Exhibit 10.3
Extension Agreement
Diamond Home Services, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Defaults by Diamond Home Services, Inc. (the "Borrower")
and request for extension of forbearance under that certain
Credit Agreement dated as of April 20, 1998 as previously amended
(the "Credit Agreement")
_________________________________________________________________
Gentlemen:
As you know, there are currently Existing Defaults by the Borrower under
the Credit Agreement. In addition, the Borrower has informed the Banks that the
Borrower will be unable to make the principal payment on the Term Loans
scheduled as due today. We are currently party to a September 1, 1999
Forbearance Agreement with the Borrower and the Material Subsidiaries (the
"Forbearance Agreement") which sets out the terms and conditions upon which the
Banks were willing to provide the Borrower with limited financial support and
forbear from accelerating the Obligations and enforcing the liens granted by the
Collateral Documents during the Standstill Period. Terms defined in the
Forbearance Agreement are used herein with the same meanings.
The Borrower has requested that the Banks extend to October 18, 1999 the
Scheduled Standstill Expiration Date and refrain from acting on the Borrower's
failure to make the principal payment on the Term Loans required today. This
letter will confirm the terms, conditions and provisions upon which the Banks
are willing to so extend the forbearance arrangements. Accordingly, effective
upon the Borrower's and the Material Subsidiaries' acceptance of this letter by
the Borrower's and the Material Subsidiaries' execution in the space provided
for that purpose below (which acceptance must occur without any modification of
the terms of this letter and no later than 5:00 p.m., Chicago time, on Monday,
October 4, 1999), the Banks agree to extend the forbearance arrangements with
the Borrower under the following terms and conditions:
1. Extension. The Scheduled Standstill Expiration Date shall be and
hereby is extended from September 29, 1999 to October 18, 1999. All
references in the Forbearance Agreement to September 29, 1999 shall be
deemed references to October 18, 1999.
2. Acknowledgment of Amounts Owing. The Borrower acknowledges and
agrees that the principal amount of Loans and L/C Obligations as of
September 29, 1999,
is $40,416,710 ($16,875,000 in Term Loans, $0 in Swing Loans, $22,841,710
in Revolving Loans and $700,000 in L/C Obligations) and such amount
(together with interest thereon) is justly and truly owing by the Borrower
to the Banks without defense, offset or counterclaim.
3. No Additional Credit. The Borrower acknowledges that the Banks
continue to exercise their right to cease extending any additional credit
under the Credit Agreement; provided, however, that unless and until a
Standstill Termination occurs, the Banks will continue, pursuant to Section
1.6(c) of the Credit Agreement, to make Base Rate Loans to repay
Reimbursement Obligations arising from drawings paid on Letters of Credit.
4. Net Cash Position. The Projections set forth in Schedule One to
the Forbearance Agreement are being replaced by the projections attached
hereto as Schedule One (the "New Projections"). All references in the
Forbearance Agreement to the Projections shall be deemed references to the
New Projections.
5. September 30, 1999 Principal Payment. The Borrower has
indicated its inability to make the principal payment on the Term Loans
scheduled as due today. The Banks agree that this failure to make such
payment shall constitute an "Existing Default" to the same extent as if it
were originally included in the Forbearance Agreement as an Existing
Default. As more fully set forth in the Forbearance Agreement, the Banks
are not waiving this or any other Existing Default.
6. KanTel. No later than October 8, 1999, the Borrower shall, and
shall cause its Subsidiaries to, execute and deliver such instruments and
documents (including without limitation UCC financing statements, stock
certificates and stock powers), and do such further acts and things, as the
Agent shall reasonably deem necessary to confirm and assure that the
Property acquired by the Borrower and its Subsidiaries as a result of their
acquisition of KanTel constitutes Collateral in the manner contemplated by
the Loan Documents.
7. Lien on ▇▇▇▇▇▇ Real Estate. Notwithstanding anything contained in
the Credit Agreement to the contrary, no later than the Scheduled
Standstill Expiration Date (as extended hereby), the Borrower (i) shall
have reached agreement with the Agent on the form of mortgage necessary to
grant to the Agent for the benefit of itself and the Banks a Lien on each
parcel of real property owned by ▇▇▇▇▇▇ and designated by the Agent to
secure the Obligations and Hedging Liability and (ii) shall at its expense
order for each such parcel designated by the Agent (no parcel with a fair
market value of less than $100,000 to be so designated), the following
items: a survey, environmental report and commitment for a mortgagee's
policy of title insurance from a title insurer reasonably acceptable to the
Agent insuring the validity of the relevant mortgage and its status as a
first Lien (subject to Liens permitted by the Credit Agreement) on the real
property encumbered thereby (it being understood that (i) the Agent may not
at its discretion require each of such items for each such parcel and (ii)
the placement of an
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order for any item prior to the Scheduled Standstill Expiration Date does
not necessarily mean that the item so ordered will be provided prior to
such date).
8. Green Tree Purchase. The Banks will consent to the Disposition
made by Marquise to Green Tree Financial Servicing Corporation ("Green
Tree") of Property owned by Marquise pursuant to the same or substantially
the same terms and conditions as are set forth in the draft of the Green
Tree Contract Purchase Agreement ("Draft Purchase Agreement") faxed from
Green Tree to Marquis on August 18, 1999; provided, however, that (i) such
disposition is made prior to any Standstill Termination, (ii) such
Disposition is for a gross cash consideration payable entirely at closing
to Marquis of not less than 103% of face principal amount of the Contracts
(as defined in the Draft Purchase Agreement) and (iii) any guaranty or
other support by the Borrower or any Subsidiary for Marquise's obligations
with respect to such Disposition shall be on terms and conditions
satisfactory to the Banks.
9. Intercompany Payables between ▇▇▇▇▇▇ and Diamond Exteriors, Inc.
Diamond Exteriors, Inc. ("Exteriors") purchases goods from ▇▇▇▇▇▇ in the
ordinary course of its business and such purchases give rise to
intercompany payables. A Standstill Termination shall be deemed to occur
if Exteriors' intercompany payables to ▇▇▇▇▇▇ remain unpaid for a period
longer than what is generally now the case for Exteriors' other accounts
payable, and in no event shall such intercompany payables remain unpaid
longer than what generally is now the case for Exteriors' accounts payable
to its other third party material vendors.
10. Legal Expense. No later than the Scheduled Standstill
Termination Date, the Borrower must pay in full all of the Agent's invoices
and legal expenses for work done in connection with the credit arrangements
contemplated by the Credit Agreement.
11. New Borrowing Base Reporting. The Agent conducted a field
audit on the Collateral in September of this year (the "Field Audit").
Based on the information gained from the Field Audit, the Agent has
determined that the Borrower has been inaccurately computing and reporting
the Borrowing Base. No later than October 12, 1999, the Borrower must
accurately compute and report its Borrowing Base so as to eliminate the
inaccuracies revealed by the Field Audit.
12. Compliance With Forbearance Agreement. The Borrower must
continue to comply with all the terms, conditions and provisions of the
Forbearance Agreement as modified by this letter. Without limiting the
generality of the foregoing, the Borrower must continue to comply with the
Borrowing Base requirements as modified by the Forbearance Agreement and
this letter (it being understood and agreed that modifications of such
Borrowing Base requirements may be made as a result of the information
gained from the Field Audit).
13. Miscellaneous. Except as specifically modified by this letter,
the terms, conditions and provisions of the Forbearance Agreement remain in
full force and effect.
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Dated as of October 1, 1999.
Very truly yours,
▇▇▇▇▇▇ Trust and Savings Bank, individually
and as Agent
By
Its Vice President
LaSalle Bank, National Association
By
Its________________________________________
Bank of America, N.A.
By
Its_______________________________________
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The undersigned accept and agree to the above letter.
Diamond Home Services, Inc.
By
Its______________________
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Material Subsidiaries' Consent
The undersigned, being all the Material Subsidiaries of the Borrower, have
heretofore executed and delivered to the Banks a Guaranty and certain other
Collateral Documents and hereby consent to the above Agreement and confirm that
their Guaranty and such Collateral Documents and all of the undersigneds'
obligations thereunder remain in full force and effect. The undersigned further
agree that the consent of the undersigned to any further modifications in the
credit arrangements contemplated by the Credit Agreement shall not be required
as a result of this consent having been obtained. Each Material Subsidiary
shall take such action as the Borrower is required by this letter to cause such
Material Subsidiary to take, and shall refrain from taking such action as the
Borrower is required by the above Agreement to prohibit such Material Subsidiary
from taking.
▇▇▇▇▇▇ Southeastern Corporation
By
Its___________________________
Foreline Security Corporation
By
Its___________________________
Diamond Exteriors, Inc.
By
Its___________________________
Marquise Financial Services, Inc.
By
Its___________________________
▇▇▇▇▇▇ Southeastern Realty, Inc.
By
Its___________________________
Schedule One
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