EXHIBIT 10.5
SECURED PROMISSORY TERM NOTE
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$700,000.00 New York, New York
April 6, 1998
FOR VALUE RECEIVED, U. S. REMODELERS, INC., a Delaware corporation
("Borrower") with a principal place of business at 0000 Xxxx Xxxxxxxxxxx Xxxx,
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Suite 900 East, Dallas, Texas 75247, promises to pay to the order of FINOVA
CAPITAL CORPORATION, a Delaware corporation (" FINOVA "), at its offices at 111
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West 40th Street, New York, New York 10018, or at such other place or places as
FINOVA may from time to time designate in writing, the principal sum of Seven
Hundred Thousand Dollars ($700,000.00), plus interest in the manner and upon the
terms and conditions set forth below. This Secured Promissory Term Note
("Note") incorporates that certain Security Agreement of even date between the
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FINOVA and Borrower (the "Security Agreement").
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1.0 SCHEDULE OF PAYMENTS; RATE AND PAYMENT OF INTEREST; PREPAYMENT; FEES.
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1.1 This Note shall be payable as follows:
a. Twenty-three (23) equal successive monthly installments of
principal of Eight Thousand Three Hundred Thirty Three Dollars and Thirty Three
Cents ($8,333.33) each on the first day of each month, beginning May 1, 1998,
and continuing through and including March 1,2000; and
b. A final installment of Five Hundred and Eight Thousand Three
Hundred Thirty Three Dollars and Forty One Cents ($508,333.41) on the lst day of
April, 2000, together with accrued interest on the principal balance from time
to time remaining unpaid, payable monthly on the first day of each and every
month, beginning May 1, 1998, and all other sums, fees, charges, and expenses
due FINOVA in connection herewith.
1.2 Prepayment may be made under this Note in whole but not in part,
subject to the termination fee set forth as follows ("Termination Fee"): (i)
five (5%) percent of the amount prepaid if such early termination occurs on or
prior to the first anniversary of the date hereof; and (ii) one (1%) percent of
the amount prepaid if such early termination occurs within the first nine (9)
months after the first anniversary of the date of this Note; provided that such
prepayment is preceded by not less than five (5) business days prior written
notice to FINOVA and accompanied by all accrued but unpaid interest and the full
amount of the applicable Termination Fee. Notwithstanding anything herein to
the contrary, in the event the Note is terminated by Borrower, by FINOVA or by
any other person at any time, then the entire unpaid principal balance of this
Note, together with all accrued and unpaid interest hereon and the full amount
of the applicable Termination Fee, shall become immediately due and payable in
full on the effective date of such termination, without presentment, notice or
demand of any kind.
1.3 Interest shall be computed on the basis of a 360-day year for the
actual number of days elapsed, and shall be at the rate of two and one hundred
twenty five thousandths of one (2.125 %) percentage points above the Prime Rate
(as hereafter defined), computed on the
basis of a 360-day year; provided, however, upon the occurrence and during the
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continuance of an event of default (as hereinafter defined), interest shall
accrue on the outstanding principal balance of this Note at a default rate (the
"Default Rate") of four and one hundred and twenty-five thousandths of one
(4.125%) percentage points above the Prime Rate, and shall be payable on demand.
In the event that the Borrower and FINOVA do not close that certain credit
facility referenced in the proposal letter between Xxxxxxxx and FINOVA dated
March 17, 1998 by May ___, 1998, the interest under this Note shall be at the
rate of three (3%) percentage points above the Prime Rate, and five (5%)
percentage points above the Prime Rate upon the occurrence and during the
continuance of an Event of Default. "Prime Rate" means, for any day, the rate of
interest per annum (over a year of 360 days) published in the "Money Rates"
section of The Wall Street Journal, from time to time, as its "base rate" (or
any successor thereto) in effect on such day. The Prime Rate is not necessarily
the lowest rate published in The Wall Street Journal. As of the date of this
Note, the Prime Rate is eight and one-half of one percent (8.50%) per annum. The
applicable rate of interest assessed hereunder will be increased or decreased
from time to time hereafter, in an amount equal to any increase or decrease
hereafter published by The Wall Street Journal in the Prime Rate. A change in
the Prime Rate shall be effective on the first day following such change.
1.4 At the closing of this transaction, Borrower shall pay to FINOVA
a closing fee in an amount equal to Ten Thousand Five Hundred Dollars
($10,500.00) which shall be deemed fully earned on the date such payment is due.
1.5 The Borrower shall pay an auditor's fee in the amount of Five
Hundred Dollars ($500.00) per examiner per day together with all reasonable out-
of-pocket expenses associated with audits, such fee shall not exceed an amount
of Ten Thousand Dollars ($10,000.00) unless an Event of Default shall occur
under the Security Documents.
2.0 EVENTS OF DEFAULTS; REMEDIES.
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2.1 The occurrence of any one of the following events shall
constitute a default by Borrower under this Note (hereinafter an "Event of
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Default"): (a) if Borrower fails to pay to FINOVA an installment of principal or
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interest hereunder when due and the continuance thereof for a period of five (5)
days after notice from FINOVA; (b) if Borrower fails to pay any of its
Obligations (as defined in the Security Agreement) to FINOVA when due and
payable or declared due and payable and the continuance thereof for a period of
five (5) days after notice from FINOVA; (c) if Borrower fails or neglects to
perform, keep or observe any term, provision, covenant, warranty or
representation contained in the Security Documents (other than as referred to in
(a) or (b) of this paragraph), which is required to be performed, kept or
observed by Borrower or if a default occurs under the Security Agreement, and
the continuance thereof for a period of fifteen (15) days after notice from
FINOVA; or (d) the occurrence of a default or an event of default under any
Security Agreement, instrument or document heretofore, now or at any time or
times hereafter delivered to FINOVA by Borrower or by any guarantor of part or
all of Borrower's Obligations to FINOVA.
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2.2 Upon the occurrence of any Event of Default hereunder, in
addition to FINOVA's right to charge interest on the Obligations at the Default
Rate: (a) at the option of FINOVA, the entire unpaid amount of all of the
Obligations, including without limitation the Termination Fee, shall become
immediately due and payable without demand, notice or legal process of any kind;
(b) FINOVA may, at its option, without demand, notice or legal process of any
kind, exercise any and all rights and remedies granted to it by the Security
Agreement or by any other Security Agreement now or hereafter existing between
FINOVA and Borrower or between FINOVA and any guarantor of part or all of
Borrower's liabilities to FINOVA; and (c) FINOVA may at its option exercise from
time to time any other rights and remedies available to it under the Uniform
Commercial Code or other law of the State of Arizona.
2.3 The remedies of FINOVA as provided herein and in the Security
Agreement shall be cumulative and concurrent, and may be pursued singularly,
successively, or together, at the sole discretion of FINOVA. No act of omission
or commission of FINOVA, including specifically any failure to exercise any
right, remedy or recourse, shall be deemed to be a waiver or release of the
same, such waiver or release to be effected only through a written document
executed by FINOVA and then only to the extent specifically recited therein. A
waiver or release with reference to any one event shall not be construed as
continuing, as a bar to, or as a waiver or release of, any subsequent right,
remedy or recourse as to a subsequent event.
3.0 GENERAL PROVISIONS.
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3.1 Borrower warrants and represents to FINOVA that Borrower has used
and will continue to use the loans and advances represented by this Note solely
for proper business purposes, and consistent with all applicable laws and
statutes.
3.2 This Note is secured by the Collateral described in the Security
Agreement.
3.3 Borrower waives presentment, demand and protest, notice of
protest, notice of presentment and all other notices and demands in connection
with the enforcement of FINOVA's rights hereunder, except as specifically
provided and called for by this Note, and hereby consents to, and waives notice
of, the release, addition, or substitution, with or without consideration, of
any collateral or of any person liable for payment of this Note. Any failure of
FINOVA to exercise any right available hereunder or otherwise shall not be
construed as a waiver of the right to exercise the same or as a waiver of any
other right at any other time.
3.4 If this Note is not paid when due or upon the occurrence of an
Event of Default, Borrower further promises to pay all costs of collection,
foreclosure fees, attorneys fees and expert witness fees incurred by FINOVA,
whether or not suit is filed hereon, and the fees, costs and expenses as
provided in the Security Agreement.
3.5 The contracted for rate of interest of the loan contemplated
hereby, without limitation, shall consist of the following: (i) the interest
rate set forth on this Note, calculated and applied to the principal balance of
this Note in accordance with the provisions of this Note; (ii)
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interest after an Event of Default, calculated and applied to the amounts due
under this Note in accordance with the provisions hereof; and (iii) all
Additional Sums (as herein defined), if any, Xxxxxxxx agrees to pay an effective
contracted for rate of interest which is the sum of the above referenced
elements. All examination fees, attorneys fees, expert witness fees, letter of
credit fees, collateral monitoring fees, closing fees, facility fees,
Termination Fees, other charges, goods, things in action or any other sums or
things of value paid or payable by Borrower, whether pursuant to this Note, the
Security Agreement or any other documents or instruments in any way pertaining
to this lending transaction, or otherwise with respect to this lending
transaction, that under any applicable law may be deemed to be interest with
respect to this lending transaction, for the purpose of any applicable law that
may limit the maximum amount of interest to be charged with respect to this
lending transaction (collectively, the "Additional Sums"), shall be payable by
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Borrower as, and shall be deemed to be, additional interest and for such
purposes only, the agreed upon and "contracted for rate of interest" of this
lending transaction shall be deemed to be increased by the rate of interest
resulting from the inclusion of the Additional Sums.
3.6 It is the intent of the parties to comply with the usury law of
the State of Arizona (the "Applicable Usury Law"). Accordingly, it is agreed
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that notwithstanding any provisions to the contrary in this Note, or in any of
the documents securing payment hereof or otherwise relating hereto, in no event
shall this Note or such documents require the payment or permit the collection
of interest in excess of the Maximum Interest Rate, then in any such event (1)
the provisions of the paragraph shall govern and control, (2) neither Borrower
nor any other person or entity now or hereafter liable for the payment hereof
shall be obligated to pay the amount of such interest to the extent that it is
in excess of the Maximum Interest Rate, (3) any such excess which may have been
collected shall be either applied as a credit against the then unpaid principal
amount hereof or refunded to Borrower, at FINOVA's option, and (4) the effective
rate of interest shall be automatically reduced to the Maximum Interest Rate.
It is further agreed, without limiting the generality of the foregoing, that to
the extent permitted by the Applicable Usury Law; (x) all calculations of
interest which are made for the purpose of determining whether such rate would
exceed the Maximum Interest Rate shall be made by amortizing, prorating,
allocating and spreading during the period of the full stated term of the loan
evidenced hereby, all interest at any time contracted for, charged or received
from Borrower or otherwise in connection with such loan; and (y) in the event
that the effective rate of interest on the loan should at any time exceed the
Maximum Interest Rate, such excess interest that would otherwise have been
collected had there been no ceiling imposed by the Applicable Usury Law shall be
paid to FINOVA from time to time, if and when the effective interest rate on the
loan otherwise fall below the Maximum Interest Rate, until the entire amount of
interest which would otherwise have been collected had there been no ceiling
imposed by the Applicable Usury Law has been paid in full. Borrower further
agrees that should the Maximum Interest Rate be increased at any time hereafter
because of a change in the Applicable Usury Law, then to the extent not
prohibited by the Applicable Usury Law, such increases shall apply to all
indebtedness evidenced hereby regardless of when incurred; but, again to the
extent not prohibited by the Applicable Usury Law, should the Maximum Interest
Rate be decreased because of a change in the Applicable Usury Law, such
decreases shall not apply to the indebtedness evidenced hereby regardless of
when incurred.
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3.7 FINOVA may at any time transfer this Note and FINOVA's rights in
any or all collateral securing this Note, and FINOVA thereafter shall be
relieved from all liability with respect to such collateral arising after the
date of such transfer.
3.8 This Note shall be binding upon Borrower and its legal
representatives, successors and assigns. Wherever possible, each provision of
this Note shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Note shall be prohibited by or
invalid under such law, such provision shall be severable, and be ineffective to
the extent of such prohibition or invalidity, without invalidating the remaining
provision of this Note.
THIS NOTE HAS BEEN DELIVERED FOR ACCEPTANCE BY FINOVA IN PHOENIX, ARIZONA
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ARIZONA, AS THE SAME
MAY FROM TIME TO TIME BE IN EFFECT, INCLUDING, WITHOUT LIMITATION, THE UNIFORM
COMMERCIAL CODE AS ADOPTED IN ARIZONA. BORROWER HEREBY (i) IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN MARICOPA COUNTY,
ARIZONA OVER ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING
FROM OR RELATED TO THIS NOTE; (ii) WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON BORROWER, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
MESSENGER, CERTIFIED MAIL OR REGISTERED MAIL DIRECTED TO BORROWER AT THE ADDRESS
SET FORTH BELOW AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE
EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN
POSTED TO BORROWER'S ADDRESS; (iii) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
BORROWER MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING; (iv) AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW; (v) AGREES NOT TO INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST FINOVA
OR ANY OF FINOVA'S DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY,
CONCERNING ANY MATTER ARISING OUT OF OR RELATING TO THIS NOTE IN ANY COURT OTHER
THAN ONE LOCATED IN MARICOPA COUNTY, ARIZONA; AND (vi) IRREVOCABLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION ARISING UNDER OR IN CONNECTION
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WITH THIS NOTE. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR IMPAIR FINOVA'S RIGHT
TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR FINOVA'S RIGHT TO BRING
ANY ACTION OR PROCEEDING AGAINST BORROWER OR BORROWER'S PROPERTY IN THE COURTS
OF ANY OTHER JURISDICTION.
U.S. REMODELERS, INC.
a Delaware corporation
By: /s/ Xxxxxx X.Xxxxx
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Xxxxxx X. Xxxxx, President
"Borrower"
Federal Taxpayer Identification
Number: 00-0000000
Address: 0000 Xxxx Xxxxxxxxxxx Xxxx
Xxxxx 000 Xxxx
Xxxxxx, Xxxxx 00000
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