Exhibit 10.57
RESTRUCTURING AGREEMENT
This Restructuring Agreement (this "Agreement") is made and entered
into as of the 25th day of March, 1999 (the "Effective Date") between and among
Consolidated Eco-Systems, Inc., an Idaho corporation formerly known as Exsorbet
Industries, Inc. ("Consolidated"), all of the wholly or partially owned
subsidiaries of Consolidated (the "Subsidiaries") listed on Schedule I attached
hereto (except for 7-7, Inc., an Arkansas corporation), and American Physicians
Service Group, Inc., a Texas corporation ("APS").
R E C I T A L S:
WHEREAS, Consolidated executed and delivered that certain Promissory
Note dated November 26, 1996 (the "Original Note") in the original principal
amount of Three Million Three Hundred Thousand Dollars ($3,300,000) payable to
the order of APS, and secured by various security agreements, assignments and
guarantees executed and granted by Consolidated and the Subsidiaries
(collectively, the "Original Security Documents"), including, without
limitation, those listed on Schedule II attached hereto; and
WHEREAS, APS, Consolidated and the Subsidiaries of Consolidated
executed and delivered that certain Master Refinancing Agreement dated November
6, 1997 (the "Refinancing Agreement"), pursuant to which (i) Consolidated
executed and delivered to APS a renewal and replacement promissory note in the
amount of $3,788,580 (the "Existing Note") in lieu of the Original Note, (ii)
Consolidated and the Subsidiaries affirmed the existence and enforceability of
the Original Security Documents as security for, among other things, payment of
the Existing Note and (iii) Consolidated and certain of the Subsidiaries
executed and delivered new security agreements and guarantees securing, among
other things, payment of the Existing Note, including, without limitation, those
listed on Schedule II attached hereto (all such new security agreements and
guarantees, together with the Refinancing Agreement, the Original Security
Documents, and all other contracts, or agreements entered into by Consolidated
and/or its current or former subsidiaries and/or affiliates, with or for the
benefit of APS and/or APS subsidiaries and/or affiliates, are hereinafter
collectively referred to as the "Existing Security Documents");
WHEREAS, Consolidated is in default under the Existing Note and some or
all of the Subsidiaries are in default under the terms of one or more of the
Existing Security Documents, and, in connection therewith, Consolidated and
certain of the Subsidiaries have agreed to execute and deliver additional
security documents (the "Additional Security Documents") securing, among other
things, full satisfaction of all amounts owing APS under the Existing Note and
Existing Security Documents; and
WHEREAS, Consolidated has agreed to execute and deliver, and APS has
conditionally agreed to accept, but only upon the terms and the prior
satisfaction of certain conditions set forth herein, a new note in the original
principal amount of $2,500,000, substantially in the form attached hereto as
Exhibit A (the "New Note"), in renewal, replacement and extension of the
Existing Note, which New Note is also to be secured pursuant to the Existing
Security Documents and the Additional Security Documents; and
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WHEREAS, in addition to the covenants and agreements contained in the
New Note, the Existing Security Documents and the Additional Security Documents
(together, the "Security Documents"), Consolidated, the Subsidiaries and APS
desire to memorialize certain other understandings and binding agreements
between them as provided herein.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound hereby, agree as
follows:
Section 1. Acknowledgement of Existing Debt. Consolidated and each of
the Subsidiaries hereby acknowledge the existence and enforceability of the
Existing Note, that all the original principal amount remains due thereunder and
has been accelerated and is now fully due and owing, and that accrued and unpaid
interest owed thereunder to APS through February 1, 1999, is approximately
$731,800. The principal and interest due APS under the Existing Note, together
with any and all expenses, fees (including attorneys' fees), costs of
collection, and other amounts owed under the Existing Note and any Transaction
Document, as defined in Section 7 hereof is collectively referred to herein as
the "Existing Debt." Consolidated and each of the Subsidiaries acknowledges and
agrees that Consolidated is currently in default under the Existing Note and one
or more of the Transaction Documents, that such default is material, and that
APS has not previously waived, and does not hereby waive, any breach or default,
or any of its rights, under any of the Transaction Documents.
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Section 2. Acceptance of New Note and Deficiency Obligation. APS agrees
to, upon the expiration of at least eighteen (18) months immediately following
the Effective Date, accept in full satisfaction of the Existing Debt (i) the New
Note and (ii) the obligation of Consolidated and the Subsidiaries to pay, upon
the terms and conditions hereinafter provided, the deficiency, (the "Deficiency
Obligation") between the amount of the New Note and the amount of the Existing
Debt (as increased by any additional indebtedness arising hereafter under any of
the Transaction Documents). Once APS accepts the New Note under the terms of
this Agreement, APS agrees that its sole remedy and recourse with respect to the
Deficiency Obligation will be payment by Consolidated and the Subsidiaries of
the Contingent Payments (as defined in Section 4 hereof) upon the terms and
conditions provided in Section 4 hereof. APS's obligation under this Section to
accept the New Note and the Deficiency Obligation in replacement of the Existing
Debt is further qualified by each of the following conditions (subject to waiver
by APS in its sole discretion):
(a) Compliance with Existing Agreements. At the time of APS's
acceptance of the New Note and the Deficiency Obligation (the "Exchange Date"),
neither Consolidated nor any of the Subsidiaries shall be in default, and no
event of default shall have previously occurred since the Effective Date, under
any of the Transaction Documents, except only for: (i) default in making the
scheduled payments described in the Existing Note, (ii) default under the
provisions of the Refinancing Agreement (but not this Agreement) requiring
submission of financial information and (iii) the provisions of Section 1 of the
Refinancing Agreement requiring registration of securities of Consolidated; and
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(b) Bankruptcy/Insolvency. At no time prior to and including
the Exchange Date has Consolidated or any Subsidiary: (i) taken any action that
could impair any collateral securing the obligations of Consolidated and/or the
Subsidiaries under any of the Transaction Documents (the "Collateral"); (ii) had
a receiver, trustee or custodian appointed for, or take possession of, all or
substantially all of the assets of such party or any of the Collateral, either
in a proceeding brought by such party or in a proceeding brought against such
party; (iii) filed a petition for relief under the United States Bankruptcy Code
or any other present or future federal or state insolvency, bankruptcy or
similar laws (all of the foregoing hereinafter collectively called "Applicable
Bankruptcy Law") or had an involuntary petition for relief filed against it
under any Applicable Bankruptcy Law, or had an order for relief naming it
entered under any Applicable Bankruptcy Law, or had any composition,
rearrangement, extension, reorganization or other relief of debtors now or
hereafter existing requested or consented to by it; or (iv) failed to have
discharged within a period of ten (10) days any attachment, sequestration or
similar writ levied upon, or any claim against or affecting, any property of
such party; and
(c) Minimum Receipts. APS must have been paid a minimum of (i)
all Additional Reimbursable Costs (as defined in Section 11), plus (ii) $375,000
from Consolidated and the Subsidiaries, which $375,000 shall be applied first to
any penalties and interest accrued and unpaid under the Existing Debt, with any
balance to be applied to principal; provided, that amounts retained by APS
pursuant to Section 3(g) shall count toward the minimum receipts requirement set
forth in this subsection; and
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(d) Acquisition of Eco-Systems. APS and/or its affiliates must
have acquired, through the Foreclosure or otherwise, all of the issued and
outstanding capital stock or other equity ownership interests of Eco-Systems (as
hereinafter defined), and there shall not be outstanding any right on the part
of any person or entity to acquire any interest in the capital stock of, or
other equity ownership interest in, Eco-Systems.
Section 3. Acquisition of Eco-Systems.
(a) Foreclosure. Consolidated and each Subsidiary hereby
agrees that APS is entitled to foreclose (the "Foreclosure") on the issued and
outstanding capital stock of Eco Acquisition, Inc. d/b/a Eco-Systems
("Eco-Systems"), an Arkansas corporation, pursuant to that certain Assignment
and Security Agreement dated November 6, 1997, by and between APS and
Consolidated (the "Eco-Systems Security Agreement"). Consolidated and each
Subsidiary (including, without limitation, Eco-Systems) acknowledges and agrees
that there exists under the Eco-Systems Security Agreement an Event of Default
(as defined therein), and as of the date of this Agreement, such Event of
Default has not been cured. Consolidated and each Subsidiary, including, without
limitation, Eco-Systems, further agrees to cooperate fully with APS in the
Foreclosure, and to not take any action which could adversely impact the value
of Eco-Systems up to, and/or after, the Foreclosure. Accordingly, Consolidated
and each Subsidiary acknowledges and agrees that any sale conducted by APS or
one of its affiliates under the Eco-Systems Security Agreement and this
Agreement is hereby accepted by Consolidated and each Subsidiary as a
commercially reasonable sale. APS or one of its affiliates may bid on the
collateral under the Eco-Systems Security Agreement at the sale, whether public
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or private, and in the event it is the successful bidder, all parties hereby
agree that such purchase shall not be a discharge or satisfaction of
Consolidated's or any Subsidiary's obligations under Section 9.505 of the Texas
UCC (Texas Business and Commerce Code). Furthermore, Consolidated and each
Subsidiary hereby renounces any right to notification of the Foreclosure. Any
amount of value or credit arising from the Foreclosure will be applied to the
Existing Debt pursuant to the terms of the applicable Existing Security
Documents and will, in no event, reduce the original amount of, or any amounts
due under, the New Note.
(b) Limitation on Foreclosure. Notwithstanding the foregoing
provisions of subsection (a), APS agrees that it will not consummate the
Foreclosure prior to April 1, 1999 as long as the following conditions are met:
(i)Compliance with Existing Agreements. Consolidated
and each of the Subsidiaries complies in all respects with its respective
obligations under each of the Transaction Documents to which it is a party
(except for obligations to make the scheduled payments called for in the
Existing Note); and
(ii) Distributions. Without the prior written
approval of APS in each instance, Eco-Systems does not
distribute any cash or other assets to Consolidated, another Subsidiary or
(except to pay the obligations and expenses of Eco-Systems incurred in the
ordinary course of business) any third party.
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(iii) Access. APS and its representatives is allowed
free and complete access to books, records,
employees, officers, directors and assets of Eco-Systems for purposes of
evaluating the business, prospects, financial condition, continued viability and
value of Eco-Systems.
(c) Indemnification. Consolidated and each Subsidiary, jointly
and severally, hereby agrees to indemnify and hold harmless (i) APS, and all of
APS's affiliates, subsidiaries, employees, officers, directors, shareholders and
representatives (collectively, the "APS Indemnified Parties"), from and against
any and all damages, losses, claims, liabilities, demands, charges, suits,
penalties, costs and expenses (including, without limitation, any and all taxes,
court costs and attorneys' fees and expenses incurred in investigating and
preparing for any litigation or proceeding) (collectively, "Indemnified Costs")
which any APS Indemnified Party may sustain or become subject to in connection
with the commencement or assertion of any action, proceeding, demand or claim
arising out of the Foreclosure or the ownership of any interest in Eco-Systems
upon and after the Foreclosure and that is related to or arises, directly or
indirectly, in whole or in part, out of matters occurring or circumstances
existing on or prior to the date of the Foreclosure and (ii) APS, each APS
Indemnified Party and Eco-Systems from and against any and all Indemnified Costs
that are (A) incurred by, or asserted against, Eco-Systems, (B) related to any
act or omission by or on behalf of Eco-Systems, Consolidated or any Subsidiary
occurring on or prior to the date of Foreclosure, and (C) that are not reflected
by amount, or included within an amount, shown as a liability on the balance
sheet of Eco-Systems dated January 31, 1999 and provided to APS by Consolidated,
a copy of which is attached hereto as Exhibit B. Furthermore, any Indemnified
Cost incurred by APS or Eco-Systems that is not
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promptly paid or reimbursed by
Consolidated pursuant to this Section shall bear interest at an annual rate of
ten percent (10%).
(d) Issuance of Employee Stock Options. All parties hereto
acknowledge and agree that, after the Foreclosure, Eco-Systems may, from
time-to-time, issue employee stock options to its directors, officers and/or
employees on such terms and conditions as may be approved by the Board of
Directors of Eco-Systems. APS agrees that it will, during the six (6)
consecutive month period beginning on the Effective Date, and only to the extent
allowed under applicable law, take all actions necessary to prevent the grant of
any and all employee stock options by Eco-Systems without the prior approval of
Xxx Xxxxxxx in each instance.
(e) Allocation of Expenses and Corporate Overhead.
Consolidated and each of the Subsidiaries acknowledges and agrees that, for any
period during which APS owns a controlling interest in Eco-Systems, APS is
entitled to allocate to and charge Eco-Systems for, and receive the
corresponding payment for (i) direct and indirect costs for services and
products provided to Eco-Systems by APS or one of its affiliates, (ii) corporate
overhead associated with accounting costs, employee benefit administration costs
and executive or manager salaries, incurred by APS and attributable to
Eco-Systems, together with such other corporate overhead allocation as is
consistent with the past practices of APS and its subsidiaries and (iii) the
amount of any and all other costs, expenses, fees, liabilities or other
obligations that are incurred by APS or one of its affiliates, to the extent
that such amounts benefit Eco-Systems, directly or indirectly. The parties agree
that no allocation to or payment by Eco-Systems pursuant to this Section will
constitute payment of any of their obligations under any of the Transaction
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Documents (including, without limitation, obligations under the Existing Debt or
the New Note, as the case may be).
(f) Restricted Payments. Consolidated, Eco-Systems and APS
each agree that any payments made by Eco-Systems to Xxx Xxxxxx after the
Foreclosure, regardless of whether such payments are compensatory in nature,
shall be restricted for all purposes to no greater than $10,000 per month and
shall count toward the payment obligations of APS set forth in the second
paragraph of Section 3(g). Consolidated, Eco-Systems and APS each further agree
that after October 15, 1999, Eco-Systems will not be obligated in any manner to
pay any amounts to Xxx Xxxxxx, as compensation or otherwise, except for such
salary and benefits as have been approved in writing by the then current
officers of Eco-Systems.
(g) Application of Post-Foreclosure Proceeds. APS agrees that,
after the Foreclosure, APS will apply any cash dividends distributed from
Eco-Systems to APS, or such subsidiaries of APS who then own equity interests in
Eco-Systems, first to satisfaction of all Additional Reimbursable Costs and then
to satisfaction of interest and principal under the Existing Debt, or, once the
New Note has been accepted by APS pursuant hereto, to interest and principal
owed under the New Note. But in the event that, prior to APS's acceptance of the
New Note, APS receives cash dividends paid pursuant to this Section by
Eco-Systems (excluding any portion of such amounts paid over to Consolidated
pursuant to this Section) in excess of the sum of (i) all Additional
Reimbursable Costs, plus (ii) $375,000, then any such excess amount will not be
applied to the Existing Debt, but will rather be applied by APS as a contingent
prepayment of the New Note (contingent only upon APS's acceptance of the New
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Note); provided, however, that such excess amount will be applied to the
Existing Debt in the event that APS does not accept the New Note.
APS further agrees that it will pay to Consolidated (or its
designee) one-half of all cash dividends received on or before October 14, 1999
in respect of APS's or APS's subsidiaries' ownership of Eco-Systems.
Notwithstanding the foregoing or any other provision of this Agreement,
Consolidated acknowledges and agrees that amounts paid to Consolidated (or its
designee) pursuant to the immediately preceding sentence will not be applied
against the Existing Debt or the New Note, as the case may be. In the event APS
acquires, directly or indirectly, all ownership interests in Eco-Systems through
the Foreclosure, APS agrees that it will use reasonable efforts to cause
Eco-Systems to distribute as dividends all excess cash that is reasonably
available for distribution (using commercially prudent business judgment) after
payment of Eco-Systems' obligations and expenses and establishment of reasonable
reserves.
(h) Repurchase Option. Consolidated is hereby granted a right
to purchase from APS or its affiliates all (but only all) of the capital stock
of Eco-Systems that may have been acquired by APS or its affiliates through the
Foreclosure (the "Repurchase Option"). But the Repurchase Option is subject to
the following terms and conditions: (i) APS must have accepted the New Note upon
satisfaction of the terms and conditions set forth in this Agreement, (ii) all
amounts outstanding under the New Note, including all interest thereon shall
have been paid, (iii) Consolidated and each of the Subsidiaries must have fully
complied with all of the terms of this Agreement and the Additional Security
Documents, including, without limitation, the payment of all amounts due to any
APS Indemnified Parties and Eco-Systems pursuant to the indemnity obligations
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under Section 3(c) (including any interest provided for therein), (iv) the
Repurchase Option, if available, must be exercised prior to the expiration of
six (6) months immediately following the full satisfaction of all amounts owed
under the New Note, (v) the purchase price of $1,000 in immediately available
funds must be tendered at the closing of the conveyance allowed under the
Repurchase Option, and (vi) Consolidated and each Subsidiary must execute and
deliver at the closing a general release of liability in favor of all APS
Indemnified Parties, and such other documents and instruments as APS may
request.
Section 4. Contingent Payments. Consolidated and the Subsidiaries each
agree that the payments set forth in this Section (each a "Contingent Payment")
will be made upon the occurrence of the events triggering such payments, all as
more fully described in subsections (a) through (c) below. Any Contingent
Payment received by APS or one of its affiliates is to be applied as set forth
in the applicable subsection which describes the Contingent Payment obligation.
(a) Payment Upon Disposition of Interests in Subsidiaries.
Consolidated agrees that it must have APS's prior written approval for any sale
or disposition of either the stock or the assets (or any portion thereof) of
Exsorbet Technical Services, Inc., an Arkansas corporation doing business as
SpilTech Services, Inc. ("SpilTech"), KR Industrial Service of Alabama, Inc., an
Alabama corporation ("KR") or any other Subsidiary. Assuming any such sale is
negotiated on arms-length terms, APS will agree to give such approval provided
Consolidated first notifies APS in writing of the possibility of such
disposition and provides APS (prior to execution) with copies of the documents
governing such disposition. Consolidated
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acknowledges and agrees that,
notwithstanding the foregoing or any other provision of this Agreement, any such
disposition is, and remains after the Effective Date, prohibited under the
Transaction Documents, absent the express prior written consent of APS in each
instance.
Consolidated further agrees that, with respect to any sale of
the stock or assets of either SpilTech or KR, such documents must provide that
seventy-five percent (75%) of the net proceeds from such disposition (after
payment of only perfected secured indebtedness which is senior to the liens of
APS) will be paid directly to APS at the closing of the disposition, limited in
amount, however, to the aggregate of all amounts then owing to APS by
Consolidated and the Subsidiaries. APS agrees that it will apply any Contingent
Payment received pursuant to this subsection first to satisfaction of all
Additional Reimbursable Costs and then to satisfaction of interest and principal
under the Existing Debt, or, once the New Note has been accepted by APS pursuant
hereto, to interest and principal owed under the New Note. But in the event
that, prior to APS's acceptance of the New Note, APS receives combined
Contingent Payments pursuant to this subsection and dividends from Eco-Systems
that it may retain pursuant to Section 3(g), in excess of the sum of (i) all
Additional Reimbursable Costs, plus (ii) $375,000, then any such excess amount
will not be applied to the Existing Debt, but will rather be applied by APS as a
contingent prepayment of the New Note (contingent only upon APS's acceptance of
the New Note); provided, however, that such excess amount will be applied to the
Existing Debt in the event that APS does not accept the New Note.
(b) Payment Upon Disposition of Interests in Consolidated.
Consolidated agrees that prior to any sale, change of control transaction, or
other disposition (by merger,
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consolidation or otherwise) of either its stock or
its assets (or any portion thereof), Consolidated will notify APS in writing of
the possibility of such disposition and provide APS (prior to execution) with
copies of the documents governing such disposition. Consolidated acknowledges
and agrees that, notwithstanding the foregoing or any other provision of this
Agreement, any such disposition is, and remains after the Effective Date,
prohibited under the Transaction Documents, absent the express prior written
consent of APS in each instance.
Consolidated agrees that the documents governing such
disposition must provide that seventy-five percent (75%) of the net proceeds
from such disposition (prior to any payment or other consideration being
received by any direct or indirect shareholders or controlling persons of
Consolidated) will be paid to APS at the closing of the disposition, limited in
amount, however, to $600,000. APS agrees that it will apply any Contingent
Payment received pursuant to this subsection to satisfaction of interest and
principal under the Existing Debt, or, once the New Note has been accepted by
APS pursuant hereto, to the Deficiency Obligation. In no event will amounts paid
under this subsection be applied to the New Note.
Notwithstanding the foregoing or any other provision of this
Agreement to the contrary, this subsection (b) shall not apply to any sale of
stock of either KR or SpilTech as long as the Contingent Payment obligations in
Section 4(a) have been fully satisfied with respect to such sale of stock.
(c) Payment Upon Settlement of Everen Securities Lawsuit.
Consolidated and the Subsidiaries agree to pay to APS seventy-five percent (75%)
of the total cash proceeds
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payable to them (after deduction of only legal fees
and up to $75,000 payable to American Dynasty Insurance Company), by way of
settlement, judgment or otherwise, out of or in relation to any litigation and
claims (whether or not asserted as of the Effective Date, but including, without
limitation, the litigation pending on the Effective Date) between Everen
Securities and/or any of its affiliates or insurers on the one hand and
Consolidated and/or any of its affiliates on the other hand, limited in amount,
however, to $600,000. Consolidated and the Subsidiaries agree that they will
promptly pay such amounts to APS upon receipt and will not dispose of, settle or
agree to the entry of any judgment without the prior written consent of APS;
provided, however, that such consent may not be withheld if such disposition,
settlement or judgment explicitly provides for immediate payment of $600,000 to
APS pursuant to this Section. APS agrees that it will apply any Contingent
Payment received pursuant to this subsection to satisfaction of interest and
principal under the Existing Debt, or, once the New Note has been accepted by
APS pursuant hereto, to the Deficiency Obligation. In no event will amounts paid
under this subsection be applied to the New Note.
Consolidated agrees that it must provide APS with at least ten (10)
days opportunity, prior to the closing of any disposition described in the
foregoing subsections (a) or (b), or prior to finalizing any settlement or
judgment described in subsection (c), and after receipt by APS of all documents,
instruments and agreements related to such disposition, settlement or judgment,
to review the terms and conditions of such and to ensure compliance with the
conditions imposed under this Agreement and under any of the other Transaction
Documents. Furthermore, Consolidated agrees to cooperate with APS and to provide
APS access to, and participation in, the closing of any such disposition,
settlement or judgment all as requested by APS in order to ensure compliance
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with the terms and conditions of the Transaction Documents. Upon any breach by
Consolidated of the terms and provisions of this Section, the entire Deficiency
Obligation shall automatically become immediately due and payable without any
limitation on the source of repayment as otherwise provided herein.
Section 5. Additional Covenants.
(a) Future Subsidiaries. Consolidated and each Subsidiary
agrees that it will take any and all actions that may be necessary to cause any
future corporations or other entities that become owned or controlled, wholly or
partially, directly or indirectly, by Consolidated or that Subsidiary after the
Effective Date to execute and deliver to APS (i) a counterpart to this
Agreement, and (ii) a payment and performance guaranty agreement and a first
lien security agreement on all of its assets, each for the benefit of APS
covering all payment and performance obligations of Consolidated, in
substantially the same form of the guaranty agreements and security agreements
executed by the Subsidiaries that are included in the Security Documents.
Consolidated and each Subsidiary further agrees that, with respect to each such
newly owned or controlled corporation or entity, it will (i) execute and deliver
to APS a first lien, perfected security interest in and to all of the capital
stock or other equity interests held by Consolidated or the Subsidiary in that
entity and (ii) take any and all other actions as may be necessary to ensure
that such entity is considered a Subsidiary hereunder for all purposes.
(b) Dismissal of Lawsuit. APS agrees to dismiss, within 10
business days of the Effective Date, the existing lawsuit by APS against
Consolidated. Such dismissal, however,
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will be without prejudice and without any
limitation on the refiling of the same or other lawsuits by APS or its
affiliates against Consolidated, any Subsidiary or any of their respective
affiliates.
(c) Existing Covenants Under Transaction Documents.
Consolidated and each of the Subsidiaries covenants and agrees that it will
continue to comply with all of the covenants set forth in the Transaction
Documents to which it is a party.
(d) Other Agreements. Consolidated agrees to execute and
deliver, concurrently with its execution and delivery of this Agreement, the
Assignment and Security Agreement attached hereto as Exhibit C and the Security
Agreement attached hereto as Exhibit D, both of which, for all purposes hereof,
shall be deemed to be included within the Additional Security Documents.
Furthermore, each of Eco-Systems, SpilTech and KR agrees to execute and deliver,
concurrently with its execution and delivery of this Agreement, a Security
Agreement in a form attached hereto as Exhibit E, which shall, for all purposes
of this Agreement, be considered included in the Additional Security Documents.
(e) Financial Reporting Requirements. In addition to such
financial and other reporting requirements as may be provided pursuant to the
Transaction Documents, Consolidated covenants and agrees that it will, after the
date of this Agreement, provide to APS true and correct copies of all financial
statements, reports or summaries concerning the business, financial condition or
operations of Consolidated or any of the Subsidiaries (or Consolidated and the
Subsidiaries on a consolidated basis), within ten (10) days after such
statements, reports or summaries become available to Consolidated. Furthermore,
any such statements, reports or
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summaries shall contain a written statement
signed by the Chief Financial Officer of Consolidated to the effect that the
financial information contained therein has been prepared in accordance with
generally accepted accounting principles, consistently applied, and is fairly
and accurately presented.
(f) Consolidated and Eco-Systems each agree that they will (i)
vigorously contest any lawsuit, claim or action filed against either
Consolidated or Eco-Systems by former accountants of Consolidated and (ii) allow
APS full participation in the defense of any such lawsuit, claim or action.
Section 6. No Additional Financings. The parties acknowledge and agree
that certain of the Transaction Documents provide that, without the prior
consent of APS, neither Consolidated nor any of the Subsidiaries will create,
incur, assume or become liable in any manner for any indebtedness (for borrowed
money, deferred payment for the purchase of assets, lease payments, as surety or
guaranty of the debt of another, or otherwise) other than to APS, except trade
debts incurred in the ordinary course of business. The parties hereto covenant
and agree that such provisions of the Transaction Documents remaining binding
and enforceable in all respects, are to be broadly construed for the benefit of
APS, and that the prohibitions on creating, incurring, assuming or becoming
liable for, any indebtedness, etc., shall be deemed to preclude, without
limitation, not only traditional methods of financing, but also financings in
the form of factoring, assets securitizations, sale and lease backs, financings
through the issuance of equity securities, debt securities or convertible
securities, debenture or bond financings and all other forms of financing and
borrowing, except for open account trade payables incurred in the ordinary
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course of business; provided, however that the following will not be deemed to
constitute a violation of the foregoing prohibition: (i) factoring transactions
that occurred prior to October 15, 1997, so long as there has not since October
15, 1997 been, and there is not after the date of this Agreement, any increase
in the amounts due or involved in such factoring relationships and (ii)
refinancing of existing obligations (but only those existing obligations which
are themselves not in violation of any of the Transaction Documents), so long as
there is not any increase in amounts due under such existing obligations.
Section 7. Representations and Warranties. Consolidated and each of
the Subsidiaries hereby, jointly and severally, represents and warrants to APS
(as of the Effective Date), and covenants with APS, as follows:
(a) Consolidated and each of the Subsidiaries is a corporation
duly organized, validly existing, and in good standing under the laws of the
state of their incorporation, and has full corporate power and authority to
carry on its business as now conducted, to enter into and perform this
Agreement, and to perform all of its obligations under and pursuant to this
Agreement, the Existing Note, the Refinancing Agreement, each Security Document,
and each other document, agreement, contract, instrument or certificate
contemplated by or executed and delivered in connection with any of the
foregoing, including, without limitation, the New Note (if issued and accepted)
and those certain agreements referred to in Section 5(d) above and in Section
7(g) below (collectively, including this Agreement, the "Transaction
Documents"), to which it is a party.
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(b) This Agreement has been duly and validly authorized,
executed and delivered by Consolidated and each of the Subsidiaries, and
constitutes the valid and binding obligation of Consolidated and each of the
Subsidiaries, enforceable against them in accordance with its terms.
Furthermore, each of the Transaction Documents is, or will be when executed and
delivered, the valid and binding obligation of the parties thereto (other than
APS), enforceable against the parties thereto (other than APS) in accordance
with its respective terms.
(c) There is only one class of capital stock of Consolidated,
Eco-Systems, SpilTech and KR outstanding.
(d) Consolidated's and each of the Subsidiaries'
representations and warranties under each of the Transaction Documents to which
they are parties was true and correct when made, and remains true and correct as
of the Effective Date of this Agreement.
(e) The entering into, and delivery and performance of their
obligations under, the Transaction Documents does not, and will not, (i)
conflict with or constitute a breach of, or default under, any organizational
document, bylaw, contract, agreement or obligation applicable to Consolidated or
any of the Subsidiaries or (ii) require any notice to, declaration, filing or
registration with, or permit or consent from, any domestic or foreign
governmental or regulatory body or authority, or any other person or entity,
including, without limitation, any party to any contract or agreement by which
Consolidated or any Subsidiary is bound or any approval by the shareholders of
Consolidated or any Subsidiary.
20
(f) Following the Foreclosure described in Section 3(a)
hereof, APS will, directly or indirectly, enjoy sole and exclusive ownership,
free and clear of any liens or encumbrances, of any and all of the capital
stock, of all classes, of Eco-Systems. Furthermore, APS will enjoy all of the
rights and benefits of stock ownership with respect to any shares of capital
stock of Eco-Systems acquired through the Foreclosure, including, without
limitation, the sole and exclusive right to elect new directors and to amend or
replace existing (or adopt new) stock option plans.
(g) Consolidated and Eco-Systems, jointly and severally,
represent and warrant that Xxx Xxxxxxx has been fully and unconditionally
released from his employment with Consolidated and that he is free of any
contract, agreement, understanding or other restraint that could be construed as
prohibiting his full time employment with Eco-Systems after the date of this
Agreement. Consolidated and Eco-Systems, jointly and severally, represent and
warrant that, except as set forth and described in detail on (or attached to)
Schedule III, there are no contracts or agreements relating to the employment
(as an employee, independent contractor, consultant or otherwise) of any
individual by Eco-Systems, and each of them covenants and agrees not to allow
any such contract or agreement to be entered into hereafter without APS's prior
written consent.
(h) Consolidated and each Subsidiary acknowledges and agrees
that execution and delivery of each of the Transaction Documents required to be
executed by it under this Agreement (or any other Transaction Document) is a
condition to each and every obligation of APS under this Agreement.
21
(i) Consolidated and each Subsidiary has supplied APS with all
information necessary for APS to conduct appropriate lien searches with respect
to any and all property owned by Consolidated and each Subsidiary, and Schedule
IV attached hereto contains the location of both the principal place of business
(by city) and all property (by county and state) of Consolidated and each
Subsidiary.
Section 8. Release. The parties being released by Consolidated and each
of the Subsidiaries by virtue of this Section, all of whom are collectively
referred to herein as the "Released Parties", are APS, Eco-Systems, Xxx Xxxxxxx,
their principals, shareholders, partners, members, directors, officers, agents,
employees, spouses, children, servants, insurers, employee welfare benefit
plans, pension and/or deferred compensation plans, administrators and other
fiduciaries, parent companies, affiliated entities, subsidiaries, successors and
assigns, and each of them, individually and collectively (in each case
excluding, however, Consolidated and the Subsidiaries other than Eco-Systems).
(a) Release by Consolidated and the Subsidiaries. Each of
Consolidated and the Subsidiaries hereby releases and discharges the Released
Parties (the "Release"), individually and collectively, of and from any and all
claims, causes of action, suits, debts, contracts, agreements (including, with
respect to Xxx Xxxxxxx, and without limitation, any existing employment
agreement between Xxx Xxxxxxx and Consolidated), promises, liability, demands,
damages, and other expenses of any nature whatsoever, at law or in equity, known
or unknown, fixed or contingent, contemplated or uncontemplated, whether
asserted or assertable, arising out
22
of any matter whatsoever which has occurred
from the beginning of time up through and including the date hereof. Without
limiting the generality of the foregoing, each of Consolidated and the
Subsidiaries hereby acknowledges and agrees that the Release is intended to
waive and discharge any and all actions, claims, demands and causes of action
arising out of or in any way related to its prior relationship with the Released
Parties. But the foregoing provisions do not, and should not be construed so as
to, alter, amend or negate the enforceability of this Agreement or any other
Transaction Document.
(b) Construction. The Release is intended to be and should be
construed as a general, complete and final waiver and release of all claims. The
Release is being made and executed by each of Consolidated and the Subsidiaries
individually and on behalf of its successors, assigns, agents, all persons
subrogated to its rights or to whom its rights are secondary or derivative, and
all other persons on behalf of whom it is authorized to act.
(c) No Admissions. It is expressly understood and agreed that
neither this Agreement, the Release, nor the furnishing of consideration for
this Agreement or the Release, shall be deemed or construed at any time for any
purpose as an admission by anyone of wrongdoing or liability of any kind, all
such wrongdoing and liability being expressly denied.
(d) Knowledge of Claims. Each of Consolidated and the
Subsidiaries expressly warrants and stipulates that it intends for the Release
to release any and all claims that it may now have against the Released Parties,
regardless of whether such claims have been
23
asserted and regardless of whether
such claims arise out of or are related in any way to any facts in existence on
or before the date of this Agreement.
Section 9. Further Assurances. Consolidated and each Subsidiary agrees
to cooperate fully with APS, and to take such steps and execute and deliver such
documents, instruments or certificates as may be necessary to carry out, or
further evidence, its obligations under this Agreement.
Section 10. Effect of Agreement. The parties hereto acknowledge and
agree that this Agreement does not constitute an amendment, modification,
replacement or limitation on any of APS' rights under and pursuant to any of the
Transaction Documents, and all of the Transaction Documents are intended to be,
and remain, binding and enforceable in accordance with their terms. The
Transaction Documents are intended to be construed consistently with this
Agreement. However, in the event of a direct conflict between the terms of any
of the Transaction Documents and this Agreement, the terms of this Agreement
shall control. Consolidated and each of the Subsidiaries represents, warrants,
covenants and agrees that (i) APS has not breached or defaulted under any
contractual obligations to any of them, and (ii) there are no defenses available
to Consolidated or any of the Subsidiaries against the enforceability of each
and every of their obligations under the Transaction Documents.
Without limiting the foregoing, and except as expressly provided in any
release arising out of that certain action filed in the United States District
Court for the Western District of Texas, Austin Division, Case No. A98CA375-SS,
Consolidated and each of the Subsidiaries
24
expressly acknowledges and agrees that
APS is not relinquishing, waiving or otherwise modifying any right, claim or
cause of action it has or may have, against Consolidated or any of the
Subsidiaries or any of their affiliates, directors, officers, shareholders or
employees, including, without limitation, any such claims, rights or causes of
action related to the negotiation and entering into the various agreements and
transactions which gave rise to any of the Transaction Documents, or any
misrepresentation made in connection therewith, or any breach or default
thereunder.
Consolidated and the Subsidiaries agree to an extension or tolling of
all defenses based on the passage of time, including but not limited to statutes
of limitation and principles of laches, applicable or relating to any possible
claims, demand, and/or cause of action which APS may have that arises out of or
in connection with any of the Transaction Documents any of the transactions
giving rise to the Original Note or any other transaction, act or omission
involving APS or any of the APS Indemnified Parties, or the promises,
warranties, inducements, or representations in connection therewith. Such
tolling and extension of the time in which APS may bring any such claim, demand,
and/or cause of action shall extend until the Existing Debt, or all amounts due
under the New Note and Deficiency Obligation (if the New Note is issued) have
been paid in full.
Section 11. Reimbursement of Expenses. Without in any way reducing or
otherwise limiting any of Consolidated's or the Subsidiaries' other obligations
to reimburse expenses pursuant to any of the Transaction Documents or otherwise,
Consolidated agrees to reimburse APS for (i) $45,000 previously advanced by APS
or its affiliates on behalf of Consolidated,
25
(ii) all legal, accounting and
other costs, fees and expenses incurred by APS in negotiating, preparing and
entering into this Agreement and the other Transaction Documents, and perfecting
the various security interests granted pursuant thereto and (iii) all legal,
accounting and other costs, fees and expenses incurred by APS or one of its
affiliates at any time after March 1, 1999 and arising out of or related to the
transactions contemplated in this Agreement. All amounts for which reimbursement
is due under this Section are collectively referred to herein as the "Additional
Reimbursable Costs."
Section 12. Remedies. This Agreement may be enforced at law or in
equity, including, but not limited to, injunctive relief. In case any one or
more of the provisions of this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, any other provision hereof in
this Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein. Such invalid, illegal or
unenforceable provisions shall be given effect to the maximum extent then
permitted by law. Consolidated and the Subsidiaries shall be deemed to be in
joint and several default under this Agreement if there is any default under any
of the Transaction Documents.
Section 13. Governing Law and Venue. This Agreement shall be governed
by, and construed and enforced in accordance with, the laws of the State of
Texas (except the laws of Texas that would render such choice of law
ineffective). Venue for any action relating to this Agreement shall be proper
only in Texas.
26
Section 14. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, and all of which together shall constitute one and the same
instrument.
Section 15. Inurement. This Agreement shall be binding upon the parties
hereto and their respective heirs, legal representatives, successors and
permitted assigns. This Agreement shall not be assignable by any party hereto
(other than APS) without the express prior written consent of APS in each
instance. Upon written notice to Consolidated, APS may assign its rights and
obligations under this Agreement.
Section 16. Limitation on Interest: Maximum Rate. The parties agree
that, with respect to any and all lending provisions contained in any of the
Transaction Documents, they intend to contract in strict compliance with
applicable usury law from time to time in effect. To effectuate this intention,
the parties acknowledge and agree that none of the terms and provisions of any
of the Transaction Documents, whether now existing or arising hereafter, shall
ever be construed as a contract to pay interest for the use, forbearance or
detention of money in excess of the Maximum Rate (as hereinafter defined). If,
from any possible construction of any Transaction Document, interest would
otherwise be payable to the lender thereunder in excess of the Maximum Rate, any
such construction shall be subject to the provisions of this Section and such
document shall be automatically reformed and the interest payable to the lender
thereunder shall be automatically reduced to the Maximum Rate permitted under
applicable law, without the necessity of the execution of any amendment or new
document. Neither the borrower, endorsers or other persons that now or hereafter
become liable for payment of any obligation referred to
27
herein shall ever be
liable for any unearned interest on the principal amount or shall ever be
required to pay interest thereon in excess of the Maximum Rate. Any party that
is a lender under any Transaction Document and any subsequent holder of the
related loan expressly disavows any intention to charge or collect unearned or
excessive interest or finance charges in the event the maturity of such loan, is
accelerated. If the maturity of such loan is accelerated for any reason, whether
as a result of a default under the loan, or by voluntary prepayment, or
otherwise, any amounts constituting interest, or adjudicated as constituting
interest, which are then unearned and have previously been collected by such
lender or any subsequent holder of the loan shall be applied to reduce the
principal balance thereof then outstanding, or if such amounts exceed the unpaid
balance of principal, the excess shall be refunded to the borrower thereunder.
In the event such lender or any subsequent holder of the loan ever receives,
collects or applies as interest any amounts constituting interest or adjudicated
as constituting interest which would otherwise increase the interest to an
amount in excess of the amount permitted under applicable law, such amount which
would be excessive interest shall be applied to the reduction of the unpaid
principal balance of the loan, and, if the principal balances of the loan is
paid in full, any remaining excess shall be paid to the borrower thereunder. In
determining whether or not the interest paid or payable under the specific
contingencies exceeds the Maximum Rate allowed by applicable law, the borrower
and the lender thereunder shall, to the maximum extent permitted under
applicable law, (i) characterize any non-principal payment as an expense, fee or
premium, rather than as interest; (ii) exclude voluntary prepayments and the
effect thereof; (iii) amortize, prorate, allocate and spread, in equal parts,
the total amount of interest throughout the entire contemplated term of the
applicable loan (as it may be renewed and extended) so that the interest rate is
uniform throughout the entire term of the loan. The terms and provisions of this
28
section shall control and supersede every other provision of all existing and
future agreements between each such lender and each such borrower. As used in
this Agreement, "Maximum Rate" means the maximum non-usurious interest rate that
at any time or from time to time may be contracted for, taken, reserved, charged
or received on the unpaid principal or accrued past due interest under
applicable law and may be greater than the applicable rate, the parties hereby
stipulating and agreeing that the lender may contract for, take, reserve, charge
or receive interest up to the Maximum Rate without penalty under any applicable
law; and "applicable law" means the laws of the State of Texas or the laws of
the United States of America, whichever laws allow the greater interest, as such
laws now exist or may be changed or amended or come into effect in the future.
In the event applicable law provides for an interest ceiling under Chapter One
of Title 79, Texas Revised Civil Statutes Annotated, as amended, that ceiling
shall be the indicated rate ceiling, subject to any right the lender may have in
the future to change the method of determining the Maximum Rate.
Section 17. Treatment of 7-7. The parties hereby acknowledge and agree
that 7-7, Inc., an Arkansas corporation ("7-7"), is a subsidiary of Consolidated
and is a party to various of the Security Documents. Although not a signatory to
this Agreement, references in this Agreement to "Subsidiary" shall include 7-7,
and nothing in this Section 17 may be construed as a waiver or other
relinquishment of rights by APS under any Security Document to which 7-7 is a
party.
Section 18. Notices. Any notices required or permitted to be given
under this Agreement shall be given in writing and shall be deemed received (a)
when personally delivered
29
to the relevant party at its address as set forth
below or (b) if sent by mail, on the third day following the date when deposited
in the United States mail, certified or registered mail, postage pre-paid to the
relevant party at its address indicated below:
APS: American Physicians Service Group, Inc.
0000 Xxxxxxx xx Xxxxx Xxxxxxx, Xxxxx X-000
Xxxxxx, Xxxxx 00000-0000
Attn: President
Consolidated Consolidated Eco-Systems, Inc.
or 0000 X. 00xx Xxxxxx
the Subsidiaries: Xxxxxx Xxxx, Xxxxxxxx 00000
Attn: President
Any party may change its address for purposes of this Agreement by
proper notice to the other party.
[Signature pages to follow]
30
SIGNATURE PAGES TO
RESTRUCTURING AGREEMENT
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the 25 th day of March, 1999.
CONSOLIDATED: Consolidated Eco-Systems, Inc.
By /s/ Xxxxx Xxxxxxxx
Name Xxxxx Xxxxxxxx
Title President
APS: American Physicians Service Group,
Inc.
By /s/ Xxxxx X. Xxxx, Xx.
Name Xxxxx X. Xxxx, Xx.
Title XX
XXXXX: Larco Environmental Services, Inc.
By /s/ Xxxxx Xxxxxxxx
Name Xxxxx Xxxxxxxx
Title President
1
SIGNATURE PAGES TO
RESTRUCTURING AGREEMENT
(continued)
CES: Consolidated Environmental
Services, Inc.
By /s/ Xxxxx Xxxxxxxx
Name Xxxxx Xxxxxxxx
Title President
CIERRA: Cierra, Inc.
By /s/ Xxxxx Xxxxxxxx
Name Xxxxx Xxxxxxxx
Title President
KR INDUSTRIAL: KR Industrial Service of Alabama,
Inc.
By /s/ Xxxxx Xxxxxxxx
Name Xxxxx Xxxxxxxx
Title President
2
SIGNATURE PAGES TO
RESTRUCTURING AGREEMENT
(continued)
EXSORBET TECHNICAL: Exsorbet Technical Services, Inc.
By /s/ Xxxxx Xxxxxxxx
Name Xxxxx Xxxxxxxx
Title President
ECO-SYSTEMS: Eco Acquisition, Inc.
By /s/ Xxxxx Xxxxxxxx
Name Xxxxx Xxxxxxxx
Title President
3
SCHEDULE I
SUBSIDIARIES
1. Consolidated Environmental Services, Inc., an Arkansas
corporation
2. Cierra, Inc., an Arkansas corporation
3. Larco Environmental Services, Inc., a Louisiana corporation
4. KR Industrial Service of Alabama, Inc., an Alabama corporation
5. Exsorbet Technical Services, Inc., an Arkansas corporation doing
business as SpilTech Services, Inc.
6. Eco Acquisition, Inc., an Arkansas corporation also known as
Eco-Systems, Inc.
7. 7-7, Inc., an Arkansas corporation
1
SCHEDULE II
EXISTING SECURITY DOCUMENTS
1. Guaranty Agreement dated September 30, 1996 in favor of
American Physicians Service Group, Inc. from Consolidated
Environmental Services, Inc.
2. Guaranty Agreement dated September 30, 1996 in favor of
American Physicians Service Group, Inc. from Cierra, Inc.
3. Guaranty Agreement dated September 30, 1996 in favor of
American Physicians Service Group, Inc. from Larco
Environmental Services, Inc.
4. Guaranty Agreement dated September 30, 1996 in favor of
American Physicians Service Group, Inc. from KR Industrial
Service of Alabama, Inc.
5. Guaranty Agreement dated September 30, 1996 in favor of
American Physicians Service Group, Inc. from Exsorbet
Technical Services, Inc.
6. Guaranty Agreement dated September 30, 1996 in favor
of American Physicians Service Group, Inc. from Eco
Acquisition, Inc.
7. Guaranty Agreement dated September 30, 1996 in favor of
American Physicians Service Group, Inc. from 7-7 Merger, Inc.
8. Security Agreement dated September 30, 1996 by and between
7-7 Merger, Inc. and American Physicians Service Group, Inc.
9. Assignment and Security Agreement dated September 30, 1996 by
and between American Physicians Service Group, Inc. and
Exsorbet Industries, Inc.
10. Security Agreement dated December 12, 1996 by and between 7-7
Merger, Inc. and American Physicians Service Group, Inc.
11. Master Refinancing Agreement dated November 6, 1997 by and
among Consolidated Eco-Systems, Inc. ("Consolidated") and all
of the wholly or partially owned subsidiaries of Consolidated
and American Physicians Service Group, Inc.
12. Promissory Note dated November 6, 1997 executed by
Consolidated Eco-Systems, Inc. and payable to American
Physicians Service Group, Inc. in the original principal
amount of $3,788,580.
13. Security Agreement dated November 6, 1997 by and between Larco
Environmental Services, Inc. and American Physicians Service
Group, Inc.
2
14. Assignment and Security Agreement dated November 6, 1997 by
and between Consolidated Eco-Systems, Inc. and American
Physicians Service Group, Inc.
3
SCHEDULE III
EMPLOYMENT AGREEMENTS
[TO BE PREPARED BY XXXX XXXXXX]
1
SCHEDULE IV
BUSINESS AND ASSET LOCATIONS
1
EXHIBIT A
2
EXHIBIT B
3
EXHIBIT C
4
EXHIBIT D
5
EXHIBIT E
6
