1
Exhibit 10.58
LOAN AGREEMENT
between
Xxxxxx Xxxxxxxxxx XX,
Xxxxxxxxx,
Xxxxxxx,
hereinafter: the "Lender" -
and
Decora Incorporated,
Fort Xxxxxx,
New York, USA
hereinafter: the "Borrower" -
WHEREAS, Decora Industries, Inc. holds 100% of the shares of Decora
Incorporated and of Decora Industries Deutschland GmbH which in turn is the
owner of approximately 75% of all outstanding shares of the Lender and the
Parties agree that their business relationship shall be at arm's length at all
times;
WHEREAS, both the Borrower and the Lender are in the business of producing
and distributing self-adhesive decorative covering; Borrower currently produces
Con-Tact for distribution by Rubbermaid and Con-Tact is a market leader as a
surface covering in the United States; Lender is the manufacturer and
distributor of other decorative covering products in Europe and elsewhere which
currently have no significant distribution in the U.S.;
WHEREAS, the Lender and the Borrower intend to deepen their cooperation
with regard to Lender's establishing of a distribution network in the United
States for its self-adhesive decorative covering and by utilizing the Con-Tact
name outside of North America, thereby realizing substantial synergies for the
mutual benefit of the Lender and the Borrower;
WHEREAS, the Borrower intends to acquire from Rubbermaid Incorporated
(hereinafter, "Rubbermaid") the assets of Rubbermaid's decorative coverings
division which include trademarks (including the Con-Tact brand), retail shelf
space and fixed assets (hereinafter: the "Rubbermaid Acquisition") and the
Lender wishes to participate directly in the Rubbermaid
2
Acquisition by (i) arranging for Borrower to distribute Lender's products using
Rubbermaid's distribution channels in over 15,000 outlets in the United States
and (ii) by receiving world-wide rights to the Con-Tact brand outside of North
America which will give the Lender access to markets where a popular lower cost
alternative to Lender's d-c-fix brand is required);
WHEREAS, the Lender has substantial funds immediately available under
existing of credit and the Borrower requires funds on short notice in order to
be able to consummate the Rubbermaid Acquisition, the Borrower being ready to
pay interest at rates above the rates payable by the Lender under the Lender's
existing lines of credit;
WHEREAS, the interim financing is intended to be replaced by bank or other
third party financing incurred by the Borrower no later than 3 years from the
Drawdown Date (as defined);
NOW it is hereby agreed as follows:
1. LOAN
The Lender hereby grants to the Borrower a loan in the amount of
DM 18,000,000.
2. DRAWDOWN
The loan can be drawn by the Borrower upon satisfaction of all payment
conditions set forth in clause 8 hereof namely the date the last payment
condition set forth in clause 8 hereof has been satisfied (the "Drawdown Date").
3. PURPOSE OF USE
The loan is made available to the Borrower exclusively for the purpose of
financing the purchase price for the Rubbermaid Acquisition including ancillary
transaction costs. Any use of the loan proceeds for other purposes (including
passing on the loan proceeds to entities affiliated to the Borrower) shall be
expressly excluded. Upon request, the use of the loan proceeds will be
demonstrated to the Lender by the Borrower.
4. INTEREST RATE
The interest rate will be determined by the Parties on the Drawdown Date
based on the effective interest rate payable by the Lender on the refinancing
loans incurred by the Lender plus an effective margin of 0.5 percentage points
p.a.
Interest is due and payable in arrears at the end of the Loan Period.
3
5. REPAYMENT
The loan is granted for a fixed period ending on the 3rd anniversary of
the Drawdown Date (the "Loan Period"). The statutory rights of either party to
termination for cause shall remain unaffected. The Borrower shall be entitled to
premature partial or total re- payments; no prepayment penalties apply, except
to the extent the Lender shall become subject to prepayment penalties on the
refinancing loans he has incurred.
6. COLLATERAL
The Borrower undertakes to provide the following collateral:
- First security interest in the machinery, equipment and fixtures of
Borrower (the "Collateral").
7. COVENANTS
During the entire Loan Period, to keep the Lender informed on the
development of its financial status, the Borrower will provide the Lender with
- audited annual accounts of the Borrower and Decora Industries, Inc.
no later than 105 days after the end of any business year;
- quarterly reports of the Borrower and Decora Industries, Inc.
including balance sheets and profit and loss statements for the
respective quarter no later than 50 days after the end of the
respective quarter.
8. PAYMENT CONDITIONS
Payment of the Loan Principal to the Borrower is subject to satisfaction
of the following conditions:
- signing of a Purchase Agreement between the Borrower and Rubbermaid
regarding the Rubbermaid Acquisition;
- valid grant of first priority security interests in the Collateral;
- signing of a Marketing and Distribution Agreement regarding
establishment of U.S. distribution for products of the Lender using
distribution channels in the U.S. to be acquired by the Borrower in
the course of the Rubbermaid Acquisition;
4
- signing of a Licensing Agreement which gives the Lender the right to
world-wide use of the Con-Tact brand outside North America;
9. APPLICABLE LAW; PLACE OF VENUE
This Agreement is exclusively subject to German law without giving effect
to principles of conflicts of laws; the agreements referred to in clause 8 will
be subject to the law stipulated therein. Any and all claims under this
Agreement are subject to the exclusive jurisdiction of the courts of Stuttgart.
10. MISCELLANEOUS
Except as stipulated herein, there are no side agreements to this
Agreement. Any amendments to this Agreement must be made in writing in order to
become valid.
In the event that any provision hereof shall be held to be invalid or
ineffective, the remaining provisions hereof shall be unaffected thereby. The
parties undertake to replace the invalid or ineffective provision by such valid
and effective provision which most closely corresponds to the economic purpose
of the invalid or ineffective provision. The same shall apply mutatis mutandis
with regard to supplementary interpretation of this Agreement.
Dated: April 28, 1998
/s/ Xxxxxx Xxxxxxxxxx AG /s/ Decora Incorporated
--------------------------------- ----------------------------------------
Lender Borrower
