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EXHIBIT 10.51
LINE OF CREDIT NOTE
$1,000,000.00 March 27, 1997
Albany, New York
ON DEMAND, FOR VALUE RECEIVED, the undersigned, DECORA, INCORPORATED, a
Delaware corporation authorized to do business in the State of New York as
DECORA MANUFACTURING, with an office and principal place of business at Xxx Xxxx
Xxxxxx, Xxxx Xxxxxx, Xxx Xxxx 00000 (the "Borrower") promises to pay to the
order of FLEET BANK, a bank organized and existing under the laws of the State
of New York (herein called the "Bank"), at the office of the Bank, 00 Xxxxx
Xxxxxx, Xxxxxx, Xxx Xxxx 00000, or at such other place as may be designated from
time to time by the Bank, the unpaid amount of all sums that have been advanced
to or for the benefit of the Borrower in accordance with the terms hereof, not
to exceed the lesser of (i) ninety (90.0%) of the value of the Borrower's
foreign accounts receivable that are either (a) fully insured through Ex-Im
Bank, or (b) guaranteed by a standby letter of credit, issued in favor of the
Bank, and satisfactory to the Bank in all respects, or (ii) the aggregate sum of
ONE MILLION AND NO/100 DOLLARS ($1,000,000.00), lawful money of the United
States of America, plus interest on the unpaid principal balance computed from
the date hereof, at a per annum rate equal to the "Fleet Bank Prime Rate", based
on a year of 360 days but chargeable on actual days.
As used herein, the following terms shall have the following meanings:
Default Rate - The Fleet Bank Prime Rate, plus two (2.00%) percent.
Event of Default - Any of those events defined as an Event of Default under this
Note or in any other instruments or documents executed in connection with the
Loan.
Fleet Bank Prime Rate - That rate announced from time to time by the Bank as a
reference point for determining interest rates charged on certain loans and is
not necessarily the lowest rate at which the Bank lends. Any change in this
interest rate shall be effective on the date the change in such rate occurs,
whether or not notice has been given to the Borrower.
Loan - The loan of up to $1,000,000.00 by the Bank to the Borrower.
Loan Formula Certificate - that certain loan formula certificate to be delivered
by the Borrower to the Bank at the time of delivery of each Request for Advance,
and in any event, no less frequently than weekly. A form of the Loan Formula
Certificate is attached hereto as Exhibit B.
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Request for Loan Advance - The Notice to be delivered by the Borrower to the
Bank from time to time in the form of Exhibit A attached hereto, in which the
Borrower shall indicate a desire to receive an advance of Loan proceeds.
Security Agreement - that certain Export-Import Bank of the United States
Notification by Insured of Amounts Payable under Multi-Buyer Export Credit
Insurance Policy assignment, pledge and security agreement executed by the
Borrower in favor of the Bank on even date herewith.
When requesting each advance of Loan proceeds from the Bank, the
Borrower shall deliver to the Bank a Request for Loan Advance a Loan Formula
Certificate, and either (i) proof that the intended foreign account buyer has
been added to the Export-Import Bank of the United States policy via an
endorsement acceptable to the Bank, or (ii) a standby letter of credit, issued
in favor of the Bank in the amount of the requested advance, and satisfactory to
the Bank in all respects.
The Borrower agrees to pay principal and interest to the Bank on demand.
In the absence of prior demand, interest shall be payable monthly in arrears
commencing April 1, 1997, and continuing on the first day of each and every
month thereafter. On demand, the entire unpaid balance of principal, plus
accrued interest, on all Loan advances shall be due and payable in any event.
Advances under this Note shall be reflected on the records of the Bank.
Notwithstanding anything to the contrary contained herein, the Bank shall not be
obligated to make any advances under this Note if, in the Bank's sole judgment,
a material adverse change in the Borrower's financial condition has occurred, or
if an Event of Default has occurred hereunder.
Unless cancelled in writing by the Borrower, the Borrower authorizes the
Bank to debit its account at the Bank to make the payments due hereunder, but
such authority shall not relieve the Borrower of its obligation to assure that
payments are made when due. All payments made hereunder shall be applied first
to accrued interest, next to the payments of any fees and expenses of the Bank,
then to principal and finally to any unpaid "Late Charge" as hereinafter
defined.
In the event that any payment shall become overdue for a period in
excess of ten (10) days, a "Late Charge" of five cents ($0.05) for each dollar
($1.00) so overdue will be charged by the Bank for the purpose of defraying the
expense incident to handling such delinquent payment.
Upon the occurrence of one or more events of default as provided below,
the entire disbursed and unpaid principal, and the interest on this Note shall,
upon written demand of the Bank,
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become immediately due and payable without presentment or protest or other
notice or demand, all of which are expressly waived by the Borrower. Any one or
more of the following shall constitute an event of default ("Event of Default"):
(a) Upon the failure of the Borrower to pay any part of the interest or
principal on this Note when due and payable and continuance of such failure for
ten (10) days;
(b) Any event of default pursuant to the terms and conditions
of the Security Agreement;
(c) Any default pursuant to the terms and conditions of any
other loan or credit accommodation by the Bank to the Borrower or
by the Bank to Decora Industries, Inc. after notice and the
expiration of any grace period, if applicable;
(d) Dissolution, cessation of business and/or transfer of a
material part of the assets of the Borrower;
(e) Institution of Bankruptcy proceedings or other proceedings of any
kind for the relief of or collection of debts by the Borrower, including,
without limitation, assignments for the benefit of creditors, appointment of
trustees, receivers or custodians for a material part of the Borrower's assets,
levies upon or attachment of assets, or filing of judgments not fully insured,
bonded or removed within thirty days or a filing of tax liens;
(f) Institution of Bankruptcy proceedings or other proceedings of any
kind for the relief of or collection of debts against the Borrower, including,
without limitation, assignments for the benefit of creditors, appointment of
trustees, receivers or custodians for a material part of the Borrower's assets,
levies upon or attachment of assets, or filing of tax liens; which proceedings,
assignments, appointments, levies or tax liens are not fully bonded or
discharged within ten days of the date of their imposition;
(g) Failure by the Borrower to at all times keep proper books and
records and accounts in accordance with generally accepted accounting principals
consistently applied ("GAAP"), and provide the following financial reporting to
the Bank;
(i) within one hundred fifty (150) days of the end of its
fiscal year, annual certified public accountant audited,
consolidated statements for the Borrower and Decora
Industries, Inc. (which must include a consolidating
statement schedule), all prepared in accordance with
generally accepted accounting
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principles ("GAAP") consistently applied, as well
as copies of the Borrower's 10-k reports;
(ii) within thirty (30) days of each calendar month end,
internally prepared financial statements for the Borrower
for the preceding month, in form acceptable to the Bank,
all prepared in accordance with GAAP;
(iii) within sixty (60) days of the end of each fiscal
quarter, 10Q reports for Decora Industries, Inc.;
(iv) within thirty (30) days of the end of each month, separate
domestic and international account receivable aging
reports concerning the Borrower in form acceptable to the
Bank;
(v) within sixty (60) days after the end of each fiscal
quarter, a compliance letter acknowledged by the Chief
Financial Officers of both the Borrower and Decora
Industries, Inc. concerning those financial covenants
referenced below in subparagraph (h); and
(vi) At the time of submittal of each Request for Advance, but
in no event less frequently than monthly, a Loan Formula
Certificate.
(h) Failure by the Borrower to maintain compliance with the following
financial covenants, as would be shown on the quarterly and fiscal year end
financial statements of the Borrower prepared in accordance with GAAP:
(i) a minimum current ratio of 1.20 to 1.00 during fiscal year
1997; 1.30 to 1.00 during fiscal year 1998; 2.00 to 1.00 during
fiscal year 1999 and thereafter. For the purposes of this Note,
current ratio shall be defined as the ratio of the Borrower's
current assets (including the unused formula loan availability
under that certain $6,000,000.00 revolving line of credit loan
extended by the Bank to the Borrower and that certain
$1,000,000.00 revolving line of credit loan to be extended by the
Bank to the Borrower on even date herewith [collectively the
"Revolver Loans"]) to the Borrower's current liabilities
(excluding the aforementioned Revolver Loans) as would be shown
on each fiscal quarter end and fiscal year end balance sheets of
the Borrower prepared in accordance with GAAP;
(ii) a minimum working capital of Four Million and no/100 Dollars
($4,000,000.00) as at March 31, 1997 through December 31, 1997
and Five Million Five Hundred Thousand and no/100 Dollars
($5,500,000.00) as at March 31, 1998.
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During fiscal year 1999 and thereafter, the Borrower must
maintain a minimum working capital of Seven Million and no/100
Dollars ($7,000,000.00), all as would be shown on the fiscal
quarter end and fiscal year end balance sheets of the Borrower
prepared in accordance with GAAP. For the purposes of determining
working capital, the Borrower's liability to the Bank pursuant to
the Revolver Loans will be excluded, and the Borrower's current
assets shall be increased by the Borrower's unused formula loan
availability under the Revolver Loans.
(iii) a total debt to tangible net worth ratio at fiscal year end
March 31, 1997 of 3.75 to 1.0; at fiscal year end March 31, 1998
of 4.50 to 1.00 and at fiscal year end March 31, 1999 and
thereafter at each March 31 fiscal year end of 3.00 to 1.0. For
the purposes of this Note, debt to tangible net worth ratio shall
be defined, for the purposes of the fiscal year end March 31,
1997 calculation, as the ratio of the Borrower's total funded
debt (all currently outstanding senior and subordinated debt)
divided by the Borrower's earnings before interest, taxes,
depreciation and amortization. For the purposes of this Note,
debt to tangible net worth ratio shall be defined, for the
purposes of all other fiscal year end calculation periods, as the
ratio of the Borrower's total liabilities (less subordinated
debt) divided by the sum of the Borrower's tangible net worth
plus subordinated debt less the amount of the outstanding
principal balance of the notes receivable from Decora Industries,
Inc., as would be shown on the fiscal quarter end and fiscal year
end balance sheets of the Borrower prepared in accordance with
GAAP.
(iv) a minimum debt service coverage ratio during fiscal year
1997 of 1.20 to 1.00, during fiscal year 1998 of 1.15 to 1.0 and
during fiscal year 1999 and thereafter of 1.20 to 1.0. For the
purposes of this Note, debt service coverage ratio will be
calculated using the trailing four quarters of the Borrower's
earnings before interest, taxes, depreciation and amortization
minus the Borrower's cash capital expenditures (net of financed
capital expenditures) divided by the sum of Borrower's trailing
four quarters debt service payments (principal and interest) less
funds raised to finance the Borrower's repayment of indebtedness
owed to CIGNA (whether in the form of debt or equity), as would
be shown on the fiscal quarter end and fiscal year end balance
sheets of the Borrower prepared in accordance with GAAP;
(v) the Borrower shall be limited to making annual capital
expenditures in the maximum amount of One Million Five Hundred
Thousand and no/100 Dollars during the term
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of this Note. If required by the terms of the manufacturing
agreement between the Borrower and Rubbermaid, for each year
during the term of this Note, the Borrower must provide evidence,
satisfactory to the Bank, that the Borrower has received the
consent of Rubbermaid to make capital expenditures exceeding One
Million and no/100 Dollars ($1,000,000.00) in said year; and
(vi) the Borrower's expenditures for management fees shall not
exceed Eight Hundred Thousand and no/100 Dollars ($800,000.00)
per annum.
If an Event of Default has occurred and is continuing, the Borrower
shall not be permitted to make any Requests for Loan Advances unless and until
the Event of Default is cured, and interest shall accrue at the Default Rate
until the earlier of (i) the Event of Default is cured, or (ii) this Note is
paid in full.
The powers and remedies given hereby and by the Security Agreement shall
not be exclusive of any other powers and remedies available to the Bank. No
course of dealings between the Borrower and the Bank and no delay on the part of
the Bank in exercising any rights with respect to any default shall operate as a
waiver of any rights of the Bank. Failure on the part of the Bank to exercise
any rights with respect to any default shall not operate as a waiver of any
rights with respect to any other default. The Borrower agrees to pay all costs
and expenses incurred by the Bank in enforcing this Note, including, without
limitation, reasonable attorneys' fees and legal expenses.
Interest after maturity (whether by acceleration or otherwise) shall be
payable at the Default Rate until this Note is paid in full. If any provisions
of this Note or the application of it to any person or circumstance, shall be
invalid or unenforceable, the remainder of this Note or the application of those
provisions to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected and every other provision of
this Note shall be valid and fully enforceable.
This Note may not be waived, changed, modified or discharged orally, but
only by agreement in writing signed by the party against whom any enforcement of
any waiver, change, modification or discharge is sought.
This Note and all rights of the Bank hereunder, may be assigned by the
Bank, but this Note may not be assigned by the Borrower, without the prior
written consent of the Bank.
The purchaser, assignee, transferee, or pledgee of this Note shall be
entitled to all rights of the Bank hereunder as if said
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purchaser, assignee, transferee, or pledgee were originally named
in this Note.
THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED HEREON, OR ARISING
OUT OF OR IN CONNECTION WITH THIS NOTE, THE SECURITY AGREEMENT OR ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH.
IN WITNESS WHEREOF, the Borrower has duly executed this Note the day and
year first above written.
DECORA, INCORPORATED d/b/a DECORA MANUFACTURING
By: _________________________
Xxxxxxx X. Xxxxxxx, Vice
President Finance
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