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SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-QSB
/ X / Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
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/ / Transition report pursuant to Section 13 of 15 (d) of the Securities
Exchange Act of 1934
For the transition period from ______________ to_____________
Commission File No. 0-15241
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NYTEST ENVIRONMENTAL INC.
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(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 11-2725582
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(State of other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
60 Seaview Boulevard, Port Washington, New York 11050
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(Address of principal executive offices) (Zip Code)
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(516) 625-5500
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant ( 1 ) has filed all reports
required to be filed by Section 13 of 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and ( 2 ) has been subject to
such filing requirements for the past 90 days.
YES X NO
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As of March 31, 1996, the Issuer had 6,705,230 shares outstanding of its $ .01
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par value common stock.
Page 1 of 12 pages.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
ASSETS (Unaudited) (Audited)
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<S> <C> <C>
Current Assets:
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Cash $ 137,588 $ 426,631
Accounts receivable, less allowance for doubtful
accounts of $85,792 - 1996 and $52,941 - 1995 3,489,641 2,249,044
Inventories - Laboratory supplies, at cost 62,206 63,468
Prepaid expenses and other current assets 287,832 420,746
Deferred taxes 22,000 22,000
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Total Current Assets 3,999,267 3,181,889
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Fixed Assets:
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Plant and Equipment, at cost 8,446,322 8,413,002
Less: Accumulated depreciation 3,692,651 3,135,405
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Net Fixed Assets 4,753,671 5,277,597
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Other assets 425,249 314,837
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Total Assets $ 9,178,187 $8,774,323
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
--------------------
Loans Payable (note 4) $ 368,024 $1,704,000
Notes payable - current maturity 38,145 38,824
Obligations under capital leases - current maturity 198,788 231,039
Accounts payable 2,452,956 1,290,890
Accrued liabilities 1,045,413 766,741
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Total Current Liabilities 4,103,326 4,031,494
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Long Term Liabilities:
----------------------
Loans Payable (note 4) 1,923,643 0
Notes payable 25,227 32,521
Obligations under capital lease 166,270 200,228
Subordinated convertible debt 1,095,000 1,095,000
Deferred income taxes payable 45,000 45,000
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Total Long Term Liabilities 3,255,140 1,372,749
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Total Liabilities 7,358,466 5,404,243
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STOCKHOLDERS' EQUITY
--------------------
Common stock $.01 par; authorized 10,000,000 shares,
issued and outstanding 6,705,230 shares 67,052 67,052
Additional paid-in capital 3,068,255 3,068,255
Retained earnings (1,315,586) 234,773
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Total Stockholders' Equity 1,819,721 3,370,080
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Total Liabilities and Stockholders' Equity $ 9,178,187 $8,774,323
============ ==========
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NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
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<CAPTION>
For the Three Months Ended
March 31
-----------------------------
1996 1995
(Unaudited) (Unaudited)
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<S> <C> <C>
Revenues $ 3,558,630 $1,604,737
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Cost and expenses:
Cost of operations 3,805,613 1,112,906
Selling, general and administrative expenses 1,213,764 424,420
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Total costs and expenses 5,019,377 1,537,326
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Operating (loss) income (1,460,747) 67,411
Interest expense 89,612 31,216
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(Loss) income before taxes (1,550,359) 36,195
Income tax provision (note 5) 0 11,500
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Net (loss) income (1,550,359) 24,695
Retained Earnings-January 1 234,773 567,139
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Retained Earnings-March 31 $ (1,315,586) $ 591,834
============ ==========
(Loss) earnings per share : $ (0.23) $ 0.00
============ ==========
Average number of shares outstanding 6,705,230 6,705,230
============ ==========
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NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
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<CAPTION>
For the Three Months Ended
March 31
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1996 1995
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(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
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Net (loss) income $ (1,550,359) $ 24,695
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Adjustments to reconcile net income to
net cash provided (used) by operating activities:
Depreciation and amortization 557,246 115,587
Deferred income taxes 0 (4,000)
Net changes in assets and liabilities:
Accounts receivable - net (1,240,597) (46,326)
Laboratory supplies 1,262 (778)
Prepaid expenses and other current assets 132,914 60,976
Other assets (110,412) (33,267)
Accounts payable 1,162,066 (76,231)
Accrued liablilities 278,672 69,086
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Total adjustments 781,151 85,047
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Net cash (used) provided by operating activities (769,208) 109,742
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Cash flows (used) for investing activities:
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Acquisition of equipment (33,320) (3,206)
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Cash flows provided (used) by financing activities:
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Proceeds of bank borrowings 596,000 0
Repayments of bank borrowings (8,333) 0
Repayments of notes payable (7,973) (12,533)
Repayments of capitalized lease obligations (66,209) (6,633)
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Net cash provided (used) by financing activities 513,485 (19,166)
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Net (decrease) increase in cash (289,043) 87,370
Cash at beginning of period 426,631 561,323
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Cash at end of period $ 137,588 $ 648,693
============ ==========
Supplemental Disclosure of Cash Flow Information:
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Interest payments $ 55,321 $ 31,216
============ ==========
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NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995 (UNAUDITED)
AND DECEMBER 31, 1995 (AUDITED)
NOTE 1. COMPANY'S OPINION ON UNAUDITED FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited financial statements
contain all ordinary and necessary adjustments to present fairly the balance
sheet as of March 31, 1996, and the related statements of operations and cash
flows for each of the three month periods ended March 31, 1996 and March 31,
1995. The balance sheet as of December 31, 1995, is audited.
The statements of operations for the periods ended March 31, 1996 and March
31, 1995 are not necessarily indicative of the results for the entire year.
NOTE 2. BASIS OF PRESENTATION
The accompanying consolidated financial statements at March 31, 1996, include
the effects of the Company's wholly owned subsidiaries, NEI of Pennsylvania,
Inc. and NEI/GTEL Environmental Laboratories, Inc., since August 5, 1995 and
December 31, 1995, respectively. The statement of operations for the three
month period ended March 31, 1995, does not reflect the results of operations
of these acquisitions discussed in Note 3 below, as they were acquired
subsequent to March 31, 1995.
NOTE 3. ACQUISITIONS
On July 17, 1995, the Company organized NEI of Pennsylvania, Inc., a Delaware
corporation ("NEIPA"), as a wholly owned subsidiary to acquire and operate a
testing laboratory in Norristown, Pennsylvania. Effective August 5, 1995,
NEIPA acquired from BCM Engineers, Inc., a wholly owned subsidiary of Smith
Environmental Technologies Corporation ("Smith"), certain assets comprising an
environmental testing laboratory in Norristown, Pennsylvania.
Effective December 31, 1995, the Company organized NEI/GTEL Environmental
Laboratories, Inc., a Delaware corporation ("NEI/GTEL"), as a wholly owned
subsidiary of the Company, to acquire the business and substantially all of the
assets of GTEL Environmental Laboratories, Inc. ("GTEL"), a subsidiary of
Groundwater Technologies, Inc. In exchange for the assets acquired plus
closing costs, NEI/GTEL paid $ 3,200,000 in a combination of cash, assumption
of liabilities and the issuance of a secured convertible note in the amount of
approximately $ 1,100,000. NEI/GTEL, as part of the transaction, hired all of
the active employees of GTEL. NEI/GTEL also entered into a long term lease for
the use of the GTEL Wichita, Kansas facility and assignment and assumption
agreements for the leases of GTEL facilities in Tampa, Florida and Milford, New
Hampshire.
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NYTEST ENVIRONMENTAL INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995 (UNAUDITED)
AND DECEMBER 31, 1995 (AUDITED)
NOTE 4. SUBSEQUENT EVENT
On April 23, 1996, the Company executed a loan and security agreement with a
finance company, which replaces the Company's July 1995, $ 2,000,000 line of
credit agreement with a different financial institution. The new agreement is
for a three year term with $ 7,000,000 maximum borrowing which includes a $
2,606,000 sublimit for equipment financing. Additional advances under
agreement are limited to no more than 80 % of eligible accounts receivable, as
defined.
The initial advance for equipment was $ 1,840,120. The agreement provides for
an additional $ 766,000 for equipment purchases during the term of the
agreement. All advances for equipment will be amortized in sixty consecutive
monthly installments until the expiration of the agreement when all unpaid
amounts will become payable.
Interest on the aforementioned advances is payable at 1 3/4 % to 2 % above the
prime rate. If the agreement is canceled by the Company, it will be required
to pay a termination fee of 3 % of the line during the first year, and 2 %
thereafter. The agreement will be collateralized by substantially all the
assets of the Company.
As a result of this agreement, the Company has reclassified $ 1,923,643 of
short term loans to long term liabilities, in accordance with Financial
Accounting Standards Board, Statement No. 6.
NOTE 5. INCOME TAXES
The Company does not have any net operating loss carryback for income
tax purposes. As a result of its loss incurred during the three months ended
March 31, 1996, the Company has net operating loss carryforwards for income tax
purposes which will be used to reduce future taxable income.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated revenues for the three months ended March 31, 1996 totaled
$3,558,630 which were $ 1,953,893 higher than the $ 1,604,737 for the
corresponding period last year. The Company's newly acquired subsidiaries
accounted for $ 2,836,395 of this increase which was partially reduced by lower
revenues from the Company's existing operations. During the three months ended
March 31, 1996, the Company's revenue from operations existing in March, 1995
were $ 722,235, which was $ 882,502, or 55 % lower than the comparable period
last year.
Revenues for the Company's existing operations were reduced during the three
months ended March 31, 1996, for several reasons. During January and February,
1996, the Company's revenues were adversely affected by the federal budget
impasse and subsequent government shutdowns. Scheduled work from the
Environmental Protection Agency, Department of Defense and Department of
Energy, was substantially curtailed. The federal budget impasse has now been
resolved and the governmental work is starting to increase. Compounding the
federal budget problem, the severe weather conditions in January and early
February, 1996 prevented customers from obtaining and delivering samples of
soil and water for testing purposes. Furthermore, the Company competes in a
very competitive industry which management believes can be characterized as
having excess capacity and aggressive price competition.
The Company believes that revenues in the three months ending June 30, 1996,
will be substantially higher than during the three months ended March 31, 1996.
Despite the aforementioned problems, the Company's backlog of orders in house
to be processed at April 30, 1996 was $ 960,000, an increase of $ 571,000 as
compared to April 30, 1995. Additionally, the Company has entered into
contracts to provide, upon request of several clients, laboratory services
having a potential value of up to $ 9,100,000 at fixed prices which are to be
completed during 1996. The actual dollar amount of laboratory services to be
performed pursuant to these contracts cannot be accurately predicted at the
present time, and accordingly, has not been included in the backlog
computation.
Cost of operations for the three months ended March 31, 1996 totaled $3,805,613
or 106.9 % of revenues. This was an increase in cost of operations
of $ 2,692,707 from the comparable period last year, of which the newly
acquired subsidiaries accounted for $ 2,765,740. The Company's cost of
operations for operations which existed in March, 1995, totaled $ 1,039,873.
This cost of operations was $ 73,033 lower than last year, but was 142.9 % of
revenues, as compared to 69.4 % of revenues for the comparable period last
year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
During January and February, 1996, management took actions to reduce its cost
of operations to reflect the lower testing volumes being performed at its
facilities. Unfortunately, the Company was unable to adequately reduce costs,
particularly for personnel required for performing analytical tests while
maintaining and retaining the necessary federal and state certifications for
its services. The Company's cost of operations for the three months ended
March 31, 1996, were also negatively impacted by its newly acquired
operations, particularly due to higher depreciation.
By the end of March, 1996, the demand for testing services had increased
significantly over the levels of January, and as a result, management believes
that its cost of operations, as a percentage of revenues, returned to the
levels experienced for the three months ended March 31, 1995. Management
believes that it will not incur substantially higher cost of operations during
the three months ending June 30, 1996.
Consolidated selling, general and administrative expenses were $ 1,213,764, or
34.1% of revenues, an increase of $ 789,344 from the comparable period last
year. The newly acquired subsidiaries accounted for $ 683,304 of this
variance, while the Company's other operations accounted for $ 106,040. This
increase was primarily due to the write off of accounts receivable, which was
partially offset by lower payroll expenses.
The consolidated pre-tax loss for the three months ended March 31, 1996 was
$ 1,550,359. The newly acquired subsidiaries sustained a loss of $ 812,452,
while the Company's existing operations sustained a loss of $ 737,607. The
consolidated net loss for the three months ended March 31, 1996, was
$ 1,550,359 compared to a profit of $ 24,695 during the comparable period in
1995. The Company has no credit for income tax purposes as the Company has no
net operating loss carryback available for federal income tax purposes.
However, as a result of its loss incurred during the three months ended March
31, 1996, the Company has net operating loss carrforwards for tax purposes
which will be used to reduce future taxable income.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
The Company's operations for the three months ended March 31, 1996 used net
cash of $ 769,208 as compared to net cash provided of $ 109,742 in the
corresponding period one year ago. The increase in cash used of $ 878,950 was
primarily due to the net loss incurred during the three months ended March 31,
1996, compared to a net income during the comparable period in 1995, and a
substantial increase in accounts receivable during the three months in 1996,
which were partially offset by the increase in accounts payable and accrued
expenses in 1996. The increase in accounts receivable and accounts payable
resulted principally from the NEI/GTEL operations.
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
The net cash provided by financing activities of $ 513,485 was $ 532,651 higher
during the three months ended March 31, 1996 than during the comparable period
in 1995. This increase in financing resulted from increased bank borrowings
principally related to the NEI/GTEL acquisition.
As a result of the financing agreement signed on April 23, 1996 with a finance
company, the Company, as of May 15, 1996, has the capacity to borrow
approximately $ 3,950,000 of which the Company has borrowed approximately
$ 3,000,000. Management believes its financing agreement and expected
improvement in operations will be sufficient to satisfy its cash requirements.
MATERIAL COMMITMENTS
The Company had no material commitments for capital expenditures.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
No change from prior filings.
Item 2. Changes in Securities.
None.
Item 3. Defaults in Senior Securities.
None.
Item 4. Submission of Matters to a Votes Of Security Holders.
None.
Item 5. Other Information.
See Notes to the financial statements.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Loan and Security Agreement dated April 22, 1996 between Nytest
Environmental Inc. NEI/GTEL Environmental Laboratories, Inc., NEI of
Pennsylvania, Inc. and The CIT Group/Credit Finance, Inc.
10.2 Term Note dated April 22, 1996 in the amount of $1,840,120 due from
Nyatest Environmental Inc., NEI/GTEL Environmental Laboratories, Inc.
and NEI of Pennsylvania, Inc. to The CIT Group/Credit Finance, Inc.
10.3 General Intangibles Mortgage and Security Agreement dated April 22,
1996 between Nytest Environmental Inc. and The CIT Group/Credit
Finance, Inc.
10.4 Cross Corporate Guaranty of Nytest Environmental Inc. to The CIT
Group/Credit Finance, Inc. dated April 22, 1996.
11
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10.5 Cross Corporate Guaranty of NEI/GTEL Environmental Laboratories,
Inc., to The CIT Group/Credit Finance, Inc. dated April 22, 1996.
10.6 Cross Corporate Guaranty of NEI of Pennsylvania, Inc. to The CIT
Group/Credit Finance, Inc. dated April 22, 1996.
10.7 Subordination and Intercreditor Agreement dated April 22, 1996 among
GTEL Environmental Laboratories, Inc., Nytest Environmental Inc. and
NEI/GTEL Environmental Laboratories, Inc. and NEI of Pennsylvania,
Inc. and The CIT Group/Credit Finance, Inc.
10.8 Subordination and Intercreditor Agreement among State Bank of Long
Island, GTEL Environmental Laboratories, Inc., Nytest Environmental
Inc., NEI/GTEL Environmental Laboratories, Inc. and NEI of
Pennsylvania, Inc. and The CIT Group/Credit Finance, Inc.
10.9 Letter Agreement dated April 22, 1996 re: Permitted Rent among
Groundwater Technology, Inc., Nytest Environmental Inc., NEI/GTEL
Environmental Laboratories, Inc. and NEI of Pennsylvania, Inc. and The
CIT Group/Credit Finance, Inc.
27 Financial Data Schedule
(b) Form of 8-K
Form 8-K dated December 31, 1995.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NYTEST ENVIRONMENTAL INC.
Registrant
Date: May 20, 1996 By: /s/ John Gaspari
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John Gaspari
CEO
Dated: May 20, 1996 By: /s/ Elliot Laitman
-----------------------------
Elliot Laitman
CFO
13
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EXHIBIT INDEX
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Exhibit
No. Description
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10.1 Loan and Security Agreement dated April 22, 1996 between Nytest
Environmental Inc. NEI/GTEL Environmental Laboratories, Inc., NEI of
Pennsylvania, Inc. and The CIT Group/Credit Finance, Inc.
10.2 Term Note dated April 22, 1996 in the amount of $1,840,120 due from
Nyatest Environmental Inc., NEI/GTEL Environmental Laboratories, Inc.
and NEI of Pennsylvania, Inc. to The CIT Group/Credit Finance, Inc.
10.3 General Intangibles Mortgage and Security Agreement dated April 22,
1996 between Nytest Environmental Inc. and The CIT Group/Credit
Finance, Inc.
10.4 Cross Corporate Guaranty of Nytest Environmental Inc. to The CIT
Group/Credit Finance, Inc. dated April 22, 1996.
10.5 Cross Corporate Guaranty of NEI/GTEL Environmental Laboratories,
Inc., to The CIT Group/Credit Finance, Inc. dated April 22, 1996.
10.6 Cross Corporate Guaranty of NEI of Pennsylvania, Inc. to The CIT
Group/Credit Finance, Inc. dated April 22, 1996.
10.7 Subordination and Intercreditor Agreement dated April 22, 1996 among
GTEL Environmental Laboratories, Inc., Nytest Environmental Inc. and
NEI/GTEL Environmental Laboratories, Inc. and NEI of Pennsylvania,
Inc. and The CIT Group/Credit Finance, Inc.
10.8 Subordination and Intercreditor Agreement among State Bank of Long
Island, GTEL Environmental Laboratories, Inc., Nytest Environmental
Inc., NEI/GTEL Environmental Laboratories, Inc. and NEI of
Pennsylvania, Inc. and The CIT Group/Credit Finance, Inc.
10.9 Letter Agreement dated April 22, 1996 re: Permitted Rent among
Groundwater Technology, Inc., Nytest Environmental Inc., NEI/GTEL
Environmental Laboratories, Inc. and NEI of Pennsylvania, Inc. and The
CIT Group/Credit Finance, Inc.
27 Financial Data Schedule
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EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
This Agreement is between the undersigned Borrower and the undersigned
Lender concerning loans and other credit accommodations to be made by Lender to
Borrower.
SECTION 1. PARTIES
1.1 The "BORROWER" is the person, firm, corporation or other entity,
identified as the Borrower in Section 10.6(c) and its successors and assigns.
If more than one Borrower is specified in Section 10.6(c), all references to
Borrower shall mean each of them, jointly and severally, individually and
collectively, and the successors and assigns of each.
1.2 The "LENDER" is THE CIT GROUP/CREDIT FINANCE, INC. and its
successors, assigns and participants.
SECTION 2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1 Revolving Loans. Lender shall, subject to the terms and conditions
contained herein, make revolving loans to Borrower ("REVOLVING LOANS") in
amounts requested by Borrower from time to time, but not in excess of the Net
Availability existing immediately prior to the making of the requested loan and
provided the requested loan would not cause the outstanding Obligations to
exceed the Maximum Credit.
(a) The "MAXIMUM CREDIT" is set forth in Section 10.1(a) hereof.
(b) The "GROSS AVAILABILITY" shall be calculated at any time as the
product obtained by multiplying the outstanding amount of Eligible Accounts,
net of all taxes, discounts, allowances and credits given or claimed, by the
Eligible Accounts Percentage set forth in Section 10.1(b), minus any Reserves.
(c) The "NET AVAILABILITY" shall be calculated at any time as an amount
equal to the Gross Availability minus the aggregate amount of all
then-outstanding Obligations to Lender other than the then outstanding
principal balance of the Term Loan.
(d) "ELIGIBLE ACCOUNTS" are accounts created by Borrower in the ordinary
course of its business which are and remain acceptable to Lender for lending
purposes. General criteria for Eligible Accounts are set forth below but may be
revised from time to time by Lender, in its sole judgment, on fifteen (15)
days' prior written notice to Borrower. Lender shall, in general, deem accounts
to be Eligible Accounts if: (1) such accounts arise from bona fide completed
<PAGE> 2
transactions and have not remained unpaid for more than the number of days
after the invoice date set forth in Section 10.1(d); (2) the amounts of the
accounts reported to Lender are absolutely owing to Borrower and do not arise
from sales on consignment, guaranteed sale or other terms under which payment
by the account debtors may be conditional or contingent; (3) the account
debtor's chief executive office or principal place of business is located in
the United States unless the sale is secured by a letter of credit issued or
confirmed by a bank organized under the laws of the United States and
acceptable to Lender, or the sale is insured under a policy of insurance
acceptable to Lender issued on behalf of Borrower by the Foreign Credit
Insurance Association and the Export-Import Bank of the United States; (4) such
accounts do not arise from (i) progress billings or (ii) retainages or (iii)
bill and hold sales; (5) there are no contra relationships, setoffs,
counterclaims or disputes existing with respect thereto and there are no other
facts existing or threatened which would impair or delay the collectibility of
all or any portion thereof, except that, with respect to any disputed account,
provided that Borrower delivers or has delivered to Lender a written agreement
from such account debtor, substantially in the form annexed hereto as Exhibit
"2.1(d)", stating that said account debtor will pay the undisputed portion of
the stated amount of such account, notwithstanding any such claimed dispute,
the undisputed portion of such account may be considered eligible to the extent
such account would otherwise be an Eligible Account pursuant to the provisions
of this Section 2.1(d); (6) the assets of Borrower were not at the time of the
transactions giving rise to the accounts subject to any liens except those
permitted in this Agreement; (7) such accounts are not accounts with respect to
which the account debtor or any officer or employee thereof is an officer,
employee or agent of or is affiliated with Borrower, directly or indirectly,
whether by virtue of family membership, ownership, control, management or
otherwise; (8) such accounts are not accounts with respect to which the account
debtor is the United States or any State or political subdivision thereof or
any department, agency or instrumentality of the United States, any State or
political subdivision, unless there has been compliance with the Assignment of
Claims Act or any similar State or local law, if applicable; (9) Borrower has
delivered to Lender or Lender's representative such original documents as
Lender may have requested pursuant to Section 5.8 hereof in connection with
such accounts and Lender shall have received a verification of such account,
satisfactory to it, if sent to the account debtor or any other obligor or any
bailee pursuant to Section 5.4 hereof; (10) there are no facts existing or
threatened which might result in any adverse change in the account debtor's
financial condition; (11) such accounts owed by a single account debtor or its
affiliates do not represent more than twenty (20%) percent of all otherwise
Eligible Accounts (accounts excluded from Eligible Accounts solely by reason of
this subsection (11) shall nevertheless be considered Eligible Accounts to the
extent of the amount of such accounts which does not exceed twenty (20%)
percent of all otherwise Eligible Accounts, or twenty five (25%) percent of all
otherwise Eligible Accounts if the account debtor is
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<PAGE> 3
Groundwater Technology, Inc. ("GROUNDWATER") or Smith Environmental
Technologies Corporation and its affiliates ("SMITH")); (12) such accounts are
not owed by an account debtor who is or whose affiliates are past due upon
other accounts owed to Borrower comprising more than fifty (50%) percent in
amount of all the accounts of such account debtor or its affiliates owed to
Borrower; (13) such accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the amount of any customer credit
limits as established, and changed, from time to time by Lender on notice to
Borrower (accounts excluded from Eligible Accounts solely by reason of this
subsection (13) shall nevertheless be considered Eligible Accounts to the
extent the amount of such accounts does not exceed such customer credit limit);
and (14) such accounts are owed by account debtors deemed creditworthy at all
times by Lender.
(e) Lender shall have a continuing right to deduct reserves in
determining the Gross Availability ("RESERVES"), and to increase and decrease
such Reserves from time to time, if and to the extent that, in Lender's sole
judgement, such Reserves are necessary to protect Lender against any state of
facts which does, or would, with notice or passage of time or both, constitute
an Event of Default or have an adverse effect on any Collateral. Lender may, at
its option, implement Reserves by designating as ineligible a sufficient amount
of accounts which would otherwise be Eligible Accounts so as to reduce Gross
Availability by the amount of the intended Reserve.
(f) Subject to the terms and conditions hereof, including but not
limited to the existence of sufficient Gross Availability and Net Availability,
Borrower agrees to borrow amounts from time to time such that the outstanding
Revolving Loans and Term Loans shall at all times equal or exceed the principal
amount set forth in Section 10.1(e) as the Minimum Borrowing. Borrower
covenants, represents and warrants to Lender that it will maintain Gross
Availability and Net Availability at all times in amounts sufficient to permit
Borrower to comply with the Minimum Borrowing requirement. Failure to comply
with the Minimum Borrowing requirement shall not constitute an Event of
Default, but Borrower shall pay to Lender the Minimum Loan Fee in accordance
with Section 3.4.
2.2 Term Loan. Subject to the terms and conditions contained herein,
Lender shall make a term loan to Borrower in the amount of one million eight
hundred forty thousand one hundred twenty ($1,840,120.00) dollars (the "TERM
LOAN"). The Term Loan shall be evidenced by a term note (the "TERM NOTE")
delivered by Borrower to Lender in form and substance satisfactory to Lender,
and shall be repaid, together with interest and other amounts, in accordance
with this Agreement and the Term Note. The principal amount of the Term Note
shall be payable in sixty (60) consecutive monthly installments, commencing May
1, 1996 and on the first day of each succeeding month in the amount of thirty
thousand six hundred sixty nine dollars ($30,669.00), except that the entire
principal amount
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of the Term Loan outstanding together with any accrued and unpaid interest
thereon, and any other amounts due thereunder, and the entire principal amount
of the EXCESS LOAN (as defined in Section 10.2), outstanding shall be due and
payable at the end of the initial Term (as defined in Section 9.1). All
principal payments in respect of the Term Loan shall be accompanied by accrued
interest to the date of payment. No amount paid in respect of the Term Loan or
the Excess Loan may be reborrowed.
2.3 Accommodations.
(a) Lender may, in its sole discretion, issue or cause to be
issued, from time to time at Borrower's request and on terms and conditions and
for purposes satisfactory to Lender, credit accommodations consisting of
letters of credit, bankers' acceptances, merchandise purchase guaranties or
other guaranties or indemnities for Borrower's account ("ACCOMMODATIONS").
Borrower shall execute and perform additional agreements relating to the
Accommodations in form and substance acceptable to Lender and the issuer of any
Accommodations, all of which shall supplement the rights and remedies granted
herein. Any payments made by Lender or any affiliate of Lender in connection
with the Accommodations shall constitute additional Revolving Loans made to
Borrower by Lender.
(b) In addition to the fees and costs of any issuer in
connection with issuing or administering Accommodations, Borrower shall pay
monthly to Lender, on the first day of each month, a charge on open
Accommodations at the rate per annum set forth in Section 10.3(a) (the
"ACCOMMODATION CHARGES").
(c) No Accommodation will be issued unless the sum of (i) the
full amount of the Accommodation requested, plus (ii) fees and costs for
issuance is less than the Net Availability existing immediately prior to the
issuance of the requested Accommodation, or if the requested Accommodation
would cause the outstanding Obligations to exceed the Maximum Credit, or cause
the open amount of Accommodations to exceed, at any time, the Accommodation
sublimit set forth in Section 10.3(b).
(d) All indebtedness, liabilities and obligations of any sort
whatsoever, however arising, whether present or future, fixed or contingent,
secured or unsecured, due or to become due, paid or incurred, arising or
incurred in connection with any Accommodation shall be included in the term
"OBLIGATIONS", as defined herein, and shall include, without limitation, (i)
all amounts due or which may become due under any Accommodation; (ii) all
amounts charged or chargeable to Borrower or to Lender by any bank, other
financial institution or correspondent bank which opens, issues or is involved
with such Accommodations; (iii) Lender's Accommodation Charges and all fees,
costs and other charges of any issuer of any Accommodation; and (iv) all
duties, freight, taxes, costs, insurance and all such other charges and
expenses which may pertain directly or indirectly to any Obligations or
Accommodations or to the goods or documents relating thereto.
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(e) Borrower unconditionally agrees to indemnify and hold
Lender harmless from any and all loss, claim or liability (including reasonable
attorneys' fees) arising from any transactions or occurrences relating to any
Accommodation established or opened for Borrower's account, the Collateral
relating thereto and any drafts or acceptances thereunder, including any such
loss or claim due to any action taken by an issuer of any Accommodation.
Borrower further agrees to indemnify and hold Lender harmless against any loss
or damage resulting from any errors or omissions in connection with the
Accommodations, whether caused by Lender, by the issuer of any Accommodation or
otherwise. Borrower's unconditional obligation to indemnify and hold Lender
harmless under this provision shall not be modified or diminished for any
reason or in any manner whatsoever, except for Lender's wilful misconduct or
gross negligence (as determined in a final non-appealable decision of a court
of competent jurisdiction). Borrower agrees that any charges made to Lender by
any issuer of any Accommodation shall be conclusive on Borrower and may be
charged to Borrower's account.
(f) Lender shall not be responsible for the conformity of any
goods to the documents presented; the validity or genuineness of any documents;
delay, default, or fraud by the Borrower or shipper and/or anyone else in
connection with the Accommodations or any underlying transaction.
(g) Borrower agrees that any action taken by Lender, if taken
in good faith, or any action taken by an issuer of any Accommodation, under or
in connection with any Accommodation, shall be binding on Borrower and shall
not create any resulting liability to Lender. In furtherance thereof, Lender
shall have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute for Borrower's account any and
all applications for steamship or airway guarantees, indemnities or delivery
orders; to grant any extensions of the maturity of, time of payment for, or
time of presentation of, any drafts, acceptances, or documents; and to agree to
any amendments, renewals, extensions, modifications, changes or cancellations
of any of the terms or conditions of any of the applications or Accommodations.
All of the foregoing actions may be taken in Lender's sole name, and the issuer
thereof shall be entitled to comply with and honor any and all such documents
or instruments executed by or received solely from Lender, all without any
notice to or any consent from Borrower. None of the foregoing actions
described in this subsection (g) may be taken by Borrower without Lender's
express written consent.
2.4 Certain Amounts Due on Demand. Lender may, in its sole discretion,
make or permit Revolving Loans, Term Loans, Accommodations or other Obligations
in excess of the Maximum Credit, Gross Availability or Net Availability or
applicable formulas or sublimits; provided, however, that the making or
permitting of any such excess Obligations shall not operate as a
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waiver by Lender of any right, privilege, remedy or option or constitute a
course of dealing between Borrower and Lender. All or any portion of such
excess(es) shall become immediately due and payable, upon Lender's demand.
2.5 Use of Proceeds. Borrower shall use the proceeds of the Revolving
Loan, the Term Loan and any Accommodation for the payment of its existing
indebtedness to State Bank of Long Island pursuant to security agreements dated
July 18, 1995 and February 8, 1996 between Borrower and said bank, and for its
general working capital.
SECTION 3. INTEREST AND FEES
3.1 (a) Interest on the Revolving Loans shall be payable by Borrower on
the first day of each month, calculated upon the closing daily balances in the
loan account of Borrower for each day during the immediately preceding month,
at the per annum rate set forth as the Interest Rate in Section 10.4(a). The
Interest Rate shall increase or decrease by an amount equal to each increase or
decrease, respectively, in the Prime Rate, effective as of the date of each
such change. On and after any Event of Default or termination or non-renewal
hereof, interest on all unpaid matured obligations shall accrue at a rate equal
to two percent (2%) per annum in excess of the Interest Rate otherwise payable
until such time as all Obligations are indefeasibly paid in full
(notwithstanding entry of any judgment against Borrower or the exercise of any
other right or remedy by Lender), and all such interest shall be payable on
demand. In no event shall charges constituting interest exceed the rate
permitted under any applicable law or regulation, and if any provision of this
Agreement is in contravention of any such law or regulation, such provision
shall be deemed amended to conform thereto.
(b) The "PRIME RATE" is the rate of interest publicly announced by
Chemical Bank, or its successor, in New York, New York, from time to time as
its Prime Rate (the Prime Rate is not intended to be the lowest rate of
interest charged by Chemical Bank to its borrowers).
3.2 Borrower shall pay Lender on the date hereof a Closing Commitment
Fee in the amount set forth in Section 10.4(b), which fee is fully earned as of
the date hereof.
3.3 Borrower shall pay Lender on each anniversary of the date hereof,
an Annual Commitment Fee in respect of the initial and any renewal Term in the
amount set forth in Section 10.4(c), which fee shall be fully earned as of the
date hereof in respect of the initial Term and on the first day of the renewal
Term in respect of any renewal Term.
3.4 Borrower shall pay Lender annually, on each anniversary of the date
hereof, in arrears, a Minimum Loan Fee during the initial
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and each renewal Term at the rate per annum set forth in Section 10.4(a),
calculated upon the amount, if any, by which the Minimum Borrowing (as set
forth in Section 10.1(e)) exceeds the average outstanding aggregate daily
principal balance during the preceding year of all Revolving Loans, all Term
Loans and all Accommodations.
3.5 Borrower shall pay Lender monthly, on the first day of each month
commencing on May 1, 1996, in arrears, an Unused Line Fee during the initial
and each renewal Term at the rate per annum set forth in Section 10.4(d),
calculated upon the amount, if any, by which the Maximum Credit exceeds the
greater of (i) the average outstanding aggregate daily principal balance during
the preceding month of all Revolving Loans, all Term Loans and all
Accommodations, and (ii) the Minimum Borrowing.
3.6 At Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement, or in any other agreement now
or hereafter existing between Lender and Borrower, may be charged to any loan
account of Borrower maintained by Lender. Interest, fees for Accommodations,
the Annual Commitment Fee, the Minimum Loan Fee, the Unused Line Fee and any
other amounts payable by Borrower to Lender based on a per annum rate shall be
calculated on the basis of actual days elapsed over a 360-day year.
SECTION 4. GRANT OF SECURITY INTEREST
4.1 To secure the payment and performance in full of all Obligations,
Borrower hereby grants to Lender, except as otherwise expressly set forth
herein, a continuing first priority security interest in and lien upon, and a
right of setoff against, and Borrower hereby assigns and pledges to Lender, all
of the Collateral, including any Collateral not deemed eligible for lending
purposes.
4.2 "OBLIGATIONS" shall mean any and all Revolving Loans, Term Loans,
Accommodations and all other indebtedness, liabilities and obligations of every
kind, nature and description owing by Borrower to Lender and/or its affiliates,
including principal, interest, charges, fees 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 or
after the commencement of any case with respect to Borrower under the United
States Bankruptcy Code or any similar statute, whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, original, renewed or extended
and whether arising directly or howsoever acquired by Lender including from any
other entity outright, conditionally or as collateral security, by assignment,
merger with any other entity, participations or interests of Lender in the
obligations of Borrower to others, assumption, operation of law, subrogation or
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otherwise and shall also include all amounts chargeable to Borrower under this
Agreement or in connection with any of the foregoing.
4.3 "COLLATERAL" shall mean all of the following property of Borrower:
All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of all: accounts, interests in property giving
rise to accounts, and rights as an unpaid vendor; contract rights; chattel
paper; 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); documents;
instruments; letters of credit, bankers' acceptances or guaranties; cash
monies, deposits, securities, bank accounts, deposit accounts, credits and
other property now or hereafter held in any capacity by Lender, its affiliates
or any entity which, at any time, participates in Lender's financing of
Borrower or at any other depository or other institution; agreements or
property securing or relating to any of the items referred to above;
All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of goods, including, but not limited to, all
inventory, wherever located, of whatever kind, nature or description, including
all raw materials, work-in-process, finished goods, and materials to be used or
consumed in Borrower's business; and all names or marks affixed to or to be
affixed thereto for purposes of selling same by the seller, manufacturer,
lessor or licensor thereof;
All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of all equipment and fixtures, wherever located,
including, without limitation, all machinery, equipment, motor vehicles, Gas
Chromatograph/Mass Spectrometry Systems, chromatographs, spectrophotometers,
auto analyzers, completers, associated laboratory equipment, furniture and
fixtures, and any and all additions, substitutions, replacements (including
spare parts), and accessions thereof and thereto;
All now owned and hereafter acquired right, title and interests of
Borrower in, to and in respect of any real or other personal property in or
upon which Lender has or may hereafter have a security interest, lien or right
of setoff.
All present and future books and records relating to any of the above
including, without limitation, all computer programs, printed output and
computer readable data in the possession or control of the Borrower, any
computer service bureau or other third party;
All products and proceeds of the foregoing in whatever form and wherever
located, including, without limitation, all insurance
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proceeds and all claims against third parties for loss or destruction of or
damage to any of the foregoing.
4.4 Notwithstanding anything to the contrary contained herein, Lender's
liens on and security interests in the equipment shall be second in priority
and subordinate only to the liens on equipment in favor of the persons listed
on Exhibit "4.4" hereto with respect to the equipment indicated on Exhibit
"4.4".
SECTION 5. COLLECTION AND ADMINISTRATION
5.1 Borrower is authorized to collect the accounts and any other
proceeds of Collateral on behalf of and in trust for Lender, at Borrower's
expense, but such authority shall automatically terminate upon an Event of
Default. Lender may modify or terminate such authority at any time whether or
not an Event of Default has occurred and directly collect the accounts and
other monetary obligations included in the Collateral. Borrower shall, at
Borrower's expense and in the manner requested by Lender from time to time,
direct that remittances and all other proceeds of accounts and other Collateral
shall be (a) sent to a post office box designated by and/or in the name of
Lender, or in the name of Borrower, but as to which access is limited to Lender
and/or (b) deposited into a bank account maintained in the name of Lender
and/or a blocked bank account under arrangements with the depository bank under
which all funds deposited to such blocked bank account are required to be
transferred solely to Lender. In connection therewith, Borrower shall execute
such post office box and/or blocked bank account agreements as Lender shall
specify.
5.2 All Obligations shall be payable at Lender's office set forth below
or at Lender's bank designated in Section 10.6(b) or at such other bank or
place as Lender may expressly designate from time to time for purposes of this
Section. Lender shall apply all proceeds of accounts or other Collateral
received by Lender and all other payments in respect of the Obligations to the
Revolving Loans whether or not then due or to any other Obligations then due,
in whatever order or manner Lender shall determine. For purposes of determining
Gross Availability and Net Availability, remittances and other payments with
respect to the Collateral and Obligations will be treated as credited to the
loan account of Borrower maintained by Lender and Collateral balances to which
they relate, upon the date of Lender's receipt of advice from Lender's bank
that such remittances or other payments have been credited to Lender's account
or in the case of remittances or other payments received directly in kind by
Lender, upon the date of Lender's deposit thereof at Lender's bank, subject to
final payment and collection. In computing interest charges, the loan account
of Borrower maintained by Lender will be credited with remittances and other
payments two (2) business days after immediately available or collected funds
have been credited to Lender's account at such bank.
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5.3 Lender shall render to Borrower monthly a loan account statement.
Each statement shall be considered correct and binding upon Borrower as an
account stated, except to the extent that Lender receives, within sixty (60)
days after the mailing of such statement, written notice from Borrower of any
specific exceptions by Borrower to that statement.
5.4 Lender may, at any time, whether or not an Event of Default has
occurred, without notice to or assent of Borrower, (a) notify any account
debtor that the accounts and other Collateral which includes a monetary
obligation have been assigned to Lender by Borrower and that payment thereof is
to be made to the order of and directly to Lender, (b) send, or cause to be
sent by its designee, requests (which may identify the sender by a pseudonym)
for verification of accounts and other Collateral directly to any account
debtor or any other obligor or any bailee with respect thereto, and (c) demand,
collect or enforce payment of any accounts or such other Collateral, but
without any duty to do so, and Lender shall not be liable for any failure to
collect or enforce payment thereof. At Lender's request, all invoices and
statements sent to any account debtor, other obligor or bailee, shall state
that the accounts and such other Collateral have been assigned to Lender and
are payable directly and only to Lender.
5.5 Borrower hereby appoints Lender and any designee of Lender as
Borrower's attorney-in-fact and authorizes Lender or such designee, at
Borrower's sole expense, to exercise at any times in Lender's or such
designee's discretion all or any of the following powers, which powers of
attorney, being coupled with an interest, shall be irrevocable until all
Obligations have been paid in full: (a) receive, take, endorse, assign,
deliver, accept and deposit, in the name of Lender or Borrower, any and all
cash, checks, commercial paper, drafts, remittances and other instruments and
documents relating to the Collateral or the proceeds thereof, (b) transmit to
account debtors, other obligors or any bailees notice of the interest of Lender
in the Collateral or request from account debtors or such other obligors or
bailees at any time, in the name of Borrower or Lender or any designee of
Lender, information concerning the Collateral and any amounts owing with
respect thereto, (c) notify account debtors or other obligors to make payment
directly to Lender, or notify bailees as to the disposition of Collateral, (d)
take or bring, in the name of Lender or Borrower, all steps, actions, suits or
proceedings deemed by Lender necessary or desirable to effect collection of or
other realization upon the accounts and other Collateral, (e) after an Event of
Default, change the address for delivery of mail to Borrower and to receive and
open mail addressed to Borrower, (f) after an Event of Default, extend the time
of payment of, compromise or settle for cash, credit, return of merchandise,
and upon any terms or conditions, any and all accounts or other Collateral
which includes a monetary obligation and discharge or release the account
debtor or other obligor, without affecting any of the Obligations, and (g)
execute in the name of Borrower and file against Borrower in favor of Lender
financing statements or amendments with respect to the
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<PAGE> 11
Collateral.
5.6 Borrower hereby releases and exculpates Lender, its officers,
employees and designees, from any liability arising from any acts under this
Agreement or in furtherance thereof, whether as attorney-in-fact or otherwise,
whether of omission or commission, and whether based upon any error of judgment
or mistake of law or fact, except for Lender's willful misconduct or gross
negligence (as determined in a final non-appealable decision of a court of
competent jurisdiction). In no event will Lender have any liability to Borrower
for lost profits or other special or consequential damages.
5.7 After written notice by Lender to Borrower and automatically,
without notice, after an Event of Default, Borrower shall not, without the
prior written consent of Lender in each instance, (a) grant any extension of
time of payment of any of the accounts or any other Collateral which includes a
monetary obligation, (b) compromise or settle any of the accounts or any such
other Collateral for less than the full amount thereof, (c) release in whole or
in part any account debtor or other person liable for the payment of any of the
accounts or any such other Collateral, or (d) grant any credits, discounts,
allowances, deductions, return authorizations or the like with respect to any
of the accounts or any such other Collateral.
5.8 At such times as Lender may request and in the manner specified by
Lender, Borrower shall deliver to Lender or Lender's representative original
invoices, agreements, proofs of rendition of services and delivery of goods and
other documents evidencing or relating to the transactions which gave rise to
accounts or other Collateral, together with customer statements, schedules
describing the accounts or other Collateral and/or statements of account and
confirmatory assignments to Lender of the accounts or other Collateral, in form
and substance satisfactory to Lender and duly executed by Borrower. Without
limiting the provisions of Section 5.7, Borrower's granting of credits,
discounts, allowances, deductions, return authorizations or the like will be
promptly reported to Lender in writing. In no event shall any such schedule or
confirmatory assignment (or the absence thereof or omission of any of the
accounts or other Collateral therefrom) limit or in any way be construed as a
waiver, limitation or modification of the security interests or rights of
Lender or the warranties, representations and covenants of Borrower under this
Agreement. Any documents, schedules, invoices or other paper delivered to
Lender by Borrower may be destroyed or otherwise disposed of by Lender six (6)
months after receipt by Lender, unless Borrower requests their return in
writing in advance and makes prior arrangements for their return, at Borrower's
expense.
5.9 From time to time as requested by Lender, at the sole expense of
Borrower, Lender or its designee shall have access, prior to an Event of
Default during reasonable business hours and on or after an Event of Default at
any time, to all of the premises
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where Collateral is located for the purposes of inspecting the Collateral, and
all Borrower's books and records, and Borrower shall permit Lender or its
designee to make such copies of such books and records or extracts therefrom as
Lender may request. Without expense to Lender, Lender may use such of
Borrower's personnel, equipment, including computer equipment, programs,
printed output and computer readable media, supplies and premises for the
collection of accounts and realization on other Collateral as Lender, in its
sole discretion, deems appropriate. Borrower hereby irrevocably authorizes all
accountants and third parties to disclose and deliver to Lender at Borrower's
expense all financial information, books and records, work papers, management
reports and other information in their possession regarding Borrower, except
for documents which are subject to a valid and enforceable attorney-client
privilege.
SECTION 6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND
COVENANTS
Each Borrower for itself and on behalf of each other Borrower, hereby,
jointly and severally, represents, warrants and covenants to Lender the
following, the truth and accuracy of which, and compliance with which, shall be
continuing conditions of the making of loans or other credit accommodations by
Lender to Borrower:
6.1 Borrower shall keep and maintain its books and records (other than
internal reports) in accordance with generally accepted accounting principles,
consistently applied. Borrower shall, at its sole expense and on or before the
fifteenth (15th) day of each month, deliver to Lender true and complete monthly
agings of its accounts receivable and accounts and notes payable, and monthly
internally prepared interim financial statements certified by the Chief
Executive Officer or Chief Financial Officer of Borrower, and not later than
forty-five (45) days after the close of each quarter, quarterly internally
prepared financial statements, certified by the Chief Executive Officer or
Chief Financial Officer of Borrower, all in such form, and together with such
other information with respect to the business of Borrower or any guarantor, as
Lender may request. Annually, Borrower shall deliver to Lender audited
financial statements of Borrower accompanied by the report and opinion thereon
of independent certified public accountants acceptable to Lender as soon as
available, but in no event later than one hundred twenty (120) days after the
end of Borrower's fiscal year.
6.1(a) Borrower shall furnish to Lender all books and records necessary
for Lender to monitor, on a weekly basis, Borrower's accrued and unpaid
payroll, payroll taxes and withholding taxes, and Borrower shall furnish to
Lender, on a weekly basis, evidence satisfactory to Lender of payment of such
payroll, payroll taxes and withholding taxes.
6.2 Subject to the provisions of Section 2.1(d)(15)(iii),
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Borrower may from time to time render invoices to account debtors under its
trade names set forth in Section 10.6(g) after Lender has received prior
written notice from Borrower of the use of such trade names and as to which,
Borrower agrees that: (a) each trade name does not refer to another corporation
or other legal entity, (b) all accounts and proceeds thereof (including any
returned merchandise) invoiced under any such trade names are owned exclusively
by Borrower and are subject to the security interest of Lender and the other
terms of this Agreement, and (c) all schedules of accounts and confirmatory
assignments including any sales made or services rendered using the trade name
shall show Borrower's name as assignor, and Lender is authorized to receive,
endorse and deposit to any loan account of Borrower maintained by Lender all
checks or other remittances made payable to any trade name of Borrower
representing payment with respect to such sales or services.
6.3 Borrower shall promptly notify Lender in writing of any loss,
damage, investigation, action, suit, proceeding or claim relating to a material
portion of the Collateral or which may result in any material adverse change in
Borrower's business, assets, liabilities or condition, financial or otherwise.
6.4 Borrower's books and records concerning accounts and its chief
executive office are and shall be maintained only at the address set forth in
Section 10.6(d). Borrower's only other places of business and the only other
locations of Collateral, if any, are and shall be the addresses set forth in
Section 10.6(e) hereof, except Borrower may change such locations or open a new
place of business after thirty (30) days prior written notice to Lender. Prior
to any change in location or opening of any new place of business, Borrower
shall execute and deliver or cause to be executed and delivered to Lender such
financing statements, financing documents and security and other agreements as
Lender may reasonably require, including, without limitation, those described
in Section 6.14.
6.5 Borrower has and at all times will continue to have good and
marketable title to all of the Collateral, free and clear of all liens,
security interests, claims or encumbrances of any kind except in favor of
Lender and except, if any, those set forth on Exhibit "4.4" hereto.
6.6 Borrower shall not directly or indirectly: (a) sell, lease,
transfer, assign, abandon or otherwise dispose of any part of the Collateral or
any material portion of its other assets (other than (i) sales of inventory to
buyers in the ordinary course of business and, (ii) provided that no Event of
Default shall have occurred and shall be continuing and only upon Lender's
prior written consent which shall not be unreasonably withheld, sales of
Collateral at fair market value not in excess of an aggregate of twenty five
thousand ($25,000) dollars per annum during the Term of this Agreement) or (b)
consolidate with or merge with or into any other entity, or permit any other
entity to consolidate with or merge
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with or into Borrower or (c) form or acquire any interest in any firm,
corporation or other entity, except that, provided that no Event of Default
shall have occurred and shall be continuing, and only upon Lender's prior
written consent which shall not be unreasonably withheld based upon Lender's
due diligence investigation the results of which are satisfactory to Lender,
Borrower may acquire interests in any firm, corporation or other entity engaged
in the same business as Borrower.
6.7 Borrower shall at all times maintain, with financially sound and
reputable insurers, casualty insurance with respect to the Collateral and other
assets. All such insurance policies shall be in such form, substance, amounts
and coverage as may be satisfactory to Lender and shall provide for thirty (30)
days' prior written notice to Lender of cancellation or reduction of coverage.
Borrower hereby irrevocably appoints Lender and any designee of Lender as
attorney-in-fact for Borrower to obtain at Borrower's expense, any such
insurance should Borrower fail to do so and, after an Event of Default, to
adjust or settle any claim or other matter under or arising pursuant to such
insurance or to amend or cancel such insurance. Borrower shall deliver to
Lender evidence of such insurance and a lender's loss payable endorsement
satisfactory to Lender as to all existing and future insurance policies with
respect to the Collateral. Borrower shall deliver to Lender, in kind, all
instruments representing proceeds of insurance received by Borrower. Lender may
apply any insurance proceeds received at any time to the cost of repairs to or
replacement of any portion of the Collateral and/or, at Lender's option, to
payment of or as security for any of the Obligations, whether or not due, in
any order or manner as Lender determines.
6.8 Borrower is and at all times will continue to be in compliance with
the requirements of all material laws, rules, regulations and orders of any
governmental authority relating to its business (including laws, rules,
regulations and orders relating to taxes, payment and withholding of payroll
taxes, employer and employee contributions and similar items, securities,
employee retirement and welfare benefits, employee health and safety, or
environmental matters) and all material agreements or other instruments binding
on Borrower or its property. Lender shall have the right, on three (3) days
notice to Borrower (except if there shall exist an Event of Default or if in
Lender's judgment such delay could have an adverse effect on Borrower or the
Collateral, in which event no notice shall be required), but not the
obligation, to take whatever action is necessary to assure Borrower's
compliance with any of the foregoing, and all costs and expenses incurred by
Lender in connection therewith, shall be included in Obligations. Borrower
shall conduct its business at all times in accordance with the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto, if applicable. Borrower shall pay and
discharge all taxes, assessments and governmental charges against Borrower or
any Collateral prior to the date on which penalties are imposed or liens attach
with respect thereto, unless the same are
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<PAGE> 15
being contested in good faith and, at Lender's option, Reserves are established
for the amount contested and penalties which may accrue thereon.
6.9 With respect to each account deemed an Eligible Account, except as
reported in writing to Lender, Borrower has no knowledge that any of the
criteria for eligibility are not or are no longer satisfied, or as to NEI/GTEL
accounts, will not be satisfied. As to each account, except as disclosed in
writing to Lender at the time such account arises (a) each is valid and legally
enforceable and represents an undisputed bona fide indebtedness incurred by the
account debtor for the sum reported to Lender, (b) each arises from an absolute
and unconditional sale of goods, without any right of return or consignment, or
from a completed rendition of services, (c) each is not, at the time such
account arises, subject to any defense, offset, dispute (subject to the
exception provided in Section 2.1(d)(5)), contra relationship, counterclaim, or
any given or claimed credit, allowance or discount, and (d) all statements made
and all unpaid balances and other information appearing in the invoices,
agreements, proofs of rendition of services and delivery of goods and other
documentation relating to the accounts, and all confirmatory assignments,
schedules, statements of account and books and records with respect thereto,
are true and correct and in all respects what they purport to be.
6.10 All equipment hereafter acquired will be kept at the location or
locations shown in Section 10.6(d) and (e), except as Lender may otherwise
consent in writing. Borrower shall at all times hereafter keep correct and
accurate records itemizing and describing the location, kind, type, age and
condition of the equipment, Borrower's cost therefor and accumulated
depreciation thereof, all of which records shall be available for examination
by Lender. Borrower shall keep all the equipment in good order and repair and
in good operating and marketable condition, and will make all repairs and
replacements when and where necessary, will not waste or destroy it or any part
thereof, and will not be negligent in the care or use thereof. Borrower shall
at all times repair and maintain all the equipment in a manner sufficient to
continue the operation of its business as heretofore. All the equipment shall
be used in material compliance with law and shall be kept separate from and
shall not be annexed or affixed to or become part of any real estate, except as
Lender may otherwise consent in writing.
6.11 Except as set forth on Exhibit "6.11" hereto, no action or
proceeding is now pending or, to the knowledge of Borrower after appropriate
investigation, is threatened against Borrower at law, in equity or otherwise,
before any court, board, commission, agency or instrumentality of the Federal
or state government or of any foreign government, municipal government or any
agency or subdivision thereof, or before any arbitrator or panel of
arbitrators, which, if adversely decided, could have a material adverse effect
on Borrower, or its business, or the Collateral, or on Borrower's ability to
pay the Obligations, and Borrower has not
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<PAGE> 16
accepted liability for any such action or proceeding. There is no proceeding
pending before any governmental agency (Federal, state, local or foreign) and,
to the best of Borrower's knowledge after appropriate investigation, no
investigation has been commenced before any such governmental agency the effect
of which, if adversely decided, could have a material adverse effect on
Borrower, or its business, or the Collateral, or on Borrower's ability to pay
the Obligations.
6.12 Borrower will not, directly or indirectly: (a) (i) lend or advance
money or property to, (ii) guarantee or assume indebtedness of, or (iii) invest
(by capital contribution or otherwise) in, any person, firm, corporation or
other entity unless, in connection with such investment, no Event of Default
shall have occurred and shall be continuing and Borrower shall have received
Lender's prior written consent which shall not be unreasonably withheld, or (b)
make any payment of the principal amount of or interest on any indebtedness (i)
for borrowed money of any kind or nature regardless of whether same is
evidenced by a written instrument, except for payments permitted pursuant to
the Intercreditor and Subordination Agreement, dated the date of this
Agreement, among Lender, GTEL Environmental Laboratories, Inc. and Borrowers,
annexed hereto as Exhibit "6.12(b)-1", and the Intercreditor and Subordination
Agreement, dated the date of this Agreement, among Lender, State Bank of Long
Island and Borrowers, annexed hereto as Exhibit "6.12(b)-2" and (ii) owing to
any officer, director, shareholder, or affiliate of Borrower; or (c) make any
loans or advances to any officer, director, employee, shareholder or affiliate
of Borrower; or (d) enter into any sale, lease or other transaction with any
officer, director, employee, shareholder or affiliate of Borrower on terms that
are less favorable to Borrower than those which might be obtained at the time
from persons who are not an officer, director, employee, shareholder or
affiliate of Borrower; or (e) declare, pay or make any dividend, redemption or
other distribution on account of any shares of any class of stock of Borrower
now or hereafter outstanding.
6.13 Borrower shall pay, on Lender's demand, all costs, expenses, filing
fees and taxes payable in connection with the preparation, execution, delivery,
recording, administration, collection, liquidation, enforcement and defense of
the Obligations, Lender's rights in the Collateral, this Agreement and all
other existing and future agreements or documents contemplated herein or
related hereto, including any amendments, waivers, supplements or consents
which may hereafter be made or entered into in respect hereof, or in any way
involving claims or defense asserted by Lender or claims or defense against
Lender asserted by Borrower, any guarantor or any third party directly or
indirectly arising out of or related to the relationship between Borrower and
Lender or any guarantor and Lender, including, but not limited to the
following, whether incurred before, during or after the initial or any renewal
Term or after the commencement of any case with respect to Borrower or any
guarantor under the United States Bankruptcy Code or any similar statute: (a)
all costs and expenses
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<PAGE> 17
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) all title insurance and other
insurance premiums, appraisal fees, fees incurred in connection with any
environmental report, audit or survey and search fees; (c) all fees relating to
the wire transfer of loan proceeds and other funds and fees for returned
checks; (d) all 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
$650 per person, per day for Lender's examiners in the field and office;
provided, however, that after the date of this Agreement, recurring field
examination fees (exclusive of all disbursements) shall not exceed fifteen
thousand ($15,000) dollars per annum, provided Borrower is in full compliance
with the Loan Documents and there exists no Event of Default; and (e) the
costs, fees and disbursements of in-house and outside counsel to Lender.
6.14 Borrower holds all federal, state and local governmental
certifications, accreditations, licenses, permits and other authorizations
necessary for the conduct of its business. All certifications, accreditations,
licenses, permits and other authorizations held by Borrower are valid and
sufficient in all material respect for the business of Borrower as it is
presently conducted and Borrower has not received any threatened suspension,
cancellation or invalidation of any such certifications, accreditations,
licenses, permits or other authorization or any threat of any proceeding for
the suspension, cancellation or invalidation of any such certification,
accreditation, license, permit or other authorization.
6.15 At the request of Lender, at any time and from time to time, at
Borrower's sole expense, Borrower shall execute and deliver or cause to be
executed and delivered to Lender, such agreements, documents and instruments,
including waivers, consents and subordination agreements from mortgagees or
other holders of security interests or liens, landlords or bailees, and do or
cause to be done such further acts as Lender, in its discretion, deems
necessary or desirable to create, preserve, perfect or validate any security
interest of Lender or the priority thereof in the Collateral and otherwise to
effectuate the provisions and purposes of this Agreement. Borrower hereby
authorizes Lender to file financing statements or amendments against Borrower
in favor of Lender with respect to the Collateral, without Borrower's signature
and to file as financing statements any carbon, photographic or other
reproductions of this Agreement or any financing statements signed by Borrower.
6.16 As of the date hereof, (a) the Gross Availability after application
of the proceeds of the Revolving Loan and the Term Loan in accordance with
Section 2.5, less the aggregate amount of all fees, expenses and costs of
consummating the transactions contemplated by this Agreement, shall be not less
than five hundred thousand ($500,000) dollars, (b) after application of the
proceeds
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<PAGE> 18
of the loans made hereunder, Borrower will have no accounts payable which are
more than sixty (60) days past due, and (c) Borrower has paid all taxes due to
federal, state and local taxing authorities for all periods prior to the date
hereof.
6.17 As of the date hereof, and after giving effect to the transactions
contemplated in this Agreement, (a) the fair saleable value of Borrower's
assets is in excess of the total amount of its liabilities (including
contingent liabilities) as they become absolute and matured; (b) Borrower has
sufficient capital to conduct its business; and (c) Borrower is able to pay its
debts as and when they mature.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 All Obligations shall be immediately due and payable, without notice
or demand, and any provisions of this Agreement as to future loans and credit
accommodations by Lender shall terminate automatically, upon the termination or
non-renewal of this Agreement or, at Lender's option, upon or at any time after
the occurrence or existence of any one or more of the following "EVENTS OF
DEFAULT":
(a) Borrower fails to pay when due any of the Obligations or fails to
perform any of the terms of this Agreement or any other existing or future
financing, security or other agreement between Borrower and Lender or any
affiliate of Lender;
(b) Any representation, warranty or statement of fact made by Borrower
to Lender in this Agreement or any other agreement, schedule, confirmatory
assignment or otherwise, or to any affiliate of Lender, shall prove inaccurate
or misleading;
(c) Any guarantor revokes, terminates or fails to perform any of the
terms of any guaranty, endorsement or other agreement of such party in favor of
Lender or any affiliate of Lender;
(d) Any judgment or judgments aggregating in excess of $25,000 or any
injunction or attachment is obtained against Borrower or any guarantor which
remains unstayed for a period of ten (10) days or is enforced;
(e) Borrower or any guarantor is dissolved, or Borrower or any guarantor
fails to maintain its corporate existence in good standing, or the usual
business of Borrower or any guarantor ceases or is suspended;
(f) Any change in the controlling ownership of Borrower;
(g) Borrower or any guarantor becomes insolvent, makes an assignment for
the benefit of creditors, makes or sends notice of a bulk transfer or calls a
general meeting of its creditors or principal creditors;
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<PAGE> 19
(h) Any petition or application for any relief under the bankruptcy laws
of the United States 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 by or against Borrower or any guarantor;
(i) The indictment of Borrower, or any officer, director or principal
stockholder of Borrower, or any guarantor, under any criminal statute, or
commencement of criminal or civil proceedings against Borrower, or any officer,
director or principal stockholder of Borrower, or any guarantor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of Borrower or such guarantor;
(j) Any default or event of default under any financing, security or
other agreement, document or instrument at any time executed and/or delivered
to, with or in favor of Lender or any of its affiliates by any affiliate of
Borrower;
(k) Any default or event of default under any agreements or instruments
evidencing indebtedness of Borrower other than to Lender, whether or not such
indebtedness is accelerated;
(l) Any federal, state or local governmental certification,
accreditation, license, permit or other authorization necessary for the conduct
of business by Borrower shall be suspended, cancelled, or invalidated, the
effect of which could result in a material adverse change in the business,
assets, condition, financial or otherwise, or prospects of Borrower, or in the
ability of Borrower to pay or perform the Obligations, or in the Collateral; or
(m) Lender in good faith believes that either (i) the prospect of
payment or performance of the Obligations is impaired or (ii) the Collateral is
not sufficient to secure fully the Obligations; provided, however, that Lender
shall give Borrower three (3) days prior written notice of the foregoing and
Borrower may, during such period, offer to Lender additional collateral, or
assurances to Lender, which are acceptable to Lender in all respects, in
Lender's sole discretion.
7.2 Upon the occurrence of an Event of Default and at any time
thereafter, Lender shall have all rights and remedies provided in this
Agreement, any other agreements between Borrower and Lender, the Uniform
Commercial Code or other applicable law, all of which rights and remedies may
be exercised without notice to Borrower, all such notices being hereby waived,
except such notice as is expressly provided for hereunder or is not waivable
under applicable law. All rights and remedies of Lender are cumulative and not
exclusive and are enforceable, in Lender's discretion, alternatively,
successively, or concurrently on any one or more occasions and in any order
Lender may determine. Without limiting the foregoing, Lender may (a) accelerate
the payment of all Obligations and demand immediate payment thereof to Lender,
(b)
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<PAGE> 20
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, (c) 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, (d) collect, foreclose,
receive, appropriate, setoff and realize upon any and all Collateral, (e)
extend the time of payment of, compromise or settle for cash, credit, return of
merchandise, and upon any terms or conditions, any and all accounts or other
Collateral which includes a monetary obligation and discharge or release the
account debtor or other obligor, without affecting any of the Obligations, (f)
sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including, without limitation, entering into contracts with respect
thereto, by public or private sales at any exchange, broker's board, 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. 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, seven (7) 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.
7.3 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 any of the Obligations, in whole or in part (including
reasonable attorneys' fees and legal expenses incurred by Lender with respect
thereto or otherwise chargeable to Borrower) 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 together with interest at the highest rate provided
for herein and all costs and expenses of collection or enforcement, including
reasonable attorneys' fees and legal expenses.
7.4 Lender may, at its option, cure any default by Borrower under any
agreement with a third party or pay or bond on appeal any judgment entered
against Borrower, discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral
and pay any amount, incur any expense or perform any act which, in Lender's
sole judgment, is
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<PAGE> 21
necessary or appropriate to preserve, protect, insure, maintain, or realize
upon the Collateral. Lender may charge Borrower's loan account for any amounts
so expended, such amounts to be repayable by Borrower on demand. Lender shall
be under no obligation to effect such cure, payment, bonding or discharge, and
shall not, by doing so, be deemed to have assumed any obligation or liability
of Borrower.
SECTION 8. JURY TRIAL WAIVER; CERTAIN OTHER WAIVERS AND
CONSENTS
8.1 Borrower and Lender each waive all rights to trial by jury in any
action or proceeding instituted by either of them against the other which
pertains directly or indirectly to the Loan Documents (as hereinafter defined),
the Obligations, the Collateral, any alleged tortious conduct by Borrower or
Lender, or, in any way, directly or indirectly, arises out of or relates to the
relationship between Borrower and Lender. In no event will Lender be liable for
lost profits or other special or consequential damages.
8.2 Borrower waives all rights to interpose any claims, deductions,
setoffs or counterclaims of any kind, nature or description in any action or
proceeding instituted by Lender with respect to this Agreement, the
Obligations, the Collateral or any matter arising therefrom or relating
thereto, except compulsory counterclaims.
8.3 Borrower hereby irrevocably submits and consents to the nonexclusive
jurisdiction of the State and Federal Courts located in the State in which the
office of Lender designated in Section 10.6(a) is located and any other State
where any Collateral is located with respect to any action or proceeding
arising out of this Agreement, the Obligations, the Collateral or any matter
arising therefrom or relating thereto. In any such action or proceeding,
Borrower waives personal service of the summons and complaint or other process
and papers therein and agrees that the service thereof may be made by mail
directed to Borrower at its chief executive office set forth herein or other
address thereof of which Lender has received notice as provided herein, service
to be deemed complete five (5) days after mailing, or as permitted under the
rules of either of said Courts. Any such action or proceeding commenced by
Borrower against Lender will be litigated only in a Federal Court located in
the district, or a State Court in the State and County, in which the office of
Lender designated in Section 10.6(a) is located and Borrower waives any
objection based on forum non conveniens and any objection to venue in
connection therewith.
8.4 Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights or remedies unless such
waiver shall be in writing and signed by an authorized officer of Lender. A
waiver by Lender of any right or
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remedy on any one occasion shall not be construed as a bar to or waiver of any
such right or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
SECTION 9. TERM OF AGREEMENT; ADDITIONAL PROVISIONS
9.1 Term. This Agreement shall only become effective upon execution and
delivery by Borrower and Lender and shall continue in full force and effect for
a term of three (3) years from the date hereof and shall be deemed
automatically renewed for successive terms of two (2) years thereafter unless
terminated as of the end of the initial or any renewal term (each a "TERM") by
either party giving the other written notice at least ninety (90) days prior to
the end of the then-current Term.
9.2 Borrower may also terminate this Agreement by giving Lender at least
thirty (30) days prior written notice at any time upon payment in full of all
of the Obligations as provided herein, including the early termination fee
provided below. Lender shall also have the right to terminate this Agreement
at any time upon or after the occurrence of an Event of Default. If Lender
terminates this Agreement upon or after the occurrence of an Event of Default,
or if Borrower shall terminate this Agreement as permitted herein effective
prior to the end of the then-current Term, in addition to all other
Obligations, Borrower shall pay to Lender, upon the effective date of
termination, 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, an early termination fee equal
to
(a) three percent (3%) of the Maximum Credit if Borrower's written notice of
termination is received by Lender or termination by Lender is effective
prior to the end of the first anniversary of the date hereof; or
(b) after the first anniversary of the date of this Agreement, two percent
(2%) of the Maximum Credit if Borrower's written notice of termination
is received by Lender or termination by Lender is effective prior to the
end of the third year of the initial Term or during any renewal Term;
provided, however, that Borrower shall not be required to pay the early
termination fee set forth in this Section 9.2(b) if the Obligations are
paid in full after the first anniversary of the date hereof with the
proceeds of a loan made available to Borrower by Key Bank of New York.
9.3 Upon termination of this Agreement by Borrower, as permitted herein,
in addition to payment of all Obligations which are not contingent, Borrower
shall deposit such amount of cash collateral as Lender determines is necessary
to secure Lender from loss, cost, damage or expense, including reasonable
attorneys' fees, in connection with any open Accommodations or remittance
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<PAGE> 23
items or other payments provisionally credited to the Obligations and/or to
which Lender has not yet received final and indefeasible payment.
9.4 Except as otherwise provided, all notices, requests and demands
hereunder shall be (a) made to Lender at its address set forth in Section
10.6(a) and to Borrower at its chief executive office set forth in Section
10.6(d), 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 by hand, immediately upon delivery; if by telex,
telegram or telecopy (fax), immediately upon receipt; if by overnight delivery
service, one day after dispatch; and if by first class or certified mail, three
(3) days after mailing.
9.5 If any provision of this Agreement is held to be invalid or
unenforceable, such provision shall not affect 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.
9.6 This Agreement, the Term Note, the Guarantees, the Subordination and
Intercreditor Agreement and any other documents executed in connection with the
foregoing or pursuant thereto (collectively the "Loan Documents") contain the
entire agreement of the parties as to the subject matter hereof, all prior
commitments, proposals and negotiations concerning the subject matter hereof
being merged herein. Neither the Loan Documents nor any provision thereof shall
be amended, modified or discharged orally or by course of conduct, but only by
a written agreement signed by the Lender and the Borrower.
9.7 No termination of this Agreement shall relieve or discharge Borrower
of its Obligations, grants of Collateral, duties and covenants hereunder or
otherwise until such time as all Obligations to Lender have been indefeasibly
paid and satisfied in full, including, without limitation, the continuation and
survival in full force and effect of all security interests and liens of Lender
in and upon all then existing and thereafter-arising or acquired Collateral and
all warranties and waivers of Borrower.
9.8 All terms used herein which are defined in the Uniform Commercial
Code shall have the meanings given therein unless otherwise defined in this
Agreement and all references to the singular or plural herein shall also mean
the plural or singular, respectively.
9.9 This Agreement shall be governed by and construed in accordance with
the laws of the State in which the office of Lender set forth in Section
10.6(a) below is located.
9.10 Whenever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors and assigns of
such party; and all covenants, promises
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<PAGE> 24
and agreements by or on behalf of Borrower or Lender that are contained in this
Agreement shall bind and inure to the benefit of their respective successors
and assigns. Borrower may not assign or transfer any of its rights or
obligations hereunder without the written consent of Lender.
9.11 Lender reserves the right to sell, assign, or participate, in whole
or in part, the Revolving Loan and/or the Term Loan and any Obligations of
Borrower hereunder to any financial institution(s) without limitation;
provided, however, that no such participation, but only an assignment to
another financial institution, shall relieve Lender of its obligations
hereunder. Each assignee and participant shall be entitled to all the benefits
of this Agreement and all other Loan Documents with respect to such
participation or assignment. The obligations of Borrower and of any guarantor
and the security interests created, confirmed and/or continued hereunder shall
survive, without being impaired in any way regardless of any assignments and
participations hereunder. Notwithstanding any other provision hereof, Lender
may, in connection with any assignment or participation or proposed assignment
or participation, disclose to the assignee or participant or proposed assignee
or participant, any information relating to Borrower or any guarantor furnished
to Lender in connection with this Agreement to the extent necessary for such
purpose.
9.12 Within five (5) Business Days after notice thereof by Lender to
Borrower, Borrower shall execute and deliver to Lender in exchange for the
surrendered Term Note, a new Note or Notes to the order of such assignee in an
amount equal to its assigned or participated portion pursuant to such
assignment or participation and, with respect to Lender in an amount equal to
the portion retained by Lender thereunder, if any. Such new Note or Notes
shall be in the aggregate principal amount of such surrendered Term Note, shall
be dated the effective date of such assignment or participation and shall
otherwise be in substantially the form of the surrendered Term Note. The
cancelled Term Note shall be returned promptly to Borrower.
SECTION 10. ADDITIONAL DEFINITIONS AND TERMS
10.1 (a) Maximum Credit: $7,000,000
(b) Gross Availability Formula:
Eligible Accounts Percentage:
(i) eighty percent (80%) of Eligible Accounts
of Nytest Environmental Inc., a Delaware
corporation ("NYTEST");
(ii) eighty percent (80%) of Eligible Accounts
of NEI of Pennsylvania, Inc., a Delaware
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<PAGE> 25
corporation ("NEIPA");
(iii) seventy-five (75%) of Eligible Accounts
of NEI/GTEL Environmental Laboratories, Inc., a
Delaware corporation ("NEI/GTEL"),
so long as the Dilution Percentage (as
hereinafter defined) of such Eligible Accounts
does not exceed five percent (5%) in respect of
Eligible Accounts of Nytest and NEIPA, and
seven percent (7%) in respect of Eligible
Accounts of NEI/GTEL, determined separately for
each such Borrower and based on a rolling
three-month average; provided, however, that
if, during the first full six (6) months after
the date of this Agreement, such Dilution
Percentage in respect of Eligible Accounts of
NEI/GTEL is not more than five percent (5%),
the Eligible Accounts Percentage applicable to
NEI/GTEL shall be increased to eighty percent
(80%).
If the Dilution Percentage exceeds five percent
(5%) in respect of Eligible Accounts of Nytest
and NEIPA, or seven percent (7%) in respect of
Eligible Accounts of NEI/GTEL (or five percent
(5%) in the event the Eligible Accounts
Percentage applicable to NEI/GTEL is increased
to 80%) (in each case, the "Excess Dilution
Percentage"), then the Eligible Accounts
Percentage applicable to each Borrower shall be
reduced by one percentage point for each
percentage point or fraction thereof of Excess
Dilution Percentage.
"Dilution Percentage" means the percent
obtained by dividing (i) all credits,
allowances, discounts, write offs,
contra-accounts and other offsets incurred in
any month by such Borrower that reduce the
value of such Borrower's accounts by (ii) the
gross amount of all accounts created by such
Borrower in such month.
(c) (Intentionally omitted)
(d) Notwithstanding anything to the contrary contained in
this Agreement, no account shall be an Eligible Account if
more than ninety (90) days have passed since the date of
the invoice evidencing such account; provided, however,
that if the account debtor is Smith and (A) if such account
is not morethan one hundred twenty (120) days past the date
of the invoice evidencing such account, and (B) the
aggregate amount
- 25 -
<PAGE> 26
of all accounts between 90 days and 120 days past the date
of the invoices evidencing such accounts does not exceed
two hundred fifty thousand ($250,000) dollars then such
account shall nevertheless be considered an Eligible
Account.
(e) Minimum Borrowing: $3,000,000
10.2 Term Loan:
At any time during the Term of this Agreement,
an amount equal to eighty percent (80%) of the appraised
auction sale value of Borrower's equipment which is and
remains acceptable to Lender for lending purposes, as
appraised by an appraiser selected by Lender; provided,
however, that in no event shall the Term Loan exceed one
million eight hundred forty thousand one hundred twenty
($1,840,120) dollars on the date of this Agreement;
provided, further, however, that Lender, at any time in its
sole discretion but not more frequently than annually, may
cause the equipment to be reappraised at Borrower's expense
(not to exceed $7,500 annually), and the excess, if any
(the "EXCESS LOAN"), of (A) the principal balance of the
Term Loan outstanding on the date of such reappraisal over
(B) the amount equal to (i) 80% of the reappraised auction
sale value of such equipment less (ii) the amount by which
the reappraised auction sale value of equipment purchased
subsequent to the date of this Agreement exceeds seven
hundred fifty thousand ($750,000) Dollars, shall be paid to
Lender in six (6) consecutive equal monthly installments
commencing on the first day of the month following the
month during which the reappraisal is made, which payments
shall be in addition to mandatory payments of the Term Loan
as provided in Section 2.2.
10.3 Accommodations:
(a) Lender's Charge for
Accommodations: two and one quarter percent (2 1/4%)
per annum
(b) Sublimit for Accommodations: $250,000.
10.4 Fees:
(a) Interest Rate: Prime Rate plus one and three quarters
percent (1-3/4%) per annum on the Revolving Loan and the
Term Loan; provided, however, that, if Borrower's
cumulative results of operations for the period ending on
the last day of the first full six (6) months after the
date of this Agreement, as reported on financial statements
prepared and delivered in
- 26 -
<PAGE> 27
accordance with Section 6.1, reflect a net loss, the
Interest Rate will be the Prime Rate plus two percent (2%)
per annum commencing as of the first day of the next month;
provided, further, however, that if Borrower's cumulative
results of operations for the period ending on the last day
of the first full twelve (12) months after the date of this
Agreement, as reported on financial statements prepared and
delivered in accordance with Section 6.1, reflect a net
profit, the Interest Rate will be the Prime Rate plus one
and three quarters percent (1-3/4%) commencing as of the
first day of the next month.
(b) Closing Commitment Fee: $35,000
(c) Annual Commitment Fee: One percent (1%) of the Maximum
Credit, payable one half of one percent (1/2%) on the first
and second anniversaries of the date of this Agreement and,
if this Agreement is renewed, payable one-half of one
percent (1/2%) on the renewal date and on the first
anniversary of the renewal date.
(d) Unused Line Fee: One half of one percent (1/2%) per
annum.
10.5 Financial Covenants: None
10.6 (a) Lender's Office: 135 West 50th Street
New York, New York 10020
(b) Lender's Bank: Chemical Bank
270 Park Avenue
New York, New York
(c) Borrower: Nytest Environmental, Inc., and
NEI/GTEL Environmental
Laboratories, Inc., and
NEI of Pennsylvania, Inc.
(d) Chief Executive Office of Nytest Environmental,
Inc.:
60 Seaview Boulevard
Port Washington, NY 11050
Chief Executive Office of NEI of Pennsylvania,
Inc.:
1850 Gravers Road
Norristown, PA 19401
- 27 -
<PAGE> 28
Chief Executive Office of NEI/GTEL
Environmental Laboratories, Inc. Meadowbrook
Industrial Park Milford, NH 03055
(e) Locations of all Collateral other than Chief
Executive Offices of Borrower:
10500 University Center Drive
Tampa, Florida 33612
4211 West May Avenue
Wichita, Kansas 67209
(f) Borrower's Other offices:
Sales Offices in Concord, California and
Atlanta, Georgia where no Collateral or
Collateral records are kept
(g) Borrower's Trade Names for
Invoicing (if other than Borrower's names):
None
10.7 Guarantors: Nytest Environmental, Inc., and
NEI/GTEL Environmental
Laboratories, Inc., and
NEI of Pennsylvania, Inc.
- 28 -
<PAGE> 29
IN WITNESS WHEREOF, Borrower and Lender have duly executed this
Agreement this 22nd day of April, 1996.
LENDER: BORROWER:
THE CIT GROUP/CREDIT
FINANCE, INC. NYTEST ENVIRONMENTAL INC.
By: /s/ Arthur McCray By: /s/ John Gaspari
-------------------- -----------------------
Title: AVP Title: CEO
----------------- --------------------
NEI OF PENNSYLVANIA, INC.
By: /s/ John Gaspari
-----------------------
Title: CEO
--------------------
NEI/GTEL ENVIRONMENTAL
LABORATORIES, INC.
By: /s/ John Gaspari
-----------------------
Title: CEO
--------------------
- 29 -
<PAGE> 30
EXHIBIT "4.4"
Permitted Liens
- 30 -
<PAGE> 31
EXHIBIT "6.11"
Litigation
- 31 -
<PAGE> 32
Dispute Letter
Exhibit "2.1(d)"
LOAN AND SECURITY AGREEMENT
THE CIT GROUP/CREDIT FINANCE, INC.
135 West 50th Street
New York, New York 10020
LETTER OF NON-OFFSET
_____ __, 199__
[Name and Address of Customer]
Re: [Nytest Environmental Inc.] [NEI/GTEL Environmental
Laboratories, Inc.] [NEI of Pennsylvania, Inc.]
("Seller")
Gentlemen:
We understand that you have certain arrangements with Seller
pursuant to which you are, or from time to time may be, an account debtor of
Seller.
We have entered into financing arrangements with Seller,
pursuant to which we have made certain loans and advances to Seller upon the
security of, among other collateral, a continuing first priority security
interest in all of Seller's existing and future accounts receivable
("Accounts").
We have been advised that an Account due from you to Seller in
the amount of $________ is the subject of a dispute. At the present time the
undisputed portion of the balance owed on the account is $______. You agree
that you will remit the undisputed portion of the balance on the Account in
accordance with the terms of the invoice evidencing such Account.
You will not assert any offset, claim, counterclaim or
deduction in respect of the Account and, whether or not you shall ultimately
prevail in respect of any such offset, claim, counterclaim or deduction, you
will pay to us, promptly when due,
<PAGE> 33
[Name and Address of Customer]
_____ __, 199__
Page 2
in accordance with its terms, any and all of the undisputed portion of the
Account.
Nothing contained herein shall in any way limit your right to
proceed against Seller by independent action for any claim of any kind that you
may now or hereafter have.
You acknowledge that we will continue to rely upon the
foregoing agreements, representations and warranties in considering loans and
advances requested by Seller.
Kindly indicate your acceptance of and agreement with the
foregoing by signing in the place provided below.
Very truly yours,
THE CIT GROUP/CREDIT FINANCE, INC.
By:
--------------------------------
Title:
-----------------------------
AGREED AND ACCEPTED:
[Name of Customer]
By:
------------------------
Name/Title:
----------------
<PAGE> 1
EXHIBIT 10.2
TERM NOTE
$1,840,120
New York, New York
April 22, 1996
FOR VALUE RECEIVED, NYTEST ENVIRONMENTAL INC., a Delaware corporation,
NEI/GTEL ENVIRONMENTAL LABORATORIES, INC., a Delaware corporation and NEI OF
PENNSYLVANIA, INC., a Delaware corporation (collectively, the "Borrowers")
hereby jointly and severally promise to pay to the order of THE CIT
GROUP/CREDIT FINANCE, INC. (the "Lender") the principal sum of One Million
Eight Hundred Forty Thousand One Hundred Twenty Dollars ($1,840,120) advanced
to the Borrowers by the Lender pursuant to a certain Loan and Security
Agreement of even date herewith between the Borrowers and the Lender (as
extended, amended, supplemented, restated or otherwise modified from time to
time, the "Loan Agreement") in sixty (60) consecutive monthly installments of
Thirty Thousand Six Hundred Sixty-Nine Dollars ($30,669.00), each payable on
the first day of each month commencing on the first day of May, 1996; provided,
however, that the payment due on April 1, 2001 shall be in an amount sufficient
to repay in full the outstanding principal amount under this Term Note and all
accrued interest thereon outstanding on such date. Whenever any payment to be
made hereunder is stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall be included in the computation of interest. Capitalized terms used
herein without definition shall have the meanings ascribed to them in the Loan
Agreement.
Borrowers jointly and severally promise to pay interest from the date
hereof on the outstanding principal balance hereof, at such rate per annum and
payable on such dates as are determined pursuant to the Loan Agreement.
Borrowers jointly and severally promise to pay interest, payable on demand, on
any overdue amounts from the due date thereof at the rate provided for in the
Loan Agreement.
This Note is the Term Note referred to in the Loan Agreement, which,
among other things, contains provisions for the acceleration of the maturity
hereof upon the happening of certain events, and for mandatory and voluntary
prepayment of the principal hereof prior to the maturity hereof, all upon the
terms and conditions therein specified.
All payments of principal and interest shall be made as provided in
the Loan Agreement in United States dollars and immediately available funds at
the office of Lender located at 135 West 50th Street, New York, New York 10020
or for its account at Chemical Bank, or such other place or bank as Lender may
designate.
<PAGE> 2
Each Borrower hereby waives diligence, presentment, demand, protest
and notice of any kind whatsoever. Each Borrower jointly and severally
promises to pay all reasonable costs of collection and enforcement of this
Note, including reasonable attorneys' fees and disbursements. No delay or
failure by the holder in exercising any of its rights hereunder in any
particular instance shall constitute a waiver thereof in that or any subsequent
instance.
The obligations of the Borrowers under this Note are secured by the
security interests granted to Lender under the Loan Agreement and the other
Loan Documents. In addition, the holder of this Note is entitled to the
benefits of the guaranty referred to in Section 9.6 of the Loan Agreement.
The terms of this Note are subject to amendment only in the manner
provided in the Loan Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS.
NYTEST ENVIRONMENTAL, INC.
By: /s/ John Gaspari
------------------------------------
Name: John Gaspari
Title: CEO
NEI/GTEL ENVIRONMENTAL LABORATORIES, INC.
By: /s/ John Gaspari
------------------------------------
Name: John Gaspari
Title: CEO
NEI OF PENNSYLVANIA, INC.
By: /s/ John Gaspari
------------------------------------
Name: John Gaspari
Title: CEO
- 2 -
<PAGE> 1
EXHIBIT 10.3
GENERAL INTANGIBLES MORTGAGE
AND SECURITY AGREEMENT
This GENERAL INTANGIBLES MORTGAGE AND SECURITY AGREEMENT is
entered into this 22nd day of April, 1996, between NEI/GTEL ENVIRONMENTAL
LABORATORIES, INC., ("Mortgagor"), a Delaware corporation having its principal
executive office at 60 Seaview Boulevard, Port Washington, New York 11050 and
THE CIT GROUP/CREDIT FINANCE, INC. (the "Secured Party"), a Delaware
corporation having its principal executive office at 135 West 50th Street, New
York, New York 10020.
WHEREAS, Mortgagor, the other borrowers signatory thereto (the
"Other Borrowers") and the Secured Party, have entered into a Loan and Security
Agreement dated the date hereof (the "Loan Agreement") (capitalized terms used
herein and not otherwise defined herein shall have the meaning set forth in the
Loan Agreement); and
WHEREAS, pursuant to the Term Loan and the Revolving Loan,
Mortgagor and the Other Borrowers have received and will receive revolving
loans and a term loan and other financial accommodations from the Secured Party
and expect to incur Obligations, as that term is defined in the Loan Agreement;
and
WHEREAS, in order to induce the Secured Party to make the Term
Loan and Revolving Loan to Mortgagor and the Other Borrowers as provided in the
Loan Agreement, Mortgagor has agreed to grant to the Secured Party security and
assurance in order to secure the payment and performance by it and the Other
Borrowers of all the Obligations, and to that effect to grant to the Secured
Party a first priority security interest and mortgage in all of the now
existing and hereafter created or acquired patents, copyrights, trademarks,
trade names, trade service styles, service marks, and all licenses, permits and
authorizations required by law that may be necessary to own Mortgagor's
property and conduct its business as it is presently conducted or as Mortgagor
intends to conduct it hereafter, and the entire goodwill of the business of
Mortgagor connected with and symbolized by such trademarks, service marks and
trade names and all of the other general intangibles of Mortgagor.
NOW THEREFORE, in order to secure all present and future
Obligations of the Mortgagor and the Other Borrowers to the Secured Party, and
the payment and performance of all Obligations of the Mortgagor herein, and the
Mortgagor and the Other Borrowers in the Loan Agreement and the other Loan
Documents, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Mortgagor hereby irrevocably
grants, assigns,
<PAGE> 2
bargains, mortgages, pledges and creates a security interest having priority
over all other security interests unto the Secured Party, with power of sale
upon the occurrence of an Event of Default under the Loan Agreement, of all of
Mortgagor's right, title and interest in and to all General Intangibles (as
hereinafter defined) including, without limitation, all of the entire right,
title and interest of Mortgagor throughout the world in and to:
(a) The United States Patents and applications
for patents described on Exhibit "A" annexed hereto and all
other United States patents and all applications for patents
or like protection of Mortgagor now existing or hereafter
filed or acquired;
(b) The inventions disclosed and/or claimed in
all of the said United States and foreign patents and
applications for patents, and all other inventions now owned
by Mortgagor or hereinafter made, created or acquired by or
for Mortgagor whether or not any of said inventions are
patentable;
(c) All other applications for patent or like
protection of any of said inventions that have now or may in
the future be filed by Mortgagor, or by the assignor(s) of the
rights to said inventions to Mortgagor, whether in the United
States or in any other country or place anywhere in the world;
(d) All other patents or like protection
including, without limitation, patents for computer software
programs, that have been or may in the future be granted on
any of the aforesaid inventions and/or applications, to
Mortgagor, or to any assignor of the rights to any such
invention to Mortgagor, whether in the United States or in any
other country or place anywhere in the world;
(e) All copyrights of Mortgagor, including,
without limitation, copyrights for computer software programs,
now existing or hereafter acquired, whether or not the
underlying works of authorship have been published and whether
said copyrights are statutory or arise under the common law,
all applications of Mortgagor for copyright presently existing
or hereafter filed or acquired and all works of authorship and
other intellectual property rights now owned or hereafter
created by or for, or acquired by Mortgagor;
(f) All trademarks, service marks and
applications to register the same of Mortgagor, whether
registered or unregistered and wherever registered, now
existing or hereafter arising, created or acquired by
Mortgagor;
2
<PAGE> 3
(g) All renewals, reissues, continuations,
extensions or the like of any patents, copyrights, trademarks,
service marks and like protection, including without
limitation, those obtained or permissible under past, present
and future laws and statutes;
(h) All rights of action on account of past,
present and future unauthorized use of any of said inventions,
copyrights, trademarks or service marks and for infringement
of said patents, copyrights, trademarks or service marks and
like protection;
(i) The right to file and prosecute applications
for patents, copyrights, and for registration of trademarks
and service marks on any of said inventions, copyrights,
trademarks, service marks or for similar intellectual property
in the United States or any other country or place anywhere in
the world;
(j) The entire goodwill of the business of
Mortgagor connected with and symbolized by the trademarks,
service marks, trade names and the other general intangibles
of Mortgagor;
(k) All of Mortgagor's trade names, customer
lists, trade secrets, corporate and other business records,
license rights, advertising materials, operating manuals,
methods, processes, know-how, sales literature, drawings,
specifications, descriptions, inventions, name plates,
catalogs, dealer contracts, supplier contracts, distributor
agreements, confidential information, consulting agreements,
engineering contracts, and all other assets which uniquely
reflect the goodwill of the business of Mortgagor to which
said general intangibles relate; and
(l) All other intangible property specified in
the Loan Agreement and not otherwise specified herein; and
(m) All of the proceeds of any of the foregoing
(the intangible assets enumerated in sub-paragraphs (a)
through (m) being hereinafter collectively referred to as the
"General Intangibles").
TO HAVE AND TO HOLD the same unto the Secured Party, its
successors and assigns, forever; provided, however, that the mortgage, lien and
security interest in the General Intangibles granted to the Secured Party
hereunder are upon the express condition that if the Mortgagor and the Other
Borrowers shall pay and discharge the Obligations and the Indebtedness
evidenced by the Loan Agreement in accordance with the terms thereof, and all
other sums that may be secured thereby, and the Loan Agreement shall be
3
<PAGE> 4
terminated, then this General Intangibles Mortgage and Security Agreement and
the mortgage, lien and security interest hereby granted shall cease, terminate
and be void, and the entire right and interest in said General Intangibles
created by this General Intangibles Mortgage and Security Agreement shall be
released (at the Mortgagor's expense) to Mortgagor, otherwise this General
Intangibles Mortgage and Security Agreement is to remain in full force and
effect.
MORTGAGOR AGREES that in addition to the rights and remedies
given to the Secured Party under the Loan Agreement upon the occurrence of any
Event of Default under the Loan Agreement, the Secured Party shall have the
rights and remedies of a secured party under the Uniform Commercial Code,
including the power to sell, assign and convey the General Intangibles, in
whole or in part, for cash or on credit, at public sale or private sale. The
Secured Party may be the purchaser of any or all of the General Intangibles at
any sale and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
General Intangibles sold at such sale, to use and apply any of the Obligations
as a credit on account of the purchase price of any General Intangibles payable
at such sale. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right on the part of the Mortgagor, and
Mortgagor hereby waives (to the fullest extent permitted by law) all rights of
redemption, stay and/or appraisal that it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
Mortgagor agrees that, to the extent notice of sale shall be required by law,
twenty (20) days' notice to Mortgagor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notice. The Secured Party shall not be obligated to make any sale
of General Intangibles regardless of notice of sale having been given. The
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Mortgagor hereby waives any claims against the Secured Party arising by reason
of the fact that the price at which any General Intangibles may have been sold
at such a private sale was less than the price that might have been obtained at
a public sale, even if the Secured Party accepts the first offer received and
does not offer such General Intangibles to more than one offeree. For such
purposes and in the event of Mortgagor's default hereunder or the occurrence of
any Event of Default under the Loan Agreement, Mortgagor hereby authorizes and
empowers the Secured Party to make, constitute and appoint any officer or agent
of the Secured Party as the Secured Party may select, in its exclusive
discretion, as Mortgagor's true and lawful attorney-in-fact, with the power to
endorse Mortgagor's name on all applications, documents, papers and instruments
as may be necessary for the Secured Party to have the full benefit of this
General
4
<PAGE> 5
Intangibles Mortgage and Security Agreement, including, but not limited to, the
full right consistent with applicable law, to use the General Intangibles
described herein or to grant or issue any exclusive or non-exclusive license
under such General Intangibles to anyone else, or as may be necessary for the
Secured Party to assign, pledge, convey or otherwise transfer title in and to
or otherwise dispose of the General Intangibles. Mortgagor hereby ratifies all
that such attorney shall lawfully do or cause to be done by virtue hereof.
This power of attorney shall be irrevocable for the life of this General
Intangibles Mortgage and Security Agreement, the Loan Agreement, and until
Mortgagor's and the Other Borrowers' Obligations are satisfied in full.
MORTGAGOR FURTHER AGREES (a) while a secured party or
mortgagee, the Secured Party shall have no obligation or responsibility to
protect or defend the General Intangibles or the right to use thereof, and
Mortgagor shall, at its own expense, protect, defend and maintain the same to
the full extent advisable for its business including, in the case of any
General Intangibles which are copyrights or patents for computer software
programs, maintaining all user and system documentation, a copy of the most
recent version of object code and a copy of the fully narrated source code for
the software programs in a place which is accessible to the Secured Party, the
location of which Mortgagor will designate in writing to the Secured Party, and
(b) to use its best efforts to detect any infringers of the rights described
herein and shall forthwith advise the Secured Party in writing of material
infringements detected, and (c) if Mortgagor fails to comply with the
foregoing, the Secured Party may do so in Mortgagor's name to the extent
permitted by law, but at Mortgagor's expense, and Mortgagor hereby agrees to
reimburse the Secured Party in full for all expenses, including reasonable
attorneys' fees, incurred by the Secured Party in protecting, defending and
maintaining the General Intangibles.
MORTGAGOR FURTHER AGREES and covenants that it will, at its
own expense, notify its successors and assigns, execute all papers and perform
such other acts as may be reasonably necessary to give the Secured Party, its
successors, assigns and participants, the full benefit of this General
Intangibles Mortgage and Security Agreement.
Mortgagor hereby represents, warrants, covenants and agrees
that:
(a) Except for the security interest granted to the
Secured Party hereby it is and will continue to be the owner
of all of its General Intangibles free from any adverse claim,
security interest or encumbrance in favor of any person other
than the Secured Party.
(b) It has the full right and power to grant the
5
<PAGE> 6
security interest in its General Intangibles made hereby.
(c) It has made no previous assignment, transfer or
agreements in conflict herewith or constituting a present or
future assignment, transfer, or encumbrance on any of the
General Intangibles.
(d) Except for the lien instruments filed or to be
filed with the United States Patent and Trademark Office or
the United States Office of Copyrights, Library of Congress,
in respect to the security interest granted to the Secured
Party hereby, there is no financing statement or other
document or instrument now signed or on file in the United
States Patent and Trademark Office or the United States Office
of Copyrights, Library of Congress, covering any part of the
General Intangibles, and so long as any of the Obligations
remain outstanding under the Loan Agreement, it will not
execute, and there will not be on file in the United States
Patent and Trademark Office or the United States Office of
Copyrights, Library of Congress, any such financing statement
or other document or instruments.
(e) Subject to any written limitation stated therein
or in connection therewith, all information furnished to the
Secured Party concerning the General Intangibles and proceeds
thereof, or otherwise for the purpose of obtaining the Term
Loan and the Revolving Loan, is or will be at the time the
same is furnished, accurate and correct in all material
respects.
(f) To the best of Mortgagor's knowledge and belief
after due inquiry, no material infringement or unauthorized
use presently is being made of any General Intangibles.
Throughout the term of this General Intangibles Mortgage and
Security Agreement, Mortgagor shall diligently prosecute all applications for
patents, copyrights and trademarks and shall file and prosecute any and all
continuations, continuations-in- part, applications for reissue, applications
for certificate of correction and like matters as shall be reasonably indicated
to be desirable from facts available to it from time to time during the term of
this General Intangibles Mortgage and Security Agreement, and Mortgagor shall
bear the entire cost of all such filing and proceedings. Mortgagor agrees to
retain an experienced and reputable copyright and trademark counsel approved by
the Secured Party for the filing and prosecution of all such applications and
other proceedings.
Mortgagor agrees to pay when due all fees, including license
fees, taxes and other expenses which shall be incurred or
6
<PAGE> 7
which shall accrue with respect to any of the patents or patent applications,
copyrights and copyright applications, trademarks and trademark applications
and know-how within the General Intangibles.
Mortgagor shall not allow any patent, copyright, trademark,
trade name, service mark or any application for patent, copyright, trademark or
like protection included within the General Intangibles to become abandoned,
nor any patent, copyright, trademark or like protection to be forfeited or
dedicated to the public without the express written approval of the Secured
Party and any license thereof by Mortgagor shall be legally sufficient to
prevent any abandonment, forfeiture or dedication to public use. In the event
any pending or hereafter filed patent or trademark application, other than
trademark renewal applications, has been finally rejected by the United States
Patent and Trademark Office and Mortgagor has exhausted its administrative
remedies, Mortgagor may abandon the same after sixty (60) days' written notice
to the Secured Party, who may thereafter at its own expense pursue judicial
appeals. Mortgagor shall cooperate in any such appeal.
The Secured Party may, upon prior notice to the Mortgagor, at
its option, whether before or after default, but without obligation to do so,
discharge taxes, liens, or security interests or other encumbrances at any time
levied or placed upon the General Intangibles, or pay for maintenance or
preservation of the General Intangibles, or pay any other fee, attorneys' fee
or other expenses necessary to preserve and protect the assignment and security
interest hereby granted.
Mortgagor shall be liable for and shall pay (i) all reasonable
out-of-pocket expenses incurred by the Secured Party in connection with the
preparation of this General Intangibles Mortgage and Security Agreement, and
with any amendments, modifications or waivers of the provisions hereof (whether
or not the transactions contemplated hereby shall be consummated), (ii) all
reasonable expenses incurred by the Secured Party in connection with the
enforcement of the rights of the Secured Party in connection with this General
Intangibles Mortgage and Security Agreement and (iii) except to the extent
resulting from the Secured Party's intentional misconduct, all damages and
reasonable expenses incurred by the Secured Party with respect to any action
which may be instituted by any Person against the Secured Party in respect of
or in connection with this General Intangibles Mortgage and Security Agreement
or as a result of any transaction, action or non-action arising from this
General Intangibles Mortgage and Security Agreement; including, in each such
case, without limitation, the reasonable fees and disbursements of counsel for
the Secured Party.
Any provisions hereof found to be invalid under the law of the
United States of America, the State of New York or any other State having
jurisdiction, shall be invalid only with respect to
7
<PAGE> 8
the offending provision. All words used herein shall be construed to be of such
gender or number as the circumstances require. This General Intangibles
Mortgage and Security Agreement shall be binding upon the successors or assigns
of the parties hereto, but shall inure to the benefit of the successors,
assigns or participants of the Secured Party only. THE LAW OF THE STATE OF NEW
YORK SHALL, EXCEPT TO THE EXTENT THE CREATION OR PERFECTION OF A SECURITY
INTEREST IS REQUIRED TO BE GOVERNED BY FEDERAL LAW, APPLY TO THIS GENERAL
INTANGIBLES MORTGAGE AND SECURITY AGREEMENT AND ITS CONSTRUCTION AND
INTERPRETATION.
The Secured Party shall permit the Mortgagor to control and
manage the General Intangibles in the operation of Mortgagor's businesses
including rights of manufacture, use and sale granted by said General
Intangibles, and to receive and use the income, revenue and profits arising
from said General Intangibles and the proceeds thereof in the same manner and
with the same effect as if this General Intangibles Mortgage and Security
Agreement had not been made so long as the Mortgagor shall pay and satisfy the
Obligations secured by this General Intangibles Mortgage and Security
Agreement.
Until the occurrence of an Event of Default as defined in the
Loan Agreement, the Mortgagor may continue to use the General Intangibles in
the ordinary course of its business, subject, however, to the rights of the
Secured Party in respect of the General Intangibles.
The rights and remedies of the Secured Party under this
General Intangibles Mortgage and Security Agreement shall be cumulative and
non-exclusive of any other rights or remedies which it may have under any other
agreement or instrument, by operation of law or otherwise.
8
<PAGE> 9
IN WITNESS WHEREOF, the Mortgagor and the Secured Party have caused
this General Intangibles Mortgage and Security Agreement to be duly executed
the day and year first above written.
[Corporate Seal] NEI/GTEL ENVIRONMENTAL LABORATORIES, INC.
/s/ Elliot Laitman
-------------------------- By: /s/ John Gaspari
Asst. Secretary --------------------------
Name: John Gaspari
Title: CEO
THE CIT GROUP/CREDIT FINANCE,
INC.
By: /s/ Arthur McCray
--------------------------
Name: Arthur McCray
Title: AVP
9
<PAGE> 10
EXHIBIT A
PATENTS
U.S. Patent No. 5,450,948
10
<PAGE> 1
EXHIBIT 10.4
GUARANTY
April 22, 1996
The CIT Group/Credit
Finance, Inc.
135 West 50th Street
New York, New York 10020
Re: Nytest Environmental Inc. ("Nytest"), NEI/GTEL
Environmental Laboratories, Inc. ("NEI/GTEL") and
NEI of Pennsylvania, Inc. ("NEI-Penn" and together
with Nytest and NEI/GTEL, each, a "Borrower" and
collectively, the "Borrowers")
Gentlemen:
Reference is made to the financing arrangements between The
CIT Group/Credit Finance, Inc. ("Lender") and the Borrowers, pursuant to which
Lender may extend loans, advances and other financial accommodations to the
Borrowers as set forth in the Loan and Security Agreement, dated the date
hereof, between the Borrowers and Lender and various other agreements,
documents and instruments now or at any time executed and/or delivered in
connection therewith or otherwise related thereto, including, but not limited
to, this Guaranty (all of the foregoing, as the same now exist or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced,
being collectively referred to herein as the "Financing Agreements").
Due to the close business and financial relationships between
NEI of Pennsylvania, Inc. and NEI/GTEL Environmental Laboratories, Inc. (the
"Other Borrowers") and the undersigned ("Guarantor"), and in consideration of
the benefits which will accrue to Guarantor as one of the Borrowers, and as an
inducement for and in consideration of Lender at any time providing or
extending loans, advances and other financial accommodations to the Other
Borrowers, whether pursuant to the Financing Agreements or otherwise, Guarantor
hereby, irrevocably and unconditionally, (a) guarantees and agrees to be liable
for the prompt indefeasible and full payment and performance of all revolving
loans, term loans, letters of credit, bankers' acceptances, merchandise
purchase guaranties or other guaranties, accomodations, or indemnities for
either of the Other Borrowers' account and all other obligations, liabilities
and indebtedness of every kind, nature or description owing by either of the
Other Borrowers to Lender and/or its affiliates, including principal, interest,
charges, fees and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, whether arising under any of the Financing
Agreements or otherwise, whether now
<PAGE> 2
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the Financing Agreements or after the
commencement of any case with respect to either of the Other Borrowers under
the United States Bankruptcy Code or any similar statute, whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, original, renewed
or extended, and whether arising directly or howsoever acquired by Lender
including from any other entity outright, conditionally or as collateral
security, by assignment, merger with any other entity, participations or
interests of Lender in the obligations of either of the Other Borrowers to
others, assumption, operation of law, subrogation or otherwise and (b) agrees
to pay to Lender on demand the amount of all expenses (including, without
limitation, attorneys' fees and legal expenses) incurred by Lender in
connection with the preparation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of either of
the Other Borrowers' obligations, liabilities and indebtedness as aforesaid to
Lender, Lender's rights in any collateral or under this Guaranty and all other
Financing Agreements or in any way involving claims by or against Lender
directly or indirectly arising out of or related to the relationship between
either of the Other Borrowers and Lender, Guarantor and Lender, or any other
Obligor (as hereinafter defined) and Lender, whether such expenses are incurred
before, during or after the initial or any renewal term of the Financing
Agreements or after the commencement of any case with respect to either of the
Other Borrowers, Guarantor or any other Obligor under the United States
Bankruptcy Code or any similar statute (all of which being collectively
referred to herein as the "Guaranteed Obligations").
Notice of acceptance of this Guaranty, the making of loans,
advances and extensions of credit or other financial accommodations to, and the
incurring of any expenses by or in respect of, either of the Other Borrowers,
and presentment, demand, protest, notice of protest, notice of nonpayment or
default and all other notices to which either of the Other Borrowers or
Guarantor are or may be entitled are hereby waived. Guarantor also waives
notice of, and hereby consents to, (i) any amendment, modification, supplement,
renewal, restatement or extensions of time of payment of or increase or
decrease in the amount of any of the Guaranteed Obligations or to the Financing
Agreements and any collateral, and the guarantee made herein shall apply to the
Guaranteed Obligations as so amended, modified, supplemented, renewed, restated
or extended, increased or decreased, (ii) the taking, exchange, surrender and
releasing of collateral or guarantees now or at any time held by or available
to Lender for the obligations of either of the Other Borrowers or any other
party at any time liable for or in respect of the Guaranteed Obligations
(individually and collectively, the "Obligors"), (iii) the exercise of, or
refraining from the exercise of any rights against either of the Other
Borrowers, Guarantor or any other Obligor or any collateral, and (iv) the
<PAGE> 3
-3-
settlement, compromise or release of, or the waiver of any default with respect
to, any Guaranteed Obligations. Guarantor agrees that the amount of the
Guaranteed Obligations shall not be diminished and the liability of Guarantor
hereunder shall not be otherwise impaired or affected by any of the foregoing.
This Guaranty is a guaranty of payment and not of collection.
Guarantor agrees that Lender need not attempt to collect any Guaranteed
Obligations from either of the Other Borrowers or any other Obligor or to
realize upon any collateral, but may require Guarantor to make immediate
payment of the Guaranteed Obligations to Lender when due or at any time
thereafter. Lender may apply any amounts received in respect of the Guaranteed
Obligations to any of the Guaranteed Obligations, in whole or in part
(including reasonable attorneys' fees and legal expenses incurred by Lender
with respect thereto or otherwise chargeable to either of the Other Borrowers
or Guarantor) and in such order as Lender may elect, whether or not then due.
No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations shall affect, impair or be a defense to this
Guaranty, nor shall any other circumstance which might otherwise constitute a
defense available to, or legal or equitable discharge of either of the Other
Borrowers in respect of any of the Guaranteed Obligations or Guarantor in
respect of this Guaranty, affect, impair or be a defense to this Guaranty.
Without limitation of the foregoing, the liability of Guarantor hereunder shall
not be discharged or impaired in any respect by reason of any failure by Lender
to perfect or continue perfection of any lien or security interest in any
collateral for the Guaranteed Obligations or any delay by Lender in perfecting
any such lien or security interest. As to interest, fees and expenses, whether
arising before or after the commencement of any case with respect to either of
the Other Borrowers under the United States Bankruptcy Code or any similar
statute, Guarantor shall be liable therefor, even if either of the Other
Borrowers' liability for such amounts does not, or ceases to, exist by
operation of law.
This Guaranty is absolute, unconditional and continuing.
Payment by Guarantor shall be made to Lender at its office from time to time on
demand as Guaranteed Obligations become due. One or more successive or
concurrent actions may be brought hereon against Guarantor either in the same
action in which either of the Other Borrowers or any other Obligors are sued or
in separate actions.
Payment of all amounts now or hereafter owed to Guarantor by
either of the Other Borrowers or any other Obligor is hereby subordinated in
right of payment to the indefeasible payment in full to Lender of the
Guaranteed Obligations and is
<PAGE> 4
-4-
hereby assigned to Lender as security therefor. Guarantor hereby irrevocably
and unconditionally waives and relinquishes all statutory, contractual, common
law, equitable and all other claims against either of the Other Borrowers, any
collateral for the Guaranteed Obligations or other assets of either of the
Other Borrowers or any other Obligor, for subrogation, reimbursement,
exoneration, contribution, indemnification, setoff or other recourse in respect
of sums paid or payable to Lender by Guarantor hereunder and Guarantor hereby
further irrevocably and unconditionally waives and relinquishes any and all
other benefits which Guarantor might otherwise directly or indirectly receive
or be entitled to receive by reason of any amounts paid by or collected or due
from Guarantor, either of the Other Borrowers or any other Obligor upon the
Guaranteed Obligations or realized from their property.
All sums at any time owed by Lender to Guarantor or to the
credit of Guarantor and any property of Guarantor on which Lender at any time
has a lien or security interest or of which Lender at any time has possession,
shall secure payment and performance of all Guaranteed Obligations and all
other obligations of Guarantor to Lender however arising.
In case proceedings be instituted by or against either of the
Other Borrowers or Guarantor or any other Obligor, in bankruptcy or insolvency,
or for reorganization, arrangement, receivership, or the like, or if either of
the Other Borrowers or Guarantor or any other Obligor calls a meeting of
creditors or makes any assignment for the benefit of creditors, or upon the
occurrence of any event which constitutes a default or event of default under
the Financing Agreements, the liability of Guarantor for the entire Guaranteed
Obligations shall mature, even if the liability of either of the Other
Borrowers or any other Obligor therefor does not.
Guarantor shall continue to be liable hereunder until one of
Lender's officers actually receives a written termination notice by certified
mail; but the giving of such notice shall not relieve Guarantor from liability
for any Guaranteed Obligations incurred before termination or for
post-termination collection expenses and interest pertaining to any Guaranteed
Obligations arising before termination.
Guarantor agrees that this Guaranty shall remain in full force
and effect or be reinstated, as the case may be, if at any time payment of any
of the Guaranteed Obligations is rescinded or otherwise restored by Lender to
either of the Other Borrowers or to any other person who made such payment, or
to the creditors or creditors' representative of either of the Other Borrowers
or such other person.
Lender's books and records showing the account between
<PAGE> 5
-5-
Lender and each of the Other Borrowers shall be admissible in evidence in any
action or proceeding as prima facie proof of the items therein set forth, and
any written statements rendered by Lender to either of the Other Borrowers, to
the extent to which no written objection is made within sixty (60) business
days after the date thereof, shall be considered correct and be binding on
Guarantor as an account stated for purposes of this Guaranty.
No delay on Lender's part in exercising any rights hereunder
or failure to exercise the same shall constitute a waiver of such rights. No
notice to, or demand on, Guarantor shall be deemed to be a waiver of the
obligation of Guarantor to take further action without notice or demand as
provided herein. No waiver of any of Lender's rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by
Lender unless the same shall be in writing, duly signed on Lender's behalf, and
each such waiver, if any, shall apply only with respect to the specific
instance involved and shall in no way impair Lender's rights or the obligations
of Guarantor to Lender in any other respect at any other time.
This Guaranty is binding upon Guarantor, its successors and
assigns and shall benefit Lender and its successors, endorsees, transferees and
assigns. All references to either of the Other Borrowers and Lender herein
shall include their respective successors and assigns. This instrument shall
be governed by, and construed and interpreted in accordance with, the laws of
the State in which the office of Lender set forth above is located.
Guarantor and Lender waive all rights to trial by jury in any
action or proceeding instituted by either of them against the other which
pertains directly or indirectly to this Guaranty, any alleged tortious conduct
by Guarantor or Lender, or, in any way, directly or indirectly, arising out of
or related to the relationship between Guarantor and Lender or either of the
Other Borrowers and Lender. In no event will Lender be liable for lost profits
or other special or consequential damages.
Guarantor waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any kind, nature or description in any
action or proceeding instituted by Lender with respect to this Guaranty or any
matter arising herefrom or relating hereto, except compulsory counterclaims.
Guarantor hereby irrevocably submits and consents to the
non-exclusive jurisdiction of the State and Federal Courts located in the State
in which the office of Lender designated above is located with respect to any
action or proceeding arising out of this Guaranty or any matter arising
herefrom or relating hereto. Any such action or proceeding commenced by
Guarantor
<PAGE> 6
-6-
against Lender will be litigated only in a Federal Court located in the
district, or a State Court in the State and County, in which the office of
Lender set forth above is located and Guarantor waives any objection based on
forum non conveniens and any objection to venue in connection therewith.
In any such action or proceeding, Guarantor waives personal
service of the summons and complaint or other process and papers therein and
agrees that any process or notice of motion or other application to any of said
Courts or a judge thereof, or any notice in connection with any proceedings
hereunder may be served (i) inside or outside such State by registered or
certified mail, return receipt requested, addressed to Guarantor at the address
set forth below or which Guarantor has previously advised Lender in writing and
as indicated in the records of Lender and service or notice so served shall be
deemed complete five (5) days after the same shall have been posted or (ii) in
such other manner as may be permissible under the rules of said Courts.
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the day and year first above written.
NYTEST ENVIRONMENTAL INC.
By: /s/ John Gaspari
----------------------------
Name: John Gaspari
Title: CEO
<PAGE> 7
-7-
STATE OF )
) ss.:
COUNTY OF )
On this ___________ day of _______________ 19___, before me
personally came _______________________, to me known, who stated that he/she is
the _________________________ of _________________, the corporation described
in the foregoing instrument, and acknowledged that he/she executed the same by
order of the Board of Directors of such corporation.
/s/
----------------------------
Notary Public
<PAGE> 1
EXHIBIT 10.5
GUARANTY
April 22, 1996
The CIT Group/Credit
Finance, Inc.
135 West 50th Street
New York, New York 10020
Re: Nytest Environmental Inc. ("Nytest"), NEI/GTEL
Environmental Laboratories, Inc. ("NEI/GTEL") and
NEI of Pennsylvania, Inc. ("NEI-Penn" and together
with Nytest and NEI/GTEL, each, a "Borrower" and
collectively, the "Borrowers")
Gentlemen:
Reference is made to the financing arrangements between The
CIT Group/Credit Finance, Inc. ("Lender") and the Borrowers, pursuant to which
Lender may extend loans, advances and other financial accommodations to the
Borrowers as set forth in the Loan and Security Agreement, dated the date
hereof, between the Borrowers and Lender and various other agreements,
documents and instruments now or at any time executed and/or delivered in
connection therewith or otherwise related thereto, including, but not limited
to, this Guaranty (all of the foregoing, as the same now exist or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced,
being collectively referred to herein as the "Financing Agreements").
Due to the close business and financial relationships between
Nytest Environmental Inc. and NEI of Pennsylvania, Inc. (the "Other Borrowers")
and the undersigned ("Guarantor"), and in consideration of the benefits which
will accrue to Guarantor as one of the Borrowers, and as an inducement for and
in consideration of Lender at any time providing or extending loans, advances
and other financial accommodations to the Other Borrowers, whether pursuant to
the Financing Agreements or otherwise, Guarantor hereby, irrevocably and
unconditionally, (a) guarantees and agrees to be liable for the prompt
indefeasible and full payment and performance of all revolving loans, term
loans, letters of credit, bankers' acceptances, merchandise purchase guaranties
or other guaranties, accomodations, or indemnities for either of the Other
Borrowers' account and all other obligations, liabilities and indebtedness of
every kind, nature or description owing by either of the Other Borrowers to
Lender and/or its affiliates, including principal, interest, charges, fees and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, whether arising under any of the Financing Agreements or
otherwise, whether now
<PAGE> 2
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the Financing Agreements or after the
commencement of any case with respect to either of the Other Borrowers under
the United States Bankruptcy Code or any similar statute, whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, original, renewed
or extended, and whether arising directly or howsoever acquired by Lender
including from any other entity outright, conditionally or as collateral
security, by assignment, merger with any other entity, participations or
interests of Lender in the obligations of either of the Other Borrowers to
others, assumption, operation of law, subrogation or otherwise and (b) agrees
to pay to Lender on demand the amount of all expenses (including, without
limitation, attorneys' fees and legal expenses) incurred by Lender in
connection with the preparation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of either of
the Other Borrowers' obligations, liabilities and indebtedness as aforesaid to
Lender, Lender's rights in any collateral or under this Guaranty and all other
Financing Agreements or in any way involving claims by or against Lender
directly or indirectly arising out of or related to the relationship between
either of the Other Borrowers and Lender, Guarantor and Lender, or any other
Obligor (as hereinafter defined) and Lender, whether such expenses are incurred
before, during or after the initial or any renewal term of the Financing
Agreements or after the commencement of any case with respect to either of the
Other Borrowers, Guarantor or any other Obligor under the United States
Bankruptcy Code or any similar statute (all of which being collectively
referred to herein as the "Guaranteed Obligations").
Notice of acceptance of this Guaranty, the making of loans,
advances and extensions of credit or other financial accommodations to, and the
incurring of any expenses by or in respect of, either of the Other Borrowers,
and presentment, demand, protest, notice of protest, notice of nonpayment or
default and all other notices to which either of the Other Borrowers or
Guarantor are or may be entitled are hereby waived. Guarantor also waives
notice of, and hereby consents to, (i) any amendment, modification, supplement,
renewal, restatement or extensions of time of payment of or increase or
decrease in the amount of any of the Guaranteed Obligations or to the Financing
Agreements and any collateral, and the guarantee made herein shall apply to the
Guaranteed Obligations as so amended, modified, supplemented, renewed, restated
or extended, increased or decreased, (ii) the taking, exchange, surrender and
releasing of collateral or guarantees now or at any time held by or available
to Lender for the obligations of either of the Other Borrowers or any other
party at any time liable for or in respect of the Guaranteed Obligations
(individually and collectively, the "Obligors"), (iii) the exercise of, or
refraining from the exercise of any rights against either of the Other
Borrowers, Guarantor or any other Obligor or any collateral, and (iv) the
<PAGE> 3
-3-
settlement, compromise or release of, or the waiver of any default with respect
to, any Guaranteed Obligations. Guarantor agrees that the amount of the
Guaranteed Obligations shall not be diminished and the liability of Guarantor
hereunder shall not be otherwise impaired or affected by any of the foregoing.
This Guaranty is a guaranty of payment and not of collection.
Guarantor agrees that Lender need not attempt to collect any Guaranteed
Obligations from either of the Other Borrowers or any other Obligor or to
realize upon any collateral, but may require Guarantor to make immediate
payment of the Guaranteed Obligations to Lender when due or at any time
thereafter. Lender may apply any amounts received in respect of the Guaranteed
Obligations to any of the Guaranteed Obligations, in whole or in part
(including reasonable attorneys' fees and legal expenses incurred by Lender
with respect thereto or otherwise chargeable to either of the Other Borrowers
or Guarantor) and in such order as Lender may elect, whether or not then due.
No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations shall affect, impair or be a defense to this
Guaranty, nor shall any other circumstance which might otherwise constitute a
defense available to, or legal or equitable discharge of either of the Other
Borrowers in respect of any of the Guaranteed Obligations or Guarantor in
respect of this Guaranty, affect, impair or be a defense to this Guaranty.
Without limitation of the foregoing, the liability of Guarantor hereunder shall
not be discharged or impaired in any respect by reason of any failure by Lender
to perfect or continue perfection of any lien or security interest in any
collateral for the Guaranteed Obligations or any delay by Lender in perfecting
any such lien or security interest. As to interest, fees and expenses, whether
arising before or after the commencement of any case with respect to either of
the Other Borrowers under the United States Bankruptcy Code or any similar
statute, Guarantor shall be liable therefor, even if either of the Other
Borrowers' liability for such amounts does not, or ceases to, exist by
operation of law.
This Guaranty is absolute, unconditional and continuing.
Payment by Guarantor shall be made to Lender at its office from time to time on
demand as Guaranteed Obligations become due. One or more successive or
concurrent actions may be brought hereon against Guarantor either in the same
action in which either of the Other Borrowers or any other Obligors are sued or
in separate actions.
Payment of all amounts now or hereafter owed to Guarantor by
either of the Other Borrowers or any other Obligor is hereby subordinated in
right of payment to the indefeasible payment in full to Lender of the
Guaranteed Obligations and is
<PAGE> 4
-4-
hereby assigned to Lender as security therefor. Guarantor hereby irrevocably
and unconditionally waives and relinquishes all statutory, contractual, common
law, equitable and all other claims against either of the Other Borrowers, any
collateral for the Guaranteed Obligations or other assets of either of the
Other Borrowers or any other Obligor, for subrogation, reimbursement,
exoneration, contribution, indemnification, setoff or other recourse in respect
of sums paid or payable to Lender by Guarantor hereunder and Guarantor hereby
further irrevocably and unconditionally waives and relinquishes any and all
other benefits which Guarantor might otherwise directly or indirectly receive
or be entitled to receive by reason of any amounts paid by or collected or due
from Guarantor, either of the Other Borrowers or any other Obligor upon the
Guaranteed Obligations or realized from their property.
All sums at any time owed by Lender to Guarantor or to the
credit of Guarantor and any property of Guarantor on which Lender at any time
has a lien or security interest or of which Lender at any time has possession,
shall secure payment and performance of all Guaranteed Obligations and all
other obligations of Guarantor to Lender however arising.
In case proceedings be instituted by or against either of the
Other Borrowers or Guarantor or any other Obligor, in bankruptcy or insolvency,
or for reorganization, arrangement, receivership, or the like, or if either of
the Other Borrowers or Guarantor or any other Obligor calls a meeting of
creditors or makes any assignment for the benefit of creditors, or upon the
occurrence of any event which constitutes a default or event of default under
the Financing Agreements, the liability of Guarantor for the entire Guaranteed
Obligations shall mature, even if the liability of either of the Other
Borrowers or any other Obligor therefor does not.
Guarantor shall continue to be liable hereunder until one of
Lender's officers actually receives a written termination notice by certified
mail; but the giving of such notice shall not relieve Guarantor from liability
for any Guaranteed Obligations incurred before termination or for
post-termination collection expenses and interest pertaining to any Guaranteed
Obligations arising before termination.
Guarantor agrees that this Guaranty shall remain in full force
and effect or be reinstated, as the case may be, if at any time payment of any
of the Guaranteed Obligations is rescinded or otherwise restored by Lender to
either of the Other Borrowers or to any other person who made such payment, or
to the creditors or creditors' representative of either of the Other Borrowers
or such other person.
Lender's books and records showing the account between
<PAGE> 5
-5-
Lender and each of the Other Borrowers shall be admissible in evidence in any
action or proceeding as prima facie proof of the items therein set forth, and
any written statements rendered by Lender to either of the Other Borrowers, to
the extent to which no written objection is made within sixty (60) business
days after the date thereof, shall be considered correct and be binding on
Guarantor as an account stated for purposes of this Guaranty.
No delay on Lender's part in exercising any rights hereunder
or failure to exercise the same shall constitute a waiver of such rights. No
notice to, or demand on, Guarantor shall be deemed to be a waiver of the
obligation of Guarantor to take further action without notice or demand as
provided herein. No waiver of any of Lender's rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by
Lender unless the same shall be in writing, duly signed on Lender's behalf, and
each such waiver, if any, shall apply only with respect to the specific
instance involved and shall in no way impair Lender's rights or the obligations
of Guarantor to Lender in any other respect at any other time.
This Guaranty is binding upon Guarantor, its successors and
assigns and shall benefit Lender and its successors, endorsees, transferees and
assigns. All references to either of the Other Borrowers and Lender herein
shall include their respective successors and assigns. This instrument shall
be governed by, and construed and interpreted in accordance with, the laws of
the State in which the office of Lender set forth above is located.
Guarantor and Lender waive all rights to trial by jury in any
action or proceeding instituted by either of them against the other which
pertains directly or indirectly to this Guaranty, any alleged tortious conduct
by Guarantor or Lender, or, in any way, directly or indirectly, arising out of
or related to the relationship between Guarantor and Lender or either of the
Other Borrowers and Lender. In no event will Lender be liable for lost profits
or other special or consequential damages.
Guarantor waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any kind, nature or description in any
action or proceeding instituted by Lender with respect to this Guaranty or any
matter arising herefrom or relating hereto, except compulsory counterclaims.
Guarantor hereby irrevocably submits and consents to the
non-exclusive jurisdiction of the State and Federal Courts located in the State
in which the office of Lender designated above is located with respect to any
action or proceeding arising out of this Guaranty or any matter arising
herefrom or relating hereto. Any such action or proceeding commenced by
Guarantor
<PAGE> 6
-6-
against Lender will be litigated only in a Federal Court located in the
district, or a State Court in the State and County, in which the office of
Lender set forth above is located and Guarantor waives any objection based on
forum non conveniens and any objection to venue in connection therewith.
In any such action or proceeding, Guarantor waives personal
service of the summons and complaint or other process and papers therein and
agrees that any process or notice of motion or other application to any of said
Courts or a judge thereof, or any notice in connection with any proceedings
hereunder may be served (i) inside or outside such State by registered or
certified mail, return receipt requested, addressed to Guarantor at the address
set forth below or which Guarantor has previously advised Lender in writing and
as indicated in the records of Lender and service or notice so served shall be
deemed complete five (5) days after the same shall have been posted or (ii) in
such other manner as may be permissible under the rules of said Courts.
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the day and year first above written.
NEI/GTEL ENVIRONMENTAL
LABORATORIES, INC.
By: /s/ John Gaspari
----------------------------
Name: John Gaspari
Title: CEO
<PAGE> 7
-7-
STATE OF )
) ss.:
COUNTY OF )
On this ___________ day of _______________ 19___, before me
personally came _______________________, to me known, who stated that he/she is
the _________________________ of _________________, the corporation described
in the foregoing instrument, and acknowledged that he/she executed the same by
order of the Board of Directors of such corporation.
/S/
----------------------------
Notary Public
<PAGE> 1
EXHIBIT 10.6
GUARANTY
April 22, 1996
The CIT Group/Credit
Finance, Inc.
135 West 50th Street
New York, New York 10020
Re: Nytest Environmental Inc. ("Nytest"), NEI/GTEL
Environmental Laboratories, Inc. ("NEI/GTEL") and
NEI of Pennsylvania, Inc. ("NEI-Penn" and together
with Nytest and NEI/GTEL, each, a "Borrower" and
collectively, the "Borrowers")
Gentlemen:
Reference is made to the financing arrangements between The
CIT Group/Credit Finance, Inc. ("Lender") and the Borrowers, pursuant to which
Lender may extend loans, advances and other financial accommodations to the
Borrowers as set forth in the Loan and Security Agreement, dated the date
hereof, between the Borrowers and Lender and various other agreements,
documents and instruments now or at any time executed and/or delivered in
connection therewith or otherwise related thereto, including, but not limited
to, this Guaranty (all of the foregoing, as the same now exist or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced,
being collectively referred to herein as the "Financing Agreements").
Due to the close business and financial relationships between
Nytest Environmental Inc. and NEI/GTEL Environmental Laboratories, Inc. (the
"Other Borrowers") and the undersigned ("Guarantor"), and in consideration of
the benefits which will accrue to Guarantor as one of the Borrowers, and as an
inducement for and in consideration of Lender at any time providing or
extending loans, advances and other financial accommodations to the Other
Borrowers, whether pursuant to the Financing Agreements or otherwise, Guarantor
hereby, irrevocably and unconditionally, (a) guarantees and agrees to be liable
for the prompt indefeasible and full payment and performance of all revolving
loans, term loans, letters of credit, bankers' acceptances, merchandise
purchase guaranties or other guaranties, accomodations, or indemnities for
either of the Other Borrowers' account and all other obligations, liabilities
and indebtedness of every kind, nature or description owing by either of the
Other Borrowers to Lender and/or its affiliates, including principal, interest,
charges, fees and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, whether arising under any of the Financing
Agreements or otherwise, whether now
<PAGE> 2
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the Financing Agreements or after the
commencement of any case with respect to either of the Other Borrowers under
the United States Bankruptcy Code or any similar statute, whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, original, renewed
or extended, and whether arising directly or howsoever acquired by Lender
including from any other entity outright, conditionally or as collateral
security, by assignment, merger with any other entity, participations or
interests of Lender in the obligations of either of the Other Borrowers to
others, assumption, operation of law, subrogation or otherwise and (b) agrees
to pay to Lender on demand the amount of all expenses (including, without
limitation, attorneys' fees and legal expenses) incurred by Lender in
connection with the preparation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of either of
the Other Borrowers' obligations, liabilities and indebtedness as aforesaid to
Lender, Lender's rights in any collateral or under this Guaranty and all other
Financing Agreements or in any way involving claims by or against Lender
directly or indirectly arising out of or related to the relationship between
either of the Other Borrowers and Lender, Guarantor and Lender, or any other
Obligor (as hereinafter defined) and Lender, whether such expenses are incurred
before, during or after the initial or any renewal term of the Financing
Agreements or after the commencement of any case with respect to either of the
Other Borrowers, Guarantor or any other Obligor under the United States
Bankruptcy Code or any similar statute (all of which being collectively
referred to herein as the "Guaranteed Obligations").
Notice of acceptance of this Guaranty, the making of loans,
advances and extensions of credit or other financial accommodations to, and the
incurring of any expenses by or in respect of, either of the Other Borrowers,
and presentment, demand, protest, notice of protest, notice of nonpayment or
default and all other notices to which either of the Other Borrowers or
Guarantor are or may be entitled are hereby waived. Guarantor also waives
notice of, and hereby consents to, (i) any amendment, modification, supplement,
renewal, restatement or extensions of time of payment of or increase or
decrease in the amount of any of the Guaranteed Obligations or to the Financing
Agreements and any collateral, and the guarantee made herein shall apply to the
Guaranteed Obligations as so amended, modified, supplemented, renewed, restated
or extended, increased or decreased, (ii) the taking, exchange, surrender and
releasing of collateral or guarantees now or at any time held by or available
to Lender for the obligations of either of the Other Borrowers or any other
party at any time liable for or in respect of the Guaranteed Obligations
(individually and collectively, the "Obligors"), (iii) the exercise of, or
refraining from the exercise of any rights against either of the Other
Borrowers, Guarantor or any other Obligor or any collateral, and (iv) the
<PAGE> 3
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settlement, compromise or release of, or the waiver of any default with respect
to, any Guaranteed Obligations. Guarantor agrees that the amount of the
Guaranteed Obligations shall not be diminished and the liability of Guarantor
hereunder shall not be otherwise impaired or affected by any of the foregoing.
This Guaranty is a guaranty of payment and not of collection.
Guarantor agrees that Lender need not attempt to collect any Guaranteed
Obligations from either of the Other Borrowers or any other Obligor or to
realize upon any collateral, but may require Guarantor to make immediate
payment of the Guaranteed Obligations to Lender when due or at any time
thereafter. Lender may apply any amounts received in respect of the Guaranteed
Obligations to any of the Guaranteed Obligations, in whole or in part
(including reasonable attorneys' fees and legal expenses incurred by Lender
with respect thereto or otherwise chargeable to either of the Other Borrowers
or Guarantor) and in such order as Lender may elect, whether or not then due.
No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations shall affect, impair or be a defense to this
Guaranty, nor shall any other circumstance which might otherwise constitute a
defense available to, or legal or equitable discharge of either of the Other
Borrowers in respect of any of the Guaranteed Obligations or Guarantor in
respect of this Guaranty, affect, impair or be a defense to this Guaranty.
Without limitation of the foregoing, the liability of Guarantor hereunder shall
not be discharged or impaired in any respect by reason of any failure by Lender
to perfect or continue perfection of any lien or security interest in any
collateral for the Guaranteed Obligations or any delay by Lender in perfecting
any such lien or security interest. As to interest, fees and expenses, whether
arising before or after the commencement of any case with respect to either of
the Other Borrowers under the United States Bankruptcy Code or any similar
statute, Guarantor shall be liable therefor, even if either of the Other
Borrowers' liability for such amounts does not, or ceases to, exist by
operation of law.
This Guaranty is absolute, unconditional and continuing.
Payment by Guarantor shall be made to Lender at its office from time to time on
demand as Guaranteed Obligations become due. One or more successive or
concurrent actions may be brought hereon against Guarantor either in the same
action in which either of the Other Borrowers or any other Obligors are sued or
in separate actions.
Payment of all amounts now or hereafter owed to Guarantor by
either of the Other Borrowers or any other Obligor is hereby subordinated in
right of payment to the indefeasible payment in full to Lender of the
Guaranteed Obligations and is
<PAGE> 4
-4-
hereby assigned to Lender as security therefor. Guarantor hereby irrevocably
and unconditionally waives and relinquishes all statutory, contractual, common
law, equitable and all other claims against either of the Other Borrowers, any
collateral for the Guaranteed Obligations or other assets of either of the
Other Borrowers or any other Obligor, for subrogation, reimbursement,
exoneration, contribution, indemnification, setoff or other recourse in respect
of sums paid or payable to Lender by Guarantor hereunder and Guarantor hereby
further irrevocably and unconditionally waives and relinquishes any and all
other benefits which Guarantor might otherwise directly or indirectly receive
or be entitled to receive by reason of any amounts paid by or collected or due
from Guarantor, either of the Other Borrowers or any other Obligor upon the
Guaranteed Obligations or realized from their property.
All sums at any time owed by Lender to Guarantor or to the
credit of Guarantor and any property of Guarantor on which Lender at any time
has a lien or security interest or of which Lender at any time has possession,
shall secure payment and performance of all Guaranteed Obligations and all
other obligations of Guarantor to Lender however arising.
In case proceedings be instituted by or against either of the
Other Borrowers or Guarantor or any other Obligor, in bankruptcy or insolvency,
or for reorganization, arrangement, receivership, or the like, or if either of
the Other Borrowers or Guarantor or any other Obligor calls a meeting of
creditors or makes any assignment for the benefit of creditors, or upon the
occurrence of any event which constitutes a default or event of default under
the Financing Agreements, the liability of Guarantor for the entire Guaranteed
Obligations shall mature, even if the liability of either of the Other
Borrowers or any other Obligor therefor does not.
Guarantor shall continue to be liable hereunder until one of
Lender's officers actually receives a written termination notice by certified
mail; but the giving of such notice shall not relieve Guarantor from liability
for any Guaranteed Obligations incurred before termination or for
post-termination collection expenses and interest pertaining to any Guaranteed
Obligations arising before termination.
Guarantor agrees that this Guaranty shall remain in full force
and effect or be reinstated, as the case may be, if at any time payment of any
of the Guaranteed Obligations is rescinded or otherwise restored by Lender to
either of the Other Borrowers or to any other person who made such payment, or
to the creditors or creditors' representative of either of the Other Borrowers
or such other person.
Lender's books and records showing the account between
<PAGE> 5
-5-
Lender and each of the Other Borrowers shall be admissible in evidence in any
action or proceeding as prima facie proof of the items therein set forth, and
any written statements rendered by Lender to either of the Other Borrowers, to
the extent to which no written objection is made within sixty (60) business
days after the date thereof, shall be considered correct and be binding on
Guarantor as an account stated for purposes of this Guaranty.
No delay on Lender's part in exercising any rights hereunder
or failure to exercise the same shall constitute a waiver of such rights. No
notice to, or demand on, Guarantor shall be deemed to be a waiver of the
obligation of Guarantor to take further action without notice or demand as
provided herein. No waiver of any of Lender's rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by
Lender unless the same shall be in writing, duly signed on Lender's behalf, and
each such waiver, if any, shall apply only with respect to the specific
instance involved and shall in no way impair Lender's rights or the obligations
of Guarantor to Lender in any other respect at any other time.
This Guaranty is binding upon Guarantor, its successors and
assigns and shall benefit Lender and its successors, endorsees, transferees and
assigns. All references to either of the Other Borrowers and Lender herein
shall include their respective successors and assigns. This instrument shall
be governed by, and construed and interpreted in accordance with, the laws of
the State in which the office of Lender set forth above is located.
Guarantor and Lender waive all rights to trial by jury in any
action or proceeding instituted by either of them against the other which
pertains directly or indirectly to this Guaranty, any alleged tortious conduct
by Guarantor or Lender, or, in any way, directly or indirectly, arising out of
or related to the relationship between Guarantor and Lender or either of the
Other Borrowers and Lender. In no event will Lender be liable for lost profits
or other special or consequential damages.
Guarantor waives all rights to interpose any claims,
deductions, setoffs or counterclaims of any kind, nature or description in any
action or proceeding instituted by Lender with respect to this Guaranty or any
matter arising herefrom or relating hereto, except compulsory counterclaims.
Guarantor hereby irrevocably submits and consents to the
non-exclusive jurisdiction of the State and Federal Courts located in the State
in which the office of Lender designated above is located with respect to any
action or proceeding arising out of this Guaranty or any matter arising
herefrom or relating hereto. Any such action or proceeding commenced by
Guarantor
<PAGE> 6
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against Lender will be litigated only in a Federal Court located in the
district, or a State Court in the State and County, in which the office of
Lender set forth above is located and Guarantor waives any objection based on
forum non conveniens and any objection to venue in connection therewith.
In any such action or proceeding, Guarantor waives personal
service of the summons and complaint or other process and papers therein and
agrees that any process or notice of motion or other application to any of said
Courts or a judge thereof, or any notice in connection with any proceedings
hereunder may be served (i) inside or outside such State by registered or
certified mail, return receipt requested, addressed to Guarantor at the address
set forth below or which Guarantor has previously advised Lender in writing and
as indicated in the records of Lender and service or notice so served shall be
deemed complete five (5) days after the same shall have been posted or (ii) in
such other manner as may be permissible under the rules of said Courts.
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the day and year first above written.
NEI OF PENNSYLVANIA, INC.
By: /s/ John Gaspari
----------------------------
Name: John Gaspari
Title: CEO
<PAGE> 7
-7-
STATE OF )
) ss.:
COUNTY OF )
On this ___________ day of _______________ 19___, before me
personally came _______________________, to me known, who stated that he/she is
the _________________________ of _________________, the corporation described
in the foregoing instrument, and acknowledged that he/she executed the same by
order of the Board of Directors of such corporation.
/s/
----------------------------
Notary Public
<PAGE> 1
EXHIBIT 10.7
INTERCREDITOR AND SUBORDINATION AGREEMENT
April 22, 1996
THE CIT GROUP/CREDIT FINANCE, INC.
135 West 50th Street
New York, New York 10020
Re: Nytest Environmental, Inc., NEI/GTEL Environmental Laboratories,
Inc. and NEI of Pennsylvania, Inc.
Gentlemen:
Reference is made to certain financing arrangements being entered into
contemporaneously herewith between THE CIT GROUP/CREDIT FINANCE, INC. ("CIT")
and NYTEST ENVIRONMENTAL, INC. ("Nytest"), NEI/GTEL ENVIRONMENTAL LABORATORIES,
INC. ("NEI/GTEL") and NEI OF PENNSYLVANIA, INC. ("NEI/PENN"; and collectively
with Nytest and NEI/GTEL, the "Borrowers") pursuant to the terms and conditions
of certain financing agreements, including, but not limited to, the Loan and
Security Agreement ("Loan Agreement") and various documents, notes,
instruments, guaranties and agreements executed and delivered in connection
therewith (all of the foregoing, as the same may now exist or may hereafter be
amended, modified, supplemented, renewed or extended, executed and delivered by
Borrowers or related third parties in favor of CIT, are hereinafter
collectively referred to as the "CIT Agreements"). Capitalized terms not
defined herein shall have the meanings ascribed to them in the CIT Agreements.
Reference is further made to that certain Subordinated Convertible
Note dated December 31, 1995 between NEI/GTEL and GTEL Environmental
Laboratories, Inc. ("Junior Creditor") (all of the foregoing, together with all
financing statements, agreements, documents and instruments executed and/or
delivered in connection therewith, as the same may now exist or may hereafter
be amended, modified, supplemented, extended, renewed or replaced, are
collectively referred to herein as the "Junior Creditor Agreements").
This letter sets forth the agreement between CIT and Junior Creditor
concerning the subordination of payment of all obligations of the Borrowers to
Junior Creditor to the prior payment of all obligations of the Borrowers to
CIT, the relative priority of the security or other interests now or in the
future held by CIT with respect to the property of the Borrowers and any
existing or future security or other interests which Junior
<PAGE> 2
Creditor may now or in the future hold or acquire with respect to the property
of the Borrowers and related matters.
1. SUBORDINATION.
(a) Except as expressly permitted in this Agreement,
Junior Creditor hereby subordinates its rights to payment and satisfaction of
any and all Obligations (as defined below) of any of the Borrowers to Junior
Creditor (the "Junior Debt") to the prior indefeasible payment and satisfaction
in full of all Obligations of any of the Borrowers to CIT (the "Senior Debt").
For purposes hereof, the term "Obligations" shall mean obligations, liabilities
and indebtedness of every kind, nature and description, direct or indirect,
absolute or contingent, matured or unmatured, now existing or hereafter
incurred or created, both before and after the commencement of any case under
Title 11 of the United States Code, as amended (the "Bankruptcy Code"), and
including charges, commissions, interest, fees and expenses.
(b) Each of the Borrowers and Junior Creditor agree in
favor of CIT that until all Senior Debt is indefeasibly paid and satisfied in
full:
(i) Except as permitted in Section 1(c) below,
the Borrowers shall not, directly or indirectly, make, and Junior Creditor
shall not, directly or indirectly, accept or receive, demand or sue for any
payment of principal or interest or any prepayment or non-mandatory payment or
any payment pursuant to acceleration or claims of breach or to acquire Junior
Debt or otherwise in respect of any Junior Debt;
(ii) Junior Creditor shall not seek to collect
against any of the Borrowers any Junior Debt or otherwise enforce any of its
rights against any of the Borrowers upon a default by any of the Borrowers
under the Junior Creditor Agreements;
(iii) The Borrowers shall not grant to Junior
Creditor and Junior Creditor shall not acquire or demand any additional
collateral or guarantees for any Junior Debt;
(iv) The Borrowers and Junior Creditor shall not
amend, modify, alter or change the terms of any of the Junior Creditor
Agreements or any other arrangements related to the Junior Debt without the
prior written consent of CIT;
(v) The Borrowers shall not directly or
indirectly, make, and Junior Creditor shall not, directly or indirectly,
demand, accept or receive from any of the Borrowers, any loan, gift or
distribution of assets to Junior Creditor;
(vi) No Junior Debt will be converted into capital
interests in any of the Borrowers, without the prior written consent of CIT, to
the extent that such conversion will result in a change of control in the
equity ownership of such Borrower;
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<PAGE> 3
(vii) Junior Creditor shall furnish to CIT copies
of all notices or demands sent to any of the Borrowers under the Junior
Creditor Agreements simultaneously with the sending or delivery of same to any
of the Borrowers; and
(viii) Junior Creditor and the Borrowers shall, at
any time or times upon request by CIT, promptly furnish to CIT a true, correct
and complete statement of the outstanding Junior Debt.
(c) Notwithstanding anything to the contrary contained in
the Junior Creditor Agreements and herein, NEI/GTEL may make and Junior
Creditor may receive and retain from NEI/GTEL the following:
(i) scheduled payments of interest in respect of
the Subordinated Convertible Note dated December 31, 1995, the principal
balance of which on the date of this Agreement is approximately one million
ninety five thousand ($1,095,000) dollars (the "Subordinated Note") only if,
(A) prior, and after giving effect, to each such payment, no default or Event
of Default has occurred and is continuing or would occur as a result of such
payment, whether or not the Senior Debt has been accelerated and (B) such
payments are made solely from the positive Cash Flow of the Borrowers. For
purposes hereof, Cash Flow shall mean the Borrower's consolidated net income
(loss) plus depreciation and amortization less debt service and capital
expenditures, as reflected on the Borrower's statements prepared and delivered
in accordance with the CIT Agreements;
(ii) on December 31, 1998, payment of all or any
portion of the outstanding principal of the Subordinated Note only if (A)
prior, and after giving effect to such payment, no default or Event of Default
shall have occurred and be continuing or would occur as a result of such
payment if not expressly permitted herein, whether or not the Senior Debt has
been accelerated and (B) after giving effect to such payment, Borrower's Gross
Availability shall be not less than five hundred thousand ($500,000) dollars;
(iii) payments in respect of accounts receivable
due to Junior Creditor incurred by Borrowers in the ordinary course of business
of Borrowers and Junior Creditor for services actually rendered by Junior
Creditor to Borrowers, in amounts and on terms customary in the industry and
consistent with practices prior to the date of this Agreement;
(iv) rental payments in accordance with the rent
payment agreement annexed hereto as Exhibit "1(c)(iv)"; and
(v) payments not in excess of four hundred
thirty-one thousand six hundred seventy ($431,670) dollars in reduction of
indebtedness of Borrowers to Junior Creditor for amounts actually paid by
Junior Creditor to or for the benefit of Borrowers, as set forth on Exhibit
"1(c)(v)" annexed hereto, in the aggregate amount of seven hundred eighty-one
thousand six hundred seventy ($781,670) dollars (the
-3-
<PAGE> 4
"Outstanding Advances"); provided, however, that the balance of the Outstanding
Advances in the amount of three hundred fifty thousand ($350,000) dollars and
all interest due thereon (the "Unpaid Balance") shall be Junior Debt in all
respects, subject to the provisions of this Agreement, and may not be paid
prior to the indefeasible payment and satisfaction in full of the Senior Debt,
except as follows:
(x) If Borrowers achieve cumulative
positive Cash Flow for the three (3) months ending June 30, 1996 (the
"Measurement Period"), Borrowers shall be entitled to pay the Unpaid Balance,
and shall pay the Unpaid Balance to Junior Creditor within five (5) business
days after such positive Cash Flow is determined; or
(y) If Borrowers fail to achieve
cumulative positive Cash Flow for the Measurement Period, and provided that no
Event of Default has occurred and is continuing or would occur as a result of
such payment, whether or not the Senior Debt has been accelerated, Borrowers
shall be entitled to pay, and shall pay to Junior Creditor in reduction of the
Unpaid Balance an amount not in excess of twenty thousand ($20,000) dollars per
month commencing August 5, 1996 and on the fifth day of each month thereafter;
and
(z) If Borrowers achieve cumulative
positive Cash Flow for the six (6) months ended September 30, 1996, or for any
other successive fiscal quarters thereafter on a cumulative basis with the
Measurement Period, Borrowers shall be entitled to pay an amount equal to the
Unpaid Balance less the sum of all payments theretofore made in reduction of
the Unpaid Balance. Immediately upon payment in full of such Junior Debt,
Junior Creditor shall execute and deliver Form UCC-3 termination statements for
each financing statement which it has filed against any of the Borrowers;
provided, however, that CIT shall have no obligation or liability to Junior
Creditor or to Borrowers in respect of any payments required to be made by
Borrowers to Junior Creditor hereunder.
(d) (i) A legend shall be written by Junior Creditor
on any instrument at any time evidencing the Junior Debt to the effect that it
is subordinate in right of payment to the Senior Debt and subject to the terms
and conditions of this Agreement (and evidence thereof shall be furnished to
CIT), and there shall be delivered to CIT upon its request after a default or
event of default under the CIT Agreements, true and complete copies of all
original notes, guarantees or other instruments at any time evidencing Junior
Debt. All hereafter arising Junior Debt shall be and is subject to the same
terms and conditions of this Agreement as the existing Junior Debt and is
included in the term "Junior Debt" as defined herein.
(ii) In the event any legend is omitted, CIT is
hereby irrevocably authorized on behalf of Junior Creditor to make the same.
However, no specific legend, further assignment or endorsement or delivery of
notes, guarantees or instruments shall be necessary to subject any Junior Debt
to the subordination thereof contained in this Agreement.
-4-
<PAGE> 5
(e) Each Borrower and Junior Creditor warrant to CIT that
(i) Junior Creditor is and will be the exclusive legal and beneficial owner of
all Junior Debt and related collateral and guarantees, and (ii) none of the
Junior Debt or collateral or guarantees is or will be subject to any lien,
security interest, financing statement, subordination, assignment or other
claim, except in favor of CIT or as otherwise consented to in writing by CIT or
as expressly permitted hereunder.
(f) In the event of any insolvency or bankruptcy case or
any receivership, liquidation, reorganization or similar proceedings in
connection therewith relative to any Borrower or its property or in the event
of any cases for voluntary liquidation, dissolution or other winding up of any
Borrower or in the event of any assignment for the benefit of creditors
("Insolvency Case"), CIT shall first be entitled to receive indefeasible
payment in full of all Senior Debt before Junior Creditor shall be entitled to
receive and retain any payment on account of the Junior Debt, and, as between
CIT and Junior Creditor, CIT shall be entitled to receive for application in
payment of the Senior Debt any payment or distribution of any kind or
character, whether in cash, property or securities, which may be payable or
deliverable in any such Insolvency Case in respect of the Junior Debt. In any
Insolvency Case, CIT is irrevocably authorized by Junior Creditor to take any
action which Junior Creditor might otherwise be entitled to take.
(g) Should any payment of or distribution on account of
any Junior Debt be received or collected by Junior Creditor, except in
accordance with Section 1(c) hereof, such payment shall be held in trust by
Junior Creditor for the benefit of CIT and shall be immediately delivered
forthwith to CIT for application to Senior Debt, in the form received with any
necessary endorsement or assignment.
(h) Junior Creditor shall not be subrogated to, or be
entitled to any assignment of any Senior Debt or Junior Debt, or of any
collateral for or guarantees or evidence of any Senior Debt or Junior Debt,
until all Senior Debt is indefeasibly paid in full to CIT.
(i) Each Borrower and Junior Creditor waive notice of
acceptance hereof by CIT, and waive notice of and consent to the creation of
any Senior Debt, extensions granted or other action taken by CIT in reliance
hereon, the acquisition or release of collateral for or guarantors of the
payment of Senior Debt, and the releasing of any other subordinating creditor,
if applicable. Each Borrower and Junior Creditor waives demand, presentment,
protest, notice of protest and of default and any and all other notices (except
as expressly provided for herein) to which any of them might otherwise be
entitled.
(j) The Junior Creditor acknowledges receipt of a copy of
(i) the Loan Agreement and (ii) a certificate of the respective presidents and
chief financial officers of the Borrowers certifying that the execution,
delivery and performance of the Loan Agreement and the incurrence of the Senior
Debt has been approved by the respective Board of Directors of the Borrowers,
and further acknowledges that (x) the Obligations
-5-
<PAGE> 6
of Borrowers to CIT include indebtedness that is revolving in nature and that
the amount thereof which may be outstanding at any time or from time to time
may be increased or reduced and subsequently reborrowed and (y) receipt by it
of the Loan Agreement shall constitute a reasonably detailed summary of the
terms of the CIT Agreements as required by the Junior Creditor Agreements.
2. SECURITY INTERESTS. Junior Creditor hereby acknowledges that
to secure all of the Senior Debt, CIT has been granted or will be granted, from
time to time, a security interest in and a general lien upon all personal
property of the Borrowers, whether now owned or hereafter acquired, wherever
located, of every kind, nature, and description, tangible or intangible,
including, but not limited to, all accounts, contract rights, general
intangibles, chattel paper, documents, instruments, inventory, equipment,
fixtures and the proceeds and products thereof as more particularly set forth
in the Loan Agreement (all of the foregoing, being hereinafter referred to
collectively as the "CIT Collateral"). Junior Creditor waives the application
of all provisions, if any, contained in the Junior Creditor Agreements which
would or might otherwise prohibit any of the Borrowers from entering into
and/or consummating the CIT Agreements and the transactions contemplated
thereunder. In addition, Junior Creditor specifically acknowledges and
consents to the execution and the performance of the CIT Agreements, consents
to any extensions or postponements of the time of payment of the Senior Debt
and any other indulgence with respect thereto, to any substitutions, exchange
or release of the CIT Collateral which may at any time secure the Senior Debt
and to the addition or release of any other party or person primarily or
secondarily liable therefor.
3. PRIORITIES IN COLLATERAL. Notwithstanding any provision
contained in the CIT Agreements or the Junior Creditor Agreements to the
contrary, and notwithstanding the time, order or method of attachment or
perfection of the security interests or liens granted thereby or the time or
order of filing or lien notation or recording of financing statements,
mortgages, or other evidence of liens or security interests, and
notwithstanding anything contained in any such filing, lien notation, recorded
instrument or agreement to which Junior Creditor or CIT may now or hereafter be
a party, and notwithstanding any provision of the Uniform Commercial Code or
other applicable law, Junior Creditor agrees that the security interests and
liens upon the CIT Collateral in favor of CIT have and shall have priority over
the security interests and liens, if any, upon the CIT Collateral held by
Junior Creditor to the full extent of the Senior Debt outstanding at any time
and from time to time.
4. STANDSTILL.
(a) Junior Creditor agrees that it shall not exercise any
rights (including, but not limited to, setoff rights) nor assert any claims
with respect to the CIT Collateral, nor seek to foreclose on its security
interests, nor take any action or institute any proceedings, directly or
indirectly, with respect to the CIT Collateral (including, but not limited to,
commencing or joining with any other creditor or creditors in commencing any
bankruptcy, reorganization or insolvency case against Borrowers) until the
receipt by
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<PAGE> 7
Junior Creditor of notice from CIT that the Borrowers have indefeasibly
satisfied in full the Senior Debt.
(b) In addition, Junior Creditor agrees that, until all
Senior Debt is indefeasibly paid and satisfied in full, Junior Creditor shall
not, directly or indirectly, without the prior written consent of CIT, seek to
collect against any of the Borrowers any Junior Debt or take any other action,
including a declaration of default as to, or acceleration of, any Junior Debt
or assertion of any claims or joining in any petition or otherwise initiating
any Insolvency Case, or instituting any other legal proceeding against any
Borrower.
5. CONSENT TO ASSET DISPOSITIONS, ETC. Junior Creditor agrees,
unless and until all of the Senior Debt has been fully and indefeasibly paid or
satisfied, to release or otherwise terminate any security interest and lien it
may have in and upon the CIT Collateral which may be sold or otherwise disposed
of either by CIT, its agents, or any Borrower with CIT's consent, whether in
the ordinary course of business or after the declaration of an Event of Default
pursuant to the CIT Agreements, promptly upon CIT's written notice that the CIT
Collateral will be sold or otherwise disposed of, and to immediately deliver
satisfactions of mortgages, Uniform Commercial Code partial releases or
termination statements and such other documents as CIT may reasonably require
in connection therewith at no cost to Junior Creditor.
6. WAIVER. (a) Waivers by Junior Creditor. The Junior Creditor
hereby waives, or acknowledges the satisfaction of, the following conditions to
the subordination of the Junior Debt required under the Junior Creditor
Agreements:
(i) that the subordination provided herein is reasonable
and consistent with the terms of the Junior Debt,
(ii) that the Senior Debt now, or at any time during which
amounts are outstanding thereunder, will not cause Borrowers' consolidated debt
to equity ratio to exceed 3:1, and
(iii) that the Senior Debt will not result in the
Borrowers' inability to pay all amounts due under the Junior Creditor
Agreements on or before the due date thereof.
(b) Generally. No waiver shall be deemed to be made
by Junior Creditor or CIT of any of their respective rights hereunder unless
the same shall be in writing signed by either CIT or Junior Creditor, as the
case may be, and each waiver, if any, shall be a waiver only with respect to
the specific instance involved and shall in no way impair the rights of Junior
Creditor or CIT in any other respect at any other time.
7. APPLICATION OF PROCEEDS; WAIVER OF MARSHALLING. Junior
Creditor hereby agrees that any proceeds of the CIT Collateral received by CIT
may be applied, reversed, and reapplied, in whole or in part, to any of the
Senior Debt, as CIT, in its sole discretion, deems appropriate. Junior
Creditor hereby waives the application of the
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<PAGE> 8
doctrine of marshalling assets or collateral or any other legal or equitable
principle or doctrine which could otherwise, in any way, constrain, limit or
affect the order or manner of liquidation by CIT of the CIT Collateral or
enforcement against any person obligated for the Senior Debt, all of which
shall be subject to CIT's sole discretion.
8. ASSIGNMENT; ENTIRE AGREEMENT.
(a) All of the terms, covenants and conditions contained
herein shall inure to the benefit of and be binding upon the parties hereto and
their successors and assigns, as the case may be.
(b) None of the Junior Debt or interests in any CIT
Collateral held by Junior Creditor may be assigned or transferred by Junior
Creditor or its successors and assigns unless, prior to such assignment, CIT
shall have received from the assignee a written acknowledgement, in form and
substance satisfactory to CIT, stating that such assignee has received a copy
of this Agreement and agrees to be bound by the terms hereof. The Junior
Creditor represents and warrants that, as of the date hereof, it has not
assigned or transferred all or any portion of the Junior Debt.
(c) This Agreement sets forth the entire understanding of
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any term may be modified, altered, waived, discharged, or
terminated except by an instrument in writing executed by the party against
whom such alteration, waiver, discharge or termination is sought to be
enforced.
9. NO BENEFIT TO THIRD PARTIES. The terms and provisions of this
Agreement shall be for the sole benefit of the parties hereto and their
respective successors and assigns; no other person, firm, entity or corporation
shall have any right, benefit, priority or interest under this Agreement.
10. FURTHER ASSURANCES.
(a) Junior Creditor, and each Borrower, by their
respective acceptance hereof, acknowledge and agree that the subordination
provisions contained in this Agreement are, and are intended to be, an
inducement and a consideration to CIT as holder of the Obligations, whether
created or acquired before or after the issuance of the Junior Debt, to acquire
such Obligations, and CIT or any present or future other holder of the
Obligations shall be deemed conclusively to have relied on such subordination
provisions in acquiring such Obligations.
(b) Junior Creditor shall execute and deliver such
additional documents and hereby consents to such additional actions as shall be
reasonably necessary to acknowledge the superiority of CIT's security and other
interests and liens over the security or other interests or liens of Junior
Creditor with respect to the CIT Collateral and to effectuate the provisions
and purposes of this Agreement at no cost to Junior Creditor. If requested by
CIT, Junior Creditor shall execute such notice filings to be filed
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<PAGE> 9
with the Uniform Commercial Code records in each jurisdiction where filings
have been made with respect to the CIT Collateral, indicating the existence of
this Agreement and confirming the terms hereof at no cost to Junior Creditor.
(c) Without limiting the generality of the foregoing,
Junior Creditor agrees that each and every financing statement filed by Junior
Creditor claiming a security or other interest in any assets of any of the
Borrowers shall bear, or shall be amended to bear, a conspicuous legend to the
effect that:
"SECURED PARTY'S RIGHTS ARE SUBJECT TO THE TERMS OF
AN INTERCREDITOR AND SUBORDINATION AGREEMENT BETWEEN
SECURED PARTY AND THE CIT GROUP/CREDIT FINANCE, INC.,
135 WEST 50TH STREET, NEW YORK, NEW YORK 10020."
11. GOVERNING LAW/CONSENT TO JURISDICTION. JUNIOR CREDITOR HEREBY
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT AND FURTHER HEREBY WAIVES ANY RIGHT OF OFFSET OR
RIGHT TO INTERPOSE ANY COUNTERCLAIM IN ANY SUCH ACTION. EACH OF THE PARTIES
HERETO EXPRESSLY SUBMITS IN ADVANCE TO THE NON-EXCLUSIVE JURISDICTION OF THE
SUPREME COURT, COUNTY OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION OR PROCEEDING RELATING TO ANY
CLAIM, DISPUTE OR OTHER MATTER PERTAINING DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
12. UNIFORM COMMERCIAL CODE DEFINITIONS. All terms used herein
which are defined in the Uniform Commercial Code in effect in the State of New
York shall have the meanings set forth therein unless otherwise defined herein.
13. NOTICES.
(a) Each party hereto shall simultaneously provide the
other with a copy of any written notice to any of the Borrowers of any default
declared by either party hereto under the Junior Creditor Agreements or the CIT
Agreements, as the case may be; provided, however, that failure to furnish such
notices shall not be a default hereunder and shall not prejudice any rights or
remedies provided herein.
(b) All notices, requests or demands required to be made
or given hereunder shall be deemed to have been duly given or made: if by hand,
immediately upon delivery; if by certified mail, return receipt requested, five
(5) days after mailing; if by overnight delivery service, one day after
dispatch; or if by telex, telecopier (fax) or telegram, immediately upon
receipt. All notices, requests or demands shall be in writing and shall be
sent to the respective parties at the addresses set forth below (or such
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<PAGE> 10
other addresses as either party may designate by notice in accordance with the
provisions of this paragraph):
To CIT: THE CIT GROUP/CREDIT FINANCE, INC.
135 West 50th Street
New York, New York 10020
Attention: Robert Strack
with a copy to:
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
Attention: Harvey F. Milman, Esq.
To Junior Creditor: GTEL ENVIRONMENTAL LABORATORIES, INC.
c/o Groundwater Technology, Inc.
100 River Ridge Road
Norwood, Massachusetts 02062
Attention: Chief Financial Officer
with a copy to:
GTEL ENVIRONMENTAL LABORATORIES, INC.
c/o Groundwater Technology, Inc.
100 River Ridge Road
Norwood, Massachusetts 02062
Attention: General Counsel
To Borrowers: Nytest Environmental, Inc., and
NEI/GTEL Environmental
Laboratories, Inc., and
NEI of Pennsylvania, Inc.
c/o 60 Seaview Boulevard
Port Washington, NY 11050
14. INSOLVENCY. This Agreement shall be applicable both before
and after the commencement of any Insolvency Case by or against any Borrower
under the Bankruptcy Code and all converted and succeeding cases in respect
thereof. The relative rights, as provided for in this Agreement, shall
continue after the commencement of any such case on the same basis as prior to
the date of the commencement of any such case, as provided in this Agreement,
subject to any court order approving the financing of or use of cash collateral
by such Borrower, as debtor-in-possession.
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<PAGE> 11
15. BANKRUPTCY FINANCING. If any Borrower shall become subject to
an Insolvency Case under the Bankruptcy Code and if CIT wishes to permit use of
cash collateral or to provide financing to such Borrower secured by the CIT
Collateral and other property of such Borrower, as debtor-in-possession, under
either Section 363 or 364 of the Bankruptcy Code ("DIP Financing"), then Junior
Creditor agrees as follows:
(a) adequate notice to Junior Creditor shall have been
provided for such DIP Financing or use of cash collateral if Junior Creditor
receives notice three (3) business days prior to the entry of the order
approving such use of cash collateral or DIP Financing, or if Junior Creditor
receives such other or shorter notice as approved by the Bankruptcy Court; and
(b) no objection shall be raised by Junior Creditor to
any such use of cash collateral or DIP Financing on the grounds of the failure
to provide "adequate protection" to any lien on the CIT Collateral securing the
Junior Debt to Junior Creditor or any other grounds, provided Junior Creditor
retains a lien on and security interest in the post-petition CIT Collateral and
any other properties or assets of such Borrower with the same priorities as
existed prior to the commencement of the case under the Bankruptcy Code. If
CIT shall advise Junior Creditor that CIT opposes post-petition use of cash
collateral or any proposed DIP Financing by Junior Creditor or any other
person, then Junior Creditor shall, at CIT's request (i) not provide or
participate in any such DIP Financing and (ii) join in any application or
opposition made by CIT and shall assert no position inconsistent therewith.
16. TERM. This Agreement is a continuing agreement and shall
remain in full force and effect (a) until the payment, satisfaction in full of
all Senior Debt, and the termination of all the CIT Agreements, or (b) until
CIT notifies Junior Creditor, in writing, of the termination of this Agreement,
whichever shall first occur; provided that, termination of this Agreement shall
not release any party of its obligations hereunder with respect to matters
arising or events occurring prior to termination.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original hereof and
admissible into evidence, and all of which together shall be deemed to be a
single instrument.
18. PARAGRAPH HEADINGS. The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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<PAGE> 12
If the foregoing correctly states our understanding and agreement,
kindly sign the counterpart of this Agreement in the space provided below.
GTEL ENVIRONMENTAL LABORATORIES, INC.
By: /S/ Joel Adler
---------------------------------
Title: Asst. Treasurer.
------------------------------
AGREED:
THE CIT GROUP/CREDIT FINANCE, INC.
By: /s/ Arthur McCray
------------------------------
Title: AVP
---------------------------
NYTEST ENVIRONMENTAL INC.
By: /s/ John Gaspari
------------------------------
Title: CEO
---------------------------
NEI/GTEL ENVIRONMENTAL
LABORATORIES, INC.
By: /s/ John Gaspari
------------------------------
Title: CEO
---------------------------
NEI OF PENNSYLVANIA, INC.
By: /s/ John Gaspari
------------------------------
Title: CEO
---------------------------
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<PAGE> 1
EXHIBIT 10.8
INTERCREDITOR AND SUBORDINATION AGREEMENT
April 22, 1996
THE CIT GROUP/CREDIT FINANCE, INC.
135 West 50th Street
New York, New York 10020
Re: Nytest Environmental, Inc., NEI/GTEL Environmental
Laboratories, Inc. and NEI of Pennsylvania, Inc.
Gentlemen:
Reference is made to certain financing arrangements being entered into
contemporaneously herewith between THE CIT GROUP/CREDIT FINANCE, INC. ("CIT")
and NYTEST ENVIRONMENTAL, INC. ("Nytest"), NEI/GTEL ENVIRONMENTAL LABORATORIES,
INC. ("NEI/GTEL") and NEI OF PENNSYLVANIA, INC. ("NEI/PENN"; and collectively
with Nytest and NEI/GTEL, the "Borrowers") pursuant to the terms and conditions
of certain financing agreements, including, but not limited to, the Loan and
Security Agreement ("Loan Agreement") and various documents, notes,
instruments, guaranties and agreements executed and delivered in connection
therewith (all of the foregoing, as the same may now exist or may hereafter be
amended, modified, supplemented, renewed or extended, executed and delivered by
Borrowers or related third parties in favor of CIT, are hereinafter
collectively referred to as the "CIT Agreements"). Capitalized terms not
defined herein shall have the meanings ascribed to them in the CIT Agreements.
Reference is further made to that certain (i) Promissory Note dated
July 1, 1995 made by Nytest in favor of State Bank of Long Island ("Junior
Creditor") and (ii) Promissory Note dated February 8, 1996 made by Nytest in
favor of Junior Creditor (all of the foregoing, together with all financing
statements, agreements, documents and instruments executed and/or delivered in
connection therewith, as the same may now exist or may hereafter be amended,
modified, supplemented, extended, renewed or replaced, are collectively
referred to herein as the "Junior Creditor Agreements").
This letter sets forth the agreement between CIT and Junior Creditor
concerning the subordination of payment of all obligations of the Borrowers to
Junior Creditor to the prior payment of all obligations of the Borrowers to
CIT, the relative priority of the security or other interests now or in the
future held by CIT with respect to the property of the Borrowers and any
existing or future security or other interests which Junior
<PAGE> 2
Creditor may now or in the future hold or acquire with respect to the property
of the Borrowers and related matters.
1. SUBORDINATION.
(a) Except as expressly permitted below, Junior Creditor
hereby subordinates its rights to payment and satisfaction of any and all
Obligations (as defined below) of any of the Borrowers to Junior Creditor (the
"Junior Debt") to the prior indefeasible payment and satisfaction in full of
all Obligations of any of the Borrowers to CIT (the "Senior Debt"). For
purposes hereof, the term "Obligations" shall mean obligations, liabilities and
indebtedness of every kind, nature and description, direct or indirect,
absolute or contingent, matured or unmatured, now existing or hereafter
incurred or created, both before and after the commencement of any case under
Title 11 of the United States Code, as amended (the "Bankruptcy Code"), and
including charges, commissions, interest, fees and expenses. The Borrowers and
Junior Creditor acknowledge that the Junior Debt after payments to be made to
the Junior Creditor on the Closing Date (as defined in the CIT Agreements)
shall be in the principal amount of $350,000, represented by a promissory note
of Borrowers to Junior Creditor, a copy of which is annexed hereto as Exhibit
"1(a)" (the "Junior Debt Note").
(b) Each of the Borrowers and Junior Creditor agree in favor of
CIT that until all Senior Debt is indefeasibly paid and satisfied in full:
(i) Except as permitted in Section 1(c) below,
the Borrowers shall not, directly or indirectly, make, and Junior Creditor
shall not, directly or indirectly, accept or receive, demand or sue for any
payment of principal or interest or any prepayment or non-mandatory payment or
any payment pursuant to acceleration or claims of breach or to acquire Junior
Debt or otherwise in respect of any Junior Debt;
(ii) Junior Creditor shall not seek to collect
against any of the Borrowers any Junior Debt or otherwise enforce any of its
rights against any of the Borrowers upon a default by any of the Borrowers
under the Junior Creditor Agreements;
(iii) The Borrowers shall not grant to Junior
Creditor and Junior Creditor shall not acquire or demand any additional
collateral or guarantees for any Junior Debt;
(iv) The Borrowers and Junior Creditor shall not
amend, modify, alter or change the terms of any of the Junior Creditor
Agreements or any other arrangements related to the Junior Debt without the
prior written consent of CIT;
(v) The Borrowers shall not directly or
indirectly, make, and Junior Creditor shall not, directly or indirectly,
demand, accept or receive from any of the Borrowers, any loan, gift or
distribution of assets to Junior Creditor;
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<PAGE> 3
(vi) No Junior Debt will be waived, forgiven,
canceled or converted into capital interests in any of the Borrowers without
the prior written consent of CIT;
(vii) Junior Creditor shall furnish to CIT copies
of all notices or demands sent to any of the Borrowers under the Junior
Creditor Agreements simultaneously with the sending or delivery of same to any
of the Borrowers; and
(viii) Junior Creditor and the Borrowers shall, at
any time or times upon request by CIT, promptly furnish to CIT a true, correct
and complete statement of the outstanding Junior Debt.
(c) Notwithstanding anything to the contrary contained in
the Junior Creditor Agreements and herein, Nytest may make and Junior Creditor
may receive from Nytest the following:
(i) scheduled payments of interest on the Junior
Debt only if prior, and after giving effect to such payment, no default or
Event of Default has occurred and is continuing or would occur as a result of
such payment, whether or not the Senior Debt has been accelerated, and
(ii) beginning August 1, 1996, payments not in
excess of thirty thousand ($30,000) dollars per month in respect of the
principal of the Junior Debt, only if prior, and after giving effect, to each
such payment, no default or Event of Default has occurred and is continuing or
would occur as a result of such payment, whether or not the Senior Debt has
been accelerated; provided, however, that if the Borrowers achieve cumulative
positive Cash Flow for the three (3) months ending June 1996, and no default or
Event of Default has occurred or is continuing or would result as a result of
the payment, Nytest shall be entitled to repay in full the outstanding
principal balance of, and accrued interest on, the Junior Debt. For purposes
hereof, Cash Flow shall mean the Borrower's consolidated net income (loss) plus
depreciation and amortization less principal payments in respect of outstanding
indebtedness and capital expenditures not in excess of one hundred fifty
thousand ($150,000) dollars during each quarter, as reflected on the Borrower's
statements prepared and delivered in accordance with the CIT Agreements.
Immediately upon payment in full of such Junior Debt, Junior Creditor shall
execute and deliver Form UCC-3 termination statements for each financing
statement which it has filed against any of the Borrowers.
(d) (i) A legend shall be written by Junior Creditor
on any instrument at any time evidencing the Junior Debt to the effect that it
is subordinate in right of payment to the Senior Debt and subject to the terms
and conditions of this Agreement (and evidence thereof shall be furnished to
CIT), and there shall be endorsed and delivered to CIT upon its request after a
default or event of default under the CIT Agreements, all original notes,
guarantees or other instruments at any time evidencing Junior Debt. All
hereafter arising Junior Debt shall be and is subject to the same terms and
conditions of this Agreement as the existing Junior Debt and is included in the
term "Junior Debt" as defined herein.
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<PAGE> 4
(ii) In the event any legend or endorsement is
omitted, CIT is hereby irrevocably authorized on behalf of Junior Creditor to
make the same. However, no specific legend, further assignment or endorsement
or delivery of notes, guarantees or instruments shall be necessary to subject
any Junior Debt to the subordination thereof contained in this Agreement.
(e) Each Borrower and Junior Creditor warrant to CIT that
(i) Junior Creditor is and will be the exclusive legal and beneficial owner of
all Junior Debt and related collateral and guarantees, and (ii) none of the
Junior Debt or collateral or guarantees is or will be subject to any lien,
security interest, financing statement, subordination, assignment or other
claim, except in favor of CIT or as otherwise consented to in writing by CIT or
as expressly permitted hereunder.
(f) In the event of any insolvency or bankruptcy case or
any receivership, liquidation, reorganization or similar proceedings in
connection therewith relative to any Borrower or its property or in the event
of any cases for voluntary liquidation, dissolution or other winding up of any
Borrower or in the event of any assignment for the benefit of creditors
("Insolvency Case"), CIT shall first be entitled to receive indefeasible
payment in full of all Senior Debt before Junior Creditor shall be entitled to
receive and retain any payment on account of the Junior Debt, and, as between
CIT and Junior Creditor, CIT shall be entitled to receive for application in
payment of the Senior Debt any payment or distribution of any kind or
character, whether in cash, property or securities, which may be payable or
deliverable in any such Insolvency Case in respect of the Junior Debt. In any
Insolvency Case, CIT is irrevocably authorized by Junior Creditor to take any
action which Junior Creditor might otherwise be entitled to take.
(g) Should any payment of or distribution on account of
any Junior Debt be received or collected by Junior Creditor, except in
accordance with Section 1(c) hereof, such payment shall be held in trust by
Junior Creditor for the benefit of CIT and shall be immediately delivered
forthwith to CIT for application to Senior Debt, in the form received with any
necessary endorsement or assignment.
(h) Junior Creditor shall not be subrogated to, or be
entitled to any assignment of any Senior Debt or Junior Debt, or of any
collateral for or guarantees or evidence of any Senior Debt or Junior Debt,
until all Senior Debt is indefeasibly paid in full to CIT.
(i) Each Borrower and Junior Creditor waive notice of
acceptance hereof by CIT, and waive notice of and consent to the creation of
any Senior Debt, extensions granted or other action taken by CIT in reliance
hereon, the acquisition or release of collateral for or guarantors of the
payment of Senior Debt, and the releasing of any other subordinating creditor,
if applicable. Each Borrower and Junior Creditor waive demand, presentment,
protest, notice of protest and of default and any and all other notices (except
as expressly provided for herein) to which any of them might otherwise be
entitled.
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<PAGE> 5
2. SECURITY INTERESTS. Junior Creditor hereby acknowledges that
to secure all of the Senior Debt, CIT has been granted or will be granted, from
time to time, a security interest in and a general lien upon all personal
property of the Borrowers, whether now owned or hereafter acquired, wherever
located, of every kind, nature, and description, tangible or intangible,
including, but not limited to, all accounts, contract rights, general
intangibles, chattel paper, documents, instruments, inventory, equipment,
fixtures and the proceeds and products thereof as more particularly set forth
in the Loan Agreement (all of the foregoing, being hereinafter referred to
collectively as the "CIT Collateral"). Junior Creditor waives the application
of all provisions, if any, contained in the Junior Creditor Agreements which
would or might otherwise prohibit any of the Borrowers from entering into
and/or consummating the CIT Agreements and the transactions contemplated
thereunder. In addition, Junior Creditor specifically acknowledges and
consents to the execution and the performance of the CIT Agreements, consents
to any extensions or postponements of the time of payment of the Senior Debt
and any other indulgence with respect thereto, to any substitutions, exchange
or release of the CIT Collateral which may at any time secure the Senior Debt
and to the addition or release of any other party or person primarily or
secondarily liable therefor.
3. PRIORITIES IN COLLATERAL. Notwithstanding any provision
contained in the CIT Agreements or the Junior Creditor Agreements to the
contrary, and notwithstanding the time, order or method of attachment or
perfection of the security interests or liens granted thereby or the time or
order of filing or lien notation or recording of financing statements,
mortgages, or other evidence of liens or security interests, and
notwithstanding anything contained in any such filing, lien notation, recorded
instrument or agreement to which Junior Creditor or CIT may now or hereafter be
a party, and notwithstanding any provision of the Uniform Commercial Code or
other applicable law, Junior Creditor agrees that the security interests and
liens upon the CIT Collateral in favor of CIT have and shall have priority over
the security interests and liens, if any, upon the CIT Collateral held by
Junior Creditor to the full extent of the Senior Debt outstanding at any time
and from time to time.
4. STANDSTILL.
Junior Creditor agrees that it shall not exercise any rights
(including, but not limited to, setoff rights) nor assert any claims with
respect to the CIT Collateral, nor seek to foreclose on its security interests,
nor take any action or institute any proceedings, directly or indirectly, with
respect to the CIT Collateral (including, but not limited to, commencing or
joining with any other creditor or creditors in commencing any bankruptcy,
reorganization or insolvency case against Borrowers) until the receipt by
Junior Creditor of notice from CIT that the Borrowers have indefeasibly
satisfied in full the Senior Debt.
5. CONSENT TO ASSET DISPOSITIONS, ETC. Junior Creditor agrees,
unless and until all of the Senior Debt has been fully and indefeasibly paid or
satisfied, to release or otherwise terminate any security interest and lien it
may have in and upon the CIT
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<PAGE> 6
Collateral which may be sold or otherwise disposed of either by CIT, its
agents, or any Borrower with CIT's consent, whether in the ordinary course of
business or after the declaration of an Event of Default pursuant to the CIT
Agreements, immediately upon CIT's written notice that the CIT Collateral will
be sold or otherwise disposed of, and to immediately deliver satisfactions of
mortgages, Uniform Commercial Code partial releases or termination statements
and such other documents as CIT may reasonably require in connection therewith.
6. WAIVER. No waiver shall be deemed to be made by Junior
Creditor or CIT of any of their respective rights hereunder unless the same
shall be in writing signed by either CIT or Junior Creditor, as the case may
be, and each waiver, if any, shall be a waiver only with respect to the
specific instance involved and shall in no way impair the rights of Junior
Creditor or CIT in any other respect at any other time.
7. APPLICATION OF PROCEEDS; WAIVER OF MARSHALLING. Junior
Creditor hereby agrees that any proceeds of the CIT Collateral received by CIT
may be applied, reversed, and reapplied, in whole or in part, to any of the
Senior Debt, as CIT, in its sole discretion, deems appropriate. Junior
Creditor hereby waives the application of the doctrine of marshalling assets or
collateral or any other legal or equitable principle or doctrine which could
otherwise, in any way, constrain, limit or affect the order or manner of
liquidation by CIT of the CIT Collateral or enforcement against any person
obligated for the Senior Debt, all of which shall be subject to CIT's sole
discretion.
8. ASSIGNMENT; ENTIRE AGREEMENT.
(a) All of the terms, covenants and conditions contained
herein shall inure to the benefit of and be binding upon the parties hereto and
their successors and assigns, as the case may be.
(b) None of the Junior Debt or interests in any CIT
Collateral held by Junior Creditor may be assigned or transferred by Junior
Creditor or its successors and assigns unless, prior to such assignment, CIT
shall have received from the assignee a written acknowledgement, in form and
substance satisfactory to CIT, stating that such assignee has received a copy
of this Agreement and agrees to be bound by the terms hereof. The Junior
Creditor represents and warrants that, as of the date hereof, it has not
assigned or transferred all or any portion of the Junior Debt.
(c) This Agreement sets forth the entire understanding of
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any term may be modified, altered, waived, discharged, or
terminated except by an instrument in writing executed by the party against
whom such alteration, waiver, discharge or termination is sought to be
enforced.
9. NO BENEFIT TO THIRD PARTIES. The terms and provisions of this
Agreement shall be for the sole benefit of the parties hereto and their
respective successors and
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<PAGE> 7
assigns; no other person, firm, entity or corporation shall have any right,
benefit, priority or interest under this Agreement.
10. FURTHER ASSURANCES.
(a) Junior Creditor, and each Borrower, by their
respective acceptance hereof, acknowledge and agree that the subordination
provisions contained in this Agreement are, and are intended to be, an
inducement and a consideration to CIT as holder of the Obligations, whether
created or acquired before or after the issuance of the Junior Debt, to acquire
such Obligations, and CIT or any present or future other holder of the
Obligations shall be deemed conclusively to have relied on such subordination
provisions in acquiring such Obligations.
(b) Junior Creditor shall execute and deliver such
additional documents and take such additional actions as shall be necessary to
acknowledge the superiority of CIT's security and other interests and liens
over the security or other interests or liens of Junior Creditor with respect
to the CIT Collateral and to effectuate the provisions and purposes of this
Agreement. If requested by CIT, Junior Creditor shall execute such notice
filings to be filed with the Uniform Commercial Code records in each
jurisdiction where filings have been made with respect to the CIT Collateral,
indicating the existence of this Agreement and confirming the terms hereof.
(c) Without limiting the generality of the foregoing,
Junior Creditor agrees that each and every financing statement filed by Junior
Creditor claiming a security or other interest in any assets of any of the
Borrowers shall bear, or shall be amended to bear, a conspicuous legend to the
effect that:
"SECURED PARTY'S RIGHTS ARE SUBJECT TO THE TERMS OF
AN INTERCREDITOR AND SUBORDINATION AGREEMENT BETWEEN
SECURED PARTY AND THE CIT GROUP/CREDIT FINANCE, INC.,
135 WEST 50TH STREET, NEW YORK, NEW YORK 10020."
11. GOVERNING LAW/CONSENT TO JURISDICTION. JUNIOR CREDITOR HEREBY
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT AND FURTHER HEREBY WAIVES ANY RIGHT OF OFFSET OR
RIGHT TO INTERPOSE ANY COUNTERCLAIM IN ANY SUCH ACTION. EACH OF THE PARTIES
HERETO EXPRESSLY SUBMITS IN ADVANCE TO THE NON-EXCLUSIVE JURISDICTION OF THE
SUPREME COURT, COUNTY OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION OR PROCEEDING RELATING TO ANY
CLAIM, DISPUTE OR OTHER MATTER PERTAINING DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
-7-
<PAGE> 8
12. UNIFORM COMMERCIAL CODE DEFINITIONS. All terms used herein
which are defined in the Uniform Commercial Code in effect in the State of New
York shall have the meanings set forth therein unless otherwise defined herein.
13. NOTICES.
(a) Junior Creditor shall simultaneously provide CIT with
a copy of any written notice to any of the Borrowers of any default declared by
Junior Creditor under the Junior Creditor Agreements.
(b) All notices, requests or demands required to be made
or given hereunder shall be deemed to have been duly given or made: if by hand,
immediately upon delivery; if by certified mail, return receipt requested, five
(5) days after mailing; if by overnight delivery service, one day after
dispatch; or if by telex, telecopier (fax) or telegram, immediately upon
receipt. All notices, requests or demands shall be in writing and shall be
sent to the respective parties at the addresses set forth below (or such other
addresses as either party may designate by notice in accordance with the
provisions of this paragraph):
To CIT: THE CIT GROUP/CREDIT FINANCE, INC.
135 West 50th Street
New York, New York 10020
Attention: Robert Strack
with a copy to:
Berlack, Israels & Liberman LLP
120 West 45th Street
New York, New York 10036
Attention: Harvey F. Milman, Esq.
To Junior Creditor: STATE BANK OF LONG ISLAND
Commercial Lending Division
699 Hillside Avenue
New Hyde Park, New York 11040
Attention: /X/
14. INSOLVENCY. This Agreement shall be applicable both before
and after the commencement of any Insolvency Case by or against any Borrower
under the Bankruptcy Code and all converted and succeeding cases in respect
thereof. The relative rights, as provided for in this Agreement, shall
continue after the commencement of any such case on the same basis as prior to
the date of the commencement of any such case, as provided in this Agreement,
subject to any court order approving the financing of or use of cash collateral
by such Borrower, as debtor-in-possession.
-8-
<PAGE> 9
15. BANKRUPTCY FINANCING. If any Borrower shall become subject to
an Insolvency Case under the Bankruptcy Code and if CIT wishes to permit use of
cash collateral or to provide financing to such Borrower secured by the CIT
Collateral and other property of such Borrower, as debtor-in-possession, under
either Section 363 or 364 of the Bankruptcy Code ("DIP Financing"), then Junior
Creditor agrees as follows:
(a) adequate notice to Junior Creditor shall have been
provided for such DIP Financing or use of cash collateral if Junior Creditor
receives notice three (3) business days prior to the entry of the order
approving such use of cash collateral or DIP Financing, or if Junior Creditor
receives such other or shorter notice as approved by the Bankruptcy Court; and
(b) no objection shall be raised by Junior Creditor to
any such use of cash collateral or DIP Financing on the grounds of the failure
to provide "adequate protection" to any lien on the CIT Collateral securing the
Junior Debt to Junior Creditor or any other grounds, provided Junior Creditor
retains a lien on and security interest in the post-petition CIT Collateral and
any other properties or assets of such Borrower with the same priorities as
existed prior to the commencement of the case under the Bankruptcy Code. If
CIT shall advise Junior Creditor that CIT opposes post-petition use of cash
collateral or any proposed DIP Financing by Junior Creditor or any other
person, then Junior Creditor shall, at CIT's request (i) not provide or
participate in any such DIP Financing and (ii) join in any application or
opposition made by CIT and shall assert no position inconsistent therewith.
16. TERM. This Agreement is a continuing agreement and shall
remain in full force and effect (a) until the payment, satisfaction in full of
all Senior Debt, and the termination of all the CIT Agreements, or (b) until
CIT notifies Junior Creditor, in writing, of the termination of this Agreement,
whichever shall first occur; provided that, termination of this Agreement shall
not release any party of its obligations hereunder with respect to matters
arising or events occurring prior to termination.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original hereof and
admissible into evidence, and all of which together shall be deemed to be a
single instrument.
18. PARAGRAPH HEADINGS. The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
-9-
<PAGE> 10
If the foregoing correctly states our understanding and agreement,
kindly sign the counterpart of this Agreement in the space provided below.
STATE BANK OF LONG ISLAND
By: /s/ Michael Sabala
------------------------------------
Title: V.P.
---------------------------------
AGREED:
THE CIT GROUP/CREDIT FINANCE, INC.
By: /s/ Arthur McCray
---------------------------------
Title: AVP
------------------------------
-10-
<PAGE> 11
ACKNOWLEDGEMENT AND AGREEMENT
The undersigned hereby agrees to the terms set forth in Section 1 of
the foregoing Intercreditor and Subordination Agreement between STATE BANK OF
LONG ISLAND and THE CIT GROUP/CREDIT FINANCE, INC. (the "Intercreditor
Agreement") and agrees that it will, together with its successors and assigns,
be bound by such terms.
The undersigned acknowledges that it does not and will not receive any
right, benefit, priority or interest under or because of the existence of the
foregoing Intercreditor Agreement.
The undersigned agrees to execute and deliver such additional
documents and take such additional action as may be necessary or desirable to
effectuate the provisions and purposes of the Intercreditor Agreement and
further agrees to promptly reimburse the Junior Creditor for its reasonable
costs and expenses in connection with entering into the Intercreditor
Agreement.
THE UNDERSIGNED AGREES THAT THE VALIDITY, INTERPRETATION AND EFFECT OF
SUCH INTERCREDITOR AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK AND IT HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF
THE SUPREME COURT OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK AND WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WITH RESPECT TO SUCH INTERCREDITOR AGREEMENT.
NYTEST ENVIRONMENTAL, INC.
By: /s/ John Gaspari
----------------------------------
Title: CEO
-------------------------------
NEI/GTEL ENVIRONMENTAL
LABORATORIES, INC.
By: /s/ John Gaspari
----------------------------------
Title: CEO
-------------------------------
-11-
<PAGE> 12
NEI OF PENNSYLVANIA, INC.
By: /s/ John Gaspari
-----------------------------------
Title: CEO
--------------------------------
-12-
<PAGE> 1
EXHIBIT 10.9
GROUNDWATER TECHNOLOGY, INC.
100 River Ridge Drive
Norwood, Massachusetts 02062
April 22, 1996
THE CIT GROUP/CREDIT FINANCE, INC.
135 West 50th Street
New York, New York 10020
Re: Nytest Environmental Inc., NEI/GTEL Environmental
Laboratories, Inc. and NEI of Pennsylvania, Inc.
(collectively, "Borrower")
Ladies and Gentlemen:
We have been advised that, pursuant to a Loan and Security
Agreement among you and Borrower dated the date hereof (the "Loan Agreement"),
you will make available a revolving loan and a term loan to Borrower.
We are currently party to a Lease Agreement dated December 31,
1995 with NEI/GTEL Environmental Laboratories, Inc. (the "Lease Agreement", a
copy of which is attached hereto as Exhibit A) which provides among other
things, for periodic rent to be paid by NEI/GTEL Environmental Laboratories,
Inc. to us.
This confirms your agreement that Borrower may continue to pay
rent, in accordance with the Lease Agreement, and confirms our agreement that
we will not increase the rent, except as provided in the Lease Agreement,
without your prior written consent at any time while any Obligations (as
defined in the Loan Agreement) are due to you from the Borrower.
Please indicate your agreement with the foregoing by signing
in the space provided below.
Very truly yours,
GROUNDWATER TECHNOLOGY, INC.
By: /S/ Joel Adler
--------------------------
Title: Asst. Treasurer
-----------------------
<PAGE> 2
ACCEPTED AND AGREED TO:
THE CIT GROUP/CREDIT FINANCE, INC.
By: /s/ Arthur McCray
-------------------------------
Name: Arthur McCray
Title: AVP
NYTEST ENVIRONMENTAL INC.
By: /s/ John Gaspari
-----------------------
Title: CEO
--------------------
NEI/GTEL ENVIRONMENTAL
LABORATORIES, INC.
By: /s/ John Gaspari
-----------------------
Title: CEO
--------------------
NEI OF PENNSYLVANIA, INC.
By: /s/ John Gaspari
-----------------------
Title: CEO
--------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Consolidated Statement of Operations filed as
part of the quarterly report on Form 10-QSB and is qualified in its entirety by
reference to such quarterly report on Form 10-QSB.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 138
<SECURITIES> 0
<RECEIVABLES> 3,575
<ALLOWANCES> (86)
<INVENTORY> 62
<CURRENT-ASSETS> 3,999
<PP&E> 5,446
<DEPRECIATION> 3,693
<TOTAL-ASSETS> 9,178
<CURRENT-LIABILITIES> 4,103
<BONDS> 0
67
0
<COMMON> 0
<OTHER-SE> 1,753
<TOTAL-LIABILITY-AND-EQUITY> 9,178
<SALES> 3,559
<TOTAL-REVENUES> 3,559
<CGS> 3,806
<TOTAL-COSTS> 3,806
<OTHER-EXPENSES> 1,214
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90
<INCOME-PRETAX> (1,550)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,550)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,550)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
