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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Security Exchange Act of 1934
Date of Report (Date of earliest event reported) December 30, 1996
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SMITH TECHNOLOGY CORPORATION
(formerly Smith Environmental Technologies Corporation)
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(Exact name of registrant as specified in its charter)
DELAWARE 0-14992 38-2294876
(State of other jurisdiction of (Commission File (IRS Employer
incorporated organization) Number) identification No.)
Bayview Corporate Center
3501 Jamboree Road, Suite 550
Newport Beach, CA 92660
(address of principal executive offices)
Registrant's telephone number, including area code: (714) 737-7900
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Item 5. Other Events
On December 30, 1996, the Company and the lenders in respect of its senior bank
credit facility (the "Senior Lenders") executed the Seventh Amendment to the
Forbearance Agreement dated June 7, 1996, in connection with its Loan and
Security Agreement, extending the forbearance period thereunder to January 14,
1997.
The Company and its Senior Lenders have executed a Fourth Amendment and Waiver
to the Loan and Security Agreement effective January 14, 1997 (the "Fourth
Amendment"). Pursuant to the amendment the Senior Lenders waived and consented
to certain conditions and actions related to (1) payments to be made in respect
of the BCM Employee Stock Ownership Plan and (2) financial covenant violations
for periods ended June 30, 1996 and September 30, 1996 under the Loan
Agreement. The Fourth Amendment also increased interest rates by one-half
percent, modified certain fees and reduced the revolving line of credit from
$28.5 million to $27 million. The term loan maturity date was modified to
October 18, 1998, concurrent with the maturity of the revolving line of credit.
The Fourth Amendment also established new financial covenants for the remaining
term of the credit facility through October 18, 1998.
The Company executed an Amended and Restated Note Purchase Agreement (the
"Amended Agreement") effective as of May 15, 1996 with the holders of notes
payable to 399 Venture Partners Inc., an affiliate of Citicorp Venture Capital,
Ltd., and to various individual distributees of promissory notes formerly held
by 399 Venture Partners, Inc. (the "Holders"), in the aggregate principal
amount of $10.0 million in Convertible Subordinated Notes and $2.0 million in
Senior Subordinated Notes (collectively referred to as the "Subordinated
Notes"). Prior to the Amended Agreement, the Holders had agreed to defer the
payment of interest due May 21, 1995 and November 21, 1995, and pursuant to the
Amended Agreement the Holders agreed to defer the payment of interest due on
the Subordinated Notes on May 21, 1996 and November 21, 1996 and the interest
which will accrue and become due on May 21, 1997. An additional amendment in
the same form effective as of the delivery of replacement notes signed by the
Company has been executed as of January 13, 1997 which will defer the interest
which will accrue and become due on November 21, 1997 and May 21, 1998 (the
"Third Amendment"). The Amended Agreement, as amended by the Third Amendment,
provides for the issuance of additional notes (maturing on November 21, 2004)
in lieu of all deferred interest payments. The effect as of September 30, 1996
of this deferral was to reclassify approximately $1.8 million of accrued
interest expense to long-term debt under the Subordinated Notes, which
reclassification is reflected in the Company's financial statements. All of the
interest converted to principal will be subject to conversion rights on the
same terms and conditions as the original principal amount of the Subordinated
Notes.
The Company and NL Industries, Inc., Gould, Inc., Johnson Controls, Inc.,
Exide, Inc., AT&T Technologies, Inc., Rhone-Poulenc AG Co., and Burlington
Northern Railroad Co. (the "PRP Group") have reached an agreement in principal
for the resolution of the arbitration award against the Company in favor of the
PRP Group in the amount of $4.5 million (the "Settlement Agreement"). The
settlement provides for payment by the Company of the $4.5 million over a
period of six years with interest at twelve percent, scheduled (inclusive of
interest) as follows: $150,000 in 1997; $300,000 in 1998; $584,000 in 1999;
$584,000 in 2000; $1,994,000 in 2001; $1,814,000 in 2002; and a final
installment of $1,972,000 in fiscal year 2003. The Settlement Agreement also
allows a discounted prepayment of $2.5 million on or before December 31, 1997
or $2.75 million on or before April 30, 1998 in complete
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satisfaction of the obligation. The Third Amendment to the Amended and Restated
Note Purchase Agreement and the Fourth Amendment to the Company's senior credit
facility authorizes permitted lien status respecting the Company's Settlement
Agreement obligation to the PRP Group in respect of up to $2.5 million of
such obligation.
The Filing of the Company's Form 10-K covering the annual period ending
September 30, 1996 was extended from the original filing date of December 29,
1996 to January 14, 1997. The Form 10-K has been delayed and has not been filed
as of the filing of this Form 8-K. The Company's financial statements and
related Management Discussion and Analysis is dependent upon the execution and
delivery of the Settlement Agreement and completion of review by its
independent auditors.
The Company expects that execution and delivery of the Settlement Agreement
should be completed in the near term which will allow the completion of
financial statements and filing of the 10K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
c. Exhibits
The following exhibits are filed herewith:
10.33 - Fourth Amendment and Waiver to the Loan and Security
Agreement dated as of January 14, 1997 by and among the
Registrant, BCM Engineers Inc., a Pennsylvania corporation,
BCM Engineers Inc., an Alabama corporation, Riedel
Environmental Services, Inc. and Chemical Bank, as Agent
for the Lenders.
10.34 - Third Amended and Restated Note Purchase Agreement effective
January 13, 1997 between the Registrant and 399 Venture
Partners, Inc.
10.35 - Seventh Amendment to the Forebearance Agreement made as of
December 30, 1996 by and among the Registrant, BCM Engineers
Inc., a Pennsylvania corporation, BCM Engineers Inc., an
Alabama corporation, Riedel Environmental Services, Inc.,
and Chase Manhattan Bank, as Agent for the Lenders.
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SIGNATURE
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 hereunto duly authorized.
SMITH TECHNOLOGY CORPORATION
By: /s/ William T. Campbell
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William T. Campbell
Vice President-Finance
January 21, 1997
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SMITH TECHNOLOGY CORPORATION
(FORMERLY SMITH ENVIRONMENTAL TECHNOLOGIES CORPORATION)
The Company incurred a net loss of $19.9 million for fiscal year 1996 as
compared to net income of approximately $1.7 million for the 12 month period
ended September 30, 1995. The Company believes a significant portion of the
fiscal 1996 loss can be attributed to non-recurring events and that operating
result and cash flows will improve significantly in 1997.
During 1996, the Company experienced little increase in revenues due to declines
in engineering services revenues caused by a severe winter in the Northeast,
reduced pass-thru costs associated with sub contractors and general market
conditions. Revenues were also negatively impacted during the fiscal year by
delays in the Federal Government budget approval process affecting revenues from
the Company's EPA ERCS contracts and its engineering services contracts with the
U.S. Army Corps of Engineers. For the most part, revenues under these contracts
have been deferred to a later period subject to contract funding and time period
limitations. The Company's gross profit decreased by $7.4 million or 36.1% in
fiscal year 1996 due primarily to reduced project profit margins in the
Company's remediation services operations, the impact of Federal Government
budget delays, contract adjustments and severe winter weather in the Northeast.
Additionally, the Company recorded a charge of approximately $8.9 million in
the fourth quarter related to its settlement of the NL Industries arbitration
award which settlement was comprised of the $4.5 million obligation to the PRP
Group, the write-off of project-related equipment of $2.5 million and accounts
receivable of $1.5 million, and approximately $400,000 of associated legal and
consulting fees. The Company also incurred approximately $800,000 of legal and
consulting fees in prior quarters in the 1996 fiscal year resulting in a total
charge to earnings of $9.7 million.
The Company's net loss is primarily attributable to the factors set forth above,
which, as indicated, the Company believes are non-recurring events.
The table below compares the consolidated statement of operations for the year
ended September 30, 1996 with the unaudited twelve month period ended September
30, 1995.
<TABLE>
<CAPTION>
12 MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1995
SEPTEMBER 30, 1996 (UNAUDITED)
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<S> <C> <C>
Revenues ............................. $ 165,632 $ 166,257
Cost of Revenues ..................... 152,535 145,723
---------- ----------
Gross profit ...................... 13,097 20,534
Selling, general, and administrative
expenses ............................ 14,218 13,527
Amortization of intangibles, goodwill
and deferred financing fees ......... 1,957 1,335
Special Items ........................ 11,811 393
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(Loss) Income from operations ........ (14,889) 5,279
Interest expense ..................... 4,417 3,413
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Income before share in earnings
of unconsolidated affiliate and
income tax .......................... (19,306) 1,866
Share in earnings of unconsolidated
affiliates........................... 375 103
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(Loss) income before taxes and
extraordinary charge ................ (18,931) 1,969
Income tax (benefit) expense ......... (419) 310
---------- ----------
(Loss) income before extraordinary
charge .............................. (18,512) 1,659
Extraordinary charge on
debt refinancing ................... (1,395) --
Net (loss) income .................... (19,907) 1,659
Dividends and accretion on
redeemable preferred Stock .......... 587 552
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Net income applicable to
common stock ........................ $ (20,494) $ 1,107
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Weighted average number of common
and common equivalent shares
outstanding ......................... 5,978,084 5,897,881
(Loss) earnings per common and
common equivalent share before
extraordinary item .................. $ (3.19) $ .19
---------- ----------
(Loss) earnings per common and
common equivalent share ............. $ (3.43) $ .19
---------- ----------
</TABLE>
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EXECUTION COPY
FOURTH AMENDMENT, WAIVER AND CONSENT dated as of January 14, 1997
("Amendment") to LOAN AND SECURITY AGREEMENT dated as of October 18, 1995 (as
amended through the date hereof, the "Loan Agreement") among SMITH TECHNOLOGY
CORPORATION ("Smith Technology"), formerly known as Smith Environmental
Technologies Corporation, BCM ENGINEERS INC., a Pennsylvania corporation, BCM
ENGINEERS INC., an Alabama corporation, RIEDEL ENVIRONMENTAL SERVICES INC.,
each of the Lenders which are or which may become parties to the Loan Agreement
and THE CHASE MANHATTAN BANK, formerly known as Chemical Bank, as Agent for the
Lenders. Terms which are capitalized herein and not otherwise defined shall
have the meanings ascribed to them in the Loan Agreement.
WHEREAS, Smith Technology has requested that the Agent and the Lenders
(i) waive as separate Events of Default the failure of Smith Technology and its
Subsidiaries to comply with certain covenants, including financial covenants,
contained in the Loan Agreement, and (ii) amend the Loan Agreement in various
respects, and the Agent and each of the Lenders have so agreed, upon the terms
and subject to the conditions set forth in this Amendment;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the amendment of certain terms and provisions of the Loan Agreement,
the payment of the fee described in Section 6(g) hereof, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrowers, the Lenders and the Agent hereby agree as follows:
1. Waiver of Compliance Conditions; Consent. Upon the fulfillment
of the conditions set forth in Section 6 hereof, effective as of January 14,
1997, each of the Lenders and the Agent waives as a condition precedent to the
payment of the ESOP Dividend Smith Technology's fulfillment of the Compliance
Conditions and each of the Lenders and the Agent consents to the payment in
cash to the ESOP or other holders of the ESOP Stock of the ESOP Dividend for
the fiscal quarters ending in June, 1996, September, 1996 and December, 1996,
provided that (a) the last of such payments shall have been made no later than
June 30, 1997, (b) the aggregate amount of such payments shall not exceed the
sum of $420,000 and (c) immediately after giving effect to any such payment,
the Borrowers shall have, on a combined basis, Excess Availability of at least
$1.00.
2. Redemption of ESOP Stock; Waiver and Consent. Upon the
fulfillment of the conditions set forth in Section 6 hereof, effective as of
January 14, 1997, each of the Lenders and the Agent consents to the redemption
of up to $860,000, in the aggregate, of ESOP Stock for the period commencing
January 1, 1996 and ending February 28, 1997 provided that (a) not more than
$290,000 of the cost of such redemption is paid for in cash together with
$13,000 of accrued dividends related to such redeemed ESOP Stock, (b) such cash
payment or payments are made not later than June 30, 1997, (c) the debt
securities issued in connection with such redemption, by their terms, provide
for the payment of interest at an annual rate not to exceed three percent (3%)
over the Prime Rate and for amortization of principal consistent with
<PAGE> 2
the provisions of the Stock Repurchase Agreement as in effect on the date
hereof, (d) the original principal amount of such debt securities, in the
aggregate, does not exceed $570,000 and (e) immediately after giving effect to
any such payment, the Borrowers shall have, on a combined basis, Excess
Availability of at least $1.00.
3. Waiver of Financial Covenants and other Violations of Loan
Agreement. Upon the fulfillment of the conditions set forth in Section 6 hereof,
effective as of January 14, 1997, each of the Lenders and the Agent waives (a)
as an Event of Default the failure of the Borrowers to immediately repay the
"Overadvance" upon the creation thereof, as such term is defined in the
Forbearance Agreement dated as of June 7, 1996 (as amended through the date
hereof, the "Forbearance Agreement") among the Borrowers, BCM-Alabama, the
Agent and the Lenders and (b) the financial covenant violations described in
paragraphs (a) through (e) below and the defaults described in paragraph (f)
through (i) below as Events of Default, the waiver set forth in this clause (b)
with respect to such financial covenant violations to be effective for the nine
month period ending on the last day of the fiscal month of September, 1996:
(a) the failure of Smith Technology and its Subsidiaries, on
a consolidated basis, to have a Net Loss of no greater than
$100,000 for each of the fiscal quarters ending in March, 1996,
June, 1996 and September, 1996 as required under paragraph
14(o)(i);
(b) the failure of Smith Technology and its Subsidiaries, on
a consolidated basis, to maintain a Tangible Net Worth of not
less than (i) $5,800,000 at all times during the period from
December 31, 1995 through March 30, 1996, (ii) $6,400,000 at all
times during the period from March 31, 1996 through June 29,
1996, (iii) $8,400,000 at all times during the period from June
30, 1996 through September 29, 1996 and (iv) $10,400,000 at all
times during the period from September 30, 1996 through November
29, 1996, as required under paragraph 14(o)(ii), provided that
the actual Tangible Net Worth of Smith Technology and its
Subsidiaries, on a consolidated basis, is not less than
$3,500,000 at all times during the period from June 30, 1996
through September 29, 1996;
(c) the failure of Smith Technology and its Subsidiaries, on
a consolidated basis, to maintain an interest coverage ratio as
of the end of (i) the two fiscal quarters ending in March, 1996
or not less than 2.00 to 1.00, (ii) the three fiscal quarters
ending in June, 1996 of not less than 2.75 to 1.00 and (iii) the
four fiscal quarters ending in September, 1996 of not less than
3.00 to 1.00, as required under paragraph 14(o)(iii);
(d) the failure of Smith Technology and its Subsidiaries, on
a consolidated basis, to maintain a debt service coverage ratio
as of the end of (i) the two fiscal quarters ending in March,
1996 of not less than .85 to 1.00, (ii) the three fiscal
quarters ending in June, 1996 of not less than
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1.50 to 1.00 and (iii) the four fiscal quarters ending in
September, 1996 of not less than 1.90 to 1.00, as required under
paragraph 14(o)(v);
(e) the failure of Smith Technology and its Subsidiaries, on
a consolidated basis, to have an amount of Funded Indebtedness
of not greater than (i) 14 times FFO minus Capital Expenditures,
as of the two fiscal quarters ending in March, 1996, (ii) 9
times FFO minus Capital Expenditures, as of the three fiscal
quarters ending in June, 1996 and (iii) 7 times FFO minus
Capital Expenditures, as of the four fiscal quarters ending in
September, 1996 as required under paragraph 14(o)(vii);
(f) the failure of Riedel to make certain scheduled payments
(the "EPA Payments") when due in accordance with the Terms of
Payment attached as Exhibit 1 to the Consent Judgment, provided
that a final resolution of the payment or satisfaction of the
EPA Payments (which may include the netting of such EPA Payments
against amounts owing to Riedel by the U.S. Environmental
Protection Agency) shall have occurred no later than June 30,
1997, the terms and conditions of which shall be satisfactory to
the Agent, and provided further that no action be taken and no
proceeding be commenced to execute, levy or foreclose upon, or
enforce, the Consent Judgment;
(g) the failure of Smith Technology to file when due, for
itself or on behalf of any Subsidiary, tax returns in respect of
the following taxes and periods, provided that in each case, and
in all such cases, collectively, such failure has not had, nor
is reasonably likely to have, a Material Adverse Effect; federal
corporate income tax returns covering the period from March 1,
1995 through February 28, 1996 and related state income tax
returns;
(h) the failure of Smith Technology to pay personal property
taxes due Multnomah County, Oregon, assessed on plant and
equipment owned by Smith Technology and located at Portland,
Oregon, provided the aggregate amount of such taxes, together
with interest and penalties, if any, accrued thereon, shall not
exceed $218,000, and provided further that Smith Technology is
diligently contesting the payment of such taxes in good faith
and by appropriate proceedings;
(i) the failure of Smith Technology to pay sales and use
taxes due the State of New Mexico in the amount of $240,262,
provided that an adequate reserve is being maintained by Smith
Technology for the payments of such taxes and provided further
that Smith Technology is actively pursuing a resolution of such
tax liability with the appropriate taxing authorities; and
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(j) the issuance of the Gould Arbitration Award and the
entry of a judgment in the United States District Court for the
Middle District of Pennsylvania in the amount of $1,004,217 in
favor of the Stroud Township Board of Directors against BCM in
connection with the U-Max Litigation (the "Stroud Township
Judgment") provided that (i) the disposition, payment or
satisfaction of such judgment occurs on or before September 30,
1997 in a manner satisfactory to the Agent, (ii) the entry of
the Stroud Township Judgment does not create a lien on any
property of any Borrower or Account Owner and (iii) the holder
of the Stroud Township Judgment does not take any action or
commence any proceeding, the effect of which is to create or
impose such lien, or take any action or commence any proceeding,
to enforce or execute on the Stroud Township Judgment or levy or
foreclose upon any such lien, and provided further that in the
event that the holder of the Stroud Township Judgment takes any
action or commences any proceeding against the primary defendant
in the U-Max Litigation to enforce or execute on the Stroud
Township Judgment, then, in such event, unless any of the events
described in clause (i) hereof shall have then occurred and are
then continuing, BCM shall promptly obtain and post an appeal
bond so as to stay the enforcement of the Stroud Township
Judgment against it.
4. Amendment. Upon the fulfillment of the conditions set forth in
Section 6 hereof, effective as of January 14, 1997 (except with respect to the
amendment of paragraph 14(a) of the Loan Agreement as set forth in Section 4(f)
below, which amendment shall be effective as of September 29, 1996), the Loan
Agreement is hereby amended as follows:
(a) Paragraph 1. Definitions. The definitions of the
terms Net Income, Revolving Line of Credit and Total Credit Facility are
deleted in their entireties, the following definitions are substituted in lieu
thereof, and the terms "Compliance Conditions", "ESOP Dividend", "ESOP Stock",
"Gould Arbitration Award", "Gould Settlement Agreement", "Intangible Assets,
"Joint Venture Arrangement", "Mutual Pharmaceutical Settlement
Agreement", "Net Worth", "PRP Group", "Stock Repurchase Agreement", and "U-Max
Litigation", and the definitions thereof, are added to Paragraph 1 in the
appropriate alphabetical order:
"Compliance Conditions" shall mean the conditions precedent to
the payment of dividends on Junior Securities, as set forth in
sub-clause (I) following the proviso to clause (ii) of paragraph
14(1) of this Agreement.
"ESOP Dividend" means dividends payable in cash to the ESOP, as
holder of the ESOP Stock, or to any other holders of the ESOP
Stock.
"ESOP Stock" means the outstanding shares of non-voting
preferred stock of Smith Technology.
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"Gould Arbitration Award" shall mean the arbitration award in
the amount of $4,500,000 made on or about June 27, 1996 against
Smith Technology in favor of the PRP Group.
"Gould Settlement Agreement" shall mean the Settlement Agreement
which may be entered into after the date hereof between Smith
Technology and the PRP Group, the terms and conditions of which
shall be substantially the same as those contained in the final
draft thereof dated or distributed to the Lenders on or about
December 26, 1996, a copy of which is annexed hereto as Exhibit
E.
"Intangible Assets" shall mean, with respect to any Person as of
any date of determination, the book value of all assets of such
Person classified as intangible under GAAP, including without
limitation, good will, deferred taxes, trademarks, trade names,
patents, copyrights, and licenses.
"Joint Venture Arrangement" shall mean any joint venture
agreement or arrangement, whether or not in writing, between or
among Smith Technology and/or any other Borrower, on the one
hand, and one or more unrelated Persons, on the other hand, the
primary purpose of which relates to the provision of
environmental remediation or consultation, or other
technological services.
"Mutual Pharmaceutical Settlement Agreement" shall mean the
settlement agreement dated September 12, 1996, as amended, among
Mutual Pharmaceutical Company, Inc., Smith Technology and BCM.
"Net Income" (or Net Loss) shall mean, with respect to any
Person and its subsidiaries, on a consolidated basis, for any
period, the aggregate income (or loss) of such Person for such
period which shall be an amount equal to revenues and other
proper items of income for such Person, less the aggregate for
such Person of any and all items that are treated as expenses
under GAAP, less Federal, state and local income taxes, but
excluding any extraordinary gains or losses or any gains or
losses from the sale or disposition of assets other than in the
ordinary course of business, and less dividends charged to
income during such period, all computed and calculated in
accordance with GAAP applied on a consistent basis.
"Net Worth" shall mean, with respect to any Person as of any
date of determination, an amount equal to the sum of (i) the
amount appearing on the balance sheet, as of the most recently
ended financial period, of such Person, under the caption
"common stockholders' equity" or under a similarly worded
caption plus (ii) the outstanding principal balance as of such
date of all debt securities which are Junior Securities and the
value
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as of such date of all equity securities which are Junior
Securities, such value to be based on the amount carried on the
books of the issuer of such equity securities and reflected on
its balance sheet as of the most recently ended financial
period.
"PRP Group" shall mean each of the parties to the Gould
Settlement Agreement other than Smith Technology or any other
Borrower.
"Revolving Line of Credit" shall mean the sum of $27,000,000, as
such amount may be increased or decreased in accordance with the
terms of this Agreement.
"Stock Repurchase Agreement" means the agreement dated September
28, 1994, between Canonie Environmental Services Corp. and the
trustees of the ESOP, relating to the repurchase of certain of
the shares of ESOP Stock.
"Total Credit Facility" shall mean the sum of $33,500,000, as
such amount may be decreased in accordance with the terms of
this Agreement.
"U-Max Litigation" shall mean Civil Action No. 3:93-CV-14
brought in the U.S. District Court for the Middle District of
Pennsylvania, captioned U-Max Engineering and Construction Corp.
v. Stroud Township Board of Supervisors v. BCM Engineers, Inc.
and Woodward -- Clyde Consulting.
(b) Paragraph 3. Term Loans. The second sentence of
Paragraph 3(a) is deleted in its entirety and the following is substituted in
lieu thereof:
"Principal payable on account of each Term Loan shall be payable
in successive monthly installments (i) payable on the last day
of each month, the first of which installments shall be due and
payable on the last day of the month immediately following the
30th day after the Closing Date and (ii) the first thirty-four
(34) of which installments shall be based on an amortization
schedule consisting of forty-eight (48) equal and level
payments, the last installment of which shall be in an amount
equal to the then unpaid principal balance thereof, provided,
however, that the entire unpaid principal balance of each Term
Loan shall be due and payable in full upon the earliest to occur
of (A) October 18, 1998 (the "Term Loan Maturity Date"), (B) the
date upon which the Borrowers shall have elected to terminate
this Agreement, pursuant to paragraph 12 hereof and (C) the date
upon which the Liabilities shall have been accelerated pursuant
to paragraph 17 hereof."
(c) Paragraph 4. Letters of Credit. The first sentence of
paragraph 4(a) is deleted in its entirety and the following is substituted in
lieu thereof:
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"Subject to the terms and conditions of this Agreement and the
Other Agreements, during the Revolving Credit Term, absent the
existence of an Event of Default, from time to time upon a
Borrower's request, the Issuing Bank may issue Letters of Credit
in its sole and absolute discretion, provided that the aggregate
undrawn amount of all such Letters of Credit shall at no time
exceed Three Million Dollars ($3,000,000), and provided further
that no Letter of Credit shall have an expiry date (i) more than
365 days from the date of issuance or (ii) later than the
thirtieth day prior to the expiration of the Revolving Credit
Term."
(d) Paragraph 5. Interest, Fees and Charges. Paragraph 5(b)
is deleted in its entirety and the following is substituted in lieu thereof:
"(b) Determination of Applicable Margin. The Applicable Margin
shall mean (i) at all times prior to May 15, 1996, 1.50% in the
case of ABR Revolving Loans, 3.25% in the case of Eurodollar
Revolving Loans, 1.75% in the case of ABR Term Loans and 3.50%
in the case of Eurodollar Term Loans, (ii) at all times on and
after May 15, 1996 and prior to January 14, 1997, 2.00% in the
case of ABR Revolving Loans, 3.75% in the case of Eurodollar
Revolving Loans, 2.25% in the case of ABR Term Loans and 4.00%
in the case of Eurodollar Term Loans, and (iii) at all times on
and after January 14, 1997, 2.50% in the case of ABR Revolving
Loans, 4.25% in the case of Eurodollar Revolving Loans, 2.75% in
the case of ABR Term Loans and 4.50% in the case of Eurodollar
Term Loans, provided, that the Applicable Margin in the case of
both ABR Revolving Loans and Eurodollar Revolving Loans (but not
ABR Term Loans or Eurodollar Term Loans) otherwise in effect
shall be reduced by one half of one percent (1/2 of 1%) for any
period commencing at the beginning of a fiscal quarter (the
"reduction date") and ending on the sooner of (i) the date an
Event of Default shall have occurred and (ii) the date on which
the Lenders shall have made a Revolving Loan based on any
Eligible Unbilled Accounts, so long as no Event of Default shall
have occurred and then be continuing on the reduction date, if
no portion of the Revolving Loans outstanding at any time during
the fiscal quarter immediately preceding the reduction date
shall have been based on any Eligible Unbilled Accounts."
(e) Paragraph 11. Schedules and Reports. Paragraph 11(a) is
deleted in its entirety and the following is substituted in lieu thereof, and
paragraph 11(b) is amended by (i) deleting the word "and" at the end of clause
(viii) thereof and substituting a semi-colon in lieu thereof and (ii) deleting
the period at the end of clause (ix) thereof and substituting the following in
lieu thereof:
"(a) Each Account Owner shall deliver to the Agent no
less frequently than weekly, on each Monday for the
previous week, in each
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case by facsimile transmission, a borrowing base certificate of
such Account Owner for such week, in form and substance
satisfactory to the Agent, together with a report of such
Account Owner's sales, collections, debit and credit adjustments
for such week, and a report of such Account Owner's Eligible
Unbilled Accounts and Unbilled Accounts for such week. In
addition, each Account Owner shall deliver to the Agent on the
last Business Day of each month a projection, prepared by an
authorized representative of such Account Owner, of the checks,
cash, instruments and other collections such Account Owner
expects to receive during the following month in payment of
Accounts owing to such Account Owner which are not Eligible
Accounts."
"(x) a progress report in reasonable detail of work
performed and to be performed under outstanding contracts and
other agreements to which any Borrower or Account Owner is a
party, in respect of environmental remediation or consultation,
or other technological services, provided in the usual course of
its business by such Borrower or Account Owner, together with a
schedule setting forth in reasonable detail such Borrower's or
Account Owner's related accruals and related cash expenditures
and receipts; (xi) a status report, together with all pertinent
documentation, in respect of (A) the Gould Arbitration Award,
including without limitation the docketing of or levy of
execution upon any judgment in connection therewith, and, if
applicable, the Gould Settlement Agreement, (B) the judgment
entered on October 18, 1995, as amended, in favor of the
plaintiffs in the U-Max Litigation, the appeal by BCM of such
judgment and any levy of execution upon such judgment and (C)
the Mutual Pharmaceutical Settlement Agreement; (xii) a status
report regarding any proposed amendment, modification or waiver
of any material term or provision of any of the Junior
Securities; and (xiii) all documentation relating to any
proposed or existing Joint Venture Arrangement, together with a
description, in reasonable detail, of all projects in respect of
which any such Joint Venture Arrangement is or will be engaged."
(f) Paragraph 14. Covenants. Paragraph 14(a) is amended by
deleting the date "September 30, 1996" and by substituting therefor the date
"July 1, 1997".
(g) Paragraph 14. Covenants. Paragraph 14(b)(i) is deleted
in its entirety and the following is substituted in lieu thereof:
"(i) no later than thirty (30) days after each calendar
month (except with respect to any such calendar month which
coincides with the last month of any fiscal quarter, as to which
such financial statements shall be delivered no later than
forty-five (45) days after such calendar month) copies of
internally prepared financial statements of Smith Technology
and
-8-
<PAGE> 9
its Subsidiaries on a consolidated and consolidating, monthly
and year-to-date, basis, including, without limitation, (x)
balance sheets and statements of income of Smith Technology and
its Subsidiaries (which shall disclose in reasonable detail the
effect on the income statement and on the balance sheet of (A)
the sale, transfer or other disposition, if any, of any plant,
property or equipment, and (B) any checks, cash, instruments and
other collections, if any, received in payment of Accounts which
are not Eligible Accounts) and (y) statements of retained
earnings of Smith Environmental and its Subsidiaries, certified
by the chief financial officer of Smith Environmental and
accompanied by a No Default Certificate and a Leverage Ratio
Certificate, each signed by the Borrowers' Chief Financial
Officer (which Certificates, for purposes hereof, may be
consolidated into one certificate);"
(h) Paragraph 14. Covenants. The parenthetical proviso
contained in Paragraph 14(k) is deleted in its entirety and the following is
substituted in lieu thereof:
"(provided, however, that Borrower shall (1) deliver to
the Agent for the ratable benefit of the Lenders, pursuant to an
executed stock pledge and security agreement, the form and
substance of which shall be satisfactory to the Agent, the stock
certificates evidencing all of the issued and outstanding shares
of the capital stock of such newly created Subsidiary or
Affiliate, together with stock transfer powers relating thereto,
executed in bank and (2) cause each such newly created
Subsidiary or Affiliate, upon the organization thereof, to
execute and deliver to the Agent, for the ratable benefit of the
Lenders (a) financing statements on form UCC-1, suitable for
recordation in all requisite jurisdictions and (b) a secured
guaranty of the Liabilities of each Borrower pursuant to an
instrument of secured guaranty in form and substance
satisfactory to the Agent)"
(i) Paragraph 14. Covenants. Paragraph 14(n) is deleted in
its entirety and the following is substituted in lieu thereof:
"(n) Borrower shall not change its fiscal year from a
fiscal year ending on September 30, nor amend its organizational
documents, or without the Lenders' prior written consent,
materially amend or modify any material term or condition of the
CVC Notes, the CVC Bridge Notes, the CVC Note Purchase
Agreement, the Gould Settlement Agreement, the Mutual
Pharmaceutical Settlement Agreement or the Consent Judgment."
(j) Paragraph 14. Covenants. Clauses (i) through (vii) of
paragraph 14(o) are deleted in their entireties, the following are substituted
in lieu thereof, and clause (viii) thereof is renumbered as clause (x) thereof:
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<PAGE> 10
(o) Borrowers shall maintain and keep in full force and
effect each of the financial covenants set forth below. The
calculation and determination of each such financial covenant,
and all accounting terms contained therein, shall be so
calculated and construed in accordance with GAAP, applied on a
basis consistent with the financial statements of the Borrowers
delivered on or before the Closing Date;
(i) Consolidated Net Income or Loss. Smith Technology
and its Subsidiaries, on a consolidated basis, shall not have,
as of the end of (A)(1) the fiscal quarter ending in December
1996, a Net Loss of greater than $355,000, (2) the fiscal
quarter ending in March, 1997, a Net Loss of greater than
$670,000, and (3) each fiscal quarter thereafter, a Net Loss of
greater than $100,000 and (B)(1) the fiscal month of November,
1996, a Net Loss of greater than $70,000, (2) the fiscal month
of December, 1996, a Net Loss of greater than $385,000, (3) the
fiscal month of January, 1997, a Net Loss of greater than
$335,000, (4) the fiscal month of February, 1997, a Net Loss of
greater than $435,000 and (5) each fiscal month thereafter, a
Net Loss of greater than $35,000, provided, however, that solely
for purposes of determining compliance with this covenant only,
the calculation of the Net Loss of Smith Technology and its
Subsidiaries, on a consolidated basis, as of the end of any
period of determination, shall exclude the aggregate amount of
ESOP Dividends paid in accordance with Section 14(1) during such
period;
(ii) Consolidated Net Worth. Smith Technology and its
Subsidiaries, on a consolidated basis, shall maintain at all
times during each period set forth below, a Net Worth of not
less than the amount set forth below opposite each such period;
<TABLE>
<CAPTION>
Minimum Consolidated
Measuring Period Net Worth
---------------- --------------------
<S> <C>
(A) from September 30, 1996 $20,500,000
through December 30, 1996
(B) from December 31, 1996 $19,500,000
through March 30, 1997
(C) from March 31, 1997 $19,500,000
through June 29, 1997
</TABLE>
-10-
<PAGE> 11
<TABLE>
<S> <C>
(D) from June 30, 1997 $19,665,000
through September
29, 1997
(E) from September $20,225,000
30, 1997 through
December 30, 1997
(F) from December $20,900,000
31, 1997 through
March 30, 1998
(G) from March 31, $20,655,000
1998 through June
29, 1998
(H) from June 30, 1998 $21,925,000
through September
29, 1998
(I) from September $22,625,000
30, 1998 and at all
times thereafter
</TABLE>
(iii) Consolidated Interest Coverage Ratio. Smith Technology and its
Subsidiaries, on a consolidated basis, shall maintain as of the end of each
fiscal quarter set forth below, a ratio of (A) EBITDA for such fiscal quarter
less Capital Expenditures made during such fiscal quarter to (B) Cash Interest
Expense payable during such fiscal quarter of not less than the ratio set forth
below opposite each such fiscal quarter, provided, however, that with respect
to the fiscal quarters ending in June and December, 1997 and June 1998, the
calculation of Cash Interest Expense payable during any such quarter shall
exclude the $150,000 installment payable during such quarter pursuant to the
Gould Settlement Agreement:
<TABLE>
<CAPTION>
Minimum Consolidated
Measuring Period Interest Coverage Ratio
---------------- -----------------------
<S> <C>
(A) fiscal quarter ending 2.50 to 1.00
in December, 1996
(B) fiscal quarter ending 2.10 to 1.00
in March, 1997
</TABLE>
-11-
<PAGE> 12
<TABLE>
<S> <C>
(C) fiscal quarter ending 3.20 to 1.00
in June, 1997
(D) fiscal quarter ending 3.60 to 1.00
in September, 1997
(E) fiscal quarter ending 2.80 to 1.00
in December, 1997
(F) fiscal quarter ending 2.90 to 1.00
in March, 1998
(G) fiscal quarter ending 3.70 to 1.00
in June, 1998
(H) fiscal quarter ending 4.00 to 1.00
in September, 1998
</TABLE>
(iv) Consolidated Current Ratio. Smith Technology
and its Subsidiaries, on a consolidated basis, shall maintain as
of the end of each fiscal quarter, commencing with the fiscal
quarter ending in December, 1996, a ratio of (A) consolidated
current assets to (B) consolidated current liabilities of not
less than 1.10 to 1.00, provided, however, that solely for
purposes of determining the Borrowers' compliance with this
covenant, (x) consolidated current assets shall exclude any cash
or its equivalent then on hand in excess of the aggregate amount
of $1,800,000 and (y) consolidated current liabilities shall not
include the outstanding principal balance of the Revolving
Loans;
(v) Consolidated Debt Service Coverage Ratio.
Smith Technology and its Subsidiaries, on a consolidated basis,
shall maintain as of the end of each fiscal quarter set forth
below, a ratio of (A) FFO for such fiscal quarter less Capital
Expenditures made during such fiscal quarter to (B) an amount
equal to the product of .25 multiplied by the sum of (i) current
principal maturities of long term debt due and owing during the
immediately following period of four fiscal quarters and (ii)
the portion of Capitalized Lease Obligations due and owing
during such period which is allocable to the repayment of
principal, of not less than the ratio set forth below opposite
each such period:
-12-
<PAGE> 13
<TABLE>
<CAPTION>
Minimum Consolidated
Measuring Period Debt Service Coverage Ratio
---------------- ---------------------------
<S> <C>
(A) fiscal quarter ending
in December, 1996 .95 to 1.00
(B) fiscal quarter ending .40 to 1.00
in March, 1997
(C) fiscal quarter ending 1.70 to 1.00
in June, 1997
(D) fiscal quarter ending 2.30 to 1.00
in September, 1997
(E) fiscal quarter ending 1.20 to 1.00
in December, 1997
(F) fiscal quarter ending 1.20 to 1.00
in March, 1998
(G) fiscal quarter ending 2.20 to 1.00
in June, 1998
(H) fiscal quarter ending 2.50 to 1.00
in September, 1998
</TABLE>
(vi) Consolidated Capital Expenditures. Smith Technology and
its Subsidiaries, on a consolidated basis, shall not make Capital
Expenditures of an aggregate amount during (A) the fiscal quarter ending
in March, 1997 in excess of $525,000, (B) each fiscal quarter thereafter
in excess of $450,000 and (C) any fiscal year in excess of $1,700,000;
(vii) Maximum Funded Indebtedness. Smith Environmental and its
Subsidiaries, on a consolidated basis, shall not have an aggregate
amount of Funded Indebtedness, as of any date of determination, in
excess of $50,000,000, provided, however, that for purposes of
compliance with this covenant only, the calculation of Funded
Indebtedness shall (x) exclude all Indebtedness of the kind described in
clause (i) of the definition of the term Indebtedness, (y) exclude
Indebtedness owing as of such date of determination to the PRP Group
under the Gould Settlement Agreement, up to the respective amounts set
forth on Schedule 14(o)(vii) and (z) include all Indebtedness which
matures within one year from the date of determination, so long as such
Indebtedness matures no more than one year from the date of its
incurrence;
-13-
<PAGE> 14
(viii) Minimum FFO. Smith Technology and its
Subsidiaries, on a consolidated basis, shall maintain a minimum
FFO as of the end of each fiscal quarter set forth below of not
less than the amount set forth below opposite each such fiscal
quarter:
<TABLE>
<CAPTION>
Measuring Period Minimum FFO
--------------------------------- --------------
<S> <C>
(A) fiscal quarter ending in $775,000
December, 1996
(B) fiscal quarter ending in March, $490,000
1997
(C) fiscal quarter ending in June, $1,390,000
1997
(D) fiscal quarter ending in $1,580,000
September, 1997
(E) fiscal quarter ending in $965,000
December, 1997
(F) fiscal quarter ending in March, $965,000
1998
(G) fiscal quarter ending in June, $1,535,000
1998
(H) fiscal quarter ending in $1,725,000
September, 1998
</TABLE>
(ix) Maximum Consolidated Intangible Assets and
Certain Fees. Smith Technology and its Subsidiaries, on a
consolidated basis, shall maintain at all times during each
period set forth below, an aggregate amount of (A) Intangible
Assets plus (B) the aggregate amount of loan transaction fees
payable to any of the Lenders on the Closing Date of not more
than the amount set forth below opposite each such period:
<TABLE>
<CAPTION>
Maximum Consolidated
Intangible Assets and
Measuring Period Loan Transaction Fees
---------------- ---------------------
<S> <C>
(A) from September 30, $31,000,000
1996 through
December 30, 1996
</TABLE>
-14-
<PAGE> 15
<TABLE>
<S> <C>
(B) from December 31, $31,250,000
1996 through
March 30, 1997
(C) from March 31, $30,750,000
1997 through
June 29, 1997
(D) from June 30, 1997 $30,250,000
through September
29, 1997
(E) from September 30, $29,750,000
1997 through
December 30, 1997
(F) from December 31, $29,250,000
1997 through
March 30, 1998
(G) from March 31, $28,750,000
1998 through
June 29, 1998
(H) from June 30, 1998 $28,250,000
through September
29, 1998
(I) from September 30, $27,750,000
1998 and at all
times thereafter
</TABLE>
(k) Paragraph 16. Default. Paragraph 16 is amended by (i) deleting
the word "or" at the end of clause (j) thereof, (ii) deleting the period at the
end of clause (k) thereof and substituting a semi-colon, followed by the word
"or", in lieu thereof, and (iii) adding the following new clause (1) as follows:
"(1) Smith Technology, any other Borrower or Account Owner, to the
extent it is a party to the Gould Settlement Agreement or the Mutual
Pharmaceutical Settlement Agreement, shall be in default thereunder or the
holder of the judgment in favor of the Stroud Township Board of Directors
against BCM in connection with the U-Max Litigation and shall take any action
or commence any proceeding, the effect of which is to (i) create or impose a
lien on any property of any Borrower or Account Owner or (ii) enforce or
execute on such judgment or levy or foreclose upon such lien."
-15-
<PAGE> 16
(l) Annex I to the Loan Agreement is deleted in its entirety and
Annex I hereto is substituted in lieu thereof.
(m) Schedules 1(a), 13(q), 13(s) and 13(t) to the Loan Agreement
are deleted in their entireties and the Schedules annexed hereto are
respectively substituted in lieu thereof, and Schedules 13(e), 13(f), 13(g) and
14(o)(vii) to the Loan Agreement are added to the Loan Agreement in the forms
of the Schedules annexed hereto respectively.
(n) A new Exhibit E to the Loan Agreement is hereby added in the
form of Exhibit E to this Amendment.
5. Representations and Warranties. In order to induce the Lenders
and the Agent to enter into this Amendment, Smith Technology and each other
Account Owner makes the following representations and warranties in favor of
each of the Lenders and the Agent (which representations and warranties shall
survive the execution and delivery of this Amendment) as of the date hereof:
(a) Smith Technology and each other Account Owner has the
corporate power, authority and legal right to execute, deliver and perform this
Amendment, and the instruments, agreements, documents and transactions
contemplated hereby, and has taken all actions necessary to authorize the
execution, delivery and performance of this Amendment, and the instruments,
agreements, documents and transactions contemplated hereby;
(b) No consent of any Person (including, without
limitation, shareholders or creditors of Smith Technology, as the case may be)
other than the Lenders, and no consent, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority, is required in connection with the execution,
delivery, performance, validity or enforceability of this Amendment, and the
instruments, agreements, documents and transactions contemplated hereby;
(c) This Amendment has been duly executed and delivered on
behalf of Smith Technology and each other Account Owner by its duly authorized
officer, and constitutes the legal, valid and binding obligation of Smith
Technology and each such Account Owner, enforceable in accordance with its
terms;
(d) Except as set forth in Section 3(f), and except for the
failure of the Borrowers to pay their trade accounts payable and subcontractors
in accordance with the payment terms thereof, neither Smith Technology nor any
other Borrower is in default under any indenture, mortgage, deed of trust,
agreement or other instrument to which it is a party or by which it may be
bound. Neither the execution and delivery of this Amendment, nor the
consummation of the transactions herein contemplated, nor compliance with the
provisions hereof or thereof will (i) violate any law or regulation, (ii)
result in or cause a violation by Smith Technology or by any other Account
Owner of any order or decree of any court or government instrumentality, (iii)
conflict with, or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, agreement or other instrument to which
Smith
-16-
<PAGE> 17
Technology or any other Account Owner is a party or by which it may be bound,
(iv) result in the creation or imposition of any lien, charge, or encumbrance
upon any of the property of Smith Technology or of any other Account Owner,
except in favor of the Agent for the benefit of the Lenders, to secure the
Liabilities, or (v) violate any provision of the Articles or Certificate of
Incorporation, By-Laws or any capital stock provisions of Smith Technology or
of any other Account Owner;
(e) No Default or Event of Default has occurred and is
continuing, except for such Defaults and Events of Default as have been waived
pursuant to this Amendment;
(f) Since the date of the Agent's receipt of Smith
Technology's consolidated and consolidating financial statements for the period
ended November 30, 1996, no change or event has occurred which has had or is
reasonably likely to have a Material Adverse Effect;
(g) On September 23, 1996 Smith Technology filed with the
Secretary of State of Delaware a Certificate of Ownership and Merger, pursuant
to which Smith Technology changed its corporate name from "Smith Environmental
Technologies Corporation" to "Smith Technology Corporation". Such change of name
became effective on September 23, 1996. Such change of name is only a change in
the corporate name of Smith Technology, and not a change in Smith Technology's
corporate structure or business; and
(h) The entry of the Stroud Township Judgment does not
create a lien on any property of any Borrower or Account Owner, and the holder
of the Stroud Township Judgment is not as of the date of this Amendment a "lien
creditor" of any Borrower, or Account Owner, as such term is defined under
Section 9-301 of the Uniform Commercial Code as in effect in the Commonwealth of
Pennsylvania.
(i) The recitals contained in this Amendment are true and
correct in all respects; and
(j) The Agent has a perfected lien on and security interest
in all of the Collateral, wherever located, subject to no other liens except
for Permitted Liens.
6. Conditions Precedent. This Amendment shall not become
effective until all of the following conditions, the fulfillment of each of
which is a condition precedent to the effectiveness of this Amendment, shall
have occurred or shall have been waived in writing by the Agent and the Lenders.
(a) The Agent and each of the Lenders shall have received a
fully executed counterpart or original of this Amendment, together with all
schedules and exhibits hereto, appropriately completed to the extent required,
and those certain letters from the Agent and the Lenders to the Borrowers in
respect of the application of proceeds of certain assets, and the preliminary
results of a field examination of the Borrowers' books and records, each such
letter to be appropriately acknowledged by the Borrowers.
-17-
<PAGE> 18
(b) Upon the effectiveness of this Amendment, all representations
and warranties set forth in the Loan Agreement (except for such inducing
representations and warranties that were only required to be true and correct
as of a prior date) shall be true and correct in all material respects on and
as of the effective date hereof, and no Default or Event of Default shall have
occurred and be continuing.
(c) No event or development shall have occurred since the date of
delivery to the Lenders of the Borrowers' most recent financial statements
which event or development has had or is reasonably likely to have a Material
Adverse Effect.
(d) The Agent shall have received a certificate from Smith
Technology, executed by its Chief Executive Officer or other authorized
officer, as to the accuracy and completeness of the representations and
warranties contained in Section 5 hereof, together with a certified copy of the
Certificate of Ownership and Merger referred to in Section 5(g).
(e) All corporate and legal proceedings and all documents and
instruments executed or delivered in connection with this Amendment shall be
satisfactory in form and substance to the Lenders and their counsel, and the
Lenders and their counsel shall have received all information and copies of all
documents which the Lenders and their counsel may have requested in connection
herewith and the matters contemplated hereunder, such documents, when requested
by them, to be certified by appropriate corporate authorities.
(f) The Lenders shall have received such further agreements,
consents, instruments and documents as may be necessary or proper in the
reasonable opinion of the Lenders, the Agent and their counsel to carry out the
provisions and purposes of this Amendment.
(g) The Agent shall have received from Smith Technology, for the
pro rata benefit of the Lenders a non-refundable fee, in cash, in the amount of
$100,000. Smith Technology hereby authorizes the Agent to debit Smith
Technology's loan account by the amount of $100,000 in payment of such fee.
(h) The Agent shall have received from Smith Technology a schedule,
in reasonable detail, of each term, provision and condition of the Loan
Agreement or any material Other Agreement with which any Borrower or Account
Owner is not in compliance as of the effective date of this Amendment.
(i) The Borrowers shall have entered into an agreement with CVC,
the terms and conditions of which shall be satisfactory to the Agent, the
Lenders and their counsel, which agreement shall provide for, among other
things, the deferral of payment of, and the addition to the unpaid principal
balance of the CVC Notes of, all installments of interest on the CVC Notes
scheduled to have been paid on and after May 21, 1995 through and including
May 21, 1998.
-18-
<PAGE> 19
(j) The Agent shall have received from Smith Technology a
schedule setting forth in reasonable detail (i) a projection of dividend
payments to be made on the ESOP Stock, including the amount and timing of each
such payment and (ii) the number of shares of ESOP Stock to be redeemed, the
dates on which such shares shall be redeemed, the value of such shares and the
terms of payment of such redemption(s), in each case during the period from the
date of this Amendment through the end of the Revolving Credit Term.
(k) The Agent shall have received a duly executed
counterpart of a certain lien waiver agreement between the Agent and Bankers
Leasing Association, Inc., or its successor or assignee, if applicable
(collectively the "Equipment Lessor"), the terms and conditions of which lien
waiver agreement shall be satisfactory to the Agent.
(l) The Agent and the Lenders shall have received updated
disclosure schedules to the Loan Agreement, which schedules shall set forth in
reasonable detail all of the pertinent information requested thereon and which
information shall be satisfactory in both form and substance to the Agent and
Lenders.
(m) The Lenders and their counsel shall have received and
reviewed to their satisfaction the Mutual Pharmaceutical Settlement Agreement
and any other documents relating to the Mutual Pharmaceutical Settlement
Agreement.
(n) The Lenders and their counsel shall have received and
reviewed to their satisfaction all documents relating to the U-Max Litigation.
(o) The Agent shall have received from Smith Technology (i)
a schedule describing in reasonable detail any existing contract between Smith
Technology or any of its Subsidiaries and any federal governmental agency which
contract relates to the provision of environmental remediation or consultation
or other technological services (each a "Federal Governmental Contract"), (ii)
a schedule reconciling each existing Federal Governmental Contract to the
requisite documentation pursuant to which the right to payment on Accounts
arising from or relating to each such Federal Governmental Contract was
previously assigned to the Agent in full compliance with the Assignment of
Claims Act of 1940, as amended, and (iii) all documentation referred to in
clause (ii) hereof, to the extent that such documentation referred to in clause
(ii) was not previously executed and delivered in appropriate form to the Agent.
(p) The Lenders shall have received and reviewed to their
satisfaction (i) the certified financial statements of Smith Technology and its
Subsidiaries, on a consolidated basis, for the fiscal year ending September 30,
1996 and (ii) revised consolidated financial projections of Smith Technology
and its Subsidiaries, such projections to be prepared on a month-by-month basis
for the period commencing on the effective date of this Amendment and ending on
the last day of the Revolving Credit Term, such projections to include a
schedule of all checks, cash, instruments and other collections anticipated to
be received by any Borrower or Account Debtor, other than in the ordinary
course of payment on Accounts.
-19-
<PAGE> 20
(q) The Agent shall have received a schedule containing a
description, by item and type and where appropriate, by serial number, of all
machinery and equipment to be sold, transferred or otherwise disposed of by
Smith Technology pursuant to the Gould Settlement Agreement (the "Gould
Equipment").
(r) The Agent and its counsel shall have received and
reviewed to their satisfaction copies of all material documents relating to each
Joint Venture Arrangement in effect as of the date of this Amendment, and the
Agent shall have received a schedule setting forth in reasonable detail a
description of each Joint Venture Arrangement which any Borrower or Account
Owner currently proposes to enter into after the date of this Amendment.
(s) The Agent shall have received and reviewed to its
satisfaction evidence of the Borrowers' compliance with all of the terms of the
first sentence of paragraph 14(i) and the terms of paragraph 14(e) of the Loan
Agreement.
7. General Provisions
(a) Nothing contained in this Amendment shall be deemed to
be a waiver of any Defaults or Events of Default other than those set forth in
Sections 1, 2 and 3 hereof, whether or not the Agent or any of the Lenders
shall have any knowledge thereof, nor shall anything contained in this
Amendment be deemed to be a waiver of any future Default or Event of Default
whatsoever, it being understood that the waivers contained herein shall only
extend to the specific Defaults and Events of Default identified herein and
then only throughout the periods specifically stated herein.
(b) Each of the Borrowers hereby agrees, at its expense, as
soon as practicable after the date of this Amendment, but in no event later
than February 7, 1997, to engage a business consultant, the identity of such
consultant, and the terms and conditions of the engagement of such consultant
(including without limitation the length and scope of such engagement), to be
acceptable to the Agent and the Lenders. Such consultant shall commence such
engagement no later than February 14, 1997. The Borrowers agree that their
failure to comply with the covenants contained in this subparagraphs (b) shall
constitute an Event of Default.
(c) Except as herein expressly amended, the Loan Agreement
and all other agreements, documents, instruments and certificates executed in
connection therewith, with the exception of the Forbearance Agreement, are
ratified and confirmed in all respects and shall remain in full force and
effect in accordance with their respective terms. The Forbearance Agreement is
hereby terminated by mutual consent and is of no further force or effect.
(d) In the event that the Borrowers shall have entered into
the Gould Settlement Agreement after the date hereof, if the terms and
conditions thereof are substantially the same as those contained in the final
draft thereof distributed to and reviewed by the Agent's counsel on December
26, 1996, the Agent and the Lenders shall have no objection to the execution
thereof by the Borrowers. Upon execution by all of the parties to the Gould
-20-
<PAGE> 21
Settlement Agreement, Smith Technology shall deliver a true and correct copy
thereof to the Agent. At any time following the execution of the Gould
Settlement Agreement by all of the parties thereto, upon the request of Smith
Technology, the Agent shall execute and deliver to Smith Technology or to its
designee, financing statements on form UCC-3, pursuant to which the Agent shall
release its lien on and security interest in the Gould Equipment, it being
understood and agreed to by the Lenders that Smith Technology may sell, transfer
or otherwise dispose of the Gould Equipment and the proceeds thereof may be
delivered to the PRP Group free and clear of any lien on or security interest
therein in favor of the Agent, notwithstanding anything to the contrary
contained in the Loan Agreement. If any Borrower shall grant to any member of
the PRP Group, or any agent or trustee acting on its behalf, any lien on or
security interest in any property or assets of such Borrower, such grant of lien
or security interest shall constitute an Event of Default unless, concurrently
therewith, the PRP Group shall have entered into an intercreditor agreement with
the Agent and the Lenders on terms and conditions acceptable to them.
(e) The Borrowers agree that, within twenty (20) Business Days of
the day hereof, they shall either (i) deliver to the Agent a stock pledge and
security agreement, stock certificates, stock powers, secured guaranty and
financing statements, each in the form referred to in the parenthetical proviso
to paragraph 14(k) of the Loan Agreement, all with respect to Smith
International Corporation, a Cayman Islands corporation, a wholly-owned
Subsidiary of Smith Technology or (ii) cause the dissolution of such
Subsidiary, satisfactory evidence of which shall be delivered by them to the
Agent within such time period.
(f) The Borrowers agree that, within twenty (20) Business Days of
the date hereof, they shall have obtained from the Equipment Lessor and shall
have delivered to the Agent the requisite financing statements on form UCC-3,
suitable for recordation in all appropriate jurisdictions, executed by the
Equipment Lessor, pursuant to which the Equipment Lessor shall have released
its security interest in (i) all Accounts and (ii) all other property of Smith
Technology which is not directly related to the equipment leased by the
Equipment Lessor to Smith Technology.
(g) The Borrowers agree that within twenty (20) Business Days of
the date hereof, they shall deliver to the Agent (i) the back-up reports to the
financial projections prepared on a break even basis and previously delivered
to the Agent and (ii) an updated schedule of locations of all fixed assets of
each Borrower.
(h) All references in the Other Agreements to the Loan Agreement
shall mean the Loan Agreement as waived and amended as of the effective date
hereof, and as waived and amended hereby and as hereafter amended, supplemented
or modified from time to time. From and after the date hereof, all references
in the Loan Agreement to "this Agreement," "hereof," "herein," or similar terms,
shall mean and refer to the Loan Agreement as waived and amended by this
Amendment.
-21-
<PAGE> 22
(i) This Amendment may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of which
shall be an original and all which shall constitute one and the same agreement.
(j) This Amendment shall be governed and controlled by the
laws of the State of New York without reference to its choice of law principles.
IN WITNESS WHEREOF, each of the Borrowers, BCM-Alabama, the Lenders and
the Agent have caused this Amendment to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above written.
SMITH TECHNOLOGY CORPORATION
formerly known as Smith RIEDEL ENVIRONMENTAL SERVICES
Environmental Technologies Corporation
By: [SIG]
---------------------------
By: [SIG] (Title)
----------------------------------
(Title)
THE CHASE MANHATTAN BANK,
BCM ENGINEERS INC. formerly known as Chemical
a Pennsylvania corporation Bank, as a Lender and Agent
By: [SIG] By: /s/ E. J. HESS
---------------------------------- ---------------------------
(Title) (Title) Vice President
BCM ENGINEERS INC. BTM CAPITAL CORPORATION,
an Alabama corporation formerly known as BOT Financial
Corporation
By: [SIG] By: [SIG]
---------------------------------- ---------------------------
(Title) (Title) Vice President
-22-
<PAGE> 23
ANNEX I
<TABLE>
<CAPTION>
Revolving
Loan Term Loan
Name and Address of Lenders Commitment Commitment Commitment
- --------------------------- ----------- ----------- ----------
<S> <C> <C> <C>
BTM Capital Corporation, $16,750,000 $13,500,000 $3,250,000
formerly known as BOT
Financial Corporation
2001 Ross Avenue
Suite 3160
Dallas, Texas
The Chase Manhattan Bank, $16,750,000 $13,500,000 $3,250,000
formerly known as
Chemical Bank
633 Third Avenue
New York, New York 10017
</TABLE>
<PAGE> 1
EXHIBIT 10.34
AMENDMENT NO. 3 TO
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
Amendment No. 3, dated as of January ___, 1997 ("Amendment"), by and
between SMITH TECHNOLOGY CORPORATION (formerly Smith Environmental Technologies
Corporation, and formerly Canonie Environmental Services Corp.), a Delaware
corporation (the "Company"), and 399 VENTURE PARTNERS, INC., a Delaware
corporation ("399"), to the Amended and Restated Note Purchase Agreement dated
November 15, 1995 between the foregoing parties (the "Note Agreement").
Capitalized terms used but not otherwise defined herein shall have the meanings
given to them in the Note Agreement.
WITNESSETH:
WHEREAS, the parties hereto desire to amend the Note Agreement as provided
for herein in connection with the modification of interest payments on the notes
issued under the Note Agreement and Amendment No. 2 to the Note Agreement as
evidenced by amended and restated notes to be issued in placement thereof
pursuant to this Amendment (the "Amended and Restated Notes"), and to make
certain other amendments to the Note Agreement;
NOW, THEREFORE, for and in consideration of the above premises and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby expressly acknowledged, the Company and 399 hereby agree as follows:
Section 1. Amendments. The Note Agreement is hereby amended as follows:
(a) Exhibits A and B to the Note Agreement are hereby amended as of the
date hereof by:
(i) Replacing all references therein to Canonie Environmental
Services Corp. or Smith Environmental Technologies Corporation with Smith
Technology Corporation to reflect the name changes by the Company; and
<PAGE> 2
(ii) Delete the reference contained in Section 1(b)(ii) to "May
21, 1997", and replace same with "May 2, 1998".
(b) Add to Section 4.1 of the Note Agreement the following:
"(g) Settlement Obligations."
Delete the word "and" from paragraph (e) of Section 4.1 of the Note Agreement,
and amend and restate paragraph (f) as follows: "(f) Indebtedness under the EPA
Promissory Note; and".
(c) Add to Section 12.1 in alphabetical order the following
defined term:
""Mutual Pharmaceutical obligations" means all obligations of
the Company and its subsidiaries under that certain settlement
Agreement made as of January 14, 1996 by and among the Company,
BCM, Mutual Pharmaceuticals Company, Inc., among others,
relative to the Company's and BCM's obligations relating to
certain environmental investigation work at a site known as the
Action Arms."
""PRP Obligations" means all obligations of the Company and its
Subsidiaries under that certain settlement entered into as of
December __, 1996 by and among the Company and the parties
identified therein as the "PRP Group" relative to the Company's
obligations relating to certain environmental remediation work
at the site commonly referred to as the "Gould Site" in
Portland, Oregon."
""Settlement Obligations" means the Mutual Pharmaceutical
Obligations and the PRP Obligations."
(d) Amend Section 12.1 of the Note Agreement by restating subparagraph
(v) of the defined term "Permitted Liens" as follows:
"(v) Liens in favor of Indebtedness permitted hereunder (other
than the PRP Obligations), including, without duplication,
Senior Bank Indebtedness; Liens securing the PRP Obligations up
to but not exceeding $2,500,000
2
<PAGE> 3
and Liens securing the Mutual Pharmaceutical Obligations;"
Section 2. Conditions to Effectiveness of Amendment. This Amendment
shall become effective on the date (the "Effective Date") on which the
following conditions precedent shall have been satisfied:
2.1 Delivered Documents. On the Effective Date, the Registered Holders
shall have received the following documents, each of which shall be
satisfactory to such holders in form and substance:
(a) This Amendment, executed and delivered by a duly authorized
officer of the Company.
(b) For the account of each Registered Holder replacement Notes
amended as provided for in Section 1 hereof having respective principal
amounts equal to those on each Note outstanding immediately prior to the
effectiveness of this Amendment.
(c) A copy, which shall have been certified by the Secretary or
Assistant Secretary of the Company to be true, complete and correct, of
the resolutions of the Board of Directors of the Company approving this
Amendment and the issuance of the Amended and Restated Notes.
(d) A certificate of the Secretary or an Assistant Secretary of
the Company which shall certify the names of the officers of the Company
authorized to sign this Amendment, the Amended and Restated Notes and the
other documents, instruments or certificates to be delivered pursuant to
this Amendment by the Company or any of its officers, together with the
true signatures of such officers.
(e) The Company shall have taken all corporate and other action,
made any governmental filings and obtained any consents or waivers
necessary to carry out the transactions contemplated hereby and each
shall be in full force and effect on the Effective Date.
2.2 No Default. On the Effective Date the Company shall be in
compliance with all of the terms and provisions set forth in the Note Agreement
on its part to be observed or performed and the representations and warranties
made and restated by the Company pursuant to Section 3 of this Amendment shall
be true and correct on and as of such date with the same force in effect as if
made on and as of such date.
3
<PAGE> 4
2.3 Waiver. Any party hereto may, at its sole option, waive any one
or more of the above stated conditions to such party's obligation to close at
or prior to the Effective Date.
Section 3. Representations and Warranties. The Company hereby confirms
and reaffirms the representations and warranties contained in Section 2.1 of
the Note Agreement; provided, however, that the reference to this Agreement and
the Notes shall be deemed to include the Note Agreement and the Notes as
amended and/or restated hereby. 399 hereby confirms and warrants that it
constitutes the Majority of the Holders of Senior Notes and the Majority of the
Holders of Senior Subordinated Notes, as those terms are defined and used in
the Note Agreement, and that it has the authority to enter into, perform and
effect this Amendment on behalf of itself and the holders of the Notes.
Section 4. Limited Effect. Except as expressly amended and modified
by this Amendment, the Note Agreement shall continue to be and shall remain, in
full force and effect in accordance with its terms.
Section 5. Counterparts. This Amendment may be executed by one or
both of the parties hereto on any number of separate counterparts, each of
which shall be an original and all of which taken together shall constitute one
and the same instrument.
Section 6. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the internal laws of the State of New York
without regard to principles of conflicts of law.
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the day and year
first above written.
SMITH TECHNOLOGY CORPORATION
(formerly Smith Environmental
Technologies Corporation and
formerly Canonie Environmental
Services Corp.)
By: E. Brian Smith
--------------------------
E. Brian Smith
President
399 VENTURE PARTNERS, INC.
By: Richard M. Cashin
--------------------------
Richard M. Cashin
5
<PAGE> 1
EXHIBIT 10.35
EXECUTION COPY
SEVENTH AMENDMENT made as of December 30, 1996 (the "Amendment") to
FORBEARANCE AGREEMENT made as of June 7, 1996, as amended by the First Amendment
thereto, dated as of June 28, 1996 (the "First Amendment"), the Second Amendment
thereto, dated as of August 13, 1996 (the "Second Amendment"), the Third
Amendment thereto, dated as of September 3, 1996 (the "Third Amendment"), the
Fourth Amendment thereto, dated as of September 27, 1996 (the "Fourth
Amendment"), the Fifth Amendment thereto, dated as of October 30, 1996 (the
"Fifth Amendment") and the Sixth Amendment thereto, dated as of November 28,
1996 (the "Sixth Amendment") (as so amended and as amended through the date
hereof, the "Forbearance Agreement") among SMITH TECHNOLOGY CORPORATION, BCM
ENGINEERS INC., a Pennsylvania corporation, BCM ENGINEERS INC., an Alabama
corporation, RIEDEL ENVIRONMENTAL SERVICES INC., each of the Lenders which are
parties to the Loan Agreement, and THE CHASE MANHATTAN BANK, as Agent for the
Lenders. Terms which are capitalized herein and not otherwise defined shall have
the meanings ascribed to them in the Forbearance Agreement.
WHEREAS, pursuant to the Sixth Amendment, the Current Forbearance
Period automatically terminates on December 31, 1996; and
WHEREAS, the Borrowers have requested the Lenders to consider
extending the Current Forbearance Period to January 14, 1997 and the Lenders
have so agreed, on the terms and subject to the fulfillment of the conditions
contained in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. EXTENSION OF CURRENT FORBEARANCE PERIOD. The Current Forbearance
Period is hereby extended to January 14, 1997. Accordingly, the First Amendment
is hereby modified by deleting the third sentence of Section 2 thereof and by
substituting the following in lieu thereof:
"However, for the period commencing on the date hereof and
terminating on January 14, 1997 (the "Current Forbearance
Period"), so long as none of the events described in the
following clauses (a), (b) or (c) shall have occurred during
the Current Forbearance Period, the Lenders shall not demand
payment of the Liabilities, nor shall the Lenders otherwise
seek to exercise any of their rights or remedies under the
Loan Agreement, any of the Other Agreements or applicable law
with respect to the Designated Default (and the Forbearance
Agreement is hereby amended to so provide): (a) any Event of
Default (other than the Designated
<PAGE> 2
Default) shall have occurred or other event which, with the giving of
notice or passage of time would constitute an Event of Default shall
have arisen, (b) the Gould Award shall have been paid by any Borrower
in whole or in part or shall have been entered as a judgment in any
court of competent jurisdiction and the enforcement of such judgment
shall not have been stayed or (c) any default by any Borrower in the
performance of the terms of this Agreement shall have occurred."
Section 2. Conditions Precedent to Effectiveness of Amendment. This Amendment
shall not be effective unless and until each of the following conditions shall
have been satisfied in the sole discretion of the Lenders or waived by the
Lenders, for whose sole benefit such conditions exist:
(a) The Agent and each of the Lenders shall have received a
fully executed counterpart or original of this Amendment.
(b) Upon the effectiveness of this Amendment, all
representations and warranties set forth in the Loan Agreement shall be true
and correct in all material respects on and as of the effective date hereof,
except for (x) such inducing representations and warranties that were only
required to be true and correct as of a prior date, (y) such representations
and warranties as relate to the defaults described in clause (ii) hereof and
(z) such representations and warranties as relate to the occurrence of an event
which has had or is reasonably likely to have a Material Adverse Effect, but
only to the extent that such event constitutes the Gould Event, and no Default
or Event of Default shall have occurred and be continuing, other than (i) the
Designated Default and (ii) defaults under agreements made in the ordinary
course of business between or among any of the Borrowers and Persons other than
the Agent, the Lenders, or any Affiliate of the Borrowers, such as lease
agreements, none of which agreements is material to the business of such
Borrower and none of which defaults, singly or in the aggregate, has had or is
reasonably likely to have, a Material Adverse Effect.
(c) Except for the collectibility of the Referenced Account
and the occurrence of the Gould Event,no event or development shall have
occurred since the date of delivery to the Lenders of the Borrowers' most
recent financial statements which event or development has had or is reasonably
likely to have a Material Adverse Effect.
(d) All corporate and legal proceedings and all documents and
instruments executed or delivered in connection with this Amendment shall be
satisfactory in form and substance satisfactory to the Lenders and their
counsel, and the Lenders and their counsel shall have received all information
and copies of all documents which the Lenders and their counsel may have
requested in connection herewith and the matters contemplated hereunder, such
documents, when requested by them, to be certified by appropriate corporate
authorities.
<PAGE> 3
(e) The Lenders shall have received such further agreements,
consents, instruments and documents as may be necessary or proper in the
reasonable opinion of the Lenders, the Agent and their counsel to carry out the
provisions and purposes of this Amendment.
SECTION 3. GENERAL PROVISIONS.
(a) Nothing contained in this Amendment shall be deemed to be
a waiver of any Defaults or Events of Default, whether or not the Agent or any
of the Lenders shall have any knowledge thereof, nor shall anything contained
in this Amendment be deemed to be a waiver of any future Default or Event of
Default whatsoever.
(b) Except as herein expressly amended, the Forbearance
Agreement, the First Amendment thereto, the Second Amendment thereto, the Third
Amendment thereto, the Fourth Amendment thereto, the Fifth Amendment thereto,
the Sixth Amendment thereto and the Loan Agreement and all other agreements,
documents, instruments and certificates executed in connection therewith, are
ratified and confirmed in all respects and shall remain in full force and
effect in accordance with their respective terms.
(c) All references in any document or agreement to the
Forbearance Agreement shall mean the Forbearance Agreement as amended as of the
effective date hereof.
(d) This Amendment may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of which
shall be an original and all which shall constitute one and the same agreement.
(e) The Third Amendment, Waiver and Consent dated as of May
15, 1996 is hereby modified by deleting the date "December 31, 1996" set forth
in Section 7(a) thereof and by substituting in lieu thereof the date "January
14, 1997".
(f) This Amendment shall be governed and controlled by the
laws of the State of New York without reference to its choice of law principles.
<PAGE> 4
IN WITNESS WHEREOF, each of the Borrowers, BCM-Alabama, the Lenders and
the Agent have caused this Amendment to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above written.
SMITH TECHNOLOGY CORPORATION RIEDEL ENVIRONMENTAL SERVICES INC.
formerly known as Smith Environmental
Technologies Corporation
By: William T. Campbell By: William T. Campbell
---------------------------------- ---------------------------------
(Title) Vice President -- Finance (Title) Vice President
BCM ENGINEERS INC., THE CHASE MANHATTAN BANK, as a
a Pennsylvania corporation Lender and as Agent, formerly known
as Chemical Bank
By: William T. Campbell By:
---------------------------------- ---------------------------------
(Title) Vice President (Title)
BCM ENGINEERS, INC., BTM CAPITAL CORPORATION, formerly
Alabama corporation known as BOT Financial Corporation
By: William T. Campbell By:
---------------------------------- ---------------------------------
(Title) Vice President (Title)
