U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: Commission File Number:
March 31, 1999 0-17776
LEAK-X ENVIRONMENTAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 23-2823596
(State or other jurisdiction of (IRS Employer Identi-
incorporation or organization) fication Number)
790 East Market Street, Suite 270, West Chester, PA 19382
(Address of Principal Executive Offices) (Zip Code)
(610) 344-3380
(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 or 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
filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, par value $.001 per share, outstanding
as of May 10, 1999 is 990,126 shares.
Transitional Small Business Disclosure Format: Yes X No
CONSOLIDATED BALANCE SHEETS
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 381 $ 1,742
Accounts receivable, net 1,155,270 1,492,982
Estimated earnings in excess of billings 13,339 89,980
Other current assets 130,034 85,423
Net assets of discontinued operations 450,000 450,000
TOTAL CURRENT ASSETS 1,749,024 2,120,127
PROPERTY AND EQUIPMENT, NET 81,281 82,371
OTHER ASSETS - Deposits 6,269 6,269
TOTAL ASSETS $ 1,836,574 $ 2,208,767
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,330,991 $ 1,723,455
Unearned revenue 51,693 123,989
Line of credit 429,274 335,403
Current portion of long term debt 150,000 150,000
Net liabilities of discontinued operations 449,653 450,000
TOTAL CURRENT LIABILITIES 2,411,611 2,782,847
LONG-TERM DEBT 75,000 112,500
STOCKHOLDERS' EQUITY
Common stock $.001 par value:
5,000,000 shares authorized,
990,126 issued and outstanding 990 990
Additional paid-in capital 8,310,195 8,310,195
Accumulated deficit (8,961,222) (8,997,765)
TOTAL STOCKHOLDERS' EQUITY (650,037) (686,580)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,836,574 $ 2,208,767
See notes to consolidated financial statements.
</TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
<S> <C> <C>
Revenues $ 1,161,404 $ 1,819,443
Cost of revenues 704,268 1,349,780
Gross profit 457,136 469,663
Selling, general and
administrative expenses 409,694 422,478
Operating income 47,442 47,185
Other income (858) (3,372)
Interest expense 2,588 3,504
Net income before taxes and 45,712 47,053
discontinued operations
Income tax expense 9,169 821
Net income before 36,543 46,232
discontinued operations
Discontinued Operations:
Operating Income ---------- 21,943
Loss on Sale of Discontinued Operations ---------- ----------
0 21,943
Net Income $ 36,543 $ 68,175
Weighted average number of shares of common
stock outstanding Basic 990,126 1,219,645
Diluted 1,005,244 1,295,519
Net income per share:
Basic: Continuing operations $ 0.04 $ 0.04
Discontinued operations 0.00 0.02
Total Basic $ 0.04 $ 0.06
Diluted: Continuing operations $ 0.04 $ 0.04
Discontinued operations 0.00 0.02
Total Diluted $ 0.04 $ 0.06
See notes to consolidated financial statements.
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998 1
<S> <C> <C>
CASH FLOW FROM
OPERATING ACTIVITIES:
Net income $36,543 $68,175
Adjustments to reconcile net income to
net cash used by operating activities
of continuing operations:
Income from discontinued operations ------- (15,120)
Depreciation 9,300 9,000
Allowance for bad debt 15,000 -------
Changes in assets and liabilities:
Accounts receivable 322,712 (533,206)
Costs and estimated earnings in 76,641 136,295
excess of billings
Other current assets (44,610) (46,265)
Accounts payable (397,507) 60,056
Billings in excess of cost (72,296) (240,064)
Accrued expenses and other liabilities 5,043 233,226
NET CASH USED BY OPERATING ACTIVITIES OF
CONTINUING OPERATIONS (49,174) (327,903)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditure (8,211) (4,856)
Increase in other assets, net ------- (35,291)
NET CASH USED BY INVESTING ACTIVITIES OF
CONTINUING OPERATIONS (8,211) (40,147)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advance on line-of-credit 93,871 -------
Payments on long-term debt (37,500) -------
Decrease in advances to discontinued operations ------- 139,939
NET CASH PROVIDED BY FINANCING ACTIVITIES OF
CONTINUING OPERATIONS 56,371 139,939
NET CASH USED IN CONTINUING OPERATIONS (1,014) (228,111)
NET CASH PROVIDED BY (USED IN)
DISCONTINUED OPERATIONS (347) 17,943
NET DECREASE IN CASH (1,361) (210,168)
CASH, beginning of the period 1,742 240,769
CASH, end of the period $381 $30,601
See notes to consolidated financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LEAK-X ENVIRONMENTAL CORPORATION AND SUBSIDIARIES
(UNAUDITED)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements of Leak-X
Environmental Corporation (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation (consisting of normal recurring
accruals) have been included. The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Operating results for the three month period ended March 31, 1999
are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1998.
Per share data for the periods are based upon the weighted average number of
shares of common stock outstanding during such periods, plus net additional
shares issued upon exercise of options and warrants (see Note 4).
Note 2. Financial Matters
Total interest expense for the three months ended March 31, 1999 and
March 31, 1998 was $2,588 and $3,504, respectively.
Note 3. Discontinued Operations
Net assets of discontinued operations at March 31, 1999 consist of
accounts receivable of $450,000. Net liabilities of discontinued operations
at March 31, 1999 include accounts payable and accrued expenses of $346,251
and $103,402, respectively.
Note 4. Income Per Share
The following is a reconciliation of the numerator and denominator
underlying the income per share calculations:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
Income Shares Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Income from continuing operations available
to common stockholders $36,543 990,126 $0.04
Effect of dilutive securities:
Incremental shares of assumed
conversions of options 15,118
Diluted income from continuing operations
available to common stockholders and
assumed conversions $36,543 1,005,244 $0.04
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
<S> <C> <C> <C>
Income Shares Per Share
(Numerator) (Denominator) Amount
Income from continuing operations
available to common stockholders $68,175 1,219,645 $0.06
Effect of dilutive securities:
Incremental shares of assumed
conversions of options 75,874
Diluted income from continuing operations
available to common stockholders and
assumed conversions $68,175 1,295,519 $0.06
</TABLE>
Note 5. Line of Credit
On May 10, 1999, the Company signed a new Revolving Credit Agreement (the
"Credit Agreement") with First Union National Bank. The Credit Agreement will
expire on June 30, 2000. The Credit Agreement permits the Company to borrow
up to $750,000. Borrowings under the Credit Agreement are limited to 60% of
eligible accounts receivable, as defined, and bears interest at the prime rate
plus three-quarter (3/4) percent. The eligible accounts receivable, as
defined by the terms of the Credit Agreement, were $1,127,075 at March 31,
1999. The calculated borrowing base of 60% of eligible accounts receivable
was $676,245, for which the Company has utilized $429,274 as of March 31,
1999. Borrowings under this facility are also collateralized by a security
interest in substantially all of the assets of the Company and impose
restrictions on the payment of dividends and stock redemptions and the sale of
property.
Item 2. Management's Discussion and Analysis or Plan of Operation
Results of Operations
Quarter Ended March 31, 1999 Compared to the Quarter Ended March 31, 1998
The Company's net income was $36,543, or $0.04 per share, for the
quarter ended March 31, 1999 (the "1999 Quarter") as compared to net income of
$68,175, or $0.06 per share, for the quarter ended March 31, 1998 (the "1998
Quarter").
Revenues decreased $658,039, or 36%, to $1,161,404 for the 1999
Quarter, as compared to $1,819,443 for the 1998 Quarter. The decrease in
revenues is primarily attributable to a lower volume of construction
management services as the deadline for underground storage tank compliance
passed in December 1998. Construction management services typically include a
large portion of subcontractor costs which become included in the Company's
revenues.
The Company's gross margin improved significantly to 39% in the 1999
Quarter as compared to 26% in the 1998 Quarter. As the demand for low margin
construction management services declined, the Company experienced a higher
volume of traditional environmental engineering services which contribute a
higher gross margin.
Selling, general, and administrative ("SG&A") expenses decreased
$12,784 to $409,694 for the 1999 Quarter, as compared to $422,478 in the 1998
Quarter. This decrease is primarily attributable to the cost containment
program implemented to control the Company's corporate overhead costs. The
Company's focus is to incur minimum corporate overhead expenses in order to
preserve its working capital for growth within the Company. However, the
Company did incur higher SG&A expenses for continued investment in its growth,
including the hiring of new employees and continued marketing of its new
environmental monitoring services.
The Company incurred lower interest expense of $2,588 in the 1999
Quarter, as compared to $3,504 in the 1998 Quarter due to the Company's new
cash management systems which applies excess cash balances against the line of
credit on a daily basis. Income tax expense of $9,169 in the 1999 Quarter was
higher than income tax expense of $821 in the 1998 Quarter due to Fiscal 1998
taxes which were not recorded until 1999 and accrual of anticipated taxes for
Fiscal 1999.
Liquidity and Capital Resources
The Company utilized $49,174 of cash from operating activities of
continuing operations in the 1999 Quarter, as compared to utilizing $327,903
in the 1998 Quarter. Net income from continuing operations of $36,543 in the
1999 Quarter was lower than net income from continuing operations in the 1998
Quarter of $53,055. The 1999 Quarter included a $322,712 decrease in accounts
receivable and a $397,507 decrease in accounts payable as compared to an
increase of $533,206 in accounts receivable and an increase of $60,056 in
accounts payable in the 1998 Quarter. This significant change in accounts
receivable and accounts payable is primarily due to decreased revenues from
construction management services. The Company recorded a bad debt reserve of
$15,000 for certain receivables in the 1999 Quarter.
Net cash used by investing activities of continuing operations in
the 1999 Quarter was $8,211, as compared to $40,147 net cash used in the 1998
Quarter. Capital expenditures in the 1999 Quarter of $8,211, which were
primarily for computer equipment, were slightly higher than the $4,856 in the
1998 Quarter. The 1998 Quarter included a $35,291 investment in the
development of the Company's new environmental monitoring services division.
Net cash provided by financing activities of continuing operations
was $56,371 in the 1999 Quarter, as compared to $139,939 in the 1998 Quarter.
During the 1999 Quarter, the Company's cash management system, which applies
excess cash balances against its outstanding line of credit resulted in an
increase of $93,871 on the line of credit balance. During the 1999 Quarter,
the Company paid out $37,500 on long-term debt and during the 1998 Quarter,
the Company received $139,939 from its discontinued operations in payback on
outstanding debt.
The Company's working capital deficit of ($662,587) at March 31,
1999 was consistent with working capital of ($662,720) at December 31, 1998.
The Company continues to manage its working capital to support the Company's
ongoing operations and make scheduled payments on its long-term debt.
On May 10, 1999, the Company signed a new Revolving Credit Agreement
(the "Credit Agreement") with First Union National Bank. The Credit Agreement
will expire on June 30, 2000. The Credit Agreement permits the Company to
borrow up to $750,000. Borrowings under the Credit Agreement are limited to
60% of eligible accounts receivable, as defined, and bears interest at the
prime rate plus three-quarter (3/4) percent. The eligible accounts
receivable, as defined by the terms of the Credit Agreement, were $1,127,075
at March 31, 1999. The calculated borrowing base of 60% of eligible accounts
receivable was $676,245, for which the Company has utilized $429,274 as of
March 31, 1999. Borrowings under this facility are also collateralized by a
security interest in substantially all of the assets of the Company and impose
restrictions on the payment of dividends and stock redemptions and the sale of
property.
Backlog at March 31, 1999 of $2,600,000 is consistent with the level
at December 31, 1998 as a result of continued success in obtaining new work as
the Company continues to complete the ongoing projects which were booked at
the beginning of the fiscal year. The Company believes that all of the
current backlog will be completed in 1999, although no assurance of this can
be given. Much of the Company's backlog is subject to termination at will and
rescheduling without significant penalty.
Computers, software, and other equipment utilizing microprocessors that
use only two digits to identify a year in a date field may be unable to
process accurately certain date-based information after the year 2000. This
is commonly referred to as the "Y2K" problem. The Company is utilizing
internal resources to address the potential impact of the Y2K problem. Key
areas of the Company's operations that are being addressed include external
customers and suppliers and internal computers and software.
Y2K considerations may have an effect on some of the Company's customers
and suppliers, and thus, indirectly on the Company. The Company is assessing
the potential effect on the Company with respect to customers and suppliers
with Y2K issues and does not expect a material affect on the Company's
financial condition or results of operation at this time. However, the
potential does exist that if customers of the Company are not Y2K compliant,
payments to the Company in the first quarter of the Year 2000 could be delayed
until the customers are able to correct their Y2K compliance deficiencies.
The Company has upgraded its internal computerized information systems to
ensure that it is able to process information that may be date sensitive and
to be Y2K compliant. No related software or hardware costs are expected. A
contingency plan is being formulated to address unavoidable Y2K risks with
customers, vendors, and other third parties.
Management has maintained control of overhead expenses and operating
margins. However, there is no assurance that the cost controlling measures
will be sufficient to permit the Company to meet its financial obligations
while providing capital for ongoing operations.
The Company deems its present facilities and equipment adequate for its
immediate needs and it has no material commitments for capital expenditures.
The Company believes its present liquidity and cash flow are adequate for its
current needs. There can be no assurance, however, that additional financing,
whether from debt or equity, will be available to the Company when needed on
commercially reasonable terms, or at all.
The Company's management believes that inflation has not had a
significant impact on its business during the past three years.
The statements contained herein include forward looking statements that
involve a number of risks and uncertainties. In addition to the facts
discussed, among the other factors that could cause actual results to differ
materially are the following: enforcement of environmental regulations,
business conditions and growth in the industry and general economy;
competitive factors, such as rival designs and prices; changes in sales mix;
and the risk factors listed from time to time in the Company's SEC reports.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Promissory Note between Lexicon Environmental Associates, Inc.
and First Union National Bank dated May 10, 1999.
10.2 Loan Agreement between Lexicon Environmental Associates, Inc.
and First Union National Bank dated May 10, 1999.
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
(b) Reports on Form 8-K:
On January 26, 1999, the Company filed a Form 8-K with respect to the
change in its auditors to Radin Glass & Co., LLP.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 17, 1999
LEAK-X ENVIRONMENTAL CORPORATION
by: /s/ Joyce A. Rizzo
Joyce A. Rizzo
Chief Executive Officer
by: /s/ Eileen E. Bartoli
Eileen E. Bartoli
Controller and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE LEAK-X
ENVIRONMENTAL CORPORATION CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1999, AND
THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1999, AND THE ACCOMPANYING NOTES, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 381
<SECURITIES> 0
<RECEIVABLES> 1,170,270
<ALLOWANCES> 15,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,749,024
<PP&E> 279,626
<DEPRECIATION> 198,344
<TOTAL-ASSETS> 1,836,574
<CURRENT-LIABILITIES> 2,411,611
<BONDS> 75,000
0
0
<COMMON> 990
<OTHER-SE> (651,027)
<TOTAL-LIABILITY-AND-EQUITY> 1,836,574
<SALES> 1,161,404
<TOTAL-REVENUES> 1,161,404
<CGS> 704,268
<TOTAL-COSTS> 704,268
<OTHER-EXPENSES> 409,694
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,588
<INCOME-PRETAX> 45,712
<INCOME-TAX> 9,169
<INCOME-CONTINUING> 36,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,543
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE LEAK-X
ENVIRONMENTAL CORPORATION CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998, AND
THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1998, AND THE ACCOMPANYING NOTES, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 30,602
<SECURITIES> 0
<RECEIVABLES> 2,519,030
<ALLOWANCES> 15,000
<INVENTORY> 299,432
<CURRENT-ASSETS> 661,069
<PP&E> 472,510
<DEPRECIATION> 323,426
<TOTAL-ASSETS> 3,761,889
<CURRENT-LIABILITIES> 3,749,556
<BONDS> 0
0
0
<COMMON> 1,220
<OTHER-SE> 11,113
<TOTAL-LIABILITY-AND-EQUITY> 3,761,889
<SALES> 1,819,443
<TOTAL-REVENUES> 1,819,443
<CGS> 1,349,780
<TOTAL-COSTS> 1,349,780
<OTHER-EXPENSES> 422,478
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,504
<INCOME-PRETAX> 47,053
<INCOME-TAX> 821
<INCOME-CONTINUING> 46,232
<DISCONTINUED> 21,943
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,175
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
FIRST UNION
LOAN AGREEMENT
First Union National Bank
123 South Broad Street
Philadelphia, Pennsylvania 19109
(Hereinafter referred to as the "Bank")
Lexicon Environmental Associates, Inc.
790 East Market Street
Suite 270
West Chester, Pennsylvania 19382
(Individually and collectively "Borrower")
This Loan Agreement ("Agreement") is entered into May 10, 1999, by and between
Bank
and Borrower, a Corporation (For profit) organized under the laws of New York.
Borrower has applied to Bank for a loan or loans (individually and
collectively, the "Loan") evidenced by one or more promissory notes (whether
one or more, the "Note") as follows:
Line of Credit - in the principal amount of $750,000.00 which is evidenced by
the Promissory Note dated May 10, 1999 ("Line of Credit Note"), under which
Borrower may borrow, repay, and reborrow from time to time, so long as the
total indebtedness outstanding at any one time does not exceed the principal
amount. The Loan proceeds are to be used by Borrower solely for financing
accounts receivable. Bank's obligation to advance or readvance under the Line
of Credit Note shall terminate if a default in the payment of the Obligations
occurs or the Borrower is in Default (as defined in the Loan Documents) under
any Loan Document, or in any event, on the first anniversary unless renewed or
extended by Bank in writing upon such terms then satisfactory to Bank.
This Agreement applies to the Loan and all Loan Documents. The terms "Loan
Documents" and "Obligations," as used in this Agreement, are defined in the
Note. The term "Borrower" shall include its Subsidiaries and Affiliates. As
used in this Agreement as to Borrower, "Subsidiary" shall mean any corporation
of which more than 50% of the issued and outstanding voting stock is owned
directly or indirectly by Borrower. As to Borrower, "Affiliate" shall have
the meaning as defined in 11 U.S.C. section 101, except that the term "debtor"
therein shall be substituted by the term "Borrower" herein.
Relying upon the covenants, agreements, representations and warranties
contained in this Agreement, Bank is willing to extend credit to Borrower upon
the terms and subject to the conditions set forth herein, and Bank and
Borrower agree as follows:
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: Accurate Information. All
information now and hereafter furnished to Bank is and will be true, correct
and complete. Any such information relating to Borrower's financial condition
will accurately reflect Borrower's financial condition as of the date(s)
thereof, (including all contingent liabilities of every type), and Borrower
further represents that its financial condition has not changed materially or
adversely since the date(s) of such documents. Authorization;
Non-Contravention. The execution, delivery and performance by Borrower and
any guarantor, as applicable, of this Agreement and other Loan Documents to
which it is a party are within its power, have been duly authorized by all
necessary action taken by the duly authorized officers of Borrower and any
guarantors and, if necessary, by making appropriate filings with any
governmental agency or unit and are the legal, binding, valid and enforceable
obligations of Borrower and any guarantors; and do not (i) contravene, or
constitute (with or without the giving of notice or lapse of time or both) a
violation of any provision of applicable law, a violation of the
organizational documents of Borrower or any guarantor, or a default under any
agreement, judgment, injunction, order, decree or other instrument binding
upon or affecting Borrower or any guarantor, (ii) result in the creation or
imposition of any lien (other than the lien(s) created by the Loan Documents)
on any of Borrower's or guarantor's assets, or (iii) give cause for the
acceleration of any obligations of Borrower or any guarantor to any other
creditor. Asset Ownership. Borrower has good and marketable title to all of
the properties and assets reflected on the balance sheets and financial
statements supplied Bank by Borrower, and all such properties and assets are
free and clear of mortgages, security deeds, pledges, liens, charges, and all
other encumbrances, except as otherwise disclosed to Bank by Borrower in
writing ("Permitted Liens"). To Borrower's knowledge, no default has occurred
under any Permitted Liens and no claims or interests adverse to Borrower's
present rights in its properties and assets have arisen. Discharge of Liens
and Taxes. Borrower has duly filed, paid and/or discharged all taxes or other
claims which may become a lien on any of its property or assets, except to the
extent that such items are being appropriately contested in good faith and an
adequate reserve for the payment thereof is being maintained. Sufficiency of
Capital. Borrower is not, and after consummation of this Agreement and after
giving effect to all indebtedness incurred and liens created by Borrower in
connection with the Loan, will not be, insolvent within the meaning of 11
U.S.C. section 101 (32). Compliance with Laws. Borrower is in compliance in
all respects with all federal, state and local laws, rules and regulations
applicable to its properties, operations, business, and finances, including,
without limitation, any federal or state laws relating to liquor (including 18
U.S.C. section 3617, et seg.) or narcotics (including 21 U.S.C. section 801,
et seg.) and/or any commercial crimes; all applicable federal, state and local
laws and regulations intended to protect the environment; and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), if applicable.
Organization and Authority. Each corporate or limited liability company
Borrower and any guarantor, as applicable, is duly created, validly existing
and in good standing under the laws of the state of its organization, and has
all powers, governmental licenses, authorizations, consents and approvals
required to operate its business as now conducted. Each corporate or limited
liability company Borrower and any guarantor, if any, is duly qualified,
licensed and in good standing in each jurisdiction where qualification or
licensing is required by the nature of its business or the character and
location of its property, business or customers, and in which the failure to
so qualify or be licensed, as the case may be, in the aggregate, could have a
material adverse effect on the business, financial position, results of
operations, properties or prospects of Borrower or any such guarantor. No
Litigation. There are no pending or threatened suits, claims or demands
against Borrower or any guarantor that have not been disclosed to Bank by
Borrower in writing.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date of this Agreement
and until final payment in full of the Obligations, unless Bank shall
otherwise consent in writing, Borrower will: Business Continuity. Conduct its
business in substantially the same manner and locations as such business is
now and has previously been conducted. Maintain Properties. Maintain,
preserve and keep its property in good repair, working order and condition,
making all needed replacements, additions and improvements thereto, to the
extent allowed by this Agreement. Access to Books & Records. Allow Bank, or
its agents, during normal business hours, access to the books, records and
such other documents of Borrower as Bank shall reasonably require, and allow
Bank to make copies thereof at Bank's expense. Insurance. Maintain adequate
insurance coverage with respect to its properties and business against loss or
damage of the kinds and in the amounts customarily insured against by
companies of established reputation engaged in the same or similar businesses
including, without limitation, commercial general liability insurance, workers
compensation insurance, and business interruption insurance; all acquired in
such amounts and from such companies as Bank may reasonably require. Notices.
Promptly notify Bank in writing of (i) any material adverse change in its
financial condition or its business; (ii) any default under any materia!
agreement, contract or other instrument to which it is a party or by which any
of its properties are bound, or any acceleration of the maturity of any
indebtedness owing by Borrower; (iii) any material adverse claim against or
affecting Borrower or any part of its properties; (iv) the commencement of,
and any material determination in, any litigation with any third party or any
proceeding before any governmental agency or unit affecting Borrower; and (v)
at least 30 days prior thereto, any change in Borrower's name or address as
shown above, and/or any change in Borrower's structure. Compliance with Other
Agreements. Comply with all terms and conditions contained in this Agreement,
and any other Loan Documents, and swap agreements, if applicable, as defined
in the Note. Payment of Debts. Pay and discharge when due, and before subject
to penalty or further charge, and otherwise satisfy before maturity or
delinquency, all obligations, debts, taxes, and liabilities of whatever nature
or amount, except those which Borrower in good faith disputes. Reports and
Proxies. Deliver to Bank, promptly, a copy of all financial statements,
reports, notices, and proxy statements, sent by Borrower to stockholders, and
all regular or periodic reports required to be filed by Borrower with any
governmental agency or authority. Other Financial Information. Deliver
promptly such other information regarding the operation, business affairs, and
financial condition of Borrower which Bank may reasonably request. Estoppel
Certificate. Furnish, within 15 days after request by Bank, a written
statement duly acknowledged of the amount due under the Loan and whether
offsets or defenses exist against the Obligations.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: Nonpayment; Nonperformance. Fail to
pay or perform the Obligations or Default (as defined in the Loan Documents)
under any of the Loan Documents. Cross Default. Default in payment or
performance of any obligation under any other loans, contracts or agreements
of Borrower, any Subsidiary or Affiliate of Borrower ("Affiliate" shall have
the meaning as defined in 11 U.S.C. section 101, except that the term "debtor"
therein shall be substituted by the term "Borrower" herein; "Subsidiary" shall
mean any corporation of which more than 50% of the issued and outstanding
voting stock is owned directly or indirectly by Borrower), any general partner
of or the holder(s) of the majority ownership interests of Borrower with Bank
or its affiliates; Material Capital Structure or Business Alteration.
Materially alter the type or kind of Borrower's business or that of its
Subsidiaries or Affiliates, if any; or suffer or permit the acquisition of
substantially all of Borrower's business or assets, or a material portion (10%
or more) of such business or assets if such a sale is outside Borrower's
ordinary course of business, or more than 50% of its outstanding stock or
voting power in a single transaction or a series of transactions; or acquire
substantially all of the business or assets or more than 50% of the
outstanding stock or voting power of any other entity; or enter into any
merger or consolidation without prior written consent of Bank. Default on
Other Contracts or Obligations. Default on any material contract with or
obligation when due to a third party or default in the performance of any
obligation to a third party incurred for money borrowed. Judgment Entered.
Permit the entry of any monetary judgment or the assessment against, the
filing of any tax lien against, or the issuance of any writ of garnishment or
attachment against any property of or debts due Borrower. Government
Intervention. Permit the assertion or making of any seizure, vesting or
intervention by or under authority of any government by which the management
of Borrower or any guarantor is displaced of its authority in the conduct of
its respective business or such business is curtailed or materially impaired.
Prepayment of Other Debt. Retire any long-term debt entered into prior to the
date of this Agreement at a date in advance of its legal obligation to do so.
Retire or Repurchase Capital Stock. Retire or otherwise acquire any of its
capital stock. Encumbrances. Create, assume, or permit to exist any mortgage,
security deed, deed of trust, pledge, lien, charge or other encumbrance on any
of its assets, whether now owned or hereafter acquired, other than: (i)
security interests required by the Loan Documents; (ii) liens for taxes
contested in good faith; (iii) liens accruing by law for employee benefits; or
(iv) Permitted Liens.
ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 120 days
after the close of each fiscal year, unaudited management-prepared financial
statements reflecting its operations during such fiscal year, including,
without limitation, a balance sheet, profit and loss statement and statement
of cash flows, with supporting schedules; all on a consolidated and
consolidating basis and in reasonable detail, prepared in conformity with
generally accepted accounting principles, applied on a basis consistent with
that of the preceding year. Such statements shall be certified as to their
correctness by a principal financial officer of Borrower.
PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank unaudited
management-prepared quarterly financial statements, including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules, as soon as available and in any event within
60 days after the close of each such period; all in reasonable detail and
prepared in conformity with generally accepted accounting principles, applied
on a basis consistent with that of the preceding year. Such statements shall
be certified as to their correctness by a principal financial officer of
Borrower.
ACCOUNTS RECEIVABLE AGING. Borrower shall, deliver to Bank monthly within 20
days of the end of each such period, a detailed aging of accounts by total, a
summary aging of accounts by customer and customer address, and a
reconciliation statement. Said aging should also include the original date of
each invoice.
BORROWING BASE CERTIFICATE. Borrower shall deliver to Bank monthly within 20
days of month's end a borrowing base certificate.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such
information as Bank may reasonably request from time to time, including
without limitation, financial statements and information pertaining to
Borrower's financial condition. Such information shall be true, complete, and
accurate.
BORROWING BASE. As to the Line of Credit Note in the principal amount of
$750,000.00, the following provisions shall apply:
Borrowing Limitation. The maximum principal amount that Borrower may borrow
shall be the lesser of the principal amount stated in the Line of Credit Note
or the maximum principal amount allowed under this addendum (the "Maximum
Principal Amount").
The Maximum Principal Amount shall be an amount equal to 60% of the net amount
of Eligible Accounts, less the amount of any Reserve required by Bank.
"Eligible Account" refers to an account receivable not more than 90 days from
the date of the original invoice that arises in the ordinary course of
Borrower's business and meets the following eligibility requirements: (a) the
sale of goods or services reflected in such account is final and such goods
and services have been delivered or provided and accepted by the account
debtor and payment for such is owing; (b) the invoices comprising an account
are not subject to any claims, returns or disputes of any kind; (c) the
account debtor is not insolvent; (d) the account debtor has its principal
place of business in the United States; (e) the account debtor is not an
affiliate of Borrower and is not a supplier to Borrower and the account is not
otherwise exposed to risk of set-off; (f) not more than thirty percent of the
original invoices owing Borrower by the account debtor are more than ninety
days from the date of the original invoice.
"Reserves" may be required at any time and from time to time by Bank without
prior notice to Borrower in amounts deemed by Bank to be adequate to reserve
against outstanding letter of credit, outstanding bankers acceptances,
Borrower's obligations to Bank or its affiliates or any guaranties or other
contingent debt of Borrower.
Required Reports. Borrower shall certify to Bank by the twentieth day of each
month, the amount of Eligible Accounts as of the first day of each month, on
forms required by Bank together with all detail and supporting documents
requested by Bank. Bank may at any time and from time to time, during Bank's
normal business hours, enter upon any business premises of Borrower and audit
Borrower's accounts. Bank's determination of the amount of Eligible Accounts
shall at all times be indisputable and deemed correct. The Borrower, at all
times, shall cooperate with Bank without limitation by providing Bank
information and access to Borrower's premises and business records and shall
be courteous to Bank's agents.
Continuing Representations. Borrower warrants and represents as a continuing
warranty, that so long as principal is outstanding under the Line of Credit
Note, the outstanding principal balance shall not exceed the lesser of the
Maximum Principal Amount or the principal amount stated in the Line of Credit
Note (the "Borrowing Limit"). Borrower agrees to pay any advances in excess
of the Borrowing Limit immediately upon receipt by Borrower of written notice
that the Borrowing Limit has been exceeded.
CONDITIONS PRECEDENT. The obligations of Bank to make the Loan and any
advances pursuant to this Agreement are subject to the following conditions
precedent: Additional Documents. Receipt by Bank of such additional
supporting documents as Bank or its counsel may reasonably request.
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written
above, have caused this Agreement to be executed under seal.
Lexicon Environmental Associates, Inc.
CORPORATE By: /s/ Joyce A. Rizzo
SEAL Joyce A. Rizzo, CEO
First Union National Bank
CORPORATE By: /s/ Karen A. Sek
SEAL Karen Sek, Assistance Vice President
FIRST UNION
PROMISSORY NOTE
$750,000.00 May 10, 1999
Lexicon Environmental Associates, Inc.
790 East Market Street
Suite 270
West Chester, Pennsylvania 19382
(Individually and collectively "Borrower")
First Union National Bank
123 South Broad Street
Philadelphia, Pennsylvania 19109
(Hereinafter referred to as the "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Seven Hundred and Fifty Thousand and No/100 Dollars
($750,000.00) or such sum as may be advanced and outstanding from time to time
with interest on the unpaid principal balance at the rate and on the terms
provided in this Promissory Note (including all renewals, extensions or
modifications hereof, this "Note").
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, personal
property collateral described in that certain Security Agreement of even date
herewith.
INTEREST RATE. Interest shall accrue on the unpaid principal balance of this
Note from the date hereof at the rate of Bank's Prime Rate plus .75% as that
rate may change from time to time in accordance with changes in the Bank's
Prime Rate ("Interest Rate"). Bank's Prime Rate shall be that rate announced
by Bank from time to time as its Prime Rate and is one of several interest
rate bases used by Bank. Bank lends at rates both above and below Bank's Prime
Rate, and Borrower acknowledges that Bank's Prime Rate is not represented or
intended to be the lowest or most favorable rate of interest offered by Bank.
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus 3%
("Default Rate"). The Default Rate shall also apply from acceleration until
the Obligations or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION. (Actual/360). Interest and fees, if any,
shall be computed on the basis of a 360-day year for the actual number of days
in the applicable period ("Actual/360 Computation"). The Actual/360
Computation determines the annual effective yield by taking the stated
(nominal) rate for a year's period and then dividing said rate by 360 to
determine the daily periodic rate to be applied for each day in the applicable
period. Application of the Actual/360 Computation produces an annualized
effective rate exceeding that of the nominal rate.
REPAYMENT TERMS. This Note shall due and payable in consecutive monthly
payments of accrued interest only commencing on June 1,1999, and on the same
day of each month thereafter until fully paid. In any event, all principal and
accrued interest shall be due and payable on June 30, 2000.
AUTOMATIC DEBIT OF CHECKING ACCOUNT FOR LOAN PAYMENT. Borrower authorizes Bank
to debit its demand deposit account number 2000032756171 or any other account
with Bank (routing number 031000503) designated in writing by Borrower,
beginning June 1, 1999 for any payments due under this Note. Borrower further
certifies that Borrower holds legitimate ownership of this account and
preauthorizes this periodic debit as part of its right under said ownership.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for
application toward payment of the Obligations shall be applied to accrued
interest and then to principal. If a Default occurs, monies may be applied to
the Obligations in any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
DEFINITIONS. Loan Documents. The term "Loan Documents" used in this Note and
other Loan Documents refers to all documents executed in connection with the
loan evidenced by this Note and any prior notes which evidence all or any
portion of the loan evidenced by this Note, and may include, without
limitation, a commitment letter that survives closing, a loan agreement, this
Note, guaranty agreements, security agreements, security instruments,
financing statements, mortgage instruments, any renewals or modifications,
whenever any of the foregoing are executed, but does not include swap
agreements (as defined in 11 U.S.C. section 101). Obligations. The term
"Obligations" used in this Note refers to any and all indebtedness and other
obligations under this Note, all other obligations under any other Loan
Document(s), and all obligations under any swap agreements as defined in 11
U.S.C. section 101 between Borrower and Bank whenever executed. Certain Other
Terms. All terms that are used but not otherwise defined in any of the Loan
Documents shall have the definitions provided in the Uniform Commercial Code.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 10 or more days.
Acceptance by Bank of any late payment without an accompanying late charge
shall not be deemed a waiver of Bank's right to collect such late charge or to
collect a late charge for any subsequent late payment received.
If this Note is secured by owner-occupied residential real property located
outside the state in which the office of Bank first shown above is located,
the late charge laws of the state where the real property is located shall
apply to this Note and the late charge shall be the highest amount allowable
under such laws. If no amount is stated thereunder, the late charge shall be
5% of each payment past due for 10 or more days.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations,
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. (f at any time the effective interest rate under this Note would, but
for this paragraph, exceed the maximum lawful rate, the effective interest
rate under this Note shall be the maximum lawful rate, and any amount received
by Bank in excess of such rate shall be applied to principal and then to fees
and expenses, or, if no such amounts are owing, returned to Borrower.
DEFAULT. If any of the following occurs, a default ("Default") under this Note
shall exist: Nonpayment; Nonperformance. The failure of timely payment or
performance of the Obligations or Default under this Note or any other Loan
Documents. False Warranty. A warranty or representation made or deemed made in
the Loan Documents or furnished Bank in connection with the loan evidenced by
this Note proves materially false, or if of a continuing nature, becomes
materially false. Cross Default. At Bank's option, any default in payment or
performance of any obligation under any other loans, contracts or agreements
of Borrower, any Subsidiary or Affiliate of Borrower, any general partner of
or the holder(s) of the majority ownership interests of Borrower with Bank or
its affiliates ("Affiliate" shall have the meaning as defined in 11 U.S.C.
section 101, except that the term "debtor" therein shall be substituted by the
term "Borrower" herein; "Subsidiary" shall mean any business in which Borrower
holds, directly or indirectly, a controlling interest). Cessation; Bankruptcy.
The death of, appointment of guardian for, dissolution of, termination of
existence of, loss of good standing status by, appointment of a receiver for,
assignment for the benefit of creditors of, or commencement of any bankruptcy
or insolvency proceeding by or against the Borrower, its Subsidiaries or
Affiliates, if any, or any general partner of or the holder(s) of the majority
ownership interests of Borrower, or any party to the Loan Documents. Material
Capital Structure or Business Alteration. Without prior written consent of
Bank, (i) a material alteration in the kind or type of Borrower's business or
that of Borrower's Subsidiaries or Affiliates, if any; (ii) the sale of
substantially all of the business or assets of Borrower, any of Borrower's
Subsidiaries or Affiliates or guarantor or a material portion (10% or more) of
such business or assets if such a sale is outside the ordinary course of
business of Borrower, or any of Borrower's Subsidiaries or Affiliates or any
guarantor or more than 50% of the outstanding stock or voting power of or in
any such entity in a single transaction or a series of transactions; (iii) the
acquisition of substantially all of the business or assets or more than 50% of
the outstanding stock or voting power of any other entity; or (iv) should any
Borrower, or any of Borrower's Subsidiaries or Affiliates or any guarantor
enter into any merger or consolidation.
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions: Bank
Lien. Foreclose its security interest or lien against Borrower's accounts
without notice. Acceleration Upon Default. Accelerate the maturity of this
Note and all other Obligations, and all of the Obligations shall be
immediately due and payable. Cumulative. Exercise any rights and remedies as
provided under the Note and other Loan Documents, or as provided by law or
equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such
information as Bank may reasonably request from time to time, including
without limitation, financial statements and information pertaining to
Borrower's financial condition. Such information shall be true, complete, and
accurate.
YEAR 2000 COMPATIBILITY. Borrower shall take all action necessary to ensure
that Borrower's computer based systems are able to operate and effectively
process data including dates on and after January 1, 2000. At the request of
Bank, Borrower shall provide Bank assurance acceptable to Bank of Borrower's
Year 2000 compatibility.
CONFESSION OF JUDGMENT. THE FOLLOWING PARAGRAPH SETS FORTH A POWER OF
AUTHORITY FOR ANY ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER. IN GRANTING
THIS WARRANT OF ATTORNEY TO CONFESS JUDGMENT AGAINST BORROWER, THE BORROWER,
FOLLOWING CONSULTATION WITH (OR DECISION NOT TO CONSULT) SEPARATE COUNSEL FOR
BORROWER AND WITH KNOWLEDGE OF THE LEGAL EFFECT HEREOF, HEREBY KNOWINGLY,
INTENTIONALLY, VOLUNTARILY, INTELLIGENTLY AND UNCONDITIONALLY WAIVES ANY AND
ALL RIGHTS THE BORROWER HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR
HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES OF
AMERICA, COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE INCLUDING, WITHOUT
LIMITATION, A HEARING PRIOR TO GARNISHMENT AND ATTACHMENT OF THE BORROWER'S
BANK ACCOUNT AND OTHER ASSETS. BORROWER ACKNOWLEDGES AND UNDERSTANDS THAT BY
ENTERING INTO THIS NOTE CONTAINING A CONFESSION OF JUDGMENT CLAUSE THAT
BORROWER IS VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY GIVING UP ANY AND ALL
RIGHTS, INCLUDING CONSTITUTIONAL RIGHTS, THAT BORROWER HAS OR MAY HAVE TO
NOTICE AND A HEARING BEFORE JUDGMENT CAN BE ENTERED AGAINST BORROWER AND
BEFORE THE BORROWER'S ASSETS, INCLUDING, WITHOUT LIMITATION, ITS BANK
ACCOUNTS, MAY BE GARNISHED, LEVIED, EXECUTED UPON AND/OR ATTACHED. BORROWER
UNDERSTANDS THAT ANY SUCH GARNISHMENT, LEVY, EXECUTION AND/OR ATTACHMENT SHALL
RENDER THE PROPERTY GARNISHED, LEVIED, EXECUTED UPON OR ATTACHED IMMEDIATELY
UNAVAILABLE TO BORROWER. IT IS SPECIFICALLY ACKNOWLEDGED BY BORROWER THAT THE
BANK HAS RELIED ON THIS WARRANT OF ATTORNEY AND THE RIGHTS WAIVED BY BORROWER
HEREIN IN RECEIVING THIS NOTE AND AS AN INDUCEMENT TO GRANT FINANCIAL
ACCOMMODATIONS TO THE BORROWER.
If a Default occurs under this Note or any other Loan Documents, each Borrower
hereby jointly and severally authorizes and empowers any attorney of any court
of record or the prothonotary or clerk of any county in the Commonwealth of
Pennsylvania, or in any jurisdiction where permitted by law or the clerk of
any United States District Court, to appear for Borrower in any and all
actions which may be bought hereunder and enter and confess judgment against
the Borrower or any of them in favor of the Bank for such sums as are due or
may become due hereunder or under any other Loan Documents, together with
costs of suit and actual collection costs including, without limitation,
reasonable attorneys' fees equal to 5% of the Obligations then due and owing
but in no event less than $5,000.00, with or without declaration, without
prior notice, without stay of execution and with release of all procedural
errors and the right to issue executions forthwith. To the extent permitted by
law, Borrower waives the right of inquisition on any real estate levied on,
voluntarily condemns the same, authorizes the prothonotary or clerk to enter
upon the writ of execution this voluntary condemnation and agrees that such
real estate may be sold on a writ of execution; and also waives any relief
from any appraisement, stay or exemption law of any state now in force or
hereafter enacted. Borrower further waives the right to any notice and hearing
prior to the execution, levy, attachment or other type of enforcement of any
judgment obtained hereunder, including, without limitation, the right to be
notified and heard prior to the garnishment, levy, execution upon and
attachment of Borrower's bank accounts and other property. If a copy of this
Note verified by affidavit of any officer of the Bank shall have been filed in
such action, it shall not be necessary to file the original thereof as a
warrant of attorney, any practice or usage to the contrary notwithstanding.
The authority herein granted to confess judgment shall not be exhausted by any
single exercise thereof, but shall continue and may be exercised from time to
time as often as the Bank shall find it necessary and desirable and at all
times until full payment of all amounts due hereunder and under any other Loan
Documents. The Bank may confess one or more judgments in the same or different
jurisdictions for all or any part of the Obligations arising hereunder or
under any other Loan Documents to which Borrower is a party, without regard to
whether judgment has theretofore been confessed on more than one occasion for
the same Obligations. In the event that any judgment confessed against the
Borrower is stricken or opened upon application by or on behalf of Borrower or
any obligor for any reason, the Bank is hereby authorized and empowered to
again appear for and confess judgment against Borrower for any part or all of
the Obligations owing under this Note and/or for any other liabilities, as
herein provided.
LINE OF CREDIT ADVANCES. Borrower may borrow, repay and reborrow, and Bank may
advance and readvance under this Note respectively from time to time until the
maturity hereof (each an "Advance" and together the "Advances"), so long as
the total indebtedness outstanding at any one time does not exceed the
principal amount stated on the face of this Note. Bank's obligation to make
Advances under this Note shall terminate if Borrower is in Default or a
representation in any of the Loan Documents is false or has become false. As
of the date of each proposed Advance, Borrower shall be deemed to represent
that each representation made in the Loan Documents is true as of such date.
If Borrower subscribes to Bank's cash management services and such services
are applicable to this line of credit, the terms of such service shall control
the manner in which funds are transferred between the applicable demand
deposit account and the line of credit for credit or debit to the line of
credit.
LOAN AGREEMENT. This Note is subject to the provisions of that certain Loan
Agreement between Bank and Borrower dated May 10, 1999, as modified from time
to time.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note
and other Loan Documents shall be valid unless in writing and signed by an
officer of Bank. No waiver by Bank of any Default shall operate as a waiver of
any other Default or the same Default on a future occasion. Neither the
failure nor any delay on the part of Bank in exercising any right, power, or
remedy under this Note and other Loan Documents shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment,
protest, notice of dishonor, demand for payment, notice of intention to
accelerate maturity, notice of acceleration of maturity, notice of sale and
all other notices of any kind. Further, each agrees that Bank may extend,
modify or renew this Note or make a novation of the loan evidenced by this
Note for any period and grant any releases, compromises or indulgences with
respect to any collateral securing this Note, or with respect to any other
Borrower or any other person liable under this Note or other Loan Documents,
all without notice to or consent of each Borrower or each person who may be
liable under this Note or other Loan Documents and without affecting the
liability of Borrower or any person who may be liable under this Note or other
Loan Documents.
MISCELLANEOUS PROVISIONS. Assignment. This Note and other Loan Documents shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns. Bank's interests in and
rights under this Note and other Loan Documents are freely assignable, in
whole or in part, by Bank. In addition, nothing in this Note or any of the
Loan Documents shall prohibit Bank from pledging or assigning this Note or any
of the Loan Documents or any interest therein to any Federal Reserve Bank.
Borrower shall not assign its rights and interest hereunder without the prior
written consent of Bank, and any attempt by Borrower to assign without Bank's
prior written consent is null and void. Any assignment shall not release
Borrower from the Obligations. Applicable Law; Conflict Between Documents.
This Note and other Loan Documents shall be governed by and construed under
the laws of the state named in Bank's address shown above without regard to
that state's conflict of laws principles. If the terms of this Note should
conflict with the terms of the loan agreement or any commitment letter that
survives closing, the terms of this Note shall control. Borrower's Accounts.
Except as prohibited by law, Borrower grants Bank a security interest in all
of Borrower's accounts with Bank and any of its affiliates. Jurisdiction.
Borrower irrevocably agrees to non-exclusive personal jurisdiction in the
state named in Bank's address shown above. Severability. If any provision of
this Note or of the other Loan Documents shall be prohibited or invalid under
applicable law, such provision shall be ineffective but only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Note or other such document.
Notices. Any notices to Borrower shall be sufficiently given, if in writing
and mailed or delivered to the Borrower's address shown above or such other
address as provided hereunder, and to Bank, if in writing and mailed or
delivered to Bank's office address shown above or such other address as Bank
may specify in writing from time to time. In the event that Borrower changes
Borrower's address at any time prior to the date the Obligations are paid in
full, Borrower agrees to promptly give written notice of said change of
address by registered or certified mail, return receipt requested, all charges
prepaid. Plural; Captions. All references in the Loan Documents to Borrower,
guarantor, person, document or other nouns of reference mean both the singular
and plural form, as the case may be, and the term "person" shall mean any
individual, person or entity.
The captions contained in the Loan Documents are inserted for convenience only
and shall not affect the meaning or interpretation of the Loan Documents.
Binding Contract. Borrower by execution of and Bank by acceptance of this Note
agree that each party is bound to all terms and provisions of this Note.
Advances. Bank in its sole discretion may make other Advances under this Note
pursuant hereto. Posting of Payments. Al) payments received during normal
banking hours after 2:00 p.m. local time at the office of Bank first shown
above shall be deemed received at the opening of the next banking day. Joint
and Several Obligations. Each Borrower is jointly and severally obligated
under this Note. Fees and Taxes. Borrower shall promptly pay all documentary,
intangible recordation and/or similar taxes on this transaction whether
assessed at closing or arising from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out
of or relating to the Loan Documents between parties hereto (a "Dispute")
shall be resolved by binding arbitration conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of
the American Arbitration Association (the "AAA") and the Federal Arbitration
Act. Disputes may include, without limitation, tort claims, counterclaims, a
dispute as to whether a matter is subject to arbitration, claims brought as
class actions, or claims arising from documents executed in the future. A
judgment upon the award may be entered in any court having jurisdiction.
Notwithstanding the foregoing, this arbitration provision does not apply to
disputes under or related to swap agreements. Special Rules. All arbitration
hearings shall be conducted in the city named in the address of Bank first
stated above. A hearing shall begin within 90 days of demand for arbitration
and all hearings shall conclude within 120 days of demand for arbitration.
These time limitations may not be extended unless a party shows cause for
extension and then for no more than a total of 60 days. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000.00. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties do not waive applicable Federal or state substantive law
except as provided herein. Preservation and Limitation of Remedies.
Notwithstanding the preceding binding arbitration provisions, the parties
agree to preserve, without diminution, certain remedies that any party may
exercise before or after an arbitration proceeding is brought. The parties
shall have the right to proceed in any court of proper jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose against any real or personal property or other
security by exercising a power of sale or under applicable law by judicial
foreclosure including a proceeding to confirm the sale; (ii) all rights of
self-help including peaceful occupation of real property and collection of
rents, set-off, and peaceful possession of personal property; (iii) obtaining
provisional or ancillary remedies including injunctive relief, sequestration,
garnishment, attachment, appointment of receiver and filing an involuntary
bankruptcy proceeding; and (iv) when applicable, a judgment by confession of
judgment. Any claim or controversy with regard to any party's entitlement to
such remedies is a Dispute. Waiver of Exemplary Damages. The parties agree
that they shall not have a remedy of punitive or exemplary damages against
other parties in any Dispute and hereby waive any right or claim to punitive
or exemplary damages they have now or which may arise in the future in
connection with any Dispute whether the Dispute is resolved by arbitration or
judicially. Waiver of Jury Trial. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO
BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO
JURY TRIAL WITH REGARD TO A DISPUTE.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
Lexicon Environmental Associates, Inc.
Taxpayer Identification Number: 22-3000443
CORPORATE
SEAL By: /s/ Joyce A. Rizzo
Joyce A. Rizzo, Chief Executive Officer
