Exhibit 10Y
April 16, 2004
Decorator Industries, Inc.
10011 Pines Boulevard, Suite 201
Pembroke Pines, Florida 33024-06167
Gentlemen:
This letter constitutes an agreement (the "Agreement") by and between
WASHINGTON MUTUAL, FA (the "Bank"), and DECORATOR INDUSTRIES, INC., a
Pennsylvania corporation (the "Borrower"), pertaining to certain loans and other
credit which Bank has made and/or may from time to time hereafter make available
to Borrower.
In consideration of all present and future loans, advances and other
credit from time to time made available by Bank to or in favor of Borrower,
including, without limitation, a FIVE MILLION AND NO/100 DOLLAR ($5,000,000.00)
revolving line of credit ("Revolving Line") as evidenced by a Revolving
Promissory Note of even date herewith (the "Note") maturing June 30, 2007 (the
"Maturity Date"), made available by Bank to Borrower, and in consideration of
all present and future liabilities, obligations and indebtedness of Borrower to
Bank, howsoever created, evidenced, existing or arising, whether direct or
indirect, absolute or contingent, joint or several, now or hereafter existing or
arising, or due or to become due (collectively, the "Liabilities"), Borrower
represents, warrants, covenants and agrees as follows:
1. Each loan, advance or other extension of credit made by Bank to or
otherwise in favor of Borrower shall be evidenced by and subject to the Note and
any other agreement or evidence of indebtedness acceptable to Bank, in each
case, executed and delivered by Borrower unto Bank. The funding and disbursement
of any loan or advance, and the extension of any other credit, to or in favor of
Borrower shall be subject to the execution and/or delivery unto Bank such
documents, instruments, agreements, opinions and certificates as Bank may
reasonably require, and shall be further subject to the satisfaction of such
other conditions and requirements as Bank, and its counsel, may from time to
time require (the Note and any and all other notes, instruments, documents and
agreements at any time evidencing, governing, securing or otherwise relating to
any of the Liabilities are herein collectively called the "Loan Documents").
2. Borrower hereby represents and warrants, and such representations
and warranties shall be deemed to be continuing representations and warranties
during the entire life of this Agreement, and thereafter, so long as any
Liabilities remain unpaid and outstanding:
(a) It is a corporation duly organized, validly existing and in
good standing under the laws of the State of Pennsylvania, it
is duly qualified and authorized to do business in Florida and
in each other jurisdiction where the character of its assets
or the nature of its activities makes such qualification
necessary, and it has the legal power and authority to own its
property and assets and to carry out its business as now being
conducted in each such jurisdiction wherein such qualification
is necessary; execution, delivery and performance of this
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Agreement, and any and all other Loan Documents to which
Borrower is a party or by which it is otherwise bound, are
within Borrower's corporate powers and authorities, have been
duly authorized by all requisite corporate or other necessary
or appropriate action, and are not in contravention or
violation of law or the terms of Borrower's Articles of
Incorporation or Bylaws, and do not require the consent or
approval of any governmental body, agency or authority; and
this Agreement, and any other Loan Documents contemplated
hereby, when executed, issued and/or delivered by Borrower, or
by which Borrower is otherwise bound, will be valid and
binding and legally enforceable against Borrower in accordance
with their terms.
(b) The execution, delivery and performance of this Agreement and
any other Loan Documents required under or contemplated by
this Agreement to which Borrower is a party or by which it is
otherwise bound, and the issuance of this Agreement and any
such other Loan Documents by Borrower, and the borrowings and
other transactions contemplated hereby and thereby, are not in
contravention or violation of the unwaived terms of any
indenture, agreement or undertaking to which Borrower is a
party or by which it or any of its property or assets is
bound, and will not result in the creation or imposition of
any lien or encumbrance of any nature whatsoever upon any of
the property or assets of Borrower, except to or in favor of
Bank.
(c) No litigation or other proceeding before any court or
administrative agency is pending, or, to the knowledge of
Borrower or any of its officers, is threatened against
Borrower, the outcome of which could materially impair
Borrower's financial condition or its ability to carry on its
business or its ability to pay and perform its liabilities and
obligations hereunder or otherwise in respect of the
Liabilities.
(d) There are no security interests in, liens, mortgages, or other
encumbrances on any of Borrower's property or assets, except
Permitted Encumbrances (as hereinafter defined).
(e) There exists no Event of Default (as hereinafter defined), or
any condition or event which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default
(as such condition or event is herein called a "Default")
under any of the Liabilities.
(f) The most recent financial statements with respect to Borrower
delivered to Bank fairly present the financial condition of
Borrower as of the date thereof and for the period(s) covered
thereby in accordance with generally accepted accounting
principles consistently applied ("GAAP"), and since the date
of said statements, there has been no material adverse change
in the condition (financial or otherwise) of Borrower.
3. So long as Bank shall have any commitment or obligation, if any, to
make any loans or extend credit to or in favor of Borrower, and so long as any
Liabilities remain unpaid and outstanding, Borrower covenants and agrees that it
shall:
(a) Furnish to Bank, or cause to be furnished to Bank, in each
case, in form and detail and on a reporting basis satisfactory
to Bank, the following:
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(i) as soon as available, and in any event not later than
ninety (90) days after the close of each fiscal year
of Borrower, beginning with the fiscal year ending
December 31, 2003, audited financial statements of
Borrower, containing the balance sheet of Borrower as
of the close of each such fiscal year, statements of
income and retained earnings and a statement of cash
flows for each such fiscal year, and such other
comments and financial details as are usually
included in similar reports, including any management
letter(s). Such financial statements shall be
prepared in accordance with GAAP, shall be in such
detail as Bank may reasonably require, and shall be
reviewed by independent certified public accountants
of recognized standing selected by Borrower and
acceptable to Bank;
(ii) as soon as available, and in any event not later than
sixty (60) days after the close of each fiscal year
of Borrower, beginning with fiscal year ending
December 31, 2003, Borrower's annual projections,
including, but not limited to, Borrower's projections
for sales, net income, capital expenditures and
redemption of Borrower's stock;
(iii) as soon as available, and in any event not later than
forty-five (45) days after and as of close of each
fiscal quarter (except the fiscal year end) of each
fiscal year of Borrower, beginning with the fiscal
quarter ending April 1, 2004, financial statements of
Borrower, containing the balance sheet of Borrower as
of the close of each such fiscal quarter, statements
of income and retained earning and a statement of
cash flows for Borrower for such fiscal quarter and
for the portion of the fiscal year of Borrower
through the end of the fiscal quarter then ending,
and such other comments and financial details as are
usually included in similar reports. Such financial
statements shall be prepared by Borrower in
accordance with GAAP, and shall be certified as to
accuracy and fairness by an authorized officer of
Borrower;
(iv) simultaneous with the delivery to Bank of the
respective financial statements required in
SUB-SECTIONS (I) AND (III) above, quarterly
compliance certificates in form and detail
satisfactory to Bank, certified by an authorized
officer of Borrower, certifying that, as of the date
thereof, to the best of each such authorized
officer's knowledge, no Default or Event of Default
shall have occurred and be continuing or exist, or if
any Default or Event of Default shall have occurred
and be continuing or exist, specifying, in detail,
the nature and period of existence thereof and any
action taken or proposed to be taken by Borrower in
respect thereof, and also certifying as to whether
Borrower is in compliance with the financial
covenants contained in SECTIONS 3(G) AND 3(H) of this
Agreement (which certificate shall set forth, in
reasonable detail, Borrower's calculations and the
resultant ratios or financial tests determined
thereunder);
(v) as soon as possible, and in any event within three
(3) Business Days after becoming aware of the
occurrence or existence of any Default or Event of
Default, or of any other condition or occurrence
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which has had or could reasonably be expected to have
a materially adverse effect upon Borrower's business,
properties, or financial condition or upon Borrower's
ability to comply with its obligations hereunder, a
written statement of an authorized officer of
Borrower setting forth the details of such Default or
Event of Default, or such other condition or
occurrence, and the action which Borrower has taken
or caused to be taken, or proposes to take or cause
to be taken with respect thereto; and
(vi) promptly, at such times as Bank may reasonably
require, in form and detail satisfactory to Bank,
such other information and reports as may be required
under the terms of any Loan Documents or as Bank may
reasonably request from time to time.
(b) Keep proper books of record and account in which full and
correct entries shall be made of all of its financial
transactions and its assets and businesses so as to permit the
presentation of financial statements (including, without
limitation, those financial statements to be delivered to Bank
pursuant to SECTION 3(A) above) prepared in accordance with
GAAP; and permit Bank, or its representatives, at reasonable
times and intervals, to visit all of Borrower's offices and to
make inquiries as to Borrower's respective financial matters
with its respective directors, officers, employees, and
independent certified public accountants.
(c) Permit Bank, through Bank's authorized attorneys, accountants
and representatives, to inspect, audit and examine Borrower's
books, accounts, records, ledgers and assets and properties of
every kind and description, wherever located, at all
reasonable times during normal business hours, upon written
request of Bank. Borrower agrees to reimburse Bank for all
reasonable costs and expenses incurred by Bank in connection
with such inspections, examinations and audits, and to pay to
Bank such fees as Bank may reasonably charge in respect of
such inspections, examinations and audits, or as otherwise
mutually agreed upon by Borrower and Bank if such inspections,
examinations and audits are conducted due to any Event of
Default by Borrower.
(d) The Borrower will maintain, with respect to its business and
properties, insurance at all times by insurance companies of
nationally recognized stature and responsibility which the
Borrower believes to be financially sound, of a character
usually insured by corporations engaged in the same or a
similar business similarly situated against loss or damage of
the kinds and in the amounts customarily insured against and
for by such corporations, and carry or cause to be carried,
with such insurers in customary amounts (with customary
deductibles), such other insurance, including public liability
insurance as is usually carried by corporations engaged in the
same or a similar business similarly situated: provided,
however, that all insurance maintained pursuant to this
paragraph shall be carried in amounts sufficient to prevent
the Borrower from incurring liability as a co-insurer under
law or the terms of the applicable policy or policies.
(e) Pay and discharge promptly when due: all taxes, assessments,
and governmental charges and levies imposed upon Borrower, its
income, or any of its properties, before the same shall become
delinquent; and provided, however, that none of the foregoing
need to be paid while the same is being contested in good
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faith by appropriate proceedings diligently conducted so long
as adequate reserves shall have been established in accordance
with GAAP with respect thereto. The Borrower will file all
federal, state and local tax returns and all other tax reports
as required by law.
(f) Do or cause to be done all things necessary to preserve and
keep in full force and effect Borrower's corporate existence,
rights and franchises and comply with all applicable laws
where failure to do so has had or could reasonably be expected
to have a material adverse effect upon Borrower's business,
properties, or financial condition or upon Borrower's ability
to comply with its obligation hereunder; continue to conduct
and operate its business substantially as conducted and
operated during the present and preceding calendar year; at
all times maintain, preserve and protect all franchises and
trade names and preserve all the remainder of its property and
keep the same in good repair, working order and condition; and
from time to time make, or cause to be made, all needed and
proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in
connection therewith may be properly and advantageously
conducted at all times.
(g) Maintain at all times, an Interest Coverage Ratio of not less
than 5.00 to 1.00, measured quarterly on a trailing twelve
(12) month basis.
"Interest Coverage Ratio" shall be determined by Bank in its
reasonable discretion by dividing (a) the sum of (i)
Borrower's Net Income before taxes, plus (ii) depreciation,
plus (iii) amortization, plus (iv) interest expenses by (b)
Interest Expenses.
"Interest Expenses" shall mean, for the period in question,
the sum of all of Borrower's interest payments associated with
all indebtedness for borrowed money (including, without
limitation, capital lease obligations, subordinated debt, and
unreimbursed drawings under letters of credit) or evidenced by
a note, bond, debenture or similar instrument.
"Net Income" shall mean the net income (or net loss) of
Borrower, for the period in question, after giving effect to
deduction or provision for all operating expenses, all
reserves (including reserves for deferred taxes) and all other
proper deductions all determined in accordance with GAAP
applied on a consistent basis.
(h) Maintain a Leverage Ratio of not more than 1.10 to 1.00,
measured quarterly.
Leverage Ratio shall be determined by Bank in its reasonable
discretion by dividing Borrower's Total Liabilities by
Borrower's Total Shareholders' Equity.
"Total Liabilities" shall mean all liabilities of Borrower,
including capitalized leases and all reserves for deferred
taxes and other deferred sums appearing on the liabilities
side of a balance sheet of Borrower, in accordance with GAAP
applied on a consistent basis.
"Total Shareholders' Equity" shall mean, at any time, the sum
of: (i) the par or stated value of all outstanding capital
stock, plus (ii) capital surplus, plus (iii) retained earnings
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after deducting shares which have been reacquired by the
issuer, whether such reacquired shares constitute treasury
shares or otherwise, as would appear on a consolidated balance
sheet of the Borrower prepared as at such date in accordance
with the GAAP applied on a consistent basis.
(i) Take all actions and fulfill all conditions necessary to
maintain any and all plans in substantial compliance with
applicable requirements of ERISA, the Code, and all applicable
foreign law, if any, until such Plans are terminated, and the
liabilities discharged thereof, in accordance with applicable
law. No domestic Pension Plan (other than a Multiemployer
plan) will incur any accumulated funding deficiency (within
the meaning of Section 412 of the Code), and no foreign
Pension Plan will be in violation of any funding requirement
imposed by applicable foreign law, which deficiency or
violation would or would be reasonably likely to, materially
adversely affect the business, earnings, prospects,
properties, or condition (financial or otherwise) of the
Borrower.
"Plan" shall mean any "employee benefit plan" (within the
meaning of Section 3 (3) of ERISA) that the Borrower
maintains, contributes to, or is obligated to contribute to
for the benefit of employees or former employees of the
Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and any successor
statue, together with the rules and regulations there under.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statue, together
with the rules and regulations thereunder.
"Multiemployer Plan" shall mean any Plan that is a
"multiemployer plan" within the meaning of Section 4001 (a)(3)
of ERISA.
(j) Comply in all material respects with all applicable
Environmental Laws, and maintain all material permits,
licenses and approvals required under applicable Environmental
Laws, where the failure to do so could have a material adverse
effect upon the business, operations, condition (financial or
otherwise) performance or properties of Borrower, or could
have a material adverse effect upon the ability of Borrower to
perform its obligations under this Agreement or any of the
other Loan Documents, or could materially adversely affect the
enforceability of this Agreement or any of the other Loan
Documents; and promptly provide to Bank, immediately upon
receipt thereof, copies of any material correspondence,
notice, pleading, citation, indictment, complaint, order,
decree, or other document from any source asserting or
alleging a violation of any Environmental Laws by Borrower, or
of any circumstance or condition which requires or may require
a financial contribution by Borrower, or a clean-up, removal,
remedial action or other response by or on behalf of Borrower
under applicable Environmental Law(s), or which seeks damages
or civil, criminal, or punitive penalties from Borrower for
any violation or alleged violation of any Environmental Law(s)
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by Borrower. Borrower hereby indemnifies, saves and holds
Bank, and any of Bank's past, present and future officers,
directors, shareholders, employees, representatives and
consultants, harmless from any and all losses, damages,
suites, penalties, costs, liabilities and expenses (including,
without limitation, reasonable legal expenses and attorneys'
fees) incurred or arising out of any claim, loss or damage of
any property, injuries to or death of any persons,
contamination of or adverse effects on the environment, or
other violation of any applicable Environmental Law(s), in any
case, caused by Borrower, or in any way related to any
property owned or operated by Borrower, or due to any acts of
Borrower, or any of its officers, directors, shareholders,
employees, consultants and/or representations; provided,
however, that the foregoing indemnification shall not be
applicable, and Borrower shall not be liable for any such
losses, damages, suits, penalties, costs, liabilities or
expenses, to the extent (but only to the extent) the same
arise or result from any gross negligence or willful
misconduct of Bank or any of its agents or employees.
"Environmental Laws" shall mean all laws, codes, ordinances,
rules, regulations, orders, decrees and directives issued by
federal, state, local, foreign or other governmental or
quasi-governmental authority or body (or any agency,
instrumentality or political subdivision thereof) pertaining
to hazardous or toxic materials, including without limitation,
any hazardous materials or wastes, toxic substances,
flammable, explosive or radioactive materials, asbestos,
and/or other similar materials; any so-called "superfund" or
"superlien" law pertaining to hazardous or toxic materials on
or about any property at any time owned, leased or otherwise
used by Borrower, or any portion thereof, including, without
limitation, those relating to soil, surface, subsurface
groundwater conditions and the condition of the ambient air;
and any other federal, state, foreign or local statute, law,
ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct
concerning, any hazardous, toxic, radioactive, flammable or
dangerous waste, substance or material, as now or at any time
hereafter in effect.
4. So long as Bank shall have any commitment or obligation, if any, to
make any loans or extend credit to or in favor of Borrower, and so long as any
Liabilities remain unpaid and outstanding, Borrower covenants and agrees that it
shall not, without the prior written consent of Bank:
(a) Create, incur, assume or suffer to exist any mortgage, pledge,
encumbrance, security interest, lien or charge of any kind
upon any of its property or assets (including, without limit,
any charge upon property purchased or acquired under a
conditional sales or other title retaining agreement or lease
required to be capitalized under GAAP), whether now owned or
hereafter acquired, other than the following (collectively,
"Permitted Encumbrances"):
(i) liens, mortgages, security interests and encumbrances
to or in favor of Bank;
(ii) liens for taxes, assessments or other governmental
charges incurred in the ordinary course of business
and for which no interest, late charges or penalties
which in aggregate do not exceed Fifty Thousand and
No/100 Dollars ($50,000.00), are attaching or which
are being contested in good faith by appropriate
proceedings diligently pursued and, if requested by
Bank, bonded in an amount and manner satisfactory to
Bank;
(iii) liens, not delinquent, created by statute in
connection with workers' compensation, unemployment
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insurance, social security, old age pensions (subject
to the applicable provisions of the Agreement) and
similar statutory obligations;
(iv) liens in favor of mechanics, materialmen, carriers,
warehousemen or other like statutory or common law
liens securing obligations incurred in good faith in
the ordinary course of business that are not yet due
and payable;
(v) minor encumbrances or imperfections of title
consisting of existing or future zoning restrictions,
existing recorded rights-of-way, existing recorded
easements, existing recorded private restriction or
existing or future public restrictions on the use of
real property, none of which (individually or in the
aggregate) materially impairs, or would materially
impair, the present or future use of such property in
the operation of the business for which it is used,
or would be violated in any material respect by any
existing or proposed structure or land use or would
have a material adverse effect on the sale or lease
of such property, or render title thereto
unmarketable;
(vi) purchase money security interests to secure purchase
money indebtedness permitted under SECTION 4(B)(III)
of this Agreement, so long as such purchase money
security interests (A) arise substantially
contemporaneously with the purchase or acquisition of
the respective property or assets encumbered by and
subject to such purchase money security interests,
(B) do not at any time encumber any property or
assets other than the respective property or assets
financed by the respective purchase money
indebtedness, and (C) secure only the respective
purchase money indebtedness incurred to finance the
purchase or acquisition of such property or assets;
(vii) purchase money mortgages grated to third-party
institutional lenders to secure purchase money
indebtedness so long as such purchase money mortgages
(A) arise substantially contemporaneously with the
purchase or acquisition of corporate owned and
operated real estate, and (B) secure only the
respective purchase money indebtedness incurred to
finance the purchase or acquisition of such property
or assets;
(viii) any liens and encumbrances existing as of the date of
this Agreement, as more particularly identified in
SCHEDULE 4(A) attached hereto, and
(ix) any other liens agreed or consented to, in writing,
by Bank.
(b) Incur, create, assume or permit to exist any indebtedness or
liability on account of deposits or advances or any
indebtedness or liability for borrowed money, or any other
indebtedness or liability evidenced by notes, bonds,
debentures or similar obligations, or any other indebtedness
whatsoever, except for (i) the Liabilities, (ii) existing
indebtedness to the extent set forth on attached SCHEDULE 4(B)
attached hereto, (iii) purchase money indebtedness not to
exceed Five Hundred Thousand and No/100 Dollars ($500,000.00)
in aggregate principal amount each fiscal year of Borrower
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incurred to finance Borrower's purchase or acquisition of
capital assets (whether pursuant to a loan, capital lease or
otherwise); (iv) unsecured trade indebtedness incurred and
paid in the ordinary course of business of Borrower or another
"Person" (as defined below) acquired by Borrower; (v)
contingent indebtedness to the extent permitted by SECTION
4(D) of this Agreement, (vi) indebtedness secured by Permitted
Encumbrances, and (vii) lease obligations (whether in respect
of capitalized leases, operating leases or otherwise), not
otherwise disclosed in SCHEDULE 4(B) attached hereto, or
(viii) indebtedness incurred for the acquisition of corporate
real estate to the extent permitted by SECTION 4(A)(VII).
"Person" shall mean any individual, corporation, partnership,
limited liability company, trust, incorporated or
unincorporated organization, joint venture, joint stock
company, government, or any agency or political subdivision
thereof, or any other entity of any kind.
(c) Make loans, advances or extensions of credit to any Person,
except, without duplication, (i) employees of Borrower in an
unpaid principal amount not to exceed One Hundred Thousand and
No/100 Dollars ($100,000.00), in aggregate, at any time, (ii)
sales on open account in the ordinary course of business, and
(iii) other loans, advances and extensions of credit in the
ordinary course of business in an unpaid principal amount not
to exceed Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00), in aggregate, at any time.
(d) Guarantee or otherwise, directly or indirectly, in any way be
or become responsible for obligations of any other Person,
whether by agreement to purchase the indebtedness of any other
Person, agreement for the furnishing of funds to any other
Person through the furnishing of goods, supplies or services,
by way of stock purchase, capital contribution, advance or
loan, for the purpose of paying or discharging (or causing the
payment or discharge of) the indebtedness of any other Person,
or otherwise, except (i) guaranties in favor of Bank; and (ii)
the endorsement of negotiable instruments in the ordinary
course of business for deposit or collection.
(e) Subordinate any indebtedness due to it from a Person to
indebtedness of other creditors of such Person.
(f) Sell, lease (as lessor), transfer or otherwise dispose of
properties and assets, except as to the sale of inventory and
equipment in the ordinary course of business; change its name,
consolidate with or merge into any other corporation, permit
any other corporation to merge into it except as set forth in
SECTION 4(K) hereof, enter into any reorganization or
recapitalization, or reclassify its capital stock, or enter
into any sale-leaseback transaction.
(g) Allow any fact, condition or event to occur or exist with
respect to any employee pension or profit sharing plan
established or maintained by it which might constitute grounds
for termination of any such plan or for the court appointment
of a trustee to administer any such plan; or permit any such
plan to be the subject of termination proceedings (whether
voluntary or involuntary) from which termination proceedings
there may result in a liability of Borrower to the "PBGC" (as
defined below) which, in the opinion of Bank, will have a
materially adverse effect upon the operations, business,
property, assets, financial condition or credit of Borrower.
"PBGC" shall mean the Pension Benefit Guarantee Corporation
established pursuant to Subtitle A of Title IV of ERISA, or
any successor corporation established under ERISA.
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(h) Furnish Bank with any certificate or other document that
contains any untrue statement of a material fact or omits to
state a material fact necessary to make such certificate or
document not misleading in light of the circumstances under
which it was furnished.
(i) Apply any of the proceeds of any loan, advance or other
extension of credit by Bank to or in favor of Borrower, to the
purchase or carrying of any "margin stock" within the meaning
of Regulation U of the Board of Governors of the Federal
Reserve System, or any regulations, interpretations or rulings
thereunder.
(j) Make Capital Expenditures, excluding acquisitions of real
property, shall not exceed One Million Five Hundred Thousand
and No/100 Dollars ($1,500,000.00) annually.
Capital Expenditures shall mean with respect to any Person,
all expenditures made and liabilities incurred for the
acquisition of assets which are not, in accordance with GAAP,
treated as expense items for such person in the year made or
incurred or as a prepaid expense applicable to a future year
or years.
(k) Shall not participate in any Acquisition of any Person,
individually or in the aggregate, in excess of Five Million
and No/100 Dollars ($5,000,000.00).
5. An "Event of Default" shall be deemed to have occurred or exist
under this Agreement upon the occurrence and/or existence of any of the
following conditions or events:
(a) Borrower shall fail to pay the principal interest on or shall
otherwise fail to pay any other amount owing by Borrower to
Bank, when due, under any of the Liabilities, and such default
in payment shall continue unremedied or uncured beyond any
applicable period of grace provided with respect thereto, if
any, in the relevant Loan Document(s);
(b) any representation, warranty, certification or statement made
or deemed to have been made by Borrower herein, or by any
Person(s) (including, without limit, Borrower) in any
certificate, financial statement or other document or
agreement delivered by or on behalf or Borrower in connection
with the Liabilities or any of the Loan Documents, shall prove
to be untrue in any material respect;
(c) Borrower shall fail to observe or perform any condition,
covenant or agreement of Borrower, set forth in SECTION 3(a)
hereof, for a period exceeding fifteen (15) days;
(d) Borrower shall fail to observe or perform any condition,
covenant or agreement of Borrower, set forth in SECTION 4
hereof, for a period exceeding five (5) days;
(e) Borrower shall fail to observe or perform any condition,
covenant or agreement of Borrower set forth herein;
(f) Borrower shall fail to observe or perform any condition,
covenant or agreement of Borrower set forth in any other Loan
Document (other than as provided in SUBPARAGRAPHS (A) AND (C)
ABOVE), and such default shall remain unremedied or uncured
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beyond any applicable period or grace or cure, if any,
provided with respect thereto;
(g) if there shall be any change, for any reason whatsoever, in
the management, including, without limit to, the termination
of employment or title of William A. Bassett as Chairman and
CEO, or control of Borrower which, in the reasonable
discretion of Bank, could have a material adverse effect upon
the business, operations or condition (financial or otherwise)
of Borrower;
(h) whenever Bank, in good faith, deems the prospect of payment or
performance of any of the Liabilities to be impaired; or
(i) upon the occurrence or existence of any "Default" or "Event of
Default", as the case may be, set forth in any other Loan
Document.
6. Upon the occurrence and at any time during the continuance or
existence of any Event of Default, Bank may give notice to Borrower declaring
all outstanding Liabilities to be due and payable, whereupon all such
Liabilities then outstanding shall immediately become due and payable, without
further notice or demand, and any commitment or obligation, if any, on the part
of Bank to make loans or otherwise extend credit to or in favor of Borrower
shall immediately terminate. Further, upon the occurrence or at any time during
the continuance or existence of any Event of Default hereunder, Bank may
collect, deal with and dispose of all or any part of any security in any manner
permitted or authorized by the Florida Uniform Commercial Code or other
applicable law (including public or private sale), and after deducting expenses
(including, without limitation, reasonable attorneys' fees and expenses), Bank
may apply the proceeds thereof in part or full payment of any of the
Liabilities, whether due or not, in any manner or order Bank elects. In addition
to the foregoing, upon the occurrence and at any time during the continuance or
existence of any Event of Default hereunder, Bank may exercise any and all
rights and remedies available to it as a result thereof, whether by agreement,
by law or otherwise.
7. BORROWER HEREBY ACKNOWLEDGES AND AGREE THAT BORROWER'S COMPLIANCE
WITH THE TERMS AND CONDITIONS SET FORTH HEREIN, AND THE ABSENCE OF ANY EVENT OF
DEFAULT HEREUNDER, SHALL NOT, IN ANY WAY WHATSOEVER, LIMIT, RESTRICT OR
OTHERWISE AFFECT OR IMPAIR BANK'S RIGHT OR ABILITY TO MAKE DEMAND FOR PAYMENT OF
ANY OR ALL OF THE LIABILITIES WHICH MAY BE ON A DEMAND BASIS AT ANY TIME IN
BANK'S SOLE AND ABSOLUTE DISCRETION, WITH OR WITHOUT REASON OR CAUSE, AND THE
EXISTENCE OF ANY EVENT OF DEFAULT HEREUNDER SHALL NOT BE THE SOLE REASON OR
BASIS FOR ENABLING BANK TO MAKE DEMAND FOR PAYMENT OF ALL OR ANY PART OF SUCH
LIABILITIES.
8. No forbearance on the part of the Bank in enforcing any of its
rights or remedies under this Agreement or any other Loan Document, nor any
renewal, extension or rearrangement of any payment or covenant to be made or
performed by Borrower hereunder or any such other Loan Document, shall
constitute a waiver of any of the terms of this Agreement or such Loan Document
or of any such right or remedy.
9. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Florida.
10. All covenants, agreements, representations and warranties by or on
behalf of Borrower made in connection with this Agreement and any other Loan
11
Documents shall survive the borrowing hereunder or thereunder and shall be
deemed to have been relied upon by Bank. All statements contained in any
certificate or other document delivered to Bank at any time by or on behalf of
Borrower pursuant hereto shall constitute representations and warranties by
Borrower.
11. Borrower agrees that it will pay all costs and expenses incurred by
Bank in connection with preparation of this Agreement and any other Loan
Documents contemplated hereby, including, without limitation, reasonable
attorneys' fees and distributions of counsel for the Bank.
12. This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective successors and assigns; provided,
however, that Borrower shall not assign or transfer any of its rights or
obligations hereunder or otherwise in respect of any of the Liabilities without
the prior written consent of Bank.
13. BORROWER AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVE ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS AGREEMENT OR THE LIABILITIES.
[EXECUTIONS APPEAR ON THE FOLLOWING PAGES]
12
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
DECORATOR INDUSTRIES, INC.,
a Florida corporation
By: /s/ Michael Solomon
----------------------------
Vice President and Treasurer
Sworn to and subscribed before me this 16 day of April, 2004 by Michael Solomon,
as the Vice President and Treasurer, of DECORATOR INDUSTRIES, INC., a Florida
corporation, on behalf of the corporation. I certify that: (a) I am the duly
authorized and licensed captain of "Risky Business" (the "Vessel") described
above; and (b) the Vessel was outside the territorial limits of the State of
Florida at a longitude of 80 00.926 W and a latitude of 26 06.126N at the time
of the execution and delivery of this Agreement.
/s/ Jason M. Roe
----------------------------
Captain of Vessel
Print Name: Jason M. Roe
License Number: 1059705
BANK:
WASHINGTON MUTUAL BANK, FA
By: /s/ Douglas E. Roberts
----------------------------
Douglas E. Roberts,
Vice President
Sworn to and subscribed before me this 16 day of April, 2004 by Douglas E.
Roberts, Vice President of WASHINGTON MUTUAL BANK, FA, on behalf of the bank. I
certify that: (a) I am the duly authorized and licensed captain of "Risky
Business" (the "Vessel") described above; and (b) the Vessel was outside the
territorial limits of the State of Florida at a longitude of 80 00.926 W and a
latitude of 26 06.126N at the time of the execution and delivery of this
Agreement.
/s/ Jason M. Roe
----------------------------
Captain of Vessel
Print Name: Jason M. Roe
License Number: 1059705
13
REVOLVING
PROMISSORY NOTE
$5,000,000.00 International Waters off the coast of Florida
April 16, 2004
FOR VALUE RECEIVED, the undersigned, DECORATOR INDUSTRIES, INC., a
Pennsylvania corporation (herein called "Borrower"), promises to pay to the
order of WASHINGTON MUTUAL BANK, FA (herein called "Bank"), in lawful currency
of the United States of America, the principal sum of FIVE MILLION AND NO/100
DOLLARS ($5,000,000.00), or so much of said sum as has been advanced and is then
outstanding under this Note, together with interest thereon as hereinafter set
forth.
This Note is a note under which Advances, repayments and re-Advances
may be made from time to time, subject to the terms and conditions of this Note;
provided, however, in no event shall Bank be obligated to make any Advances or
re-Advances hereunder (notwithstanding anything expressed or implied herein or
elsewhere to the contrary) in the event that any Default, or any condition or
event which, with the giving of notice or the running of time, or both, would
constitute a Default, shall have occurred or be continuing or exist.
Prior to maturity, accrued and unpaid interest shall be due and payable
in arrears on the first (1st) day of each month commencing on the first (1st)
month after the initial Advance hereunder. The entire principal balance of this
Note then unpaid, together with all accrued and unpaid interest and all other
amounts payable hereunder and under the other Loan Documents (as hereinafter
defined), shall be due and payable in full on June 30, 2007 (the "Maturity
Date"), the final maturity of this Note. All such payments will be made by
automatic monthly debits of Borrower's operating or demand account(s) with Bank.
Interest charges shall be computed at a rate per annum equal to the Eurodollar
Rate plus 150 basis points (the "Interest Rate"). Upon and after either (a) the
third (3rd) Business Day following the occurrence of a Default caused by failure
to make a required payment, or (b) the occurrence of any other Default, and
during the continuation thereof, the Indebtedness shall bear interest at the
then applicable Interest Rate plus six (6%) percent per annum (the "Default
Rate"). Notwithstanding any other provision hereof, if any applicable law,
treaty, regulation or directive, or any change therein or in the interpretation
or application thereof, shall make it unlawful for Bank (for purposes of this
subsection, the term "Bank" shall include the office or branch where Bank or any
corporation or bank controlling Bank makes or maintains any Eurodollar Rate
loans) to make or maintain its Eurodollar Rate loans, the obligation of Bank to
make Eurodollar Rate loans hereunder shall forthwith be cancelled and Borrowers
shall, if any affected Eurodollar Rate loans are then outstanding, promptly open
request from Bank, either shall pay all such affected Eurodollar Rate loans or
convert such affected Eurodollar Rate loans into loans of another type which
Bank may specify.
Interest and fees hereunder shall be computed on the basis of a year of
360 days and for the actual number of days elapsed. If any payment to be made
hereunder becomes due and payable on a day other than a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and interest
thereon shall be payable at the applicable Interest Rate during such extension.
All fees hereunder shall be earned in full on the date when the same are due and
payable hereunder and shall not be subject to rebate or proration upon
termination of this Note for any reason.
1
The amount and date of each Advance, its Interest Rate, and the amount
and date of any repayment shall be noted on Bank's records, which records shall
be conclusive evidence thereof, absent manifest error; provided, however, any
failure by Bank to make any such notation, or any error in any such notation,
shall not relieve Borrower of its obligations to repay Bank all amounts payable
by Borrower to Bank under or pursuant to this Note, when due in accordance with
the terms hereof.
Borrower may request an Advance hereunder, including the refunding of
an outstanding Advance as the same type of Advance, upon delivery to Bank of a
request for Advance executed by two (2) authorized officers of Borrower, subject
to the following:
(a) no Default, and no condition or event which, with the giving of
notice or the running of time, or both, would constitute a Default, shall have
occurred and be continuing or exist under this Note;
(b) each such Request for Advance shall set forth the information
required by that certain Letter Agreement by and between Borrower and Bank of
even date herewith;
(c) each such Request for Advance shall be delivered to Bank by 11:00
a.m. (Eastern Standard Time) two (2) Business days prior to the proposed date of
Advance;
(d) a Request for Advance, once delivered to Bank, shall not be
revocable by Borrower; provided, however, as aforesaid, Bank shall not be
obligated to make any Advance under this Note; and
(e) the proceeds of such Advance must be payable directly into an
account of Borrower at Bank.
Advances hereunder may not be requested by telephonic notice to Bank.
Borrower may repay all or any part of the outstanding balance of this
Note at any time. Any repayment made in accordance with this paragraph shall be
without premium or penalty. Any other repayment shall be otherwise restricted by
and subject to the terms of this Note.
In the event that any payment under this note becomes due and payable
on any day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day, and, to the extent applicable, interest
shall continue to accrue and be payable thereon during such extension at the
rates set forth in this Note.
All payments to be made by Borrower to Bank under or pursuant to this
Note shall be in immediately available funds, without setoff or counterclaim,
and in the event that any payments submitted hereunder are in funds not
available until collected, said payments shall continue to bear interest at the
Interest Rate until collected. Borrower hereby authorizes Bank to charge any
account of Borrower with Bank for all sums due hereunder, when due in accordance
with the terms hereof.
If the adoption after the date hereof, or any change after the date
hereof in, any applicable law, rule or regulation of any governmental authority,
central bank or comparable agency after the date hereof:
2
(a) shall subject Bank to any tax, duty or other charge with
respect to this note or any Advance hereunder or shall change
the basis of taxation of payments to Bank of the principal of
or interest on any Advance or any amounts due under this Note
in respect thereof (except for changes in the rate of tax on
the overall net income of Bank imposed by the jurisdiction in
which Bank's principal executive office; or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for
the account of, or credit extended by Bank or the foreign
exchange and interbank markets any other condition affecting
any Advance under this Note;
and the result of any of the foregoing is to increase the cost to bank
of maintaining any part of the indebtedness hereunder or to reduce the amount of
any sum received or receivable by Bank under this Note by an amount deemed by
the Bank to be material, then Borrower shall pay to Bank, within fifteen (15)
days of Borrower's receipt of written notice from Bank demanding such
compensation, such additional amount or amounts as will compensate Bank for such
increased cost or reduction. A certificate of Bank, prepared in good faith and
in reasonable detail by Bank and submitted by bank to Borrower, setting forth
the basis for determining such additional amount or amounts necessary to
compensate Bank shall be conclusive and binding for all purposes, absent
manifest error in computation.
In the event that any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect and whether or not
presently applicable to Bank, or any interpretation or administration thereof by
any governmental authority charged with the interpretation or administration
thereof, or compliance by Bank with any guideline, request or directive of any
such authority (whether or not having the force of law), including any
risk-based capital guidelines, affects or would affect the amount of capital
required or expected to be maintained by Bank (or any corporation controlling
Bank), and Bank determines that the amount of such capital is increased by or
based upon the existence of any obligations of Bank hereunder or the making or
maintaining of any Advances hereunder, and such increase has the effect of
reducing the rate of return on Bank's (or such controlling corporation's)
capital as a consequence of such obligations or the making of such Advances
hereunder to a level below that which Bank (or such controlling corporation)
could have achieved but for such circumstances (taking into consideration its
policies with respect to capital adequacy), then Borrower shall pay to Bank,
within fifteen (15) days of Borrower's receipt of written notice from Bank
demanding such compensation, additional amounts sufficient to compensate Bank
(or such controlling corporation) for any increase in the amount of capital and
reduced rate of return which Bank reasonably determined to be allocable to the
existence of any obligations of the Bank hereunder or to the making or
maintaining any Advances hereunder. A certificate of Bank as to the amount of
such compensation, prepared in good faith an din reasonable detail by the Bank
and submitted by Bank to Borrower, shall be conclusive and binding for all
purposes absent manifest error in computation.
This Note and any other indebtedness and liabilities of any kind of
Borrower to Bank, and any and all modifications, renewals or extensions thereof,
whether joint or several, contingent or absolute, direct or indirect, now
existing or later arising, and however evidenced (collectively the
"Indebtedness"), are secured by and Bank is granted a security interest in all
3
of item at any time deposited in any account of Borrower with Bank and by all
proceeds of these items (cash or otherwise), all account balances of Borrower
from time to time with Bank, by all property of Borrower from time to time in
the possession of Bank, and by any other collateral, rights and properties
described in each and every mortgage, security agreement, pledge, assignment and
other security or collateral agreement which has been, or will at any time(s)
later be, executed by Borrower or others to or for the benefit of Bank
(collectively the "Collateral"). Notwithstanding the foregoing, (a) to the
extent that any portion of the Indebtedness is a consumer loan, that portion
shall not be secured by any deed of trust or mortgage on or any other security
interest in any Borrower's principal dwelling or in any Borrower's real property
which is not a purchase money security interest as to that portion, unless
expressly provided to the contrary in another place, and (b) if Borrower has
given or gives bank a deed of trust or mortgage covering California real
property, that deed of trust or mortgage shall not secure this Note or any other
Indebtedness of Borrower, unless expressly provided to the contrary in another
place.
If (a) Borrower or any guarantor under a guaranty of all or part of the
Indebtedness (a "guarantor") fail(s) to pay this Note, or any part thereof, or
any of the Indebtedness when due, by maturity acceleration or otherwise, or
fail(s) to pay any Indebtedness owing on a demand basis upon demand; or (b)
Borrower or any guarantor fails(s) to comply with any of the terms or provisions
of any agreement between Borrower or any guarantor and Bank; or (c) Borrower or
any guarantor become(s) insolvent or the subject of a voluntary or involuntary
proceeding in bankruptcy, or a reorganization, arrangement or creditor
composition proceeding, (if a business entity) cease(s) doing business as a
going concern, (if a natural person) die(s) or become(s) incompetent, (if a
partnership) dissolve(s) or any general partner of it dies, becomes incompetent
or becomes the subject of a bankruptcy proceeding, or (if a corporation) is the
subject of dissolution, merger or consolidation; or (d) any warranty or
representation made by Borrower or any guarantor in connection with this Note or
any of the Indebtedness shall be discovered to be untrue or incomplete in any
material respect; or (e) there is any termination, notice of termination, or
breach of any guaranty, pledge, collateral assignment or subordination agreement
relating to all or any part of the Indebtedness; or (f) there is any failure by
Borrower or any guarantor to pay, when due, any of its indebtedness (other that
to bank) or in the observance or performance of any term, covenant or condition
in any document evidencing, securing or relating to such indebtedness which has
had or could reasonably be expected to have a material adverse effect upon
Company's business, properties, or financial condition or upon Company's ability
to comply with its obligations hereunder; or (g) Bank deems itself insecure,
believing in good faith that the prospect of payment or performance of this Note
or any of the Indebtedness is materially impaired; or (h) there is filed or
issued a levy or writ of attachment or garnishment or other like judicial
process upon Borrower or any guarantor with Bank, then Bank, upon the occurrence
and at any time during the continuance or existence of any of these conditions
or events (each a "Default"), may at its option and without prior notice to
Borrower, declare any or all of the Indebtedness to be immediately due and
payable (notwithstanding any provisions contained in the evidence of it to the
contrary), sell or liquidate all or any portion of the Collateral, set off
against the Indebtedness any amounts owing by Bank to Borrower, charge interest
at the default rate provided in the document evidencing the relevant
Indebtedness, and exercise any one or more of the rights and remedies granted to
Bank by any agreement with Borrower or which are granted to Bank under
applicable law, or otherwise.
Borrower waives presentment, demand, protest, notice of dishonor,
notice of demand or intent to demand, notice of acceleration or intent to
accelerate, and all other notices, and agrees that no extension or indulgence to
Borrower, or release, substitution or nonenforcement of any security, or release
or substitution of any guarantor or any other part, whether with or without
notice, shall affect he obligations of Borrower. Borrower waives all defenses or
4
right to discharge available under Section 3-605 of the Uniform Commercial Code
and waives all other suretyship defenses or right to discharge. Borrower agrees
that Bank has the right to sell, assign, or grant participations, or any
interest, in any or all of the Indebtedness, and that, in connection with such
right, but without limiting its ability to make other disclosures to the full
extent allowable, Bank may disclose all documents and information which the Bank
now or later has relating to Borrower and the Indebtedness.
Borrower agrees to reimburse Bank, or any other holder or owner of this
Note, for any and all costs expenses (including, without limit, court costs,
legal expenses and reasonable attorneys' fees, whether inside or outside counsel
is used, whether or not suit is instituted, and, if suit is instituted, whether
at the trial court level, appellate level, in a bankruptcy, probate or
administrative proceeding or otherwise) incurred in collecting or attempting to
collect this note or the Indebtedness or incurred in any other matter or
proceeding relating to this Note or the Indebtedness.
Borrower acknowledges and agrees that there are no contrary agreement,
oral or written, establishing a term of this Note and agrees that the terms and
conditions of this Note may not be amended, waived or modified except in writing
signed by a duly authorized officer of Bank expressly stating that the writing
constitutes an amendment, waiver or modification of the terms of this Note. If
any provision of this note is unenforceable in whole or part for any reason, the
remaining provisions shall continue and be effective. THIS NOTE SHALL BE
EXECUTED OUTSIDE OF FLORIDA BUT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF FLORIDA.
This Note shall bind Borrower and Borrower's respective successors and
assigns.
For the purpose of this Note, the following terms have the following
meanings:
"Advance" means a borrowing requested by Borrower and made by Bank
under this Note, including any refunding of an outstanding Advance.
"Business Day" means any day, other than Saturday, Sunday or holiday,
on which bank is open for all or substantially all of its domestic and
international business (including dealings in foreign exchange) in Fort
Lauderdale, Florida.
"Eurodollar Rate" shall mean, for any day, the interest rate which is
the rate for deposits in Dollars for a maturity of one month which appears on
Page 3750 on the Telerate Service (or such other page as may replace that page
on such service, or such other services as may be nominated by the British
Bankers Association for the purpose of displaying their fixing of the London
Inter-Bank Offered Rate) as of 11:00 a.m., London time, on the day that is two
London Banking Days preceding the first day of the then current calendar month.
If, for any reason, the Eurodollar Rate is not available, Bank shall, in good
faith and in its sole discretion, determine a reasonable comparable interest
rate.
"Request for Advance" means a Request for Advance issued by Borrower
under this Note and in accordance with the provisions of that certain Letter
Agreement by and between the Borrower and Bank of even date herewith.
No delay or failure of Bank in exercising in any right, power or
privilege hereunder shall affect such right, power or privilege, nor shall any
single or partial exercise thereof preclude any further exercise thereof, or the
5
exercise of any other power, right or privilege. The rights of Bank under this
Agreement are cumulative and not exclusive of any right or remedies which Bank
would otherwise have, whether by other instruments or by law.
BORROWER AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS NOTE OF THE INDEBTEDNESS HEREUNDER.
[EXECUTION APPEARS ON THE FOLLOWING PAGE]
6
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal. BORROWER:
DECORATOR INDUSTRIES, INC.,
a Pennsylvania corporation
By: /s/ Michael Solomon
----------------------------
Michael Solomon
Vice President and Treasurer
Sworn to and subscribed before me this 16 day of April, 2004, by
Michael Solomon, as the Executive Vice President and Treasurer, of DECORATOR
INDUSTRIES, INC., a Pennsylvania corporation, on behalf of the corporation. I
certify that: (a) I am the duly authorized and licensed captain of "Risky
Business" (the "Vessel") described above; and (b) the Vessel was outside the
territorial limits of the State of Florida at a longitude of 80 00.926 W and a
latitude of 26 06.126N at the time of the execution and delivery of this
Agreement.
/s/ Jason M. Roe
----------------------------
Captain of Vessel
Print Name: Jason M. Roe
License Number: 1059705
7