SEVENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
Exhibit
10.2
SEVENTH
AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS SEVENTH AMENDMENT (the
“Amendment”), dated October 23, 2009, is entered into by and between PURE EARTH,
INC., a Delaware corporation (“Pure Earth”) and all of its wholly owned
subsidiaries (collectively, the “Borrower”) and XXXXX FARGO BANK, NATIONAL
ASSOCIATION (the “Lender”), acting through its Xxxxx Fargo Business Credit
operating division.
RECITALS
The Borrower and the Lender are parties
to a Credit and Security Agreement dated October 24, 2006 (as amended from time
to time, the “Credit Agreement”). Capitalized terms used in this Amendment have
the meanings given to them in the Credit Agreement unless otherwise
specified.
NOW, THEREFORE, in consideration of the
premises and of the mutual covenants and agreements herein contained, it is
agreed as follows:
1. The
definition of “Accounts Advance Rate” set forth in Section 1.1 of the Credit
Agreement shall be deleted in its entirety and replaced with the
following:
“Accounts
Advance Rate” means up to seventy-five percent (75%), or such lesser rate as the
Lender in its sole, but reasonable, discretion may deem appropriate from time to
time.
2. The
definition of “Adjusted Net Income” set forth in Section 1.1 of the Credit
Agreement shall be deleted in its entirety and replaced with the
following:
“Adjusted
Net Income” means Net Income (a) plus the amount of any income taxes accrued and
unpaid and deducted in the calculation of Net Income, (b) plus any loss included
in the calculation of Net Income arising from (i) the book loss associated with
the sale or other divestiture of Equipment that is idle, obsolete, or otherwise
not necessary for the current operations of Borrowers’ business, in an aggregate
amount per calendar year not to exceed $1,000,000; (ii) GAAP-required non-cash
adjustments to earnings arising from stock options and warrants, restricted
stock awards and other similar items, (iii) goodwill and intangible asset
impairments under GAAP, and (iv) non-cash losses attributable to any outstanding
interest rate swap obligations; (c) less any gain included in the calculation of
Net Income arising from GAAP-required non-cash adjustments to earnings arising
from stock options and warrants, restricted stock awards and other similar
items, (d) less the amount of any income tax benefit included in the
calculation
of Net Income, and (e) less non-cash gains attributable to any outstanding
interest rate swap obligations.
3. The
definition of “Current Maturities of Long Term Debt” set forth in Section 1.1 of
the Credit Agreement shall be deleted in its entirety and replaced with the
following:
“Current Maturities of Long Term Debt” means, during a period beginning and
ending on designated dates, the amount of Borrower’s long-term debt and
capitalized leases which become due during that period.
4. The
definition of “Debt Service Coverage Ratio” set forth in Section 1.1 of the
Credit Agreement shall be deleted in its entirety and replaced with the
following:
“Debt Service Coverage Ratio” means (a) the sum of (i) Funds from
Operations and (ii) Interest Expense divided by (b) the sum of
(i) Current Maturities of Long Term Debt and (ii) Interest
Expense.
5. The
definition of “Eligible Accounts” set forth in Section 1.1 of the Credit
Agreement shall be deleted in its entirety and replaced with the
following:
“Eligible
Accounts” means all unpaid Accounts of the Borrower arising from the sale or
lease of goods or the performance of services, net of any credits, but excluding
any such Accounts having any of the following characteristics:
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(i)
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That
portion of Accounts unpaid more than 90 days or more after the
invoice date, but in no event more than 60 days past due
date;
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(ii)
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That
portion of Accounts related to goods or services with respect to which the
Borrower has received notice of a claim or dispute, which are subject to a
claim of set-off or a contra account (to the extent of such claim of
set-off or contra account), or which reflect a reasonable reserve for
warranty claims or returns;
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(iii)
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That
portion of Accounts not yet earned by the final delivery of goods or
rendition of services, as applicable, by the Borrower to the customer,
including progress xxxxxxxx, and that portion of Accounts for which an
invoice has not been sent to the applicable account
debtor;
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(iv)
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Accounts
constituting (i) proceeds of copyrightable material unless such
copyrightable material shall have been registered with the United States
Copyright Office, or (ii) proceeds of patentable inventions unless such
patentable inventions have been registered with the United States Patent
and Trademark Office;
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(v)
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Accounts
owed by any unit of government, whether foreign or domestic (provided,
however, that there shall be included in Eligible Accounts that portion of
Accounts owed by such units of government for which the Borrower has
provided evidence satisfactory to the Lender that (A) the Lender has
a first priority perfected security interest and (B) such Accounts
may be enforced by the Lender directly against such unit of government
under all applicable laws);
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(vi)
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Accounts
denominated in any currency other than United States
dollars;
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(vii)
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Accounts
owed by an account debtor located outside the United States which are not
(A) backed by a bank letter of credit naming the Lender as
beneficiary or assigned to the Lender, in the Lender’s possession or
control, and with respect to which a control agreement concerning the
letter-of-credit rights is in effect, and acceptable to the Lender in all
respects, in its sole discretion, or (B) covered by a foreign
receivables insurance policy acceptable to the Lender in its sole
discretion;
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(viii)
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Accounts
owed by an account debtor that is insolvent, the subject of bankruptcy
proceedings or has gone out of
business;
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(ix)
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Accounts
owed by an Owner, Subsidiary, Affiliate, Officer or employee of the
Borrower;
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(x)
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Accounts
not subject to a duly perfected security interest in the Lender’s favor or
which are subject to any Lien in favor of any Person other than the
Lender;
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(xi)
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That
portion of Accounts that has been restructured, extended, amended or
modified;
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(xii)
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That
portion of Accounts that constitutes advertising, finance charges, service
charges or sales or excise taxes;
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(xiii)
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Accounts
owed by an account debtor, regardless of whether otherwise eligible, to
the extent that the aggregate balance of such Accounts exceeds ten percent
(10%) of the aggregate amount of all Accounts (with ineligibility under
this subsection limited to such excess),
except Account owed by Xxxxx Services to the to the extent that the
aggregate balance of such Accounts owed by Xxxxx Services exceeds fifteen
percent (15%) of the aggregate amount of all Accounts (with ineligibility
under this subsection limited to such excess);
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(xiv)
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Accounts
owed to the Borrower by Civetta Cousins, to the extent that the aggregate
balance of such Accounts exceeds $1,000,000 (with ineligibility under this
subsection limited to such excess);
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(xv)
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Accounts
owed to the Borrower by The Laquila
Group;
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(xvi)
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Accounts
owed by an account debtor, regardless of whether otherwise eligible, if
twenty-five percent (25%) or more of the total amount of Accounts due from
such debtor is ineligible under clauses (i), (ii), or (x) above;
and
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(xvii)
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Accounts,
or portions thereof, otherwise deemed ineligible by the Lender in its sole
reasonable discretion.
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6. The
definition of “Funds from Operations” set forth in Section Section 1.1 of the
Credit Agreement shall be deleted in its entirety and replaced with the
following:
“Funds
from Operations” means for a given period, the sum, without duplication of
(a) Adjusted Net Income, (b) depreciation and amortization, and
(c) any increase (or decrease) in deferred income taxes, (d) any increase
(or decrease) in lifo reserves, and (e) other non-cash items, each as determined
for such period in accordance with GAAP.
7. The
definition of “Interest Expense” set forth in Section 1.1 of the Credit
Agreement shall be deleted in its entirety and replaced with the
following:
“Interest
Expense” means for a fiscal year-to-date period, Borrower’s total gross interest
expense during such period (excluding interest income), and shall in any event
include (a) interest expensed and paid on all Debt, but specifically
excluding dividends (treated as interest under GAAP) paid-in-kind in connection
with Series B Preferred Stock issued in the Fidus Transaction, (b) the
amortization of debt discounts (excluding debt discounts in connection with the
Fidus Transaction), (c) the amortization of all fees payable in connection
with the incurrence of Debt to the extent included in interest expense
(excluding transaction fees paid in connection with the Fidus Transaction, the
Susquehanna Bank Financing and any financing with the Lender), and (d) the
portion of any capitalized lease obligation allocable to interest
expense.
8. The
definition of “Maturity Date” set forth in Section 1.1 of the Credit Agreement
shall be deleted in its entirety and replaced with the following:
“Maturity
Date” means April 23, 2010.
9. The
definition of “Maximum Line” set forth in Section 1.1 of the Credit Agreement
shall be deleted in its entirety and replaced with the following:
“Maximum
Line” means $3,300,000 on the date hereof, reducing to $3,150,000 on December
15, 2009 and reducing to $3,000,000 on February 15, 2010, unless this amount is
reduced pursuant to Section 2.10, in which event it means such lower
amount.
10. The
definition of “Unfinanced Capital Expenditures” in Section 1.1 of the Credit
Agreement shall be deleted in its entirety and replaced with the following
:
“Unfinanced
Capital Expenditures” means for a period, any expenditure of money during such
period for the purchase or construction of assets, or for improvements or
additions to such assets, which are not financed with borrowed funds and are
capitalized on Borrower’s balance sheet.
11. Section
6.2 of the Credit Agreement shall deleted in its entirety and replaced with the
following:
(a) Minimum Debt Service Coverage
Ratio. Commencing the month ending January 31, 2010, Borrower
shall maintain, as of each month end, a Debt Service Coverage Ratio of not less
than 1.0 to 1.0; provided, however no default shall be deemed to have occurred
hereunder, if it is determined within twenty-five days after the end of any
month that Borrower’s Minimum Debt Service Coverage Ratio is less than 1.0 to
1.0, and cured within five (5) business days thereafter by Borrower receiving a
cash infusion in the form of equity or subordinated debt in an amount which, if
treated as an “add back” in the determination of Adjusted Net Income
for the relevant month, would result in Borrower achieving a Minimum Debt
Service Coverage Ratio of not less than 1.0 to 1.0. for such month.
(b) Capital
Expenditures. Borrower will not incur or contract to incur any
Unfinanced Capital Expenditures in excess of $50,000 from November 1, 2009
through and including the Maturity Date.
(c) Account Aging
Limits. Commencing November 30, 2009, Accounts older than
ninety (90) days past invoice date shall not exceed the greater of thirteen
percent (13%) of all Accounts or $1,250,000.
12.
No Cash
Dividends. Borrower will not declare or pay any dividends
(other than dividends payable solely in stock of Borrower) on any class of its
stock, or make any payment on account of the purchase, redemption or other
retirement of any shares of such stock, or other securities or evidence of its
indebtedness or make any distribution in respect thereof, either directly or
indirectly.
13.
LIBOR
Advances. LIBOR Advances shall not be available at any
time.
14.
Supplemental
Reports. Copies of all invoices and credit memos along with
detailed supporting materials shall be included in the supplemental reports
required under Section 6.1(e) of the Credit Agreement.
15. Equity
Investment. On or before November 30, 2009, Borrower shall
raise new equity or subordinated debt in the Borrower of no less than $800,000,
on terms acceptable to the Lender. On or before February 15, 2010,
Borrower shall raise additional new equity or subordinated debt in the Borrower
of no less than $1,000,000, on terms acceptable to the Lender.
16. Retention of
Consultant. Borrower shall retain a consultant, reasonably
acceptable to the Lender, to review the Borrower’s business strategy and
projections. The consultant shall provide a report of its findings to
the Borrower and the Lender on or before January 15, 2010.
17. Xxxxxxxx Group
Inc. Borrower shall notify Xxxxxxxx Group, Inc. that it must
remit to the Lockbox all payments due Borrower under the May 29, 2009 Settlement
Agreement among 775 Columbus, LLC, Xxxxxxxx Group, Inc., Chetrit Group, LLC and
Borrower.
18. Amendment Fee. The
Borrower shall pay the Lender a fully earned, as of the date hereof,
non-refundable fee in the amount of $75,000 in consideration of the Lender’s
execution and delivery of this Amendment, payable $37,500 on November 30, 2009
and $37,500 on February 15, 2010.
19. No Other Changes.
Except as explicitly amended by this Amendment, all of the terms and conditions
of the Credit Agreement shall remain in full force and effect and shall apply to
any advance or letter of credit thereunder.
20. Conditions Precedent.
This Amendment shall be effective when the Lender shall have received an
executed original hereof, together with each of the following, each in substance
and form acceptable to the Lender in its sole discretion:
a. A
Certificate of the Secretary of Pure Earth (i) certifying as to the resolutions
of the board of directors of Pure Earth approving the execution and delivery of
this Amendment, copies of which will be attached to such Certificate;
(ii) certifying that the articles of incorporation or certificates of
formation or other organizational documents of Pure Earth and each of the other
Borrowers have not been amended or otherwise modified since March 12, 2009, or
if they have been amended or otherwise modified, attaching a copy of such
amended and or modified organizational documents to such Certificate;
(iii) certifying that the bylaws or operating agreements, if any, of Pure
Earth and each of the other Borrowers have not been amended or otherwise
modified since March 12, 2009, or if they have been amended or otherwise
modified, attaching a copy of such amended and or modified bylaws or operating
agreements to such Certificate; and (iv) certifying that the officers of Pure
Earth and each other Borrower set forth on a schedule to such Certificate have
the due authority to sign and act on behalf of Pure Earth and each such other
Borrower in connection with the execution and delivery of this Amendment and all
other documents, agreements and certificates on behalf of Pure Earth and each
such other Borrower.
b. The
Liquidation Support Agreement of Xxxxx Xxxxxxxxxx, in the form attached hereto
as Exhibit A.
21. Representations and
Warranties. The Borrower hereby represents and warrants to the Lender as
follows:
(a) The
Borrower has all requisite power and authority to execute this Amendment and any other agreements
or instruments required hereunder and to perform all of its obligations
hereunder, and this Amendment and all such other
agreements and
instruments
has been duly executed and delivered by the Borrower and constitute the legal,
valid and binding obligation of the Borrower, enforceable in accordance with its
terms.
(b) The
execution, delivery and performance by the Borrower of this Amendment and any other agreements
or instruments required hereunder have been duly authorized by all necessary
corporate action and do not (i) require any authorization, consent or
approval by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree presently in
effect, having applicability to the Borrower, or the articles of incorporation
or by-laws of the Borrower, or (iii) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
(c) All
of the representations and warranties contained in Article V of the Credit
Agreement are correct on and as of the date hereof as though made on and as of
such date, except to the extent that such representations and warranties relate
solely to an earlier date.
22. References. All
references in the Credit Agreement to “this Agreement” shall be deemed to refer
to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.
23. No Waiver. The
execution of this Amendment and the acceptance of all other agreements and
instruments related hereto shall not be deemed to be a waiver of any Default or
Event of Default under the Credit Agreement or a waiver of any breach, default
or event of default under any Security Document or other document held by the
Lender, whether or not known to the Lender and whether or not existing on the
date of this Amendment.
24. Release. The Borrower
hereby absolutely and unconditionally releases and forever discharges the
Lender, and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former directors,
officers, agents and employees of any of the foregoing, from any and all claims,
demands or causes of action of any kind, nature or description, whether arising
in law or equity or upon contract or tort or under any state or federal law or
otherwise, which the Borrower has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing
whatsoever arising from the beginning of time to and including the date of this
Amendment, whether such claims, demands and causes of action are matured or
unmatured or known or unknown.
25. Costs and Expenses.
The Borrower hereby reaffirms its agreement under the Credit Agreement to pay or
reimburse the Lender on demand for all costs and expenses incurred by the Lender
in connection with the Loan Documents, including without limitation all
reasonable fees and disbursements of legal counsel. Without limiting the
generality of the foregoing, the Borrower specifically agrees to pay all fees
and disbursements of counsel to the Lender for the services performed by such
counsel in connection with the preparation of this Amendment and the documents
and instruments incidental hereto. The Borrower hereby agrees that the Lender
may, at any time or from time to time in its sole discretion and without further
authorization by the Borrower, make a loan to the Borrower under the Credit
Agreement, or apply the proceeds of any loan, for the purpose of paying any such
fees, disbursements, costs and expenses.
26. Miscellaneous. This
Amendment may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same
instrument.
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
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XXXXX
FARGO BANK,
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NATIONAL
ASSOCIATION
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By:
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/s/ Xxxx Xxxxx
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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Xxxx
Xxxxx
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Xxxxx
Xxxxxxxxxx
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Its
Vice President
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Its
Executive Vice President and Chief
Financial
Officer
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GEO
METHODS, LLC
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PURE
EARTH ENERGY RESOURCES, INC.
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Its
Treasurer
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Its
Treasurer
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| PURE EARTH TREATMENT (NJ), INC. |
NEW
NYCON, INC.
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By:
:
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/s/ Xxxxx
Xxxxxxxxxx
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By:
:
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/s/ Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Its
Treasurer
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Its
Treasurer
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REZULTZ,
INCORPORATED
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PURE
EARTH RECYCLING (NJ), INC.
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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By:
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/s Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Its
Treasurer
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Its
Treasurer
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BIO
METHODS, LLC.
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PURE EARTH ENVIRONMENTAL,
INC.
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Its
Treasurer
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Its
Treasurer
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HFH
ACQUISITION CORP.
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JUDA
CONSTRUCTION, LTD
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Its
Treasurer
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Its
Treasurer
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PURE
EARTH TRANSPORTATION AND DISPOSAL, INC.
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PURE
EARTH MATERIALS, INC.
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Its
Treasurer
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Its
Treasurer
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| PURE EARTH MATERIALS, (NJ) INC. | PEI DISPOSAL GROUP, INC. | |||
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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By:
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/s/ Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Its
Treasurer
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Its
Treasurer
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ECHO
LAKE XXXXXXXXXX, LLC.
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By:
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/s/ Xxxxx Xxxxxxxxxx
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Xxxxx
Xxxxxxxxxx
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Its
Treasurer
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