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EXHIBIT 10.3
TERM LOAN AND ACQUISITION LINE AGREEMENT
BY AND BETWEEN
XXXXXX GENERAL CORPORATION
AND
BANKBOSTON, N.A.
Dated as of December 16, 1997
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TABLE OF CONTENTS
Title
Section Page
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SECTION 1 - DEFINITIONS 1
1.1. Definitions 1
1.2. Rules of Interpretation 10
SECTION 2 - THE LOANS 10
2.1. The Term Loan 10
2.2. The Term Note 10
2.3. Interest Rate and Payments of Interest on the Term Loan 11
2.4. Additional Interest 11
2.5. Repayment of Term Loan 11
2.6. Acquisition Loans 12
2.7. Notice of Borrowing 12
2.8. Discretionary Nature of Acquisition Line 12
2.9. Acquisition Note 12
2.10. Interest Rates and Payments of Interest on the Acquisition Loans 13
2.11. Repayment of Acquisition Loans 13
2.12. Optional Prepayments of Loans 13
2.13. Mandatory Prepayment of Loans 13
SECTION 3 - CERTAIN GENERAL PROVISIONS 14
3.1. Closing Fee 14
3.2. Funds for Payments 14
3.3. Computations 15
3.4. Additional Costs, Etc. 15
3.5. Capital Adequacy 16
3.6. Certificate 17
3.7. Interest After Default; Late Fee 17
SECTION 4 - COLLATERAL SECURITY 17
SECTION 5 - REPRESENTATIONS AND WARRANTIES 17
5.1. Organization and Qualification 17
5.2. Corporate Authority 18
5.3. Valid Obligations 18
5.4. Consents or Approvals 18
5.5. Title to Properties; Absence of Encumbrances 18
5.6. Financial Statements 19
5.7. Changes 19
5.8. Defaults 19
5.9. Taxes 19
5.10. Litigation 19
5.11. Margin Stock 20
5.12. Subsidiaries 20
5.13. Investment Company Act 20
5.14. Compliance with ERISA 20
5.15. Environmental Matters 20
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5.16. Franchises, Patents, Copyrights, Etc. 21
5.17. No Materially Adverse Contracts, Etc. 22
5.18. Compliance With Other Instruments, Laws, Etc. 22
5.19. Absence of UCC Financing Statements, Etc. 22
5.20. Certain Transactions 22
5.21. Loan Documents 22
SECTION 6 - AFFIRMATIVE COVENANTS 23
6.1. Financial Statements and other Reporting Requirements 23
6.2. Conduct of Business 25
6.3. Maintenance and Insurance 25
6.4. Taxes 25
6.5. Inspection by the Bank 26
6.6. Maintenance of Books and Records 26
6.7. Punctual Payment 26
6.8. Maintenance of Office 26
6.9. Compliance with Laws, Contracts, Licenses, and Permits 26
6.10. Use of Proceeds 27
6.11. Further Assurances 27
SECTION 7 - NEGATIVE COVENANTS 27
7.1. Indebtedness 27
7.2. Leases 28
7.3. Sale and Leaseback 28
7.4. Encumbrances 28
7.5. Merger; Consolidation; Sale or Lease of Assets 29
7.6. Additional Stock Issuance 30
7.7. Distributions 30
7.8. Investments 30
7.9. ERISA 30
7.10. Compliance with Environmental Laws 30
7.11. Subordinated Indebtedness 30
SECTION 8 - FINANCIAL COVENANTS OF THE COMPANY 31
8.1. Tangible Net Worth 31
8.2. Funded Debt to Consolidated EBITDA 31
8.3. Consolidated EBITDA to Interest Charges 31
8.4. Maximum Capital Expenditures 32
8.5. Adjusted Consolidated EBITDA 32
8.6. Consolidated Operating Cash Flow to Debt Service Charges 33
8.7. Transition Expenses 33
SECTION 9 - CLOSING CONDITIONS 35
9.1. Loan Documents 35
9.2. Certified Copies of Organization Documents 35
9.3. By-laws; Resolutions 35
9.4. Incumbency Certificate; Authorized Signers 36
9.5. Validity of Liens 36
9.6. Pledge of Stock 36
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9.7. Opinion of Counsel Concerning Organization and Loan Documents 36
9.8. Payment of Fees 36
9.9. Agreements with Holders of Subordinated Indebtedness 36
9.10. ATC Acquisition 36
9.11. Minimum Cash-on-Hand 37
9.12. Minimum Consolidated EBITDA 37
9.13. No Adverse Change 37
9.14. Corporate Structure 37
9.15. Additional Documents 37
SECTION 10 - CONDITIONS TO ALL BORROWINGS 37
10.1. Representations True; No Event of Default 37
10.2. No Legal Impediment 38
10.3. Governmental Regulation 38
10.4. Proceedings and Documents 38
SECTION 11 - DEFAULTS 38
11.1. Events of Default 38
11.2. Remedies 41
SECTION 12 - MISCELLANEOUS 41
12.1. Notices 41
12.2. Expenses 42
12.3. Indemnification 43
12.4. Set-Off 43
12.5. Term of Agreement 44
12.6. No Waivers 44
12.7. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE 44
12.8. Amendments 44
12.9. Binding Effect of Agreement 44
12.10. Counterparts 44
12.11. Partial Invalidity 45
12.12. Captions 45
12.13. WAIVER OF JURY TRIAL 45
12.14. Entire Agreement 45
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EXHIBITS
EXHIBIT A - Form of Term Note
EXHIBIT B - Form of Acquisition Loan Certificate
EXHIBIT C - Form of Acquisition Note
EXHIBIT D - Excess Cash Flow Computation Report
EXHIBIT E - Form of Compliance Certificate
SCHEDULES
Schedule 5.10 Litigation
Schedule 5.12 Subsidiaries
Schedule 5.14 ERISA Plans
Schedule 6.2 Subsidiaries to Be Dissolved
Schedule 6.10 Use of Proceeds
Schedule 7.1 Indebtedness
Schedule 7.4 Encumbrances
Schedule 7.8 Investments
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TERM LOAN AND ACQUISITION LINE AGREEMENT
THIS TERM LOAN AND ACQUISITION LINE AGREEMENT is made as of December
16, 1997 by and between XXXXXX GENERAL CORPORATION (the "Company"), a California
corporation having its chief executive office at 00000 Xxxx Xxxxxx Xxxxxx, Xxxxx
000, Xxxxxxxx, Xxxxxxxx 00000 and BANKBOSTON, N.A. (the "Bank"), a national
banking association having its head office at 000 Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000.
I. SECTION
DEFINITIONS
A. Definitions.
All capitalized terms used in this Agreement or in the other Loan
Documents or in any certificate, report or other document made or delivered
pursuant to this Agreement (unless otherwise defined therein) shall have the
meanings assigned to them below:
ACQUISITION FACILITY. The discretionary facility provided hereunder to
the Company to obtain Acquisition Loans for Permitted Acquisitions.
ACQUISITION LOAN and ACQUISITION LOANS. See Section 2.5 hereof.
ACQUISITION LOAN CEILING. $2,250,000.00.
ACQUISITION LOAN CERTIFICATE. See Section 2.6 hereof.
ACQUISITION LOAN PERIOD. The period beginning on the date of this
Agreement and ending December 11, 1998.
ACQUISITION NOTE(S). See Section 2.9 hereof.
ADDITIONAL INTEREST. See Section 2.4.
ADJUSTED CONSOLIDATED EBITDA. For any period, the sum of Consolidated
EBITDA plus Transition Expenses incurred in such period to the extent permitted
hereunder.
AGREEMENT. This Term Loan and Acquisition Line Agreement, together with
all Exhibits and Schedules hereto, as supplemented or amended from time to time.
ATC. Advanced Tank Certification, Inc., a Tennessee corporation.
ATC ACQUISITION. The acquisition by the Company of all outstanding
capital stock of ATC pursuant to a Primary Stock Purchase Agreement dated as of
December 11, 1997 and a Contingent Stock Purchase Agreement dated as of December
11, 1997.
BANK. See Preamble.
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BASE RATE. The greater of (i) the rate of interest announced from time
to time by the Bank at its head office at 000 Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx as its Base Rate, and (ii) the Federal Funds Effective Rate
plus 1/2 of 1% per annum (rounded upwards, if necessary, to the next 1/8 of 1%).
BENEFICIAL OWNERSHIP. As defined in Rule 13d-3 under the Securities
Exchange Act of 1934.
BUSINESS DAY. Any day other than a Saturday, Sunday, legal holiday or
other day on which banks in Boston, Massachusetts are required or permitted by
law to close.
CAPITAL EXPENDITURES. All Capitalized Leases and all expenditures made
by the Company and its Subsidiaries which are capitalized or are required to be
capitalized on the Consolidated balance sheet of the Company and its
Subsidiaries in accordance with Generally Accepted Accounting Principles (but
excluding expenses which are required to be capitalized in connection with the
purchase of any Permitted Acquisitions).
CAPITALIZED LEASES. Leases under which the Company or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are capitalized or are required to be capitalized on the
balance sheet of the lessee or obligor in accordance with Generally Accepted
Accounting Principles.
CHANGE IN CONTROL. (a) Any Person or group of Persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934) (other than
Sagaponack) shall have acquired Beneficial Ownership of 25% or more of the
outstanding shares of common stock of the Company, or (b) a majority of the
board of directors of the Company is not comprised of Continuing Directors, or
(c) Sagaponack fails to have Beneficial Ownership of at least 25% of the
outstanding shares of common stock of the Company.
CLOSING DATE. The first date upon which the conditions set forth in
Sections 9 and 10 have been satisfied and any Loans are to be made.
CODE. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.
COLLATERAL. All assets of the Company and its Subsidiaries, whenever
acquired, including, without limitation, all real estate, accounts, inventory,
equipment, general intangibles, and capital stock of the Subsidiaries.
COMPANY. See Preamble.
CONSOLIDATED OR CONSOLIDATED. With reference to any term defined
herein, shall mean that term as applied to the accounts
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of the Company and its Subsidiaries, consolidated in accordance with Generally
Accepted Accounting Principles.
CONSOLIDATED EBITDA. With respect to any fiscal period, the result
(determined with respect to the same period and without duplication) of the
following: (a) Consolidated Net Income (or Net Loss); plus (b) all depreciation,
amortization and other non-cash deductions included as an expense of the Company
and its Subsidiaries in the determination of Consolidated Net Income (or
Deficit); minus (c) extraordinary gains included in the determination of
Consolidated Net Income; plus (d) all income taxes included as an expense of the
Company and its Subsidiaries in the determination of Consolidated Net Income (or
Deficit); plus (e) interest included as an expense of the Company and its
Subsidiaries in the determination of Consolidated Net Income (or Deficit), minus
(f) any net income (or net loss) relating to any Discontinued Operations, all as
determined in accordance with Generally Accepted Accounting Principles.
CONSOLIDATED EXCESS CASH FLOW. For any period, an amount equal to the
sum of (i) Consolidated EBITDA, minus (ii) Capital Expenditures permitted
hereunder minus (iii) interest expense paid in cash during such period minus
(iv) income, franchise, and other taxes paid in cash during such period minus
(v) regularly scheduled principal payments made during such period in cash with
respect to the Obligations, minus (vi) the cash portion of the purchase price
paid during such period for any Permitted Acquisitions, minus (vii) net
increases in working capital, plus (viii) net decreases in working capital, all
as determined in accordance with Generally Accepted Accounting Principles.
CONSOLIDATED NET INCOME (OR DEFICIT). With respect to any fiscal
period, the consolidated net income (or deficit) of the Company and its
Subsidiaries, after deduction of all expenses, taxes, and other proper charges,
determined in accordance with Generally Accepted Accounting Principles.
CONSOLIDATED OPERATING CASH FLOW. For any period, an amount equal to
the sum of (i) Adjusted Consolidated EBITDA, minus (ii) Capital Expenditures
permitted hereunder made during such period, minus (iii) income taxes paid in
cash by the Company and its Subsidiaries during such period, all as determined
in accordance with Generally Accepted Accounting Principles.
CONSOLIDATED NET WORTH. At any date as of which the amount thereof
shall be determined, the difference between (a) Consolidated Total Assets and
(b) the sum of Consolidated Total Liabilities of the Company and its
Subsidiaries (exclusive of Subordinated Indebtedness).
CONSOLIDATED TOTAL ASSETS. At any date, all assets of the Company and
its Subsidiaries that, in accordance with Generally Accepted Accounting
Principles, should be classified as assets on a Consolidated balance sheet of
the Company and its Subsidiaries.
CONSOLIDATED TOTAL LIABILITIES. At any date as of which the amount
thereof shall be determined, all obligations that should,
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in accordance with generally accepted accounting principles, be classified as
liabilities on the consolidated balance sheet of the Company and its
Subsidiaries, including in any event all Indebtedness.
CONTINUING DIRECTORS. A member of the board of directors of the Company
who (a) was a member of such board prior to the date hereof and continuously
thereafter, or (b) became a member of such board after the date hereof and whose
election or nomination for election was approved by a vote of the majority of
the Continuing Directors then members of such board, or (c) is elected to the
board by Sagaponack or is otherwise elected in accordance with Sagaponack's
rights under its existing agreements with the Company.
CONTROLLED GROUP. All trades or businesses (whether or not
incorporated) under common control that, together with the Company, are treated
as a single employer under Section 414(b) or 414(c) of the Code or Section 4001
of ERISA.
DEBT SERVICE CHARGES. For any period, the sum of (i) Interest Charges
payable in cash during such period, plus (ii) principal payments made or
required to be made by the Company and its Subsidiaries on account of
Indebtedness (including, without limitation, Capitalized Leases) for such
period, in each case determined in accordance with Generally Accepted Accounting
Principles.
DEFAULT. An Event of Default or event or condition that, but for the
requirement that time elapse or notice be given or both, would constitute an
Event of Default.
DISCONTINUED OPERATIONS. Collectively, the business operations of
Toxguard Systems, Inc., and if sold by December 31, 1997, Toxguard Fluid
Technologies, Inc.
DISTRIBUTION. With respect to any Person, the declaration or payment of
any dividend on or in respect of any shares of any class of capital stock, other
than (a) dividends payable solely in shares of common stock of such Person and
(b) the payment of cash in lieu of the distribution of fractional shares in the
event of any stock dividend or stock split; the purchase, redemption, or other
retirement of any shares of any class of capital stock of such Person, directly
or indirectly by such Person through a Subsidiary of such Person or otherwise;
the return of capital by such Person to its shareholders as such; or any other
distribution (whether of such or other property) on or in respect of any shares
of any class of capital stock of such Person.
DRAWDOWN DATE. The date upon which the Bank makes an advance under the
Acquisition Loan.
ENCUMBRANCES. See Section 7.4.
ERISA. The Employee Retirement Income Security Act of 1974 and the
rules and regulations thereunder, collectively, as the
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same may from time to time be supplemented or amended and remain in effect.
ERISA AFFILIATE. Any Person which is treated as a single employer with
the Company under Section 414 of the Code.
ERISA REPORTABLE EVENT. A reportable event (other than a reportable
event described in Subsections 4043(b)(2)-(4) and 4043(b)(6)-(9), which do not
require a thirty (30) day notice to the PBGC) with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
ENVIRONMENTAL LAWS. Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over the Company or any of its
Subsidiaries and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations,
relating to injury to, or the protection of, real or personal property or human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Materials, chemical substances, pollutants or contaminants whether solid, liquid
or gaseous in nature, into the environment or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of such Hazardous Materials, chemical substances, pollutants or
contaminants.
EVENT OF DEFAULT. Any event described in Section 11.
FEDERAL FUNDS EFFECTIVE RATE. For any day, a fluctuating interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the Bank
from three Federal funds brokers of recognized standing selected by the Bank.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time
and (ii) consistently applied with past financial statements of the Company and
its Subsidiaries adopting the same principles; provided that in each case
referred to in this definition of "Generally Accepted Accounting Principles" a
certified public accountant would, insofar as the use of such accounting
principles is pertinent, be in a position to deliver an unqualified opinion
(other than a qualification regarding changes in Generally Accepted Accounting
Principles) as
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to financial statements in which such principles have been properly applied.
GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Company or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
GUARANTEES. As applied to the Company and its Subsidiaries, all
guarantees, endorsements or other contingent or surety obligations with respect
to obligations of others whether or not reflected on the consolidated balance
sheet of the Company and its Subsidiaries, including any obligation to furnish
funds, directly or indirectly (whether by virtue of partnership arrangements, by
agreement to keep-well or otherwise), through the purchase of goods, supplies or
services, or by way of stock purchase, capital contribution, advance or loan, or
to enter into a contract for any of the foregoing, for the purpose of payment of
obligations of any other person or entity.
HAZARDOUS MATERIAL. Any substance (i) the presence of which requires or
may hereafter require notification, investigation or remediation under any
Environmental Law; (ii) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "controlled industrial waste"
or "pollutant" or "contaminant" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and any, applicable local statutes and the regulations promulgated
thereunder; (iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or had jurisdiction over the Company; or (iv) without
limitation, which contains gasoline, diesel fuel or other petroleum products,
asbestos or polychlorinated biphenyls ("PCB's").
INDEBTEDNESS. As applied to the Company and its Subsidiaries, all
obligations, contingent and otherwise, that in accordance with Generally
Accepted Accounting Principles should be classified upon the consolidated
balance sheet of the Company and its Subsidiaries as liabilities, or to which
reference should be made by footnotes thereto, including in any event and
whether or not so classified: (i) all obligations for borrowed money or other
extensions of credit, including all obligations representing the deferred
purchase price of property, other than accounts payable arising in the ordinary
course of business, (ii) all obligations evidenced by bonds, notes, debentures
or other similar instruments, (iii) all obligations secured by any mortgage,
pledge, security interest or other lien on property owned or acquired by the
Company or any of its Subsidiaries whether or not the obligations secured
thereby shall have been
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assumed, (iv) that portion of all obligations arising under Capital Leases that
is required to be capitalized on the consolidated balance sheet of the Company
and its Subsidiaries, and (v) all Guarantees.
INTEREST CHARGES. For any fiscal period, the expenses of the Company
and its Subsidiaries for such period for interest payable with respect to
Indebtedness (including, without limitation, the Obligations and imputed
interest on Capitalized Leases) and all fees paid on account of or with respect
thereto, determined in accordance with Generally Accepted Accounting Principles.
INVESTMENT. As applied to the Company and its Subsidiaries, the
purchase or acquisition of any share of capital stock, partnership interest,
evidence of indebtedness or other equity security of any other person or entity,
any loan, advance or extension of credit to, or contribution to the capital of,
any other person or entity, any real estate held for sale or investment, any
commodities futures contracts held other than in connection with bona fide
hedging transactions, any other investment in any other person or entity, and
the making of any commitment or acquisition of any option to make an Investment.
LOAN. A loan made to the Company by the Bank pursuant to Section 2 of
this Agreement, and "Loans" means all of such loans, collectively.
LOAN DOCUMENTS. This Agreement, the Notes, the Security Documents, and
other instruments, documents and agreements now or hereafter executed in
connection therewith, as each may be modified, amended, supplemented or
restated.
NET PROCEEDS. the entire proceeds received from a sale or disposition
of any assets of the Company and its Subsidiaries or the sale or issuance of any
of the capital stock of the Company, less (a) the reasonable costs and expenses
incident to realizing such proceeds, including, without limitation, reasonable
brokerage commissions and reasonable legal fees and expenses, and (b) with
respect to the sale or disposition of assets, amounts required to be paid to the
holder of any Permitted Encumbrance on such assets which has priority over the
Bank's lien.
NOTES. Collectively, the Term Note and the Acquisition Note(s).
OBLIGATIONS. Any and all obligations of the Company to the Bank of
every kind and description, direct or indirect, absolute or contingent, primary
or secondary, due or to become due, now existing or hereafter arising,
regardless of how they arise or by what agreement or instrument, if any, and
including obligations to perform acts and refrain from taking action as well as
obligations to pay money.
PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
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PERMITTED ACQUISITIONS. The acquisition by the Company or any of its
Subsidiaries of the assets or capital stock of any Person on terms and
conditions acceptable to the Bank. Without limitation, the ATC Acquisition shall
be deemed a Permitted Acquisition.
PERMITTED ENCUMBRANCES. See Section 7.4.
PERSON. Any individual, corporation, partnership, trust, unincorporated
association, limited liability company, business, or other legal entity, and any
government or any governmental agency or political subdivision thereof.
PLAN. At any time, an employee pension or other benefit plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of the
Controlled Group or (ii) if such Plan is established, maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which the Company or any member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five Plan years made contributions.
QUALIFIED INVESTMENTS. As applied to the Company and its Subsidiaries,
investments in (i) notes, bonds or other obligations of the United States of
America or any agency thereof that as to principal and interest constitute
direct obligations of or are guaranteed by the United States of America; (ii)
certificates of deposit or other deposit instruments or accounts of banks or
trust companies organized under the laws of the United States or any state
thereof that have capital and surplus of at least $100,000,000, (iii) commercial
paper that is rated not less than prime-one or A-1 or their equivalents by
Xxxxx'x Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or their successors, and (iv) any repurchase agreement secured by any one or
more of the foregoing.
SAGAPONACK. Individually and collectively, Sagaponack Partners, L.P., a
Delaware limited partnership, and Sagaponack International Partners, L.P., a
Cayman Islands limited partnership, and the affiliates of each of them.
SECURITY DOCUMENTS. All security agreements, mortgages, deeds of trust
and other instruments, documents, and agreements from the Company and/or any of
its Subsidiaries, granting a lien, security interest or other right in favor of
the Bank in any asset of the Company and its Subsidiaries to secure the
Obligations, whether such agreements now exist or hereafter arise.
SUBORDINATED INDEBTEDNESS. Indebtedness due from the Company to
Sagaponack in the aggregate principal sum of $7,000,000.00 evidenced by certain
Senior Subordinated Promissory
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Notes dated May 22, 1997, as amended and in effect from time to time.
SUBSIDIARY. Except as provided in the following sentence, any
corporation, association, joint stock company, business trust or other similar
organization of which 50% or more of the ordinary voting power for the election
of a majority of the members of the board of directors or other governing body
of such entity is held or controlled by the Company or a Subsidiary of the
Company; or any other such organization the management of which is directly or
indirectly controlled by the Company or a Subsidiary of the Company through the
exercise of voting power or otherwise; or any joint venture, whether
incorporated or not, in which the Company has a 50% ownership interest.
Notwithstanding the foregoing, for purposes of this Agreement, neither Toxguard
Systems, Inc. nor, if sold by December 31, 1997, Toxguard Fluid Technologies,
Inc. shall be deemed a Subsidiary of the Company.
TERM LOAN. The loan made to the Company pursuant to Section 2.1(b) of
this Agreement.
TERM LOAN MATURITY DATE. December 31, 2000 or such earlier date on
which the Term Loan shall become due and payable pursuant to the terms hereof.
TERM NOTE. See Section 2.2 hereof.
TRANSITION EXPENSES. Non-recurring expenses of the Company incurred in
connection with the ATC Acquisition and with the Company's acquisition of Ustman
Industries, Inc., which expenses consist of salary and severance relating to
terminated employees, duplicate trade show expenses, employee and office related
moving expenses, data entry expenses, legal and consulting fees, and banking and
accounting fees.
A. Rules of Interpretation.
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by Generally Accepted Accounting Principles.
(f) The words "include", "includes" and "including" are not
limiting.
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(g) All terms which are defined in the Uniform Commercial Code
as enacted in Massachusetts and are not otherwise specifically defined herein or
by Generally Accepted Accounting Principles shall have the meanings assigned to
them in the Uniform Commercial Code.
(h) Reference to a particular "Section" refers to that section
of this Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of
like import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.
I. SECTION
THE LOANS
Subpart A - The Term Loan
The Term Loan. (a) Subject to the terms and conditions hereof,
the Company shall borrow, and the Bank shall lend, on the Closing Date the
principal sum of $3,750,000.00 (the "Term Loan").
The Term Note. The Term Loan shall be evidenced by, and
repayable with interest in accordance with, a promissory note in the form of
Exhibit A hereto (the "Term Note"), payable to the order of the Bank and having
a final maturity of December __, 2000. The Term Note shall be dated on or before
the date of the Closing Date and shall be completed with appropriate insertions.
Interest Rate and Payments of Interest on the Term Loan. The
Term Loan shall bear interest on the outstanding principal amount thereof at a
rate equal to the aggregate of the Base Rate plus two and one-half percent (2
1/2%) per annum. Such interest shall be payable on the last day of each of the
Borrower's fiscal quarters commencing December 31, 1997, and when such Term Loan
is due (whether at maturity, by reason of acceleration or otherwise).
Additional Interest. In addition to interest provided in
Section 2.3 hereof, the Company shall also pay to the Bank additional interest
("Additional Interest") equal to the following:
An amount equal to the greater of (i) $150,000.00 or (ii) five
percent (5%) of the result of (A) the Consolidated EBITDA of the
Company and its Subsidiaries for fiscal years 1998, 1999 and 2000
divided by (B) three (3). Such Additional Interest shall be paid on the
date the Company is required to furnish its annual financial statement
for fiscal year 2000 pursuant to the provisions of Section 6.1(a)
hereof and shall be accompanied by a certification of the principal
financial officer of the
16
Company setting forth in reasonable detail computations evidencing the
calculation of such Additional Interest.
In the event that the Term Loan is prepaid in full prior to
the Term Loan Maturity Date (whether by virtue of acceleration upon the
occurrence of an Event of Default or otherwise), in lieu of the amounts
payable under Section 2.4(a) hereof, an amount equal to the greater of
(i) $150,000.00, or (ii) five percent (5%) of the Consolidated EBITDA
of the Company and its Subsidiaries for the twelve (12) months
immediately preceding such prepayment. Such Additional Interest shall
be paid to the Bank contemporaneously with such prepayment. Such
Additional Interest payment shall be accompanied by a certification of
the principal financial officer of the Company setting forth in
reasonable detail computations evidencing the calculation of such
Additional Interest, provided that if such Additional Interest becomes
due as a result of the acceleration of the Obligations by the Bank, the
Bank may, in its discretion, calculate the amounts payable hereunder
based upon information available to the Bank.
Repayment of Term Loan. The principal balance of the Term Loan
shall be repaid in consecutive quarterly installments payable on the last day of
each March, June, September and December, commencing March 31, 1998 in the
following amounts:
Quarters Ending In Quarterly Installment
------------------ ---------------------
1998 $125,000.00
1999 $250,000.00
2000 $375,000.00
Unless sooner paid or accelerated, the outstanding principal balance of the Term
Loan, and all accrued and unpaid interest thereon (other than Additional
Interest which shall be paid in accordance with the provisions of Section 2.4
hereof) shall be due and payable in full on the Term Loan Maturity Date.
Subpart B - The Acquisition Loans
A. Acquisition Loans. Subject to the terms and conditions set forth in this
Agreement, during the Acquisition Loan Period, the Company may borrow a sum not
to exceed in the aggregate the Acquisition Loan Ceiling (each an "ACQUISITION
LOAN" and all of such Loans being referred to herein as "ACQUISITION LOANS") for
the purpose of financing Permitted Acquisitions. The Company may request
Acquisition Loans on more than one occasion. Amounts borrowed under this Section
2.6 and repaid or prepaid may not be reborrowed.
Notice of Borrowing. Whenever the Company desires to make a
borrowing of an Acquisition Loan, the Company shall give the Bank prior written
notice thereof at least thirty (30) Business Days prior to the day on which the
requested Acquisition Loan is to be made. Each notice of borrowing hereunder
shall be substantially in the form of Exhibit B hereto (each an
17
"ACQUISITION LOAN CERTIFICATE") and shall (a) specify (i) the principal amount
of the Acquisition Loan requested and (ii) the proposed Drawdown Date of the
Acquisition Loan and (b) be accompanied by (i) the Purchase and Sale Agreement
for such Permitted Acquisition, and (ii) a pro forma balance sheet, income
statement, statement of cash flow, and other financial information as the Bank
may reasonably request, for the Company and its Subsidiaries (including the
Permitted Acquisition) covering such period(s) as the Bank may require. Each
notice of borrowing of an Acquisition Loan shall be irrevocable and shall
obligate the Company to accept the Acquisition Loan from the Bank.
Discretionary Nature of Acquisition Line. The Acquisition Line
is not a committed line of financing. All Acquisition Loans shall be made, if at
all, in the sole discretion of the Bank. The making of an Acquisition Loan on
one occasion shall not obligate the Bank to make any other Acquisition Loan on
any other occasions.
Acquisition Note. Each Acquisition Loan shall be evidenced by,
and repayable with interest in accordance with a promissory note in the form of
Exhibit C hereto (the "Acquisition Note"), payable to the order of the Bank.
Each Acquisition Note shall be dated on each Drawdown Date and shall be
completed with the appropriate insertions.
Interest Rates and Payments of Interest on the Acquisition
Loans. (a) The Acquisition Loans shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to the Base Rate plus two and
one-half percent (2 1/2%) which rate shall change contemporaneously with any
change in the Base Rate. Such interest shall be payable on the last day of each
of the Borrower's fiscal quarters, commencing on the last day of the quarter in
which the Drawdown Date for each Acquisition Loan occurs, and when such
Acquisition Loan is due (whether at maturity, by reason of acceleration or
otherwise).
Repayment of Acquisition Loans. The principal balance of each
Acquisition Loan shall be repaid at such times, in such amounts, and upon such
maturity, as the Bank may, in its discretion, establish at the time of the
making of the subject Acquisition Loan.
Subpart C - Applicable to All Loans
A. Optional Prepayments of Loans. The Company shall have the right, at its
election, to repay the outstanding amount of any of the Loans, as a whole or in
part, at any time without penalty or premium. Any prepayment in full of the Term
Loan shall be accompanied by the payment of Additional Interest as provided in
Section 2.4 hereof. All such prepayments shall be applied to the Notes in
inverse order of maturity. No prepayment hereunder shall postpone the date for,
or reduce the amount of, any subsequent payment of the Loans. Any Loans which
are prepaid may not be reborrowed.
18
Mandatory Prepayment of Loans. In addition to other principal
reductions on the Loans required pursuant hereto, the Company shall pay, and
there shall become due and payable, a prepayment in respect of the Obligations,
the following:
An amount equal to seventy-five percent (75%) of Consolidated
Excess Cash Flow of the Company and its Subsidiaries for each of their
fiscal years. Such prepayment shall be made within ninety (90) days
after the end of each fiscal year of the Company and its Subsidiaries,
and shall be accompanied by the Excess Cash Flow Computation Report in
the form of Exhibit D hereto.
An amount equal to the Net Proceeds received by the Company
and its Subsidiaries from any sales of their assets, other than (i)
sales in the ordinary course of business,(ii) sales of assets for an
aggregate sales price not exceeding $25,000.00 in any fiscal year, or
(iii) sales otherwise permitted under this Agreement. Such prepayment
shall be made within one (1) Business Day of the Company's or any such
Subsidiary's receipt of any such Net Proceeds, and shall be accompanied
by a settlement statement for the subject transaction reflecting in
detail the disbursement of the gross proceeds of the transaction.
An amount equal to the Net Proceeds received by the Company
upon the sale or issuance of any of its capital stock (other than the
issuance of such capital stock to the seller as full or partial payment
of the purchase price in any Permitted Acquisition, or in connection
with any employee compensation or employee stock option plans). Such
prepayment shall be made within one (1) Business Day of the Company's
or any such Subsidiary's receipt of any such Net Proceeds.
The amounts so prepaid pursuant to this ss.2.13 shall be
applied FIRST, to the principal balance of the Term Loan (in inverse
order of maturity) until the principal balance of the Term Loan has
been paid in full; SECOND, to interest, fees and other amounts due on
account of the Term Loan until the Term Loan is paid in full; THIRD, to
the outstanding principal balance of the Acquisition Loans (in such
order and manner as the Bank may, in its discretion determine) until
the Acquisition Loans have been paid in full, and FOURTH, to all other
Obligations. No prepayment made hereunder shall postpone the time for,
or reduce the amount of, any subsequent payment on account of the
Obligations. No amounts prepaid may be reborrowed.
I. SECTION
CERTAIN GENERAL PROVISIONS
A. Closing Fee. The Company agrees to pay to the Bank on the Closing Date a
closing fee on account of the Term Loan in the amount of $37,500.00.
19
A. Funds for Payments.
a) All payments of principal, interest, commitment fees,
closing fees and any other amounts due hereunder or under any of the other Loan
Documents shall be made to the Bank, at its head office at 000 Xxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000, or at such other location in the Boston,
Massachusetts area that the Bank may from time to time designate, in each case
in immediately available funds.
All payments by the Company hereunder and under any of the
other Loan Documents shall be made without setoff or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts, duties, charges,
fees, deductions, withholdings, compulsory loans, restrictions or conditions of
any nature now or hereafter imposed or levied by any jurisdiction or any
political subdivision thereof or taxing or other authority therein unless the
Company is compelled by law to make such deduction or withholding. If any such
obligation is imposed upon the Company with respect to any amount payable by it
hereunder or under any of the other Loan Documents, the Company will pay to the
Bank, on the date on which such amount is due and payable hereunder or under
such other Loan Document, such additional amount as shall be necessary to enable
the Bank to receive the same net amount which the Bank would have received on
such due date had no such obligation been imposed upon the Company. The Company
will deliver promptly to the Bank certificates or other valid vouchers for all
taxes or other charges deducted from or paid with respect to payments made by
the Company hereunder or under such other Loan Document.
Computations. All computations of interest on the Loans and of
other fees payable by the Company to the extent applicable shall be based on a
365-day year and paid for the actual number of days elapsed. Each change in the
Base Rate shall be effective, for purposes of the determination of interest
hereunder, contemporaneously with the effectiveness of such change in the Base
Rate. Whenever a payment hereunder or under any of the other Loan Documents
becomes due on a day that is not a Business Day, the due date for such payment
shall be extended to the next succeeding Business Day, and interest shall accrue
during such extension. The outstanding amount of the Loans as reflected on the
Bank's records from time to time shall be considered correct and binding on the
Company unless within ten (10) Business Days after receipt by the Company from
the Bank of any notice of such outstanding amount, the Company shall notify the
Bank to the contrary.
Additional Costs, Etc. If any present or future applicable
law, which expression, as used herein, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to the Bank by any central bank or other
20
fiscal, monetary or other authority (whether or not having the force of law),
shall:
subject the Bank to any tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature with respect to this Agreement,
the other Loan Documents, or the Loans (other than taxes based upon or
measured by the income or profits of the Bank); or
materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to the Bank of the principal of
or the interest on any Loans or any other amounts payable to the Bank
under this Agreement or the other Loan Documents; or
impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any
special deposit, reserve, assessment, liquidity, capital adequacy or
other similar requirements (whether or not having the force of law)
against assets held by, or deposits in or for the account of, or loans
by, or commitments of an office of the Bank; or
impose on the Bank any other conditions or requirements with
respect to this Agreement, the other Loan Documents, the Loans, or any
class of loans or commitments of which any of the Loans forms a part;
and the result of any of the foregoing is
to increase the cost to the Bank of making, funding, issuing,
renewing, extending or maintaining any of the Loans; or
to reduce the amount of principal, interest or other amount
payable to the Bank on account of any of the Loans; or
to require the Bank to make any payment or to forego any
interest or other sum payable hereunder, the amount of which payment or
foregone interest or other sum is calculated by reference to the gross
amount of any sum receivable or deemed received by the Bank from the
Company hereunder,
then, and in each such case, the Company will, upon demand made by the Bank at
any time and from time to time and as often as the occasion therefor may arise,
pay to the Bank such additional amounts as will be sufficient to compensate the
Bank for such additional cost, reduction, payment or foregone interest or other
sum.
Capital Adequacy. If any present or future law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) or the interpretation thereof by a court or governmental authority
with appropriate jurisdiction affects the amount of capital required or expected
21
to be maintained by the Bank or any corporation controlling the Bank and the
Bank determines that the amount of capital required to be maintained by it is
increased by or based upon the existence of the Loans or the commitments made
pursuant hereto, then the Bank may notify the Company of such fact, and the
Company shall pay to the Bank from time to time on demand, as an additional fee
payable hereunder, such amount as the Bank shall determine in good faith and
certify in a notice to the Company to be an amount that will adequately
compensate the Bank in light of those circumstances for its increased costs of
maintaining such capital.
Certificate. A certificate setting forth any additional
amounts payable pursuant to Section 3.4 or Section 3.5 and a brief explanation
of such amounts which are due, submitted by the Bank to the Company, shall be
prima facie evidence that such amounts are due and owing.
Interest After Default; Late Fee. (a) Following the occurrence
of an Event of Default, principal and (to the extent permitted by applicable
law) interest on the Loans and all other amounts payable hereunder or under any
of the other Loan Documents, at the option of the Bank, shall bear interest
(compounded daily) payable on demand at a rate per annum equal to the aggregate
of the Base Rate plus five and one-half percent (5 1/2%) per annum.
(b) If a payment of principal or interest on account of any of
the Loans is not made within ten (10) days of its due date, the Company will
also pay on demand a late payment charge equal to five percent (5%) of the
amount of such payment. Nothing contained in the preceding sentence shall affect
the Bank's right to exercise any of its rights or remedies upon the occurrence
of an Event of Default.
I. SECTION
COLLATERAL SECURITY
The Obligations shall be secured by a perfected first priority security
interest to be held by the Bank (subject only to Permitted Liens) in the
Collateral.
I. SECTION
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Agreement and to make
Loans hereunder, the Company represents and warrants to the Bank that:
Organization and Qualification. Each of the Company and its
Subsidiaries (a) is a corporation duly organized. validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate
22
power to own its property and conduct its business as now conducted and as
presently contemplated and (c) is duly qualified and in good standing as a
foreign corporation and is duly authorized to do business in each jurisdiction
where the nature of its properties or business requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on the business, financial condition, assets or properties of the Company
or of the Company and its Subsidiaries taken as a whole.
Corporate Authority. The execution, delivery and performance
of this Agreement and the other Loan Documents to which the Company and its
Subsidiaries are to become a party and the transactions contemplated hereby are
within the corporate power and authority of the Company and its Subsidiaries and
have been authorized by all necessary corporate proceedings, and do not and will
not (a) require any consent or approval of the stockholders of the Company or
its Subsidiaries, except for such consents or approvals as have been obtained or
which may be required from the holders of Indebtedness which will be satisfied
from the proceeds of the Term Loan, (b) contravene any provision of the charter
documents or by-laws of the Company or its Subsidiaries, or any law, rule or
regulation applicable to the Company or its Subsidiaries, (c) contravene any
provision of, or constitute an event of default or event that, but for the
requirement that time elapse or notice be given or both would constitute an
event of default under, any other agreement, instrument, order or undertaking
binding on the Company or its Subsidiaries, or (d) result in or require the
imposition of any Encumbrance on any of the properties, assets or rights of the
Company or its Subsidiaries other than in favor of the Bank.
Valid Obligations. This Agreement and the other Loan Documents
and all of their respective terms and provisions are the legal, valid and
binding obligations of the Company and its Subsidiaries, enforceable in
accordance with their respective terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally, and except as the remedy of specific
performance, injunctive relief, or other equitable relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
Consents or Approvals. The execution, delivery and performance
of this Agreement and the other Loan Documents and the transactions contemplated
herein do not require any approval or consent of, or filing or registration
with, any governmental or other agency or authority, or any other party, except
for such consents or approvals as have been obtained or which may be required
from the holders of Indebtedness which will be satisfied from the proceeds of
the Term Loan.
Title to Properties; Absence of Encumbrances. Each of the
Company and its Subsidiaries has good and marketable title to all of the
properties, assets and rights of every name and nature now purported to be owned
by it, including, without limitation, such properties, assets and rights as are
reflected
23
in the financial statements referred to in Section 5.6 (except such properties,
assets or rights as have been disposed of in the ordinary course of business
since the date thereof), free from all Encumbrances except Permitted
Encumbrances, and free from all defects of title that might materially adversely
affect such properties, assets or rights, taken as a whole.
Financial Statements. The Company has furnished the Bank its
Consolidated balance sheet as of June 30, 1997 and its Consolidated statements
of income, changes in stockholders' equity and cash flow for the fiscal year
then ended, and related footnotes, audited and certified by Ernst & Young, LLP.
The Company has also furnished the Bank its Consolidated balance sheet as of
September 30, 1997 and its Consolidated statements of income, changes in
stockholders equity and cash flow for the fiscal quarter then ended, certified
by the principal financial officer of the Company but subject, however, to
normal, recurring year-end adjustments that shall not in the aggregate be
material in amount. All such financial statements were prepared in accordance
with Generally Accepted Accounting Principles applied on a consistent basis
throughout the periods specified and present fairly the financial position of
the Company and its Subsidiaries as of such dates and the results of the
operations of the Company and its Subsidiaries for such periods. There are no
liabilities, contingent or otherwise, not disclosed in such financial statements
that involve a material amount.
Changes. Since the date of the most recent financial
statements referred to in Section 5.6, there have been no changes in the assets,
liabilities, financial condition, business or prospects of the Company or any of
its Subsidiaries other than changes in the ordinary course of business and
changes resulting from the ATC Acquisition, the effect of which has not, in the
aggregate, been materially adverse.
Defaults. As of the date of this Agreement, no Default exists.
Taxes. The Company and each Subsidiary have filed all federal,
state and other tax returns required to be filed, and all taxes, assessments and
other governmental charges due from the Company and each Subsidiary have been
fully paid. The Company and each Subsidiary have established on their books
reserves adequate for the payment of all federal, state and other tax
liabilities.
Litigation. Except as set forth on Schedule 5.10 hereto, there
is no litigation, arbitration, proceeding or investigation pending, or, to the
knowledge of the Company's or any Subsidiary's officers, threatened, against the
Company or any Subsidiary before any court, tribunal or administrative agency or
board that, if adversely determined, could result in a material judgment not
fully covered by insurance or could otherwise have a material adverse effect on
the assets, business, financial condition, or prospects of the Company or any
Subsidiary, or materially impair the right of the Company and its Subsidiaries
to carry on business substantially as now conducted by them, or
24
which questions the validity of this Agreement or any of the Loan Documents, or
any action taken or to be taken pursuant hereto or thereto.
Margin Stock. No portion of any Loan is to be used for the
"purpose of purchasing or carrying" any "margin stock" or "margin security" as
such terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. 221 and 224, as amended.
Subsidiaries. As of the date of this Agreement, all the
Subsidiaries of the Company are listed on Schedule 5.12 hereto. The Company or a
Subsidiary of the Company is the owner, free and clear of all liens and
encumbrances, of all of the issued and outstanding stock of each Subsidiary. All
shares of such stock have been validly issued and are fully paid and
nonassessable, and no rights to subscribe to any additional shares have been
granted, and no options, warrants or similar rights are outstanding.
Investment Company Act. Neither the Company nor any of its
Subsidiaries is subject to regulation under the Investment Company Act of 1940,
as amended.
Compliance with ERISA. The Company does not maintain or
contribute to any Plan other than as set forth in Schedule 5.14. The Company and
each member of the Controlled Group have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the applicable provisions of
ERISA and the Code, and have not incurred any liability to the PBGC or a Plan
under Title IV of ERISA; and no "prohibited transaction" or "reportable event"
(as such terms are defined in ERISA) has occurred with respect to any Plan.
Environmental Matters. (a) The Company and each of its
Subsidiaries have obtained all permits, licenses and other authorizations which
are required under all Environmental Laws, except to the extent failure to have
any such permit, license or authorization would not have a material adverse
effect on the business, financial condition or operations of the Company and its
Subsidiaries. The Company and each of its Subsidiaries are in compliance with
the terms and conditions of all such permits, licenses and authorizations, and
are also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply would
not have a material adverse effect on the business, financial condition or
operations of the Company and its Subsidiaries.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any
25
governmental or other entity with respect to any alleged failure by the Company
or any of its Subsidiaries to have any permit, license or authorization required
in connection with the conduct of its business or with respect to any
Environmental Laws, including, without limitation, Environmental Laws relating
to the generation, treatment storage, recycling, transportation, disposal or
release of any Hazardous Materials.
(c) To the best of the Company's knowledge no material oral or
written notification of a release of a Hazardous Material has been filed by or
on behalf of the Company or any of its Subsidiaries and no property now or
previously owned, leased or used by the Company or any of its Subsidiaries is
listed or proposed for listing on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, or on any similar state list of sites requiring investigation or
clean-up.
(d) There are no liens or encumbrances arising under or
pursuant to any Environmental Laws on any of the real property or properties
owned, leased or used by the Company or any of its Subsidiaries and no
governmental actions have been taken or are in process which could subject any
of such properties to such liens or encumbrances or, as a result of which the
Company or any of its Subsidiaries would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any property
owned by it in any deed to such property.
(e) Neither Company nor any of its Subsidiaries nor, to the
best knowledge of the Company, any previous owner. tenant, occupant or user of
any property owned, leased or used by the Company or any of its Subsidiaries has
(i) engaged in or permitted any operations or activities upon or any use or
occupancy of such property, or any portion thereof, for the purpose of or in any
way involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal (whether legal or illegal,
accidental or intentional) of any Hazardous Materials on, under, in or about
such property, except in compliance with all Environmental Laws, or (ii)
transported any Hazardous Materials to, from or across such property except in
compliance with all Environmental Laws; nor to the best knowledge of the Company
have any Hazardous Materials migrated from other properties upon, about or
beneath such property, nor, to the best knowledge of the Company, are any
Hazardous Materials presently constructed, deposited, stored or otherwise
located on, under, in or about such property except in compliance with all
Environmental Laws.
Franchises, Patents, Copyrights, Etc. The Company and its
Subsidiaries possess all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter,
26
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation that has or is expected in the future to have a materially adverse
effect on the business, assets or financial condition of the Company or its
Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement that has or is expected, in the judgment of the Company's
officers, to have any materially adverse effect on the business of the Company
or its Subsidiaries.
Compliance With Other Instruments, Laws, Etc. Neither the
Company nor any of its Subsidiaries is in violation of any provision of its
charter or other organization documents, by-laws, or any agreement or instrument
to which it may be subject or by which it or any of its properties may be bound,
or any decree, order, judgment, statute, license, rule or regulation, in any of
the foregoing cases in a manner that could result in the imposition of
substantial penalties or materially and adversely affect the financial
condition, properties or business of the Company and its Subsidiaries.
Absence of UCC Financing Statements, Etc. Except with respect
to Permitted Encumbrances or Encumbrances to be terminated and relating to
Indebtedness to be repaid in full with the proceeds of the Term Loan, there is
no financing statement, security agreement, chattel mortgage, real estate
mortgage or other document filed or recorded with any filing records, registry,
or other public office, that purports to cover, affect or give notice of any
present or possible future lien on, or security interest in, any Collateral or
rights thereunder.
Certain Transactions. Except for those transactions with
Sagaponack under a Securities Purchase Agreement dated as of May 22, 1997 and
related documents (as amended and in effect), none of the officers, trustees,
directors, or employees of the Company or any of its Subsidiaries is presently a
party to any transaction with the Company or any of its Subsidiaries (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, trustee, director or such employee
or, to the knowledge of the Company, any corporation, partnership, trust or
other entity in which any officer, trustee, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
Loan Documents. All of the representations and warranties of
the Company made in the other Loan Documents or any document or instrument
delivered to the Bank pursuant to or in connection with any of such Loan
Documents are true and correct in all material respects.
27
I. SECTION
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding, the Company covenants as
follows:
Financial Statements and other Reporting Requirements. The
Company shall furnish to the Bank:
as soon as available to the Company, but in any event within
90 days after the end of each of its fiscal years, a consolidated and
consolidating balance sheet as of the end of, and a related
consolidated and consolidating statement of income, changes in
stockholders equity and cash flow for, such year, audited and certified
by Ernst & Young LLP (or other independent certified public accountants
acceptable to the Bank) in the case of such consolidated statements,
and certified by the chief financial officer in the case of such
consolidating statements, each setting forth in comparative form the
figures for the previous year, prepared in accordance with Generally
Accepted Accounting Principles; and, concurrently with such financial
statements, a copy of said certified public accountants' management
report and notes accompanying such financial statements and a written
statement by such accountants that, in the making of the audit
necessary for their report and opinion upon such financial statements
they have obtained no knowledge of any Default or, if in the opinion of
such accountants any such Default exists, they shall disclose in such
written statement the nature and status thereof;
as soon as available to the Company, but in any event within
45 days after the end of each of its fiscal quarters, a consolidated
and consolidating balance sheet as of the end of, and a related
consolidated and consolidating statement of income and cash flow for,
the period then ended, certified by the principal financial officer of
the Company but subject, however, to normal, recurring year end
adjustments that shall not in the aggregate be material in amount;
as soon as available to the Company, but in any event within
25 days after the end of each month, a consolidated and consolidating
balance sheet as of the end of, and a related consolidated and
consolidating statement of income and cash flow for, the month then
ended, certified by the principal financial officer of the Company but
subject, however, to normal, recurring year end adjustments that shall
not in the aggregate be material in amount;
concurrently with the delivery of each financial statement
pursuant to subsections (a) and (b) of this Section 5.1, a report in
substantially the form of Exhibit E hereto signed on behalf of the
Company by its chief financial officer and setting forth in reasonable
detail
28
computations evidencing compliance with the covenants contained in
Sections 8.1 through 8.7;
promptly after the receipt thereof by the Company, copies of
any reports submitted to the Company by independent public accountants
in connection with any interim review of the accounts of the Company
made by such accountants;
promptly after the same are available, copies of all proxy
statements, financial statements and reports as the Company shall send
to its stockholders or as the Company may file with the Securities and
Exchange Commission or any governmental authority at any time having
jurisdiction over the Company or its Subsidiaries;
if and when the Company gives or is required to give notice to
the PBGC of any "Reportable Event" (as defined in Section 4043 of
ERISA) with respect to any Plan that might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that any
member of the Controlled Group or the plan administrator of any Plan
has given or is required to give notice of any such Reportable Event, a
copy of the notice of such Reportable Event given or required to be
given to the PBGC;
immediately upon becoming aware of the existence of any
condition or event that constitutes a Default, written notice thereof
specifying the nature and duration thereof and the action being or
proposed to be taken with respect thereto;
promptly upon becoming aware of any litigation or of any
investigative proceedings by a governmental agency or authority
commenced or threatened against the Company or any of its Subsidiaries
of which it has notice, the outcome of which would or might have a
materially adverse effect on the assets, business or prospects of the
Company or the Company and its Subsidiaries on a consolidated basis,
written notice thereof and the action being or proposed to be taken
with respect thereto;
promptly upon becoming aware of any investigative proceedings
by a governmental agency or authority commenced or threatened against
the Company or any of its Subsidiaries regarding any potential
violation of Environmental Laws or any spill, release, discharge or
disposal of any Hazardous Material, written notice thereof and the
action being or proposed to be taken with respect thereto; and
from time to time, such other financial data and information
about the Company or its Subsidiaries as the Bank may reasonably
request.
Conduct of Business. Each of the Company and its Subsidiaries
shall:
29
duly observe and comply in all material respects with all
applicable laws and valid requirements of any governmental authorities
relative to its corporate existence, rights and franchises, to the
conduct of its business and to its property and assets (including
without limitation all Environmental Laws and ERISA), and shall
maintain and keep in full force and effect all licenses and permits
necessary in any material respect to the proper conduct of its
business;
except as set forth in Schedule 6.2, maintain its corporate
existence; and
remain engaged substantially in the business of furnishing
environmental services for statistical inventory reconciliation leak
detection.
Maintenance and Insurance. Each of the Company and its
Subsidiaries shall maintain its properties in good repair, working order and
condition as required for the normal conduct of its business. Each of the
Company and its Subsidiaries shall at all times maintain insurance on all
Collateral as required by the Loan Documents, and will maintain such other
liability, casualty and other insurance with financially sound and reputable
insurers, against such casualties and contingencies as shall be in accordance
with the general practices of businesses engaged in similar activities and in
amounts, containing such terms, in such forms and for such periods as may be
reasonable and prudent. In the event of failure to provide and maintain
insurance as herein provided, the Bank may, at its option, provide such
insurance and charge the amount thereof to the account of the Company or any of
its Subsidiaries with the Bank. The Company shall furnish to the Bank
certificates or other evidence satisfactory to the Bank of compliance with the
foregoing insurance provisions.
Taxes. The Company shall pay or cause to be paid all taxes,
assessments or governmental charges on or against it or any of its Subsidiaries
or its or their properties on or prior to the time when they become due.
Inspection by the Bank. (a) The Company shall permit the Bank
or its designees, at any reasonable time and at reasonable intervals of time,
and upon reasonable notice (or if a Default shall have occurred and is
continuing, at any time and without prior notice), at the Company's expense, to
(i) visit and inspect the properties of the Company and its Subsidiaries, (ii)
examine and make copies of and take abstracts from the books and records of the
Company and its Subsidiaries, and (iii) discuss the affairs, finances and
accounts of the Company and its Subsidiaries with their appropriate officers,
employees and accountants.
(b) Without limiting the rights of the Bank under Section
6.5(a) above, the Company shall permit the Bank, at the Company's expense, (i)
to undertake one (1) commercial finance examination annually; (ii) to obtain
appraisals of any of the Company's and its Subsidiaries' assets in form and
substance and
30
by appraisers satisfactory to the Bank; and (iii) to obtain environmental site
assessments of any of the Company's or its Subsidiaries' properties, all of the
foregoing at such times and intervals as the Bank may request.
Maintenance of Books and Records. Each of the Company and its
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with Generally
Accepted Accounting Principles consistently applied and applicable law.
Punctual Payment. The Company will duly and punctually pay or
cause to be paid the principal and interest (including Additional Interest) on
the Loans and all interest, fees and other Obligations provided for in this
Agreement, all in accordance with the terms of this Agreement and the Notes, as
well as all other sums owing pursuant to the Loan Documents.
Maintenance of Office. The Borrower will maintain its chief
executive office in Lakewood, Colorado, or at such other place in the United
States of America as the Company shall designate upon not less than forty five
(45) days prior written notice to the Bank.
Compliance with Laws, Contracts, Licenses, and Permits. The
Company will comply with, and will cause each of its Subsidiaries to comply with
(a) all applicable laws and regulations now or hereafter in effect wherever its
business is conducted, including all Environmental Laws, (b) the provisions of
its corporate charter and other charter documents and by-laws, (c) all
agreements and instruments to which it is a party or by which it or any of its
properties may be bound and (d) all applicable decrees, orders, and judgments,
except, with respect to each of the foregoing, for violations which, in the
aggregate, do not have a material adverse effect on the business, operations,
properties, assets, or financial condition of the Company and its Subsidiaries.
If at any time while any Obligation is outstanding, any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of any
government shall become necessary or required in order that the Company or its
Subsidiaries may fulfill any of its obligations hereunder, the Company will
promptly take or cause to be taken all reasonable steps to obtain such
authorization, consent, approval, permit or license and furnish the Bank with
evidence thereof.
Use of Proceeds. The Borrower will use the proceeds (a) of the
Term Loan solely to fund in part the ATC Acquisition, to repay Indebtedness
described in SCHEDULE 6.10 hereto, and to support working capital, capital
expenditures, and general corporate purposes; and (b) of the Acquisition Loans,
solely for Permitted Acquisitions.
Further Assurances. At any time and from time to time the
Company shall, and shall cause each of its Subsidiaries
31
to, execute and deliver such further instruments and take such further action as
may reasonably be requested by the Bank to effect the purposes of this Agreement
and the other Loan Documents.
I. SECTION
NEGATIVE COVENANTS
So long as the Bank has any commitment to lend hereunder or any Loan or
other Obligation remains outstanding, the Company covenants as follows:
Indebtedness. Neither the Company nor any of its Subsidiaries shall
create, incur, assume, guarantee or be or remain liable with respect to any
Indebtedness other than the following:
Indebtedness of the Company or any of its Subsidiaries to the
Bank or any of its affiliates;
Indebtedness existing as of the date of this Agreement and
disclosed on Schedule 7.1 hereto;
current liabilities of the Company or its Subsidiaries
incurred in the ordinary course of business but not incurred through
(i) the borrowing of money, or (ii) the obtaining of credit except for
credit on an open account basis customarily extended and in fact
extended in connection with normal purchases of goods and services;
Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be
made in accordance with the provisions of Section 6.4;
Indebtedness in respect of judgments or awards that have been
in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which the
Company shall at the time in good faith be prosecuting an appeal or
proceedings for review and in respect of which a stay of execution
shall have been obtained pending such appeal or review;
endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the
ordinary course of business;
Subordinated Indebtedness;
Indebtedness in connection with insurance premium financing;
and
32
Other Indebtedness not to exceed $50,000.00 in the
aggregate outstanding at any time.
Leases. Neither the Company nor any of its Subsidiaries shall
during any fiscal year enter into any leases of real or personal property as
lessee, without the prior written consent of the Bank (which shall not be
unreasonably withheld or delayed).
Sale and Leaseback. Neither the Company nor any of its
Subsidiaries shall enter into any arrangement, directly or indirectly, whereby
it shall sell or transfer any property owned by it in order to lease such
property or lease other property that the Company or any such Subsidiary intends
to use for substantially the same purpose as the property being sold or
transferred.
Encumbrances. Neither the Company nor any of its Subsidiaries
shall create, incur, assume or suffer to exist any mortgage, pledge, security
interest, lien or other charge or encumbrance, including the lien or retained
security title of a conditional vendor upon or with respect to any of its
property or assets ("Encumbrances"), or assign or otherwise convey any right to
receive income, including the sale or discount of accounts receivable with or
without recourse, except the following ("Permitted Encumbrances"):
Encumbrances in favor of the Bank or any of its affiliates;
Encumbrances existing as of the date of this Agreement and
disclosed in Schedule 7.4 hereto;
liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same is not overdue;
landlords' and lessors' liens in respect of rent not in
default or liens in respect of pledges or deposits under workmen's
compensation, unemployment insurance, social security laws, or similar
legislation (other than ERISA) or in connection with appeal and similar
bonds incidental to litigation; mechanics', laborers' and materialmen's
and similar liens, if the obligations secured by such liens are not
then delinquent; liens securing the performance of bids, tenders,
contracts (other than for the payment of money); and statutory
obligations incidental to the conduct of its business and that do not
in the aggregate materially detract from the value of its property or
materially impair the use thereof in the operation of its business;
judgment liens that shall not have been in existence for a
period longer than 30 days after the creation thereof or, if a stay of
execution shall have been obtained, for a period longer than 30 days
after the expiration of such stay;
33
rights of lessors under Capital Leases; and
easements, rights of way, restrictions and other similar
charges or Encumbrances relating to real property and not interfering
in a material way with the ordinary conduct of its business.
Merger; Consolidation; Sale or Lease of Assets. Neither the
Company nor any of its Subsidiaries shall sell, lease or otherwise dispose of
assets or properties, or liquidate, merge or consolidate into or with any other
person or entity, or effect any asset or stock acquisition except for the
following:
Any Subsidiary of the Company may merge or consolidate into or
with (i) the Company if no Default has occurred and is continuing or
would result from such merger and if the Company is the surviving
company, or (ii) any other wholly-owned Subsidiary of the Company;
Sales, leases or dispositions of assets in the ordinary course
of business;
Permitted Acquisitions;
the sale or other disposition of Toxguard Fluid Technologies,
Inc.; or
transactions contemplated on Schedule 6.2 hereof.
Additional Stock Issuance. The Company shall not permit any of
its Subsidiaries to issue any additional shares of its capital stock or other
equity securities, any options therefor or any securities convertible thereto
other than to the Company. Neither the Company nor any of its Subsidiaries shall
sell, transfer or otherwise dispose of any of the capital stock or other equity
securities of a Subsidiary, except (i) to the Company or any of its wholly-owned
Subsidiaries, or (ii) in connection with a transaction permitted by Section 7.5.
Distributions. The Company shall not make any Distributions.
Investments. Neither the Company nor any of its Subsidiaries
shall make or maintain any Investments other than (i) existing Investments in
Subsidiaries and new Investments in Subsidiaries in connection with Permitted
Acquisitions, (ii) Investments existing on the date hereof and described in
Schedule 7.8 hereto, and (iii) Qualified Investments.
ERISA. Neither the Company nor any member of the Controlled
Group shall permit any Plan maintained by it to (i) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code, (ii) incur any
"accumulated funding deficiency" (as defined in Section 302 of ERISA) whether or
not waived, or (iii) terminate any Plan in a manner that could result in the
imposition of a lien or encumbrance on the assets of the Company or any of its
Subsidiaries pursuant to Section 4068 of ERISA.
34
Compliance with Environmental Laws. The Company will not, and
will not permit any of its Subsidiaries to, do any of the following: (a) use any
real estate owned or leased by it or any portion thereof as a facility for the
handling, processing, storage or disposal of Hazardous Materials, except in full
compliance with Environmental Laws, (b) cause or permit to be located on any of
such real estate any underground tank or other underground storage receptacle
for Hazardous Materials except in full compliance with Environmental Laws, (c)
generate or dispose of any Hazardous Materials on any of such real estate except
in full compliance with Environmental Laws, or (d) conduct any activity at any
real estate or use any real estate in any manner so as to cause a release.
Subordinated Indebtedness. The Company and its Subsidiaries
shall not modify or amend any of the provisions of the instruments, documents,
and agreements evidencing the Subordinated Indebtedness without the prior
written consent of the Bank.
Affiliate Transactions. The Company shall not, after the date
hereof, enter into transactions with its Subsidiaries, affiliates, officers,
directors, and shareholders (including, without limitation, as compensation for
services rendered or for the purchase, leasing, sale, or exchange of property),
except for transactions upon terms not less favorable to the Company than would
be obtainable at the time in comparable transactions in arms length dealings
with other Persons, provided that, in no event shall the Company:
make any loans or advances to any such Subsidiaries,
affiliates, officers, directors, and shareholders; provided that the
Company may make loans and advances to ATC in an amount not to exceed $
150,000.00 in the aggregate outstanding at any time.
make any additional investments in any such Subsidiaries,
affiliates, officers, directors, and shareholders in excess of the
amounts outstanding on the Closing Date; or
issue any Guarantees of the obligations of any such
Subsidiaries, affiliates, officers, directors, and shareholders.
I. SECTION
FINANCIAL COVENANTS OF THE COMPANY
The Company covenants and agrees that, so long as any Obligation is
outstanding:
A. Consolidated Net Worth. The Company shall at all times maintain a
Consolidated Net Worth equal to or greater than the sum of (a) $8,000,000.00,
plus (b) one hundred percent (100%) of the proceeds realized from the issuance
of any stock or other
35
equity interests in the Company, plus (c) seventy-five percent (75%) of the
Consolidated Net Income (but not any net loss) of the Company and its
Subsidiaries in each of their fiscal years commencing with the fiscal year
ending June 30, 1998. In the event that Consolidated Net Worth is less than that
required hereunder solely by virtue of the incurrence of a net loss in any
fiscal year, for purposes of calculating Consolidated Net Worth in any such
year, Transition Expenses permitted under Section 8.7 hereof and incurred in the
subject year (in an amount not to exceed the actual net loss) shall be added to
the actual Consolidated Net Worth of the Company and its Subsidiaries.
A. Funded Debt to Adjusted Consolidated EBITDA. The Company shall not permit the
ratio of Indebtedness for borrowed money (including Capital Lease obligations
but excluding Subordinated Indebtedness) to Adjusted Consolidated EBITDA to be
less than the following at any time during the period indicated:
Period Ratio
------ -----
Quarter Ending 3.3:1.0
December 31, 1997
Quarter Ending 3.3:1.0
March 31, 1998
Quarter Ending 2.25:1.0
June 30, 1998
Quarter Ending 2.25:1.0
September 30, 1998
Quarter Ending 2.0:1.0
December 31, 1998 and
Each Quarter end thereafter
For purposes of calculating compliance with this covenant for each quarter
through the quarter ending December 31, 1998, Adjusted Consolidated EBITDA shall
be calculated by multiplying Adjusted Consolidated EBITDA for the applicable
quarter by four (4).
A. Adjusted Consolidated EBITDA to Interest Charges. The Company shall not
permit the ratio of Adjusted Consolidated EBITDA to Interest Charges paid in
cash to be less than 2.5:1.0 for each of the Company's fiscal quarters ending
December 31, 1997 and March 31, 1998, or 3.0:1.0 for each of the Company's
fiscal quarters ending thereafter.
Maximum Capital Expenditures. The Company and its Subsidiaries
shall not make or incur Capital Expenditures in excess of (a) $500,000.00 in any
fiscal year, and (b) $125,000.00 in any fiscal quarter; provided that, if the
Capital Expenditures of the Company and its Subsidiaries in any fiscal quarter
are less than $125,000.00, the difference between $125,000.00 and the
36
actual Capital Expenditures made during such fiscal quarter may be carried over
to, and shall increase the amount of Capital Expenditures permitted in, any
other fiscal quarter of the Company and its Subsidiaries of the same fiscal year
(no such carry over being permitted between fiscal years).
Adjusted Consolidated EBITDA. (a) The Company and its
Subsidiaries shall achieve Adjusted Consolidated EBITDA in excess of the
following amounts for the periods indicated:
Period
------
Quarter Ending $282,000.00
December 31, 1997
Six Months Ending $563,000.00
March 31, 1998
Nine Months Ending $1,048,000.00
June 30, 1998
Twelve Months Ending $1,532,000.00
September 30, 1998
Fifteen Months Ending $1,734,000.00
December 31, 1998
(b) The Company and its Subsidiaries shall achieve Adjusted
Consolidated EBITDA (calculated on a rolling four quarters basis) in excess of
$1,936,000.00 as of each of their fiscal quarter ends commencing with the
quarter ending March 31, 1999.
A. Consolidated Operating Cash Flow to Debt Service Charges. The Company shall
not permit the ratio of Consolidated Operating Cash Flow to Debt Service Charges
to be less than the following amounts for the periods indicated:
Period Minimum Ratio
------ -------------
Quarter Ending 1.1:1.0
December 31, 1997
Six Months Ending 1.1:1.0
March 31, 1998
Nine Months Ending 1.1:1.0
June 30, 1998
Twelve Months Ending 1.1:1.0
September 30, 1998
Fifteen Months Ending 1.1:1.0
December 31, 1998
(b) The Company shall not permit the ratio of Consolidated Operating
Cash Flow to Debt Service Charges (calculated on a rolling four (4) quarters
basis) to be less than 1.1:1.0 as of
37
the end of any fiscal quarter of the Company, commencing with the fiscal quarter
ending March 31, 1999.
A. Transition Expenses. The Company shall not permit Transition Expenses in
connection with either the ATC Acquisition or the Ustman Industries, Inc.
("Ustman") acquisition to exceed the following amounts for the periods
indicated:
Period Amount
------ ------
Quarter Ending Ustman - $115,000.00
December 31, 1997 ATC - $310,000.00
Quarter Ending Ustman - $50,000.00
March 31, 1998
Quarter Ending Ustman - $25,000.00
June 30, 1998 ATC - $74,000.00
Quarter Ending Ustman -0-
September 30, 1998 ATC - $38,000.00
Quarter Ending Ustman -0-
December 31, 1998 and thereafter ATC -0-
I. SECTION
CLOSING CONDITIONS
The obligations of the Bank to make the Term Loan and the Acquisition
Loans shall be subject to satisfaction of the following conditions precedent:
Loan Documents. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto and, shall be in full
force and effect and shall be in form and substance satisfactory to the Bank.
Certified Copies of Organization Documents. The Bank shall have
received from the Company and its Subsidiaries a copy, certified as of a recent
date by the appropriate officer of the State in which Company and its
Subsidiaries is organized to be true and complete, of the corporate charter and
any other organization documents of the Company and its Subsidiaries as in
effect on such date of certification.
By-laws; Resolutions. All action on the part of the Company and its
Subsidiaries necessary for the valid execution, delivery and performance by the
Company and its Subsidiaries of this Agreement and the other Loan Documents to
which it is or is to become a party shall have been duly and effectively taken,
and evidence thereof satisfactory to the Bank shall have been
38
provided to the Bank. The Bank shall have received from the Company and its
Subsidiaries true copies of the Company's and its Subsidiaries' by-laws and the
resolutions adopted by the Company and its Subsidiaries board of directors
authorizing the transactions described herein, each certified by the Company's
or its Subsidiaries' secretary (as applicable) as of a recent date to be true
and complete.
Incumbency Certificate; Authorized Signers. The Bank shall
have received from the Company and each of its Subsidiaries an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized officer
of the Company and each of its Subsidiaries and giving the name and bearing a
specimen signature of each individual who shall be authorized: (a) to sign, in
the name and on behalf of the Company and each of its Subsidiaries, each of the
Loan Documents to which the Company and each of its Subsidiaries is or is to
become a party; (b) to make requests for Acquisition Loans; and (c) to give
notices and to take other action on behalf of the Company and each of its
Subsidiaries under the Loan Documents.
Validity of Liens. The Security Documents shall be effective
to create in favor of the Bank a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) security interest in
the Collateral. All filings, recordings, deliveries of instruments and other
actions necessary or desirable in the opinion of the Bank to protect and
preserve such security interests shall have been duly effected. The Bank shall
have received evidence thereof in form and substance satisfactory to the Bank.
Pledge of Stock. All capital stock of ATC shall have been
pledged by the Company to the Bank to secure the Obligations.
Opinion of Counsel Concerning Organization and Loan Documents.
The Bank shall have received a favorable opinion addressed to the Bank and dated
as of the Closing Date, in form and substance satisfactory to the Bank from
Attorneys Xxxxxxx & Xxxxxx, LLP.
Payment of Fees. The Borrower shall have paid to the Bank the
closing fee pursuant to Section 3.1, and shall have paid all fees and expenses
incurred by the Bank, including, without limitation, reasonable attorneys' fees.
Agreements with Holders of Subordinated Indebtedness. The Bank
shall have entered into a subordination agreement with the holders of the
Subordinated Indebtedness on terms satisfactory to the Bank (including, without
limitation, with respect to restrictions on payment of cash interest and
principal on account of the Subordinated Indebtedness until all Obligations have
been paid in full).
ATC Acquisition. The ATC Acquisition shall be consummated on
the Closing Date on terms reasonably satisfactory to the Bank.
39
Minimum Cash-on-Hand. After payment or accrual of all fees and
expenses paid to the Bank or its counsel or otherwise incurred by the Company
and its Subsidiaries in connection with the consummation of the ATC Acquisition
and this Agreement, the Company shall have cash-on-hand on the Closing Date of
at least $500,000.00.
Minimum Consolidated EBITDA. The Bank shall have received
evidence satisfactory to the Bank that the pro forma Adjusted Consolidated
EBITDA of the Company and its Subsidiaries for the fiscal year ending June 30,
1997 would have been at least $2,250,000.00, assuming the Company had owned and
operated ATC, Ustman Industries, Inc. and all of its existing Subsidiaries for
the entire fiscal year then ending.
Pro Forma Covenant Compliance. The Bank shall have received
from the Company a pro forma Compliance Certificate in the form of Exhibit E
hereto which shall indicate that, as of the Closing Date, on a pro forma basis
(calculated on the basis of the Company's consolidated financial position as of
September 30, 1997), after giving effect to the ATC Acquisition and this
Agreement, the Company and its Subsidiaries are in compliance with the covenants
set forth in Section 8 of this Agreement, provided that the Bank recognizes that
the Transition Expenses incurred through September 30, 1997 exceed the
limitations set forth in Section 8.7 hereof.
No Adverse Change. No event shall have occurred, or shall have
failed to occur, which occurrence or failure has, or could have, a materially
adverse effect on the Borrower's financial condition, business, operations,
properties or prospects.
Corporate Structure. The Bank shall be satisfied with the
corporate, tax, and capital structure of the Company and its Subsidiaries.
Additional Documents. The Company shall have provided such
additional instruments and documents to the Bank as the Bank and its counsel may
have reasonably requested.
I. SECTION
CONDITIONS TO ALL BORROWINGS
The obligations of the Bank to make any Loan, whether on or after the
Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
Representations True; No Event of Default. Each of the
representations and warranties of the Company and its Subsidiaries contained in
this Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with this Agreement shall be true as of
the date as of which they were made and shall also be true at and as of the time
of the making of such Loan, with the same effect as if made
40
at and as of that time (except to the extent of changes resulting from
transactions contemplated and permitted by this Agreement and the other Loan
Documents and changes occurring in the ordinary course of business that singly
or in the aggregate are not materially adverse, and except to the extent that
such representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing. The Bank
shall have received a certificate of the Company signed by an authorized officer
of the Company to such effect.
No Legal Impediment. No change shall have occurred in any law
or regulations thereunder or interpretations thereof that in the reasonable
opinion of the Bank would make it illegal for the Bank to make such Loan.
Governmental Regulation. The Bank shall have received such
statements in substance and form reasonably satisfactory to the Bank as the Bank
shall require for the purpose of compliance with any applicable regulations of
the Comptroller of the Currency or the Board of Governors of the Federal Reserve
System.
Proceedings and Documents. All proceedings in connection with
the transactions contemplated by this Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Bank to the Bank's counsel, and the Bank and such counsel shall have
received all information and such counterpart originals or certified or other
copies of such documents as the Bank may reasonably request.
I. SECTION
DEFAULTS
A. Events of Default. There shall be an Event of Default hereunder if any of the
following events occurs:
the Company or any of its Subsidiaries shall fail to pay when
due (i) any amount of principal of any Loans, or (ii) any amount of
interest thereon or any fees or expenses payable hereunder or under the
other Loan Documents; or
the Company or any of its Subsidiaries shall fail to perform
any term, covenant or agreement contained in Sections 6.5, 6.7, 6.10, 7
or 8 hereof or in any other Loan Documents; or
the Company or any of its Subsidiaries shall fail to perform
any term, covenant or agreement (other than those subject to
subsections 11.1(a) through (b) hereof) contained in this Agreement and
such default shall continue for 15 days after notice thereof has been
given to the Company by the Bank; or
41
any representation or warranty of the Company or any of its
Subsidiaries made in this Agreement or in any other Loan Documents or
in any certificate delivered hereunder shall prove to have been false
in any material respect upon the date when made or deemed to have been
made or repeated; or
there shall occur any material adverse change in the assets,
liabilities, financial condition, business or prospects of the Company
and its Subsidiaries, taken as a whole, as determined by the Bank
acting in good faith; or
the Company or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligations for
borrowed monies or advances, for Capitalized Leases, or for the use of
real or personal property, in each case aggregating in excess of
$50,000.00, or fail to observe or perform any term, covenant or
agreement evidencing or securing such obligations for borrowed monies
or advances, or relating to Capitalized Leases or such use of real or
personal property as and when due or within any applicable period of
grace, which failure has not been waived by the holder or holders of
such Indebtedness, and the result of which failure is to permit the
holder or holders of such Indebtedness to cause such Indebtedness to
become due prior to its stated maturity upon delivery of required
notice, if any; or
the Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar official of itself
or of all or a substantial part of its property, (ii) be generally not
paying its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect).
(v) take any action or commence any case or proceeding under any law
relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, or any other law providing for the
relief of debtors, (vi) fail to contest in a timely or appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code or other law, (vii)
take any action under the laws of its jurisdiction of incorporation or
organization similar to any of the foregoing, or (viii) take any
corporate action for the purpose of effecting any of the foregoing; or
a proceeding or case shall be commenced, without the
application or consent of the Company or any of its Subsidiaries in any
court of competent jurisdiction. seeking (i)the liquidation,
reorganization, dissolution, winding up, or composition or readjustment
of its debts, (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of it or of all or any substantial part of its
assets, or (iii) similar relief in respect of it, under any law
relating to bankruptcy, insolvency,
42
reorganization, winding-up or composition or adjustment of debts or any
other law providing for the relief of debtors, and such proceeding or
case shall continue undismissed, or unstayed and in effect, for a
period of 45 days; or an order for relief shall be entered in an
involuntary case under the Federal Bankruptcy Code, against the Company
or such Subsidiary; or action under the laws of the jurisdiction of
incorporation or organization of the Company or any of its Subsidiaries
similar to any of the foregoing shall be taken with respect to the
Company or such Subsidiary and shall continue unstayed and in effect
for any period of 30 days; or
a judgment or order for the payment of money shall be entered
against the Company or any of its Subsidiaries by any court, or a
warrant of attachment or execution or similar process shall be issued
or levied against property of the Company or such Subsidiary, that in
the aggregate exceeds $100,000.00 in value and such judgment, order,
warrant or process shall continue undischarged or unstayed for 30 days;
or
the Company or any member of the Controlled Group shall fail
to pay when due an amount or amounts aggregating in excess of
$100,000.00 that it shall have become liable to pay to the PBGC or to a
Plan under Title IV of ERISA; or notice of intent to terminate a Plan
or Plans shall be filed under Title IV of ERISA by the Company, any
member of the Controlled Group, any Plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate or to cause a trustee to be
appointed to administer any such Plan or Plans or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans against the Company
and such proceedings shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any such Plan or
Plans must be terminated; or
if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded or any action at law, suit or in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of the Company or any of its
Subsidiaries, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the
effect that, any material provision of the Loan Documents is illegal,
invalid or unenforceable in accordance with the terms thereof; or
the Company or any of its Subsidiaries shall be indicted for a
federal crime, a punishment for which could include the forfeiture of
any material assets of the Company or such Subsidiaries; or
43
any change in the ownership of the capital stock of any of the
Company's Subsidiaries (except as otherwise permitted in this
Agreement), or any Change in Control of the Company.
the failure of the Company and its Subsidiaries to maintain,
or the cancellation of, insurance upon the Collateral, in amounts and
covering such risks at least equal to that which existed on the date of
this Agreement, naming the Bank as loss payee and/or additional
insured, as required hereunder and under the other Loan Documents.
Remedies. Upon the occurrence of an Event of Default described
in subsections 11.1(g) and (h), immediately and automatically, and upon the
occurrence of any other Event of Default, at any time thereafter while such
Event of Default is continuing, at the Bank's option and upon the Bank's
declaration:
the Bank's commitment to make any further Loans hereunder
shall terminate;
the unpaid principal amount of the Loans together with accrued
interest and all other Obligations shall become immediately due and
payable without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived; and
the Bank may exercise any and all rights it has under this
Agreement, the Note or any other Loan Documents or agreements executed
in connection herewith, or at law or in equity, and proceed to protect
and enforce the Bank's rights by any action at law, in equity or other
appropriate proceeding.
I. SECTION
MISCELLANEOUS
A. Notices. Unless otherwise specified herein, all notices hereunder to any
party hereto shall be in writing and shall be delivered by hand, by registered
or certified first class mail, postage prepaid, by telex, answerback received,
or electronic facsimile transmission, by telegraph company or overnight courier,
addressed to such party at its address indicated below:
If to the Company, at
Xxxxxx General Corporation
00000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxx X. Xxxx
Telecopier:(000) 000-0000
44
If to the Bank, at
BankBoston, N.A.
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Diversified Finance
Telecopier: (000) 000-0000
or at any other address specified by such party in writing.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile directed to a responsible officer of the party to which it is
directed, at the time of the receipt thereof by such officer or the sending of
such facsimile (with confirmation of receipt at its destination) and (ii) if
sent by registered or certified first-class mail, postage prepaid, on the third
Business Day following the mailing thereof.
Expenses. The Company agrees to pay (a) the reasonable costs
of producing and reproducing this Agreement, the other Loan Documents and the
other agreements and instruments mentioned herein, (b) any taxes (including any
interest and penalties in respect thereto) payable by the Bank other than taxes
based upon the Bank's net income), including any recording, mortgage,
documentary or intangibles taxes in connection with the Loan Documents, or other
taxes payable on or with respect to the transactions contemplated by this
Agreement, including any taxes payable by the Bank after the Closing Date (the
Company hereby agreeing to indemnify the Bank with respect thereto), (c) all
appraisal fees, engineer's fees, and the reasonable fees, expenses and
disbursements of the Bank's counsel or any local counsel to the Bank incurred in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, each closing hereunder, and
amendments, modifications, approvals, consents or waivers hereto or hereunder,
(d) the fees, expenses and disbursements of the Bank incurred by the Bank in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, (e) all reasonable
out-of-pocket expenses (including reasonable attorneys' fees and costs and the
fees and costs of appraisers, engineers, investment bankers or other experts
retained by the Bank in connection with any such enforcement proceedings)
incurred by the Bank in connection with (i) the enforcement of or preservation
of rights under any of the Loan Documents against the Company or any of its
Subsidiaries or the administration thereof and (ii) any litigation, proceeding
or dispute whether arising hereunder or otherwise, in any way related to any
Bank's relationship with the Company or any of its Subsidiaries and (f) all
reasonable fees, expenses and disbursements of the Bank incurred in connection
with UCC searches, UCC filings or mortgage recordings. The covenants of this
Section 12.2 shall survive payment or satisfaction of payment of amounts owing
with respect to the Notes.
Indemnification. The Company agrees to indemnify and hold
harmless the Bank, its officers, directors, agents,
45
employees, attorneys and affiliates, from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and expenses of every nature and character
arising out of this Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (a) any actual
or proposed use by the Company or any of its Subsidiaries of the proceeds of any
of the Loans, (b) any actual or alleged infringement of any patent, copyright,
trademark, service xxxx or similar right of the Company or any of its
Subsidiaries comprised in the Collateral, (c) the Company's or any of its
Subsidiaries' entering into or performing this Agreement or any of the other
Loan Documents or (d) with respect to the Company and its Subsidiaries and their
respective properties and assets, the violation of any Environmental Law, the
release or threatened release of any Hazardous Materials or any action, suit,
proceeding or investigation brought or threatened with respect to any Hazardous
Materials (including, but not limited to claims with respect to wrongful death,
personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and allocated costs
of internal counsel incurred in connection with any such investigation,
litigation or other proceeding. In litigation, or the preparation therefor, the
Bank shall be entitled to select its own counsel and, in addition to the
foregoing indemnity, the Company agrees to pay promptly the reasonable fees and
expenses of such counsel. If, and to the extent that the obligations of the
Company under this Section 12.3 are unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment in satisfaction of
such obligations which is permissible under applicable law. The provisions of
this Section 12.3 shall survive the repayment of the Loan and the termination of
the obligations of the Bank hereunder.
Set-Off. Regardless of the adequacy of any collateral or other
means of obtaining repayment of the Obligations, any deposits, balances or other
sums credited by or due from the Bank or any of its affiliates to the Company or
any of its Subsidiaries may, at any time and from time to time after the
occurrence of an Event of Default hereunder, without notice to the Company or
any of its Subsidiaries or compliance with any other condition precedent now or
hereafter imposed by statute, rule of law, or otherwise (all of which are hereby
expressly waived) be set off, appropriated, and applied by the Bank against any
and all obligations of the Company or any of its Subsidiaries to the Bank or any
of its affiliates in such manner as the Bank in its sole discretion may
determine, and the Company and each of its Subsidiaries hereby grants the Bank a
continuing security interest in such deposits, balances or other sums for the
payment and performance of all such obligations.
Term of Agreement. This Agreement shall continue in force and
effect so long as any Loan or any Obligation shall be outstanding.
No Waivers. No failure or delay by the Bank in exercising any
right, power or privilege hereunder or under the Notes
46
or under any other Loan Documents shall operate as a waiver thereof; nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein and in the other Loan Documents provided are cumulative and not
exclusive of any rights or remedies otherwise provided by agreement or law.
GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. THIS
AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT AS OTHERWISE SPECIFICALLY
PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SUCH COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). THE COMPANY AND ITS SUBSIDIARIES AGREE THAT ANY
SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL
COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH
COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE COMPANY BY
MAIL AT THE ADDRESS SPECIFIED IN SECTION 12.1. THE COMPANY AND EACH OF ITS
SUBSIDIARIES HEREBY WAIVE ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
Amendments. Neither this Agreement nor the Note nor any
provision hereof or thereof may be amended, waived, discharged or terminated
except by a written instrument signed by the Bank and, in the case of
amendments, by the Company.
Binding Effect of Agreement. This Agreement shall be binding
upon and inure to the benefit of the Company and the Bank and their respective
successors and assigns; provided that the Company may not assign or transfer its
rights or obligations hereunder. The Bank may sell, transfer or grant
participations in the Loan Documents without the prior written consent of the
Company, and the Company agrees that any transferee or participant shall be
entitled to the benefits of the Loan Documents.
Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
Partial Invalidity. The invalidity or unenforceability of any
one or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
Captions. The captions and headings of the various sections
and subsections of this Agreement are provided for convenience only and shall
not be construed to modify the meaning of such sections or subsections.
WAIVER OF JURY TRIAL. THE BANK AND THE COMPANY AND ITS
SUBSIDIARIES AGREE THAT NONE OF THEM NOR ANY ASSIGNEE OR
47
SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM
OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT, ANY RELATED
INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG
ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE BANK AND THE COMPANY AND ITS
SUBSIDIARIES, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER
THE BANK NOR THE COMPANY AND ITS SUBSIDIARIES HAS AGREED WITH OR REPRESENTED TO
THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN
ALL INSTANCES.
Entire Agreement. This Agreement, the Note and the other Loan
Documents executed in connection herewith constitute the final agreement of the
parties hereto and supersede any prior agreement or understanding, written or
oral, with respect to the matters contained herein and therein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
XXXXXX GENERAL CORPORATION
By
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Name:
Title:
BANKBOSTON, N.A.
By
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Name:
Title:
