FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 0-19009
AMETECH, Inc.
_____________________________________________________
(Exact Name of Registrant as Specified in its Charter)
Oklahoma 73-0766924
_______________________ __________________________________
(State of Incorporation) (I.R.S. Employer Identification No.)
1813 Southeast 25th
Oklahoma City, Oklahoma 73129
________________________ ________
(Address of Principal (Zip Code)
Executive Offices)
Registrant's Telephone Number, Including Area Code:
(405) 677-8781
______________
Former name, former address, and former fiscal year, if changed
since last report:
None
________
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Indicate by check mark whether the Registrant (1) has filed all
reports required by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for the shorter
period of that the Registrant has had to file the reports), and (2)
has been subject to the filing requirements for the past 90 days.
YES X NO
____ ____
As of July 30, 1997, the Registrant had 13,817,121 shares of common
stock issued and outstanding (excluding 115,000 shares of common
stock held as treasury stock).
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FORM 10-Q OF AMETECH, INC.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Page
____
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Item 1. Financial Statements.................... 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations......................... 13
PART II
OTHER INFORMATION
Item 2. Change in Securities ................... 18
Item 6. Exhibits and Reports on Form 8-K........ 18
SIGNATURES ........................................ 20<PAGE>
PART I
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<PAGE>
FINANCIAL INFORMATION
Item 1. Financial Statements.
____________________
The accompanying Consolidated Balance Sheet as of March 31, 1997,
and the related Statements of Operations and Retained Earnings and
Statements of Cash Flows for the three month periods ended
March 31, 1997, and 1996 are unaudited. In the opinion of
management, all appropriate adjustments have been included. Such
adjustments consisted primarily of normal recurring items, which
are, in the opinion of management, necessary for a fair
presentation of the interim period. Interim results are not
necessarily indicative of results for a full year. The condensed
Financial Statements and Notes are presented as permitted by Form
10-Q and do not contain certain information included in the
Company's Annual Financial Statements and Notes; therefore, these
Financial Statements should be read in conjunction with the Notes
to the Financial Statements contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, which are
incorporated herein by reference.
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AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1997 1996
____________ ___________
(unaudited)
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 1,000 $ 10,000
Certificate of deposit 122,000 222,000
Accounts receivable 3,698,000 4,074,000
Prepaid expenses 1,002,000 664,000
Other 270,000 227,000
__________ ___________
Total Current Assets 5,093,000 5,197,000
__________ ___________
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation
of $8,424,000 and $9,044,000 at
March 31, 1997, and December 31,
1996, respectively 7,373,000 8,278,000
___________ ___________
OTHER ASSETS, net of accumulated
amortization of $365,000 and
$347,000 at March 31, 1997,
and December 31, 1996,
respectively 339,000 346,000
___________ ___________
$12,805,000 $13,821,000
=========== ===========
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The accompanying notes are an integral part
of these financial statements.
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AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
March 31, December 31,
1997 1996
____________ ___________
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
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CURRENT LIABILITIES:
Accounts payable and accrued
liabilities $ 2,137,000 $ 1,697,000
Current maturities of long-term
obligations 6,314,000 7,306,000
___________ ___________
Total Current Liabilities 8,451,000 9,003,000
___________ ___________
DEFERRED INCOME TAXES 641,000 641,000
___________ ___________
LONG-TERM OBLIGATIONS, net of current
maturities 333,000 393,000
___________ ___________
STOCKHOLDERS' EQUITY:
Common stock of $.01 par value;
25,000,000 shares authorized at
March 31, 1997, and December 31,
1996;
13,932,121 shares issued at
March 31, 1997, and December 31,
1996, respectively 139,000 139,000
Additional paid-in capital 2,994,000 2,994,000
Retained earnings 356,000 760,000
___________ ___________
3,489,000 3,893,000
Less - Treasury Stock (115,000 shares
at March 31, 1997, and December 31,
1996) 109,000 109,000
___________ ___________
Total Stockholders' Equity 3,380,000 3,784,000
___________ ___________
$ 12,805,000 $ 13,821,000
=========== ===========
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The accompanying notes are an integral part
of these financial statements.
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AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
Three Months Ended
March 31,
___________________________
1997 1996
___________ ___________
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REVENUES $ 4,130,000 $ 4,310,000
___________ ____________
COSTS AND EXPENSES:
Operating costs 3,398,000 3,538,000
General and administrative expense 477,000 609,000
Depreciation and amortization 304,000 495,000
Interest expense 184,000 213,000
Other expense (income), net 171,000 (102,000)
___________ ___________
4,534,000 4,753,000
___________ ___________
LOSS BEFORE INCOME TAXES (404,000) (443,000)
___________ ___________
INCOME TAX EXPENSE (BENEFIT):
Current - (201,000)
Deferred - 34,000
___________ ___________
- (167,000)
___________ ___________
NET LOSS (404,000) (276,000)
RETAINED EARNINGS AT BEGINNING
OF PERIOD 760,000 2,287,000
___________ ___________
RETAINED EARNINGS AT END OF PERIOD $ 356,000 $ 2,011,000
=========== ===========
LOSS PER COMMON SHARE:
Loss per common share $ (0.03) $ (0.02)
=========== ===========
Weighted average shares outstanding 13,817,121 13,776,600
=========== ===========
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The accompanying notes are an integral part
of these financial statements.
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AMETECH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
___________________________
1997 1996
____________ ____________
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Cash Flows From Operating Activities:
Cash collected from customers $ 4,368,000 $ 4,043,000
Interest paid (184,000) (213,000)
Interest received 2,000 11,000
Cash paid to employees and other
suppliers of goods and services (3,795,000) (4,614,000)
Income taxes refunded (paid) (7,000) 50,000
___________ ___________
Net Cash Provided by (Used in)
Operating Activities 384,000 (723,000)
___________ ___________
Cash Flows From Investing Activities:
Additions to property and equipment (59,000) (256,000)
Proceeds from disposal of equipment 435,000 153,000
Capitalized costs for West Coast
operation (4,000) 0
Liquidation of certificate of deposit 100,000 0
Payments received on notes receivable 187,000 27,000
___________ ___________
Net Cash Provided by (Used in)
Investing Activities 659,000 (76,000)
___________ ___________
Cash Flows From Financing Activities:
Proceeds of long-term debt 0 1,138,000
Payments on long-term debt (1,052,000) (303,000)
Sale of unissued stock 0 5,000
___________ ___________
Net Cash Provided by (Used in)
Financing Activities (1,052,000) 840,000
___________ ___________
Net Increase (Decrease) in Cash and
Cash Equivalents (9,000) 41,000
___________ ___________
Cash and Cash Equivalents at
Beginning of Period 10,000 74,000
___________ ___________
Cash and Cash Equivalents at
End of Period $ 1,000 $ 115,000
=========== ===========
The accompanying notes are an integral part
of these financial statements.
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AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
__________________________________
1. The financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All
significant intercompany transactions are eliminated.
2. EARNINGS PER SHARE
Earnings per common share are based upon the weighted average
number of common shares outstanding during the respective three-
month periods. All outstanding stock options are considered anti-
dilutive and are not included in the calculation for earnings per
share.
3. RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
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The reconciliation of net loss to net cash provided by operating
activities for the three-month periods ended March 31, 1997, and
1996, is as follows:
Three Months Ended March 31,
______________________________
1997 1996
____________ ____________
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Net Loss $ (404,000) $ (276,000)
Adjustments to reconcile net loss
to net cash provided by (used
in) operating activities:
Depreciation and amortization 304,000 495,000
Gain on sale of subsidiary (46,000) (9,000)
(Gain)loss on sale of property 231,000 (88,000)
Change in assets and liabilities:
(Increase) Decrease in accounts
receivable 229,000 (267,000)
Increase in prepaid expenses (338,000) (886,000)
(Increase) Decrease in other assets (43,000) 6,000
Increase in accounts payable and
accrued liabilities 447,000 336,000
Deferred income taxes 0 (34,000)
Other 4,000 0
__________ _________
$ 384,000 $ (723,000)
========== =========
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AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
__________________________________
4. COMMITMENTS AND CONTINGENCIES
At March 31, 1997, the Company had outstanding letters of credit of
$116,000. The letters of credit serve as security to obtain
licenses in certain states for uninsured workman's compensation
deposits and for performance of services. A certificate of deposit
in the amount of $122,000, including interest, has been pledged as
collateral for the letters of credit.
Until February 6, 1997, the Company was partially uninsured on its
workers' compensation insurance for Oklahoma employees. The
Company s retention under this plan was $500,000, after which
coverage under the excess workers' compensation insurance plan
becomes effective. The Company accrued estimated losses monthly
based on a review of claims filed and claims incurred but not
reported. There was no claim expense incurred under the partially
uninsured workers' compensation plan for the three months ended
March 31, 1997, and $27,000 was incurred for the three months ended
March 31, 1996. In February, 1997, the Company ceased being
partially uninsured on its workers' compensation insurance for its
Oklahoma employees.
The Company was also partially uninsured for its employee group
health insurance coverage until June 1, 1997. Under this self-
insured program, the Company was liable for up to $35,000 per
covered person per year with an aggregate liability not to exceed
$450,000 per year for the total group. The excess insurance
coverage becomes effective when the aforementioned limits are
reached. The Company accrued estimated losses monthly based on a
review of claims filed and claims incurred but not reported. The
claim and premium expense incurred under the Company's partially
uninsured group health insurance plan was $41,000 for the three
months ended March 31, 1997, and $44,000 for the three months ended
March 31, 1996. In June, 1997, the Company ceased being partially
self-insured on its employee group health insurance.
The Company leases transportation terminals, office space and
transportation equipment under operating lease arrangements. The
following is a schedule by year of future minimum lease payments
under these operating leases as of March 31, 1997:
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AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
__________________________________
4. COMMITMENTS AND CONTINGENCIES (Continued)
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Year Ending
December 31, Total
____________________ ___________
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Nine months beginning
April 1, 1997 $371,000
1998 476,000
1999 470,000
2000 94,000
____________
$1,411,000
=============
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Total lease expense for the three months ended March 31, 1997, was
approximately $151,000.
The Company has employment agreements with certain of its key
employees which provide for salary continuation for a specified
number of months upon a change of control of the Company. In
addition, certain stock options to those employees immediately vest
upon a change of control.
On January 3, 1992, seven individual plaintiffs filed a Petition
against the Company's transportation subsidiary, Environmental
Transportation Services, Inc. ("ETS"), and Dyna-Turn of Oklahoma
Incorporated ("Dyna-Turn"), in the District Court of Oklahoma
County. The seven plaintiffs, who were employees at a waste
incineration facility in Miami, Oklahoma, claim that Dyna-Turn
generated solid waste which was contaminated with toxic and
hazardous chemicals, and that this solid waste was transported by
ETS to the incineration facility for disposal. The plaintiffs
claim that Dyna-Turn and ETS were engaged in ultra-hazardous
activities during the generation and transportation of the waste,
were negligent during the generation and transportation of the
waste, and failed to warn the plaintiffs of the hazardous nature of
the waste or of its harmful side effects. The plaintiffs claim
they sustained personal injuries and lost earnings and are seeking
unspecified actual damages in excess of $10,000 and punitive
damages. The Company's insurance carrier has denied coverage for
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AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
__________________________________
4. COMMITMENTS AND CONTINGENCIES (Continued)
the plaintiffs' claims. The Company has instructed its attorneys
to vigorously defend the litigation. The case involves facts yet
unknown to the Company. The Company believes that ETS has valid
defenses to the plaintiffs' claims, and while the ultimate
resolution is unknown, management believes the final outcome will
not have a material adverse impact on the Company's financial
position or results of operations.
The Texas Workers' Compensation Fund has requested additional
workers' compensation premiums totaling $69,000 based upon salaries
of drivers carried under the Oklahoma self-insurance policy. The
Company believes the drivers are not Texas employees because they
were interstate drivers hired and controlled through the Oklahoma
office. Although the ultimate impact of this matter is unknown,
the Company does not believe the final outcome will have a material
adverse impact on the Company's financial position or results of
operations.
ETS and numerous other defendants have been sued in District Court,
Tarrant County, Texas, by parties who allegedly live or work near
a permitted hazardous waste disposal well in Smith County, Texas
("Disposal Well"). The plaintiffs have sued the owners of the
Disposal Well, as well as all or substantially all generators of
hazardous waste that disposed of such waste at the Disposal Well
and transporters, such as ETS, that transported waste generated by
others to the Disposal Well. The plaintiffs are alleging that the
owners of the Disposal Well negligently operated the Disposal Well
and that the generators of hazardous waste that was disposed of at
the Disposal Well and transporters that transported waste generated
by others to the Disposal Well were negligent in not ensuring the
owner or owners properly operated the Disposal Well. The lawsuit
alleges joint and several liability for all defendants for actual
and punitive damages of an unspecified amount. This matter is in
the early stages and discovery has not commenced. However, the
Company intends to vigorously defend itself and, although the
ultimate outcome is unknown, the Company believes the final
resolution will not have a material adverse impact on the Company's
financial position or results of operations.
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AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
__________________________________
4. COMMITMENTS AND CONTINGENCIES (Continued)
In August, 1996, a judgment of approximately $115,000, plus
interest and costs, was entered against ETS in favor of Richard K.
Larson ("Larson"), a former employee of ETS, in connection with a
lawsuit involving allegations of breach of a consulting agreement
between ETS and Larson. After the judgment was entered against
ETS, ETS or Larson entered into a payment plan to pay such judgment
("Payment Plan"). ETS has paid approximately $35,000 toward
satisfaction of the judgment, leaving approximately $80,000, plus
interest and costs, remaining to be paid as of March 31, 1997. ETS
has not made any payments under the Payment Plan since January,
1997. ETS is in the process of attempting to settle this matter,
but such has not been resolved as of the date of this report. The
Company plans to pay such judgment out of the proceeds of the loan
from Congress Financial Corporation discussed in Note 5 of the
Notes to Consolidated Financial Statements.
The Company is involved in various other legal actions arising in
the normal course of business. After taking into consideration
available insurance coverage, legal counsel s evaluation of such
actions, and other relevant information, management is of the
opinion that their outcome will not have a significant effect on
the Company s consolidated financial position or results of
operations.
At March 31, 1997, the Company and ETS were in default under its
revolving loan agreement and certain equipment lending agreements
due to the Company's default under its payment obligations under
certain of these loan agreements and the Company's failure to
timely provide financial statements to certain lenders. As a
result of such default, the Company reclassified approximately
$3,948,000 to current maturities of long-term debt under current
liabilities that would have otherwise been classified as long-term
debt under generally accepted accounting principles. With the
completion of the financing discussed in Note 5 to Notes to
Consolidated Financial Statements on July 18, 1997, the Company
paid all of the Company's and ETS' previous revolving line of
credit and equipment loans, except for $225,000 to one equipment
lender, and cured all defaults under such previous loan agreements.
See Note 5 to Notes to Consolidated Financial Statements.
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<PAGE>
AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
__________________________________
4. COMMITMENTS AND CONTINGENCIES (Continued)
The Company has reached an agreement in principle to acquire from
Sullivan Trucking Company, Inc. ("Sullivan"), its customer list,
goodwill, parts, supplies and other business aspects of Sullivan's
hazardous waste transportation business. The Company and Sullivan
have agreed in principle that, in addition to the lease agreements
discussed below, the Company will pay Sullivan approximately 1.3
million shares of the Company's common stock for such customer
list, goodwill, parts, supplies and other business aspects of
Sullivan's hazardous waste transportation business. The Company
and Sullivan are in the process of finalizing such purchase.
Additionally, in March, 1996, ETS began leasing from Sullivan a
certain number of hazardous waste tractors, trailers and rolloff
boxes, and, under such lease, is paying Sullivan approximately
$29,000 a month. Further, the Company leased from Sullivan its
transportation terminal for a term of approximately four years at
a rental of $3,800 per month.
5. SUBSEQUENT EVENTS
On July 18, 1997, the Company and ETS completed and finalized an
$11,000,000 financing package with Congress Financial Corporation
( Congress ), which replaced all of the Company s equipment loans
and its revolving working capital line of credit. The financing
includes a term loan of approximately $6,000,000 and a working
capital revolving line of credit up to $5,000,000. The amount that
may be borrowed under the working capital portion of the financing
is based on 80% of outstanding eligible accounts receivable less
certain reserves. At July 31, 1997, the Company had borrowings of
$642,000 under this revolving working capital portion of the
financing and had approximately $530,000 in availability under such
working capital line of credit. The term loan is payable in sixty
(60) monthly installments, commencing August 1, 1997, of
$93,333.33, plus accrued and unpaid interest. The loan agreement
between Congress, the Company and ETS has a term of two years but
may be extended for one additional year by Congress. Upon
termination of the loan agreement, the then outstanding balance due
under the term loan and working capital line of credit shall become
due and payable. The proceeds of the term loan portion of this
financing were used to repay the Company s previous working capital
line of credit and equipment loans, except for $225,000 to one
equipment lender as discussed below, and eliminated all previously
disclosed defaults under these prior lending agreements.
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AMETECH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
__________________________________
5. SUBSEQUENT EVENTS (Continued)
Simultaneously with the closing of the Congress financing, the
Company and ETS paid in full all of its then outstanding equipment
loans and working capital line of credit, except for $225,000 due
to CIT/Equipment Financing Group, Inc. ("CIT"). The $225,000 due
CIT is evidenced by an unsecured promissory note and is
subordinated to the amounts due Congress by the Company and ETS.
Under the terms of the subordination agreement, no principal
payments are to be made under the note and no interest is to be
accrued under the note until [September 1, 1998]. After
[September 1, 1998], interest is to accrue under the note to CIT
equal to 10% per annum, and ETS is to make principal payments of
$10,000 per month, plus accrued interest, provided that there is no
event of default by the Company and ETS under the Congress loan
agreement and that the Company has at least $600,000 in
availability under the revolving working capital line of credit
with Congress. Within fifteen business days after payment of all
amounts due Congress by the Company and ETS and termination of the
loan agreement with Congress, the unpaid portion of the note to CIT
is to be paid in full.
During 1996, Carl B. Anderson, Jr. ("Anderson"), CEO and President
of the Company, loaned to ETS $195,000 ("Anderson Loan"). The
Anderson Loan is secured by certain real estate owned by ETS. As
a condition to finalizing the loan agreement with Congress,
Anderson agreed to subordinate to Congress the repayment of the
principal balance of such loan. However, as part of the Congress
financing, ETS and Anderson agreed that the interest under the
Anderson Loan would be increased to 14% per annum pursuant to the
terms of a Second Amended and Restated Promissory Note ("Amended
Note"). Under the subordination agreement with Congress, Anderson
and ETS agreed that there would be no further principal payments
under the Anderson Loan until such time as the Company's and ETS'
obligations to Congress are paid in full, but that ETS may make
interest payments to Anderson pursuant to the terms of the Amended
Note. As of March 31, 1997, the unpaid principal amount due
Anderson under such loan was $167,000, as compared to $162,000, as
of July 31, 1997.
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<PAGE>
Item 2. Management s Discussion and Analysis of Financial
Condition and Results of Operations
________________________________________________________
Forward-Looking Statements
__________________________
Certain statements contained within this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" may
be deemed "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended
(collectively, the "Private Securities Litigation Reform Act of
1995").
The forward-looking statements contained herein relate to
anticipated financial performance, ability to comply with the
Company's general working capital requirements, and all other
statements which are not statements of historical fact. While the
Company believes the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance such
expectations will prove to have been correct. There are a variety
of factors which could cause future outcomes to differ materially
from those described in this Form 10-Q, including, but not limited
to, general economic conditions, material reduction in revenues,
inability to collect in a timely manner a material amount of
receivables, increased competitive pressures, overcapacity in the
environmental transportation industry, changes in federal, state
and local laws and regulations, especially environmental
regulations, or in interpretation of such, potential increases in
equipment, maintenance, operating or labor costs, and management
retention and development. The Company undertakes no obligation to
update publicly any forward-looking statement, whether as a result
of new information, future events or otherwise.
The following Management's Discussion and Analysis should be read
in conjunction with a review of the Company's March 31, 1997,
Unaudited Consolidated Financial Statements included elsewhere in
this Form 10-Q.
Results of Operations
_____________________
Quarter Ended March 31, 1997, Compared to Quarter Ended March 31,
1996
___________________________________________________________________
The net loss for the quarter ended March 31, 1997 was $404,000, as
compared to a net loss of $276,000 for the quarter ended March 31,
1996. This increase in net loss of $128,000 was primarily
attributable to losses recognized on equipment sales. During the
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quarter ended March 31, 1997, the Company recognized losses of
approximately $231,000 due to such equipment sales.
Total revenues were $4,130,000 and $4,310,000 for the quarters
ended March 31, 1997 and 1996, respectively. This decrease of
$180,000 was largely attributable to a decrease in transportation
and related revenues of $126,000 due to: (1)lower volume resulting
from operating fewer tractors during the first quarter of 1997 than
the first quarter of 1996, and (2) a decrease in the running mile
rate of $.06 per mile due to continuing competitive pressures.
Non-transportation related revenues decreased $54,000 from the
first quarter of 1996 to the first quarter of 1997 due to decreased
revenues generated by BMH Materials, Inc. ( BMH ), the Company s
non-hazardous waste processing facility located in Green Cove
Springs, Florida, which facility was sold in August 1996.
Operating costs were $3,398,000 and $3,538,000 for the first
quarters of 1997 and 1996, respectively. This represents an
increase of .2 percentage points when expressed as a percentage of
total revenues.
Operating costs related to transportation services were $3,398,000
and $3,510,000 for the quarters ended March 31, 1997 and 1996,
respectively. These amounts represent 82.3% and 82.5% of
transportation and related revenues for the respective quarters of
1997 and 1996. This decrease in the percentage of operating costs
to revenues from 1996 to 1997 is due largely to reduced variable
transportation cost partially offset by the lower running mile rate
as discussed earlier.
Operating costs associated with BMH decreased $28,000 from 1996 to
1997 due to the reduced activity as discussed earlier.
General and administrative expenses decreased $132,000 from 1996 to
1997 which represents a decrease of 2.6 percentage points when
expressed as a percentage of revenues. This decrease was mainly
attributable to the elimination of general and administrative costs
associated with BMH as well as lower personnel and related costs.
Interest expense decreased $29,000 due to decreased debt.
Liquidity and Capital Resources
_______________________________
Working capital deficit decreased from a negative $3,806,000 at
December 31, 1996 to a negative $3,358,000 at March 31, 1997. This
decrease of $448,000 is due primarily to the reduction of current
maturities of long-term obligations through the sales of tractors
and trailers.
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<PAGE>
At March 31, 1997, and until completion of the Congress Loan, as
defined below, the Company and ETS were in default under their
revolving working capital line of credit and certain equipment
loans. Such default was due to the failure by the Company and ETS
to make debt payments under certain of their loan agreements and
failing to timely file annual financial statements. This default
situation resulted in reclassifying approximately $3,948,000 from
long-term obligations to current maturities of long-term
obligations under current liabilities. See Note 4 to Notes to
Consolidated Financial Statements.
On July 18, 1997, the Company and ETS completed and finalized an
$11,000,000 financing package with Congress Financial Corporation
( Congress ), which replaced all of the Company s equipment loans
and its working capital line of credit. The financing includes a
term loan of approximately $6,000,000 and a working capital line of
credit up to $5,000,000 (collectively, "Congress Loan"). The
amount that may be borrowed under the working capital portion of
the financing is based on 80% of outstanding eligible accounts
receivable less certain reserves. At July 31, 1997, the Company
had borrowed approximately $642,000 under such revolving working
capital line of credit and had approximately $530,000 in
availability under the working capital portion of this financing.
The proceeds of the term loan portion of this financing were used
to repay the Company s previous line of credit and substantially
all of the Company s then outstanding equipment loans, except for
$225,000 to one equipment lender, and eliminated all previously
disclosed defaults under these prior lending agreements. The term
loan is to be repaid in sixty monthly installments, commencing
August 1, 1997, of $93,333.33, plus accrued and unpaid interest.
The loan agreement with Congress has a term of two years but may be
extended for an additional year by Congress. Upon termination of
the loan agreement, the then outstanding balance of the term loan
and the working capital line of credit shall become due and
payable. The revolving working capital portion of the loans from
Congress is to bear an annual rate of interest of 1 1/2% above the
prime rate and the term loan is to bear an annual rate of interest
of 1 3/4% above the prime rate, with such increasing during the
occurrence of an event of default. Under the terms of the loan
agreement with Congress, the Company and ETS are limited as to the
amount of capital expenditures that they may incur in any one year
during the term of the Congress loan agreement.
Simultaneously with the closing of the Congress financing, the
Company and ETS paid in full all of its then outstanding equipment
loans and working capital line of credit, except for $225,000 due
to CIT/Equipment Financing Group, Inc. ("CIT"). The $225,000 due
CIT is evidenced by an unsecured promissory note and is
subordinated to the amounts due Congress by the Company and ETS.
Under the terms of the subordination agreement, no principal
payments are to be made under the note and no interest is to be
accrued under the note until August 30, 1998. After
-15
<PAGE>
August 30, 1998, interest is to accrue under the note to CIT
equal to 10% per annum, and ETS is to make principal payments of
$10,000 per month, plus accrued interest, provided that there is no
event of default by the Company and ETS under the Congress loan
agreement and that the Company has at least $600,000 in
availability under the revolving working capital line of credit
with Congress. Within fifteen business days after payment of all
amounts due Congress by the Company and ETS and termination of the
loan agreement with Congress, the unpaid portion of the note to CIT
is to be paid in full.
During 1996, Carl B. Anderson, Jr. ("Anderson"), CEO and President
of the Company, loaned to ETS $195,000 ("Anderson Loan"). The
Anderson Loan is secured by certain real estate owned by ETS. As
a condition to finalizing the loan agreement with Congress,
Anderson agreed to subordinate to Congress the repayment of the
principal balance of such loan. However, as part of the Congress
financing, ETS and Anderson agreed that the interest under the
Anderson Loan would be increased to 14% per annum pursuant to the
terms of a Second Amended and Restated Promissory Note ("Amended
Note"). Under the subordination agreement with Congress, Anderson
and ETS agreed that there would be no further principal payments
under the Anderson Loan until such time as the Company's and ETS'
obligations to Congress are paid in full, but that ETS may make
interest payments to Anderson pursuant to the terms of the Amended
Note. As of July 31, 1997, the principal amount owing to Anderson
under the Anderson Note was $162,000, as compared to $167,000 as of
March 31, 1997.
The Company's accounts payable continued to age beyond normal terms
prior to the consummation of the Congress Loan. As of March 31,
1997, the Company's accounts payable in excess of sixty days were
approximately $96,000 and in excess of ninety days were
approximately $159,000. As of July 31, 1997, following application
of the proceeds from the Congress Loan, the Company's accounts
payable in excess of sixty days were approximately $71,000 and in
excess of ninety days were approximately $111,000.
In 1996, a judgment of approximately $115,000, plus interest and
costs, was entered against ETS in favor of Richard K. Larson, a
former employee, in a case involving Mr. Larson ("Larson Case").
The Larson Case alleged breach of a consulting agreement between
ETS and Mr. Larson. Pursuant to the terms of a structured payment
plan agreed to by ETS and Mr. Larson ("Payment Plan"), ETS has paid
$35,000 toward satisfaction of the judgment, leaving approximately
$80,000, plus interest and costs, remaining to be paid. ETS,
however, has been in default on the Payment Plan since January,
1997. Although ETS has been attempting to conduct further
negotiations with Mr. Larson regarding the Larson Case judgment,
such negotiations have been unsuccessful. In May, 1997, Mr. Larson
informed ETS that if he is not paid in full the amount owed to him
pursuant to the judgment, he will file a writ of execution against
-16-
<PAGE>
assets of ETS in order to satisfy the unpaid portion of the
judgment. With the completion of the Congress Loan, the Company
has the liquidity to pay such judgment.
The Company received $187,000 as a prepayment of a note due the
Company in February, 1997, which proceeds were applied by the
Company to reduce the outstanding balance under the Company's
working capital line of credit.
Giving effect to the Congress Loan, the Company believes as of the
filing date of this report, that it will be able to meet its
presently foreseeable working capital requirements. The previous
sentence is a forward-looking statement that is subject to a number
of risks and uncertainties that could cause actual results to
differ materially, such as the factors noted under "Forward-Looking
Statements" of this "Management's Discussion and Analysis of
Financial Conditions and Results of Operations."
The Company s transportation subsidiary has entered into two lease
agreements with Sullivan s Trucking Company, Inc. ( Sullivan ),
effective March 1, 1996 whereby ETS is leasing a certain number of
hazardous waste tractors, trailers and roll-off boxes. ETS has
used this equipment to transport waste for Sullivan s and ETS
customers. In connection with such leases, ETS is to pay Sullivan
$8,684 per month for twenty four months on one lease and $28,803
per month for forty eight months on the other lease. ETS began
making payments on both these leases March 1, 1996. Subsequently,
ETS and Sullivan agreed to terminate the twenty four month lease
effective August 1, 1996, and ETS has returned all equipment
subject to the lease to Sullivan. Additionally, the Company has
leased from Sullivan its transportation terminal in Ponca City,
Oklahoma for a term of four years, effective March 1, 1996, at a
rental of $3,800 per month.
The Company has reached an agreement in principle to acquire from
Sullivan certain customer lists, goodwill, inventory, and other
business aspects of Sullivan s hazardous waste transportation
business. Under the tentative agreement, the Company will pay
Sullivan 1,309,221 shares of the Company s common stock. The
Company and Sullivan are in the process of finalizing definitive
agreements relating to these transactions.
-17-
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities
______________________
As previously disclosed, the Company and ETS have entered into a
Loan and Security Agreement, dated July 17, 1997, with Congress
Financial Corporation ("Congress Loan Agreement"), which provides
to the Company and ETS an $11,000,000 financing package, with
approximately $6,000,000 of such being in the form of a term loan
and the balance in the form of a revolving working capital line of
credit. The amount that may be borrowed under such revolving
working capital line of credit at any one time is not to exceed the
lesser of (i) $5,000,000 or (ii) 80% of the then outstanding
eligible accounts receivable of the Company and ETS, less certain
reserves. The Company and ETS used the proceeds of the term loan
to repay substantially all of its then revolving line of credit and
equipment loans, which cured all previous defaults under such prior
lending agreements. See Note 5 to Notes to Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources."
Under the Congress Loan Agreement, the Company and ETS are
prohibited from redeeming or acquiring any of, or from paying any
dividends (other than common stock) on, their outstanding capital
stock.
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits:
________
4.1 Loan and Security Agreement, dated July 17, 1997,
between Congress, the Company and ETS. An index
of Exhibits and Schedules is included in the Loan
and Security Agreement, and the Company agrees to
provide to the Commission supplementally such
Exhibits and Schedules at the request of the
Commission;
10.1 Unsecured Promissory Note, dated July 17, 1997,
between ETS and CIT;
10.2 Subordination Agreement, dated July 17, 1997,
between Congress, CIT, the Company and ETS;
-18
<PAGE>
10.3 Second Amended and Restated Promissory Note,
dated July 1, 1997, from ETS to Carl B. Anderson,
Jr.;
10.4 Subordination Agreement, dated July 17, 1997,
between Congress, Anderson, the Company and ETS.
27 Financial Data Schedule.
(b) Reports on Form 8-K
___________________
No reports on Form 8-K were filed by the Company
during the quarter ended March 31, 1997.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company has caused
the undersigned, duly authorized, to sign this report on its behalf
on the 8th day of August, 1997.
AMETECH, Inc.
By /s/ David R. Bennett
______________________________
David R. Bennett
Executive Vice President
By /s/ Kerry Willingham
______________________________
Kerry Willingham
Vice President and
Chief Financial Officer
(Principal Financial Officer)
ISTE:\A-C\AMETECH\10Q\397\10Q.3
-20-
LOAN AND SECURITY AGREEMENT
by and among
CONGRESS FINANCIAL CORPORATION (SOUTHWEST)
as Lender,
and
AMETECH, INC. AND
ENVIRONMENTAL TRANSPORTATION SERVICES, INC.
collectively, as Borrower
Dated: July 17, 1997
<PAGE>
TABLE OF CONTENTS
Page
____
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . 1
SECTION 2. CREDIT FACILITIES . . . . . . . . . . . . . 9
2.1 Revolving Loans. . . . . . . . . . . . 9
2.2 Letter of Credit Accommodations. . . . 10
2.3 Term Loan. . . . . . . . . . . . . . . 11
2.4 Availability Reserves
2.5 Joint and Several Liability;
Rights of Contribution. . . . . . . 12
SECTION 3. INTEREST AND FEES . . . . . . . . . . . . . 13
3.1 Interest . . . . . . . . . . . . . . . 13
3.2 Closing Fee. . . . . . . . . . . . . . 14
3.3 Servicing Fee. . . . . . . . . . . . . 14
3.4 Commitment Fee . . . . . . . . . . . . 14
SECTION 4. CONDITIONS PRECEDENT. . . . . . . . . . . . 15
4.1 Conditions Precedent to Initial Loans
and Letter of Credit Accommodations. . 15
4.2 Conditions Precedent to All Loans
and Letter of Credit Accommodations. . 18
SECTION 5. GRANT OF SECURITY INTEREST. . . . . . . . . 18
SECTION 6. COLLECTION AND ADMINISTRATION . . . . . . . 19
6.1 Borrower's Loan Account. . . . . . . . 19
6.2 Statements . . . . . . . . . . . . . . 19
6.3 Collection of Accounts . . . . . . . . 19
6.4 Payments . . . . . . . . . . . . . . . 20
6.5 Authorization to Make Loans. . . . . . 21
6.6 Use of Proceeds. . . . . . . . . . . . 21
SECTION 7. COLLATERAL REPORTING AND COVENANTS. . . . . 22
7.1 Collateral Reporting . . . . . . . . . 22
7.2 Accounts Covenants . . . . . . . . . . 20
7.3 Inventory Covenants. . . . . . . . . . 23
i
7.4 Equipment Covenants. . . . . . . . . . 24
7.5 Power of Attorney. . . . . . . . . . . 24
7.6 Right to Cure. . . . . . . . . . . . . 25
7.7 Access to Premises . . . . . . . . . . 25
SECTION 8. REPRESENTATIONS AND WARRANTIES. . . . . . . 26
8.1 Corporate Existence, Power
and Authority; Subsidiaries. . . . . . 26
8.2 Financial Statements; No
Material Adverse Change. . . . . . . . 26
8.3 Chief Executive Office; Collateral
Locations. . . . . . . . . . . . . . . 26
8.4 Priority of Liens; Title to
Properties . . . . . . . . . . . . . . 26
8.5 Tax Returns. . . . . . . . . . . . . . 27
8.6 Litigation . . . . . . . . . . . . . . 27
8.7 Compliance with Other Agreements
and Applicable Laws. . . . . . . . . . 27
8.8 Accuracy and Completeness of
Information. . . . . . . . . . . . . . 27
8.9 Survival of Warranties; Cumulative . . 28
8.10 Environmental Compliance . . . . . . . 28
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS. . . . . 29
9.1 Maintenance of Existence . . . . . . . 29
9.2 New Collateral Locations . . . . . . . 29
9.3 Compliance with Laws,
Regulations, Etc. . . . . . . . . . . 29
9.4 Payment of Taxes and Claims. . . . . . 30
9.5 Insurance. . . . . . . . . . . . . . . 31
9.6 Financial Statements and Other
Information. . . . . . . . . . . . . . 31
9.7 Sale of Assets, Consolidation,
Merger, Dissolution, Etc. . . . . . . 32
9.8 Encumbrances . . . . . . . . . . . . . 33
9.9 Indebtedness . . . . . . . . . . . . . 33
9.10 Loans, Investments, Guarantees, Etc. . 35
9.11 Dividends and Redemptions. . . . . . . 36
9.12 Transactions with Affiliates . . . . . 36
9.13 Adjusted Net Worth . . . . . . . . . . 36
9.14 Costs and Expenses . . . . . . . . . . 36
9.15 After Acquired Real Property . . . . . 37
9.16 Further Assurances . . . . . . . . . . 37
SECTION 10. EVENTS OF DEFAULT AND REMEDIES. . . . . . . 37
10.1 Events of Default. . . . . . . . . . . 37
10.2 Remedies . . . . . . . . . . . . . . . 39
ii
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW . . . . . . . . 40
11.1 Governing Law; Choice of Forum;
Service of Process;Jury Trial
Waiver . . . . . . . . . . . . . . . . 40
11.2 Waiver of Notices. . . . . . . . . . . 42
11.3 Amendments and Waivers . . . . . . . . 42
11.4 Waiver of Counterclaims. . . . . . . . 42
11.5 Indemnification. . . . . . . . . . . . 42
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS. . . . . . 43
12.1 Term . . . . . . . . . . . . . . . . . 43
12.2 Notices. . . . . . . . . . . . . . . . 44
12.3 Partial Invalidity . . . . . . . . . . 45
12.4 Successors . . . . . . . . . . . . . . 45
12.5 Entire Agreement . . . . . . . . . . . 45
12.6 Nonapplicability of Article
5069-15.01 et seq. . . . . . . . . . . 45
12.7 Waiver of Consumer Rights. . . . . . . 45
12.8 Oral Agreements Ineffective. . . . . . 45
iii
<PAGE>
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Schedule 8.4 Existing Liens
Schedule 8.7 Compliance With Agreements
Schedule 8.10 Environmental Matters
Schedule 9.3 Compliance With Laws
Schedule 9.9 Permitted Indebtedness
Schedule 9.11 Permitted Dividends and Other Dis-
tributions on Capital Stock
i
<PAGE>
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement, dated as of July 17, 1997, is
entered into by and among CONGRESS FINANCIAL CORPORATION
(SOUTHWEST), a Texas corporation ("Lender"), on the one hand, and
AMETECH, INC., an Oklahoma corporation ("Ametech"), and
ENVIRONMENTAL TRANSPORTATION SERVICES, INC., an Oklahoma
corporation ("ETS") (Ametech and ETS being individually and
collectively referred to as "Borrower"), on the other hand.
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may
make loans and provide other financial accommodations to Borrower;
and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article
9 of the Uniform Commercial Code shall have the meanings given
therein unless otherwise defined in this Agreement. All references
to the plural herein shall also mean the singular and to the
singular shall also mean the plural. All references to Borrower
and Lender pursuant to the definitions set forth in the recitals
hereto, or to any other person herein, shall include their
respective successors and assigns. The words "hereof", "herein",
"hereunder", "this Agreement" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not
any particular provision of this Agreement and as this Agreement
now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced. An Event of Default shall
exist or continue or be continuing until such Event of Default is
waived in accordance with Section 11.3. Any accounting term used
herein unless otherwise defined in this Agreement shall have the
meanings customarily given to such term in accordance with GAAP.
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1
<PAGE>
"Accounts" shall mean all present and future rights of Borrower
to payment for goods sold or leased or for services rendered, which
are not evidenced by instruments or chattel paper, and whether or
not earned by performance.
"Adjusted Net Worth" shall mean as to any Person, at any time,
in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its
subsidiaries (if any), the amount equal to: (a) the difference
between: (i) the aggregate net book value of all assets of such
Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after
deducting from such book values all appropriate reserves in
accordance with GAAP (including all reserves for doubtful
receivables, obsolescence, depreciation and amortization) and (ii)
the aggregate amount of the indebtedness and other liabilities of
such Person and its subsidiaries (including tax and other proper
accruals) plus (b) indebtedness of such Person and its subsidiaries
which is subordinated in right of payment to the full and final
payment of all of the Obligations on terms and conditions
acceptable to Lender.
"Anderson Mortgage" shall mean that certain Mortgage and
Security Agreement, dated as of November 29, 1996, by and between
ETS and Carl B. Anderson, Jr., an individual, as recorded with the
Oklahoma County Clerk on December 27, 1996, Document Number
96177118, Book 7000, Pages 1145-1157, respecting Borrower's Real
Property located in Oklahoma City, Oklahoma.
"Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time
establish and revise in good faith reducing the amount of Revolving
Loans and Letter of Credit Accommodations which would otherwise be
available to Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks
which, as determined by Lender in good faith, do or may affect
either (i) the Collateral or any other property which is security
for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or any Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including
the enforceability, perfection and priority thereof) or (b) to
reflect Lender's good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or any
Obligor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect or (c) in respect of any state
of facts which Lender determines in good faith constitutes an Event
of Default or may, with notice or passage of time or both,
constitute an Event of Default.
"Blocked Accounts" shall have the meaning set forth in Section
6.3 hereof.
"CIT Note" shall mean that certain Promissory Note, dated as of
even date herewith, in the original principal amount of Two Hundred
Twenty-Five Thousand Dollars ($225,000), executed by Borrower to
the order of The CIT Group/Equipment Finance.
"Collateral" shall have the meaning set forth in Section 5
hereof.
2
<PAGE>
"Effective Date" shall mean the date upon which all the
conditions precedent in Section 4 hereof are satisfied to Lender's
satisfaction and the initial Loans are made hereunder.
"Eligible Accounts" shall mean Accounts created by Borrower
which are and continue to be based on the criteria set forth below.
Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale
and delivery of goods by Borrower or rendition of services by
Borrower in the ordinary course of its business which transactions
are completed in accordance with the terms and provisions contained
in any documents related thereto, and for which Borrower has
received any and all required paperwork and proof of delivery of
such goods or rendition of services giving rise to such Accounts;
(b) such Accounts are not unpaid more than ninety (90)
days after the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions
contained in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms
under which payment by the account debtor may be conditional or
contingent;
(e) the chief executive office of the account debtor with
respect to such Accounts is located in the United States of
America, or, if the account debtor with respect to such Accounts is
not located in the United States, then, at Lender's option, if such
Accounts are payable in the United States in United States currency
and either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank
satisfactory to Lender, sufficient to cover such Account, in form
and substance satisfactory to Lender and, if required by Lender,
the original of such letter of credit has been delivered to Lender
or Lender's agent and the issuer thereof notified of the assignment
of the proceeds of such letter of credit to Lender, or (ii) such
Account is subject to credit insurance payable to Lender issued by
an insurer and on terms and in an amount acceptable to Lender, or
(iii) such Account is otherwise acceptable in all respects to
Lender (subject to such lending formula with respect thereto as
Lender may determine);
(f) such Accounts do not consist of progress billings,
bill and hold invoices or retainage invoices, except as to bill and
hold invoices, if Lender shall have received an agreement in
writing from the account debtor, in form and substance reasonably
satisfactory to Lender, confirming the unconditional obligation of
the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has
not asserted a counterclaim, defense or dispute and does not have,
and does not assert any right of setoff against such Accounts or
the Borrower;
3
<PAGE>
(h) there are no facts, events or occurrences which would
impair the validity, enforceability or collectability of such
Accounts or reduce the amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid
and perfected security interest of Lender and any goods giving rise
thereto are not, and were not at the time of the sale thereof,
subject to any liens except those permitted in this Agreement;
(j) neither the account debtor nor any officer or employee
of the account debtor with respect to such Accounts is an officer,
employee or agent of or affiliated with Borrower directly or
indirectly by virtue of family membership, ownership, control,
management or otherwise;
(k) the account debtors with respect to such Accounts are
not any foreign government, the United States of America, any
State, political subdivision, department, agency or instrumentality
thereof, unless, if the account debtor is the United States of
America, any State, political subdivision, department, agency or
instrumentality thereof, upon Lender's request, the Federal
Assignment of Claims Act of 1940, as amended or any similar State
or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) the Borrower is not aware of any proceedings or
actions which are threatened or pending against the account debtors
with respect to such Accounts which might result in any material
adverse change in any such account debtor's financial condition;
(m) such Accounts of a single account debtor or its
affiliates do not constitute more than twenty-five (25%) percent of
all otherwise Eligible Accounts at any one time (but the portion of
the Accounts not in excess of such percentage may be deemed
Eligible Accounts), except with respect to the Accounts of Rollins
Environmental Services, Inc. ("Rollins") after consummation of the
acquisition of Laidlaw Chem-Waste, Inc., a Delaware corporation
pursuant to the terms of that certain Stock Purchase Agreement,
dated as of February 6, 1997, among Rollins, Laidlaw, Inc., a
Canadian corporation, and Laidlaw Transportation, Inc., a Delaware
corporation, in which case such Accounts will not exceed, at
Lender s option, thirty-five percent (35%) of all otherwise
Eligible Accounts at any one time;
(n) such Accounts are not owed by an account debtor who
has Accounts unpaid more than ninety (90) days after the date of
the original invoice for them which constitute more than twenty-
five percent (25%) of the total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with
respect to such account debtors as determined in good faith by
Lender from time to time (but the portion of the Accounts not in
excess of such credit limit may still be deemed Eligible Accounts);
and
4
<PAGE>
(p) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and
revised from time to time by Lender in good faith. Any Accounts
which are not Eligible Accounts shall nevertheless be part of the
Collateral.
"Eligible Equipment" shall mean Equipment which is subject to a
first priority, valid and perfected security interest in favor of
Lender and which has otherwise been determined to be acceptable to
Lender in good faith. Any Equipment which is not Eligible
Equipment shall nevertheless be part of the Collateral.
"Environmental Laws" shall mean all Federal, State and local
laws, legislation, rules, regulations, codes, ordinances, licenses
and permits (including any conditions imposed therein) held by
Borrower, programs, orders, consent decrees, authorizations,
judicial or administrative decisions, injunctions or agreements
between Borrower and any governmental authority, (a) relating to
pollution and the protection, preservation or restoration of the
environment (including air, water vapor, surface water, ground
water, drinking water, drinking water supply, surface land,
subsurface land, plant and animal life or any other natural
resource), or to human health or the environment, (b) relating to
the exposure to, or the use, storage, recycling, treatment,
generation, manufacture, processing, distribution, transportation,
handling, labeling, production, release or disposal, or threatened
release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term
"Environmental Laws" includes (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the
Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and
Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto) ("RCRA"), the Federal Solid Waste Disposal and
the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and
(iii) any common law or equitable doctrine that could impose
liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any
Hazardous Materials.
"Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, office equipment, computers and
computer hardware and software (whether owned or licensed),
vehicles, tools, parts, furniture, fixtures, goods, all
attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located, including, but not limited
to, dump trucks, vacuum tank trucks, tractors, trailers, vans and
container boxes.
"Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
"Financing Agreements" shall mean, collectively, this Agreement,
the Mortgages and all notes, guarantees, security agreements and
other agreements, documents and instruments now or at any time
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hereafter executed and/or delivered by Borrower or any Obligor in
connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time as set
forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial
Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied,
except that, for purposes of Section 9.13 hereof, GAAP shall be
determined on the basis of such principles in effect on the date
hereof and consistent with those used in the preparation of the
audited financial statements delivered to Lender prior to the date
hereof.
"Hazardous Materials" shall mean any hazardous, toxic or
dangerous substances, materials and wastes, as such terms are
defined in any applicable Environmental Laws, including, without
limitation, hydrocarbons (including naturally occurring or man-made
petroleum and hydrocarbons), flammable explosives, asbestos, urea
formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and
any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any
other substances, materials or wastes that are or become regulated
under any Environmental Law (including, without limitation any that
are or become classified as hazardous or toxic under any
Environmental Law).
"Information Certificate" shall mean the Information Certificate
of Borrower constituting Exhibit A hereto containing material
information with respect to Borrower, its business and assets
provided by or on behalf of Borrower to Lender in connection with
the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.
"Initial Excess Availability" shall mean the amount, as
determined in good faith by Lender, calculated at the time of the
initial loans under this Agreement, equal to: (a) the result of
the calculation set forth in Section 2.1 hereof; minus (b) the sum
of: (i) the amount of all then outstanding and unpaid Obligations,
plus (ii) the aggregate amount of all then outstanding and unpaid
trade payables of Borrower which are more than thirty (30) days
past due as of such time, plus (iii) the amount by which Borrower's
then outstanding checks exceed Borrower's then current balances of
the banks where such checks are drawn, plus (iv) all costs and
expenses payable by Borrower to Lender on the Closing Date of this
Agreement.
"Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired spare parts and supplies of whatsoever kind or
nature, wherever located.
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"Judgment Reserve" shall mean an availability reserve in an
amount equal to any unpaid portion of the judgment against Borrower
in connection with that certain employee suit brought by Richard K.
Larson against Borrower.
"Licensing Payment Reserve" shall mean an availability reserve
calculated on a monthly basis equal to the aggregate amount of
licensing payments payable by Borrower which will accrue during the
month of determination.
"Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from
time to time either (a) issued or opened by Lender for the account
of Borrower or any Obligor or (b) with respect to which Lender has
agreed to indemnify the issuer or guaranteed to the issuer the
performance by Borrower of its obligations to such issuer.
"Loans" shall mean the Revolving Loans and the Term Loan.
"Maximum Credit" shall mean the amount of Eleven Million Dollars
($11,000,000).
"Mortgages" shall mean, individually and collectively, each of
the following (as the same may now or hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced):
(a) the Deed of Trust with Security Agreement, Financing Statement
For Fixture Filing and Assignment of Rents, dated as of even date
herewith, executed by Borrower in favor of Lender, with respect to
the Real Property and related assets of Borrower located in
Chattanooga, Tennessee, and (b) the Mortgage with Security
Agreement, Financing Statement and Assignment of Rents, dated as of
even date herewith, executed by Borrower in favor of Lender, with
respect to the Real Property and related assets of Borrower located
in Oklahoma City, Oklahoma.
"Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included
in the amount thereof and (b) returns, discounts, claims, credits
and allowances of any nature at any time issued, owing, granted,
outstanding, available or claimed with respect thereto.
"Obligations" shall mean the then outstanding amount of any and
all Revolving Loans, the Term Loan, Letter of Credit Accommodations
and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and
expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, whether arising under this
Agreement or otherwise, whether now existing or hereafter arising,
whether arising before, during or after the initial or any renewal
term of this Agreement or after the commencement of any case with
respect to Borrower under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of
interest and other amounts which would accrue and become due but
for the commencement of such case), whether direct or indirect,
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absolute or contingent, joint or several, due or not due, primary
or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender.
"Obligor" shall mean any guarantor, endorser, acceptor, surety
or other person liable on or with respect to the Obligations or who
is the owner of any property which is security for the Obligations,
other than Borrower.
"Orderly Liquidation Value" shall mean, for Equipment, the value
which is attainable through an orderly liquidation of such
Equipment within a time frame of six (6) to twelve (12) months, the
balance being sold at a public auction, as determined by appraisals
in form, scope and methodology acceptable to Lender conducted at
Borrower's expense by an appraiser acceptable to Lender.
"Payment Account" shall have the meaning set forth in Section
6.3 hereof.
"Permanent Reserve" shall mean an availability reserve in an
amount equal to Three Hundred Thousand Dollars ($300,000).
"Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without
limitation, any corporation which elects subchapter S status under
the Internal Revenue Code of 1986, as amended), business trust,
unincorporated association, joint stock corporation, trust, joint
venture or other entity or any government or any agency or
instrumentality or political subdivision thereof.
"Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its
office in Philadelphia, Pennsylvania, as its prime rate, whether or
not such announced rate is the best rate available at such bank.
"Real Property" shall mean all now owned and hereafter acquired
real property of Borrower, together with all buildings, structures,
and other improvements located thereon and all licenses, easements
and appurtenances relating thereto, wherever located, relating to
the real property and related assets of Borrower, as more
particularly described in the Mortgages, located in Oklahoma City,
Oklahoma and Chattanooga, Tennessee.
"Records" shall mean all of Borrower's present and future books
of account of every kind or nature, purchase and sale agreements,
invoices, ledger cards, bills of lading and other shipping
evidence, statements, correspondence, memoranda, credit files and
other data relating to the Collateral or any account debtor,
together with the tapes, disks, diskettes and other data and
software storage media and devices, file cabinets or containers in
or on which the foregoing are stored (including any rights of
Borrower with respect to the foregoing maintained with or by any
other person).
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"Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis
(involving advances, repayments and readvances) as set forth in
Section 2.1 hereof.
"Term Loan" shall mean the term loan made by Lender to Borrower
as provided for in Section 2.3 hereof.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions
contained herein, Lender agrees to make Revolving Loans to Borrower
from time to time in amounts requested by Borrower up to the amount
equal to the sum of:
(i) eighty percent (80%) of the Net Amount of
Eligible Accounts, less
(ii) the sum of: (A) any Availability Reserves, (B)
the Permanent Reserve, (C) the Judgment Reserve, and (D) the
Licensing Payment Reserve.
(b) Lender may, in its good faith discretion, from time to
time, reduce the lending formula with respect to Eligible Accounts
to the extent that Lender determines in good faith that: (A) the
dilution with respect to the Accounts for any period (based on the
ratio of (1) the aggregate amount of reductions in Accounts other
than as a result of payments in cash to (2) the aggregate amount of
total sales) has increased in any material respect or may be
reasonably anticipated to increase in any material respect above
historical levels, or (B) the general creditworthiness of account
debtors has materially declined as determined by Lender in good
faith. In determining whether to reduce the lending formula(s),
Lender may consider events, conditions, contingencies or risks
which are also considered in determining Eligible Accounts or in
establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of
the Loans and the Letter of Credit Accommodations outstanding at
any time shall not exceed the Maximum Credit. In the event that the
outstanding amount of any component of the Loans, or the aggregate
amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set
forth in Section 2.2(c) or the Maximum Credit, as applicable, such
event shall not limit, waive or otherwise affect any rights of
Lender in that circumstance or on any future occasions and Borrower
shall, upon demand by Lender, which may be made at any time or from
time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
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2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions
contained herein, at the request of Borrower, Lender agrees to
provide or arrange for Letter of Credit Accommodations for the
account of Borrower containing terms and conditions acceptable to
Lender and the issuer thereof. Any payments made by Lender to any
issuer thereof and/or related parties in connection with the Letter
of Credit Accommodations shall constitute additional Revolving
Loans to Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged
by any bank or issuer in connection with the Letter of Credit
Accommodations, Borrower shall pay to Lender a letter of credit fee
at a rate equal to one and three quarters percent (1.75%) per annum
on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part
thereof), payable in arrears as of the first day of each succeeding
month. Such letter of credit fee shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and
the obligation of Borrower to pay such fee shall survive the
termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Revolving Loans available to Borrower (subject
to the Maximum Credit and any Availability Reserves) are equal to
or greater than an amount equal to one hundred (100%) percent of
the face amount thereof and all other commitments and obligations
made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, the amount of
Revolving Loans which might otherwise be available to Borrower
shall be reduced by the applicable amount set forth in this Section
2.2(c).
(d) Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other
commitments and obligations made or incurred by Lender in
connection therewith, shall not at any one time exceed Five Hundred
Thousand Dollars ($500,000). At any time an Event of Default
exists or has occurred and is continuing, upon Lender's request,
Borrower will either furnish cash collateral to secure the
reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to
Lender for the Letter of Credit Accommodations, and in either case,
the Revolving Loans otherwise available to Borrower shall not be
reduced as provided in Section 2.2(c) to the extent of such cash
collateral.
(e) Borrower shall indemnify and hold Lender harmless from
and against any and all losses, claims, damages, liabilities, costs
and expenses which Lender may suffer or incur in connection with
any Letter of Credit Accommodations and any documents, drafts or
acceptances relating thereto, including, but not limited to, any
losses, claims, damages, liabilities, costs and expenses due to any
action taken by any issuer or correspondent with respect to any
Letter of Credit Accommodation. Borrower assumes all risks with
respect to the acts or omissions of the drawer under or beneficiary
of any Letter of Credit Accommodation and for such purposes the
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drawer or beneficiary shall be deemed Borrower's agent. Borrower
assumes all risks for, and agrees to pay, all foreign, Federal,
State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents,
drafts or acceptances thereunder. Borrower hereby releases and
holds Lender harmless from and against any acts, waivers, errors,
delays or omissions, whether caused by Borrower, by any issuer or
correspondent or otherwise with respect to or relating to any
Letter of Credit Accommodation. The provisions of this Section
2.2(e) shall survive the payment of Obligations and the termination
or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed
to grant Borrower any right or authority to pledge the credit of
Lender in any manner. Lender shall have no liability of any kind
with respect to any Letter of Credit Accommodation provided by an
issuer other than Lender unless Lender has duly executed and
delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit
Accommodation. Borrower shall be bound by any interpretation made
in good faith by Lender, or any other issuer or correspondent under
or in connection with any Letter of Credit Accommodation or any
documents, drafts or acceptances thereunder, notwithstanding that
such interpretation may be inconsistent with any instructions of
Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of
Default exists or has occurred and is continuing, (A) approve or
resolve any questions of non-compliance of documents, (B) give any
instructions as to acceptance or rejection of any documents or
goods or (C) execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or
documents, and (B) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or
any letters of credit included in the Collateral. Lender may take
such actions either in its own name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other
agreement in favor of any issuer or correspondent relating to any
Letter of Credit Accommodation, shall be deemed to have been
granted or undertaken by Borrower to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in
any application for any Letter of Credit Accommodation, or any
other agreement by Lender in favor of any issuer or correspondent
relating to any Letter of Credit Accommodation, shall be deemed to
have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Term Loan. Lender is making a Term Loan to Borrower in the
original principal amount equal to the lesser of: (i) eighty
percent (80%) of the Orderly Liquidation Value of Eligible
Equipment; and (ii) Five Million Nine Hundred Sixty Thousand
Dollars ($5,960,000). The Term Loan is (a) evidenced by a Term
Promissory Note in such original principal amount duly executed and
delivered by Borrower to Lender concurrently herewith; (b) to be
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repaid, together with interest and other amounts, in accordance
with this Agreement, the Term Promissory Note, and the other
Financing Agreements and (c) secured by all of the Collateral.
2.4 Availability Reserves. All Revolving Loans otherwise
available to Borrower pursuant to the lending formulas and subject
to the Maximum Credit and other applicable limits hereunder shall
be subject to Lender's continuing right to establish and revise
Availability Reserves.
2.5 Joint and Several Liability; Rights of Contribution.
(a) Each Borrower states and acknowledges that: (i)
pursuant to this Agreement, Borrowers desire to utilize their
borrowing potential on a consolidated basis to the same extent
possible if they were merged into a single corporate entity; (ii)
it has determined that it will benefit specifically and materially
from the advances of credit contemplated by this Agreement; (iii)
it is both a condition precedent to the obligations of Lender
hereunder and a desire of Borrowers that each Borrower execute and
deliver to Lender this Agreement; and (iv) Borrowers have requested
and bargained for the structure and terms of and security for the
advances contemplated by this Agreement.
(b) Each Borrower hereby irrevocably and unconditionally:
(i) agrees that it is jointly and severally liable to Lender for
the full and prompt payment of all the Obligations and the full and
prompt performance of all obligations of any Borrower under this
Agreement or any other Loan Document, notwithstanding anything
herein or in any other Loan Document specifying that a particular
Borrower is responsible for a given payment or performance; (ii)
agrees to fully and promptly perform all of its obligations
hereunder with respect to each advance of credit hereunder as if
such advance had been made directly to it; and (iii) agrees as a
primary obligation to indemnify Lender on demand for and against
any loss incurred by Lender as a result of any of the Obligations
of any of the Borrowers being or becoming void, voidable,
unenforceable or ineffective for any reason whatsoever, whether or
not known to Lender or any Person, the amount of such loss being
the amount which Lender would otherwise have been entitled to
recover from any Borrower.
(c) It is the intent of each Borrower that the
indebtedness, obligations and liability hereunder of no one of them
be subject to challenge on any basis. Accordingly, as of the date
hereof, the liability of each Borrower under this Section 2.5,
together with all of its other liabilities to all Persons as of the
date hereof and as of any other date on which a transfer is deemed
to occur by virtue of this Agreement, calculated in amount
sufficient to pay its probable net liabilities on its existing
Indebtedness as the same become absolute and matured ("Dated
Liabilities") is, and is to be, less than the amount of the
aggregate of a fair valuation of its property as of such
corresponding date ("Dated Assets"). To this end each Borrower
under this Section 2.5 (i) grants to and recognizes in the other
Borrower, ratably, rights of subrogation and contribution in the
amount, if any, by which the Dated Assets of such Borrower, but for
the aggregate of subrogation and contribution in its favor
recognized herein, would exceed the Dated Liabilities of such
Borrower or, as the case may be (ii) acknowledges receipt of and
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recognizes its right to subrogation and contribution ratably from
the other Borrower in the amount, if any, by which the Dated
Liabilities of such Borrower, but for the aggregate of subrogation
and contribution in its favor recognized herein, would exceed the
Dated Assets of such Borrower under this Section 2.5. In
recognizing the value of the Dated Assets and the Dated
Liabilities, it is understood that Borrowers will recognize, to at
least the same extent of their aggregate recognition of liabilities
hereunder, their rights to subrogation and contribution hereunder.
It is a material objective of this Section 2.5 that each Borrower
recognizes rights to subrogation and contribution rather than be
deemed to be insolvent (or in contemplation thereof) by reason of
an arbitrary interpretation of its joint and several obligations
hereunder.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest: (i) on the
outstanding principal amount of the Revolving Loans at a rate of
one and one half percent (1.50%) per annum in excess of the Prime
Rate, and (ii) on the outstanding principal balance of the Term
Loans at a rate of one and three quarters percent (1.75%) per annum
in excess of the Prime Rate, except that Borrower shall pay to
Lender interest, at Lender's option, without notice, at the rate of
three and one half percent (3.50%) per annum in excess of the Prime
Rate with respect to the Receivable Loans, and three and three
quarters percent (3.75%) per annum in excess of the Prime Rate with
respect to the Term Loan: (x) on the non-contingent Obligations
for the period from and after the date of termination or non-
renewal hereof, or the date of the occurrence of an Event of
Default, and for so long as such Event of Default is continuing as
determined by Lender and until such time as Lender has received
full and final payment of all such Obligations (notwithstanding
entry of any judgment against Borrower) or such Event of Default is
waived by Lender, and (y) on the Revolving Loans at any time
outstanding in excess of the amounts available to Borrower under
Section 2 (whether or not such excess(es), arise or are made with
or without Lender's knowledge or consent and whether made before or
after an Event of Default). All interest accruing hereunder on and
after the occurrence of any of the events referred to in clauses
(x) and (y) above shall be payable on demand.
(b) Interest shall be payable by Borrower to Lender
monthly in arrears not later than the first day of each calendar
month and shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed. The interest rate shall
increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime
Rate in effect on the last day of the month in which any such
change occurs. No agreements, conditions, provisions or
stipulations contained in this Agreement or any other instrument,
document or agreement between Borrower and Lender or default of
Borrower, or the exercise by Lender of the right to accelerate the
payment of the maturity of principal and interest, or to exercise
any option whatsoever contained in this Agreement or any other
Financing Agreement, or the arising of any contingency whatsoever,
shall entitle Lender to contract for, charge, or receive, in any
event, interest exceeding the maximum rate of interest permitted by
applicable state or federal law in effect from time to time
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(hereinafter "Maximum Legal Rate"). In no event shall Borrower be
obligated to pay interest exceeding such Maximum Legal Rate and all
agreements, conditions or stipulations, if any, which may in any
event or contingency whatsoever operate to bind, obligate or compel
Borrower to pay a rate of interest exceeding the Maximum Legal
Rate, shall be without binding force or effect, at law or in
equity, to the extent only of the excess of interest over such
Maximum Legal Rate. In the event any interest is contracted for,
charged or received in excess of the Maximum Legal Rate ("Excess"),
Borrower acknowledges and stipulates that any such contract,
charge, or receipt shall be the result of an accident and bona fide
error, and that any Excess received by Lender shall be applied,
first, to reduce the principal then unpaid hereunder; second, to
reduce the other Obligations; and third, returned to Borrower, it
being the intention of the parties hereto not to enter at any time
into a usurious or otherwise illegal relationship. Borrower
recognizes that, with fluctuations in the Prime Rate and the
Maximum Legal Rate, such a result could inadvertently occur. By
the execution of this Agreement, Borrower covenants that (i) the
credit or return of any Excess shall constitute the acceptance by
Borrower of such Excess, and (ii) Borrower shall not seek or pursue
any other remedy, legal or equitable, against Lender, based in
whole or in part upon contracting for, charging or receiving of any
interest in excess of the maximum authorized or receiving of any
interest in excess of the maximum authorized by applicable law.
For the purpose of determining whether or not any Excess has been
contracted for, charged or received by Lender, all interest at any
time contracted for, charged or received by Lender in connection
with this Agreement shall be amortized, prorated, allocated and
spread in equal parts during the entire term of this Agreement.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee
the amount of One Hundred Sixty-Five Thousand Dollars ($165,000),
which shall be fully earned as of and payable on the date hereof.
3.3 Servicing Fee. Borrower shall pay to Lender quarterly a
servicing fee in an amount equal to Three Thousand Dollars ($3,000)
in respect of Lender's services for each quarter (or part thereof)
while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the date hereof and on the
first day of each quarter hereafter.
3.4 Commitment Fee. Borrower shall pay to Lender monthly a
commitment fee at a rate equal to one half of one percent (.50%)
percent per annum calculated upon the amount by which the Maximum
Credit less the outstanding amount of the Term Loan exceeds the
average daily principal balance of the outstanding Revolving Loans
and Letter of Credit Accommodations during the immediately
preceding month (or part thereof) while this Agreement is in effect
and for so long thereafter as any of the Obligations are
outstanding, which fee shall be payable on the first day of each
month in arrears.
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SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to
Lender making the initial Loans and providing the initial Letter of
Credit Accommodations hereunder:
(a) Lender shall have received evidence, in form and
substance satisfactory to Lender, that Lender has valid perfected
and first priority security interests in and liens upon the
Collateral and any other property which is intended to be security
for the Obligations or the liability of any Obligor in respect
thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(b) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other
documents as Lender may request to evidence and effectuate the
termination by certain existing lenders to Borrower of their
respective financing arrangements with Borrower and the termination
and release by them, as the case may be, of any interest in and to
any assets and properties of Borrower, duly authorized, executed
and delivered by each of them, including, but not limited to, (i)
Uniform Commercial Code termination statements for all Uniform
Commercial Code financing statements previously filed by any of
them or their predecessors, as secured party and Borrower, as
debtor and (ii) satisfactions and discharges of any mortgages,
deeds of trust or deeds to secure debt by Borrower in favor of such
existing lenders, in form acceptable for recording in the
appropriate government office, other than the Anderson Mortgage;
(c) all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements
shall be satisfactory in form and substance to Lender, and Lender
shall have received all information and copies of all documents,
including, without limitation, records of requisite corporate
action and proceedings which Lender may have requested in
connection therewith, such documents where requested by Lender or
its counsel to be certified by appropriate corporate officers or
governmental authorities;
(d) no material adverse change shall have occurred in the
assets, business or prospects of Borrower since the date of
Lender's latest field examination and no change or event shall have
occurred which would impair the ability of Borrower or any Obligor
to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce
the Obligations or realize upon the Collateral;
(e) Lender shall have completed a field review of the
Records and such other information with respect to the Collateral
as Lender may require to determine the amount of Revolving Loans
available to Borrower, the results of which shall be satisfactory
to Lender, not more than five (5) business days prior to the date
hereof;
(f) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and
other agreements from third persons which Lender may deem necessary
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or desirable in order to permit, protect and perfect its security
interests in and liens upon the Collateral or to effectuate the
provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, acknowledgments by
lessors, mortgagees and warehousemen of Lender's security interests
in the Collateral, waivers by such persons of any security
interests, liens or other claims by such persons to the Collateral
and agreements permitting Lender access to, and the right to remain
on, the premises to exercise its rights and remedies and otherwise
deal with the Collateral;
(g) Lender shall have received evidence of insurance and
loss payee endorsements required hereunder and under the other
Financing Agreements, in form and substance satisfactory to Lender,
and certificates of insurance policies and/or endorsements naming
Lender as loss payee;
(h) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower
with respect to the Financing Agreements and such other matters as
Lender may request;
(i) Lender shall have received, in form, scope and
methodology satisfactory to Lender, Phase I hazardous waste and
environmental audits, upon which Lender is expressly entitled to
rely, conducted by an independent environmental engineering firm at
Borrower's expense, of Borrower's Real Property located in Oklahoma
City, Oklahoma and Chattanooga, Tennessee, confirming (i) Borrower
is in compliance with all material applicable Environmental Laws
with respect to the Real Property covered by such audit, and
(ii) there is no material actual liability of Borrower for any
remedial action with respect to any environmental conditions
applicable to the Real Property covered by such audit;
(j) Lender shall have received, in form and substance
satisfactory to Lender, valid and effective title insurance
commitments issued by companies and agents acceptable to Lender (i)
insuring the priority, amount and sufficiency of the Mortgages,
(ii) insuring against matters that are not disclosed by surveys and
(iii) containing any reasonable, standard and legally available
endorsements, assurances or affirmative coverage requested by
Lender for protection of its interests;
(k) Lender shall have received, in form and substance
satisfactory to Lender, (i) current agings and rollforwards of
Accounts through and including the date hereof, (ii) any and all
supporting documentation necessary to allow Lender to accurately
identify and verify Eligible Accounts at or before the date hereof,
and (iii) all such financial information, budgets, cash flows and
other information respecting the Collateral and the business of
Borrower as Lender may reasonably request;
(l) Lender shall have received a certificate executed by
the Vice President Finance of Borrower setting forth in reasonable
detail the sources and uses of the funds in the transactions
contemplated herein;
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(m) Lender shall have received, in form and substance
satisfactory to Lender, a certificate from Borrower, regarding the
Equipment of Borrower, which includes a listing of all Equipment and
the locations of such Equipment, signed by the Vice President-
Finance, dated as of the date hereof;
(n) Borrower shall have entered into one or more lockbox
and/or blocked account agreements acceptable to Lender;
(o) Lender shall have received, in form and substance
satisfactory to Lender, a closing certificate signed by the President
and Vice President Finance of Borrower dated as of the date hereof,
stating that (i) the representations and warranties set forth in
Section 8 hereof are true and correct on and as of such date, (ii)
all exhibits and schedules in this Agreement and the Other Financing
Agreements are true, correct and complete, (iii) all covenants,
conditions and agreements in this Agreement required to be satisfied
on or before the date hereof have been complied with, and, (iv) no
Event of Default or event or condition which, with notice or passage
of time or both, would constitute an Event of Default, has occurred
or is continuing;
(p) the Initial Excess Availability as determined by
Lender, as of the date hereof, shall be not less than Four Hundred
Thousand Dollars ($400,000) after giving effect to (i) the initial
Loans made or to be made and Letter of Credit Accommodations issued
or to be issued in connection with the initial transactions
hereunder, and (ii) the payment of any and all reasonable out of
pocket fees and expenses incurred by Lender in connection with the
initial transactions hereunder;
(q) Carl B. Anderson, Jr., an individual, shall have
executed and delivered a subordination agreement, which shall be in
form, scope and substance satisfactory to Lender in its sole
discretion;
(r) Lender shall have received an executed copy of the CIT
Note, and The CIT Group/Equipment Finance shall have executed and
delivered a subordination agreement in form and substance
satisfactory to Lender;
(s) the accounts payable and cash of Borrower shall be at
a level and in a condition acceptable to Lender;
(t) Lender shall have received written instructions from
Borrower directing the application of proceeds of the initial Loans
made pursuant to this Agreement;
(u) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed
and delivered to Lender, in form and substance satisfactory to
Lender; and
(v) such other documents and information as Lender may
reasonably request.
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4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrower, including
the initial Loans and Letter of Credit Accommodations and any future Loans
and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been
made on and as of the date of the making of each such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with notice or
passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such
Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right
of set off against, and hereby assigns to Lender as security, the following
property and interests in property, whether now owned or hereafter acquired
or existing, and wherever located (collectively, the "Collateral"):
5.1 Accounts;
5.2 All present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee,
choses in action and other claims and existing and future leasehold interests
in equipment, real estate and fixtures), chattel paper, documents,
instruments, letters of credit, bankers' acceptances and guaranties;
5.3 All present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Borrower now or hereafter held or
received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of Borrower, whether
for safekeeping, pledge, custody, transmission, collection or otherwise, and
all present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
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evidencing, Accounts or other Collateral, including, without limitation,
returned, repossessed and reclaimed goods, and (d) deposits by and property
of account debtors or other persons securing the obligations of account
debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Real Property located in Oklahoma City, Oklahoma and Chattanooga,
Tennessee;
5.7 Records; and
5.8 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties
for loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate
debits and credits as provided in this Agreement, including, without
limitation, fees, charges, costs, expenses and interest. All entries in
the loan account(s) shall be made in accordance with Lender's customary
practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by
Lender for Borrower pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall
be subject to subsequent adjustment by Lender but shall, absent manifest
errors or omissions, be considered correct and deemed accepted by Borrower
and conclusively binding upon Borrower as an account stated except to the
extent that Lender receives a written notice from Borrower of any specific
exceptions of Borrower thereto within thirty (30) days after the date such
statement has been mailed by Lender. Until such time as Lender shall have
rendered to Borrower a written statement as provided above, the balance in
Borrower's loan account(s) shall be presumptive evidence of the amounts due
and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to
Lender into which Borrower shall promptly deposit and direct its account
debtors to directly remit all payments on Accounts and all payments
constituting proceeds of Inventory or other Collateral in the identical form
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in which such payments are made, whether by cash, check or other manner. The
banks at which the Blocked Accounts are established shall enter into an
agreement, in form and substance satisfactory to Lender, providing that all
items received or deposited in the Blocked Accounts are the property of
Lender, that the depository bank has no lien upon, or right to setoff
against, the Blocked Accounts, the items received for deposit therein, or
the funds from time to time on deposit therein and that the depository bank
will wire, or otherwise transfer, in immediately available funds, on a daily
basis, all funds received or deposited into the Blocked Accounts to such bank
account of Lender as Lender may from time to time designate for such purpose
("Payment Account"). Borrower agrees that all payments made to such Blocked
Accounts or other funds received and collected by Lender, whether on the
Accounts or as proceeds of Inventory or other Collateral or otherwise shall
be the property of Lender.
(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) business day following the date of
receipt of immediately available funds by Lender in the Payment Account.
For purposes of calculating the amount of the Revolving Loans available to
Borrower such payments will be applied (conditional upon final collection) to
the Obligations on the business day of receipt by Lender in the Payment
Account, if such payments are received within sufficient time (in accordance
with Lender's usual and customary practices as in effect from time to time)
to credit Borrower's loan account on such day, and if not, then on the next
business day.
(c) Borrower and all of its affiliates, subsidiaries, employees or
agents shall, acting as trustee for Lender, receive, as the property of
Lender, any monies, checks, notes, drafts or any other payment relating to
and/or proceeds of Accounts or other Collateral which come into their
possession or under their control and immediately upon receipt thereof, shall
deposit or cause the same to be deposited in the Blocked Accounts, or remit
the same or cause the same to be remitted, in kind, to Lender. In no event
shall the same be commingled with Borrower's own funds. Borrower agrees to
reimburse Lender on demand for any amounts owed or paid to any bank at which a
Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person in connection with
such Blocked Accounts. The obligation of Borrower to reimburse Lender for
such amounts pursuant to this Section 6.3 shall survive the termination or
non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from Borrower or
for the account of Borrower (including, without limitation, the monetary
proceeds of collections or of realization upon any Collateral) to such of
the Obligations, whether or not then due, in such order and manner as
Lender determines. At Lender's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other
Financing Agreements may be charged directly to the loan account(s) of
Borrower. Borrower shall make all payments to Lender on the Obligations
free and clear of, and without deduction or withholding for or on account
of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
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fees, deductions, withholding, restrictions or conditions of any kind. If
after receipt of any payment of, or proceeds of Collateral applied to the
payment of, any of the Obligations, Lender is required to surrender or
return such payment or proceeds to any Person for any reason, then the
Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force
and effect as if such payment or proceeds had not been received by Lender.
Borrower shall be liable to pay to Lender, and does hereby indemnify and
hold Lender harmless for the amount of any payments or proceeds surrendered
or returned by Lender pursuant to this Section 6.4. This Section 6.4 shall
remain effective notwithstanding any contrary action which may be taken by
Lender in reliance upon such payment or proceeds. This Section 6.4 shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or
other instructions received from anyone purporting to be an officer of
Borrower or other authorized person or, at the discretion of Lender, if
such Loans are necessary to satisfy any Obligations. All requests for Loans
or Letter of Credit Accommodations hereunder shall specify the date on which
the requested advance is to be made or Letter of Credit Accommodations
established (which day shall be a business day) and the amount of the
requested Loan. Requests received after 11:00 a.m. Central Time on any day
shall be deemed to have been made as of the opening of business on the
immediately following business day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have
been made to, and at the request of and for the benefit of, Borrower when
deposited to the credit of Borrower or otherwise disbursed or established
in accordance with the instructions of Borrower or in accordance with
the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the Loans
provided by Lender to Borrower hereunder only for: (a) payments to each of
the persons listed in the disbursement direction letter furnished by Borrower
to Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter
of Credit Accommodations provided by Lender to Borrower pursuant to the
provisions hereof shall be used by Borrower only for general operating,
working capital and other proper corporate purposes of Borrower not otherwise
prohibited by the terms hereof. None of the proceeds will be used, directly
or indirectly, for the purpose of purchasing or carrying any margin security or
for the purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose
which might cause any of the Loans to be considered a "purpose credit" within
the meaning of Regulation G of the Board of Governors of the Federal Reserve
System, as amended.
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SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis
as required by Lender, a schedule of Accounts; (b) on a monthly basis or more
frequently as Lender may request, (i) roll forward inventory reports, and
(ii) agings of accounts payable, (c) upon Lender's request, (i) copies of
customer statements and credit memos, remittance advices and reports, and
copies of deposit slips and bank statements, (ii) copies of shipping and
delivery documents, and (iii) copies of purchase orders, invoices and
delivery documents for Inventory and Equipment acquired by Borrower;
(d) agings of accounts receivable on a monthly basis or more frequently
as Lender may request; and (e) such other reports as to the Collateral as
Lender shall reasonably request from time to time. If any of Borrower's
records or reports of the Collateral are prepared or maintained by an
accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow
Lender's instructions with respect to further services at any time that an
Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material delay
in Borrower's performance of any of its obligations to any account debtor or
the assertion of any material claims, offsets, defenses or counterclaims by
any account debtor, or any material disputes with account debtors, or any
settlement, adjustment or compromise thereof, (ii) all material adverse
information relating to the financial condition of any account debtor that
the Borrower becomes aware of, and (iii) any event or circumstance which,
to Borrower's knowledge would cause Lender to consider any then existing
Accounts as no longer constituting Eligible Accounts. No credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted
to any account debtor without Lender's consent, except in the ordinary course
of Borrower's business in accordance with practices and policies previously
disclosed in writing to Lender. So long as no Event of Default exists or
has occurred and is continuing, Borrower shall settle, adjust or compromise
any claim, offset, counterclaim or dispute with any account debtor. At any
time that an Event of Default exists or has occurred and is continuing,
Lender shall, at its option, have the exclusive right to settle, adjust or
compromise any claim, offset, counterclaim or dispute with account debtors
or grant any credits, discounts or allowances.
(b) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement,
(iii) no credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor except as reported to
Lender in accordance with this Agreement and except for credits, discounts,
allowances or extensions made or given in the ordinary course of Borrower's
business in accordance with practices and policies previously disclosed to
Lender, (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except
as reported to Lender in accordance with the terms of this Agreement, and
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(v) none of the transactions giving rise thereto will violate any applicable
State or Federal laws or regulations, all documentation relating thereto
will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms.
(c) Lender shall have the right at any time or times, in Lender's name
or in the name of a nominee of Lender, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(d) Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time
acquire immediately upon Borrower's receipt thereof, except as Lender may
otherwise agree.
(e) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any
duty to do so, and Lender shall not be liable for its failure to collect
or enforce the payment thereof nor for the negligence of its agents or
attorneys with respect thereto and (iv) take whatever other action Lender
may deem necessary or desirable for the protection of its interests. At
any time that an Event of Default exists or has occurred and is continuing,
at Lender's request, all invoices and statements sent to any account debtor
shall state that the Accounts and such other obligations have been assigned
to Lender and are payable directly and only to Lender and Borrower shall
deliver to Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts
as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory owned by Borrower:
(a) Borrower shall at all times maintain inventory records reasonably
satisfactory to Lender, keeping correct and accurate records of Inventory,
Borrower's cost therefor and daily withdrawals therefrom and additions
thereto; (b) Borrower shall conduct a physical count of the Inventory at
least once each year, but at any time or times as Lender may request on or
after an Event of Default, and promptly following such physical inventory shall
supply Lender with a report in the form and with such specificity as may be
reasonably satisfactory to Lender concerning such physical count; (c)
Borrower shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of Lender, except for sales
of Inventory in the ordinary course of Borrower's business, the use and
consumption of such Inventory in the ordinary maintenance of Borrower's
Equipment constituting motor vehicles, and except to move Inventory directly
from one location set forth or permitted herein to another such location; (d)
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Borrower shall use, store and maintain the Inventory, with all reasonable care
and caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including, but not limited to, the
requirements of the Federal Fair Labor Standards Act of 1938, as amended and
all rules, regulations and orders related thereto); (e) Borrower assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; and (f) Borrower shall keep the
Inventory in good and useable condition.
7.4 Equipment Covenants. With respect to the Equipment: (a) Borrower
shall, at its expense, no more than once in any twelve (12) month period, but
at any time or times as Lender may request on or after the occurrence and
continuance of an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Equipment in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender;
(b) Borrower shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (c) Borrower shall
use the Equipment with all reasonable care and caution and in accordance
with applicable standards of any insurance and in conformity with all
applicable laws; (d) the Equipment is and shall be used in Borrower's
business and not for personal, family, household or farming use; (e)
Borrower shall not remove any Equipment from the locations set forth or
permitted herein, except to the extent necessary to have any Equipment repaired
or maintained in the ordinary course of the business of Borrower or to move
Equipment directly from one location set forth or permitted herein to another
such location and except for the movement or location of motor vehicles or
rolloff boxes used by or for the benefit of Borrower in the ordinary course
of business; (f) the Equipment is now and shall remain personal property
and Borrower shall not permit any of the Equipment to be or become a part of
or affixed to real property; (g) Borrower assumes all responsibility and
liability arising from the use of the Equipment; and (h) Borrower shall
provide Lender, within one hundred twenty (120) days after the initial
funding of the Loans hereunder, all certificates of title with respect to
motor vehicles constituting part of the Equipment, noting Lender's lien on
the face of such certificates of title and satisfying such other conditions
as may be required for perfection of Lender's security interests in such
Equipment.
7.5 Power of Attorney. Borrower hereby irrevocably designates and appoints
Lender (and all persons designated by Lender) as Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to:
(a) at any time an Event of Default or event which with notice or passage of
time or both would constitute an Event of Default exists or has occurred and
is continuing (i) demand payment on Accounts or other proceeds of Inventory
or other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect
any Account or other Collateral, (iv) sell or assign any Account upon such
terms, for such amount and at such time or times as the Lender deems
advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi)
discharge and release any Account, (vii) prepare, file and sign Borrower's
name on any proof of claim in bankruptcy or other similar document against
an account debtor, (viii) notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by Lender,
and open and dispose of all mail addressed to Borrower, and (ix) do all
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acts and things which are reasonably necessary, in Lender's determination,
to fulfill Borrower's obligations under this Agreement and the other
Financing Agreements, and (b) at any time to (i) take control in any manner
of any item of payment to Borrower in connection with an Account, or
proceeds thereof, (ii) have access to any lockbox or postal box into which
Borrower's mail is deposited, (iii) endorse Borrower's name upon any items
of payment or proceeds thereof relating to an Account and deposit the same
in the Lender's account for application to the Obligations, (iv) endorse
Borrower's name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Account or any goods
pertaining thereto or any other Collateral, (v) sign Borrower's name on
any verification of Accounts and notices thereof to account debtors and
(vi) execute in Borrower's name and file any UCC financing statements or
amendments thereto relating to the Collateral. Borrower hereby releases
Lender and its officers, employees and designees from any liabilities
arising from any act or acts under this power of attorney and in furtherance
thereof, whether of omission or commission, including, without limitation,
as a result of Lender's own negligence, except as a result of Lender's own
gross negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal
any judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with
respect to the Collateral and (c) pay any amount, incur any expense or
perform any act which, in Lender's judgment, is necessary or appropriate
to preserve, protect, insure or maintain the Collateral and the rights of
Lender with respect thereto. Lender may add any amounts so expended to
the Obligations and charge Borrower's account therefor, such amounts
to be repayable by Borrower on demand. Lender shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing
so, be deemed to have assumed any obligation or liability of Borrower. Any
payment made or other action taken by Lender under this Section shall be
without prejudice to any right to assert an Event of Default hereunder and
to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at
the cost and expense of Borrower, Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours, or at
any time if an Event of Default exists or has occurred and is continuing,
for the purposes of inspecting, verifying and auditing the Collateral
and all of Borrower's books and records, including, without limitation, the
Records, and Borrower shall promptly furnish to Lender such copies of such
books and records or extracts therefrom as Lender may request, and use
during normal business hours such of Borrower's personnel, equipment,
supplies and premises as may be reasonably necessary for the foregoing
and if an Event of Default exists or has occurred and is continuing for the
collection of Accounts and realization of other Collateral.
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SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which shall
survive the execution and delivery of this Agreement), the truth and accuracy
of which are a continuing condition of the making of Loans and providing
Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is a
corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of
the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure
to so qualify would not have a material adverse effect on Borrower's
financial condition, results of operation or business, on a consolidated
basis, or the rights of Lender in or to any of the Collateral. The
execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder are all
within Borrower's corporate powers, have been duly authorized and are not
in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any
indenture, agreement or undertaking to which Borrower is a party or by
which Borrower or its property are bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms. Borrower
does not have any subsidiaries except as set forth on the Information
Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered
by Borrower to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrower as
at the dates and for the periods set forth therein. Except as disclosed
in any interim financial statements furnished by Borrower to Lender prior to
the date of this Agreement, there has been no material adverse change in the
assets, liabilities, properties and financial condition of Borrower, on a
consolidated basis, since the date of the most recent audited financial
statements furnished by Borrower to Lender prior to the date of this
Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located
only at the address set forth below and its only other places of business
and the only other locations of Collateral, if any, are the addresses set
forth in the Information Certificate, subject to the right of Borrower to
establish new locations in accordance with Section 9.2 below, except for
motor vehicles and rolloff boxes that constitute Collateral. The
Information Certificate correctly identifies any of such locations
which are not owned by Borrower and sets forth the owners and/or operators
thereof.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing
Agreements constitute valid and perfected first priority liens and security
interests in and upon the Collateral subject only to the liens indicated
on Schedule 8.4 hereto and the other liens permitted under Section 9.8
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hereof. Borrower has good and marketable title to all of its properties
and assets subject to no liens, mortgages, pledges, security interests,
encumbrances or charges of any kind, except those granted to Lender and
such others as are specifically listed on Schedule 8.4 hereto or permitted
under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Borrower has
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued
and available to Borrower and with respect to which adequate reserves have
been set aside on its books. Adequate provision has been made for the
payment of all accrued and unpaid Federal, State, county, local, foreign and
other taxes whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, there
is no present investigation by any governmental agency pending, or to
Borrower's knowledge threatened, against or affecting Borrower, its assets
or business and there is no action, suit, proceeding or claim by any Person
pending, or to the best of Borrower's knowledge threatened, against Borrower
or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against
Borrower would result in any material adverse change in the assets,
business or prospects of Borrower, on a consolidated basis, or would
materially impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a
party or of Lender to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Except as set
forth in Schedules 8.7 or 8.10 hereto, Borrower is not in default in any
material respect under, or in violation in any material respect of any of
the terms of, any agreement, contract, instrument, lease or other commitment
to which it is a party or by which it or any of its assets are bound, which
default would have a material adverse effect on Borrower on a consolidated
basis, andBorrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits,
approvals and orders of any foreign, Federal, State or local governmental
authority, in which the failure to comply would have a material adverse
effect on Borrower on a consolidated basis.
8.8 Accuracy and Completeness of Information. All information furnished
by or on behalf of Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all
information on the Information Certificate is true and correct in all
material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make
such information not misleading. No event or circumstance has occurred
which has had or could reasonably be expected to have a material adverse
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affect on the business, assets or prospects of Borrower on a consolidated
basis, which has not been fully and accurately disclosed to Lender in
writing or in this Agreement.
8.9 Survival of Warranties; Cumulative. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to
have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to
have been relied on by Lender regardless of any investigation made or
information possessed by Lender. The representations and warranties set
forth herein shall be cumulative and in addition to any other representations
or warranties which Borrower shall now or hereafter give, or cause to be
given, to Lender.
8.10 Environmental Compliance.
(a) Except as set forth on Schedule 8.10 hereto, Borrower has not
generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates any
applicable Environmental Law or any license, permit, certificate, approval
or similar authorization thereunder and the operations of Borrower complies
in all material respects with all Environmental Laws and all licenses,
permits, certificates, approvals and similar authorizations thereunder, the
failure of which would have a material adverse effect on Borrower on a
consolidated basis.
(b) Except as set forth on Schedule 8.10 hereto, there has been no
pending, or to the best of Borrower's knowledge threatened, investigation,
proceeding, complaint, order, directive, claim, citation or notice by any
governmental authority, with respect to any non-compliance with or violation
of the requirements of any Environmental Law by Borrower or the release,
spill or discharge, threatened or actual, of any Hazardous Material or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental
matter, which would have a material adverse effect on the Borrower on a
consolidated basis or its business, operations or assets on a consolidated
basis.
(c) Except as set forth on Schedule 8.10 hereto, Borrower, on a
consolidated basis, has no actual material liability in connection with a
release, spill or discharge, threatened or actual, of any Hazardous Materials
or the generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials.
(d) Except as set forth on Schedule 8.10 hereto, Borrower has all
licenses, permits, certificates, approvals or similar authorizations required
to be obtained or filed in connection with the operations of Borrower under
any Environmental Law in which the failure to have or obtain would have a
material adverse effect on Borrower on a consolidated basis and all of such
licenses, permits, certificates, approvals or similar authorizations are
valid and in full force and effect.
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SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve, renew
and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed
to be conducted in which the failure to maintain would have a material
adverse effect on Borrower on a consolidated basis. Borrower shall give
Lender thirty (30) days prior written notice of any proposed change in its
corporate name, which notice shall set forth the new name and Borrower
shall deliver to Lender a copy of the amendment to the Certificate of
Incorporation of Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation of Borrower as soon
as it is available.
9.2 New Collateral Locations. Borrower may open any new location within
the continental United States provided Borrower gives Lender thirty (30) days
prior written notice of the intended opening of any such new location and
executes and delivers, or causes to be executed and delivered, to Lender
such agreements, documents, and instruments as Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location, including, without limitation, UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Except as set forth on Schedules 8.7, 8.10 and 9.3 hereto, Borrower
shall, at all times, comply in all material respects with all laws, rules,
regulations, licenses, permits, approvals and orders applicable to it and
duly observe all requirements of any Federal, State or local governmental
authority, including the Employee Retirement Security Act of 1974, as
amended, the Occupational Safety and Health Act of 1970, as amended, the Fair
Labor Standards Act of 1938, as amended, and all statutes, rules,
regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including all of the Environmental
Laws, in which the failure to do so would have a material adverse effect on
the Borrower on a consolidated basis.
(b) Borrower shall establish and maintain, at its expense, an environmental
management system to assure and monitor its continued compliance with all
Environmental Laws in all of its operations in accordance with the require-
ments of all applicable Environmental Laws and laws and regulations of the
U.S. Department of Transportation, which system shall include written
policies and procedures, as applicable, best environmental management
practices, and environmental training for all relevant employees, and shall,
only upon Lender s reasonable request, cause an annual written operations
compliance review to be conducted by an experienced outside environmental
consultant familiar with the requirements of Environmental Laws. At
Lender's request, copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be
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promptly furnished, or caused to be furnished, by Borrower to Lender.
Borrower shall take prompt and appropriate action to respond to any non-
compliance with any of the Environmental Laws and shall regularly report
to Lender on such response.
(c) Borrower shall give both oral and written notice to Lender as soon
as possible upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event involving the release,
spill or discharge, threatened or actual, of any material amount of Hazardous
Material or (ii) any investigation, proceeding, complaint, order, directive,
claims, citation or notice with respect to: (A) any material non-compliance
with or violation of any material amount of Environmental Law by Borrower or
(B) the release, spill or discharge, threatened or actual, of any Hazardous
Material or (C) any other environmental, health or safety matter, which
materially and adversely affects Borrower on a consolidated basis or its
business, operations or assets on a consolidated basis.
(d) Without limiting the generality of the foregoing, whenever Lender
reasonably determines that there is a material non-compliance, or any
condition which requires any action by or on behalf of Borrower in order to
avoid any material non-compliance, with any Environmental Law, of which non-
compliance would result in a material adverse effect on the Borrower on a
consolidated basis, Borrower shall, at Lender's request and Borrower's
expense: (i) cause an independent environmental engineer acceptable to Lender
to conduct such tests of the site where Borrower's non-compliance or alleged
non-compliance with such Environmental Laws has occurred as to such non-
compliance and prepare and deliver to Lender a report as to such non-
compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
(e) Borrower shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and
assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly
or indirectly arising out of or attributable to Borrower's use, generation,
manufacture, reproduction, storage, release, threatened release, spill,
discharge, disposal or presence of a Hazardous Material, including the costs
of any required or necessary repair, cleanup or other remedial work with
respect to any property of Borrower and the preparation and implementation
of any closure, remedial or other required plans. All representations,
warranties, covenants and indemnifications in this Section 9.3 shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books. Borrower shall be liable for any tax or
penalties imposed on Lender as a result of the financing arrangements
provided for herein and Borrower agrees to indemnify and hold Lender harmless
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with respect to the foregoing, and to repay to Lender on demand the amount
thereof, and until paid by Borrower such amount shall be added and deemed
part of the Loans, provided, that, nothing contained herein shall be
construed to require Borrower to pay any income or franchise taxes
attributable to the income of Lender from any amounts charged or paid
hereunder to Lender. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established
reputation engaged in the same or similar businesses and similarly situated,
except that Borrower self insures all loss due to collision on its motor
vehicles. Said policies of insurance shall be satisfactory to Lender as to
form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance,
and, if Borrower fails to do so, Lender is authorized, but not required, to
obtain such insurance at the expense of Borrower. All policies shall provide
for at least thirty (30) days prior written notice to Lender of any
cancellation or reduction of coverage and that Lender may act as attorney
for Borrower in obtaining, and at any time an Event of Default exists or
has occurred and is continuing, adjusting, settling, amending and canceling
such insurance. Borrower shall cause Lender to be named as a loss payee, as
its interest may appear, and an additional insured (but without any liability
for any premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies
in form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be
payable to Lender as its interests may appear and further specify that Lender
shall be paid regardless of any act or omission by Borrower or any of its
affiliates. At its option, prior to the occurrence and continuance of an
Event of Default, any insurance proceeds received by Lender at any time shall
be applied to the cost of repairs or replacement of Collateral. After the
occurrence and continuance of an Event of Default, any insurance proceeds
received by the Lender at any time shall be applied to payment of the
Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its subsidiaries
(if any) in accordance with GAAP and Borrower shall furnish or cause to be
furnished to Lender: (i) within thirty (30) days after the end of each
fiscal month, monthly unaudited consolidated financial statements, and, if
Borrower has any subsidiaries, unaudited consolidating financial statements
(including in each case balance sheets, statements of income and loss and
statements of shareholders' equity), all in reasonable detail, fairly
presenting the financial position and the results of the operations of
Borrower and its subsidiaries as of the end of and through such fiscal
month and (ii) within one hundred five (105) days after the end of each
fiscal year, audited consolidated financial statements and, if Borrower
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has any subsidiaries, audited consolidating financial statements of
Borrower and its subsidiaries (including in each case balance sheets,
statements of income and loss, statements of cash flow and statements of
shareholders' equity), and the accompanying notes thereto, all in
reasonable detail, fairly presenting the financial position and the
results of the operations of Borrower and its subsidiaries as of the end
of and for such fiscal year, together with the opinion of independent
certified public accountants, which accountants shall be an independent
accounting firm selected by Borrower and reasonably acceptable to Lender,
that such financial statements have been prepared in accordance with GAAP,
and present fairly the results of operations and financial condition of
Borrower and its subsidiaries as of the end of and for the fiscal year
then ended.
(b) Borrower shall promptly notify Lender in writing of the details of
(i) any loss, damage, investigation, action, suit, proceeding or claim
relating to a material portion of the Collateral or any other property which
is security for the Obligations or which would result in any material adverse
change in Borrower's business, properties, assets, goodwill or financial
condition on a consolidated basis, and (ii) the occurrence of any Event of
Default or event which, with the passage of time or giving of notice or
both, would constitute an Event of Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which
Borrower sends to its stockholders generally and copies of all reports and
registration statements which Borrower files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by such accountants or auditors on
behalf of Borrower and to disclose to Lender such information as they may
have regarding the business of Borrower. Any documents, schedules,
invoices or other papers delivered to Lender may be destroyed or otherwise
disposed of by Lender one (1) year after the same are delivered to Lender,
except as otherwise designated by Borrower to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, directly or indirectly, (a) merge into or with or consolidate
with any other Person or permit any other Person to merge into or with or
consolidate with it, or (b) sell, assign, lease, transfer, abandon or
otherwise dispose of any stock or indebtedness to any other Person or any
of its assets to any other Person (except for (i) sales of Inventory in
the ordinary course of business and (ii) the disposition of worn-out or
obsolete Equipment or Equipment no longer used in the business of
Borrower so long as (A) any proceeds are paid to Lender and (B) such
sales do not involve Equipment having an aggregate fair market value in
excess of Two Hundred Thousand Dollars ($200,000) for all such Equipment
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disposed of in any fiscal year of Borrower), or (c) form or acquire any
subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do
any of the foregoing, except that nothing contained herein shall limit or
prohibit Ametech from selling, transferring or assigning its capital stock
under any employee stock option plan or under the proposed Asset Purchase
Agreement to be entered into among Borrower, Sullivan Trucking Company,
Inc. and Roy Sullivan.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except: (a) liens and
security interests of Lender; (b) liens securing the payment of taxes,
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to
Borrower and with respect to which adequate reserves have been set
aside on its books; (c) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of Borrower's
business to the extent: (i) such liens secure indebtedness which is not
overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost
and expense and at the sole risk of the insurer or being contested in good
faith by appropriate proceedings diligently pursued and available to
Borrower, in each case prior to the commencement of foreclosure or
other similar proceedings and with respect to which adequate reserves have
been set aside on its books; (d) zoning restrictions, easements, licenses,
covenants and other restrictions affecting the use of real property which
do not interfere in any material respect with the use of such real
property or ordinary conduct of the business of Borrower as presently
conducted thereon or materially impair the value of the real property which
may be subject thereto; (e) purchase money security interests in Equipment
(including capital leases) and purchase money mortgages on real estate not
to exceed Twenty Thousand Dollars ($20,000) in the aggregate at any one
time outstanding so long as such security interests and mortgages do not
apply to any property of Borrower other than the Equipment or real estate
so acquired, and the indebtedness secured thereby does not exceed the cost
of the Equipment or real estate so acquired, as the case may be; (f) liens
and security interests of Carl B. Anderson, Jr. under the Anderson Mortgage,
which liens and security interests are, in all respects, subject and
subordinate in priority to the liens and security interests of Lender
pursuant to the subordination agreement between Lender and Carl B.
Anderson, Jr., dated as of even date herewith; (g) the security interests
and liens set forth on Schedule 8.4 hereto; (h) liens or deposits under
workmen's compensation, unemployment insurance, Social Security and other
similar laws; (i) liens relating to obligations with respect to
surety, appeal bonds, performance bonds, bids, tenders and other
obligations of like nature, (j) mechanic, materialmen and other like liens
arising in the ordinary course of business securing obligations which are
not overdue or being contested in good faith by appropriate proceedings
and adequately reserved against; and (k) statutory liens in favor of
landlords.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations
or indebtedness, except:
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(a) the Obligations;
(b) trade obligations and normal accruals in the ordinary course of
business, or with respect to which Borrower is contesting in good faith the
amount or validity thereof by appropriate proceedings diligently pursued
and available to Borrower and with respect to which adequate reserves have
been set aside on its books;
(c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in
violation of any other provision of this Agreement;
(d) indebtedness of Borrower to Carl B. Anderson, Jr., an individual,
evidenced by that certain Amended and Restated Promissory Note, dated as of
November 1, 1996, issued by Borrower payable to Carl B. Anderson, Jr., an
individual, which indebtedness is subject and subordinate in right of payment
to the right of Lender to receive the prior final payment and satisfaction
in full of all of the Obligations; provided, that: (i) the principal
amount of such indebtedness shall not exceed One Hundred Ninety-Five Thousand
Dollars ($195,000), less the aggregate amount of all repayments, repurchases
or redemptions, whether optional or mandatory in respect thereof, plus
interest thereon at the rate provided for in such agreement or instrument
as in effect on the date hereof, (ii) Borrower shall not, directly or
indirectly, make any payments in respect of such indebtedness, including, but
not limited to, any prepayments or other non-mandatory payments, except
that until an Event of Default, or event which with notice or passage of
time or both would constitute an Event of Default, shall exist or have
occurred and be continuing, Borrower may make regularly scheduled payments of
interest in accordance with the terms of such agreement or instrument as in
effect on the date hereof, (ii) Borrower shall not, directly or indirectly,
(A) amend, modify, alter or change any terms of such indebtedness or any
agreement, document or instrument related thereto, or (B) redeem, retire,
defease, purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) Borrower
shall furnish to Lender all notices, demands or other materials concerning
such indebtedness either received by Borrower or on its behalf, promptly
after receipt thereof, or sent by Borrower or on its behalf, concurrently
with the sending thereof, as the case may be;
(e) indebtedness of Borrower to The CIT Group/Equipment Finance,
evidenced by the CIT Note, which indebtedness is subject and subordinate
in right of payment to the right of Lender to receive the prior final
payment and satisfaction in full of all of the Obligations; provided, that:
(i) the principal amount of such indebtedness shall not exceed Two Hundred
Twenty-Five Dollars ($225,000), less the aggregate amount of all repayments,
repurchases or redemptions, whether optional or mandatory in respect thereof,
plus interest thereon at the rate provided for in such agreement or
instrument as in effect on the date hereof, (ii) the interest on such note
shall not begin to accrue until August 30, 1998, (iii) Borrower shall not,
directly or indirectly, make any payments in respect of such indebtedness,
including, but not limited to, any prepayments or other non-mandatory
payments, except that until an Event of Default, or event which with notice
or passage of time or both would constitute an Event of Default, shall exist
or have occurred and be continuing, Borrower may, beginning August 30, 1998,
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make regularly scheduled payments of interest and principal in monthly
amounts not to exceed $10,000 in accordance with the terms of such agreement
or instrument as in effect on the date hereof; provided, that, after giving
effect to such payments Borrower shall have availability to borrow an
additional $600,000 under Section 2 hereof, (iv) Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change any terms of such
indebtedness or any agreement, document or instrument related thereto, or
(B) redeem, retire, defease, purchase or otherwise acquire such indebtedness,
or set aside or otherwise deposit or invest any sums for such purpose, and
(v) Borrower shall furnish to Lender all notices, demands or other materials
concerning such indebtedness either received by Borrower or on its behalf,
promptly after receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be;
(f) indebtedness of Borrower as described in the Judgment Reserve;
(g) indebtedness resulting from a judgment (other than as described
in (e) above) rendered against the Borrower that is being appealed by the
Borrower in good faith and in a timely manner for which an adequate reserve
has been recorded in Borrower's books or which is fully covered by insurance;
(h) indebtedness set forth on Schedule 9.9 hereof; and
(i) other indebtedness not otherwise permitted in this Section 9.9
in an amount not to exceed One Hundred Thousand Dollars ($100,000) at any
one time.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly
or indirectly, make any loans or advance money or property to any person,
or invest in (by capital contribution, dividend or otherwise) or purchase
or repurchase the stock or indebtedness or all or a substantial part of
the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of
the foregoing, except: (a) the endorsement of instruments for collection or
deposit in the ordinary course of business; (b) investments in: (i) short-
term direct obligations of the United States Government, (ii) negotiable
certificates of deposit issued by any bank satisfactory to Lender, payable
to the order of the Borrower or to bearer and delivered to Lender, and
(iii) commercial paper rated A1 or P1; provided, that, as to any of the
foregoing, unless waived in writing by Lender, Borrower shall take such
actions as are deemed necessary by Lender to perfect the security interest
of Lender in such investments; (c) the guarantees set forth in the
Information Certificate; (d) loans, advances and investments between the
Borrowers subject to the restrictions of Section 9.12 hereof; and (e)
Borrower may make additional loans, advances or investments in and to
subsidiaries that are not Borrowers in an amount not to exceed Five
Thousand Dollars ($5,000) in the aggregate per annum. It is recognized
that Ametech and all of its subsidiaries (including, but not limited to,
ETS) file consolidated income tax returns and payroll tax returns and pay
such, if any, on a consolidated basis, and that such filings and payment of
taxes in connection therewith shall not be considered a loan, investment,
guarantee or capital contribution for purposes of this Section 9.10.
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9.11 Dividends and Redemptions. Borrower shall not, directly or indirectly,
declare or pay any dividends on account of any shares of class of capital
stock of Borrower now or hereafter outstanding, or set aside or otherwise
deposit or invest any sums for such purpose, or redeem, retire, defease,
purchase or otherwise acquire any shares of any class of capital stock (or
set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or
make any other distribution (by reduction of capital or otherwise) in
respect of any such shares or agree to do any of the foregoing, except
as set forth on Schedule 9.11 hereto.
9.12 Transactions with Affiliates. Borrower shall not enter into any
transaction for the purchase, sale or exchange of property or the rendering
of any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon
fair and reasonable terms no less favorable to the Borrower than Borrower
would obtain in a comparable arm's length transaction with an unaffiliated
person; provided, however, that nothing in this Section 9.12 shall limit or
restrict transactions between one Borrower and another Borrower so long as
such transactions do not exceed Five Thousand Dollars ($5,000) in the
aggregate in any one year.
9.13 Adjusted Net Worth. Borrower shall, at all times, maintain Adjusted
Net Worth of not less than the following:
<TABLE>
<CAPTION>
Applicable Period Minimum Adjusted Net Worth
__________________ ___________________________
<S> <C>
July 18, 1997 through
July 31, 1998 $2,900,000
August 1, 1998 and thereafter $3,200,000
</TABLE>
9.14 Costs and Expenses. Borrower shall pay to Lender on demand all
reasonable out-of-pocket costs, expenses, filing fees and taxes paid or
payable in connection with the preparation, negotiation, execution, delivery,
recording, administration, collection, liquidation, enforcement and defense
of the Obligations, Lender's rights in the Collateral, this Agreement, the
other Financing Agreements and all other documents related hereto or
thereto, including any amendments, supplements or consents which may
hereafter be contemplated (whether or not executed) or entered into in
respect hereof and thereof, including, but not limited to: (a) all costs
and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles
taxes and mortgage recording taxes and fees, if applicable); (b) subject to
the terms of this Agreement, all costs, expenses and fees for title
insurance and other insurance premiums, environmental audits, surveys,
assessments, engineering reports and inspections, appraisal fees and search
fees; (c) costs and expenses of remitting loan proceeds, collecting checks
and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Lender's customary charges and fees with respect
thereto; (d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (e) costs and expenses
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<PAGE>
of preserving and protecting the Collateral; (f) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing
the security interests and liens of Lender, selling or otherwise realizing
upon the Collateral, and otherwise enforcing the provisions of this Agreement
and the other Financing Agreements or defending any claims made or threatened
against Lender arising out of the transactions contemplated hereby and
thereby (including, without limitation, preparations for and consultations
concerning any such matters); (g) all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the rate of Six Hundred Dollars ($600)
per person per day for Lender's examiners in the field and office; and (h)
the reasonable fees and disbursements of counsel (including legal assistants)
to Lender in connection with any of the foregoing.
9.15 After Acquired Real Property. If Borrower hereafter acquires any
title to the Real Property, fixtures or any other property that is of the
kind or nature described in the Mortgages and such Real Property, fixtures
or other property at any one location has a fair market value in an amount
equal to or greater than Fifty Thousand Dollars ($50,000) (or if an Event
of Default has occurred and is continuing, then regardless of the fair
market value of such assets), without limiting any other rights of Lender,
or duties or obligations of Borrower, upon Lender's request, Borrower shall
execute and deliver to Lender a mortgage, deed of trust or deed to secure
debt, as Lender may determine, in form and substance substantially similar
to the Mortgages and as to any provisions relating to specific state laws
satisfactory to Lender and in form appropriate for recording in the real
estate records of the jurisdiction in which such Real Property or other
property is located granting to Lender a first and only lien and mortgage
on and security interest in such Real Property, fixtures or other property
(except as Borrower would otherwise be permitted to incur hereunder or
under the Mortgages or as otherwise consented to in writing by Lender) and
such other agreements, documents and instruments as Lender may require in
connection therewith.
9.16 Further Assurances. At the request of Lender at any time and from time
to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary
or proper to evidence, perfect, maintain and enforce the security interests
and the priority thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Financing
Agreements. Lender may at any time and from time to time request a
certificate from an officer of Borrower representing that all conditions
precedent to the making of Loans and providing Letter of Credit
Accommodations contained herein are satisfied. In the event of such request
by Lender, Lender may, at its option, cease to make any further Loans or
provide any further Letter of Credit Accommodations until Lender has
received such certificate and, in addition, Lender has determined that such
conditions are satisfied. Where permitted by law, Borrower hereby authorizes
Lender to execute and file one or more UCC financing statements signed only
by Lender.
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<PAGE>
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay when due any of the Obligations, (ii)
Borrower fails to perform any of the terms, covenants, conditions or
provisions contained in Section 9.6 of this Agreement and such failure to
perform is not cured to Lender s satisfaction within five (5) days after
the sooner to occur of Borrower s receipt of notice of such failure from
Lender or the date on which such failure becomes known to any officer of
Borrower, or (iii) Borrower fails to perform any of the other terms,
covenants, conditions or provisions contained in this Agreement or any of
the other Financing Agreements;
(b) any representation, warranty or statement of fact made by Borrower
to Lender in this Agreement, the other Financing Agreements or any other
agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect as of the
date when made or furnished;
(c) except as previously disclosed to Lender in this Agreement, any
judgment for the payment of money is rendered against Borrower in excess of
Twenty-Five Thousand Dollars ($25,000) in any one case or in excess of
Twenty-Five Thousand Dollars ($25,000) in the aggregate and shall remain
undischarged or unvacated for a period in excess of thirty (30) days
or execution shall at any time not be effectively stayed, or any judgment
other than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against Borrower or any of their assets which could
have a material adverse effect on Borrower on a consolidated basis;
(d) Borrower becomes insolvent (however defined or evidenced; provided,
however, that a Borrower shall not be deemed insolvent hereunder due to being
jointly and severally liable in connection with the Obligations), makes an
assignment for the benefit of creditors, makes or sends notice of a bulk
transfer or calls a meeting of its creditors or principal creditors;
(e) a case or proceeding under the bankruptcy laws of the United States
of America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction now or hereafter in effect (whether at law or in equity)
is filed against Borrower all or any part of its properties and such petition
or application is not dismissed within thirty (30) days after the date of its
filing or Borrower shall file any answer admitting or not contesting such
petition or application or indicates its consent to, acquiescence in or
approval of, any such action or proceeding or the relief requested is granted
sooner;
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(f) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a
law or equity) is filed by Borrower for all or any part of its property; or
(g) any default by Borrower under any agreement, document or instrument
relating to any indebtedness for borrowed money owing to any person other than
Lender, or any capitalized lease obligations, contingent indebtedness in
connection with any guarantee, letter of credit, indemnity or similar type of
instrument in favor of any person other than Lender, in any case in an amount
in excess of Twenty-Five Thousand Dollars ($25,000), which default continues
for more than the applicable cure period, if any, with respect thereto, or any
default by Borrower, except such defaults pending as of the date of this
Agreement and disclosed in this Agreement or any Schedule or certificate
attached hereto, under any material contract, lease, license or other obligation
to any person other than Lender, which default continues for more than the
applicable cure period, if any, with respect thereto;
(h) any change in the controlling ownership of Borrower;
(i) the indictment or threatened indictment of Borrower under any
criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against Borrower, pursuant to which statute or proceedings
the penalties or remedies sought or available include forfeiture of any
material amount of the property of Borrower constituting Collateral;
(j) there shall be a material adverse change in the business, assets
or prospects of Borrower on a consolidated basis after the date hereof; or
(k) there shall be an event of default under any of the other Financing
Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this Agree-
ment, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without
notice to or consent by Borrower or any Obligor, except as such notice or
consent is expressly provided for hereunder or required by applicable law. All
rights, remedies and powers granted to Lender hereunder, under any of the
other Financing Agreements, the Uniform Commercial Code or other applicable
law, are cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions,
and shall include, without limitation, the right to apply to a court of
equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender
may, at any time or times, proceed directly against Borrower or any Obligor
to collect the Obligations without prior recourse to the Collateral.
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<PAGE>
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of
any Event of Default described in Sections 10.1(e) and 10.1(f), all
Obligations shall automatically become immediately due and payable), (ii)
with or without judicial process or the aid or assistance of others, enter
upon any premises on or in which any of the Collateral may be located and
take possession of the Collateral or complete processing, manufacturing and
repair of all or any portion of the Collateral, (iii) require Borrower, at
Borrower's expense, to assemble and make available to Lender any part or all
of the Collateral at any place and time designated by Lender, (iv) collect,
foreclose, receive, appropriate, setoff and realize upon any and all
Collateral, (v) remove any or all of the Collateral from any premises on or
in which the same may be located for the purpose of effecting the sale,
foreclosure or other disposition thereof or for any other purpose, (vi) sell,
lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including, without limitation, entering into contracts with
respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may
deem reasonable, for cash, upon credit or for future delivery, with the
Lender having the right to purchase the whole or any part of the Collateral
at any such public sale, all of the foregoing being free from any right or
equity of redemption of Borrower, which right or equity of redemption is
hereby expressly waived and released by Borrower and/or (vii) terminate
this Agreement. If any of the Collateral is sold or leased by Lender upon
credit terms or for future delivery, the Obligations shall not be reduced
as a result thereof until payment therefor is finally collected by Lender.
If notice of disposition of Collateral is required by law, five (5) days
prior notice by Lender to Borrower designating the time and place of any
public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable
notice thereof and Borrower waives any other notice. In the event Lender
institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of
any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition
of the Collateral to payment of the Obligations, in whole or in part and
in such order as Lender may elect, whether or not then due. Borrower shall
remain liable to Lender for the payment of any deficiency with interest at
the highest rate provided for herein and all costs and expenses of collection
or enforcement, including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event
of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice,
(i) cease making Loans or arranging for Letter of Credit Accommodations or
reduce the lending formulas or amounts of Revolving Loans and Letter of
Credit Accommodations available to Borrower and/or (ii) terminate any
provision of this Agreement providing for any future Loans or Letter of
Credit Accommodations to be made by Lender to Borrower and/or (iii)
terminate this Agreement.
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<PAGE>
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
(a) The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of Texas (without giving
effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the non-
exclusive jurisdiction of the State of Texas and the United States District
Court for the Northern District of Texas and waive any objection based on
venue or forum non conveniens with respect to any action instituted therein
arising under this Agreement or any of the other Financing Agreements
or in any way connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each case
whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Lender
shall have the right to bring any action or proceeding against Borrower or
its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth
on the signature pages hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the
U. S. mails, or, at Lender's option, by service upon Borrower in any other
manner provided under the rules of any such courts. Within thirty (30)
days after such service, Borrower shall appear in answer to such process,
failing which Borrower shall be deemed in default and judgment may
be entered by Lender against Borrower for the amount of the claim and other
relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF
THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE
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OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
(e) LENDER SHALL NOT HAVE ANY LIABILITY TO BORROWER
(WHETHER IN TORT, CONTRACT, EQUITY OR OTHERWISE) FOR LOSSES
SUFFERED BY BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN
ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS
CONTEMPLATED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION HEREWITH, UNLESS IT IS DETERMINED BY A
FINAL AND NON-APPEALABLE JUDGMENT OR COURT ORDER BINDING ON
LENDER, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN ANY
SUCH LITIGATION, LENDER SHALL BE ENTITLED TO THE BENEFIT OF THE
REBUTTABLE PRESUMPTION THAT IT ACTED IN GOOD FAITH AND WITH THE
EXERCISE OF ORDINARY CARE IN THE PERFORMANCE BY IT OF THE TERMS
OF THIS AGREEMENT.
11.2 Waiver of Notices. Borrower hereby expressly waives demand, present-
ment, notice of intent to accelerate, notice of acceleration, protest and
notice of protest and notice of dishonor with respect to any and all
instruments and commercial paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and
notices of any kind or nature whatsoever with respect to the Obligations,
the Collateral and this Agreement, except such as are expressly provided
for herein. No notice to or demand on Borrower which Lender may elect to
give shall entitle Borrower to any other or further notice or demand in
the same, similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course
of conduct, but only by a written agreement signed by an authorized officer
of Lender. Lender shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its rights, powers
and/or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. Any such waiver shall be enforceable only to
the extent specifically set forth therein. A waiver by Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to
or waiver of any such right, power and/or remedy which Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom
or relating hereto or thereto.
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11.5 INDEMNIFICATION. BORROWER SHALL INDEMNIFY AND HOLD
LENDER, AND ITS DIRECTORS, AGENTS, EMPLOYEES AND COUNSEL,
HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES, COSTS OR EXPENSES IMPOSED ON, INCURRED BY OR ASSERTED
AGAINST ANY OF THEM IN CONNECTION WITH ANY LITIGATION,
INVESTIGATION, CLAIM OR PROCEEDING COMMENCED OR THREATENED
RELATED TO THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY,
ENFORCEMENT, PERFORMANCE OR ADMINISTRATION OF THIS AGREEMENT,
ANY OTHER FINANCING AGREEMENTS, OR ANY UNDERTAKING OR
PROCEEDING RELATED TO ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR ANY ACT, OMISSION, EVENT OR TRANSACTION RELATED OR
ATTENDANT THERETO, INCLUDING, WITHOUT LIMITATION, ANY AND ALL
LOSSES, CLAIMS, DAMAGES, LIABILITIES, COSTS OR EXPENSES, CAUSED BY
THE LENDER AND LENDER'S DIRECTORS' AGENTS, EMPLOYEES AND
COUNSEL, AND FURTHER INCLUDING, WITHOUT LIMITATION, AMOUNTS PAID
IN SETTLEMENT, COURT COSTS, AND THE FEES AND EXPENSES OF COUNSEL,
EXCEPT FOR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART
OF LENDER OR ITS AGENTS OR AFFILIATES. TO THE EXTENT THAT THE
UNDERTAKING TO INDEMNIFY, PAY AND HOLD HARMLESS SET FORTH IN
THIS SECTION 11.5 MAY BE UNENFORCEABLE BECAUSE IT VIOLATES ANY
LAW OR PUBLIC POLICY, BORROWER SHALL PAY THE MAXIMUM PORTION
WHICH IT IS PERMITTED TO PAY UNDER APPLICABLE LAW TO LENDER IN
SATISFACTION OF INDEMNIFIED MATTERS UNDER THIS SECTION. THE
FOREGOING INDEMNITY SHALL SURVIVE THE PAYMENT OF THE
OBLIGATIONS AND THE TERMINATION OR NON-RENEWAL OF THIS
AGREEMENT.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date two (2)
years from the date hereof (the "Renewal Date"), and from year to year
thereafter, unless sooner terminated pursuant to the terms hereof; provided,
that, Lender may, at its option, extend the Renewal Date to the date one
(1) year from the Renewal Date by giving Borrower notice at least sixty
(60) days prior to the second anniversary of this Agreement. Lender or
Borrower (subject to Lender's right to extend the Renewal Date as provided
above) may terminate this Agreement and the other Financing Agreements
effective on the Renewal Date or on the anniversary of the Renewal Date in
any year by giving to the other party at least sixty (60) days prior
written notice; provided, that, this Agreement and all other Financing
Agreements must be terminated simultaneously. Upon the effective date of
termination or non-renewal of the Financing Agreements, Borrower shall pay to
Lender, in full, all outstanding and unpaid Obligations and shall furnish
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cash collateral to Lender in such amounts as Lender determines are reasonably
necessary to secure Lender from loss, cost, damage or expense, including
reasonable attorneys' fees and legal expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of Credit
Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such cash collateral shall be remitted by wire
transfer in Federal funds to such bank account of Lender, as Lender may,
in its discretion, designate in writing to Borrower for such purpose.
Interest shall be due until and including the next business day, if the
amounts so paid by Borrower to the bank account designated by Lender are
received in such bank account later than 12:00 noon, Dallas, Texas time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies
of Lender hereunder, under the other Financing Agreements and applicable law,
shall remain in effect until all such Obligations have been fully and finally
discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end of
the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's
lost profits as a result thereof, Borrower agrees to pay to Lender, upon
the effective date of such termination, an early termination fee in the
amount set forth below if such termination is effective in the period
indicated:
Amount Period
______ __________
(i) Four Percent (4%) of First twelve (12) month period
Maximum Credit following the Effective Date
(ii) Two Percent (2%) of Second twelve (12) month period
Maximum Credit following the Effective Date
(iii) One Percent (1%) of Third twelve (12) month period
Maximum following the Effective Date
if this Agreement is renewed
pursuant to Section 12.1(a).
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower
agrees that it is reasonable under the circumstances currently existing.
The early termination fee provided for in this Section 12.1 shall be
deemed included in the Obligations.
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12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower
at its chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision, and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt;
if by nationally recognized overnight courier service with instructions to
deliver the next business day, one (1) business day after sending; and
if by certified mail, return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed
as though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be
construed and enforced only to such extent as shall be permitted by
applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure
to the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document
referred to herein or therein without the prior written consent of Lender.
Lender may, after notice to Borrower, assign its rights and delegate its
obligations under this Agreement and the other Financing Agreements and
further may assign, or sell participations in, all or any part of the Loans,
the Letter of Credit Accommodations or any other interest herein to another
financial institution or other person, in which event, the assignee or
participant shall have, to the extent of such assignment or participation,
the same rights and benefits as it would have if it were the Lender
hereunder, except as otherwise provided by the terms of such assignment or
participation.
12.5 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
12.6 NONAPPLICABILITY OF ARTICLE 5069-15.01 ET SEQ. BORROWER AND
LENDER HEREBY AGREE THAT, EXCEPT FOR SECTION 15.10(B) THEREOF, THE
PROVISIONS OF TEX. REV. CIV. STAT. ANN. ART. 5069-15.01 ET SEQ. (VERNON
1987) (REGULATING CERTAIN REVOLVING CREDIT LOANS AND REVOLVING
TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR ANY OF
THE OTHER FINANCING AGREEMENTS.
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12.7 WAIVER OF CONSUMER RIGHTS. EACH BORROWER HEREBY WAIVES
ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER
PROTECTION ACT, SECTION 17.41 ET. SEQ. BUSINESS & COMMERCE CODE, A
LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER
CONSULTATION WITH AN ATTORNEY OF SUCH BORROWER'S OWN
SELECTION, BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. EACH
BORROWER EXPRESSLY WARRANTS AND REPRESENTS THAT SUCH
BORROWER (a) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION RELATIVE TO LENDER, AND (b) HAS BEEN REPRESENTED BY LEGAL
COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.
BORROWER HAS READ AND UNDERSTANDS
SECTION 12.7:
KW
________ (INITIALS OF
AUTHORIZED OFFICER OF AMETECH)
KW
_________ (INITIALS OF
AUTHORIZED OFFICER OF ETS)
12.8 ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE
OTHER FINANCING AGREEMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES, AND THE SAME MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
BORROWER AND LENDER EACH
READ AND UNDERSTAND THIS
SECTION 12.8:
KW
________________ (INITIALS OF AUTHORIZED OFFICER OF AMETECH)
KW
________________ (INITIALS OF AUTHORIZED OFFICER OF ETS)
GE
________________ (INITIALS OF AUTHORIZED OFFICER OF LENDER)
46
<PAGE>
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWER
_______ ________
CONGRESS FINANCIAL CORPORATION AMETECH, INC.,
(SOUTHWEST) an Oklahoma corporation
By: /s/ Gill Elmore By: /s/ Kerry Willingham
__________________________ ______________________________
Name: Gill Elmore Name: Kerry Willingham
________________________ ____________________________
Title: V. P. Title: V. P. Finance
________________________ ___________________________
Address:
_______ ENVIRONMENTAL TRANSPORTATION
1201 Main Street, Suite 1625 SERVICES, INC.,
Dallas, Texas 75250 an Oklahoma corporation
Attn: Loan Administrator
By: /s/ Kerry Willingham
_____________________________
Name: Kerry Willingham
___________________________
Title: V. P. Finance
___________________________
Chief Executive Office:
______________________
1813 S.E. 25th Street
Oklahoma City, Oklahoma 73129
47
UNSECURED PROMISSORY NOTE
$225,000 Oklahoma City, Oklahoma
Effective July 18, 1997
FOR VALUE RECEIVED, the undersigned, AMETECH, Inc., an Oklahoma
corporation and ENVIRONMENTAL TRANSPORTATION SERVICES, INC., an
Oklahoma corporation (collectively "Maker"), jointly and severally
promise to pay to the order of THE CIT GROUP/EQUIPMENT FINANCING,
INC., a New York corporation, at 300 S. Grand Avenue, 3rd Floor in
Los Angeles, California 90071, or at such other place as may be
designated in writing by the holder of this Note, the principal sum
of TWO HUNDRED TWENTY-FIVE THOUSAND AND 00/100 DOLLARS
($225,000.00), together with interest thereon from the date hereof
at the fixed rate of ten percent (10%) per annum on the unpaid
balance, both principal and interest due and payable in lawful money
of the United States of America as follows:
Monthly payments of principal and interest will be
payable commencing on August 30, 1998, in accordance with
and subject to the restrictions, limitations and condi-
tions as described in that certain Subordination Agree-
ment ("Subordination Agreement") dated July 17, 1997, by
and among The CIT Group/Equipment Financing, Inc., the
Maker, and Congress Financial Corporation (Southwest), a
Texas corporation, until this Note is paid in full. The
Subordination Agreement is attached hereto as Exhibit
"A." All interest will be computed at a per diem charge
for the actual number of days elapsed on the basis of a
year consisting of three hundred sixty-five (365) days.
The entire unpaid principal balance of this Note plus all
accrued and unpaid interest thereon will be due and
payable in the form of a lump sum balloon payment within
fifteen (15) business days of the latter of the (a) date
upon which payment in full of any and all Senior Indebt-
edness (as defined in the Subordination Agreement) is
made and (b) the date upon which the Subordination
Agreement is terminated pursuant to its terms.
The undersigned agrees that if, and as often as, this Note is
placed in the hands of an attorney for collection, or to defend or
enforce any of the holder's rights hereunder, the undersigned will
pay to such holder its reasonable attorneys' fees, together with all
court costs and other expenses paid by such holder, subject to, and
except as otherwise provided by, the terms of the Subordination
Agreement.
On the failure of the undersigned to pay any amount when due
hereunder, or on the breach of any provision of this Note, or on the
default in payment of any other indebtedness owing by the under-
signed to the holder hereof, at the option of the holder, the entire
indebtedness hereby evidenced will immediately become due, payable
and collectible, regardless of the date of maturity hereof, and
forthwith, without further notice or demand, subject to, and except
as otherwise provided by, the terms of the Subordination Agreement.
<PAGE>
Notice of nonpayment, presentment, protest, notice of dishonor, or
other notice of any kind or nature, all of which are expressly
waived by maker and all endorsers, sureties, guarantors and all
other persons who may become liable for all or any part of this
obligation.
This Note is to be construed according to the laws of the
State of Oklahoma. The undersigned hereby waives all objections to
venue and consents to the jurisdiction of any state or federal court
located in Oklahoma County, Oklahoma in connection with any action
instituted by the holder of this Note by reason of or arising out
of the execution, delivery or performance of this Note.
The undersigned will have the right at any time and from time
to time to prepay the unpaid principal amount of the Note in whole
or in part without premium or penalty, subject to, and except as
otherwise provided by, the terms of the Subordination Agreement
From time to time the maturity date of this Note may be
extended, or this Note may be renewed, in whole or in part, or a new
Note of different form may be substituted for this Note and/or the
rate of interest may be changed or changes may be made in consider-
ation of loan extensions, and the holder, from time to time, may
waive or surrender, either in whole or in part, rights, guarantees,
security interests, or liens, given for the benefit of the holder
in connection with the payment and the securing of the payment of
this Note but no such occurrence shall in any manner affect, limit,
modify or otherwise impair any rights, guarantees or security of the
holder not specifically waived, released or surrendered in writing,
nor shall Maker or any guarantor or endorser or any other person who
is or might be liable hereon, either primarily or secondarily, be
released from such liability by reason of the occurrence of any such
event. The holder hereof, from time to time, shall have the
unlimited right to release any person who is or might be liable
hereon and such release shall not affect or discharge the liability
of any other party who is or might be liable hereon. Maker and each
surety, endorser and guarantor hereof (whether or not any such
suretyship, endorsement or guaranty or the execution thereof appears
on this Note or is by separate instrument) hereby specifically
consents and agrees to any renewal of this Note or to any extension,
acceleration or postponement of the time of payment or any other
indulgence, to any substitution, exchange or resale of any security
given for the payment hereof and to the release of any party
primarily or secondarily liable hereon without prejudice to the
holder and without notice to Maker or any such endorser, guarantor
or surety, any such notice being hereby specifically waived.
Nothing contained herein shall be construed, expressly or impliedly,
to obligate the holder hereof to make any further or future advance
or loan to Maker whether requested or not.
The indebtedness evidenced by this Note represents the only
existing indebtedness of either AMETECH, Inc. or Environmental
Transportation Services, Inc. in favor of The CIT Group/Equipment
Financing, Inc. and there are no other sums of money due or owing
to The CIT Group/Equipment Financing by either AMETECH, Inc. or
Environmental Transportation Services, Inc.
-2-
<PAGE>
The makers, endorsers, sureties, guarantors and all other
persons who may become liable for all or any part of this obligation
severally waive presentment for payment, protest and notice of
nonpayment. Said parties consent to any extension of time (whether
one or more) of payment hereof, release of all or any part of the
security for payment hereof, or release of any party liable for
payment of this obligation. Any such extension or release may be
made without notice to any party and without discharging said
party's liability hereunder.
THIS NOTE IS GIVEN BY THE UNDERSIGNED AND ACCEPTED BY THE HOLDER
HEREOF PURSUANT TO AND SUBJECT TO THE TERMS OF THE SUBORDINATION
AGREEMENT, WHICH HAS BEEN NEGOTIATED, CONSUMMATED AND IS TO BE
PERFORMED IN OKLAHOMA CITY, OKLAHOMA COUNTY, OKLAHOMA. MAKER SHALL
MAKE NO PAYMENT AND HOLDER SHALL NEITHER DEMAND NOR ACCEPT ANY
PAYMENT HEREUNDER EXCEPT IN ACCORDANCE WITH AND SUBJECT TO THE TERMS
OF THE SUBORDINATION AGREEMENT.
ENVIRONMENTAL TRANSPORTATION
SERVICES, INC.,
an Oklahoma corporation
By: /s/ Kerry Willingham
__________________________________
Vice President - Finance
AMETECH, INC.,
an Oklahoma corporation
By:
__________________________________
Vice President - Finance
ISTE:\A-C\AMETECH\10Q\397\EXHIB10.1
-3-
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is made as of
July 17, 1997, by and among The CIT Group/Equipment Financing,
Inc., a New York corporation (the "Junior Creditor"), Ametech,
Inc., an Oklahoma corporation ("Ametech"), Environmental
Transportation Services, Inc., an Oklahoma corporation ("ETS";
Ametech and ETS are collectively and individually referred to
herein as the "Borrower"), and Congress Financial Corporation
(Southwest), a Texas corporation ("Lender").
RECITALS
1. Lender has made, or in the future may make, credit
accommodations available to Borrower pursuant to the terms and
provisions of that certain Loan and Security Agreement, of even
date herewith, by and between Lender and Borrower (as amended,
modified, extended and restated from time to time, the "Loan
Agreement").
2. Borrower has executed that certain Unsecured Promissory
Note, effective July 18, 1997, in the stated principal amount of
$225,000 payable to the Junior Creditor, a copy of which is
attached hereto as Exhibit A (the "Junior Note").
3. In order to induce Lender to make the credit
accommodations described above available to Borrower, Junior
Creditor has agreed to subordinate certain of its rights and claims
now existing or hereafter arising against Borrower to the rights
and claims of Lender now existing or hereafter arising against
Borrower, all in accordance with the terms and provisions of this
Agreement.
4. The parties hereto are entering into this Agreement in
order to set forth their agreements as to payment of the Senior
Indebtedness (hereinafter defined) and the Junior Indebtedness
(hereinafter defined) and their agreements as to certain other
matters.
NOW, THEREFORE, for and in consideration of the premises and
the mutual agreements contained herein, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms defined
above shall have their respective meanings set forth above and the
following terms shall have the following meanings:
1
<PAGE>
"Collateral" shall mean any and all property which
now constitutes or hereafter will constitute collateral or
other security for payment of the Senior Indebtedness pursuant
to the Senior Documents or otherwise.
"Distribution" by any Person shall mean (a) with respect
to any stock or partnership interest issued by such Person,
the retirement, redemption, purchase or other acquisition for
value of any such stock or partnership interest, (b) the
declaration or payment of any dividend or other distribution
on or with respect to any such stock or partnership interest,
(c) any loan or advance by such Person to, or other investment
by such Person in, the holder of any such stock or partnership
interest, and (d) any other payment (other than ordinary
salaries to employees or advances made in the ordinary course
of business to employees for travel or other expenses incurred
in the ordinary course of business) by such Person to or for
the benefit of the holder of any such stock or partnership
interest.
"Junior Documents" shall mean any and all agreements,
documents and instruments evidencing, governing or executed or
delivered in connection with the Junior Indebtedness,
including, without limitation, the Junior Note.
"Junior Indebtedness" shall mean any and all
indebtedness, obligations and liabilities of every kind and
character of either Borrower now or hereafter owing to Junior
Creditor, including, without limitation, the indebtedness
evidenced and to be evidenced by the Junior Documents, whether
such indebtedness, obligations and liabilities are direct or
indirect, primary or secondary, joint, several or joint and
several, fixed or contingent and whether incurred by either
Borrower as maker, endorser, guarantor or otherwise.
"Person" shall mean and include an individual, a
partnership, a corporation, a business trust, a joint stock
company, a trust, an unincorporated association, a joint
venture or other entity or a governmental authority.
"Proceeds" shall have the meaning assigned to it under
the Uniform Commercial Code, shall also include products (as
defined in the Uniform Commercial Code), and, in any event,
shall include, but not be limited to (a) any and all proceeds
of any insurance, indemnity, warranty, letter of credit or
guaranty or collateral security payable to any grantor from
time to time with respect to any of the Collateral, (b) any
and all payments (in any form whatsoever) made or due and
payable to the owner of the Collateral from time to time in
connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by
any governmental body, authority, bureau or agency (or any
Person acting under color of governmental authority) and (c)
any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"Senior Creditor" shall mean Lender and its successors
and assigns.
2
<PAGE>
"Senior Documents" shall mean any and all agreements,
documents and instruments evidencing, governing or executed or
delivered in connection with the Senior Indebtedness,
including, without limitation, the Loan Agreement.
"Senior Indebtedness" shall mean any and all
indebtedness, obligations and liabilities of every kind and
character of Borrower now or hereafter owing to Senior
Creditor, whether such indebtedness, obligations and
liabilities are direct or indirect, primary or secondary,
joint, several or joint and several, fixed or contingent and
whether incurred by Borrower as maker, endorser, guarantor or
otherwise, including, without limitation, any and all
indebtedness, obligations and liabilities of Borrower now or
hereafter owing to Senior Creditor pursuant to or evidenced by
the Senior Documents.
ARTICLE II
RIGHTS IN COLLATERAL
2.1 Priorities Regarding Collateral. The Junior
Indebtedness is unsecured and shall not be secured, by any
lien on or securing interest in any assets or properties of
Borrower, or otherwise, in any way during the term of this
Agreement. Without affecting Junior Creditors obligations
set forth in this Agreement not to obtain any lien or security
interest, any and every lien and security interest in the
Collateral in favor of or held for the benefit of the Senior
Creditor has and shall have priority over any lien or security
interest that Junior Creditors might have or acquire in the
Collateral notwithstanding any statement or provision
contained in the Junior Documents or otherwise to the contrary
and irrespective of the time or order of filing or recording
of financing statements, deeds of trust, mortgages or other
notices of security interests, liens or assignments granted
pursuant thereto, and irrespective of anything contained in
any filing or agreement to which any party hereto or its
respective successors and assigns may now or hereafter be a
party, and irrespective of the ordinary rules for determining
priorities under the Uniform Commercial Code or under any
other law governing the relative priorities of secured
creditors.
2.2 Management of Collateral. Senior Creditor shall
have the exclusive right to manage, perform and enforce the
terms of the Senior Documents with respect to the Collateral,
to exercise and enforce all privileges and rights thereunder
according to its discretion and the exercise of its business
judgment including, but not limited to, the exclusive right to
take or retake possession of the Collateral and to hold,
prepare for sale, process, sell, lease, dispose of, or
liquidate the Collateral, pursuant to a foreclosure or
otherwise. Notwithstanding anything to the contrary contained
in any document, instrument or agreement evidencing, securing
or otherwise executed in connection with the incurrence of the
Junior Indebtedness, only the Senior Creditor shall have the
right to restrict or permit, or approve or disapprove, the
sale, transfer or other disposition of Collateral.
Accordingly, should Senior Creditor elect to exercise its
rights and remedies with respect to any of the Collateral,
Senior Creditor may proceed to do so without regard to any
interest of Junior Creditor, and Junior Creditor waives any
claims that it may have against Senior Creditor for any
disposition of the Collateral. Without affecting Junior
Creditor's obligations set forth in this Agreement not to
obtain any lien on or security interest in any of the
3
<PAGE>
Collateral, Junior Creditor agrees, whether or not a default
has occurred in the payment of any indebtedness or the
performance of any other obligations to it, that any liens on
and security interests in the Collateral or any portion
thereof that it might have or acquire shall automatically be
fully released ipso facto as to all indebtedness and other
obligations secured thereby owing to Junior Creditor if and
when Senior Creditor releases its lien in and security
interest on such Collateral or any portion thereof.
ARTICLE III
PROCEEDS
3.1 Distribution of Proceeds of Collateral. At any time
during which all or any part of the Senior Indebtedness
remains outstanding, and whether or not the same is then due
and payable, the Proceeds of any sale, disposition or other
realization by Senior Creditor or other party hereto (or any
agent therefor) upon all or any part of the Collateral shall
be applied in the following order of priorities irrespective
of the application of any rule of law or the defect or
impairment of any Senior Document, Junior Document or security
interest, lien or assignment thereunder:
first, to the payment of all costs and expenses of
Senior Creditor and/or its agent or agents
(including, without limitation, the reasonable
fees and expenses of counsel to Senior Creditor)
incurred in connection with the collection of
such Proceeds or the protection of the rights
and interests of Senior Creditor therein;
second, to the payment in full of all Senior
Indebtedness in such order as Senior Creditor
determine in its sole discretion; and
finally, to pay any surplus then remaining to the
owner of the Collateral or its successors or
assigns or as a court of competent juris-
diction may direct.
3.2 Contingent Obligations. For purposes of
distributing the Proceeds of Collateral pursuant to this
Article III, the portion of Senior Indebtedness consisting of
loans or advances not yet made by Senior Creditor to Borrower
under the Senior Documents shall be considered Senior
Indebtedness then outstanding, and the Senior Creditor shall
have the right to retain, in a cash collateral account, cash
collateral equal to the amount thereof which Senior Creditor
determines, in its sole discretion, may rise or exist from
time to time.
3.3 Holding of Proceeds in Trust. In the event any
party to this Agreement other than Senior Creditor receives
the Proceeds of the Collateral, such party shall be deemed to
hold all of such Proceeds in trust for the benefit of Senior
Creditor until the proper application thereof in accordance
with Section 3.1 hereof. No party to this Agreement shall
seek to challenge the validity, enforceability, priority or
perfection of any of the Senior Documents if the purpose or
effect thereof would in any manner defeat or delay the
distribution of the Proceeds of any Collateral in the manner
set forth in Section 3.1 hereof.
4
<PAGE>
ARTICLE IV
SUBORDINATION
Junior Creditor covenants and agrees that the Junior
Indebtedness, howsoever evidenced and whether now existing or
hereafter incurred, shall be subordinate and junior in right
of payment, to the extent and in the manner hereinafter set
forth, of all Senior Indebtedness:
(a) The holder of the Senior Indebtedness shall first be
finally and irrevocably paid in cash an aggregate amount equal
to the principal thereof and termination fees, if any,
interest at the time due thereon, and all other costs, fees,
expenses and/or obligations now or hereafter owing thereunder
and all commitments of Senior Creditor shall have terminated,
before any payment or Distribution of any character, whether
in cash, securities or other property, shall be made on
account of the Junior Indebtedness or otherwise to or for the
benefit of the Junior Creditor; and any payment or
Distribution of any character, whether in cash, securities or
other property, which would otherwise, but for the provisions
of this Article IV, be payable or deliverable in respect of
the Junior Indebtedness or otherwise shall be paid or
delivered directly to the holder of the Senior Indebtedness
(or its duly authorized representatives), until all the Senior
Indebtedness shall have been paid in full and all commitments
of Senior Creditor shall have terminated. No interest on the
Junior Note shall accrue until August 30, 1998.
(b) Notwithstanding the provisions of subparagraph (a)
of this Article IV, Borrower may make monthly payments of
principal of not more than $10,000 monthly plus accrued
interest beginning August 30, 1998; provided, that, as
conditions precedent to Borrower being permitted to make and
Junior Creditor being permitted to accept and retain such
payment (i) Borrower shall have delivered to Senior Creditor
a certificate in form and substance acceptable to Senior
Creditor executed by an officer of Borrower acceptable to
Senior Creditor stating that no Event of Default (as defined
in the Loan Agreement) or event or condition which with the
giving of notice or passage of time or both would constitute
an Event of Default (a Default ) has occurred and is
continuing; (ii) no Event of Default or Default shall have
occurred and be continuing, and (iii) Borrower shall have
availability to borrow an additional $600,000 under Section 2
of the Loan Agreement after giving effect to such payment.
(c) The Junior Creditor agrees to promptly notify the
Senior Creditor in writing of any default or event of default
on any Junior Indebtedness or otherwise or under any of the
Junior Documents and further agree not to exercise any right
or remedy or take any enforcement action with respect to any
default or event of default on any of the Junior Indebtedness
or otherwise or under any of the Junior Documents until such
time as the Senior Indebtedness has been paid in full and all
commitments of Senior Creditor shall have terminated. Without
limiting any of the foregoing, any failure of Borrower to
perform any of its obligations to the Junior Creditor as a
result of any of the prohibitions, restrictions or limitations
set forth in this Agreement shall not constitute the basis for
5
<PAGE>
a default or event of default on any Junior Indebtedness or
under any Junior Documents.
(d) No reimbursement, payment, direct or indirect, or
disbursement of other property or assets of Borrower shall be
made by Borrower on account of the Junior Indebtedness or
otherwise or received, accepted, retained or applied by the
Junior Creditor (except for the account and benefit of Senior
Creditor, which shall be held in trust for Senior Creditor, or
except as specifically permitted in Subparagraph (b) of this
Article IV) until such time as the Senior Indebtedness has
been finally and irrevocably paid in full in cash and all
commitments of Senior Creditor shall have terminated.
(e) Without affecting the Junior Creditor s obligations
set forth in this Agreement not to exercise any remedy as set
forth in this Article IV under the circumstances described
herein, in the event that any Junior Creditor exercises any
remedy permitted under applicable law with respect to any of
the assets or properties of Borrower or receives any other
payment of any character, whether in cash, securities, or
other properties, that would, but for the provisions of this
Article IV, be payable or deliverable in respect of the Junior
Indebtedness, such cash, securities or other properties shall
be held in trust for the benefit of the holder of the Senior
Indebtedness and shall be paid or delivered to the holder of
the Senior Indebtedness (or its authorized representatives),
in the proportions in which it holds same, until all the
Senior Indebtedness shall have been paid in full.
(f) The provisions of this Agreement are and are
intended solely for the purpose of defining the relative
rights of the holder of the Junior Indebtedness, on the one
hand, and the holder of the Senior Indebtedness on the other
hand. Nothing contained in this Agreement is intended to or
shall impair, as between Borrower and its creditor other than
the holder of the Senior Indebtedness and the holder of the
Junior Indebtedness, the obligation of Borrower which is
absolute and unconditional, to pay to the holder of the Junior
Indebtedness the principal thereof and interest thereon as and
when the same shall become due and payable in accordance with
its terms, or is intended to or shall affect the relative
rights against Borrower of the holder of the Senior Indebt-
edness.
(g) No right of any present or future holder of any of
the Senior Indebtedness to enforce the subordination as herein
provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of Borrower
or by any act in good faith or failure to act in good faith by
any such holder, or by any noncompliance by Borrower with the
covenants, agreements and conditions of the Junior
Indebtedness, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
(h) Senior Creditor shall have no obligation to
preserve the rights of the Collateral against any prior
parties or to marshal any of the Collateral for the benefit of
any Person.
6
<PAGE>
ARTICLE V
FURTHER ASSURANCES
Each of the parties hereto hereby agrees to promptly
execute and deliver to the other parties hereto any and all
such further instruments and documents and take such further
action as such other parties may reasonably request in order
to fully effect the purposes of this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARTIES
6.1 General Representations and Warranties. Each of the
Junior Creditor and the Borrower hereby represents and
warrants to Senior Creditor that:
(a) such party has full power, authority and legal
right to execute, deliver and perform this Agreement, and has
taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement; and
(b) this Agreement constitutes a legal, valid and
binding obligation of such party enforceable against it in
accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or
other similar laws affecting creditors rights generally and
except as enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity).
6.2 Additional Representations and Warranty. Junior
Creditor hereby represents and warrants to Senior Creditor
that a true and correct copy of the Junior Note is attached
hereto as Exhibit A.
ARTICLE VII
CONSENT OF JUNIOR CREDITORS
Junior Creditor hereby consents to the execution and
delivery of the Senior Documents and agrees that the
performance (including, without limitation, the making of
future borrowings) by Borrower of its obligations under the
Senior Documents will not constitute a default or an event of
default under the Junior Documents. Junior Creditor further
consents to and covenants that, without the necessity of any
reservation of rights against Junior Creditor, and without
notice to or further assent by Junior Creditor, (a) any demand
for payment of any Senior Indebtedness may be rescinded in
whole or in part and any Senior Indebtedness may be continued,
and the Senior Indebtedness, or the liability of Borrower or
any other Person upon or for any part thereof, or any
collateral security or guaranty therefor or right of offset
with respect thereto, or any obligation or liability of
Borrower or any other Person under the Senior Documents may,
from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised, waived and surrendered, or
released, and (b) the Senior Documents, any document or
instrument evidencing or governing the terms of the Senior
Indebtedness or any collateral security documents or
guaranties or documents in connection therewith may be
amended, modified, supplemented or terminated, in whole or in
7
<PAGE>
part, as the Senior Creditor or its agent may deem advisable
from time to time, and any collateral security at any time
held for the benefit of the Senior Creditor for the payment of
any of the Senior Indebtedness may be sold, exchanged, waived,
surrendered or released, in each case all without notice to or
further assent by the Junior Creditor which will remain bound
under this Agreement, and all without impairing, abridging,
releasing or affecting the subordination provided for herein,
notwithstanding any such renewal, extension, modification,
acceleration, compromise, amendment, supplement, termination,
sale, exchange, waiver, surrender or release. The Junior
Creditor waives any and all notice of the creation, renewal,
extension or accrual of any of the Senior Indebtedness and
notice of or proof of reliance by the Senior Creditor upon
this Agreement, and the Senior Indebtedness shall conclusively
be deemed to have been created, contracted or incurred in
reliance upon this Agreement, and all dealings between
Borrower and the Senior Creditor have been deemed to have been
consummated in reliance upon this Agreement. The Junior
Creditor acknowledges and agrees that the Senior Creditor has
relied upon the subordination and consent provided for herein
in entering into the Senior Loan Documents and in providing
for the credit facilities described therein. The Junior
Creditor waives notice of or proof of reliance on this
Agreement and protest, demand for payment and notice of
default. Any agreements, documents or instruments which at
any time evidence the Junior Indebtedness or any part thereof
shall be marked with a legend stating that payment thereunder
is subject to the terms and provisions of this Agreement. The
Junior Creditor agrees that it shall not, under any
circumstances, take or initiate any action or proceeding under
any federal or state bankruptcy or insolvency law, or any
other reorganization, liquidation, receivership or similar
action or proceeding, involving Borrower without the prior
written consent of every Senior Creditor, which consent may be
granted or withheld by each Senior Creditor in such Senior
Creditor s sole and absolute discretion.
ARTICLE VIII
PROVISIONS TO APPLY AFTER BANKRUPTCY
The provisions of this Agreement shall continue in full
force and effect, notwithstanding the commencement of a case
under Title 11 of the United States Code, as amended and/or
superseded (the Federal Bankruptcy Code ) by or against
Borrower or any of its property. In furtherance of the
foregoing, if Junior Creditor receives any property of, or
payments from Borrower after the commencement of such a case
on account of a secured claim which is subordinated by the
terms of this Agreement (whether as adequate protection
payments or otherwise), Junior Creditor shall immediately turn
such property or payments over to the Senior Creditor for
distribution by it in accordance with the applicable
provisions of Article III. To the extent that Junior Creditor
has or acquires any rights under Section 363 or Section 364 of
the Federal Bankruptcy Code with respect to collateral, Junior
Creditor hereby agrees not to assert such rights without the
prior written consent of the Senior Creditor. The Junior
Creditor hereby grants to the Senior Creditor the right, but
Senior Credit shall not be obligated, to file, prove and vote
claims on account of the Junior Indebtedness in any
receivership, bankruptcy, or other proceeding under the
Federal Bankruptcy Code commenced by or against Borrower.
8
<PAGE>
ARTICLE IX
NO WAIVER, CUMULATIVE REMEDIES
No failure to exercise, and no delay in exercising on the
part of Senior Creditor, any right, power or privilege under
this Agreement shall operate as a waiver thereof; nor shall
any single or partial exercise by Senior Creditor of any
right, power or privilege under this Agreement preclude any
other or further exercise thereof or the exercise of any other
right, power or privilege by Senior Creditor. The rights and
remedies by Senior Creditor provided in this Agreement are
cumulative and shall not be exclusive of any rights or
remedies provided by law.
ARTICLE X
NOTICES
All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing
(including by telegraph, telecopier, or telex) and, unless
otherwise expressly provided herein, shall be deemed to have
been duly given or made when delivered by hand, or if by
certified mail, return receipt requested, five days after
being deposited in the mail or, in the case of telegraphic
notice, when delivered to the telegraph company, or in the
case of telex notice, when sent, answer back received,
addressed as set forth below or to such address or other
address as may be hereafter notified in writing by the
respective parties hereto:
To Senior Creditor: Congress Financial Corporation (Southwest)
1201 Main Street, Suite 1625
Dallas, Texas 75250
Attn: Loan Administrator
Telecopy No.: (214) 748-9118
With copies to: Patton Boggs, L.L.P.
2626 Cole Avenue, Suite 700
Dallas, Texas 75204
Attn: Larry A. Makel, Esq.
Telecopy No.: (214) 871-2688
To Borrower: Ametech, Inc.
Environmental Transportation
Services, Inc.
1813 S.E. 25th Street
Oklahoma City, Oklahoma 73129
Telecopy No.: (405)672-1781
9
<PAGE>
With copies to: Conner & Winters
One Leadership Square
211 North Robinson, Suite 1700
Oklahoma City, Oklahoma 73102-7101
Telecopy No.: (405) 232-2695
To Junior Creditor: The CIT Group/Equipment Financing, Inc.
1620 West Fountainhead Parkway
Suite 600
Tempe, Arizona 85282
Telecopy No.: (602) 858-1488
ARTICLE XI
GOVERNING LAW
This Agreement has been executed, delivered and accepted
at and shall be deemed to have been made in Dallas County,
Texas and shall be interpreted and the rights and obligations
of the parties under this Agreement shall be governed by, and
construed and interpreted in accordance with, the internal
laws of the State of Texas and shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors, transferees and assigns.
ARTICLE XII
AMENDMENTS AND WAIVERS
Neither this Agreement nor any of the terms hereof may be
amended, waived, discharged or terminated unless such
amendment, waiver, discharge or termination is in writing
signed by each of the parties hereto. Each of the Borrower
and the Junior Creditor agree not to amend the Junior
Documents without the prior written consent of the Lender.
ARTICLE XIII
EXCULPATION
Neither the Senior Creditor nor its agents have made to
the other parties hereto nor do any of them hereby or
otherwise make any representations or warranties, express or
implied, nor do they assume any liability with respect to (i)
obligors under any instruments of guarantee; (ii) the
enforceability, validity, value or collectibility of the
Senior Indebtedness, any Collateral therefor, or any guarantee
or security which may have been granted to any of them in
connection with the Senior Documents; or (iii) Borrower's
title or right to transfer any collateral or security. Senior
Creditor shall not be liable to any other party hereto for any
action or failure to act or any error of judgment, negligence,
or mistake or oversight whatsoever on its part or its respec-
tive agents, officers, employees or attorneys with respect to
any transaction relating to the Collateral or this Agreement.
To the maximum extent permitted by law, except as otherwise
provided herein, Junior Creditor waives any claim it might
have against Senior Creditor with respect to, or arising out
10
<PAGE>
of, the handling of the Collateral (including, without
limitation, any such claim based upon the timing or method of
realizing upon such Collateral).
ARTICLE XIV
THIRD PARTY RIGHTS
This Agreement is solely for the benefit of the parties
hereto and their respective successors and assigns, and no
other Person shall have any right, benefit, priority or other
interest under, or because of the existence of, this
Agreement.
ARTICLE XV
TERMINATION
This Agreement shall terminate upon the final and
indefeasible payment in full of all the Senior Indebtedness
and the termination of all of the Senior Documents and all
commitments thereunder.
ARTICLE XVI
COUNTERPARTS
This Agreement may be executed by one or more of the
parties hereto in any number of separate counterparts, each of
which shall be an original, but all of which shall constitute
but one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their proper and duly
authorized officers or partners as of the day and year first
above written.
JUNIOR CREDITOR:
THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: /s/ Thomas E. Magrath
_________________________________
Name: Thomas E. Magrath
_______________________________
Title: Vice President
_______________________________
11
<PAGE>
BORROWER:
AMETECH, INC.
By: /s/ Kerry Willingham
_________________________________
Name: Kerry Willingham
_______________________________
Title: V. P. Finance
_______________________________
ENVIRONMENTAL TRANSPORTATION
SERVICES, INC.
By: /s/ Kerry Willingham
________________________________
Name: Kerry Willingham
______________________________
Title: V. P. Finance
______________________________
12
ISTE:\A-C\AMETECH\10Q\797\EXHIB10.2
SECOND
AMENDED AND RESTATED
PROMISSORY NOTE
$195,000.00 Oklahoma City, Oklahoma
Effective July 1, 1997
FOR VALUE RECEIVED, the undersigned, ENVIRONMENTAL TRANSPORTA-
TION SERVICES,INC., an Oklahoma corporation ("Maker"), promises to
pay to the order of CARL B. ANDERSON, JR., at 1813 S.E. 25th Street,
P.O. Box 36118, in Oklahoma City, Oklahoma, or at such other place
as may be designated in writing by the holder of this Note, the
principal sum of ONE HUNDRED NINETY-FIVE THOUSAND AND No/100 DOLLARS
($195,000.00), together with interest thereon from the date hereof
at the fixed rate of fourteen percent (14%) per annum on the unpaid
balance, both principal and interest due and payable in lawful money
of the United States of America as follows:
Interest will be payable monthly commencing on July 1,
1997, until this Note is paid in full. All interest will
be computed at a per diem charge for the actual number of
days elapsed on the basis of a year consisting of three
hundred sixty (360) days. The entire unpaid principal
balance of this Note plus all accrued interest hereon
will be due and payable in the form of a lump sum balloon
payment upon the earlier of: (a) three (3) years from the
date of the initial advance under this Note or Febru-
ary 1, 2001, or (b) upon demand.
The payment of this Note is secured by a certain Real Estate
Mortgage and Security Agreement between the parties hereto of
November 29, 1996, covering certain real and personal property
located in Oklahoma County, State of Oklahoma and more particularly
described in said Real Estate Mortgage and Security Agreement.
On the failure of the undersigned to pay any amount when due
hereunder, or on the breach of any provision of this Note or the
occurrence of an event of default under the mortgage and security
agreement or on the default in payment of any other indebtedness
owing by the undersigned to the holder hereof, at the option of the
holder, the entire indebtedness hereby evidence will immediately
become due, payable and collectible, regardless of the date of
maturity hereof, and forthwith, without further notice or demand,
notice of nonpayment, presentment, protest, notice of dishonor, or
other notice of any kind or nature, all of which are expressly
waived by Maker and all endorsers, sureties, guarantors and all
other persons who may become liable for all or any part of this
obligation. In the event of such a default, all principal and
interest due shall draw interest in the amount of eighteen percent
(18%) per annum. Any and all additional interest which is provided
for herein and which has accrued during the existence of a default
shall be payable at the time of, and as a condition precedent to,
the curing of such default.
The undersigned agrees that if, and as often as, this Note is
placed in the hands of an attorney for collection or to defend or
enforce any of the holder's rights hereunder, the undersigned will
<PAGE>
pay to the holder its attorneys' fees and court costs and other
expenses incurred by such holder in connection therewith.
This Note is executed, delivered and accepted, not in payment,
but to amend and restate a certain Amended and Restated Promissory
Note dated November 1, 1996, in the principal face amount of
$195,000.00, signed by the undersigned in favor of the holder, which
served to renew and extend the terms of a certain Demand Promissory
Note dated February 1, 1996, in the principal face amount of
$195,000.00, signed by the undersigned in favor of the holder. The
undersigned represents that the undersigned is not in default under
any term, covenant, or condition contained in the Demand Promissory
Note, as amended by the Amended and Restated Promissory Note, as of
the date of this Note.
This Note is given by the undersigned and accepted by the
holder hereof pursuant to a commercial lending transaction negotiat-
ed, consummated and to be performed in Oklahoma City, Oklahoma
County, Oklahoma. This Note is to be construed according to the
laws of the State of Oklahoma. The undersigned hereby waives all
objections to venue and consents to the jurisdiction of any state
or federal court located in Oklahoma County, Oklahoma in connection
with any action instituted by the holder of this Note by reason of
or arising out of the execution, delivery or performance of this
Note.
From time to time the maturity date of this Note may be
extended, or this Note may be renewed, in whole or in part, or a new
Note of different form may be substituted for this Note and/or the
rate of interest may be changed or changes may be made in consider-
ation of loan extensions, and the holder, from time to time, may
waive or surrender, either in whole or in part, rights, guarantees,
security interests, or liens, given for the benefit of the holder
in connection with the payment and the securing of the payment of
this Note but no such occurrence shall in any manner affect, limit,
modify or otherwise impair any rights, guarantees or security of the
holder not specifically waived, released or surrendered in writing,
nor shall Maker or any guarantor or endorser or any other person who
is or might be liable hereon, either primarily or secondarily, be
released from such liability by reason of the occurrence of any such
event. The holder hereof, from time to time, shall have the
unlimited right to release any person who is or might be liable
hereon and such release shall not affect or discharge the liability
of any other party who is or might be liable hereon. Maker and each
surety, endorser and guarantor hereof (whether or not any such
suretyship, endorsement or guaranty or the execution thereof appears
on this Note or is by separate instrument) hereby specifically
consents and agrees to any renewal of this Note or to any extension,
acceleration or postponement of the time of payment or any other
indulgence, to any substitution, exchange or resale of any security
given for the payment hereof and to the release of any party
primarily or secondarily liable hereon without prejudice to the
holder and without notice to Maker or any such endorser, guarantor
or surety, any such notice being hereby specifically waived.
Nothing contained herein shall be construed, expressly or impliedly,
to obligate the holder hereof to make any further or future advance
or loan to Maker whether requested or not.
-2-
<PAGE>
The makers, endorsers, sureties, guarantors and all other
persons who may become liable for all or any part of this obligation
severally waive presentment for payment, protest and notice of
nonpayment. Said parties consent to any extension of time (whether
one or more) of payment hereof, release of all or any part of the
security for payment hereof, or release of any party liable for
payment of this obligation. Any such extension or release may be
made without notice to any party and without discharging said
party's liability hereunder.
Except in the event of the payment of the full principal
balance and accrued interest thereon, this Note may be terminated
only by discharge in writing, signed by the party who is the owner
and holder of this Note at the time enforcement of any discharge is
sought.
ENVIRONMENTAL TRANSPORTATION
ATTEST: SERVICES, INC.,
an Oklahoma corporation
/s/ Kerry Willingham By: /s/ David R. Bennett
_________________________ _______________________________
Secretary David Bennett
(SEAL) Exec. Vice President
ACKNOWLEDGMENT
It is acknowledged and agreed that this Second Amended and
Restated Promissory Note evidences the same debt as evidenced by the
Amended and Restated Promissory Note, dated November 1, 1996, issued
by Environmental Transportation Services, Inc. to Carl B. Anderson,
Jr.
/s/ Carl B. Anderson, Jr.
____________________________________
Carl B. Anderson, Jr.
ISTE:A-C\AMETECH\10Q\397\EXHIB10.3
-3-
SUBORDINATION AGREEMENT
[Carl B. Anderson, Jr.]
THIS SUBORDINATION AGREEMENT (this "Agreement") is made as of
the 17th day of July, 1997, by and between CONGRESS FINANCIAL
CORPORATION (SOUTHWEST), a Texas corporation (together with its
successors and assigns and all other present and future holders of
all or part of the Senior Debt, individually and collectively,
"Senior Creditor"), and CARL B. ANDERSON, JR., an individual
(together with his successors and assigns and all other present and
future holders of all or part of the Subordinate Debt, individually
and collectively, "Subordinate Creditor").
RECITALS
WHEREAS, Senior Creditor has made, or in the future will make,
credit accommodations available to Environmental Transportation
Services, Inc., an Oklahoma corporation ("ETS"), pursuant to the
terms and provisions of that certain Loan and Security Agreement,
dated as of even date herewith, by and among ETS, Ametech, Inc., an
Oklahoma corporation ("Ametech" and together with ETS, individually
and collectively, "Borrower") and Senior Creditor (as in effect or as
amended, modified, supplemented, renewed, and restated from time to
time, the "Senior Loan Agreement");
WHEREAS, ETS has previously executed that certain Second Amended
and Restated Promissory Note, dated as of July 1, 1997, in the
original principal amount of One Hundred Ninety-Five Thousand Dollars
($195,000), to the order of Subordinate Creditor (as in effect or as
amended, modified, supplemented, renewed, and restated from time to
time, the "Subordinate Note"), a copy of which is attached hereto as
Exhibit A; and
WHEREAS, as a condition to Senior Creditor making advances to
Borrower pursuant to the terms of the Senior Loan Agreement, Senior
Creditor has required that Senior Creditor and Subordinate Creditor
enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and the
provisions set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. For purposes of this Agreement, the
following terms used herein shall have the following meanings:
"Ametech" shall have the meaning set forth in the recitals
hereto.
"Borrower" shall have the meaning set forth in the recitals
hereto.
-1-
<PAGE>
"Collateral" shall mean any and all property (real or
personal) which now constitutes or will constitute collateral or
other security for payment of the Senior Debt pursuant to the
Senior Loan Documents, including, but not limited to, Borrower's
real property located in Oklahoma County, Oklahoma.
"Enforcement Notice" shall mean a notice which states that
a default or event of default under any provision of the
Subordinate Debt has occurred and that Subordinate Creditor
desires to take enforcement action as a consequence thereof.
"ETS" shall have the meaning set forth in the recitals
hereto.
"Event of Default" shall have the same meaning as set forth
in the Senior Loan Agreement.
"Loan Party" means a Borrower.
"Proceeding" shall mean any (a) insolvency, bankruptcy,
receivership, custodianship, liquidation, reorganization or
other similar proceeding relating to any Loan Party or
substantially all of their respective properties, whether under
any bankruptcy, reorganization or insolvency law or laws,
federal or state, or any law, federal or state, relating to
relief of debtors, readjustment of indebtedness or
reorganization, (b) proceeding for any liquidation, liquidating
distribution, dissolution or other winding up of any Loan Party
or of all or substantially all of the assets, property or
business of any Loan Party, voluntary or involuntary, whether
or not involving insolvency or bankruptcy proceedings, by
operation of law or otherwise, (c) assignment for the benefit
of creditors of any Loan Party or (d) other marshalling of the
assets of any Loan Party.
"Proceeds" shall have the meaning assigned to it under the
UCC, shall also include "products" (as defined in the UCC),
and, in any event, shall include, but not be limited to (a) any
and all proceeds of any insurance, indemnity, warranty, letter
of credit or guaranty or collateral security payable to any
grantor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever)
made or due and payable to the owner of the Collateral from
time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental body, authority, bureau or
agency (or any person acting under color of governmental
authority) and (c) any and all other amounts from time to time
paid or payable under or in connection with any of the
Collateral.
"Senior Creditor" shall have the meaning set forth in the
introduction hereto.
"Senior Debt" shall mean and include all indebtedness,
obligations and liabilities of any Loan Party under the Senior
Loan Documents, including, without limitation, all principal,
premium, if any, and interest (including interest accrued
subsequent to, and interest that would have accrued but for,
the filing of any petition under any bankruptcy, insolvency or
similar law), fees, expenses, reimbursements and other amounts
-2-
<PAGE>
payable thereunder, in either case whether now or hereafter
arising, direct or indirect, primary or secondary, joint,
several or joint and several, final or contingent and whether
incurred as maker, endorser, guarantor or otherwise.
"Senior Loan Agreement" shall have the meaning set forth
in the recitals hereto.
"Senior Loan Documents" shall mean the "Financing
Agreements" (as such term is defined in the Senior Loan
Agreement as in effect on the date hereof), including, without
limitation, the Senior Notes.
"Senior Notes" shall mean the Term Note, as such term is
defined in the Senior Loan Agreement.
"Stop Payment Notice" shall have the meaning set forth in
Section 4(a) hereof.
"Subordinate Creditor" shall have the meaning set forth
in the introduction hereto.
"Subordinate Debt" shall mean and include all
indebtedness, obligations and liabilities of any Loan Party
under the Subordinate Loan Documents, including, without
limitation, all principal, premium, if any, and interest
(including post-petition interest accrued subsequent to the
filing of any petition under any bankruptcy, insolvency or
similar law), fees, expenses, reimbursements and other amounts
payable thereunder.
"Subordinate Loan Documents" shall mean the Subordinate
Note, the Subordinate Mortgage and all other documents,
instruments or agreements executed in connection therewith.
"Subordinate Mortgage" shall mean that certain Mortgage
and Security Agreement, dated as of November 29, 1996, by and
between ETS and Subordinate Creditor, as recorded with the
Oklahoma County Clerk on December 27, 1996, Document Number
96177118, Book Number 7000, Pages 1145-1157, together with all
amendments, modifications, supplements, renewals and
restatements executed from time to time in connection
therewith.
"Subordinate Note" shall have the meaning set forth in the
recitals hereto.
"UCC" shall mean the Uniform Commercial Code as in effect
from time to time in the State of Texas.
Section 2. No Payments in General on Subordinate Debt. Except
as otherwise provided in Section 3 of this Agreement, as long as this
Agreement is in effect, Subordinate Creditor shall not, without the
prior written consent of Senior Creditor, be entitled to demand,
attempt to receive, or receive, and Subordinate Creditor hereby
agrees not to demand, attempt to receive or receive, any payment on
the Subordinate Debt or any portion thereof.
-3-
<PAGE>
Section 3. Permitted Payments on Subordinate Debt.
Notwithstanding anything to the contrary contained in Section 2 of
this Agreement, Borrower may pay and Subordinate Creditor may receive
regularly scheduled monthly interest payments as is presently
provided for in the Subordinate Note, as detailed in the copy of the
Subordinate Note attached hereto as Exhibit A ("Permitted Payments");
provided however, that the right of Subordinate Creditor to receive
Permitted Payments may be suspended pursuant to Section 4 of this
Agreement. Under no circumstances shall prepayments on the
Subordinate Debt constitute Permitted Payments.
Section 4. Subordination in the Event of Certain Defaults.
(a) If an Event of Default under the Senior Loan Agreement
occurs and is continuing, then (i) the rights of Subordinate
Creditor to receive any payment or distribution of any character,
whether in cash, securities or other property, with respect to the
Subordinate Debt shall be suspended from and after the date that the
holders of the Subordinate Debt receive a written notice to suspend
payments under the Subordinate Debt which is accompanied by a copy
of the notice of such default that Senior Creditor sent to Borrower
until such Event of Default is cured by Borrower or waived by Senior
Creditor (a "Stop Payment Notice"), and (ii) no payment, transfer of
any collateral, guarantee of any nature to secure or pay the
Subordinate Debt, or distribution of any character, whether in cash,
securities or other property shall be made by any Loan Party, or
received or accepted by Subordinate Creditor, on account of the
Subordinate Debt or in respect of the redemption, retirement,
purchase or other acquisition thereof, unless and until such Event
of Default shall have been cured or waived in accordance with the
provisions of the Senior Loan Agreement.
(b) Notwithstanding anything to the contrary contained in
this Section 4, Borrower may pay and Subordinate Creditor may take
and retain any Permitted Payment on the Subordinate Debt before
receipt by Subordinate Creditor of a Stop Payment Notice.
Section 5. Subordination in the Event of Insolvency, etc. In
the event and during the continuance of any Proceeding, all Senior
Debt shall first be finally and irrevocably paid in full in cash
before any payment, transfer of any collateral, guarantee of any
nature to secure or pay the Subordinate Debt, or distribution of any
character, whether in cash, securities or other property, shall be
made, received or accepted for or on account of any Subordinate
Debt. In the event of any Proceeding, any payment or distribution
in any such Proceeding of any kind or character, whether in cash,
securities or other property which would otherwise (but for this
Agreement) be payable or deliverable in respect of any Subordinate
Debt shall be paid or delivered by the person making such
distribution or payment, transfer of any collateral, guarantee of
any nature to secure or pay the Subordinate Debt, whether a trustee
in bankruptcy, receiver, assignee for the benefit of creditors,
liquidating trustee or agent, or otherwise, directly to Senior
Creditor, for application in payment of the Senior Debt in
accordance with the priorities then existing among such holders, to
the extent necessary to pay in full all Senior Debt then remaining
unpaid, after giving effect to any concurrent payment or
distribution to the holders of Senior Debt. The holders of the
Senior Debt are hereby authorized to file an appropriate claim for
and on behalf of the holders of the Subordinate Debt relating to the
Subordinate Debt if they or any of them do not file, and there is
not otherwise filed on behalf of the holders of the Subordinate
Debt, a proper claim or proof of claim in the form required in any
-4-
<PAGE>
such Proceeding prior to thirty (30) days before the expiration of
the time to file such claim or claims. Subordinate Creditor hereby
further agrees to take any action in connection with any Proceeding
as shall be reasonably requested from time to time by Senior
Creditor in respect of the Subordinate Debt in order to enable the
holders of the Senior Debt to enforce the rights described above in
this Section 5 in any of such Proceedings and to otherwise cooperate
with the holders of the Senior Debt in any manner as shall be
reasonably requested from time to time by the holders of the Senior
Debt in order to enable the holders of the Senior Debt to enforce
the rights described above in this Section 5 in any of such
Proceedings.
Section 6. Standstill. Subordinate Creditor agrees to
promptly send to Senior Creditor a copy of any notice of default
under the Subordinate Debt sent to any Loan Party and further agrees
that Subordinate Creditor shall not exercise any rights or remedies
or take any enforcement action available upon the occurrence of a
default or an event of default or otherwise under the Subordinate
Loan Documents or take any action toward the collection of any
Subordinate Debt until the earliest of (a) the occurrence of a
Proceeding, or (b) all of the Senior Debt shall have been paid in
full in cash and all commitments of Senior Creditor to lend under
the Senior Loan Agreement shall have been terminated.
Section 7. Payments Notwithstanding. No payment or
distribution of any character, whether in cash, securities or other
property to which Subordinate Creditor would have been entitled in
connection with the Subordinate Debt, except as otherwise provided
for under the provisions of this Agreement and that shall have been
made to or for the account of Senior Creditor shall, as between each
Loan Party and its creditors (other than Senior Creditor), be deemed
to be a payment or distribution by such Loan Party to or for the
account of Senior Creditor, and from and after the payment in full
in cash of all Senior Debt and termination of all commitments to
lend of Senior Creditor under the Senior Loan Agreement, Subordinate
Creditor shall be subrogated to all rights of Senior Creditor to
receive any further payments or distribution applicable to the
Senior Debt until the principal of and interest on the Subordinate
Debt shall be paid in full, and no such payment or distribution made
pursuant to such rights of subrogation to Subordinate Creditor that
otherwise would be payable or distributable to or for the account of
Senior Creditor shall, as between each Loan Party and its creditors
(other than Subordinate Creditor), be deemed to be a payment or
distribution by such Loan Party to Subordinate Creditor or on
account of the Subordinate Debt.
Section 8. No Prejudice or Impairment. The provisions of
this Agreement are solely for the purposes of defining the relative
rights of Senior Creditor, on the one hand, and Subordinate
Creditor, on the other hand. Senior Creditor shall not be
prejudiced in the right to enforce subordination of the Subordinate
Debt by any act or failure to act by any Loan Party or anyone in
custody of its assets or property. Nothing herein shall impair, as
between each Loan Party and Subordinate Creditor, the obligation of
such Loan Party to pay to Subordinate Creditor the principal of and
interest on the Subordinate Debt as and when the same shall become
due in accordance with their terms, nor shall anything herein
prevent Subordinate Creditor from exercising all remedies otherwise
permitted by applicable law upon default under the Subordinate Loan
Documents, subject, however, to the provisions of this Agreement and
the rights of Senior Creditor to the extent provided herein.
-5-
<PAGE>
Section 9. Turnover of Payments. If any payment,
distribution or security, or the proceeds of any thereof, shall be
collected or received by Subordinate Creditor in connection with the
Subordinate Debt in contravention of any of the terms of this
Agreement and prior to the irrevocable payment in full in cash of
all Senior Debt, the holder thereof will forthwith deliver such
payment, distribution, security or proceeds to Senior Creditor and,
until so delivered, the same shall be held in trust by such holder
as the property of Senior Creditor.
Section 10. Priorities Regarding Collateral; Management of
Collateral; Limitation of Remedies of Subordinate Creditor as to
Collateral.
(a) Any and every lien and security interest in the
Collateral in favor of or held for the benefit of Senior
Creditor have and shall have priority over any lien or security
interest that Subordinate Creditor now has or may hereafter
acquire in the Collateral, whether by contract, operation or
rule of law or otherwise, notwithstanding any statement or
provision contained in the Subordinate Loan Documents or
otherwise to the contrary and irrespective of the time or order
of filing or recording of financing statements, deeds of trust,
mortgages or other notices of security interests, liens or
assignments granted pursuant thereto, and irrespective of
anything contained in any filing or agreement to which any
party hereto or its respective successors and assigns may now
or hereafter be a party, and irrespective of the ordinary rules
for determining priorities under the UCC or under any other law
governing the relative priorities of secured creditors. At any
time during which all or any part of the Senior Debt remains
outstanding, and whether or not the same is then due and
payable, the Proceeds of any sale, disposition or other
realization by Senior Creditor or (or any agent therefor) upon
all or any part of the Collateral after the occurrence of an
Event of Default that is continuing shall be applied in the
following order of priorities irrespective of the application
of any rule of law or the defect or impairment of any Senior
Loan Document, Subordinate Loan Document or security interest,
lien or assignment thereunder:
first, to the payment of all costs and expenses
of Senior Creditor and/or its agent or
agents (including, without limitation, the
reasonable fees and expenses of legal counsel and
other agents) incurred in connection with the
collection of such Proceeds or the protection of the
rights and interests of Senior Creditor therein;
second, to the payment in full of all Senior
Debt in the manner provided in the Senior Loan
Documents;
third, to the payment in full of all Subordinate Debt
or to such other parties as their interest
lawfully appears, in such order as Subordinate
Creditor shall determine, in its sole
discretion; and
finally, to pay any surplus then remaining to the owner
of the Collateral or its successors or assigns
or as a court of competent jurisdiction may
direct.
-6-
<PAGE>
In the event any party to this Agreement receives Proceeds of
the Collateral to which it is not entitled under this Section
10, such party shall be deemed to hold all of such Proceeds in
trust for the benefit party entitled thereto under this Section
10.
(b) Senior Creditor shall have the exclusive right to
manage, perform and enforce the terms of the Senior Loan
Documents with respect to the Collateral, to exercise and
enforce all privileges and rights thereunder according to its
discretion and the exercise of its business judgment including,
but not limited to, the exclusive right to take or retake
possession of the Collateral and to hold, prepare for sale,
process, sell, lease, dispose of, or liquidate the Collateral,
pursuant to a foreclosure or otherwise. Even if Subordinate
Creditor is otherwise permitted pursuant to Section 6 hereof to
exercise rights and remedies and take enforcement action with
respect to Borrower, until all Senior Debt is irrevocably paid
in full in cash and all commitments of Senior Creditor to lend
under the Senior Loan Agreement have terminated, Subordinate
Creditor shall not take or attempt to take any action or
exercise or attempt to exercise any rights and remedies against
all or any portion of the Collateral, except to the extent, and
only to the extent, such action is necessary to toll any
applicable statute of limitations. Notwithstanding anything to
the contrary contained in any document, instrument or agreement
evidencing, securing or otherwise executed in connection with
the incurrence of the Subordinate Debt, only the Senior
Creditor shall have the right to restrict or permit, or approve
or disapprove, the sale, transfer or other disposition, by
Borrower or otherwise, of Collateral. Should Senior Creditor
elect to exercise their rights and remedies with respect to any
of the Collateral, Senior Creditor may proceed to do so without
regard to any interest of Subordinate Creditor, and Subordinate
Creditor waives any claims that it may have against Senior
Creditor for any disposition of the Collateral.
(c) Subordinate Creditor shall not contest (and hereby
waives any right to contest) or support any other person or
entity in contesting, in any action or Proceeding or otherwise,
the priority, validity or enforceability of any liens or
security interests of Senior Creditor in the Collateral or of
any claims made by the holders of the Senior Debt pursuant to
the terms of the Senior Loan Documents.
Section 11. Benefit of Agreement; Amendments of Certain
Documents; etc. This Agreement shall constitute a continuing offer
to all persons who, in reliance upon such provisions, become a
Senior Creditor, and such provisions are made for the benefit of
Senior Creditor and Senior Creditor may enforce such provisions.
Subordinate Creditor shall not amend the payment, prepayment or
interest rate provisions of the Subordinate Debt nor amend any of
the covenants or events of default thereunder in a manner more
restrictive on or to Borrower nor amend or modify the provisions of
the Subordinate Loan Documents in any respect which adversely
affects Senior Creditor or violates the terms of the Senior Loan
Agreement as such document is in effect on the date hereof, without
the prior written consent of all holders of Senior Debt so affected.
Neither Senior Creditor nor Subordinate Creditor shall have any
obligation to preserve rights in the Collateral against any prior
parties or to marshal any of the Collateral for the benefit of any
person or entity. No failure to exercise, and no delay in
exercising on the part of any party hereto, any right, power or
-7-
<PAGE>
privilege under this Agreement shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided in this Agreement are
cumulative and shall not be exclusive of any rights or remedies
provided by law. Any agreements, documents or instruments which at
any time evidence the Subordinate Debt or any part thereof shall be
marked with a legend stating that payment hereunder is subject to
the terms and provisions of this Agreement. Subordinate Creditor
hereby consents to the execution and delivery of the Senior Loan
Documents and agrees that the performance (including, without
limitation, the making of future borrowings and the granting by
Borrower to Senior Creditor a mortgage, which shall be senior in
priority to the Subordinate Mortgage) by Borrower of its obligations
under the Senior Loan Documents will not constitute a default or an
event of default under the Subordinate Loan Documents. The
Subordinate Creditor acknowledges and agrees that the Senior
Creditor has relied upon the subordination and consent provided for
herein in entering in to the Senior Loan Documents and in providing
for the credit facilities described therein.
Section 12. Representations and Warranties. Each of the
parties hereto hereby represents and warrants that (a) it has full
power, authority and legal right to make and perform this Agreement,
and (b) this Agreement is its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
Section 13. Amendment. Neither this Agreement nor any of the
terms hereof may be amended, waived, discharged or terminated unless
such amendment, waiver, discharge or termination is in writing
signed by Senior Creditor and Subordinate Creditor.
Section 14. Successors and Assigns. This Agreement, and the
terms, covenants and conditions hereof, shall be binding upon and
inure to the benefit of the parties hereto, and their respective
successors and assigns, and no other person or entity shall have any
right, benefit, priority or other interest under, or because of the
existence of, this Agreement.
Section 15. Governing Law. This Agreement will be construed
in accordance with and governed by the law of the State of Texas.
Section 16. Notices. Whenever it is provided herein that any
notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the
parties by another, or whenever any of the parties desires to give
or serve upon another any such communication with respect to this
Agreement, each such notice, demand, request, consent, approval,
declaration, or other communication shall be in writing (including
by telegraph, telecopier or telex) and shall be deemed to have been
duly given and received, for purposes hereof, when delivered by hand
or three days after being deposited in the mail, postage prepaid,
or, in the case of telegraphic notice, when delivered to the
telegraph company, or in the case of telex notice, when sent, answer
back received, or in the case of telecopy notice, when sent to the
number set forth below, addressed as follows:
If to Senior Creditor: Congress Financial Corporation
(Southwest)
-8-
<PAGE>
1201 Main Street, Suite 1625
Dallas, Texas 75250
Attn.: Loan Administrator
Telecopy No: (214) 748-9118
with courtesy copies to: Patton Boggs, L.L.P.
2626 Cole, Suite 300
Dallas, Texas 75204
Attn.: Larry A. Makel, Esq.
Telecopy No: (214) 871-2141
If to Subordinate Creditor: Carl B. Anderson, Jr.
1813 S.E. 25th Street
Oklahoma City, Oklahoma 73129
Telecopy No.: (405) 672-1781
If to Borrower: Ametech, Inc.
Environmental Transportation
Services, Inc.
1813 S.E. 25th Street
Oklahoma City, Oklahoma 73129
Attn: Mr. Kerry Willingham,
Vice President-Finance
Telecopy No.: (405) 672-1781
with a courtesy copy to: Connor & Winters
One Leadership Square
211 N. Robinson, Suite 1700
Oklahoma City, Oklahoma 73102
Attn: Irwin Steinhorn, Esq.
Telecopy No.: (405) 232-2695
or at such address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived
in writing by the party entitled to receive such notice. Every
notice, demand, request, consent, approval, declaration or other
communication hereunder shall be deemed to have been duly given or
served on the date on which personally delivered, with receipt
acknowledged, or five business days after the same shall have been
deposited in the United States mail, certified, return receipt
requested. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other
communication to the persons designated above to receive copies
shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other
communication.
Section 18. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their proper and duly authorized officers as
of the day and year first above written.
SENIOR CREDITOR:
CONGRESS FINANCIAL CORPORATION
(SOUTHWEST)
By: /s/ Gill Elmore
_______________________________
Name: Gill Elmore
_____________________________
Title: V. P.
____________________________
SUBORDINATE CREDITOR:
/s/ Carl B. Anderson, Jr.
____________________________________
CARL B. ANDERSON, JR., an individual
-10-
<PAGE>
BORROWER'S AGREEMENT
The undersigned, the Borrower mentioned in the foregoing
Subordination Agreement, hereby acknowledges receipt of a copy
thereof, acknowledges that the Subordinate Debt mentioned therein is
payable as stated therein, and agrees to make no payment of principal
of or interest on the Subordinate Debt so long as the undersigned
shall be indebted to Senior Creditor, except (i) such payments as may
be made to Senior Creditor, (ii) such payments as may be made with
the prior written consent of Senior Creditor, and (iii) such payments
as are permitted by Paragraph 3 of the foregoing Subordination
Agreement. If (a) the undersigned makes any other payment of the
Subordinate Debt, except such payments as are permitted by Paragraph
3 of the foregoing Subordination Agreement, (b) any term of the
foregoing Subordination Agreement or this Borrower s Agreement is
breached by any party which executed same, or (c) the undersigned
fails to make any payment of the Subordinate Debt when due after
Senior Creditor has given its written consent to the making of such
payment, then, notwithstanding any contrary provisions of that
certain Loan and Security Agreement, dated as of even date herewith,
among Senior Creditor and Borrower (as the same thereafter was or
hereafter may be renewed, extended, modified and restated from time
to time), Senior Creditor may, at its sole election, declare all or
any portion of the Senior Debt to be immediately due and payable
without demand or notice of any kind.
Dated: July 17, 1997.
AMETECH, INC.
By: /s/ Kerry Willingham
______________________________
Name: Kerry Willingham
____________________________
Title: V. P. Finance
____________________________
ENVIRONMENTAL TRANSPORTATION
SERVICES, INC.
By: /s/ Kerry Willingham
_____________________________
Name: Kerry Willingham
___________________________
Title: V. P. Finance
__________________________
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> $ 1,000
<SECURITIES> 122,000
<RECEIVABLES> 3,698,000
<ALLOWANCES> 0
<INVENTORY> 195,000
<CURRENT-ASSETS> 5,093,000
<PP&E> 15,797,000
<DEPRECIATION> 8,424,000
<TOTAL-ASSETS> 12,805,000
<CURRENT-LIABILITIES> 8,451,000
<BONDS> 333,000
0
0
<COMMON> 139,000
<OTHER-SE> 3,350,000
<TOTAL-LIABILITY-AND-EQUITY> 12,805,000
<SALES> 0
<TOTAL-REVENUES> 4,130,000
<CGS> 0
<TOTAL-COSTS> 3,875,000
<OTHER-EXPENSES> 475,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 184,000
<INCOME-PRETAX> (404,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (404,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (404,000)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
