Exhibit 4.3
DECORIZE, INC.
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(▇▇▇) ▇▇▇-▇▇▇▇
January 12, 2005
SRC Holdings Corporation
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Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, President
Quest Capital Alliance, L.L.C.
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Attn: ▇▇▇▇▇▇ ▇. ▇▇▇, General Manager
Re: Loan Agreement dated as of January 12, 2005, by and between Decorize,
Inc., a Delaware corporation (the "Company"), and Bank of America, N.A.
(the "Bank"), providing for a line of credit in an aggregate principal
amount not to exceed $4,000,000 (the "Loan Agreement")
Ladies and Gentlemen:
The Bank has requested, as a condition to its making available certain
loans as contemplated under the Loan Agreement, that SRC Holdings Corporation, a
Missouri corporation ("SRC"), provide a limited guaranty in the amount of
$750,000 for the benefit of the Company. Quest Capital Alliance, L.L.C., a
Missouri limited liability company ("Quest"), has agreed to provide a
supplemental guarantee to SRC for $250,000 of the amount guaranteed by SRC,
pursuant to an agreement between Quest and SRC. The Company has requested that
each of SRC and Quest provide the foregoing guarantees in connection with its
entering into the Loan Agreement.
Accordingly, this letter agreement shall confirm that the parties have
agreed as follows:
1. SRC will execute and deliver that certain Commercial
Guaranty, in the form attached hereto as Exhibit A, which provides for
a limited guarantee by SRC in the amount of $750,000, with respect to
the Company's performance under the Loan Agreement (the "Guaranty").
Quest shall enter into an agreement with SRC whereby it will commit to
fund no less than $250,000 of the Guaranty if at any time the Bank
exercises its rights to payment with respect to the Guaranty, and as a
result SRC pays to the Bank certain amounts in satisfaction of its
obligations under the Guaranty (such payment by SRC being referred to
herein as a "Guaranty Payment"). The parties agree that the Guaranty is
intended to be for a period of eighteen (18) months.
SRC Holdings Corporation
Quest Capital Alliance, L.L.C.
January 12, 2005
Page 2
2. The Company will issue to SRC new five-year warrants in the
form attached hereto as Exhibit B (the "New Warrants"), which are
exercisable for an aggregate 1,500,000 shares of the Company's common
stock, $.001 par value per share ("Common Stock"), at an initial
exercise price of $0.40 per share.
3. The Company will issue to Quest New Warrants, which are
exercisable for an aggregate 750,000 shares of Common Stock at an
initial exercise price of $0.40 per share.
4. The New Warrants shall provide that if
(a) SRC makes a Guaranty Payment, or
(b) SRC is still required to provide the
Guaranty under the Loan Agreement as of June 30,
2006, and SRC continues to do so after such date in
accordance with the Bank's requirements (a "Guaranty
Extension"),
then the applicable exercise prices under the New Warrants issued to
SRC and Quest shall be reduced to the lesser of (i) $0.20 per share or
(ii) an amount per share equal to 50% of the trailing twenty day market
price for the Common Stock, as further described in the form of the New
Warrants. The reduced exercise price as so calculated is referred to
herein as the "Adjusted Price".
5. The existing warrants for Common Stock that are held by SRC
and Quest, exercisable for an aggregate 1,500,000 shares of Common
Stock and an aggregate 1,057,143 shares of Common Stock, respectively,
shall be and hereby are amended such that (a) the "Exercise Price"
applicable thereunder as of the date of this letter agreement shall be
equal to $0.40, (b) the exercise period of such warrants shall be
reduced such that 50% shall expire six (6) months from the date of
issuance of the amended warrants and the remaining 50% shall expire one
year from the date of issuance, and (c) the "Exercise Price" shall be
further reduced to the Adjusted Price upon the occurrence of a Guaranty
Payment or a Guaranty Extension. The Company shall prepare amended
warrant certificates in replacement of the existing warrants within
three (3) business days of the execution of this letter agreement,
which shall be issued upon delivery of the existing warrants to the
Company.
6. The Company shall obtain within thirty (30) days of the
execution of this letter agreement, and shall at all times thereafter
during the effectiveness of the Guaranty keep in full force and effect,
at its sole cost and expense, three separate key-man life insurance
policies on ▇▇▇▇▇ ▇▇▇▇▇▇▇, President and CEO of the Company, in the
amounts of $2,000,000, $1,000,000 and $1,000,000, respectively. SRC
shall be the named beneficiary of the policy in the face amount of
$2,000,000, Quest shall be the named beneficiary of the policy in the
face amount of $1,000,000, and the Company shall be the named
beneficiary of the remaining $1,000,000 policy. Each of the foregoing
insurance policies shall provide that (a) such insurance shall be
primary and shall not contribute with any insurance carried by the
beneficiary(ies), and (b) the insurance company issuing the same shall
notify the named beneficiary no less than thirty (30) days prior to the
expiration date of the policy if the policy is not renewed prior to
such date. All insurance policies or duly executed certificates for the
same required to be carried by the Company hereunder, together with
satisfactory evidence of the payment of the premiums thereof, shall be
delivered to SRC (a) no later than the thirtieth (30th) day following
execution of this letter agreement, and (b) upon renewals of such
policies, not less than fifteen (15) days prior to the expiration of
the term of the same, but no less than annually.
SRC Holdings Corporation
Quest Capital Alliance, L.L.C.
January 12, 2005
Page 3
7. The Company agrees that the terms of its outstanding shares
of Series A Convertible Preferred Stock, $.001 par value per share (the
"Preferred Stock"), shall be amended such that (a) the conversion price
for the Preferred Stock shall be immediately reduced to $0.40 per
share, and (b) upon the occurrence of a Guaranty Payment or a Guaranty
Extension, the conversion price for the Preferred Stock shall be
further reduced to the Adjusted Price. The Company shall make such
filings as are appropriate to reflect the foregoing change as soon as
reasonably practicable.
8. The Company shall issue an amended and restated promissory
note, in the form of Exhibit C (the "New Note"), in substitution and
replacement of that certain First Amended and Restated Secured
Promissory Note in the original principal amount of $750,000, which was
issued on September 30, 2004 (the "Original Note"). The New Note shall
be subordinate to the indebtedness owed to the Bank and shall be
convertible for shares of Common Stock at an initial conversion price
equal to $0.40 per share. Upon the occurrence of a Guaranty Payment or
a Guaranty Extension, the conversion price under the New Note shall be
further reduced to the Adjusted Price.
9. The Company agrees that if SRC makes a Guaranty Payment,
then in addition to the conversion and exercise price adjustments
referred to above, the Company shall, within ten (10) days of such
occurrence, issue and deliver 1,250,000 shares of Common Stock to SRC
and 625,000 shares of Common Stock to Quest. No such issuance shall be
made in connection with a Guaranty Extension.
10. The Company agrees that within thirty (30) days of it
receiving notice of (a) an exercise of the New Warrants or any existing
warrants held by SRC or Quest, (b) the conversion of the New Note, or
(c) the issuance of shares as contemplated under paragraph 9 of this
letter agreement, it shall file a registration statement to register
the resale of all shares of Common Stock held by SRC and Quest,
including those issued or issuable to them under the terms of this
letter agreement.
11. 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.
SRC Holdings Corporation
Quest Capital Alliance, L.L.C.
January 12, 2005
Page 4
12. By executing this letter agreement, each party represents
and warrants that it is duly authorized and empowered to execute,
deliver and perform its respective obligations under this letter
agreement, that the persons executing on such party's behalf are duly
authorized to do so, and that this letter agreement represents such
party's final and binding obligation. Furthermore, each party
represents and warrants that none of the execution, delivery or
performance of this letter agreement violates any material agreement,
court order or legal regulation, statute or obligation applicable to
such party.
13. The parties agree that the Company's obligations
hereunder, including those with respect to the amendment or issuance of
securities under paragraphs 2, 5, 7, 8 and 9 of this letter agreement,
are subject to the Company first making all appropriate regulatory
filings and obtaining such regulatory approvals as are required under
applicable federal securities laws and the American Stock Exchange
("AMEX"), including the filing of an information statement under
Section 14 of the Securities Exchange Act of 1934, as amended, and
completing all requisite waiting periods thereunder. The Company shall
use its best reasonable efforts to obtain such approvals and make such
filings no later than thirty-five (35) days following the date of this
letter agreement. Without limiting the foregoing, the Company agrees
that it shall (i) make any filings with AMEX with respect to the notice
of listing of additional shares no later than ten (10) days following
the date of this letter agreement, and (ii) file such proxy or other
materials as are appropriate in connection with obtaining stockholder
approval no later than seven (7) days following the date of this letter
agreement. If the Company does not obtain all requisite stockholder and
other approvals, such that it is able to perform and it does perform
all its obligations hereunder, then (i) all indebtedness owed by the
Company to SRC under the New Note, the Original Note or any other
instrument shall be immediately due and payable in full to SRC, without
any further action by either party, (ii) all actions and obligations
taken by SRC and Quest in reliance on this letter agreement shall be
null and void, and the Company shall take all actions as are necessary
to terminate any agreements or obligations of those parties as a result
of such actions and to otherwise return all parties to the position at
which they were prior to entering into the transactions contemplated
by, or made in reliance upon, this letter agreement, (iii) the Company
shall take all actions as are necessary to permanently release SRC and
Quest from any undertakings, agreements or obligations under this
letter agreement, including without limitation the Guaranty and any
other security agreements or other instruments executed in connection
with the Loan Agreement or for the benefit of the Bank, and (iv) at any
time after the 50th day following the date of this letter agreement,
SRC may demand the Company pay to SRC an amount equal to $500,000 in
liquidated damages, with all parties agreeing that the foregoing amount
due Aurum is not intended as a penalty, but in light of the difficulty
of calculating actual damages represents a good faith estimate of the
damages to be caused to SRC by the Company's failure to perform.
SRC Holdings Corporation
Quest Capital Alliance, L.L.C.
January 12, 2005
Page 5
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 January 14, 2005, this letter shall expire
and be of no further force and effect.
Sincerely,
DECORIZE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
President and Chief Executive Officer
ACKNOWLEDGED AND AGREED:
SRC HOLDINGS CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇ Date:
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▇▇▇▇ ▇. ▇▇▇▇▇, President
QUEST CAPITAL ALLIANCE, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇ Date:
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▇▇▇▇▇▇ ▇. ▇▇▇, General Manager