenants, terms and conditions; and modify certain covenants,
terms and conditions, all subject to the terms contained
herein;
WHEREAS, as of the quarters ending February 28, 2007 and May
31, 2007, Borrower was not in compliance with:
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(a)
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Section
3.7 (Event of Default) of the Agreement,
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(b)
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Section
3.8 (Adverse Changes) of the Agreement,
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(c)
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Section
7.7 (Financial Statements) of the Agreement,
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(d)
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Section
7.9 (Event of Default) of the Agreement,
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(e)
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Section
7.11 (Adverse Circumstances) of the Agreement,
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(f)
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Section
7.18 (Complete Information) of the Agreement,
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(g)
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Section
8.3 (Investments) of the Agreement,
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(h)
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Section
8.5 (Issuance of Stock) of the Agreement,
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(i)
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Section
8.9 (Acquisitions) of the Agreement,
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(j)
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Section
9.7 (Financial Statements) of the Agreement,
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(k)
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Section
9.12 (Brokerage Account) of the Agreement,
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(l)
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Section
9.16 (Notice of Default) of the Agreement,
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(m)
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Section
10.1 (Senior Funded Debt to EBITDA Ratio) of the
Agreement,
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(n)
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Section
10.2 (Tangible Net Worth) of the Agreement, and Section
10.4
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(o)
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(Fixed
Charge Coverage Ratio) of the Agreement.
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Such
noncompliance by the Borrower constitute Events of Default
under the Agreement. The foregoing Events of Default, as of
the quarters ending February 28, 2007 and May 31, 2007, under
Sections 3.7, 3.8, 7.7, 7.9, 7.11, 7.18, 8.3, 8.5, 8.9, 9.7,
9.12, 9.16, 10.1, 10.2 and 10.4 of the Agreement are
collectively referred to herein as the "Existing
Defaults"; and
Now, THEREFORE, in
consideration of the premises, and the mutual promises herein
contained, the parties agree that the Agreement shall be, and it
hereby is, amended as provided herein and the parties further agree
as follows:
PART I. AMENDATORY
PROVISIONS
ARTICLE 1 DEFINITIONS
.
Section
1.1 Defined Terms. Section 1.1 of the Agreement is
hereby amended by deleting the definition for "Tangible Net
Worth"; substituting the following definitions of
"Amortization", "Borrowing Base Certificate", "Fixed Asset
Value", "Interest Rate Agreements", "Loan Rate",
"Obligations", "Revolving Loan Guarantor", "Revolving Note"
and "Term Loan Guarantor" in lieu of the like existing
definitions; and adding definitions for "Funded Debt",
"Guarantees", "Landlord Consent and Waiver", "Net Worth",
"Revolving Loan Guaranty", "Term Loan Guaranty", "Total
Capitalization", "Trust Funds", and "Trust" as
follows:
"Amortization" shall mean the total amount added to
amortization expense, as reflected on the Borrower's Financial
Statements and determined in accordance with GAAP.
"Borrowing Base Certificate" shall mean a certificate duly
executed by an officer or duly authorized representative of the
Borrower completed and in substantially the form of Exhibit A
hereto.
"Fixed Asset Value" shall mean the sum of (i) Three Million
Five Hundred Thousand Dollars and No Cents ($3,500,000.00) minus
(ii) the product of (A) Five Hundred Thousand Dollars and No Cents
($500,000.00) times (B) the number equal to the number of complete
calendar years that have passed since the date hereof; provided,
however, that the Fixed Asset Value shall not be less than
zero.
"Funded Debt' of a Person means such Person's (a) obligations
for borrowed money; (b) obligations representing the deferred
purchase price of property or services (other than accounts payable
arising in the ordinary course of such Person's business payable on
terms customary in the trade), including, without limitation,
payment obligations under non-compete agreements; (c) obligations,
whether or not assumed, secured by any mortgage, deed of trust,
pledge, lien, security interest or other charge or encumbrance upon
or in property owned by the subject Person or payable out of the
proceeds or production from property now or hereafter owned or
acquired by such Person; (d) obligations which are evidenced by
notes, acceptances, or other instruments; (e) Capital Lease
obligations; (f) indebtedness or other obligations of any other
Person for borrowed money or for the deferred purchase price of
property or services, the payment or collection of which the
subject Person has guaranteed (except by reason of endorsement for
collection in the ordinary course of business) or in respect of
which the subject Person is liable, contingently or otherwise,
including, without limitation, liability by way of agreement to
purchase, to provide funds for payment, to supply funds to or
otherwise to invest in such other Person, or otherwise to assure a
creditor against loss; and (g) reimbursement or other obligations
in connection with letters of credit.
"Interest Rate Agreements" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered
into between Borrower and the Bank or Affiliate thereof (or any
other financial institution upon terms acceptable to Bank and
accompanied by an appropriate intercreditor agreement as may be
required, in form and substance satisfactory to Bank, acting
reasonably), which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap
transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect
to any of these transactions) or any combination thereof, whether
linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.
"Guarantees" shall mean collectively, the Revolving Loan
Guaranty and the Term Loan Guaranty.
"Landlord Consent and Waiver" shall have the meaning set forth
in Section 3.1.
"Loan Rate" shall mean (a) the LIBOR Rate plus two percent
(2.00%) or (b) if Borrower maintains a Fixed Charge Coverage Ratio
of at least 1.15 to 1.00 for four (4) consecutive fiscal quarters,
tested at the end of each fiscal quarter, then the LIBOR Rate plus
one and three-quarters percent (1.75%); provided,
however, that upon the Borrower attaining a Fixed Charge
Coverage Ratio at the end of any fiscal quarter of less than 1.15
to 1.00, then the Loan Rate automatically reverts back to the LIBOR
Rate plus two percent (2.00%).
"Net Worth" shall mean, at a particular date, all amounts which
would be included under equity for any Person determined in
accordance with GAAP.
"Obligations" shall mean the Loans, as evidenced by the Notes,
all interest accrued thereon, any fees due the Bank hereunder, any
expenses incurred by the Bank hereunder and any and all other
liabilities and obligations of the Borrower and its Subsidiaries
(and of any partnership in which the Borrower or any of its
Subsidiaries is or may be a partner) to the Bank, howsoever
created, arising or evidenced, and howsoever owned, held or
acquired, whether now or hereafter existing, whether now due or to
become due, direct or indirect, absolute or contingent, and whether
several, joint or joint and several, including, but not limited to,
(i) any Interest Rate Agreements; (ii) any other documents,
agreements, instruments, letters of credit, and/or credit
agreements under which the Borrower and/or any Subsidiary are or
will be in the future obligated or liable to the Bank; and (iii)
any other present or future documents, agreements, instruments,
letters of credit, and/or credit agreements evidencing any of the
Obligations.
"Revolving Loan Guarantor" shall mean collectively or
individually, as applicable, each Subsidiary, Carter M. Fortune,
John F. Fisbeck and the Trust.
"Revolving Loan Guaranty" shall mean collectively or
individually, as applicable, the guaranty of each Subsidiary,
Carter M. Fortune, John F. Fisbeck and the Trust with respect to
the Revolving Loan.
"Revolving Note" shall have the meaning set forth in Section
4.1 hereof.
"Tangible Net Worth" the definition of Tangible Net Worth is
amended by deleting the definition in its entirety.
"Term Loan Guarantor" shall mean collectively or individually,
as applicable, Carter M. Fortune, John F. Fisbeck and the
Trust.
"Term Loan Guaranty" shall mean collectively or individually,
as applicable, the guaranty of Carter M. Fortune, John F. Fisbeck
and the Trust with respect to the Term Loan.
"Total Capitalization" shall mean at any time the sum of Funded
Debt and Net Worth, each calculated at such time.
"Trust" shall mean The Carter M. Fortune Living Trust dated May
4, 2006; Carter M. Fortune Living Trust dated May 4, 2006; or
Carter M. Fortune, Trustee of the Carter M. Fortune Living Trust
dated May 4, 2006, and any amendments thereto.
"Trust Funds" shall mean all monies specifically owned,
designated or earmarked by any customer of the Borrower and/or any
customer of a Subsidiary, pursuant to a contract, as employee
wages, employee benefits (including, but not limited to, health
insurance, workers compensation insurance and retirement funds)
and/or payroll taxes to be held by the Borrower or a Subsidiary in
the Deposit Accounts listed in Section 6.1 herein prior to being
disbursed to the respective employees, governmental agency and/or
third party.
Section
1.4
Other Definitional Provisions; Construction. The
Agreement is hereby amended by substituting the following new
Section 1.4 in lieu of the existing Section 1.4:
Section
1.4 Other Definitional Provisions: Construction.
Whenever the context so requires, the neuter gender includes
the masculine and feminine, the single number includes the
plural, and vice versa, and in particular the word "Borrower"
shall be so construed. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and references to
Article, Section, Subsection, Schedule, Exhibit and like
references are references to this Agreement unless otherwise
specified. An Event of Default shall "continue" or be
"continuing" until such Event of Default has been waived in
accordance with Section 13.3 hereof. References in this
Agreement to any party shall include such party's successors
and permitted assigns. References to any "Section" shall be a
reference to such Section of this Agreement unless otherwise
stated. To the extent any of the provisions of the other Loan
Documents are inconsistent with the terms of this Agreement,
the provisions of this Agreement shall govern.
Article 2
COMMITMENT OF THE BANK.
Section
2.1 Revolving Loans. The Agreement is hereby amended by
substituting the following new Sections 2.1(a), 2.1(c)(i) and
2.1(c)(ii) in lieu of the existing Sections 2.1(a), 2.1(c)(i)
and 2.1(c)(ii):
(a)
Revolving Loan Commitment. Subject to the terms and
conditions of this Agreement and the other Loan Documents, and
in reliance upon the representations and warranties of the
Borrower set forth herein and in the other Loan Documents, the
Bank agrees to make such Revolving Loans at such times as the
Borrower may from time to time request until, but not
including, the Revolving Loan Maturity Date, and in such
amounts as the Borrower may from time to time request,
provided, however, that the aggregate principal balance of all
Revolving Loans outstanding at any time shall not exceed the
Revolving Loan Availability. Revolving Loans made by the Bank
may be repaid and, subject to the terms and conditions hereof,
borrowed again up to, but not including, the Revolving Loan
Maturity Date unless the Revolving Loans are otherwise
terminated or extended as provided in this Agreement. The
Revolving Loans shall be used for general working capital
purposes of the Borrower.
(c)
Revolving Loan Principal Repayments.
(i)
Mandatory Principal Repayments. All Revolving Loans
hereunder shall be repaid by the Borrower on the Revolving
Loan Maturity Date, unless payable sooner pursuant to the
provisions of this Agreement. In the event the aggregate
outstanding principal balance of all Revolving Loans hereunder
exceed the Revolving Loan Availability, the Borrower shall,
without notice or demand of any kind, immediately make such
repayments of the Revolving Loans or take such other actions
as shall be necessary to eliminate such excess.
(ii)
Optional Prepayments. The Borrower may from time to
time prepay the Revolving Loans, in whole or in part, without
any prepayment penalty other than those set forth herein. If,
for any reason, a Revolving Loan is paid prior to the last
Business Day of any Interest Period, whether voluntary,
involuntary, by reason of acceleration or otherwise, each such
prepayment of a Revolving Loan will be accompanied by the
amount of accrued interest on the amount prepaid and any and
all reasonable costs, expenses, penalties and charges incurred
by the Bank as a result of the early termination or breakage
of a Revolving Loan on a date other than the last Business Day
of the applicable Interest Period, plus the amount, if any, by
which (i) the additional interest which would have been
payable during the Interest Period on the Revolving Loan had
it not been prepaid, exceeds (ii) the interest which would
have been recoverable by the Bank by placing the amount
prepaid on deposit in the domestic certificate of deposit
market, the eurodollar deposit market, or other appropriate
money market selected by the Bank, for a period starting on
the date on which it was prepaid and ending on the last day of
the Interest Period for such Revolving Loan. The amount of any
such loss or expense payable by the Borrower to the Bank under
this section shall be determined in the Bank's reasonable
discretion based upon the assumption that the Bank funded its
loan commitment for Revolving Loans in the London Interbank
Eurodollar market and using any reasonable attribution or
averaging methods which the Bank deems appropriate and
practical, provided, however, that the Bank is not obligated
to accept a deposit in the London Interbank Eurodollar market
in order to charge interest on a Revolving Loan at the Loan
Rate.
Section
2.2 Term Loan. The Agreement is hereby amended by
substituting the following new Section 2.2(b) in lieu of the
existing Section 2.2(b):
(b) Term
Loan Interest and Payments. Except as otherwise provided in
this Section 2.2(b), the principal amount of the Term Loan
outstanding from time to time shall bear interest at the Loan Rate.
Principal and accrued and unpaid interest on the unpaid principal
balance of the Term Loan outstanding from time to time, shall be
due and payable monthly, in arrears, commencing on October 5, 2006
and continuing on the fifth (5 th ) day of
each calendar month thereafter, in equal monthly principal
installments of One Hundred Sixty-Six Thousand Six Hundred
Sixty-Seven Dollars and No Cents ($166,667.00), together with an
additional amount representing accrued interest as set forth above,
beginning on October 5, 2006, and continuing on the fifth (5
th ) day of
each month thereafter, with a final payment of all outstanding
principal and accrued interest due on the Term Loan Maturity Date.
Principal amounts repaid on the Term Loan Note may not be borrowed
again. Any amount of principal or interest on the Term Loan which
is not paid when due, whether at stated maturity, by acceleration
or otherwise, shall bear interest payable on demand at the Default
Rate.
Article 3 CONDITIONS OF
BORROWING .
Section
3.1 Loan Documents. The Agreement is hereby amended by
substituting the following new Section 3.1 in lieu of the
existing Section 3.1:
Section
3.1 Loan Documents. The Borrower shall have failed to
execute and deliver to the Bank any of the following loan
documents all of which must be satisfactory to the Bank and
the Bank's counsel in form, substance and execution (the loan
documents listed below in subparagraphs (a) through (h)
together with (i) any other documents, agreements,
instruments, letters of credit, and/or credit agreements under
which the Borrower and/or any Subsidiary are or will be in the
future obligated or liable to the Bank; (ii) any other
documents executed in connection with the Loans, including
without limitation, any guaranties or security agreements
executed by the Guarantors or Borrower's Subsidiaries; and
(iii) any other present or future documents, agreements,
instruments, letters of credit, and/or credit agreements
evidencing any of the Obligations, collectively, the "Loan
Documents"):
(a)
Loan Agreement. Two copies of this Agreement duly
executed by the Borrower.
(b)
Revolving Note. The Revolving Note duly executed by the
Borrower.
(c)
Term Loan Note. The Term Loan Note duly executed by the
Borrower.
(d)
Landlord Consent and Waiver. A Landlord Consent and
Waiver duly executed by any landlord with respect to any
leased real estate of Borrower or its Subsidiaries, in form
and substance acceptable to Bank.
(e)
Term Loan Guaranty. The Limited Guaranty duly executed
by each Term Loan Guarantor.
(f)
Stock Pledge Agreements. The Stock Pledge Agreements
duly executed by the Borrower, Nor-Cote International, Inc.,
CSM, Inc., James H. Drew Corporation, Century II Staffing,
Inc., Fortune Wireless, Inc., and Professional Staff
Management, Inc.
(g)
Resolutions. Resolutions of the boards of directors
and/or shareholders of the Borrower authorizing the execution
of this Agreement and the Loan Documents.
(h)
Additional Documents. Such other certificates,
guaranties, financial statements, schedules, resolutions,
opinions of counsel, notes and other documents which are
provided for hereunder or which the Bank shall require as well
as (i) any other documents, agreements, instruments, letters
of credit, and/or credit agreements under which the Borrower
and/or any Subsidiary are or will be in the future obligated
or liable to the Bank and (ii) any other present or future
documents, agreements, instruments, letters of credit, and/or
credit agreements evidencing any of the
Obligations.
Section
3.12 Conditions to Subsequent Revolving Loans. The
Agreement is hereby amended by adding the following new
Section 3.12:
Section
3.12 Conditions to Subsequent Revolving Loans. Prior to
the making of any Revolving Loan by the Bank:
(a)
No Default. No Event of Default shall have
occurred and be continuing.
(b)
Representations and Warranties. Each
representation and warranty contained in this Agreement shall
be true and correct as of the date of each Revolving Loan,
except to the extent any such representation or warranty
relates solely to an earlier date and except changes
reflecting transactions permitted by this
Agreement.
(c)
Legal Matters. All legal matters incident to
the making of each Revolving Loan shall be reasonably
satisfactory to Bank and its counsel.
(d)
Expenses. Borrower shall have reimbursed Bank
for all reasonable legal fees and other reasonable expenses
incurred by Bank in connection with the Loans in accordance
with this Agreement.
ARTICLE
5 MANNER OF BORROWING.
Article
5
Manner of Borrowing. The Agreement is hereby amended by
substituting the following new Article 5 in lieu of the
existing Article 5:
Each
Revolving Loan shall be made available to the Borrower upon
its request, by Carter M. Fortune, John F. Fisbeck, or any
other individual authorized in writing by either of them
unless such Person's authority to so act has been revoked by
the Borrower in writing previously received by the Bank. A
request for a Revolving Loan must be received by no later than
11:00 a.m. Indianapolis, Indiana time, on the day it is to be
funded. The proceeds of each Revolving Loan shall be made
available at the office of the Bank by credit to the account
of the Borrower or by other means requested by the Borrower
and acceptable to the Bank.
The
Bank is authorized to rely on any written, verbal, electronic,
telephonic or telecopy loan requests which the Bank believes
in its good faith judgment to emanate from a properly
authorized representative of the Borrower, whether or not that
is in fact the case. The Borrower does hereby irrevocably
confirm, ratify and approve all such advances by the Bank and
does hereby indemnify the Bank against losses and expenses
(including court costs, attorneys' and paralegals' fees) and
shall hold the Bank harmless with respect
thereto.
ARTICLE
6 SECURITY FOR THE OBLIGATIONS.
Section
6.1 Security for
Obligations. The Agreement is hereby amended by
substituting the following new Section 6.1(b)(vi) in lieu of
the existing Section 6.1(b)(vi):
(vi)
All Chattel Paper, Electronic Chattel Paper, Instruments,
Documents, Letter of Credit Rights, all proceeds of letters of
credit, Health Care Insurance Receivables, Supporting
Obligations, notes secured by real estate, Commercial Tort
Claims and General Intangibles, including Payment
Intangibles;
The
Agreement is hereby amended by adding the following language
to the end of Section 6.1:
Notwithstanding
anything herein to the contrary, Collateral shall not include
any Trust Funds held in the following Deposit Accounts with
respect to the following Subsidiaries:
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Subsidiary Name
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Bank Account Name
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Account Number(s)
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Century
II ASO, Inc.
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Century
II ASO, Inc.
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Fifth
Third Bank:
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#
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Century
II ASO, Inc.
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Century
II ASO, Inc.
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Bank
of America:
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#
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Century
II Services, Inc.
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Century
II Services, Inc.
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Fifth
Third Bank:
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#
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#
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#
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Century
II Services, Inc.
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Century
II Services, Inc.
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Bank
of America:
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|
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#
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Century
II Staffing TN,
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Century
II Staffing TN,
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Fifth
Third Bank:
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Inc.
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Inc.
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#
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Century
II Staffing TN,
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Century
II Staffing TN,
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Bank
of America:
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Inc.
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Inc.
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#
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Century
II Staffing USA,
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Century
II Staffing USA,
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Fifth
Third Bank:
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Inc.
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Inc.
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#
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Century
II Staffing USA,
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Century
II Staffing USA,
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Bank
of America:
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Inc.
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Inc.
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#
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Employer
Solutions
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ESG
of SLC - Operating
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Key
Bank:
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Group
of SLC, Inc.
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Account
|
#
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Employer
Solutions
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ESG
of SLC - Payroll
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Key
Bank:
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Group
of SLC, Inc.
|
|
#
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ESG
Achievement, Inc.
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ESG
Achievement, Inc.
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Key
Bank:
#
|
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ESG
Administration, Inc.
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ESG
Administration, Inc.
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Key
Bank:
#
|
|
ESG
Assistance, Inc.
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ESG
Assistance, Inc.
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Key
Bank:
#
|
|
ESG
Consulting, Inc.
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ESG
Consulting, Inc.
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Key
Bank:
#
|
|
ESG
Direction, Inc.
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ESG
Direction, Inc.
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Key
Bank:
#
|
|
ESG
Entities, Inc.
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ESG
Entities, Inc.
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Key
Bank:
#
|
|
ESG
Fulfillment, Inc.
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ESG
Fulfillment, Inc.
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Key
Bank:
#
|
|
ESG
Management, Inc.
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ESG
Management, Inc.
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Key
Bank:
#
|
|
ESG
Offerings, Inc.
|
ESG
Offerings, Inc.
|
Key
Bank:
#
|
|
ESG
Services, Inc.
|
ESG
Services, Inc.
|
Key
Bank:
#
|
|
ESG
Success, Inc.
|
ESG
Success, Inc.
|
Key
Bank:
#
|
|
ESG
Supervision, Inc.
|
ESG
Supervision, Inc.
|
Key
Bank:
#
|
|
ESG
Insurance, Inc. d/b/a
Aspen
Cove Insurance,
Inc.
|
Aspen
Cove/Neal Dastrup
Insurance
- Operating
|
Key
Bank:
#
|
|
Sageland
Flagging, Inc.
d/b/a
Employer Solutions
Staffing
Group, Inc.
|
Employer
Solutions
Staffing
Group - General
Account
|
Key
Bank:
#
|
|
Employer
Solutions
Group
of Idaho, Inc.
|
Employer
Solution Group
|
Key
Bank:
#
|
|
Fortune
Staffing, Inc.
|
Fortune
Staffing, Inc.
|
Fifth
Third Bank:
#
|
|
Fortune
Staffing, Inc.
|
Fortune
Staffing, Inc.
|
Bank
of America, NA:
#
|
|
Precision
Employee
Management,
L.L.C.
d/b/a
Checkmate
Professional
Employer
|
Precision
Employee
Management
d/b/a
Checkmate
|
Chase
#
|
|
Precision
Employee
Management,
L.L.C.
d/b/a
Checmate
Professional
Employer
|
Precision
Employee
Mgmt
d/b/a Checmate
|
Wells
Fargo #
|
|
Pro
Staff, Inc.
|
Pro
Staff,
|
|
