CREDIT AGREEMENT Between GUARANTY BANK (“Lender”) and DECORIZE, INC., GUILDMASTER, INC. and FAITH WALK DESIGNS, INC. (“Borrower”) $3,000,000 Revolving Secured Credit Facility
Exhibit
10.1
Between
GUARANTY
BANK
(“Lender”)
and
DECORIZE,
INC., GUILDMASTER, INC. and FAITH WALK DESIGNS, INC.
(“Borrower”)
$3,000,000
Revolving Secured Credit Facility
THIS
CREDIT AGREEMENT
(“Agreement”), is made and entered into effective October 19, 2007, between
GUARANTY BANK, a state chartered trust company with banking powers (“Lender”)
and DECORIZE, INC., a Delaware corporation, GUILDMASTER, INC., a Missouri
corporation, and FAITH WALK DESIGNS, INC., a Missouri corporation (each
individually and collectively, the “Borrower”) as follows:
SECTION
ONE - DEFINITIONS
As
used
in this Agreement, capitalized terms not otherwise defined have the following
meanings:
1.1 “Account”
means
all accounts as defined in the Uniform Commercial Code as adopted and in force
in the State of Missouri, as amended, contracts, contract rights, chattel paper,
instruments and documents, in which Borrower now has or hereafter acquires
an
interest.
1.2 “Advance”
is
defined in Section 2.2.
1.3 “Daily
Balance”
is
defined in Section 2.6.
1.4 “Bankruptcy
Code”
means
the Federal Bankruptcy Code (11 U.S.C. Sec. 101, et
seq.),
as
amended.
1.5 “Borrowing
Base”
means
on a revolving basis an amount equal to the sum of: (i) Eighty percent (80%)
of
Eligible Accounts Receivable plus Fifty percent (50%) of Eligible
Inventory.
1.6 “Borrowing
Base Certificate”
means
a
certificate in the form of Exhibit 1
duly
completed and executed by the Borrower.
1.7 “Business
Day”
means
any day on which the Lender is open for business in Springfield,
Missouri.
2
1.8 “Collateral”
means
Decorize’s (i) Accounts, accounts receivable, Deposit Accounts, promissory notes
and other obligations owed to Decorize that arise from the sale, rental or
lease
of inventory, goods or other property of Borrower or the rendering of services
by Decorize, and all Chattel Paper, Instruments (including Promissory Notes),
Documents, drafts, contract rights and acceptances, and other forms of
obligations (including but not limited to all obligations that may be
characterized as General Intangibles or otherwise under the UCC) respecting
the
rights of Decorize to the payment of money from others and all other rights
to
the payment of money; (ii)
all
Goods
and Inventory, and all documents of title at any time evidencing or representing
a part thereof, including all inventories of raw materials, work-in-process,
finished goods, and merchandise, materials and supplies and all other personal
property and assets of every kind and description held for sale, rental or
lease
or held to be furnished under contracts for services or consumed in Decorize’s
business, or in any case held, used or useable in the supply, servicing,
advertising, processing, packaging, delivery or shipping of such property;
(iii)
all
Equipment, machinery, tools furniture, and fixtures of every sort and spare
parts therefor, whether or not titled or certificated; (iv)
all
General Intangibles, including Payment Intangibles, all computer programs,
data
and databases, leases, licenses, claims and causes of action against others
(whether in litigation, settlement or otherwise), and tax refunds, and all
summaries, compilations, mailing and customer, client or supplier lists, and
other supporting evidence records relating to the business, assets, liabilities
or capital of Decorize, and all patents, patent applications, trademarks,
trademark applications, trade secrets, trade names, service marks, trade styles,
and copyrights, designs,
prototypes, labels, molds, inventions, improvements, processes, manufacturing
techniques, know-how, specifications, in
each
case whether or not registered, licensed or filed; (v)
all
rights under all licenses, permits, leases, contracts, governmental approvals,
franchises, applications for any of the foregoing, renewals of any of the
foregoing, and similar rights or privileges or immunities; (vi)
(A) all
dividends, cash, securities, instruments and other property from time to time
paid, payable or otherwise distributed to Decorize in respect of or in exchange
for any shares or other capital stock; (B) any and all distributions made to
Decorize in respect of any such shares or capital stock, or trust, partnership
or limited liability company interests, whether in cash or in kind, by way
of
dividends or stock splits, or pursuant to a merger or consolidation or
otherwise, or any substitute security issued to Decorize upon conversion,
reorganization or otherwise; and (C) any and all other property hereafter
delivered to Decorize or Lender in substitution for or in addition to any of
the
foregoing; (vii)
all of
Decorize’s property in the possession, custody or control of Lender in any way,
whether or not for safekeeping, custody, pledge, transmission, collection or
otherwise; (viii)
all
funds paid to Lender or in transit to any deposit account or fund established
by
Decorize, and any securities in which such funds may be invested; and
(ix)
all
cash
and non-cash proceeds and products of the foregoing, all proceeds from insurance
on any of the foregoing, all goodwill associated with the foregoing, all
additions and accessions to and replacements and substitutions for any of the
foregoing, everything that becomes (or is held for the purpose of being) affixed
to or installed in any of the foregoing, and all products, rents, income,
dividends, royalties, and profits of or from any of the foregoing. All
capitalized terms used and not otherwise defined in this definition of
Collateral have the meanings given them in the Uniform Commercial Code as in
effect from time to time in the State of Missouri (“UCC”).
1.9 “Compliance
Certificate”
means
a
certificate substantially in the form of Exhibit
2.
1.10 “Default”
is
defined in Section 7.01 of this Agreement.
1.11 “EBITDA”
means,
on a consolidated basis, the amount of Borrower’s and its consolidated Foreign
Subsidiaries’ earnings (excluding all gains and losses caused by foreign
currency exchange adjustments) before interest, taxes, depreciation and
amortization expense for the measurement period.
1.12 “Eligible
Accounts Receivable”
means
at the time of any determination thereof all Accounts (net of all allowances
and
reserves for doubtful or uncollectible Accounts and sales adjustments, as
determined by Lender in its reasonable credit judgment) that, based on the
Borrower’s accounting practices on the date hereof, meet the following criteria
at the time of creation and continue to meet the same at the time of such
determination:
(a) such
Account has been invoiced and not more than ninety (90) days have elapsed since
the date of the related invoice;
(b) such
Account is denominated in U.S. dollars;
(c) such
Account arose in the ordinary course of Borrower’s business;
(d) the
sale
represented by such Account is not on a xxxx-and-hold, undelivered sale, sale
or
return, consignment, sale-on-approval or any other repurchase or return
basis;
(e) such
Account is owned solely by Borrower and is subject to a perfected first priority
security interest in favor of Lender pursuant to the Loan
Documents;
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(f) no
event
of death (if the account debtor is an individual), bankruptcy, insolvency or
inability to pay creditors generally of the account debtor thereunder has
occurred (it being understood that if the Borrower receives notice of any such
death, bankruptcy, insolvency or inability to pay creditors, the Borrower shall
immediately give the same notice to the Lender);
(g) with
respect to such Account, the account debtor (I) is (A) a Person domiciled in
the
United States or (B) a Person outside of the continental United States that
has
supplied the Borrower with an irrevocable letter of credit or other credit
insurance in form and substance satisfactory to Lender that (x) was issued
or
confirmed by a financial institution reasonably satisfactory to Lender and
(v)
has been duly transferred to, or the benefits of which are otherwise enforceable
by, Borrower, (II) is not the United States or a State or any agency or
instrumentality thereof unless the Borrower duly assigns its rights to payment
of such Account to Lender pursuant to the Assignment of Claims Act of 1940,
as
amended (31 U.S.C. Sec. 3727 et seq.), or the comparable state law, as the
case
may be, in a manner reasonably satisfactory to Lender and (III) is not an
affiliate of Borrower or any of the Foreign Subsidiaries;
(h) such
Account complies in all material respects with the requirements of all
applicable laws and regulations, whether federal, state or local;
and
(i) Lender
has not, after consultation with Borrower, notified Borrower that Lender is
not
reasonably satisfied with the credit standing of the account debtor in relations
to the amount of credit extended.
Notwithstanding
the foregoing, no Account shall be an Eligible Accounts Receivable
if:
(aa) all
Accounts of an account debtor when 20% of the outstanding balance is more than
ninety (90) days since the date of the related invoice; or
(bb) the
portion of an account debtor’s balance that (when combined with account debtor’s
remaining balance) exceeds 20% of all Accounts, provided, however, that the
Borrower may have one (1) account debtor at any given time with a balance not
to
exceed 25% of all Accounts if the Borrower promptly notifies Lender of the
(I)
identity of such account debtor (together with the applicable account debtor
balance), and (II) any change in the identity of such account
debtor.
1.13 “Eligible
Inventory”
means
such inventory of Borrower which, in Lender’s opinion, (i) is in good, new and
saleable condition, (ii) is not obsolete or unmerchantable, (iii) meets the
standards imposed by any governmental agency or authority in all material
respects, (iv) conforms in all material respects to the warranties and
representations set forth in this Agreement and the Loan Documents, (v) is
at
all times subject to Lender’s duly perfected, first priority security interest
and no other Lien, and (vi) is located either (a) in the forty-eight (48)
contiguous U.S., or (b) on the water in transit to the U.S., and (vii) Lender
deems to be Eligible Inventory in Lender’s reasonable opinion.
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1.14 “Environmental
Laws”
means
and includes all present and future federal, state or local laws including
the
Comprehensive Environmental Response Compensation and Liability Act of 1980,
42
U.S.C. Sec. 9601 et
seq.,
Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C. Sec. 6901,
et
seq.,
the
Hazardous Materials Transportation Act, 49 U.S.C. Sec. 1801, et
seq.,
the
Federal Water Pollution Control Act, 33 U.S.C. Sec. 1251, et
seq.,
the
Clean Air Act, 42 U.S.C. Sec. 7401, et
seq.,
the
Toxic Substances Control Act, 15 U.S.C. Sec. 2601, et
seq.,
the
Safe Drinking Water Act, 42 U.S.C. Sec. 300f-300j, the Emergency Planning and
Community Xxxxx-Xx-Xxxx Xxx, 00 X.X.X. Xxx. 00000, et
seq.,
and
any so-called “Superfund” or “Super Lien” law, environmental laws administered
by the United States Environmental Protection Agency, any similar state and
local laws and regulations, all amendments thereto, all regulations, orders,
decisions, and decrees now or hereafter promulgated thereunder, in each case
relating to environmental, health, safety or land use matters.
1.15 “Event
of Default”
is
defined in Section 7.01 of this Agreement.
1.16 “ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and regulations
promulgated thereunder.
1.17 “Fixed
Charges”
means
for any period of calculation, the sum of (i) all scheduled and unscheduled
principal payments on long term Indebtedness of Borrower during such period;
(ii) cash interest expense during such period, (iii) capital expenditures for
maintenance and repair during such period, (iv) federal, state and local income
taxes paid and (v) management fees during such period (whether accrued or paid
in cash), all as determined in accordance with generally accepted accounting
principles.
1.18 “Fixed
Charge Coverage Ratio”
means
the ratio of (a) EBITDA, to (b) Fixed Charges, all as determined in accordance
with generally accepted accounting principles.
1.19 “Foreign
Subsidiary”
or
“Foreign
Subsidiaries”
means
individually or collectively, Westway Enterprises, Ltd., a Hong Kong
corporation, and P.T. Niaga Merapi, an Indonesian corporation.
1.20 “Guarantors”
means
the Foreign Subsidiaries.
1.21 “Indebtedness”
means
all liability (i) in respect of money borrowed, or (ii) evidenced by a note,
debenture (senior and subordinated) or other like written obligation to pay
money, or (iii) in respect of rent or hire of property under leases or lease
arrangements which under generally accepted accounting principals are required
to be capitalized, or (iv) in respect of obligations under conditional sales
or
other title retention agreements.
1.22 “Lien”
means
any security interest, mortgage, deed of trust, pledge, hypothecation,
assignment, charge or deposit arrangement, encumbrance, lien (statutory or
other) or preferential arrangement of any kind or nature whatsoever in respect
of any property (including those created by, arising under or evidenced by
any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease, or any financing lease having substantially the same
economic effect as any of the foregoing, but not including the interest of
a
lessor under an operating lease).
1.23 “Loan
Documents”
is
defined in Section 3.1
1.24 “Note”
shall
refer to the Revolving Note (defined in Section 3.1(A) hereof).
1.25 “Obligations”
means
the obligation of Borrower:
A. Payments
of Principal, Interest and Advances.
To pay
the principal advanced or any interest on the Note and under this Agreement
in
accordance with their terms and to satisfy all of its other liabilities to
Lender, whether under the Note or under this Agreement or otherwise, whether
now
existing or hereafter incurred, matured or unmatured, direct or contingent,
joint or several, including any extensions, modifications, renewals, and
substitutions;
5
B. Payment
of Costs.
To
reimburse Lender, on demand, for all of Lender’s expenses and costs, including
reasonable fees and expenses of its counsel, in connection with the preparation,
administration, amendment, modification, or enforcement of this Agreement and
the documents required hereunder and in connection herewith, including, without
limitation, any proceeding brought or threatened to enforce payment of any
of
the Obligations, notwithstanding the foregoing, Borrower and Lender agree that
Borrower’s reimbursement obligations to Lender for third party expenses
associated with the preparation of the Loan Documents shall not exceed $10,000;
C. Performance.
To
fully perform and comply with all covenants, conditions, representations and
warranties of Borrower set forth in this Agreement or in any Loan
Document.
1.26 “Pension
Plan”
means
a
pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA
with respect to which the Borrower or any affiliate may have any
liability.
1.27 “Permitted
Liens”
means:
A. Taxes
or Assessments.
Liens
for taxes, assessments, or similar charges, incurred in the ordinary course
of
business, that are not yet due and payable;
B. Workmen’s
Compensation.
Pledges
or deposits made in the ordinary course of business to secure payment of
workmen’s compensation, or to participate in any fund in connection with
workmen’s compensation, unemployment insurance, old-age pensions, or other
social security programs;
C. Pledges
or Deposits.
Good
faith pledges or deposits made in the ordinary course of business to secure
performance of bids, tenders, contracts (other than for the repayment of
borrowed money), or leases, or to secure statutory obligations, or surety,
appeal, indemnity, performance, or other similar bonds required in the ordinary
course of business;
D. Lender’s
Liens.
Liens
in favor of Lender;
E. Contested
Matters.
The
following, if the validity or amount is being contested in good faith by
appropriate and lawful proceedings and for which adequate reserves are
maintained, so long as levy and execution thereon have been stayed and continue
to be stayed and such contested matters do not, in the aggregate, materially
detract from the value of the Collateral or property of Borrower, or materially
impair the use of the Collateral or property of Borrower in the operation of
Borrower’s business:
(1) Claims
or
Liens for taxes, assessments, or charges due and payable;
(2) Claims,
Liens, and encumbrances on, and defects of title to, real or personal property,
including any attachment of personal or real property or other legal process
prior to adjudication of a dispute on the merits;
(3) Claims
or
Liens of mechanics, materialmen, warehousemen, carriers, or other like Liens;
and
(4) Adverse
judgments on appeal.
6
F. Purchase
Money Liens.
Liens
securing a purchase money obligation or Indebtedness arising under capital
leases, provided that, in each case, any such Lien (i) attaches only to the
specific item(s) of property or asset(s) acquired or financed with the proceeds
of the corresponding Indebtedness, and (ii) does not exceed
$100,000.
1.28 “Person(s)”
means
an individual, corporation, joint venture, partnership, trust, limited liability
company, unincorporated organization or a government or any agency or political
subdivision thereof.
1.29 “Prime
Rate”
means
the base rate on corporate loans posted by at least 75% of the 30 largest U.S.
banks, as published in the Wall Street Journal. The Prime Rate as of the date
of
this Agreement is Seven and Three-Quarter Percent (7.75%).
1.30 “Request
for Advance”
means any request by Borrower for an Advance made in compliance with Section
2.3.
1.31 “Revolving
Commitment Amount”
means
Three Million Dollars ($3,000,000.00) which is the maximum amount of outstanding
Senior Indebtedness at any time during the term of this Agreement which the
Borrower may borrow and reborrow pursuant to the terms of the Revolving
Loan.
1.32 “Maturity
Date”
means
December 31, 2008.
1.33 “Senior
Indebtedness”
means
the outstanding balance of the Obligations at the time of
calculation.
1.34 “Subordinated
Indebtedness”
means
all Indebtedness, excluding the Senior Indebtedness, incurred at any time by
Borrower, repayment of which is subordinated to the Obligations in form and
manner satisfactory to Lender, including but not limited to Indebtedness subject
to a Subordination Agreement between Lender and Borrower. All existing
Subordinated Indebtedness is specified in Exhibit 3
and
Borrower represents and warrants that no Subordinated Indebtedness exists which
is not disclosed to Lender and specified on such Exhibit
3.
1.35 “U.S.”
means
United States of America.
SECTION
TWO - THE
REVOLVING LOAN
2.1 Revolving
Loan Limit.
Subject
to the terms of this Agreement, Borrower shall have the right from time to
time
prior to the Maturity Date to borrow an aggregate principal balance not
exceeding the lesser of (i) $3,000,000.00, or (ii) the Borrowing Base determined
as of the date of the most recent Borrowing Base Certificate delivered to the
Lender (“Revolving Loan”).
2.2 Disbursement
of the Loan.
Lender
will credit the proceeds of the Revolving Loan from time to time to Borrower’s
deposit account with Lender on the same Business Day requested, if Borrower’s
request therefor is received by Lender prior to 3:00 p.m. Springfield, Missouri
time or the next Business Day, if Borrower’s request therefor is received by
Lender after 3:00 p.m. Springfield, Missouri time. Such credit of Loan proceeds
shall sometimes herein be referred to as an “Advance.”
2.3 Requests
for Advances under the Revolving Loan.
Borrower shall make requests for Advances under the Revolving Loan in writing
by
delivering (via fax or e-mail) to Lender a Request for Advance in the form
attached hereto as Exhibit
4.
Each
Advance under the Revolving Loan shall be in integrals of $1,000.00. Lender
may
rely and act on any Request for Advance from any individual who Lender, absent
gross negligence or willful misconduct, believes to be a representative of
Borrower.
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2.4 Use
of
Revolving Loan Proceeds.
The
Revolving Loan shall be used by the Borrower solely for (i) the refinancing
of
existing working capital indebtedness (including the factoring arrangement
with
Bibby Financial), (ii) the financing of ongoing working capital needs of the
Borrower to the extent not inconsistent with the terms of this Agreement, and
(iii) the payment of fees and expenses in connection with the closing of the
transactions contemplated by this Agreement.
2.5 Payment
of Principal.
Borrower shall repay the principal amount of the Revolving Loan immediately
and
without notice or demand: (i) to the extent at any time the aggregate principal
amount of the Revolving Loan outstanding hereunder exceeds the Revolving
Commitment Amount; (ii) to the extent at any time the aggregate principal amount
of the Revolving Loan outstanding hereunder exceeds the Borrowing Base; (iii)
upon Acceleration under Section 7.2; and (iv) in any and all events on the
Maturity Date.
2.6 Payment
of Interest.
Interest shall accrue on the aggregate principal amount of the Revolving Loan
outstanding from time to time under this Agreement. Borrower shall pay interest
on the first (1st)
day of
each month, commencing on the first (1st)
day of
the first (1st)
month
following the date of this Agreement calculated by multiplying the Daily
Interest Rate by the balance of the Revolving Loan at the end of each day (the
“Daily Balance”) during the immediately preceding calendar month. The “Daily
Interest Rate” shall be calculated by dividing the Adjusted Prime Rate in effect
from time to time by three hundred sixty (360) days.
2.7 Adjusted
Prime Rate.
The
“Adjusted Prime Rate” shall be the Prime Rate plus the applicable Prime Margin
determined from the Pricing
Table contained herein.
2.8 Prime
Margin. Commencing
on the date of this Agreement and continuing until Lender’s receipt of the
Borrower’s first Compliance Certificate, the Prime Margin shall be 1.5%.
Commencing on the first Business Day following the Lender’s receipt of a
Compliance Certificate, the Prime Margin shall be determined as follows:
|
Pricing
Table
|
|
|
If
the ratio of Borrower’s Senior Indebtedness to EBITDA (for the four fiscal
quarter period of Borrower most recently ended) is:
|
The
Prime Margin is:
|
|
Greater
than or equal to 0.0 and less than 3.0
|
0.00%
|
|
Greater
than or equal to 3.0 and less than 4.0
|
0.50%
|
|
Greater
than or equal to 4.0 and less than 5.0
|
1.50%
|
|
Greater
than or equal to 5.0 and less than 6.0
|
1.75%
|
|
Greater
than or equal to 6.0 or less than 0.0
or
undefined
|
2.50%
|
The
applicable Prime Margin shall be re-determined by Lender promptly after each
delivery by Borrower to Lender of Borrower’s Financial Statements (and
accompanying Compliance Certificate) as required herein, and will become
applicable on the first Business Day following Lender’s receipt of the
applicable Compliance Certificate.
8
2.9 Time
of Accrual.
Interest
shall accrue on all principal amounts outstanding from the date when first
outstanding to the date when no longer outstanding. Amounts shall be deemed
outstanding until payments are applied thereto as provided herein.
2.10 Computation.
Interest
shall be computed for the actual days elapsed over a year deemed to consist
of
360 days.
2.11 Rate
After Maturity or After an Event of Default.
Borrower
shall pay interest on any Loans after their Maturity, and, at the option of
Lender, after declaration of an Event of Default, at a rate per annum of two
percent (2.0%) plus the interest rate otherwise applicable thereto.
2.12 Right
of Setoff.
If an
Event of Default exists, Lender may charge against any deposit, savings,
investment or other account of Borrower at Lender as due all or any part of
any
Obligation due whether in the nature of a regular monthly installment, by reason
of acceleration due to default, or otherwise.
SECTION
THREE - CONDITIONS
PRECEDENT
3.1 First
Advance.
Borrower shall execute and/or deliver to Lender, as appropriate, prior to the
closing and disbursement of the first Advance hereunder, the following, each
of
which together with this Agreement, immediately upon execution and delivery
shall be considered a “Loan Document” hereunder:
A. Note.
A duly
executed promissory note in the amount of the Revolving Loan and in form
satisfactory to Lender (“Revolving Note”);
B. Security
Agreement.
A duly
executed security agreement in form reasonably satisfactory to Lender (“Security
Agreement”) covering the Collateral and granting the Lender a first priority
lien in any and all items of Collateral pledged as security for the
Loan;
C. Landlord’s
Consent and Waiver.
Executed copies of the Landlord Consent and Waiver from all landlords who lease
any real property to the Borrower, if any;
D. Authorizing
Resolution.
A
certified copy of resolutions of Borrower’s (including its Subsidiaries’) boards
of directors, members or partners, as applicable, authorizing the execution,
delivery, and performance of each Loan Document to be delivered pursuant hereto,
together with certified articles of formation, organization, by-laws, operating
agreements and/or partnership agreements as are appropriate;
E. Good
Standing Certificate.
A
certificate, as of the most recent dates practicable, of the Secretary of State
of the State of organization of the Borrower as to the good standing of each
Borrower and of the Secretary of State of the State of Missouri as to the
qualification of Decorize, Inc. to do business in the State of
Missouri;
F. UCC
Financing Statements.
Acknowledgment copies of filed financing statements from the Borrower, as
debtor, to the Lender, as secured party, covering the Collateral, from such
jurisdictions as the Lender deems necessary or desirable to perfect its security
interest in the Collateral all of which financing statements Borrower authorizes
the Lender to file;
9
G. Subordinate
Loan Documents.
Copies
of all documents evidencing the terms and conditions of any debt specified
as
“Subordinated Indebtedness” on Exhibit 3;
H. Subordination
Agreements.
Executed copies of all Subordination Agreements required by the
Lender;
I. Guaranty
Agreement.
Executed copy of the Guaranty Agreement signed by the Foreign
Subsidiaries.
J. Deposit
Account
Control Agreement.
Executed copy of the Deposit
Account
Control Agreement signed by Bank of America, N.A., Borrower and
Lender.
K. Life
Insurance.
Copies
of the life insurance policy described in Section 6.1(D);
L. Insurance
Policies.
The
Lender shall have received evidence satisfactory to it that the insurance
described in Section 6.1(D) is in effect and that the Lender has been named
as
additional insured and loss payee under all insurance policies to be maintained
with respect to the properties of the Borrower constituting the
Collateral;
M. Payment
of Fees.
Borrower shall have paid all fees and other closing or like costs and expenses
of Lender which Borrower is obligated to pay hereunder, including but not
limited a non-refundable loan fee in the amount of Fifteen Thousand and 00/100
Dollars ($15,000.00), provided,
however,
that
the costs payable by Borrower in connection with the origination of this Loan
(i.e., attorney fees, loan documentation costs, recording fees, etc.) shall
not
exceed $10,000.00.
N. Opinion
of Counsel.
A
written opinion of the Borrowers’ counsel, as of the date of this Agreement and
addressed to the Lender, in form reasonably satisfactory to the Lender, and
containing assumptions and qualifications customary for this type of loan
transaction, to the effect that:
(1) Each
Borrower is a corporation organized, existing, and in good standing under the
laws of its state of incorporation and, with respect to Decorize, Inc., is
qualified as a foreign corporation to transact business and is in good standing
in the State of Missouri;
(2) Each
Borrower has the power to execute and deliver the Loan Documents to which it
is
a party, to borrow money thereunder, to grant the Collateral required
thereunder, and to perform the obligations thereunder;
(3) All
corporate action by each Borrower, all consents and approvals of any
governmental entity, necessary to the validity of each Loan Document to which
it
is a party, the Loan Documents, and such other documents do not conflict with
any provision of the charter or bylaws of each Borrower, or of any applicable
laws or any other material agreement binding on each Borrower or its property
of
which such counsel has knowledge; and
(4) The
Loan
Documents, and all other agreements to be delivered hereunder have been executed
by, and each is a valid and binding obligation of, each Borrower, enforceable
in
accordance with its terms.
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O. Other
Items.
Such
other agreements, documents and assurances as the Lender may reasonably request
in connection with the transactions described in or contemplated by the Loan
Documents or as deemed necessary or desirable by the Lender to perfect its
security interest in any Collateral.
3.2 First
and Subsequent Advances.
The
obligation of Lender to make any Loan hereunder is subject to the following
conditions precedent:
A. No
Default.
No
Event of Default shall have occurred and be continuing, and no event shall
have
occurred and be continuing that, with the giving of notice or passage of time,
or both, would be an Event of Default, under any Loan Document or this
Agreement;
B. No
Material Adverse Change.
No
material adverse change shall have occurred in the financial condition of any
Borrower since the date of this Agreement;
C. No
Action.
No
action, proceeding, investigation, regulation or legislation shall have been
instituted, threatened or proposed before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain damages in
respect of, or which is related to or arises out of this Agreement or the
consummation of the transactions contemplated hereby or which, in the Lender's
sole discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement or any of the other Loan Documents;
D. Representations
and Warranties.
The
representations and warranties contained in Section 5 shall be true and correct
in all material respects as of the date of each Advance as though made on and
as
of such date;
E. Loan
Documents in Effect.
All of
the Loan Documents are and shall have remained in full force and
effect;
F. Borrowing
Base Certificate.
Borrower shall have delivered to Lender a current monthly Borrowing Base
Certificate;
G. Legal
Matters.
All
legal matters relating to this Agreement and each Loan shall be satisfactory
to
counsel to Lender.
3.3 Incorporation
of this Agreement.
All
Loan Documents currently outstanding and in existence and all Loan Documents
entered into from and after the day of this Agreement by and between Borrower
and Lender shall be subject to the terms and conditions of this Agreement which
is hereby deemed to be incorporated therein by reference.
SECTION
FOUR - COLLATERAL
SECURITY
4.1 Composition
of the Collateral.
The
Collateral, together with all of Borrower’s other property of any kind held by
Lender, shall stand as one general, continuing, collateral security for all
Obligations and may be retained by Lender until all Obligations have been
satisfied in full.
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4.2 Rights
in Property held by Lender.
As
security for the prompt satisfaction of all Obligations, Borrower assigns,
transfers, and sets over to Lender all of its right, title and interest in
and
to, and grants Lender a Lien on and a security interest in, all amounts that
may
be owing from time to time by Lender to Borrower in any capacity, including,
but
not limited to, any balance or share belonging to Borrower, or any deposit
or
other account with Lender, which Lien and security interest shall be independent
of and in addition to the right of setoff that Lender has as against such
amounts. This shall be a continuing assignment.
4.3 Rights
in Property held by Borrower.
As
further security for the prompt satisfaction of all Obligations arising under
this Agreement, Borrower assigns to Lender all of its right, title and interest
in and to, and grants Lender a Lien on and a security interest in, the
Collateral and Borrower agrees to immediately execute any necessary documents
to
assign to Lender and grant Lender a security interest in any new or replacement
Collateral.
4.4 Priority
of Liens.
The
Borrower covenants and agrees and represents and warrants that the Liens granted
hereby or by any Loan Document shall be first and prior Liens except for any
Permitted Liens that may have priority.
4.5 Financing
Statements.
Borrower authorizes Lender to file such financing statements (including
amendments and continuation statements) in form satisfactory to Lender, as
Lender may from time to time specify, agrees to pay to or reimburse Lender
for
all costs and taxes of filing or recording the statements in such public offices
as Lender may designate (but, when coupled with all other costs payable by
Borrower in connection with the origination of this Loan (i.e., attorney fees,
loan documentation costs, recording fees, etc.), such costs, taxes and other
payments shall not exceed $10,000), and agrees to take such other steps as
Lender may direct, including the noting of Lender’s Lien on the Collateral and
on any certificates of title therefor, to perfect Lender’s interest in the
Collateral. In addition to the foregoing, and not in limitation thereof, a
copy
of this Agreement or any Security Agreement executed hereunder shall be
sufficient as a financing statement and may be filed in any appropriate office
in lieu thereof, and, to the extent lawful, Borrower hereby grants Lender an
irrevocable power of attorney (without requiring Lender to act as such and
which
shall be deemed to be coupled with an interest) to execute any financing
statements in the name of Borrower, and to perform all other acts that Lender
deems appropriate to preserve and continue its security interest in, and to
protect and preserve, the Collateral.
4.6 Mortgagees’
and Landlords’ Waivers.
Borrower will cause each mortgagee of all real estate owned by Borrower and
each
landlord of premises leased by Borrower to execute and deliver to Lender
instruments, in form and substance satisfactory to Lender, by which such
mortgagee or landlord waives its rights, if any, to all goods composing a part
of the Collateral.
4.7 Operating
and Lockbox Accounts.
Borrower shall maintain its principal operating and cash management accounts
(including without limitations, lockbox account) with Lender or such other
financial institution as Lender shall approve in its reasonable discretion
as to
which the Lender is hereby granted a security interest and right of set off
(the
“Approved Operating Accounts”).
Borrower
shall ensure that all collections of its Accounts and all other payments
received by Borrower from account debtors and other Persons are paid and
delivered directly into the Approved Operating Accounts. To the extent that
any
Accounts are collected by Borrower or any other cash payments received by
Borrower are not sent directly to an Approved Operating Account but are received
by Borrower, such collections and proceeds shall be held in trust for the
benefit of Lender and immediately remitted (and in any event within
five (5) Business Days) to an Approved Operating Account. Borrower
acknowledges and agrees that compliance with the terms of this Section 4.7
is an essential term of this Agreement and upon Borrower’s failure to comply
with the terms of this Section 4.7, Lender may, in its discretion, declare
an
Event of Default.
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SECTION
FIVE - REPRESENTATIONS
AND WARRANTIES
5.1 Original.
To
induce Lender to enter into this Agreement, Borrower represents and warrants
to
Lender (“Borrower Representations and Warranties”) as follows:
A. Good
Standing.
Each
Borrower is a corporation duly organized, validly existing, and in good standing
under the laws of its state of incorporation; each Foreign Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
laws of its country of incorporation; Borrower and the Foreign Subsidiaries
have
the lawful power to own their properties and to engage in the business they
conduct, and each is qualified and in good standing as a foreign corporation
in
the jurisdictions wherein the nature of the business transacted by it or
property owned by it makes such qualification necessary, except those states
in
which the failure to qualify or maintain good standing would not reasonably
be
expected to have a material adverse effect on Borrower’s ability to perform its
obligations under this Agreement;
B. No
Default.
Borrower is not in default with respect to any of its existing Indebtedness,
and
the making and performance of this Agreement and the Loan Documents will not
immediately or with the passage of time, or the giving of notice, or both
violate the charter or bylaw provisions of Borrower, or violate any laws
applicable to Borrower or result in a default under any material contract or
agreement to which Borrower is a party or by which Borrower or its property
is
bound, or result in the creation or imposition of any security interest in,
or
Lien or encumbrance on, any of the assets of Borrower, except in favor of
Lender;
C. Power
and Authority.
Borrower has the corporate power and authority to enter into and perform this
Agreement, the Note, and the Loan Documents, and to incur such obligations,
and
has taken all corporate action necessary to authorize the execution, delivery,
and performance of this Agreement, the Note, and the Loan
Documents;
D. Binding
and Enforceable.
This
Agreement and the Loan Documents are, and each Loan Document when delivered
will
be, valid, binding and enforceable in accordance with their respective terms,
subject to limitations imposed by bankruptcy, insolvency, moratorium or other
similar laws affecting the rights of creditors generally or the application
of
general equitable principles;
E. Approval
of Governmental Bodies.
No
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for the due execution,
delivery and performance by the Borrower of the Loan Documents or the exercise
by the Lender of its rights thereunder, including, without limitation, the
sale
or other disposition of any of the Collateral;
F. No
Litigation.
There
is no pending or, to the knowledge of Borrower, threatened, order, notice,
claim, litigation, proceeding or investigation against or affecting Borrower,
whether or not covered by insurance, that would materially and adversely affect
the business or prospects of Borrower if adversely determined;
G. Marketable
Title.
Borrower has good and marketable title to all of their assets, which are not
subject to any security interest, encumbrance, Lien or claim of any Person,
except for Permitted Liens;
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H. Priority.
Lender
has a perfected first priority lien in the Collateral subject to no other liens
or claims except for Permitted Liens.
I. Financial
Statement.
All
financial statements of the Borrower which have been furnished to the Lender
fairly present the financial condition of the Borrower, as of the dates
reflected on the financial statements, and fairly present the results of its
operations for the period covered thereby, all in accordance with GAAP. As
of
the date of this Agreement, there has been no material change in such conditions
or such operations since the most recent financial statements submitted to
the
Lender;
J. No
Debt.
As of
the date of this Agreement, Borrower has no material Indebtedness of any nature,
including, but not limited to, liabilities for taxes and any interest or
penalties relating thereto, any contingent liabilities or any material
Indebtedness of any nature, not fully reflected and reserved against in the
financial statements provided to Lender;
K. Business.
Borrower is not a party to or subject to any agreement or restriction that
would
reasonably be expected to have a material adverse effect on Borrower's business,
properties or prospects.
L. Licenses,
Permits, etc.
Borrower
has obtained any and all licenses, permits, franchises, governmental
authorizations, patents, trademarks, copyrights or other rights necessary for
the ownership of its properties and the conduct of its business. Borrower
possesses adequate licenses, patents, patent applications, copyrights,
trademarks, trademark applications, and trade names to continue to conduct
its
business as heretofore conducted by it, without any conflict with the rights
of
any other Person. All of the foregoing are in full force and effect and none
of
the foregoing are in known conflict with the rights of others.
M. Laws
and Taxes.
Borrower
is in material compliance with all laws, regulations, rulings, orders,
injunctions, decrees, conditions or other requirements applicable to or imposed
upon Borrower by any law or by any governmental authority, court or agency.
Borrower has filed all required tax returns and reports that are now required
to
be filed by it in connection with any federal, state and local tax, duty or
charge levied, assessed or imposed upon Borrower or its assets, including
unemployment, social security, and real estate taxes. Borrower has paid all
taxes which are now due and payable. To Borrower’s knowledge, no taxing
authority has asserted or assessed any additional tax liabilities against
Borrower which are outstanding on this date.
N. Hazardous
Materials.
To
Borrower’s knowledge, the Borrower has duly complied in all material respects
with all Environmental Laws and all of its facilities, leaseholds, assets and
other property are in compliance with all Environmental Laws. There are no
outstanding or, to Borrower’s knowledge, threatened citations, notices or orders
of noncompliance issued to the Borrower or relating to its facilities,
leaseholds, assets or other property. The Borrower has been issued all licenses,
certificates, permits or other authorizations required under any Environmental
Law or by any federal, state or local governmental or quasi-governmental
entity.
O. Subsidiaries
and Partnerships.
Borrower has no subsidiaries and is not a party to any partnership agreement
or
joint venture agreement except as set forth on Exhibit
5.
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P. No
Omissions.
No
representation or warranty by Borrower contained herein or in any certificate
or
other document furnished by Borrower pursuant hereto contains any untrue
statement of material fact or omits to state a material fact necessary to make
such representation or warranty not misleading in light of the circumstances
under which it was made;
Q. Use
of
Proceeds.
The
proceeds of the Revolving Loan shall be used solely for the purposes set forth
in Section 2.4;
R. No
Additional Consents.
Each
consent, approval or authorization of, or filing, registration, or qualification
with, any Person required to be obtained or effected by Borrower in connection
with the execution and delivery of this Agreement, the Loan Documents, or the
undertaking or performance of such obligations, has been obtained or
effected;
S. Leases,
Contracts or Commitments.
Except
as described in Exhibit
6
(“Material Leases, Contracts or Commitments”), Borrower has no Material Lease,
Contract, or Commitment of any kind; a Material Lease, Contract or Commitment
shall be defined as any such obligations requiring payments by Borrower in
excess of Fifty Thousand Dollars ($50,000.00) per year or having a total cost
to
Borrower in excess of One Hundred Thousand Dollars ($100,000.00); to Borrower’s
knowledge, all parties to all such Material Leases, Contracts, or Commitments
to
which Borrower is a party have complied with provisions of such Material Leases,
Contracts, or Commitments, to Borrower’s knowledge, no party is in default under
any such Material Leases, Contracts, or Commitments, and no event has occurred
that, but for the giving of notice or the passage of time, or both, would
constitute a default; and
T. Investment
Company Act; Public Utility Holding Company Act.
Borrower is not (a) an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940 or (b) a “holding company”
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935.
U. Regulations
U, G, T and X.
No part
of the proceeds of any Advance will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock or for any purpose which violates, or which would be
inconsistent with, the provisions of Federal Reserve Regulations G, T, U or
X.
V. Transactions
with Foreign Subsidiaries; Loans to Insiders.
Each
Borrower shall not enter into or be a party to any transaction or arrangement,
including the purchase, sale or exchange of property of any kind or the
rendering of any service with any other Borrower or Foreign Subsidiary, or
make
any loans or advances to any other Borrower or Foreign Subsidiary, in each
case
on terms more favorable than could be obtained with independent third parties.
Further, Borrower shall not directly or indirectly (a) fund a personal loan
to
or for the benefit of a director or executive officer of Borrower, other than
travel expense advances and company credit card advances in the ordinary course
of business, or (b) take any action in violation of or otherwise prohibited
by
or fail to take any action required by, the Xxxxxxxx-Xxxxx Act of
2002.
W. Pension
Plan.
Any
Pension Plan maintained by Borrower is in full compliance in all material
respects with applicable governmental laws and regulations (including, without
limitation, ERISA) and there are no current enforcement or investigative actions
or proceedings associated with such Pension Plans.
5.2 Survival.
All of
the representations and warranties set forth herein shall survive and be
continuing representations and warranties until all Obligations to Lender are
satisfied in full.
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SECTION
SIX - BORROWER’S
COVENANTS
Borrower
covenants and agrees with Lender that, until any of its Obligations arising
under this Agreement are fully satisfied, Borrower will comply with the
following covenants (“Covenants”):
6.1 Affirmative
Covenants.
A. Periodic
Reports.
Borrower will furnish Lender:
(1) Monthly
Borrowing Base Certificate, Inventory and Accounts Receivable
Report.
By the
fifteenth (15th) day of each calendar month: a Borrowing Base Certificate
prepared as of the last day of the immediately preceding calendar month; and
a
complete listing of all inventory of Borrower and an updated list of accounts
receivable including aging monthly;
(2) Monthly
Financials.
As soon
as available and in any event within 30 days after the end of each month of
each
fiscal year of the Borrower, an internally prepared balance sheet of the
Borrower as of the end of such month and internally prepared income statements
as of the end of such month and for the fiscal year-to-date, each certified
by
the Borrower's chief financial officer;
(3) Annual
Financials.
As soon
as available and in any event within 90 days after the end of each fiscal year
of the Borrower, final audited financial statements (as described above but
including a statement of changes in financial position) as of the end of such
fiscal year of the Borrower audited by independent certified accountants
satisfactory to the Lender and a copy of any management, operation or other
letter or correspondence from such accountant to the Borrower in connection
therewith; and
(4) Compliance
Certificate.
Within
thirty (30) days after the end of each fiscal quarter of the Borrower, a
certificate of the president or principal financial officer of Borrower stating
that (i) he or she has individually reviewed the provisions of this Agreement
and that a review of the activities of Borrower during such quarterly period,
has been made by or under the supervision of the signer of such certificate
with
a view to determine whether Borrower has kept, observed, performed, and
fulfilled all its Obligations under this Agreement, (ii) a computation of each
of the financial ratios and restrictions as set forth in the Compliance
Certificate attached hereto as Exhibit 2, and (iii) that, to the best of his
or
her knowledge, no Event of Default has occurred and is continuing or, if an
Event of Default has occurred and is continuing, specifying all such Events
of
Default.
B. Maintenance
of Collateral, Property.
Borrower will maintain the Collateral, including but not limited to Lender’s
priority security interest in the Collateral, as well as their personal
properties in good condition and repair (normal wear and tear excepted); will
pay and discharge or will cause to be paid and discharged when due, the cost
of
repairs and maintenance of the same; and will pay or cause to be paid all rental
or mortgage payments due on such real estate. Borrower agrees that in the event
it fails to pay or cause to be paid any such payment, Lender may notify Borrower
in writing of Lender’s intention to pay same and unless Borrower makes such
payment within five (5) days of such notice, Lender may do so and on demand
be
reimbursed therefor by Borrower.
16
C. Use
of
Proceeds.
The
proceeds of the Revolving Loan will be used solely for the purposes set forth
in
Section 2.4.
D. Insurance.
At its
own cost, Borrower shall obtain and maintain insurance against (a) loss,
destruction or damage to its properties and business of the kinds and in the
amounts customarily insured against by corporations with established reputations
engaged in the same or similar business as Borrower and, in any event,
sufficient to fully protect Lender’s interest in the Collateral, and (b)
insurance against public liability and third party property damage of the kinds
and in the amounts customarily insured against by corporations with established
reputations engaged in the same or similar business as Borrower. All such
policies shall (i) be issued by financially sound and reputable insurers, (ii)
name Lender as an additional insured and, where applicable, as loss payee under
a lender loss payable endorsement satisfactory to Lender, and (iii) shall
provide for thirty (30) days written notice to Lender before such policy is
altered or canceled. All of the insurance policies required hereby shall be
evidenced by one or more Certificates of Insurance delivered to Lender by
Borrower on the Closing Date and at such other times as Lender may request
from
time to time.
E. Life
Insurance.
Maintain life insurance in an aggregate amount of $4,000,000.00, insuring the
life of Xxxxxx X. Xxxxxxx with the Borrower, SRC Corporation, Quest Capital
Alliance, LLC and Capital Investors named as beneficiaries therein.
F. Payment
of Taxes.
Borrower shall pay when due all taxes, assessments and other governmental
charges imposed upon it or its assets, franchises, business, income or profits
before any penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for
sums
which by law might be a lien or charge upon any of its assets, provided that
(unless any material item or property would be lost, forfeited or materially
damaged as a result thereof) no such charge or claim need be paid if it is
being
diligently contested in good faith, if Lender is notified in advance of such
contest and if Borrower establishes an adequate reserve or other appropriate
provision required by generally accepted accounting principles.
G. Compliance
with Laws.
Borrower shall comply with all federal, state and local laws, regulations and
orders applicable to Borrower or its assets including but not limited to all
Environmental Laws and the Xxxxxxxx-Xxxxx Act of 2002, in all respects material
to Borrower’s business, assets or prospects and shall promptly notify Lender of
any violation of any rule, regulation, statute, ordinance, order or law relating
to the public health or the environment and of any complaint or notifications
received by Borrower regarding to any environmental or safety and health rule,
regulation, statute, ordinance or law. Borrower shall obtain and maintain any
and all licenses, permits, franchises, governmental authorizations, patents,
trademarks, copyrights or other rights necessary for the ownership of its
properties and the advantageous conduct of its business and as may be required
from time to time by applicable law, except where the failure to so maintain
such licenses, permits, franchises, governmental authorizations, patents,
trademarks, copyrights or other rights would not materially or adversely affect
the actual or prospective business, financial condition or operations of the
Borrower.
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H. Other
Amounts Deemed Loans.
If
Borrower fails to pay any tax, assessment, governmental charge or levy or to
maintain insurance within the time permitted or required by this Agreement,
or
to discharge any Lien prohibited hereby, or to comply with any other Obligation,
Lender may, but shall not be obligated to, pay, satisfy, discharge or bond
the
same for the account of Borrower, and to the extent permitted by law and at
the
option of Lender, all monies so paid by Lender on behalf of Borrower shall
be
deemed Obligations.
I. Further
Assurances.
Borrower
shall execute, acknowledge and deliver, or cause to be executed, acknowledged
or
delivered, any and all such further assurances and other agreements or
instruments, and take or cause to be taken all such other action, as shall
be
reasonably necessary and requested by Lender from time to time to give full
effect to the Loan Documents and the transactions contemplated
thereby.
J. Books
and Records; Inspection; Lender Audits. Maintain
complete and accurate books and financial records in accordance with GAAP;
no
more than once a year unless an Event of Default exists, during normal working
hours that does not otherwise unnecessarily interfere with Borrower’s business,
permit the Lender and persons designated by the Lender to visit and inspect
its
properties and to conduct any environmental tests or audits thereon, to inspect
its books and financial records (including its journals, orders, receipts and
correspondence which relates to its Accounts), and to discuss its affairs,
finances and Accounts and operations with its directors, officers, employees
and
agents and its independent public accountants; and permit the Lender and persons
designated by the Lender to perform audits of such books and financial records
when and as requested by the Lender.
K. Preservation
of Business and Corporate Existence.
Carry
on and conduct its principal business substantially as it is now being
conducted; maintain in good standing its existence and its right to transact
business in those states in which it is now or may hereafter be doing business;
and maintain all licenses, permits and registrations necessary to the conduct
of
its business (except where the failure to so maintain its right to transact
business or to maintain such licenses, permits or registrations would not
materially and adversely affect the actual or prospective business, financial
condition or operations of the Borrower)
L. Collection
of Accounts Receivable.
Borrower will collect its Accounts and sell its inventory only in the ordinary
course of business.
M. Accounts
Records.
Borrower will keep accurate and complete records of its Accounts, inventory,
and
equipment, consistent with sound business practices.
N. Notice
to Lender of Litigation.
Borrower will give immediate notice to the Lender of any litigation or
proceeding in which any of them is a party, if an adverse decision therein
would
require them to pay over more than One Hundred Thousand Dollars ($100,000.00)
or
deliver assets, the value of which exceeds such sum, provided such claim is
not
covered by insurance, is defended by an insurance company under a reservation
of
rights or exceeds the limits of coverage of any insurance policy, and the
institution of any other suit or proceeding involving any of them that might
materially and adversely affect their operations, financial condition, property,
or business.
O. Copies
of Tax Returns.
Within
twenty (20) days after Lender’s request therefor, Borrower will furnish Lender
with copies of federal income tax returns filed by Borrower.
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P. Pay
Other Obligations.
Borrower will pay when due (or within applicable grace periods) all Indebtedness
due any Person, except when the amount is being contested in good faith by
appropriate proceedings and with adequate reserves therefor being set aside
or
if such amount is otherwise subject to Subordinated Indebtedness where payments
are restricted or otherwise not allowed in certain circumstances. If Borrower
defaults in the payment of any principal (or installment thereof) of, or
interest on, any such Indebtedness, Lender shall have the right, in its
discretion, to pay such interest or principal for the account of Borrower and
be
reimbursed by Borrower on demand.
Q. Notify
Lender of Default.
Borrower will notify Lender immediately if any of them becomes aware of the
occurrence of any Event of Default or of any fact, condition, or event that,
with the giving of notice or passage of time, or both, could become an Event
of
Default, or of the failure of Borrower to observe any of their respective
undertakings under this Agreement.
R. Notify
Lender of Change of Address.
Borrower will notify Lender thirty (30) days in advance of any change in the
location of any of their places of business or of the establishment of any
new,
or the discontinuance of any existing, place of business.
S. Notify
Lender of Change in Senior Management.
Borrower will notify Lender contemporaneously of any change in the officers,
directors or senior management of the Borrower.
T. Environmental
Compliance.
Borrower shall comply with Environmental Laws relating to the Collateral or
the
conduct of Borrower’s business. Borrower shall immediately remove and dispose of
in compliance with Environmental Laws any hazardous substances located on or
about Borrower’s business premises in violation of Environmental Laws. Borrower
shall indemnify and hold Lender harmless (with attorneys satisfactory to Lender)
from any and all costs and expenses, including attorney’s fees, suffered or
incurred by Lender arising out of or in connection with, whether directly or
indirectly, any breach or violation of any Environmental Law.
U. Loans.
All
shareholder loans are to be subordinated. Borrower is prohibited from making
loans to its employees or entering into any guarantee for the benefit of any
third party.
V. Inspection
of Collateral.
Borrower shall give Lender reasonable access to the Collateral.
W. Financial
Covenants.
(1) Minimum
Fixed Charge Coverage Ratio.
Commencing
with the four quarters ending September 30, 2007, the ratio of Borrower’s EBITDA
to Borrower’s Fixed Charges for each four-quarter period then ended during the
term of this Agreement, shall not be less than 1.0.
(2) Maximum
Ratio of Senior Indebtedness to EBITDA (Leverage Ratio).
Commencing with the four quarters ending September 30, 2007, the ratio of
Borrower’s Senior Indebtedness to EBITDA for each four-quarter period then ended
during the term of this Agreement, calculated as of the last day of each such
period, shall not be greater than 6.0.
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(3) Distributions.
Borrower shall not directly
or indirectly declare or make, or incur any liability to make, any cash dividend
or other payment to shareholders of Borrower that relate to such shareholder's
ownership in Borrower; provided, that this Section 6.1(W)(3) shall not be deemed
to limit or otherwise prohibit Borrower from paying any indebtedness or other
amounts due and owing from Borrower to any shareholder that is otherwise
permitted pursuant to this Agreement.
(4) Limitation
on Operating Leases and Capital Expenditures.
Without
the prior written consent of the Lender, no Borrower shall make any capital
expenditures in excess of $100,000, or lease real or personal property requiring
in the aggregate rental payments in excess of $100,000 in any consecutive four
(4) quarter period.
6.2 Negative
Covenants.
A. No
Name Change or Merger.
Borrower will not change its corporate name, enter into any merger,
consolidation, reorganization or recapitalization, reclassify its capital stock
or permit a change of control in the Borrower.
B. No
Sale of Assets out of Ordinary Cause.
Borrower will not sell, transfer, lease or otherwise dispose of all, or (except
in the ordinary course of business) any material part of, its
assets.
C. No
Pledge of Assets.
Borrower will not mortgage, pledge, grant, or permit to exist a security
interest in or Lien on any of its assets of any kind, now owned or hereafter
acquired, except for Permitted Liens.
D. No
Guarantees.
Borrower will not become liable, directly or indirectly, as guarantor or
otherwise, for any obligation of any other Person.
E. No
Debt.
Borrower will not incur, create, assume, or permit to exist any Indebtedness
except:
(1) The
Senior Indebtedness;
(2) Subordinated
Indebtedness as set forth in Exhibit
3;
(3) trade
indebtedness incurred in the ordinary course of business;
(4) Indebtedness
secured by Permitted Liens;
(5) Lease
obligations permitted by this Agreement.
F. Payments
on Subordinated Indebtedness.
Borrower will not, directly or indirectly, make any principal or cash interest
payment on Subordinated Indebtedness that, after giving effect to such principal
or cash interest payment when added to the Fixed Charges, would result in a
Fixed Charge Coverage Ratio of less than 1.0.
G. No
New
Subsidiaries.
Without
the prior written approval of Lender, which approval will not be unreasonably
withheld, Borrower will not form any subsidiary or make any investment in,
or
make any loan in the nature of an investment to, a Person if and to the extent
that after giving effect thereto, such formation, investment or loan results
in
a breach of Borrower’s covenants in Section 6.1(W)(1) (Minimum Fixed Charge
Coverage Ratio) or Section 6.1(W)(2) (Maximum Ratio of Senior Indebtedness
to
EBITDA (Leverage Ratio)).
20
H. No
Acquisitions.
Without
the prior written approval of Lender, which approval will not be unreasonably
withheld, Borrower will not purchase or otherwise acquire (in one transaction
or
a series of transactions) any stock or assets of any other Person.
I. No
Loans to Insiders.
Each
Borrower will not make any loan or advance to any officer, shareholder,
director, or employees of another Borrower or a Foreign Subsidiary, except
temporary advances in the ordinary course of business.
J. No
Lease Financing.
Borrower will not make payments on account of Lease Financing of assets that,
in
the aggregate, in any fiscal year, commencing with the current fiscal year,
exceed $100,000.00. As used in this paragraph, the term “Lease Financing” means
a lease reflected on a consolidated balance sheet of Borrower and its Foreign
Subsidiaries or a lease that should be so reflected under generally accepted
accounting principles.
K. Notice
of Leases.
Borrower agrees to promptly notify the Lender of any Lease in excess of
$100,000, undertaken by Borrower during the term of this Agreement and further
agrees to promptly provide Lender with an executed copy of such Lease. “Lease”
as used in this paragraph shall mean a lease that is not reflected on a
consolidated balance sheet of Borrower and its Foreign Subsidiaries and should
not be so reflected under generally accepted accounting principles.
L. Compensation
- Salary.
Borrower is prohibited from paying total compensation to its officers and
directors in excess of reasonable compensation or that is not otherwise
commensurate with past practices or for companies similarly situated with
Borrower.
M. Investments.
Unless
specifically permitted by Lender, Borrower is prohibited from holding any
investments which (i) are not guaranteed by the United States (Treasury
obligations); or (ii) are not issued by financial institutions that are insured
by the FDIC or have capital in excess of $25,000,000.
N. Conflicting
Agreements; Default.
Borrower will not enter into any agreement any term or condition of which
conflicts with any provision of this Agreement or the other Loan Documents,
or
default under any material agreement with any other Person.
O. Prepayments.
Other
than Indebtedness to Lender or Borrower’s trade creditors, Borrower is
prohibited from prepaying any other Indebtedness; provided, however, Borrower
may make prepayments on shareholder loans to the Borrower as long as such
prepayment(s) do not cause, directly or indirectly, the Fixed Charge Coverage
ratio to exceed 1.0.
P. Transactions
with Affiliates and Foreign Subsidiaries.
Each
Borrower is prohibited from entering into transactions with any of its Foreign
Subsidiaries or affiliates, except in the ordinary course of and pursuant to
the
reasonable requirements of Borrower’s business and upon fair and reasonable
terms no less favorable to Borrower than Borrower would obtain in a comparable
arm’s length transaction with a Person not an affiliate.
SECTION
SEVEN - DEFAULT
7.1 Events
of Default.
The
occurrence of any one or more of the following events shall constitute an Event
of Default or Default under this Agreement:
21
A. Monetary
Default.
Borrower shall fail to pay within three (3) business days after being due any
installment of principal or interest, or any fee or charge payable hereunder
or
under any Loan Document.
B. Nonmonetary
Default.
Borrower shall fail to observe or perform any covenant, representation or
warranty to be observed or performed by them hereunder or under any of the
Loan
Documents (other than those covenants, representations and warranties covered
by
other subparagraphs of this Paragraph), and this failure shall continue for
thirty (30) days after written notice of the failure from the
Lender.
C. Default
to Third Persons.
Borrower shall fail to pay any Indebtedness in excess of $100,000 due to any
third Persons or an event of default occurs with respect to any Indebtedness,
and this failure shall continue beyond any applicable grace period.
D. False
Financial Statements.
Any
financial statement, representation, warranty, or certificate made or furnished
by Borrower to Lender in connection with this Agreement, or as inducement to
Lender to enter into this Agreement, or in any separate statement or document
to
be delivered hereunder to Lender, shall be materially false, incorrect, or
incomplete when made.
E. Material
Adverse Change in Borrower’s Condition.
There
shall occur a cessation of a material part of the business of the Borrower
for a
period which materially and adversely affects the Borrower's capacity to
continue its business on a profitable basis; or the Borrower shall suffer the
loss or revocation of any license or permit now held or hereafter acquired
by
the Borrower which is necessary to the continued or lawful operation of its
business; or the Borrower shall be enjoined, restrained or in any way prevented
by court, governmental or administrative order from conducting all or any
material part of its business affairs; or any material lease or agreement
pursuant to which the Borrower leases, uses or occupies any Property shall
be
canceled or terminated prior to the expiration of its stated term; or any
material part of the Collateral shall be taken through condemnation or the
value
of such Collateral shall be materially impaired through
condemnation.
F. Enforceability
of Loan Documents.
Any of
the Loan Documents ceases for any reason to be in full force and effect or
any
Lien created under any Loan Documents ceases to constitute a valid first
priority perfected Lien (subject only to Permitted Liens) on the Collateral
in
accordance with the terms thereof
G. Borrower
Challenge to Loan Documents.
The
Borrower shall challenge or contest in any action, suit or proceeding the
validity or enforceability of this Agreement or any of the other Loan Documents,
the legality or enforceability of any of the Obligations or the perfection
or
priority of any lien granted to the Lender.
H. Violation
of Laws.
Borrower shall violate and/or fail to comply in all material respects with
all
federal, state and local laws, regulations and orders applicable to Borrower,
its assets or the Collateral, including but not limited to all Environmental
Laws, ERISA, the Xxxxxxxx-Xxxxx Act of 2002 or the any federal or state
racketeering statute (including, without limitation, the Racketeer Influenced
and Corrupt Organization Act of 1970).
I. Inability
to Pay Debts.
Borrower shall admit its inability to pay its debts as they mature, or shall
make an assignment for the benefit of it or any of its creditors.
22
J. Bankruptcy.
Proceedings in Bankruptcy, or for reorganization of Borrower, or for the
readjustment of any of their respective debts, under the Bankruptcy Code, as
amended, or any part thereof, or under any other laws, whether state or federal,
for the relief of debtors, now or hereafter existing, shall be commenced against
Borrower and shall not be discharged within sixty (60) days of their
commencement, or any such proceeding shall be commenced by
Borrower.
K. Appointment
of Receiver.
A
receiver or trustee shall be appointed for Borrower or for any substantial
part
of their respective assets, or any proceedings shall be instituted for the
dissolution or the full or partial liquidation of Borrower, and the receiver
or
trustee shall not be discharged within sixty (60) days of his or her
appointment, or the proceedings shall not be discharged within sixty (60) days
of their commencement, or Borrower shall discontinue business or materially
change the nature of its business.
L. Adverse
Judgment.
Borrower shall suffer final judgments, whether by a court of competent
jurisdiction or by arbitration, for payment of money aggregating in excess
of
$100,000 and shall not discharge the same within a period of sixty (60) days,
unless, pending further proceedings, execution has been effectively
stayed.
M. Repossession
of Collateral.
A
judgment creditor of Borrower shall obtain possession of any of the Collateral
by any means, including but without limitation, garnishment, levy, distraint,
replevin, or self help.
N. Default
by Subordinate Lenders.
Any
obligee of Subordinated Indebtedness shall fail to comply with the subordination
provisions of the instruments evidencing the Subordinated
Indebtedness.
O. Notice
of Federal Tax Lien.
The
filing against Borrower of any notice of federal tax lien and Borrower’s failure
to discharge or contest in good faith such lien within sixty (60) days after
Borrower’s knowledge thereof.
7.2 Acceleration.
Immediately, and without notice, on the occurrence of an Event of Default,
all
Obligations, whether hereunder or under any Loan Document, shall, at the option
of Lender, immediately become due and payable without further action of any
kind
and Lender shall be under no obligation to make any further or additional Loan
or advance hereunder.
23
7.3 Remedies.
After
any acceleration, Lender shall have, in addition to the rights and remedies
given to it by this Agreement and the Loan Documents, all those rights and
remedies allowed by all applicable laws, including, but not limited to, the
Uniform Commercial Code as enacted in any jurisdiction in which any Collateral
may be located. Without limiting the generality of the foregoing, Lender,
immediately and without demand of performance and without other notice (except
as specifically required by this Agreement or the Loan Documents) or demand
whatsoever to Borrower, all of which are hereby expressly waived, and, without
advertisement, may sell at public or private sale, or otherwise realize on,
at a
time and place convenient to Lender, the whole, or from time to time, any part
of the Collateral, or any interest that Borrower may have therein. After
deducting from the proceeds of sale or other disposition of the Collateral
all
expenses, including all reasonable expenses for legal services, Lender shall
apply such proceeds towards the satisfaction of the Obligations. Any remainder
of the proceeds after satisfaction in full of the Obligations shall be
distributed as required by applicable laws. Notice of any sale or other
disposition shall be given to Borrower at least ten (10) days before the time
of
any intended public sale or of the time after which any intended private sale
or
other disposition of the Collateral is to be made, which Borrower hereby agrees
shall be reasonable notice of such sale or other disposition. Borrower agrees
to
assemble, or cause to be assembled, at its own expense the Collateral at such
place or places as Lender shall designate. At any such sale or other
disposition, Lender, to the extent permissible under applicable laws, may
purchase the whole or any part of the Collateral, free from any right of
redemption on the part of Borrower, which right is hereby waived and released.
Without limiting the generality of any of the rights and remedies conferred
on
Lender under this paragraph, Lender, to the full extent permitted by applicable
laws after acceleration of the Obligations, may:
A. Repossession.
Enter
on the premises of Borrower, exclude therefrom Borrower or any affiliate, and
take immediate possession of the Collateral, either personally or by means
of a
receiver appointed by a court of competent jurisdiction;
B. Use
Collateral.
At
Lender’s option, use, operate, manage, and control the Collateral in any
manner;
C. Collect
Income.
Collect
and receive all rents, income, revenue, earnings, issues, and profits of
Borrower arising out of or in connection with the Collateral; and
D. Maintain
Collateral.
Maintain, repair, renovate, alter, or remove the Collateral as Lender may
determine in its discretion.
SECTION
EIGHT - MISCELLANEOUS
8.1 Construction
of Agreement.
As used
herein, the singular shall include the plural and the masculine shall include
the feminine and neuter and vice versa, as the context so requires. The
provisions of this Agreement shall be in addition to those of any guaranty,
pledge, security agreement, note, or other evidence of liability held by Lender,
all of which shall be construed as complementary to each other. Nothing herein
contained shall prevent Lender from enforcing any or all other notes, guaranty,
pledge, or security agreements in accordance with their respective
terms.
8.2 Joint
and Several Liability.
If
there is more than one Borrower hereunder, Obligations hereunder shall be joint
and several.
8.3 Successors
and Assigns.
This
Agreement shall be binding on Borrower, its successors and assigns, and shall
inure to the benefit of and be enforceable by the Lender, its successors and
assigns (including, without limitation, any entity to which the Lender assigns
or sells all or any portion of its interest in the Loan).
8.4 Further
Assurances.
From
time to time, Borrower shall execute and deliver to Lender such additional
documents and will provide such additional information as Lender may reasonably
require to carry out the terms of this Agreement and be informed of Borrower’s
status and affairs.
8.5 Enforcement
and Waiver by Lender.
Lender
shall have the right at all times to enforce the provisions of this Agreement
and the Loan Documents in strict accordance with their terms, notwithstanding
any conduct or custom on the part of Lender in refraining from so doing at
any
time or times. The failure of Lender at any time or times to enforce its rights
under such provisions, strictly in accordance with the same, shall not be
construed as having created a custom in any way or manner contrary to specific
provisions of this Agreement or as having in any way or manner modified or
waived the same. All rights and remedies of Lender are cumulative and
concurrent, and the exercise of one right or remedy shall not be deemed a waiver
or release of any other right or remedy.
24
8.6 Expenses
of Lender.
Borrower, on demand, will reimburse Lender for all expenses, including the
reasonable fees and expenses of legal counsel for Lender, incurred by Lender
in
connection with the preparation, administration, amendment, modification, or
enforcement of this Agreement and the Loan Documents, and the collection or
attempted collection of the Note. Notwithstanding the foregoing, Borrower and
Lender agree that the costs payable by Borrower in connection with the
origination of the Loan (i.e., attorney fees, loan documentation costs,
recording fees, etc.) shall not exceed $10,000.
8.7 Notices.
Any
notices or consents required or permitted by this Agreement shall be in writing
and shall be deemed delivered if delivered in person, or, if sent by certified
mail, postage prepaid, return receipt requested, or if sent by overnight
delivery, or if sent by facsimile, as follows, unless such address is changed
by
written notice similarly delivered:
|
A.
If to Borrower:
|
Decorize,
Inc.
|
|
0000
X. Xxxxxx
|
|
|
Xxxxxxxxxxx,
Xxxxxxxx 00000
|
|
|
Attn.:
XX Xxxxxx
|
|
|
Facsimile:
(000) 000-0000
|
|
|
With
copy to:
|
Xxxxxxx
& Xxxxxx, P.C.
|
|
0000
Xxxxx Xxxxxx, Xxxxx 0000
|
|
|
Xxxxxx,
Xxxxx 00000
|
|
|
Attn:
M. Xxxxxxxxxxx Xxxxxx
|
|
|
Facsimile:
(000) 000-0000
|
|
|
B.
If to Lender:
|
Guaranty
Bank
|
|
0000
X. Xxxxxxxxxxx
|
|
|
Xxxxxxxxxxx,
Xxxxxxxx 00000
|
|
|
Attn.:Xxxx
Xxxxxxxxxxx, Senior Vice President
|
|
|
Facsimile:
(000) 000-0000
|
|
|
With
copy to:
|
Xxxxxxxxx
Xxxxxxx, LLP
|
|
000
Xx. Xxxxx Xxxxxx, Xxx. 0000
|
|
|
Xxxxxxxxxxx,
Xxxxxxxx 00000
|
|
|
Attn.:
Xxxxxxx X. Xxxxxxx
|
|
|
Facsimile:
(000) 000-0000
|
8.8 Waiver
and Release by Borrower.
To the
maximum extent permitted by applicable laws, Borrower waives: (i) protest of
all
commercial paper at any time held by the Lender on which the Borrower is in
any
way liable; and (ii) notice of acceleration and of intention to accelerate,
and
notice and opportunity to be heard, after acceleration in the manner provided
in
this Agreement, before exercise by Lender of the remedies of self-help, set
off,
or of other summary procedures permitted by any applicable laws or by any
agreement with Borrower, and, except when required hereby or by any applicable
laws, notice of any other action taken by Lender; and
8.9 Governing
Law.
It is
agreed that this Agreement shall be governed by, construed, and enforced in
accordance with the internal laws of the State of Missouri.
8.10 Binding
Effect.
This
Agreement shall inure to the benefit of, and shall be binding on, the respective
successors and permitted assigns of the parties.
25
8.11 Assignment.
Borrower has no right to assign any of its rights or obligations under this
Agreement without the prior, express, and written consent of Lender, which
consent Lender may withhold in its sole discretion.
8.12 Entire
Agreement.
This
Agreement shall constitute the entire Agreement between the parties and any
prior understanding or representation of any kind preceding the date of this
Agreement shall not be binding on either party except to the extent incorporated
in this Agreement.
8.13 Modification
of Agreement.
Any
modification of this Agreement or additional obligation assumed by either party
in connection with this Agreement shall be binding only if evidenced in writing
signed by each party or an authorized representative of each party.
ORAL
AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT
IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER) AND
US
(CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH
COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE
AND
EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE
IN
WRITING TO MODIFY IT.
8.14 Paragraph
Headings.
The
titles to the paragraphs of this Agreement are solely for the convenience of
the
parties and shall not be used to explain, modify, simplify, or aid in the
interpretation of the provisions of this Agreement.
8.15 Severability.
If any
provision of this Agreement shall be held invalid under any applicable laws,
such invalidity shall not affect any other provision of this Agreement that
can
be given effect without the invalid provision, and, to this end, the provisions
of this Agreement are severable.
8.16 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original, but all of which together shall constitute but one
and
the same instrument.
8.17 Terms
Generally.
All
capitalized terms used and not otherwise defined herein shall have the meanings
given them in the UCC.
8.18 WAIVER
OF JURY TRIAL.
BORROWER HEREBY WAIVES ANY RIGHTS THAT IT MAY HAVE TO A JURY TRIAL IN ANY
CONTROVERSY ARISING UNDER THIS AGREEMENT OR UNDER ANY OF THE LOAN DOCUMENTS.
BORROWER SHALL, IF DIRECTED BY LENDER, FILE EVIDENCE OF THIS WAIVER WITH A
COURT
OF COMPETENT JURISDICTION IN COMPLIANCE WITH MISSOURI SUPREME COURT RULE
69.01(b), AND IF BORROWER FAILS TO FILE SUCH EVIDENCE WITHIN FIVE (5) DAYS
AFTER
THE LENDER’S REQUEST, BORROWER HEREBY GRANTS TO THE LENDER AN IRREVOCABLE POWER
OF ATTORNEY (WHICH SHALL BE DEEMED TO BE COUPLED WITH AN INTEREST) TO FILE
EVIDENCE OF THIS WAIVER WITH A COURT OF COMPETENT JURISDICTION IN ORDER TO
EFFECT THIS WAIVER AS PROVIDED IN MISSOURI SUPREME COURT RULE
69.01(b).
26
8.19 CHOICE
OF FORUM.
SUBJECT ONLY TO THE EXCEPTION IN THE NEXT SENTENCE, BORROWER AND LENDER HEREBY
AGREE TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL COURT OF THE WESTERN DISTRICT
OF MISSOURI AND THE STATE COURTS OF MISSOURI LOCATED IN XXXXXX COUNTY AND WAIVE
ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION
INSTITUTED THEREIN, AND AGREE THAT ANY DISPUTE CONCERNING THE RELATIONSHIP
BETWEEN LENDER AND BORROWER OR THE CONDUCT OF ANY OF THEM IN CONNECTION WITH
THIS NOTE OR OTHERWISE SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE.
NOTWITHSTANDING THE FOREGOING,
BORROWER AND LENDER ACKNOWLEDGE THAT ANY APPEALS FROM THE COURTS DESCRIBED
IN
THE IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE THOSE JURISDICTIONS.
[SIGNATURE
PAGES FOLLOW]
27
IN
WITNESS WHEREOF,
the
undersigned has caused this Agreement to be executed by an authorized
representative effective on the date recited above.
| LENDER: | ||
|
GUARANTY BANK, a state chartered trust company
with banking powers
|
||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxxxxxxx | |
| Name: |
Xxxxxxx X. Xxxxxxxxxxx
|
|
| Title: | Senior Vice President | |
28
IN
WITNESS WHEREOF,
the
undersigned have caused this Agreement to be executed by an authorized
representative effective on the date recited above.
| BORROWER: | ||
| DECORIZE, INC., a Delaware corporation | ||
| |
|
|
| By: | /s/ Xxxxx Xxxxxxx | |
|
Name:
|
Xxxxx Xxxxxxx |
|
| Title: | President and CEO | |
| GUILDMASTER, INC., a Missouri corporation | ||
| |
|
|
| By: | /s/ Xxxxx Xxxxxxx | |
|
Name:
|
Xxxxx Xxxxxxx |
|
| Title: | President and CEO | |
|
|
||
| FAITH WALK DESIGNS, INC., a Missouri corporation | ||
| |
|
|
| By: | /s/ Xxxxxx Xxxx | |
|
Name:
|
Xxxxxx Xxxx |
|
| Title: | Secretary | |
EXHIBIT
1
Borrowing
Base Certificate
To: Guaranty
Bank
Please
refer to the Credit Agreement dated as of October 19, 2007 (as amended,
restated, supplemented or otherwise modified from time to time, the
“Credit
Agreement”)
between DECORIZE, INC., a Delaware corporation, GUILDMASTER, INC., a Missouri
corporation, and FAITH WALK DESIGNS, INC., a Missouri corporation (each
individually and collectively, the “Borrower”),
and
GUARANTY BANK, a state chartered trust company with banking powers (the
“Lender”).
This
certificate (this “Certificate”),
together with supporting calculations attached hereto as Exhibit 1-A, is
delivered to you pursuant to the terms of the Credit Agreement. Capitalized
terms used but not otherwise defined herein shall have the same meanings herein
as in the Credit Agreement.
Borrower
hereby certifies and warrants to the Lender that: (i) at the close of business
on ______________, ____ (the “Calculation
Date”),
the
Borrowing Base was $_____________, computed as set forth on the schedule
attached hereto as Exhibit 1-A; and (ii) the Company has kept, observed,
performed, and fulfilled all its Obligations under the Credit Agreement, (iii)
and all of Borrower’s Representations and Warranties are true and correct in all
material respects, and (iv) and that no Event of Default has
occurred.
The
Company has caused this Certificate to be executed and delivered by its officer
thereunto duly authorized on ___________,
______.
| BORROWER: | ||
| DECORIZE, INC., a Delaware corporation | ||
| |
|
|
| By: | ||
| Name: | ||
| Title: | ||
| GUILDMASTER, INC., a Missouri corporation | ||
| |
|
|
| By: | ||
| Name: | ||
| Title: | ||
| FAITH WALK DESIGNS, INC., a Missouri corporation | ||
| |
|
|
| By: | ||
| Name: | ||
| Title: | ||
30
EXHIBIT
1-A
Borrowing
Base Calculation
| 1) |
Total
Accounts Receivable
|
| 2) |
Less:
Ineligible Accounts
|
| a. | All account balances more than 90 days from original invoice date (Section 1.12(a)): |
| b. | All accounts of account debtors with ≥ 20% of outstanding balance more than 90 days from original invoice date (Section 1.12(aa)): |
| c. |
The
portion of each account debtor’s outstanding balance that (when combined
with account debtor’s remaining balance) exceeds 20% of Line 1 above
(Section 1.12(bb)):
|
| d. | Account debtor and account balance not subject to the immediately preceding exclusion in (c) above: |
| e. |
Ineligible
for all other reasons (Section 1.12 (a through
i)):
|
| f. | Total Ineligible Accounts (a + b + c - d + e) |
| 3) |
Eligible
Accounts Receivable (Line 1 minus Line
2(f))
|
| 4) | Accounts Receivable Borrowing Base (Line 3 multiplied by 0.8) |
| 5) | Total Inventory |
| 6) | Less: Inventory reserves (shrinkage, damage, obsolescence, etc.) |
| 7) | Net Inventory (Line 5 minus Line 6) |
| 8) | Less: Ineligible Inventory (Section 1.13) |
| 9) | Eligible Inventory (Line 7 minus Line 8) |
| 10) | Inventory Borrowing Base (Line 9 multiplied by 0.5) |
| 11) | Total Borrowing Base (Line 4 plus Line 10) |
| 12) | Revolving Line of Credit Balance |
| 13) | Line 11 minus Line 12: |
| a. | If a positive number: Borrowing Base Availability |
| or, |
| b. | If a negative number: Required Repayment |
31
EXHIBIT
2
Compliance
Certificate
To: Guaranty
Bank, as Lender
Ladies
and Gentlemen:
This
Compliance Certificate is being delivered pursuant to Section 6.1(A)(4) of
the
Credit Agreement dated as of October 19, 2007 (the “Credit
Agreement”),
among
GUARANTY BANK, a state chartered trust company with banking powers (“Lender”)
and DECORIZE, INC., a Delaware corporation, GUILDMASTER, INC., a Missouri
corporation, and FAITH WALK DESIGNS, INC., a Missouri corporation (each
individually and collectively, the “Borrower”). Terms not otherwise defined
herein shall have the meanings assigned to such terms in the Credit
Agreement.
Borrower
hereby certifies and warrants to the Lender that the following is a true and
correct computation as of the date of this Compliance Certificate of the
following ratios and/or financial restrictions contained in the Credit
Agreement:
|
A.
|
Section
6.1(W)(1) - Minimum Fixed Charge Coverage
Ratio
|
|||
|
1.
|
EBITDA
|
$________
|
||
|
2.
|
Fixed
Charges
|
$________
|
||
|
a.
|
Cash
Interest Expense
|
$________
|
||
|
b.
|
Scheduled
and unscheduled principal
|
|||
|
payments
on long term Indebtedness
|
$________
|
|||
|
c.
|
Capital
expenditures for maintenance and repair
|
$________
|
||
|
d.
|
Federal,
state and local income taxes paid
|
$________
|
||
|
e.
|
Management
fees (whether accrued or paid in cash)
|
$________
|
||
|
3.
|
Ratio
of (1) to (2)
|
____
to 1
|
||
|
B.
|
Section
6.1(W)(2) - Maximum Senior Indebtedness to EBITDA
Ratio
|
|||
|
1.
|
Senior
Indebtedness
|
$________
|
||
|
2.
|
EBITDA
|
$________
|
||
|
3.
|
Ratio
of (1) to (2)
|
____
to 1
|
||
32
C.
Section
6.1(W)(4) - Capital Expenditures
1.
Capital
Expenditures for the
last
four
(4) Fiscal Quarters
$__________
Borrower
further certifies to you that no Event of Default has occurred and is
continuing.
Borrower
has caused this Compliance Certificate to be executed and delivered by its
duly
authorized officer on _________, ____.
| BORROWER: | ||
| DECORIZE, INC., a Delaware corporation | ||
| |
|
|
| By: | ||
| Name: | ||
| Title: | ||
| GUILDMASTER, INC., a Missouri corporation | ||
| |
|
|
| By: | ||
| Name: | ||
| Title: | ||
| FAITH WALK DESIGNS, INC., a Missouri corporation | ||
| |
|
|
| By: | ||
| Name: | ||
| Title: | ||
33
EXHIBIT
3
Subordinated
Indebtedness
34
EXHIBIT
4
Request
for Advance
(Revolving
Loan)
| To: | Guaranty Bank |
|
From:
|
Decorize,
Inc., GuildMaster, Inc. and Faith Walk Designs,
Inc.
|
|
(each
individually and collectively, the
“Borrower”)
|
This
Request for Advance is delivered pursuant to the Credit Agreement (the “Credit
Agreement”) dated October 19, 2007, by and among GUARANTY BANK, a state
chartered trust company with banking powers (“Lender”) and DECORIZE, INC., a
Delaware corporation, GUILDMASTER, INC., a Missouri corporation, and FAITH
WALK
DESIGNS, INC., a Missouri corporation (each individually and collectively,
the
“Borrower”). All terms used herein shall have the meaning set forth in the
Credit Agreement.
Borrower
hereby gives irrevocable notice of a request for a borrowing as
follows:
|
Request
for borrowing under Revolving Line of Credit Balance:
|
$_________________
|
|
|
Plus:
Previous Revolving Line of Credit Balance:
|
$_________________
|
|
|
Equals:
New Revolving Line of Credit Balance:
|
$_________________
|
|
The
Borrower hereby represents, warrants, ratifies and confirms that, on the date
hereof and as of the date of the Advance as set forth above, (i) Borrower has
kept, observed, performed, and fulfilled all its Obligations under the Credit
Agreement, (ii) and all of Borrower’s Representations and Warranties are true
and correct in all material respects, (iii) and that no Event of Default has
occurred, (iv) that all information contained in this Request for Advance is
true and correct and (v) that the new revolving line of credit balance amount
set forth above does not exceed the lessor of: (a) $3,000,000.00, or (b) the
Borrowing Base.
EXECUTED
this ______ day of _______________, 20___.
| BORROWER: | ||
| DECORIZE, INC., a Delaware corporation | ||
| |
|
|
| By: | ||
| Name: | ||
| Title: | ||
| GUILDMASTER, INC., a Missouri corporation | ||
| |
|
|
| By: | ||
| Name: | ||
| Title: | ||
| FAITH WALK DESIGNS, INC., a Missouri corporation | ||
| |
|
|
| By: | ||
| Name: | ||
| Title: | ||
35
EXHIBIT
5
Subsidiaries
and Partnerships
|
1.
|
GuildMaster,
Inc., a Missouri corporation, 100% owned domestic
subsidiary.
|
|
2.
|
Faith
Walk Designs, Inc., a Missouri corporation, 100% owned domestic
subsidiary
|
|
3.
|
Westway
Enterprises, Ltd., 100% owned foreign subsidiary, located in Guangdong,
China.
|
|
4.
|
P.T.
Niaga Merapi, a 100% owned foreign subsidiary, located in Yogyakarta,
Indonesia.
|
36
EXHIBIT
6
Material
Leases, Contracts or Commitments
None.
37
