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EXHIBIT (B)(1)
BB&T BRANCH BANKING & TRUST CO.
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BUSINESS SERVICES
March 22, 2001 One West Pack Square (28801)
Suite 201
P.O. Box 450
Asheville, NC 28802
(828) 285-1800
Fax (828) 251-4650
CASCO International, Inc.
Mr. Charles R. Davis
Mr. S. Robert Davis
Mr. Jeffrey A. Ross
P.O. Box 310
Shelby, NC 28151
COMMITMENT LETTER
Dear Chuck, Bob and Jeff:
Branch Banking and Trust Company ("Bank") is pleased to offer you the following
commitment (the "Commitment") for a loan (the "Loan"). The terms and conditions
of this Commitment are as follows:
TERM LOAN
1. Borrower: CASCO International, Inc. (the "Borrower").
2. Purpose: The proceeds of the Loan shall be used by the
Borrower to purchase outstanding shares of stock to take the
company private.
3. Collateral: The Loan shall be cross-collateralized with the
existing collateral securing the Asset Based Line of Credit
established July 30, 1998. Also, the Loan shall be secured by
a second lien deed of trust (the "Deed of Trust") on
approximately 14.6 acres and improvements of approximately
134,000 sq. ft. office building and warehouse located at 4205
E. Dixon Blvd., Shelby, NC 28152 (the Collateral").
4. Amount: The maximum principal amount of the Loan shall be
$2,200,000.00.
5. Advances: The proceeds of the Loan shall be advanced at
closing.
6. Interest Rate: The interest rate on the Loan shall be the
variable rate per annum of the Bank's Prime Rate plus .25% to
be adjusted daily as the Bank's Prime Rate changes.
7. Repayment Terms: Accrued interest only shall be repayable
monthly beginning three (3) months from the date of closing.
Fifty-six (56) equal monthly payments of principal and
interest shall then be payable beginning in the fourth (4th)
month from the date of closing, with a final payment of all
unpaid principal and accrued interest due at maturity.
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Commitment Letter to CASCO International, Inc.
March 22, 2001
Page 2 of 5
8. Guarantors: American Home Building Corporation, Mr. Chuck
Davis and Mr. Robert Davis shall be required to guarantee the
loan in full and execute appropriate documents at Loan closing
to evidence the obligation.
9. Commitment Fee: A commitment fee of $5,500.00 shall be payable
by Borrower to Bank at Loan closing.
10. Prepayment: Bank shall charge no prepayment premium should
Borrower choose at any time to prepay part or all of the
remaining principal balance due on the Loan.
11. Documentation: At Loan closing, the Borrower shall execute a
promissory note, security agreement, Deed of Trust, Loan
Agreement and other related documents and instruments
satisfactory to the Bank to evidence and secure the Loan.
12. Hazard Insurance: At the Loan closing, the Borrower shall
furnish Bank a hazard insurance policy for the replacement
cost of the Collateral naming Bank as lienholder/loss payee on
the business assets and Mortgagee/loss payee on the real
estate and improvements. The insurance company issuing the
policy must be acceptable to the Bank.
13. Appraisal: Prior to the Loan closing, the Borrower shall
submit three (3) copies of an appraisal on the Collateral
prepared by an appraiser engaged by the Bank. The first and
second liens on the real estate and improvements shall not
exceed 80% of the loan to value, without requiring additional
approved collateral.
14. Survey and Flood Hazard Certification: Prior to the Loan
closing, the Bank shall require the receipt of a satisfactory
survey of the real estate Collateral. The surveyor must
provide certification that the improvements are not located in
a special flood hazard area.
15. Title Insurance: Prior to the Loan closing, the Bank shall
receive a standard ALTA mortgagee title insurance binder on
the real property, and promptly after the Loan closing, the
Bank shall receive a standard ALTA mortgagee title insurance
policy covering the Deed of Trust satisfactory to the Bank as
to coverage and amount. The binder and policy shall show no
exceptions to coverage not acceptable to the Bank.
16. Assignment of Life Insurance Policy: The Bank shall receive an
assignment of a company life insurance policy with the cash
value of at least $700,000.00. The Borrower agrees to pay down
the $2,200,000.00 loan after closing to $1,500,000.00 from the
$700,000.00 insurance proceeds.
ASSET BASED LINE OF CREDIT MODIFICATION
1. Borrower: CASCO International, Inc. (the "Borrower").
2. Purpose: The modification of the existing Asset Based Lien of
Credit ("ABL") shall reduce the face amount from $5,000,000.00
to $3,000,000.00.
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Commitment Letter to CASCO International, Inc.
March 22, 2001
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3. Documentation: At Loan closing, the Borrower shall execute a
Note Modification Agreement to evidence the amendment to the
existing Promissory Note and Loan Agreement dated July 30,
1998.
4. Other Conditions Precedent: Other conditions precedent to the
modification to existing Asset Based Line of Credit (ABL):
a. The Bank shall increase ABL reporting and audits from
moderate to standard reporting and servicing. Borrowing
availability based on 85% of eligible accounts
receivable and 50% of eligible inventory, with a
$1,500,000.00 limit on inventory. Standard ABL
reporting requires weekly loan base reports, monthly
Accounts Receivable agings, monthly inventory listings
and monthly Accounts Payable agings.
5. Existing Terms and Conditions: All terms and conditions of the
existing loan documents executed on July 30, 1998, and
Commitment Letter dated June 10, 1998, shall remain in full
force and effect.
STANDARD TERMS AND CONDITIONS FOR TERM LOAN
AND ASSET BASED LINE OF CREDIT
1. Credit Qualifications: This Commitment is issued in reliance
upon the accuracy and completeness of all information
furnished by or for the Borrower and guarantors and is subject
to the continued accuracy and completeness of all such
information. The extension of credit by the Bank pursuant to
this Commitment is subject to the condition precedent that the
Borrower and guarantors shall after the date hereof maintain a
financial condition acceptable to the Bank in its sole
discretion. In addition, the Loan is conditioned upon there
being no material adverse change which threatens the
Borrower's ability to repay the Loan or pledge the Collateral
to secure repayment.
2. Financial Information: While the Loan is outstanding, the
borrower shall provide the Bank with annual audited financial
statements within 120 days of the Borrower's fiscal year end
and monthly Borrower prepared financial statements. Also, all
individual guarantors and American Home Building Corporation
shall furnish annual financial statements and tax returns. In
addition, Borrower shall supply Bank with such other financial
information as the Bank may reasonably request from time to
time. All financial information shall be prepared in
accordance with GAAP and must be certified true and correct by
the Borrower.
3. Expenses: All expenses associated with the Loan are to be paid
by the Borrower. These expenses shall include, but are not
limited to, the attorneys' fees, appraisal fee, and all
necessary recording fees.
4. Attorney's Opinion: The Bank shall require a legal opinion
letter from Borrower's attorney, which must be acceptable to
the Bank and Bank's counsel.
5. Banking Relationship: The Borrower agrees to maintain its
primary depository account(s) with the Bank.
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Commitment Letter to CASCO International, Inc.
March 22, 2001
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6. Covenants: The Borrower agrees to adhere to the following
covenants, which shall be included, along with other
covenants, in a loan agreement to be executed by the Bank and
the Borrower at or prior to the Loan closing:
(a) No additional company debt or leases without prior
written approval of the Bank.
(b) No dividend payout without prior bank approval.
(c) Maintain a maximum Debt/Tangible Net Worth of 11:1 at
closing.
(d) Increase Tangible Net Worth by $400,000.00 or greater
by fiscal year end (12/31/01) and by a minimum of
$750,000.00 annually each year after 2001.
(e) Maintain a minimum cash flow debt service ratio of
1.25x.
7. Conflicting Provisions: If any of the provisions of this
commitment letter shall be construed to conflict with any
terms or provisions contained in the Loan Documents, then the
Loan Documents shall take priority.
8. Other Conditions Precedent: Other conditions precedent to the
closing of this Loan include the following:
(a) The commitment is based upon a satisfactory review of
the Borrower's final 2000 audit.
(b) Prior to closing, the Bank shall review and approve
the final ownership structure.
(c) The Bank shall engage outside counsel to represent
the Bank at this Loan closing at the Borrower's
expense.
(d) The Bank's counsel shall provide a favorable opinion
on all aspects of the stock transaction including the
disposition of outstanding warrants.
(e) American Home Builders to pledge closely held stock
to the Bank.
(f) An updated personal financial statement on Chuck
Davis is required prior to closing.
This Commitment is open for your acceptance until the close of business on
February 16, 2001 (the "Expiration Date"), at which time this Commitment expires
if not accepted and returned to the Bank. In addition, this Commitment shall
expire and the Bank shall not be required to make the Loan if the Loan does not
close by March 16, 2001. To acknowledge your acceptance, please return a signed
copy of this letter to my attention at the following address on or before the
Expiration Date:
Branch Banking and Trust Company
P.O. Box 450
Asheville, NC 28802
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Commitment Letter to CASCO International, Inc.
March 22, 2001
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Very truly yours,
BRANCH BANKING AND TRUST COMPANY
By: /s/ Laura A. Herring
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Laura A. Herring
Title: Sr. Vice President
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Phone: 828-232-4360
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The foregoing terms and conditions are hereby accepted and agreed to this 15th
day of February, 2001.
CASCO INTERNATIONAL, INC.
By: /s/ S. Robert Davis
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Title: Chairman
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GUARANTORS:
AMERICAN HOME BUILDING CORPORATION
By: /s/ Charles R. Davis
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Title:
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By: /s/ S. Robert Davis
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Title:
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/s/ Charles R. Davis
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Charles R. Davis
/s/ S. Robert Davis
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S. Robert Davis