THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT to Loan Agreement ("Third Amendment") is made and
entered into as of the 20th day of February, 1996, by and between ACR GROUP,
INC., a Texas corporation, with offices and place of business at 3200
Wilcrest, Suite 440, Houston, Texas 77042-6019 (hereinafter called
"Borrower") and NATIONSBANK OF TEXAS, N.A., a national banking association,
with offices and banking quarters at 700 Louisiana, Houston, Texas 77002
(hereinafter called "Lender"). For and in consideration of the mutual
covenants and agreements herein contained, Borrower and Lender hereby amend
as of the date of this Agreement that certain Loan Agreement ("Loan
Agreement") between Borrower and Lender dated the 8th day of March, 1994, as
previously amended by that certain First Amendment to Loan Agreement dated
October 27, 1994, and that certain Second Amendment to Loan Agreement dated
March 27, 1995, in the following respects:
Section 1. AMENDMENTS TO LOAN AGREEMENT.
Section 1.1 is deleted and the following is substituted in its place:
1.1 INDEBTEDNESS. Upon the terms and conditions hereinafter set
forth, the Lender agrees to lend to and/or issue letters of credit for
the account of Borrower in an aggregate of up to $8,000,000.00,
outstanding at any time as evidenced by a Revolving Line of Credit to
be extended to the Borrower by the Lender as more specifically described
in Section 1.3(a) hereof and the Letter of Credit Facility as more
specifically described in Section 1.3(b) hereof, up to $432,000.00
pursuant to the Pasadena Real Estate Loan as more specifically described
in Section 1.6 hereof, and up to $500,000.00 pursuant to the Equipment
Advance Facility as more specifically described in Section 1.7 hereof.
Section 1.2(a)(9) is deleted and the following is substituted in its
place:
(9) "Commitment Fee" means fees payable by Borrower to
Lender (i) in an amount equal to $6,250.00 payable on March 8,
1994; (ii) in an amount equal to $5,570.00 payable upon
execution of the First Amendment to Loan Agreement; (iii) in an
amount equal to $11,875.00 payable upon execution of the Second
Amendment to Loan Agreement; (iv) in an amount equal to $18,958.33
payable upon execution of the Third Amendment to Loan Agreement for
the commitment of Lender to provide the Revolving Line of Credit;
and (v) on the average daily unused portion of the Revolving Line
of Credit (use shall include the face amount of Credits and the
principal amount of Loans outstanding) from and including the date
of this Agreement to February 28, 1998, at the rate of one-quarter
of one percent (1/4%) per annum based on a 365 or 366 day year as
applicable and the actual number of days elapsed, payable on the
last day of each March, June, September and December, commencing on
March 31, 1994, and on February 28, 1998; and (vi) $1,117.08 upon
execution of the Third Amendment to Loan Agreement for the
commitment of Lender to provide the Equipment Advance Facility.
Section 1.2 (a)(12) is amended by replacing "February 28,
1997" with "February 28, 1998".
Section 1.2(a)(19A) is added to the Agreement as follows:
(19A) "Ener-Tech Subordinated Debt" shall mean the
indebtedness listed on Exhibit "1.2.1" to this Agreement.
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Section 1.2(a)(23) is amended by adding "Ener-Tech Industries, Inc., a
Tennessee corporation" immediately after Valley Supply, Inc., a Texas
corporation
Section 1.2(a)(29) is amended by replacing "May 31, 1997" with "May 31,
1998",
Section 1.2(a)(33A) is added to the Agreement as follows:
(33A) "Other Eligible Inventory" shall mean inventory which meets
the definition of Eligible Inventory but is not kept at locations set
forth on Exhibit "1.3.3".
Section 1.2(a)(37) is deleted and the following is substituted in its
place:
(37) "Prior Financial Statements" shall mean the audited
consolidated financial statements for the Borrower for the periods ended
February 28, 1993, and February 28, 1994, and February 28, 1995, and as
at such date, as modified and supplemented by Borrower-prepared
financial statements for the period ending November 30, 1995, and as at
such date.
Section 1.2(a)(40) is amended by replacing "$5,000,000" with
"$8,000,000".
Section 1.3 is amended by replacing "February 28, 1997" with "February
28, 1998", by replacing "$5,000,000.00" with "$8,000,000.00" in all
locations $5,000,000 appears in said Section, by replacing "$750,000" in
Section 1.3(b) with "$1,000,000".
Section 1.3(c) is deleted and the following is substituted in its
place:
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(c) The Borrower's obligation to repay the Credit Facility shall be
evidenced by a promissory note of the Borrower in substantially the form
attached as Exhibit "1.3.2" to the Third Amendment to Loan Agreement,
payable to the order of Lender. The Revolving Note shall bear interest at
the rate set forth in said Revolving Note, not to exceed the maximum
non-usurious interest rate permitted by applicable law with the balance
of principal plus accrued and unpaid interest due and payable on or before
February 28, 1998.
Section 1.4 is deleted and the following is substituted in its place:
1.4 REPAYMENT SCHEDULE. Borrower hereby agrees to pay, and
authorities and directs Lender to collect:
(a) Credit Fees (at the time of the issuance of a Credit) and
the Commitment Fee (at closing and (i) as required pursuant to
Section 1.2(a)(9)(iv) on the last day of each March, June,
September and December, commencing March 30, 1994, and (ii) as
required pursuant to Section 1.2(a)(9)(v) annually on March 31 of
each year), all payable by Borrower by debit to Borrower's
Operating Account No. 266-286-9162 at Lender;
(b) the amount of any drawing under a Credit not otherwise
reimbursed to Lender by advance under the Notes on the earlier of
the LOC Expiration Date by Lender by debit to Borrower's Operating
Account No. 266-286-9162 at Lender or any other of Borrower's
accounts at Lender; and
(c) advances under the Notes (on the maturity of the Notes),
and accrued interest on the advances under the Note (monthly on the
first day of each month and on maturity of the Note); provided,
that all advances under the Notes to reimburse Lender for draws
under any Credit shall be due and payable in full on the maturity
of the Notes; provided further, that all outstanding principal,
together with accrued and unpaid interest, shall be due and
payable in full on or before February 28, 1998, such amounts to be
paid by debit to Borrower's
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Operating Account No. 266-286-9162 at Lender or any other
of Borrower's accounts at Lender.
Section 1.7 is amended by deleting all references to
"$350,000" and replacing them with "$500,000".
Section 1.7 is amended by adding the following sentence:
Borrower may readvance amounts pursuant to this facility
provided that the outstanding principal balance does not exceed
$500,000 at any time.
Section 3.11 is deleted and the following is substituted in
its place:
3.11 BORROWING BASE. The aggregate indebtedness
pursuant to the Revolving Line of Credit and the amount of
outstanding Credits shall never exceed the Borrowing Base. The
Borrowing Base is the sum of (x) eighty percent (80%) of Eligible
Accounts PLUS (y) fifty percent (50%) of Eligible Inventory, PLUS
(2) twenty-five percent (25%) of Other Eligible Inventory, provided
that amount of the Borrowing Base based upon fifty percent (50%) of
Eligible Inventory PLUS twenty-five percent (25%) of Other Eligible
Inventory shall not exceed the amount of the Borrowing Base based
upon eighty percent (80%) of the Eligible Accounts. In accordance
with Section 3.1(d), Borrower shall provide the Lender a
calculation of the foregoing Borrowing Base on the Borrowing Base
Report. In the event, at any time, the aggregate unpaid principal
balance of Loans plus the outstanding Credits exceeds the Borrowing
Base calculated as described above, the Borrower will promptly, but
in any event no later the next Business Day, reduce the
indebtedness under the Revolving Line of Credit until the amount
owed is less than that calculated as described above.
Section 4.7 is deleted and the following is substituted in its
place:
4.7 FINANCIAL COVENANTS. The Borrower will not at any
time permit:
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(a) its Maximum Leverage Ratio to be greater than (i)
3.50 up to 1.0 and (ii) 2.75 to 1.00 as of the end of the fiscal
quarters ending February 28 and November 30, excluding from Debt of
the Borrower for the purposes of this calculation any payable
incurred to acquire inventory which is due by its terms more than
60 days after February 28 and November 30;
(b) its Minimum Debt Coverage Ratio to be less than 1.25
to 1.0; and
(c) its Tangible Net Worth plus the Catalyst Debt plus
the Ener-Tech Subordinated Debt to be less than (i) $4,500,000
prior to and as of February 28, 1996, and (ii) $4,500,000 plus
seventy-five percent (75%) of positive net income of the Borrower
earned after February 28, 1996.
All terms not expressly defined shall be defined in accordance
with generally accepted accounting principles. All determinations
under this Agreement shall be made in accordance with generally
accepted accounting principles consistently applied, on a
consolidated basis, except where expressly provided to the
contrary. All references to a preceding period shall mean the
period ending as of the end of the month, quarter or fiscal year
for which the applicable report is delivered. All references to a
period immediately following shall mean the period beginning on the
first day of the month, quarter or fiscal year following the end of
the period for which the applicable report is delivered.
Section 7.17 is added as follows:
7.17 ENER-TECH COLLATERAL. Borrower agrees that accounts and
inventory owned by Ener-Tech Industries, Inc., a Tennessee
corporation, shall not constitute Eligible Inventory or Eligible
Other Inventory until such time as Lender has determined, in its
sole and absolute discretion, that Lender holds a first and prior
security interest in such accounts and inventory.
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Exhibit 1.3.2 is deleted and the attached Exhibit 1.3.2
is substituted in its place.
Exhibit 1.3.3 is deleted and the attached Exhibit 1.3.3 is
substituted in its place.
Exhibit 3.8 is deleted and the attached Exhibit 3.8 is
substituted in its place.
Exhibit 3.11 is deleted and the attached Exhibit 3.11 is
substituted in its place.
Section 2. CLOSING.
The closing of the transactions contemplated by this Amendment
is subject to the satisfaction of the following conditions.
2.1 COUNSEL TO LENDER. All legal matters incident to the
transactions herein contemplated shall be satisfactory to Gardere
Wynne Sewell & Riggs, LLP, counsel to the Lender.
2.2 REQUIRED DOCUMENTS.
(a) The Lender shall have received certified copies of
resolutions of the Board of Directors of the Borrower in form and
substance satisfactory to Lender with respect to authorization of
this Amendment, the Revolving Note, the Security Instruments and
the other corporate instruments provided for herein.
(b) The Lender shall have received a certificate of the
Secretary of the Borrower of the names of officers of the Borrower
to sign this Amendment, the Revolving Note, the Security Instru-
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ments and the other instruments or certificates related hereto
together with the true signatures of such officers.
(c) The Lender shall have received fully executed copies of
this Amendment and the documents indicated on Exhibit "2.2"
attached hereto and made a part hereof.
2.3 OPINION OF COUNSEL. The Lender shall have received from
Robert D. Remy, counsel to the Borrower, a written opinion,
satisfactory to the Lender and its counsel.
Section 3. RATIFICATION.
Except as amended hereby, the Loan Agreement shall remain
unchanged and the terms, conditions, representations, warranties,
and covenants of said Loan Agreement and the Security Instruments
are true as of the date hereof, are ratified and confirmed in all
respects and shall be continuing and binding upon the parties.
Section 4. DEFINED TERMS.
All terms used in this Amendment which are defined in the Loan
Agreement shall have the same meaning as in the Loan Agreement,
except as otherwise indicated in this Amendment.
Section 5. MULTIPLE COUNTERPARTS.
This Amendment may be executed by the parties hereto in
several separate counterparts, each of which shall be an original
and all of which taken together shall constitute one and the same
agreement.
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Section 6. APPLICABLE LAW.
This Amendment shall be deemed to be a contract under and
subject to, and shall be construed for all purposes in accordance
with the laws of the State of Texas.
Section 7. FINAL AGREEMENT.
THE WRITTEN LOAN AGREEMENTS IN CONNECTION WITH THIS THIRD
AMENDMENT REPRESENT THE FINAL AGREEMENT BETWEEN THE BORROWER AND
THE LENDER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE BORROWER AND
THE LENDER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
LENDER AND THE BORROWER.
IN WITNESS WHEREOF, the parties have caused this Amendment to
be executed by their duly authorized officers as of the 20th day of
February, 1996.
ACR GROUP, INC., a Texas corporation
By: /s/ Alex Trevino, Jr.
__________________________________
Alex Trevino, Jr.
Chairman of the Board and
President
NATIONSBANK OF TEXAS, N.A.
By: /s/ James D. Racer
__________________________________
James D. Racer
Vice President
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Exhibit 1.2.1
ENER-TECH SUBORDINATED DEBT
Original Principal
Maker Payee Amount of Note
----- ----- ------------------
ACR Group, Inc. Robert J. Pfleiger $145,894.40
ACR Group, Inc. Jerome B. Neal 109,420.80
ACR Group, Inc. Malcolm V. Lyell 36,473.60
Ener-Tech Industries, Inc. Robert J. Pfleiger 13,000.00
Ener-Tech Industries, Inc. Jerome B. Neal 32,000.00
Ener-Tech Industries, Inc. W. D. Miller 15,000.00
Ener-Tech Industries, Inc. John Hoff 40,000.00
EXHIBIT "1.3.2"
REVOLVING NOTE
P R O M I S S O R Y N O T E
$8,000,000.00 February 20, 1996
FOR VALUE RECEIVED, after date, without grace, in the manner,
on the dates and in the amounts so herein stipulated, the
undersigned, ACR GROUP, INC., acting by and through its duly
authorized officer, ("Borrower"), PROMISES TO PAY TO THE ORDER OF
NATIONSBANK OF TEXAS, N.A. ("Lender"), in Houston, Harris County,
Texas, the sum of EIGHT MILLION AND NO/100 DOLLARS ($8,000,000.00)
or, if less, the aggregate unpaid principal amount of advances made
by Lender to Borrower pursuant to this Note, in lawful money of the
United States of America, which shall be legal tender in payment of
all debts and dues, public and private, at the time of payment, and
to pay interest on the unpaid principal amount from date until
maturity at a rate equal to the Stated Rate (hereinafter defined),
not to exceed the maximum non-usurious interest rate permitted by
applicable law from time to time in effect as such law may be
interpreted, amended, revised, supplemented or enacted ("Maximum
Rate"), provided that if any any time the Stated Rate exceeds the
Maximum Rate then interest hereon shall accrue at the Maximum Rate. In the
event the Stated Rate subsequently decreases to a level which would be less
than the Maximum Rate or if the Maximum Rate applicable to this Note should
subsequently be changed, then interest hereon shall accrue at a rate equal to
the applicable Maximum Rate until the aggregate amount of interest so accrued
equals the aggregate amount of interest which would have accrued at
the Stated Rate without regard to any usury limit, at which time
interest hereon shall again accrue at the Stated Rate. This Note is
payable as follows:
Interest shall be due and payable monthly as it accrues,
on the last day of each and every month, beginning February 29,
1996, and continuing regularly thereafter until February 28, 1998,
when the entire balance of principal and accrued interest shall be
due and payable.
It is agreed that time is of the essence of this agreement. In
the event of default in the payment of any installment of principal
or interest when due or in the event of any other default
hereunder, Lender may accelerate and declare this Note immediately
due and payable without notice. Any failure to exercise this option
shall not constitute a waiver by Lender of the right to exercise
the same at any other time.
In the event of default in the making of any payment herein
provided, either of principal or interest, or in the event this
Note is declared due, interest shall accrue at the Maximum Rate.
As used herein, the Stated Rate shall mean:
Applicable Minimum
Net Income Before Taxes Stated Rate
- --------------------------- -----------
Borrower's consolidated net income Prime Rate + 1.00%
before taxes for the preceding four
fiscal quarters is less than $750,000
Borrower's consolidated net income Prime Rate + .50%
before taxes for the preceding four
fiscal quarters is equal to or greater
than $750,000.
As used in this Note, the term "Prime Rate" shall mean the
variable rate of interest announced by Lender from time to time as
its prime rate of interest and, without notice to the maker of this
Note or any other person, such rate of interest shall change as and
when changes in that prime rate of interest are announced. The
Prime Rate is set by Lender as a general reference rate of
interest, taking into account such factors as Lender may deem
appropriate, it being understood that many of Lender's commercial or
other loans are priced in relation to such rate, that it is not
necessarily the lowest or best rate of interest actually charged on
any loan, and that Lender may make various commercial or other
loans at rates of interest having no relationship to the Prime
Rate. If at any time the "Prime Rate" of Lender is not longer
available, then the owner of this Note ("Owner") will designate a
difference "Prime Rate" as announced by a national banking
association of Owner's choice.
Borrower hereby agrees to pay all expenses incurred, including
reasonable attorney's fees, all of which shall become a part of the
principal hereof, if this Note is placed in the hands of an
attorney for collection or if collected by suit or through any probate,
bankruptcy or any other legal proceedings.
Interest charges will be calculated on amounts advanced
hereunder on the actual number of days these amounts are
outstanding on the basis of a 360-day year, except for calculations
of the Maximum Rate which will be on the basis of a 365-day or
366-day year, as is applicable. It is the intention of the parties
hereto to comply with all applicable usury laws; accordingly, it
is agreed that notwithstanding any provision to the contrary in
this Note, or in any of the documents securing payment hereof or
otherwise relating hereto, no such provision shall require the payment or
permit the collection of interest in excess of the Maximum Rate.
If any excess of interest in such respect is provided for, or shall
be adjudicated to be so provided for, in this Note or in any of the
documents securing payment hereof or otherwise relating hereto, then in
such event (1) the provisions of this paragraph shall govern and control,
(2) neither Borrower, endorsers or guarantors,
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Initials
nor their heirs, legal representatives, successors or assigns nor any other
party 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 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, and (4) the provisions of this Note and any documents securing
payment of this Note shall be automatically reformed so that the effective
rate of interest shall be reduced to the Maximum Rate. For the purpose of
determining the Maximum Rate, all interest payments with respect to this
Note shall be amortized, prorated and spread throughout the full term of
the Note so that the effective rate of interest on account of this Note is
uniform throughout the term hereof.
Borrower agrees that the Maximum Rate to be charged or collected
pursuant to this Note shall be the applicable indicated rate ceiling as
defined in TEX. REV. CIV. STAT. ANN. Art. 5069-1.04, provided that Lender
may rely on other applicable laws, including without limitation laws of
the United States, for calculation of the Maximum Rate if the application
thereof results in a greater Maximum Rate. Except as provided above, the
provisions of this Note shall be governed by the laws of the State of Texas.
Each maker, surety, guarantor and endorser (i) waives demand, grace,
notice, presentment for payment, notice of intention to accelerate the
maturity hereof, notice of acceleration of the maturity hereof and protest,
(ii) agrees that this Note and the liens securing its payment may be
renewed, and the time of payment extended from time to time, without
notice and without releasing any of the foregoing, and (iii) agrees that
without notice or consent from any maker, surety, guarantor, or endorser,
Lender may release any collateral which may from time to time be pledged to
secure repayment of this Note, or may release any party who might be liable
for this Note. Borrower grants to Lender a lien on any of Borrower's funds
which may from time to time be deposited with Lender.
Borrower may prepay this Note, in whole or in part, at any time prior
to maturity without penalty, and interest shall cease on any amount
prepaid. Any partial prepayment shall be applied toward the payment of the
principal installments last maturing on the Note, that is, in the inverse
order of maturity, without reducing the amount or time of payment of the
remaining installments.
The principal of this Note represents funds which Lender will advance
to Borrower from time to time upon request of Borrower. Any part of the
principal may be repaid by Borrower and thereafter reborrowed, provided the
outstanding principal amount of this Note shall never exceed the face
amount of this Note. Each advance shall constitute a part of the principal
hereof and shall bear
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interest from the date of the advance. The provisions of Tex. Rev. Civ. Stat.
Ann. art. 5069-15.01, ET SEQ., as may be amended, shall not apply to this Note
or to any of the security documents executed in connection with this Note.
This Note is the Revolving Note referred to in, is subject to, and is
entitled to the benefits of the Third Amendment to Loan Agreement of even
date herewith between Borrower and Lender amending that certain Loan
Agreement dated March 8, 1994, as that Loan Agreement was amended by the
First Amendment to Loan Agreement dated October 27, 1994 and the Second
Amendment to Loan Agreement dated March 27, 1995 and may be further
amended, modified or supplemented from time to time (the "Loan Agreement").
The Loan Agreement contains, among other things, provisions for the
acceleration of the maturity hereof upon the occurrence of certain stated
events.
This Note is entitled to the benefits of and security afforded by (i) a
Ratification of Security Agreement of even date herewith executed by ACR
Supply, Inc., Heating and Cooling Supply, Inc., and Total Supply, Inc.,
(ii) a Ratification of Security Agreement of even date herewith executed
by Valley Supply, Inc., (iii) a Ratification of Continuing Guaranty of even
date herewith executed by ACR Supply, Inc., Heating and Cooling Supply,
Inc., and Total Supply, Inc., (iv) a Ratification of Continuing Guaranty of
even date herewith executed by Valley Supply, Inc., (v) a Ratification of
Security Agreement of even date herewith executed by ACR Group, Inc., (vi)
a Deed of Trust, Security Agreement and Assignment of Leases and Rents
dated October 27, 1994, (vi) a Security Agreement of Ener-Tech Industries,
Inc. of even date herewith, and (vii) a Continuing Guaranty of Ener-Tech
Industries of even date herewith. This Note is subject to the provisions
contained in the foregoing security instruments which, among other things,
provide for acceleration of the maturity hereof upon the occurrence of
certain events.
Borrower represents and warrants that this loan is for business,
commercial, investment or similar purposes and not primarily for personal,
family, household or agricultural use, as such terms are used in Chapter
One of the Texas Credit Code.
ACR GROUP, INC., a Texas
corporation
By:
----------------------------------------------
Alex Trevino, Jr.
Chairman of the Board and President
"BORROWER"
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Exhibit "1.3.3"
ELIGIBLE INVENTORY LOCATIONS
8978 Westpark Drive 4744 Center Park Blvd.
Houston, Texas 77063 Suite 101
San Antonio, Texas 78218
806 East Harris
Pasadena, Texas 77506 4525 South Pinemont
Suite 100
3924 Dunvale Houston, Texas 77041
Houston, Texas 77063
108 East Highway Business 83
722 S. Padre Island Drive McAllen, Texas 78501
Corpus Christi, Texas 78416
9324 Neils Thompson Drive
Suite 101
Austin, Texas 78758
5312 Franklin Avenue
Waco, Texas 76710
747 Kenrick
Suite 124
Houston, Texas 77060
1700 Buchanan
Brenham, Texas 77833
705 Cedar Bayou Road
Baytown, Texas 77520
2402 South 57th Street
Temple, Texas 76504
EXHIBIT "3.8"
CERTIFICATE OF COMPLIANCE
In accordance with Section 3.8 of the Loan Agreement, as
amended ("Loan Agreement") dated March 8, 1994, between NationsBank
of Texas, N.A. ("Lender") and ACR Group, Inc. ("Borrower"), I, ______
_______________________, ___________________, of the Borrower do
hereby certify that the following is true and correct as of
______________________, 19____.
1. To the best of my knowledge and belief, that the Borrower
and its Subsidiaries are not in default under the Loan Agreement,
the Notes, and the Security Instruments.
2. That the Borrower's financial condition for the month
ending _______________________ is as follows:
FINANCIAL REQUIRED RATIO/ ACTUAL
RATIO/
COVENANT AMOUNT AMOUNT
- --------- -------------- ------
Maximum Leverage Ratio not to exceed 3.5 to 1.0
Maximum Leverage Ratio not to exceed 2.75 to 1.0
for quarters ending February 28 and
November 30 with adjusted definition of Debt
Minimum Debt Coverage Ratio not less than
1.25 to 1.0
Minimum Tangible Net Worth not less than
$4,500,000 plus 75% of positive net
income after February 28, 1996
Collateral Location:
All inventory of Borrower and its Subsidiaries is located
in the following states and no other states:
ACR Group, Inc.-Texas
ACR Supply, Inc.-Texas and Louisiana
Heating and Cooling Supply, Inc.-Nevada
Total Supply, Inc.-Georgia
Valley Supply, Inc. - Tennesee
Ener-Tech Industries, Inc. - Tennessee
The foregoing terms are used as defined in the Loan Agreement.
____________________________________
(Signature of Certifying Officer)
EXHIBIT "3.11"
BORROWING BASE REPORT
FORM OF
BORROWING BASE CERTIFICATE
NO. Dated , 19
------------------------- -------------- --
In accordance with a loan agreement, as amended ("Agreement") dated
March 8, 1994 between NationsBank of Texas, N.A. ("Lender") and ACR Group,
Inc. ("Borrower"), I, of the Borrower hereby
---------------------------
certify and warrant that the following schedule accurately states Borrower's
Eligible Accounts and Eligible Inventory and Borrower's borrowing base as of
the date hereof:
A. Eligible Accounts x 80% =
-------- -------------------------
B. Eligible Inventory -------- x 50% = -------------------------
C. Other Eligible Inventory -------- x 25% = -------------------------
D. Sum of B plus C -------------------------
(not to exceed Line A)
E. Borrowing Base = -------------------------
F. Availability:
1. Maximum Credit Facility Commitment = $8,000,000.00
2. Borrowing Base (from E above) = -------------------------
3. Lesser of Borrowing Base or
Credit Facility Commitment = -------------------------
4. Total Loans Outstanding = -------------------------
5. Total Credits Outstanding = -------------------------
6. Total Outstandings (sum of
F.4. plus F.5. above) = -------------------------
7. Net Availability
(F.3. minus F.6. above) = -------------------------
The Undersigned further certifies and covenants that there has been no
material adverse change in the financial condition of Borrower from that
shown by the financial statements furnished to Lender and to the best of his
knowledge that no default under the Agreement is existing on the date of this
certificate, and that the foregoing report is true and correct as of the
date, and that the items mentioned herein constitute collateral in accordance
with the terms of the Agreement.
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Signature of Certifying Officer
Title: ---------------------------