Exhibit 10.1
CREDIT AGREEMENT
Between
GUARANTY BANK
(“Lender”)
and
DECORIZE, INC., GUILDMASTER, INC. and FAITH WALK DESIGNS,
INC.
(“Borrower”)
$3,000,000
Revolving Secured Credit Facility
CREDIT AGREEMENT
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.
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)
a ll
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)
a ll
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 bill-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;
(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.
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 Right-To-Know Act, 42 U.S.C. Sec.
11001,
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;
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.
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.
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 (1
st )
day of each month, commencing on the first (1
st )
day of the first (1
st )
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.
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;
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.
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.
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.
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 qu
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