Document:

Exhibit 10.1

 

CHANGE IN CONTROL AGREEMENT

 

THIS CHANGE IN CONTROL AGREEMENT (the “Agreement”) is entered into as of the 4th day of May, 2011 by and between MAINSOURCE FINANCIAL GROUP, INC. (the “Company”), an Indiana corporation, and CHRIS HARRISON (the “Executive”).

 

RECITALS:

 

WHEREAS, Executive and the Company are parties to a Change in Control Agreement dated as of September 18, 1997 (the “Prior Agreement”), as such Prior Agreement may have been amended as of the date of this Agreement; and

 

WHEREAS, in consideration of the Company’s implementation of certain executive compensation plans the Company has requested that Executive agree to terminate the Prior Agreement and execute this Agreement with such changes as the Company and Executive agree; and

 

WHEREAS, the Executive has agreed to execute this Agreement in replacement of the Prior Agreement; and

 

WHEREAS, the Board has authorized the Company to enter into this Agreement;

 

NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the company and the Executive, hereby agree as follows:

 

AGREEMENT:

 

1.                                       Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below:

 

(a)         “Bonus Amount” means the annual incentive bonus earned by Executive from the Company during the last completed fiscal year of the Company immediately preceding Executive’s Date of Termination (annualized in the event Executive was not employed by the Company for the whole of any such fiscal year).

 

(b)          “Cause” means (i) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from Executive’s incapacity due to physical or mental illness or any such failure subsequent to Executive being delivered a Notice of Termination without Cause by the Company or delivering a Notice of Termination for Good Reason to the Company) after a written demand for substantial performance is delivered to Executive by the Board that specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive’s duties, (ii) the willful engaging by Executive in illegal conduct or gross misconduct that is demonstrably and materially injurious to the Company, or (iii) the conviction of Executive of, or a plea by Executive of nolo contendre to, a felony.  For purpose of this paragraph (b), no act or failure to act by Executive shall be considered 

 

 

“willful” unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive’s action or omission was legal, regulatory compliant, and in the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Company or upon the instructions of the Company’s chief executive officer or another senior officer of the Company, shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.  Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three-fourths (3/4) of the entire Board (excluding Executive if Executive is a Board member) at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board an event set forth in clauses (i) or (ii) has occurred and specifying the particulars thereof in detail. The Company must notify Executive of any event constituting Cause within 90 days following the Company’s knowledge of its existence or such event shall not constitute Cause under this Agreement.

 

(c)          “Change in Control” means the occurrence of any one of the following events:

 

(i)                              individuals who, on January 1, 2011, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 1, 2011, whose election or nomination for election was approved by a vote of at least two-thirds (2/3) of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection by such Incumbent Directors to such nomination) shall be deemed to be an Incumbent Director; provided, however, that no individual elected or nominated as a director of the Company initially as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director;

 

(ii)                           any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25 percent or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any Subsidiary, (B) by any employee benefit plan sponsored or maintained by the Company or any Subsidiary, or by any employee stock benefit trust created by the Company or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (iii)), (E) pursuant to any acquisition by Executive or any group of persons including Executive (or any entity controlled by Executive or any group of persons including Executive); or (F) a transaction (other than one described in (iii) below) in which Company Voting Securities are acquired from the Company, if a majority of the Incumbent Directors approves a resolution providing expressly that the acquisition pursuant to this clause (F) does not constitute a Change in Control under this paragraph (ii);

 

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(iii)                        the consummation of a merger, consolidation, share exchange or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company’s shareholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than 40 percent of the total voting power of (x) the corporation resulting from the consummation of such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100 percent of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan sponsored or maintained by the Surviving Corporation or the Parent Corporation or any employee stock benefit trust created by the Surviving Corporation or the Parent Corporation) is or becomes the beneficial owner, directly or indirectly, of 25 percent or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least one-half of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

 

(iv)                      the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or a sale of all or substantially all of the Company’s assets.

 

Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 25 percent of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company that reduces the number of Company Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control of the Company shall then occur.

 

(d)          “Date of Termination” means (i) the effective date on which Executive’s employment by the Company terminates as specified in a prior written notice by the Company or Executive, as the case may be, to the other, delivered pursuant to Section 10, or (ii) if Executive’s employment by the Company terminates by reason of death, the date of Executive’s death.  Whether a termination has occurred will be interpreted in accordance with Treasury Regulation §1.409A-(1)(h).

 

(e)           “Disability” means termination of Executive’s employment by the Company due to Executive’s absence from Executive’s duties with the Company on a full-time basis for at least 180 consecutive days as a result of Executive’s incapacity due to physical or mental illness.  The 

 

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determination of Disability shall be made by a physician mutually agreed upon by both the Executive and the Company.

 

(f)            “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following events after a Change in Control:

 

(i)                              any change in the duties or responsibilities of Executive that is inconsistent in any material respect with Executive’s positions, duties, responsibilities or status with the Company immediately prior to such Change in Control (including any material diminution of such duties or responsibilities);

 

(ii)                           (A) a material reduction by the Company in Executive’s rate of annual base salary as in effect immediately prior to such Change in Control, or as the same may be increased from time to time thereafter, or (B) the failure by the Company to pay Executive an annual bonus in respect of the year in which such Change in Control occurs in an amount greater than or equal to the annual bonus earned for the year prior to the year in which such Change in Control occurs, provided that Executive has met any requisite performance criteria threshold necessary to the payment of such annual bonus in respect of the year in which such Change in Control occurs.

 

(iii)                       any requirement of the Company that Executive (A) be based anywhere more than 30 miles from the office where Executive is located at the time of the Change in Control, or (B) endure overnight travel on Company business to an extent substantially greater than the overnight travel obligations of Executive immediately prior to such Change in Control;

 

(iv)                      the failure of the Company to (A) continue in effect any employee benefit plan, compensation plan, welfare benefit plan or material fringe benefit plan (individually or collectively, “Plan”) in which Executive is participating immediately prior to such Change in Control or the taking of any action by the Company that would adversely affect Executive’s participation in or reduce Executive’s benefits under any such Plan, unless Executive is permitted to participate in other plans providing Executive with the same benefits that the party effecting the Change in Control (or, if applicable, its Parent Corporation) provides to an executive in a comparable position (or, in the case of a Parent Corporation, the executive of its principal banking or financial services subsidiary in a comparable position), or (B) provide Executive with paid time-off in accordance with the most favorable time-off policies of the Company and its affiliated companies as in effect for Executive immediately prior to such Change in Control, including the crediting of all service for which Executive had been credited under such vacation policies prior to the Change in Control; or

 

(v)                         the failure of the Company to obtain the assumption (and, if applicable, guarantee) agreement from any successor (and Parent Corporation) as contemplated in Section 9(b).

 

The Executive must notify the Company within 90 days after existence of the initial condition giving rise to a termination for Good Reason.  The Company will then have a 30-day period after the Company receives notice from Executive to cure the condition and not be required to pay an amount under Section 4. Executive’s right to terminate employment for Good Reason shall not be affected by Executive’s incapacities due to mental or physical illness and Executive’s continued employment 

 

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shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason.

 

(g)           “Qualifying Termination” means a termination of Executive’s employment (i) by the Company other than for Cause, or (ii) by Executive for Good Reason.  Termination of Executive’s employment on account of death, Disability or Retirement shall not be treated as a Qualifying Termination.

 

(h)          “Retirement” means the termination of Executive’s employment on or after the first of the month coincident with or following Executive’s attainment of age 65, or such later date as may be provided in a written agreement between the Company and the Executive.

 

(i)              “Subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50 percent or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors or in which the Company has the right to receive 50 percent or more of the distribution of profits or 50 percent of the assets upon liquidation or dissolution.

 

(j)             “Termination Period” means the period of time beginning with a Change in Control and ending 12 months following such Change in Control.  Notwithstanding anything in this Agreement to the contrary, if (i) Executive’s employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control; (ii) Executive reasonably demonstrates that such termination (or Good Reason event) was at the request of a third party who had indicated an intention or taken steps reasonably calculated to effect a Change in Control; and (iii) a Change in Control involving such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then for purposes of this Agreement, the date immediately prior to the date of such termination of employment or event constituting Good Reason shall be treated as a Change in Control.  For purposes of determining the timing of payments and benefits to Executive under Section 4, the date of the actual Change in Control shall be treated as Executive’s Date of Termination under Section l(d).

 

2.                                       Obligation of Executive.  In the event of a tender or exchange offer, proxy contest, or the execution of any agreement that, if consummated, would constitute a Change in Control, Executive agrees not to voluntarily leave employment other than as a result of Disability, Retirement or an event that would constitute Good Reason if a Change in Control had occurred, until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest or agreement is terminated or abandoned.

 

3.                                       Term of Agreement.  This Agreement shall be effective on the date hereof and shall continue in effect until the Company shall have given 12 months written notice of cancellation; provided, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a 12-month period after a Change in Control, if such Change in Control shall have occurred during the term of this Agreement.  Notwithstanding anything in this Section to the contrary, this Agreement shall terminate if Executive or the Company terminates Executive’s employment prior to a Change in Control except as provided in Section 1(j).

 

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4.                                       Payments Upon Termination of Employment.

 

(a)          Qualifying Termination — Cash Payment.  If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, then the Company shall provide to Executive, subject to the provisions of Section 11 hereunder:

 

(i)                         within 20 days following the Date of Termination a lump-sum cash amount equal to the sum of (A) Executive’s base salary through the Date of Termination and any bonus amounts that have become payable, to the extent not theretofore paid or deferred, (B) a pro rata portion of Executive’s annual bonus for the fiscal year in which Executive’s Date of Termination occurs in an amount at least equal to (x) Executive’s Bonus Amount, multiplied by (y) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is 365, and reduced by (z) any amounts paid from the Company’s annual incentive plan for the fiscal year in which Executive’s Date of Termination occurs and (C) any accrued vacation pay, to the extent not theretofore paid; plus

 

(ii)                      within 20 days following the Date of Termination, a lump-sum cash amount equal to the sum of (A) 1.5 times Executive’s highest annual rate of base salary during the 12-month period immediately prior to Executive’s Date of Termination, plus (B) 1.5 times Executive’s Bonus Amount; provided, however, that if Executive’s Date of Termination is within 12 months of the earliest date on which termination by the Executive could otherwise be considered a Retirement (“Retirement Date”), such sum shall be multiplied by a fraction (“Adjustment Fraction”), the numerator of which is equal to the number of full months from the Date of Termination to the Retirement Date, and the denominator of which is equal to 12.

 

(b)          Qualifying Termination — Continued Coverage.  If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, the Company shall continue to provide, for a 18-month  period following Executive’s Date of Termination, Executive (and Executive’s dependents, if applicable) with the same level of medical, dental, accident, disability and life insurance benefits upon substantially the same terms and conditions (including contributions required by Executive for such benefits) as existed immediately prior to Executive’s Date of Termination (or, if more favorable to Executive, as such benefits and terms and conditions existed immediately prior to the Change in Control); provided, however, that if Executive’s Date of Termination is within one year of Executive’s Retirement Date, the period of time of continued benefits coverage (as described in this Section 4(b)) shall be equal to the product of (x) one, and (y) the Adjustment Fraction; provided, further, if Executive cannot continue to participate in the Company plans providing such benefits, the Company shall otherwise provide such benefits on the same after-tax basis as if continued participation had been permitted.  Notwithstanding the foregoing, in the event Executive becomes reemployed with another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described herein shall be secondary to such benefits during the period of Executive’s eligibility, but only to the extent that the Company reimburses Executive for any increased cost and provides any additional benefits necessary to give Executive the benefits provided hereunder.  The Executive’s accrued benefits as of the Date of Termination under the Company’s employee benefit plans shall be paid to Executive in accordance with the terms of such plans.

 

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(c)           Other than Qualifying Termination. If during the Termination Period the employment of Executive shall terminate other than by reason of a Qualifying Termination, then the Company shall pay to Executive within 30 days following the Date of Termination, a lump-sum cash amount equal to the sum of (1) Executive’s base salary through the Date of Termination and any bonus amounts that have become payable, to the extent not theretofore paid or deferred, and (2) any accrued vacation pay, to the extent not theretofore paid.  The Company may make such additional payments, and provide such additional benefits, to Executive as the Company and Executive may agree in writing. The Executive’s accrued benefits as of the Date of Termination under the Company’s employee benefit plans shall be paid to Executive in accordance with the terms of such plans.

 

(d)          Suspension of Payments to Specified Employees.  To the extent such suspension is required by Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or Treasury Regulations issued pursuant to Code Section 409A, payment of all amounts of deferred compensation for purposes of Code Section 409A pursuant to Section 4 will be suspended for six months following the date of the Qualifying Termination.  The Executive will receive payment of such amounts on the first day following the six-month suspension period with interest on any delayed payment at the 30-year Treasury Bond rate as published in the Wall Street Journal.

 

5.                                       Potential Reduction in Certain Payments.  To the extent payments made to Executive in connection with a Change in Control, or within 12 months after a Change in Control would be considered “excess parachute payments” pursuant to the Code Section 280G, the benefit payment to Executive under this Agreement, when combined with all other parachute payments to Executive, shall be the greater of:

 

(a)          Executive’s benefit under the Agreement reduced to the maximum amount payable to Executive such that when it is aggregated with payments and benefits under all other plans and arrangements it will not result in an “excess parachute payment;” or

 

(b)          Executive’s benefit under the Agreement after taking into account the amount of the excise tax imposed on Executive under Code Section 280G due to the benefit payment.

 

The determination of whether any reduction in the rights or payments under this Agreement is to apply will be made by the Company in good faith after consultation with Executive, and such determination will be conclusive and binding on Executive.  The reduction of the amounts payable hereunder, if applicable, shall be made by reducing first the payments under Section 4(a)(ii).

 

6.                                       Withholding Taxes.  The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes that, by applicable federal, state, local or other law, the Company is required to withhold therefrom.

 

7.                                       Reimbursement of Expenses.  If any contest or dispute shall arise under this Agreement involving termination of Executive’s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive for all reasonable legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof), together with interest in an 

 

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amount equal to the prime rate as published in the Wall Street Journal  from time to time in effect, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives Executive’s statement for such fees and expenses through the date of payment thereof, regardless of whether or not Executive’s claim is upheld by an arbitration panel.  In no event will reimbursement be made later than the end of the year following the year in which the expense was incurred.

 

8.                                       Scope of Agreement.  Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its Subsidiaries, and if Executive’s employment with the Company shall terminate prior to a Change in Control, Executive shall have no further rights under this Agreement (except as otherwise provided hereunder); provided, however, that any termination of Executive’s employment during the Termination Period shall be subject to all of the provisions of this Agreement.

 

9.                                       Successors; Binding Agreement.

 

(a)         This Agreement shall not be terminated by any Business Combination. In the event of any Business Combination, the provisions of this Agreement shall be binding upon the Surviving Corporation, and such Surviving Corporation shall be treated as the Company hereunder.

 

(b)         The Company agrees that in connection with any Business Combination, it will cause any successor entity to the Company unconditionally to assume (and for any Parent Corporation in such Business Combination to guarantee), by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder.  Failure of the Company to obtain such assumption and guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control shall be a breach of this Agreement and shall constitute Good Reason hereunder and shall entitle Executive to compensation and other benefits from the Company in the same amount and on the same terms as Executive would be entitled hereunder if Executive’s employment were terminated following a Change in Control by reason of a Qualifying Termination.  For purposes of implementing the foregoing, the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs, and shall be the Date of Termination if requested by Executive.

 

(c)          This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If Executive dies while any amounts are payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive’s estate.

 

10.                                Notice.

 

(a)         For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when delivered or 5 days after deposit in the United States mail, certified and return receipt requested, postage prepaid, addressed as follows:

 

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If to Executive:
    	
 
    	
At   the address set forth below the signatory
    
	
 
    	
 
    	
 
    
	
If to the Company:
    	
 
    	
MainSource   Financial Group, Inc.
    
	
 
    	
 
    	
2105   N. State Road 3 Bypass
    
	
 
    	
 
    	
Greensburg, Indiana   47240
    
	
 
    	
 
    	
Attn:   Chairman of the Board
    

 

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

(b)         A written notice of Executive’s date of termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) specify the Date of Termination (which date shall not be less than 15 days (30, if termination is by the Company for Disability) nor more than 60 days after the giving of such notice).  The failure by Executive or the Company to set forth in such notice any fact or circumstance that contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.

 

11.                                Full Settlement; Resolution of Disputes.  The Company’s obligation to make any payments provided for in this Agreement and otherwise to perform its obligations hereunder shall be in lieu of and in full settlement of all other severance payments to Executive under any other severance or employment agreement between Executive and the Company, and any severance plan of the Company.  The Company’s obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action that the Company may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and, except as provided in Section 4(b), such amounts shall not be reduced whether or not Executive obtains other employment.  Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Indianapolis, Indiana by three arbitrators in accordance with the rules of the American Arbitration Association then in effect.  The results of the arbitration will be binding on both parties and may not be appealed.  Judgment may be entered on the arbitrators’ award in any court having jurisdiction.  The Company shall bear all costs and expenses arising in connection with any arbitration proceeding pursuant to this Section.

 

12.                                Employment with Subsidiaries.  Employment with the Company for purposes of this Agreement shall include employment with any Subsidiary.

 

13.                                Survival.  The respective obligations and benefits afforded to the Company and Executive as provided in Sections 4 (to the extent that payments or benefits are owed as a result of a termination of employment that occurs during the term of this Agreement), 5 (to the extent that Payments are made to Executive as a result of a Change in Control that occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.

 

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14.                                Governing Law; Validity.  The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Indiana without regard to the principle of conflicts of laws.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which other provisions shall remain in full force and effect.

 

15.                                Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

 

16.                                Miscellaneous.  No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  Except as set forth in Sections l(b) and l(f), the failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.  Except as otherwise specifically provided herein, the rights of, and benefits payable to, Executive, his estate or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, Executive, his estate or his beneficiaries under any other employee benefit plan or compensation program of the Company.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and Executive has executed this Agreement, in each case as of the day and year first set forth above.

 

	
 
    	
 
    	
MAINSOURCE FINANCIAL GROUP, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
/s/   Archie M. Brown, Jr.
    
	
 
    	
 
    	
Archie   M. Brown, Jr., President and Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
EXECUTIVE
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
/s/   Chris Harrison
    
	
 
    	
 
    	
Chris   Harrison
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Address
    

 

11Exhibit 10.1

 

BB&T

LOAN AGREEMENT

 

This Loan Agreement (the “Agreement”) is made this 20th day of January, 2012 by and between BRANCH BANKING AND TRUST COMPANY, a North Carolina banking corporation (“Bank”), and:

 

Body Central Corp., a Delaware corporation, Body Shop of America, Inc., a Florida corporation, and Catalogue Ventures, Inc., a Florida corporation (collectively, “Borrower”), each having its chief executive office at 6225 Powers Avenue, Jacksonville, Florida 32217.

 

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 Five Million and No/100 Dollars ($5,000,000.00) at any one time outstanding for the purpose of working capital which shall be evidenced by the Borrower’s Promissory Note dated on or after the date hereof which shall mature May 5, 2013 (the “Maturity Date”), when the entire unpaid principal balance then outstanding plus accrued interest thereon shall be paid in full. Prior to maturity or the occurrence of any Event of Default hereunder and subject to any availability limitations, as applicable, the Borrower may borrow, repay, and reborrow 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.

 

The promissory note(s) evidencing the Line of Credit is referred to herein as the “Note(s)” and shall include all extensions, renewals, modifications and substitutions thereof. The Line of Credit shall be secured by the collateral described in the security documents described below.

 

Borrower shall have the option at any time prior to the Maturity Date to increase the Line of Credit (the “Accordion Increase”) by an amount which does not cause the Loan in the aggregate to exceed Twenty Million Dollars ($20,000,000.00), provided, and on the conditions, that (a) no Default or Event of Default has occurred and is continuing at the time of such Accordion Increase, (b) Borrower shall have received approval from Bank for such Accordion Increase, including, without limitation, adding additional Financial Covenants to the Loan Agreement, implementation of a borrowing base, and/or monthly or quarterly monitoring of the Collateral, which approval shall be in Bank’s sole discretion; (c) the Borrower shall be in pro forma compliance after giving effect to such Accordion Increase with the Financial Covenants then in effect and those to be added as a result of the Accordion Increase, if any; (d) Bank shall have received a satisfactory legal opinion from counsel to the Borrower, and such other documentation as it deems reasonably necessary to effectuate such Accordion Increase, and (e) the Accordion Increase shall not have a shorter maturity or a different Interest Rate than the then existing Line of Credit.

 

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 form 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. Borrower shall notify Bank promptly of any change in such information.

 

Note(s): The Note(s) evidencing the Loans(s) duly executed by the Borrower.

 

Security Agreement(s): Security Agreement 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 (the “Collateral”). (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: 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.

 

Commitment Fee: A commitment fee (or balance thereof) of $10,000.00 payable to the Bank on the date of execution of the Loan Documents, unless a schedule follows: N/A.

 

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Corporate Resolution: A Corporate Resolution, or unanimous written consent, 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 Good Standing: A certification of the Secretary of State (or other government authority) of the State of the Borrower’s Incorporation or Organization as to the 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.

 

Unused Fee Penalty: Client shall pay the Bank, quarterly in arrears on the last day of each calendar quarter, an unused fee equal to .20% per annum on the average daily unused amount of the Credit Commitment for such calendar quarter calculated on the basis of a year of 360 days for the actual number of days elapsed. “Unused Amount of the Credit Commitment” means the maximum commitment amount less any outstanding principal under the Line of Credit.

 

Section 2 Representations and Warranties

 

The Borrower 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 in all material respects and fairly reflect the financial condition of the Borrower and its subsidiaries as of the dates thereof, including all contingent liabilities of every type, and the financial condition of the Borrower and its subsidiaries as stated therein has not changed materially and adversely since the date 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 is a corporation, general partnership, 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 duly qualified and in good standing in every other state in which the nature of their business shall require such qualification, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect, 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”)) 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 or Pledgor, or give cause for the acceleration of any of the respective obligations of the Borrower.

 

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 its Subsidiaries have good 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.

 

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 required by GAAP) for the payment thereof is being maintained.

 

2.07.Regulations U and X. 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 and Regulation X 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 meets, as of the date hereof,

 

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the minimum funding standards of Section 302 of ERISA, all applicable 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, to Borrower’s knowledge, reasonably anticipated before any court, commission, administrative agency, whether State or Federal, or arbitration which would reasonably be expected to have a Material Adverse Effect.

 

2.10.Other Agreements. The representations and warranties made by Borrower to Bank in the other Loan Documents are true and correct in all material 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 Florida 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, and (d) comply with all rules and regulations of the Securities and Exchange Commission (“SEC”) and timely file all schedules, forms and reports required from time to time with the SEC.

 

3.02.Maintain Records. Keep adequate records and books of account, in which complete entries will be made in a manner to allow financial statements to be prepared in accordance with GAAP consistently applied, reflecting all material 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 businesses, and business interruption insurance if required by Bank, (or other commercially reasonable substitute insurance program), 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 material 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, except to the extent such obligations are being contested in good faith by appropriate proceedings which are pursued diligently.

 

3.07.Right of Inspection. Permit the officers and authorized agents of the Bank, at any reasonable time or times during normal business hours with reasonable advance notice, 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 with the participation of the Borrower (which the Borrower will not withhold, condition or delay), the Borrower’s independent accountant as the Bank deems necessary and proper.

 

3.08. Reporting Requirements. Furnish to the Bank:

 

Financial Statements: As soon as available and not more than Ninety (90) 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

 

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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.

 

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 proceeding before any court or administrative agency of any type which would reasonably be expected to have a Material Adverse Effect.

 

Tax Returns: As soon as available each year, complete copies (including all schedules) of all state and federal tax returns filed by Borrower.

 

Officer Compliance Certificate: If required, an Officer Compliance Certificate in the form of Schedule EE attached hereto, quarterly.

 

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.

 

Notice of Contest: Promptly after Borrower’s initiation of any contest of taxes, assessments, or governmental charges imposed upon it or upon its property which would reasonably be expected to have a Material Adverse Effect.

 

Other Information: Such other information as the Bank may from time to time reasonably request.

 

3.09.Deposit Accounts. Maintain substantially all of its demand deposit/operating accounts with the Bank, except the bank accounts maintained in the localities in which the Borrower’s retail stores are located and which are periodically swept into the Borrower’s accounts with Bank.

 

3.10.Affirmative Covenants from other Loan Documents. All affirmative covenants contained in any Security Agreement, or other security document executed by the Borrower which are described in Section 1 hereof are hereby incorporated by reference herein.

 

3.11.Landlord Lien Waivers. Deliver to Bank on or before January 30, 2012, an executed landlord lien waiver for Borrower’s leased property located at 6225 Powers Avenue, Jacksonville, Florida.

 

Section 4 Guarantor(s) Covenants [INTENTIONALLY DELETED — NO GUARANTORS] 

 

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 (collectively, whether one or more, the “Financial Covenants”) all in accordance with GAAP unless otherwise specified:

 

Tangible Net Worth. A minimum tangible net worth of not less than Thirty Million ($30,000,000.00), to be tested quarterly as of the end of each fiscal quarter. 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.

 

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 the Collateral, 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)              [Intentionally deleted];

 

(e)               purchase money security interests on any property hereafter acquired, provided that such lien shall attach only to the property acquired;

 

(f)                 Pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations, other than any Lien imposed by ERISA;

 

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(g)              Liens incurred in the ordinary course of business securing insurance premiums or reimbursement obligations under insurance policies;

 

(h)              Easements, covenants, conditions, restrictions, building code laws, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of the Borrower, and such other minor title defects, or survey matters that are disclosed by current surveys, that, in each case, do not materially and adversely interfere with the ordinary conduct of the business of the applicable Borrower;

 

(i)    Liens existing on the date hereof and listed on Schedule 6.01 and solely with the prior written consent of Bank any renewals or extensions thereof where: (i) the property covered thereby is not changed, (ii) the amount secured or benefited thereby is not increased, (iii) the direct or any contingent obligor with respect thereto is not changed, and (iv) any renewal or extension of the obligations secured or benefited thereby is otherwise permitted hereunder);

 

(j)    Landlords’ and lessors’ liens in respect of rent not in default, as to Borrower’s retail locations without the necessity of obtaining Bank’s consent, and as to Borrower’s non-retail locations from and after the execution and delivery to Bank of landlord/lessor’s lien waivers acceptable to Bank and its counsel for any such location, provided, however, a landlord’s lien for rent not in default shall be permitted without delivery of a lien waiver for Borrower’s location at 4115 University Blvd. West, Unit 9, Jacksonville, Florida so long as inventory is not stored or located at such location;

 

(k)               Liens arising solely by virtue of any statutory or common law provisions relating to banker’s liens, liens in favor of securities intermediaries, rights of setoff or similar rights and remedies as to deposit accounts or securities accounts or other funds maintained with depository institutions or securities intermediaries;

 

(l)    Liens arising from precautionary UCC filings regarding “true” operating leases or the consignment of goods to the Borrower;

 

(m)            Liens in favor of customs and revenues authorities imposed by applicable law arising in the ordinary course of business in connection with the importation of goods;

 

(n)              Liens of a collection bank arising under Section 4-210 of the UCC on items in the course of collection; and

 

(o)              Liens incurred in the ordinary course of business of the Borrower which secure obligations that do not exceed $250,000 at any time in the aggregate.

 

6.02. Debt. Create, incur, assume, or suffer to exist any 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 and only with the Bank’s prior written consent any re-financings, renewals, and extensions thereof;

 

(c)     Accounts payable to trade creditors incurred in the ordinary course of business;

 

(d)     Debt secured by purchase money security interests as outlined above in Section 6.01 (e);

 

(e)     Indebtedness of any Borrower to any other Borrower;

 

(f)      Contingent liabilities under surety bonds or similar instruments incurred in the ordinary course of business in connection with the construction or improvement of retail locations provided such liabilities are unsecured or only encumber the assets being constructed; and

 

(g)     Indebtedness not specifically described herein in an aggregate principal amount not to exceed $250,000 at any time outstanding.

 

6.03. [Intentionally deleted].

 

6.04. Change of Legal Form of Business; 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, and Borrower shall not purchase all or substantially all of the assets or business of any Person, provided that the Bank’s consent to any such actions shall not be unreasonably withheld.

 

6.05. 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;

 

(c)               Leases for Borrower’s retail store locations entered into in the ordinary course of business.

 

6.06. Dividends or Distributions; Acquisition of Capital Stock or Other Ownership Interests. [Intentionally deleted].

 

6.07. Salaries. Salaries and any other cash compensation to owners/officers/partners/managers shall be limited as follows: N/A.

 

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6.08. 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.

 

6.09. [Intentionally deleted].

 

6.10. 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.

 

6.11. [Intentionally deleted]

 

6.12. Negative Covenants from other Loan Documents. All negative covenants contained in any Security Agreement or other security document executed by the Borrower which are described in Section 1 hereof are hereby incorporated by reference herein.

 

Section 7 Hazardous Materials and Compliance with Environmental Laws

 

7.01. Investigation. Borrower hereby represents to the best of Borrower’s knowledge, none of 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; and there are no such Hazardous Materials contaminating its real property, nor 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, excluding certain leased retail locations which previously contained, or may have contained, asbestos materials, but for which Borrower and/or its respective landlord(s), have removed such asbestos containing materials. Borrower hereby agrees that, except in strict compliance with applicable Environmental Laws, it shall not knowingly permit any release, storage or contamination which would reasonably be expected to result in a Material Adverse Effect 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 underground 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. If requested by Bank, Borrower shall provide Bank with all necessary and reasonable assistance required for purposes of determining the existence of Hazardous Materials on Borrower’s property, including allowing Bank access to Borrower’s employees having knowledge of, and to files and records within Borrower’s control relating to the existence, storage, or release of Hazardous Materials on Borrower’s property.

 

7.02. Compliance. Borrower agrees to comply with all applicable Environmental Laws, including, without limitation, all those relating to Hazardous Materials except where the failure to comply would not reasonably be expected to result in a Material Adverse Effect. Borrower further agrees to provide Bank, and all appropriate Federal and State authorities, with immediate notice in writing of any release of Hazardous Materials on Borrower’s property and to pursue diligently to completion all appropriate and/or required remedial action in the event of such release.

 

7.03. Remedial Action. Bank shall have the right, but not the obligation, to undertake all or any part of such remedial action in the event of a release of Hazardous Materials on the Borrower’s property and to add any expenditures so made to the principal indebtedness secured by Collateral. Borrower agrees to indemnify and hold Bank harmless from any and all loss or liability arising out of any violation of the representations, covenants, and obligations contained in this Section 7.

 

Section 8 Events of Default

 

The following shall be “Events of Default” by Borrower:

 

8.01. The failure to make prompt payment of any installment of principal or interest on any of the Note(s) when due or payable.

 

8.02. Should any representation or warranty made in the Loan Documents prove to be false or misleading in any material respect.

 

8.03 Should any report, certificate, financial statement, or other document furnished prior to the execution of or pursuant to the terms of this Agreement prove to be false or misleading in any material respect.

 

8.04. Should the Borrower or any Guarantor default on the performance of any other obligation of indebtedness in excess of $250,000 when due or in the performance of any obligation incurred in connection with money borrowed and the holder of such indebtedness accelerates the maturity date thereof.

 

8.05. Should the Borrower, any Guarantor or any Pledgor breach any covenant, condition, or agreement made under any of the Loan Documents, and such breach continues beyond any cure period set forth in such Loan Document, or if no cure period is set forth therein, for a period of thirty days.

 

8.06. Should a custodian be appointed for or take possession of any or all of the assets of the Borrower or any Guarantor, or should the Borrower or any Guarantor either voluntarily or involuntarily become subject to any insolvency proceeding, including becoming a debtor under the United States Bankruptcy Code, any proceeding to dissolve the Borrower or any Guarantor, any proceeding to have a receiver appointed, or should the Borrower or any

 

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Guarantor make an assignment for the benefit of creditors, or should there be an attachment, execution, or other judicial seizure of all or any portion of the Borrower’s or any Guarantor’s assets, including an action or proceeding to seize any funds on deposit with the Bank, and such seizure is not discharged within 30 days.

 

8.07. Should final judgment for the payment of money in excess of $250,000 be rendered against the Borrower or any Guarantor which is not covered by insurance and shall remain undischarged for a period of 30 days unless such judgment or execution thereon be effectively stayed.

 

8.08. Upon the death of, or termination of existence of, or dissolution of, any Borrower, Pledgor or Guarantor.

 

8.09. Should any lien or security interest granted to Bank in respect of any material portion of the Collateral to secure payment of the Note(s) terminate, fail for any reason to have the priority agreed to by Bank on the date granted, or become unperfected or invalid for any reason.

 

Section 9 Remedies Upon Default

 

Upon the occurrence of any of the above listed Events of Default, the Bank may at any time thereafter, at its option, take any or all of the following actions, at the same or at different times:

 

9.01. Declare the balance(s) of the Note(s) to be immediately due and payable, both as to principal and interest, late fees, and all other amounts/expenditures without presentment, demand, protest, or notice of any kind, all of which are hereby expressly waived by Borrower and each Guarantor, and such balance(s) shall accrue interest at the Default Rate as provided herein until paid in full;

 

9.02. Require the Borrower to pledge additional collateral to the Bank from the Borrower’s or any Guarantor’s assets and properties, the acceptability and sufficiency of such collateral to be determined in the Bank’s sole discretion;

 

9.03. Take immediate possession of and foreclose upon any or all collateral which may be granted to the Bank as security for the indebtedness and obligations of Borrower or any Guarantor under the Loan Documents;

 

9.04. Exercise any and all other rights and remedies available to the Bank under the terms of the Loan Documents and applicable law, including the Florida Uniform Commercial Code;

 

9.05. Upon the occurrence of any Event of Default described in Section 8.06, or at Bank’s election (without requirement for notice to Borrower) upon the occurrence of any other Event of Default, any obligation of the Bank to advance funds to the Borrower or any other Person under the terms of under the Note(s) and all other obligations, if any, of the Bank under the Loan Documents shall immediately cease and terminate unless and until Bank shall reinstate such obligation in writing.

 

Section 10 Miscellaneous Provisions 

 

10.01. Definitions.

 

“Default Rate” shall mean a rate of interest equal to Bank’s Prime Rate plus five percent (5%) per annum (not to exceed the legal maximum rate) from and after the date of an Event of Default hereunder which shall apply, in the Bank’s sole discretion, to all sums owing, including principal and interest, on such date.

 

“Environmental Laws” shall mean all applicable federal and state laws and regulations which affect or may affect the Borrower’s operations or real property, including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Sections 9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), all such applicable environmental laws and regulations of the State of Florida, as such laws and regulations may be amended from time to time.

 

“Loan Documents” shall mean this Agreement including any schedule attached hereto, the Note(s), the Security Agreement(s), all UCC Financing Statements, and all other documents, certificates, and instruments executed in connection therewith, and all renewals, extensions, modifications, substitutions, and replacements thereto and therefore.

 

“Material Adverse Effect” shall mean any event or occurrence which will materially adversely affect the Collateral, financial condition, operations, properties, or business of the Borrower and its subsidiaries, if any, taken as a whole, or the ability of the Borrower to perform its obligations under the Loan Documents.

 

“Person” shall mean an individual, partnership, corporation, trust, unincorporated organization, limited liability company, limited liability partnership, association, joint venture, or a government agency or political subdivision thereof.

 

“GAAP” shall mean generally accepted accounting principles as established by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants, as amended and supplemented from time to time.

 

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“Prime Rate” shall mean the rate of interest per annum announced by the Bank from time to time and adopted as its Prime Rate, which is one of several rate indexes employed by the Bank when extending credit, and may not necessarily be the Bank’s lowest lending rate.

 

10.02. Non-impairment. If any one or more provisions contained in the Loan Documents shall be held invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained therein shall not in any way be affected or impaired thereby and shall otherwise remain in full force and effect.

 

10.03. Applicable Law. The Loan Documents shall be construed in accordance with and governed by the laws of the State of Florida.

 

10.04. Waiver. Neither the failure or any delay on the part of the Bank in exercising any right, power or privilege granted in the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise of any other right, power, or privilege which may be provided by law.

 

10.05. Modification. No modification, amendment, or waiver of any provision of any of the Loan Documents shall be effective unless in writing and signed by the Borrower and Bank.

 

10.06. Payment Amount Adjustment. In the event that any Loan(s) referenced herein has a variable (floating) interest rate and the interest rate increases, Bank, at its sole discretion, may at any time adjust the Borrower’s payment amount(s) to prevent the amount of interest accrued in a given period to exceed the periodic payment amount or to cause the Loan(s) to be repaid within the same period of time as originally agreed upon.

 

10.07 Stamps and Fees. The Borrower shall pay all federal or state stamps, taxes, or other fees or charges, if any are payable or are determined to be payable by reason of the execution, delivery, or issuance of the Loan Documents or any security granted to the Bank; and the Borrower and Guarantor agree to indemnify and hold harmless the Bank against any and all liability in respect thereof.

 

10.08. Attorneys’ Fees. In the event the Borrower or any Pledgor or Guarantor shall default in any of its obligations hereunder and the Bank believes it necessary to employ an attorney to assist in the enforcement or collection of the indebtedness of the Borrower to the Bank, to enforce the terms and provisions of the Loan Documents, to modify the Loan Documents, or in the event the Bank voluntarily or otherwise should become a party to any suit or legal proceeding (including a proceeding conducted under the Bankruptcy Code), the Borrower and Guarantors agree to pay the reasonable attorneys’ fees of the Bank and all related costs of collection or enforcement that may be incurred by the Bank. The Borrower and Guarantor shall be liable for such attorneys’ fees and costs whether or not any suit or proceeding is actually commenced.

 

10.09. Bank Making Required Payments. In the event Borrower shall fail to maintain insurance, pay taxes or assessments, costs and expenses which Borrower is, under any of the terms hereof or of any Loan Documents, required to pay, or fail to keep any of the properties and assets constituting collateral free from new security interests, liens, or encumbrances, except as permitted herein, Bank may at its election make expenditures for any or all such purposes and the amounts expended together with interest thereon at the Default Rate, shall become immediately due and payable to Bank, and shall have benefit of and be secured by the collateral; provided, however, the Bank shall be under no duty or obligation to make any such payments or expenditures.

 

10.10. Right of Offset. Any indebtedness owing from Bank to Borrower may be set off and applied by Bank on any indebtedness or liability of Borrower to Bank, at any time and from time to time after maturity, whether by acceleration or otherwise, and without demand or notice to Borrower. Bank may sell participations in or make assignments of any Loan made under this Agreement, and Borrower agrees that any such participant or assignee shall have the same right of setoff as is granted to the Bank herein.

 

10.11. UCC Authorization. Borrower authorizes Bank to file such UCC Financing Statements describing the collateral in any location deemed necessary and appropriate by Bank.

 

10.12. Modification and Renewal Fees. Bank may, at its option, charge any fees for modification, renewal, extension, or amendment of any terms of the Note(s) not prohibited by Florida law, and as otherwise permitted by law if Borrower is located in another state.

 

10.13. Conflicting Provisions. If provisions of this Agreement shall conflict with any terms or provisions of any of the Note(s) or security document(s) or any schedule attached hereto, the provisions of such Note(s) or security document(s) or any schedule attached hereto, as appropriate, shall take priority over any provisions in this Agreement.

 

10.14. Notices. Any notice permitted or required by the provisions of this Agreement shall be deemed to have been given when delivered in writing to the City Executive or any Vice President of the Bank at its offices in Jacksonville, Florida, and to the General Counsel and to the Chief Financial Officer of the Borrower at its offices in Jacksonville, Florida, when sent by certified mail and return receipt requested.

 

10.15. Consent to Jurisdiction. Borrower hereby irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement may be instituted in any Florida state court or federal court sitting in the state of Florida, or in such other appropriate court and venue as Bank may choose in its sole discretion. Borrower consents to the jurisdiction of such courts and waives any objection relating to the basis for personal or in rem jurisdiction or to venue which Borrower may now or hereafter have in any such legal action or proceedings.

 

10.16. Arbitration. Upon demand of any party hereto, whether made before or after institution of any judicial proceeding, any dispute, claim or controversy arising out of, connected with, or relating to the Agreement and other

 

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Loan Documents (“Disputes”) between or among the parties to this Agreement and other Loan Documents shall be resolved by binding arbitration as provided herein. Institution of a judicial proceeding by a party does not waive the right of that party to demand arbitration hereunder. Disputes may include, without limitation, tort claims, counterclaims, disputes as to whether a matter is subject to arbitration, claims brought as class actions, claims arising from Loan Documents executed in the future, or claims arising out of or connected with the transaction reflected by this Agreement and other Loan Documents. Arbitration shall be conducted under and governed by the Commercial Financial Disputes Arbitration Rules (the “Arbitration Rules”) of the American Arbitration Association (the “AAA”) and Title 9 of the U.S. Code. All arbitration hearings shall be conducted in the city of Tallahassee. The expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims less than $1,500,000. All applicable statutes of limitation shall apply to any Dispute. A judgment upon the award may be entered in any court having jurisdiction. The panel from which all arbitrators are selected shall be comprised of licensed attorneys. The single arbitrator selected for expedited procedure shall be a retired judge from the highest court of general jurisdiction, state or federal, of the state where the hearing will be conducted or if such person is not available to serve, the single arbitrator may be a licensed attorney. Notwithstanding the foregoing, this arbitration provision does not apply to disputes under or related to swap or hedging agreements.

 

10.17 Counterparts. This Agreement may be executed by one or more parties on any number of separate counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

 

10.18 Entire Agreement. The Loan Documents embody the entire agreement between Borrower and Bank with respect to the Loans, and there are no oral or parol agreements existing between Bank and Borrower with respect to the Loans which are not expressly set forth in the Loan Documents.

 

10.19. Indemnification. The Borrower and the Guarantors hereby jointly and severally agree to and do hereby indemnify and defend the Bank, its affiliates, their successors and assigns and their respective directors, officer, employees and shareholders, and do hereby hold each of them harmless from and against, any loss, liability, lawsuit, proceeding, cost expense or damage (including reasonable in-house and outside counsel fees, whether suit is brought or not) arising from or otherwise relating to the closing, disbursement, administration, or repayment of the Loans, including without limitation: (i) the failure to make any payment to the Bank promptly when due, whether under the Notes evidencing the Loans or otherwise; (ii) the breach of any representations or warranties to the Bank contained in this agreement or in any other loan documents now or hereafter executed in connection with the Loans; or (iii) the violation of any covenants or agreements made for the benefit of the Bank and contained in any of the loan documents; provided, however, that the foregoing indemnification shall not be deemed to cover any loss which is finally determined by a court of competent jurisdiction to result solely from the Bank’s gross negligence or willful misconduct.

 

10.20. WAIVER OF JURY TRIAL. UNLESS EXPRESSLY PROHIBITED BY APPLICABLE LAW, THE UNDERSIGNED HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS OR CLAIMS ARISING OUT OF THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH OR OUT OF THE CONDUCT OF THE RELATIONSHIP BETWEEN THE UNDERSIGNED AND BANK. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK TO MAKE THE LOAN AND ENTER INTO THIS AGREEMENT. FURTHER, THE UNDERSIGNED HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF BANK, NOR BANK’S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WOULD NOT SEEK TO ENFORCE THIS WAIVER OR RIGHT TO JURY TRIAL PROVISION. NO REPRESENTATIVE OR AGENT OF BANK, NOR BANK’S COUNSEL, HAS THE AUTHORITY TO WAIVE, CONDITION OR MODIFY THIS PROVISION.

 

[SIGNATURES ON FOLLOWING PAGE]

 

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SIGNATURE PAGE

 

IN WITNESS WHEREOF, the Bank and Borrower have caused this Agreement to be duly executed under seal all as of the date first above written.

 

	
Witnesses:
    	
 
    	
BODY CENTRAL CORP., a Delaware corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Thomas W. Stoltz, Executive Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Witnesses:
    	
 
    	
BODY SHOP OF AMERICA, INC., a Florida corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Thomas W. Stoltz, Executive Vice President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Witnesses:
    	
 
    	
CATALOGUE VENTURES, INC., a Florida   corporation
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Thomas W. Stoltz, Executive Vice President
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    

 

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Schedule 6.01 
  Existing Liens

 

1. Florida UCC-1 Financing Statement No. 200809324308 —

a.     Secured Party - Marlin Leasing Corp.

b.     Debtor - Body Shop of America, Inc.

c.     Collateral — “True Lease”

 

2. Florida UCC- 1 Financing Statement No. 200909898810 —

a.     Secured Party - Marlin Leasing Corp.

b.     Debtor - Body Shop of America, Inc.

c.     Collateral — “True Lease”

 

3. Florida UCC-1 Financing Statement No. 200706946330 —

a.     Secured Party — Copytronics, Inc.

b.     Debtor - Body Shop of America, Inc.

c.     Collateral — Lease

 

4. Florida UCC-1 Financing Statement No. 201003476013 —

a.     Secured Party - Marlin Leasing Corp.

b.     Debtor - Body Shop of America, Inc.

c.     Collateral — “True Lease”

 

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