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$600,000
CREDIT AGREEMENT
between
BH FUNDING, LLC
and
INTERIORS, INC.
Dated February 7, 1997
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CREDIT AGREEMENT
THIS AGREEMENT is made as of February 7, 1997, by and between BH
Funding, LLC, a Delaware Limited Liability Company (the "Lender"), and
Interiors, Inc., a Delaware corporation (the "Borrower").
SECTION 1. DEFINITIONS
1.1. Definitions. As used in this Agreement, the following terms
have the respective meanings set forth below:
"Affiliate" of a Person shall mean any Person controlling, controlled
by, or under common control with, such person.
"Bankruptcy Law" shall mean Title 11 of the U.S. Code, as in effect
from time to time, or any similar Federal or state law for the relief of
debtors.
"Borrowing Date" shall mean the date of any borrowing by the
Borrower pursuant hereto.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required by law to close in New York
City.
"Debt" shall mean any indebtedness, contingent or otherwise, of the
Borrower, including, without limitation, (i) indebtedness evidenced by
guarantees or in effect guarantees by the Borrower of Debt of any other Person,
(ii) indebtedness evidenced by notes, debentures, bonds or similar instruments
or letters of credit, (iii) indebtedness representing the deferred and unpaid
balance of the purchase price of any property or interest therein and
obligations of the Borrower under any agreement to lease, or lease of, any real
or personal property in each case which, in accordance with generally accepted
accounting principles then in effect, appears as a liability upon a balance
sheet of the Borrower, and (iv) obligations of the Borrower under interest rate
swaps, caps, collars, calls and similar arrangements, and foreign currency
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entered into in respect of any indebtedness or obligations.
"Default" shall mean any event which, with the giving of notice or
lapse of time or both, would constitute an Event of Default.
"Event of Default" shall have the meaning assigned to it in
Section 6.1.
"Governmental or Regulatory Body" means any government or political
subdivision thereof, whether federal, state, county, local or foreign, or any
agency, authority or instrumentality of any such government or political
subdivision.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"Loan" shall have the meaning assigned to it in Section 2.1.
"Material Adverse Effect" or "Material Adverse Change" means any change
or changes or effect or effects that individually or in the aggregate are or may
reasonably be expected to be materially adverse to (a) the business or the
assets, operations, income, prospects or conditions (financial or otherwise) of
the Borrower or its Subsidiaries or (b) the ability of the Borrower to perform
its obligations under this Agreement.
"Note" shall have the meaning assigned to it in Section 2.2.
"Person" shall mean an individual, a corporation, a partnership, a
joint venture, a firm, an enterprise, a trust, an unincorporated organization, a
government or any agency or political subdivision thereof.
"Tax" or "Taxes" mean all taxes, charges, fees, levies or other
assessments imposed by any federal, state, local or foreign Taxing
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Authority, including, without limitation, gross income, gross receipts, income,
capital, excise, property (tangible and intangible), sales, transfer, value
added, employment, payroll and franchise taxes and such terms shall include any
interest, penalties or additions attributable to or imposed on or with respect
to such assessments.
"Termination Date" shall mean April 30, 1998.
SECTION 2. AMOUNT AND TERMS OF LOAN COMMITMENT AND LOANS
2.1 The Loan Commitment. Subject to the terms and conditions contained
in Section 5 of this Agreement, the Lender agrees to make direct payments on
behalf of the Borrower, to the Borrower's creditors(individually, a "Creditor
Payment"; collectively, the "Creditor Payments") on a twice monthly basis for a
period of one (1) year from the date hereof (the "Loan Commitment Period") in
the aggregate principal amount of $600,000(the "Loan Commitment"). The Creditor
Payments will begin as of the date hereof and shall continue on a monthly basis
until the Termination Date. The Creditor Payments shall be made by Lender on
behalf of Borrower, directly to Borrower's creditors in such amounts and during
such monthly periods as delineated in the Interiors Creditor Repayment Schedule
(the "Schedule"), attached hereto as Exhibit A.
2.2 The Note. The Loans made by the Lender shall be evidenced by a
promissory note of the Borrower substantially in the form of Exhibit B, with
appropriate insertions, which shall be payable to the order of the Lender and
shall represent the obligation of the Borrower to pay the amount of the Loan
Commitment of the Lender. The date and amount of each Loan made by the Lender
and each payment of principal with respect thereto will be endorsed by the
Lender on the schedule annexed to and constituting a part of the Note, which
endorsement, absent manifest error, shall constitute prima facie evidence of the
accuracy of the information endorsed. The Note shall (a) be dated the date
hereof, (b) be stated to mature on April 30, 1998 (the "Repayment Date") and (c)
bear interest for the period from the date of each Loan until paid in full on
the unpaid principal amount thereof from time to time outstanding at the rates
prescribed in Section 2.6.
2.3 Repayment of Decor Notes. Borrower shall within
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three (3) business days from the date hereof, utilize a portion of the proceeds
of the Loan from Lender to repay in full all of its' obligations under those
certain Promissory Notes (the "Decor Notes"), entered into between Borrower and
Decor, each dated as of January 14, 1997, the aggregate loaned amount of which
totals one hundred eighty three thousand dollars ($183,000). Failure to repay
the Decor Notes in accordance with this Section 2.3 shall be deemed an event of
default and shall accelerate the Repayment Date, as defined in the Note, to
February , 1997. The remainder of the proceeds of the Loan shall be utilized
in accordance with the terms of the Schedule.
2.4 Procedure for Borrowing. Borrower may borrow under the Loan
Commitment in accordance with the Schedule on a monthly basis during the Loan
Commitment Period, provided that the borrowing is substantially in accordance
with the Schedule.
2.5 Optional and Mandatory Prepayment. (a) The Borrower may, at its
option, prepay the Note without premium or penalty, in whole or in part, upon at
least two Business Day's prior notice to the Lender, specifying the date and
amount of prepayment. Such notice shall be irrevocable and the payment amount
specified in such notice shall be due and payable on the date specified.
(b) In the event that the Borrower shall receive proceeds
from the exercise of any of Borrower's Common Stock or Preferred Stock
Purchase Warrants (collectively the "Warrants") currently issued and outstanding
as of the date hereof, the net cash proceeds of any such exercise (after
allowance for any federal, state and local income taxes payable with respect to
such exercise of the Warrants) shall be applied by the Borrower as a mandatory
prepayment of, first any accrued and unpaid interest on the principal amount of
the Note as of the Repayment Date, and second, the outstanding principal amount
of the Note.
2.6 Interest Rates. (a) The Loans shall bear interest (calculated
on the basis of a 360-day year for the actual number of days elapsed) on the
unpaid principal amount thereof at a rate per annum equal to 15%, payable in
full on the Repayment Date.
(b) If all or a portion of the principal amount of any of the
Loans shall not be paid when due (whether at the stated
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maturity, by acceleration or otherwise), such overdue principal amount shall
bear interest at the rate of 20% per annum, to the extent permitted by law.
2.7 Additional Payments. If all of the debts of Borrower, as
delineated in the Schedule, are extinguished, and there are funds still
available from the Loan Commitment, then those funds may be utilized for other
Creditor Payments, arising in the ordinary course of business, of Borrower,
without prior approval of Lender. Payments for any purpose other than Creditor
Payments may not be made without the prior approval of Lender.
2.8 Payment. All payments made by the Borrower to the Lender shall be
made in federal or other immediately available funds in lawful money of the
United States for credit, not later than 12:00 noon, New York time, on the day
when due, or in any case by such other reasonable method or at such other
address as the Lender shall have from time to time notified the Borrower.
2.9 Maturity of Loans. The outstanding principal amount of the
Loans shall be due and payable on April 30, 1998.
SECTION 3. COVENANTS
3.0 Pledge Agreement. As a condition to the execution and delivery
of this Agreement by Lender, Borrower shall execute and deliver that certain
Pledge Agreement, pledging certain assets to secure Borrower's obligations
hereunder, a form of which is attached hereto as Exhibit C.
3.1 Payment of Note. The Borrower shall pay the principal of,
and interest on, the Note on the dates and in the manner provided in the Note.
3.2 Financial and Business Information. The Borrower covenants and
agrees that so long as the Loan Commitment shall be in effect or any Debt under
the Note shall be outstanding, the Borrower will deliver to the Lender:
(a) as soon as available, but not later than 120 days after
the close of each fiscal year of the Borrower, the
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consolidated balance sheet of the Borrower as at the end of such fiscal year and
the related consolidated statements of income and retained earnings and changes
in financial position of the Borrower for such fiscal year, setting forth in
each case in the comparative form the figures for the previous year, reported on
by independent certified public accountants of nationally recognized standing
selected by the Borrower;
(b) promptly on their becoming available, any such other
financial data, information or reports as from time to time may be furnished
to all stockholders of the Borrower in their capacity as stockholders.
3.3 Notice of Default. If any one or more events occur which
constitute a Default or an Event of Default, upon obtaining knowledge thereof,
the Borrower will forthwith give notice to the Lender, specifying the nature and
status of the Default or Event of Default.
3.4 Covenants of the Borrower. The Borrower covenants and agrees
that from and after the date hereof:
(a) The Borrower and its Subsidiaries shall continue to
conduct their business and affairs in the ordinary course of business and shall
not enter into any agreement, commitment, instrument or contract or take any
action out of the ordinary course of business.
SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
the Loans hereunder, the Borrower hereby represents and warrants as follows:
4.1 Organization and Qualification. Each of the Borrower and
its direct and indirect subsidiaries ("Subsidiaries") is a corporation validly
existing and in good standing under the laws of the state of its incorporation,
and has all requisite corporate power and authority to (a) own, lease and
operate its properties and assets as they are now owned, leased and operated and
(b) carry on its business as now presently conducted and as proposed to be
conducted. Each of the Borrower and its Subsidiaries is duly
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qualified to do business in each jurisdiction in which the nature of its
business or properties makes such qualification necessary, except where the
failure to do so would not have a Material Adverse Effect.
4.2. Validity and Execution of Agreement. The Borrower has the
full legal right, capacity and power and all requisite corporate authority and
approval required to enter into, execute and deliver this Agreement and any
other agreement or instrument contemplated hereby, and to perform fully its
respective obligations hereunder and thereunder. The board of directors of the
Borrower has approved the transactions contemplated pursuant to this Agreement
and each of the other agreements required to be entered into pursuant hereto by
the Borrower. This Agreement and such other agreements and instruments have been
duly executed and delivered by the Borrower and each constitutes the valid and
binding obligation of the Borrower enforceable against it in accordance with its
terms, subject to the qualifications that enforcement of the rights and remedies
created hereby is subject to (i) bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting the rights and
remedies of creditors, and (ii) general principals of equity (regardless of
whether such enforcement is considered in a proceedings in equity or at law).
4.3. No Conflict. Neither the execution and delivery of this
Agreement nor the performance by the Borrower of the transactions contemplated
hereby will violate or conflict with (a) any of the provisions of the Articles
of Incorporation or By-Laws of the Borrower; (b) or result in the acceleration
of, or entitle any party to accelerate the maturity or the cancellation of the
performance of any obligation under, or result in the creation or imposition of
any Lien in or upon the assets of the Borrower or constitute a default (or an
event which might, with the passage of time or the giving of notice, or both,
constitute a default) under any contract, (c) to the best of Borrower's
knowledge, any order, judgment, regulation or ruling of any Governmental or
Regulatory Body to which the Borrower is a party or by which any of its property
or assets may be bound or affected or to the best of Borrower's knowledge, with
any provision of any law, rule, regulation, order, judgment, or ruling of any
Governmental or Regulatory Body applicable to the Borrower.
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4.4 Litigation. Except as previously disclosed by Borrower to
Lender or contained in Borrower's filings with the Securities and Exchange
Commission, there are no material outstanding orders, judgments, injunctions,
investigations, awards or decrees of any court, Governmental or Regulatory Body
or arbitration tribunal by which the Borrower or its Subsidiaries, or any of its
securities, assets, properties or business is bound. Except as previously
disclosed by Borrower to Lender, there are no material actions, suits, claims,
legal, administrative or arbitration proceedings pending or, to the best
knowledge of the Borrower, overtly threatened (whether or not the defense
thereof or liabilities in respect thereof are covered by insurance) against or
affecting the Borrower or any Affiliate thereof, or any of its assets or
properties, that, individually or in the aggregate, could, if determined
adversely to the Borrower or such affiliate have a Material Adverse Effect, nor,
to the best knowledge of the Borrower, are there any facts which are likely to
give rise to any such action, suit, claim, investigation or legal,
administrative or arbitration proceeding.
4.5 The Assets. The Borrower owns outright and has good and
marketable title to its assets pledged to Lender as collateral for the Loan.
4.6 Undisclosed Liabilities. To the best of Borrower's knowledge,
the Borrower does not have any material liabilities that is not fully
and adequately reflected or reserved against on the Borrower's financial
statements or covered in full by insurance.
4.7 Survival. All of the representations and warranties of the
Borrower contained herein shall survive the Closing Date until the date upon
which the liability to which any claim relating to any such representation or
warranty is barred by all applicable statutes of limitations.
SECTION 5. CONDITIONS TO ALL LOANS
The obligation of the Lender to make a Creditor Payment is subject to
fulfillment of the following conditions precedent to the satisfaction of the
Lender:
5.1 Representations and Warranties. The representations
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and warranties made by the Borrower in this Agreement and in any certificate,
document or financial or other statement furnished at any time hereunder shall
be true and correct in all material respects unless stated to relate to a
specific earlier date.
5.2 No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date.
SECTION 6. DEFAULTS AND REMEDIES
6.1 Events of Default. "Event of Default" whenever used
herein means any of the following events:
(a) the Borrower defaults in the due and punctual payment of
principal of, interest on, or any other amount owing in respect of, the Note
when and as the same shall become due and payable, and continuance of such
default for a period of 5 Business Days after receipt of notice; or
(b) the Borrower defaults in the performance or observance of any
covenant or agreement of the Borrower in this Agreement or the Note and the
continuance of such default for a period of 30 calendar days after there has
been given to the Borrower by the Lender a written notice specifying such
default and requiring it to be remedied; or
(c) the Borrower shall (i) allow to exist an uncured judgement
against Borrower in excess of $50,000 for more than thirty (30) days or (ii)
default in the observance or performance of any agreement or condition relating
to any such Debt or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause (immediately or with
the giving of notice or lapse of time or both) any such Debt to become due prior
to its stated maturity; or
(d) the Borrower, either pursuant to or within the meaning
of any Bankruptcy Law: (i) commences a voluntary case, (ii) consents
to the entry of an order for relief against it in an involuntary case, (iii)
consents to the appointment of a Custodian of it or for all or substantially all
of its property, or (iv) makes a general assignment for the benefit of its
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creditors; or
(e) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (i) is for relief against the Borrower in an
involuntary case, (ii) appoints a custodian of the Borrower for any substantial
part of all the property of the Borrower, or (iii) orders the liquidation of the
Borrower; and the order or decree remains unstayed and in effect for 60 days.
The term "Custodian" means any receiver, trustee, assignee, custodian,
liquidator or similar official under any Bankruptcy Law.
6.2 Acceleration of Maturity. If an Event of Default occurs and is
continuing, then and in every such case the Lender may, declare the principal of
the Note to be due and payable immediately and the Loan Commitment to be
terminated, by a notice in writing to the Borrower, and upon any such
declaration the principal of the Note shall become immediately due and payable
and the Loan Commitment shall be terminated.
SECTION 7. MISCELLANEOUS
7.1 Amendments and Waiver. This Agreement and the Note may be amended,
and the terms hereof waived, only by a written instrument signed by the parties
hereto or, in the case of a waiver, by the party waiving compliance.
7.2 Notices. Any notice, demand or delivery pursuant to the provisions
hereof shall be sufficiently given or made if sent by hand, facsimile
transmission or by registered or certified mail, postage prepaid, addressed to
the Lender at 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx or, except as otherwise expressly
provided herein, to the Borrower at 000 Xxxxxxxxxx Xxxxxx, Xx. Xxxxxx, New York,
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery. Any such notice shall be deemed given when so
delivered personally or, if mailed, three days after the date of deposit in the
United States mails or one day following the deposit with a reputable overnight
courier.
7.3 Governing Law. This Agreement shall be governed by,
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and construed in accordance with, the laws of the State of New York without
regard to principles of conflicts of law.
7.4 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Lender, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
7.5 Successors and Assigns. This Agreement and each document and
certificate delivered pursuant thereto shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective successors and
permitted assigns, except that neither the Borrower nor the Lender may assign or
transfer any of its rights under this Agreement or the Note without the prior
written consent of the other.
7.6 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Lender.
7.7 Severability. Any provision of this Agreement or the Note which is
prohibited, invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition, invalidity or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition, invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction or
any other provision of this Agreement or the Note.
7.8 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the agreements, certificates and other documents
delivered pursuant to this Agreement contain the entire agreement among the
parties with respect to the transactions
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described herein, and supersede all prior agreements, written or oral, with
respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
INTERIORS, INC.
By: /s/ Xxx Xxxx
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Xxx Xxxx
President
BH FUNDING, LLC
By: /s/ Xxxxxxxx Xxxx
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Schedule attached to Note date February , 1997, of Interiors, Inc.
payable to the order of BH Funding, LLC
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
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Amount of Principal Unpaid Notation
Date Amount of Loan Paid or Prepaid Principal Balance Total Made By
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