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April 29, 2004
SRC Holdings Corporation
0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx, President
Re: Securities Purchase Agreement, dated February 13, 2004 (the "Purchase
Agreement"), by and among Decorize, Inc. (the "Company"), SRC Holdings
Corporation ("SRC") and Quest Capital Alliance, L.L.C.
Ladies and Gentlemen:
Pursuant to Section 2.05 of the Purchase Agreement, SRC agreed to guaranty
a $1,000,000 line of credit for the Company. In consideration for such guaranty,
the Company agreed to issue SRC warrants for up to 1,000,000 shares of Company
common stock, on the basis of one share for each dollar drawn on the line of
credit.
The Company and SRC have determined that it is in their respective best
interests to have the Company obtain a short-term line of credit from SRC
directly at this time, rather than to obtain a line of credit, guaranteed by
SRC, from a third party lender. However, SRC has agreed that it will guaranty a
third party line of credit, in accordance with Section 2.05 of the Purchase
Agreement, if the Company decides to obtain one in the future. Accordingly, this
letter agreement shall confirm that the parties have agreed as follows (unless
otherwise specifically defined herein, capitalized terms in this letter
agreement shall have the meaning given to them in the Purchase Agreement):
1. SRC will provide to the Company, on an interim basis, a $500,000
line of credit (the "Credit Facility"), which will be evidenced by the
Secured Line of Credit Promissory Note and the Security Agreement attached
hereto as Exhibit A and Exhibit B, respectively. The Credit Facility is
being offered in satisfaction of SRC's obligations under Section 2.05 of
the Purchase Agreement, and subject to the closing of the Credit Facility,
the Company agrees to issue Contingent Warrants to SRC, on the terms set
forth in Section 2.05 of the Purchase Agreement, upon the Company's
subsequent draws from the Credit Facility; provided, that the Company will
only be obligated to issue warrants for an aggregate 500,000 Warrant
Shares in connection with the Credit Facility. SRC and the Company
acknowledge and agree that the value to be attributed to the 500,000
Contingent Warrants issuable hereunder shall be [$10,000] in the
aggregate.
2. If the Company obtains another credit facility from a third party
in the future, including any that is used to retire the Credit Facility,
then SRC will continue to be obligated to provide a guaranty of such line
of credit, subject to the terms of Section 2.05 of the Purchase Agreement.
In connection with any such line of credit, the Company will be obligated
to issue Contingent Warrants to SRC as described in the Purchase
Agreement; provided, however, that (a) the number of Contingent Warrants
to be issued with respect to the first $500,000 drawn against such new
facility shall be reduced by the number of Contingent Warrants issued with
respect to the Credit Facility, (b) the Company shall only be obligated to
issue Contingent Warrants in excess of that provided in subparagraph (a)
if the Company draws over $500,000, and (c) any Contingent Warrants issued
with respect to the Credit Facility shall count toward the 1,000,000 limit
on the aggregate number of Warrant Shares to be issued by the Company
under Section 2.05 of the Purchase Agreement.
SRC Holdings Corporation
April 29, 2004
Page 2
3. This letter agreement constitutes the entire agreement between
the undersigned and merges all prior and contemporaneous communications
with respect to the subject matter hereof. This letter agreement may not
be amended or otherwise modified except by an instrument in writing signed
by the parties hereto. Except for the payment of a monthly fee described
above, each party will bear its own expenses in connection with the
transactions contemplated hereby, whether or not a transaction is
consummated. This letter agreement will be governed by and construed in
accordance with the laws of the State of Delaware, but without giving
effect to applicable principles of conflicts of law to the extent that the
application of the laws of another jurisdiction would be required thereby.
This letter agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become
effective when one or more such counterparts have been executed by each of
the parties and delivered to the other parties.
If the foregoing proposal is satisfactory to you, will you please so
indicate by signing this letter or a counterpart in the spaces provided below
and returning it to us. If you have not signed and returned this letter on or
before the end of the business day on April 30, 2004, this letter shall expire
and be of no further force and effect.
Sincerely,
/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
President
ACKNOWLEDGED AND AGREED:
SRC HOLDINGS CORPORATION
By: /s/ Xxxx X. Xxxxx Date: 4-29-04
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Xxxx X. Xxxxx, President
