June 1, 2009
Exhibit
10.29
June 1,
2009
0000
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Re: Amendment No. 1 to Loan
Documents
Dear
Sirs:
Reference
is made to the Revolving Credit and Term Loan Agreement dated as of August 31,
2008 (the “Loan
Agreement”), by and between CVC California, LLC (the “Lender”) and General
Environmental Management, Inc. (the “Borrower”), and the
Loan Documents described therein. All capitalized terms used herein
without definition have the respective meanings ascribed to them in the Loan
Agreement.
The
Borrower has advised the Lender that (a) the Borrower is in default in the
payment of the principal installment that was due under the Term Note on May 1,
2009, and may be unable to pay the principal installment due under the Term Note
on June 1, 2009, (b) the Borrower was not in compliance with Section 6.18 of the
Loan Agreement for the periods ended December 31, 2008 and March 31, 2009, and
(c) the Borrower is in need of additional capital availability for the normal
conduct of the Business Operations. By reason of the forgoing, the
Borrower has requested from the Lender a waiver of such Events of Default, and a
deferral of certain principal installments under the Term Note, all of which the
Lender is willing to provide, subject to the terms and conditions set forth in
this Amendment No. 1.
Accordingly,
this will confirm the agreement of the Lender and the Borrower to make the
following amendments to the Loan Agreement.
1.
Definitions. The
following additional definition is hereby added to Article 1 of the Loan
Agreement in the appropriate alphabetical location:
“GPP” shall mean
General Pacific Partners LLC, a California limited liability
company.
2.
Amendments to Loan
Agreement.
(a) The
following new Section 5.16 is hereby added to the Loan Agreement:
Section
5.16. Seller Notes Modification. On or prior to
September 1, 2009, (a) GEM-DE and the holders of the Seller Notes shall have
executed and delivered written modification agreements pursuant to which the
payment provisions thereof (including, without limitation, installment due dates
and final maturity dates) shall have been modified to the satisfaction of the
Lender in its sole discretion, and (b) true and complete copies of such executed
modification agreements shall have been delivered to the Lender.
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(b) Section
6.18 of the Loan Agreement is hereby modified so as to read in full as
follows:
Section
6.18. EBITDA. Permit EBITDA to be less than (a)
$670,000 for the fiscal quarter ending September 30, 2009, (b) $660,000 for the
fiscal quarter ending December 31, 2009, or (c) in any succeeding fiscal
quarter, an amount which is more than $10,000 less than the required minimum
EBITDA in the immediately preceding fiscal quarter (i.e., $650,000 for the
fiscal quarter ending March 31, 2010, $640,000 for the fiscal quarter ending
June 30, 2010, etc.). For purposes of assessing interest at the
default rates provided in the Notes, any failure to comply with this Section
6.18 shall be deemed to be an Event of Default at the end of the subject fiscal
quarter (and not deferred until such non-compliance is reported), but for all
other purposes, such non-compliance shall not be deemed an Event of Default (i)
unless (A)the Borrower fails, within thirty (30) days after the conclusion of
the subject fiscal quarter, to reach written agreement with the Lender on a plan
to cure such non-compliance, or (B) if such a curative plan is agreed upon, the
Borrower fails to complete the cure within sixty (60) days after the conclusion
of the subject fiscal quarter, or (ii) if (A) the Borrower shall have received,
during or within sixty (60) days after the conclusion of the subject fiscal
quarter, net cash proceeds from the issuance of Common Stock in a dollar amount
at least equal to the amount by which the Borrower failed to achieve the
required minimum EBITDA), which net cash proceeds amount (or requisite portion
thereof) are, for purposes hereof, added to EBITDA to the extent necessary (on a
dollar-for-dollar basis) to eliminate the EBITDA shortfall in such fiscal
quarter, and/or (B) to the extent that such net cash proceeds are not applied to
cure an EBITDA shortfall as aforesaid (“Excess Cash
Proceeds”), and provided that the Borrower has made or simultaneously
makes a prepayment of principal under the Term Note out of such net cash
proceeds (which prepayment shall be applied to the principal installments
thereunder in direct order of maturity, and shall be without requirement of any
premium or penalty) in an amount equal to one-half of the Excess Cash Proceeds,
an amount equal to one-half of the Excess Cash Proceeds are, for purposes
hereof, added to EBITDA in the first fiscal quarter immediately following the
fiscal quarter in which the Excess Cash Proceeds were received by the
Borrower.
(c) Section
6.19 of the Loan Agreement is hereby modified so as to read in full as
follows:
Section
6.19. Coverage Test. Permit the ratio of (a)
EBITDA, plus
any permitted additions to EBITDA effected in accordance with Section 6.18
above, minus
any and all dividends, distributions and/or redemption payments made by the
Borrower to its shareholders or other holders of equity interests, to (b) Fixed
Charges, to be less than 1.0 to 1.0 for any four (4) consecutive fiscal quarters
ending on or after September 30, 2009.
(d) The
following new Section 6.20 is hereby added to the Loan Agreement:
Section 6.20. GPP
Payments. Make any payments of any kind (whether in cash, in
kind or otherwise) to or on behalf of GPP or any of its Affiliates, provided that the
foregoing limitation shall not be applicable to scheduled payments which are
made as and when due under the outstanding Equipment Lease Agreement between
GEM-DE and P-1 Leasing (an affiliate of GPP), at the rate of $4,000 per month
(the “P-1
Lease”).
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3.
Amendment
to Term Note.
(a) The
monthly principal payment that was due under the Term Note on May 1, 2009, and
the monthly principal payment becoming due under the Term Note on June 1, 2009,
shall instead be due and payable on August 31, 2011 (which payments shall be in
addition to the payments otherwise scheduled to be due and payable on such date
in accordance with the Term Note).
(b) The
Conversion Price (as such term is defined in the Term Note) currently in effect
under the Term Note is hereby reduced to $.75 per share of Common Stock, subject
to further adjustment from time to time in accordance herewith and in accordance
with the Term Note. In addition to any and all other adjustments, the
Conversion Price shall be adjusted, effective December 1, 2009, to be an amount
equal to the weighted average Trading Price (as such term is defined in the Term
Note) of the Common Stock during the period from May 1, 2009 through November
30, 2009 (the “Measuring Period”),
but in no event less than $.60 per share of Common Stock; provided, however, that if, at
any time and from time to time during such Measuring Period, there shall occur
any stock split, stock dividend, combination of shares, recapitalization or
other such event relating to the Common Stock, then appropriate adjustment shall
be made to the Trading Prices used in such calculation, and the minimum $.60
Conversion Price, to fairly reflect the effects of each such stock split, stock
dividend, combination of shares, recapitalization or other such
event. The Borrower shall, as promptly as practicable after November
30, 2009, provide to the Lender a detailed written calculation of the adjusted
Conversion Price in accordance with this paragraph 3(c)
(c) In
the event that the Borrower shall hereafter receive, at any time and from time
to time, any Excess Cash Proceeds (as such term is defined in the modified
Section 6.18 of the Loan Agreement as set forth above), the Borrower shall be
required to make a prepayment of principal under the Term Note (which prepayment
shall be applied to the principal installments thereunder in direct order of
maturity, and shall be without requirement of any premium or penalty) in an
amount equal to one-half of such Excess Cash Proceeds. If such Excess
Cash Proceeds are received during the sixty (60) day period following the close
of a fiscal quarter in which there was an EBITDA shortfall under Section 6.18 of
the Loan Agreement, such prepayment shall be due and payable within one (1)
Business Day after the receipt of such Excess Cash Proceeds, and otherwise shall
be due and payable on the first (1st)
Business Day after the conclusion of the fiscal quarter in which such Excess
Cash Proceeds are received.
(d) Upon
execution and delivery of this Amendment No. 1, a copy hereof shall be attached
to and form a part of the Term Note.
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4.
Amendments to
Warrants.
(a) Warrant
No. CV-2 issued by the Borrower to the Lender pursuant to the Loan Agreement is
hereby amended so as to change the current Exercise Price thereunder to $.70 per
share of Common Stock, subject to further adjustment hereafter from time to time
in accordance with such Warrant.
(b) Warrant
No. CV-3 issued by the Borrower to the Lender pursuant to the Loan Agreement is
hereby cancelled, and shall be destroyed by the Lender promptly following the
effectiveness of this Amendment No. 1.
(c) In
the event that, at any time from and after the date of this Amendment No. 1,
there shall occur any Event of Default under Section 7.01(b) of the Loan
Agreement, then the exercise price applicable under each of the remaining
outstanding Warrants shall thereupon automatically (and without requirement of
any further writing) be reduced to $.01 per share of Common Stock (provided
that, if the Exercise Price under any such Warrant is then already less than
$.01 per share, then there shall be no increase in such Exercise Price by reason
of this paragraph 4(c)).
(d) Upon
execution and delivery of this Amendment No. 1, a copy hereof shall be attached
to and form a part of each of the remaining outstanding Warrants.
5.
Amendments to Registration
Rights Agreement.
(a) Sections
2(a) and 2(b) of the Registration Rights Agreement are hereby amended so as to
require the filing of the required Registration Statement (as such term is
defined in the Registration Rights Agreement), or, if applicable, the initial
Registration Statement, by not later than July 31, 2010, and to require such
Registration Statement (or, if applicable, the initial Registration Statement)
to be declared effective by the SEC by not later than October 31,
2009. Any additional Registration Statement required under the
circumstances described in the proviso to Section
2(a) of the Registration Rights Agreement shall be required to be filed as soon
after the required filing of the initial Registration Statement as is permitted
by the SEC, and the Company shall cause each such additional Registration
Statement to be declared effective as promptly as possible after the required
filing thereof. Such registration(s) shall include, in addition to
the shares described in the Registration Rights Agreement, the shares of Common
Stock being issued to the Lender pursuant to paragraph 7(a) below.
(b) Anything
contained in the Registration Rights Agreement to the contrary notwithstanding,
the Lender hereby consents to the inclusion, in each registration statement
filed under the Registration Rights Agreement, of the shares received by GPP
pursuant to the debt conversion contemplated by paragraph 8(c) below, subject to
proportionate cutback (based on the relative number of shares requested to be
registered by the Lender and GPP) in the event that less than all of the
Lender’s shares and GPP’s shares can be included in any such registration
statement. The Lender hereby confirms that GPP is an intended third
party beneficiary of this paragraph 5(b).
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6.
Waivers.
(a) The
Lender hereby waives the Events of Default consisting of the non-payment by the
Borrower of the principal installments due under the Term Note on May 1, 2009
and June 1, 2009.
(b) The
Lender hereby further waives the Events of Default consisting of the failure of
the Borrower to comply with Section 6.18 of the Loan Agreement for the periods
ended December 31, 2008 and March 31, 2009.
(c) The
Lender hereby waives all rights to collect the increased interest chargeable
under the Notes by reason of the foregoing Events of Default. The
foregoing does not and shall not affect the Lender’s right to collect interest
at the non-default rates provided in the Notes, or to assess interest at the
default rates in the event of any other or subsequent Events of
Default.
7.
Fees. In
consideration of the waivers and amendments herein, the Borrower shall (a)
within five (5) Business Days after the date of this Amendment No. 1, issue to
and in the name of the Lender or its securities intermediary, by such means as
is directed by the Lender, at a price of $.01 per share (which shall be paid by
crediting such amount to the outstanding Advances) but having an agreed value of
$.74 per share, 600,000 shares of Common Stock, all of which shall, upon
issuance, be validly issued, fully paid and nonassessable (and the Lender hereby
confirms that, pending the resale registration thereof contemplated by paragraph
5 above, such shares will constitute ‘restricted securities” for purposes of
federal securities laws), and (b) upon the execution and delivery of this
Amendment No. 1, issue to the Lender the Borrower’s promissory note in the
principal amount of $164,000, bearing interest at the rate of 7% per annum
(which interest shall be payable monthly in arrears on the first day of each
calendar month commencing June 1, 2009) and maturing in full on August 31, 2011,
which promissory note (the “Fee Note”) shall be
in form and substance satisfactory to the Lender. The Fee Note shall
constitute a “Note” under and for all purposes of the Loan Documents, and the
Borrower’s obligations under such promissory note shall constitute Obligations
under and for all purposes of the Loan Documents, and shall be secured by the
Collateral pursuant to the Security Documents.
8.
Conditions
Precedent. This Agreement shall not become effective unless,
on or prior to June 2, 2009:
(a)
the Borrower shall have executed and delivered to the Lender the Fee
Note;
(b) GPP
and the Borrower shall have executed and delivered to the Lender a subordination
agreement, in form and substance satisfactory to the Lender, respecting GPP’s
rights and the Borrower’s obligations under the outstanding promissory notes
dated February 14, 2008 and March 19, 2008 in the principal amounts of $272,500
and $200,000, respectively, issued by the Borrower to GPP (the “GPP
Notes”);
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(c)
GPP and its Affiliates shall have
converted into Common Stock, at the rate of $.60 per share of Common Stock, all
indebtedness and monetary obligations (other than the P-1 Lease and the
principal of the GPP Notes) owed by the Borrower and its Subsidiaries to GPP and
its Affiliates, which the Borrower has represented and warranted to the Lender
consist entirely of (i) unpaid accrued interest on the GPP Notes in the
aggregate amount of approximately $59,367.81, (ii) interest and fees in respect
of letters of credit previously provided for the benefit of the Borrower and/or
its Subsidiaries, such interest and fees totaling approximately $50,169, (iii)
reimbursement of legal fees in the approximate amount of $13,250 in respect of
the Romic litigation, (iv) reimbursement of travel expenses in the approximate
amount of $19,469, and (v) reimbursement of payments to a public relations firm
in the total amount of $22,500; and
(d) the
Borrower shall have provided to the Lender evidence, reasonably satisfactory to
the Lender, of the debt-to-equity conversion described in paragraph 8(c)
above.
The
Lender hereby waives any antidilution adjustment under Warrant No. CV-2 by
reason of the issuance of Common Stock in accordance with paragraph 8(c) above,
which waiver is expressly limited to the share issuance described in paragraph
8(c).
9.
Expenses. The
Borrower shall pay or reimburse the Lender on demand for its costs and expenses
(including reasonable attorneys’ fees) incurred in connection with the
preparation of this Amendment No. 1 and the other documents described
herein.
10.
Reaffirmation.
(a) The
Borrower hereby reaffirms all of its representations and warranties in the Loan
Documents on and as of the date hereof, as if expressly made on and as of the
date hereof.
(b) The
Borrower hereby (i) confirms the ongoing validity of all of the Obligations
outstanding on the date hereof and on the effectiveness of this Amendment No. 1
(after giving effect to this Amendment No. 1), (b) confirms that such
Obligations are owing without reservation, defense, counterclaim or offset, (c)
confirms that, after giving effect to this Amendment No. 1, neither the Borrower
nor any Subsidiary has any claims or causes of action against the Lender or any
of its Affiliates, managers or officers, and (d) acknowledges, confirms and
agrees that none of the amendments to be effected by this Amendment No. 1 shall
constitute a novation of any of the Obligations outstanding immediately prior to
the effectiveness of this Amendment No. 1.
(c) The
Borrower hereby reaffirms the validity of all of the liens and security
interests heretofore granted to the Lender as collateral security for the
Obligations, and acknowledges that all of such liens and security interests, and
all collateral heretofore pledged as security for the Obligations, continues to
be and remains collateral for the Obligations from and after the effectiveness
of this Amendment No. 1.
11.
Representations and
Warranties. Each of the Lender and the Borrower hereby
represents and warrants that (a) this Amendment No. 1 has been duly and validly
authorized by all necessary corporate or company action on such party’s part,
(b) this Amendment No. 1 has been duly executed and delivered by such party’s
duly authorized officer, and (c) this Amendment No. 1 constitutes such party’s
valid and binding obligation, enforceable against such party in accordance with
its terms.
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12.
Ongoing Force
and Effect; Waiver and Amendment. Except as expressly set
forth herein, all of the terms and conditions of the Loan Agreement and the
other Loan Documents remain unchanged and in full force and
effect. All references to the Loan Agreement, the Term Note and any
of the Warrants in any other Loan Documents shall hereafter mean and refer to
the Loan Agreement, the Term Note and such Warrant, respectively, as amended by
this Amendment No. 1. This Amendment No. 1 may not be amended or
modified, nor may any performance required hereunder be waived, except pursuant
to a written agreement signed by the party to be charged therewith.
13.
Governing
Law. This Amendment No. 1 shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
conflicts of laws principles.
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remainder of this page is intentionally blank]
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Kindly
confirm your agreement to the foregoing by countersigning a counterpart copy of
this Amendment No. 1 in the space provided below.
| Very truly yours, | ||||
| CVC CALIFORNIA, LLC | ||||
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/s/
Xxxx Xxxxxxx
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Xxxx
Xxxxxxx
Chief Executive Officer
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| Acknowledged, Confirmed and Agreed To: | ||||
| GENERAL ENVIRONMENTAL MANAGEMENT, INC. | ||||
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/s/
Xxxxxxx Xxxxxx
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Xxxxxxx
Xxxxxx
Chief Executive Officer
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