Xxx. 00-00
MASTER REFINANCING AGREEMENT
This Master Refinancing Agreement (this "Agreement") is made and
entered into as of the 6th day of November, 1997 (the "Effective Date") between
and among Consolidated Eco-Systems, Inc., an Idaho corporation formerly known as
Exsorbet Industries, Inc. ("Consolidated"), all of the wholly or partially owned
subsidiaries of Consolidated, and American Physicians Service Group, Inc., a
Texas corporation ("APS").
R E C I T A L S:
WHEREAS, Consolidated executed and delivered that certain Promissory
Note dated November 26, 1996 (the "Original Note") in the original principal
amount of Three Million Three Hundred Thousand Dollars ($3,300,000) payable to
the order of APS; and
WHEREAS, the Original Note was secured pursuant to the following
agreements, all for the benefit of APS: (i) that certain Security Agreement
dated December 12, 1996 entered into by 7-7, Inc., an Arkansas corporation
("7-7"), formerly known as 7-7 Merger, Inc.; (ii) that certain Security
Agreement dated September 30, 1996 entered into by 7-7; (iii) that certain
Assignment and Security Agreement dated September 30, 1996 entered into by
Consolidated; and (iv) those certain Guaranty Agreements dated September 30,
1996 entered into by each of the following entities:
a. Consolidated Environmental Services, Inc., an Arkansas corporation ("CES");
b. Cierra, Inc., an Arkansas corporation ("Cierra");
x. Xxxxx Environmental Services, Inc., a Louisiana corporation ("Larco");
d. KR Industrial Services of Alabama, Inc., an Alabama corporation ("KR
Industrial");
e. Exsorbet Technical Services, Inc., an Arkansas corporation
("Exsorbet Technical") doing business as SpilTech Services, Inc.;
f. Eco Acquisition, Inc. ("Acquisition"), an Arkansas corporation also known
as Eco-Systems, Inc.; and
g. 7-7
(all of the agreements described in (i) through (iv) above are collectively
referred to herein as the "Original Security Documents"); and
WHEREAS, Consolidated has executed and delivered a new note of even
date herewith in the original principal amount of $3,788,580 (the "New Note") in
renewal, replacement and extension of the Original Note, which New Note is
secured pursuant to the Original Security Documents and the additional Security
Documents described below; and
WHEREAS, in addition to the Original Security Documents, the New Note
and the indebtedness and obligations evidenced thereby are further secured
pursuant to (i) that certain Security Agreement of even date herewith entered
into for the benefit of APS by Larco; and (ii) that certain Assignment and
Security Agreement of even date herewith entered into for the benefit of APS by
Consolidated (both of which agreements described in (i) and (ii) of this
sentence, together with the Original Security Documents, are collectively
referred to herein as the "Security Documents"); and
WHEREAS, for purposes hereof, 7-7, CES, Cierra, Xxxxx, XX Industrial,
Exsorbet Technical, and Acquisition, together with any future corporations or
other entities, wholly or partially, directly or indirectly, owned or controlled
by Consolidated, are collectively referred to herein as the "Subsidiaries" and
individually as a "Subsidiary"; and
WHEREAS, in addition to the covenants and agreements contained in the
New Note and the Security Documents, Consolidated, the Subsidiaries and APS
desire to memorialize certain other understandings and agreements between them
as provided herein.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
1. REGISTRATION OF COLLATERAL SHARES. Consolidated agrees to, within
thirty (30) days after the execution and delivery of this Agreement, file for,
and use its best efforts to effect, the registration under the Securities Act of
1933, as amended (the "Securities Act"), and the qualification under applicable
state securities laws (the "State Laws"), of all of the shares of common stock
of Consolidated in which APS has a security interest under the Security
Documents, including without limitation those certain One Million Two Hundred
Thousand (1,200,000) shares of common stock of Consolidated, and such additional
shares as may be executed or issuable upon any stock dividend, stock split,
reverse stock split, reclassification or other similar act or transaction (all
of which shares of Consolidated common stock in which APS has a security
interest are hereinafter referred to as the "Collateral Shares"). Consolidated
agrees that, in addition to such other obligations and restrictions as may be
set forth in the Security Documents, Consolidated will not engage in any stock
split, stock dividend, reclassification or other similar act or transaction
regarding its capital stock unless the Collateral Shares are included in such
act or transaction and effected thereby in all respects the same as any other
class or share of Consolidated's capital stock.
Consolidated will use its best efforts to effect the registration under
the Securities Act and the qualification under the State Laws of the Collateral
Shares, to the extent required to permit the disposition thereof in any manner,
or combinations of manners, which APS may select, at APS' sole discretion. APS
agrees that Consolidated may utilize Form S-3 to register the Collateral Shares
unless APS determines, in good faith, that Form S-3 would not accomplish the
best disposition of the Collateral Shares for APS' benefit (or another form is
required by applicable regulations or regulatory authorities). Consolidated
agrees to maintain such registration statement under the Securities Act and the
qualification under the State Laws to be maintained in effect until such time as
all Collateral Shares have been sold at the direction and under the control of
APS, and the gross proceeds from such sales have been remitted directly to APS
for repayment of Consolidated's indebtedness under the New Note, or until all
indebtedness due APS under and pursuant to the New Note has been repaid in full,
whichever occurs first. Alternatively, but only upon the written request of APS
and in APS' sole discretion, Consolidated will promptly take such steps (at
Consolidated's sole cost) as necessary to allow APS to cause a sale of some or
all of the Collateral Shares pursuant to an exception to the registration
requirements of the Securities Act and the State Laws. However, if APS does not,
in writing, elect the alternative described in the preceding sentence as to all
Collateral Shares, Consolidated shall be deemed to be in default hereunder and
under the New Note and the Security Documents in the event Consolidated has
failed or refused, for any or no reason, to effect the registration under the
Securities Act and the qualification under the State Laws of all the Collateral
Shares in accordance with this Section 1 on or before May 1, 1998.
Consolidated agrees to cooperate fully with APS, and to take such steps
and execute and deliver such documents and instruments, as APS may request or as
may otherwise be necessary, in order to allow APS, from time-to-time, to sell,
or cause the sale of, the Collateral Shares, or any portion thereof. Any and all
proceeds from any sale of the Collateral Shares shall be retained by, or
remitted directly to, APS and shall be applied to the indebtedness of
Consolidated to APS in the order provided in the New Note and the Security
Documents pursuant to which APS acquired its security interest in the Collateral
Shares. APS shall be entitled to cause a sale of the Collateral Shares and
remittance of the proceeds therefrom to APS regardless of whether any particular
installment of principal and/or interest is then due under the New Note, and any
such payments accomplished through the sale of Collateral Shares shall not
affect Consolidated's monthly or final payment obligations under the New Note,
except to the extent the application of the sales proceeds from Collateral
Shares causes an early pay-off, in full, of all amounts due under and pursuant
to the New Note in compliance with the terms of the New Note and the Security
Documents. Consolidated will bear all costs and expenses (including without
limitation brokerage costs, legal fees and expenses and printing fees and
expenses) incurred in connection with, or related to, the registration and sale
of the Collateral Shares and the remittance of, or retention by, APS of the
proceeds from such sales.
In connection with the registration, qualification and/or sale of
Collateral Shares pursuant to this Agreement, APS shall provide such information
to Consolidated concerning APS as may be required by law, but APS shall not be
required to undertake any indemnity obligation or other contractual obligations,
and Consolidated covenants and agrees to comply fully and continually with all
applicable federal and state laws. Consolidated hereby agrees to indemnify and
hold APS, and all of APS' affiliates, subsidiaries, employees, officers,
directors, shareholders and representatives (collectively, the "APS Indemnified
Parties"), harmless from and against all losses, claims, damages, liabilities
and expenses (including but not limited to expenses incurred in the
investigation of, preparing for, and defending against, any claim) to which APS
or any of the other APS Indemnified Parties may become subject under the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the State Laws, or otherwise, insofar as (i) any such losses, claims,
damages, liabilities or expenses arise out of or are based upon or caused by, in
whole or in part, any untrue statement or alleged untrue statement of fact
contained in any registration statement or prospectus (or any amended or
supplemented registration statement or prospectus), or (ii) the same arise out
of or are based upon or are caused by any omission or alleged omission to state
therein a fact required to be stated therein or necessary to make the statements
therein not misleading, or (iii) the same arise out of or are based upon any
violation by Consolidated or Consolidated's employees, officers, directors,
Subsidiaries or representatives, of the Securities Act or the Exchange Act, any
rule or regulation thereunder, or any State Laws.
2. POTENTIAL GLOBAL REFINANCING. The parties acknowledge and agree that
Consolidated is considering a global refinancing of all the secured indebtedness
of the Subsidiaries (other than 7-7) to banks, which would require the approval
of APS pursuant to the Security Documents. For purposes of this Agreement, such
refinancing is hereby referred to as the "Global Refinancing"). If all of the
following terms and conditions are satisfied at the time of any such Global
Refinancing, APS agrees that it will give its written consent to the Global
Refinancing at such time:
a. Neither Consolidated nor any of the Subsidiaries shall be in
default, and no event of default shall have occurred, under any of the Security
Documents or the New Note; and
b. As a result of any Global Refinancing or otherwise, (i) there shall
be no increase in the gross amount of indebtedness (as of the Effective Date)
secured by liens on the assets of 7-7 which are superior or equal (as of the
Effective Date) to the liens of APS, and (ii) there shall be no increase greater
than $1,000,000 in the gross amount of indebtedness (as of the Effective Date)
secured by liens on the assets of Larco which are superior or equal (as of the
Effective Date) to the liens of APS. Consolidated and the Subsidiaries represent
and warrant that the amount of their gross aggregate indebtedness (as of the
Effective Date) that are secured by liens on the assets of Larco which are
superior or equal (as of the Effective Date) to the liens of APS is $3,181,562;
and
c. The aggregate amount of indebtedness of Consolidated and the
Subsidiaries incurred as a result of the Global Refinancing may not exceed
$21,613,000; and
d. APS must receive at least thirty percent (30%) of the proceeds (the
"APS Payment") received or receivable by Consolidated as a result of the Global
Refinancing, after deduction of only the amount, if any, distributed to other
unrelated, secured creditors of Consolidated or the Subsidiaries at or
immediately after the closing of any Global Refinancing. The APS Payment must be
received by APS in immediately available funds directly from the lender(s) at
the closing of the Global Refinancing as payment on the indebtedness evidenced
by the New Note. All parties hereto acknowledge and agree that such payment
shall not in any respect affect Consolidated's monthly or final payment
obligations under the New Note, except to the extent the final payment
obligation amount is reduced as a result of the special payment received
pursuant to this provision. The APS Payment is to be applied first to any
interest accrued and unpaid under the New Note, with any balance to be applied
to principal; and
e. APS shall have been given at least ten (10) days opportunity prior
to the closing of any Global Refinancing and after receipt by APS of all
documents, instruments and agreements, to review all documents, instruments and
agreements entered into, or to be entered into at any such closing, in
connection with such Global Refinancing, and as may otherwise be necessary for
APS to ensure compliance with the conditions for any APS consent to a Global
Refinancing as contained herein. Furthermore, Consolidated agrees to cooperate
with APS and to provide APS access to, and participation in, the closing of any
such Global Refinancing and the interaction with the lenders involved therein,
as APS shall request in order for APS to ensure compliance with the conditions
to any APS consent to a Global Refinancing as contained herein. APS shall not be
required to provide its written consent to any Global Refinancing until the
closing of any Global Refinancing, and any such consent may be conditioned
expressly upon compliance with the terms and conditions provided herein.
3. IMPLEMENTATION OF CONVERSION FEATURE. Consolidated agrees to use its
best efforts to obtain the approval of Consolidated's shareholders (the
"Shareholder Approval") for an increase in the authorized number of shares of
common stock of Consolidated as necessary to provide APS with the right to
convert any or all indebtedness of Consolidated to APS into common stock of
Consolidated at a conversion rate to be mutually agreed upon in writing by APS
and Consolidated (the "Conversion Price Agreement"). Consolidated's shareholder
proxy solicitation will designate a specific item, which will have been approved
by, and will be expressly recommended for approval by, the Board of Directors of
Consolidated, seeking approval of an increase in the number of authorized shares
of common stock of Consolidated solely as security for the New Note and other
indebtedness secured by the Security Documents, or to satisfy the obligations
owed by Consolidated and the Subsidiaries to APS, or in such other form as APS
may require, provided that Consolidated or its management can lawfully solicit
such proxy item. If Shareholder Approval is obtained, Consolidated agrees to
reserve such shares of its common stock for issuance as may be necessary in
order for APS to have the right to convert any or all of the outstanding
principal amount and accrued interest due under the New Note into common stock
of Consolidated at any time thereafter at the price agreed in the Conversion
Price Agreement. APS shall be required to obtain the prior written consent of
Consolidated, which shall not unreasonably be withheld, prior to any such
conversion, provided that upon any default, or event of default, under the New
Note or any of the Security Documents, the consent of Consolidated shall no
longer be necessary to effect any conversions.
Consolidated agrees to, promptly after obtaining Shareholder Approval,
effect the registration under the Securities Act, and the registration and/or
qualification under the State Laws, of such shares of common stock of
Consolidated as may be obtainable, from time-to-time, by APS through any
conversions as contemplated in this Section (the "Conversion Shares").
Consolidated will effect the registration under the Securities Act and the
registration and/or qualification under the State Laws, if the Conversion
Shares, to the extent required to permit the disposition thereof by APS,
immediately upon acquisition by APS (if APS were to so choose), in any manner,
or combination of manners, which APS may select, at APS' sole discretion.
Consolidated agrees to maintain such registration in effect for so long as
necessary for APS to sell any or all of the shares of Consolidated acquired
pursuant to such conversion without restriction. Consolidated agrees that
Consolidated will have all of the obligations with respect to the registration
and sale of Conversion Shares as Consolidated has pursuant to the registration
and sale of Collateral Shares under Section 1 of this Agreement. Furthermore,
APS shall have all rights related to the registration and sale of Conversion
Shares as APS has with respect to the registration and sale of Collateral Shares
pursuant to Section 1 of this Agreement. The parties hereto acknowledge and
agree that failure to reach a Conversion Price Agreement prior to December 15,
1997, or to obtain Shareholder Approval on or before April 1, 1998 will result
in an acceleration of certain payment obligations under and pursuant to the New
Note as provided in Section 5 below.
4. MATTERS CONCERNING ACQUISITION. The parties acknowledge and agree
that Consolidated is considering the sale of the Houston division (the "Houston
Division") of Acquisition, and possibly also the other divisions of Acquisition
(the "Other Divisions"), which sales would require the prior written consent of
APS pursuant to the Security Documents. APS will give its written consent for a
reorganization of Acquisition into two (2) separate corporations to facilitate a
sale of each, one (1) owning all the assets of the Houston Division (the
"Houston Sub") and one (1) owning all the assets of the Other Divisions (the
"Other Sub") provided (i) each of the Houston Sub and the Other Sub execute and
deliver to APS a payment and performance guaranty agreement for the benefit of
APS covering all payment and performance obligations of Consolidated, in
substantially the same form of the guaranty agreements executed by the
Subsidiaries that are included in the Security Documents, (ii) Consolidated
grants APS a first lien, perfected security interest in and to all of the
capital stock of the Houston Sub and the Other Sub, and (iii) APS is reasonably
satisfied, after a full opportunity to engage in sufficient due diligence, that
the division of assets between the Houston Sub and the Other Sub reflects a
commercially reasonable division to each new Subsidiary of assets applicable to
that Subsidiary's operations as previously conducted.
If all of the following terms and conditions are satisfied, APS agrees
that at the time of any sale of the Houston Division or the Houston Sub, APS
will give its written consent to the sale at such time:
a. Neither Consolidated nor any of the Subsidiaries shall be in
default, and no event of default shall have occurred, under any of the Security
Documents or the New Note; and
b. APS must receive at least Seven Hundred Fifty Thousand Dollars
($750,000) in immediately available funds, from the funds received directly from
the purchaser of the Houston Division at any closing of the sale thereof, as
payment on the indebtedness evidenced by the New Note. All parties hereto
acknowledge and agree that such payment shall not in any respect affect
Consolidated's monthly or final payment obligations under the New Note, except
to the extent the final payment obligation amount is reduced as a result of the
special payment received pursuant to this provision. The Seven Hundred Fifty
Thousand Dollars ($750,000), or more if more is paid, is to be applied first to
any interest accrued and unpaid under the New Note, with any balance to be
applied to principal; and
c. The Houston Division or Houston Sub must be sold to a purchaser who
is not related to, or affiliated with, Consolidated or any of the Subsidiaries
or any of the shareholders, directors or officers of Consolidated or any of the
Subsidiaries; and
d. APS shall have been given at least ten (10) days opportunity prior
to the closing of any sale of the Houston Division or Houston Sub and after
receipt by APS of all documents, instruments and agreements, to review all
documents, instruments and agreements entered into, or to be entered into at any
such closing, in connection with such sale and as may otherwise be necessary for
APS to ensure compliance with the conditions for any APS consent to the sale as
contained herein. Furthermore, Consolidated agrees to cooperate with APS and to
provide APS access to, and participation in, the closing of any such sale, as
APS shall request in order for APS to ensure compliance with the conditions to
any APS consent as provided herein. APS shall not be required to provide its
written consent to any sale of the Houston Division or Houston Sub until the
closing of any such sale, and any such consent may be conditioned expressly upon
compliance with the terms and conditions provided herein.
Upon a sale of the Houston Division or Houston Sub on the terms and
conditions provided herein, and upon APS receiving at least the Seven Hundred
Fifty Thousand Dollars ($750,000) minimum payment required as a condition to it
giving its consent to such sale, APS will release its security interest in the
stock of Acquisition and the Houston Sub (if applicable) and return the
certificates evidencing such stock to Consolidated and will release the Houston
Sub from its guaranty agreement. However, Acquisition and any Other Sub will
continue to be bound by their guaranty agreements and such guaranty agreements
shall remain binding and enforceable in accordance with their terms.
APS will give its written consent to a sale of the Other Divisions or
the Other Sub in the event each of the conditions for a sale of the Houston
Division or the Houston Sub described in paragraphs a., c. and d. are satisfied
as to the sale of the Other Divisions or Other Sub, and provided APS receives a
payment directly from the purchaser of an amount, in immediately available
funds, equal to at least thirty percent (30%) of the cash and fair market value
of other property or assets received or receivable by Consolidated as a result
of any such sale, after deducting only the amount, if any, paid to secured
creditors of Acquisition or the Other Sub. Upon any such sale of the Other
Divisions or the Other Sub, and upon APS receiving the minimum thirty percent
(30%) payment described above, APS will release any security interest it has in
the capital stock of the Other Sub, and will release the guaranty agreements of
Acquisition and the Other Sub (if applicable).
5. New Note Modifications. The parties hereto agree that,
notwithstanding the terms of the New Note, in the event (i) APS and Consolidated
are unable to enter into a mutually agreeable written Conversion Price Agreement
as described in Section 3 above on or prior to December 15, 1997, or (ii)
Shareholder Approval of the necessary increase in the authorized number of
shares of common stock of Consolidated as contemplated pursuant to Section 3
above is not obtained on or prior to April 1, 1998, then, in either event, the
monthly installments of $85,000 that would otherwise be due beginning October 1,
1998 will, instead, be required to begin April 1, 1998 (or on December 15, 1997,
in the event of failure to enter into a written Conversion Price Agreement on or
prior to December 15, 1997), and Consolidated shall be in default
(notwithstanding any terms of the New Note to the contrary) under the New Note
and the Security Documents if Consolidated thereafter fails to make any such
$85,000 monthly payment.
The parties hereto agree that notwithstanding any terms of the New Note
to the contrary, in the event APS gives its written consent to the Global
Refinancing pursuant to Section 2 hereof, and receives the APS Payment, and the
Global Refinancing is closed prior to January 1, 1998, then the $40,000 monthly
payments due under the New Note which would otherwise begin January 1, 1998
pursuant to the terms of the New Note, will, instead, begin on the earlier of
(i) the first day of the calendar month following the month in which the Global
Refinancing is closed, or (ii) January 1, 1998, and Consolidated shall be in
default (notwithstanding any terms of the New Note to the contrary) under the
New Note and the Security Documents if Consolidated fails thereafter to make a
payment of at least $40,000 on or before the first day of each month through and
including September 1, 1998.
The parties hereto agree that, in the event, on October 1, 1999
Consolidated tenders to APS all outstanding principal and accrued interest due
under and pursuant to the New Note, and there has not theretofor been any
default, or event of default, under the New Note or any of the Security
Documents, then APS will agree to accept, in lieu of the fifteen percent (15%)
per annum interest due from and after the Effective Date under the terms of the
New Note, interest after the Effective Date on the principal amount due under
the New Note calculated at the rate of twelve percent (12%) per annum.
Notwithstanding the foregoing, nothing contained in this paragraph, or otherwise
in this Agreement, is intended to modify, limit or otherwise affect any of
Consolidated's obligations with respect to the repayment of (i) any principal
amount of the New Note, or (ii) any principal or interest accrued under the
Original Note that was refinanced into the principal of the New Note.
6. No Additional Financings. The parties acknowledge and agree that
certain of the Security Documents provide that, without the prior consent of
APS, neither Consolidated nor any of the Subsidiaries will create, incur, assume
or become liable in any manner for any indebtedness (for borrowed money,
deferred payment for the purchase of assets, lease payments, as surety or
guaranty of the debt of another, or otherwise) other than to APS, except trade
debts incurred in the ordinary course of business. The parties hereto covenant
and agree that such provisions of the Security Documents remaining binding and
enforceable in all respects, are to be broadly construed for the benefit of APS,
and that the prohibitions on creating, incurring, assuming or becoming liable
for, any indebtedness, etc., shall be deemed to preclude, without limitation,
not only traditional methods of financing, but also financings in the form of
factoring, assets securitizations, sale and lease backs, financings through the
issuance of equity securities, debt securities or convertible securities,
debenture or bond financings and all other forms of financing and borrowing,
except for open account trade payables incurred in the ordinary course of
business; provided, however that factoring transactions that occurred prior to
October 15, 1997, will not be deemed to constitute a violation of the foregoing
so long as there is no increase after October 15, 1997, in the amounts due or
involved in such factoring relationships.
7. Financial Reporting Requirements. In additional to such financial
and other reporting requirements as may be provided pursuant to the Security
Documents, Consolidated covenants and agrees that it will provide to APS, within
thirty (30) days of the end of each month, beginning with the month of
September, 1997, consolidated financial statements for Consolidated and all of
the Subsidiaries, together with separate supporting Subsidiary financial
statements and statements of consolidation, as of and for the month and year to
date period ended on the last day of each calendar month. Each such set of
financial statements shall be presented on a comparative basis for the periods
and dates in the preceding year and shall include detailed narrative analysis by
the management of Consolidated, addressed to the attention of the board of
directors of APS, of the financial position and results of operations reflected
therein as of and for the periods covered by the financial statements, together
with an assessment of future operating results (on a consolidated basis, and for
each Subsidiary). Furthermore, each set of monthly financial statements and
associated management analysis shall contain a written statement signed by the
Chief Financial Officer of Consolidated to the effect that (i) the financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, and are a fair and accurate presentation of
the financial position and results of operations of Consolidated, each of the
Subsidiaries, and the consolidated group as of the date and for the periods
covered by the financial statements, and (ii) the Chief Financial Officer has no
reason to believe that the narrative management analysis accompanying such
financial statements contains any misleading facts or statements, or omits any
fact or statement, the omission of which would make the statements contained
therein materially misleading.
8. Prohibition on Sale of Assets. Consolidated and each of the
Subsidiaries covenants and agrees with APS that neither Consolidated nor any of
the Subsidiaries shall sell, transfer, assign or otherwise convey any of their
assets, properties or rights or enter into any agreement with respect to any of
the foregoing, in any one transaction or a series of related transactions,
involving an aggregate consideration, in cash or the fair market value of other
property or consideration, in excess of Fifty Thousand Dollars ($50,000) without
the express prior written consent of APS in each instance; provided such consent
shall not be withheld if there has been no default, or event of default, under
the New Note or any of the Security Documents, and APS receives, directly from
the purchaser at the closing of any such sale, a payment in immediately
available funds, equal to at least thirty percent (30%) of the net cash and fair
market value of other property or assets received or receivable by Consolidated
or the applicable selling Subsidiary as a result of such sale, after deducting
only the amount, if any, paid to secured creditors having liens on the assets
sold. APS must receive the ten (10) day opportunity, as described in paragraph
d. of Section 4, with respect to each such sale and any payments received by APS
upon any asset sale shall be treated as described in paragraph b. of Section 4.
The parties further acknowledge and agree, that once the total accrued interest
and principal remaining due under and pursuant to the New Note is, in the
aggregate, less than Nine Hundred Thousand Dollars ($900,000), then no consent
shall be required from APS for purposes of any of the asset sale transactions
described in this Section 8 provided APS receives the minimum thirty percent
(30%) payment described above and Consolidated and the Subsidiaries complies
with the other provisions of this Section 8 with respect to any such asset sale,
transfer, assignment or conveyance. Notwithstanding the foregoing (but subject
to the provisions of Section 4 regarding Acquisition), the provisions for APS
granting consent (or not needing to grant consent) for the transactions
described in this Section 8 shall not apply to sales of divisions, operating
units, business lines, departments or other businesses, and APS' prior written
consent for any sale, transfer, assignment or other conveyance thereof shall be
required in each instance (which consent APS shall be under no obligation to
grant or not withhold).
9. INSURANCE COVERAGE. Consolidated and the Subsidiaries each covenant
and agree that APS has received, prior to or simultaneously upon the execution
of this Agreement, written agreements from all of Consolidated's and the
Subsidiaries' current insurance carriers or insurance brokers (i) acknowledging
the existence and terms of coverage of all policies of insurance owned or
maintained by Consolidated or any of the Subsidiaries, and (ii) expressly
agreeing with APS that each carrier or broker will notify APS in writing
simultaneously whenever a cancellation notice is sent to Consolidated or any of
the Subsidiaries with respect to any of the policies of insurance. Furthermore,
Consolidated and each of the Subsidiaries covenants and agrees that, as a
condition to obtaining or renewing any policies of insurance, they will obtain
from the applicable insurance carriers or brokers written agreements
acknowledging the existence and terms of coverage of the subject policies of
insurance and expressly agreeing with APS that each carrier or broker will
notify APS in writing simultaneously whenever a cancellation notice is sent to
Consolidated or any of the Subsidiaries with respect to any of the policies of
insurance.
10. INTERCOMPANY INDEBTEDNESS. Consolidated and each of the
Subsidiaries agrees that for so long as any indebtedness from Consolidated or
any of the Subsidiaries, to APS remains unpaid, neither Larco nor 7-7 shall have
any payment obligation, shall make any payments, or shall forego, waive or
release any amount due to Larco or 7-7, with respect to any intercompany or
affiliate indebtedness, and neither Consolidated nor any of the Subsidiaries
shall (i) fail to pay any amounts due Larco or 7-7, or (ii) demand, receive or
accept any payments from either Larco or 7-7 except for (X) charges to Larco
used solely to satisfy payroll, administrative, debt or other legitimate and
commercially reasonable obligations of Larco arising in the ordinary course of
business consistent with past practices, or (Y) short term advances repaid to
Larco within ten (10) days after being made by Larco. Furthermore, Consolidated
and each of the Subsidiaries agrees that upon any default, or event of default,
under the New Note or any of the Security Documents, Consolidated and each of
the Subsidiaries will be deemed, automatically and without the requirement of
any further action on their part, to have forgiven, waived and released any
indebtedness or obligations owed to them by Larco or by 7-7, and will not
thereafter demand, receive or accept any payments, properties or other amounts
from Larco or 7-7, and Larco and 7-7 will not thereafter pay or tender any
amounts to any Subsidiary. Consolidated and each of the Subsidiaries agrees
that, upon request of APS, they will execute such acknowledgments, documents and
other instruments or agreements as APS shall request to evidence the matters
described in this Section 10.
11. REPRESENTATIONS AND WARRANTIES. Consolidated and each of the
Subsidiaries hereby, jointly and severally, represents and warrants to APS, and
covenants with APS, as follows:
(a) Consolidated and each of the Subsidiaries is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of their incorporation, and has full corporate power and authority to
carry on its business as now conducted, to enter into and perform this
Agreement, and to perform all of its obligations under and pursuant to each and
every of the Security Documents to which it is a party. This Agreement has been
duly and validly authorized, executed and delivered by Consolidated and each of
the Subsidiaries, and constitutes the valid and binding obligation of
Consolidated and each of the Subsidiaries, enforceable against them in
accordance with its terms.
(b) There is only one class of common stock of Consolidated
outstanding.
(c) Consolidated has made available to APS copies of
Consolidated's annual report on Form 10-K for the year ended December 31, 1996,
and its quarterly reports on Form 10-Q for the quarters ended March 31, 1997 and
June 30, 1997, (collectively, the "Periodic Reports"), in the form filed with
the Commission pursuant to the requirements of the Exchange Act. The Periodic
Reports were appropriately responsive to the requirements of the Exchange Act,
were complete and proper in form and did not contain an untrue statement of a
fact or omit to state a fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Since June 30, 1997, and through the Effective Date, no
event has occurred as a consequence of which Consolidated would be required to
file, on or before the Effective Date, a current report on Form 8-K pursuant to
the requirements of the Exchange Act, except for the Form 8-K filed prior to the
Effective Date to report that Consolidated's stock is no longer traded on the
Nasdaq Stock Market, Inc. SmallCap Market.
(d) No default, or event of default, has occurred under any of the
Security Documents, and each of the parties to the Security Documents is in
compliance with its obligations thereunder.
(e) Consolidated's and each of the Subsidiaries' representations and
warranties under each of the Security Documents to which they are parties was
true and correct when made, and remains true and correct as of the Effective
Date of this Agreement.
(f) The entering into and performance of their obligations under the
Security Documents, and the execution and delivery by Consolidated of the New
Note (and the performance of Consolidated's and the Subsidiaries' obligations
thereunder), does not conflict with or constitute a breach of, or default under,
any organizational document, bylaw, contract, agreement or obligation applicable
to Consolidated or any of the Subsidiaries.
12. EFFECT OF AGREEMENT. The parties hereto acknowledge and agree that
this Agreement does not constitute an amendment, modification, replacement or
limitation on any of APS' rights under and pursuant to any of the Security
Documents, and all of the Security Documents are intended to be, and remain,
binding and enforceable in accordance with their terms. The Security Documents
are intended to be construed consistently with this Agreement. However, in the
event of a direct conflict between the terms of any of the Security Documents
and this Agreement, the terms of this Agreement shall control. Consolidated and
each of the Subsidiaries represents, warrants, covenants and agrees that (i) APS
has not breached or defaulted under any contractual obligations to any of them,
and (ii) there are no defenses available to Consolidated or any of the
Subsidiaries against the enforceability of each and every of their obligations
under the Security Documents. Consolidated and each of the Subsidiaries does
hereby forever release and discharge APS and APS' shareholders, directors,
officers, affiliates, agents, attorneys and employees, from any and all claims,
demands, causes of action, obligations, debts or other rights, whether arising
from the law of contract, tort, property, common law, constitutional law or
statutory law, known or unknown, which it may have or could assert, including
but not limited to any claims or causes of action relating to the Original Note,
the Security Documents, the New Note or any transactions with APS (including
without limitation the purchase by APS, and sale back to Consolidated, of the
stock of Consolidated pursuant to which the Original Note was executed and
delivered by Consolidated to APS). The foregoing is not intended to release APS
from any of its executory obligations under this Agreement.
Without limiting the foregoing, Consolidated and each of the
Subsidiaries expressly acknowledge and agree that APS is not relinquishing,
waiving or otherwise modifying any right, claim or cause of action it has or may
have, against Consolidated or any of the Subsidiaries or any of their
affiliates, directors, officers, shareholders or employees, including without
limitation, any such claims, rights or causes of action related to (i) the
negotiation and entering into the various agreements and transactions which give
rise to the Original Note and Security Documents, or any misrepresentation made
in connection therewith, or any breach or default thereunder, or (ii) the
Original Note, the New Note, or any of the Security Documents, or any breach or
default thereunder.
13. REIMBURSEMENT OF EXPENSES. Consolidated agrees to reimburse APS for
all legal fees and associated expenses incurred by APS in negotiating, preparing
and entering into this Agreement, the New Note and the Security Documents, and
perfecting the various security interests granted pursuant thereto. APS
acknowledges that Consolidated has prepaid Ten Thousand Dollars ($10,000) of
such fees and expenses. Consolidated agrees to promptly reimburse any of the
reimbursable fees and expenses described above in excess of Ten Thousand Dollars
($10,000) upon written request by APS, which request shall include reasonable
supporting documentation for the reimbursement requested. In the event the
reimbursable fees and expenses described above do not exceed Ten Thousand
Dollars ($10,000), APS will reimburse any unutilized amount of the prepayment to
Consolidated after a final accounting of the costs incurred by APS.
14. REMEDIES. This Agreement may be enforced at law or in equity,
including, but not limited to, injunctive relief. In case any one or more of the
provisions of this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, any other provision hereof in this
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein. Such invalid, illegal or
unenforceable provisions shall be given effect to the maximum extent then
permitted by law. Consolidated and the Subsidiaries shall be deemed to be in
joint and several default under this Agreement if there is any default (which is
not cured after any required notices of default and opportunity to cure) under
the New Note or any of the Security Documents.
15. GOVERNING LAW AND VENUE. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Texas
(except the laws of Texas that would render such choice of law ineffective).
Venue for any action relating to this Agreement shall be proper only in Texas.
16. COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.
17. INUREMENT. This Agreement shall be binding upon the parties hereto
and their respective heirs, legal representatives, successors and permitted
assigns. This Agreement shall not be assignable by any party hereto (other than
APS) without the express prior written consent of APS in each instance. Upon
written notice to Consolidated, APS may assign its rights and obligations under
this Agreement. Upon the creation or acquisition of any new Subsidiary,
Consolidated and the Subsidiaries shall cause such new Subsidiary to promptly
execute and be bound by, a counterpart of this Agreement.
18. NOTICES. Any notices required or permitted to be given under this
Agreement shall be given in writing and shall be deemed received (a) when
personally delivered to the relevant party at its address as set forth below or
(b) if sent by mail, on the third day following the date when deposited in the
United States mail, certified or registered mail, postage pre-paid to the
relevant party at its address indicated below:
APS: American Physicians Service Group, Inc.
0000 Xxxxxxx xx Xxxxx Xxxxxxx, Xxxxx X-000
Xxxxxx, Xxxxx 00000-0000
Attn: President
Consolidated
or
the Subsidiaries: Consolidated Eco-Systems, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxx Xxxx, XX 00000
Attn: President
Any party may change its address for purposes of this Agreement by proper notice
to the other party.
[Remainder of this page left intentionally blank.]
043860.0002 Austin 32504 v04
SIGNATURE PAGES TO
MASTER REFINANCING AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the 6th day of November, 1997.
CONSOLIDATED: Consolidated Eco-Systems, Inc.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
Name: Xxxxx X. Xxxxxxx
Title: President/CEO
APS: American Physicians Service Group,
Inc.
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: Senior XX
XXXXX: Larco Environmental Services, Inc.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: President/CEO
SIGNATURE PAGES TO
MASTER REFINANCING AGREEMENT
(continued)
7-7: 7-7, Inc.
By: /s/ Xxx X. Xxxxxxxx
Name: Xxx X. Xxxxxxxx
Title: President
CES: Consolidated Environmental
Services, Inc.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: President/CEO
CIERRA: Cierra, Inc.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: President/CEO
KR INDUSTRIAL: KR Industrial Services of Alabama,
Inc.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: President/CEO
SIGNATURE PAGES TO
MASTER REFINANCING AGREEMENT
(continued)
EXSORBET TECHNICAL: Exsorbet Technical Services, Inc.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: President/CEO
ACQUISITION: Eco Acquisition, Inc.
By: /s/ Xxxxx X. Xxxxxxx, Xx.
Name: Xxxxx X. Xxxxxxx, Xx.
Title: President/CEO
