TERM LOAN AGREEMENT
THIS AGREEMENT, dated as of May 30, 1997, is entered into by
and between AMERICAN ECO CORPORATION, an Ontario, Canada
corporation maintaining a place of business in Houston, Texas
("Borrower"), and REFCO CAPlTAL MARKETS, LTD., a Bermuda
corporation ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower desires to borrow funds from Lender, and
Lender is willing to make such loan to Borrower, upon the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the terms and conditions
contained herein, the parties hereby agree as follows:
1. Term Loan.
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Subject to the terms and conditions of this Agreement and
the other Loan Documents (as defined below), and in reliance upon
the warranties of Borrower set forth herein and in the other Loan
Documents, Lender agrees to loan to Borrower the principal amount
of Five Million Dollars (US $5,000,000) (the "Loan").
Simultaneously with the funding of the Loan, Deere Park Capital
Management, Inc., an Illinois corporation ("Deere Park"), is
making a $1,000,000 principal amount secured loan (the "Deere
Park Loan") to Borrower on terms and pursuant to agreements (the
"Deere Park Agreements") substantially similar to the Loan, this
Agreement and the other agreements contemplated hereby. The Loan
shall be funded concurrently with the execution of this Agreement
on the date hereof by wire transfer of immediately available
funds to an account designated by Borrower in writing.
2. Terms.
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2.1 Interest. The principal amount of the Loan from time to
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time outstanding shall bear interest at the rate of ten
percent (10%) per annum. Interest on the unpaid
principal balance of the Loan outstanding from time to
time shall be payable monthly in arrears as set forth
in Section 2.2 and in the form of the Note attached
hereto as EXHIBIT A (the "Note"), and shall be
calculated on the basis of a 360 day year for the
actual number of days elapsed.
2.2 Payment. The Loan shall be repayable monthly in
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arrears, on the first day of each calendar month,
commencing on the first day of the first full calendar
month succeeding the date of this Agreement, with the
final payment due hereunder on the third anniversary
date of this Agreement. Payments shall be made in
United States Dollars (all references in this Agreement
to dollars and $ shall refer to United States Dollars)
by wire transfer of immediately available funds to the
account designated by Lender in Section 12.3(b) as
follows:
(a) The first twelve (12) monthly installments shall
consist of interest only;
(b) The subsequent twenty-three (23) monthly
installments shall consist of principal payments of
$83,333.33 each, plus accrued interest thereon; and,
(c) On the third anniversary date of this Agreement,
the entire outstanding principal amount, plus all
accrued and unpaid interest, plus any fees or penalties
associated with the Loan shall be paid.
2.3 Evidence of Borrowing~. The Loan shall be evidenced by,
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and shall have the payment terms and other provisions
contained in, the Note.
2.4 Business Day. If any payment to be made by Borrower
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hereunder or under the Note shall become due on a
Saturday, Sunday or any legal holiday on which banks
are authorized or required to be closed for the conduct
of commercial banking business in New York, New York,
such payment shall be made on the next succeeding
business day and such extension of time shall be
included in computing any interest in respect of such
payment.
2.5 Prepayment. The Note may be prepaid in whole or in part
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without penalty, provided that the Borrower may not
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prepay all or any part of the outstanding amount of the
Deere Park Loan without simultaneously prepaying the
same pro rata portion of the outstanding amount of the
Note.
3. Collateral.
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The Loan shall be secured by a pledge of 500 shares of
common stock of MidAtlantic Recycling Technologies, Inc., a
Delaware corporation ("MART"), representing 50% of the
outstanding shares of MART ("Collateral"), in accordance with the
Stock Pledge Agreement (the "Stock Pledge Agreement") attached
hereto as EXHIBIT B. Lender acknowledges that the Collateral is
also subject to the security interest granted to Deere Park,
pursuant to a Stock Pledge Agreement between Borrower and Deere
Park dated as of the date hereof.
4. Warrants.
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4.1 Issuance. In connection herewith, as additional
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consideration for the Loan, Borrower shall issue to
Lender detachable warrants (the "Warrants") to purchase
up to 400,000 common shares without par value (the
"Shares") of Borrower, which Warrants shall expire on
the fifth anniversary of the date of this Agreement and
shall have such other terms and conditions as are set
forth in the form of Warrant attached hereto as EXHIBIT
C. Borrower shall issue the Warrants to Lender
immediately upon obtaining approval thereof from the
Toronto Stock Exchange (the "TSE") and, if applicable,
all approvals required thereby. Borrower covenants and
agrees that the registration rights provisions set
forth in Section 8 of the Warrants shall be deemed
applicable as if the Warrants were issued on the date
of this Agreement. Accordingly, Borrower agrees that
its obligation to file a Registration Statement (as
defined in the Warrants) with the United States
Securities and Exchange Commission (the "Commission")
shall commence on the date hereof and such filing is
required to be made no later than 30 days after the
date hereof.
4.2 Lender's Representations. Lender represents and
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warrants to Borrower that (a) Lender is purchasing the
Warrants for its own account for investment and not
with a view towards the public sale or distribution
thereof and (b) Lender is an "accredited investor" as
that term is defined in Rule 501 of Regulation D under
the United States Securities Act of 1933, as amended
(the "1933 Act").
5. Representations Warranties and Covenants.
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To induce Lender to enter into this Agreement and to make
the Loan provided for herein, Borrower represents and warrants to
and covenants with Lender as follows:
5.1 Organization. Borrower and each corporation or other
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entity of which a majority of the capital stock or
other ownership interests having ordinary voting power
to elect a majority of the board of directors or other
persons performing similar functions are directly or
indirectly owned by Borrower (a "Subsidiary") is a
corporation duly organized, existing and in good
standing under the laws of its jurisdiction of
organization, with full and adequate corporate power to
carry on and conduct its business as presently
conducted, and is duly licensed or qualified in all
jurisdictions where the nature of its activities
require such qualification or licensing, except with
respect to any Subsidiary where the failure to be so
licensed or qualified would not have a material adverse
effect on the business, properties, condition
(financial or otherwise) or prospects of Borrower and
its Subsidiaries, taken as a whole.
5.2 Authorization: Validity. Borrower has full right, power
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and authority to enter into this Agreement and to make
the borrowings and execute and deliver the other Loan
Documents (as defined in Section 6 below), as herein
provided for, and the execution and delivery of this
Agreement and the other Loan Documents shall not nor
shall the observance or performance of any of the
matters and things herein or therein set forth, violate
or contravene any provision of the charter or by-laws
of Borrower or any of its Subsidiaries. All necessary
and appropriate action has been taken on the part of
Borrower to authorize the execution and delivery of
this Agreement and the other Loan Documents. This
Agreement and the other Loan Documents are the valid
and binding agreements of Borrower enforceable in
accordance with their respective terms.
5.3 Financial Statements: Absence of Certain Changes.
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Borrower has delivered to Lender Borrower's 1996 Annual
Report ("1996 Annual Report") containing Borrower's
consolidated financial statements for its fiscal year
ended November 30, 1996. Such financial statements have
been prepared (except as otherwise noted therein) in
accordance with GAAP on a basis consistent with the
previous fiscal year and fairly present the financial
position of Borrower and the results of its operations
as of the date and for the periods indicated. Since
November 30, 1996, there has been no material adverse
change in the business, financial condition, assets,
results of operations, liabilities or prospects of
Borrower and its Subsidiaries, taken as a whole, or
MART. "GAAP" SHALL MEAN generally accepted accounting
principles in (i) Canada, for fiscal periods ended on
or prior to November 30, 1996 and (ii) the United
States, for fiscal periods ending after November 30,
1996, in each case using the accrual basis of
accounting and consistently applied.
5.4 Litigation. There is no litigation or governmental
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proceeding pending, or to the knowledge of Borrower,
threatened, against Borrower, any of its Subsidiaries
or MART, which, if adversely determined, would result
in any material adverse change in the financial
condition or properties, business, operations or
prospects of Borrower and its Subsidiaries, taken as a
whole, or of MART. Each of Borrower, its Subsidiaries
and MART has duly filed all applicable income or other
tax returns and has paid all income or other taxes when
due. There is no controversy or objection pending, or
to the knowledge of Borrower, threatened, in respect of
any tax returns of Borrower, its Subsidiaries or MART.
5.5 No Default. No Default (as defined below) has occurred
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and is continuing, and no event has occurred and is
continuing which, with the lapse of time, the giving of
notice, or both, would constitute such a Default under
this Agreement or any of the other Loan Documents.
5.6 ERISA Obligations. Borrower has paid and shall promptly
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pay and discharge all obligations and liabilities
arising under the Employee Retirement Income Security
Act of 1974 ("ERISA") of a character which if unpaid or
unperformed might result in the imposition of a lien
against any of its or its Subsidiaries' properties or
assets and shall promptly notify Lender of (a) the
occurrence of any reportable event (as defined in
ERISA) which might result in the termination by the
Pension Benefit Guaranty Corporation ("PBGC") of any
employee benefit plan covering any officers or
employees of Borrower or its Subsidiaries, any benefits
of which are, or are required to be, guaranteed by PBGC
("Plan"), (b) receipt of any notice from PBGC of its
intention to seek termination of any such Plan or
appointment of a trustee therefor, and (c) its
intention to terminate or withdraw from any Plan.
Borrower shall not terminate any such Plan or withdraw
therefrom unless it shall be in compliance with all of
the terms and conditions of this Agreement after giving
effect to any liability to PBGC resulting from such
termination or withdrawal.
5.7 Authority. Borrower has full power and authority to
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conduct its business as presently conducted, to enter
into this Agreement and the other Loan Documents and to
perform all of its duties and obligations under this
Agreement and the other Loan Documents.
5.8 Absence of Breach. The execution, delivery and
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performance of this Agreement, the other Loan Documents
and any other documents or instruments to be executed
and delivered by Borrower in connection with this Loan
shall not: (a) violate, in any material respect, any
provisions of United States, Canadian or any other
jurisdiction's law or any applicable regulation, order,
writ, injunction or decree of any court or governmental
authority in the United States, Canada or any other
jurisdiction, or (b) conflict with, be inconsistent
with, or result in any breach or default of any of the
terms, covenants, conditions or provisions of any
indenture, mortgage, deed of trust, instrument,
document, loan agreement or other agreement or contract
of any kind to which Borrower, or any of its
Subsidiaries or MART is a party or by which Borrower,
any of its Subsidiaries or MART may be bound. Neither
Borrower, any of its Subsidiaries or MART is in default
(without regard to grace or cure periods) under any
contract or agreement to which it is a party, the
effect of which default could materially adversely
affect the performance by Borrower of its obligations
pursuant to and as contemplated by the terms and
provisions of this Agreement and the other Loan
Documents.
5.9 Adverse Circumstances. No condition, circumstance,
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event, agreement, document, instrument, restriction,
litigation, violation of law or proceeding (or
threatened litigation or proceeding or basis therefor)
exists which could adversely affect the validity or
priority of the liens and security interests granted to
Lender under the Loan Documents, which could materially
adversely affect the ability of Borrower to perform its
obligations under the Loan Documents, which would
constitute a default under any of the Loan Documents or
which would constitute such a default with the giving
of notice or lapse of time or both.
5.10 Complete Information. This Agreement and all financial
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statements, schedules, certificates, confirmations,
agreements, contracts and other materials, including
without limitation (a) the 1996 Annual Report and (b)
the Borrower's Annual
Report on Form 10-K for the fiscal year ended November
30, 1996 (the "1996 10K") submitted to Lender in
connection with or in furtherance of this Agreement and
the other Loan Documents by or on behalf of Borrower
fully and fairly state the matters with which they
purport to deal, and neither misstate any material fact
or, separately or in the aggregate, fail to state any
material fact necessary to make the statements made
therein not misleading.
5.11 Ownership of MART Stock. Borrower has good,
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indefeasible and sole title to the Collateral, free and
clear of all liens, claims, security interests and
other encumbrances, other than those liens, claims,
security interests or other encumbrances set forth on
SCHEDULE 5.11 attached hereto ("Permitted
Encumbrances").
5.12 MART. MART is a corporation duly organized, existing
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and in good standing under the laws of Delaware, with
full and adequate corporate power and authority to
carry on and conduct its business as presently
conducted, and is duly licensed or qualified in all
jurisdictions wherein the nature of its activities
require such qualification or licensing.
5.13 Business Purpose. This Loan is being secured by
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Borrower for business purposes only.
5.14 Intellectual Property. Borrower and each of its
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Subsidiaries owns, or possesses adequate rights to use,
all patents, patent rights, inventions, trade secrets,
knowhow, proprietary techniques, including processes
and substances, trademarks, service marks, trade names
and copyrights owned or used by it or which are
necessary for the conduct of its business as it is
presently conducted, or as proposed to be conducted,
and Borrower is not aware of any claim to the contrary
or any challenge by any person to the rights of
Borrower or any of its subsidiaries with respect to the
foregoing.
5.15 Compliance with Law. Neither Borrower, any of its
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Subsidiaries or MART is in violation of any statute,
law, rule, regulation, ordinance, decision or order of
any governmental agency or body or any court in the
United States, Canada or any other jurisdiction,
including~ without limitation, those relating to the
use, operation~ handling, transportation, disposal or
release of hazardous or toxic substances or wastes or
relating to the protection or restoration of the
environment or human exposure to hazardous or toxic
substances or wastes, except where such violation would
not individually or in the aggregate have a material
adverse effect on the business, properties, operations,
condition (financial or other), results of operations
or prospects of the Borrower and its Subsidiaries,
taken as a whole, or of MART; and the Borrower is not
aware of any pending investigation which would
reasonably be expected to lead to such a claim.
5.16 Properties. Borrower, each of its Subsidiaries and MART
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has good title to all property real and personal
(tangible and intangible) and other assets owned by it,
free and clear of all security interests, charges,
mortgages, liens or other encumbrances, except as
provided on SCHEDULE 5.16, such as are described in the
1996 10-K or such as do not materially interfere with
the use of such property made, or proposed to be made,
by Borrower and its Subsidiaries, taken as a whole, and
MART. The leases, licenses or other contracts or
instruments under which the Borrower, each of its
Subsidiaries and MART leases, holds or is entitled to
use any property, real or personal, are valid,
subsisting and enforceable with only such exceptions as
do not materially interfere with the use of such
property made or proposed to be made by Borrower and
its Subsidiaries, taken as a whole, and MART. Neither
Borrower, any of its Subsidiaries or MART has received
notice of any material violation of any applicable law,
ordinance, regulation, order or requirement relating to
its owned or leased properties.
5.17 Labor Relations. No material labor problem exists or,
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to the knowledge of Borrower, is imminent with respect
to any of the employees of Borrower, its Subsidiaries
or MART.
5.18 Insurance. Each of Borrower, its Subsidiaries and MART
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maintain insurance against loss or damage by fire or
other casualty and such other insurance, including but
not limited to insurance for pollution-related and
environmental damage liabilities, in such amounts and
covering such risks as is usually maintained by
companies of comparable size engaged in the same or a
similar business and in the same geographic region as
Borrower, its Subsidiaries and MART, respectively.
5.19 Permits. (a) Each of Borrower and its Subsidiaries,
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taken as whole, and MART has all Permits (as defined
below) as are necessary for the conduct of its business
as it has been carried on; (b) all such Permits are in
full force and effect, and each of Borrower, its
subsidiaries and MART has fulfilled and performed all
material obligations with respect to such Permits; (c)
no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination by
the issuer thereof or which results in any other
material impairment of the rights of the holder of any
such Permit; and (d) each of Borrower, its Subsidiaries
and MART has no reason to believe that any governmental
body or agency is considering limiting, suspending or
revoking any such Permit. "Permits" means all United
States, Canadian and other jurisdictions' licenses,
permits and approvals required for the full operation
of Borrower, its Subsidiaries and MART, including
provincial, state, federal, city and county permits and
approvals.
5.20 Material Losses. Since November 30, 1996, neither
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Borrower nor any of its Subsidiaries has sustained any
loss or interference with its business or properties
from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance or from
any labor dispute or court or governmental action,
order or decree, which loss or interference would be
material to the business or properties or condition
(financial or otherwise) or prospects of Borrower or
its Subsidiaries.
5.21 Conduct of Business. Since November 30, 1996, except as
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disclosed in the 1996 10-K or on SCHEDULE 5.16,
Borrower and each of its Subsidiaries has not: (i)
incurred any material obligation or liability (absolute
or contingent) other than in the ordinary course of
business; (ii) cancelled without payment in fully any
material notes, loans or other obligations receivable
or other debts or claims held by it other than in the
ordinary course of business; (iii) sold, assigned,
transferred, abandoned, mortgaged, pledged or subjected
to lien any of its material properties, tangible or
intangible or rights under any material contract,
permit, license, franchise or other agreement; or (iv)
conducted its business in a manner materially adversely
different from its business as conducted on such date.
5.22 Approvals. No authorization, approval or consent of, or
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filing with, any court, governmental body, regulatory
agency, self-regulatory organization or stock exchange
or market in the United States, Canada or any other
jurisdiction, any other party, or the stockholders of
Borrower or MART is required to be obtained or made
(which has not been obtained or made) by Borrower or
MART in connection with the execution, delivery and
performance of this Agreement and the other Loan
Documents, the issuance of the Warrants, the issuance
and sale of the Shares upon exercise of the Warrants
and the public resale of the Shares as contemplated by
the Warrants, other than (1) listing of the Warrants
and the Shares on the TSE and, if applicable, all
approvals required thereby, (2) listing of the Shares
on the Nasdaq National Market ("Nasdaq"), (3)
registration of the resale of the Shares under the 1933
Act as contemplated by Section 8 of the Warrants and
(4) such filings as may be required under applicable
United States and Canadian provincial, state securities
or "blue sky" laws.
5.23 No Solicitation. No form of general solicitation or
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general advertising was used by Borrower or, to the
best of its knowledge, any other person acting on
behalf of Borrower, in respect of the Warrants, the
Shares or any similar securities offered to Deere Park
or any other persons (collectively, the "Securities")
in connection with the offer and sale of the
Securities. Borrower represents and agrees that neither
Borrower nor any person authorized to act on its behalf
has sold or offered or will sell or offer for sale any
Security to, or solicit any offers to buy any Security
from, or otherwise approach or negotiate in respect
thereof with, any person or persons so as thereby to
cause the issuance or sale of any of the Warrants or
Shares to be in violation of any of the provisions of
Section 5 of the 1933 Act or the Securities Act
(Ontario) and the Regulation thereto.
5.24 Capitalization. The authorized capital of Borrower
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consists of an unlimited number of common shares and an
unlimited number of preference shares issuable in
series of which 14,925,932 common shares are issued and
outstanding at the date hereof all as fully paid and
non-assessable shares.
5.25 Securities Regulation. (a) Except for (i) the late
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filing of the 1996-10-K, (ii) Borrower's Quarterly
Report on Form 10-Q for the quarter ended February 28,
1997 which is past due, (iii) the filing of a Form
8-K/A in connection with the Borrower's acquisition of
Chempower, Inc. which is past due and (iv) the filing
of Amendments to Schedules 13D with respect to the
Borrower's investment in EIF Holdings, Inc., Borrower
has timely filed all reports required to be filed
under-the United States Securities Exchange Act of
1934, as amended (the "1934 Act"), and any other
material reports or documents required to be filed with
the Commission since January 1, 1996. Borrower has
timely filed all reports required to be ~lled under all
applicable Canadian and TSE securities laws and
regulations and any other material reports or documents
required to be filed with the TSE since January 1,
1994. All of such reports and documents complied, when
filed, in all material respects, with all applicable
requirements of the 1933 Act, the 1934 Act and such
Canadian and TSE securities laws and regulations.
(b) Borrower is a reporting issuer in good standing
under the securities laws of the Provinces of Ontario,
Quebec, British Columbia and Alberta and is in
compliance with the by-laws, rules and regulations of
the TSE and no material change relating to Borrower has
occurred with respect to which the requisite material
change report has not been filed under the applicable
Canadian and provincial securities laws and no such
disclosure has been made on a confidential basis.
5.26 Warrants and Shares. (a) The Warrants, when issued,
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sold and delivered in accordance with the terms hereof
for the consideration expressed herein, will be valid
and binding obligations of Borrower, enforceable in
accordance with their terms and will be issued in
compliance with all applicable United States and
Canadian federal, state and provincial securities laws,
and with the listing requirements of the TSE and, with
respect to the Shares, Nasdaq. The Shares have been
duly and validly reserved for issuance as hereafter
provided and upon issuance in accordance with the terms
of the Warrants, shall be duly and validly issued,
fully paid and nonassessable. Borrower currently has
reserved a sufficient number of common shares for
issuance upon exercise of the Warrants and shall at all
times reserve and keep available out of its authorized
but unissued common shares, solely for the purposes of
effecting the exercise of the Warrants, a sufficient
number of common shares as shall be sufficient to
effect the exercise of all then outstanding Warrants.
(b) Borrower has made application to the TSE for the
listing of the Shares issuable by Borrower upon the
exercise of the Warrants.
5.27 Deere Park Loan. Borrower has provided Lender with true and
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accurate copies of the Deere Park Agreements.
The foregoing representations, warranties and covenants
shall survive the making of this Agreement and the issuance of
the Note pursuant hereto, and shall be deemed to be continuing
representations, warranties and covenants until such time as
Borrower has fulfilled all obligations to Lender under the Loan
Documents, and Lender has been paid in full.
6. Loan Documents.
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On or prior to the date of this Agreement, Borrower shall
have provided Lender with the following documents, all of which
must be satisfactory to Lender and Lender's counsel in form,
substance and execution:
6.1 Loan Agreement. This Agreement duly executed by
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Borrower.
6.2 Note. The Note duly executed by Borrower, in the form
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attached hereto as EXHIBIT A.
6.3 Stock Pledge Agreement. The Stock Pledge Agreement duly
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executed by Borrower, in the form attached hereto as
EXHIBIT B.
6.4 Certified Resolutions. Resolutions of Borrower's Board
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of Directors, certified by an officer of Borrower,
approving the Loan Agreement, the Note, the Stock
Pledge Agreement and the Warrants and authorizing the
execution, issuance and delivery thereof.
6.5 Opinions of Counsel. The opinions of United States and
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Canadian legal counsel to Borrower in the form of
EXHIBITS D-1 AND D-2 hereto.
6.6 Additional Documents. Such other instruments and
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documents as Lender may reasonably require.
All such above-listed documents, the Warrants and all other
instruments and documents that may hereafter be executed by
Borrower and delivered to Lender pursuant to this Agreement, are
sometimes referred to herein as the "Loan Documents."
7. Negative Covenants.
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From and after the date hereof and so long as any amount is
outstanding under the Loan or under this Agreement, except to the
extent compliance in any case or cases is waived in writing by
Lender, Borrower shall not, and shall not permit any of its
Subsidiaries or MART to, directly or indirectly:
7.1 Transfer: Merger. Merge, consolidate, sell, transfer,
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lease, encumber or otherwise dispose of all or
substantially all of its property, assets or business,
except for such transactions (i) solely between
subsidiaries of the Borrower, (ii) in which the Net
Worth of the assets or business being disposed of is
less than $10,000,000 ("Net Worth" means the gross book
value of the assets being disposed of less total
liabilities related to such assets being disposed of or
cancelled, including but not limited to accrued and
deferred income taxes, and any reserves against assets)
or (iii) where Borrower or a Subsidiary is the
surviving entity of a merger or consolidation and no
change of control of Borrower or such Subsidiary has
occurred;
7.2 Value of Collateral. Take any actions, directly or
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indirectly, or permit MART to take any actions,
resulting in the diminution of the value of the
Collateral, or to create, assume, incur, suffer or
permit to exist any mortgage, pledge, encumbrance,
security interest, assignment, lien or charge of any
kind or character upon the Collateral other than the
Permitted Encumbrances or other than to Lender;
7.3 Actions Regarding MART. Take any actions, directly or
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indirectly, or permit MART to take any actions, which
would result in: (i) the merger, consolidation, sale,
transfer, lease, encumbrance or any other disposition
of all or any part of the property, assets or business
of MART; (ii) the sale or discount of any of the notes
or accounts receivable of MART, except in the ordinary
course of MART's business; or (iii) the payment or
distribution of dividends or other distributions to the
stockholders of MART, the redemption of such interests,
or the purchase or setting aside of any sums for the
purchase or payment of such interests; or
7.4 Transactions with Affiliates. Directly or indirectly,
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pay any funds to or for the account of, make any
investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property,
guarantee or other agreement to pay, purchase or
service, directly or indirectly, any indebtedness, or
otherwise) in, lease, sell, transfer or otherwise
dispose of any assets, tangible or intangible, to, or
participate in, or effect any transaction in connection
with any joint enterprise or other joint arrangement
with, any Affiliate (as defined below) of Borrower,
except, on terms to Borrower, its subsidiary or MART no
less favorable than terms that could be obtained by
Borrower, such subsidiary or MART from a person that is
not an Affiliate of Borrower, as determined in good
faith by the Board of Directors of Borrower.
"Affiliate" means, with respect to any person, any
other person that directly, or indirectly through one
or more intermediaries, controls, is controlled by or
under common control with the subject person, including
without limitation all officers and directors of the
subject person.
8. Affirmative Covenants.
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From and after the date hereof and so long as any amount is
outstanding under the Loan or under this Agreement, except to the
extent compliance is in any case or cases waived in writing by
Lender, Borrower shall:
8.1 Continued Ownership of Collateral. Continue to own,
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without lien or encumbrance other than Permitted
Encumbrances, the Collateral.
8.2 Use of Proceeds. Use the proceeds of the Loan and the
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Deere Park Loan only for purposes of providing
financing to MART except for approximately $2,500,000
thereof which may be used to repay outstanding
indebtedness owed to Deere Park.
8.3 Information. Maintain a standard and modern system of
-----------
accounting, on the accrual basis of accounting and in
all respects in accordance with GAAP; and shall furnish
to Lender or its authorized representatives (i) within
three business days of their filing, all annual,
quarterly and other reports and documents filed by
Borrower, any of its Subsidiaries or MART with the
Commission or the TSE and (ii) such other information
respecting the business affairs, operations and
financial condition of Borrower, its Subsidiaries and
MART as reasonably may be requested by Lender.
8.4 Access to Records. Allow Lender access to the books and
------------------
records of Borrower, its subsidiaries and MART, as
Lender may reasonably request.
8.5 Insurance. Insure and keep insured with good and
----------
responsible insurance companies, all insurable property
owned by it, its subsidiaries and MART which is of a
character usually insured by companies similarly
situated and operating like properties, against loss or
damage from fire and such other hazards or risks as are
customarily insured against by companies similarly
situated and operating like properties; and shall
similarly insure employers' and public liability risks
with good and responsible insurance companies; and
shall prior to the date hereof and from time to time
thereafter upon request of Lender furnish a certificate
setting forth in summary form the nature and extent of
the insurance maintained by Borrower, its Subsidiaries
and MART pursuant to this Section 8.5.
8.6 Notice of Proceedings. Immediately after the
----------------------
commencement thereof, give notice to Lender in writing
of all actions, suits and proceedings before any court
or governmental department, commission, board or other
administrative agency in Canada, the United States or
any other jurisdiction which may have a material effect
on the operations of Borrower, its Subsidiaries or
MART.
8.7 Notice of Default. Immediately after the commencement
------------------
thereof, give notice to Lender in writing of the
occurrence of a Default (as defined below) or an event
which with notice or lapse of time or both would
constitute a Default.
8.8 Payment of Obligations. Pay and discharge, and will
----------------------
cause each Subsidiary and MART to pay and discharge,
all their respective material obligations and
liabilities, including, without limitation, tax
liabilities, except where the same may be contested in
good faith by appropriate proceedings.
8.9 Maintenance of Property. Keep, and will cause each
-----------------------
Subsidiary and MART to keep, all property useful and
necessary in its business in good working order and
condition, ordinary wear and tear excepted.
8.10 Conduct of Business and Maintenance of Existence.
------------------------------------------------
Except as permitted by Section 7.1, continue, and will
cause each Subsidiary and MART to continue, to engage
in business of the same general type as now conducted
by each such entity, and will preserve, renew and keep
in full force and effect, and will cause each
subsidiary and MART to preserve, renew and keep in full
force and effect, their respective corporate existence
and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of
business.
8.11 Compliance with Laws. Comply, and will cause each
--------------------
Subsidiary and MART to comply, in all material respects
with all applicable laws, ordinances, rules,
regulations, decisions, orders and requirements of
governmental authorities and courts (including, without
limitation, environmental laws) of and in the United
States, Canada and all other jurisdictions except (i)
where compliance therewith is contested in good faith
by appropriate proceedings or (ii) where non-compliance
therewith could not reasonably be expected to have a
material adverse effect on the business, condition
(financial or otherwise), operations, performance,
properties or prospects of Borrower and its
subsidiaries or of MART.
8.12 Toronto Stock Exchange. Borrower will promptly take all
-----------------------
actions necessary to obtain the approval by the TSE for
the issuance of the Warrants and the Shares and to
obtain the listing of the Shares on the TSE and will
thereafter take all actions necessary to maintain such
listing so that the Shares may be freely traded without
restriction on the TSE.
9. Financial Covenants.
--------------------
9.1 Initial Covenants. Subject to Section 9.2 below, from
------------------
and after the date of this Agreement and so long as any
amount is outstanding under the Loan or under this
Agreement, except to the extent compliance is in any
case or cases waived in writing by Lender, Borrower
covenants and agrees as follows:
(a) Current Ratio. Commencing on the first anniversary
-------------
of the date of this Agreement, Borrower shall maintain
a ratio of Current Assets (as defined below) to current
liabilities of at least 1:1, determined at the end of
each fiscal quarter. "Current Assets" means cash,
short-term cash investments, net trade receivables and
marketable securities not classified as long-term
investments.
(b) Tangible Net Worth. Borrower shall maintain on a
------------------
consolidated basis Tangible Net Worth (as defined
below), determined at the end of each fiscal quarter,
equal to at least $25,000,000. "Tangible Net Worth"
means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names,
organization expense, treasury stock, unamortized debt
discount and expense, deferred research and development
costs, deferred marketing expenses, and other like
intangibles) less total liabilities, including but not
limited to accrued and deferred income taxes, and any
reserves against assets.
(c) Total Liabilities to Tangible Net Worth Ratio. To
----------------------------------------------
maintain on a consolidated basis a ratio of Total
Liabilities (as defined below) to Tangible Net Worth
not exceeding 4:1, determined at the end of each fiscal
quarter. "Total Liabilities" means the sum of current
liabilities plus long term liabilities.
(d) Dividends. Borrower shall not declare or pay any
---------
dividends or make any distributions on any of its
capital stock, except dividends payable in capital
stock of the Borrower, and shall not directly or
indirectly purchase, redeem or otherwise acquire for
value any of its capital stock, or create any sinking
fund in relation thereto; provided, however, that the
--------- -------
foregoing shall not apply to the redemption or
repurchase of common shares pursuant to the terms of
Borrower's employee stock option and benefit plans
existing on the date of this Agreement.
9.2 New Bank Facility. If during the three-month period
------------------
following the date of this Agreement, Borrower shall
enter into a long-term loan facility with one or more
banks pursuant to which Borrower may borrow up to
$50,000,000 for the principal purpose of refinancing
indebtedness of Borrower and its subsidiaries
outstanding on the date hereof (the "Bank Facility"),
Borrower and Lender agree to amend, supplement and/or
replace the financial covenants of Borrower set forth
in Section 9.1 to be consistent with the affirmative
and negative financial covenants of Borrower set forth
in the Bank Facility (the "New Covenants"). The New
Covenants to become applicable to the Loan and this
Agreement shall include, without limitation, all
covenants and obligations with respect to Borrower, its
Subsidiaries and other entities in which it has an
interest relating to (i) mergers, consolidations,
acquisitions or sales of assets or businesses or joint
ventures, (ii) the provision of financial and business
information to lenders, (iii) any matter referred to in
Section 9.1, (iv) incurrence of indebtedness and
guaranties, (v) creation of liens and encumbrances,
(vi) financial tests, ratios and covenants relating to
cash flow, working capital, earnings and losses, net
worth, short and long-term indebtedness and other
liabilities, capital expenditures, debt service and
dividends, (viii) issuances of capital stock and (ix)
changes in control of Borrower. Upon the closing of the
Bank Facility, the parties hereto agree to promptly
negotiate and deliver an amendment to this Agreement
(the "Amendment") to give effect to this Section 9.2.
In addition to the New Covenants, the Amendment will
contain grace periods and cure periods with respect to
the matters referred to in Sections 10.1 and 10.3
consistent with such periods set forth in the Bank
Facility. The parties acknowledge and agree that,
notwithstanding anything to the contrary in this
Section 9.2, the Amendment shall permit or contain such
covenants and other provisions which, as between the
provisions set forth herein and the provisions of the
Bank Facility, are the most favorable to Lender on a
"most favored nation" basis, provided that the
--------
provisions of this Agreement which are permitted to
continue by the Amendment do not violate or result in a
default under the Bank Facility.
10. Events of Default.
------------------
If any of the following shall occur, they shall be deemed
events of default hereunder (a "Default"):
10.1 Payment. The failure of Borrower to make any payment of
-------
principal or interest when due under the Note or any
other amount due under any other agreement with Lender,
including, without limitation, any of the other Loan
Documents, for a period of five (5) days following any
specified payment date;
10.2 Representations. Any representation or warranty in this
---------------
Agreement, the other Loan Documents or any agreement
with Lender shall be false when made or at any time
during the term of this Agreement or any extension
thereof;
10.3 Nonperformance. The failure of Borrower to perform any
--------------
covenant, condition or agreement contained in this
Agreement or any other agreement with Lender,
including, without limitation, any of the Loan
Documents, and Borrower does not cure such failure
within thirty (30) days of its occurrence;
10.4 Assignment For Creditors. An assignment by
------------------------
Borrower, any of its subsidiaries or MART for the
benefit of creditors, or if Borrower, any of its
Subsidiaries or MART fails to pay, or admits in writing
its inability to pay its debts as they mature; or if a
trustee of any substantial part of the assets of
Borrower, any of its Subsidiaries or MART is applied
for or appointed, and if appointed in a proceeding
brought against Borrower, any of its subsidiaries or
MART, any action or failure to act indicates its
approval of, consent to, or acquiescence in such
appointment, or within thirty (30) days after such
appointment, such appointment is not vacated or stayed
on appeal or otherwise, or shall not otherwise have
ceased to continue in effect;
10.5 Bankruptcy. Any proceedings involving Borrower, any of
----------
its Subsidiaries or MART are commenced by or against
Borrower, any of its subsidiaries or MART under any
bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law or
statute of the federal government or any state or
provincial government of the United States, Canada or
any other jurisdiction and if such proceedings are
instituted against Borrower, any of its Subsidiaries or
MART, Borrower, any of its Subsidiaries or MART by any
action or failure to act indicates its approval of,
consent to or acquiescence therein, or an order shall
be entered approving the petition in such proceedings
and within thirty (30) days after the entry thereof
such order is not vacated or stayed on appeal or
otherwise, or shall not otherwise have ceased to
continue in effect;
10.6 Other Agreements. Borrower, any of its Subsidiaries or
-----------------
MART defaults in any payment of principal or interest
relating to any other obligation in excess of $250,000
(including, without limitation, the Deere Park Loan) or
in the performance of any other term, condition or
covenant contained in any agreement beyond any period
of grace provided with respect thereto, under which any
such obligation is created the effect of which default
is to cause or permit the holder of such obligation to
cause such obligation to become due prior to its stated
maturity;
10.7 Judgments. There shall be entered against Borrower, any
----------
of its Subsidiaries or MART one or more judgments or
decrees involving in the aggregate a liability of
$100,000 or more, and any such judgment or decree shall
not have been vacated, discharged or stayed pending
appeal within thirty (30) days from the entry thereof;
10.8 Delivery of Warrants. Borrower fails to execute and
--------------------
deliver the Warrants to Lender (i) subject to clause
(ii), within 25 days after the date of this Agreement
or (ii) if such failure to deliver the Warrants is due
to the receipt by Borrower of notice from the TSE
immediately (a copy of which shall be provided to
Lender) requiring that Borrower obtain the prior
approval of its shareholders of the issuance of the
Warrants and Borrower promptly takes all actions
necessary to obtain such shareholder approval, 50 days
after the date such notice is received by Borrower.
Delivery of the Warrants after the applicable dates
specified in this Section 10.8 shall not be deemed to
cure such Default;
10.9 Listing. The common shares of Borrower or the Shares
-------
for any reason cease to be listed for trading on either
Nasdaq or the TSE; or
10.10 Registration Statement.
-----------------------
(a) the Registration Statement shall not have been
filed with the Commission by Borrower within 30 days
after the date of this Agreement;
(b) the Registration Statement shall not have been
declared effective by the Commission within 90 days
after the date of this Agreement; or
(c) the Lender, or any transferee thereof who holds the
Shares, shall for any reason, other than as a direct
result of an act or omission by a selling
securityholder named in the Registration Statement, be
unable to sell any or all of the Shares pursuant to the
Registration Statement for a period of 30 days (whether
or not consecutive) after the Registration Statement is
first declared effective by the Commission; provided,
---------
that in the event of an acquisition or disposition
requiring the filing by Borrower of a Current Report on
Form 8-KIA containing related financial statements,
such period shall be 60 days from the date the initial
Form 8-K for such acquisition or disposition is
required to be filed with the Commission.
Upon the occurrence of a Default, Lender shall have all
rights and remedies set forth in the Loan Documents or as
otherwise provided at law or in equity and, without limiting the
generality of the foregoing, may, at its option, declare the
Note, all interest thereon, and all other obligations to Lender
under the Loan Documents to be immediately due and payable in
full, without any presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived, anything
contained herein or in the Note to the contrary notwithstanding,
and may, also without limitation, exercise its rights with
respect to the Collateral and appropriate and apply toward the
payment of the Note any indebtedness of Lender to Borrower
however created or arising. There shall be no obligation to
exercise any remedy available to Lender in any order.
11. Hazardous Waste Indemnification.
--------------------------------
Borrower will indemnify and hold harmless Lender from any
loss or liability directly or indirectly arising out of the use,
generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a hazardous
substance. This indemnity will apply whether the hazardous
substance is on, under or about Borrower's, its Subsidiaries' or
MART's property or operations or property leased by or to
Borrower, any Subsidiary or MART. The indemnity includes but is
not limited to attorneys' fees. The indemnity extends to Lender,
its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys and assigns. For these
purposes, the term "hazardous substances" means any substance
which is or becomes designated as "hazardous" or "toxic" under
any federal, state, provincial or local law in the United States,
Canada or any other jurisdiction. This indemnity will survive
repayment of Borrower's obligations to Lender.
12. Miscellaneous.
-------------
12.1 Waiver. No failure or delay on the part of Lender in
------
exercising any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the
exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not
exclusive of any remedies provided at law or in equity.
12.2 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties and there are no promises
expressed or implied unless contained herein. No
amendment, modification, termination or waiver of any
provision of this Agreement or any of the Loan
Documents or consent to any departure by Borrower
therefrom shall in any event be effective unless the
same shall be in writing and signed by Lender, and then
such waiver or consent shall be effective only for the
specific purpose for which given. No notice to or
demand on Borrower in any case shall entitle Borrower
to any other or further notice or demand in similar or
other circumstances.
12.3 Notices: Wire Instructions. (a) All notices, requests,
---------------------------
demands and other communications provided for hereunder
shall be in writing, and shall be sent by certified or
registered mail, by courier or by telephone line
facsimile transmission and addressed as follows:
If to BORROWER: American Eco Corporation
00000 Xxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxxx X. XxXxxxxx,
President and CEO
Fax No.: (000) 000-0000
If to LENDER: Refco Capital Markets, Ltd.
Rosebank Xxxxxxxx
00 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00
Xxxxxxx
Xxxxxxxxx: Mr. Xxxx Xxxxx
Fax No.: (000) 000-0000
With a copy to: Xx. Xxxxx Xxxxxx
c/o Refco Group, Ltd.
One World Financial Center - Tower
A
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party
complying as to delivery with the terms of this subsection.
Notices shall be deemed given when actually received.
(b) All payments due Lender pursuant to the Note or
the other Loan Documents shall be made by wire transfer
of immediately available funds to the following
account:
Chase Manhattan Bank
ABA No.: 000000000
Account Name: Refco Capital
Markets
Account No.: 066290570
Further Credit Account: 4308
or to such other account or place designated in writing by
Lender.
12.4 Counterparts. This Agreement may be executed in any
-------------
number of counterparts and by different parties hereto
in separate counterparts, each of which when so
executed and delivered shall be deemed to be an
original and all of which taken together shall
constitute but one and the same instrument. A telephone
line facsimile transmission of this Agreement bearing a
signature on behalf of a party hereto shall be legal
and binding on such party.
12.5 Binding Effect. This Agreement shall become effective
--------------
when it shall have been executed by Borrower and Lender
and thereafter shall be binding upon and inure to the
benefit of Borrower and Lender and their respective
heirs, successors and assigns, except that Borrower
shall not have the right to assign its rights hereunder
or under the other Loan Documents or any interest
herein or therein without the prior written consent of
Lender.
12.6 Assignment. This Agreement may be assigned by Lender
----------
without prior notice to, or consent of, Borrower.
12.7 Governing~ Law. This Agreement has been, and the Note
--------------
shall be, delivered and accepted in and shall be deemed
to be contracts made under and governed by the internal
laws of the State of New York (without regard to its
conflict of laws doctrine) and for all purposes shall
be construed in accordance with the laws of such State.
12.8 Enforceability. Any provision of this Agreement which
---------------
is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or lack of enforceability
without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such
provision in any other jurisdiction; wherever possible,
each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under
applicable law.
12.9 Survival. All covenants, agreements~ representations
---------
and warranties made by Borrower herein shall,
notwithstanding any investigation by Lender, be deemed
material and relied on by Lender and shall survive the
execution and delivery to Lender of this Agreement and
the Note.
12.10 Extensions. This Agreement shall secure and govern
-----------
the terms of any extensions or renewals of the Note.
12.11 Time of Essence. Time is of the essence in
---------------
connection with all matters -relating to this
Agreement.
12.12 Expenses. Borrower shall pay all costs and
--------
expenses, if any, in connection with the collection and
enforcement of, or any amendments or waivers requested
by Borrower of, this Agreement, the other Loan
Documents, the Note and the other instruments and
documents to be delivered hereunder including, without
limitation, reasonable attorney's fees. In addition,
Borrower shall pay any and all recording fees, stamp
and other taxes determined to be payable in connection
with the execution and delivery of this Agreement, the
Note and the other instruments and documents to be
delivered hereunder, and agrees to indemnify and save
Lender harmless from and against any and all
liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes.
13. CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
------------------------
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITUATED IN
NEW YORK COUNTY, NEW YORK, AND WAIVES ANY OBJECTION BASED ON LACK
OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS,
---------------------
WITH REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS
RELATING TO THIS AGREEMENT, OR ANY DOCUMENT DELIVERED HEREUNDER
OR IN CONNECTION HEREWITH, OR ANY TRANSACTION ARISING FROM OR
CONNECTED TO ANY OF THE FOREGOING. BORROWER WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS, AND CONSENTS TO ALL SUCH SERVICE
OF PROCESS MADE BY MAIL OR BY MESSENGER DIRECTED TO THE ADDRESS
SPECIFIED HEREIN. Nothing herein shall affect Lender's right to
serve process in any manner permitted by law, or limit Lender's
right to bring proceedings against Borrower or its property or
assets in the competent courts of any other jurisdiction or
jurisdictions.
IN Witness WHEREOF, the parties hereto have caused this
Term Loan Agreement to be executed by their respective, duly
authorized officers, as of the date first above written.
AMERICAN ECO CORPORATION
By: /s/ Xxxxx Xxxxxx
---------------------------------
Its: SVP & CFO
--------------------------------
REFCO CAPITAL MARKETS, LTD.
By: /s/ Xxxxxx
---------------------------------
Its: Director
--------------------------------
EXHIBIT A
---------
SECURED TERM NOTE
US $5,000,000 Dated: May 30, 1997
For value received, AMERICAN ECO CORPORATION, an
Ontario, Canada Corporation (the "Maker"), promises to pay to the
order of REFCO CAPITAL MARKETS, LTD., a Bermuda corporation (the
"Payee"), the principal sum of FIVE MILLION UNITED STATES DOLLARS
(US $5,000,000), together with interest payable on the principal
balance from time to time remaining outstanding, pursuant to the
terms of this Note.
Amounts due hereunder shall be payable monthly in
arrears on the first day of each calendar month, commencing on
the first day of the first full calendar month succeeding the
date of this Note. Payments shall be made as follows: (i) the
first twelve (12) installments shall consist of interest only;
(ii) the subsequent twenty-three (23) payments shall consist of
principal payments of US $83,333.33 each, plus interest accrued
thereon; and (iii) a final payment of all outstanding principal
and interest to be made on the third anniversary date of this
Note.
Interest shall be computed on the actual number of days
elapsed on the basis of a 360 day year from the date of borrowing
until payment at the rate of ten percent (10%) per annum.
Any amount of principal hereof or interest hereon which
is not paid when due whether at stated maturity, by acceleration,
or otherwise, shall bear interest payable on demand at the rate
of twelve percent (12%) per annum. All payments hereunder shall
be applied first to interest on the unpaid balance at the rate
herein specified and then to principal.
Principal and interest shall be paid to the Payee to
the account specified in the Term Loan Agreement (as defined
below), or to or at such other account or place as the holder of
this Secured Term Note may designate in writing to the Maker.
This Note may be prepaid in whole or in part without penalty,
subject to the terms of Section 2.5 of the Term Loan Agreement.
This Note is subject to the terms and conditions of the
Term Loan Agreement, dated as of the date hereof, by and between
the Maker and the Payee (the "Term Loan Agreement"), which is
incorporated herein by this reference. This Note is also secured
by a Stock Pledge Agreement, dated as of the date hereof, by and
between the Maker and the Payee (the "Pledge Agreement"). The
holder hereof is entitled to all the benefits and security
provided for in the Term Loan Agreement and the Pledge Agreement,
including without limitation the right to accelerate the balance
of this Note under the terms and conditions of the Term Loan
Agreement.
Without affecting the liability of any maker, endorser,
surety or guarantor, the Payee may, without notice, grant
renewals or extensions, accept partial payments, or agree not to
xxx any party liable on this Note. This Note shall be binding
upon the Maker and its successors and assigns, and shall inure to
the benefit of the Payee and its successors and assigns. This
Note and the rights of the parties hereunder shall be governed by
and construed in accordance with the laws of the United States
and the internal laws of the State of New York.
This Note may be assigned by Payee without prior notice
to, or consent of, Maker.
The Maker agrees that if any action or proceeding is
instituted to collect or enforce collection of this Note, the
amount on the Payee's records shall be prima-facie evidence of
the unpaid principal balance of this Note.
AMERICAN ECO CORPORATION
By:
---------------------------
Its:
--------------------------
Duly Authorized Officer
