EXHIBIT 10.02
FIRST AMENDMENT, dated as of May 11, 2006 ("Amendment"), to and under
CREDIT AND SECURITY AGREEMENT, dated as of July 28, 2004 (as amended from time
to time, the "Credit Agreement"), by and among AMERICAN/UNIVERSAL SUPPLY, INC.,
a New York corporation ("American"), THE RAL SUPPLY GROUP, INC., a New York
corporation ("RAL") and UNIVERSAL SUPPLY GROUP, INC., a New York corporation
("Universal"; American, RAL and Universal are each individually referred to as a
"Borrower" and are collectively referred to as the "Borrowers") and XXXXX FARGO
BANK, NATIONAL ASSOCIATION, acting through its Xxxxx Fargo Business Credit
operating division, as successor to Xxxxx Fargo Business Credit, Inc. (the
"Lender"). Terms which are capitalized in this Amendment and not otherwise
defined shall have the meanings ascribed to such terms in the Credit Agreement.
WHEREAS, the Borrowers have requested that the Lender (i) provide the
Borrowers with up to $500,000 of temporary overadvances and (ii) extend the
maturity date of the Credit Agreement, and the Lender has agreed to the
foregoing request, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Borrowers and the Lender hereby agree as
follows:
SECTION ONE. AMENDMENTS TO CREDIT AGREEMENT.
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(a) Effective upon satisfaction of the conditions precedent set forth
in subsection (a) of Section Four hereof, the Credit Agreement is hereby amended
as follows:
(i) SECTION 1.1. DEFINITIONS. (1) The following defined terms
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contained in Section 1.1 of the Credit Agreement are amended and restated as
follows:
"BORROWING BASE" means, with respect to any Borrower at any time,
and subject to change from time to time in the Lender's sole
discretion, which discretion shall be exercised in a commercially
reasonable manner, the lesser of:
(a) the Maximum Line, minus the L/C Amount, minus the
aggregate principal amount of outstanding Advances made to the
other Borrowers; or
(b) the sum of:
(i) up to eighty-five percent (85%) of such Borrower's
Eligible Accounts, plus
----
(ii) the lesser of: (A) up to fifty-seven percent
(57%) of the lower of the cost or fair market
value, as determined in accordance with GAAP, of
such Borrower's Eligible Inventory, but in no
event to exceed $8,500,000.00, minus the aggregate
-----
principal amount of outstanding Advances made
to the other Borrowers pursuant to this clause
(ii),
and (B) up to ninety-five percent (95%) of
the liquidation value of such Borrower's Eligible
Inventory, net of liquidation and other related
expenses, as determined by the Lender in its sole
discretion, which discretion shall be exercised in
a commercially reasonable manner, but in no event
to exceed $8,500,000.00, minus the aggregate
-----
principal amount of outstanding Advances made to
the other Borrowers pursuant to this clause (ii),
plus
----
(iii) up to the amount of the Structural Sublimit
then in effect, minus the aggregate principal
-----
amount of outstanding Advances made to the other
Borrowers pursuant to this clause (iii), plus
----
(iv) up to the amount of the Overadvance Sublimit
then in effect, minus the aggregate principal
-----
amount of outstanding Advances made to the other
Borrowers pursuant to this clause (iv), minus
-----
(v) up to the amount of the Landlord Reserve then
in effect, apportioned among the Borrowers in such
manner as the Lender may determine from time to
time in its sole discretion, which discretion
shall be exercised in a commercially reasonable
manner, minus
-----
(vi) up to the amount of the Availability Reserve
then in effect, apportioned among the Borrowers in
such manner as the Lender may determine from time
to time in its sole discretion, which discretion
shall be exercised in a commercially reasonable
manner, minus
-----
(vii) the portion of the L/C Amount relating to
Letters of Credit issued for such Borrower's
account, minus
-----
(viii) such other reserves as the Lender may
establish from time to time in its sole
discretion, which discretion shall be exercised in
a commercially reasonable manner.
Notwithstanding the foregoing, in the event that dilution for all
Accounts during any ninety (90) consecutive day period, expressed as a
percentage, as determined by the Lender in its sole discretion, exercised
in a commercially reasonable manner, pursuant to its periodic examination
of the Borrowers' collateral reports and/or books and records, exceeds four
percent (4%), then the Lender, in its sole discretion, may implement and
maintain such reserves and/or reduce the advance percentages used in
determining the Borrowing Base to adjust for such excess.
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"FLOATING RATE" means with respect to all Advances, other than
Overadvances and Structural Sublimit Advances, an annual rate equal to
the Prime Rate minus one-quarter of one percent (1/4 of 1%), and with
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respect to Overadvances and Structural Sublimit Advances, an annual
rate equal to the Prime Rate plus one-half of one percent (1/2 of 1%),
----
which annual rate, in each case, shall change when and as the Prime
Rate changes.
(2) The following new defined terms shall be inserted in Section
1.1 of the Credit Agreement in alphabetical order:
"OVERADVANCE SUBLIMIT" means, on May 11, 2006, the amount of
$500,000, which amount shall be automatically and permanently reduced
on each Business Day, beginning on July 11, 2006, by the sum of
$12,500.00, until reduced to zero (-0-).
"OVERADVANCES" means Advances made pursuant to and in accordance
with the terms of paragraph (b)(iv) of the defined term Borrowing
Base.
(ii) SECTION 2.12. The following sentence is added at the end of
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Section 2.12 of the Credit Agreement:
In furtherance and not in limitation of Section 2.3, the
Borrowers jointly and severally agree to permanently pre-pay the
aggregate principal balance of the Overadvances (i) on each Business
Day of each month, beginning on July 11, 2006, by an amount equal to
$12,500.00, and (ii) on September 11, 2006 by an amount such that the
Overadvances shall be reduced to zero (-0-).
(b) EFFECTIVE UPON SATISFACTION OF THE CONDITIONS PRECEDENT SET FORTH
IN SUBSECTION (B) OF SECTION FOUR HEREOF, THE CREDIT AGREEMENT IS HEREBY AMENDED
AS FOLLOWS:
(i) SECTION 1.1. DEFINITIONS. The following defined term contained
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in Section 1.1 of the Credit Agreement is amended and restated as follows:
"ORIGINAL MATURITY DATE" means August 1, 2010.
SECTION TWO. AMENDMENT FEE. In consideration for the accommodations and
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amendments provided herein, the Borrowers shall pay to the Lender a
non-refundable fee in the amount of $10,000 (the "Amendment Fee"), which fee
shall be fully earned on the date hereof. The Borrowers hereby authorize the
Lender to charge the Borrowers' loan account with the Lender in payment of such
fee.
SECTION THREE. REPRESENTATIONS AND WARRANTIES. To induce the Lender to
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enter into this Amendment, each Borrower warrants and represents to the Lender
as follows:
(a) all of the representations and warranties contained in the
Credit Agreement and each other Loan Document continue to be true and correct in
all material respects as of the date hereof, as if repeated as of the date
hereof, except for such representations and warranties which, by their terms,
are only made as of a previous date;
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(b) the execution, delivery and performance by each Borrower of
this Amendment, the consummation of the transactions herein contemplated and the
compliance with the provisions hereof have been duly authorized by all necessary
corporate action and do not and will not require any consent or approval of such
Borrower's stockholders; require any authorization, consent, license, permit or
approval by, or registration, declaration or filing with, or notice to, any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or any third party, except such authorization, consent,
license, permit, approval, registration, declaration, filing or notice as has
been obtained, accomplished or given prior to the date hereof; violate any
provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
such Borrower or of such Borrower's articles of incorporation or bylaws; result
in a breach of or constitute a default under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which such
Borrower is a party or by which it or its properties may be bound or affected;
or result in, or require, the creation or imposition of any Lien (other than in
favor of the Lender) upon or with respect to any of the properties now owned or
hereafter acquired by such Borrower;
(c) upon its execution, this Amendment shall constitute the legal,
validand binding obligation of each Borrower, enforceable against each Borrower
in accordance with its terms;
(d) no Default or Event of Default has occurred and is continuing;
and
(e) since the date of the audited financial statements of the
Borrowers for the fiscal year ended December 31, 2005, there has been no
material adverse change in any Borrower's business, properties or condition
(financial or otherwise).
SECTION FOUR. CONDITIONS PRECEDENT. (a) The amendments to the Credit
---------------------
Agreement set forth in subsection (a) of Section One hereof shall become
effective upon the date on which all of the following events shall have
occurred:
(i) the Lender shall have received this Amendment, duly
executed by each Borrower;
(ii) the Lender shall have received the Amendment Fee;
(iii) the Lender shall have received payment of all fees and
disbursements incurred by the Lender in connection with the preparation,
negotiation and closing of this Amendment and the transactions contemplated
to occur hereunder; and
(iv) no event has occurred and is continuing which constitutes
a Default or an Event of Default, and no event or development which has had
or is reasonably likely to have a Material Adverse Effect shall have
occurred since the date of the Borrowers' audited financial statements for
the fiscal year ended December 31, 2005.
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(b) The amendment to the Credit Agreement set forth in subsection
(b) of Section One hereof shall become effective upon the date on which all of
the following events shall have occurred:
(i) the Lender shall have received this Amendment, duly
executed by each Borrower;
(ii) the Lender shall have received a certificate of each
Borrower's Secretary or Assistant Secretary certifying as to (A) the
resolutions of such Borrower's directors and, if required,
shareholders, authorizing the execution, delivery and performance of the
this Amendment, (B) such Borrower's articles of incorporation and bylaws,
and (C) the signatures of such Borrower's officers or agents authorized to
execute and deliver the this Amendment and other instruments, agreements
and certificates to be delivered in connection with this Amendment on such
Borrower's behalf;
(iii) the Lender shall have received a current certificate
issued by the Secretary of State of each Borrower's state of
incorporation certifying that such Borrower is in compliance with all
applicable organizational requirements of such state;
(iv) the Lender shall have received the Amendment Fee, if not
previously received by the Lender;
(v) the Lender shall have received payment of all fees and
disbursements incurred by the Lender in connection with the preparation,
negotiation and closing of this Amendment and the transactions contemplated
to occur hereunder;
(vi) the Lender shall have received from each Guarantor a duly
executed original (or any executed facsimile copy) of the Guarantor
Acknowledgment and Consent in substantially the form attached hereto as
Exhibit A;
(vii) the Lender shall have received from each holder of
Subordinated Debt a duly executed original (or any executed facsimile
copy) of the Subordinated Lender Acknowledgment and Consent in
substantially the form attached hereto as Exhibit B; and
(viii) no event has occurred and is continuing which constitutes
a Default or an Event of Default, and no event or development which
has had or is reasonably likely to have a Material Adverse Effect shall
have occurred since the date of the Borrowers' audited financial statements
for the fiscal year ended December 31, 2005.
SECTION FIVE. GENERAL PROVISIONS.
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(a) Except as herein expressly amended, the Credit Agreement and
all of the other Loan Documents are ratified and confirmed in all respects and
shall remain in full force and effect in accordance with their respective terms.
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(b) All references to the Credit Agreement in the Loan Documents
shall mean the Credit Agreement as amended as of the effective date hereof, and
as amended hereby and as hereafter amended, supplemented and modified from time
to time.
(c) This Amendment embodies the entire a greement between the
parties hereto with respect to the subject matter hereof and supercedes all
prior agreements, commitments, arrangements, negotiations or understandings,
whether written or oral, of the parties with respect thereto.
(d) This Amendment shall be governed by and construed in accordance
with the internal laws of the State of New York, without regard to the conflicts
of law principals thereof.
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IN WITNESS WHEREOF, the Borrowers and the Lender have signed below to
indicate their agreement with the foregoing and their intent to be bound
thereby.
AMERICAN/UNIVERSAL SUPPLY, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
THE RAL SUPPLY GROUP, INC.
By: /s/ Xxxxxxx Pagano_
-----------------------------------
Name: Xxxxxxx Xxxxxx
Title: Vice President
UNIVERSAL SUPPLY GROUP, INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
XXXXX FARGO BANK, NATIONAL ASSOCIATION,
acting through its Xxxxx Fargo
Business Credit operating division
By: /s/ Xxxxxx Xxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxx
Title: Vice President
EXHIBIT A
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Form of Guarantor Acknowledgment and Consent
--------------------------------------------
The undersigned, each a guarantor with respect to the obligations of
American/Universal Supply, Inc., a New York corporation ("American"), The RAL
Supply Group, Inc., a New York corporation ("RAL") and Universal Supply Group,
Inc., a New York corporation ("Universal"; American, RAL and Universal are
collectively referred to as the "Borrowers"), to Xxxxx Fargo Bank, National
Association, acting through its Xxxxx Fargo Business Credit operating division,
as successor to Xxxxx Fargo Business Credit, Inc. (the "Lender"), under the
Credit and Security Agreement, dated as of July 28, 2004 (as amended from time
to time, the "Credit Agreement"), by and among the Borrowers and the Lender,
hereby (i) acknowledges and consent to the execution, delivery and performance
by the Borrowers of the First Amendment, dated as of May 11, 2006 (the
"Amendment"), to and under the Credit and Security Agreement, by and among the
Borrowers and the Lender, attached hereto as Annex A, (ii) reaffirms and agrees
that the Guaranty by Corporations, dated as of July 28, 2004 (as amended from
time to time, the "Guaranty"), made by the undersigned for the benefit of the
Lender is in full force and effect, without defense, offset or counterclaim, and
will remain in full force and effect from and after the effective date of the
Amendment, and the undersigned acknowledges and guarantees the Indebtedness (as
defined in the Guaranty), including, without limiting the generality of the
foregoing, the obligations of the Borrowers under the Credit Agreement, as
amended by the Amendment; and (iii) the execution, delivery and performance of
this Guarantor Acknowledgment and Consent (the "Consent") and the performance of
the Guaranty, as amended and supplemented by this Consent, have been duly
authorized by all necessary corporate action and do not and will not require any
consent or approval of such undersigned's stockholders, or require any
authorization, consent, license, permit or approval by, or registration,
declaration or filing with, or notice to, any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any third party, except such authorization, consent, license, permit, approval,
registration, declaration, filing or notice as has been obtained, accomplished
or given prior to the date hereof, in order for this Consent or the Guaranty, as
amended and supplemented by this Consent, to be effective and enforceable
against the undersigned with respect to all of the Indebtedness (as defined in
the Guaranty).
In addition to the foregoing, Colonial Commercial Corp. ("Colonial") hereby
(i) reaffirms and agrees that each of the General Security Agreement, dated as
of July 28, 2004 (as amended from time to time, the "Security Agreement"),
entered into by Colonial and the Lender and the Securities Pledge Agreement,
dated as of July 28, 2004 (as amended from time to time, the "Pledge Agreement"
and, together with the Security Agreement, the "Collateral Documents"), made by
Colonial in favor of the Lender is in full force and effect, and will remain in
full force and effect from and after the effective date of the Amendment, and
acknowledges that the Collateral (as defined in the Security Agreement) and the
Pledged Collateral (as defined in the Pledge Agreement) will secure the
Indebtedness (as defined in the Guaranty) and (ii) represents and warrants to
the Lender that as of the date hereof all of the representations and warranties
of Colonial contained in the Collateral Documents, as supplemented by this
Consent, continue to be true and correct in all material respects as of the date
hereof, as if repeated as of the date hereof,
except for such representations and warranties which, by their terms, are only
made as of a previous date.
Unless otherwise specified herein, capitalized terms used herein have the
meanings specified in the Amendment.
AMERICAN/UNIVERSAL SUPPLY, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President
THE RAL SUPPLY GROUP, INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxx
Title: Vice President
UNIVERSAL SUPPLY GROUP, INC.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
COLONIAL COMMERCIAL CORP.
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxxx Xxxxxx
Title: Chief Executive Officer
Annex A to Guarantor
Acknowledgment and Consent
First Amendment
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EXHIBIT B
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Form of Subordinated Lender Acknowledgment and Consent
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The undersigned, each a holder of Subordinated Debt (as defined in the
Credit and Security Agreement, dated as of July 28, 2004 (as amended from time
to time, the "Credit Agreement"), by and among American/Universal Supply, Inc.,
a New York corporation ("American"), The RAL Supply Group, Inc., a New York
corporation ("RAL") and Universal Supply Group, Inc., a New York corporation
("Universal"; American, RAL and Universal are collectively referred to as the
"Borrowers"), and Xxxxx Fargo Bank, National Association, acting through its
Xxxxx Fargo Business Credit operating division, as successor to Xxxxx Fargo
Business Credit, Inc., hereby (i) acknowledges and consent to the execution,
delivery and performance by the Borrowers of the First Amendment, dated as of
May 11, 2006 (the "Amendment"), to and under the Credit Agreement, attached
hereto as Annex A, (ii) reaffirms and agrees that the Subordination Agreement
set forth on Annex B attached hereto to which it is a party (each as amended
from time to time, the "Subordination Agreement"), is in full force and effect,
and will remain in full force and effect from and after the effective date of
the Amendment.
Unless otherwise specified herein, capitalized terms used herein have the
meanings specified in the Amendment.
XXXXXXXXXXX PROPERTIES, LLC
By: /s/ Xxxx X. Xxxxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxxxx
Title:
COLONIAL COMMERCIAL CORP.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Chief Executive Officer
XXXXXXX ASSOCIATES OF NEW YORK, INC.
By: /s/ Xxxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: President
For Xxxx Xxxxxx, Xxxxxxx Xxxxxx, Xxxx X.
Xxxxxxxxxxx, Xxxx X. Xxxxxxxxxxx, Xxxxxx
Xxxxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxxxx,
Xxxxxxx X. Xxxxxxxxx and Xxxxxxxx Xxxxxxxxx
by Power of Attorney
/s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx, Attorney-in-Fact
Annex A to Subordinated Lender
Acknowledgment and Consent
First Amendment
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Annex B to Subordinated Lender
Acknowledgment and Consent
Subordination Agreements
------------------------
Subordination Agreement, dated as of the 28th day of July, 2004, as amended from
time to time, made by Xxxxxxxxxxx Properties, LLC, for the benefit of Xxxxx
Fargo Business Credit, Inc.
Subordination Agreement, dated as of the 28th day of July, 2004, as amended from
time to time, made by Xxxx X. Xxxxxxxxxxx, for the benefit of Xxxxx Fargo
Business Credit, Inc.
Subordination Agreement, dated as of the 28th day of July, 2004, as amended from
time to time, made by Colonial Commercial Corp. for the benefit of Xxxxx Fargo
Business Credit, Inc.
Subordination Agreement, dated as of the 28th day of July, 2004, as amended from
time to time, made by Xxxxxxx Associates of New York, Inc., a New York
corporation, for the benefit of Xxxxx Fargo Business Credit, Inc.
Subordination Agreement, dated as of the 28th day of July, 2004, as amended from
time to time, made by Xxxx Xxxxxx, Xxxxxxx Xxxxxx, Xxxx X. Xxxxxxxxxxx, Xxxx X.
Xxxxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxxxx, Xxxxxxx X. Xxxxxxxxx
and Xxxxxxxx Xxxxxxxxx, for the benefit of Xxxxx Fargo Business Credit, Inc.
